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| Harpreet S. Grover Co-founder and CEO, CoCubes.com |
The fourth day of DARE July Eweek had Harpreet S. Grover, Co-founder and CEO of CoCubes.com.
He started the session with these words, “I am not an expert of the field, am far away from it. But am definitely the person who stumbled upon the concept in the last three years, trying to find out some parts of ESOP here and some parts there. That culminated in finding and formulating an ESOP plan, touting it out, getting legal advice and in the last month the plan was activated in my organisation.” He further adds, “I definitely have practical experiences in getting this implemented. So the intent of the session is not talking about the definition or giving Gyan, rather to tell you how ESOPs turbocharged our own business and that can be replicated in your organisation as well.”
Grover says in his organisation, out of the total employees employed, only 30 employees have stock options. His company has grown from 6 lakh in the first year to 40 lakh in the second and 3 crore in the last year and hope to continue the same pace in the coming years as well. He says, “ I believe a lot of it, is because of the people who joined our team, stayed with us, they believed in our passion. Its because of them Harpreet no longer has to go across and do frequent client meetings. My employees know what our vision is and I believe its happening because of the stock options. Am very proud of the fact that people who mattered, who are very critical to the company's growth have not left us.”
ESOP as the popular name of Employee Stock Ownership Options gives choice to employee to own a certain stake of the company that the entrepreneur has started. It's about giving ownership of the company to the people who work there. So it's very important to understand the difference between salary and ownership. Salary is given so that the employees can come to work every month, every day and end of the month they get a salary. Bonus is given annually or quarterly so that they stayed motivated to work.
However according to Grover the biggest hindrance of implementing stock option in India has been lose for fix compensation. The first person knocks the door asks about hi/her fix compensation. Lose for fix compensation is something that is not accepted largely in India. Second hindrance is lack of understanding of the concept-how stock option will work for you? How it will change your life-people do not understand. Grover says, “They want Rs. 19,000 instead of Rs. 17, 000 that they are getting. They are unable to understand how this Rs. 2000 can change their lives.”
The understanding is lacking due to the fact that there is lack of success stories of implementing the concept in Indian businesses. Lately companies like Infoedge has started implementing the concept and thus the scenario has been changing. This is happening because of the new breed of entrepreneurs coming who are giving equity to their employees.
Stock options lead to great benefits. One: It gives extremely committed work force, people who are there-own the company, they work to grow the company so that they also grow with the organisation.
Second benefit ESOP offers is that it lowers down the attrition rate. He says, “Let me put this with an example. Lets say, your company is worth 10 crore, you as an entrepreneur say would like to make it a Rs. 1, 000 crore in the next five years. You have ten employee today and you are giving Rs. 1 lakh equity to each one, its not shares but stock options worth Rs. 1 lakh to each employee.
So what does it mean? If these guys stay for five years and if your company grow as you want to, chances are there that your company will grow that much, because you have these pool of talent, a committed work force. So after five years along with the salary, those guys will walk out with 1 crore each, if there is a buyout or IPO, the employees would get a chance to earn a crore in five years which they may not earn in their life within that short period.
One more critical point is that to decide whom to give these stock options. He says, “In my opinion, there should be two parameters. Tenure and performance. Look for the employees who are with you from long and who are consistently performing well.”
ESOPs is a good option to hire senior level employees as well. Grover says, “Stock option helps in getting people whose annual compensation stands at Rs. 40 lakh. With the stock option you can say, I would give you 25 lakh and the rest amount will be compensated by the EPOS option.”
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written by Sujata Desai, July 30, 2011
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