Has anyone here setup an employee owned web hosting company? I like the idea of this and think it sounds good on paper but unsure how it would work in the long run. Ideally it would keep everyone motivated to do the best. What do you think the pros and cons would be versus a regular setup?
Employee owned business?
- Thread starter Foley
- Start date
It means every employee is also an owner. They also get a say in all the decisions etc. This is as opposed to have big bosses that don't see the real world. It's mostly about larger companies.
Huawei is a larger company that sort of runs like this.
drmike
100% Tier-1 Gogent
You are speaking of in one term worker owned co-operative. Might want to search for such online. There are organizations for and examples of such enterprises out there. I like and endorse such a company style. We need more of these.
More progressive cities have these sorts of companies in brick and mortar - everything from manufacturing to coffeee shops to whatever.
What are the cons of such?
1. Have to perfect legaleses and ownership interest division up front or hell can ensue.
2. Need clear terms for selling/transfer of equity when people want out of such.
3. Things have to be fair. This can result in you as maybe the focal point of the place losing your role, losing control, etc.
4. Vested interested folks tend to create unhealthy working times for themselves. Putting in too many hours happens quite easily, especially where others on the team are doing the same. Balancing time and sending people home/offline is something hard to do and should be policy about weekly maximums and having a life. Been there and suffered from such in a hostile environment set up like this. 8PM at night and everyone waiting for someone to go home to start the exodus. Some people always had to be last to leave. They suffered heavily from such.
Pros:
1. In theory just about everyone SHOULD be able to do everything it takes to run said company.
2. Since everyone is vested ideally the pay scale is unform. No scamming lowly paid employees (warm bodies). No overpaying the gray hairs because of their three decades of relative experience at a "high" level.
3. Risk is shared. You ideally all succeed or fail based on healthy participation by folks.
More progressive cities have these sorts of companies in brick and mortar - everything from manufacturing to coffeee shops to whatever.
What are the cons of such?
1. Have to perfect legaleses and ownership interest division up front or hell can ensue.
2. Need clear terms for selling/transfer of equity when people want out of such.
3. Things have to be fair. This can result in you as maybe the focal point of the place losing your role, losing control, etc.
4. Vested interested folks tend to create unhealthy working times for themselves. Putting in too many hours happens quite easily, especially where others on the team are doing the same. Balancing time and sending people home/offline is something hard to do and should be policy about weekly maximums and having a life. Been there and suffered from such in a hostile environment set up like this. 8PM at night and everyone waiting for someone to go home to start the exodus. Some people always had to be last to leave. They suffered heavily from such.
Pros:
1. In theory just about everyone SHOULD be able to do everything it takes to run said company.
2. Since everyone is vested ideally the pay scale is unform. No scamming lowly paid employees (warm bodies). No overpaying the gray hairs because of their three decades of relative experience at a "high" level.
3. Risk is shared. You ideally all succeed or fail based on healthy participation by folks.
Yes. This is what I meant. Thanks.
Thanks for the response. You say that everyone should be able to do everything that it takes to run the company. Do you think it would be a bad idea having people on board who specialize in certain tasks? Like have someone who is the lead Linux admin, and someone else who is more skilled at the Windows server tasks? The idea of a employee owned business appeals to me but I am still exploring the idea.
drmike
100% Tier-1 Gogent
Well, specialization has its place. In a cooperative business, at startup leve, I don't think that's a good idea.
Reason why is what happens during times that specialist is unavailable? The answer is probably nothing Windows related. Or in case of Linux pro, the Windows person sits on his hands and says he/she doesn't know.
The goal isn't to have high level knowledge of everything in everyone's heads. But to process, document and do value added things many "for profit" companies neglect to do in course of being understaffed and with workers that have constant axe to grind with management/ownership.
There is one company in Latin America, Brazil I do believe, where invested folks in similar structure actually spend time changing jobs literally. So the workforce is learning and fluid.
I love companies like this and they are rather rare in most of the US.
drmike
100% Tier-1 Gogent
Well a split like that just wouldn't function as an employee owned cooperative. That share above is more like Google and the gazillion shareholder who still have a minority voting stake and can never get anyting done or oust the royalty on the corporate toilet.
