incentive presentation 070410

Incentive Plan Seminar

startupcfo.ca@startupcfo

Mark MacLeod

April 2010

© 2010 StartupCFO Enterprises Inc.

Agenda

Incentive Compensation• What does incentive mean? • Issues

• Suggestions

• Bonus Plans

• ESOP

• Questions


Introduction

Me:


Incentive Comp

Incentive:

any factor (financial or non-financial) that enables or motivates a particular course of action.


What Motivates You?

Depends….


Incentive Drivers

Investors Founder Execs Team

Motivators

Fame J J KFortune J J KPower J J KAutonomy J J J JWork environment K JPeers J JGreat Work JAdvancement J JNew Skills J

More Funding KGrowth J J JSpeed J KExit event J K J

Ownership High High So So Low

Frequency Few 1 or few Few Many


Issues

Structuring Incentive Plans:• Who designs them vs. who is impacted • Where to focus? Strategic vs. Practical • Cause and effect • Clarity • Alignment

• Culture

• Inconsistency

• Frequency


Suggestions

• Start with practical, non-financial incentives

• Make goals clear and tied to individual / team actions

• Annual goals and quarterly goals

• Communicate consistently & regularly

• Reward excellent results and those people who make them happen


Bonus Plans

Who, When, Where, Why?

Who: Senior execs, Department directors, people with quotas & /or quantifiable time-driven targets

When: Annual, based on company & individual performance, spot grants can be used

Where: After minimum revenue or break-even

Why: Reward quantified short term performance


Bonus Plans

How Much?% Base

Founder CEOs 0 - 30CEOs 30 - 50+CxOs 30+VPs 15 - 25Directors 10 - 20Managers 0 -10


Bonus Plans

Mechanics

Bonus = Corporate Performance * Individual Performance * Base Salary %.

Bonuses will be paid twice yearly, at the discretion of the CEO. Bonuses will only be paid if corporate AND individual performance are 50% or higher and the company is profitable.


ESOP

Who, When, Where, Why?

Who: Depends. Everyone? Admin? Senior team?

When: At time of hire. Spot grants & annual top ups

Where: Anytime after ESOP in place

Why: Reward long term performance


ESOP

Senior Management - % of companyNon-founder CEOs - 8 - 10%Founder CEOs - 0 - 3%COO / President - 3 - 5%CFO - 1 - 3%CTO - 1 - 3%VPs 0.75 - 1.5%

How Much?

Team - % of base


ESOP

Role % of Base Role % of BaseAdmin 6% Junior marketing 21%Analyst 3% Operations, Sys Admin 18%Community Manager 12% Ops Lead 22%Controller 13% Product Manager 31%Designer 6% QA 5%Developer 22% QA Lead 11%Director, Biz Dev 32% Sales Engineer 18%Director, Engineering 36% Senior Dev 16%Director, Marketing 23% Senior Dev / Team lead 19%Director, Operations 29% Senior QA 24%Director, Product Management 56% Support 7%Director, R & D 43% Systems Engineer 21%Junior Dev 8% UX Designer 33%

Benchmarks


ESOP

•Top heavy • Valuable?

• Unfair rules

• Early exercise

IssuesPresident 5%CFO 3%VPs 3%

11%

Everyone else 4%15%


ESOP

Align grant with real contribution & role impact

Make them real!

Follow standard structure

Vest everyone on exit

Voting Trusts, buyback rights

Suggestions


Questions

incentive presentation 070410

Business

corporate performance

company individual performance

reward long term performance

short term performance

annual goals

senior team

incentive compincentive

incentive mean