Scarb eesbm6e ppt_16

CHAPTER 16
Building a New Venture Team
and
Planning for the Next Generation
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Leadership
 The process of influencing and
inspiring others to work to achieve a
common goal and then giving them
the power and the freedom to
achieve it.
 Entrepreneurs must take on many
roles in their companies, but none is
more important than that of leader.
Copyright © 2011 Pearson Education, Inc. Publishing Ch. 16: Building a Team & Succession Planning as Prentice Hall 16 - 2

Business Leaders Are…
 Innovative
 Passionate
 Willing to take risks
 Adaptable

Effective Leaders
 Create a set of values and beliefs for
employees and passionately pursue them.
 Establish a culture of ethics.
 Define and then constantly reinforce
the vision they have for the company.
 Respect and support their employees.
 Set the example for their employees.
 Create a climate of trust in the organization.
 Build credibility with their employees.

Effective Leaders
(continued)
 Focus employees’ efforts on challenging
and driving toward those goals.
 Provide the resources employees need to
achieve their goals.
 Listen to their employees.
 Value the diversity of their workers.
 Celebrate their workers’ successes.
 Are willing to take risks.
 Encourage creativity among their workers.
 Maintain a sense of humor.

Effective Leaders
(continued)
 Create an environment in which people
have the motivation, the training, and the
freedom to achieve the goals they have set.
 Create a work climate that encourages
maximum performance.
 Become a catalyst for change
when change is needed.
 Develop leadership talent.
 Keep their eyes on the horizon.

Three Vital Tasks of a Leader
1. Add the right employees and
constantly improve their skills.
2. Create a culture for
retaining employees.
3. Plan for “passing the torch” to
the next generation of leadership.

Building an
Entrepreneurial Team
 Study: 80% of employees turnover is caused
by bad hiring decisions.
 Leadership IQ study:
 46% of newly hired employees will fail in their
jobs within 18 months.
 19% of newly hired employees will achieve
unequivocal success.
 Study: 34% of hiring managers admit to
making bad hiring decisions because they
were under pressure to fill a job.

FIGURE 16.1 Annual Growth Rate in the U.S. Labor Force Source: U.S. Census Bureau, 2008.
Copyright © 2011 Pearson Education, Inc. Ch. 6: Franchising and the Entrepreneur Publishing as Prentice Hall
16 - 9

How to Hire Winners
 Commit to hire the best talent.
 Elevate recruiting to a strategic position.

Strategic Recruiting
 Look inside the company first.
 Encourage employee referrals.
 Make employment advertisements
stand out.
 Use multiple channels to recruit talent.
 Recruit on campus.

Strategic Recruiting
(continued)
 Get involved in a college internship
program.
 Recruit “retired” workers.
 Consider using offbeat recruiting
techniques.
 Offer what workers want.

How to Hire Winners
(continued)
 Create practical job descriptions and job
specifications.

Conducting a Job Analysis
 Create a job description - a written
statement of the duties, responsibilities,
reporting relationships, working conditions,
and materials and equipment used in a job.
 Handy tool: Dictionary of Occupational Titles
 Create a job specification - written
statement of the qualifications and
characteristics needed for a job, stated in
terms such as education, skills, and
experience.

Sample Job Description from the
Dictionary of Occupational Titles
Worm Picker - gathers worms to be used as fish
bait; walks about grassy areas, such as gardens,
parks, and golf courses and picks up
earthworms (commonly called dew worms and
nightcrawlers). Sprinkles chlorinated water on
lawn to cause worms to come to the surface and
locates worms by use of lantern or flashlight.
Counts worms, sorts them, and packs them into
containers for shipment.
(# 413.687-014 in D.O.T)

How to Hire Winners
(continued)
specifications.
 Plan an effective interview.

Planning an Effective Interview
 Involve others in the interview process.
 Develop a series of core questions and
ask them of every job candidate.
 Ask open-ended questions rather than
questions calling for “yes or no” answers.
 Create hypothetical situations candidates
would encounter on the job and ask how
they would handle them.
 Situational interviews

Planning an Effective Interview
(continued)
 Probe for specific examples in the
candidate’s work history that demonstrate
the necessary traits and characteristics.
 Ask candidates to describe a recent
success and a recent failure and how they
dealt with them.
 Arrange a “non-interview” setting that
allows others to observe the candidate in
an informal setting.

How to Hire Winners
(continued)
specifications.
 Conduct the interview.

Conducting an
Effective Interview
 Break the ice.
 Goal: to diffuse nervous tension.
 Ask questions.
 Puzzle interviews.
 Remember the 25/75 Rule.
 Be respectful and keep it legal!
 Sell the candidate on the company.
Best candidates will have other job offers.
Your job: to convince the best candidates
that your company is a great place to work.

