Long-term incentives can actually change how your team performs and stays committed to your company’s success! These programs help to align employee interests with organizational goals through structured rewards that mature over multiple years. It helps if you choose the right combination of incentives that can motivate your workforce and support your business goals.
These incentives give you some surprising results when they’re implemented properly. I’ll talk about the best options, such as equity grants, performance bonuses, professional development, and recognition programs. I’ll also take a quick look at how leading businesses use these strategies – and common dangers to stay away from.
Let’s take a look at some proven approaches that’ll energize your team for the long haul and drive sustainable growth.
What Are Long-Term Incentives?
Long-term incentives can give you a real stake in your company’s future success. These rewards usually stretch across a few years, and they include rewards like company stock options or ownership plans!
These incentives help to keep the talented people around. Your coworkers will stay longer when they know they can own a part of the company they work for.
The whole process actually works like growing a tree in your backyard. You won’t see any fruit – but with some time and attention, the rewards start rolling in. Long-term incentives need time to grow, too – usually around three to five years. When they do pay off, though, everyone wins (you and your company).
These programs look different from your regular yearly bonus because they start with the bigger picture. Your annual bonus might reward you for crushing this year’s goals. But long-term incentives get you thinking about your company’s future. They change your mindset from “just an employee” to “part-owner.”
Most businesses use stock options as their preferred long-term incentive. You’ll get the chance to buy the company shares at a fixed price, even after the market value shoots up. Everyone gets to share in the company’s success.
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Long-term incentives can really change how people work. You’ll naturally start making better and more future-focused decisions when you have something personal at stake. Instead of chasing quick wins that might backfire later, you’ll think about what’s best for the long haul.
Your connection to work grows stronger with these incentives. You’ll care about how well the company performs once you own even a small part of it – just like homeowners care about their property more than renters do.
Consider Stock Options And Equity
Long-term incentives can make your best employees feel like they’re invested in your company’s success. Businesses use stock options and equity grants to give their team members a real stake in the business. Your employees will work harder toward shared goals when they own a part of the company!
Serious tech businesses like Amazon and Snapchat have mastered equity to motivate their top talent. These businesses usually spread stock grants over multiple years, which helps give employees a reason to stay committed to long-term success.
Your employees might care about ownership through equity more than cash bonuses over time. The value of stock options and shares can multiply when your company performs well – this shot at bigger future rewards tends to mean more to the team than immediate cash.
Equity-based incentives come with some problems, too. Stock prices don’t always increase, which means options could end up being worth less than planned. Your employees might feel let down if they’ve counted on their equity as a part of their pay package.
Businesses like Verizon show how equity programs can work for everyone involved. Their “Stock Together” program lets all employees benefit when the company succeeds. The rewards build up over three years and grow based on company performance.
Lyft works with compensation differently with yearly equity grants. They issue new stock that can become available after just one year – this keeps their team focused on quick wins and future growth. Their employees love fresh equity.
You can build a stronger connection to the business when you give employees ownership. Your team members will think more like owners when they have real skin in the game and a personal stake in success.
Offer Restricted Stock Units
You have to give out some long-term incentives to draw in and keep top talent around. Restricted Stock Units (RSUs) work well as one of the tools your business can use. Your employees get a direct stake in your company’s future when you give them these stock awards.
RSUs also give you way more protection than regular stock options. You won’t need to buy anything – the company basically hands over the shares once you meet the conditions. That’s quite a bit less risky than stock options that might end up worthless if the stock takes a nosedive.
Your company will probably spread out the RSU vesting over four years, like other businesses do. You can get about 25% of your total shares each year – this setup helps you to improve the company’s growth in the long run.
The tax rules for your RSUs are actually pretty easy. You’ll only pay taxes when those shares officially become yours through vesting. Your company will usually hold some shares back to manage the tax payments – much easier than dealing with the tough tax matters that come with stock options.
Successful tech businesses show how well RSUs work to keep employees happy. You can look at Tesla – they handed their CFO more than 100,000 RSUs to show how much they liked his dedication to the company’s future. An incentive like that makes you think twice about jumping to another job.
