How to evaluate and use unvested equity to retain top talent with Compensia

In our latest webinar, Charlie met with Tom Langle, Principal at Compensia, to discuss how to evaluate and use unvested equity to retain top talent.

Tom started with the current economic climate and how it’s leading many companies to make decisions to “right-size,” which includes layoffs and pivoting to AI to do more with less.

Tom mentioned how AI engineers in the marketing field see their compensation increase if they have the skill sets to innovate within the medium, which is much needed in a volatile market.

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The challenges of public vs. private companies 

Tom and Charlie also discussed the difference between challenges for public and private companies and described the benefits (and downsides) that come with raising money to keep the lights on.

Private companies can raise money on their own terms, but public companies have to compete on the open market with their share price. Public companies have to deal with the buying and selling of shares, which can cause an imbalance of share price if investors stop buying for whatever reason.

Charlie went on to discuss how Compa allows for better decision-making as software-delivered comp data can point to markets moving, such as equity being pulled from a specific area of the business.

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Taking steps to being proactive 

Tom discussed the need for companies to use unvested equity to keep their best employees and to be proactive about it. He explained that waiting until a good employee is sought out by competitors, and then making an offer to keep them, is not ideal. Tom used the 80-20 rule for unvested equity, meaning that 80% of the allocated equity be used in normal cycles and 20% is saved to compensate those who support the company best.

Charlie followed up by emphasizing the 80-20 rule, noting that while he agrees with the idea, he has some cautions when implementing it. He noted not to use the budget to create programs that are ongoing, as costs can become painful down the road. He suggested using discretionary budgets to fix specific problems. 

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Using ratios to measure risk

Charlie mentioned the ratio of new hire grant values vs. unvested equity, and he gives a good example of new hire grant and bonus versus what current employees make. He noted that if an employee’s new hire grant and signing bonus value are larger than the holding value, then they’re more likely to leave if offered a new position.

He continued to explain that the budget may not be there to match every job one-to-one, so companies may pick and choose where they want to retain or attract their talent. He cautioned against companies losing employees because they aren’t using their unvested equity to meet market rate and compensate people properly.

Tom jumped in to say that checking what the market is doing is important to make sure that new hire grants are not only competitive, but fit into the market, as it may not be feasible to meet market rate in all circumstances.

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The future of using unvested equity to retain your workforce

Both Tom and Charlie then talked about the new and innovative strategies that companies are looking at that focus more on retaining high performers than paying huge bonuses to get people in the door.

They also discussed how Compa helps companies take proactive steps if they see a trend that can affect the stability of employee retention. When making refresh compensation decisions, knowing what is going on in the market can help companies make informed decisions as to how they allocate for new hires versus their refresh rate.

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Watch the full webinar recording to revisit all the topics Tom and Charlie explored. 

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