Attract, Engage, Retain: Leveraging Equity Compensation for Gen Z Motivation‍

Casey Fenton

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February 20, 2024

Forget ping pong tables and beanbag chairs. Today's workforce demands more than just office perks. Gen Z: the tech-native, purpose-driven, meme-generating generation, is shaking up the traditional workplace. A whopping 77% of Gen Z prioritize work-life balance, according to McKinsey. They crave meaning, collaboration, and a chance to make a real impact. 

So, how do you attract, engage, and retain this talented yet unique workforce? The one-size-fits-all incentives won’t cut it anymore. Your secret weapon lies in harnessing the power of equity compensation, but Gen Z style.

But here’s the catch: this isn't your grandpa's stock options. We're talking flexible vesting schedules, instant gratification rewards, and even crypto-powered incentives. By understanding Gen Z's unique values and aspirations, you can unlock their incredible potential and build a team that crushes your goals—and theirs.

Embrace the Purpose Revolution: Gen Z's Motivational Currency

Gen Z, the generation raised on TED Talks and YouTube activism, crave purpose. They aren't just clocking in for a paycheck; they're seeking to make a tangible difference in the world. More than just altruism, it's a driving force, a motivator that eclipses ping-pong paddles and free lattes.

So, how do you tap into this purpose-driven wellspring? It starts by showcasing your company's mission with laser-sharp clarity. Avoid vague statements about "innovation" or "excellence." Articulate a compelling vision, one that tackles social challenges, promotes sustainability, or champions ethical practices. This isn't just marketing; it's an invitation to join a movement, a chance to be part of something bigger than themselves.

And here's where equity compensation becomes a powerful tool. Align your equity plan with your purpose. Reward achievements that directly contribute to your mission, like developing sustainable packaging solutions or exceeding diversity targets. Offer equity bonuses for volunteer hours spent on social impact initiatives. Make them see the direct connection between their work, their equity, and the positive impact they're creating.

Tailoring Equity for Gen Z's Diverse Goals

You can ignore the rigid, one-size-fits-all stock option packages of yesteryear. Gen Z, the generation raised on instant gratification and personalized experiences, demands flexibility in their equity compensation. They're not interested in waiting five years for a payoff that feels distant and impersonal. They crave immediate rewards, tailored to their unique goals and aspirations.

Ironically, this isn't about catering to whims but recognizing the dynamic nature of Gen Z's career trajectories. They might switch careers multiple times in their lifetime, prioritize personal growth alongside financial gain, and value experiences over material possessions. So, how do you cater to this mosaic of goals?

Offer shorter vesting schedules that provide quicker gratification, allowing them to see the tangible benefits of their work sooner. Consider milestone-based rewards, where equity unlocks as they achieve specific goals, be it mastering a new skill, exceeding sales targets, or completing a passion project.

Think beyond traditional stock options. Explore phantom stock, which offers virtual shares that track the company's performance without diluting ownership, providing a sense of ownership from day one. Consider profit-sharing models, where equity bonuses are tied to the company's overall success, fostering a sense of shared ownership and collective achievement.

Here, personalization is key. Offer different equity packages to cater to individual career paths and aspirations. Allow them to choose vesting schedules, reward structures, or even the type of equity they receive. This gives them a sense of control and empowers them to design an equity plan that truly aligns with their goals.

By embracing flexibility, you send a powerful message: "We value your individuality, your unique goals, and your contribution to the company's success." This resonates deeply with Gen Z, fostering a culture of trust, engagement, and loyalty. So, eliminate the one-size-fits-all mentality and embrace the flexplosion. Watch your Gen Z team blossom, their diverse aspirations fueled by the power of personalized equity rewards.

When Gen Z sees their financial rewards tied to their purpose, they become more than employees; they become missionaries. They're invested in your success, not just because of the bottom line, but because they believe in the difference you're making.

Transparency: Building Trust with Gen Z's Financial Literacy

Gen Z, the generation raised on YouTube explainer videos and social media transparency, crave education and clarity when it comes to their finances. They won't be dazzled by fancy terms or veiled promises. They want to understand their equity options clearly and confidently.

So, how do you build trust with this information-hungry generation? Ditch the legalese and embrace the transparency revolution. Break down your equity plan into bite-sized, digestible chunks. Explain terms like "vesting schedule" and "stock options" in plain language, using relatable examples and visuals. Offer educational resources, workshops, and one-on-one consultations to empower them to ask questions and make informed decisions.

With Gen Z, transparency is an investment, not a cost. When Gen Z understands their equity options, they feel valued and respected. They see the potential rewards and risks with clear eyes, allowing them to make informed choices about their careers. This transparency fosters trust, a significant ingredient for long-term engagement and retention.

Think beyond just the numbers. Connect equity compensation to the company's goals and vision. Show them how their efforts translate into financial rewards, not just for them, but for the company's collective success. This fosters a sense of ownership and belonging, further fueling their motivation and commitment.

And in the age of information overload, fight the temptation to sugarcoat. Be honest about potential risks and uncertainties. Address common concerns about market fluctuations and vesting periods openly. This authenticity resonates with Gen Z, who appreciate open communication and genuine partnership.

