Nanogene Technologies Inc. (NTI) has been studied thoroughly and in the reader’s opinion, the questions that the case poses are interesting. This reader has attempted to answer the same based on the case, and also as per the principles of Management Science especially in Human Resource Management, and Strategic business planning. (Case studies descriptive type-here-the case study introduction is the narrating of the story-I have done that in two lines as to what the study intends to do).You can find it in the internet if you google diff between essay and case study.
The company is very young and consists of five co-founders. Of these, the decision has been taken that all the co-founders will contribute in their areas of common interest and commensurate with their core competencies. Consequently, contribution of different cofounders to the company’s formation and sustaining ability is essential for the venture to be successful. The outputs demanded are different for each cofounder. Let us consider Gary Garfield for instance. Garfield’s job is almost the same as to what he was doing earlier. He may have financial problems and he may feel hurt if his proportion of equity is decreased. However, if the company is to succeed, then reality has to be faced. (No 1 & 2 both as the questions are not in chronological order)
Gary Garfield and everyone’s equity should vary depending upon the effort and responsibility which he shall be imparting to the development of the company. It is very important that these matters should be cleared at the initial stage itself, as otherwise, there may be bad blood among the cofounders. The venture capitalists will certainly have to and will insist on this, before investing (No 1)
As said before, the number of co-founders is much more than normal. Four is acceptable but five is too many. To be brutally honest, perhaps Garfield can be made an early employee and not a co-founder. But as the idea was initiated by all, a small percentage of the equity should be allocated to all the five. A small percentage means an amount not exceeding 3% or 4% at the most. Beyond this, their compensation should depend upon their value to the organization. Early employees generally do not own equity although they may earn fat salaries, whereas founders own equity, though he may receive a much less net amount than the older employee. (no 1 & no 2 both)
Equity is very important to a company as land is valuable to a cultivator. This value is not only monetary but also in terms of the value of intangible imagery. Equity giving away to employees should be done as only the last resort at this stage. The funding structure of the company is also very important here .Huge conglomerates can give stock options to their employees, but Nanogene Technologies cannot afford to do so. (no 3 and no 4)
It will make a bad precedent for other employees too. Often professionals get huge compensation, which the founders do not get. Miller is vital to the company’s success. She should be reimbursed in monetary terms without ESOP at least for the first year. Alternatively, she can work as a consultant to the company without ESOP. After the funding is complete, Paige can be a partner too with equity, but also with equivalent deductions from her package. Miller appears to be a positive minded and dynamic individual. If the matter is explained to her in detail, she should agree to it as her benefit and career growth is ensured. (no 3 paige miller both paras above)
The company should immediately form Mission and Vision Statements. These should dictate the company policy. Further, to avoid vagueness, Miller should put together a controlled version of a written policy. It is not necessary for everyone to be there in the interview. The interviewed person’s department representative, the CEO and Miller’s presence should be good enough, to ascertain what the candidate could give to the company and get from the company in return. The compensation policy should be performance oriented. People of same level may get offers at different salary levels but at the end of a year or two, the ceiling will become smooth, as performance shall be the main evaluation criteria. (no 4 and conclusion)
Note: Because of the red marking the case study has become 3 pages not counting title page.
Please delete these red notes and it will become 2 pages again. Please trust me. I know what I am saying.