DOCUMENT RESUME

ED 373 208 CE 067 042

TITLE Business Management. Unit 13. Level 1. InstructorGuide. PACE: Program for Acquiring Competence inEntrepreneurship. Third Edition. Research &Development Series No. 301-13.

INSTITUTION Ohio State Univ., Columbus. Center on Education andTraining for Employment.

PUB DATE 94

NOTE 28p.; For the complete set, i.e., 21 units, each doneat three levels, see CE 067 029-092. Supported by theInternational Consortium for EntrepreneurshipEducation, the Coleman Foundation, and the Center forEntrepreneurial Leadership Inc.

AVAILABLE FROM Center on Education and Training for Employment, 1900Kenny Road, Columbus, OH 43210-1090 (order no.RD301-13 IG, instructor guide $4.50; RD301-13 M,student module, $3; student module sets, level1--RD301M, level 2--RD302M, level 3--RD303M, $45each; instructor guide sets, level 1-RD301G, level2--RD302G, level 3--RD303G, $75 each; 3 levels andresource guide, RD300G. $175).

PUB TYPE Guides Classroom Use Teaching Guides (For

Teacher) (052) Guides Classroom UseInstructional Materials (For Learner) (051)

EDRS PRICE MF01/PCO2 Plus Postage.

DESCRIPTORS Administrators; Behavioral Objectives; *BusinessAdministration; *Business Education; *CompetencyBased Education; *Decision Making; *Entrepreneurship;Interpersonal Communication; Learning Activities;*Managerial Occupations; Postsecondary Education;Secondary Education; Self Employment; *SmallBusinesses; Teaching Guides

IDENTIFIERS *Program for Acquiring Competence Entrepreneurship

ABSTRACTThis instructor guide for a unit on business

management in the PACE (Program for Acquiring Competence inEntrepreneurship) curriculum includes the full text of the studentmodule and lesson plans, instructional suggestions, and other teacherresources. The competencies that are incorporated into this module

are at Level 1 of learning--understanding the creation and operationof a business. Included in the instructor's guide are the following:

unit objectives, guidelines for using PACE, lists of teachingsuggestions for each unit objective/subobjective, model assessmentresponses, and overview of the three levels of the PACE program. The

student module includes the following: specific objectives, questions

supporting the objectives, complete content in the form of answers to

the questions, case studies, individual activities, group activities,

discussion questions, assessment questions, and list of 13references. Model assessment responses are provided in the instructor

materials. These seven objectives are addressed: explain the role ofmanagement in small business; explain how managers spend their time;

name the attributes and skills of a leader; explain the steps in

decision making; define "business ethics"; discuss the purpose ofcommunication in business; and identify the rewards of management.

(YLB)

BusinessManagement

UNIT 13LEVEL 1

FACE=3'Hzzw3 EDITION

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CENTER ON EDUCATIONAND TWANG FOR EMPLOYMENT

COLLEGE OF EDUCATION5,1104.VER.,

Program for AcquiringCompetence inEntrepreneurship

h DI St 1.1,1,11111 r 'No 4,1 I

Objectives:

Explain the role of management in small business.

Explain how managers spend their time.

Name the attributes and skills of a leader.

Explain the steps in decision making.

Define "business ethics."

Ni Discuss the purpose of communication in business.

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Q Identify the rewards of management.

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l'crro-. r.t ....n... rh, op:m.1r,-. .t.ttott , l'.. TO THE EDUCATIONAL RESOURCESlrt,ent rIc. rot rorrr.,.-Irt, -rfro-rot-.' ..1 Of Iii [..,.. ,. , ,,,, INFORMATION CENTER IERICI

INSTRUCTOR GUIDE

Unit 13

Business ManagementLevel 1

HOW TO USE PACE

Use the objectives as a pretest. If a studentis able to meet the objectives, ask him orher to read and respond to the assessmentquestions in the back of the module.

Duplicate the glossary from the ResourceGuide to use as a handout.

Use the teaching outlines provided in theInstructor Glade for assictqnce in focusingyour teaching delivery. t he left side ofeach outline page lists objectives with thecorresponding headings (margin questions)from the unit. Space is provided for you toadd your own suggestions. Try to increasestudent involvement in as many ways aspossible foster an interactive learningprocess.

When your students are ready to do theActivities, assist them in selecting thosethat you feel would be the most beneficialto their growth in entrepreneurship.

Assess your students on the unit contentwhen they indicate they are ready. Youmay choose written or verbal assessmentsaccording to the situation. Model re-sponses are provided for each module ofeach unit. While these are suggestedresponses, others may be equally valid.

fl2

BEST COPY AVAILABLE

Objectives Teaching Suggestions

1. EXPLAIN THE ROLE OFMANAGEMENT IN SMALLBUSINESS

What are the responsibilities ofmanagement?

2. EXPLAIN HOW MANAGERSSPEND THEIR TIME

How does a manager spend his/hertime?

What are the tasks of a manager?

What are some of the problemsthat managers face?

What are leadership styles?

3. NAME THE ATTRIBUTES ANDSKILLS OF A LEADER

What are some attributes and skillsof leaders?

4. EXPLAIN THE STEPS INDECISION MAKING

Why are decisions so important?

What are the steps in decisionmaking?

How important is it to use eachstep in this decision-making pro-cess?

Open the discussion by showing a chart that lists managementresponsibilities. Have students express their own opinions onwhat management activities respectively correspond to planning,organizing, staffing/directing, and evaluating.

