Owner manager internal conflict

Owner – Manager conflict can lead to reduced productivity, waste, and even bankruptcy. There are at least five sources of conflict between the owner and the manager

  • Efforts to choose. The extra effort of managers often increases the value of the company, but because the managers spend a lot of effort, extra effort will reduce their effectiveness.
  • Exquisite taking. In order to attract and retain capable people, it is in the interest of the owner to pay enough wages and bonuses. However, the owner does not want to pay more for the manager. In contrast, managers may not only need more advanced salons, but also senior club membership, luxury office furniture, luxury vehicles, exciting day care for children and expensive French desserts. Managers can pay more, and lower employees are underpaid, causing conflicts between all involved, which can lead to reduced productivity and sometimes even business closure.
  • Differential risk exposure. Managers often have a large amount of human capital and invest in the company's personal wealth. From a landlord's perspective, such large-scale investments may make managers appear to be overly risk-averse, as owners [at least in large public companies] typically invest only a small portion of their wealth in any company. Here, managers may abandon projects they expect to be profitable because they don't want to take the risk of a project failing and cause their pay to be reduced. Managers will take care of their own interests, even if it means a loss to the owner or shareholder.
  • Differential field of view. Managers' claims against the company are generally limited by the company's tenure. As a result, managers have limited incentives to focus on cash flows beyond their term. On the other hand, the owner is interested in the value of the entire cash flow in the future because it determines the price at which they can sell their claims in the company. The owners want their profits again, and the manager just wants to work and make enough money.
  • Overinvestment. Managers can be linked by reducing the size of the company, even if the company has exhausted the available profitable projects; they prefer the Empire. In addition, managers are often associated with cutting universities and friends in sectors that are no longer profitable. Managers who fire their teams bear personal costs [liabilities], while shareholders get most of the benefits. Some managers become friends with their employees and their families, so they have problems when they have to get off work or leave them because of a slowdown in business. Managers prefer to let owners or shareholders lose profits rather than let their friends lose their jobs.

An example is a company that drills wells. The owners have built an honest and reputable business, but after they retire and hire managers to run their business, managers have different ideas about how to run the business. They are not as honest as their owners, and they treat employees unscrupulously by deceiving their wages. This has led to many conflicts between the owner and the manager because the company is losing customers, but the manager continues to pay high wages for himself.

Another example is a used car from Dade City. The original owner sells the car in an honest and reputable way to build a business. When he hires a manager to take over the business, the manager starts selling cars that have failed within a few weeks of the customer. Drive away. If he sells a car that causes customer problems, the manager cannot help the customer repair the car. The manager is selling and showing profits to the owner, thereby earning more for himself, but at the same time he undermines the car's reputation. Since the owner wants the business to operate in one way and the manager operates in a different way, there is a conflict with the owner and manager.

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