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If the Shoe Fits: the Wrongest Way to Close a Company

Friday, September 2nd, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mIn June we learned the right way to close a company and last month we got a lesson in the wrong way to do it.

Right, wrong; what’s left?

(Allegedly) crooked.

How crooked?

Penny Kim is a marketing professional who relocated from Dallas in July to work for WrkRiot (formerly known as 1for.one and apparently also known as JobSonic) for $135,000 a year plus equity and a $10,000 signing bonus for relocation expenses,

It ended with her dismissal in August after she filed a complaint with the Division of Labor Standards Enforcement over failure to properly pay her

If you wonder whether she’s just another disgruntled employee, she’s not.

Not when the CEO gives everyone faked documentation of wage payment.

“Thursday, August 4th was D-Day … That afternoon in the office, Michael emailed each employee a personalized PDF receipt of a Wells Fargo wire transfer with the message: ‘Here is the receipt. It has been calculated for the taxes on your semi-monthly salary and signing bonus. The money is arriving either today or tomorrow. I am sorry about the delay.'”

But the receipts were fake.

Al Brown, former CTO and one of the founders, confirmed much of her account, even the most outrageous accusation: The CEO she dubbed “Michael,” whose LinkedIn profile identifies him as Isaac Choi, gave employees fake receipts for money wire transfers to convince them the company had paid their back wages when in fact it hadn’t.

Not even a good fake, since the photoshopped receipts said 2014.

Even after that two employees lent the company an additional $65K.

All told, Choi burned through $695,000 (his own initial $400,000, Brown’s $230,000 and the borrowed $65,000) in less than a year.

A comment on Hacker News should serve as a bona fide caveat emptor for everyone in the global startup world, not just in Silicon Valley.

“Welcome to the club. It’s pretty much a rite of passage here to spend some time with a psychopath VC, a completely self absorbed CTO with a rich investor dad that fuels his fantasies, or an idiotic CEO with an ego problem, and to pay the price for it (just time if you’re lucky, time+money if you’re not).”

This isn’t a warning not to join, just a note to do so with your eyes open.

There’s a reason it’s called “due diligence” and it’s as much for employees as it is for founders and investors.

Image credit: HikingArtist

If the Shoe Fits: Shock and Fear in Coder Heaven

Friday, June 17th, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

5726760809_bf0bf0f558_mProgrammers in Silicon Valley are reeling.

What are they going to do?

No more clandestine recruiter calls from unicorn startups offering million dollar salaries, six figure sign-on bonuses, thousands of stock options and country club style perks.

And those graduating with CS degrees may find fewer startups bidding against each other for their services.

Not to mention layoffs. Layoff a programmer? Are you nuts?

Nope, that’s exactly what’s happening.

And, as an ex recruiter, all I can say is it’s about time.

Perhaps now candidate focus will return to the mission and the tech, instead of the dollars and bragging rights.

Because, in spite of the all the media coverage, there is a large number of programmers who don’t believe it will affect them — others, sure, but not them.

Of course, it’s hard when you’ve been the golden (mostly) boys and reality rears its ugly head.

But ask anyone in tech who has been around for awhile and they’ll tell you that change is constant and what goes up comes down — and eventually goes back up again.

Programmer jobs not excepted.

Image credit: HikingArtist

Entrepreneurs: HireAthena — On Demand, But Not 1099

Thursday, April 28th, 2016

HireAthena

Do you use or are you familiar with HireAthena? It provides professional services, such as HR, benefits, payroll, FSA and 401k management, accounting, bookkeeping, monthly financials, and taxes, using a subscription model priced according to size and needs, dominantly for startups, non-profits and other small biz.

However, unlike most on-demand providers HireAthena is not using 1099 contract professionals.

In a unique twist in the on-demand labor market, HireAthena offers its professional workforce the best of both worlds: they receive a competitive salary, 401(k), and medical/dental/vision insurance, but they can also work from home. (…) “We’re committed to the idea that employees are loyal if we’re loyal to employees, even if you’re part-time,” said Kristen Koh Goldstein, founder and CEO of HireAthena.

What’s more, HireAthena is specifically targeting professional stay-at-home moms and dads, which gives them a significantly under-utilized source of candidates.

And in case you think that HireAthena’s model only applies to higher-end professional, you have a short memory.

Last year on-demand cleaning service Managed by Q did the same with their staff.

