GENERAL MANAGEMENT
CHECK POINT 1: THE GENERAL MANAGEMENT PROCESS (OVERVIEW)

Please Select Any Topic In Check Point 1 Below And Click.

1. WHAT IS MANAGEMENT?
2. FOUR PRIME MANAGEMENT FUNCTIONS
3. FOUR IMPORTANT MANAGEMENT ROLES
4. CLASSIFICATION OF MANAGERS
5. TIME ALLOCATION BY MANAGERS
6. FIVE MAIN OPERATIONAL AREAS IN A COMPANY
7. ENTREPRENEURSHIP AND MANAGEMENT SCIENCE
8. THE BUSINESS ENGINERING METHOD
9. BUSINESS ENVIRONMENT AND ORGANIZATIONAL CULTURE
10. PRINCIPLES OF DECISION MAKING
11. THE PLANNING PROCESS
12. STRATEGIC PLANNING
13. IMPLEMENTATION OF STRATEGIC PLANS
14. MANAGEMENT BY OBJECTIVES
15. OPERATIONAL PLANNING
16. PLAN OF MANAGEMENT
17. THE ORGANIZING PROCESS
18. ORGANIZATIONAL DEPARTMENTALIZATION
19. MANAGEMENT STRUCTURE
20. ORGANIZATIONAL DESIGN AND DEVELOPMENT
21. THE LEADING PROCESS
22. PRINCIPLES OF COMMUNICATION
23. THE CONTROLLING PROCESS
24. MANAGERIAL ETHICS
25. THEORY Z
26. WHAT IS A SMALL BUSINESS?
27. HOW CAN YOU SUCCEED IN YOUR SMALL BUSINESS?
28. FOR SERIOUS BUSINESS OWNERS ONLY
29. THE LATEST INFORMATION ONLINE

1. WHAT IS MANAGEMENT?

DEFINITION OF MANAGEMENT

You must be familiar with various principles of business management if you really want to succeed in your business. Please remember that about 70 percent of all small businesses fail during the first few years after starting a business. Why? Because they simply didn't know a better way. You definitely don't want to follow them ...

"Management is the art of getting things done through people".

In this definition by Mary Parker Follet:

"One category of people, known as managers, should achieve their organizational objectives by arranging others, known as subordinates to carry out the necessary tasks instead of performing those tasks themselves."

Therefore:

"The prime purpose of management is to create a suitable environment in which people can perform productively and coordinate individual efforts toward achieving organizational goals."

On the other hand, there are Business Owners and Managers who don't know how to perform their duties properly, although they may not be aware of it. We prefer to call them "Damagers".

2. FOUR PRIME MANAGEMENT FUNCTIONS

Irrespective of a company's size, all business owners and managers are engaged in four prime Management Functions outlined below.

FOUR PRIME MANAGEMENT FUNCTIONS

No.

Description

1.

Planning.
Planning the development of specific organizational objectives and the appropriate actions to achieve those objectives. This enables management to pursue its goals in a systematic manner instead of relying on chance.

2.

Organizing.
Organizing the company's human and material resources into a workable structure to ensure cost-effective organizational performance. This entails coordinating all working activities into an integrated operational framework, creating functional positions, and staffing them with suitable employees.

3.

Leading.
Leading the company's employees toward accomplishment of organizational objectives. This entails directing and influencing subordinates in performing their designated duties in the most cost-efficient manner.

4.

Controlling.
Controlling the performance of the company's employees and ensuring that the organization is progressing toward achieving its goals. This entails establishing standards of performance, measuring actual performance, comparing it against established standards, and taking action to correct any significant deviations.

3. FOUR IMPORTANT MANAGEMENT ROLES

According to Henry Mintzberg, business owners and managers perform additional important Management Roles outlined below. (1)

FOUR IMPORTANT MANAGEMENT ROLES

No.

Description

1.

Leadership Role.
Managers usually act as figureheads on behalf of their company and liaison between their company and various outside organizations. Managers also act as leaders and are constantly involved in hiring training, training, motivating, and disciplining subordinates.

2.

Informational Role.
Managers constantly monitor information obtained from various external sources, such as newspapers, magazines, and business reports. Managers also disseminate essential information among employees within their organization.

3.

Decisional Role.
Managers constantly make decisions related to their company’s activities. Managers also face a broad range of problems and conflict which must be resolved to ensure successful company performance.

4.

Entrepreneurial Role.
Managers are often taking risks in undertaking new projects, investing company funds into new ventures, and developing new products and services.

4. CLASSIFICATION OF MANAGERS

Depending upon the size of the organization, managers can be classified into three Management Types outlined below.

CLASSIFICATION OF MANAGERS

Business Owners And Top Managers

These include company president and vice-presidents.

Middle-Level Managers

These include heads of departments.

First-Level Managers

These include supervisors and foremen.

5. TIME ALLOCATION BY MANAGERS

Results of the recent research indicate that Managers allocate their time to various activities according to their status within the organization as illustrated below.

