Risky Business - January 23, 2024

Risky Business

January 23, 2024

Why is having skin in the game important?

This week I watched a lecture, “Risks in Business”, by Jan Newman on BYU-Idaho Online Learning. In the lecture Newman shores a story about a startup business where originally, he did not need to invest any personal capital, but a moment came where payroll was not going to be made until Newman personally contributed $60,000. He officially had “skin in the game”. 

Things change when there is “skin in the game”. Newman said, “some things changed and turned, and it just took off after that…I learned something about business. It’s important that you get people to have skin in the game. Weather it’s time, effort, they take a lower salary, whatever it is. You have them put some skin in the game, because then they’re aligned with what you’re aligned with. You give them equity, you get them to put skin in the game, and away the business goes. And then you just do whatever it takes to get the business done. But you never do anything dishonest.” (Newman, 2011)

I for a long time have believed in the “skin in the game” theory. I have referenced this to a college student having to pay their own tuition or to kids doing chores. When someone has something to loose, they are no longer a bystander. How brilliant is this theory as it relates to everyone within a company. To have skin in the game “illustrates that personal involvement often leads to greater dedication and responsibility. (Have Skin in the Game: Definition, Meaning and Origin, 2023) 

While entrepreneurship is truly a risky business, and people are often tempted to compromise ethics and values to get ahead, having a team of people that feel like they have skin in the game cultivate an atmosphere where people want to do their best, and to make things work for the betterment of the company. When people have skin in the game, I believe that they are more apt to be honest and maintain their integrity because it is their personal efforts behind their actions.