Learning Outcomes
After studying this chapter, you should be able to master the following concepts.
Discuss the entrepreneur's leadership role.
Explain the small business management process and its unique features.
Identify the managerial tasks of entrepreneurs.
Describe the problem of time pressure and suggest solutions.
Outline the various types of outside management assistance.
Leadership Fundamentals
Understanding the core definition and importance of leadership.
What is Leadership?
— Richard Barton, CEO, Expedia.com
Introduction
Even established businesses need vigorous leadership if they are to avoid stagnation or failure.
When the time arrives, you must find ways to integrate the efforts of employees and give new direction to the business.
Small Business Leadership
Leadership roles differ, depending on the size of the business and its stage of development.
Qualities & Effectiveness
What it takes to be an effective founder and leader.
Leadership Qualities of Founders
What Makes a Leader Effective?
Many assume that a business leader must have a flashy, highly charismatic personality to be effective, but this is not the norm and not required.
Charisma has little to do with effective leadership.
It is not about wanting to be in charge, but having the ability to take charge and inspire others to follow one's lead.
Leaders exhibit a determination to do whatever is needed to lead their companies to success.
Effective leadership is based not on a larger-than-life personality, but on a focus on reaching business goals.
Leadership Styles
Different approaches to guiding teams and organizations.
Visionary
Mobilizes people toward a shared vision.
Coaching
Develops people by establishing a relationship and trust.
Affiliate
Promotes emotional bonds and organizational harmony.
Democratic
Builds consensus through participation.
Pacesetting
Sets challenging and exciting standards and expects excellence.
Commanding
Demands immediate compliance.
Empowerment
Giving employees authority to make decisions or take actions on their own.
Work Teams
Groups of employees with freedom to function without close supervision.
Culture & Management Process
Shaping the environment and systematizing management in small firms.
Leaders Shape the Culture of the Organization
Gradual Emergence: A company culture does not emerge overnight; it unfolds over the lifetime of the business and reflects the character and style of the founder.
Physical Design: Deliberate physical design efforts can influence the culture, helping shape how people think, interact, and achieve together.
Hiring Practices: An important factor is hiring new employees based on their attitude, style, and fit with the personality of the company.
Critical Impact: Organizational culture is important; it can make or break a company.
Every leader should strive to incorporate a positive "can-do" attitude into the organizational culture.
The Small Firm Management Process
Professional Manager
A manager who uses systematic analytical methods of management. Evolves from founder to professional manager.
Expanding Beyond Comfort Zone
Managing the constraints that hamper small businesses.
- Most small business managers are generalists.
- Lack support from specialists (marketing research, financial analysis, advertising, HR).
- May overcome issues by getting outside management assistance.
Firm Growth and Managerial Practices
An entrepreneur plays a different role in starting a business than operating it over the long haul. Personal qualities for starting a venture differ from those required to manage it long-term.
& Plan
Managerial Responsibilities & Control
Key tasks, organizational structuring, and the process of maintaining quality and performance.
Long range plan (strategic plan): A firm's overall plan for the future.
Short range plan: A plan that governs a firm's operations for one year or less.
Budget: A document that expresses future plans in monetary terms.
The unplanned structure: Evolve with little conscious planning.
The chain of command: The official, vertical channel of communication in an organization.
Line organization: A simple organizational structure in which each person reports to one supervisor.
Span of control: The number of subordinates supervised by one manager.
Stages of Control Process
Preventive Control
Concurrent Control
Corrective Control
Time Management & Assistance
Strategies for managing an entrepreneur's workload and leveraging outside expertise.
Personal Time Management
A business owner spends much of the work day on the front lines—meeting customers, solving problems, listening to employee complaints, talking with suppliers and the like.
The Problem of Time Pressure
- Heavy Workload: 60 to 80 hours per week or more working hours.
- Inefficient Performance due to being too busy to:
- See sales representatives who supply market information on new products.
- Read technical or trade literatures to adapt improvements to their own use.
- Listen to employees' opinions and grievances.
- Give instructions employees need to do their jobs correctly.
Time Savers for Busy Managers
Outside Management Assistance
Outside assistance can supplement the manager's personal knowledge and the expertise of the few staff specialists on the company's payroll.
The Need for Outside Assistance:
Lack of opportunities to share ideas with peers, given the small staff in most new enterprises.
Experiencing a sense of loneliness in decision-making.
By obtaining help from peer groups, entrepreneurs can overcome managerial deficiencies and ease loneliness.
Outsiders are detached, offering an objective point of view and bringing new ideas.
They may possess knowledge of methods, approaches, and solutions far beyond the founder's experience.
Sources of Outside Assistance
SCORE
Service Corps of Retired Executives
SBDCs
Small Business Development Centers
Management Consultants
Professional Services
Student Teams & Networks
Teams of upper-class and graduate business students, operating under the direction of a faculty member, who assist in analyzing and solving small business problems.
Networking is the process of developing and engaging in mutually beneficial relationships (e.g., Rotary Club, Lions Club, chamber of commerce).
Discussion Questions
Reflect on the concepts learned in this chapter to test your understanding.
Explain the relationships between planning and control in a small business. Give an example that shows how these two features can work together.
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?
Case Study
Analyze the scenario and answer the questions based on leadership and management principles.
Sarah's Media Sales Business
After a slow start in a spare bedroom in her home. Sarah media sales business was flourishing. Even thought it had been only three and half years since she launched the company, Sullivan was beginning to wonder if she had the necessary talent to ensure its continued success. The business had grown to 100 employees after two years, and now it was approaching 200 employees. When the business was small, Sullivan could figure out solutions to problems on a case-by-case basis, but now the problems were becoming increasingly complicated.
What kinds of practices or procedures will Sullivan need to adopt to enable the business to continue to operate successfully?
What resources might Sullivan use to get good feedback to help her to assess her competence and understand the issues her growing business is facing?
Malaysian Entrepreneur Example
Applying management and leadership concepts to a successful local business.
Datuk Ramly bin Mokni (Ramly Group)
The story of Ramly Burger perfectly illustrates the transition from a micro-enterprise to a large-scale corporate manufacturer, highlighting key principles of leadership, structural organization, and managerial control discussed in this chapter.
1. The Trailblazer & Visionary
Datuk Ramly identified a crucial gap in the late 1970s: a lack of guaranteed Halal burger patties in Malaysia. As a visionary leader, he didn't just want to sell burgers; he wanted to solve a market problem. Despite early rejections from supermarkets, his persistence built a nationwide culture and a highly recognizable food brand.
2. Evolving Organizational Structure
Initially operating as an unplanned structure (just him and his wife making 200 patties a day at home), the business faced intense time pressure. To grow, he had to evolve into a professional manager, establishing a formal chain of command, delegating factory operations, and creating specialized departments for logistics and marketing.
3. Stages of Control Process
- Preventive: Strict sourcing of 100% Halal-certified raw meat and ingredients before processing begins.
- Concurrent: Monitoring hygiene, safety, and machinery continuously on the factory floor (adhering to ISO standards).
- Corrective: Inspecting final packaged patties for quality and consistency before they are shipped to vendors.
4. Outside Management Assistance
Just as the chapter mentions SBDCs and SCORE, Ramly leveraged local Malaysian business assistance. He utilized support from institutions like Bank Pembangunan to secure financing and expert guidance when scaling his production from a small shop to a massive commercial manufacturing plant.