Have the class think of how managers spend their time. Ask

guiding questions to ensure a smooth discussion.

Have students follow Joan's or Bob's Typical Work Weekmodels in the text and fill in a similar table that outlines theirown typical work week activities. Try to teach students how toorganize their tasks and pay attention to details and priorities.

Have the class think of what problems managers face. Help stu-dents understand what weaknesses managers must work on.

Use a chalkboard or an overhead to show the three basic man-agement styles. Use simple examples to illustrate these stylesand discuss.

Run a contest between teams of students. Each team is tasked torecall as many attributes and skills common to leaders aspossible.

Have students give examples from their own experience to showthe importance of decision making.

Explain to students the five steps of the decision-making processby using the example provided in the text or your own example.Have students follow the five steps with their own examples.

Use other examples to illustrate the importance of each of thesteps :n the decision-making process. Repeat the activity andskii, individual steps of the process. Have students assess thedifferent results.

(-)

Objectives Teaching Suggestions

5. DEFINE "BUSINESS ETHICS"

What are business ethics?

6. DISCUSS THE PURPOSEOF COMMUNICATIONIN BUSINESS

What purpose does communicationhave in business?

7. IDENTIFY THE REWARDSOF MANAGEMENT

What rewards does managementoffer?

This is a good opportunity for students to be creative. Givesituations involving business ethics issues to small groups ofstudents. Have them debate/discuss the issues.

Create a simple chart to demonstrate the importance of businesscommunications: Teach students how to improve written, verbal,and nonverbal communication skills.

Ask students to express their own understanding of managementrewards.

MODEL ASSESSMENT RESPONSES

1. Managers must be able to organize, schedule and plan employees' work on a daily basis, hire and trainemployees, set production levels, and control the quality of products and services.

2. There are three basic leadership styles: (1) hands-off, (2) autocratic/directive, and (3) worker involvement.

The hands-off leadership approach is characterized by employees' freedom of action. Managers selectemployees according to their skills, assign them various tasks and let them choose their own way to perform

these tasks. This approach cannot correct undesired behaviors and is not recommended for employees who

do not feel they are an integral part of the organization.

The autocratic/directive style uses close management supervision and attempted control of all factors inorganizations. It is designed to correct employees' undesired behaviors. However, this style does not take

advantage of the employees' creativity and inventiveness.

The worker involvement approach seeks a two-way communication between the manager and employees.The manager selects employees according to their skills and capabilities, assigns tasks to them, and allowsthem to perform them the way they choose. The manager controls and monitors only key activities.

3. The planning stage includes all activities that must be performed prior to target actions, such as openinga new business, introducing a new product, hiring new employees, etc. Organizing activities include sched-uling, assigning work load, and establishing a firm's code of policies. The staffing process involves hiring,laying off, and training employees. Controlling and evaluating employees' work ensures appropriate moni-

toring and control by managers to keep the business profitable. Production management includes settingproduction levels and quality standards, production job scheduling, equipment and machinery technological

upgrading, etc.

4. There are five steps in a decision-making process: (1) identifying the problem/objective, (2) definingalternative solutions. (3) gathering facts about the alternatives, (4) evaluating the alternatives, and(5) formulating the plan of action.

4

By using this step-by-step procedure (or variations of it) many bad decisions can be avoided. Sometimesit is difficult to identify the problem or to find alternative solutions if one does not make a list ofalternatives or does not gather enough information about the alternatives.

It is not always a good idea to do things on your own. Professional consultants offer managers their experi-ence and expertise to help solve business problems.

5. Business ethics are a key factor to business success. Even though some unethical practices are not illegal,they will project a bad business image. The business community perceives unethical practices as unaccept-able and eventually excludes unethical behavior from the business environment.

Ethical issues link legal and moral aspects. Ethics affect customers, employees and yourself; unethicalbehavior may lead to loss of both employees and customers as well as self-respect.

6. To communicate in business is to share messages with other people involved in the business activities. In

order to avoid business miscommunication, managers should develop good oral and written communicationskills. They must listen well to what others say, use appropriate words in both verbal and writtencommuni-cation, use feedback, and have a proper body and nonverbal language.

Good communication skills are critical to employee and customer relations. A manager with good com-munication skills is able to convey messages, desires, thoughts and orders clearly to avoid wasting energy,time and money.

5i

Program for AcquiringCompetence inEntrepreneurship

Incorporates the needed competencies for creating and operating a small business at three levels of learning, with experiences and

outcomes becoming progressively more advanced.Level 1 -- Understanding the creation and operation of a business.Level 2 Planning for a business in your future.Level 3 Starting and managing your own business.

Self-contained Student Modules include: specific objectives, questions supporting the objectives, complete content in form of answers

to the questions, case studies, individual activities, group activities, module assessment references. Instructor Guides include the full text

of each student module and lesson plans, instructional suggestions, and other resources. PACE,Third Edition, Resource Guide includes

teaching strategies, references, glossary of terms, and a directory of entrepreneurship assistance organizations.

For information on PACE or to order. contact the Publications Department at theCenter on Education and Training for Employment. 19(X) Kenny Road, Columbus, Ohio 4321(1-1(191)

(614) 292-4353. (X(X)) /i48-4815.

