Have you ever bought a cool new car only to spend the next few weeks noticing how many other people drive the same car? You give them the “nod” as you pass on the streets in acknowledgement of their obvious good decision. It doesn't take long to feel like there are far more people smart enough to be driving the same car as you after your purchase than prior. What's going on here?
Last month I did a presentation with two other professionals covering the topic of how equity compensation is actually used. One of the presenters is another well-respected compensation consultant who told me that “everyone” tends to exercise their stock options just before the expiration date. I responded that in my experience most people tended to exercise just after vesting. These diametrically opposing ideas were challenged when the third presenter provided data that showed us both to be wrong.
As we discussed these contradictory results, we realized that our positions were greatly influenced by what we had been dealing with most recently (in this case the past 6-9 months). The data we had been provided had not been filtered or adulterated in any way. It was a statistically sound data set pulled directly from a system used to administer equity compensation programs. This lack of “selection criteria” meant the data spoke for itself. We did not get to color it, shape it or add any personal or professional bias.
Compensation professionals go through this all the time (ok maybe not “all the time”, but at least some of the time.) Attorneys, consultants and those in corporate roles often start their conversations with, “Everyone seems to be…” When I drill deeper I often find that “everyone” is two or three people who recently had been spoken to. Usually the topic came up at a compensation meeting or industry conference. People gather for a presentation on a specific topic, or someone brings an issue up at lunch. Someone else at the table mentions they have also dealt with that problem, or rolled out a similar program and we are off to the races.
We believe we see a trend, but perhaps the facts won't support that. And, I won't even get into how our process of creating and selecting survey data can exacerbate this issue. Your new program or even your old process may be something that other people do, but don’t forget that new car experience. It may be that you are noticing the similarities because you like your own decisions.
Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation”, “If I’d Only Known That”, “GEOnomics 2011” and “Equity Alternatives.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts, a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay.