Management Issues for the Growing Business

INTRODUCTION

Effective management is the key to the establish-
ment and growth of the business. The key to suc-
cessful management is to examine the marketplace
environment and create employment and profit op-
portunities that provide the potential growth and
financial viability of the business. Despite the
importance of management, this area is often mis-
understood and poorly implemented, primarily be-
cause people focus on the output rather than the
process of management.

Toward the end of the 1980s, business managers be-
came absorbed in improving product quality, some-
times ignoring their role vis-Ö-vis personnel. The
focus was on reducing costs and increasing output,
while ignoring the long-term benefits of motivating
personnel. This shortsighted view tended to in-
crease profits in the short term, but created a
dysfunctional long-term business environment.

Simultaneously with the increase in concern about
quality, entrepreneurship attracted the attention
of business. A sudden wave of successful entrepre-
neurs seemed to render earlier management concepts
obsolete. The popular press focused on the new
cult heroes Steve Jobs and Steve Wozniack (cre-
ators and developers of the Apple Computer) while
ignoring the marketing and organizing talents of
Mike Markula, the executive responsible for
Apple’s business plan.* The story of two guys
selling their Volkswagen bus to build the first
Apple computer was more romantic than that of
the organizational genius that enabled Apple to
develop, market and ship its products while rap-
idly becoming a major corporation.

In large businesses, planning is essential for de-
veloping a firm’s potential. However, many small
businesses do not recognize the need for long-range
plans, because the small number of people involved
in operating the business implies equal responsi-
bility in the planning and decision-making proces-
ses. Nevertheless, the need for planning is as im-
portant in a small business as it is in a large one.

This publication focuses on the importance of good
management practices. Specifically, it addresses
the responsibilities of managing the external and
internal environments. It can provide a basis for
confronting the challenges of the 1990s.

—————————————————–
*References to large corporations do not imply SBA’s
endorsement of their products or services.
—————————————————–

MANAGING THE EXTERNAL ENVIRONMENT

Two decades ago, Alvin Toffler suggested that the
vision of the citizen in the tight grip of an om-
nipotent bureaucracy would be replaced by an or-
ganizational structure of ad-hocracy.* The tra-
ditional business organization implied a social
contract between employees and employers. By ad-
hering to a fixed set of obligations and sharply
defined roles and responsibilities, employees re-
ceived a predefined set of rewards.

—————————————————–
* A. toffler, Future Shock (New York: Bantam Books,
1970), 124-125.
—————————————————–

The organizational structure that Toffler predict-
ed in 1970 became the norm 20 years later, and
with it came changed concepts of authority. As or-
ganizations became more transitory, the authority
of the organization and firm was replaced by the
authority of the individual manager. This entre-
preneurial management model is now being replica-
ted throughout society. As a result, the individ-
ual business owner must internalize ever increas-
ing organizational functions.

Another change in today’s business environment is
dealing with government agencies. Their effect on
the conduct of business most recently appears to
have increased. As industries fail to achieve high
levels of ethical behavior or individual busines-
ses exhibit specific lapses, the government rushes
in to fill the breach with its regulations.

To identify the impact of government agencies
on your business and the measures you can take
to challenge that impact, consider the follow-
ing questions.

– Which agencies influence how you conduct
business?
Local ———————————-
State ———————————-
Federal ——————————–

– Who are the key contacts in each agency?

– What regulations currently affect your
business?

– What are the current public policy propos-
als expanding the impact of the agency?

– Do you know how to challenge agency find-
ings?

– Are you ready to work with the agency over
the long-term?

– Do you know how to use attorneys effectively?

MANAGING THE INTERNAL ENVIRONMENT

Human Resource Issues

Ensuring Open Communications

Effective communications play an integral role in
managing and operating any successful business.
With open communications changes and their effects
on the organization are quickly shared. Your firm
then has the time and skills needed to respond to
changes and take advantage of evolving opportuni-
ties.

The following checklist addressing how you
would respond to an employee’s suggestion pro-
vides an assessment of the communication pro-
cess in your business. Place a check next to
the statements that are commonly heard in your
business.