Support for PACE, Third Edition provided in whole or in part by:

International Consortium for Entrepreneurship Educationand

International Enterprise AcademyCenter on Education and Training for Employment

The Ohio State University 5

The Coleman Foundation

Center for Entrepreneurial Leadership Inc.Ewing Marion Kauffman Foundation

Your Potentialas an

Entrepreneur

BusinessManagement

UNIT 13LEVEL 1

Nature ofSmall Business

BusinessOpportunities

Global MarketsThe

Business Plan

Help forthe

Entrepreneur

Types ofOwnership

MarketingAnalysis

LocationPricing

StrategyFinancing

the Business

LegalIssues

HumanResources

Promotion Selling

RecordKeeping

FinancialAnalysis

CustomerCredit

RiskManagement

Operations

DIP_ k

Program for Acquiring111. Competence in

Entrepreneurship

CENTER ON EDUCATIONAND TRAINING FOR EMPLOYMENT

COLLEGE OF EDUCATIONTHE OHIO STATE UNIVERSITY

Research & Development Series No. 301-13

BUSINESS MANAGEMENT

BEFORE YOU BEGIN .. .

1. Consult the Resource Guide for instructions if this is your first PACE unit.

2. Read What are the Objectives for this Unit on the following page. If you thinkyou can meet these objectives now, consult your instructor.

3. Look for these business terms as you read this unit. If you need help with themeanings, ask your instructor for a copy of the PACE Glossary contained in theResource Guide.

Business ethicsCommunicationDecision makingEvaluationLeadershipManagementOrganizingPlanningProductionStaffing

Copyright "('. 1994, Center on Education and Training for Employment.The Ohio State University. All rights reserved.

rl TSINESS MANAGEMENT

WHAT ARE THE OBJECTIVES FOR THIS UNIT?

Upon completion of this unit you will be able to

explain the role of management in small business,

explain how managers spend their time,

name the attributes and skills of a leader,

explain the steps in decision making,

define "business ethics,"

discuss the purpose of communication in business, and

identify the rewards of management.

WHAT IS THIS UNIT ABOUT?

Some people have been successful in attain-ing their dreams of owning their own busi-nesses; others have not. No matter the out-come, if you could talk to these people, theyall would likely agree with this statement:

Almost all small business successesare attributed directly or indirectly togood management practices.

3

Why is management so important? What domanagers do? Do managers have specialskills? The purpose of this unit is to helpyou answer these very basic questions. Youwill learn about the responsibilities of man-agement. You will have the opportunity toexamine a typical week in a manager's lifeand look at the common problems oftenfaced by managers. You will also learnabout the importance of leadership and deci-sion making. Finally, you will have the op-portunity to explore the roles of ethics andcommunication in business.

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Evaluating

StaffingI.

Organizing

Planning

L

WHAT ARE THERESPONSIBILITIESOF MANAGEMENT?

in order to understand management, youneed to know the tasks for which a manageris responsible. In simplest terms, a managermust plan and guide the work of others sothat the business can reach its goals. Thisrequires the manager to have good planningskills. This includes the ability to set goalsand determine the objectives, or steps, neces-sary for reaching those goals. After plansare made, the work must be organized andscheduled. Resources for carrying out thework must be identified, and employeesmust be hired and trained. One significanttask of the manager is to evaluate all workto ensure that quality and quantity are satis-factory. If the work is not satisfactory, plansmust be amended and new plans implement-ed. Finally, the ability to plan, organize,hire, train, schedule, and evaluate are criticalto a manager's success.

The following example illustrates the respon-sibilities of management in a small midwest-ern travel company:

Planning. A small midwestern travel com-pany decides to introduce the New EnglandColors Tour. The package features a tour ofthe surrounding countryside to observe thebeautiful fall colors, dinner at the famousRoadside Tavern, an overnight stay at theWayside Inn, and breakfast at Maude's.This package will be marketed to seniorcitizen groups.

Organizing. A travel itinerary is developed.Rooms are reserved. Motor coaches arebooked. Potential groups are invited toparticipate.

Staffing. Tour guides and escorts are hiredand trained, and assignments are made.

Evaluating. The tours are conducted. Es-corts make notes about the trip's highlights.At the end of the tour, participants evaluatethe tour.

HOW DOES A MANAGERSPEND HIS/HER TIME?

Joan and Bob are managers of very differentbusinesses. Joan owns and manages a con-signment craft shop. Bob owns and man-ages a small construction company. Al-though they spend different amounts of timeon different aspects of their joos, theirresponsibilities are basically the same: theyboth plan and organize the work, staff theirbusinesses and make job assignments, andmonitor and evaluate the work. In addition,they spend a certain amount of time on pro-duction, or non-management work. Figures1 and 2 show the amount of time Joan andBob spend on different tasks during a typicalwork weeK.

Most businesses have many projects (tasks)occurring in various stages at the same time.If you are thinking about owning your ownbusiness, here are some questions gat youwill want to ask yourself.

Am I capable of remembering detailsfrom one job to the next?

Can I calmly listen to a worker who in-terrupts my work to discuss a problem?

Do I become nervous and irritable underpressure?

Can I work on several things at onetime, or am I likely to concentrate sohard on one thing that I won't recognizewhen something else needs attention?

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Just what is it that an entrepreneur does thatis so vital to success? Simply stated, themanager's primary task is to plan and directthe work of others in a way that allows thebusiness to reach its goals. As an owner ofa small business, it is very important to notethat you will be responsible not only for set-ting the goals for the business but also forplanning, directing, controlling, and evalu-ating. To do this, managers go through thesteps of planning, organizing, staffing, di-recting, controlling, and evaluating. Deci-sion making skills are often the factors thatmake the difference between a manager'ssuccess or failure.

