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
© 2008 Cengage Learning. All rights reserved.
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.
18–16
18-3
Line-and-Staff Organization
© 2008 Cengage Learning. All rights reserved.
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
© 2008 Cengage Learning. All rights reserved.
18–21
18-4
Stages of the Control Process
© 2008 Cengage Learning. All rights reserved.
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,
http://www.aresearchguide.com/3tips.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
© 2008 Cengage Learning. All rights reserved.
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