Conquering the Challenge of Change

Elizabeth Dodge, Equity Plan Solutions, LLC

Jennifer Kirk, Google

Carrie Kovac, E*TRADE Financial Corporate Services, Inc.

Larry Reynolds, Fidelity Stock Plan Services

There is nothing permanent except change.

Heraclitus

Philosopher of the 4th century BC

Stories of Change

• Operational Change – Carrie

• Career Change – Jen

• Options to RSUs – Larry

• Client Automation – Elizabeth

Internal

• Process changes

• New job, new employee

• Mergers, spins, etc.

• Organizational changes

• IPO

• New product features

• More automation

• Streamlined processes

External

• Regulatory

• System changes

• Grant practices

– Options to RSUs

• New ESPP

• Performance type

Types of Change

When is Change Needed?

It depends…

Regulatory Change

• Some allow adoption at different times

– ASU 2016-09 (simplification)

– ASU 2017-09 (modifications)

– Non-employee accounting (coming soon?)

• Some “flip the switch”

– 2-day settlement

– Tax rates

– 162(m) changes

Process Change

• Something is “broken”– Late terms mean expense/plan roll forward are moving targets– Employees complain– Processes are time-consuming and error-prone– Material weakness found by audit firm– Reports don’t tie

• Process is inefficient/expensive– How do you know?– Networking, comparing notes, conferences, consultants– Sometimes automation is NOT better (ECD example)– Limited tech skills– Best process for YOU, not best process

System Change

• Value lacking

• System inflexible/slow

• Technology outdated/no longer supported

• Needed functionality lacking/needs changing too fast

• Integration lacking

• Service levels insufficient

• Participant complaints

Stock Plan Design Change

Reasons to Change

• Options underwater

• Turnover rates too high

• Employee confusion

• Expense too high compared to “value perceived”

• Peers are hiring your people away

Changes to Consider

• Implement an ESPP

• Move away from Options to RSUs

• Move away from RSUs to Options

• Implement performance awards

• Change vesting schedule

• Change communication tactics

Job Change

• You lack passion about your job (job vs. career?)• Company is sinking/you don’t believe in the company/

direction/culture• No upward mobility/lack of growth• Duties increase/pay not so much• You long for fewer hours/more flexibility?• Ability to work from home?• Your boss doesn’t respect you• You dread going to work• Set goals for your new role and discuss DURING the interview

process– If you’re not going to get what you want, it’s better for everyone

to discover that early!

Process Change

• Understand the current process first!

• Understand WHY the process is in it’s current state –how did it come to be?

– Must understand to avoid past mistakes

• Get input and buy-in from ALL impacted stakeholders

Cross-Functional Team

Stock Plans

Finance

HR

Payroll

Legal

Internal Audit

Treasury

Investor Relations

IT Payroll Provider

Transfer Agent

Broker

S/H Advisory

Firms

Audit Firm

Plan the Work and Work the Plan!

• Plan out the project, then execute, execute, execute!

• More planning up front = – Smoother project– Better results– More likely to meet

deadlines

• If implementing a newfeature, TEST!– ALL the way through!– Consider downstream

impacts!

First Steps

• Corporate sponsor (champion for change)– Someone who can pull strings when/if needed

• Cross-functional brainstorm– Get everyone at the table

• Include vendor, if appropriate

– Define goals– Determine roles and responsibilities– Discuss definition of success– How will you measure success?

• SMART Goals?– Specific, measurable – Attainable/agreed upon– Realistic, timely/time-framed

• Needs vs. wants

Project Plan

• Create a project plan/checklist– Reports required/tasks to complete – Due dates and owners– Status and notes/comments

• Constantly update project plan• Put important dates on your calendar AND on

others’ calendars!– Add market close dates, holidays, etc. as well

• Review project plan weekly to make sure project still on track

• Obtain sign-off on project plan from all players– Send out in advance of kick-off meeting and review at

meeting

Kick It Off

• Hold a cross-functional kick-off meeting

– Schedule well in advance

– Review DRAFT of project definition

– Review DRAFT of project plan

• Include owners for EACH task

• Review expectations for deliverables

• Are goals realistic? Who else can help?