Usually, up front, the original creators, they get a chunk each. They collectively throw a big chunk into a pool for others to vest, buy into or preferably partner/join/work into.
So as percentage, they project total owners they thing reasonable and needed... The draw out share plane to accomodate.
Real downside with these hybrid companies are when time comes for someone to move on. How does the interest get divested. What are the equity share/transfer rules. Coming up with way the company or other shareholders buy back that equity is best, but often problematic. All depends on how easy going and fair everyone is though.
Its a great day in the short term. It builds your company in a more productive way, and allows for I believe a greater over quality of your services. However in the long run it doesn't seem like such a good idea. You have to factor in people will want to leave, people want things changed while others don't, no real "leader" to overrule on horrible ideas, and so on and so fourth.
BrianHarrison
Member
Depends what your definition of "employee-owned" is. Does holding any number of shares in the company qualify or are you referring to a controlling interest?
dano
New Member
Employee owned does seem like a more "win-win", but I have never been a part of one or started one myself. I see companies like New Belgium Brewing, and wonder how they do it, as they seem to be productive and profitable to be employee owned.
I also see companies like Bobs Red Mill, who said he would be "giving his company to the employee's via a stock ownership program". I am not sure if New Belgium was employee owned from day one, and obviously Bob's Red Mill didn't start this program until way after conception.
If anything, start your company with this in mind, but possibly start it traditionally, with the major stakeholders or yourself as owner, and if things go well, introduce this, once you have the ability to(when growth/profit/legal understanding mature).
I also see companies like Bobs Red Mill, who said he would be "giving his company to the employee's via a stock ownership program". I am not sure if New Belgium was employee owned from day one, and obviously Bob's Red Mill didn't start this program until way after conception.
If anything, start your company with this in mind, but possibly start it traditionally, with the major stakeholders or yourself as owner, and if things go well, introduce this, once you have the ability to(when growth/profit/legal understanding mature).
Oi - I couldn't disagree more with the first sentiment, and yet I wholly agree with the second.
A cooperative business does not mean all people can (or should) do all things. It means all people have a vested interest in seeing the entire organization succeed.
Now I'm not saying I disagree that you should have only one windows specialist, and when they are unavailable you are SOL. That would be crazy. But to expect all people to troubleshoot all problems at all times is also crazy. People are more proficient at certain tasks and to best aid the entire organization those are what they should focus on.
Likewise you still need a management structure in place. Even if you have a slew of good linux admins, they will all have different ideas on network architeture, security, etc. Just as too many cooks in the kitchen can ruin a meal, there needs to be a clear leader who gets the final say on vision and direction or else the entire entity will simply flail and flounder and not move in any clear direction.
Documentation in all things business related is crucial. Not just commenting code or creating network diagrams. All business policies, practices, etc should be fully documented and available for all. Everything from HR issues, to disaster recovery plans, to client billing policies and practices. The more that is "written down" (wikis are awesome!) the better off the whole organization will be!
farhanideas
Member
I agree with him it will work great to wrk together
Licensecart
Active Member
I wouldn't do that, Waitrose do that, and there still are people who are managers who think they own the shop but the Store Manager above them is nice.
Keep things simple, manage your business well, do everything you can to encourage employee and business growth. Good employees will stick around in a good environment, but as a manager/owner you can't let yourself become stagnant. Training/learning opportunities are important as are competitive compensation.
When starting out it is hard to achieve the great work environment, but you will have more opportunities to encourage employee growth and boost morale as the business grows and becomes profitable.
Don't complicate things by sharing up company ownership, bonuses are a much simpler alternative, and complement your employees by trying to meet your employee's financial and learning needs.
Shared ownership sounds all peachy if you assume the business is always profitable, but most businesses are not profitable for the first few years. As a owner you need to take away the stress of managing the bottom line, so that your employees can focus on doing their job well.
Some of the most difficult decisions are best made alone, with the consultation of trusted advisors, a democracy does not a lean business make. Running a lean business is pretty much crucial to being able to maintain a healthy bottom line, and in turn being able to do things for your employees (compensation, good work place, learning etc)
/ramble, tldr; keep things simple.
When starting out it is hard to achieve the great work environment, but you will have more opportunities to encourage employee growth and boost morale as the business grows and becomes profitable.