Statement
—————————————————
– Face facts it’s unrealistic. —–
– Who else has done it? —–
– It’s not your problem. —–
– Fill out form XX/xx revised. —–
– It won’t work. —–
– Bring it to the committee. —–
– We don’t have the time. —–
– We tried it before and it failed. —–
– You think what? You’re joking! —–
– Everybody knows that that’s foolish. —–
– We can’t afford to think about it. —–
– Don’t you have better things to do? —–
– Are you some kind of a radical? —–
– We’re too small/big for that. —–
– Impossible; our main product line
would be obsolete. —–
– The boss would never consider it. —–
– It’s contrary to company policy. —–

Carefully consider any statements that you have
checked. This may indicate that management is
inflexible and unresponsive to employee sugges-
tions. Management that is unable to respond im-
mediately to changes in the market signals an
inflexible unstable firm. In the rapidly chang-
ing business environment such management can
mean eventual failure for your business. If you
haven’t developed such a checklist do so. It
will help you determine if and where adjust-
ments are needed in your management staff.

Balancing Schedules Stress and Personnel

Without organization and good management the
compressed time schedules associated with modern
business can cause stress and make extraordinary
demands on people. An effective management struc-
ture can reduce stress and channel the productive
capacity of employees into business growth and
profits.

Setting Duties Tasks and Responsibilities

An organization is characterized by the nature
and determination of employees’ duties tasks
and responsibilities. While many organizations
use different methods for determining these it
is essential that they be clearly defined.

The core of any organization is its people and
their functions. Duties tasks and responsibili-
ties often evolve in an ad hoc manner. A typi-
cal firm starts with a few people often one per-
forming all duties. As the firm grows others are
hired to fill specific roles often on a function-
al basis. Roles that were handled by consultants
and specialists outside the firm now are handled
internally. As new needs emerge new roles are de-
veloped.

Just as an emerging business develops an account-
ing system it should also develop a human resource
system. For instance the following employee infor-
mation should be available and checked for accura-
cy at least once each year.

– Name
– Address
– Nationality (immigration status)
– Marital status and dependents
– Hire date
– Company job history:
– Title and code
– Performance
– Location
– Salary rate and history
– Education including degrees
– Specialty training
– Transcripts as appropriate
– Pre-employment work experience:
– Key responsibilities and levels
– Professional licenses or certificates
– Professional publication and speaking
engagements
– Teaching experience
– Language abilities:
– Reading
– Writing
– Speaking
– Leadership evidence:
– Company
– Civic
– Other
– Relocation preferences and limitations
– Travel experience and preferences
– Career goals

Review your personnel files periodically to
ensure that the information is correct and
current. Implement a system that will make
updating personnel files a fairly simple
routine yet confidential process.

Business Team

The apex of an effective organization lies in
developing the business team. Such a team in-
volves delegating authority and increasing
productivity. Assess the effectiveness of your
business team with the following checklist:

– The leader of the team is
respected by the members. —–
– The abilities of all team
members are respected. —–
– A team spirit is evident
through activities. —–
– Individual members compen-
sate for weaknesses in each
other. —–
– Jokes are not disparaging. —–
– A genuine feeling of being
part of the best is exuded. —–
– The work area is self-
delineated and reflects a
spirit. —–
– Mistakes result in corrective
action not retribution. —–

– Each member understands the
importance of his or her
contribution. —–
– The team can explore new
areas of activity. —–
– Security of employment is
evident. —–

Controlling Conflict

Another key to successful management lies in
controlling conflict. Conflict cannot be elim-
inated from either the business or the inter-
personal activities of the enterprise. A mea-
sure of the organization’s success is the de-
gree to which conflict can be exposed and the
energies associated with it channeled to de-
velop the firm. Although establishing policies
and procedures represents the tangible aspect
of organization and management the mechanisms
to tolerate and embody challenges to the es-
tablished operation serve as the real essence
of a firm that will survive and prosper.

