New Venture Lab: Equipping Christian Entrepreneurs

I'm sure you've all experienced this from time to time: when the owner is absent, the employees will do almost anything but serve a customer.  Well, it happened to me just today and it served as a fresh reminder of some of the typical problems with employees.  It also turned into a good lesson for our children as they were with me.  (See the first installment of The Problem with Employees)

We pulled up to the specialty discount retail store a few minutes before closing, but in sufficient time to run in and make a large purchase of around $1,000 for our farmhouse renovation project.  Unbeknownst to the employees, we already had been all over their website and we knew exactly what we wanted.  As I pulled up, the first thing I noticed was that the security roll-up door was already in the down position.  Even though it wasn't yet closing time, they had evidently decided to lock up early to keep any customers from coming in.  Since I could see two vehicles in the parking lot, I held out hope that perhaps we could still get in and make the purchase.  As we sat there in the car we saw two men roll up the door and come out of the store.  As it was still before closing time, I sprang out of our car and asked them if I could make a quick purchase before they locked up completely for the night.  They stared at me as if I came from a different planet, lamely looked at the watches and mumbled that it was almost quitting time.  Without any more preamble, they turned their backs to me, pulled the roll-up door back down, locked it in place and turned to head to their vehicles without a second glance at me.

How disappointing that store owner would be to find out that his two trusted employees were in too much hurry to make a large sale BEFORE closing time.  Two employees making something on the order of $10 per hour each had just caused their boss to lose a $1,000 sale because they were not aligned with the owner's interests.  Not only did they lock up early to keep out those that might inconvenience them, but they also hid in the store until closing time so they could clock out on time (or perhaps a little early), but without the risk of staying even one minute late.

That's the typical problem with employees.  It almost certainly would never happen in a family business where everyone has a vested interest in serving the customer and would happily throw the doors open to make one more sale at the end of the day.  This is not to say that we shouldn't have employees or that we should even mistrust them, but that it is difficult to gain full alignment between the employee and the owner.  In MBA speak, this is called the "agency" problem where the agent has different incentives than the owner.  In scripture, this is the issue Jesus spoke about in John 10:12-13: “But he that is an hireling, and not the shepherd, whose own the sheep are not, seeth the wolf coming, and leaveth the sheep, and fleeth: and the wolf catcheth them, and scattereth the sheep.  The hireling fleeth, because he is an hireling, and careth not for the sheep.”

The challenge for an entrepreneur is to create incentive and compensation programs, such as "Pay for Performance" programs and bonus programs that create as much alignment as possible and keeps the employee motivated to do the right thing, serve the customer and maximize profits.