Has there ever been an instance of late payroll (as opposed to eg sales commission checks being calculated wrong) where the company actually pulled out of the nosedive? It seems like it's almost always the death knell.
I remember reading a couple years ago about a company where the CEO came in and announced that they weren't going to be able to make payroll so he was going to have to lay everybody off; some of the employees left, but others stuck around working "for free", and the company turned around within a few months. A couple years later they exited and the CEO gave large gifts to the employees who stuck around because they didn't own any stock but he knew that the company would have failed if they had left when he couldn't make payroll.
But that was a case of a CEO who was honest with the employees about the state of the company; I don't know of any cases where a company succeeded after a CEO lied about failing to make payroll.
as an ex-CEO who offered stock to employees in lieu of pay because my startup was running low on funds, it was all rejected. i later found out when i left the room, some of the employees actually mocked me and made it seem like i was just trying to scam them. one of them said something like "he's offering us stock in a company that is basically worthless, does he think we are idiots?"
just to be clear, the company was not worthless. we were actually somewhat breakeven at that point, monthly revenue was around $15k and employee salaries were somewhere around $15-16k. the idea at the time was that if they accepted stock compensation instead of cash, the company could theoretically afford to hire more developers, or launch a more ambitious marketing campaign. i did not factor in the fact that these employees weren't invested in the company, and to them, the fact that we weren't making millions in revenue means we are broke. so they value the stock at zero.
just to conclude the story: i ended up selling my company to another large company for a small profit (not headline-making numbers), enough that i can live comfortably and continue pursuing entrepreneurship dreams while not being employed. the employees who would have received stock back when i offered it would have made a profit, although in all honesty it's not Google or Facebook money. just for fun, i did a quick calculation on how much one of the employees who refused the offer would have made in stock - it was roughly about $250,000 worth.
Eh, I can see that going both ways.
As far as fluidity is concerned, stocks in a small, private company may as well be worth $0 since you can't pay rent or buy groceries with them.
Nice gesture on your part though: still didn't deserve mockery. Hopefully it was just their fear talking. :)
well, a few months ago i actually ran into one of the ex-employees, in fact i believe he was one of the main ones who mocked me. he's now working for some small tech company as a web developer. we had a quick 10 minute chat about how life was, but in a moment of pettiness, i took the last minute as an opportunity to kind of mock him back. the conversation was kind of winding down, and i said "hey by the way, no hard feelings about that whole saga back in the day. honestly, i actually understand your position now so it's all good. not going to lie, if all of you had not rejected the offer, i would be a few million dollars short when the acquisition happened!"
i walked away with a smile, and that dude kind of just shrugged and walked away.
Absolutely yes, though it depends on the transparency of the rest of the team really. I have been involved with three companies in my career which pulled out of this seeming nosedive. One of the companies was going through a really horrible time. They had just got done releasing software that was horribly behind schedule which relieved their customers, but it was still stressful. They were working on settling two law suits. And it was almost Christmas time (first pay check of December, I remember it well). The owner came in and said he couldn't make payroll and that he would be able to as soon as a few customers paid. Everyone was upset. Later that afternoon the CEO's daughter rolled up in a brand new Subaru which he had bought for her over the weekend. I was the head of development, my buddy was the head of operations. We walked the CEO outside and broke the news to his daughter and him that the car was going back. We took the cash and made payroll. We never allowed the CEO to make financial decisions again and about 10 months later closed the sale of the entire business for a windfall profit for him and us. Ultimately everyone got paid well and everything worked out.
The second place, the C level executives literally didn't know how to calculate runway and more or less ignored the bank accounts. Checks started to bounce from the bank accounts two days before the payroll was to be cashed. The executives freaked out and honestly felt horrible. Payroll bounced but we warned all of the employees. I was again development manager and the CEO asked me if I knew anyone who could help. We brought in a friend of mine who is a consulting turn around expert. We got one of the existing investors to make payroll, three days late, by signing a personal check. My friend, the turn around expert, wrangled the books (after not sleeping for numerous days to try to figure out the financial situation). We turned the company around, and in a few months had it to a level of profitability it had never seen before.
It is possible to turn things around. Really the biggest problems come when people aren't honest with themselves and their employees about the situation they are in. The first CEO in my example had to be honest with himself and realize he had to spend on his employees before he could spend on his family. When he relinquished control of the financial decisions and stuck to what he was good at, the company turned around quickly. The second executive team had to realize that they were young and inexperienced and needed help. When they did and asked for it, the company turned around quickly.
Not trying to pick over semantics, but in both of those cases, payroll was in fact met almost immediately, just via "extraordinary measures". Going a full pay period without a paycheck should be the signal to stop showing up and start seizing assets.
That's an incredible set of stories. What strikes me is the ability and confidence to take the CEO aside and say no, that's not happening. That sounds pretty nerve racking.
The things that stick out to me here are how excellent teams took the mantle and provided radical turn arounds from a trajectory pointing to failure.
I would say the first time I went through this it was very nerve-racking. However, the CEO of the first company (which I spoke about in another comment, the real estate software company) really changed my attitude on working and being an employee forever. I remember sitting with him at an Applebee's late at night. We were talking about the downturn of the market and the financial problems the company had during the time and how scary it was for me as "just an employee". He said to me, "You're not 'just an employee', you're an investor in my business. You invest your time, talents, and efforts to make me succeed. I pay you dividends more regularly but honestly you should never act as just an employee. If you do amazing work you'll be rewarded just like an investor, if you act like an investor."
I know what a lot of people will say to that. "No way, you're just an employee, you won't be treated like an investor." Well, true, if you have that attitude you won't be treated like an investor. You'll be treated like an employee. However, if you start acting like an investor, you'll be treated as one. Ask intelligent questions about the business and its financials. Talk to the board. Give intelligent and thoughtful advise to help the company. Be an asset far above the code you write.
If you do that, and then all of the sudden everything starts to nosedive, you will be in a position to help fix the problem and reap the rewards. You are an investor, not an employee.
I wasn't as involved with the third company's solution as I was with the first two I mentioned. The third company was a real estate software company. The problem was there was a down turn in the market that was rather unexpected (this wasn't the '08-'09 down turn, this was much much smaller than that). The company couldn't absorb the slowing of revenue as much as they wanted to be able to and ultimately they got into trouble. The company was completely bootstrapped, single owner, no investors, as it is to this day. Payday was set for a Friday. On Wednesday the owner knew there would be trouble. He told everyone that payroll wouldn't make it by Friday and to give him the weekend to find the money needed to pay everyone off. By Tuesday he would decide whether the company was still viable or needed to be shuttered.
This lead to a number of interesting situations. He did make payroll the next Monday (he literally sold everything he had, went to his elderly parents and begged them for some, and made it happen. Someone had to drive him into work on Monday because he sold his cars). A good percentage of the employees left that day and never returned. Some of us stayed, believing in the business, his honesty and integrity. I was just an engineer but we did turn it around and actually he had some great plans on how to never get into that situation again. He actually did very well after the 08'-09' market downturn and his business is still very profitable to this day.
"According to Business Insider, Pandora co-founder Tim Westergren admitted at a San Francisco startup conference that, between 2002 and 2004, it didn't pay its 50 employees at all. "
