Chapter 19—Professional Management and the Small Business
TRUE/FALSE
1. Individuals who are launching promising startups need to have a “tolerance for ambiguity”.
2. Someone with a charismatic personality will make a more effective leader.
3. Top-level executives in a large corporation have a distinct advantage over the leader of a small
business in exerting their influence.
4. A small company’s culture unfolds over the lifetime of the business..
5. A consultant beginning to ask employees for their marketing ideas illustrates empowerment.
6. Work teams require a lower level of participation of employees than empowerment.
7. Professional managers often have more sophisticated methods of management than entrepreneurs.
8. A small business that has expanded beyond the comfort zone of its entrepreneur will end in
bankruptcy.
9. A small business typically has greater constraints in cash flow and employee expertise than found in
larger corporations.
10. When a firm reaches Stage 2, the entrepreneur engages extensively in both the coordination of the
efforts of others as well as performing basic work activities.
11. The formal organization stage of business growth is a turning point because the entrepreneur must
learn to rise above direct management and work through an intermediate level of managers.
12. Stage 4 of small business growth involves the use of budgets, personnel policies, organizational charts,
and computerization.
13. Small firms that hesitate to acquire professional management often limit growth.
14. As a firm moves from Stage 1 to Stage 4, the entrepreneur becomes less of a manager and more of a
doer.
15. Owner-managers of small businesses typically overdo the amount of planning.
16. Budgets are usually prepared for five years in advance using quarterly figures.
17. Company planning helps clarify issues and how these issues can be faced, provides focus and
increases credibility with outsiders.
18. Line organization uses a single chain of command.
19. The maximum number of employees who can be supervised effectively by a capable manager is four.
20. A manager who grants subordinates the right to act or make decisions is delegating authority.
21. Periodic performance review sessions for a company following two-way communication would
discuss employee ideas, questions, complaints, and job expectations.
22. Entrepreneurs who follow a win-win negotiating strategy seek a solution that will satisfy at least the
basic interests of both parties.
23. A positive solution should be pursued in negotiations whenever it is feasible to do so.
24. Many owner-managers seldom work more than 40 to 60 hours a week.
25. The greatest time saver is the effective use of time.
26. Preparing a daily written plan of activities is useful in deciding which tasks deserve highest priority.
27. It is critical for entrepreneurs to set aside time to work undisturbed.
28. The SCORE program offers entrepreneurs the opportunity to enroll in college courses.
29. Some colleges and universities offer training directly to aspiring small business owners.
30. SBDCs are affiliated with colleges and universities and provide counseling solely through a group of
retired executives.
MULTIPLE CHOICE
1. Leadership roles differ greatly, depending on the size of the business and its
a.
stage of development.
b.
product and service offerings.
c.
marketing efforts.
d.
industry in which the company operates.
2. Leadership in small firms is more ____ in comparison to the leadership in large corporations.
a.
haphazard
b.
impersonal
c.
personalized
d.
skillful
3. What type of leadership style focuses on creating emotional bonds?
a.
Affiliative
b.
Pace-setting
c.
Coaching
d.
Coercive
4. Barry’s expectation that employees will complete his requests immediately is typical of ______
leaders.
a.
democratic
b.
commanding
c.
pacesetting
d.
affiliative
5. Linda’s high standards and expectations of employee excellence is typical of ____ leaders.
a.
affiliative
b.
authoritative
c.
coercive
d.
pacesetting
6. Workers who act on their own and to make decisions about the processes they’re involved with are
considered to be
a.
“beginning” or nascent managers.
b.
empowered employees.
c.
policy-capable subordinates.
d.
work-team ready.
7. To improve employee morale, an industrial distribution business might consider __________.
a.
employee empowerment.
b.
formulating policies after gaining employee thoughts.
c.
soliciting employee input on the adoption of budgets.
d.
the establishment of control standards.
8. Marcia, owner of Drapes by Design, has groups of employees in production and installation. If she
decides to use work teams as part of her leadership approach, she may be able to:
a.
earn more in quarterly profits.
b.
decrease the number of supervisors.
c.
improve product quality.
d.
reduce total compensation.
9. If a company successfully creates properly functioning self-managed teams among employees, the
supervisors will
a.
feel threatened by her leadership approach to teams.
b.
likely become fewer in number.
c.
may attempt to delegate mundane tasks to the teams.
d.
need to maintain closer supervision.
10. If Elizabeth, who just hired her first employee, desires to create an innovative cultural environment
within the business, what should she do?
a.
Support experimentation while eliminating unnecessary penalties for failure
b.
Maintain tight control of all aspects of the business.
c.
Reject employee ideas.
d.
Treat all employees the same.
11. Founders are least likely to be described as a(n)
a.
analytical person.
b.
good organizational member.
c.
risk taker.
d.
systematic problem solver.
