Chapter 19: Professional Management and the Small Business
CHAPTER 19: PROFESSIONAL MANAGEMENT AND THE SMALL
BUSINESS
CHAPTER OUTLINE
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1) Small Business Leadership
LO1: Understand the entrepreneur’s leadership role.
a) What Is Leadership?
i) Others will follow willingly
ii) More focused on the destination than how to get there
b) Leadership Qualities Of Founders
i) Gets others to help with the project
ii) Faces uncertainties and certainties
c) What Makes a Leader Effective?
i) Charisma is nice but doesn’t need to be a part of the formula
ii) It’s not so much about wanting to be in charge as it is having the ability to take
change and inspire others to follow one’s lead.
iii) Leader’s exhibit a determination to do whatever is needed to lead their companies
to success.
iv) Must have vision for the goal
d) Leadership Styles
i) Six styles identified:
(1) Visionary mobilizes people toward a shared vision.
(2) Coach develops people by establishing a relationship and trust.
(3) Team builder promotes emotional bonds and organizational harmony.
(4) Populist builds consensus through participation.
(5) Paragon sets challenging and exciting standards and expecs excellence.
(6) The general demands immediate compliance.
ii) Leadership may include empowering employees and leading work teams
(1) Empowerment—authorization of employees to make decisions or take actions
on their own
(2) Self-managed work teams—Groups of employees with freedome to function
without direct supervision, but with responsibility for results
e) Leaders Shape the Culture of the Organization
i) Company culture emerges over the lifetime of the business
ii) Culture usually reflects the character and style of the founder
iii) To change or retain culture, hire new employees based on their attitude, style, and
fit with the personality of the company
2) The Small Firm Management Process
LO2: Explain the small business management process and its unique features.
a) From Founder to Professional Manager
Chapter 19: Professional Management and the Small Business
ii) Managers must ensure the firm is functioning as intended
iii) Exhibit 19-3 Stages of the Control Process
(1) Preventive Control (input stage)
(2) Concurrent Control (process stage)
(3) Corrective Control (output stage)
e) Communicating
i) Getting managers to talk with one another and openly share problems and ideas
ii) To communicate effectively, managers must:
(1) Tell employees where they stand
(2) Tell how the business is doing
(3) Tell what the firm’s plans are for the future
iii) Communication Tools
(1) Periodic performance review sessions to discuss employees’ ideas, questions,
complaints, and job expectations
(2) Bulletin boards to keep employees informed about developments affecting
them and/or the company
(3) Blogs for internal communication, especially in companies that have open
organization cultures and truly want transparent dialogue.
(4) Microblogging tools (like Twitter and Yammer) to enable employees to
communicate, collaborate, and share very brief thoughts and observations
about the business in real time.
(5) Physical or virtual suggestion boxes to solicit employees’ ideas on possible
improvements
(6) Wikis to bring issues to the surface and draw feedback from employees
(7) Formal staff meetings to discuss problems and matters of general concern
(8) Breakfast or lunch with employees to socialize and just talk
(9) Exhibit 19-4 Presentation Tips
f) Negotiating
i) Two-way communication process to resolve differences
ii) Developing win-win strategy in relationships
3) Personal Time Management
LO4: Describe the problem of time pressure and suggest solutions.
a) The Problem of Time Pressure
i) Small business owners work 60-80 hours a week
ii) Owners may fear that the firm will not function properly if they are not there, so
NO vacations
b) Time Savers for Busy Managers
i) Apply managerial approaches from preceding section
ii) Effective use of time is greatest time saver
iii) Time and attention should be parceled out as follows:
(1) Give your attention first to “critical activities”
(2) Next, deal with “important concerns”
(3) Interruptions can keep you from completing important work. Be prepared to
say “no”.
(4) Avoid distractions
4) Outside Management Assistance
Chapter 19: Professional Management and the Small Business
LO5: Outline the various types of outside management assistance.
a) The Need for Outside Assistance
b) Sources of Management Assistance
i) U.S. Small Business Administration (SBA)
(1) 3 C’s of service
(a) Capital
(b) Contracts
(c) Counseling
(2) Service Corps of Retired Executives (SCORE)
(3) Small Business Development Centers (SBDCs)
ii) Educational Institutions
iii) Management Consultants
iv) Small Business Networks
(1) Entrepreneurs can gain management assistance from peers through
networking which is the process of developing and engaging in mutually
beneficial informal relationships.
v) Other Business and Professional Services
ADDITIONAL DISCUSSION QUESTIONS
1. Would most employees of small firms welcome or resist a leadership approach
that sought their ideas and involved them in meetings to let them know what
was going on? Why might some employees resist such an approach?
2. Is the quality of management likely to be relatively uniform in all types of small
businesses? If not, what might account for differences?