Consider Joan and Bob's example on thenext page to illustrate how these manage-ment functions work in practice.

WHAT ARE THE TASKSOF A MANAGER?

Although Joan and Bob are on very differ-ent schedules, their work has many things incommon (note that each performs a signifi-cant number of non-management or "produc-tion" tasks). Each of them

perform a variety of duties each week,

give and receive a lot of information,

use their own judgment and are responsi-ble for their decisions, and

guide their companies toward their busi-ness goals.

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ManagementFunction Joan Bob

Planning Joan plans to change one of hersuppliers. The new supplier willprovide a broad line of craft artsobjects.

Bob plans to enter a new contractwith a real estate company. The con-tract is related to a four-month ren-ovation work in a downtown officebuilding.

Organization Joan calls on potential suppliers.She obtains price lists and creditconditions. She chooses the supplierand calls back.

Bob develops a detailed renovationplan. Potential workers ere identi-fied.

Staffing/Directing

Joan designates two of her employ-ees to make an inventory of the artsobjects in the store. A new order isplaced with the new supplier.

Bob hires ten new workers and desig-nates the team leaders. He also ap-points two of his most skillful em-ployees to help him train the newworkers.

Controlling/Evaluating

The new order comes in. Joan sup-ervises how the new items are dis-played. She makes notes on pro-ducts and packaging. The notes willhelp her evaluate the new suppliersand plan fot new orders.

The renovation work starts as sched-uled. The team leaders keep theoperation going smoothly. Bob visitsthe job site every day. He makesnotes and gives directions. The noteswill help him evaluate the workassignment and plan for newoperations.

The following examples of Joan and Bob'sweekly work schedules illustrate that mana-gers do in fact share common activities.Most entrepreneurs perform the following:

1. Planning work

2. Organizing people

3. Staffing the business and directingemployees

4. Controlling and evaluating work

5. Production work (when you are con-ducting non-management work on behalfof the business)

As an entrepreneur, you must be a goodplanner. If you are not, your success willprobably be short-lived. When managersmake a plan, they set up objectives or goals.They set up policies, procedt. es, methods, orprograms to accomplish these goals. Plansmust be constantly reviewed and updated.However, the plans themselves do not guar-antee success.

After plans are made, the work must then beorganized. You must identify resources andthe number of people needed to carry out theplan.

I

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Monday Tuesday Wednesday Thursday Friday

Make work Make work Take new prints Make work Make workassignments (2) assignments (2) to state capital for

approval (5)assignments (2) assignments (2)

Make sales calls Pick up tax forms Meet with sub- Visit Job Site 1on prospectiveclients (5)

(5) Lunch contractor (3) (3,4)

Visit Job Site 3 Make phone calls Place material Plan next week'sLunch (3,4) (5) order for new

building (2,5)work (1)

Visit Job Site 1 Lunch Go through mail Lunch(3,4) (5) Talk with sales-

Return calls (5) person (4) Make materialsPlan work assign- Figure and submit list for next weekments (1) Check prints for

new job (4)bid for job (2) Lunch and place orders

with suppliersGo through mail Check time sheets Visit Job Site 3 (2,5)(5) Go through mail (4) (3,4)

(5) Go through mailPlan workassignments (1)

Visit Job Site 2(3,4)

(5)

Return calls (5)Call service per-son for copymachine (5)

Go through mail(5) Call ad agency

(5)

Plan workassignments (1)

Figure 1. Joan's Typical Work Week

* 1,2,3,4,5represent (Planning, Organizing, Staffing/Directing, Controlling/Evaluating, Production)respectively. Note the relatively small amount of time that a business owner spends on the four strictlymanagement functions.

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Monday Tuesday Wednesday Thursday Friday

Tend shop (5) Tend Shop (5) Tend Shop (5) Tend Shop (5) Tend Shop

Tidy shop (5) Make craft items Plan new display Tidy Shop (f. Set up new dis-

(5) (1) play (5)

Go through mail Go through mail

(5) Go through mail Go through mail (5) Go through mail

(5) (5) (5)

Inventory (4, 5) Inventory (4, 5)Lunch Lunch Lunch

Lunch Lunch

Afternoon off Bookkeeping (4) Go to bank (5)

Plan the week (1) Call handcraftGive evening talk Correspondence workers (3) Design ad for

Go to bank (5) to club (5) (5)Pick up new con-

next week'spaper (5)

Call handcraftworkers (3)

Go to bank (5) signments (5)

Pick up new con-signments (5)

Pay hills (5) Pick up suppliesfor display (5)

Update books

Order supplies (5) (4, 5)

Update books (4,5)

Talk with officeequipment sales-person (2)

Figure 2. Bob's Typical Work Week

The next step is staffing and directing.Staffing means hiring and training theemployees the business needs. Directingmeans motivating employees to work effi-ciently and effectively to get the job done.

Once the plan is put into action, the qualityand quantity of all results must be evaluated.

If the results are satisfactory, work cancontinue. If problems arise, changes mustbe made and alternative plans may have tobe developed. You must make adjustmentsin personnel, equipment, policies, or proce-dures whenever they are needed.

'3

WHAT ARE SOME OFTHE PROBLEMS THATMANAGERS FACE?

