Small Business Management

1. PowerPoint Presentation by Charlie Cook
The University of West Alabama
Longenecker • Moore • Petty • Palich
© 2008 Cengage Learning.
All rights reserved.
CHAPTER 18
Professional
Management in
the
Entrepreneurial
Firm
Managing Growth in the Small Business
Part 5

2. Looking AHEAD
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.
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After you have read this chapter, you should be able to:

3. 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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4. 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.
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5. 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.
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6. 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.
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7. Steps to a Positive Attitude
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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.

8. Distinctive Characteristics of
Small Firm Management
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Professional-Level
Management
Managerial
Weakness
Management
of
Small Firms
Resource
Constraints
Firm Growth and
Managerial
Practices
Founders as
Managers

9. Organizational Stages of Small Business Growth
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10. Stages in Firm Growth and
Management
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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.

11. Managing Versus Doing
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STAGE 1 STAGE 2 STAGE 3 STAGE 4
One-Person
Operation
Player-Coach Intermediate
Supervision
Formal
Organization
Time spent managing Time spent doing

12. Managerial Tasks of
Entrepreneurs
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Creating an
Organizational
Structure
Controlling
Operations
Planning
Activities
Leading and
Delegating
Entrepreneurial
Management

13. 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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14. Planning Activities: Types of
Plans
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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

15. 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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16. 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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17. Line-and-Staff Organization
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18. Factors Determining Optimum Span of Control
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Many Subordinates
Simple work
Very experienced workers
Superior with much ability
Few Subordinates
Complex work
Inexperienced workers
Superior with limited ability
More Subordinates
Moderately difficult work
Moderately experienced workers
Superior with moderate ability

19. 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.
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20. 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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21. Controlling Operations
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Measuring
Performance
Establishing
standards
Planning and
Goal Setting
Taking Corrective
Action

22. Stages of the Control Process
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23. 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.
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24. 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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25. Presentation Tips
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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.

26. 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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27. 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.
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28. Outside Management
Assistance
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Business
Incubators
Student
Consulting
Teams
Service Corps of
Retired Executives
(SCORE)
Small Business
Development
Centers (SBDCs)
Management
Consultants
Entrepreneurial
Networks
Other Business
and Professional
Services
Source of
Outside
Management
Assistance

29. Services Provided by Business Incubators to New Firms
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30. 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
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