QnA : Hiring an Entrepreneurial Employee, Founder’s Salary [and more]

Roundup of insightful answers and unanswered questions from Startup QnA service, startupqna.com

Question: Hiring an Entrepreneurial Employee

The questions to be really asked – (i) why are we hiring him? (ii) Why he’s joining?
One hires for competence, attitude, chemistry & values, etc. One joins for learning, compensation, chemistry etc. People leave for many reasons of which compensation -though important- is less critical than chemistry, learnability and freedom. If indeed this individual is very competent and capable, then the organization should make every effort to retain him.

The right management culture is therefore important – no micro-management, transparency, participation in decision making, ability to learn and contribute, recognition of performance (monetary and non-monetary), open and candid communication, no politics, a sense of ownership, etc. Creating such a management culture that harnesses the entrepreneurial energies of its people is the most important step in organization building.

—-

Question: Startup Founder’s Salary? How much it too much?

Answer by Navin

If the company is already profit making, founder should take a decent salary (could be equivalent to what you were drawing in your last job) or something which is higher than rest of your employees (if you are putting that efforts and is one of the most valuable asset to the company).

If the company is making losses, founders can still claim a salary to meet their personal needs or whatever is closest to it.

Investors do look at founders salary and if you are not taking one, it may not be viewed favourably.

—

Question: Mentor vs. Advisor – What’s the Difference [Operationally]?

Answer (by Sanjay Anandaram):

A mentor is more involved with the development of individuals while an advisor is more involved with the operational aspects of a company. Clearly, there are no hard and fast rules demarcating the two and often times; Often times, both roles are performed by the same person depending of course on the individual. Examples of typical mentoring: Development of the CEO’s leadership & management style, communication, decision making, dealing with stressful or new situations;

Examples of typical advisory: setting up of organizational processes, business & financial planning, customer-partner-market outreach programmes, technology infrastructure.
Equity payouts vary depending on the stage of the company, maturity of management, the nature and kind of involvement etc. But I’ve seen equity ranges from fractional percentages to high single digit percentages.

Board seats are not necessary. You can create an advisory board which is different from the legally constituted board of the company.

—

Question: How to give equity or profit/revenue share to employee when the organisation is a LLP?

Answer (by Sharda)

You can share revenue or profit without the the person being a partner. On a periodic basis you can draw up the financial statements (profit/loss account) and based on your agreement with the employee (whether revenue or profit) you can pay the amount. Since the person is not a partner, the amount paid to the employee will be shown as ’salary’ in the financial statements.

Unanswered Questions

Sign Up for nextbigwhat newsletter