It’s 98 degrees and breezeless. Your car dies and coasts to a stop. Try as you might it doesn’t make it out of the street. The only gas station you know of is 15 blocks away. You get out of the car only to be mocked by the sun shining brightly overhead. You have run out of gas. It’s easy to see the solution, but not as easy to execute it.
It’s not the best neighborhood and your parents don’t know you’ve borrowed their expensive car. If you leave it on the street it might be gone by the time you get back. If you call your parents, you will be in real trouble.
You step out and put one hand on the steering wheel and the other on the door and push. You hadn’t even noticed that you were on a hill. Now the struggle is keeping the car from rolling back into the traffic from behind. You can’t do it by yourself.
Someone walks up and asks if you need help. You happily accept and even let them sit in the car while you begin to push. The car creeps forward. It’s hot and you know you won’t make it to the gas station, but you push for the curb. It’s hot.
Three more people walk up and offer to help. You have a few bucks in your pocket and a few more in the car, so you offer them one dollar for each block. They push with you.
You make it a block and it’s clear it’s too hot and too hard to get to the gas station. You offer your pushers twenty bucks more each when they get to the gas station (where there is an ATM). This inspires them to push another block and then they have a great idea. They call some friends and eight more people quickly show up to help.
You offer everyone the same deal. One buck a block and twenty more when you get to the gas station. They push. With twelve people the car is actually pretty light. It’s still hot and the hill isn’t fun, but you are moving pretty well. Three of the pushers decide it’s taking too long and it’s too hot and leave. They get to keep the few dollars you’ve given them for the blocks they’ve pushed and will give up any chance at the twenty waiting at your destination.
A few more people are called to replace the “leavers”, and you are now at fourteen pushers. The car is moving quickly, and the destination has appeared on the horizon. Three blocks from the station the road flattens, and it almost feels like you are going downhill. You get there and stop the car in the shade of the awning. Everyone is happy, hot, tired… and waiting for you to pay them their bonus, which you happily do. You even buy everyone a cold drink while the gas tank fills up.
You achieved the goal that seemed impossible an hour earlier. You’ve made some friends and told some stories while building the foundation for a completely new one. It cost you a few bucks, but far less than having your parents find out. You still have to help people get home and then get the car back in your own garage, but those things seem easy after reaching your goal.
And that, my friends, is how equity compensation works when done well. It brings people together to push in the same direction. It focuses people on a faraway goal and keeps them engaged until they reach it. The people who leave along the way were paid a bit, but give up the big opportunity, so it can be used to inspire the people who replace them. The people who are the at the end celebrate, get paid and become part of a group that will tell the story for the ages.
Dan Walter is a CECP and CEP and works as Managing Consultant for FutureSense. He is passionately committed to aligning pay with company strategy and culture and is considered a leading expert on equity compensation issues. Dan has written several industry resources including an issue brief on Performance-Based Equity Compensation than Dan refers to as informative written Ambien. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @Performensation (soon to be updated!)