TIME ALLOCATION BY THREE LEVELS OF MANAGERS

Activity

Business Owners
And
Top Managers

Middle Managers

First-Level Managers

Planning 20% - 30%

10% - 20%

10% - 20%
Organizing

30% - 40%

30% - 40%

20% - 30%

Leading 20% - 30%

30% - 40%

50% - 60%

Controlling 10% - 20% 10% - 20%

10% - 20%

6. FIVE MAIN OPERATIONAL AREAS IN A COMPANY

Most activities within any organization may be allocated to one of the five main Operational Areas outlined below.

FIVE MAIN OPERATIONAL AREAS IN A COMPANY

Area Of Operations

Functions

General Management

  • Various administrative aspects of running a company.
  • Developing strategic and operational plans.
  • Formulating policies and rules.
  • Organizing human and material resources into a workable structure.
  • Establishing lines of communication.
  • Leading the company towards achieving its goals.
  • Controlling the company's performance.
  • Monitoring company's results and taking corrective actions.

Human Resources Management

  • Familiarity with equal employment opportunity laws.
  • Analyzing various jobs.
  • Preparing job descriptions and job specifications.
  • Planning and forecasting employee requirements.
  • Recruiting and hiring employees.
  • Screening and testing of applicants.
  • Conducting interviews.
  • Employee orientation.
  • Training and developing employees.
  • Motivation and compensation of employees.
  • Conducting performance appraisals.
  • Maintaining career management of employees.
  • Establishing sound labor-management relations.
  • Resolving interpersonal conflicts.
  • Ensuring safety and health of employees.

Financial Management

  • Gathering of accounting information.
  • Maintaining a bookkeeping system.
  • Collaborating with accountants in preparing financial statements.
  • Evaluating the company's financial performance.
  • Preparing operating, capital expenditure, and cash budgets.
  • Formulating tax strategies.
  • Identifying suitable sources of finance.
  • Maintaining cash, credit, and expenditure control.
  • Maintaining inventory and capital assets management and control.
  • Costing of products, services, and projects.
  • Developing pricing methods.
  • Managing computerized accounting.
  • Preparing accounting reports.

Operations Management

  • Facility design, location, and organization.
  • Product selection, design, and standardization.
  • Process design.
  • Design office supervision.
  • Equipment evaluation and selection.
  • Plant layout.
  • Equipment maintenance and replacement.
  • Tool control.
  • Cost estimating.
  • Operations planning and control.
  • Material requirements planning and purchasing.
  • Quality control.
  • Inventory control, storage, and dispatch.

Marketing And Sales Management

  • Gathering marketing information.
  • Measuring and forecasting market potential.
  • Formulating effective marketing strategies.
  • Developing product, pricing, promotional and distribution strategies.
  • Preparing marketing plans.
  • Initiating the sales process.
  • Preparing sales plans and budgets.
  • Developing the sales organization.
  • Recruiting, training, and motivating sales staff.
  • Allocating, compensating, and controlling the sales force.

7. ENTREPRENEURSHIP AND MANAGEMENT SCIENCE

ENTREPRENEURSHIP AND MANAGEMENT SCIENCE

Entrepreneurship And Management Science represent the cornerstone of a successful economic society. There is a very fine line between the terms Entrepreneur and a Small Business Owner. Both terms, in fact, describe the same kind of a person – somebody, who has strong personality, is determined to be independent at any price, be his* own boss, make a lot of money in the process, and take his destiny into his own hands.

The majority of entrepreneurs usually start small business as a “one person show” with the intention of developing their business into something much bigger. Some entrepreneurs succeed beyond their imagination, while others remain small and continue to struggle for many years.  Moreover, unfortunately, over 70 percent of small businesses fail during the first few years of their existence.

REASONS FOR SMALL BUSINESS FAILURE

Many small business owners become discouraged and often give up their business ambitions after experiencing their first failure. Others, on the other hand, learn from their tough experience, and become stronger and better prepared for their next business challenge.

There are several reasons why entrepreneurs fail in business. The main reasons for the Small Business Failure include lack of business knowledge and experience, insufficient capital, poor motivation, family problems, competition in the marketplace, and difficult economic conditions. It is very important, therefore, to understand what these reasons are before undertaking the next business venture.

Entrepreneurship And Management Science are discussed in detail in Tutorial 1.

* Note:

Any reference to gender means "he" or "she" throughout this program.

8. THE BUSINESS ENGINERING METHOD

THE BUSINESS ENGINERING METHOD

There is a certain irony about the “profession” called Small Business Owner.

People who want to become doctors, engineers, or attorneys, for example, must go to college or university, study hard for many years, and pass many difficult tests before they can start their professional life. Upon graduation some of these professionals join large organizations and become successful, while others start their own professional practice. Conversely, entrepreneurs can start a small business without any formal business education virtually “overnight”, but only about 30 percent of them remain successful in the long term.

On the other hand, there are many Business Colleges and Business Schools in the U.S. and other countries, where students can learn about business management and receive a Master Of Business Administration (MBA) degree in business management. However, the majority of the MBA graduates usually look for employment in various financial institutions and banks, insurance companies, and other large organizations. Only a small percentage of MBA graduates actually start their own business.

