How to Use Equity to Incentivize Employees

July 31st, 2014 | Posted by Sarah Jones in Guest Blogs - (Comments Off)

NVTC is inviting members and industry leaders to serve as guest bloggers, sharing insights and information on trends or business issues relevant to other members. In his latest post on the NVTC blog, Matt Rajput of CohnReznick shares his insights how to attract and retain employees through equity compensation.


Technology company executives are continually challenged with how to attract, retain, and motivate key employees. Technology start-ups, in an effort to conserve cash, are known for streamlining operations and offering employees thin compensation and benefits packages until they land on more stable financial ground.

One idea for attracting and retaining employees is to include an equity component as part of the complete compensation package.  This can be in the form of common stock, stock options, profits interests, phantom stock, and other forms of equity.

Issuing equity to employees is a great opportunity to give employees a stake in the future of the company because the value of their stock, stock options, or other equity instrument is tied to the performance and growth of the company. This concept of ownership also creates inherent advantages as employees who become owners themselves (or have the option to become owners) will work harder to improve the business, because it will drive more value to their options.

Equity compensation promotes employee retention as vesting terms or restrictions typically require employees to remain with the company for a certain period before they are fully vested in the equity. For example, an employee can be given 100 stock options, in lieu of or in addition to an annual bonus, but the options have a four year vesting term requiring the employee to vest in 25 options each year. In this circumstance, the employee would have to remain with the company for four years to fully recognize the entire value of the 100 stock options. If the employee were to leave after two years, they would only be vested in 50 stock options leaving 50 options on the table.

Equity is also a very important carrot that can be used to attract talent.  In a competitive market, the ability to offer a prospective employee a stake in the upside of the company’s growth could be a differentiator in closing the deal.  Even if the company has the ability to pay market salaries, many astute tech executives continue to look for an equity stake.

Another attractive element of this type of compensation is that it is a cost-effective way to offer employees additional compensation that may be worth a great deal of money in the future as the value of the company improves over time.

However, implementing an equity compensation plan does not come without challenges. Some employees may not want to wait a few years for a liquidity event to receive the compensation for the work that they are currently performing. Long vesting periods, tax consequences, and high exercise prices are all characteristics that make equity issuances less satisfying to employees than cash compensation. Additionally, non-public companies may have a hard time getting employees to realize the value in an equity instrument that cannot be easily turned into cash.

Despite these pitfalls, many companies, both public and private, continue to utilize various forms of equity compensation to keep their employees motivated, well-compensated, and engaged.


Matt Rajput, CPA, is an Audit Senior Manager with CohnReznick LLP and a member of the firm’s Technology Industry Practice. Working from the firm’s Tysons Corner office, Matt has eight+ years of experience servicing publicly-traded and closely-held companies in the technology sector and he routinely provides services to private equity and venture capital backed companies. Contact Matt at matt.rajput@cohnreznick.com. Follow CohnReznick’s Technology Practice on Twitter @CR_TechInd.

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The Value of Captured Knowledge

July 22nd, 2014 | Posted by Sarah Jones in Uncategorized - (Comments Off)

NVTC is inviting members and industry leaders to serve as guest bloggers, sharing insights and information on trends or business issues relevant to other members. In the post below, Derek Alden Elder of member company Salient Federal Solutions explains the value of ensuring data from the greatest workforce our country has known is captured and our people are properly prepared to fill the void once they retire.


With the greatest workforce our country has ever seen set to soon retire we must, as a country, focus now to ensure the data is captured and our people are properly prepared to fill the void. In most organizations, valuable knowledge is scatted across so many sources. Additionally, valuable information and experience is in the organizations people. This puts new emphasis on training and infusing innovative technology to validate the effectiveness and return on investment for each training dollar spent but how are you and or is your organization capturing this truly vital data?

Configuration management is a term loosely used these days when discussing the capturing of vital data but how do you define it within the context of training? What tools do you use and or requirements define your process? Are you ready for the knowledge gap and or is your organization well positioned to thrive with the talent that will remain …?

It would not be honest or fair to consider ourselves the end all be all of capability with respect to the questions but we have answered them in the manner they are posed above and have found that our solution is both viable and scalable within many different verticals. We find that our customers have been trying to do the same but few are actually, where they need to be to thrive due to poor organizational planning, threat understanding, or simply insufficient insight which begs the question, “Are you spending the training dollars you need to ensure organizational success beyond the retirements of the current subject matter expert workforce?” And if not, then “How can we prepare today?” It has never been more important to capture the knowledge from a professional and make it readily sharable before the expertise of that is expertise is list forever.

Not only is it important to preserve this knowledge, but the real value is derived from applying it into business decisions to enhance the organization. We use multiple methods but the most valuable is a custom built learning management system with an additional widget built in that we call the Individual Development Plan (IDP). IDP enables our customers and team (as well as management) alike to enter data regarding capability, lessons learned, anticipated development roadmap and much more. Leadership can push courses they want their staff to take down through hierarchal recognition and assign training in the same fashion users can enroll themselves. We can capture technical data from on-site tasks, which is specific to each user, and then reference it as needed. In a digital world with minimal travel budgets instant secure access from anywhere becomes vital so handheld devices and computers share similar accessibility.

Every requirement and user demands a situational approach. This method has become essential to the way we operate and continues to be validated by the user community on both ends. It doesn’t matter what you have today as much as it does that you have a plan capture knowledge and preserve it. That roadmap will soon be vital as we progress deeper into the upcoming era of senior knowledge gap and the timeliness will directly impact your bottom line.  It is vital that you take the necessary steps today to mitigate this issue tomorrow.

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NVTC is inviting members and industry leaders to serve as guest bloggers, sharing insights and information on trends or business issues relevant to other members. In the post below, Derek Alden Elder of member company Salient Federal Solutions explains how professional development is essential for success.


Today’s government, industry, civilian, and institutional professional leadership all agree on one thing: Professional development is vital to success. Yet it is becoming harder each and every day to find time for it. This is driven by many factors. The most obvious, of course, is the continual reduction in force to accommodate todays lower cost requirements. These strong economic and political headwinds demand we make a difference.

With less people doing more work it is impossible to ignore the implications to the remaining forces’ availability to support seemingly non-essential requirements, such as further developing their applicable capabilities through professional development, training, and education. We must have a relentless commitment to our customers, colleagues and our communities. Salient Federal Solutions believes that a viable solution exists which will mitigate this issue and we use it today.

In a rapidly changing environment, infusing current work requirements into the training our warfighters receive today is essential to increasing effectiveness within an experiential modality while also serving the trainee by assisting with the execution of their deliverables and concurrently advancing their knowledge base. Salient plans a custom approach to every requirement so it can and is being done today. We understand that success is dependent upon our situational approach and customized execution on each task – getting warfighters what they need and when they need it. Minimizing time spent while maximizing output to current requirements while broadening knowledge base will determine effectiveness and thus define return on investment of training to leadership. Although counter to most industry culture, this is the only viable path to solving the growing work/train/time issue we all experience in these leaner times.

Whether it be professional, technical, or personal development it is essential for the end user to insist upon their workload being infused to the exercises associated with our learning process, but similarly, we need to drive this approach from the top down as the leading providers to the education and training industry. This change can only be achieved if we stand together behind one simple truth; developing our workforce is vital to future success and it cannot be accomplished without fundamental changes to the approach most take today. If our workplace has become more efficient and lean then so must we with something as important this.


If you’re interested in professional development, get involved with NVTC! Attend an event for opportunities to see and be seen by industry leaders; join a committee to meet potential clients, build relationships, and learn about trends; and check out NVTC’s many other resources.

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