Structural Issues

Organization

The effectiveness of a particular organization-
al form depends on a variety of internal and
external events for example:

– Competitors (number or activity)
– Technology (internal or external)
– Regulatory environment
– Customer characteristics
– Supplier characteristics
– Economic environment
– Key employees
– Growth
– Strategy (including new products and markets)

Even though you may discover that certain events
are affecting your business be careful not to
change the organizational structure of your firm
without discussing it with your management team.
Employees generally can accomplish goals despite
organizational structures imposed by management.
Because restructuring involves spending a lot of
time learning new rules implementing a new orga-
nizational structure is costly.

Structure

The essence of a successful organization can
be more simply summarized than implemented.
The following checklist can help you deter-
mine measures to ensure your management struc-
ture is adequate. Check the entries that apply
to your firm and also find out what measures
your company needs to take to improve its man-
agement structure.

– Key market and customers are understood. —–
– Technology is mastered. —–
– Key objectives are articulated and shared. —–
– Major functions are identified and staffed. —–
– A hierarchy of relationships is established. —–
– A business team is in place and functioning. —–
– Measurable results are well above industry
standards. —–
– Employees are the best source of new hires. —–

Policy and Procedural Issues

Authority

The central element of organizational management
is authority. Through authority your firm develops
the structure necessary to achieve its objectives.

A. L. Stinchcombe summarized the role of authority
succinctly when he stated any administrative sys-
tem that decides on the use of resources is also a
system of authority directing the activities of
people.*

The authority that once was conferred by either
owning a small business or having a position in
the bureaucracy of a larger firm has been re-
placed by technical competence (including that
of forming and running the business). Forces ex-
ternal to your business may emphasize the ele-
ments of granted versus earned authority. Once
the owner-manager controlled the entire business
but suppliers customers unions and the govern-
ment have severely limited the ability of the
business owner-manager to take independent ac-
tion.

——————————————————-
* A. L. Stinchcombe, Economic Sociology (New York:
Academic Press, 1983), 137.
——————————————————-

A primary component of authority is the exercise
of control within the organization. A thorough
system of controls ensures the firm’s operation
and provides a mechanism for imposing authority.
Internal controls include the provision that au-
thority be delegated and circumscribed; examples
of these provisions follow. Place a check by the
provisions that apply to your firm. Consider im-
plementing controls over areas that you have not
checked.

– Approval for disbursements of cash
and regular accounting. —–
– Reconciliation of bank statements. —–
– Periodic count and reconciliation
of inventory records. —–
– Approval of pricing policies and
exemptions. —–
– Approval of credit policies and
exemptions. —–
– Review of expense and commission
accounts. —–
– Approval of purchasing and
receiving policies. —–
– Review of payments to vendors
and employees. —–
– Approval of signature authorities
for payments. —–
– Review of policies. —–

Delegation is a key to the effective exercise of
authority in your business. By delegating limited
authority to accomplish specific tasks the talents
of employees in the organization can be used to
upgrade the skills and experience of the manager.
The following checklist enables you to determine
if you are taking advantage of opportunities to
delegate authority.

– Is your time consumed by daily
chores? —–
– Do you have time for the following:
– Training and development of
subordinates? —–
– Planning? —–
– Coordinating and controlling
work of subordinates? —–
– Visiting customers and sub-
ordinates regularly? —–
– Remaining involved in new
product development? —–
– Visiting branch locations
regularly? —–
– Attending business meetings
outside your business? —–
– Participating in civic affairs? —–
– Is no one on your staff as good
as you are? —–

To effectively delegate responsibility and au-
thority in your organization you must:

– Accept the power of delegation.
– Know the capabilities of subordinates.
– Ensure that specific training is available.
– Select specific responsibilities to be dele-
gated.
– Clearly define the extent and limits of
delegation.
– Match each with necessary authority.
– Provide periodic monitoring and interest.
– Restrain the impulse to insist on how
to do something.
– Remember there are many ways to ac-
complish a specific objective.
– Assess results and provide appropriate
feedback.
– Praise and criticize.

The skills and abilities of each level of author-
ity can be increased by effectively delegating au-
thority throughout any organization.