UNIVERSAL SOLUTION FOR SMALL BUSINESS OWNERS

Here is a real challenge - the majority of people, who are in business, are not trained in business management, while the majority of people who are trained in business management, are not in business. No wonder that about 70 percent of all small businesses fail during the first few years of their existence. This represents about sixty thousand small business bankruptcies every single year!

A prudent way to meet this challenge could be to offer small business owners a comprehensive self-study business knowledge base and a practical business management method. Such method could become a cost-effective alternative to spending tens of thousands of dollars and several years in a university to get an MBA degree. Fortunately, this method is now available and it is called the Business Engineering Method.

The prime objective of the Business Engineering Method is to provide small business owners with a unique “Be-Your-Own-Management-Consultant” Tool, designed to help them to succeed in business.

The Business 2010 Management Program, which you are using at present, represents the first stage of the business engineering method and provides a knowledge-based foundation of this method. You can view this program as a Mini-MBA Program for entrepreneurs and small business owners, like you.

The Business 2010 Management Program prescribes cross-functional self-training of business owners and members of the company’s management team. The ultimate purpose of this program is to provide you with detailed guidance in various areas of operational business management and to enable you to engineer your business for a long-term success, as long as you are prepared to keep an open mind and learn.

The Business Engineering Method is discussed in detail in Tutorial 1.

9. BUSINESS ENVIRONMENT AND ORGANIZATIONAL CULTURE

BUSINESS ENVIRONMENT AND ORGANIZATIONAL CULTURE

Many entrepreneurs and small business owners often don’t pay enough attention to various issues related to the Business Environment, and they don’t spend enough time developing a proper Organizational Culture within their companies. These entrepreneurs simply feel that such issues aren’t really as important as, for example, cash flow and profitability.

The reality, however, is quite different. Business environment plays an integral part in the success or failure of every business. It is essential, therefore, that small business owners get a better understanding of various elements of the External Environment, such as customers, suppliers, banks, competitors, labor unions, and government agencies.

Moreover, small business owners need to pay more attention to various External Conditions which may also affect their business. These include economic conditions, political conditions, social conditions and technological conditions.

Small business owners also need to have a better understanding in developing and cultivating Internal Resources within their organization. These include human resources, financial resources, operational resources, and marketing resources. To ensure a cost-effective utilization of these resources, business owners and managers must be knowledgeable and well-prepared to carry out specific Management Tasks, directly related to such resources. This, in turn, will enable the company’s management team to secure a profitable long-term organizational performance.

IMPORTANCE OF CORPORATE CULTURE

Finally, small business owners need to get a much better appreciation of the importance in developing a solid Corporate Culture within the organization. Obviously, a “one person show” does not really need a corporate culture, since the business owner does everything within the company. However, when the company starts to grow, it is of paramount importance to set the basic guidelines for an effective and ethical corporate culture. A properly developed corporate culture in any organization is as important as a solid foundation of any building.

Unfortunately many business owners don’t pay any attention to the development of the corporate culture within their small business. In fact, they usually feel that this is a “waste of time”. In reality, however, absence of a well-defined corporate culture often becomes one of the biggest reasons for business failure in many organizations, irrespective of their size.

Business Environment And Organizational Culture are discussed in detail in Tutorial 1.

10. PRINCIPLES OF DECISION MAKING

PRINCIPLES OF DECISION MAKING

The ability of small business owners to make good Decisions is of paramount importance to the success of any organization, irrespective of its size. Small business owners are faced with making decisions on a daily basis and this represents an integral part of the business process.

Unfortunately, however, many small business owners often make bad decisions and, subsequently, their companies suffer in different ways. One of the main reasons for this is that many business owners frequently make one common error in the management decision-making process. They are usually looking for the right answers and often reach wrong conclusions, based on erroneous assumptions.

The key to an effective Decision-Making Process is not to look for correct answers, but, instead, to ask correct questions regarding the company’s performance and activities. These questions should relate to the company’s planning activities, organizing activities, leading activities, and controlling activities.

It is essential therefore that small business owners and managers understand the Principles Of Decision Making to ensure successful performance and growth of their organization. Moreover, it is important that business owners and managers become familiar with the basic Steps In The Decision-Making Process. These steps are outlined below.

STEPS IN THE DECISION-MAKING PROCESS

No.

Details

1.

Analyze the existing situation.

2.

Define the problem.

3.

Develop alternative solutions.

4.

Select the most suitable solution.

5.

Implement the decision.

6.

Evaluate the results.

7.

Repeat the process as necessary.

Principles Of Decision Making are discussed in detail in Tutorial 1.

11. THE PLANNING PROCESS

THE PLANNING PROCESS

Planning is the first essential managerial responsibility in any organization. The Planning Process, therefore, represents the foundation of all operational activities within the company. Small business owners must be engaged in the planning process regarding all aspects of their company’s activities including general management, human resources management, financial management, operations management, marketing and sales management.

