I never will understand why any VC or hired-gun-big-name-CEO would actually expect founders to stay at a suffrage level and insist on dangled carrots of "big payout later when the IPO drops." It may never happen, and in fact, there's a huge chance it won't, and it's not always the founders fault. Sure, founders should make sacrifices, but as the author of this article said, when the payscales are adjusted due to an influx in capital or revenue, they should get some kind of raise.
The compensation should have been skewed the other way. The founders had proven themselves, the CEO had not. Ergo, the salaries should have worked the other way around.
Besides, the founders were hiring the CEO; his job was to work FOR THEM.
Then again, if you look rationally at how companies work, all management is overhead by the nature of the job. Why should the OVERHEAD staff have the power to fire the people who actually earn the company money? The people who create the products or who bill their time to clients are obviously the people who matter the most to the company, yet those are the same people that most companies consider expendable.
That's obviously backward, and not sustainable -- but it's probably also why the state of IT hasn't actually improved over the years. The best developers are either working to go independent or leave the field entirely. In some cases, both.
That of course means that the companies that treat their staff that badly are ending up with exactly what they deserve: the leftovers. The ones that only got CS degrees because the universities lowered the bar for getting degrees.
Actually, the board of directors hires the CEO, the CEO reports to the board, and the employees report to the CEO.
The CEO can only be said to 'work for the founders' if the founders control the board. If the founders lose control of the board, then founder status itself means nothing.
Well, in this case it sounds like the VC was skewing the compensation to the minimum that would achieve his desired short term results, recruiting this CEO (at a big pay cut) and retaining the founders (with no pay raise).
It worked, in that he achieved both objectives and the company went public. The problem from the VC's point of view is the longer term....
This brings out one other point, which for illustration I'd like to turn around to something we're all familiar with: how much do you charge?
If you're to be successful in sales it has nothing to do with e.g. how much are your costs.
In fact, your general approach should be more one of "What is the right price and where does that leave us?"
By the time you have a few rounds of VC money the founders are effectively employees like anyone else - except that you happen to own a minority chunk of equity. Which might be worth something one day but has very little power.
Well, in some cases a manager can be more important. If your job is to lead the company and strategize the way to the top, you can't have that position changing every time an "expendable" CEO does something offensive, because nothing will get done if you do that. In some cases, you'll have to cut the friction from the technical side.
Though I agree with the bulk of your post and think it's great.
Comments
I never will understand why any VC or hired-gun-big-name-CEO would actually expect founders to stay at a suffrage level and insist on dangled carrots of "big payout later when the IPO drops." It may never happen, and in fact, there's a huge chance it won't, and it's not always the founders fault. Sure, founders should make sacrifices, but as the author of this article said, when the payscales are adjusted due to an influx in capital or revenue, they should get some kind of raise.
The compensation should have been skewed the other way. The founders had proven themselves, the CEO had not. Ergo, the salaries should have worked the other way around.
Besides, the founders were hiring the CEO; his job was to work FOR THEM.
Then again, if you look rationally at how companies work, all management is overhead by the nature of the job. Why should the OVERHEAD staff have the power to fire the people who actually earn the company money? The people who create the products or who bill their time to clients are obviously the people who matter the most to the company, yet those are the same people that most companies consider expendable.
That's obviously backward, and not sustainable -- but it's probably also why the state of IT hasn't actually improved over the years. The best developers are either working to go independent or leave the field entirely. In some cases, both.
That of course means that the companies that treat their staff that badly are ending up with exactly what they deserve: the leftovers. The ones that only got CS degrees because the universities lowered the bar for getting degrees.
Actually, the board of directors hires the CEO, the CEO reports to the board, and the employees report to the CEO.
The CEO can only be said to 'work for the founders' if the founders control the board. If the founders lose control of the board, then founder status itself means nothing.
Well, in this case it sounds like the VC was skewing the compensation to the minimum that would achieve his desired short term results, recruiting this CEO (at a big pay cut) and retaining the founders (with no pay raise).
It worked, in that he achieved both objectives and the company went public. The problem from the VC's point of view is the longer term....
This brings out one other point, which for illustration I'd like to turn around to something we're all familiar with: how much do you charge?
If you're to be successful in sales it has nothing to do with e.g. how much are your costs.
In fact, your general approach should be more one of "What is the right price and where does that leave us?"
One of many important lessons to be found in my favorite high tech company development book, Walking the High Tech High Wire (http://www.amazon.com/Walking-High-Tech-High-Wire-Entreprene... or http://www.amazon.com/Walking-Technical-Entrepreneurs-Succes...)
By the time you have a few rounds of VC money the founders are effectively employees like anyone else - except that you happen to own a minority chunk of equity. Which might be worth something one day but has very little power.
Well, in some cases a manager can be more important. If your job is to lead the company and strategize the way to the top, you can't have that position changing every time an "expendable" CEO does something offensive, because nothing will get done if you do that. In some cases, you'll have to cut the friction from the technical side.
Though I agree with the bulk of your post and think it's great.
Well, in this case, it's just part of consistently sending the signal of "“Who the hell do you think you guys are. You’re just the founders.”
Truth in advertising and all that....