A startup involves so many activities that are not standardized and are therefore more time and resource-consuming. The opportunity cost of these is quite high since the time and resources spent on managing operations can otherwise be used for business development, thought leadership, and other ways to widen the horizon of the business.
Fortunately, one area in which founders and key people in an organization can outsource is employee equity management.
Employee equity, also known as stock options, is a powerful tool that can help your startup attract top talent, retain key employees and drive the company to success.
Employee equity management involves decisions regarding the stock option policies of the company. But it is a little more complicated than it sounds. Issuing stock options, managing their operations, ensuring compliance, timely reminders, payments and updating their statuses is a full-time job.
Employee Equity Management Software – An Efficient Tool to Enhance the Value of Your Organization
Here are 4 ways in which using an employee equity management software will help your business.
1. Reduce Labor and Labor Cost
Typically, a startup has a lesser number of employees compared to a large organization. These few take care of all aspects of the business, from operations and finance to management. They are also compensated commensurate with their skill and contribution to the growth of the startup. If they allocate many precious hours to stock option management, there is a double cost ineffectiveness that occurs for an organization. This is because of the following two reasons:
- The core employees are doing work that is below their talent level and compensation, which is detrimental to the company financially since it is paying a much higher rate than normal for employee equity management.
- The company is losing out on potential business or managerial breakthroughs which could have happened if the key people focused their energies on business development instead of employee equity management.
The solution? Employee equity management software.
It reduces the load on your workforce by automating some of the tasks that need to be done manually. Some examples of these tasks are manually creating or filling out documents, sending reminders to the relevant teams upon certain instances or transactions, and updating the database.
These are not only time-consuming but also eat into the precious time of highly resourceful employees. Using an employee equity management software for these tasks will reduce your labor cost.
2. Smooth and Timely Operations
A stock option management software is an end-to-end solution for commencing, managing, and documenting the employee equity journey of your startup.
Employee equity has various stages such as a grant, vesting, exercise, and sale. Some of these involve an instance alone, while some involve an instance followed by a period. Not sure what these terms mean? Click here to find out.
Managing these instances and stages is not easy, since it involves planning and execution across financial years. The person in charge of employee equity management must check the documents on a regular basis, figure out whether there are any tasks to be done, and complete the tasks manually. The company may miss out on key events such as the allotment of shares since the timeline for a stock option runs for several years.
An employee equity management software that comes with timely reminders eliminates this hassle. It sends reminders to the relevant teams or people to take the needful action on the grant, exercise, vesting, and sale of shares. Thus, it facilitates adherence to plans and timelines.
An employee equity management software that comes with preset templates that can be customized as per your startup’s needs greatly reduces the time taken to set up a stock option. Integrating this software with the accounting system, payment system, and repository of policy documents ensures that the related systems are automatically updated and reminded for upcoming transactions.
3. Risk Management
An employee equity management software also functions as a risk management tool for a company, since it reduces the following risks:
Manipulation of Information
If the information pertaining to the number of shares held by different individuals is accessible and editable by people who manage such information, it is prone to manipulation for the personal benefit of one or more individuals at a detriment to the company. Having an employee equity management software can prevent this.
Errors in Manual Work
Errors might creep in while entering numbers or dates manually. When data is communicated from one source to another, miscommunication can occur. Errors made years ago might be discovered only much later on, which can make the rectification process extremely cumbersome due to changes in documentation. An employee equity management software acts as a checks-and-balances system to ensure that errors are minimized.
Breach of Security
The employee equity database consists of information regarding the type, class, and value of shares issued. If this information is leaked and falls into the wrong hands, the valuation of the company can be negatively impacted. Therefore, information regarding employee equity is to be treated as highly confidential. An employee equity management software that comes with strong security features protects the information and the company against users with ill intentions.
Negligence in compliance
Companies that manage their stock options without the use of a suitable software solution may inadvertently miss out on complying with all the rules prescribed by the regulatory authority. Having an employee equity management software in place will ensure that policies are drafted keeping in mind the mandatory compliance and are also aligned with the best practices in the market.
Reliance on a single source
Since startups run on a low number of employees, it is possible that manually managing employee equity is done by a single employee, or at maximum, a select few. If the employee who is at the helm of affairs of employee equity quits the organization, the company might not be prepared to handle the operations since only one person possesses the know-how. Having an employee equity management software ensures that the stock option operations do not get disrupted regardless of the labor turnover.
In addition to protecting your company against potential threats and simplifying operations, a good employee equity management software can act as a reliable guide to facilitate crucial decisions involving the capital structure of a company, particularly its equity.
This is because the software can display the information in a manner that is easy to grasp, represent it graphically, and reveal insights based on statistical tools like trend analysis.
This can be used to predict how many options might be exercised in the future or the value of your company’s paid-up capital. The insights revealed by a good employee equity management software can help you strategize your capital structure decisions with ease.
Employee equity management has become a mandatory activity for most startups since employee equity is a viable, strategically beneficial, and cash-conserving mode of fairly compensating top employees. Thus, it makes financial and operational sense to have an employee equity management software in place so that you can focus on building your brand and growing your business.
Click here to view the employee equity management software offered by trica equity!