Planning is critically important in every organization, because without proper planning everybody will start “running in circles” and the entire business operation will become totally unproductive. Unfortunately, many small business owners often don’t spend enough time in planning their company’s operational activities in a professional manner and this causes many businesses to perform poorly and lose money in the process.

Small business owners need to pay serious attention to the planning process and become familiar with two basic types of planning – Strategic Planning and Operational Planning. Moreover, business owners need to become familiar with short-term planning, medium-term planning and long-term planning regarding their company’s activities.

Main Steps In The Planning Process are outlined below.

STEPS IN THE PLANNING PROCESS

No.

Details

1.

Identify the opportunities in the market place.

2.

Establish objectives.

3.

Develop the premises.

4.

Identify alternative courses of action.

5.

Evaluate alternative courses of action.

6.

Select the most suitable course of action.

7.

Formulate supporting plans.

8.

Summarize financial plans.

The Planning Process is discussed in detail in Tutorial 1.

12. STRATEGIC PLANNING

STRATEGIC PLANNING

If the planning process represents the foundation of all operational activities within the organization, then Strategic Planning represents the foundation of the entire planning process. Strategic planning, in fact, represents the most critical factor in determining the company’s overall long-term direction, just like a compass helps the captain to navigate a ship in the ocean.

Many small business owners erroneously assume that strategic planning is designed to be used only by managers in large organizations. They couldn’t be more mistaken. Strategic planning is equally important for all companies, irrespective of their size, just like a compass is equally important for a small fishing boat, as well as a large ocean liner.

For this reasons small business owners need to understand the importance of strategic planning and become familiar with the basic principles of the Strategic Planning Process. This will be the only way to ensure that small business owners will be able to navigate their business toward successful performance and profitability.

Steps in the strategic planning process are outlined below.

STEPS IN THE STRATEGIC PLANNING PROCESS

No.

Details

1.

Define your company’s mission.

2.

Establish your company’s objectives.

3.

Conduct your company’s situational analysis.

4.

Develop and evaluate alternative strategies.

5.

Select the most suitable strategy.

6.

Develop supporting plans.

7.

Implement strategy and supporting plans.

8.

Evaluate strategy and supporting plans.

Strategic Planning is discussed in detail in Tutorial 1.

13. IMPLEMENTATION OF STRATEGIC PLANS

IMPLEMENTATION OF STRATEGIC PLANS

The ultimate result of any planning process lies not in its development, but in its effective implementation. Many small business owners may have prepared various sophisticated plans for their companies, but in the end these plans remained just that. Effective Implementation Of Strategic Plans, therefore, represents the ultimate planning objective of every business owner, irrespective of the company’s size.

The implementation of strategic plans, which by definition are long-term plans, must be supported by several short-term plans to ensure effective results. The supporting short-term elements of the strategic plan include Tactics, Policies, Procedures and Rules. Many small business owners often erroneously assume that these short-term plans are specifically designed to be used by large organizations. Obviously, they couldn’t be more mistaken again.

Small business owners may generally have several types of short-term plans at their disposal and use these plans, based on the specific situation of their company. These short-term plans may support the following Strategic Long-Term Options outlined below.

STRATEGIC LONG-TERM OPTIONS

No.

Details

1.

Limited growth.

2.

Expansion.

3.

Retrenchment through consolidation.

4.

Retrenchment through divestment.

5.

Retrenchment through liquidation.

6.

Combination of the above strategies.

 

COMPANY POLICIES AND RULES

In addition, small business owners must develop specific Company Policies related to various areas of their company’s operational activities. These policies cover the following areas of operations: general administration, human resources, finance and accounting, operations, marketing and sales.

Finally, small business owners also need to develop Company Rules designed to spell out specific guidelines for employee behavior within the organization. In reality, unfortunately, many small businesses don’t have any written rules, and this, in turn, often causes poor operational performance.

Implementation Of Strategic Plans is discussed in detail in Tutorial 1.

14. MANAGEMENT BY OBJECTIVES

MANAGEMENT BY OBJECTIVES

One of the biggest challenges in business management is that the majority of small business owners are not familiar with a very important management tool known as Management By Objectives (MBO). The importance of this tool can’t be overstated, since it represents, probably, one of the most practical ways to improve any company’s performance in a relatively short period of time.

The prime purpose of management by objectives is to take advantage of positive attitudes of employees, to create a suitable atmosphere within the organization, to enable managers and subordinates to evaluate their performance and compare actual results, to provide additional support for effective control of performance, and to accomplish improved performance within the organization in the long run.

Business owners should be aware that the Management By Objectives Process (The MBO Process) in a company of any size can be accomplished through implementation of the following steps outlined below.

STEPS IN THE MANAGEMENT BY OBJECTIVES PROCESS

No.

Details

1.

Set goals.

2.

Plan action.

3.

Implement action.

4.

Review action.

5.

Repeat steps 1 – 4 above on a regular basis.

 

IMPLEMENTATION OF THE MANAGEMENT BY OBJECTIVES PROCESS

Although the MBO Process may sound complicated at first, in reality this is a relatively simple process, which can be effectively introduced in any small business organization. A successful implementation of management by objectives requires full commitment by the business owners and by senior management to the MBO Process throughout the organization.

