i am the owner of a small design build company. i have a valuable employee
that has worked with us for four years. he is paid well but would like to do
better for his family and has hinted he may ‘go out on his own’. i would like to retain
his services. aside from a partnership does anyone have a formula for profit sharing
or similar ideas? thanks.
Replies
I think the best thing you could do is sit down with him and have a frank discussion about goals, timelines, dreams, etc. with your man. Find out what HE wants. You may find that you can satisfy his needs while giving up little.
If you are targeting your profit sharing to one specific individual then you want to be sure that your aim is very close to the bullseye.
Jon Blakemore
On a different track than Jon.... does your employee realize that he will probably make less on his own for the first few years at least? Seen it happen a lot of times, myself included.
You could try profit sharing, but does he want to pony up if the company has a down period? Most employees say 'profit sharing' but think 'unconditional bonus'. You could raise his pay and maybe start contributing to a retirement plan. In the long run, employees rise to the point where they want to move on and you need to adapt to that, find someone to replace them, break them in, fill in the gaps yourself while they're getting up to speed.
Tom,
What does this guy do for you? What is his growth potential? How can he make your company grow?
If your gonna share profit with a guy he needs to bring something to the table. When I was a much younger man I used to run a framing crew for a guy. He told me how many man hours I had to finish the job. If I came in under it meant I would get a cut of the extra profit. It was up to me to decide how to split it. I got my cut when the drywall was hung. Any call backs because of quality issues counted against my man hours. I only saw him once or twice a week. we talked by phone every day. I had all the freedom I wanted and made plenty of money.
A few of the crew leaders would keep all the bonus when they got it. I decided to split it. I kept half for me and gave half to my crew. that way we were all in it together. Made all my guys pull together.
Not sure if you could modify this to fit your business but it worked for us.
I would still work for him today. He sold the business to his son who thought it was insane to give employees money he could be spending on Corvettes. Last I heard the son was running a crew for someone else.
BRB
Tom, while I think making the transition to an employee owned company was always a part of my original vision I don't think I really put much drive or serious research and drive behind it until a just a few years ago. I read something about a company called the South Mountain Company and on checking them out a little further I discovered this on their website THE SMC STORY by John Abrams, Founder and President and felt I really wanted to work to model my company after what they accomplished.
I've got some other stuff I researched and collected as a guides to how to approach something like that that I dig up and point you to but off the top of my head I remember the book by Jack Stack called A Stake in the Outcome : Building a Culture of Ownership for the Long-Term Success of Your Business was a big help. He also wrote The Great Game of Business which I think you may find valuable too especially since it outlines some strategies that don't necessarily involve giving an employee an equity stake (it was the predecessor to A stake in the Outcome).
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