You suffer from motivation bias. We all do. We assume other people are motivated by the same things that motivate us. Being entrepreneurs we assume everyone wants "a piece of the rock". We assume that motivation for our employees, our board members and our key vendor partners. We assume they want equity in the venture. And for almost all of them, the answer is no. Given a choice between a cash bonus and stock options - 9 times out of 10 they'll take the cash. The studies on risk verses reward scenarios have been widely studied with stock market investing and they apply here as well.
This is not to say your employees, board members and partners don't believe in you or your company. They are working for you so obviously they do. BUT, the key words are they are working "for you". And that decision makes all the difference in motivation. Entrepreneurs come in different shapes and forms, interests and backgrounds but ultimately they need the business to be theirs. It's that complete vestment in the venture that is the difference. The money will come with the growth of the business. For most entrepreneurs it's not even very much about the money. It's about providing their idea "right to the world".
For most other people they don't want stock options or profit sharing. They want a good working environment and they want some stability in income. There will be exceptions. They tend to be the opportunists in your organization. Usually it's the sales people and the business development persons that have these motivation traits. But that kind of motivation tends to be "coin operated". Keep feeding the meter or their time at your company "expires". You will also find a few key executives will see the long term picture. But in general, stock options are wasted on the "rank and file". By wasted I mean it really doesn't motivate them and it really isn't appreciated. You may say, "well I'll give it to them anyways". That is your decision, but isn't the point to motivate them? Aren't you looking to retain them? If that is the case then discover what they want. It is different with different people. Do they want bonuses, advancement opportunities, a flexible work schedule, health benefits, stock options, performance bonuses?
1) Here is an easy test. Go to survey monkey and create a basic online survey. Ask the employees to fill it out. Ask some questions like:
"Pick the two benefits you'd like the company to focus on giving employees" and lay out your laundry list.
"Did you choose to work for the company because of the stock option plan?"
"Are you counting on the company stock options to fund your retirement?"
I think you get the point. I also think you'll be surprised by the survey results.
2) Okay, so what about new employees? Give them a choice. When you are hiring a new employee give them the choice of a bump in pay to start OR stock options. It could be $10,000 difference on a $100,000 salary. The difference there is 10 percent. Give them the choice. If indeed your company will be successful it will save the shareholders a lot of money on financial exit to save unnecessarily giving out options and it puts the stock options to use where they are most effective. It will also put the motivation choice in the hands of employees. Nove
Watch out for your own bias as you make decisions in your company. Don't assume what you like and want is what everyone wants. Start with stock options and work from there.