Procrastination does not pay
Sanjay Anandram
About three years ago, he had given up attractive career options with MNCs to join a startup. The CEO of the startup had talked of his vision to make his outfit the leading company in its field, of profitably growing his company ten-fold over five years and of value creation. To achieve these goals, he said he needed experienced executives to lead the business. The executive was to be part of the company’s three-member leadership team with the freedom to chart the course of his business lines. Finally, there was the very attractive stock option plan on offer that swung the needle for the executive.
The executive looked disillusioned because the stock option plan wasn’t yet implemented. He had first dropped hints and then had had conversations with the CEO regarding this. He was told that tax implications were being studied, the company was being re-structured, that an Esop consultant had been appointed, that there were complications on account of earlier employees. In any case, the stock option plan hadn’t been implemented. All the executive had was a letter that mentioned how many shares he was eligible for and over what period. No other details of the plan were available and no shares had ever been issued.
He was convinced that he had been taken for a ride and was therefore looking around for other options. A startup wasn’t part of these – once bitten, twice shy.
The company the CTO worked for was one of the shining examples of 21st century entrepreneurship in India. Though just over five years old, it was a market leader and was known for its very intuitive, fast and user-friendly technology. The CTO, who had been with the company since its inception and believed he owned a good percentage of the startup that he helped build, was passionate about his job and considered a technical wizard inside and outside the company.
One day, the CTO decided to leave the company—the technical challenges were no longer there, he wanted to again be part of a brand new startup and, in his own words, ‘do exciting stuff’. He had been in conversations with another startup and was about to resign. However, he decided to check on the number of shares he owned in his startup. He was shocked to learn that apart from the employment letter issued several years ago that just mentioned the number of shares he...would be eligible for and over what period, there was nothing. He had no idea how many shares he actually owned and how many were outstanding, how much money was owed and what his rights, responsibilities etc were. Upon writing to the company, he was told last week that the details of the plan and his share holding were finally being sent to him! He’s now thinking whether all startups operate in this fashion.
There are probably no villains in both these examples. It was probably a case of procrastination by the CEO—either because the CEO himself wasn’t clear or comfortable about stock options or because he didn’t consider the matter important enough. In either case, the impact was rather serious. The two people in the examples above felt cheated—they had trusted the CEO and worked hard in the hope that their stock would be worth something significant over time. And to discover that the most elementary steps hadn’t been taken with regard to their stock was a big let-down. The trickle down impact of this is that top talent will be hesitant to join startups. The contract discussions will now be a lot more involved. Costs and time spent on negotiations will go up .
If people are the most important asset of a company (tired cliché I know!), then they deserve to be treated with respect and regard. Not as expendable resources. Ignorance of employee matters and lack of time for understanding and implementing a plan are not excuses. They betray a mindset, part arrogance, part ownership and control orientation—“Don’t worry, he won’t go anywhere”, or “What’s the problem? We’ll sort it out—my word is good enough” or, “ I actually don’t want to part with my stock; if he leaves, I don’t want him sitting on some shares”.
Words and intent have to therefore be matched by action and deeds. People have choices and need to be treated with respect.
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