Caroline Joseph
Apr 12, 2022 9:03:19 AM

Equity is not a dirty word, but from the way it’s used by many people, you’d be forgiven for thinking otherwise. Hushed tones, concerned expressions and wide eyes accompany more discussions of employee equity than not, worn by People Ops professionals who feel out of their depth just hearing the phrase “share schemes”.

But with the war for talent raging on and competition for talented employees fiercer than ever, something’s gotta give. A number of People Ops leaders have already taken charge, brushing up on their equity expertise and joining forces with finance teams to get the most out of this startup superpower. They’ve shown that getting to grips with equity isn’t as daunting as it seems, and that it could make all the difference to a scaling business.



Already thrilled by this budding trend, Capdesk decided to take it one step further, holding a webinar where CEOs and People Ops leaders could share insights and advice for leveraging equity in today’s market. Felicity Winkley, People Director at Papier, Dan Hardaker, Chief People Officer at Penta and Lauren Stewart, CEO of Invigorate joined Capdesk’s CEO, Christian Gabriel, on this expert panel.

Setting the scene

The panellists kicked off the conversation by discussing who gets equity, why it’s important and what it can achieve. Felicity raised a common question about who deserves equity.

“If you’re a tech company, should it be your engineers building that product that get equity,” she asked, “and not the sales or customer success team? Or should it be everyone?”

“Everyone should have equity in some shape or form,” answered Christian. “It's the only remuneration structure that completely aligns the board, founders, management and employees.”

Lauren suggested that new faces in the boardroom were leading to an increase in equity schemes.

“Increasingly, Chief People Officers are being promoted to take on board seats where, traditionally, other business matters have taken priority. In the boardroom, they provide governance and represent employees and their equity while making sure people are at the heart of the company’s overall growth strategy.”

Dan agreed, noting employee equity both reflects and rewards the challenge of working for a growing company. “People have to work hard in a startup – it’s not easy. You often expect employees to do a little bit more. Sharing in success motivates employees and helps them understand why they often have to multi-task.”

A novel approach to flexible working

Many new working practices have emerged post-pandemic, forcing startups to consider what employees want and need from their employers. In a recent Capdesk community poll, 74% of respondents thought it was time to transition to a four-day working week – but Felicity argued otherwise.

"The reason equity is a valuable proposition in startup culture is because you’re often asking people to wear more than one hat,” she explained. “People work hard and the business moves very quickly. To compress that and ask people to do a full week’s work in four days creates pressure.”

Dan took a similar view. “I don’t think people will see this as a long-term benefit,” he shared. “The question shouldn’t be about whether it’s four days or five but rather what people want to do. Some might prefer to work three days, others, five or six. The four-day week is simply mandating a different way of working. It doesn’t provide choice or flexibility.”

On the topic of flexibility, the panel went on to discuss the impact of remote, home and hybrid working policies. 

“It can’t be a one-size-fits-all solution anymore,” said Felicity of Papier’s current setup. “We’ve tried to be flexible by mandating just two days in the office a week. Employees who want that social element often target specific days, while others, who want a quieter working environment, come in when there are fewer people around.”

Remote working has made a lot of leaders question how they make connections and communicate with their teams. To create a coherent company culture, Christian argued, there needs to be one element that holds it all together.

 

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Open-ended equity

If employees aren’t engaged with or interested in their equity, People Ops leaders and CEOs alike are in trouble. It means the most valuable perk on offer isn’t being appreciated, and it means founders are giving away some of their company without good reason. 

With this in mind, the panel dived into ways employers can engage their staff with equity.  

Lauren spoke about the fine line startup CEOs have to tread when talking to employees about company ownership. “As a leader, you’ve got to explain the risks but you’ve also got to portray confidence,” she said. “You’re selling this vision to your investors and management team and you have to do the same with employees.”

Christian stressed the need to communicate all aspects of equity. “Employees need to understand that equity is not a perfect instrument. It’s high-risk, high-reward and they should be motivated by that,” he explained. “Ideally, you shouldn’t be looking at a 2x financial return, you should be looking at 100x, or it doesn’t really make sense.”

 

Finding the right narrative 

When asked what she might need from a leadership team to educate and inspire employees about equity, Felicity expressed a desire for more information and greater transparency. 

“I'm already doing around 80% of the work on employee share schemes, but that missing 20% – such as information from our lawyers or the board – would help me answer employees’ questions,” she admitted. 

“When you’re talking about equity, you want to be able to show employees a model of what their equity is going to look like in five years’ time. If you don’t have that data, it can all be a bit abstract,” she continued. “Without confidence in what you’re describing, it’s not going to filter down effectively.”

Championing People Ops professionals, Dan spoke about why they’re best placed to communicate equity information to employees.

“We've got the right set of skills to move equity beyond being just a transaction, beyond a piece of paper you sign. We’ll embed it into our processes, from onboarding to internal comms, and we’ll sell it as a strong benefit. It can be built into the strategy for engaging and rewarding staff.”

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A blank page for fresh talent

Using equity to attract talent has become increasingly important as the war for talent heats up. However, a recent Sifted survey found that only 23.5% of candidates for startup positions consider equity or shares a priority. We asked our panellists for their thoughts on the survey results. 

Dan wasn’t surprised. “In many organisations, equity is still shrouded in secrecy, so it’s no surprise that people don’t fully understand it.” For him, one solution is better financial advice. “We find that once we take the time to explain equity to candidates, they really value it and recognise that it’s an important part of their package.”

Christian felt that equity will become a stronger talent magnet as more success stories are shared. “I think we need to foster a sense of “FOMO” by doing secondaries and allowing some employees to cash out. Then you can go out and show that you practise what you preach. You can point to the employees who have been able to pay off their mortgage or buy a house.”

Actions speak louder than words

Spurred on by news that Monzo was introducing a three-month sabbatical for long-standing employees, our panel talked about creative ways to retain top talent. 

Dan thought the Monzo sabbatical was a nice idea but the fact that most employees spend an average of 19 months with a startup had him doubting its effectiveness. 

“There’s very little value in holding onto someone who doesn’t want to be there simply because they might have a huge amount of equity to come,” he expressed. “That’s not going to help you, your culture or the individual.”

His advice? Set realistic timelines. “Don’t kid yourself that four years isn't a long time to work in a startup.”

A final sentiment from Christian rounded out the panel’s discussion. 

“You can’t hack culture. Equity can't replace what you need to put in to make people stay, but it can and will amplify a good culture.”


Capdesk’s new employee dashboard makes communicating share schemes to your workforce simpler and more engaging than ever.
Book a call with one of our equity experts today to discover more ➡️

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