During this process managers and subordinates set joint objectives related to various operational activities. Each participant has sufficient autonomy in producing results to ensure an effective implementation process. Finally, the MBO Process entails frequent review of the program performance and evaluation of results.

Management By Objectives is discussed in detail in Tutorial 1.

15. OPERATIONAL PLANNING

OPERATIONAL PLANNING

Operational Planning represents an integral part of the overall planning process. If strategic planning provides the boundaries and the overall direction in which the company is heading in the long run, then the operational planning deals with the actual day-to-day operational activities within and outside the organization.

Operational planning represents a very important function of any small business owner and senior management within the company. If strategic planning is designed to provide answers regarding where the organization is heading, then operational planning is designed to provide answers regarding how the company plans to get there and when it plans to achieve specific organizational objectives.

Business owners should also be aware of the following steps in the Operational Planning Process outlined below.

STEPS IN THE OPERATIONAL PLANNING PROCESS

No.

Details

1.

Establish an objective or a set of objectives.

2.

Define the present situation.

3.

Identify operational methods.

4.

Develop a plan or a set of actions to achieve the company’s objectives.

 

OPERATIONAL PLANNING IN A SMALL BUSINESS

Operational planning in a small business can be done on a daily, weekly, monthly, quarterly, semi-annual, or annual basis. This type of planning relates to the following five activities within the organization presented below.

FIVE AREAS OF OPERATIONAL PLANNING IN A SMALL BUSINESS

General Management Planning

Human Resources Management Planning

Financial Management Planning

Operations Management Planning

Marketing
And Sales Management Planning

Operational Planning is discussed in detail in Tutorial 1.

16. PLAN OF MANAGEMENT

PLAN OF MANAGEMENT

A well-defined Plan Of Management represents the final result of all planning activities undertaken by management within any organization. In order for the plan of management to be effective, each element of the planning process has to be implemented in a very professional manner. This, in fact, represents one of the most important tasks and the biggest challenge to every business owner irrespective of the company’s size.

The plan of management comprises various elements derived from the strategic planning, operational planning and management by objectives activities undertaken by management. A professionally managed organization, therefore, should have the following Elements Of The Plan Of Management outlined below.

ELEMENTS OF THE PLAN OF MANAGEMENT

No.

Details

1.

The company’s values and mission.

2.

The company’s strategic objectives.

3.

The company’s situational analysis.

4.

The company’s opportunities and threats in the marketplace.

5.

The company’s strategic plan.

6.

The company’s supporting plans.

7.

The company’s operational plan of action.

8.

The company’s budgets.

 

THE PLAN OF MANAGEMENT COVERAGE

A well-prepared plan of management represents the ultimate responsibility of the business owner and the entire management team in any organization. A comprehensive plan of management should adequately cover the following areas of company’s Operational Activities presented below.

Absence of a sound plan of management, on the other hand, will certainly lead the company in a wrong direction and may cause poor operational performance and potentially serious financial losses in the long term.

THE PLAN OF MANAGEMENT MUST COVER FIVE OPERATIONAL AREAS

General Management

Human Resources Management

Financial Management

Operations Management

Marketing
And Sales Management

Plan Of Management is discussed in detail in Tutorial 1.

17. THE ORGANIZING PROCESS

THE ORGANIZING PROCESS

Organizing is the second essential managerial responsibility, after Planning of various operational activities, within the organization. The implementation of the Organizing Process, therefore, represents a vital step in converting the company’s plan of management into reality. Small business owners and the entire management team are responsible for ensuring that the organizational process is implemented in a professional manner.

If the planning process is designed to provide answers regarding where the company is heading, what needs to be accomplished by the company and when it needs to be accomplished, then the organizing process is designed to provide answers regarding how the organization plans to accomplish these tasks through a specific organizational structure.

Business owners should also be aware of the following steps in the organizing process in a company of any size as outlined below.

STEPS IN THE ORGANIZING PROCESS

No.

Details

1.

Identify and classify activities which must be carried out in accordance with the strategic and operational plans.

2.

Group all required activities in light of the available resources and current environment.

3.

Create organizational structure and departmentalize all activities.

4.

Develop an organizational chart and create functional positions within the organization.

5.

Assign authority, responsibility and accountability to every functional position.

6.

Establish and coordinate the relationships among all functional positions.

The organizing process must be professionally implemented in the following areas of company’s operational activities presented below.

ORGANIZING IS REQUIRED IN FIVE OPERATIONAL AREAS

General Management

Human Resources Management

Financial Management

Operations Management

Marketing
And Sales Management

The Organizing Process is discussed in detail in Tutorial 1.

18. ORGANIZATIONAL DEPARTMENTALIZATION

ORGANIZATIONAL DEPARTMENTALIZATION

Organizational Departmentalization represents one of the first steps in the organizing process in any company. Small business owners and the entire management team are responsible for ensuring a professionally conducted organizational departmentalization.

