The Day We Couldn’t Make Payroll
It was one of the worst days of my professional career. I was the Executive Vice President of a 10 person startup called Agile Studios that designed web sites and custom software applications. My title was Executive VP, but my real role was resident grown up.
Like many startups, we were chronically short of cash. It was a challenge every month to make ends meet. And then one month they didn’t.
Brett, we’re short.
How bad?
If we don’t pay any of the three managers, and just pay developers we can cover about 75%.
Until when?
Well, I think we can get Taj Remodeling to pay us early for next month. But, best case we’re talking next Wednesday at the earliest.
How’s next month look?
Better.
I sent out an email to the employees.
Agile Staff,
Receipts this month were lower than we expected. Tomorrow is payday and we will not be able to cover it. Our current plan is that Brett, myself and the Dev Lead will be foregoing paychecks this Friday. We will be able to cut you a check for 75% of your regular pay. We hope to be able to pay the reminder next week.
I apologize for the obvious inconvenience this causes. This is the first time we have failed to meet payroll and we are committed to not having to make this painful decision again.
We appreciate the work you all do, and recognize how valuable you are to the company.
Rodney
I intentionally avoided saying “any inconvenience this might cause.” Of COURSE it’s inconvenient.
The staff took it remarkably well. Some offered to defer their own paychecks so the managers could get paid something. But I knew them well enough to know they couldn’t really afford it. I thanked each of them for the offer, hoped I sounded more confident than I felt and assured them we’d be fine.
Taj Remodeling came through the following week and we were back to cash flow positive. I wanted to reward the employees for sticking with us. Our office in south Orem, UT was right around the corner from a Gandolfo’s sandwich shop.
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If you’ve ever been to Utah and not tried their sandwiches, you really need to try their breakfast selections. I’ve never been to a deli in New York, but if they are anything like Gandolfo’s I’m trying it the next time I’m back east.
I bought $50 worth of gift certificates for each full time employee and $10 worth for each part timer. I then included the gift certificates with a handwritten note of thanks and their check and hand delivered it to each employee.
A couple of interesting things happened.
First, the employees were shocked. At the rates we were paying the full-time developers, $50 was a pretty big bonus. And part timers never got bonuses. The employees were more devoted than ever.
Second, they all got really tired of Gandolfo’s over the next month.
I say they, because I didn’t hand out bonuses to the managers.
Rodney M Bliss is an author, blogger and IT Consultant. His favorite Gandolfo’s sandwich is the 5th Avenue. He lives in Pleasant Grove, UT with his lovely wife and 13 children.
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Best of 2013. This was the 5th most popular Blog entry for 2013. It was original posted on August 2.