In the past, if you had a large, tech-focused company, offering ownership to your employees was common, though far from expected. But in the past few years, offering equity to workers has quickly grown to become one of the most vital and effective ways to help them remain engaged with the company. An AON market analysis found that 49% of S&P 500 companies offer equity to employees. Research shows that when employees feel like owners, they are more enthusiastic, hardworking and loyal.
However, equity plans, such as stock options or restricted stock units, have historically been complicated and difficult to understand. If some owners didn’t understand the benefits of their own plans, how could they explain them to their employees?
Throw in sensational headlines about falling stock prices, and many employees may start to have misgivings about the risks of ownership in the company. After all, what if the company fails and the stock becomes worthless? It’s your job as an owner to make sure that your workers and team members understand the risks and rewards of company equity.
Your organization might also be offering equity in exchange for lower monetary compensation, with the hope that the equity will be worth more than its current price in the long run. This makes it even more critical for workers to understand what they’re getting and how it works.
In order to really value the equity they receive, workers need to understand it. The smartest companies know that employing an effective technique is key to equity plan communication.
Traditionally, the way companies have explained equity plans is through a long, tedious and raw presentation packed with complex legal language that workers may not understand. Lawyers are often needed to come in and explain complicated legal concepts.
Luckily, these days, there are tools that can simplify and boil down the most important aspects and concepts of equity. They allow employees to understand their benefits in simpler terms.
Remember that not all workers have the same levels of knowledge and familiarity about equity. Some may have decades’ worth of experience with equity plans, others may be receiving them as part of their compensation package for the first time.
A one-size fits all email or presentation can’t possibly address all of them. Fortunately, you can personalize your resources by surveying your employees, formally or informally, to gauge their understanding of the principles of company ownership so you can learn how to segment and target them.
Usually, in order to understand their equity plans, workers needed to find a lawyer who could help them decipher if the company has a conflict of interest, or provide advice about how much the equity is worth or could become worth. This often costs considerable amounts of time and money.
A platform like Upstock, however, has already absorbed these costs by working with lawyers and experts in building out a vast base of educational materials that workers can use to further understand their equity plan on their own time. Upstock also has an intuitive dashboard where workers and team members can see the value of their equity in real time. The goal here is to convey equity in ways that build trust within a team.
Tools like Upstock reduces the need for lawyers to act as middlemen. This enables founders and employees to foster a direct relationship based on trust, rather than acting as adversaries. That leaves employees feeling a greater sense of purpose and connection with the company, and leads to the creation of an ownership mindset. When workers own something they identify with it. Anything humans identify with they automatically work to improve. That goes for owning equity in companies too.
It is important to distribute and keep documents like copies of equity plans disclosures, external communications, and other contracts and agreements in an easy-to-reach location for workers to access on their own time.
This can be done through apps like Upstock which feature a recordkeeping function. Online apps make sure that the company is seen as transparent and fair when it comes to these legal documents. It lets employees know that their company is looking out for them in order to make sure they get their fair share, before and after the company becomes successful.
Coupled with intuitive dashboards, mobile apps and related materials, Upstock allows workers to see the company’s growing valuation, and see how much their equity could be worth over time if the company keeps growing. This helps build and retain trust and keeps workers wanting to contribute more to the company.
Of course, having access to a professional is important, so consider inviting the administrators of your equity plan to make themselves available to consult with workers in small groups or one-on-one. But be careful, your company must be sure not to “provide legal advice” to workers. If you inadvertently provide incorrect information that could open your company up to a dispute later on. Upstock can help you communicate and help ensure that workers get the correct information from the start.
It’s no secret that the way we consume information these days isn’t the same as it once was. Not many people have time to sit down and read lengthy manuals full of jargon that explain company equity. Using different forms of content like video, audio, infographics and other forms of rich media simplifies complex concepts into more digestible offerings that can be consumed in a sitting.
Employees can’t value something they find too complex to understand, so presenting information in a way that’s simple and fun goes a long way to getting them onboard. Likewise, it’s ideal to keep them informed on a regular schedule in a way that’s automated, such as before a major vesting date. Upstock does this through its automated notification system that keeps team members on the loop with regard to important events regarding their equity plans.
A company that offers equity to its employees is a company that values their contributions and wants to demonstrate that in an immediate and tangible way. When workers and team members can see how their actions contribute toward the company’s success, this helps build a culture wherein everyone wants to contribute more of themselves to achieve a common goal.
A big win in the company is ideally shared at company-wide meetings and celebrations where everyone is thanked for their contributions. However, those personal moments when an employee sees the company’s value go up are just as important. Through a platform like Upstock, workers and employees are able to experience that personal connection every time they log in.
Again, it isn’t enough to merely offer ownership in a company; it’s on you as an owner or founder to help your workers understand it. It’s only then that they can start to recognize the true value of ownership and buy into the mission, creating alignment and better value for everyone involved.
Upstock is an equity and cap table management app that provides equal focus and attention to founders and workers. As equity plan creation and management software, it enables founders to create equity plans and manage them, and also workers to keep track of their equity and legal documents in an intuitive manner and centralized location.
But where Upstock truly excels is equity plan communication or the process of enabling parties to the plan to truly understand its mechanisms, components, conditions and value. Setting up an equity plan system from scratch is difficult enough, but letting workers understand why it is good for them may even be harder without the right tools to effectively explain and communicate.
At Upstock, we do that for you and much more. If you want to know more about how Upstock works, we’d be glad to talk to you about it.