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Attracting Talent with Equity In Your Business

Written by Tom Dott, Senior Vice President - Commercial Banking

Tom Dott CandidIt’s no surprise that employers are having challenges finding employees in 2021 and it doesn’t appear to be industry specific. As of the end of March, Wisconsin’s unemployment rate was 3.8% while the federal number was closer to 6.2%. Whether you’re in hospitality, manufacturing, construction, or any other industry, finding good talent is a daunting challenge. My colleague, Nancy Johnshoy, CFA, discusses the reasons behind this at length in her recent article, “The Job Market Enigma.”

In response to those challenges, employers are pulling out all the stops to attract employees with sign-on bonuses, more paid sick time, increased vacation, and, of course, higher wages, just to name a few. This challenge can get even more complicated as employers begin searching for specialized roles within their companies and become increasingly concerned about keeping the key people they have. Positions like controllers, welders, salespeople, and engineers can be like finding the Loch Ness monster — much talked about, seldom seen.

In response, I’ve heard many employers talking about the possibility of offering some even more enticing benefits, primarily around ownership equity. This can be difficult as many owners are not interested in the cost or complexity of creating a traditional stock awards program nor are they excited about giving up any true ownership of the company. So, what’s a person to do if you feel like this a path you want to pursue?

Here are a few basic considerations to ponder:

  1. Who would I want to offer this to? New and existing employees?
  2. Am I comfortable granting actual ownership in my company and how much am I willing to give up?
  3. Would I want a vesting schedule for any program I put in place or does it need to be immediate?
  4. How might a program like this affect the possible future sale of the company? Good or bad?
  5. Do I want to grant true stock or an alternative like Phantom Stock or Stock Appreciation Rights?
  6. Is an ESOP right for me and the company?

These are decisions you shouldn’t entertain lightly. Rather, I always recommend discussing them at length with your team of business advisors, including your attorney, your insurance advisor, your accountant, and your banker.

Considering Offering Equity?

For more about ESOPs and deciding whether they may be right for your company, make sure to check out “Why Create An Employee Stock Ownership Plan (ESOP)?” episode of the First Business Bank Podcast.

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