Managed by Q hires its “operators,” as it calls them, as employees, offering full-time and part-time employment with benefits and stock options. The work is flexible, and Managed by Q works with operators’ schedules.

While HireAthena is a spinoff of Backops and Scalus, which have raised $12 million, it hasn’t taken any funding directly and expects to be profitable later this year.

“Our mission wouldn’t be taken seriously unless we were profitable. This is not a charitable organization. We’re employing moms and dads in order to provide a very affordable service to small businesses.”

No funding. Profitable. Employees, with benefits.

How old fashioned.

Image credit: HireAthena

Ducks in a Row: Do People Count?

Tuesday, March 15th, 2016

800px-The_protectors_of_our_industries

I’ve written a lot about the 1099 economy and its poster boy Uber; none of it particularly flattering.

Why?

Because the way the drivers are treated they are not “independent contractors” as described by the Feds.

They are revolting in the best way — by becoming the competition.

That was back at the end of February and in tech three weeks can be a lifetime.

The new news is that Talmon Marco founder of Viber six years ago and sold for $900 million two years later, is the guy behind Juno, Uber’s newest competitor — but a competitor that values it’s people.

“What Uber left out in the process of building their company is that they completely and totally forgot about the people who do the work, the drivers. Imagine a company where all the employees hate management; that is not a good place to be.”

And there lies the problem for most of the 1099 crowd.

Unlike most other 1099 businesses, full-time Juno drivers will be employees, not contractors, receive stock quarterly and have the potential to build  “as much equity as the founders.” according to Marco.

Remember the robber barons of the late 19th-arly 20th Century?

A robber baron is a wealthy, powerful businessman who employs practices including exerting control over natural resources, influencing high levels of government, paying subsistence wages, squashing competition by acquiring competitors, creating monopolies and raising prices  [emphasis mine], and schemes to sell stock at inflated prices to unsuspecting investors.

Even the inflated stock seems familiar when you consider that Uber’s unicorn valuation is based on funds raised, not revenue, and it’s losing hundreds of millions each year.

Robber barons indeed.

Image credit: Wikipedia

Yelp Follows in Walmart’s Footsteps

Wednesday, February 24th, 2016

https://www.flickr.com/photos/javmorcas/8528220016/

Have you read yet the story of Talia Jane?

She is a customer service rep at Yelp, whose pay puts her right down there with Walmart and bank tellers.

“I got paid yesterday ($733.24, bi-weekly) but I have to save as much of that as possible to pay my rent ($1245) for my apartment that’s 40 miles away from work because it was the cheapest place I could find that had access to the train, which costs me $5.65 one way to get to work. That’s $11.30 a day, by the way. I make $8.15 an hour after taxes.” (Minimum wage in San Francisco is $12.25 an hour.)

She was fired two hours after writing an open letter to Yelp CEO Jeremy Stoppelman on Medium.

Yelp, of course, says the letter had nothing to do with her termination.

Stoppleman has a solution.

“The reality of such a high Bay Area cost of living is entry level jobs migrate to where costs of living are lower. Have already announced we are growing EAT24 support in AZ for this reason.”

Stoppleman’s solution seems to be to kick out everyone who doesn’t earn a fat salary — how dare “them” have the temerity to want to enjoy the pleasures and opportunities of life in San Francisco/Silicon Valley.

That said, I’ve never understood why Walmart, banks, Yelp or all those who follow in their footsteps, pay their front-line people—the actual “face of the company”— what can amount to starvation wages in urban areas and then are surprised when those same people lie, cheat, steal or speak out publicly.

Tony Hsieh, of Zappos fame, Costco and Trader Joe’s are a different story.

What it comes down to is that the further away from contact with customers the greater the money, perks and benefits.

Crazy.

Flickr image credit: Javier Morales

Ducks in a Row: You Get What You Pay For

Tuesday, February 16th, 2016

https://www.flickr.com/photos/37254648@N07/5000767635/

The way you treat your employees affects more than your retention rate.

It can have a major impact on your company’s trainsecurity.

Banks are an excellent example. They are notorious for the low pay,  haphazard training and opportunities and iffy managers that frontline employees, i.e., tellers, endure.

But it is the pay that is especially erroneous.

According to the Bureau of Labor Statistics, the median annual income for tellers in 2014 was $25,760, a salary that prosecutors say does not match the high-risk nature of their jobs.

Raising a family and paying bills on $25K a year is beyond difficult, which increases temptation, yet these are the people who have the most access and opportunity to rip off customers.

And many of them are doing just that.

