Does your Virtual Assistant have your business’s best interests at heart?
What challenges can arise in a company when a business owner delegates work to a manager or employee, or appoints a supplier who acts on the business’s behalf?
Micro businesses are very likely to be headed by a hands-on owner who takes on employees as the workload becomes too onerous for one person – or if they need add to skills and expertise to their business. In this close-knit unit, the team’s vision and priorities have a good chance of being in alignment.
However, it stands to reason that the larger and more complex organisation’s needs are, the more separation there is between ownership and control – and the more chance there is that the priorities of the owners or shareholders differ from those of the people who do the work. Although, as stated by Investopedia1, this problem can occur in a variety of situations. For example, in the relationship between a client and their lawyer or accountant – or the relationship between shareholders and a CEO or a CEO and their managers.
In economic terms, this conflict in priorities has been defined as The Principle-Agent Problem – or “a conflict in priorities between the owner of an asset (“the Principle”) and the person (the “Agent”) to whom control of the asset has been delegated.”
The Principle-Agent Problem is an economic concept that was developed in the 1970s by notable American economists William Meckling2 and Michel Jensen3. In a seminal paper published in 1976 entitled, Theory of the firm: Managerial behavior, agency costs and ownership structure4, Meckling and Jensen outline the theory of an ownership structure designed to avoid what they defined as “agency cost” and its cause, which they identified as the separation of ownership and control.
When it comes to ownership and control, how might The Theory of The Firm need to be expanded upon or updated considering the rapid advancement of digital technologies?
A research paper published in 2021, co-authored by Dr David Collis (a long-standing adjunct professor at the Harvard Business School), entitled Corporate Strategy and the Theory of the Firm in the Digital Age, speaks to the fact that the rise of modern communication technologies has supported the emergence of more widely dispersed company headquarters – and the rise of the hybrid and remote workplace. The paper suggests that the digital age has “changed the nature of task and workforce design, which has implications for the firm’s corporate strategy, specifically for the corporate structure, decision making and corporate roles or functions” and that “it has also contributed to the trend towards more functional specialists capable of mastering a single discipline.”
This thinking is validated by the apparent rise of the era of the Virtual Assistant.
While The Principle-Agent Problem is a universal problem in organisation’s big and small, there are many measures that business owners can take to ensure this is not their reality. Enabled by modern communication technology, taking on a Virtual Assistant does not necessarily exacerbate the problem. In fact, it may help to alleviate it.
Does having your Virtual Assistant work remotely worsen The Principle-Agent Problem?
No it does not. One of the biggest advantages of communication technology in the modern workplace is that colleagues and contributors from all over the world can collaborate in real time. That being said, there is no substitute for regular, high-quality team and one-on-one interaction and communication – and ongoing learning. It helps to ensure that every member of the team understands their duties and responsibilities and “keeps employees on the same page” when it comes to aligning vision and values. Modelling effective, two-way communication should start at the top of an organisation and be encouraged throughout the company.
Virtual Assistants who are carefully chosen for their positive attitude alleviate The Principle-Agent Problem.
Beyond being reliable, trustworthy, skilled and having a good work ethic, a high calibre Virtual Assistant’s most important attribute is a positive mind-set:
- Their positive mindset serves to attune a Virtual Assistant to the priorities of their boss and the company.
- Virtual Assistants with a positive mindset are more likely to enjoy their work and feel a sense of purpose in their role.
- Positive thinking enables Virtual Assistants to be more proactive in their communication, in anticipating their boss’s and the company’s needs.
Virtual Assistants round out an aligned team by bringing skills that are not the principle’s or other employee’s strengths.
Rather than exacerbating The Principle-Agent Problem, taking on the right, skilled virtual assistant and embedding them in a cohesive team can take a company to the next level through the additional skills and resources they can provide. Every facet of running a business is essential to its success, no matter how “minor” it may seem. However, routine administrative and operational tasks are better outsourced to free up a business owner’s time to focus on working ‘on’ their business rather than ‘in’ their business.
Virtual Assistants who are aligned with business priorities help grow the firm by supplying a range of skills that would otherwise not be affordable.
Even taking on a very experienced and specialist Virtual Assistant, like a seasoned bookkeeper or property manager, is cost-effective. When it comes to cost-to-company, not only do they work for an hourly rate comparable to the National Minimum Wage, but there are no additional employee benefits or a physical workstation to pay for.
In conclusion
When it comes to ensuring that your Virtual Assistant is aligned with your business priorities and has your business’s best interests at heart, having a dedicated Virtual Assistant who works only for you means they can provide you with their full attention and become a fully-fledged member of the team. This provides greater opportunities to ensure that their priorities align with the vision and values of your business as they contribute to the success of the business.
Sources:
1https://www.investopedia.com/terms/p/principal-agent-problem.asp#
2https://en.wikipedia.org/wiki/William_H._Meckling
3https://en.wikipedia.org/wiki/Michael_C._Jensen
4https://www.sciencedirect.com/science/article/pii/0304405X7690026X
