ESOPs are used to motivate employees and give the feel of “ownership.” The process does not end with handing over Grant letters to employees; it actually starts there. Moreover, ESOPs are a long-term instrument, and it is essential to engage the Option holders, handhold them, and keep them informed about the Plan and its performance.
Rolling out ESOPs is one thing, and ensuring it is a success is another. Therefore, let’s look at the key factors important in managing ESOPs post rollout – Communication – Documentation – Administration – Compliance….
- Employee Communication & Awareness –
Communication is vital for the success of any employee benefit plan. Effective information disbursement of the Plan through a structured communication channel helps ensure employees understand the linkage between their performance and the company’s growth.
Constant and phased out communication with employees through the Plan tenure and its details on vesting of Options, expiry/lapse at regular intervals ensures employees’ desired participation for converting these options to company shares, thereby creating ownership.
Communication is usually done by disseminating periodical financial performance, information on the Valuation of shares, sharing insights through Townhalls. Awareness is also created through Banners, FAQ booklets, Helpdesk, etc.
- Effective Tool and Systems for Plan execution –
As we know, ESOPs run through long durations, and the data maintenance it demands can be tedious, causing an administrative burden on the company. As the Plan information updates in real-time based on activities defined in the scheme, managing this information in real-time requires highly qualified and updated tools and systems. A specialized design accommodates the ease of management and administration to the company and the grantees. A tool that effectively creates Management reports and dashboards and ensures compliance is essential for efficient Plan Management through the years
Automation of better employee handholding processes and reducing paperwork creates administrative ease and reduced person dependency, thereby leading to compliant data integrity, improvement in the user experience, and data security.
- Data Security & Access –
Every plan has two sides of stakeholders on it: the company side and the other being the grantees. The information flow plan should include aspects of confidentiality from a data management perspective which is a crucial aspect of any ESOP plan. Online access through secured logins and structured reporting helps required stakeholders’ access to relevant information only. To ensure the safety and security of company and employees’ confidential data, companies should adopt tools and systems which have industry best practices in
- Process & IT Security along with data security controls
- Disaster Recovery & Continuity of systems/tools containing ESOP information.
- Ongoing vulnerability and security testing in addition to audits by registered auditor companies
- MIS & Reporting –
Defined and structured Management reports and dashboards help in better decision making, better control, and enables measurement of Plan performance.
The above factors are a few (and not limited to) pointers that help manage your ESOP Plans effectively, contributing to a successful ESOP Plan for your company and employees.