Rich and elderly bank customers are particularly at risk, prosecutors say, when tellers and other retail-branch employees tap into accounts to wire funds without authorization, make fake debit cards to withdraw money from A.T.M.s and sell off personal information to other criminals. Accounts with high balances and those with direct deposits of government funds, like Social Security payments, are especially coveted.

If you haven’t already guessed, the banks don’t want to spend to fix the problems.

Despite their importance, tellers and many low-level bank employees are not subjected to rigorous background checks. (…)  Kevin Streff, managing partner at Secure Banking Solutions, a security consulting firm, said the sluggish controls came, in part, from banks’ outdated view that tellers handled only low-risk transactions. (…)  Despite the warnings, progress has been slow. “There is a reluctance to provide real oversight, rigor or even security training because it costs time and money,” Mr. Streff said.

What will banks do?

Reimburse you for money actually taken, but that does nothing if your personal information has been shared or sold.

Based on their actions, as opposed to their words, executive attitude in many banks, insurance companies and others in the financial services industry seems be one of keep costs low, bonuses high and caveat emptor for customers.

That attitude is deeply embedded in their cultural DNA, which means changing it isn’t going to be simple — or quick.

Which means you had better embed caveat emptor in your DNA.

Flickr credit: Daz

Golden Oldies: Mine’s Bigger Than Yours

Monday, January 25th, 2016

It’s amazing to me, but looking back over nearly a decade of writing I find posts that still impress, with information that is as useful now as when it was written. Golden Oldies is a collection of what I consider some of the best posts during that time. Read other Golden Oldies here

no_guarantee

I’m no happier about the AIG and other bonuses paid to screwed up Wall Street banks, but I’m not sure why any of us are surprised.

“In the largest 25 corporate bankruptcies between 1999 and 2002, while hundreds of billions of dollars of investor wealth and over 100,000 jobs disappeared, the Financial Times found the “barons of bankruptcy” made off with $3.3 billion.”

Giant compensation packages, guaranteed bonuses and platinum parachutes are excused by Boards and executives as necessary to attract the “best and brightest,” but here’s what’s really going on.

The ‘name’ demands outsize compensation/stock options/guaranteed bonus/etc. in order to validate their ‘brand’.

Those responsible for hiring not only meet the demands, but even exceed them in an effort to attain or sustain the company’s reputation as a better home for ‘stars’—the more stars you have the greater the bragging rights— mine’s bigger than yours in high school locker room talk.

Now let’s consider the folly of this attitude.

Those hiring often seek a name brand in the mistaken belief that the brand comes with a warranty that guarantees good results.

But no matter who you hire you’re actually paying for their past performance, which is always influenced by

  • circumstances—boss and company positioning in its market and industry
  • environment—culture and colleagues;

and let us not forget that minor factor

  • the economy.

The hiring mindset is that everything the brand accomplished was done in a total vacuum and dependent only on the brand’s own actions, therefore changing every single surrounding factor will have no impact on performance.

Put like that it sounds pretty stupid, doesn’t it.

This is one of the prime reasons that so many CEOs bring their ‘own team’ over when they move, as do managers all the way down the food chain—they know they didn’t do it alone.

CEOs aren’t like movie and rock stars whose very names draw consumers into spending money—nobody ever bought a product from GE because Jack Welch was CEO, nor do they carry Jobs’ iPods—so why pay them that way?

Moreover, assuming that performance occurring during an expansion is a valid yardstick for performance in general, let alone a downturn, is sheer idiocy.

You have only to remember the difficulties faced by people whose management skills were honed between 1991 and 2000, the longest expansion in our history. When the recession hit in March of 2001 they had no experience whatsoever of how to drive revenue or manage in a down economy.

That recession and the previous one in 1990 lasted only 8 months each. The longest recession we’ve had was 2 years, January-July 1980 and July 1981-November 1982, and that one had a 12 month break in it. This means there are a very small number of managers with any actual experience managing in anything even close to what’s happening now.

The current recession officially started in December 2007, so it’s already 15 months old and the end isn’t in sight.

What experience makes these folks the ‘best and brightest’ for today’s world?

Just what the hell are companies still guaranteeing oversized compensation and exorbitant exit packages when now is definitely the time to pay for future performance—no guarantees.

Sad, isn’t it. Seven years and nothing’s changed, in fact, it’s gotten much worse.  

