Part 5
Managing Growth in the Small Business
CHAPTER 18
Professional Management in the Entrepreneurial Firm
Longenecker • Moore • Petty • Palich
© 2008 Cengage Learning. All rights reserved.
PowerPoint Presentation by Charlie Cook The University of West Alabama
Looking AHEAD After you have read this chapter, you should be able to:
1. Discuss the entrepreneur’s leadership role. 2. Explain the distinctive features of small firm management.
3. Identify the managerial tasks of entrepreneurs. 4. Describe the problem of time pressure and suggest solutions. 5. Explain the various types of outside management assistance.
© 2008 Cengage Learning. All rights reserved.
18–2
Entrepreneurial Leadership • What is Leadership? ➢ Involves pointing the way: creating and
communicating the entrepreneur’s vision of the firm ➢ Varies in a business as it grows larger and more
mature.
• Leadership Qualities of Founders ➢ A tolerance for ambiguity ➢ A capacity for adaptation
© 2008 Cengage Learning. All rights reserved.
18–3
Entrepreneurial Leadership (cont’d) • What Makes an Effective Leader? ➢ One who is focused intently on attaining the firm’s
business goals. ➢ One who creates a significant personal relationship
with employees based on loyalty and respect. ➢ One who directly influences employees’
understanding of how the firm operates (e.g., its ethics). ➢ One who makes the firm attractive to new
employees.
© 2008 Cengage Learning. All rights reserved.
18–4
Entrepreneurial Leadership (cont’d) • Leadership Styles 1. Coercive leaders demand immediate compliance. 2. Authoritative leaders mobilize people toward a
vision. 3. Affiliative leaders create emotional bonds. 4. Democratic leaders build consensus. 5. Pacesetting leaders set high standards and expect
excellence. 6. Coaching leaders develop people.
© 2008 Cengage Learning. All rights reserved.
18–5
Entrepreneurial Leadership (cont’d) • Leadership That Builds Enthusiasm ➢ Empowerment ❖ Giving
employees authority to make decisions or take actions on their own ➢ Work teams ❖ Groups of self-managed employees with the freedom to function without close supervision ➢ Benefits ❖ Workers are more satisfied with their working environment. ❖ Productivity and profitability are enhanced.
© 2008 Cengage Learning. All rights reserved.
18–6
18-1
Steps to a Positive Attitude
1. Recognize accomplishments at the end of each day.
2. At the close of business, take time to set goals for the next day. 3. Take care of yourself.
4. Spend time with friends who are upbeat. 5. Imagine your way to success. 6. Use thoughts of failure as a signal to turn your attention back to achievement.
Source: Adapted from Romanus Wolter, “A Brand New Day,” Entrepreneur, Vol. 33, No. 3 (March 2005), pp. 134–135. © 2008 Cengage Learning. All rights reserved.
18–7
Distinctive Characteristics of Small Firm Management Professional-Level Management
Founders as Managers
Resource Constraints
© 2008 Cengage Learning. All rights reserved.
Management of Small Firms
Managerial Weakness
Firm Growth and Managerial Practices
18–8
18-2
Organizational Stages of Small Business Growth
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18–9
Stages in Firm Growth and Management Growth Stage
Entrepreneur’s Workload
Stage 1. One-Person Operation
Doing all of the work. Making contact with customers.
Stage 2. Player-Coach
Continuing to do some of the basic work, although learning to hire and supervise.
Stage 3. Intermediate Supervision Rising above hands-on management; working through intermediate managers. Stage 4. Formal Organization
© 2008 Cengage Learning. All rights reserved.
Using plans and budgets; following policies and procedures.
18–10
Managing Versus Doing STAGE 1
STAGE 2
STAGE 3
STAGE 4
One-Person Operation
Player-Coach
Intermediate Supervision
Formal Organization
Time spent managing
© 2008 Cengage Learning. All rights reserved.
Time spent doing
18–11
Managerial Tasks of Entrepreneurs
Creating an Organizational Structure
Planning Activities
Entrepreneurial Management
Leading and Delegating
© 2008 Cengage Learning. All rights reserved.
Controlling Operations
18–12
Planning Activities • The Benefits of Formal Planning ➢ Improved productivity
➢ Better focus on goal attainment ➢ Increased credibility with stakeholders
• Planning Time ➢ “Tyranny of the urgent” ➢ Planning requires discipline ➢ Planning should not be postponed
• Employee Participation ➢ Employees are an excellent planning resource
© 2008 Cengage Learning. All rights reserved.
18–13
Planning Activities: Types of Plans Type of Plan
Purpose
Long-range plan (strategic plan)
A firm’s overall plan for the future
Short-range plan
A plan that governs a firm’s operations for one year or less
Budget
A document that expresses future plans in monetary terms
Business policies
Basic statements that provide guidance for managerial decision making
Procedures
Specific work methods to be followed in business activities
Standard operating procedures
An established method of conducting a business activity
© 2008 Cengage Learning. All rights reserved.
18–14
Creating an Organizational Structure • The Unplanned Structure ➢Structure evolves as the firm evolves.
➢Growth creates the need for structural change.
