How do you establish effort expectations with a co-founder?
Something I've always struggled with is how to ensure founders are each pulling their own respective weights when building a company.
In my experience, invariably, and for whatever reason, someone ends up doing more work than the others and it can lead to feeling of unfairness and resentment.
How do you ensure each member is putting in an equitable amount of effort?
How do you put into place ways to deal with perceived inequities, either in the short term or over a period of time?
Does it make sense to objectively measure time invested in terms of hours, tasks completed or some other form of performance management?
Would love the communities' thoughts!
In The Founder's Dilemmas, Noam Wasserman recommends a dynamic equity split an one way to address this issue. I highly recommend looking at Mike Moyer's Slicing Pie model for such a split, as it has all the details worked out to create a fair equity split based on risk-adjusted market value of all inputs from all founders, preventing perceived inequities.
https://slicingpie.com/
Interesting, thanks for sharing! I'll take a look
This comment was deleted 6 months ago
I hear what you're saying, I'm just wondering what a "commitment" looks like? Is it a deliverable in a certain time frame? How does effort vs. results play a role? Who determines if the commitment is achieved or not? (assuming it's not purely objective like "build a landing page")
This comment was deleted 6 months ago
Performance is a separate issue from equity allocation. The CEO always has the responsibility for ensuring that all employees, including those earning equity, are meeting the expectations of their respective positions. The Slicing Pie model doesn't preclude that, it in fact includes explicit provisions for canceling earned equity in cases of partners not meeting agreed-upon expectations, violating of company policy, engaging in moral turpitude, and other "for cause" termination conditions. Likewise, there are provisions for protecting earned equity in cases where the company conditions change and through no fault of their own, founders must leave.
You always have to deal with performance issues regardless of what equity allocation you use. No system is perfect, but with a dynamic equity model like Slicing Pie, you don't at least have to argue about the subjective issues of fairness arising with fixed percentages and relative contributions against arbitrary milestones.