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Why the Qualities That Make LBM Presidents Great Weaken Them When Negotiating for Themselves.

Updated: Jan 18

"Self-defense is not just a set of techniques; it's a state of mind that begins with the belief that you are worth defending." – Rorion Gracie 


04/10/2023


The media hypes the notion that CEOs and presidents are greedy and overpaid - the resentment of successful people and minimizing winners' sells. What drives media profits and might be popular is simply not true. Years spent negotiating with top prospects and the owners looking to hire them have taught me there are four big reasons why LBM executives don't get what they deserve.


The Black Hole of Compensation Information: Financial performance is easily accessed information at publicly held companies, as is executive compensation. The free market hammers of supply and demand lead to compensation packages based on financial performance and the executive's talent track record. Unlike privately held LBM operations, where compensation data is locked down tight. As a result, many C-level executives lack the data to negotiate effectively for themselves. 


"Truth never damages a cause that is just." – Mahatma Gandhi


Inequitable Terms:  Owners set grand goals around sustained company growth and wealth-building objectives. It can take three to five years for a new executive to reach those goals, and it's highly disruptive and expensive to turn over a C-level leader in mid-build. The best way owners can assure a C-level executive will stay the course is to provide equity in the company. Equity creates alignment between the ownership and C-level leader, providing the best security to the ownership's retention risk factor in the critical position. Many factors drive the supply and demand numbers of qualified candidates and executive roles; equity grants of 2% to 10% of the company is a typical range. Each situation is different, and there are creative negotiating tactics to lever up C-level executive equity rewards. Well-aligned equity grants come with simple performance hurdles around organic growth, merger & acquisition growth, or return on asset calculations. Unwise or reluctant owners left to their own devices can create overly complex hurdles, slanting the measures and eroding the foundation of trust.


Missing Resources: C-level leaders take up their roles knowing a lot about the company. Its current state: culture, competitive market position, quality of talent, assets, and historical financial performance. Where are the lines of responsibility, accountability, and authority drawn? What is the owner's honest mindset toward growth? What is the owners' risk tolerance? What are sacred cultural practices etched in stone? In private companies, these non-financial motives often impair, if not flat-out stonewall growth goals.


“Sometimes society can reward your mental illness” – Russell Brand 


Character Traits: Many C-level leaders rise to the highest leadership roles through incredible drive and energy. Often, however, this drive is fueled by their need to overcompensate for their perceived inadequacies and a need for external validation -known as the insecure overachiever character trait. Combined with the high humility trait, such leaders are doggedly resilient fighting for the team and the greater community. As a result, some of the most influential and fierce company negotiators turn into a kitten when it's time to negotiate for their own compensation.


Some of the most rewarding work we do is helping professionals move into C-level wealth-building roles. It's challenging to negotiate your executive-level compensation without comparable market data, deal structure experience, and the right mindset.  

Your family is your stakeholder, and they have earned the right to representation, given the sacrifices made. Remember, C-level compensation negotiating is a team sport for most board directors. Be humble and ask for help.


Hire Smarter™ -Tony

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