Up From Drudgery

Tweet

The multilevel management system has another attractive characteristic: the effects of bad management, whether from inexperience or inability, are locally contained. A poor manager can affect the performance only of the people in his own group. A single managerial misfit cannot poison the rest of the organization. Nor is there any conceivable way that he will be promoted and given broader responsibility.

Other system problems?

Jay Earl earned $37,000 as a group leader in 1986 and expected to do much, much better in '87 but didn't. It's the turnover rate, he complains. In a 15-month period, Earl had to hire 10 consultants to end up with 3. "The turnover takes away some of the incentive to be a manager," he says.

But Reuning points to the same attrition rate, and instead of seeing a problem sees progress. "If I want to add one person now," he says, "I have to hire 3. But I used to have to hire 10." In his opinion, shared widely, the turnover rate will continue to come down as the training produces better managers. "People won't be quitting because they think their managers are incompetent," Gregory Reuning says.

They would be quitting if the multilevel management system weren't in place.

"The system? That's exactly why I came to the company," says Busch.

If he weren't managing three other people, says Earl, he wouldn't be here, "because I'd be burned out being a recruiter on my own. Besides the override incentive, managing gives you a break from the daily grind of working the phone."

Reuning, by and large, is pleased. Multi-level management clearly gives the company advantages in recruiting and retention, but it doesn't pressure the company's margains. The total commission Diedre Moire pays on fees produced comes to a maximum of 41% (30% to the consultant, 7% to the group leader, as much as another 4% to those whose consultants have started subgroups). Diedre Moire also offers a benefits package worth 23% of compensation. In contrast, other recruiting firms may pay straight commissions of 30% or more with some benefits or 50% commission with no benefits, both without the opportunity to move up in the managerial hierarchy.

The failure of the system to produce an office manager-partner probably will be remedied soon. Michael Randazza, at 34 a veteran floor leader, qualifies for the move. In 1986 he earned $79,000. "Why haven't I become a partner yet? I enjoy going home. If I had a company, I'd live there. I'm a single man with other interests." But Gregory Reuning expects to be running his own office in 1988; he's now a floor leader earning $60,000. And Jay Earl expects to be a partner, too, though he doesn't know when. "If he didn't offer that option, I'd have been gone a long time ago."

Diedre Moire, with its unique shape, is already larger by sales and number of employees after just five years than the majority of firms in its industry. It employs 45 people, including support staff, nearly four times the work force of the typical firm. Reuning projects 1987-1988 sales at $3.6 million, up 47% from the year before. Net income, he says, should be about 10%.

Its organizational structure does impose some limits on Diedre Moire's rate of growth. Reuning says it's constrained mostly by the rate at which the company can train managers -- a process that takes a minimum of 6 to 18 months. "If I had $1 billion in capital," he adds, "I couldn't grow any faster than I am." Still, he expects the number of operating employees -- consultants and managers -- to double to 60 or more within the next 12 months and to double again the following year. The nice thing, he says, is that beyond expanding his support services, he doesn't have to plan for 120. Given the multilevel management system, the growth just happens -- so long, that is, as the company's market, which is closely related to the business cycle, holds up. A recession would hurt, but Reuning is working on diversification tactics.

Expansion through franchising would allow faster growth. But Reuning believes that franchising would cost him control of service quality and that the multilevel management system is not easily replicated by a franchisee who hasn't been bred within the system.

MULTILEVEL MANAGEMENT IS Reuning's attempt at changing -- and, he hopes, improving -- the performance of an organization by altering its structure. He didn't set out simply to do a better job of running a company with the aim of achieving superior results. Diedre Moire is organically different from the conventional recruiting firm. The people employed there work within a different motivational framework intended to produce a different set of responses.

Reuning is ready to apply multilevel management to a new data-entry department. Reuning will calculate an average cost per entry -- say, 75?. Then he'll pay the clerk a salary, but at the end of the month he'll multiply the clerk's entries by .75. If that product is greater than the salary, the clerk gets the difference as a bonus.

Clerks who consistently meet production goals will over time become supervisors, earning an override on the production of people under them. The idea here, as in sales, is not to create a chain of command. Supervisors aren't bosses so much as they are mentors. "The idea," Reuning says, "is to have someone with wisdom working next to you and to give that persons an incentive to see you succeed."

A big advantage to multilevel management, as practiced at Diedre Moire, seems to be that it makes personal and company goals congruent. "Here," says Hilfman, "my professional growth is in my hands. The same for the money I make. I don't know anywhere else I could say that."

 PREV  1 | 2 | 3 | 4