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NanoGene Technologies, Inc Case Solution
Tomkins, Gary, Mark, Ravi and Gary are the scientists who worked for Advances materials sciences lab. Using their experience and expertise, they set on to use Nanotechnology for commercial purposes. They left the lab one by one and co-founded a new venture by the name of NanoGene Technologies. After finding the venture capitalist, the founders started to look for an expert who can help them to materialize their business plan on a commercial scale. Miller was a suitable candidate, but her demand for salary contradicted the spirit of equality agreed upon by the founders. The case discusses whether inclusion of Miller with these terms will be suitable for the startup company or not.
Following questions are answered in this case study solution:
Evaluate the founders’ decisions regarding the split of equity and compensation level. As a potential venture investor in the company, would these decisions concern you?
Evaluate the size and composition of the founding team. What is the difference between being a “founder” and an early employee?
Evaluate Paige Miller as an addition to the team, and assess her compensation demands. Would you hire her on the terms she seeks?
Assess the company’s progress on each of the specific issues discussed in the last section of the case: the hiring process; a compensation policy; the company’s culture. Specifically, in each of these areas, what should the company do?
NanoGene Technologies Inc Case Analysis
1. Evaluate the founders’ decisions regarding the split of equity and compensation level. As a potential venture investor in the company, would these decisions concern you?
Yes, these decisions concern the venture investor because Tompkins, despite having higher authority, has the same salary as his subordinates. Overemphasis of the compensation system on the equality of the contributions of all members is not sustainable in the long term. Everyone should be rewarded for his own value addition and hard work. Rewarding everyone in the same way discourages people like Tomkins who bring more value than the rest. This injustice will have strong behavioral impact on the culture of the organization. A venture capitalist would want the company to have a more realistic approach and design policies that reward hard work and value addition. As far as, the split of the equity is concerned, remuneration of the founding members should be more than 3% to give them a higher stake in the future of the company. A venture capitalist would want a better alignment of objectives of founding members with the objectives of the organization.
2. Evaluate the size and composition of the founding team. What is the difference between being a “founder” and an early employee?
The size of the company appears to be a bit large, but it is too late for the company to change the size of the founding team. Compensation package designed by the founding team shows that they have the same regard for every one’s contribution.
Founders’ are the people who are normally part of the team that comes up with the business idea and their remuneration, in addition to monetary benefits, mostly includes other things like equity and title. They are responsible for bringing angel funding and fulfilling all requirements associated with a startup business. On the other hand, early employees are those who are given the task to work on the business idea already conceived by the founders. Their job description is limited to what has been agreed upon specifically at the time of their hiring. Founders, on the other hand have to go an extra mile mostly to ensure the successful implementation of business idea. Although in a running corporation, board of directors has the fiduciary duty to protect the interests of shareholders. In a startup company, most of the times founders play this role and practically protect the interests of the shareholders by taking decisions that are in the best interest of the company. Survival of the company is their main goal. As compared to an early employee, their stakes in the company are always higher and of longer term. Unlike early employees, most of the founders contribute capital and other resources. Hence, they have personal resources at the stake. Early employees have most of times more technical expertise and experience than founders, but still almost all the critical decisions are taken by founders. No matter how hard early employees work, their commitment level is most of times less than founders because the later have a higher stake in the company.
3. Evaluate Paige Miller as an addition to the team, and assess her compensation demands. Would you hire her on the terms she seeks?
Yes, I would hire her because the value that she brings in the company is worth her asking price. A careful cost-benefit analysis of her recruitment can help the company to make a final comment on her demands. Paige Miller has extensive experience in the life sciences industry, and she has worked in fields as diverse as finance, marketing and biotechnology. Having worked at important leadership positions like VP operations, she has the ability to provide the leadership to the nascent company. NanoGene Technology needs to work on commercializing their products and devise methods that can help the company to bring the operations to the level requisite for commercial production and sale. The founders of the company lack the expertise to translate their skills and patents into commercially feasible products. The inclusion of Paige Miller can help them to fill that void in the team. She can use her expertise and past experience to practically build the infrastructure, protocols, procedures and organizational culture necessary for successful implementation of the business plan. She has already worked on an IPO and has the experience of bringing the products into the market.
Despite her suitability for inclusion in the company, her inflexible demands and attitude can make the founding team dysfunctional to some extent. The compensation package devised by the founding members focuses on equal importance of contributions of all the members by setting the same salary. However, the demands of Paige Miller contradict this approach of the founding team and hence, acceptance of her demands may create bad feelings among the team members. Her inflexibility in negotiating salary also indicates her lack of willingness to sacrifice and belief in the success of the venture. In a way, she is a subordinate of the founding members and hence, she is not supposed to draw more salary then her seniors. This may create a negative impact on the culture and hierarchy of the organization. However, equal pay structure has to be given up sooner or later because it is not sustainable in the long run.
So, although, the inclusion of Paige in the team has strong behavioral consequences for the company, her services at this stage of the company is so vital that these draw backs can be ignored. As mentioned in the case, venture capitalist believes that Tompkins deserves a higher salary and equal compensation package for all is not feasible. Inclusion of Paige Miller has provided an opportunity to Tompkins to reconsider his decision of equal compensation because it is not feasible in the long run. Therefore, the company should hire her because benefits of her inclusion outweigh the losses.
4. Assess the company’s progress on each of the specific issues discussed in the last section of the case: the hiring process; a compensation policy; the company’s culture. Specifically, in each of these areas, what should the company do?
The hiring process designed by the founding team is very inefficient and unorganized. There are no particular rules and regulations that serve as the framework for human resource management. The hiring policy laid out by the scientists once again emphasizes the need to hire Miller so that she can help lay out the standard procedures for a successful organizational setting. Scientists should not devise management policies rather they should tell Miller about the requirements of hiring and then she should lay out proper procedures that can help company to hire people that can add maximum value at this critical phase. Authorizing each senior scientist to hire subordinates of his own choice can prove to be very inefficient and dangerous. Miller is right in her opinion that the company should take special care in hiring people, and everyone should be on board regarding new recruitments to make sure that the profiles of the new recruits matches the needs of the company. Rather than looking solely at the technical expertise in new employees, the company should also make sure that the new employees share the vision of the leadership. Therefore, rather than hiring people individually, the founding team and Miller should set out a framework for human resource management and everybody needs to be on board regarding new recruitments. This will strengthen organizational culture and help the company to standardize the procedures.
The founders want a very flexible compensation policy so that they can attract the best scientists for the jobs. However, allowing every senior scientist to use his own judgment regarding compensation policy is very dangerous. Different packages for different scientists can create very serious conflict of interest among people in the organization. Therefore, the company should stick to the recommendations of Miller regarding compensation policy. However, Miller should also take into consideration the concerns of senior scientists and make the compensation a little flexible for senior scientists at least for a year. This “take it or leave it” attitude may make it very difficult for the company to find scientists at senior level.
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