Karl Neset is a Fractional CFO for CliftonLarsonAllen. Karl has perfected a process that allows business owners to give employees more skin in the game and earning potential, without giving up their equity. Employees can act as owners through a profit share program that compensates people based on their contribution to the company. Karl explains why this strategy leads to a better team dynamic within the company and gives employees a strong sense of purpose, too.
[1:35] Who is Karl and what does he do for CliftonLarsonAllen?
[5:10] There are roughly 10 steps in how an owner can help an employee get more skin in the game and earn more income.
[6:10] The first step starts with gathering the data.
[7:10] How do you properly compensate differently-skilled people?
[9:25] Karl shares an example of how a system like this (ownership among employees) looks like, once it’s been properly put into action.
[11:40] It’s a team discipline. If one screws up, they all screw up.
[12:20] What does the sales department look like when a strategy like this is put in place?
[14:10] A system like this makes it a lot easier on the owners. They do not have to micro-manage their employees.
[15:35] If the owner goes away for a couple of months, the business will still run smoothly, because employees are being compensated similarly to how the owner is being compensated.
[16:45] What kind of percentage does each employee get, based on their roles?
[18:35] This strategy gives motivation to both new and older employees who now see that they can be a part of something meaningful and they will get compensated fairly well for it. It gives them drive to advance within the company and obtain career growth.
[19:50] The next step is to lay out different projections for the next five years in the company. You should have three: A bad year, an okay year, and a great year. Based on these numbers, your employees will be compensated accordingly.
[21:00] This model allows for employees to make double, in some instances, than what they can in an open market. Who wouldn’t want that?
[22:35] If someone makes double their normal salary, do they start getting cocky? How does that affect the company as a whole and how do you address it?
[28:20] Before implementing a plan like this, why is it important to run it through HR first?
[30:40] Many employees/owners might think this plan is too good to be true or unsustainable.
[32:15] It is critical to incorporate wealth management classes in the company after a strategy gets put into place. Employees who see a huge spike in wealth do need to understand what that means to them.
[33:30] Why should a business owner use this strategy vs. something like using phantom stock or equity?
[37:00] What are some things to think about/potential mistakes that could happen?
Mentioned in This Episode:
Email Karl: Karl.Neset@Claconnect.com