Obviously, a one-person operation does not require this type of organizing, since the business owner will be the “chef and the bottle-washer”. However, growing small businesses certainly need to develop an effective organizational structure to ensure effective operational performance.

Business owners should also be aware of Three Types Of Organizational Structures presented below.

THREE TYPES OF ORGANIZATIONAL STRUCTURES

   

Functional
Structure

 

Divisional
Structure

 

Matrix
Structure

 

ORGANIZATIONAL STRUCTURES USED BY MANY SMALL BUSINESSES

The majority of small business owners commonly use a Functional Structure in designing their operational activities. Based on this method of departmentalization and depending upon the number of employees, a small business owner will be in charge of the general administration department, and several members of the management team will be in charge of human resources, finance and accounting, operations, and marketing and sales departments.

When the company grows in size and volume of operations, management may consider a Divisional Structure for departmentalization of operational activities. This type of structure may offer management three different options presented below.

THREE METHODS OF ORGANIZATIONAL DEPARTMENTALIZATION

   

Departmentalization
By
Product Or Service

 

Departmentalization
By
Market Or Customer

 

Departmentalization
By
Territory

A Matrix Structure is often used by business owners in specialized product or project management organizations.

Organizational Departmentalization is discussed in detail in Tutorial 1.

19. MANAGEMENT STRUCTURE

MANAGEMENT STRUCTURE

Effective Management Structure is of paramount importance to any successful business organization. This applies to small, medium-sized, and large companies alike. The development of an effective management structure represents, therefore, a critical management responsibility of every business owner.

Obviously, the management structure in a very small company is often limited to one or two key members of the company’s management team, which may include the business owner and an associate, or two partners, or two spouses. However, when the company begins to grow, the management team may grow as well and this is when the structured approach becomes very important.

AUTHORITY, RESPONSIBILITY, AND ACCOUNTABILITY

The development of a management structure is usually based on the company’s operational activities and organizational goals. Each manager in a well-defined management structure must be assigned a certain level of Authority, Responsibility, and Accountability to ensure that the company’s objectives are met in a cost-efficient manner.

It is also important that the company’s management team adheres to the Unity Of Command Principle to avoid any confusion among employees within the company. Moreover, it is important that the management team understand the differences between Line Relationships and Staff Relationships within the organization to ensure cohesive relationships between managers and employees.

ORGANIZATIONAL CHART

The ultimate outcome of the management structure development process is an Organizational Chart. This chart represents a Management Driving Map”, which business owners can use for effective delegation of authority, responsibility and accountability within the organization. The organizational chart is also very helpful in developing clear lines of communication and avoiding confusion between management and employees.

One of the main reasons for business failure is that business owners often don’t pay enough attention to the development of an effective management structure. Many business owners have no idea what an organizational chart is, and those who are aware of this chart still run their business without it. There are also many business owners who are pre-occupied with their own “ego-trip” and by micro-managing their business they often become the biggest “bottleneck” within their own organization.

Management Structure
is discussed in detail in Tutorial 1.

20. ORGANIZATIONAL DESIGN AND DEVELOPMENT

ORGANIZATIONAL DESIGN AND DEVELOPMENT

The process of Organizational Design And Development begins with the completion of the Organizational Chart. As mentioned before, this chart provides the management with a Management Driving Map which shows how authority, responsibility and accountability are allocated to managers and employees and how communication should flow between all managers and employees within the organization.

Organizational design and development does not happen in isolation from other managerial activities. There are four key elements that affect the organizational design and they include the following factors outlined below.

FOUR KEY ELEMENTS THAT AFFECT ORGANIZATIONAL DESIGN

No.

Details

1.

Company strategy.

2.

Company environment.

3.

Company technology.

4.

Company employees.

Business owners also need to take into account the nature of the External Environment, in which their organization has to operate. This may include stable environment, changing environment, or turbulent environment.

Moreover, it is essential to take into account the specific Type Of Operations presented below.

TYPES OF OPERATIONS THAT AFFECT ORGANIZATIONAL DESIGN

Manufacturing
Operations

Service
Operations

Merchandising
Operations

Project Management And Contractors

Larry E. Greiner identified six important Phases Of Organizational Growth, that need to be taken into account by business owners during the process of organizational design and development as outlined below.

SIX PHASES OF ORGANIZATIONAL GROWTH

No.

Details

1.

Growth through creativity.

2.

Growth through direction.

3.

Growth through delegation.

4.

Growth through coordination.

5.

Growth through collaboration.

6.

Growth through alliance.

Organizational Design And Development is discussed in detail in Tutorial 1.

21. THE LEADING PROCESS

THE LEADING PROCESS

Leading is the third essential managerial responsibility after Planning and Organizing various operational activities within the organization. The implementation of the Leading Process, therefore, represents another vital step in converting the company’s plan of management into reality. Small business owners and the entire management team are responsible for ensuring that the leading process is implemented in a professional manner.

Many business owners frequently confuse the concept of a Manager with the concept of a Leader. These two concepts are not really the same and it is important to understand the difference between them. Managers can be trained and they are usually appointed to perform specific tasks within the organization, while leaders usually do not require a special appointment. Many business owners may act as strong leaders by taking the initiative in starting a business and taking subsequent action. However, they often need to get additional business education to become good managers.

