CHAPTER 12
Designing an Entrepreneurial Organization
SUMMARY AND AUTHOR’S NOTE
This chapter provides an overview of the process, or operations, side of a new venture. It is
organized into three parts: organization, location, and people. The chapter does not attempt to
cover all the management and organization issues that face a new venture but, rather, addresses
CHAPTER OBJECTIVES
After reading this chapter, students will be able to:
• Describe how businesses are organized.
CHAPTER OUTLINE
OPENING CASE: Culture Is the Competitive Advantage
I. Design: Understanding the Way the Business Works—determining the best
organizational structure for a new firm
SOCIAL ENTREPRENEURSHIP: MAKING MEANING—When Sustainability Is the
Culture
52 Chapter 132: Designing an Entrepreneurial Organization
iii. Keeping Distributed Employees and Strategic Partners Linked—maintaining
communication across distances
II. Location Strategy: Finding the Appropriate Business Site—determining the best
physical site for doing business
a. Choosing the Region, State, and Community—geographic factors influencing the
f. Alternatives to Conventional Facilities
i. Incubators
ii. Shared Space
III. People Strategy: Organizing Startup Human Resources—staffing and forms of
organization for a new business
• Figure 12.3—Simple Organizational Chart for a Growing Business
a. Creating the Company Culture—establishing the personality and values of a
company
i. Issuing Stock When the Company Is Capitalized
f. Alternatives to Equity Incentives
i. Deferred Compensation Plans
ii. Bonus Plans
RELEVANT CASE STUDIES
Case 6 Potion Inc.
Case 9 The Case of Google, Inc.
Chapter 132: Designing an Entrepreneurial Organization 53
ANSWERS TO QUESTIONS ON KEY ISSUES
1. What are the advantages and disadvantages of a virtual company?
You can build a virtual company in an industry without incurring the risk of numerous
2. What is the purpose of the imaginary tour of the business?
The tour allows you to visualize and list all the functions, people, equipment, supplies, and
3. Which factors in choosing a retail site would not be relevant to a manufacturing site—and
vice versa?
With a retail site, you need to determine the trade area and accessibility to the site and
4. What are the advantages and disadvantages of using stock as compensation and incentives?
Giving someone ownership rights in the company through equity is a way to avoid having
5. How can the entrepreneur improve the chances of choosing the best job candidate?
To have the best chance of hiring the right people, the entrepreneur should seek candidates
6. List three alternatives to equity incentives for key managers.
1) Deferred compensation plans
SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP
1. Choose an industry in which you have an interest. Find a business in that industry, arrange
to visit the site and talk with key personnel, and do a flowchart of the business process that
54 Chapter 132: Designing an Entrepreneurial Organization
reflects what you learned about it on your visit. Did you find any inefficiencies that if
corrected could improve the process flow?
2. Interview an entrepreneur about his or her hiring practices. How successful have those
practices been in getting and retaining good employees?
It might be interesting to compare the findings of the students to come up with a “best
SUPPLEMENTARY LECTURE MATERIAL
Location Matters
In the information age, one would think that perhaps location no longer matters, since many
businesses can be operated virtually from anywhere. But there is evidence to the contrary.
Certainly for retail outlets serving the consumer, location is critical to success. You have to