Ask what it will take to keep them happy and motivated. Surprisingly, some may want only slight changes in their jobs, while others seek new job functions with no immediate expectations for a pay increase. Recipients must still be employed by the company as of the funds disbursement date in order to participate. This provides an incentive to employees on a yearly basis until just after the disbursement date. The company pays for this incentive only out of profits, not operating capital.
Ownership is a powerful motivator.
Structure the options so that 25 percent are exercisable on the next four anniversary dates, and only if the option holder is still an employee of the company. This provides an employee incentive for up to four years, depending on company growth. There is virtually no cost to the company other than giving employees a small slice of the company. It also provides a small amount of cash back into the company when the options are exercised. The employees will usually see this as a significant reward, while the cost to the company is minimal.