Your RSUs will drop in value if the company’s stock price falls, sure. But here’s the point – unlike stock options, RSUs will always be worth something as long as the company’s shares have any value at all.
RSUs are at their best because they turn you into a real company owner. Once you have actual shares in your hands, you’ll naturally care about how well the company performs. Pretty soon, you’ll start thinking like an owner instead of just another employee.
Tie Rewards To Performance
Long-term incentives directly cause your team’s motivation and success! Most businesses can start with some basic performance rewards for achievements – like merit pay increases or yearly bonuses when you hit your targets.
Your organization should have a clear and complete picture of what success means for your team. Start with tracking some real metrics like how satisfied your customers are or if you’re hitting those revenue goals.
A big part is to balance rewarding star employees while keeping teamwork alive and well. You might accidentally create a competitive environment by focusing too heavily on individual achievements. Soon enough, your team members stop helping each other because they’re focused on their own goals.
Businesses like Google and Salesforce show you how to nail this balance. Their hybrid reward systems celebrate personal wins and team victories together. Employees get recognized for their individual achievements – they also have reasons to support their teammates.
Some businesses get hurt by setting unattainable goals or creating overly tough performance metrics. It usually comes back to bite them. Just look at Amazon’s warehouses to see what happens when individual metrics get pushed way too far.
The most long-term incentives usually give employees a real share of the company pie. Stock options and equity packages make your employees think and act like actual owners. Everyone can win together when the business succeeds. This mindset keeps people focused on long-term success.
You need steady updates about performance and clear direction for these systems to actually work. Your employees need regular feedback about their progress and a clear view of how their work contributes. Even the best incentive programs fall apart without communication.
Different teams need customized approaches to incentives. A reward system that works for your sales team probably won’t motivate your development crew the same way. Look for metrics that matter to each team’s role and goals.
Structure Vesting Schedules
Long-term incentives need some thoughtful planning to reach success. You can see that vesting schedules help businesses retain talented people while giving them a clear way to build wealth over time. These schedules lay out when you can access your benefits, like stock options or retirement funds.
Most businesses use time-based vesting because it’s easy, and you earn your benefits just by sticking around at the company for a timeframe. Let’s say you’re on a common four-year schedule – you’ll usually get your first chunk of benefits after working there for one year (which people call “the cliff”).
More and more businesses are switching up their strategy with milestone-based vesting, too – you’ll earn benefits by crushing goals instead of just being rewarded for time served. Maybe you’ll unlock shares after landing a big client or finishing a project that matters – this gets people fired up since your rewards are tied directly to what you achieve.
You can definitely make a meaningful difference when you set up the right vesting timeline! A timeline that’s too quick won’t keep talent around long enough to make real results. When you drag it out forever, it can leave you feeling trapped or unmotivated. That’s why lots of businesses land on four years – it’s not too short and not too long.
Businesses need crystal-clear rules about what happens if you leave early. Most will take back any unvested benefits when you head out the door. Some organizations are more flexible and might let you keep a part based on your time there. What counts is making sure everyone knows these rules from day one.
The vesting schedules create good opportunities for both sides. You’ll gradually gain more ownership while the company keeps its rock-star employees around longer. When you find that sweet balance between rewarding loyalty and pushing performance, it makes a difference. Regular updates and check-ins help everyone stay on the same page about how benefits work.
When you have good paperwork, it keeps everyone protected when it comes to vesting rules. Businesses spell out the vesting facts in their benefit packages and job contracts. They also keep you up-to-date with regular updates about your progress and upcoming milestones.
Try Real-World Examples
Long-term incentives now go way past some easy salary bumps and yearly bonuses. Your company needs to find some creative ways to get you more involved and excited about your work for the long haul.
Just look at Google’s “20% time” policy – you get one full day each week to work on any project that catches your interest. This easy idea actually caused some of Google’s biggest innovations – Gmail and Google News, too.