The wealth of the richest 62 people grew by more than half a trillion dollars in that last half-decade, while the wealth of the poorest 50 percent of people globally decreased by more than $1 trillion during the same period.

Image credit: flickr

Ducks in a Row: Falling Star Marissa Mayer

Tuesday, January 19th, 2016

https://www.flickr.com/photos/98714794@N08/15815120475/

There is nothing wrong with Marissa Mayer’s compensation.

Yahoo! Inc.’s Marissa Mayer was the country’s highest-paid female CEO. The 39-year-old was awarded $59.1 million in 2014, making her No. 3 among the eight women on the Bloomberg Pay Index…

However, there is a lot wrong with Marissa Mayer’s performance.

The problem is, as As Wally Bock succinctly said last year, “We live in a world of microwavable answers and quick fixes” — and bosses see stars as quick fixes,” and Yahoo’s board thought Mayer the star would quickly fix Yahoo.

Hiring stars is often a function of bragging rights, better known as “mine’s bigger than yours.

But in a world where where people want star status in order to brand themselves, boards and bosses would do well to remember that they don’t come with any kind of money-back guarantee — in fact, they more often come with some kind of golden buyout.

Most star performers are a product of the ecosystem in which they perform. Change the management, culture, especially culture, or any other part of that ecosystem and stars may fall.

And never forget that that ecosystem is permeated by that insidious little detail that impacts success and is so often ignored in discussions — the economy.

As everyone knows, Yahoo isn’t Google, so…

A rising star at Google has become a falling star at Yahoo.

And a lesson learned for thinking bosses at any level, especially those responsible for hiring  executive and strategic talent — the past is no guarantee of the future.

Flickr image credit: Tim Spouge

Entrepreneurs: Dan Price and the $70K Minimum Wage

Thursday, November 12th, 2015

gravity

Do you remember last August when news that Dan Price, CEO of Gravity Payments, was raising the the minimum wage at his company to $70,000, phased in over the next three years, and all hell broke loose?

Reality-show offers, book deals, research requests from Harvard, both complimentary and scathing media attention; and, hilariously, Rush Limbaugh calling a socialist.

He partly funded the move by cutting his own salary from $1.1 million to $70K.

So what happened?

So far, the results are positive.

…the publicity he’s gotten would boost new customer inquiries from 30 per month to 2,000 within two weeks. (…) customer retention rate rose from 91 to 95 percent in the second quarter. Only two employees quit — a nonevent.

The short reason Price did what he did was because he realized he wasn’t living the values he was raised with and in which he believed.

Obviously, it’s more complicated than that, so read the article.

Then think, really think, about how you can translate your values and beliefs into tangible actions, as opposed to empty words.

Flickr image credit: Gravity Payments

Ducks in a Row: the Dark Side of Adam Smith

Tuesday, September 1st, 2015

https://www.flickr.com/photos/24874528@N04/17187535692/Gallup regularly polls workers around the world to find out. Its survey last year found that almost 90 percent of workers were either “not engaged” with or “actively disengaged” from their jobs. Think about that: Nine out of 10 workers spend half their waking lives doing things they don’t really want to do in places they don’t particularly want to be.

Pretty sad, but what happened to bring us to this sorry state?

Not what, but who.

Disengagement was born in 1776 with Adam Smith wrote Wealth of Nations, became the father of industrial capitalism, and gave birth to the belief that “people were naturally lazy and would work only for pay.

The more that philosophy was embraced over the centuries the more it became a self-fulfilling prophecy — in other words, people live up or down to expectations.

An excellent essay by Barry Schwartzauga, professor of psychology at Swarthmore College, provides great insight to how much damage has been done by this one assumption.

When money is made the measure of all things, it becomes the measure of all things.

To be sure, people should be adequately compensated for their work. (…) But in securing such victories for working people, we should not lose sight of the aspiration to make work the kind of activity people embrace, rather than the kind of activity they shun.

For decades, study after study and survey after survey have placed money (assuming a living wage) around number five on what’s important to workers.

How can we do this? By giving employees more of a say in how they do their jobs. By making sure we offer them opportunities to learn and grow. And by encouraging them to suggest improvements to the work process and listening to what they say.

Work that is adequately compensated is an important social good. But so is work that is worth doing. Half of our waking lives is a terrible thing to waste.

Autonomy. Challenge. Learning and growth. The chance to make a difference. Compensation.

If you want your people engaged then provide them reasons to engage.

If not, just pay them and don’t complain.

Flickr image credit: Airwolfhound

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