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VC Cliché of the Week
One of my favorite cliches is "there is no such thing as indentured servitude". I use that line to talk about the fact that talent can't be bought and sold. It must be retained with something more than money.
You can give someone a big fat paycheck and a big slug of equity but if they don't believe in you, your company, your vision, your team, and your culture, its a total waste of money. Because they will be unproductive and have one foot out of the door all the time. And when someone else offers them that big fat paycheck, they'll be gone, leaving a hole in your organization.
I see this all the time in acqusitions. Big companies lock up entrepreneurs with earnouts, traunched payouts on equity, vesting, etc. So they "stick around" to get paid. But are they really doing anything of value for the buyer? Maybe, but I'd bet that they are mostly marking time. Entrepreneurs are entrepreneurs. Golden handcuffs can't change a person's DNA.
So you must sell your people on what you are doing. Take them up the mountain. Get them excited about the climb. Get them to buy into the vision. And keep selling the vision, the culture, and the company. Sure you have to pay your people their market value. People won't work for free either. But paying market value is surely not enough to keep your best people. Because there is no such thing as indentured servitude.
Comments (4) | Posted July 13, 2006 in Venture Capital and Technology
Comments
"Sure you have to pay your people their market value. People won't work for free either."
Our company is 15 months and counting without payroll. 6 full-time; a dozen part-time.
Maybe all that proves is that we're off our rockers ;) But at least it's shared hysteria :)
Posted by: Mike Orren | Jul 12, 2006 7:45:02 AM
You're familiar with the situation where I work, and while parachute packages for Director and above were decent, most of the architects of my recently acquired company’s success took them and RAN, even though a lot more was to be made by sticking around for a year and then leaving. I’m in the midst of an internal job search and it is becoming apparent that the situation here is the exact opposite of the cliché you’ve identified. They touted the desire to uncover the secrets that made our former company successful against all odds and apply them to the new Co.(creativity, the freedom the challenge age old status quo, etc…), but that’s proving to have been a bunch of hubris. They wanted the subs and the hefty revenue streams that came with it.
What they’re doing here is de-Baathification plain and simple. We old Co. folks represent the wild West against their stodgy ISO9000 world. I’m cool with it, not bitter at all, but I can tell you for sure that it will hurt them in the end. In a world of Me Too’s, differentiation is the only way to climb over the others. My old company proved that out. The new Co. is in some maddening race to prove their competitive worth by attempting to emulate them when they should be trying to do the exact opposite IMHO.
In a way, your post rings true to my situation. All those with the entrepreneurial spirit, those who possessed the creativity, those with the better ideas on management saw the writing on the wall and bolted quickly for the door. They are all probably working for the company that will take down this one some day. I hate that they were right.
Posted by: Tony Alva | Jul 12, 2006 9:45:01 AM
Depends on the kind of indentured servitude you are looking to create, really.
Type one, which the apprentice/journeyman/master system was based on work when you have someone thinking they are going to learn a skill, trade, thing that will benefit them for the rest of their lives.
"You can give someone a big fat paycheck and a big slug of equity but if they don't believe in you, your company, your vision, your team, and your culture, its a total waste of money."
A big fat paycheck won't last forever and generally, lets face it, even when things come off great for a start up and they get sold for a bundle -that big slug of equity doesn't convert to FU money to anyone beyond some (not all) of the early folk.
Now in some cases this does work - look at places like Ebay. Legendarily a tough place to work and it sounds to me like people leave very shortly after their 4 years are up. People do work hard tho... I've heard the same of Yahoo and I won't be surprised to see Google folks leaving at or before their 4 years. "Wonderful workplace" or not. I don't think many of the employees at the companies that have made it like this and do offer a life-altering return to the employees are sitting around just getting fat and happy; even the ones that come in via another acquisition that may have made some of them wealthy.
If you are talking about the fine system of indentured servative that worked to send criminals off to the colonies (like the US or Canukistan) - I doubt those people worked very hard for their "employers."
Like so many things, the incentive has to match the task - or based on the title of another of your blogs - perhaps this will explain it: the juice better be worth the squeeze.
Posted by: Jason Weisberger | Jul 13, 2006 9:31:14 PM
This post struck a cord with me. I work in a fairly young company (three years old),and we have a very high turnover rate, even though by and far most of the employees here are paid well (market rate and slightly above). But there is no attachment to the company, there is never talk of moving up within the company, and even though our employers have ambitious growth goals, our paritcipation in that growth and towards those goals is never mentioned. They fail to sell us the "dream" that they pitch to our clients so fervently.
Posted by: MDNY | Jul 31, 2006 4:10:45 PM
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