1. CHAPTER 18 Professional Management in the Entrepreneurial Firm
Part 5
Managing Growth in the Small Business
CHAPTER 18 Professional Management in the Entrepreneurial Firm
© 2008 Cengage Learning. All rights reserved.

2. Looking AHEAD Discuss the entrepreneur’s leadership role.
After you have read this chapter, you should be able to:
Discuss the entrepreneur’s leadership role.
Explain the distinctive features of small firm management.
Identify the managerial tasks of entrepreneurs.
Describe the problem of time pressure and suggest solutions.
Explain the various types of outside management assistance.
© 2008 Cengage Learning. All rights reserved.

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
© 2008 Cengage Learning. All rights reserved.

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.
© 2008 Cengage Learning. All rights reserved.

5. Entrepreneurial Leadership (cont’d)
Leadership Styles
Coercive leaders demand immediate compliance.
Authoritative leaders mobilize people toward a vision.
Affiliative leaders create emotional bonds.
Democratic leaders build consensus.
Pacesetting leaders set high standards and expect excellence.
Coaching leaders develop people.
© 2008 Cengage Learning. All rights reserved.

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.
© 2008 Cengage Learning. All rights reserved.

7. Steps to a Positive Attitude
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Steps to a Positive Attitude
Recognize accomplishments at the end of each day.
At the close of business, take time to set goals for the next day.
Take care of yourself.
Spend time with friends who are upbeat.
Imagine your way to success.
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.
© 2008 Cengage Learning. All rights reserved.

8. Distinctive Characteristics of Small Firm Management
Professional-Level Management
Founders as Managers
Management of Small Firms
Managerial Weakness
Resource Constraints
Firm Growth and Managerial Practices
© 2008 Cengage Learning. All rights reserved.

9. Organizational Stages of Small Business Growth
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Organizational Stages of Small Business Growth
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10. Stages in Firm Growth and Management
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.
© 2008 Cengage Learning. All rights reserved.

11. Intermediate Supervision
Managing Versus Doing
STAGE 1
STAGE 2
STAGE 3
STAGE 4
One-Person Operation
Player-Coach
Intermediate Supervision
Formal Organization
Time spent managing
Time spent doing
© 2008 Cengage Learning. All rights reserved.

12. Managerial Tasks of Entrepreneurs
Creating an Organizational Structure
Controlling Operations
Planning Activities
Leading and Delegating
Entrepreneurial Management
© 2008 Cengage Learning. All rights reserved.

13. Planning Activities The Benefits of Formal Planning Planning Time
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
© 2008 Cengage Learning. All rights reserved.

14. Planning Activities: Types of Plans
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
© 2008 Cengage Learning. All rights reserved.

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
© 2008 Cengage Learning. All rights reserved.

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
© 2008 Cengage Learning. All rights reserved.

17. Line-and-Staff Organization
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Line-and-Staff Organization
© 2008 Cengage Learning. All rights reserved.

18. Factors Determining Optimum Span of Control
Few Subordinates
Complex work
Inexperienced workers
Superior with limited ability
More Subordinates
Moderately difficult work
Moderately experienced workers
Superior with moderate ability
Many Subordinates
Simple work
Very experienced workers
Superior with much ability
© 2008 Cengage Learning. All rights reserved.

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.
© 2008 Cengage Learning. All rights reserved.

20. Delegating Authority Delegation of Authority Benefits of delegation
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
© 2008 Cengage Learning. All rights reserved.

21. Controlling Operations
Planning and Goal Setting
Establishing standards
Measuring Performance
Taking Corrective Action
© 2008 Cengage Learning. All rights reserved.

22. Stages of the Control Process
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Stages of the Control Process
© 2008 Cengage Learning. All rights reserved.

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.
© 2008 Cengage Learning. All rights reserved.

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.
© 2008 Cengage Learning. All rights reserved.

25. Know your material “spot on.” Be interactive.
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Presentation Tips
Do your homework.
Know your material “spot on.”
Be interactive.
Make vivid mental connections in the minds of listeners.
Emphasize relevance.
Be dynamic, but be yourself.
Use PowerPoint with care.
Dress appropriately.
Avoid food and drink that make speaking difficult for you.
Practice, practice, practice.
Sources: Adapted from Naomi Rockler-Gladen, “Fear of Public Speaking,” January 12, 2007,
article.cfm/fear_of_public_speaking, accessed March 15, 2007; “Presentation Tips for Public Speaking,” A Research Guide for Students,
accessed March 15, 2007; and Kimberly L. McCall, “All That Jazz,” Entrepreneur, Vol. 34, No. 1 (March 2006), p. 36.
© 2008 Cengage Learning. All rights reserved.

26. Personal Time Management
The Problem of Time Pressure
Many owner-managers work 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
© 2008 Cengage Learning. All rights reserved.

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.
© 2008 Cengage Learning. All rights reserved.

28. Outside Management Assistance
Business Incubators
Other Business and Professional Services
Student Consulting Teams
Source of Outside Management Assistance
Entrepreneurial Networks
Service Corps of Retired Executives (SCORE)
Management Consultants
Small Business Development Centers (SBDCs)
© 2008 Cengage Learning. All rights reserved.

29. Services Provided by Business Incubators to New Firms
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Services Provided by Business Incubators to New Firms
© 2008 Cengage Learning. All rights reserved.

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
© 2008 Cengage Learning. All rights reserved.