It’s easy to disparage bankers and big banks. They have corrupt relationships with their rating agencies, they routinely take positions against their own clients, and at commercial banks, their business model has transformed from giving loans to charging fees. Banks are not only destabilizing our nation, they’re nickel-and-diming us in the process.
But they do some things right. Banks hire right: Employees are not treated as consultants indefinitely. When investment banks make money, key employees get spectacular bonuses. Even in a lackluster economy with bank pay under scrutiny, banks share a significant portion of profits with employees.
When hiring, think like a banker. Don’t rob workers of rights our forefathers fought hard to win for all of us. Unemployment insurance, some sort of health insurance, lunch, breaks, reasonable hours, vacation, and overtime pay are all realities a CEOs must acknowledge and provide. Many companies impose some sort of trial period—a bizarre innovation born of a commitment-phobic culture—asking employees to act as a contractor for several months, often without any pay at all. This practice is beyond cheap—it’s often illegal. (At ClearGears we have a trial period, but it’s paid.)
Not paying unemployment insurance is an expensive mistake. In New York, each time an employer fails to pay unemployment insurance for an employee, the employer can be fined up to $12,000. New York State can ask your contractor a few questions to determine if they were truly a contractor or an employee. Contractors are actually employees if the employer can dictate the hours of work, the actual work done, and the level of pay. If the state decides your contractors are actually employees, you will owe more cash than you probably have.
When you have profits, pay like a banker.
Most online entrepreneurs never see profits. Instead, their financial windfall happens when their company is acquired or, less often, goes public. It’s at those times that paying like a banker matters. Employees should benefit significantly when their company is acquired because acquisitions are often followed by layoffs of redundant positions. By paying everyone handsomely through very high bonuses, your reputation as a CEO skyrockets, you will improve the lives of the people who you depend on, and you generate more happiness in the world.
Don’t overvalue the risk you took when starting the company. I find that most entrepreneurs justify their huge share of the company, its profits, and the windfall after an acquisition with the risk they took in the first years of founding the company. In my experience, few tech entrepreneurs truly take huge uncalculated risks to start businesses.
Shared workspaces like General Assembly, Dogpatch Labs, and WeWork Labs are filled with with pedigreed twentysomethings who enjoy family support to get through the bootstrapping stage. Few are mortgaging houses or working night shifts elsewhere to start their companies. A bubble in the cost of education makes it almost impossible for people saddled with personal loans to take on the risks that startups entail.
Instead, most have either past successes, professional investors, or lots of family support to get them through the early stages. Indirect help comes by way of free housing, little or no debt, or selling stocks bought long ago by parents. Starting our businesses takes some courage, but we’re not dodging bullets or going hungry to get our startups off the ground.
Part of the joy of starting a business is that you can do right by your customers and employees. While you may have ambitions to become the next big company, wouldn’t the world be a better place if you did so while treating coworkers with extraordinary generosity?
Arshad Chowdhury, a serial entrepreneur who is passionate about improving life at work, is CEO of ClearGears, a software as a service business that replaces traditional reviews with real-time, social feedback. Prior to developing ClearGears, Chowdhury led two culture-first ventures: a web-consulting firm called Crowd Interactive, and a fatigue-management company called MetroNaps. For more insights, read Arshad's blog and follow him on Twitter.
[Image: Flickr user SantiMB]