Chapter Sixteen

Professional Small
Business
Management
 Learning Objectives

• Describe the functions and activities

involved in managing a small business
• Explain the stages of small business
growth and their consequences for
managing your business
• Discuss the significance of employee
leadership and motivation to small
business

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 Learning Objectives (continued)

• Apply the foundations of Total Quality

Management to running a small
business
• Discuss the special management
resources of time and stress
management

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 The Four Functions of Management

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 Henry Mintzberg
Important Skills of a Manager
• Develop relationships with peers
• Carry out negotiations
• Motivate subordinates
• Resolve conflicts
• Establish information networks and then
disseminate information
• Make decisions in conditions of extreme ambiguity
in allocating resources
• Most important, a manager must be willing to
continually learn on the job

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 Using Resources
Efficiently & Effectively

Efficiently
Efficiently -- achieving
achieving your
your stated
stated goals
goals

Effectively
Effectively -- accomplishing
accomplishing goals
goals and
and
tasks
tasks while
while making
making the
the best
best use
use of
of
resources
resources required
required

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Stages of Business Growth
 Transition to Professional
Management: Complication Factors
• Highly centralized decision-making system in which
few or none of the business decisions are made by
employees
• Overdependence on one or two key individuals,
with little delegation
• Entrepreneur’s inadequate repertoire of managerial
skills and training in all areas of the business
• Paternalistic atmosphere within the company that
leads to employees’ reluctance to act without
clearance from the entrepreneur

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 Transition to Professional
Management:
Achieving Professional Standards

Automated

Competitive

Resourceful

Planned

Experienced

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 The Next Step: Exit Strategy

Sell Merge

Close

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 Exit Options

• Sell to a financial buyer

• Sell to a strategic buyer
• Sell to a key employee or group of key
employees
• Sell to all employees via an employee stock
ownership plan (ESOP)
• Take the company public
• Create a family succession
• Undertake a planned liquidation

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 Business Valuation:
Three Chief Approaches

Market Approach

Asset-Based
Income Approach
Approach

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 Leadership in Action
• Leadership abilities are crucial for small
business owners because they work so closely
with people – employees, vendors, and
customers
• Leadership - process of directing and
influencing team members – along with an
amount of planning, directing, and controlling
• Credibility – DWWSWWD (Do What We Say
We Will Do)

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 Leadership Attributes

Vision Communication Integrity Trust

Commitment Creative Toughness Ability to

Ability Take Action

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 Six Styles of
Entrepreneurial Management

Classic
Coordinator Craftsman

Entrepreneur + Small Big-Team

Employee Team Partnership Venture

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 Negotiation:
One of Four Possible Outcomes

Lose-Lose

Win-Lose Win-Win

No Outcome

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 Art of Negotiation

• Stay rationally focused on the issue being

negotiated
• Exhaustive preparation is more important
than aggressive argument
• Think through your alternatives
• Spend less time talking and more time
listening and asking good questions
• Let the other side make the first offer
• Some gurus advocate a bit of play-acting

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 Delegation

• Allows manager time to concentrate on

more important matters
• Empowers employees by increasing
involvement in their work
• Enables manager to maximize the
efforts and talents of everyone in the
company

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 Motivating Employees

Motivation – Forces that act on or within a person that

cause the person to behave in a specific manner

Motivation - The reason an individual takes an action

in satisfying some need

Motivation - Key to motivating employees is to know what

is important to them

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 Motivation Theories:
Maslow’s Hierarchy of Needs
• Maslow stated that people have in common a
set of universal needs occurring in order of
importance (lowest to highest)
– Physiological (food, water, air, sleep, sex)
– Safety & Security
– Social
– Esteem
– Self-actualization

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 Motivation Theories:
Herzberg’s Motivation-Hygiene Theory
• Herzberg’s theory recognizes that factors
producing job satisfaction are not the same
as factors producing job dissatisfaction
• Herzberg called things that cause people to
feel good about their job motivations and
things that cause people to feel bad about
their job hygiene factors
• Eliminating hygiene factors on the job may
create contentment among employees but not
necessarily motive them to excel

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 Motivation Myths

• All employees need external motivation

• Some employees don’t need any motivation
• Attempts to motivate always increase performance
and productivity
• Money always motivates people
• Intrinsic rewards provide more motivation than money
• Fear is the best motivator
• Satisfied workers are always productive
• This generation of workers is less motivated than the
last

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 Can You Motivate?

