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