Monday, 29 May 2006

any ideas?

We are having a very nice weekend.

We went on a date yesterday.

A date!

With each other!

B turned his phone off!

We went for a pizza-lunch (with artichokes) and I had an enormously decadent (or decadently enormous?) glass of white wine (at lunchtime!!) and then we went and saw The Da Vinci Code.

I rather enjoyed it, in a 'oh goodness, it's not any better than the book, is it?!' kind of way. I thought that Ron Howard had done a workman-like job of directing it and the actors had done a workman-like job of their parts; apart from Ian McKellan, who was clearly having the time of his life and was great.

Also, doesn't Tom Hanks have a big face?

Now, I have a hypothetical question about business and co-operative-type profit-sharing.  I need some opinions.  Please feel free to throw what you think in to the pile, I need some ideas:

The background:

There are currently three of us employed full-time by the business - me, B and R.  We are all directors.  We all draw a salary.  B and I own the company and R does not yet have a share in it, because so far there have not been any profits worth sharing - everything over and above our salaries has got ploughed back in.

However, we anticipate that changing in the next twelve months, due to to our own hard work and that of The Marketing Guru.

We are going to take on another member of staff full-time in the autumn.  We've got about half a dozen very reliable students-technicans who we are currently using on a casual basis and we have offered one of them the post.  I don't know if he'll take it yet - it's not an enormous salary;  but we are offerering a training package that will be about fifteen percent on top of his salary and then a bonus of ten percent of his salary if we meet our targets.  It will be his first job, so I guess it's just whether he fancies it or not, really.

We want:

To have some kind of profit-share at the end of each year.  This is pretty easy with the three of us who are directors, because we can just issue each of us with a share of the company that entitles us to a percentage of the profits.  But how do we include any staff in that and make it work however many staff we may have?

Our thoughts so far are:
  • If people are doing their jobs properly then everyone is an equally important part of the company
  • If people aren't doing their jobs properly then two things - we won't keep them around for long and what's more, they don't deserve a share of the profits
  • We don't want to issue shares to non-directorial staff because we don't want to get in to buying them back if people move on; and we'd need to buy them back, because we don't want non-employees profiting from the labours of employees
  • In any company, some employees have more responsibility than others
  • B, R and I have taken up a hell of a lot of slack over the last three years and have taken a lot of risk, both personal and financial, to get things going
  • We should probably have some kind of time-qualifier before people are eligible for this kind of profit-share - ie, they should have been with the company for more than a year (two years?  three years?)
So:

If we allocate a percentage of the profits of the company (say 25%) to be divided up among non-directorial employees, what is the best way divvy it up?  Bearing in mind that this year there will be one employee.  In five years there might be five, or ten or a million.

Remember that profits will go up as we have more people on board.  And that everyone already has a salary that is relative to the amount of responsibility and skill their job entails.  We like the idea of it being a co-operative effort.  It's a very hard industry and a co-operative seems fair.

Arrgh.  It's like the worst kind of maths problem.  I'm not looking for a solution, just some ideas.  And of course, we need to chat to Sarcastic Accountant about it.  He's not really a co-operative-type person though.  More a capitalist-type person.  Which is fine, that's what we pay him for.

And now I am going to go and research solar panels, wind turbines and heat exchangers.

Oh, and we are going to the local Greek/Turkish restaurant tonight as a post-birthday treat for me.  There may be a belly-dancer.

20 comments:

  1. "Also, doesn't Tom Hanks have a big face?"

    Yes. I used to think he had a receding hairline, then I realised that his hair was actually too small for his head.

    About the profit share scenario - yes, I would suggest a minimum time period, it seems fair to reward the people who have been there for the long haul. Maybe you could make it dependant on a certain level of productivity too.

    Have fun tonight :-)

    ReplyDelete
  2. "Also, doesn't Tom Hanks have a big face?"

    Yes. I used to think he had a receding hairline, then I realised that his hair was actually too small for his head.

    About the profit share scenario - yes, I would suggest a minimum time period, it seems fair to reward the people who have been there for the long haul. Maybe you could make it dependant on a certain level of productivity too.

    Have fun tonight :-)

    ReplyDelete
  3. I can't help on the business side but the date sounds lovely!

    ReplyDelete
  4. I can't help on the business side but the date sounds lovely!

    ReplyDelete
  5. When I worked in the "Pharmaceutical Devices" industry the company had a profit sharing scheme but it was a few years ago now.
    Divvy up was by salary - bigger salary, bigger percentage of profitshare pool. I think the qualifying period was a year but this was a larger company. If I were you I'd be concerned about any qualifying period being less than two years. And maybe eligibilty being dependent on satisfactory "performance review".
    Hope you enjoy the restaurant.
    If the movie's no better than the book I think I'll wait until it comes on TV!

    ReplyDelete
  6. When I worked in the "Pharmaceutical Devices" industry the company had a profit sharing scheme but it was a few years ago now.
    Divvy up was by salary - bigger salary, bigger percentage of profitshare pool. I think the qualifying period was a year but this was a larger company. If I were you I'd be concerned about any qualifying period being less than two years. And maybe eligibilty being dependent on satisfactory "performance review".
    Hope you enjoy the restaurant.
    If the movie's no better than the book I think I'll wait until it comes on TV!

    ReplyDelete
  7. I think it's a great idea for you to be offering a job which includes a training package. Training is a great way to share your company's success with your co-workers because it can improve their future earning potential and make them more useful to you as well. Sending people off to conferences and trade-shows in exotic locations can also be fun and is tax-deductible.