Cultivating Gen Z's Passion with Equity for Skill

Gen Z, the generation invested in online learning platforms, craves growth, mastery, and self-actualization alongside financial rewards. They're not just chasing money; they're chasing personal and professional development.

So, how do you tap into this growth-driven goal? Rethink your one-dimensional focus on financial rewards and embrace the "equity for skill" garden. Offer equity bonuses for achieving learning milestones, completing skill-building programs, or even mastering new technologies. Tie equity rewards to participation in mentorship programs or cross-functional collaborations that broaden their skillset and expose them to new perspectives.

With Gen Z, skill development is an investment, not an expense. When Gen Z sees their equity linked to their personal growth, they become more engaged, motivated, and invested in the company's success. They see your commitment to their future, not just their bottom line.

Think beyond just hard skills. Reward soft skills like communication, collaboration, and problem-solving, are critical for their long-term career success. Offer equity bonuses for exceeding in team projects, successfully navigating challenging situations, or demonstrating exceptional leadership qualities. This fosters a holistic approach to professional development, one that values both technical expertise and interpersonal skills.

And in the age of constant learning, embrace the "growth mindset." Create a culture of continuous learning and development. Offer mentorship opportunities, access to online learning platforms, and even internal training programs that equip them with the tools and resources to keep growing. This empowers them to take ownership of their learning journey, further fueling their engagement and motivation.

By embracing "equity for skill," you send a powerful message: "We value your potential, your hunger for growth, and your commitment to becoming the best version of yourself." This resonates deeply with Gen Z, fostering a culture of lifelong learning, innovation, and continuous improvement.

The Best Types of Equity for Compensating Gen Z

Gen Z demands dynamic, flexible, and immediate returns on their investment (both financial and emotional). So, which equity structures resonate with this purpose-driven, tech-savvy generation? Let's explore some options:

1. Restricted Stock Units (RSUs)

Imagine this: with every quarter that passes, you climb a ladder towards owning a piece of the company. Restricted Stock Units (RSUs) grant shares on a predetermined schedule, giving Gen Z a tangible sense of progress and ownership. They can track their ascent on this ladder, witnessing their financial future solidify with each rung. This helps foster belonging and feeling like a true stakeholder invested in the company's success.

2. Phantom Stock

The phantom stock allows them to see their wealth fluctuate in real-time. It's like a gamified ownership experience, perfect for their tech-savvy minds. This immediate gratification fuels their motivation and creates a sense of excitement around their equity journey.

3. Performance-Based Units (PBUs)

Gen Z thrives on challenge and achievement. PBUs reward them for hitting pre-defined goals, like exceeding sales targets or launching successful campaigns. Here, they get to see their individual efforts directly translated into financial rewards. This personalized approach resonates deeply with their desire for control and fuels healthy competition within a collaborative environment. Alternatively, you can also tie performance metrics with RSUs, which can better incentivize and give them a long-term perspective.

4. Profit-Sharing

Profit-sharing fosters a sense of collective ownership and shared responsibility. They understand that their contributions, big or small, contribute to the pie's growth. This collaborative spirit aligns with their desire for social impact and encourages long-term commitment to the company's mission.

5. Skill-Based Rewards

Gen Z values learning and self-improvement above all else. Skill-based rewards tie equity bonuses to acquiring new skills or completing learning modules. Imagine getting rewarded for mastering a new coding language or becoming a team communication champion. This demonstrates your commitment to their personal and professional development, creating a win-win situation where they gain valuable skills and financial rewards.

Bottomline: Purpose Meets Potential

Think beyond rigid stock options. Adjust five-year vesting cliffs that feel like distant promises. Gen Z demands immediate gratification, personalized rewards, and a tangible connection to the company's mission. Additionally, consider rewarding them for exceeding sustainability goals and championing social impact initiatives, aligning their financial success with their purpose-driven values. This generation thrives on challenges and continuous learning. Reward them for mastering new skills, exceeding goals, and collaborating effectively.

Indeed, embracing this dynamic equity ecosystem allows you to build a movement. You're creating a space where purpose meets passion, where innovation thrives, and where every Gen Zer feels like an owner, a collaborator, and a changemaker. You're unlocking their incredible potential, and in doing so, you're shaping the future of your company, your industry, and the world.

Want to know how to tailor RSUs as equity bonuses for hitting performance goals for your Gen Z talents? Book a demo with Upstock today and let’s discuss ways to leverage equity for incentivizing a unique breed of workers.

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ABOUT THE AUTHOR

Casey Fenton

Founder, Upstock & Couchsurfing, AI and Equity Innovator

Casey Fenton, the founder of Upstock & Couchsurfing and an AI and equity innovator, has revolutionized how we perceive and implement equity in the workplace. His foresight in creating platforms that not only connect people but also align their interests towards communal and corporate prosperity has established him as a pivotal figure in technology and community building. Casey speaks worldwide on topics including ownership mindset, worker equity, With Upstock and Couchsurfing, he has demonstrated an unparalleled expertise in harnessing technology for the betterment of community interaction and organizational benefits.

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