13 ENTREPRENEURSHIP: Starting and Operating a Small Business, 3/e Steve Mariotti and Caroline Glackin MANAGEMENT, LEADERSHIP, & ETHICAL PRACTICES UNIT 4 OPERATING A SMALL BUSINESS EFFECTIVELY Class Name Instructor Name Date, Semester

1. Identify leadership styles. 2. Describe the 10 basic tasks handled by managers. 3. Develop your organizational culture. 4. Determine your organizational structure. 5. Understand the functions of human resources management. 6. Pursue ethical leadership to build an ethical organization. 7. Incorporate social responsibility into your company. Learning Objectives After this lecture, you should be able to complete the following Learning Outcomes

13 The Entrepreneur as Leader Leader – a person who gets things done through influence, by guiding or inspiring others to voluntarily participate in a cause or project. Leadership – comes from self-esteem applied to knowledge, skills, and abilities.

13 Leadership Styles That Work Coercive—pressure/commanding Pro: effective in disasters or with employees who need forceful management Con: hurts employee morale, creativity Authoritative—leader sets goal, leads team – “come with me” Pro: works well if leader is expert Con: not good if leader is not an expert & is trying to lead people who are Affiliative—puts people first Pro: gets employees on board Con: can fail to give adequate direction

13 Leadership Styles (cont.) Democratic—gives employees strong voice in company Pro: builds morale Con: can result in endless meetings & stagnation Pacesetting—sets high standards, challenges employees to meet them Pro: great when employees are self motivated Con: can overwhelm less committed employees Coaching—focuses on helping employees learn & grow Pro: good with new employees Con: can create resistance among long-term employees

13 How Entrepreneurs Pay Themselves  Commission (a percentage of every sale). Treated as a variable cost (varies with sales).  Salary (fixed amount of money paid once a week or once a month/year). Treated as a fixed operating cost (does not vary with sales).  Wage (fixed amount per hour). Treated as a cost of goods sold (COGS).  Dividend—share of company profits. Deducted from net profit (after taxes). This will affect company financial performance. Options include:

13 Manage Your Time Wisely Prioritize. Set realistic goals. Don’t spend too much time on . Avoid letting your attention get caught up in portable electronic devices, such as blackberries and iPhones. Schedule sit-down meetings only when they will be more efficient than others, less time-consuming, methods of communication. Only accept meeting invitations where your presence is required in order for progress to occur. Delegate responsibility and authority, and trust your team to do the right things and do them correctly. Remember to allow yourself downtime, play-time, and creative thinking time.

13 Sample Pert Chart Exhibit 13-1 Sample Pert Chart

13 Business Management: Building a Team What Do Manages Do? 1.Planning (Strategic plans, Tactical Plans, Operational Plans) 2.Organizing 3.Leading 4.Directing 5.Staffing 6.Controlling 7.Coordinating 8.Representing 9.Innovating 10.Motivating

13 Adding Employees to Your Business Recruitment – the process of finding and hiring employees. Possible ways to bring good employees into the business: Bring them in as partners. Hire experts to accomplish specific tasks on a contractual or hourly basis. Hire someone as a part-time or full-time regular employee.

13 Recruiting Process Defining the job Posting & advertising the job Screening resumes and/or applications Assessing skills Interview candidates Check references Negotiating compensation Hiring Orientation

13 Recruitment Process (cont.) Job Profile – the identification of the knowledge, skills, and abilities required to perform the specific tasks of an employment position. Position Description – the knowledge, skills, and abilities from the job profile, as well as the required reporting and working relationships, and what the position’s goals and objectives will be. Interview Guide – a document to assist in question development regarding an individual’s knowledge, skills, abilities, and interests. Behavioral Interview – a dialogue designed to determine the fit of a prospective employee with the requirements of a position, using prior-experience examples. Job Offer Letter – a formal, written invitation extended by an employer to a candidate selected for hiring that states the basic employment terms; starting date, position, and salary.

13 Growing Your Team Campus Recruiting Executive or Retained Searches

13 Creating and Managing Organizational Culture The culture of an organization is the shared beliefs, values, and attitudes among employees – also referred to as “how things are done around here.” The culture that you create for your business should be a strategically developed translation of your vision and mission into norms, values, and of work environment you want the company to have.

13 Determining Organizational Structure Line Organization – a structure where each person reports to a single supervisor. Line and Staff Organization – a structure that includes the line organization, plus staff specialists (such as lawyers) who assist management. Span of Control – the number of direct reports to a manager or supervisor. Chain of Command – hierarchy of communication and authority.

13 Getting the Best Out of Your Employees Guidelines to be a good employer: -Get the right people. -Provide a competitive salary. -Share your vision for the company and create an environment that encourages buy-in. -Give employees incentives to work effectively. -Empower employees by giving them control over their work. -Provide career opportunities and training and development. -Communicate expectations and goals clearly and provide ongoing feedback and recognition.

