Professional
Management in the
Entrepreneurial
Firm
Part 5 Managing Growth in the
Small Business
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Copyright © 2006 Thomson Business & Professional Publishing.
All rights reserved.
Looking Ahead
After studying 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.
Copyright © 2006 Thomson Business & Professional Publishing. 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
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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
Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.
18–4
Entrepreneurial Leadership
• Leadership Styles
–Coercive leaders demand immediate compliance.
–Authoritative leaders mobilize people toward a
vision.
–Affiliative leaders create emotional bonds.
–Democratic leaders build consensus.
–Pacesetting leaders set high standards and expect
excellence.
–Coaching leaders develop people.
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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
Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.
18–6
Issues Affecting Small Firm Management
Professional
Management
The Manager
as Negotiator
Founders as
Managers
Small Firm
Management
Firm Growth
and
Management
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Managerial
Weakness
Resource
Constraints
18–7
Distinctive Characteristics of
Small Firm Management
• Professional Manager
–A manager who uses systematic, analytical methods
of management
• Limitations of Founders as Managers
–Are not always good organizational members
–Have difficulty fitting into conventional roles
–Have a different orientation from that of professional
managers
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18–8
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
Using plans and budgets; following
policies and procedures.
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18–9
Organizational Stages of Small Business Growth
Exhibit 18.1
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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
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Time spent doing
18–11
The Nature of Managerial Work
Planning
Leading
Managerial
Work
Controlling
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Organizing
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
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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
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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
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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
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18–16
Line-and-Staff Organization
Exhibit 18.2
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18–17
Factors Determining Optimum Span of Control
Fewer Subordinates
Complex work
Inexperienced workers
Superior with limited ability
Greater Number of Subordinates
Simple work
Very experienced workers
Superior with much ability
More Subordinates
Moderately difficult work
Moderately experienced workers
Superior with moderate ability
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18–18
Creating Organizational Structure (cont’d.)
• Understanding Informal Groups
–They are composed of people with something in
common, such as jobs, hobbies, carpools, or
affiliations with civic associations.
–They are an informal leadership hierarchy.
–Groups with goals aligned with those of the
organization can facilitate work performance and
make the workplace more
enjoyable for everyone.
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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
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18–20
Exercising Control
Planning and
Goal Setting
Establishing
Standards
Measuring
Performance
Taking
Corrective
Action
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18–21
Stages of the Control Process
Exhibit 18.3
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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
about developments affecting them.
–Make suggestion boxes available to solicit employees’
ideas.
–Hold staff meetings to discuss
current issues and problems.
–Hold informal meetings with
employees to socialize and talk.
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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
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18–24
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.
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18–25
Outside Management Assistance
Business
Incubators
Other Business
and Professional
Services
Entrepreneurial
Networks
Student
Consulting Teams
Outside
Management
Assistance
Management
Consultants
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Service Corps of
Retired Executives
(SCORE)
Small Business
Development
Centers (SBDCs)
18–26
Services Provided
by Business
Incubators
to New Firms
Exhibit 18.5
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18–27
Reasons Small Firm Managers Shun Outside Advice
1.
“I can solve the problem myself.”
2.
“I don’t want anyone throwing up roadblocks to my plans.”
3.
“Professional advisors should be used only as a last resort.”
4.
“An outsider could never understand my business.”
5.
“High-powered experts wouldn’t be interested in my business.”
6.
“An advisor will raise a lot of issues I don’t have time to bother
with right now.”
7.
“I don’t want to share any information with an outsider.”
8.
“Professional advisors cost too much.”
9.
“Our long-time attorney (or accountant or banker) is a friend and
knows us best. We don’t need anyone else.”
10. “I’m unsure of how relationships with professional advisors work.”
Source: Craig E. Aronoff and John L. Ward, “Why So Few Business Owners Get and
Accept Good Advice,” Small Business Forum, Vol. 14, No. 2 (Fall 1996), pp. 26–37.
Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.
18–28
Key Terms
professional manager
chain of command
negotiation
line-and-staff organization
management functions
line activities
long-range plan (strategic plan)
staff activities
short-range plan
unity of command
budget
span of control
business policies
delegation of authority
procedures
Service Corps of Retired
Executives (SCORE)
standard operating procedure
empowerment
work teams
small business development
centers (SBDCs)
networking
line organization
Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved.
18–29