The Exit Ready Series · Post R.16
View the full series →The Informal Role
The role that was never written down because everyone knew what it was becomes, at exit, the role the buyer can't evaluate, bind, or price.
Linda Kowalski is sixty years old. She has been Ed's wife for thirty-eight years and Meridian's informal head of HR for twenty.
She drives to Meridian two or three mornings a week. She has a desk next to Janet's. She has been on payroll at $95K a year since 2004.
Linda does not have a job title. The payroll system lists her as "Office Administrator" because the payroll system needs a title. Everyone at Meridian knows she is more than that.
She handles new-hire paperwork, benefits enrollment, the annual insurance renewal, terminations when they happen. She handles the personal situations Ed does not want to get in the middle of — a technician's divorce, a dispatcher's son with cancer, a service manager's drinking problem.
She does not have a job description because the thing she does for Meridian does not fit in one.
She is good at her work and she is also a problem.
Deborah's question
The buyer's HR diligence advisor — a fractional Chief Human Resources Officer (CHRO) serving three portfolio companies — asks Ed's attorney for three documents. Linda's current job description. Her employment agreement. Her non-compete.
There is no job description. There is no employment agreement beyond a single-page 2004 offer letter confirming her salary and start date. There is no non-compete, because Linda is Ed's wife and Ed has never once considered making his wife sign a non-compete against the family business.
Every absence was a reasonable decision at the time. Linda does not need a job description because Ed and Linda know what she does. She does not need an employment agreement because she is not a typical employee. She does not need a non-compete because she is Ed's wife.
The logic breaks at the exact moment the business is sold.
This is The Informal Role — a pattern distinct from the Phantom Role described in What Happens After You Sell. The Phantom Role is a position that exists on paper but not in practice. The Informal Role is the reverse: a position that exists in practice but not on paper. At exit, the buyer's diligence process can't evaluate either one.
The buyer's risk model does not care about Linda's actual intentions. It cares about structural retention risk — what you can contract for, not what you can hope for. Hope is not a line item on the valuation model.
What Ready Looks Like
The fix takes twenty minutes. A family member's non-compete signed on a Tuesday morning is HR hygiene. The same non-compete requested during diligence is a different conversation entirely.
Document every senior role — including family members. Written job description, updated within the last three years. If Deborah picks up any employee file, she should be able to answer scope, obligations, and compensation without calling Ed.
Sign employment agreements with appropriate consideration. Every person with access to confidential business information — including spouses on payroll — gets a signed confidentiality and non-compete agreement. Current agreements, not legacy documents from the year of hire.
Document the add-back rationale. Variable compensation, add-back eligibility, and above-market pay for any family member on payroll needs documentation the buyer can read without interpretation.
For Meridian, none of these were true.
Ed gets home at six-fifteen. Linda is cooking. He waits until after dinner.
"Lin, I need to talk to you about the deal."
"The buyer's people — the HR woman — she wants you to sign a couple of things before closing. A job description. An employment agreement. And a non-compete."
Linda sets the plates down.
"A non-compete. Against what?"
"Against commercial HVAC in Ohio. For three years."
Linda looks at her husband for a long moment. She is not angry. She is something quieter.
"Ed, I have done this work for twenty years. I have never asked you for a title. I have never asked you for a contract. And now, because somebody in Chicago cannot evaluate the arrangement, I am being asked to sign a document describing work I have been doing without documentation for two decades."
She is quiet for a while.
"Why has it never occurred to you to ask me to sign something like this before now? Not the non-compete. The job description. The employment agreement. The thing that says, on paper, what I do."
Ed does not have a good answer. In any of the seventy-two quarters between 2004 and today, he could have drafted a one-page document describing Linda's role. The conversation they are having tonight would not be happening. It would have happened in some other quarter, warmly, over coffee. It would have been about recognition — not about a deal.
"I should have."
Linda nods. "Okay. Have the attorney send the documents. I'll sign them."
What this cost Ed: $95K.
Deborah's memo priced the informal role as a transition adjustment. Linda is on payroll at $95K. She is Ed's wife, not a career HR professional — the buyer's transition model assumes she leaves. A head of HR to cover the same scope runs $145K. The $50K salary delta is only part of it. The rest is the cost of formalizing a role that was never documented — recruiting a professional HR head, the overlap period to transfer twenty years of institutional knowledge, and the administrative buildout Linda handled informally. Deborah priced the full transition at $95K.
The paperwork Ed never created didn't just cost him a signature. It surfaced a role the buyer had to rebuild from scratch.
Don't be Ed.