1. Chapter 13 Designing an Entrepreneurial Organization

2. Copyright © Houghton Mifflin Company. All rights reserved.13 | 2 Learning Objectives Describe how businesses are organized Explain how to identify the appropriate business site Discuss the critical issues related to organizing people

3. Copyright © Houghton Mifflin Company. All rights reserved.13 | 3 Organization: Understanding the Way the Business Works Organizational structure: –Finding the best fit Contextual factors (environment, technology, market) Design factors (strategy and models) Structural factors (complexity, formalization)

4. Copyright © Houghton Mifflin Company. All rights reserved.13 | 4 Organization: Understanding the Way the Business Works (continued) Identifying business processes: –Design the process map/flowchart that traces how information flows through the business –Mapping leads to better decisions Number of people to hire Amount of equipment to purchase Type of facility for working Type of organizational structure to employ

5. Copyright © Houghton Mifflin Company. All rights reserved.13 | 5 The Virtual Enterprise A virtual organization is a “business without walls” A temporary network of independent companies, suppliers, customers, even erstwhile rivals—linked by information technology to share skills, cost, and access to one another’s markets Its goal is to deliver highest-quality product at the lowest possible cost in a timely manner.

6. Copyright © Houghton Mifflin Company. All rights reserved.13 | 6 The Virtual Organization (continued) The virtual organization: –Outsources in a virtual world –Forms a network of strategic alliances –Keeps virtual employees and strategic partners linked

7. Copyright © Houghton Mifflin Company. All rights reserved.13 | 7 Location: Find the Appropriate Business Site Choosing the region, state, and community Economic base Financial incentives Demographics

8. Copyright © Houghton Mifflin Company. All rights reserved.13 | 8 Location: Find the Appropriate Business Site (continued) Choosing a retail site –The trade area –Competition and character –Accessibility

9. Copyright © Houghton Mifflin Company. All rights reserved.13 | 9 Location: Find the Appropriate Business Site (continued) Choosing the service/wholesale site Choosing the manufacturing site –Access to suppliers –Cost of labor –Access to transportation –Cost of utilities The Lease–Build–Buy decision

10. Copyright © Houghton Mifflin Company. All rights reserved.13 | 10 Location: Find the Appropriate Business Site (continued) Alternatives to conventional facilities –Incubators –Shared space –Mobile locations –Temporary tenant agreements

11. Copyright © Houghton Mifflin Company. All rights reserved.13 | 11 Figure 13.3: Traditional Line and Staff Organizational Chart for a Simple Manufacturing Plant

12. Copyright © Houghton Mifflin Company. All rights reserved.13 | 12 Common Leadership Traps Isolating him or herself from the rest of the start-up team Always having the one “right” answer Keeping people on board who are not up to the needs of the company Taking on too much too soon Setting unrealistic expectations Not building support

13. Copyright © Houghton Mifflin Company. All rights reserved.13 | 13 People: Organizing Start-up Human Resources Hiring the right people –Functions to fill –The employee search –Interviews Human resource leasing

14. Copyright © Houghton Mifflin Company. All rights reserved.13 | 14 Managing Employee Risk Risk management is a set of policies and their associated decision-making processes that reduce or eliminate risks associated with having employees.

15. Copyright © Houghton Mifflin Company. All rights reserved.13 | 15 Planning for Ownership and Compensation The major issues: –How much of the company to sell to potential stockholders? –How much to pay key managers?

16. Copyright © Houghton Mifflin Company. All rights reserved.13 | 16 Compensating with Stock An investor does not need to be an equal partner Hire talent rather than give away ownership Use cash for bonuses not stock

17. Copyright © Houghton Mifflin Company. All rights reserved.13 | 17 Founder’s Stock Known as Rule144 stock Stock is issued to the first shareholders of the corporation Restricted by SEC rules

18. Copyright © Houghton Mifflin Company. All rights reserved.13 | 18 Issuing Stock When the Company Is Capitalized Alternatives to equity incentives Deferred compensation plans Bonus plans Capital appreciation rights Profit-sharing plans