Doling out equity equitably; faster contract executions.
Q My firm needs to hire a few senior people and I'd like to offer them equity-based perks. Will my existing employees feel left out?
There's nothing like equity to stir charges of inequity. The same incentives that lure and retain top performers will likely provoke a "what am I, chopped liver?" response in the optionless hordes.
There are ways to dangle bunches of carrots without giving away the whole vegetable patch. Instead of leaving some employees empty-handed, for example, you can simply give them smaller shares based on how much they contribute to the company, suggests Martin Staubus, director of consulting at the Beyster Institute, a think tank in La Jolla, California. A few stock options aren't likely to make them millionaires, but that's beside the point.
The main goal of stock options and other equity-sharing plans, Staubus says, is to give employees a stake, however small, in your company's success.
Darrell Pittard, founder of MagnetBank, a year-old commercial lender in Salt Lake City, gives shares to about two dozen employees who directly affect the bottom line, including loan officers. He hedges his bets by doling out stock options and restricted stock, which converts to actual shares after a four-year vesting period. The bank's 12 clerical employees don't get the same perks, but Pittard--who has taken two other companies public--has promised them a chance to buy IPO shares if MagnetBank follows that route. The discrepancy is no secret. Pittard tells new employees up-front that only those staffers who directly affect the bottom line receive stock. He diminishes the sting with competitive wages.
If you like the idea of sharing the company's success with employees but don't want to dilute your ownership, "phantom" stock may be the way to go. As the name implies, phantom stock doesn't yield equity. Instead, it mimics the performance of actual stock over a set time period. If the stock's value rises, employees receive the equivalent in a cash bonus.
Most equity-sharing plans scale easily, so administrative costs won't increase much if you include more people. You certainly don't have to give the whole staff a piece of the pie. But it does encourage everyone to perform more like the upper crust.
Q Weeks after submitting a contract to a corporate client and beginning work on the project, I'm still awaiting the signed document, which is with the legal team. Can I speed up the process?
Every day that contract remains in legal limbo reduces your bargaining power if the customer decides to change the terms. "It is not prudent to continue working for free because things can change drastically and you can get left out in the cold," warns Noreen King, CEO of Evolve Manufacturing Technologies, a contract manufacturer in Mountain View, California.
King assumes she'll get no joy from clients' lawyers, so she enlists inside help. Specifically, she develops relationships with higher-ups at each company who can harass the legal department for her. Each time King lands a customer, she organizes a getting-to-know-you lunch with several of the client's employees, including her direct contact, another executive, and an engineer involved in the project. "If you have a good rapport with someone who can expedite things for you, it will help a lot," says King. The CEO "pesters" her contacts--courteously, of course--with regular project updates coupled with gentle reminders that she needs the contract.
But speed isn't everything; the contract must also bear a close family resemblance to what you originally agreed upon. To prevent unexpected mutations, keep a record of every e-mail, phone conversation, meeting, and Post-it note referring to those initial terms, suggests Joe Fulwiler, a business lawyer in Austin. Such records should give you more leverage if a client tries to pull a fast one.
What you don't want is a lawsuit. Says Fulwiler: "Unless you're dealing with a dispute worth more than $100,000, it is probably not worth going into litigation." Lawsuits, after all, are very expensive, and they sour relationships. Worse yet, they are handled by corporate legal departments, which means you could be in court forever.
To learn more about employee ownership, check out the website of the Beyster Institute. For more tips on handling contracts with large corporations, read Negotiate Like the Big Guys by Susan Onaitis.
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