In this article we'll look at three ways to do that. Both bonus and profit sharing plans tend reflect past period performance, rather than current and future endeavors, which is where you want your people's attention. They are fixed sums of money, and once paid out, no amount of creativity, imagination or hard work can make them larger. Finally, bonuses require cash - and profit sharing requires profits. Equity addresses these shortcomings.
Equity is the bonus that keeps on giving.
The value of equity compensation is likely to increase over time, often considerably. Equity acknowledges your employee's past contribution, but its real payoff is for work still to be done - and your people have to stay around to reap the rewards. In real terms, the current cost of equity compensation is cheap, especially relative to the loyalty it can purchase. Plus, since no cash changes hands at the time of the equity bonus, you can use it as a reward even if your company is cash-strapped. There are other plusses to equity.