Unfortunatly, a manager's work is evenmore varied ai.0 complex than the precedingexamples indicate. Each day, a managerdeals with many different projects at differ-ent stages. A manager may be planning oneproject, organizing another, and supervisingtwo more in progress. Often evaluation isinformal. Even though the manager maysupervise and direct a number of jobs atvarious stages at once, each project in itselffollows the management pattern closely.

Are you capable of:

Dealing with many projects during eachday,

Remembering details from one projectwhile you mentally "change gears" andconcentrate on solving problems in

another project, and

Listening calmly to a person who inter-rupts your work on one project to reporta serious snag in another project?

Or do you react to such pressures by:

Becoming nervous and irritable,

Criticizing the person presenting the

project so that he or she will go awayand not bother you,

9

Forgetting project details and responsi-bilities, and

Concentrating so hard on one project thatyou can't recognize when another needssome of your time?

If you exhibit these symptoms when workingon a tight schedule with more than one pro-ject, you will need to evaluate and pinpointthose areas you can improve.

Probably you will like doing some manage-ment functions more than others. You willperform certain tasks better than others andmay tend to neglect critical functions.Therefore, you will need to develop exper-tise in your "weak" areas or seek managerialassistance.

WHAT ARE LEADERSHIPSTYLES?

Leadership styles refer to the alternativeways in which managers carry out their deci-sion-making responsibilities in relation totheir employees. Each manager's style var-ies from day to day as new and differentproblems are encountered and a wide rangeof business goals are approached. However,it is worth your effort to develop an insightinto which styles can work best for you andyour specific mix of employees, problemsand points in the decision-making process.There are three labels that represent commonleadership approaches:

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1-laxicis- (Doff

46&-t1tc>crat1c/Dirfacti-ve

Worker lavircpl-brrrierit

Hands-Off

This method focuses on the manager's re-sponsibilities for the initial stages of thedecision-making process. The manager se-lects employees according to their skills andgives them the freedom to work unhindered.This style does not provide an opportunity tocorrect behaviors that do not meet your ex-pectations. Thus, some employees may notfeel part of the larger organization.

Autocratic/Directive

This style provides ample opportunity to ad-just and correct behaviors. Emphasis is onrational control of all aspects of the deci-sion-making process. Employees may not becommitted to goals of the organization. Thismethod does not benefit the employee's

ideas and contributions. In addition, often itdoes not allow for effective employeefeedback.

Worker Involvement

This method seeks two-way communicationflow between manager and employees. Themanager selects only key variables to controland leaves most tasks with employees toperform. Also, the manager solicits employ-ees' input at each stage of the decision-making process.

As the business grows, an entrepreneur oftenfinds that the style that suited the earlystages of the enterprise no longer matchesthe needs of the organization. At that pointin time, the entrepreneur might need tochange his/her management style.

WHAT ARE SOMEATTRIBUTES ANDSKILLS OF LEADERS?

Leadership consists of establishing direc-tion, developing strategies, and inspiring andmotivating others to achieve a goal or goals.Most research shows that leadership is acombination of skills and attributes. Follow-ing are 20 skills and attributes found to becommon among leaders:

1. A positive attitude2. Good interpersonal skills3. Assertive4. Ability to manage stress and conflict5. Good work skills6. Good work habits7. Ability to motivate others8. Ability to delegate work9. Sense of fairness

10. Consistent decisions11. Good listener12. Willingness to learn from others13. Sense of humor14. Responsible15. Empathetic16. Risktaker17. Personal and professional integrity18. Dependable, reliable, trustworthy19. Confident20. Creative, original, visionary

If you choose to become the owner of abusiness, you may find it very fulfilling. Bydoing your best, you can help other peoplereach their potential and you can help makeyour business a good place in which towork. You may not realize it, but you mayalready have many leadership skills andqualities. Determine your leadership poten-

11

tial by seeing how many of the followingstatements describe you

I can lead others with confidence.

I could discipline those under myleadership.

I am good at public speaking.

I can make decisions.

I seek responsibility.

I am self-motivated.

I do not have to conform in groupsituations.

I have compassion for others.

WHY ARE DECISIONSSO IMPORTANT?

Decision making is an important part ofdaily life. For the owner of a small busi-ness, the ability to make decisions is vital.If business owners make good decisions,their businesses probably will be successful.If managers make bad decisions, their busi-nesses may fail.

Before looking at how entrepreneurs makedecisions, it might be helpful to examinehow most people make everyday decisions.Suppose you want to help your friend,Susan, decide how to get to work every day.

12

Which of the following would you adviseher to do:

Buy a car?

cess will help you identify your options andthen make the best decision.

WHAT ARE THE STEPS

Find a car pool? IN DECISION MAKING?

Ride public transportation? The usual decision-making process involvesfive steps. Look at each step with Susan's

Walk? problem in mind.

If you felt you did not have enough informa-tion to make a decision, you were right.Good decisions depend on knowing every-thing you can about a problem. Decisionsmade without enough information are oftendisappointing to everyone concerned.

In making a decision, many people do notexplore all the alternatives available.Susan's problem is an example. Four op-tions have been mentioned. But perhapsthere are more. Before you can make aninformed decision on the problem, you needmore information. A decision-making pro-

1. Identify the Problem (or Objective).Before you can make any decision, youmust know what the problem is. Whomdoes the problem affect? Where does itoccur? What are the circumstances?

Consider Susan's problem of getting towork. Susan lives in California, five milesfrom the factory where she works. Until re-cently, Susan had been riding to work witha neighbor, but now the neighbor is movingto another part of town. Susan must get herown transportation.

