UNIT 4 OPERATING A SMALL BUSINESS EFFECTIVELY

MANAGEMENT, LEADERSHIP,
& ETHICAL PRACTICES

1
3
ENTREPRENEURSHIP: Starting and Operating a Small Business,
3/e
Steve Mariotti and Caroline Glackin

Class Name
Instructor Name
Date, Semester

Learning Objectives

After this lecture, you should be able to complete the following Learning Outcomes

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.

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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.

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Leadership Styles That Work

Coercivepressure/commanding
Pro: effective in disasters or with employees who need forceful
management
Con: hurts employee morale, creativity
Authoritativeleader 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
Affiliativeputs people first
Pro: gets employees on board
Con: can fail to give adequate direction

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Leadership Styles (cont.)

Democraticgives employees strong voice in company

Pro: builds morale
Con: can result in endless meetings & stagnation
Pacesettingsets high standards, challenges employees to meet
them
Pro: great when employees are self motivated
Con: can overwhelm less committed employees
Coachingfocuses on helping employees learn & grow
Pro: good with new employees
Con: can create resistance among long-term employees

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How Entrepreneurs Pay Themselves

This will affect company financial performance.
Options include:

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).
Dividendshare of company profits. Deducted from
net profit (after taxes).

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Manage Your Time Wisely

Prioritize.
Set realistic goals.
Dont spend too much time on e-mail.
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 positions goals and objectives will be.
Interview Guide a document to assist in question development
regarding an individuals 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

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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.

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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.

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Human Resources Fundamentals

Human Resources the segment of a business that

hires, trains, and develops a companys employees.
HR Department Areas:
-

Compensation and payroll.

Benefits.
Organizational development.
Education and development.

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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.

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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.

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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 employeeperformance 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.

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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.

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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
whats right.

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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.

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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.

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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.

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Doing the Right Thing in Addition to Doing

Things Right.
Balancing the Needs of Owners, Customers,
and Employees.

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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.

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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.

K EY TER M S
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