12. A corporate marketing executive is moving to a managerial position in a small firm, where she may
logically expect to find
a.
adequate financial resources and adequate staff.
b.
inadequate financial resources and inadequate staff.
c.
adequate financial resources and inadequate staff.
d.
inadequate financial resources and adequate staff.
13. John, a small business operations manager, is confronted with a quality problem. A typical small
business handicap that will hamper his efforts to solve the problem is a lack of
a.
time.
b.
chain of command.
c.
accounting data.
d.
specialized staff assistance.
14. Stage 3 in the growth of a business is characterized by
a.
a one-person operation.
b.
hands-off management practices.
c.
multi-layered organization.
d.
the entrepreneur as a player-coach.
15. Mario has just begun to personally supervise employees. His firm likely to be in the ____________
stage of growth.
a.
formal organization
b.
intermediate supervision
c.
one-person operation
d.
player-coach
16. Susan has seen her retail shop grow to the point that she has designated supervisors for the office and
two selling areas. Her shop’s stage of growth is
a.
formal organization.
b.
intermediate supervision.
c.
one-person operation.
d.
player-coach.
17. Margaret has launched a new event planning company with four employees. With the growth in sales
and personnel, the next step of growth will involve
a.
increased direct supervision.
b.
improved quality management.
c.
intermediate supervision.
d.
more formal policies.
18. The use of written policies, budgets, and job descriptions is most closely associated with which stage
of growth?
a.
Formal organization
b.
Intermediate supervision
c.
One-person operation
d.
Player-coach
19. A hesitancy by an entrepreneur to move through the various organizational stages can
a.
limit the rate of business growth.
b.
be interpreted as evidence of creativity.
c.
normally provide a competitive edge to the firm.
d.
provide a spark to the business because of the spontaneity it introduces.
20. As a firm grows, the small business owner needs to fill key positions with persons who
a.
could be future managers.
b.
can complement weaker areas of the entrepreneur.
c.
are able to survive in the culture.
d.
All of the above are true.
21. A small firm’s basic path to the future is spelled out in a document called a
a.
feasibility study.
b.
short-range plan.
c.
budget.
d.
strategic plan.
22. A monthly production schedule is prepared as part of the
a.
operational plan.
b.
short-range plan.
c.
strategic plan.
d.
tactical plan.
23. A budget is prepared as part of a
a.
strategic plan.
b.
short-range plan.
c.
organizational plan.
d.
long-range plan.
24. The owner of a rapidly growing small business needs to talk to a lender for additional financing.
Which document would increase the company’s credibility?
a.
control standards
b.
human resource guidelines
c.
strategic plan
d.
All of the above would be needed.
25. The fact that the daily “brush fires” of doing business tend to push aside planning until it is forgotten is
the message of
a.
Parkinson’s Law of Planning.
b.
the Peter Principle.
c.
the Tyranny of the Urgent.
d.
Murphy’s Law of Strategic Action.
26. The best feature of an organizational structure that evolves naturally is its
a.
economy.
b.
clarity.
c.
practicality.
d.
use of staff positions.
27. Having more than one supervisor is a violation of the:
a.
span of control
b.
delegating
c.
controlling
d.
chain of command
28. Frequent and flagrant disregard of the chain of command undermines the position of the
a.
founder.
b.
operative employee.
c.
staff specialist.
d.
bypassed manager.
29. For small businesses, the most likely form of organizational structure is
a.
functional.
b.
line.
c.
line-and-staff.
d.
committee.
30. In a line-and-staff organization, which division is a line activity?
a.
Production
b.
Legal
c.
Human Resources
d.
Accounting
31. Nancy just added her eighth employee, a human resource manager who will be responsible for all
future hiring, training, retaining, and firing decisions. The company is in a ________ organizational
structure.
a.
delegated
b.
line-and-staff
c.
line
d.
span of control
32. James is talking to another supervisor about the number of employees who report directly to him.
James is talking about his:
a.
span of control.
b.
informal organization.
c.
organizational structure.
d.
chain of command.
33. Controlling is the managerial function that involves the managers
a.
thinking through issues confronting a firm and developing a plan to increase productivity.
b.
keeping track of performance and investigating when results deviate from the plan.
c.
developing an atmosphere of cooperation and teamwork.
d.
keeping an optimum number of people under supervision.
34. Scott, a printing shop owner, believes that his business is running rather haphazardly and wants to get
it under control. The first step he should take is to
a.
take corrective action.
b.
set standards.
c.
increase inspection.
d.
increase two-way communication.
35. Vivian would like to improve two-way communication with her subordinates. Which of these ideas
would be most helpful her?
a.
Post daily updates on the bulletin board.
b.
Announce daily production requirements over the public address system.
c.
Engage employees in conversations to discuss their ideas and problems
d.
Manage by walking around.
