Professional Management and The Small Business

PART 5
MANAGING GROWTH
IN THE SMALL BUSINESS
Chapter
19
Professional
Management and
the Small Business
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The University
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2012
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use.
After studying this chapter, you should be

able to
1. Discuss the entrepreneurs 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.
2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
iStockphoto.com/Dan Bachman
5. Explain the various types of outside

management assistance.
192
Small Business Leadership

What is Leadership?
Involves pointing the way: creating and
communicating the entrepreneurs 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
193
Small Business Leadership (contd)

What Makes an Effective Leader?
One who is focused intently on attaining the firms
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.
194

Leadership Styles
Visionary leaders mobilize people toward a vision.
Coaching leaders develop people, establishing a
relationship and trust.

Affiliative leaders create emotional bonds.
Democratic leaders build consensus through
participation.
Pacesetting leaders set high standards and expect
excellence.
Commanding leaders demand immediate compliance.
195

Leaders Shape the Culture of the Organization
Empowerment
Giving employees authority to make decisions and take

actions on their own
Work teams
Groups of self-managed employees with the freedom to

function without close supervision
Working environment
Workers are affected by their surrounding
Good Hiring
Employees who fit the personality of the firm
196
Distinctive Characteristics
of Small Firm Management
Professional-Level
Professional-Level
Management
Management
Founders
Foundersas
as
Managers
Managers
Resource
Resource
Constraints
Constraints
Managerial
Managerial
Weakness
Weakness
Management
Management
of
of
Small
SmallFirms
Firms
Firm
FirmGrowth
Growthand
and
Managerial
Managerial
Practices
Practices
197
EXHIBIT 19.1
Organizational Stages of Small Business Growth
198
Stages in Firm Growth and

Management
Growth Stage
Entrepreneurs 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.
199
Managing Versus Doing

STAGE 1
STAGE 2
STAGE 3
STAGE 4
One-Person
Operation
Player-Coach
Intermediate
Supervision
Formal
Organization
Time spent managing
Time spent doing
2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1910
Managerial Responsibilities
of Entrepreneurs
Creating
Creating an
an
Organizational
Organizational
Structure
Structure
Planning
Planning
Activities
Activities
Entrepreneurial
Entrepreneurial
Management
Management
Leading
Leading and
and
Delegating
Delegating
Controlling
Controlling
Operations
Operations
1911
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
1912
Planning Activities: Types of Plans

Type of Plan
Purpose
Long-range plan
(strategic plan)
A firms overall plan for the future
Short-range plan
A plan that governs a firms 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
1913
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
1914
Creating Structure (contd)

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
1915
EXHIBIT 19.2
Line-and-Staff Organization
1916
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
1917
Creating Structure (contd)

Understanding Informal Groups
Have something in common.
Have an informal leadership hierarchy.
Are beneficial if group goals are aligned with
organizational goals.
1918
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 subordinates skills
Improves two-way communications
1919
Controlling Operations
Planning
Planningand
and
Goal
Setting
Goal Setting
Establishing
Establishing
standards
standards
Measuring
Measuring
Performance
Performance
Taking
TakingCorrective
Corrective
Action
Action
1920
EXHIBIT 19.3
Stages of the Control Process
1921
Communicating
Stimulating Two-Way Communication
Periodic performance review sessions for feedback.
Bulletin boards to keep employees informed.
Blogs and wikis for internal communication
Suggestion boxes to solicit employees ideas.
Staff meetings to discuss issues and problems.
Informal meetings with employees
to socialize and talk.
1922
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.
1923
EXHIBIT 19.4
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.
1924
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
Dont avoid unpleasant or difficult tasks
Limit conference and meeting times
1925
Outside Management Assistance

The Need for Outside Assistance
To supplement entrepreneurs 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.
1926
Outside Management Assistance

Business
Business
Incubators
Incubators
Other
OtherBusiness
Business
and
andProfessional
Professional
Services
Services
Entrepreneurial
Entrepreneurial
Networks
Networks
Management
Management
Consultants
Consultants
Student
Student
Consulting
ConsultingTeams
Teams
Source
Sourceof
of
Outside
Outside
Management
Management
Assistance
Assistance
Service
ServiceCorps
Corpsof
of
Retired
RetiredExecutives
Executives
(SCORE)
(SCORE)
Small
SmallBusiness
Business
Development
Development
Centers
Centers(SBDCs)
(SBDCs)
1927
EXHIBIT 19.5
Services Provided by Business Incubators to New Firms
Business
Business
Incubator
Incubator
1928
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
span of control
delegation of authority
negotiation
Service Corps of Retired
Executives (SCORE)
small business
development centers
(SBDCs)
networking
1929

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PART 5

After studying this chapter, you should be

5. Explain the various types of outside

Small Business Leadership

communicating the entrepreneurs vision of the firm.

Leadership Qualities of Founders

Small Business Leadership (contd)

with employees based on loyalty and respect.

understanding of how the firm operates (e.g., its

Small Business Leadership (contd)

relationship and trust.

Small Business Leadership (contd)

Giving employees authority to make decisions and take

Groups of self-managed employees with the freedom to

Workers are affected by their surrounding

Employees who fit the personality of the firm

Organizational Stages of Small Business Growth

Stages in Firm Growth and

Stage 1. One-Person Operation

Doing all of the work. Making

Continuing to do some of the

Rising above hands-on

Stage 4. Formal Organization

Using plans and budgets;

Managing Versus Doing

Time spent managing

Time spent doing

Planning Activities: Types of Plans

A firms overall plan for the future

A plan that governs a firms operations

A document that expresses future plans

Basic statements that provide guidance

Specific work methods to be followed in

An established method of conducting a

Creating an Organizational Structure

Creating Structure (contd)

Line and Staff Organization

specialists who assist management

Activities contributing directly to the primary objectives of the

Activities that support line activities

Factors Determining Optimum Span of

Creating Structure (contd)

Stages of the Control Process

to socialize and talk.

in needs, goals, or ideas.

Personal Time Management

Time Savers for Busy Managers

Analyze how time is normally spent

Eliminate practices that waste time

Outside Management Assistance

viewpoints, insights and ideas.

and solutions beyond the experience of the

Outside Management Assistance

Services Provided by Business Incubators to New Firms

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