T he average business owner will, at various times, face the temptation of putting someone else in charge of his or her company.

In some cases, it is a question of necessity; in others, it may be a question of accommodating growth. In most cases, such a move should prove positive. There are, however, times when disaster sits around the corner ... just waiting for you to fail to take the proper precautions.

The devil you know

If you already have a "second in command" or even a manager on whom you've learned to depend, you're halfway there.

The fact that you know her abilities as well as her foibles enables you to take advantage of the former and avoid the latter. This does not necessarily mean that you can forget about management responsibilities entirely, but it does mean that you no longer have to follow the day-to-day operations in all its detail.

Due diligence

In the event you need to appoint or hire a manager with whom you have not shared the responsibilities of business operations, you have a great deal to think about.

The question of "getting in early" and "leaving late" is the bane of every business owner. Whether or not a "manager" who does not participate in the business profits will be as oriented to this concept as the owner will always be a question to be answered. Whether an unsupervised manager will use a printing machine for greater profit or a photocopy machine for greater speed is another question to be answered.

The greater questions, however, are a good deal subtler.

The question of competence is only one of the questions that needs to be addressed. The aspect of "really knowing" the person ought to be your first step and highest priority on the due diligence ladder. If you know the background of your candidate because he or she has been a part of your organization, so much the better. If you don't have this personal knowledge, you will want to know the needs of your candidate to ensure that the salary you are paying will handle these needs.

The frustration of a salary too little can lead to second jobs and worse. You must be sure that the responsibilities of your business are your manager's highest priority.

Keep in mind, however, that there are questions the law does not allow to be asked in interview. You must be honest about the problem and, hopefully, get some honest answers. The best protocol is probably a probation period which will give you a chance to "become more personal" in your relationship.

Creating an incentive plan

In the event you have a business that has a profit position based on better sales, or better customer relationships, or 'selling up' at the counter, you might be able to build an incentive to the manager based on the positive nature of such activities.

If your business is not so structured, you might have to consider an equity position of sorts. In some cases, it may be as casual as a participation in the profit of the business at year-end. In other cases, it might be as formal as an equity position in the business. These alternatives are so various as not to be easily defined without examining a particular situation.

If you are contemplating such an alternative, be sure that you speak to your legal advisor to be sure that you are not creating a situation that will prevent you from making subsequent business decisions or even from selling the business or bringing in investors after the fact.

The possibility of 'partnership'

There are as many different partnership arrangements as there are people.

Be careful that you understand the basics as well as the nuances before you enter this legal arena. And keep one significant thing in mind. Although a partnership is usually defined in writing, you can also create a partnership by a handshake or a hug. And you might not even know that you've done it.

Be careful!

Ira Nottonson is a lawyer, lecturer, author, and consultant. His latest books are "Forming a Partnership" and "Buying and Selling a Business". He can be reached at 303-447-9672 or by e-mail at irabizlaw@aol.com.1