Incentives are complicated. . .
June 3, 2009
Last month I wrote a post titled, “Do Incentives Work?” where I laid out a plan to give up-to 50% of Architel to the employees in the form of stock options. After several thousand dollars in legal work (thanks Ryan) we presented the option plan to each employee in a one-on-one meeting with the company and our lawyer (to answer any questions or concerns). The result? Concern and confusion.
More than 20 employees were presented the plan, but surprisingly only one actually signed the option agreement. The NSO plan was designed specifically not to create a taxable event for the employee - so the plan is risk free. If the company is worth more than it is on the day of grant and we sell or go public the employee would share in the upside. If not it wouldn’t cost him a dime. The employees have until Friday return the option agreement and we are hopeful that more will participate.
Why didn’t the incentive have the expected result? I am not entirely sure, but I think they were surprised by the size of the grants. Why are we willing to share such a significant percentage of the company was the most common question. Many of them would have been more comfortable with a more modest sized grant - perhaps .5-1% for management and .05-.1% for everyone else.
The story isn’t over, but I thought it was worth providing this update.
