If you are new to the startup world, you might be thinking that every other person is carrying ESOs (Employee Stock Options) in their pockets. You are probably wondering if stock options need to be offered at all, considering that they will reduce your slice of the pie.
However, there are quite a few reasons that ESOs are becoming increasingly popular, and, in this blog, Tommy Shek will talk about the most common of those reasons.
Reasons to Offer Stock Options to Your Employees:
Reason 1 – Allows You Attract Top Talent:
The most talented employees have no shortage of job offers, which means that it will take a little bit extra for them to put pen to paper on your company’s employment contract. In addition, working for a startup is a major risk, and believes that ESOs serve as a potentially major reward against that risk.
Moreover, an increasing number of employees want to own a part of something that they will help grow. While health insurance is still the most sought-after employment perquisite, a recent Glassdoor survey revealed that stock options rank higher on that list than paid parental leaves.
Reason 2 – Allows You To Retain Top Talent:
Growing a startup is not an overnight job: it is a long and arduous journey, and you want your best performers to stay by your side. Shared ownership serves as a significant motivator for them in this regard.
When employees are given stock options, they are tempted to stay and make the company – and with it, the value of their shares – grow, instead of simply moving on to the next enticing challenge. Tommy Shek says that employers can also roll ESOs into promotions and performance incentives.
Reason 3 – Promotes an Ownership Mentality:
The team of employees that works to lift a startup off the ground is as much of an owner as the founders themselves. By offering a stake in the company, you can ignite the kind of ownership sense that unites the entire team around a common mission.
According to research, companies that offer stock options to their employees benefit from greater longevity, productivity, and profitability, compared to companies that do not offer ESOs. This is particularly true if employees are also encouraged to offer their input in how the business is run. When you own a part of something, you want to feel responsible for it – and this feeling fosters a long-term mindset, along with increased loyalty and commitment. Tommy Shek thinks that ESOs can also help reduce internal conflict in the company by aligning the shareholders’ goals with those of the employees.
To sum up, the ideal ESO strategy is one that is aligned with your company philosophy, and makes sure that the team feels inspired, valued, and motivated to go above and beyond for the business and its growth.