Overview
What is it:
A tranche is the portion of an award that vests on a single, distinct date; it's the basic unit a Vesting Schedule is built from. A four-year RSU grant with graded vesting, for example, is really four separate tranches, each with its own vesting date and its own independent forfeiture risk until that date arrives.
Why does it matter:
Understanding that a grant is made up of tranches rather than one lump award lets you calculate exactly what's already vested and what's still at risk at any point in time, instead of treating the whole grant as a single all-or-nothing outcome.
What do people most often get wrong:
People sometimes treat a multi-year grant as a single unit that vests all at once. In reality, each tranche carries its own vesting date and its own independent forfeiture risk, so a grant can be partially vested and partially still at risk on the very same day.