Hierarchy vs. partnership

Simple organizations, composed of operatives and one manager, may be organized as a hierarchy with the manager appropriating all profits or as a partnership with (say) equal shares of profits. Conditions on profitability and the optimal span of control are analyzed. Next, partnerships are considered and alternative incentives and distributions are compared. When partners are free to choose their time inputs, then a sufficiently high preference for leisure as against income will make a partnership more attractive even though it is less profitable.