If I Owned a Business

January 24, 2014

What I learned as an employee and, years later as a business consultant, is that a salary is never enough motivation to work harder or to do your best. If it were, the members of Congress who get paid very high salaries for doing so little, and who have the very best health insurance, medical care, and retirement benefits at taxpayers’ expense, wouldn’t have to resort to taking kickbacks and bribes.

People need to be motivated all year long and not just when they cash their paycheck. Some salesmen get straight commission while others get a draw against commission. Both are good motivators for working hard but it’s still not enough.

I used to take clients and friends to one of my favorite restaurants. The food could rival any of the five star restaurants in the world and the maitre d’ was in a class by himself. People came there just because he was so personable and made everyone feel special.

Whenever I came in, the maitre d’ would come over to our table and sit with us for a little while, regaling us with funny stories. On occasion, the chef would come out of the kitchen to ask us if everything was all right, and he would stay and talk to us for a couple of minutes. Both the chef and the maitre d’ had worked there for the couple of decades that I had been going there.

One evening, the maitre d’ came over to our table and told us about their desserts for the evening. My client told him that she had to watch her weight but she would love a strawberry. He disappeared for a few minutes and when he came back, he was carrying one of these oversized plates, about eighteen inches in diameter, and in the middle of this plate was just one large strawberry. The sight was hilarious and we couldn’t stop laughing.

On another occasion, after the maitre d’ went over to another table, I turned to my friend and said that if I owned this restaurant I’d give the chef and the maitre d’ a percentage of the business so they wouldn’t be tempted to go anywhere else.

One day, not too long after that, both the chef and the maitre d’ quit. The chef said that his wife was making a huge salary as a telemarketer and he was going to work for her company, and the maitre d’ got a job with a major airline as a pilot (he gave flying lessons on his days off). The restaurant went out of business soon after they quit.

I decided that if I ever owned a business, I would start my employees at a decent salary and give bonuses based on the company’s net earnings for the year.

If an employee was doing the same kind of work on the side, it wouldn’t be enough motivation to say that he could keep whatever he makes as long as he does my work, too, because after awhile, he might want to start his own business.

If an employee brings in new business to my company, I’d let him keep 60% of the job and I’d keep 40% of it because I’d know that I wouldn’t have gotten the sale or contract if that employee hadn’t brought it to me.

My employee would be using my materials, products, and vendors, as well as my credit rating, which is a large part of a startup company. Also, there would be no risk on his part that he might not get paid for the work he did if his client gave him a bad check or credit card. He would also not be responsible for defective parts.

Several years later, if an employee was really pulling his weight, I would give him a small percentage of the business, and several years after that, if he was also bringing in new business, I would give him a limited partnership.

In the long term, if the business was doing well and the employee’s contribution to the business was excellent and we worked well together and shared the same vision for the company, I would let him buy into the business and become an equal partner.

The one thing I would not do is let that wonderful employee find better career opportunities and leave my employ. If he did want to start his own business, he would have to weigh the costs of a startup business and the length of time it would take him to break even and start earning a profit, against the money he was presently earning and his future earnings.

In all probability, he would decide that he didn’t want to take the risk of investing his capital in his own business when he could have a no-risk partnership in mine. It would be a win-win situation for both of us.

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