Chapter 18 Revised

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.
Entrepreneurial 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
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Entrepreneurial 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
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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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Entrepreneurial Leadership (contd.)

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
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Organizational Stages of Small Business Growth
Exhibit 18.1
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 1810
Managing Versus Doing

STAGE 1
One-Person Operation
STAGE 2
Player-Coach
STAGE 3
Intermediate Supervision
STAGE 4
Formal Organization
Time spent managing
Time spent doing
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The Nature of Managerial Work
Planning
Leading
Managerial Work Controlling Organizing
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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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Planning Activities: Types of Plans

Type of Plan
Long-range plan (strategic plan) Short-range plan Budget Business policies Procedures Standard operating procedures
Purpose
A firms overall plan for the future A plan that governs a firms operations for one year or less A document that expresses future plans in monetary terms Basic statements that provide guidance for managerial decision making Specific work methods to be followed in business activities An established method of conducting a business activity
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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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Line-and-Staff Organization
Exhibit 18.2
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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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
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Exercising Control
Planning and Goal Setting
Establishing Standards
Measuring Performance Taking Corrective Action

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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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.
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Services Provided by Business Incubators to New Firms
Exhibit 18.5
Reasons Small Firm Managers Shun Outside Advice

1. 2. 3. 4. 5. 6. 7. 8. 9. I can solve the problem myself. I dont want anyone throwing up roadblocks to my plans. Professional advisors should be used only as a last resort. An outsider could never understand my business. High-powered experts wouldnt be interested in my business. An advisor will raise a lot of issues I dont have time to bother with right now. I dont want to share any information with an outsider. Professional advisors cost too much. Our long-time attorney (or accountant or banker) is a friend and knows us best. We dont need anyone else.
10. Im 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. 2637.
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Chapter 18 Revised

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Professional Management in the Entrepreneurial Firm

Part 5 Managing Growth in the Small Business

Leadership Qualities of Founders

Entrepreneurial Leadership (contd.)

Entrepreneurial Leadership (contd.)

Organizational Stages of Small Business Growth

Managing Versus Doing

Time spent managing

Time spent doing

The Nature of Managerial Work

Managerial Work Controlling Organizing

Planning Activities: Types of Plans

Creating an Organizational Structure

Factors Determining Optimum Span of Control

Greater Number of Subordinates

Measuring Performance Taking Corrective Action

Personal Time Management

Time Savers for Busy Managers

Services Provided by Business Incubators to New Firms

Reasons Small Firm Managers Shun Outside Advice

10. Im unsure of how relationships with professional advisors work.

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