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?
Consider this saying:
Employees marry the company and divorce their management.
If management is micro-managing, abusive, etc, no matter how well you pay, no matter how great the job, people will leave.
Make sure they feel like they are at home and its a family atmosphere. They will be spending more time with you than with their real families. As such, make outings a part of the corporate atmosphere. It does not have to be expensive, get everyone together for a cookout, picnic, start local teams like bowling, etc.
When someone has a baby, get everyone together to celebrate it. On birthdays have one or two people decorate the person's cubical...but remember you can't do this selectively it has to be for everyone or you will kill moral.
Best of all, in front of everyone, recognize the good work of others. Napoleon said, quite correctly: It is amazing what men will do for a piece of cloth.
He was referring to ribbons and awards, these are worn on the uniform and show one's accomplishments to his peers.
Likewise, if you have to chew someone out, do it in privacy, without an audience.