The quality of management differs, depending on a number of factors. One of
having any particular managerial expertise.
3. What are the four stages of small business growth, as outlined in this chapter?
How do management requirements change as the firm moves through these
stages?
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4. Some professional football coaches have written game plans that they consult
from time to time during games. If coaches need formal plans, does it follow
that small business owners also need them as they engage in their particular
type of competition? Why or why not?
5. What type of small firm might effectively use a line organization? When might
it be necessary to change the firm’s structure? To what type of structure? Why?
6. How important is the practice of delegation to the effective operation of a small
business? Why do many entrepreneurs find it hard to delegate responsibility to
others?
7. What is the relationship between planning and control in a small business?
How might these two feature work together?
8. The famous essayist and poet Ralph Waldo Emerson once said, “What you do
speaks so loud that I cannot hear what you say.” What does this mean, and
how does it apply to communication in small firms?
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9. What practices can a small business manager use to conserve time?
10. What sources of outside management assistance are available to small
businesses? Which of these is/are likely to provide the greatest support to the
startup of a new venture? Which would be more helpful to the continuing
management of a small company?
Outside management assistance can be used to remedy staff limitations and
SUGGESTED ANSWERS TO YOU MAKE THE CALL EXERCISES
Situation 1
1. Is such a loosely organized firm likely to be as effective as a firm that defines
jobs more precisely and monitors performance more closely? What are the
advantages and the limitations of the managerial style described above?
This company’s leadership philosophy is unusual in the extent to which it
2. How might such managerial methods affect morale?
Chapter 19: Professional Management and the Small Business
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We believe that most students would respond positively and that most employees
would also respond positively. This approach might not lead to high morale for
the type of employees mentioned above, however. Also, management might try to
stretch an employee beyond his or her abilities, and that can be discouraging.
3. Would you like to work for this company? Why or why not?
Situation 2
1. Is Richeson’s problem one of time management or general managerial ability?
2. If Richeson asked you to recommend some type of outside management
assistance, would you recommend a SCORE counselor, a student consulting
team, a CPA firm, a management consultant, or some other type of assistance?
Why?
The answer will reflect the respondent’s experience and bias. If the firm is
3. If you were asked to improve this company’s management system, what would
you would take first? What would be your initial goal?
Some steps would be to interview key members of the company, examine
Situation 3
1. Which of these two time management methods is more likely to work in a small
business?
Chapter 19: Professional Management and the Small Business
Answers may vary on this as an argument can be made for either position. The
2. What are the advantages and disadvantages of these two approaches? What
personality characteristics or natural work habits might sync up best with each
of them?
3. Which of these two methods would help you, personally, to be the most
productive? Why?
Student answers will vary.
SUGGESTED SOLUTION TO CASE 19: ANDREW MASON AND THE RISE AND
FALL OF GROUPON
1. How would you rate the leadership skills of Andrew Mason? How would you
rate his leadership style? In what ways does he fit the profile of the typical
business founder? In what ways is he different?
Andrew Mason’s leadership skills would probably be rated as poor, given the
problems in his firm that have led to inefficiencies in its internal bureaucracy,
2. Assess the organizational culture at Groupon. What are its strengths and its
weaknesses? What changes would you make to the culture to improve the
performance of the company?
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3. Do you think it was because of Mason that Groupon was unable to transition
smoothly through growth and development stages to become the technology
company that it is today, or can you identify other possible causes?
Andrew Mason was undoubtedly one of the most visible and problem-creating
figures leading Groupon during its rapid expansion. With an education in music,
Mason seemed to lack many of the fundamental business and organizational skills
necessary to lead a fast-growing company with demanding investors and an
4. What kind of leader do you think would be best suited to run Groupon? Create
a profile of its ideal leader. Then, create a profile for the ideal leader of a
technology startup, and compare the two. What would you recommend as a
plan for developing leaders of startups into leaders who are well equipped to
manage large but still-entrepreneurial firms?
As Groupon enters it next phase of leadership, the company desperately needs to
seek leadership with the experience and vision to navigate a very uncertain future.
Ideally, the next chief executive officer would also bring the depth and maturity
Chapter 19: Professional Management and the Small Business
required to promote fiscal and managerial responsibility, while simultaneously
promoting a culture of innovation among the staff. Such a leader would have the
ability to manage the pressures of running a publicly-traded company, while also
5. In your opinion, what are some of the other problems at Groupon?
Like many novelties, the popularity of a product can be overwhelming at times,
and it often fades away with time. The service offered by Groupon may or may
not be a novelty, but it represents a brand new service in a market that did not
Chapter 19: Professional Management and the Small Business
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license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19– 11
companies continue to enter the market. And finally, as Groupon looks towards its
future, it remains unclear whether the company will be able to move toward new
commercial prospects and find a profitable business model that will allow the
company to continue its growth.