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 - achieving your stated goals

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

Income 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 Ability

Toughness

Ability to Take Action

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Six Styles of Entrepreneurial Management

Classic

Coordinator

Craftsman

Entrepreneur + Employee Team

Small Partnership

Big-Team Venture

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Negotiation: One of Four Possible Outcomes

ose- ose

Win- ose

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

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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 ± ³Work 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 Conflict

Task Overload

Role Ambiguity

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Preventive Stress Management
liminate sources Modify sources of stress

STR SS

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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