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The Gangsters Guide to Business

Have you ever stopped to consider just how it is that gangs succeed in motivating self interested people to work together?

In James Suroweicki’s Wisdom of Crowds he outlines three basic business models that Hollywood criminals use to organise and manage their operations.

The Godfather (part two) - exemplifies a top-down hierarchy much like a large corporation with Michael Corleone as the CEO.

Advantages:

• Full control – It allows the man at the top to make decisions quickly and have them carried out decisively.
• Stability – It allows for long term investments and planning.
• Wide Spread Control - Michael Corleone is able to delegate the management of his remote operations.

Disadvantages

• Employees can slack off and skim profits – self interested individuals are able to skim profits and seek out side dealings with competitors.
• Stagnant flow of information – as the family grows the lack of information flowing to the top creates greater isolation for Michael Corleone.
• Isolation is bad – limited connectivity to the news on the street means that bad decisions are made at the top.
• People over ideas – New ideas are often given weight based on the rank of the person with the idea rather than the inherent merit of idea itself.

Heat - a small tight knit group of criminals – exemplifies many small businesses.

Advantages

• Good incentives - Each persons rewards are based on the success of the team therefore each person has a strong incentive to contribute.
• Specialised roles - gives each member a clear cut responsibility for an area of the operation
• Harder to hide - unlike large organisations where inefficient team members can go unnoticed, in a small well connected team there is absolute transparency.
• Reliance = Trust - because each team member relies heavily on the others to complete to pull off the job the flow of information is seen as essential.

Disadvantages

• Limited resources - simply small talent pool, limited resources.
• Team Culture – Small teams that work together build up language and systems of doing things which can be great but are not always teachable – therefore new members may struggle to adapt to the team environment.
• Reliance = Trust - both the benefit and the weakness of this model – this leaves little room for error. If one member fails to complete their job then the whole team suffers enormously.

Reservoir Dogs - a one off team is assembled in order to complete a specific job after which they disband – exemplifies specialist on-off groups in events management or film production.

Advantages

• Members hand picked for their skills – exactly what you need for the job.
• Inherent incentives – The one-off nature of the job makes sure that everyone has an incentive to preform well.

Disadvantages

• Time and Energy – huge cost of putting the group together.
• Lack of trust and cohesion - due to fact that they have never worked together.
• Self-interest Difficult to ensure that the members are working in the groups interest and not their own.

So what does this mean – it shows that there is no single model for operating your criminal empire (Or business) that is without it’s drawbacks. Is there a better way? Can you retain all the benefits of a the Godfather’s top down management style whilst also acquiring the trust and specialization of displayed in Heat and Reservior dogs? If so what are the disadvantages? – These are all questions that we will explore in our up coming focus on decentralised management and aggregated real time feedback.

Stay Tuned.

Here‘s the follow up: Gangster Management 2.0