She doesn't want to spend the cash neces-sary to buy, insure, and operate a car.Neither does she find the bus schedule in heroutlying residential area convenient. Basedon this information, you can now identifySusan's problem more accurately: she needslow-cost, dependable transportation for a tripof ten miles per day to and from work.

2. Define Alternative Solutions. The nextstep in the decision-making process is toidentify ahem. Jves or options. For ourexample, exactly what choices doesSusan have in getting to her job? Shehas the following options available:

She could walk or run.

She could buy a bicycle.

She could buy a motorized bicycle.

She could buy a used car.

She could buy a new car.

She could take a bus.

She could hitchhike.

She could take a taxi.

She could join a car pool.

She could advertise for a ride towork.

She could move within easy walkingdistance of the factory.

13

She could look for a new job closerto her present home.

She could share her apartment withanother person who had a car andworked at the factory.

Can you think of any other options or alter-natives? If so, add them to the list. Indecision making, it is important to identifyas many alternatives as possible. Sometimesan unlikely idea can stimulate you to thinkof the perfect solution to the problem.

3. Gather Facts about the Alternatives.Some alternatives are better than others.Anyone can omit the really poor options,but it takes some study to differentiatebetween those that seem good.

In Susan's case, she should attempt to findthe exact cost of each option. She shouldalso consider other resources she might needfor each one. For example, does she havetime to walk to and from work? Is her cur-rent apartment large enough to accommodatea roommate? These are just a few of thethings Susan will want to think about beforeshe can make an informed decision.

4. Evaluate the Alternatives. A workablealternative for one person may be a dis-aster for another. People are different intheir likes, dislikes, and values. Differ-ences or individual values must be con-sidered and thoroughly evaluated in for-mulating a solution. For example, theoption Susan selects will probably bedifferent from the one you might choose.Each alternative needs to be evaluated interms of its possible outcomes.

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In this example, Susan decided to buy amotorized bicycle. This inexpensive but de-pendable mode of transportation could easilyget her to work in ten minutes. After work,she could pedal part of the way home andget the exercise she needs to stay physicallyfit.

5. Formulate a Plan of Action. A plan ofaction must be made and imnlementedbefore the decision-making process iscomplete. Merely deciding on an actiondoes not make it take place. You mustplan exactly what to do to make yourdecision work and then do it.

Before Susan's plan could work, she had todo some comparative shopping and buy themotorized bicycle. Then Susan had to checkthe legal requirements to find out if a titleand license were needed. She also had toplan to buy a lock and insurance. In addi-tion, Susan wanted a carrier or knapsack forher purse, her lunch, and any other personalbelongings she might wish to take to work.Finally, she had to choose the best routewith the least traffic to and from work eachday. All these elements formed her plan ofaction.

Susan used the decision-making process tomake an informed decision that fit her life-style. At times you might want to use thisprocedure in your personal life. This organ-ized method of making decisions is veryimportant to entrepreneurs in running theirbusinesses.

HOW IMPORTANT ISIT TO USE EACH STEPIN THIS DECISION-MAKING PROCESS?

Many times entrepreneurs can turn to ex-perts on their staff for help in decisionmaking. In a small business, however, man-agers must make most decisions by them-selves. While this responsibility falls on theowner/manager, it is crucial that he/she bewilling to obtain the assistance from objec-tive professional advisors drawn from out-side the business. These advisors can bedrawn from business service professionals,such as accountants and attorneys, businessassociation members, as well as investors orvolunteer counselors drawn from local, stateor federal business assistance programs (seeyour PACE Resource Guide for specific op-tions and contact information). Don't al-ways try to "go it alone!"

Often managers find that identifying the realproblem is the hardest part of decision mak-ing. What appears to be the problem maybe only a symptom of the problem. Forexample, the problem might ..ppear to belaziness and slow production on an assemblyline, when, in fact, it could be a personalityconflict between workers and their supervis-or. Accurately defining the problem is criti-cal to making the "right" decision.

Most successful managers develop severalalternative solutions. The more imaginativeand open-minded you are, the more alterna-tive solutions you can identify. The numberof alternatives is limited only by your imagi-nation. For example:

The management of Manufacturers, Inc.could identify only one alternative or theirproblem. Their problem was a plant so ob-solete that it could not compete with newerplants. Managers felt their only alternativewas to build a modern plant nearby. Canyou think of other alternatives these mana-gers could have considered? Below aresome suggestions:

What about updating existing facilities?

What about renting new premises?

What about consolidating with anotherplant?

What about building a new locationcloser to the source of raw materials?

What about buying ready-made parts andassembling them in the old plant?

What about converting from manufac-turing to distribution of products?

These and other alternatives could probablyhave been identified had the managers ofManufacturing, Inc., used their imaginations.

When managers gather facts and evaluate al-ternatives, they must match the amount oftime spent to the importance of the problem.For instance, it does not make sense tospend weeks gathering information on whatkind of typewriter to buy. On the otherhand, major decisions could involve largeamounts of money or the development ofcompany policies that will affect many ofthe company's operations. These decisionsdeserve considerable time and study.

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Even after much study, however, you maystill be left with more than one alternativefrom which to select. If these are not verydifferent, you may have to make an "edu-cated guess." To make educated guesses,managers rely on their experiences. Othertimes they rely on their intuition or"hunches." They may have a strong feelingthat one of the decisions is better than theother. They select the decision that feelsright.

