How to standardize an option agreement

Standardizing option agreements can deliver a positive employee experience and ease negotiations – find out how in our deep dive.

This deep dive looks at how and why option agreements might be standardized at high-growth scaleups. Use the navigation below to learn more, or check out our other contract deep dives, like NDAs and employment offer letters.

What’s an option agreement? | Who do they affect? | Why standardize option agreements? | How to standardize option agreements | Useful features | Learn more

What’s an option agreement?

An option agreement outlines the Ts and Cs that give a counterparty a right (but not an obligation) to buy an asset. The term ‘option agreement’ is used in several contexts, but we’re referring to option agreements in the context of contracts used by early stage businesses to offer share options to new and existing employees. For the business, issuing these options is a great way to align incentives of the business and its employees.

Get the ‘Modern contract handbook’ and discover what end-to-end contract collaboration looks like for a modern business.

Who do option agreements affect?

Option agreements affect different teams in the business, including:

  • The people team. This team is responsible for distributing agreements to all employees, and usually works closely with legal to make edits to option agreements as the business scales.

  • The legal team. The legal team works with external counsel when the employee option pool is created or changed. This team owns the contract templates.

  • The CFO. The CFO will usually want to monitor agreements closely. If the business doesn’t have a CFO, this responsibility is owned by the leadership team.

  • New joiners and existing employees. These are the counterparties in this interaction. Employees may be sent option agreements during their time at the business, and new joiners will receive the contract when they join.

By standardizing your agreements, you can rest assured that each and every contract is designed to impress

Why standardize option agreements?

Standardizing option agreements allows the business to maintain consistency across its legal documents. This will make a huge difference to your brand and your values. Option agreements that have been thrown together, with inconsistent styling and structure, can give the wrong impression. Employees might assume that the business is unprofessional and disorganized – or worse, that it cares as little for its existing staff as it does for new employees. By standardizing your agreements, you can rest assured that each and every contract is designed to impress.

Taking time to standardize documents can also benefit teams and the wider business in the long run. As the company continues to scale, creating individual option agreements from scratch every time can be a huge time drain. Standardizing your templates will allow you to automate your option agreements and streamline the process through a contract collaboration platform.

Aim for 80% standardization – leaving 20% for that all-important personal touch to really make a difference

How to standardize option agreements

Just because you standardize your option agreements doesn’t mean your contracts have to be boring. To craft agreements that reflect the nature of your business:

  • Humanize your language. A 12-page document full of legal jargon will only confuse employees and discourage them from signing. If it doesn’t reflect your company culture, then don’t include it. Make sure your language is clear, accessible and human.

  • Don’t hide important details. Make the crucial information easy to find, to avoid any ambiguity and help your employee make a well-informed decision. Don’t hide the important stuff; put all the need-to-know details front and centre.

  • Personalize where you can. Standardizing your documents means you can dedicate more time to personalizing each agreement. Make sure your employees feel like individuals instead of another cog in the machine, receiving the same mass-produced template.

Standardization is important from an efficiency and branding point of view, but aim for 80% standardization – leaving 20% for that all-important personal touch to really make a difference.

Useful features

  • No-code template editor. A single source of truth can help teams manage version control.

  • Q&A flows. Option agreements can be autopopulated with information from a Q&A workflow. This can help people and talent teams to self-serve as it allows them to create agreements by answering simple questions.

  • Smartfields. This feature allows teams to create documents that are searchable and easier to manage.

  • Internal commenting. The commenting feature can streamline editing and ease cross-functional collaboration.

  • Dynamic editor. Brand your option agreements and include visuals in your contract collaboration platform, creating dynamic, engaging documents people want to sign.

  • Conditional logic. Being able to change the information in the option agreement depending on certain conditions will make customization quicker, which is useful as the business scales.

Standardized, scalable option agreements

Is managing routine contracts at scale a challenge for your SaaS business or marketplace? If your contract process is out of control, with multiple systems and a lack of visibility both pre- and post-signature, try Juro for free and see if you could benefit from a contract collaboration platform that enables businesses to agree and manage contracts all in one unified workspace.

 

Topics: Option agreement

Download the guide