Bitcoin's Potential Disruption of Long-Term Incentives: A Game-Changer for Talent Management.
Long-Term Incentives (LTIs) represent a widely adopted incentive model among companies, particularly those operating under partnership structures and startups. LTIs are aimed at fostering employee retention, which is vital to avoid the high costs associated with frequent recruitment or investing substantial resources in an employee's development and wanting them to remain until a satisfactory return on investment (ROI) is achieved.
One of the prevailing methods to implement such incentives is through Stock Options. These options are subject to a vesting period and cannot be exercised until they reach full maturity. At the conclusion of the vesting period, employees have the option to retain or sell their stock options back to the company.
The implementation of Stock Options requires rigorous adherence to legal and regulatory requirements, including valuations, tax tracking, and extensive administrative work.
In recent times, Bitcoin has emerged as a potentially powerful alternative to this traditional model. Bitcoin's unique features, such as transparency, self custody, and inherent appreciation in value, makes it an intriguing solution for companies considering alternative long-term incentive practices.
Under this approach, a company can award high-performing employees a specific amount of Bitcoin in a transparent manner, allowing employees to monitor the value of their Bitcoin holdings. The company can continue adding to the employee's Bitcoin allocation over time.
The awarded Bitcoins undergo a vesting process, and after a predetermined period, usually three years, employees gain the right to have their Bitcoin transferred to them.
Interestingly, these Bitcoins could also be considered analogous to stocks, enabling the company to use the employee's percentage of Bitcoin held by the company to calculate profit sharing. For example, if a partner owns 10% of the company's Bitcoin and chooses not to sell them, they may receive profits from the business similar to traditional stock-based profit-sharing models. This concept could be likened to Bitcoin staking within the framework of one's own business.
The integration of Bitcoin presents various novel and intriguing opportunities in the realm of Talent Management, and it remains to be seen which forward-thinking companies will be the first to adopt and implement these innovative ideas.
