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March 14, 2006
The Plateau Principle
I was reminded today of one of the earliest principles of community association management, the "Plateau Principle". This was fostered by one of the few management philosophers I've met by the name of Art Hiban. I can't remember the exact wording of the principle, but basically it stated that "Management companies will grow to the breaking point (plateau), then hire the needed staff which will require the company to move to the next breaking point." In other words, you never really find the balance between staff, accounts and profitability.
I imagine it is as true today as it was back in 1977 when I first heard it. Unless you've determined to stop growing, and stay at a determined size, the cycle never ends. Stretch staff to the limit, hire new staff, find new accounts to pay for new staff, which stretches larger staff to the limits....
I really thought that by now, someone would have come up with a formula that solves this problem, but although people may have figured out a way around it, no one has put it on paper that I know of. Somewhere out there must be a math major turned manager who can make sense of it. All you need to do is figure out the relationship between the cost and timing of adding new staff, add in the necessary increase in company overhead, factor in your increased time supervising and reduced time in managing, determine when and at what rates new accounts will come on and how much time they will take to manage and voila, you have it.
Hmmm...maybe that's why no one has reduced it to a simple formula. If you have, we'd love to hear it, even if its just a hypothesis, we'd be glad to test it, or, come to think of it, maybe just asking that 8-ball on your desk is still the best way.
Posted by joewest at March 14, 2006 8:28 PM