Project Meetings

• Hold monthly, then weekly, then perhaps dailystatus meetings as you get closer to end of project and your deadlines are imminent

– They can be brief, they should be well-run, they need an agenda

– If you start to waste people’s time, they will stop attending and meetings will no longer be effective

– As due dates approach, ask for and give status updates

– Open-issues discussion – issues log (with owners!)

– Update project plan (can be in Word or Excel) and send out updates regularly

Manage Scope

• Goals are defined

– Things will change, but…

– Try not to allow “feature” creep

• If scope increases, timelines will get pushed out or quality will suffer

• Requirements were signed off on at the start – must be a strong rationale for changes in the project

• Document your decisions!

Manage Risk

• Identify risk items early

– Failure to meet deadlines

– Owner provided incorrect deliverable

– Assigned deliverable was incorrect for the project

• Plan for risk

• Contingency plans

Follow Up, Follow Up, Follow Up

• “Professional” project managers are paid to nag…

• But nag NICELY!

– Even if deadlines are not being met

– Build and leverage your relationships

• Document failures to meet deadlines

• Push out target dates, when possible, so the end of the project doesn’t get the short end of the stick

Failure to Communicate

• Common failures– Differences in expectations

– People are surprised by results, deadlines missed, etc.

– No one knows state of project

– People are impacted by the project at last-minute

– Team members don’t know what is expected of them

• Solutions…

Communication!

• Status reports

– Delivered to management and all team members

• Report right away when deadlines are at risk

• Reports should be brief so that people will read them

• Call out important items at the top of the report

• Status summaries

• If you’re not getting status updates from participants

– Follow up (email, voicemail)

– Manager as last resort

Vendors

• Meet with your vendor(s)

– Outsource providers, brokers, TA, etc.

– Discuss schedule for project

– Can vendor attend status meetings?

• Often VERY useful

– Is your usual contact the right person for the project? Or will they need to bringin others?

Lessons Learned

• After it’s over, hold a “lessons learned” cross-functional review– What went well– What didn’t go well– What shall we change for next time– Update your checklist/project plans/audit list

• Any issues reported should be spot checked next year

– Do this NOW, while the project (and its challenges) are fresh in your mind!

• Especially important for repeated projects, but good for all projects

Things to Remember

• Real, lasting change is a process, not a switch to flip

• Don’t expect instant results

• Change is hard, people will resist it

– “That’s not the way we roll”

– We’ve never done that before

– Why fix what “ain’t broke”?

Contact Info

• Elizabeth Dodge, Equity Plan Solutions, LLC

– edodge@equityplansolutions.net

• Jennifer Kirk, Google

– jenkirk@google.com

• Carrie Kovac, E*TRADE Financial Corporate Services, Inc.

– carrie.Kovac@etrade.com

• Larry Reynolds, Fidelity Stock Plan Services

– lawrence.reynolds@fmr.com

FOR CEPI SYMPOSIUM ATTENDEES ONLY.

CEPI, Equity Plan Solutions, LLC, Google, E*TRADE, and Fidelity Investments are not affiliated.

835318.1.0

APPENDIX

Project DefinitionItem Description

Project Overview Why? What are the business drivers? What are the business benefits?

Objectives What will be accomplished by the project? What do you hope to achieve?

Scope What deliverables? Which groups involved? What is out of scope?

Assumptions and Risks

What are you taking for granted and might go wrong? What will you do to manage the risks to the project?

Organization Show the significant roles on the project. Sponsor? Project team? Are all stakeholders represented?

Approvals Ask sponsor and key stakeholders to approve, signifying that they are in agreement with what is planned.

Initial Effort, Cost, & Duration Estimates

Start as best estimates, and then revise as project progresses.

Sample Project Plan

Sample Project Memo

Other Details

• Create a contact list

– Include cell phone and home phone #s

– Include vendors

• Know vacation schedules for anyone with deliverables

– Lots of people take time off during the summer and around the holidays

– Identify backups at start of project