Public company equity-based pay practices, such as stock, restricted stock, and employee stock options are often a poor fit for private companies committed to reward leaders for performance and growth and to motivate leadership and capital succession.
Equity based programs that make sense and work well in a public company come with many ills for private companies: they can be costly, tax-inefficient, static, ineffective, and sometimes downright unfair. In the worst case, equity pay practices can derail the owners’ plans for growth and succession.
Dynamic synthetic equity presents a more tailored solution for private companies interested in leadership and capital succession. Restricted stock and employee stock options often distort outcomes for private companies. Consider that:
The underlying stock price in a private company gyrates as owners enter and exit from, for example, a living or a death buyout or even a recapitalization. Stock price can jump 50% – unjustly rewarding the owners of true equity awards.
There are many ways to drive sales in a services business. The hardest is to convince a new prospect to hire your organization to perform new work. Once you have a client, though, it is far easier to:
Extend and expand contracted work to provide even greater value.
Find and develop new opportunities to deliver value in other parts of the same organization.
Find similar organizations that would benefit from doing what has been successfully done already.
Most service organizations dramatically under-play opportunities to deliver more value to existing clients and to deliver for new clients what has already been successfully delivered for another.
Click the figure above to view a graphic that shows how to juxtapose the roles of New Account Sales, Project Management, Account Management, and Solution Offering Management in a way that provides a solid foundation for steady revenue growth.
Bankers and investors want to know how things will turn out with a high degree of certainty in order to manage downside risk. Consequently, organizations that take professional money learn to conservatively state what they will accomplish to have a high probability of achieving plan ith intelligent goal setting. When actual results exceed plan there is cause for celebration as suggested by the under-promiseandover-deliver lines graphed in Figure-1. Continue reading How to Aim High and Do Better with intelligent goal setting.→
When a professional services firm contracts to perform a big project, it is common for it to get a request to work at reduced hourly rates. While it may be tempting to discount to lock in the deal, doing so also sets a precedent with the customer and those it talks to, making it more likely that future work will be at the lower rates.
Since a rate, once set, is hard to increase, it is all the more critical to protect it. A good alternative to discounting is to offer a lump sum credit in the contract. Position it as an amount that is earned over the course of the contract so that, the more services provided, the greater the share of the credit is realized by the customer.
Being part of a successful start up is invigorating. Even for those with no equity stake, the energy and excitement is contagious and makes it easy to work hard for the good of the whole.
In the face of growth and strong performance, some may begin to wonder if the good times will soon end as founders, owners, and investors look to pocket the value that has been created through a sale of the organization to larger firm. Leaders sometimes struggle to keep up employee morale in such circumstances.
It can help for leaders to remind everyone that the best thing, in all scenarios, is to build the best possible business because doing so leads to:
Making the most positive impact in the market served.
Creating the most value for owners.
Creating the most opportunity for employees to assume new responsibilities, earn increased compensation, learn new skills, and be in position to take on attractive roles upon an acquisition. Continue reading Are we for sale?→