Talking to a client last week who wanted to offer equity (partnership interest) to a valuable employee. I suggested he think through whether an equity interest (which could require the employee to buy-in literally and be responsible for his share of company liabilities) is really what the employee wants. Or is it what my client and the employee think they want because that’s how every other company in that industry does it. I challenged my client to meet with his other partners to determine where they want the company to be in 5 years and ask whether offering this employee an equity share really gets them there. This led to a discussion on using Blue Ocean Strategy concepts for designing a business succession plan.
Think through whether following the industry standard will really meet your business objectives.