• Do you know what motivates each of

the people who report to you?
• To what extent are they motivated by
money?
• To what extent are they motivated by
recognition?
• To what extent are they motivated by
opportunity for growth?

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 Can You Motivate? (continued)

• Have you done anything in the last week that

was intended to motivate someone else?
• Have you done anything lately that would
undermine an employee’s motivation – such
as embarrassing or criticizing an employee in
front of others?
• Have you praised anyone today?

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Job Satisfiers and Dissatisfiers

Source: Copyright 1987 by the Harvard Business School Publishing Corporation.

Job Satisfiers and Dissatisfiers
(continued)

Source: Copyright 1987 by the Harvard Business School Publishing Corporation.

Job Satisfiers and Dissatisfiers
(continued)

Source: Copyright 1987 by the Harvard Business School Publishing Corporation.

 Total Quality Small Business
Management
• TQM - philosophy of management focusing
on problem solving and control
• TQM - based on the writings of W. Edwards
Deming, who helped ingrain and teach the
concept of quality to Japanese manufacturing
mangers after World War II
• It was not intended to be a panacea or a
cure-all

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 Deming’s 14 Points of TQM

1. Constant purpose toward improvement

2. Adopt the new philosophy
3. Stop depending on mass inspection to
ensure quality
4. Stop awarding business on the basis
of price tag alone
5. Constantly improve the system of
production and service

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 Deming’s 14 Points of TQM (continued)

6. Train everyone
7. Institute leadership
8. Drive out fear
9. Break down barriers between
departments
10. Eliminate slogans, exhortations, and
targets that demand zero defects

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 Deming’s 14 Points of TQM (continued)

11. Eliminate numerical quotas

12. Remove barriers to pride in
workmanship
13. Start a vigorous program of education
and self-improvement
14. Put everyone to work on the
transformation

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 Managers Must Understanding
The Basic Principles of TQM
• Strive to do work right the first time
• Be customer centered
• Know that continuous improvement is a
way of life
• Build teamwork and empowerment

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 Special Management Concerns:
Time Management
• Time – No one seems to have enough of it,
yet everyone has the same amount – 24
hours per day, 168 hours per week, 8,760
hours per year.
• Time – You can’t store it, rent it, hoard it, sell
it, or buy any more of it – so you had better
use it wisely.
• To be an effective time manager, you must
prioritize what needs to be accomplished in
any given day.

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 Indicators of Possible Time
Management Problems
• Frequently late for or forget meetings and
appointments
• Consistently behind in responsibilities
• Don’t have enough time for basics – eating,
sleeping, family
• Constantly working and still miss deadlines
• Often fatigued, both mentally and physically

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 Tips to Determine Effective Use of
Your Time
• Make a to-do list
• Eliminate time wasters
• Remember Parkinson’s law – “Work
expands to fill the time available”
• Know when you are most productive

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 Stress Management

• Stress – emotional states that occur in

response to demands, which may come
from internal or external sources
• Distress – the negative consequences
and components of stress
– For a situation to create distress for a
person, two conditions are necessary – its
outcome must be uncertain, and it must be
a matter of importance to the person

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 Three Sources of Stress for Small
Business Owners

Role
RoleConflict
Conflict

Task
TaskOverload
Overload

Role
RoleAmbiguity
Ambiguity

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 Preventive Stress Management

Eliminate sources
Modify sources of stress
STRESS
of stress

Reduce sources
of stress

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 Relaxation Techniques
Five-Step Relaxation Exercise
• Sit in a comfortable position in a quiet
location. Loosen any tight clothing
• Close your eyes and assume a passive,
peaceful attitude
• Relax your muscles as much as possible
• Slowly breathe through your nose and
develop a quiet rhythm of breathing
• Continue relaxing muscles and
concentrate on breathing for 10 to 20
minutes. Open your eyes occasionally to
check the time

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 Social Support Systems
• Working in an environment that provides
social and emotional support can help us
deal with distress
• Relationships within the workplace,
family, church, and clubs provide
emotional backing,
information, modeling,
and feedback

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 Physical Exercise

• A person’s physical condition

affects his or her response in
stressful situations
• Aerobically fit people have more
efficient cardiovascular systems
and better nervous system
interaction, which allows them to
deal with and recover from stressful
events more quickly
• Stress can increase performance
and quality of life if it is controlled

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