Equity: The Secret Tool to Accelerate Your Company's Growth
Updated: Oct 1, 2020
Accelerate your company’s growth, make people happy, and win at life with Equity
Most of the world’s leaders have already discovered that great leadership is not enough. Leadership can provide a vision for the future, but it doesn’t necessarily align the team members’ and the company’s goals. If you want to get average work for market rates, you can pay your team members cash. But what about if you’re trying to do something a bit more extraordinary? It's essential to make sure you have real alignment between your team members and the end goals of the company. One powerful way to motivate your team members is through performance equity compensation. Equity is every founder's most important tool to incentives their team and make the company successful.
Unfortunately, though, most of the traditional equity systems, like stock and stock options, are so complicated that they do more harm than good. Instead of building trust, traditional equity systems leave workers confused by a stack of documents and leave workers doubting that you, as their leader, actually have their back.
Team Members need to believe that if the company succeeds, they will also succeed.
Only equity compensation can do this. Equity allows founders and team members to build something great together and makes sure that everyone gets their fair slice of the pie.
The typical Silicon Valley equity packages
A lot of people in Silicon Valley and elsewhere already understand this intuitively. Founders know they need to compensate team members with something that helps them to be genuinely invested in the future of the company. They see that the best companies are already using equity systems designed to motivate workers. But, in the past, traditional Silicon Valley equity packages are the best they have been able to do for their teams. Knowing that this is the way to build a successful business, they spend $50K or more on the best lawyers to set up the best Silicon Valley equity plans.
Just because everyone else is doing it, doesn’t mean it works
The sad truth though, is that because the system is so overly complicated, founders have to trust lawyers to guide them through these systems. However, most of the stock options that lawyers provide are riddled with problems and sometimes feel like they were made to be complicated on purpose. These founders rarely have a complete picture of exactly what they or their workers are getting out of the package. It’s tough to implement something you don’t understand.
Most equity plans are far too complicated for an average team member to understand on their own. To try to make sense of it, workers have to hire their own lawyers or financial advisor, which they often can’t afford. If they turn to you as their founder or CEO, you’re not allowed to advise them due to conflicts of interest. And of course, what if you did inadvertently improperly recommend them with the wrong information? If they make the wrong choice, could they sue you for it later? This lack of understanding leads to massive problems down the road.
When team members receive their stock option plan, they see it as a communication from management. Team members believe that this is the system the founders want.
Founders can have the best equity system that Silicon Valley could offer, but workers will likely still say that they don’t trust the system, simply because they cannot understand it. Sometimes as a founder, you’re just doing what other people tell you is the best thing to do, without necessarily understanding it yourself.
All this causes team members to start to talk amongst themselves. They’re wondering, do the leaders care about their team members? Or is the founder looking to sell out and leave workers behind? Can team members trust what you say? If team members can’t trust this piece of the puzzle, what else is being hidden from them? You know that your intentions are good. You know it’s just a lawyer thing. You’re just trying to make a better world, and you want everyone to get their fair share. The team members want to believe you. Their logical brain wants to trust you. But in their hearts, team members are still left wondering. So how can you as a founder prove yourself to your team members? At the end of the day, founders usually come out of this process feeling bewildered. What starts with excitement and optimism ends with everyone’s heads spinning. All you can probably do is give up and say, “Well, I’ll just do whatever the lawyer says.” This results in another $20,000 spent and the appearance of a stack of documents an inch thick, that even you don’t understand. This is a lot to pay for a system that makes your team members less sure that they can trust you.
So, what can be done?
You have two options: 1) Leave it like that . . . or 2) Do something to change it.
As a leader, you need to know that the underlying equity system you choose is something that will treat people fairly. You need to be able to confidently stick out your hand for that handshake and look at every single person who works for you in the eye and confidently ask them to work hard. Everyone else who works in the company needs to feel that this equity system is good, that it’s trustworthy, and that they can believe what they see. It would help if you showed them that equity is worth putting in an extra severe effort. How do you explain that? What can you do to make people believe that the hours they put in are helping them to get a more significant piece of the pie?
The ANSWER is you need to have a system that allows your team to see the value of their work in real-time. Seeing is believing. It would be best if you showed them this visually, and the visuals need to match what people are experiencing in reality. You need to help them track progress over time. And the longer you do this, the more trustworthy it becomes, and the more your team will trust that you are all in this together.
Upstock’s technology makes this possible. We believe that every founder should be able to stand behind the equity system they choose. This is one reason why we’ve worked hard to make our policy easy to understand. Upstock enables everyone in the company to believe that their efforts count. Every team member should know where they stand and what they need to do to make the value of the business grow. We’ve designed a dashboard that engages team members and helps them visualize where the company is headed, so they can do their best work and stay motivated.
Companies that choose Upstock see the value in an equity system that everyone can understand. At Upstock, we work with founders who are inspired by collaboration and who know how important it is to get everyone in their company to believe in what they are building. For leaders who choose Upstock, it’s essential that they bring an equity system online quickly. They know that the longer it takes to get an equity system set up, the more time there is for misalignment, doubt, and confusion to grow within the organization. Upstock’s clients understand that it’s essential to act quickly and get a solution in place that can make team members, investors, advisors, shareholders, and founders all happy at the same time. Upstock can onboard a company in days; in a competitive business world where every day counts, the ability to act quickly and decisively to put a better equity system in place can make a world of difference.
Upstock helps founders build strong companies. Let us help you build yours.