[DMcCunney]

Originally Posted by Hitch

Well, one of the first things you learn as an entrepreneur, whether that's a newsstand, a restaurant, or an eBook company is that nobody else is going to love and slave over your company like you do. Or hate and slave. Mach nicht. You can't expect any paid person to labor over an 80/hour/week business like you do. And, unless you're extraordinarily fortunate, you can't reward them adequately in order to induce them to do so, either through direct salary or other forms of compensation. Believe me, I know this. ;-)

I'm contrary on this. I've told people elsewhere salary may be a negative incentive. I once told a boss "I expect to be paid comparably to my peers. If I discover Joe in the cube down the hall who does what I do, has the same seniority, and the same skill set and performance evaluations as I do is getting a lot more than I am, we'll have words about why. But meanwhile, while more money is nice, it's not a game changer. If you double my salary, I won't magically become twice as productive. I'm already working as hard as I can. What I want is work I like to do, making a visible contribution, done with people I get along with and having the resources to do it right. Your job is to tell me what needs doing, see that I have what I need to do it, then step out of the way and fly top cover to keep others from interfering while I get it done." Do that and I'll be happy.

(That employer later laid me off, and I had a grimly amusing exit interview with HR where they gave me a list of other eliminated positions and the ages of the affected employees. It was a CYA "We are documenting that we aren't laying you off because you are an older employee. We are laying you off because you are making more money than we want to pay." They were having problems, so it was no real surprise, but various of us noted that while IT was being cut to the bone, HR was expanding. Hmmm. The company has less people, but needs more HR employees to handle the remainder...")

Yes, but the Rothschilds were never...kid-blind. They were nearly cruel in correctly assessing the attributes of their offspring and their offspring's offspring. That's a rare talent, it seems. My mother suffered from kid-blindness, in the case of my late brother. She simply had an utterly boggling double-standard in everything--from behavior to capability to you-name-it. As one of the affected offspring, I can tell you, it was beyond infuriating. We had our own familial issues, surrounding monies and some other bits and orts, so yes--I can see the problems quite clearly.

When the family business is "lender to kings and princes", you better not be kid-blind. You're very fussy about just which offspring are in position to make those loans.

A woman I know came from a family with kid-blind issues. Older brother was ... damaged ... and needed to be institutionalized. Dad couldn't admit his son's condition, and poured resources down the rat hole that should have done things like pay for her and her sister's college education. By the time dad was forced to face reality, she and her sister had been pretty well screwed over. And dad died with all sorts of unresolved issues between them that would now never get resolved.

Her dad was a colorful character, and sounds like the sort of guy I'd have loved to meet and talk to when he was alive. The unresolved issues worked out to "He was her father, and she loved and adored him, but she also hated his guts for what he'd done to her and her sister, and she couldn't admit that to herself, let alone anyone else."

She wound up divorcing her husband because an entrepreneurial venture of his failed, and she simply needed more financial security. It was not an amicable parting. The lines were drawn among their mutual friends, and many supported her and demonized him. I stayed out of it. I thought he was clueless, and should have understood her needs better than he did, but wasn't evil.

Meanwhile, her sister got stuck with caring for brother after dad died, and eventually got him declared a ward of the state, because she simply couldn't deal with it. She wound up in a messy parting of the ways with her sister, and now lives on the West Coast and seems determined to put her whole family behind her.

Well, most of us don't have to-be felons as our issues; it's just, as I said above--having enough $$$ in the profit to PAY someone good enough, their actual worth.

I had a conversation about that with a friend. He had founded a computer consulting business that was a defense contractor, and retired young when it was acquired by a larger company, and his part of the payment made him financially independent and able to do what he liked doing. The acquriing company wanted to keep him, and said "What would it take to get you to stick around?" He really didn't want to, so he decided to name an outrageous figure and scare them off. He said "$5 million!" They said "We'll have to think about that...", leaving him thinking "OMG! What do I do if they say yes? I don't want to stick around." Fortunately, they didn't make him the offer.

More recently, his former VP Sales at the company he sold has been working with a Chinese outfit doing embedded development and having problems. He begged my friend to participate in a conference call, and since for former VP was a friend, he did. The issues the Chinese outfit was having were in areas he knew, and he made a couple of suggestions. They said they wanted to hire him as a contractor to work on that for them, and asked his rate. It's another case of "I really don't want the job. Set an absurdly high price and scare them off." He told them his rate was $500/hour. They said "When can you start?"

One minor good point is that he can twit his former corporate lawyer who bills $450/hour and say "Nyah, nyah! I'm billing more than you!" But he said "There's no way I'm worth $500/hour!" I said "Sure you are. Something is worth what someone else is willing to pay for it. They are willing to pay you $500/hour. You are worth it to them Take the money!"

One alternative, of course, is to use equity...but that's tough, again, with most family businesses. We've had several businesses, in our family, for the better part of the last century, into the first part of this one. Each has faced one or another of these issues. (Not to mention, the ubiquitous, "the kid that wanted to take it over was the LEAST capable of so doing" issue.)

The problem with equity is whether it will in fact be worth anything. I've lost count of the number of folks I've encountered working ridiculous hours for startups in exchange for equity. The problem is, maybe 1% of those startups succeed, IPO, and make the founder rich. If you aren't a founder, forget getting rich even if it does IPO, and usually, you will wind up with equity that has no value.

There may actually be equity in family businesses, bet getting a piece of it if you aren't a family member presents challenges. Issuing more shares dilutes the equity of existing holders, who may not be happy.

NONE of them worked out really satisfactorily to ALL parties. They all ended up compromises, which, natch, means that everyone felt that they'd been screwed, somehow. ;-)

So long as they all felt equally screwed and no one was getting singled out, it was proper compromise...
______
Dennis