It takes a workforce with a variety of skills to build and sustain a successful business. Even in the tech field, non-tech professionals such as those in sales or marketing are necessary components of the team, especially in the early stages of the business. Equity compensation is one way leaders can reward these early-stage hires for their commitment to the business' growth; however, each offer must be made with consideration.
Determining the right amount of equity to offer depends on several factors, including future business implications and what each employee brings to the team. Below, a panel of Newsweek Expert Forum members detail what leaders should remember when deciding how much equity to offer early-stage, non-technical hires in a tech company.
1. Level of Commitment
One way to get the best from people and retain talent is by building long-term commitment via equity. A good balance of allocation between the individual, team and organizational performance must be present. When reward is only driven by individual performance, collaboration and overall organizational performance suffers. Reward non-tech members for their individual, team and the wider organization's success. - Chris Roebuck, Simply Success
2. The Hire's Value to the Company's Future
From my perspective, offering equity should be done only when you can firmly equate the particular hire's value to the future of the company to what is necessary to offer them to get them loyal and onboard. It is a negotiation and should be treated as such. - Justin Brock, Medicare Gurus
3. Valuation
It comes down to valuation. Know the valuation upon joining, and determine valuation at agreed intervals. Correlate the change in valuation to an agreed formula. If conditions are met, equity is awarded. It's important to not overcomplicate reward and award structures in the beginning. Be nimble and flexible. Too many so-called "smart" negotiators want huge percentages of nothing in the beginning. - Vipp Jaswal, VM Inc
4. Industry Ranges for Similar Roles
Let's assume you have made the decision that you want everyone on your team to have "ownership" and to be able to win via a successful exit should they decide to leave. One factor that should be considered is industry and competitor ranges for similar roles. - Chris Heller, OJO Labs
5. Impact on Retention
I believe the answer is another question: How much do you want to retain these people? With the difficulty of hiring in this market, motivating people to stay will have its payoffs. - Karen Valencic, Spiral Impact
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
To read how Newsweek uses AI as a newsroom tool, Click here.
