Intro to the Top Ten Tips...

Each month, Tim posts his 'Top Ten Tips' for HR practitioners on various subjects. This month's subject is 'Stock Option Plan Design in private companies heading for an 'IPO' '. A list of subjects for forthcoming months and links to previous subjects can be found at the bottom of this page.

Be sure to understand the reasons for and timing behind a planned IPO. If the projected 'time to market' is beyond three years, the design of the Plan should reflect that;

Be clear who the eventual decision makers are. Is it the internal Management, or is it solely the Venture Capitalists (VC) who are not as visible, or potentially accessible to see interim design options;

Make every effort with your Management to ensure you have an opportunity to meet or conference call, at a minimum, with the key external influence makers. These may be members of the Compensation Commitee of the Board, or other Board Members;

Take the time to outline the potential alternatives for Plan design. Some of these depend on the targetted employee audience; length of time to projected IPO; existence of prior company Plans etc. Can post-implementation awards be annual; based on a fixed allotment; percentage of prior years' allotments (compounded)?;

Obtain a clear idea, before you begin modelling, of the absolute number of shares the VCs are prepared to award to eligible employees. Does the company's existing share structure include Warrants and other vehicles which allow later conversion to equity?;

Look at the company's Compensation Plan history. What compensation plan designs have been well received and approved in the past (e.g. vesting; eligibility)? What were the notable failures? Why?;

If this Stock Option Plan is implemented, what other changes should be made to the employees' 'Total Compensation' package?;

Have we taken the opportunity to involve employees in Plan design elements? Does their input differ widely from the recommended approach?;

How is the Plan to be 'valued'? What are the factors, criteria and measurements inherent in the Valuation? Are they transparent to employees, or shrouded in mystery?;

How will the Plan be communicated to eligible employees effectively? Are there opportunities to convey the Plan in the context of the overall Business Plan? Can this be communicated as part of other sales/product initiatives, or is it likely to be seen as an HR 'flavour of the month'? How will HR help the company reinforce the Plan six months, a year from now?

Timetable 2000 ... Top Ten Tips

Month	Subject
March	Interpersonal Conflict in the Workplace
April	Harassment in the Workplace...practical considerations
May	360° Feedback...is it right for you?
June	Settling post-termination disputes; mutual gains
July	Business Planning in HR...how to flex HR's muscle
August	Grievance management in unionized and non-unionized workplaces
September	Key Lessons in 'Downsizing'...maintaining business & employee relationships under difficult circumstances
October	Stock Option Plan Design in private companies heading for an 'IPO'
November	Ethical Practices in Performance Appraisal & Related Salary Admin
December	Spreading scarce bonus/incentive dollars...best bang for the buck