Business Q & A

June 2006 » Business
Business Q & A
David M. Wahby

Bully principal

Dear Dave,

I’m one of a half dozen young engineers at a firm of 50-plus staff. I’m four years out of school and have been with the firm since graduation. I joined this particular firm as a learning opportunity, based on a professor’s recommendation and on the firm’s reputation for doing excellent work.

The firm does great work, and I am learning. But the senior principal is very difficult to deal with. Usually, in front of clients and in public, he is polished, patient, and professional. In the office, behind closed doors, he is short-tempered, demanding, and crude. It is not just me; he is this way with most of the staff.

As you might guess, staff turnover at the firm, especially among young newcomers, is fairly constant.

I’ve become really stressed out and am contemplating leaving.

Is there anything you recommend that I try before I make the final decision to bail out?

D.G., Va.

Dear D.G.,

I might be in the minority here, but I’m generally skeptical that the personality type you’ve described is likely (or even capable) of changing their highly ingrained behavior based on anything you might say or do. But, if you feel the overall benefits derived from working at this particular firm are worthy of a last-ditch effort, you might try having a frank conversation with this individual.

Let the principal know (without explaining specifics) that you have some work-related questions and difficulties and that you would like to set a time to sit down and discuss them. Even if he offers to talk on the spot, resist the temptation to unload then.

Let a few days pass between when you ask for the meeting and when the meeting will occur. Setting a future time should allow each of you the opportunity to be more focused when the conversation finally takes place.

Start positive and stay positive. Don’t threaten to quit or issue ultimatums. Begin your discussion by sharing your rationale for joining the firm and expressing how grateful you are for all that you’ve learned and are likely to learn going forward. This is delicate, but in situations such as this, it is extremely important that you frame the issue of how the principal’s actions are causing you problems in a tactful manner, such that the principal does not sense you are criticizing him personally. If he perceives that you are attacking his personality, it is likely that he will become defensive and any hope for improvement will be lost. To make your points, be prepared to discuss two or three recent situational examples along with your ideas and suggestions on how the two of you could work together more effectively in similar future situations. Your goals will be to reach agreement between the two of you on ways to improve your working relationship, and obtain a mutual promise to meet again as necessary to keep things moving in a positive direction. End the meeting by thanking the principal for his time and consideration.

It probably won’t take too long to see if your effort will bear fruit. If you quickly find yourself back to the "same old, same old," you’ll have to decide whether a follow-up discussion is even worthwhile. Otherwise, it simply may be time to accept that any substantive change is highly unlikely to occur and you should react accordingly. Good luck.

Earn-outs

Dear Dave,

We have been discussing the idea of selling our firm to another area practice as a way for my partner and me to retire, while seeing to the continuation of our practice in the interest of our staff and clients. Everything seems to be on track, and we are now down to working out the final details of the transaction.

The deal offered consists of about one-third cash at closing, onethird long-term note, with the final third tied to the level of actual billings and profits made during the first three years following the sale. Is this practice common?

L.K., Texas

Dear L.K.,

The overall structure of your deal is not unusual. Some cash, a note, or even the seller accepting some stock in the acquiring firm as part of the purchase are all fairly typical. Tying the final third to post-sale performance is referred to as an earn-out. An earn-out makes the ultimate final price variable. This helps take away some of the risk of overpayment from the buyer and allows the seller to receive top-dollar based on how well the firm does in the first few years following the transaction.

As a seller, your concern with the earn-out portion needs to focus on specifically what the earn-out payments are tied to and how they will be calculated. If tied to future profits, you will need to have a good definition of "profit." If the acquiring firm begins to allocate additional overhead and other expenses to your firm, any future profits you may have anticipated to be there could be gone. If tied to sales and/or profits, what if there is a business slow-down, or what if the new owners turn out to be bad managers and the business sours? Are you willing to accept a reduced ultimate price for circumstances beyond your control? An earn-out needs to be thought out carefully, well defined, and clearly measurable to be fair to the buyer and seller alike.


Upcoming Events

See All Upcoming Events