Business owners should be aware of two specific Leadership Styles presented below.

TWO TYPES OF LEADERSHIP STYLES

 

Task-Oriented
Leadership Style

 

Employee-Oriented
Leadership Style

Business owners should also be aware of three important factors which influence leadership styles. These factors are outlined below.

FACTORS WHICH INFLUENCE LEADERSHIP STYLES

No.

Details

1.

Management.

2.

Subordinates.

3.

Organizational situation.

Additional research by Hersey and Blanchard suggests that leadership style may undergo the following four evolution stages outlined below.

FOUR EVOLUTION STAGES RELATED TO LEADERSHIP STYLES

No.

Details

1.

“Telling” leadership style.

2.

“Selling” leadership style.

3.

“Participating” leadership style.

4.

“Delegating” leadership style.

The Leading Process is discussed in detail in Tutorial 1.

22. PRINCIPLES OF COMMUNICATION

PRINCIPLES OF COMMUNICATION

Nothing can happen within any organization without good communication. It is essential, therefore, that business owners and managers learn and understand the Principles Of Communication to ensure the successful performance of their company.

Communication is critical in establishing and communicating organizational objectives, developing functional plans, selecting, developing and appraising employees, leading, motivating and controlling the performance of employees, arranging and utilizing physical resources, purchasing materials and services, and dealing with customers, suppliers and various organizations in the most efficient manner.

Business owners and managers should be aware that an ordinary Communication Process entails six basic components outlined below.

SIX COMPONENTS OF THE COMMUNICATION PROCESS

No.

Details

1.

Sender or source.

2.

Message.

3.

Channel.

4.

Receiver.

5.

Feedback.

6.

Noise.

Business owners and managers should also be aware that there can be different Types Of Communication within any organization outlined below.

FOUR TYPES OF COMMUNICATION

No.

Details

1.

Vertical downward communication.

2.

Vertical upward communication.

3.

Horizontal communication.

4.

Diagonal communication.

American Management Association has developed the Ten Commandments Of Good Communication, which should be very helpful for all business owners and employees alike. Moreover, since communication is a two-way process, listening skills are also vitally important in an effective communication process. The Ten Commandments Of Effective Listening are also included in this Tutorial.

Principles Of Communication are discussed in detail in Tutorial 1.

23. THE CONTROLLING PROCESS

THE CONTROLLING PROCESS

Controlling is the fourth essential managerial responsibility after Planning, Organizing, and Leading various operational activities within the organization. The implementation of the Controlling Process, therefore, represents the ultimate step in converting the company’s plan of management into reality. Small business owners and the entire management team are responsible for ensuring that the controlling process is implemented in a professional manner.

Business owners should also be aware that the controlling process in any organization entails four basic steps as outlined below.

FOUR STEPS IN THE CONTROLLING PROCESS

No.

Details

1.

Establish the required standards and methods for measuring performance.

2.

Measure the actual performance.

3.

Compare the actual performance with the required standards and measure the variance between them.

4.

Take corrective action if there is a variance and repeat the process.

Business owners should also know that there can be different Types Of Management Control within any organization as outlined below.

THREE TYPES OF MANAGEMENT CONTROL

No.

Details

1.

Feed-forward control.

2.

Concurrent control.

3.

Feedback control.

One of the main reasons for business failure is that business owners and managers don’t pay enough attention to the controlling function within their organization. Many business owners and managers are often not fully aware of the real feelings among employees and customers alike. They are mainly pre-occupied with the company’s financial issues and profitability and frequently neglect the most important aspects of the business, namely, its customers and employees.

There are also many business owners and managers who are so pre-occupied with their own narrow-ranged priorities that they often miss the reality of the “big picture” and subsequently their companies produce poor results.

The Controlling Process is discussed in detail in Tutorial 1.

 

24. MANAGERIAL ETHICS

MANAGERIAL ETHICS

Parents always teach their children to be honest and ethical when dealing with other children and adults. However, when these children grow up and become small business owners, some of them simply forget about the basic elements of honesty and decent behavior.  They erroneously assume that they can make more money through unethical behavior.

Business owners and managers should be aware that Managerial Ethics are an integral element of any successful organization and ethical behavior will always “pay dividends” in the long run. There are several factors which influence Ethical Behavior in the marketplace outlined below.

FACTORS WHICH INFLUENCE ETHICAL BEHAVIOR

No.

Details

1.

Government regulations.

2.

Industry ethical codes.

3.

Social pressures.

4.

Organizational framework.

5.

Company culture.

6.

Individual’s characteristics.

Some unscrupulous business owners, managers and employees alike often use Common Excuses to justify their unethical behavior as presented below.

EXAMPLES OF COMMON EXCUSES

No.

Details

1.

“It’s not really illegal or immoral”.

2.

“Since nobody knows, it’s OK”.

3.

"This is not in my personal interests".

4.

“This is not in my company’s interests”.