36. Kathleen believes she could be more efficient in the use of her time. To determine where
improvements can be made, Kathleen should first:
a.
list long term objectives.
b.
record time spent on various activities during the day.
c.
list projects that need attention.
d.
assign priorities to unfinished tasks.
37. Effective time management requires
a.
firmly established priorities.
b.
self-discipline.
c.
using a good time management system.
d.
All of the above are required.
38. Which time management suggestion would be the most critical for a small business owner?
a.
Set aside time to work undisturbed.
b.
Have a daily written plan and highlight priorities.
c.
E-mail, cell phones and the Internet should be used to save time, not be a distraction.
d.
Complete trivial tasks first to have something completed.
39. SCORE refers to
a.
the grade assigned to a small firm by the SBA.
b.
the management knowledge possessed by an entrepreneur.
c.
a group of retired executives who act as consultants to small firms.
d.
an alliance of small firms for the purpose of bidding on government contracts.
40. Small business service organizations that are patterned after the Agricultural Extension Service are
known as
a.
student consulting team programs.
b.
Small Business Development Centers.
c.
business incubators.
d.
SCORE.
41. LaToya, as the owner of a minority firm, should look to which organization first for assistance?
a.
SBDC
b.
SCORE
c.
sponsorship of student consulting team projects
d.
virtual incubators
42. The consulting resources of universities are made available to small business firms by
a.
student consulting team programs.
b.
SCORE.
c.
business incubators.
d.
management consultants.
43. Entrepreneurs can get management assistance from peers through
a.
outside consultants.
b.
SCORE advisors.
c.
volunteer work in the community.
d.
networking.
44. Marvin has just launched a consulting business. Business has been slower than expected. What
advice would you give Marvin?
a.
Post an ad in the local newspaper.
b.
Tap into his personal and professional network.
c.
Find a different line of work.
d.
Take a full-time position with a company while he builds his business part-time.
MATCHING
Match the term with its definition. Some terms may not be used.
a.
Budget
e.
Long-range plan
b.
Chain of command
f.
Professional manager
c.
Delegation of authority
g.
Self-managed work teams
d.
Empowerment
h.
Short-range plan
1. The official, vertical channel of communication in an organization
2. A firm’s overall plan for the future
3. A document that expresses future plans in monetary terms
4. Authorization of employees to make decisions or take actions on their own
5. A plan that governs a firm’s operations for one year or less
6. Groups of employees with freedom to function without direct supervision but with responsibility for
results
7. Granting to subordinates the right to act or make decisions
Match the term with its definition. Some terms may not be used.
a.
Line organization
e.
Professional manager
b.
Line-and-staff organization
f.
Service Corps of Retired Executives
c.
Negotiation
g.
Small business development centers
d.
Networking
h.
Span of control
8. The process of developing and engaging in mutually beneficial relationships
9. A manager who uses systematic, analytical methods of management
10. The process of developing workable solutions through discussions or interactions
11. An SBA-sponsored group of people who give free advice to small business owners
12. An organizational structure that includes staff specialists who assist management
13. The number of employees who are supervised by one manager
14. A simple organizational structure in which each person reports to one supervisor
ESSAY
1. For six leadership styles, briefly state how each type of leader operates.
2. Jenny is the owner-manager of a small accounting practice. She holds bi-weekly employee meetings to
cover company goals, focus points for the future and keep the employees updated on current tax
changes. She has developed significant bonds with the employees so they share work (and personal)
problems with her more than in the past. Often Jenny can be found assisting new clients and aiding in
paperwork completion especially around April 15th. What type of leadership style(s) does Jenny
display and how?
3. Discuss the use of employee empowerment and self-managed work teams in relation to how leaders
shape an innovative organizational culture.
4. Describe the four stages of small business growth and how the owner would function.
5. Andrea designed a new household cleaning product that can be used on any surface, is
environmentally friendly and performs better than other current products. As the company grew, she
added employees to produce the cleaner. Recently a grocery store chain asked to sell the cleaner in a
regional area. Should she continue as the CEO? At what level is the company in its development?
What factors should Andrea consider as the company continues to grow?
6. After identifying organizational structures of small businesses, explain how changing structures over
time impact managerial responsibilities.
7. The personal shopper business Jeff and Christy have developed has grown so they are busy 50 hours
weekly. This schedule leaves little time for them as a couple. They have decided to hire outside
employees to take over some of their business responsibilities. What suggestions should they follow to
ease this transition?
8. Jo Ann serves as the CEO of her company and currently works 60 hours a week at a minimum. What
issues does she face?
9. Suggest solutions for better time management.
10. What type of counseling is available for an entrepreneur?
11. Paul has decided to start a musical venue that also includes a restaurant and an art gallery. His brother
suggested he talk to a consultant to develop his business plan. What should Paul look for when
searching? What issues should be determined before the consultant is hired?