How do you balance the risk and reward of stock options for different employee groups and levels?

Stock options can be part of an incentive loyalty package. They can also be worthless should you work for a unicorn-turned-corporate scrap metal company. It is the employee's responsibility to know how being a shareholder hinders or enhances your performance. Conversely, you might suffer from FOMO later if you prefer to stick to an income only and don't weigh any potential upsides. Understanding your risk tolerance and maintaining a healthy outlook vs. skepticism will keep you out of trouble. Sometimes, you get lucky. Other times, you strike out for a decade. Understanding your expectations and comfort level with stocks might be a green light or a flashing yellow for your paranoia.

Stock options are a tricky thing for businesses. The first questions that need to be answered are: Why do you want to do this? What is the objective? Is this a way to transfer ownership? Or is this a way to maintain ownership? Whatever the answers are, there needs to be a conversation with a professional who specializes in stock options to walk one through the options available.

When considering stock options as part of an employee benefits package, it's crucial to align them with your company's strategic goals. For instance, if fostering innovation is a priority, offering stock options that vest based on the achievement of certain milestones can be a powerful motivator. It's also essential to tailor the stock option plan to the different roles within your company, as what incentivizes a senior developer might differ from what motivates a salesperson. Remember, the key is not just to offer stock options, but to offer them in a way that reinforces your company's objectives and culture.

Stock options are a great benefit for employees, but the education of it needs to be done on a regular and ongoing basis. Stock options are great for employers who want their employees to remain with the company long-term. It is more of a thing for the employee to determine if they want it, but from an employer standpoint there is minimal downside.

A great way for companies to align with employee objectives when offering Stock options is to give them choices. More and more companies these days offer employees a choice of how much equity or how much cash reward they prefer. Usually, there are caps and minimum amounts controlled by the company, but still, the flexibility is there. Often what I see is that employees start with selecting about a 50/50 composition but ultimately see the greater value in the share plan and end up with about an 80/20 breakdown. This will vary by industry and company though. Also to keep in mind is the burden this adds to the administration, ideally, these selections should be automated through some technology or software...

No. Overcommunicate. You have to communicate the plan with all new employees. And then when you have employees in the company, you need to talk to them about it on a quarterly basis. The biggest reason for that is to ensure that those that are participating remember the long-term value of staying and helping to build the company. And for those not participating to try and figure out why they are not.