What is it that makes a team member feel a sense of ownership? Is it autonomy? Money? Advancement? What really engages people to rise up, to act like owners, to take your business personally?
I was pondering this with my friend Adam recently, and we came up with 8 vital keys to ownership. I’m sure we missed a few aspects, but consider how you’re engaging your team members with the first four ingredients of ownership. I’ll post the rest of the list on Tuesday – so definitely schedule five minutes to read the rest of the list then.
Reminder: Your comments and feedback are always welcome.
If you want more accountability, more initiative, more caring and concern for your business, you’ll want to crank up the aspects of ownership that a team member feels.
Title/prestige (e.g. a title that conveys you are a shareholder, partner, principal, member, etc. There is some legal risk here that if you call someone a shareholder but they aren’t, they will later claim they are. Therefore this should be accompanied with an employment agreement or signed side letter that says that title is X but regardless of title they are not a shareholder (if they are not) and have no ownership interest in the company). Now, that said, I am all for incenting team members with shares of company stock once certain objectives have been achieved. The point is to state these clearly.
Money. Someone can have their compensation tied to the performance of the company without being a shareholder. This is “profit sharing” and can be complex because expenses, and thus profit, can vary widely, and although you want your team to be frugal, you also don’t want to have to step through your books with them. Again there are legal implications of promising a share of profits so you want to be careful to expressly limit rights. Also it is important in explaining to a non-entrepreneur with experience only as an employee that one of the wonderful things about tying your compensation to profits is that it can go way up AND WAY DOWN. If you want to be an owner, you go to the end of the line after everyone else is paid. If things turn south and we have to cut outflows, you and I are the first ones to be cut, and the last ones to be restored. Still loving the idea of being an owner? Great!
Upside. This is benefiting from the value increase of the company from today through exit, but it is ONLY relevant upon exit. If no exit is contemplated or occurs, upside is not real. This is why I like all entrepreneurs to have a clear End Game, of Freedom Finish Line. If you know when you want to sell your company, for ideally how much, to whom, and what assets will be most compelling, then fine—it is fair to set the Upside Expectation with your team members. If exit is contemplated, there can still be a “trust me” approach. Now if the End Game is a certain ideal annual revenue level for a lifestyle business, the Upside for team members could be bonuses tied to revenue or some other incentive.
Job Security. An owner can’t be fired unless you have a board of directors that can vote you out (this is one of the many reasons why you need to learn to manage your board, and of course have the right blend of people you trust on it, outnumbering any challenging personalities. You’ll also want a founder agreement to state appropriate protections for termination (e.g. severance).
Remember, there’s a lot more to be said about team BUILDING and ownership, and I go into tons more detail about this at my 7 Figure Business Summit on 4/30-5/2. The event is only TWO weeks away now, and there are less than 30 spots left. You can still come for the early-bird price of $997 AND bring a friend for half price. (That’s MY PERSONAL business acceleration recession buster — 7 Figure Business Summit.)
To your amazing and IMMEDIATE 7 Figure Success,
Christine Comaford, 7 Figure Business Builder
CEO of Mighty Ventures, Inc.
NY Times Best Selling Author of Rules for Renegades
PS: IF you cannot attend my Summit for any reason, then by all means, grab my Results Now Webinar and get started – but I think you should ALL be at that Summit and give me a chance to see you and hear the extraordinary life that YOU want to build.