Management by Objectives

Many firms have embraced management by objec-
tives (MBO) as a way to effectively integrate
people into the organization. An MBO system
provides a structure to ensure coordination
of the organization and to effectively dele-
gate authority and responsibilities. Estab-
lishing an MBO system is a continuing process
and includes the following steps:

– Subordinates submit proposals for objectives
and means of measuring progress.
– A supervisor assesses proposed objectives in
light of evolving business needs his or her
personal perspective and the ability of
the company to ensure rewards for attaining
goals.
– Supervisor and subordinate discuss the ob-
jectives and the standards of measurement
with appropriate timetables and potential
corrective actions.
– Supervisor and subordinate appraise results.
– Supervisor and subordinate negotiate results
(including changes necessitated during the
year) establish rewards and begin the cycle
again.

A successful MBO system is tricky to implement
and maintain because it requires a high degree
of honesty in the organization. Such a system
can fail in many ways such as when:

– Managers don’t have clear objectives for
their units.
– Managers set objectives that are too high
(maybe unconsciously).
– Subordinates neglect objectives (maybe
unconsciously).
– Responsibilities are ill-defined and remain
so.
– Authority is inconsistent with responsibili-
ties.
– Simple measurable activities are emphasized
over substantive decisions and other impor-
tant activities.
– Success is measured by the ability to please.
– Managers emphasize how something is achieved
rather than what is achieved.
– Polices do not guide action.
– Openness is not possible – game playing is
the norm.
– Secondary goals are not specified causing
subordinates to guess what superiors want.
– Neither sufficient support nor resources
are provided as part of the MBO contract.
– New ways of doing things are not allowed.
– Ability to give and withdraw rewards is
constrained.
– Management style creates and encourages chaos.
– The line between flexibility and rigidity is
lost.
– Objectives need adjustment because reality
has changed.
– Excessive chronic flexibility indicates weak-
ness in the objective-setting process.
– A corporate plan fails to shape the mission
of the firm.

At best the MBO system ensures coordination among
the various aspects of the organization through
the self-management evaluation process. At worst
it forces employees into a situation in which
they are perceived as being either poor perform-
ers (failing to meet personally set objectives)
or poor managers (failing to set objectives high
enough or to provide critical self-assessment).
The success of an MBO system depends on the mana-
ger’s ability to ensure that objectives are fair
and consistent with the firm’s needs and to re-
ward successful performance.

Operating Reports

Operating reports form the organizational basis
of your business. Such reports mirror the organi-
zation its structure and function. They define
key relationships between employees and can either
minimize or increase organizational stress.

For many businesses the following reports form the
basis for analyzing the specific areas of a busi-
ness (the frequency of each report depends on the
nature size and organization of your business).
Check the reports your firm currently generates.
Consider creating reporting systems where they are
lacking.

– Case reports (daily, weekly, monthly) —–
– New orders and backlog (weekly, monthly) —–
– Shipments/sales (weekly, monthly) —–
– Employment (monthly) —–
– Inventory out of stock (weekly, monthly) —–
– Product quality (weekly, monthly) —–
– Accounts receivable aging
accounts (monthly) —–
– Weekly overdue accounts —–
– Returns and allowances (monthly) —–
– Production (weekly, monthly) —–

Reporting must be kept current to allow for timely
identification and correction of problems before
serious damage to the organization occurs.

Too much reporting as well as inappropriate report-
ing can be as destructive as too little reporting.
For instance the CEO of a major industrial firm who
receives daily production and inventory reports by
model can lose his or her ability to maintain an
overall perspective. Thus operating managers must
attempt to identify and solve local problems and
take advantage of local opportunities within their
own authority. Inappropriate reporting compromises
management’s ability to leverage individual skills
and abilities.

Operating reports not only provide essential data
that enable management to accomplish its objectives
they also focus staff’s attention on the organiza-
tion’s goals. If reporting is not taken seriously
employees may deal with customers suppliers and each
other in a similarly trivial manner.

To avoid inappropriate reporting review reporting
policies annually to ensure that reports are ap-
propriate and contain the information needed to
make sound management decisions.

