Secret Agent Man
Are you humming the old Johnny Rivers song? “There’s a man who lives a life of danger. … They’ve given you a number and taken away your name. …” (guitar riff here) Sorry, I’m not talking about that kind of agent, but someone who can be just as dangerous!
A good friend owns a firm that handles bankruptcy processing. He shared with me that owners of businesses versus “agents,” such as attorneys or restructuring officers, view the substantial firm fees he charges much differently. Owners who are trying to emerge from bankruptcy with a viable business are much more likely to scrutinize every bill. Agents, who are hired guns, have much less personal self-interest and rarely question fees. They might also be more clinical and reasonable, but his point was that an owner whose livelihood and reputation are on the line acts much differently than an agent. How do you bridge the gap between ownership and agents?
Agency theory says that the major conflict that can divide principals (owners) and agents (managers) pertains to different goals. The problem can arise when any manager has less than 100 percent ownership of a company — in other words, all companies outside of sole proprietorships are at risk. Having been on both sides of this fence, I see the different mindset each party has. (Partnerships are a different sort of animal but driven by the same question, “What are the goals of each individual?”)
One word best bridges the gap between the behavior of an owner and the behavior of an agent: commitment. It’s naïve to believe that an agent (who might have the title of president or CEO or general manager) will naturally have the same level of commitment or the same viewpoint as an owner. The further down the organization you go, the worse the problem can become. But it doesn’t have to be that way!
How do you build commitment? In my experience, there are two large levers you can pull.
First, if you want people to act like owners, treat them like owners. How? By being transparent with information but letting them have responsibility and authority for decisions and their actions and by rewarding them like owners (and participating in the occasional painful moment). Commitment starts with understanding and is furthered with alignment, which is only possible with transparency. If I don’t know your values, goals and objectives, how can I support them?
Second, make sure you can answer the question, “What’s in it for them?” I’ve worked with numerous owners and CEOs who, when disappointed by the behavior of one of their people, asked me, “Shouldn’t I be able to expect …?” Sometimes my answer is yes. However, often the “agent” didn’t know what the expectations were and was working counter to his or her self-interest.
I’m not a pessimist. I believe that many people will do the “right” thing, even if it causes them some pain (members of our military, for instance, routinely put themselves in harm’s way for little monetary reward). However, if you expect this routinely as a business owner or senior manager, you’ll be frequently disappointed. Rational self-interest isn’t a bad thing, but it is the thing. Use it to your advantage. You should absolutely have high expectations of the “agents” whom you hire, but put yourself in their shoes for a minute and ask what your motivation and rational behavior would be.
No business grows for long without introducing agents or employees into the mix. How will you make sure they’re representing you appropriately?
Todd Ordal is President of Applied Strategy®. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He is a former CEO and has led teams as large as 7,000. Todd is the author of, Never Kick a Cow Chip On A Hot Day: Real Lessons for Real CEOs and Those Who Want To Be(Morgan James Publishing, 2016). Connect with Todd on LinkedIn, Twitter, call 303-527-0417 or email email@example.com.