In the early stages of starting a business, employees value long-term returns more and it is better to adopt actual equity incentives.

Yesterday, Toutou’s circle of friends was flooded with articles about seven years since starting a business and not getting the last penny of shares.

As a quasi-entrepreneur, Toutou feels very emotional about this.

Although equity has been mentioned in many articles we published before, some from the perspective of investors and some from the perspective of entrepreneurs, there has been a lack of a systematic article. For this reason, today I would like to give

You recommend this article by Mr. Wang Mingyao of Lenovo Star.

I hope to provide some help to all entrepreneurs or people who join entrepreneurial teams.

Introduction Now when talking about Internet startups, equity incentives have become an unavoidable topic.

Equity incentives seem simple, but in fact there are many points that need to be weighed.

Shao Yibo, founding managing partner of Matrix Partners China, once talked about the example of eBay.

eBay is following the Silicon Valley path in this regard. Employees are issued stock options after their probationary period, and almost everyone has one.

The advantage of this is that we can work together to make the company a success, and everyone is happy.

The disadvantage is that everyone gets it for free, and many people don't cherish it enough and feel that the option is not worth a lot of money.

There are also companies that issue funds very late, when the company is about to go public, and the amount is very small. Many employees do not have it, or only old employees who have been working for more than two or three years have it.

There was a company engaged in network security services. The business was not progressing well. In order to boost morale, the boss decided to give 1.5% option rewards to the 10 core executives selected from the election. This shocked its investors: it was too little.

So how should equity incentives be implemented?

I think the following issues must be clarified.

Question 1: What is the purpose and function of equity incentives?

Equity incentives are rewards given to motivate managers and key employees and encourage them to work together for the same goal.

Its purpose is to solve the problem of the principal-agent relationship between the company's shareholders and professional managers, to make professional managers more concerned about the interests of shareholders, and to make the pursuit of interests between the two as consistent as possible.

Equity incentives can be roughly divided into three levels: how to attract people, how to retain people, and how to motivate people.

What role can equity incentives play? First, shareholders and professional managers have different positions at certain times, and equity incentives are an effective way to solve the game problem between the two. Secondly, they can leave room for imagination for professional managers.

It can change the behavioral patterns of some professional managers, turn short-term interests into long-term pursuits, and enhance their enthusiasm; moreover, it has a spiritual motivational effect and enhances the sense of belonging and identity of professional managers.

Question 2: What risks will arise if equity incentives are inappropriate?

(1) Choosing the wrong incentive tool: it can easily become the wrong golden handcuffs. In startup companies, there have been examples: some employees thought they had done a good job, but after being given shares, the employees felt that the shares were too few.

After all, no competitor offered me as much money, so I chose to resign.

Therefore, it is best for equity incentives to have room for imagination. Equity incentives without room for imagination will be counterproductive.

Sometimes, if equity incentives are not in place, it means there is no incentive.

At the same time, it should be noted that all golden handcuffs have a time limit and will lose their effect after a certain stage, so different incentive programs still need to be used at different stages.

(2) Lack of fairness and impartiality: easy to cause new conflicts. Sometimes, differences in equity incentives may make some employees question the fairness of the company.

Therefore, a certain confidentiality system should be adopted for large-scale equity incentives.

At the same time, the ritual sense of equity incentives is also important because it also has a spiritual motivating effect.

A star friend from the 5th class of Lenovo Star, his company’s equity incentive method can be used as a reference for entrepreneurs: Within the company, there will be similar shareholder meetings on a regular basis, with both the founders and the backbone of the equity holders, and others.

No one has permission to participate.

Participants seemed to be labeled, which had a strong spiritual stimulation effect.

In contrast, some companies are afraid of risks and secretly give equity, which does not have the effect of spiritual stimulation.

(3) No constraint mechanism: it is easy to breed lazy people. After some startup companies gave employees equity, there was no corresponding constraint mechanism and regulations, but instead some lazy people were born.

Therefore, you should also be very careful when selecting people.

In fact, the development of the company requires a group of anchors, who must have a certain degree of loyalty.

When there are problems in the company's development, Dinghai Shenzhen is willing to work hard with the company's shareholders to tide over the difficulties. On the contrary, some purely opportunistic people will be useless if they give too much. After he leaves, it will bring about a series of chain consequences.

Reaction will cause new troubles, so there must still be corresponding restraint mechanisms.

(4) Insufficient incentives: It is easy to catch small fish but difficult to catch big fish. The reason is very simple.

For less capable employees, motivation is an extra surprise; for capable employees, insufficient motivation equals no motivation.