Why Your Employees Should Have 'Skin in the Game'

Why Your Employees Should Have 'Skin in the Game'

Offering equity in the company is the best way to motivate your workers, OfficeMax co-founder says.

Michael Feuer admits he was "born with a severe birth defect: poverty."

"So my whole life has been about leveraging what I have and making -- I hate the phrase -- one plus one equal three or four, not just two," Feuer tells IndustryWeek.

Feuer has found employee equity to be the ultimate lever.

When he co-founded OfficeMax in 1988 in Cleveland (with $20,000 of his own money), every manager had equity in the company. At the height of the company's success, there were 1,100 managers.

At Feuer's new company, Max-Wellness, every employee -- from store managers to his administrative assistant -- has equity in the company.

Feuer (pronounced "Foyer") says he believes companies should "pay for performance, not perspiration."

"And that means some type of bonus program," he says. "And I love equity programs."

His former OfficeMax employees learned to love them too.

In November 1994, BoiseCascade paid $1.5 billion for the company, after an IPO sent the firm's stock price soaring.

OfficeMax co-founder Michael Feuer
Feuer says he still hears from former employees who tell him what a "life changer" that event was for them, "because they made six figures, some made seven figures, some made eight figures in the deal."

Before the sale, Feuer says he used to worry that he was giving away the store by offering his workers stock in the company.

But he learned that he was "much better off having a relatively smaller piece of a huge pie than a huge piece of a very small pie."

"So you award people equity and you get diluted, but you have more at the end because it's a bigger pie," he says. "It's pretty basic.

"Unfortunately not many people understand that."

Communication, Communication, Communication

In his new book, "The Benevolent Dictator: Empower Your Employees, Build Your Business and Outwit Competition," Feuer shares some of the management lessons he has learned over the years, including a number of strategies for motivating employees.

It all starts with communication.

"There are three things in real estate that make something successful, and you've heard it: location, location, location," Feuer explains. "In business, the three things are communication, communication, communication."

His book includes a chapter called "When Communicating, Cut to the Chase."

"My techniques are about as basic as cavemen probably," Feuer tells IndustryWeek. "You tell people the good, the bad and the ugly. You tell them where you're going, how you think we should get there, and then get their input and you make them a part of the process."

Easier said than done, of course. Feuer believes that too many managers "keep too much to themselves," especially when there's a problem.

"In other words they walk around whistling in the dark pretending there's not a problem when there is a problem," he says.

He asserts that most people problems in organizations stem from managers, not the shop-floor people, because managers are afraid to "lay the cards on the table" when there's an issue.

"The best way to surface a problem is just spell it out," he says. "You tell a person, 'Here's what I see happening and what we're doing wrong. How do we make it better?'"

That approach is much more efficient than the alternative -- letting a problem fester and eventually firing the employee.

"It costs you a fortune to hire someone, train them, get them going and then fire them."

Other communication strategies and lessons learned from Feuer:

One size does not fit all.

"You package the message to your audience," he says. For example, you might not tell a clerk that the company needs to improve its bottom line.

When the crap hits the fan, man up.

When something good happens, you give credit to the team. "It's 'we, we, we,'" Feuer says. When something bad happens, you "stand up and man up, as the kids say, and from a public persona standpoint, you take the heat. That's part of the job."

If you perceive there's a problem, whether you're right or wrong, you need to address it with the person who may or may not be causing it.

"I've had many cases where what I perceived as a problem really wasn't as big a problem, and after talking with the person and getting some kind of a consensus, it's no longer an issue and then you're onto other things," Feuer explains.

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