13 Human Resources Fundamentals Human Resources – the segment of a business that hires, trains, and develops a company’s employees. HR Department Areas: -Compensation and payroll. -Benefits. -Organizational development. -Education and development.

13 Human Resources Fundamentals (Cont.) Labor Law and HR Compliance: -Payroll Tax - a given percentage of money that employers deduct from their employees’ pay and forward to the designated governmental entity. -Equal Pa Act of 1963 (employers pay men & women the same amount for substantially equal work). -Fair Labor Standards Act- In 1938 requires that employees receive at least the federally mandated minimum wage. -Title VII of the Civil Rights Act of 1964 – prohibits discrimination against applicants and employees on the basis of race or color, religion, sex, pregnancy, or national origin.

13 Human Resources Fundamentals (cont.) -Age Discrimination in Employment Act (ADEA) – prohibits discrimination against and harassment of employees aged 40 or older. -Americans with Disabilities Act (ADA) – prohibits employers from discrimination against a person who has a disability, or who is perceived to have a disability, in any aspect of employment. -Immigration Reform and Control Act (IRCA) of 1986 – prohibits employers from discriminating against applicants or employees on the basis of their citizenship or national origin.

13 Performance Management Performance Appraisal – the formal process used to evaluate and support employee performance. -Performance appraisal is an opportunity to communicate goals, establish training and development needs, and provide feedback to increase productivity and employee retention.

13 Firing and Laying Off Employees Sometimes you hire someone and it just does not work out, even after repeated attempts to fix the problem. -Protect your company from wrongful-termination claims by conducting regular employee- performance reviews. -If an employee is violating rules, give notification in writing (and keep a copy for your records) and work on corrections as the problem arises, rather than waiting for performance review.

13 Firing and Laying Off Employees (cont.) Sometimes you may have to lay off employees. -To minimize complications, if you can do so, offer employee severance. Severance – pay that is continued for a limited time upon separation from a company.

13 Ethical Leadership and Ethical Organizations Ethics – a system of moral conduct and judgment that helps determine right and wrong. An Ethical Perspective: -For a business, ethics are individual and organizational moral principles to actions and issues within the business context. -There is sometimes a gray area between right and wrong that cannot be clarified by relying on individuals to simply “know what’s right.”

13 Establishing Ethical Standards Code of Ethics – a statement of the values of a company. Code of Conduct – a set of official standards of employee behavior for a company. Code of Ethics and Business Conduct – a combination of a written statement of values with official standards of employee behavior. Ethical Relativism- the belief that ethical standards are open to interpretation. Ethical dilemma – a circumstance in which there is a conflict of ethical values, which thus muddies decision making.

13 Corporate Ethical Scandals In 2002 these companies were found to have published false financial statements, inflating their earnings & misleading investors. Enron WorldCom-MCI Tyco Global Crossing Stock investors and employees who had put retirement funds in company stock lost millions. These scandals were failures of corporate governance: the companies did not have rules & safeguards in place to prevent executives from lying, cheating, & stealing.

13 Corporate Governance  Corporate Governance – rules and safeguards to ensure that executives behave legally and ethically.  Do not treat company profits as personal funds.  Keep accurate records.  Use financial controls.  Create an advisory board. - Tax Evasion – the deliberate avoidance of an obligation to pay taxes; may lead to penalties or imprisonment. - Advisory Board or Advisory Council- a group that provides advice and counsel, but does not have the responsibilities of a board of directors.

13 Doing the Right Thing in Addition to Doing Things Right. Balancing the Needs of Owners, Customers, and Employees.

13 Social Responsibility & Ethics Corporate Social Responsibility – the ethical obligation of a company to its community. Social Entrepreneurship – the sale of products or services on a for-profit basis to benefit a social purpose. In-kind Donation – contribution of products or services that may include time, rather than cash.

13 Social Responsibility & Ethics (cont.) Leading with Integrity and By Example Encourage Your Employees to Be Socially Responsible -Recycling paper, glass, and plastic. -Donating a portion of your profits to a charity. -Refusing to use animal testing on products. -Offering employees incentives to volunteer in the community. -Establishing a safe and healthy workplace. Sustainable – scenario in which current needs are met while preserving future resources.

KEY TERMS advisory board or council behavioral interview chain of command code of conduct code of ethics code of ethics and business conduct corporate governance corporate social responsibility ethical dilemma ethical relativism ethics human resources in-kind donation interview guide job offer letter job profile leader line organization line and staff organization payroll tax performance appraisal position description recruitment severance social entrepreneurship span of control sustainable tax evasion