Don't complicate things by sharing up company ownership, bonuses are a much simpler alternative, and complement your employees by trying to meet your employee's financial and learning needs.
Shared ownership sounds all peachy if you assume the business is always profitable, but most businesses are not profitable for the first few years. As a owner you need to take away the stress of managing the bottom line, so that your employees can focus on doing their job well.
Some of the most difficult decisions are best made alone, with the consultation of trusted advisors, a democracy does not a lean business make. Running a lean business is pretty much crucial to being able to maintain a healthy bottom line, and in turn being able to do things for your employees (compensation, good work place, learning etc)
/ramble, tldr; keep things simple.
For big companies, this sometimes works. But the "employee ownership" usually means you get some stock (which may be 401K matching).
For small companies...I see problems. Imagine you have 5 employees and they're all part owners and one is fired or quits. What happens to his ownership? Let's say the owner has 80% and gives the other four 5%. One leaves...now you have a guy on the outside who still owns 5% of your company. And when you hire a new guy - does he get different terms, do you dilute, or does the owner give up 5% out of his ownership?
And what happens when the former employee with 5% dies and his bitchy widow suddenly is calling you every day demanding to know why you aren't giving her dividends...and even though the owner has 80%, the bitchy widow with 5% can no doubt create legal hassles if you ever decide to sell the company, etc.
Maybe those are extreme numbers and you're only giving out 1% or .5% or .01% or whatever, but ultimately these are the issues.
You definitely want to do this as a corporation with shares rather than as a partnership. Some companies create a pool and all employee ownership comes out of that pool...I guess I've never looked too closely at how those deals are structured but it requires careful planning, with lawyers.
There are other ways of incentivizing besides ownership - e.g., bonuses. The ideal bonus structure is one where I'm in complete control of whether it's achieved, which is why they're so popular in sales teams. Outside of sales, it's hard for someone to be so operationally excellent that he alone moves the needle, but you can create a bonus for the whole company tied to profits. You have to create the accompanying culture that has people thinking "if I save money/increase sales my income goes up" as opposed to just "I also get this bonus as part of my salary".
Of course, you can also set individual bonuses/incentives. If you do X, Y, and Z this year/whatever period, you get a Ferrari.
For small companies...I see problems. Imagine you have 5 employees and they're all part owners and one is fired or quits. What happens to his ownership? Let's say the owner has 80% and gives the other four 5%. One leaves...now you have a guy on the outside who still owns 5% of your company. And when you hire a new guy - does he get different terms, do you dilute, or does the owner give up 5% out of his ownership?
And what happens when the former employee with 5% dies and his bitchy widow suddenly is calling you every day demanding to know why you aren't giving her dividends...and even though the owner has 80%, the bitchy widow with 5% can no doubt create legal hassles if you ever decide to sell the company, etc.
Maybe those are extreme numbers and you're only giving out 1% or .5% or .01% or whatever, but ultimately these are the issues.
You definitely want to do this as a corporation with shares rather than as a partnership. Some companies create a pool and all employee ownership comes out of that pool...I guess I've never looked too closely at how those deals are structured but it requires careful planning, with lawyers.
There are other ways of incentivizing besides ownership - e.g., bonuses. The ideal bonus structure is one where I'm in complete control of whether it's achieved, which is why they're so popular in sales teams. Outside of sales, it's hard for someone to be so operationally excellent that he alone moves the needle, but you can create a bonus for the whole company tied to profits. You have to create the accompanying culture that has people thinking "if I save money/increase sales my income goes up" as opposed to just "I also get this bonus as part of my salary".
Of course, you can also set individual bonuses/incentives. If you do X, Y, and Z this year/whatever period, you get a Ferrari.
I just had lunch there a couple months ago :lol:
Abdussamad
New Member
I read that one of the contributing factors behind the financial crisis was stock options for executives. It motivated them to think short term so that the stock price would go up and they could make money that way. That is why they took undue risk and started lending to people who couldn't pay the bank back.
Entrepreneurs bear risk and that is what they do. If you start asking your rank and file employee to bear risk then at best it's a distraction.
Entrepreneurs bear risk and that is what they do. If you start asking your rank and file employee to bear risk then at best it's a distraction.
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