As these decision-making alternatives arebeing developed, you need to consider alter-nate sources of information regarding theprocess. For example, your employees are avital source of options and information re-garding each alternative. Other resourcesthat good managers can employ include yourcustomers and suppliers.

Once the decision is made, you must devel-op a plan nd a set of measurable objectivesto implement the decision. A person orteam responsible for carrying out these stepsmust also be chosen.

WHAT ARE BUSINESSETHICS?

In addition to your responsibility to make aprofit, in our society you as an entrepreneur,have a broader responsibility to a number ofgroups within your community. Ethicalbusiness practices include assuring that thehighest legal and moral standards are ob-served in your relationships with the follow-ing community segments:

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Customers

Suppliers and business associates

Employees

General public (neighbors and the physi-cal environment)

Fair and equitable treatment of each of thesegroups is not only "good business" but itwill assure that you and your employeesmake a lasting contribution within your com-munity. Ethical business practices are bestdeveloped by example. That is, you mustlead with "above board" practices if you ex-pect your employees to follow.

You need to be especially concerned aboutthe following unethical practices:

1. False or misleading advertising.

2. Fair treatment of suppliers.

3. Gift giving or receiving amon' yoursales or purchasing staff and customersor suppliers.

4. Income and expense reporting distortions(cash business transactions).

5. How your employees represent them-selves (and your business) to customersand the general public.

You will need to develop a formal (written)code of ethics covering the above and anyareas specific to your industry as one ofyour first orders of business. It is crucialthat you involve all of your employees in thedevelopment of this code.

WHAT PURPOSE DOESCOMMUNICATION HAVEIN BUSINESS?

Communication is the process throughwhich one person shares a message withanother person. Approximately 90 percentof our waking hours are spent communicat-ing with someone else, yet communicating isa skill that is often underdeveloped. Beingable to use a variety of communication skillsappropriately can open doors to success inlife.

In the business environment, being able tocommunicate ideas and understand others isa basic factor in developing and sustainingrelationships. In business, communicationcommonly occurs between the following in-dividuals and groups:

manager and employees

employee and customer

manager and supplier

manager and banker/investor

employee and employer

manager and government representatives

manager and community professionals

To communicate successfully with these in-dividuals and groups, it is very critical thatthe manager of a business develop no lessthan the basic communication skills.

Listening. This communication skill isoften overlooked. It is one of the most dif-ficult skills to learn. Listening is not thesame as hearing. Both hearing and listeninginvolve the ear, but listening involves under-standing what is heard. Listening can be im-proved with practice.

Verbal Communication. This refers to theresponsibility of a speaker to use the mostappropriate words, phrases, and sentences inorder to send a clear message to the listener.

Written Communication. This form ofcommunication is used in office memos, re-ports, business letters, and so forth. A wayto improve writing skills is to do more writ-ing in the form of reports and letters. Also,reading newspapers and books can improvewriting skills.

Feedback. Feedback is the response a per-son gets to message that has been sent.Feedback assures the listener that she or heunderstands the speaker's message. In two-way communication, the speaker and the lis-tener both provide feedback. In one-waycommunication, the speaker receives thefeedback. Misunderstanding often occurs inone-way communication.

Body Language or Nonverbal Communi-cation. This involves communicating amessage through gestures and body move-ments without using words. A person'sbody language often reveals the feelingsbehind a message more clearly than spokenwords.

Finally, good communication often breaksdown when barriers exist. Common barriersinclude differences of opinions, missedmeanings, physical problems, shyness, andtuning out or selective listening. The

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following examples indicate a breakdown incommunication;

I thought you wanted me to start thatnew job after I finished this one.

How was I suppose to know you wereunhappy enough to quit your job?

How was I supposed to know you meantLondon, Ontario?

You can't trust a word he says; hechanges his mind all the time.

WHAT REWARDS DOESMANAGEMENT OFFER?

Managing a business does offer rewards.One impor.ant reward for many entrepre-neurs is the personal satisfaction realizedfrom the successful operation of their busi-ness because of their decisions.

A second reward is that entrepreneurs areable to exercise all of their managerial skillsand talents, not just those skills required todo a single job. An individual's self-respectand self-reliance are thus strengthened.

A third reward is the opportunity to dealwith a wide variety of people on differentlevels. Entrepreneurs deal daily with cus-tomers, employers, suppliers, communityrepresentatives, and many others. Also, theyoften enjoy greater prestige within theircommunity than do salaried managers.

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ListeningFeedback

Body Language orNonverbal

Communication

Finally, you need to consider the financialaspect of becoming a business owner. Whilethe potential for great financial rewards arepresent, you must determine if the invest-ment of your time and money is sufficientlyrewarded by a combination of monetary andnonmonetary rewards.

In summary, managing a small businessposes both problems and rewards. Managinga small business offers a satisfying way oflife, a feeling of independence, and theopportunity to reap the profits from yourefforts.

Managing is probably the most challengingand rewarding job in any business. Manag-ing requires that you be accountable for youractions. Managers are held responsible forthe work of everyone they employ, for corn-pany operations, and for all the decisionsmade. As a manager, you will need to plan,organize the work, motivate employees tocarry out the tasks, and finally, evaluate thesuccess of the plan.

ACTIVITIES

The following activities are designed to helpyou apply what you have learned in thisunit.

INDIVIDUAL ACTIVITIES

A.

One of the neighbors on your block hashired you to clean out her garage. You arethe manager. Using the five functions ofmanagement, make out a schedule whichcould be used to show this neighbor howyou will manage the project before begin-ning work.

