Think Strategically About Your Equity Compensation Program
Use our 3 key findings to align your equity compensation plan with your company’s corporate culture and long-term strategy for success.
A primary goal of many organizations is to attract and engage a talented workforce. Fostering a strong "ownership culture" is key. It encourages employees to have a stake in the organization and its future—and when combined with a well-structured equity compensation plan, it can be a powerful driver of employee motivation, performance and loyalty.
While creating this culture isn't always easy, there are steps you can take to help foster it. After consulting with Professor William G. Castellano, Ph.D., chair of the Rutgers University Human Resources Management Department, we have come up with six practices to consider for your organization.
Widely sharing information with employees about the company’s strategic, financial and day-to-day business decisions is an important first step in creating an ownership culture. Employees who own employer equity want to know how the company is performing. Sharing such information with them can help build their trust and empower them to feel they are having a real impact on the organization’s performance. This helps foster employee loyalty and can also boost their willingness to own more equity.
Giving employees greater authority and responsibility in how they perform their work goes a long way to building an ownership culture as well. Employees who feel more empowered in their roles tend to be more motivated to solve customer problems and come up with innovative ideas for improving their areas of business. Such employees also tend to feel more accountable for long-term organizational outcomes and have been shown to be more likely to increase their equity stakes.
Employees who have a stake in their organization’s future—and who feel more informed and accountable—want to be involved in decisions that helps drive outcomes for the organization. This involvement can take many forms, from problem-solving groups to an “open-book management” approach where employees get all relevant company financial information so they can make better decisions in their respective roles.
Fostering an ownership culture also means providing opportunities for employees to enhance their skills. These may include training programs to improve role-related expertise and opportunities to build communication and teamwork. Such programs make strategic sense in two ways:
First, they give employees opportunities to improve their job performance—and to reap the potential rewards of performing better.
Second, they help organizations reinforce that employees are a valuable part of the team. This can help improve employee retention and contribute to a more stable, productive work environment.
A “participatory management” style is one in which managers willingly share information with employees, involve them in important decisions, recognize their accomplishments publicly and hold them accountable for results. By adopting this style and culture, your management team can play a key role in encouraging employees to think and act like owners.
Equity is often a significant driver of wealth, so it’s important to educate employees about how equity ownership can help them achieve their long-term financial goals. Consider developing a financial wellness curriculum that discusses not only the risks inherent in most investments, but also the risk of not participating in the company’s equity program—namely, the costs of foregoing this additional, diversifying source of long-term wealth.
In a world of uncertainty, financial stressors and organizational upheaval, creating a culture of ownership among your employees can go a long way to helping them improve their financial well-being, build loyalty with the organization and become more productive, engaged workers.
By creating a culture where your employees are as invested in the organization’s success as you, great things can happen. Learn how Morgan Stanley at Work can help find the right equity plan management strategies for your organization.
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This article has been prepared for informational purposes only. The information and data in the article have been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it.
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