5.

“This is in my company’s interests, although I am personally against it”.

6.

"Since my action helps my company, I can do it".

Business owners and managers must understand that ethical behavior could be instrumental in improving morale and the overall performance of all employees and ensuring a higher level of the company’s profitability. Ultimately, business owners and managers will realize that higher ethical standards could actually be “good for business”.

Managerial Ethics are discussed in detail in Tutorial 1.

25. THEORY Z

THEORY Z

In theory, the basic principles of business management should be the same everywhere in the world. In reality, however, this is not the case. For example, there are many differences between American Business Methods and Japanese Business Methods. These differences have been thoroughly evaluated by William G. Ouchi, who summarized them in his best-selling book Theory Z.

According to Ouchi, there are several differences between American Companies (Type A) and Japanese Companies (Type J) in the following areas outlined below.

DIFFERENCES BETWEEN AMERICAN AND JAPANESE COMPANIES

No.

Details

1.

Period of employment.

2.

Evaluation and promotion of employees within the company.

3.

Career development of employees within the company.

4.

Management control.

5.

The decision making process.

6.

Allocation of responsibility among employees within the company.

7.

Company culture and values.

8.

Employee-management relations.

 

TYPE Z ORGANIZATION

As a result of his study, Ouchi developed Type Z Theory, which describes a Type Z Organization. This type of organization refers specifically to an American company with characteristics of a Japanese organization. Small business owners and managers could benefit substantially by understanding and implementing the basic elements of the Type Z Organization within their businesses.

The actual implementation of the Type Z Organizational elements consists of thirteen steps which are described in this Tutorial. The actual transformation process may take some time and it requires full commitment by management and employees alike. However, this process could be potentially very effective in turning a typical American small business into a more successful growing organization.

Theory Z is discussed in detail in Tutorial 1.

Note:

Additional Japanese management methods include Kaizen and Just-In-Time (JIT). These methods are discussed in detail in Tutorial 4.

26. WHAT IS A SMALL BUSINESS?

CAN YOU WEAR SEVERAL HATS?

Your role as a manager will depend substantially upon the size of your organization. If you are an Owner-Manager of a small business, you must be prepared to "wear several hats" and perform a broad range of managerial and non-managerial duties.

DEFINITION OF A SMALL BUSINESS

Although there is no exact definition of a "Small Business", the U.S. Small Business Administration (SBA) defines small business as follows:

"Small business is any organization with under 500 employees."

According to the Internal Revenue Service (IRS):

99.7 percent of about 26.8 million businesses in United States can be categorized as "small" businesses. These businesses include sole proprietorships, partnerships, and corporations.

We prefer to categorize businesses and companies of various sizes into four categories illustrated below.

CLASSIFICATION OF BUSINESSES AND COMPANIES BASED ON SIZE

     

Micro
Business

 

Small
Business

 

Medium-Sized Company

 

Large
Company

One person business.   Between one and 20 employees and annual sales about $2 million U.S. Dollars.   Between 21 and 200 employees and annual sales between $2 million to $20 million U.S. Dollars.   Over 200 employees and annual sales over $20 million U.S. Dollars.
About 20.8 Million micro-businesses in the U.S.   Small, medium-sized, and large businesses in the U.S.:
About 6 million businesses with one to 500 paid employees.
• About 18,000 businesses with over 500 paid employees.

27. HOW CAN YOU SUCCEED IN A SMALL BUSINESS?

SECRET BUSINESS WEAPONS

Your success in business will depend primarily upon your Business Knowledge, Experience, and Will to succeed, Patience, Perseverance, and Discipline in getting the job done, readiness for Sacrifice to achieve your objectives, and Focus on the final goal. However, all of this will strongly depend upon the overall Attitude exhibited by you, your management team, and your employees.

Please remember, therefore, that Attitude plays a paramount role in achieving results in any company, market, or business situation!

ATTITUDE

Charles Swindoll said it best:

"The longer I live, the more I realize the impact of attitude on life.

Attitude, to me, is more important than facts. It is more important than the past, than education, than money, than circumstances, than failures, than successes, than what others think, or say or do.

It is more important than appearance, giftedness, or skill. It will make or break a company...a church...a home. The remarkable thing is we have a choice every day regarding the attitude we will embrace for that day.

We can’t change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude... I am convinced that life is 10% what happens to me and 90% how I react to it. And so it is with you!”

Always Keep A Positive Attitude!

28. FOR SERIOUS BUSINESS OWNERS ONLY

ARE YOU SERIOUS ABOUT YOUR BUSINESS TODAY?

Reprinted with permission.

29. THE LATEST INFORMATION ONLINE

WOULD YOU LIKE TO LEARN MORE?

As an added benefit to all members of Business Management Club, you will have access to the Latest Information Online on various topics discussed in this Check Point. You will be able to access this information through Business Links included in the downloadable version of this program. These links are updated on a continuous basis.

Note:

Learn more about your First-Year Free Membership in Business Management Club.

 

LESSON FOR TODAY:
Yes, We Can!

President Barack Obama