B.

Plan your school schedule for the next quar-ter or semester. Did the five steps of deci-sion making help guide your thinking?

GROUP ACTIVITIES

A.

Work in teams of four to six. Each teamneeds to make a decision about what to dofor the prom committee (planning, budget,decorations, food, music, tickets, etc.). Theteam follows through on the first fow stepsof decision making but cannot come to a

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consensus on step five, the plan of action.It is now only one week until the prom.What does your team need to do?

Compare the lists of team members. Howdo they differ? Did anyone arrive at uniqueand creative responses that others did notidentify? Are there others that no one hasmention- A?

After considering all lists, decide on thethree most appropriate alternatives and reportthese findings to the class.

B.

Work in teams of four to six. Each groupmember should think of an example of abusiness experience which represents poorbusiness ethics. Write the example on a3 X 5 note card. The group leader will askeach person to present their examples. Thenorganize the cards on a bulletin board bytype of problem. Discuss the reasons andwhat may be the result of such businesspractices.

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CASE STUDY

A school club decided to operate a grocerydelivery service for a local market over thesummer break. Peggy Meskil has been putin charge of the project.

To begin the project, Peggy made a list ofall of those who could work and the hoursthey were available. Then, she made aschedule for reporting and ending times forall student workers and gave everyonecopies.

To Peggy, scheduling seemed to be a wasteof time because everyone wanted to workand each student made a schedule based onthe available hours they could work. Every-one would work together since the money

DISCUSSION QUESTIONS

earned would pay for school projects for thecoming year.

Two weeks into the project, the club beganto experience problems in having peopleshow up when scheduled. Student workershad valid excuses but sometimes failed tocall and let the store owner know they wouldnot be in to make deliveries. This resultedin a problem with the owner and problemswithin the group over those who worked andthose who did not.

Even though there were hard feelings be-tween students at the end of the project,Peggy evaluated it as a success. The clubhad earned nearly $500.

I. Would you agree with Peggy's evaluation of the project? Explain.

2. How could Peggy have avoided the pr.)blems she faced? Be specific.

3. What valuable lesson did Peggy learn?

4. What would you have done if this was your project?

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ASSESSMENT

Read the following questions to check your knowledge of the topics presented in this unit.When you feel prepared, ask your instructor to assess your competency on them.

1. Why must good managers have special skills?

2. What are the different leadership styles and how do they difthr from one another?

3. The functions of management include planning, organizing, staffing/directing, controlling, andproduction. Define each one.

4. Define the five steps in decision making. Why is it important to follow these five steps?Should you try to "go it alone" in making decisions?

5. Are business ethics a requirement to stay in business? Are business ethics important to thecustomer? To the employee? To you?

6. What is business communication? What are some important ways to ensure againstcommunication barriers? Why is it important for a manager to have good businesscommunications with employees and customers?

REFERENCES

Curtin, Richard T. Mastering the Basics of Small Business. New York, NY: John Wiley &Sons, 1982.

Ferner, J. D. Successful Time Management. New York, NY: John Wiley & Sons, 1980.

Golen, S. Effective Business Communication. U.S. Small Business Administration ManagementAids Number 2001, 1988.

Hodgetts, R. M. Effective Small Business Management. New York, NY: Academic Press, 1982.

Kuratko, D., and Hodgetts, R. Entrepreneurship: A Contemporary Approach. New York, NY:The Dryden Press, 1989.

Kreitner, R., and Kaniki, A. Organizational Behavior. Homewood, IL: Irwin, 1989.

Longnecker, J. G., and Mcore, C. W. Small Business Management, 8th ed. Cincinnati, OH:South-Western Publishing Company, 1990.

Mitchell, T., and Larson J. People in Organizations. New York, NY: McGraw Hill, 1987.

Poza, Ernesto J. Smart Growth Critical Choices for Business Continuity and Prosperity. SanDiego, CA: Jossey Bass Publishers, 1993.

Scarborough, N., and Zimmerer, T. Effective Small Business Management, 3rd ed. Columbus,OH: Merrill Publishing, 1991.

Schroeder, R. G. Operations Management, 2nd ed. New York, NY: McGraw-Hill Book Com-pany, 1985.

Steinhoff, Dan. Small Business Fundamentals. New York, NY: McGraw-Hill Book Company,1982.

Stress, R. M. Introduction to Organizational Behavior. New York, NY: Harber & Collings,1991.

Level 1

PACE

Unit 1. Your Potential as An Entrepreneur

Unit 2. The Nature of the Small Business

Unit 3. Business Opportunities

Unit 4. Global Markets

Unit 5. The Business Plan

Unit 6. Help for the Entrepreneur

Unit 7. Types of Ownership

Unit 8. Marketing Analysis

Unit 9. Location

Unit 10. Pricing Strategy

Unit 11. Financing the Business

Unit 12. Legal Issues

1:4> Unit 13. Business Management

Unit 14. Human Resources

Unit 15. Promotion

Unit 16. Selling

Unit 17. Record Keeping

Unit 18. Financial Analysis

Unit 19. Customer Credit

Unit 20. Risk Management

Unit 21. Operations

Resource Guide

Instructor's Guide

Units on the above entrepreneurship topics are available at the following levels:

Level 1 helps you understand the creation and operation of a businessLevel 2 prepares you to plan for a business in your futureLevel 3 guides you in starting and managing your own business