Wednesday, April 30, 2008

Partnerships and Company Structure

Another critical learning experience that I've had is the realization that all businesses for profit need to be organized and structured properly. A common problem with partnerships is the fact that duties always overlap and efficiency is not maximized by the owners. When there are not actual job titles and duties, people are not accountable for anything. A proper chain of command is very necessary to conduct proper business on a day to day basis. If you run your business like a multi million dollar operation , you can expect the same results as a multi million dollar operation. A proper chain of command will look something like this...

1. Board of Directors- The owners or investors of a company (in big corps. these people are chosen to speak for the shareholders) that give direction to the officers.

2. CEO - Chief Executive Officer - The person that will make final decisions about the company and reports to the Board of Directors.

3. CFO , COO, CIO - Chief Financial Officer, Chief Operations Officer, and Chief Information Officer - They all control thier respective divisions of the company and report to the CEO.

4. Division Managers or Employees - Report to the Chief Officers of every division and directly control Operations and employees.

This looks like something that Microsoft, Coca-Cola , or General Motors might have , but not something for the everyday business... wrong... This structure must take place in every business to experience success. The difference in smaller companies is that the same person may need to wear several different hats. In partnerships, the problem that I've experienced is that every partner is the board and the CEO, CFO, COO, and CIO. Each partner has an equal say and equal responsibility for different divisions. A better way of running the business would be to have a CEO (preferably a third party) running the business and all the partners would be the board of directors. Even if the CEO was not a third party, it could still be one of the partners, the point being that there NEEDS to be one person in control and one person giving orders. It wouldn't even take more work for the CEO, it would just be that one person that would give out the orders and report to the other partners or board of directors. The benefit of having one Ceo instead of several is that authority is never undermined, orders to staff can never be miscontrued, accountability and responsibility can never be deferred, and more order will be brought to the business. This was probably one of my top 3 learning experiences to date and has been very costly for my business.

3 comments:

Zero to Millions said...

what if you can't afford a CEO , seriously as in a three headed monster you can't have all generals you need soldiers as well elect one person to go to for final decision whether right or wrong you will need to have faith in their decision. Whether it be you or one of your other partners.

Zero to Millions said...

yeah lets do it, when shall we start? I'm starting to work 16 hour days and it's not pretty I feel like zombie at work most of the time.

Zero to Millions said...

You haven't written in awhile, whats up