I plan to bootstrap and keep my company private with no plans on selling. What's an alternative to equity based compensation that recruits, motivates and retains employees? Should we increase benefits?
Lots of great answers here on motivation and there are many (well seven really) ways people are motivated. Should your question seek an answer more closely aligned with the economic motivation of an equity share, perhaps a lesson from our crowdfunding experience will help. We often counsel entrepreneurs (who, like you, are seeking to gain committed motivated folks) that a revenue royalty approach may be best. In fact to preserve more control, avoid diluting ownership or otherwise impeding later rounds of funding, and to know in advance the most such a motivation will cost you, a share provided to each person of the revenue might be an attractive option. In the context of an employee this is the well proven model of a commission. No surprise there. Thinking about how other stakeholders in your organization, such as partners, suppliers, just plain believers might be motivated to help you achieve your mission. Sure you could rely on commissions but what if the spouse of your employee is a better salesperson than they are? Just some food for thought if you are seeking an alternative to the "stock options" motivator and the resulting complications.