Entrepreneurship Chapter 13 Management, Leadership, and Ethics
Leadership Qualities • Confidence • Optimism • Self-esteem • Good time management skills—leaders get more done in less time
Management Styles Coercive—pressure/commanding • Pro: effective in disasters or with employees who need forceful management • Con: hurts employee morale, creativity Authoritative—leader sets goal, leads team – “come with me” • Pro: works well if leader is expert • Con: not good if leader is not an expert & is trying to lead people who are Affiliative—puts people first • Pro: gets employees on board • Con: can fail to give adequate direction
Management Styles (cont.) Democratic—gives employees strong voice in company • Pro: builds morale • Con: can result in endless meetings & stagnation Pacesetting—sets high standards, challenges employees to meet them • Pro: great when employees are self-motivated • Con: can overwhelm less-committed employees Coaching—focuses on helping employees learn & grow • Pro: good with new employees • Con: can create resistance among long-term employees
How Will You Pay Yourself? • This will affect company financial performance. • Options include • Commission (a percentage of every sale). Treated as a variable cost (varies with sales). • Salary (fixed amount of money paid once a week or once a month/year). Treated as a fixed operating cost (does not vary with sales). • Wage (fixed amount per hour). Treated as a cost of goods sold (COGS). • Dividend—share of company profits. Deducted from net profit (after taxes).
Ways to Add Employees to the Business • Bring in partners with complementary skills • Hire experts to work on specific tasks on a contract or hourly basis (“work for hire”) • Hire part-time employees “at will” • Hire full-time employees “at will”
The Hiring Process Define the job Post the job Screen resume Interview candidates Check references Negotiate salary Hire Orientation How to Find Employees Campus recruiting Agencies Internet job listings Executive search firms Recruitment
Laws & Taxes Affecting Employees • Payroll Taxes: Must be withheld from earnings & paid to the local, state, & federal government as wage taxes, Social Security (FICA), & others. • Fair Labor Standards Act: Requires employers to pay minimum wage & not hire anyone under 16 years old full-time among other rules. • Equal Pay Act of 1963: Requires employers to pay men & women the same amount for the same work. • Antidiscrimination Laws: Protect employees from discrimination due to age, race, religion, national origin, color, gender, & physical disability.
Encourage Great Employee Performance • Find the right people for the right jobs • Provide fair compensation & good working conditions • Share your vision for the company • Give incentives, such as profit sharing • Offer control over their work • Ensure defined responsibilities
Encourage Social Responsibility • Offer employees incentives to volunteer in their communities • Recycle in the office • Donate portion of business profits to a charity that employees support • Refuse to animal test products • Establish a safe, healthy workplace
Management • The art of planning and organizing a business so it can meet its goals • Entrepreneurs tend to be creative people who get bored with day-to-day details of running a business. Smart entrepreneurs understand this & hire managers. • A corporation can sell stock to raise capital to hire managers.
Planning Organizing Leading Directing Staffing POLDSCCRIM Controlling Coordinating Representing Innovating Motivating Management Functions
Ethical Leadership & Organizations • Your ethics become your company’s ethics. • Your behavior sets the tone for the company’s behavior. • Behaviors may be legal & not ethical. • Ethical business behavior makes good business sense! Customers return to businesses that treat them ethically. • Treat employees well, too. Employees who feel used by their employers will not do their best work.
Corporate Ethical Scandals • In 2002 these companies were found to have published false financial statements, inflating their earnings & misleading investors. • Enron • WorldCom-MCI • Tyco • Global Crossing • Stock investors and employees who had put retirement funds in company stock lost millions. • These scandals were failures of corporate governance: the companies did not have rules & safeguards in place to prevent executives from lying, cheating, & stealing.
Corporate Governance • Never just take company profits to pay yourself. • Do not treat company profits as personal funds. • Choose a wage, salary, or dividend arrangement & document it in your financial records. • Keep accurate financial records, checked once a year by a reputable accountant. • Establish financial controls. • Create an advisory board of people with strong ethics.
Human Resources Fundamentals • Compensation & payroll • Benefits • Organizational development • Organizational structure • Employee retention • Succession planning • Education & development • Labor law & HR compliance
Useful HR Strategies • Diversity—encourage gender, ethnic diversity • Benchmarking—evaluate employees & how their performance compares to competition • Retention—develop programs to encourage valued employees to stay with the company
Firing and Laying Off Employees • You cannot fire someone just because you don’t like him/her. • Unsupported firing exposes your company to wrongful termination lawsuits. • Conduct regular employee performance reviews so you have proof of poor performance. • If employee violates rules, inform him/her in writing & keep copy for your records.