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New Business Model for The 21st Century

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posted on Oct, 6 2011 @ 08:34 AM
Not sure if this is the appropriate forum, so moderators feel free to move.

Given the current climate on WS, I have given a lot of thought as to what a fair and equitable business model would be for the new generation. Typically, a business is formed by an owner or partners. They build and develop the business until they can attract investors, and which point they may go public. When this happens, a board of directors takes over control of business operations and it grows and becomes disconnected with the workers who make the products. This is the dilemma we face right now. Workers are not being paid fairly and they are seeing their jobs go overseas. So, what to do to create a business model that gives workers a fair share of compensation, keeps the business in America and allows for growth and expansion?

Here's the idea, albeit not entirely new, just expanded on an old idea. You have heard of employee own corporations, correct? Well my thought is to take it to the next level and make it a truly employee owned corporation. How? Simple. Here is a basic model:

A core group starts the business. For arguments sake, let's say they are going to make snack foods, like corn chips. Simple enough, and can be started very small. So the core group (let's say 5 people) invests $5k to get the business rolling. Now as partners, they divide the profits equally. Simple enough. now the business starts to grow and they realize they need to hire workers to keep up with the demand. Typically, they would hire someone for an hourly wage and pay taxes, insurance, workers comp, etc. All the things that bleed a company dry. Now under the new model it would work differently. Let's say they need to hire a packer. All five partners agree on the new person to be hired. But, instead of an hourly wage, they are cut in on a percentage of the profits for compensation. Now since they did not contribute to the initial investment, it is not fair to give them 1/6th of the profit...yet. So, a smaller percentage is given and let's say they can advance their share for each year they are an owner and spread it over five years. In five years they are an equal partner. This continues with each new "partner" that is brought in. All "partners" are involved in the hiring process and all business decisions. The core partners retain the top positions in the company, and have final say in business decisions, but everyone else is more or less the board of directors.

Now, let's say John has been a "partner" for 10 years. He decides he wants to leave. His severance would be the value of his percentage ownership in the company. So if the profits of the company were, let's say $1M, and there were 100 employees, then his percentage would be 10%. 10% of $1M would be $100k. Obviously the longer you are there, and the better the profits, the better the severance. Now you would also have to have a certain amount of profit that is retained for growth and expansion. So this money is taken out before the profit sharing disbursement occurs.

By using this model, the janitor makes the same amount of compensation as the president of the company does. All "partners" are equal when it comes to pay, as long as they are "vested" in the company, their five years. This also ensures the company stays in the US since all the "partners" are US citizens. And, since everyone is involved in the hiring process or "partner" selection process, everyone will ensure the right person for the job is brought in. They would also hold each other accountable, or self police.

A fair and equitable company that ensures equality for everyone. It also will produce superior products because each "partner" will realize their compensation is tied directly to the performance of the company. Made in The USA would once again mean something.

That's my thoughts anyway. No need for WS, no huge million $$ bonuses for executives. Just a simple owner driven and operated business.
edit on 10/6/2011 by haarvik because: (no reason given)

posted on Oct, 6 2011 @ 08:47 AM

Someone needs to give you some seed capital!!


posted on Oct, 6 2011 @ 09:02 AM
Wow. This well thought out. I don't have any knowledge on advance business management, but IMO this sounds like a good idea. You should give this a try when you start your own buusiness.

edit on 6-10-2011 by KySc5 because: (no reason given)

posted on Oct, 6 2011 @ 09:13 AM
reply to post by KySc5

That's part of the point to this. If everyone from the top down were involved in the operations of the business, each and every person would understand how a business works, and what it takes to be profitable and successful. So someone like you who has no business management experience would be immersed into a rich environment and given "on the job" training so to speak. It would also foster a much more educated working class, and allow for innovation without fearing someone will steal your idea.

Let me give you an example of how this would possibly work. My wife works for a food company as an accountant. This year their profits will be about $500M. They have about 1500 employees. Now, if that profit were distributed equally amongst the "partners" each one would earn $330k this year. I would say that would make anyone take pride in their work, and make them more responsible not just for their job, but also for everyone elses and would also ensure high quality of labor is brought in, don't you think?
edit on 10/6/2011 by haarvik because: (no reason given)

posted on Oct, 6 2011 @ 09:25 AM
I've thought of simular business models, I'm glad to see other people are thinking outside the box as well. I personally want to apply something like this to a record label.

Good thread!

posted on Oct, 6 2011 @ 09:28 AM
reply to post by FreakOfTheUnknownAcademy

You should! A record label is fairly easy on the wallet to start. You just need the right people and bang! You're off and running.

posted on Oct, 6 2011 @ 10:01 AM
reply to post by haarvik

The best business model is one where the businessmen, clients, and employees share a common morality. By replacing morals with relativism and situational ethics, no one can agree on what is just and moral and everyone divides into groups trying to social engineer society.

