Professional Management and the Small Business

Transcription

1 CHAPTER OUTLINE Spotlight: Kind LLC ( 1 Small Business Leadership Discuss the entrepreneur s leadership role. What Is Leadership? Others will follow willingly More focused on the destination than how to get there Leadership Qualities Of Founders Gets others to help with the project Faces uncertainties and certainties What Makes a Leader Effective? Charisma OK, but doesn t need to be a part of the formula Must have resolve and determination Must have vision for the goal Leadership Styles Visionary leaders Coaching leaders Affiliative leaders Democratic leaders Pacesetting leaders Commanding leaders Leadership may include empowering employees and leading work teams Leaders Shape the Culture of the Organization Company culture emerges over the lifetime of the business Culture usually reflects the character and style of the founder To change or retain culture, hire new employees based on their attitude, style, and fit with the personality of the company 2 The Small Firm Management Process Explain the small business management process and its unique features. From Founder to Professional Manager management professional manager is someone who uses systematic, analytical methods of management Expanding Beyond the Comfort Zone Small enterprises seem vulnerable to poor management Problems may occur as the business begins to grow and good management is more difficult for the entrepreneur Managing the Constraints That Hamper Small Business Small bank accounts and limited staff Difficult to employ an adequate number of employees Typically lack adequate specialized professional staff Firm Growth and Managerial Practices 203

2 Exhibit 19-1 Organizational Stages of Small Business Growth Stage 1 One-person startup Stage 2 entrepreneur a player-coach Stage 3 intermediate level of supervision added Stage 4 formal managerial practices as growth requires greater formality in planning and control 3 Managerial Responsibilities of Entrepreneurs Identify the managerial tasks of entrepreneurs. Planning Activities Long-range plan (strategic plan) Short-range plan Budget Creating an Organizational Structure The Unplanned Structure evolves with little conscious planning The Chain of Command Line organization (each person reports to one supervisor) Line-and-staff organization (Exhibit 19-2 Line-and-Staff Organization) Span of Control (number of employees supervised by a manager) Delegating Authority Failure to delegate a special problem for entrepreneurs Inability or unwillingness to delegate authority causes other problems and ties up the supervisor who should be doing other activities Controlling Operations Managers must monitor operations to discover deviations from plans Managers must ensure the firm is functioning as intended Exhibit 19-3 Stages of the Control Process Preventive Control (input stage) Concurrent Control (process stage) Corrective Control (output stage) Communicating Getting managers to talk with one another and openly share problems and ideas Effective communications Tell employees where they stand Tell how the business is doing 204 Tell what the firm s plans are for the future Tools and techniques to use to stimulate two-way communication Periodic performance review sessions to discuss employees ideas, questions, complaints, and job expectations Bulletin boards to keep employees informed about developments affecting them and/or the company Micro-blogging tools (like Twitter and yammer) to enable employees to communicate Suggestion boxes to solicit employees ideas

3 Wikis to bring issues to the surface and draw feedback Formal staff meetings to discuss problems and matters of general concern Breakfast or lunch with employees to socialize and just talk Negotiating Two-way communication process to resolve differences Exhibit 19-4 Presentation Tips Developing win-win strategy in relationships 4 Personal Time Management Describe the problem of time pressure and suggest solutions. The Problem of Time Pressure Small business owners work hours a week Owners may fear that the firm will not function properly if they are not there, so NO vacations Time Savers for Busy Managers Apply managerial approaches from preceding section Effective use of time is greatest time saver Steps Analyze how much time is normally spent on various activities Look for time-wasters Carefully plan available time use Often a daily written plan of work activities helps Effective time management requires firmly established priorities and selfdiscipline 5 Outside Management Assistance Outline the various types of outside management assistance. The Need for Outside Assistance Sources of Management Assistance U.S. Small Business Administration (SBA) 3 C s of service Capital Contracts Counseling Service Corps of Retired Executives (SCORE) Small Business Development Centers (SBDCs) Educational Institutions Business Incubators Exhibit 19-5 Services Provided by Business Incubators to New Firms Management Consultants Small Business Networks Other Business and Professional Services 205