    ReplyDelete
  8. I think it's a great idea for you to be offering a job which includes a training package. Training is a great way to share your company's success with your co-workers because it can improve their future earning potential and make them more useful to you as well. Sending people off to conferences and trade-shows in exotic locations can also be fun and is tax-deductible.

    ReplyDelete
  9. You could do this:

    Allocate a % of the annual profits for profit share, e.g. 10% (although you could do it six-monthly)

    Establish a points allocation for each grade of employee, e.g. 4 points for a director, down to 1 point for the tea boy, if you like.

    Come pay-out time, the pot is divided by the total number of points, with each employee receiving his or her due weighting.

    As you grow, employees should increase only in line with profits (or something is wrong), so everyone's bonus increases. The Director's mostly so, because your ratio of employees to director should increase as you get bigger.

    Or you could totally ignore this. That's OK. Maybe it will give you some other idea

    ReplyDelete
  10. You could do this:

    Allocate a % of the annual profits for profit share, e.g. 10% (although you could do it six-monthly)

    Establish a points allocation for each grade of employee, e.g. 4 points for a director, down to 1 point for the tea boy, if you like.

    Come pay-out time, the pot is divided by the total number of points, with each employee receiving his or her due weighting.

    As you grow, employees should increase only in line with profits (or something is wrong), so everyone's bonus increases. The Director's mostly so, because your ratio of employees to director should increase as you get bigger.

    Or you could totally ignore this. That's OK. Maybe it will give you some other idea

    ReplyDelete
  11. Great idea to give people some stake in the success of the business they work for. In the short term I would consider certain factors.

    1) Whatever scheme you decide on needs to be clear and transparent to all those involved and needs to have simple rules / eligibility which everyone can understand.

    2) I would definitely go for a qualifying period but I think 2 years may be too long assuming anyone useless will be long gone before the one year mark

    3)Assuming you have a business plan and budget for each year then the "pot" can be built into the budget. Say you budget for £100k of profit and want to reinvest 90% in the business and put 10% into profit share. Then everyone knows that 10k will be available if the business runs to budget. If you don't meet your budget then no profit share. If you exceed your target then you need a rule for that so could be 10% or maybe more if you want to create more incentive

    4) My suggestion would be to award people a percentage of their salary as a bonus. This would make it a little more complex to calculate but if your budget shows your expected wage bill as well then you can convert the on target profits into a percentage of that wage bill - also allows you to deal more easily with part time employees

    Anyway just a few thoughts

    ReplyDelete
  12. Great idea to give people some stake in the success of the business they work for. In the short term I would consider certain factors.

    1) Whatever scheme you decide on needs to be clear and transparent to all those involved and needs to have simple rules / eligibility which everyone can understand.

    2) I would definitely go for a qualifying period but I think 2 years may be too long assuming anyone useless will be long gone before the one year mark

    3)Assuming you have a business plan and budget for each year then the "pot" can be built into the budget. Say you budget for £100k of profit and want to reinvest 90% in the business and put 10% into profit share. Then everyone knows that 10k will be available if the business runs to budget. If you don't meet your budget then no profit share. If you exceed your target then you need a rule for that so could be 10% or maybe more if you want to create more incentive

    4) My suggestion would be to award people a percentage of their salary as a bonus. This would make it a little more complex to calculate but if your budget shows your expected wage bill as well then you can convert the on target profits into a percentage of that wage bill - also allows you to deal more easily with part time employees

    Anyway just a few thoughts

    ReplyDelete
  13. Lots of good thoughts there, thank you all very much. Am going to have a large glass of wine and assimilate them rather than blogging this evening ... .

    I got very drunk at the turkish restaurant and ranted at my inlaws about climbers who leave other climbers to die on Everest. I think they found it endearing, but I am just about to phone them and check.

    ReplyDelete
  14. Lots of good thoughts there, thank you all very much. Am going to have a large glass of wine and assimilate them rather than blogging this evening ... .

    I got very drunk at the turkish restaurant and ranted at my inlaws about climbers who leave other climbers to die on Everest. I think they found it endearing, but I am just about to phone them and check.

    ReplyDelete
  15. Awesome book on wind power:

    http://www.amazon.co.uk/exec/obidos/ASIN/1931498148/poopybumdotco-20/

    I bought it a year or so ago and found it very thorough.

    ReplyDelete
  16. Awesome book on wind power:

    http://www.amazon.co.uk/exec/obidos/ASIN/1931498148/poopybumdotco-20/

    I bought it a year or so ago and found it very thorough.

    ReplyDelete
  17. I was very puzzled by that wind farm book link until I realised that it must be an affiliate link :-)

    ReplyDelete
  18. Solar panels - having researched *very* thoroughly a couple of months ago, the only place selling just the panels that are worth having is http://www.navitron.org.uk/ and guess what? They are based in Wales! You need to speak to Ivan (currently running the business from his semi-) - not very good at answering his phone or replying to email... so be patient!

    Ours will be going up in the next couple of weeks so watch out for info/pics, and then progress reports.

    ReplyDelete
  19. Solar panels - having researched *very* thoroughly a couple of months ago, the only place selling just the panels that are worth having is http://www.navitron.org.uk/ and guess what? They are based in Wales! You need to speak to Ivan (currently running the business from his semi-) - not very good at answering his phone or replying to email... so be patient!

    Ours will be going up in the next couple of weeks so watch out for info/pics, and then progress reports.

    ReplyDelete