Other Issues

Risk Management

Every organization is vulnerable to low probabil-
ity events that could have a potentially disas-
trous effect. A small or new business is no excep-
tion although it is easy to ignore the probability
of such events under the pressures of developing
and maintaining a business. Identifying and quick-
ly dealing with such unlikely events is primarily
the responsibility of management. Also only manage-
ment has the ability to assess the full potential
impact of these events on the overall organization.
Some of the potentially disastrous events that may
affect your business are listed below. Periodically
review the list to ensure your current insurance
policies adequately cover you.

– Theft of property:
– Stealing
– Embezzlement
– Lying
– Breach of laws:
– Local
– State
– Federal
– Computer crime
– Fire and explosion:
– Accidental
– Arson
– Kickback bribery illegal contributions
– Fraud gambling
– Tornado flood lightning freezing
– Environmental dangers:
– Hazardous spills
– Air/water/ground pollution
– Strike sit-down
– Discrimination
– Sabotage

Determine how vulnerable your business is to
these and other such risks by assessing their
probability and impact. Consider actions that
you can take to lower the probability of their
occurring i.e. ways to control your risk. Re-
view the checklist each year to ensure the fu-
ture of your firm is not imperiled through ne-
glect.

Consultants

Consultants can provide a valuable perspective
in developing an organization. A variety of cir-
cumstances can trigger the need for a consultant
including

– Need for funding
– Development of a business plan (strategy)
– Operational shortfalls:
– Late delivery
– High costs
– High employee turnover
– Climbing inventory
– Loss of market share
– A lack of direction or sense of malaise

However consultants cannot solve problems. True
solutions must come from within your organization
and must be implemented daily.

CONCLUSION

Successful management is founded on the mastery
of a myriad of details. While management schools
teach the importance of focusing attention on
major issues affecting the business practical
managers realize the major issues are the vari-
ety of small aspects that form the business. In
an increasingly structured society inattention
to even one minor detail can result in signifi-
cant disruption of the business or even its fail-
ure. Appendix A includes a checklist to help you
review your management structure.

APPENDIX A: CHECKLIST FOR AN EFFECTIVE ORGANIZATION

The following checklist will help you identify
and determine the effectiveness of the manage-
ment and organizational structure of the firm.
If you answer yes to most of the following ques-
tions you are effectively managing your firm. A
no answer indicates that you need to focus on
this management issue.
y/n
– Are responsibilities clear and
matched by authority? —–
– Is your business structure
clear yet flexible? —–
– Are communications focused on
finding solutions rather than
placing blame? —–
– Do people have the information
and resources necessary to do
an excellent job? —–
– Do you and your employees care
about the business? —–
– Does staff come in early and
stay late on their own initiative? —–
– Are mechanisms for conflict reso-
lution working? —–
– Is disorder minimized and channeled? —–
– Can people joke with and about
each other and you? —–
– Does a corporate plan spell out
the firm’s vision? —–
– Do employees pitch in unasked
during a crisis? —–
– Do customers and suppliers
prefer to do business with you? —–

APPENDIX B: INFORMATION RESOURCES

U.S. Small Business Administration (SBA)

The SBA offers an extensive selection of
information on most business management
topics, from how to start a business to
exporting your products.

This information is listed in The Small
Business Directory. For a free copy con-
tact your nearest SBA office.

SBA has offices throughout the country.
Consult the U.S. Government section in
your telephone directory for the office
nearest you. SBA offers a number of pro-
grams and services, including training
and educational programs, counseling
services, financial programs and con-
tract assistance. Ask about

– Service Corps of Retired Executives
(SCORE),a national organization spon-
sored by SBA of over 13,000 volunteer
business executives who provide free
counseling, workshops and seminars to
prospective and existing small busi-
ness people.

– Small Business Development Centers
(SBDCs),sponsored by the SBA in part-
nership with state and local govern-
ments, the educational community and
the private sector. They provide as-
sistance, counseling and training to
prospective and existing business
people.

– Small Business Institutes (SBIs), or-
ganized through SBA on more than 500
college campuses nationwide. The in-
stitutes provide counseling by stu-
dents and faculty to small business
clients.

For more information about SBA business
development programs and services call
the SBA Small Business Answer Desk at
1-800-8-ASK-SBA (827-5722).

