How much do employees have to “earn†their refresh (ongoing) equity?
Stock based compensation used to feel a little like free lunch. But amidst the recent years of increased emphasis on bringing down topline metrics such as equity burn and SBC as a % of revenue, companies have been forced to think a little harder about how to maximally leverage each share of equity being granted.
There are numerous levers to keep equity burn in check–discounting grant sizes, innovative vesting structures, and equity eligibility to name a few.
An undertone of many decisions regarding equity is how to align your equity program design with pay for performance interests so that you indeed maximize the leverage of each share.
Today, let’s zone in a bit on refresh (ongoing) equity participation by performance rating.
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Our data science team took a look at the percentage of employees who receive a refresh (ongoing) equity grant broken down by performance rating across Pave’s dataset.
The results:
? Below Expectations (no promo) ? 0% median
? Meets Expectations (no promo) ? 12.7% median
? Above Expectations (no promo) ? 39.1% median
? Promoted ? 95.2% median
Are your “below†and “meets†expectations employees receiving refresh (ongoing) equity at a higher rate than the benchmarks? That is perhaps a sign of a “peanut butter†skew of your company’s equity program design.
Of course, the actual grant sizes broken down by performance rating are of material importance as well. We will take a look at that soon.
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Methodology:
Our data science team mapped all available performance ratings from various systems (3-rating, 4-rating, 5-rating, 9-box, etc) into three categories–below meets expectations, equivalent to meets expectations, and above meets expectations. Then, the results were broken down by job level. All 47,000+ incumbent data points in this analysis come from Pave customers who used the compensation planning tool for 2024 merit cycles.
Also, as a caveat, Pave’s database skews heavily towards the tech sector which historically has higher equity eligibility across a higher proportion of job levels, job families, and locations compared to other industries.
#pave #equity #benchmarks