Incentive stock has long been awarded based on candidates' history, negotiating skills and charm on one side and position urgency, managers’ agenda and sheer desperation to fill a position on the other—none of which accurately predict the real-world contributions made after the hire. Worse, this approach frequently leads to substantial disparity between peers followed by turnover or reduced engagement. Furthermore, saying that stock grants are confidential "so nobody will know" is like spending Halloween waiting for the Great Pumpkin to bring you a present.

Solution

Option Sanity™ translates a founder’s philosophy and beliefs in merit, fairness, transparency and authenticity into action when allocating incentive stock. It is delivered as an easy and inexpensive Software as a Service (SaaS) application. In addition to aligning stock allocation with cultural vision, Option Sanity™ addresses risk reduction, predicts dilution and assures investors that the company is making the best use of its equity in whatever form, including options, restricted or phantom stock.

Overview
Option Sanity™ is a framework to deisgn stock grants that are effective, fair and understandable.

The system is transparent and accurately reflects the company’s values and culture. It allocates Incentive Stock Option grants based on a role or position's ability to influence the company's success, determined by the CEO and board. This enables separation between an individual’s potential and the role’s contribution within the company.

Option Sanity™ provides a flexible structure and logical methodology that reflects both business and ethical drivers on the part of the entrepreneur and is seen as fair by employees.

Option Sanity™ benefits all stakeholders, investors, founders and participants, delivering a consistent and transparent framework for private stock management.

Option Sanity™ Features

Recognizes that at all levels, including executives, past performance and interviewing skills are only an indication, not a guarantee, of future performance.
Eliminates arbitrary awards based on whims, charm or negotiating skills.
Rewards performance by blending employees' past experience with future efforts that focus on achieving the company's goals.
Makes stock allocation process transparent to everybody.
Accurately reflects company culture and values by incorporating the founder/CEO's attitudes and philosophy of fairness and ethical behavior.
Provides a structured methodology to award stock in a startup or any company instituting a stock plan.
Flexible enough to work for any type of stock (options, restricted or phantom) and with companies in any industry, of any size, with any management structure and with staffs of all skill levels.
Structures the Annual Stock Bonus so that a significant portion of each person’s stock rewards may be based on the actual success of the company over time, as measured against quantified annual goals approved by the Board.
Manages, simplifies and administers the stock option allocation process.
Tracks ISOs as the company grows.
Contains a Reporting function (Stock Plan Report for Board, Employee Options Report, Total Stock Allocations, Annual Stock Bonus, Special Project Bonus) saves significant executive time.
Predicts and models dilution
Audit trail Supports audit and regulatory compliance needs and transparency
Fills a nitch (allocation) not addressed by other stock plan administration offerings.
Works in conjunction with other stock plan administration offerings.

Practical Impact

As Option Sanity becomes known it will be indicative of a certain type of culture and a management that backs up its talk by putting its equity where its mouth is.
It will attract people with the confidence to know they can achieve great results, thus increasing their equity stake over time.
Because the Annual Bonus is dependent on accomplishing company goals, it undercuts politics, silo-creation and a "me first" attitude among employees.
Option Sanity prevents the bad press and morale problems recently faced by Zynga.

First Steps

Connecting with thought-leaders and the “do-ers” in the startup community. This includes angel investors, mentors, VCs, serial-startup gurus, founders and advisors like attorneys, CPAs CFO-types and others who guide young companies from small to large.

We will be looking to meet the incubators, venture accelerators and centers of innovation, disruption and action.

High-growth company and start-up life is one huge network. Entrepreneurs ask other entrepreneurs what works. Option Sanity works. Top investors, advisors and board members bring value by recommending tools and processes and platforms that set up their companies for success. Option Sanity sets up any company for success, big or small.

Option Sanity is like super-food or super-inoculation against chaos and drama in fast-growing companies. We need to meet the “company doctors” who are responsible for great preventative medicine and accountable for rapid growth.

Credits

When you live with an idea long enough, taking it from a consulting intangible to a fully functioning SaaS product you tend to write about it with unconscious assumptions based on your knowledge that others do not have.

My thanks, as always, to Board member Matt Weeks for finding time to review and edit this hack and for filling any gaps created by those assumptions.

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