The Lieutenant's Model

In another essay,"Buying Another Business: It's Getting Complicated", I pointed out that the complexity of running two businesss is three times as complicated as running one; that running four is twice as complicated as running three; and so forth. There is a mathematical formula that shows this complexity. This is not something "just made up."

I have observed two models, or arrangements; two entirely different ways of managing three or more businesss. One works superbly; the other fails miserably.

The Shared Management by Committee Model
(a set-up for failure)

The phrase "Shared Management" means that the owner has decided that he will have one manager handle some aspects of all the businesses while another equal manager will handle other aspects. The word "Committee" means that in effect, every decision of each of the two managers has to be cleared by the other since the actions of one always affects the other. This is how we might write the Shared Management by Committee Model:

  • Manager 1: Employee Management & Training for all businesss
  • Manager 1: Advertising & Promotions for all businesss
  • Manager 2: Purchasing for all businesss
  • Manager 2: Repairs & Maintenance for all businesss
  • Manager 2: Accounts Payable for all businesss

Do you immediately see the problems with this model?

  1. Which manager is going to feel "second place"?
  2. Manager 1 is responsible for hiring and firing but Manager 2 writes payroll.
  3. Manager 1 is responsible for Promotions but Manager 2 is responsible for Purchasing.

    These overlays of responsibilities do not serve as "checks and balances." There are other problems that will become evident soon after this model is adopted.

  4. Travel time alone among four businesss will consume too much of your managers' time.
  5. You may have it all worked out in your mind which manager has which areas of responsibility. But your customers and suppliers are going to ignore your arrangement and build their own alliances.
  6. You will begin to see problems with the fact that spreading your managers across four businesss means that they will be available to any store one-fouth of the time. Suppliers and others will take advantage of this and it will confuse employees.

    In the real-life model I observed, two more things were evident:

  7. Each manager was very stressed.
  8. The stress created an atmosphere of irreconciliable friction. These were not nice people to work with nor to see work together.

The Lieutenants Model
(assured success)

By "lieutenant" I mean someone authorized to act in your behalf. Implied is the idea that he is fully authorized. In this model you assign two businesss to each manager. He is responsible for the entire operation. It is enough to say that this model is better because it is simpler. But benefits become obvious rather quickly.

  1. Each manager understands the total character of the business and how all the parts interact.
  2. Your managers are in friendly competition. Without being in "each other's hair," each feels more willing to experiment and take the risks we always say we want our managers to take.
  3. Each manager enjoys his job better because he gets more immediate satisfaction seeing the results of his work.
  4. If a problem develops in one store, it will add some stress to one manager, but not both.
  5. Although the two managers might have different management styles, in an emergency, each could manage the other's businesss for a while.
  6. The two managers will either directly or indirectly learn ideas from each other.
  7. It is much easier for each manager to create and foster good customer relations in "his" stores.

The Mathematical Models

Let's assume the following:
  1. There are four stores.
  2. There are two managers.
  3. There are four areas of responsibility.
  4. It really does not matter which you assign to whom. Since either manager will have to check with the other to see how his decision might affect him, each manager is jointly responsible for all the areas of responsbility.

In the Shared Responsibility by Committee Model, each manager will have 171 directions that information will flow.

In the Lieutenants Model, each manager will have 45 dirctions in which information will flow.

Which do you think is better?