Southwest Airlines created something with its SWAG program. You and your coworkers can send points to each other whenever someone does exceptional work. These points turn into real rewards and create a workplace where everyone feels liked by their teammates.
Businesses can give you some extended breaks to help you recharge. Instacart’s sabbatical program can be a good example (it lets you take a few weeks off after you’ve been there a while). You can use this time to relax or chase after personal goals – which shows that the company cares about your growth and health.
These programs come with their own set of challenges, though. Smaller businesses may have a hard time with the costs. It can become harder to run these programs as your company grows bigger. Sometimes, they even create unwanted competition between team members.
Each company needs to find its own strategy. What gets people excited at a big tech company might not work at all in a retail environment. Some teams grow on praise from their peers, while others like concrete rewards like company shares or opportunities to advance in their careers.
Good incentive programs share a few things that work well. You get more say in how you work. Real opportunities to learn new skills and grow come your way. It really helps when these programs show that sticking around matters to your employer.
Businesses now give you flexible arrangements that match our society. You might get options to work from home, pick your projects, or build your own benefits package. This strategy recognizes that different people want different rewards from their jobs.
How To Create With Care?
Your team members deserve a system that feels fair and motivating for the long haul!
Take a fresh look at your company’s goals for the next few years. Your incentive plan should line up nicely with what you’re trying to achieve. If you need to improve customer satisfaction scores, link some rewards to that – if you want to improve those revenue numbers, make that a big part of your incentive structure, too.
It might feel like an uphill battle to get your managers on board. They’ll probably worry about costs or dismiss it as just another corporate program. The best way to win them over is to show real examples of how similar programs have worked at other organizations. Let them see how their teams can actually benefit from this.
Different roles require different types of rewards, and what works for your sales team probably won’t motivate your operations staff in the same way. Try mixing up your incentives between time-based rewards (like stock options that mature over time) and performance-based bonuses that kick in when people hit targets.
Your team’s feedback matters – make sure that you’re listening to it. Some people might not feel comfortable speaking up about challenges. So, make sure to hold occasional check-ins and feedback sessions to help you find these problems early and implement quick fixes that make everyone happy.
Money isn’t everything – your team also wants recognition, opportunities to grow, and real work. When you add these elements to your incentive program, it can give you a strategy that hits the right motivation buttons for many different people. It’s a great place to start.
Also, remember that the workplace changes fast, so your plan needs some room to breathe and adapt. Today’s basic target could become impossible to reach tomorrow. If you have a clear process for changing goals, you can keep things fair when unexpected changes pop up.
Level Up Your Incentives and Rewards
You can create a flexible reward system for your team by focusing on what gets them going and motivates them! Your company culture should help shape the incentives you choose, too. Professional growth opportunities, flexible work arrangements, and real recognition work together to keep your team involved and committed for the long haul.
Different teams need different types of rewards to grow. Some of your employees might love having control over their work hours or the ability to work remotely. That’s well and fine. Others get energized by coaching sessions and opportunities to learn new skills. It helps to make rewards feel authentic and personalized for each team member.
You should think outside the box – this might mean a new wellness initiative or a new learning program. Or it could mean that you have to come up with a good way to celebrate wins publicly.
At Level 6, we can help take your business to the next level with our proven incentive services. We’ve developed programs that improve sales performance and create happier and more motivated teams. Our line of services is made possible with branded debit cards, employee recognition programs, and sales incentives. These are all customized to fit your business needs. We can give you an idea about how to see real results in your own team.
Get in touch with us for a free demo and learn how top-performing businesses use our programs to drive exceptional ROI and sales growth!
Claudine is the Chief Relationship Officer at Level 6. She holds a master’s degree in industrial/organizational psychology. Her experience includes working as a certified conflict mediator for the United States Postal Service, a human performance analyst for Accenture, an Academic Dean, and a College Director. She is currently an adjunct Professor of Psychology at Southern New Hampshire University. With over 20 years of experience, she joined Level 6 to guide clients seeking effective ways to change behavior and, ultimately, their bottom line.
