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If you choose to add performance conditions to your Westing, please ensure that the performance
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matrix is simple and easy to understand.
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You could link them to company performance or individual performance or a combination
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of the two.
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For senior roles, it is better to use either only company performance parameters or if
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you should use individual performance, assign a much higher weight to the company performance.
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For junior roles, you might do the opposite.
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Either only individual performance or a much higher weight attached to it.
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Depending upon your long-term objective, you might even consider everyone linked only
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to company performance.
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The message you send out here is that the fortunes of everyone ultimately depend upon
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the fortunes of the company.
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So we all sink or swim together.
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We all have one not-star.
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Let us focus on how the company performs overall and not how you perform individually.
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Again, this will depend upon how your work is structured within your company, the interdependencies
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it has and the work culture you have decided to create based upon your vision.
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You may consider a scale or ranges of performance rather than a binary performance matrix.
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A binary matrix would mean a yes or a no.
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If we hit this number, the options west, if we are shot by even one, nothing rests.
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A range, on the other hand, means if we reach between this and this, then 100% of those
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options rest.
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If we reach between 90 and 100% of that number, then only 80% options rest and so on.
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You should have a reasonable minimum below which nothing rests.
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You may not waste all the options based on performance.
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Some could waste only on tenure or continued employment with the company.
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You see now we are talking about multiple layers.
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The challenge is to balance fairness with simplicity.
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So try a few alternatives.
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Consider how each fits with your long-term objective and then make a decision.
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Here are a few examples.
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Let's start with the simplest.
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Standard options granted with the 10, 20, 30, 40 Westing but all options west only on
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tenure, no performance condition.
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Second, all options west on performance.
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Third, 100 options with the 10, 20, 30, 40 Westing but 70% options west on performance
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and 30% west on tenure.
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So after the first year, when the first 10 options are due to west, three of them will
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west automatically due to tenure.
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There is the balance seven would west based upon some performance parameters.
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Now that performance condition could have more layers.
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Is everything linked only to the company performance or is it also split between company
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and individual performance in a certain proportion?
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What weights are assigned to company performance versus individual performance?
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And the last layer is the performance matrix structure.
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Is it a yes, no binary kind of a matrix or is it a range matrix?
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So you could have 10 options due to west in the first year but seven of them west based
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on performance which is then split as 50% individual and 50% company performance.
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But individual performance has a scale that says that if you achieve the highest rating
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A, all of that 50% chunk, if B, then 75% of those 50% options west and so on.
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The company performance could have a similar range with respect to company parameters.
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Be careful about adding layers.
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Add new layers only when you are absolutely convinced that you must do it because it
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furthers your long term objective or the culture you are trying to create.
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Simple is always more beautiful.
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You could also create milestone options.
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As the name suggests, these do not west annually or quarterly but west only on meeting a certain
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milestone or an event occurring.
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This might sound very interesting but be very very careful about these.
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Use them only if you can define your milestone really, really, clearly and objectively.
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The milestone need not be the achievement of an entire product or the discovery of a
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molecule.
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It is a milestone so should be a certain critical and a very clearly definable stage you reach
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in your journey.
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Creative milestones are better than subjective milestones.
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So you could west simply based on continued employment or west based on performance.
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Choose whatever fits best with your vision and the culture you wish to create.
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