Why the partnership model is more suitable for SMEs than equity incentives

What is the difference between the partnership model and equity incentives? The difference is still very big, the partner mechanism focuses on the activation of the organization and the improvement of the operation.

The partnership model is relatively simple and flexible to enter, whether it is from the conditions of the employee's entry, or the assessment and distribution of the employee, to the final exit is more flexible, and it is easy to enter and exit. There are many companies, after giving the top management this ** right, it is more troublesome to enter and exit in the end, although the exit can also be solved through the agreement, but always divorce after getting married, he always has an impact on the company and shareholders.

The partnership model can be incentivized without diluting any equity of the boss, which is more acceptable to the boss or shareholders and, most importantly, safer. The partnership model is more comprehensive, and if the mechanism only solves the high-level level, not the middle level, nor the front-line employees, then the company's mechanism is not comprehensive enough. The equity incentive will be better than the high-level incentive, and the equity incentive cannot allow ordinary employees and employees to participate.

The partnership mechanism focuses on the activation of the organization, just like Huawei's TUP plan, which is essentially a set of all-round partner incentives, so he does not absorb equity, so the organization's combat effectiveness can be quickly improved. The partnership mechanism is simple and flexible, and each enterprise should achieve rapid fission growth in the future, and the profits of the team will increase. He is more suitable for traditional micro, small and medium-sized enterprises.

The partnership model is aimed at the equity partnership relationship between shareholders, and the equity incentive is aimed at the internal employee equity incentive mechanism.

1.Total performance dividends. For example, the company's total performance is 50 million yuan, and the company takes out 4% of the proportion.

2.Excess performance dividends. If the company's total performance exceeds a certain amount, the excess performance will be divided.

For example, the company and the partners can agree: the company will take out the performance of more than 30 million yuan to dividends, and if it does not achieve the performance of 40 million yuan, it will not be divided.

Regarding excess performance dividends, the company can divide the excess performance part into several tiers for dividends. For example, the first 5 million yuan of more than 30 million yuan will be distributed by 5%; the second 5 million yuan for dividends; The third 5 million yuan, take out 6% for dividends. The higher the excess, the higher the proportion of dividends, and the better the incentive effect.

1.Total profit dividends are distributed according to a certain percentage of total profits. For example, the company's total profit is 30 million yuan, and the boss takes 3%, that is, 9 million yuan, for dividends.

2.Excess profit dividends, like excess performance dividends, can also set up several ladders for dividends, and the incentive effect will be better.

Dividend-paying shares mainly enjoy the right to dividends, and generally have the right to increase value, the right to operate and the right to vote.

The characteristics of the post are not the right person, and whoever is in this position has equity.

The post unit must be on the job and in a specific position.

When doing equity incentives, the incentive objects can be classified:

The first category is people who must hold shares in order to take up their posts, such as the company's first and second leaders, the company's department directors, and other positions that have an important impact or loss on the company once they leave;

The second type is the posts that voluntarily buy shares, and the core backbone personnel in addition to the above-mentioned positions.

The third category is relatives, friends, and classmates who accompany the boss to start a business and are still in the company, and this type of people also voluntarily buy shares.

Post shares have the right to increase value, management and dividends.

Who is the incentive object in the equity incentive plan? Is the target of equity incentive a partner? Who should give options? Who should not give options? Futu experts give the following answers.

According to the purpose of the incentive to determine the scope of incentives, the incentive objects are not too many. Equity is a scarce resource, and the limited resources should be allocated to the most valuable objects for the realization of the company's current development plan.

First of all, determine the purpose of the equity incentive, that is, the purpose. Companies of different nature and scale have different purposes for implementing equity incentives at different stages of development, some are to attract and retain core technical employees and management backbones who have a direct impact on the company's development, some are to reduce the company's cash flow pressure and labor costs, some are to attract external talents, some are to improve the company's performance, and some are to return to old employees and mobilize the enthusiasm of old employees.

Secondly, according to the purpose of the incentive, the incentive object is locked, that is, the person. Usually, the incentive object is the core technical personnel and management backbone who have a direct impact on the company's development, and the company can expand or adjust the scope of the incentive and lock the incentive object according to the purpose of equity incentive or synthesis.

If the purpose of the incentive is to reduce the company's labor cost, the incentive object should include the current employees who intend to reduce their salaries or the new employees who intend to reduce their salaries; If the purpose of the incentive is to attract external talents and improve the company's performance, the incentive targets should include the industry talents to be recruited and the core employees of the company's core scattered business units.

According to the purpose of equity incentives, the scope of incentives can be accurately located, and the precise positioning of incentive objects is more conducive to achieving the purpose of equity incentives.

The partnership system and the equity incentive model have their own advantages, and it cannot be said that one has absolute benefits, because these are two models that are more widely used in modern times, and each has its own successful cases, so as a financial planner, I think that the partnership system and the equity incentive model should be determined according to their different business activities.

Clause. 1. When funds are scarce, then it is a wise choice for us to adopt the partnership system, so that you can get more funds, attract more talents, and strengthen the competitiveness of your business.

Clause. Second, the equity incentive model, generally your enterprise scale has been basically available, hope that more talents can join the enterprise, or to retain talents, to motivate everyone to unite as one, then in this case, the equity incentive model is obviously the best choice.

Clause. Third, when we choose the partnership system and equity incentive model, we should judge according to the direction of the enterprise, if the enterprise itself, the future development of the capital side is the focus, then you should choose the partnership system, if your enterprise capital does not have much requirements in five years, then the equity incentive model, retain talent is the most critical thing.

Based on the above description, you can see that the partnership system and equity incentive model are suitable for different business situations, so we must make our most suitable choice according to local conditions.

In fact, there is no conflict between the partnership system and the equity incentive model, and there is no question of which model is better.

The essence of equity incentive is to build employees into partners, change the enterprise employment system to a partnership system, and let employees do their own work for themselves and become the owners of the enterprise, so as to improve their enthusiasm, increase creativity and a sense of belonging to the enterprise, and release the maximum potential of individuals. The boss encourages employees to become partners by giving up part of the equity, so that employees no longer have the mentality of a part-time worker to work, so as to achieve performance multiplication, and the incremental increase created by the enterprise. Therefore, the partnership system and the equity incentive model are both incentives for employees, and the two complement each other, the partnership system may not need to be motivated by equity, but the equity incentive model must make employees their own partners, which is such a logic.

Partnership is a form of enterprise organization, which has the characteristics of human cooperation rather than capital cooperation, and is suitable for lawyers, accountants and other professional service industries that mainly rely on personal skills to operate. In addition, based on the role of core technical personnel in high-tech entrepreneurship, the general separation of entrepreneurial teams and capital providers, and the corporate system that dominates and benefits according to the proportion of capital cannot fully motivate core entrepreneurial talents, nor can it guarantee the management rights of core talents (the extent to which employees can play a role under the corporate system varies depending on the style of shareholders). The adoption of the limited partnership system (generally based on the partnership agreement is relatively equal between partners) can ensure the voice of the core team and a larger proportion of income distribution, and can be flexibly arranged without the restriction of the proportion of labor capital contribution under the company law.

Equity incentives only serve to motivate employees (to ensure that employees' personal goals are aligned with the company's long-term interests). There is no content for a corporate control arrangement.