Other U.S. Government Resources

Many publications on business management
and other related topics are available
from the Government Printing Office (GPO).
GPO bookstores are located in 24 major
cities and are listed in the Yellow Pages
under the bookstore heading. You can re-
quest a Subject Bibliography by writing
to Government Printing Office, Superin-
tendent of Documents, Washington, DC
20402-9328.

Many federal agencies offer publications
of interest to small businesses. There is
a nominal fee for some, but most are free.
Below is a selected list of government
agencies that provide publications and
other services targeted to small busines-
ses. To get their publications, contact
the regional offices listed in the tele-
phone directory or write to the addresses
below:

Consumer Information Center (CIC)
P.O. Box 100
Pueblo, CO 81002
The CIC offers a consumer information
catalog of federal publications.

Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
The CPSC offers guidelines for product
safety requirements.

U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
The USDA offers publications on selling
to the USDA. Publications and programs on
entrepreneurship are also available through
county extension offices nationwide.

U.S. Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Room 5898C
Washington, DC 20230
DOC’s Business Assistance Center provides
listings of business opportunities avail-
able in the federal government. This ser-
vice also will refer businesses to differ-
ent programs and services in the DOC and
other federal agencies.

U.S. Department of Health and Human Services (HHS)
Public Health Service
Alcohol, Drug Abuse and Mental Health Administration
5600 Fishers Lane
Rockville, MD 20857
Drug Free Workplace Helpline: 1-800-843-4971.
Provides information on Employee Assistance
Programs.
National Institute for Drug Abuse Hotline:
1-800-662-4357.
Provides information on preventing substance
abuse in the workplace.
The National Clearinghouse for Alcohol and
Drug Information: 1-800-729-6686 toll-free.
Provides pamphlets and resource materials on
substance abuse.

U.S. Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance
with labor laws.

U.S. Department of Treasury
Internal Revenue Service (IRS)
P.O. Box 25866
Richmond, VA 23260
1-800-424-3676
The IRS offers information on tax require-
ments for small businesses.

U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
401 M Street, SW (A-149C)
Washington, DC 20460
1-800-368-5888 except DC and VA
703-557-1938 in DC and VA
The EPA offers more than 100 publications
designed to help small businesses under-
stand how they can comply with EPA regula-
tions.

U.S. Food and Drug Administration (FDA)
FDA Center for Food Safety and Applied Nutrition
200 Charles Street, SW
Washington, DC 20402
The FDA offers information on packaging and
labeling requirements for food and food-
related products.

For More Information

A librarian can help you locate the specific
information you need in reference books. Most
libraries have a variety of directories, indexes
and encyclopedias that cover many business topics.
They also have other resources, such as

– Trade association information – Ask the li-
brarian to show you a directory of trade
associations. Associations provide a valuable
network of resources to their members through
publications and services such as newsletters,
conferences and seminars.
– Books – Many guidebooks, textbooks and manuals
on small business are published annually. To
find the names of books not in your local li-
brary check Books In Print, a directory of
books currently available from publishers.
– Magazine and newspaper articles – Business and
professional magazines provide information
that is more current than that found in books
and textbooks. There are a number of indexes
to help you find specific articles in periodi-
cals.

In addition to books and magazines, many libraries
offer free workshops, lend skill-building tapes
and have catalogues and brochures describing con-
tinuing education opportunities.

About author

SMB Reviews
SMB Reviews 473 posts

SMBReviews is committed to providing small and mid-sized business owners with the information and resources they need to select the best service or product for their company.

You might also like

Articles

6 Myths About Affiliate Marketing

Affiliate marketing is the path to riches for many marketers new to the Internet. But before you even start, you might have heard some various opinions about affiliate marketing. There

Articles

Embrace Change and Failure as You Grow as an Entrepreneur

The only thing that is constant throughout life is change. Unfortunately, it is human nature to deflect change. Not knowing what the future holds or when we have to take

Articles

How to List Your Business on Bing and Why You Should

Local SEO and online marketing is a great way for you to help local customers connect with your business. Today, search engine results have become locally oriented due to increased

0 Comments

No Comments Yet!

You can be first to comment this post!