How to Hire Winners
(continued)
specifications.
 Conduct the interview.
 Contact references and conduct a
background check.

Checking References
Checking an applicant’s references is an
important part of protecting a company
against making a “bad hire.”
Is it really necessary? Yes !
According to a CareerBuilder survey, 49%
of all candidates either exaggerate or
falsify information about their previous
employment on their résumés.

Company Culture
 Distinctive, unwritten, informal code
of conduct that governs the behavior,
attitudes, relationships, and style of
an organization.
 “The way we do things around here.”
 In small companies, culture plays as
important a part in gaining a
competitive edge as strategy does.

Characteristics of a
Positive Culture
 Respect for work and life balance
 Sense of purpose
 Sense of fun
 Engagement
 Diversity
 Integrity
 Participative management
 Learning environment

FIGURE 16.2 Composition of U.S. Workforce
Source: Jennifer Cheeseman Day, “Population Profile of the United States,” U.S. Census Bureau,
July 8, 2008, http://www.census.gov/population/www/popprofile/natproj.html.
Copyright © 2011 Pearson Education, Inc. Ch. 16: Building a Team & Succession Planning Publishing as Prentice Hall
16 - 25

Job Design Strategies
 Job simplification - breaks work down into
its simplest form and standardizes each
task.
 Job enlargement (horizontal job loading) -
adds more tasks to a job to broaden its
scope.
 Job rotation - cross-trains workers so they
can move from one job in a company to
others, giving them a greater number and
variety of tasks to perform. Often used with
a skill-based pay system.

(continued)
 Job enrichment (vertical job loading) -
builds motivators into a job by increasing
the planning, decision making, organizing
and controlling functions (which
traditionally were managerial tasks).
 Five core characteristics:
1. Skill variety
2. Task identity
3. Task significance
4. Autonomy
5. Feedback

(continued)
 Flextime - an arrangement under which
employees build their work schedules
around a set of “core hours” - such as
11 a.m. to 2 p.m. - but have flexibility
about when they start and stop work.
 Job sharing - a work arrangement in
which two or more people share a
single full-time job.

(continued)
 Flexplace - a work arrangement in which
employees work at a place other than the
traditional office, such as a satellite
branch closer to their homes or, in some
cases, at home.
 Telecommuting - an arrangement in which
employees have employees working from
their homes use modern communications
equipment to hook up to their workplaces.

Rewards and Compensation
 The key to using rewards to motivate
workers is tailoring them to the
needs and characteristics of
individual workers.
 Money is an effective motivator …
up to a point.
 Pay-for-performance systems
 Profit-sharing plans
 Open book management
 Cafeteria benefit plan

Rewards and Compensation
 Intangible rewards – such as praise,
recognition, celebrations, and others –
can be powerful, yet inexpensive,
motivators.
 Entrepreneurs tend to rely
on non-monetary rewards.

Family Businesses
 Make up 90% of all U.S. businesses.
 Account for 64% of U.S. GDP.
 Employ 62% of private sector work force.
 Comprise 37% of the Fortune 500
companies.
 Created 80% of the U.S. economy’s net
new jobs over the last two decades.

Family Businesses
(continued)
 Unfortunately, only 30% of first-generation
businesses survive into the second
generation.
 Of those that do survive to the second
generation, only 12% make it to the third
generation.
 Only 3% make it to the fourth
generation and beyond.

Why is Management
Succession So Difficult?
 81% of all business founders intend
to pass their companies on to their
children.
 Just 29% of family business owners
have prepared written management
succession plans.

How to Develop a
Management Succession Plan
Step 1. Select the successor.
Step 2. Create a survival kit for the
successor.
Step 3. Groom the successor.
Step 4. Promote an environment of trust
and respect.
Step 5. Cope with the financial realities of
estate and gift taxes.

Coping with Estate Taxes
 Buy/Sell agreement
 Lifetime gifting
 Setting up a trust
 Bypass trust
 Irrevocable life insurance trust
 Irrevocable asset trust
 Grantor Retained Annuity Trust (GRAT)
 Estate freeze
 Family Limited Partnership (FLP)

Exit Strategies
 Entrepreneurs planning to retire often
use two exit strategies:
 Sell to outsiders
 Sell to insiders
Leveraged buyout (LBO)
Employee Stock Ownership Plan (ESOP)

Conclusion
 Leadership is the process of influencing
and inspiring others.
 Leadership shapes company culture.
 A succession plan is a crucial element
in transferring leadership.
 An exit plan allows entrepreneurs to
step down and benefit most
from the sale of the company.

All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher. Printed in the United States of America.

Scarb eesbm6e ppt_16

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