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| This path has more twists and turns than needed! |
In the Sands of Iwo Jima,
Sgt. Stryker (i.e., John Wayne)
stated, “Life is tough, but it's tougher
if you're stupid.” People can be
very smart but do things that are not so smart.
The result may work out, but the path to the end can be hard to complete,
consume excess energy and money, and confuse the team. The goal should be to develop the clearest
path to success and keep the dealings as simple as possible. Otherwise, you fall in the trap of making
life more complex than needed and potentially create delays or other
complications.
The same is true for most aspects of business; business
structures, deals, compensation plans, stock plans, marketing, manufacturing,
etc. Planning is an integral part of
business. Regardless of the intended
purpose, starting simple and amending the plan as needed is often a good strategy. The ability to keep things simple allows everyone
to follow along with less confusion.
One of the added advantages of keeping things simple is that
should the originator of the plan depart, everyone remains able to determine
what the intentions were. Living with overly
complex business dealings results in making the task of building a company more
difficult especially if no one understands the situation after the originator
departs. Explaining the plan to
investors is extremely complicated and review of the dealings in diligence
becomes even more difficult. The
dealings may have worked, but certainly would require an understanding of it to
carry it out!
Creating complexity is a natural reaction to adjusting to
different situations. Once something
does not work properly, the analysis and modification are logical next
steps. The stepwise changes allow for monitoring
and improvement yet keeping plans to the simplest form possible. There are cases where individuals will
contemplate all the ways something may fail and add layers of adjustments on
day one. Some of these have a tendency
to cross from the realistic and workable to the ridiculous.
When possible, try to keep your dealings as simple as
possible. Add the degree of complexity
required to get the job done and ensure the plans are understandable by
everyone. If one of your team cannot
describe the plan, maybe it is too complex.
You can count on them not carrying it out properly if they do not understand
it.
For example, suppose you want vesting
of equity. You can go with simple time
dependent vesting, you can pick select milestones for vesting, and you may be
able to mix them. It is possible that
the mixing can become so complex the company and the employees will have
problems tracking the vesting. The
reporting of the vesting is even more complex with an overly complicated plan.
As another example, you may want to
acquire a technology for stock and cash.
You can develop a clear set of deal terms for the acquisition. You may want to delay some of the cash
payments. Most of the transaction can be
documented in very clear terms. However,
it is possible in the desire to do a great deal you develop a structure so
complicated that no one will understand it in the future. This presents problems with tracking and
explaining the deal to others.
The examples do not do justice to the complex deals they were describing.
The simplicity of the examples should
help you get the points. Maybe the
simple explanation is satisfactory to present this message. The actual deals were so horrible it is
nearly impossible to describe them anyway.
In short, try to keep things simple.
No need to create a stupid arrangement that is overly complex unless
that is the only way to do the job.
