If you’re like most company leaders, you're constantly battling competing priorities. You want to leverage your ability to achieve your financial goals by attracting top talent, retaining high-impact players, and keeping everyone focused on driving growth. At the same time, you need to protect profitability, safeguard shareholder value, and ensure performance results merit the incentive plan payouts you make.
That's why a growing number of businesses are asking the same question:
This article answers that question. It explains how you can create a value-sharing offering that drives profitability, aligns employer-employee financial interests, and creates a unified financial vision for growing the business—without inhibiting profitability or diluting shareholders.
Let’s dive in.
It’s no secret that equity compensation can be a powerful draw for talent, especially in high-growth companies. Stock options, restricted stock units, and other equity grants send a strong signal: “You’re an owner here. When we win, you win.”
But that message comes with strings attached.
When you share equity, you're giving away a piece of the business. In addition to diluting shareholder value, you may complicate future capital raises or trigger unwanted governance obligations. In some cases, you also lock yourself into a structure that’s hard to unwind.
And the truth is, most employees don’t value stock the same way owners do. They may not fully understand its mechanics and often underestimate the risks. And if they don’t see a clear line between their performance and the eventual payout, the incentive loses its power.
So how do you pay your people in a way that makes them want to be growth contributors without sharing stock or “giving away the store?”
If you want to reward people like owners without making them owners, you need to start with a simple principle: compensation should contribute to line of sight.
Your employees should be able to connect the dots between:
Long-term incentive plans (LTIPs) are one of the tools that helps create line of sight.
When properly designed, an LTIP enables you to reward contributors for helping the company grow over time—without giving up equity. And unlike short-term incentives or annual bonuses, an LTIP creates a future-oriented mindset. It keeps your people focused on driving meaningful growth, not just hitting quarterly targets.
You don’t need to share stock to implement a compelling LTIP. In fact, many high-performing companies are using phantom equity arrangements to achieve the same results but with greater control and flexibility.
Here are six LTIP alternatives to consider:
This is one of the most common forms of phantom equity. Phantom stock mimics actual shares, but no real equity is transferred. Instead, employees receive a cash payout at a future date typically based on a formula company share value.
It feels like ownership to the participant—but you retain full control.
SARs reward employees for the growth in company value over time. Some refer to them as phantom stock option plans, because they provide a similar performance reward. Like phantom stock, these are cash-based and require no equity transfer. However, as opposed to regular phantom stock, the payout is tied to the increase in phantom share value from a defined starting point (the grant price) to the payout date.
It’s a clean, performance-driven way to reward true value creation.
With this model, you assign units to participants that are tied to performance benchmarks—like revenue milestones, profit targets, or value-based metrics. When the targets are met, the units are converted into a cash payout.
This creates strong line of sight between individual effort and long-term results.
You can structure an annual bonus plan so that a portion of the payout is deferred over several years, subject to continued performance or retention. The deferred amounts can even be adjusted based on longer-term results—adding a growth orientation to what is typically a short-term reward.
A profit pool plan sets aside a portion of company profits to be distributed among participants, typically based on contribution level or role. You can structure the pool around specific business units, product lines, or overall company performance—and defer payouts to drive longer-term value creation.
Strategic deferred compensation plans reward key employees with future payouts tied to company performance. These plans can be structured to align with long-term business goals, ensuring that employees are incentivized to stay with the company and contribute to its sustained success. Unlike traditional deferred compensation, these plans are linked to specific value-creation metrics, making them a powerful tool for aligning employee interests with company growth.
No matter which approach you choose, success hinges on clarity.
Participants must clearly understand:
You don’t need to overcomplicate it. In fact, simpler is often better. But the plan must be credible. If your people don’t believe the plan is real—or that they can actually impact the result—its impact will be diluted.
Let’s be clear: LTIPs aren’t just good for employees—they make sense for the business.
When you reward people like growth partners (even without giving them equity), you:
In short, when you align the long-term financial interests of employers and employees, your growth trajectory is accelerated because your growth focus is aligned.