During the dot com era, everyone involved in a startup company was after stock options as employee incentives …with good reason. With the easy accessibility to venture capital, the public’s ravenous appetite for IPOs, and the opportunity to go from startup to exit in a year or two, stock options became the way to cash in on the gold rush.
However, times have obviously changed. Post-bubble, there are fewer IPOs, capital of all kinds is harder to come by, and the time from startup to exit has been returned to a more traditional pace. Therefore, if stock options aren’t what they used to be, how do you provide incentive for employees to burn the midnight oil and put in the extra effort that it undoubtedly takes to achieve success? There are ways to do it. While the promise of financial riches has value, there’s a variety of appealing alternative employee incentives that have more do with a quality of life that comes with working in an entrepreneurial business startup.
Create unique employee benefits
Make the notion of working for your startup business better than working at any alternative by offering other employee incentives, such as health care packages with broad coverage, a company car or even a membership to the local health club. These subtle benefits, while not directly monetary, have a big impact on the depth of commitment and appreciation expressed by employees.
Promote a team environment
Perhaps the least obvious, but most powerful, employee incentive and benefit you can offer to your team is to create an environment where the group is strong. We’re talking about a true team, comprised of individuals who are each critically important to each other and to the overall success of the company. When people know they're important, they're more dedicated and take pride in the overall success of the business. A clever way to build teamwork is to organize a day trip or a friendly contest among employees. The contest could have to do with sales achievements, customer satisfaction achievements, product development, or even a competition that has nothing to do with your business. Go play volleyball!
Be sensitive to varying employee incentives
Remember to be sensitive to the fact that the team will not be treated equally with many employee incentives. For example, some employees may receive a higher level of equity, and while this is completely justified, it should not be highlighted by the company or by the employees. Each employee’s package should be tailored to the individual based on level of importance of the position, the tenure at the company and the performance of the employee. However, at no time should the individual packages and employee incentives become “public” information to the rest of the team.
Leave room to grow employee incentives
Make sure you always leave room to continue to give employee incentives to particular individuals as their time at the company grows. For example, if you provide annual raises as an incentive, don’t price the employees out their jobs by raising their salaries so aggressively that there is no room for growth.
Offer financial rewards
There is no denying that the opportunity for a financial windfall is a powerful employee incentive. Even with the changing business environment, stock options, direct equity ownership, profit sharing plans, and/or bonus employee incentives should be part of the incentive package you provide to your team to keep them motivated and dedicated.
Providing employee incentives and benefits to the team is a must for entrepreneurial businesses. Many times it’s hard for the small business to match the salaries that can be offered by big businesses for a similar position. So it’s essential to find other ways to attract and retain employees, and most important, keep them motivated and dedicated. You've got to achieve that through the extras - the employee benefits that the team member can get through the unique offerings that a small business can provide, particularly the unique lifestyle advantages of the entrepreneurial culture. So put a little Sis! Boom! Bah! in your new business. And remember - give your team an “I” for employee incentives.