Visualizing vesting schedules

I recently wrote about the book The Visual Display of Quantitative Information by Edward Tufte.

That book inspired me to explore ways of visualizing the vesting of savings and awards.

Background

Skip this section if you know equity!

Vesting

Vesting is when stock or cash becomes available. This allows companies to reward their employees for staying with them for a long time. Savings plan matching and stock options are two examples of

Savings plan matching

Savings plan matching encourages employees to save for their future. For every dollar an employee saves, the company will contribute a certain amount. This happens every paycheck. That company contribution is often subject to vesting. In other words:

Dear employee, you saved $1. Good job. You can have this quarter… but only if you are still working here one year from now.

Stock options

Stock options freeze the price of a certain number of shares for employees, who can then buy them a few years later. It’s like:

Dear employee, the stock price today is $30. If you’re still working for us in two years you can buy 200 shares for that price. In three years you can buy 100 more. And in four years 100 more!

Why?

This promise of future money is a win-win. It helps the employee because they get rewarded. It benefits the company because employees are owners too and are less likely to leave. Some people call it “the golden handcuffs”; I like to think of it as a carrot on a stick. There’s always some money just out of reach, which encourages employees to stay.

Résultats de recherche d'images pour « bugs bunny carrot on a string »

Kind of like Bugs Bunny motivating himself with a carrot on a stick

My process

Vesting and employee equity can be hard to explain but once you get it, you get it. I’ve spent a lot of time lately exploring ways of representing equity visually.

I have done a ton of sketching. And thinking. And sketching again. It’s funny how ideas in your head can seem perfect but their flaws are revealed when the pen hits paper.

Initially I explored the idea of plotting time vs quantity of upcoming vest events.

That didn’t always work because there are often large gaps between vest events. So I decided to order the vest events by date instead of scaling by date.

Here are some of my sketches.

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A collection of sketches. Spot the coffee stain!

I settled on a sparkline showing the quantity of vest, the award price, and the market price. What I like about this is that the area of each shape is proportional to its value. It explains complex concepts like stock options vs. RSUs at a glance.

I’ll illustrate this with an example. For a fictional employee with a few savings plan contributions and a recent stock option grant, the raw data might look something like this:

Type Vest Date Quantity Grant Price Current Market Price Estimated Value
Savings plan 01-Aug-19 10 $0 $103.30 $1,033.00
Savings plan 15-Aug-19 11 $0 $103.30 $1,136.30
Savings plan 01-Sep-19 12 $0 $103.30 $1,239.60
Savings plan 15-Sep-19 11 $0 $103.30 $1,136.30
Savings plan 01-Oct-19 9 $0 $103.30 $929.70
Savings plan 15-Oct-19 8 $0 $103.30 $826.40
Stock option 28-Sep-20 50 $114.23 $103.30 -$546.50
Stock option 28-Sep-21 25 $114.23 $103.30 -$273.25
Stock option 28-Sep-22 25 $114.23 $103.30 -$273.25

There’s a lot to digest here. And this is a simple example. For many employees, we have to limit the number of vests that we show because there are too many. But it becomes much more visual and compact if we represent it using what I like to call a vesting sparkline.

vesting sketch

A vesting sparkline for the data in the above table. Note the savings plan vests on the left and the (underwater) stock option vests on the right.

What I love about this is that it reduces all the complexity with grant prices and vesting timing into simple geometry!

The area of each box is proportional to its value. The savings plan vests are narrower because they’re smaller, but their $0 grant price makes them quite valuable. The option vests are currently underwater, meaning their grant price is higher than the market price. But if the price jumps, they’ll be much more valuable than the savings plan vests.

I think this idea has potential.

Or am I crazy?

I’ve obsessed over these sparklines on and off for a month. I’m way too close to them to be objective. So, readers, please let me know if this idea sucks!

And more importantly, I need to try these charts out with real data. What will it look like for typical Australian employees? What about German executives?

If I’m satisfied that I can cover all cases with the design, I’ll then test prototypes with coworkers and real customers. Do they understand what they’re looking at? How can I tweak the design to help?

I’m hoping that this will make it into production but even if it doesn’t at least I had fun doing it!

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The Visual Display of Quantitative Information by Edward Tufte- Book Review

“A little light reading, hey?” the doctor from Pennsylvania asked me on a recent flight. “Do you have to read that for a course or something?”

“No,” I said as I showed him a fascinating chart of Napoleon’s army’s advance to and retreat from Russia, “I’m actually just reading it for fun.”

And despite the fact that the cover looks like required reading for a 1960’s advanced course in Macroeconomics, it WAS fun.

The book

Even the cover is fascinating. The graph on it looks like a meaningless jumble of lines, but it actually contains the entire train schedule of France from 1885. It is so rich in information and so elegant. It’s a thing of beauty.

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The beautiful cover of the book

The book goes on to highlight many amazing graphs, as well as a few counter-examples, and explains what makes them good or bad.

It all boils down to just a few principles. The ones that stuck with me were:

  • Don’t waste “ink” on unnecessary or distracting “chartjunk”,
  • don’t use a chart when a table will do, and
  • don’t lie.

An example of wasted ink included using internal grid lines, which often reduce the readability of the actual data. This should be avoided.

As for using charts vs. tables, the “magic number” that Tufte gave was 20. If there are fewer than 20 pieces of data, it’s often better to print those values directly in a table than for to abstract them into a chart.

The book contained several examples of charts that lie. The biggest offense was shifting axes for some or all of the data in a chart to make the data seem better or worse than it actually is. Tufte also recommended adjusting monetary values for inflation whenever possible.

Applying these ideas

I work as a UX designer for Solium, an equity compensation software company. What does that mean in English? Many companies reward their employees by giving them ownership through things like stock options and savings plans. Solium makes software that helps those companies keep track of these plans.

We recently released a redesigned interface for these employees (participants). These participants have appreciated the new interface, though there are still a few important questions that it doesn’t fully answer for them. One of which is “When am I going to get my money?” because these equity compensation programs usually have what’s called vesting, where rewards are only released after the recipient has worked for the company for a certain amount of time, usually 1-4 years.

I’m now working on a simple, compact, easy-to-learn chart that shows the vesting schedule for a participant. It may never end up being released in our software, but it’s definitely been a fun exercise exploring different concepts based on what Tufte taught me!

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Some of my sketches for vesting schedule visualizations

For details on these charts, see Visualizing vesting schedules.

Definitely worth a read!

Anyway, The Visual Design of Quantitative Information was a great read. I’d definitely recommend it if you work with data or are curious about how these things work… Or if you want to impress that doctor sitting next to you on a flight.