My opinion is that. Otherwise without morals someone is always trying to cheat the system or others.
edit on 6-10-2011 by 547000 because: (no reason given)

posted on Oct, 6 2011 @ 10:25 AM
reply to post by haarvik

Like anything. How would this work in the real world? Some people when they get their first 300K yearly salary check would simply walk off the job falsely thinking they were set for life.

posted on Oct, 6 2011 @ 10:27 AM
reply to post by Walkswithfist

If they walk off, they lose their ownership. Again, by having a stake in the company, the partners are going to be very picky in who they allow to join. Top quality people will be the choice.

posted on Oct, 6 2011 @ 02:27 PM
There is too much greed for that. Everyone who opens a business in the back of their minds they are thinking about their profit and only their profit. When they want more profit or money to invest rather to make more profit they go public and open to shareholders. No one is selfless enough to make this work/ strike that...there are those that are but that is a member of a different 1% of society. Greed would have to be genetically weeded out somehow this is why I am all for genetic engineering. Weed out greed but is that also tied to ambition? I mean if we take greed out of the DNA will that just make us not want to do anything? This is why we need real in depth scietific analysis of DNA. Maybe evolution makes us less greedy but I don't see that happening for thousands of years into the future.

posted on Oct, 6 2011 @ 02:34 PM
reply to post by ldyserenity

Can we breed out pessimism too ?

Of course something like this would need tweeked, but for instance how do you keep fresh blood and ingenuity in the mix? You set a monetary goal, and when a partner reaches that goal, then they are forced to retire with their severance. Now you have capped how much they can bank, and allowed for new partners to come into the fold and continue on.

posted on Oct, 7 2011 @ 12:25 AM
breed out pessimism!

i'd love to start a record label like this too.

posted on Oct, 7 2011 @ 09:22 AM
Many companies already have a similar model.
Microsoft and Google for instance.

posted on Oct, 7 2011 @ 09:32 AM
reply to post by martiendejong

Not talking about profit sharing, but ownership. I doubt thousands of Microsoft employees own the company. If they did, Gates wouldn't be as rich as he is and neither would Allen.

posted on Oct, 7 2011 @ 09:46 AM
This won't work imo. As soon as you mention that they would all share the risks, losses, expenses and that their pay checks wouldn't be constant, most people will lose interest.
edit on 7-10-2011 by Rockdisjoint because: (no reason given)

posted on Oct, 7 2011 @ 06:01 PM
Hi OP,

How is it possible that the Janitor should be rewarded the same as a top Exec. The work of a janitor is physical versus knowledge and experience based - additionally the education required for top Exec is much higher.

Anyone can become a janitor with little training - not everyone can become a competent executive with little training.

The risk of a bad decision on the janitor's part is not as devastating to a corporation as a bad decision on an executive's part.

The issue of demand and supply isn't satisfied by this corporation. Good Executives naturally receive better compensation. Just like the expert heart surgeon is paid higher for his work.

Compensation for work done allows for demand and supply balancing.

What you've stated is close to the premise of a co-operative.
edit on 7-10-2011 by sensibleSenseless because: Added co-operatives

posted on Oct, 8 2011 @ 07:09 AM
reply to post by sensibleSenseless

And that may be, however, for a business to succeed every person's job is dependent on others. No one is any more important than the other. The idea is to allow people to take ownership in something, to learn how a business runs, and to have a say in how that company makes money and distributes it. I have owned businesses, and yes I paid myself more than others. But I always paid more than anyone else in my field because I wanted the best. This was before my awakening of how things work and how things should work. I see nothing wrong with having a business being owned, or as you put it co-oped, and run by those who make the products or provide the service.

Should I decide to start another company, I will use this model. Does it need tweeked? Probably, but that is the fun of an experiment. I read all the time about people bashing the execs and share the wealth, and when you put forth an idea that makes everyone equal, nothing but negativity. It's whats wrong with this world. It's whats wrong with people. Why do you think profit sharing did so well when it was first introduced? Why do you think stock options were so popular during the dot com era? People felt a sense of ownership that's why. My idea is to just take it a step further. Besides, by having all workers as owners, the business no longer has to pay matching SS, medicare/medicaid, matching withholding and all the other employee driven taxes. Each owner would be responsible for their own.

Typically a business will pay about 30% of their income to labor. Imagine being able to cut that to 15 or 20%. That is huge, and would allow for a lower cost product or service making the business much more competitive. Now, that is how you beat the chinese with their cheap products!

posted on Oct, 10 2011 @ 04:36 PM
Hi Haarvik,

Let me know if you manage to get it to work.

I have some doubts about division of work. I guess I haven't worked in partnerships or co-oped companies, so, I'm not sure how the work gets divided fairly - I've known others who built co-owned companies, and they have differences about the level of work done by the others in the group.

Not that it can't be done or hasn't been.... Just not familiar with how such things work.

If it gets popular enough, maybe you'll have a case for beating the chinese.

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