Looking Out for Number 2

Creating an effective working relationship with your second-in-command and sharing responsibility.

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Sharing responsibility and trust with another manager is never easy, especially when it's your company. But failure to create an effective working relationship with your second-in-command could spell disaster

If we had a dollar for every time we heard seconds-in-command grumble about the frustrations of working for entrepreneurs, we would have a wonderful new profit center here at Inc. Chances are, you've heard some of the big gripes before -- the capriciousness, the closed-mindedness, the constant interference.

Well, chief executives do their share of complaining, too. If you want to know how bad things can get, consider the case of Michael Fanning.

Three years ago Fanning, who founded Potpourri Foundry Inc., a manufacturer of home-fragrance products in Huntington Beach, Calif., hired a bright young man to handle the financial and operational ends of his business. After three years in business, Fanning, a high-energy marketing and creative type, had decided his own time was being spread too thin. Revenues were then at about $1.5 million a year. Fanning wanted a right-hand man who could take care of the budgets and forecasts, deal with bankers, and help supervise the company's 60-odd employees. The goal was to free himself up so he could go after new customers and set the direction of the business.

During the first few months Fanning was delighted with the way things were going. The new executive was an absolute whiz at crunching numbers, which bought Fanning more time. Fanning did have some reservations about the new manager's sometimes overly aggressive manner, but that seemed forgivable given the man's knowledge of finance, and the pressures of growth. "I thought it was all part of growing a company," says 48-year-old Fanning.

But as time went on, the individual's style and, increasingly, his values loomed as an issue. More than once, Fanning would come home from a business trip to catch an earful of complaints about how harshly his second-in-command had treated employees. A few disliked working with him so much they left the company. Vendors, too, bristled at his negotiating demands and quietly told Fanning. Before long Fanning had no choice but to ask himself if his number two man was really somebody he could count on to make good decisions. Was he comfortable with someone like this running his company? He thought about it long and hard on a flight back from a business trip to Taiwan and stopped for a day in Hawaii to think some more. The more he thought about it, the more he realized that, putting aside the person's technical know-how, the answer was no.

If Fanning had any lingering doubts about whether to terminate the relationship, they quickly vanished when tax officials from both California and the federal government began hounding him for payroll taxes that his number two hadn't paid. "You can imagine the feeling of betrayal," says Fanning. "I'd been entrusting my soul." Fortunately, the business made it through. Mindful of the risks, Fanning recently did away with the number two job and reassigned duties to other people in the company. "Given all the things that can happen, I'm surprised that more companies don't go under," he says.

Fanning's reaction is quite normal. Many business owners we know would sooner strain themselves to the breaking point than trust anyone to make important decisions for them. But the reality is that you can't do it all by yourself -- not if you want to grow your company and buy some sanity for yourself. What entrepreneurs need to learn is how to work closely and productively with a second-in-command. They need to know how to structure and maintain the relationship and how to build trust.

Over the past few months we've talked to more than 150 CEOs and their number twos about how they work together. We've asked them lots of questions about what works, what doesn't work, and how things could be improved. We think we've gained some insights into what number twos and bosses think of each other -- and how you can achieve the best possible teamwork at the top:

Be honest about what you want. This should be obvious, right? Judging from what we hear from CEOs and the men and women who work for them, it isn't. Why? Because number twos, evidently, get hired for all kinds of reasons: pressure from bankers; weariness, even boredom, on the part of the founder; and once in a blue moon, because a CEO is truly interested in sharing some responsibility.

Before you bring someone in, stand in front of the mirror. Ask yourself what you're really trying to achieve -- and what kinds of decision making you're willing to part with. Your ideas will undoubtedly change, but going through the exercise up front may save you some pain later on.

Think chemistry. Considering the hours CEOs and their deputies spend together and the close quarters in which they spend them, liking each other is an absolute must. In the course of selecting your second-in-command, you'll find plenty of individuals who look good on paper. But you need to test compatibility, too.

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