4 SOURCES OF VIDEO AND OTHER INSTRUCTIONAL MATERIALS Managing Growth is a DVD produced by Vermont ETV as a part of their Emmy Award winning series Venturing: The Entrepreneurial Challenge. Inc.com offers tutorials, articles, and slide presentations on HR and on leadership on their web site at ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS 1. Would most employees of small firms welcome or resist a leadership approach that sought their ideas and involved them in meetings to let them know what was going on? Why might some employees resist such an approach? Most students will probably like the idea. In practice, some employees may be uncomfortable with it. For example, employees with limited ability or employees who have been conditioned over years of employment to take direction without question might find a participative approach disturbing. 2. Is the quality of management likely to be relatively uniform in all types of small businesses? If not, what might account for differences? 206 The quality of management differs, depending on a number of factors. One of these is size. The term small business includes a range of firms, and the somewhat larger ones of necessity give greater attention to the managerial process. Some firms, for example, require substantial amounts of capital to begin operations. In order to start, the entrepreneur must demonstrate to investors enough managerial or promotional ability to assemble these resources. In contrast, an independent tradesman may simply hang out his shingle and begin operations without having any particular managerial expertise. 3. What are the four stages of small business growth, as outlined in this chapter? How do management requirements change as the firm moves through these stages? The four stages outlined in the chapter are one-person operation, player-coach, intermediate supervision, and formal organization. The entrepreneur moves from being a doer to being a manager as the business moves through these stages. Initially, the entrepreneur is little more than a self-manager. As intermediate levels of supervision are introduced, the managerial process becomes much more complicated, difficult, and challenging for the entrepreneur. This individual must

5 learn to work through other managers. In stage 4, the stage of formal organization, the manager must learn to perform as a professional manager. 4. Some professional football coaches have written game plans that they consult from time to time during games. If coaches need formal plans, does it follow that small business owners also need them as they engage in their particular type of competition? Why or why not? We believe that the answer is yes for many types of small businesses. In a game, the competition is intense during a period of two or three hours. Business competition occurs over a longer time period. Therefore, a small firm s actions in the competitive arena should be chosen carefully, which requires planning. 5. What type of small firm might effectively use a line organization? When might it be necessary to change the firm s structure? To what type of structure? Why? Line organization structure would logically be used only in very small firms, such as those with fewer than ten employees. A newly opened frozen yogurt shop provides an example. It should be changed to a line-and-staff structure when specialized management services are required. Explain the relationship between planning and control in a small business. Give an example that shows how these two features can work together Planning includes goal setting. The goals become standards to be used in controlling. If performance falls short of a standard, some type of corrective action is required. A product specification, for example, sets a quality standard. As a product is produced, it is inspected to discover whether it meets the product specification. If it does not, the cause of the deviation (for example, inferior raw material or careless workmanship) must be identified and corrected. 6. Ralph Waldo Emerson once said, What you do speaks so loud that I cannot hear what you say. What does this mean, and how does it apply to communication in small firms? What practices can a small business manager use to conserve time? Practices that can be used by a small business manager to conserve time include effectively delegating authority to subordinates, performing tasks more efficiently, adequately planning work prior to its execution, carefully scheduling work, attending to higher priority matters first, and limiting meetings with subordinates to a reasonable amount of time. There are undoubtedly many more practices that might be suggested. 7. What are some advantages and possible drawbacks for a startup retail firm of locating in a business incubator? 207

6 A primary advantage is the management counsel and practical advice available to an inexperienced entrepreneur. In addition, various management services--such as secretarial, copying, and computer services--are made available and affordable. One limitation for a new firm is the location itself. Some new businesses require locations that are in high-traffic areas or are otherwise accessible to customers, and an incubator location may not provide such access. 8. Are student consulting teams of greater benefit to the client firm or to the students involved? Student consulting teams, under the direction of a faculty member, work with owners of small firms in analyzing business problems and proposing solutions. The use of student consulting teams apparently benefits both client firms and students. In any particular case, of course, the advantages to the business depend on the students ability and relationship with the entrepreneur, the degree of cooperation that is possible, and the nature of faculty guidance received in the process. COMMENTS ON CHAPTER YOU MAKE THE CALL SITUATIONS Situation 1 1. Is such a loosely organized firm likely to be as effective as a firm that defines jobs more precisely and monitors performance more closely? What are the advantages and the limitations of the management style described above? This company s leadership philosophy is unusual in the extent to which it emphasizes individual responsibility. It has the potential for encouraging enthusiastic performance. Effectiveness cannot be assumed, however. Much depends on the quality of personnel and the extent to which they have learned to respond to such supervision. Such a management style is limited in that it would not work well with incompetent employees or with employees who had been conditioned to distrust management and to do as little as possible. Also, some individuals are less comfortable in a work environment that is loosely structured. 2. How might such managerial methods affect morale? We believe that most students would respond positively and that most employees would also respond positively. This approach might not lead to high morale for the type of employees mentioned above, however. Also, management might try to stretch an employee beyond his or her abilities, and that can be discouraging. 3. Would you like to work for this company? Why or why not? 208