• Chain of Command ➢The official, vertical channel of communication in an
organization ➢A channel for two-way communication
• Span of Control ➢The number of subordinates supervised by one
manager
© 2008 Cengage Learning. All rights reserved.
18–15
Creating Organizational Structure (cont’d) • Line Organization ➢A simple organization in which each person reports to
one supervisor
• Line and Staff Organization ➢An organizational structure that includes staff
specialists who assist management ➢Line activities ❖ Activities contributing directly to the primary objectives of the firm ➢Staff activities ❖ Activities that support line activities
© 2008 Cengage Learning. All rights reserved.
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18-3
Line-and-Staff Organization
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18–17
Factors Determining Optimum Span of Control Few Subordinates Complex work Inexperienced workers Superior with limited ability
More Subordinates Moderately difficult work Moderately experienced workers Superior with moderate ability
Many Subordinates Simple work Very experienced workers Superior with much ability
© 2008 Cengage Learning. All rights reserved.
18–18
Creating Organizational Structure (cont’d) • Understanding Informal Groups ➢ Have something in common. ➢ Have an informal leadership hierarchy. ➢ Are beneficial if group goals are aligned with
organizational goals.
© 2008 Cengage Learning. All rights reserved.
18–19
Delegating Authority • Delegation of Authority ➢Granting to a subordinate the right to act or make
decisions
• Benefits of delegation ➢Frees up superior to perform more important tasks ➢Develops subordinate’s skills ➢Improves two-way communications
© 2008 Cengage Learning. All rights reserved.
18–20
Controlling Operations Planning and Goal Setting
Establishing standards
Measuring Performance
Taking Corrective Action
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18–21
18-4
Stages of the Control Process
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18–22
Communicating • Stimulating Two-Way Communication ➢Conduct periodic performance review sessions to get
employee feedback. ➢Use bulletin boards to keep employees informed. ➢Use suggestion boxes to solicit employees’ ideas.
➢Hold staff meetings to discuss issues and problems. ➢Hold informal meetings with
employees to socialize and talk.
© 2008 Cengage Learning. All rights reserved.
18–23
Negotiating • Negotiation ➢Two-way communication used to resolve differences
in needs, goals, or ideas. ➢Win-lose negotiations ❖ One party must win and the other party must lose. ➢Win-win negotiations ❖ Both parties find a solution that satisfies both parties’ basic interests. ❖ End result of negotiations promotes long-term continuing relationships.
© 2008 Cengage Learning. All rights reserved.
18–24
18-5
Presentation Tips
1. Do your homework.
2. Know your material “spot on.” 3. Be interactive. 4. Make vivid mental connections in the minds of listeners. 5. Emphasize relevance.
6. Be dynamic, but be yourself. 7. Use PowerPoint with care. 8. Dress appropriately. 9. Avoid food and drink that make speaking difficult for you. 10. Practice, practice, practice. Sources: Adapted from Naomi Rockler-Gladen, “Fear of Public Speaking,” January 12, 2007, http://collegeuniversity.suite101.com/ article.cfm/fear_of_public_speaking, accessed March 15, 2007; “Presentation Tips for Public Speaking,” A Research Guide for Students, https://www.expertsminds.com/assignment-help/management-6.html, accessed March 15, 2007; and Kimberly L. McCall, “All That Jazz,” Entrepreneur, Vol. 34, No. 1 (March 2006), p. 36. © 2008 Cengage Learning. All rights reserved.
18–25
Personal Time Management • The Problem of Time Pressure ➢ Many owner-managers work 60-80 hours per week.
➢ Effect of overwork is inefficient work performance.
• Time Savers for Busy Managers ➢ Effective use of time (time management) ❖ Analyze
how time is normally spent ❖ Eliminate practices that waste time ❖ Carefully plan available time ❖ Use a daily planner to prioritize activities ❖ Don’t avoid unpleasant or difficult tasks ❖ Limit conference and meeting times © 2008 Cengage Learning. All rights reserved.
18–26
Outside Management Assistance • The Need for Outside Assistance ➢ To supplement entrepreneur’s personal knowledge
and experience. ➢ To provide opportunities to share ideas with peers. ➢ To reduce feelings of loneliness and working in
isolation. ➢ To have access to outsiders’ detached, objective
viewpoints, insights and ideas. ➢ To gain fresh knowledge of methods, approaches,
and solutions beyond the experience of the entrepreneur. © 2008 Cengage Learning. All rights reserved.
18–27
Outside Management Assistance Business Incubators Student Consulting Teams
Other Business and Professional Services
Entrepreneurial Networks
Management Consultants
© 2008 Cengage Learning. All rights reserved.
Source of Outside Management Assistance
Service Corps of Retired Executives (SCORE)
Small Business Development Centers (SBDCs)
18–28
18-6
Services Provided by Business Incubators to New Firms
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18–29
Key TERMS • • • •
• • • • •
empowerment work teams professional manager long-range plan (strategic plan) short-range plan budget chain of command line organization line-and-staff organization
© 2008 Cengage Learning. All rights reserved.
• • • •
span of control delegation of authority negotiation Service Corps of Retired Executives (SCORE) • small business development centers (SBDCs) • networking
18–30