7 The students answers will indicate their supervisory preferences. Our prediction is that most will be favorable. Situation 2 1. Is this Richeson s problem one of time management or general managerial ability? Would it be feasible to engage a management consultant to help solve the firm s problems? A lack of general management skills must take at least some of the blame. Other firms run successfully with less frantic administrative activities. The situation appears ideal for analysis by a well-qualified management consultant. The entrepreneur is aware of the problem and concerned about solving it. However, he apparently lacks knowledge of how to deal with it. He should run to the nearest qualified consultant. 2. If Richeson asked you to recommend some type of outside management assistance, would you recommend a SCORE counselor, a student consulting team, a CPA firm, a management consultant, or some other type of assistance? Why? The answer will reflect the respondent s experience and bias. If the firm is strapped for cash, the entrepreneur could consider SCORE or a student consulting team. The quality of such services is unpredictable, however. The business is profitable and so may be able to pay for consulting services. A CPA firm may be able to offer management assistance or to recommend another source of qualified help. 3. If you were asked to improve this firm s management system, what would be the first steps you would take? What would be your initial goal? Some steps would be to interview key members of the company, examine organization structure and responsibilities, evaluate qualifications of key personnel, look for gaps in staffing, and study the entrepreneur s administrative style. An initial goal might be to eliminate the owner s need to sleep in the office at night and to cut his 16-hour days to a more modest 12 to 14 hours. What Actually Happened The entrepreneur hired a general manager, who was allowed to run the business. This freed the owner to reduce his working hours and also to devote more of his time to selling. Situation 3 209

8 1. What kinds of practices or procedures will Sullivan need to adopt to enable the business to continue to operate successfully? The entrepreneur needs to adopt some systematic methods of management to supplement her informal approach. Among these might be the following: a. Create an organization structure. b. Designate capable leasers for each segment. c. Give leaders sufficient authority for needed decisions. d. Establish some basic personnel policies. e. Create a planning and budgetary process. f. Arrange systems and relationships for communicating. g. Develop control methods including methods for quality control. 2. What resources might Sullivan use to get good feedback to help her assess her competence and understanding the issues her growing business is facing? Sullivan can secure help from a number of sources. These may include the firm s banker and/or CPA and/or attorney to the extent the firm has made such connections. Other sources of help include SCORE, consultants, student teams, possibly locating in a business incubator. SUGGESTED SOLUTION TO CASE 19: DIAMOND WIPES INTERNATIONAL 1. Based on what you ve just read, how would you rate the leadership skills of Eve Yen? In what ways does she fit the profile of the typical business founder? In what ways is she different? How would you describe her leadership style? Eve Yen should have determined what she needed the employees to do before hiring them. Unless a person is trained, they cannot fulfill the requirements of the position in a new company. Her answer to the problem when individuals didn t follow through as she expected them to do was to fire them and take everything back. Founders often are the creative force behind a business, but have trouble delegating to others. Eve Yen appears to follow this model fairly closely. The difference is that she was willing to hire someone in a general manager position as well as department heads and office assistants. Yen was somewhat impatient in light of the lack of preparation before hiring employees as well as the lack of training provided. Yen lacked the professional management skills to make the necessary changes to the business as it increased in size. Yen delegated tasks, but apparently did not empower people to do the tasks. Yen s leadership style was commanding, but lacked the follow-through required to make this style work. 210

9 2. Do you think Yen has the capacity to make the transition from founder to general manager of a now-sizable company? Yen probably has the capacity to make the transition from founder to general manager of this company and has made steps in that direction. She made a critical step when she took the position back from the fired employee and began learning how to handle the requirements for that position. Yen appears to be interested in knowing what the requirements are for the position of general manager and perhaps will be able to learn to delegate tasks and responsibilities. If students check the web site for this business, they will discover that as of September 3, 2008, there were no positions available with the firm. 3. How would you rate Yen s delegation skills? Was her timing appropriate for the handoff of responsibilities to a general manager? Was she too quick to take back delegated responsibilities? Is she too quick to terminate employees? Yen doesn t appear to have good delegation skills. Delegating must include either training the person with regard to the activities to be accomplished or hiring a person who already has those skills. However, the people who were hired were not provided with the skills or hired with those skills because they were hired quickly and never trained for the positions. In addition, effective communication that causes employees to talk with one another and share problems and ideas is helpful. The timing for the handoff of responsibilities to a general manager was poor because Yen was not sure exactly what the person was to do within the responsibilities of the position. Yen might have been able to retain some of the employees who were fired if there had been an opportunity to train these people to take responsibility. In addition, we don t know whether Yen empowered the employees to do the job they were hired to fill. 4. What outside sources of management assistance might help Diamond Wipes International reach its full potential? One possibility for management assistance could have been a local business incubator that could offer managerial and clerical services to new businesses. Other services that could be offered are networking opportunities/strategic Partner Linkages, and help with management team formation. Other management assistance could be through educational institutions, the Service Corps of Retired Executives (SCORE), small business development centers (SBDCs), management consultants, entrepreneurial networks, and other business and professional services such as professional groups that include trade associations. 211