DOCUMENT RESUME

ED 373 250 CE 067 084

TITLE Business Management. Unit 13. Level 3. InstructorGuide. PACE: Program for Acquiring Competence inEntrepreneurship. Third Edition. Research &Development Series No. 303-13.

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

PUB DATE 94

NOTE 34p.; 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.RD303-13 IG, instructor guide $4.50; RD303-13 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 MFOI/PCO2 Plus Postage.DESCRIPTORS Behavioral Objectives; Business Administration;

Business Communication; *Business Education; BusinessResponsibility; *Competency Based Education;*Entrepreneurship; Ethics; *LeadershipResponsibility; Learning Activities; PostsecondaryEducation; Secondary Education; *Small Businesses;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 3 of learning--starting and managing one's own business.

Included in the instructor's guide are the following: unitobjectives, guidelines for using PACE, lists of teaching suggestionsfor each unit objective/subobjective, model assessment responses, andoverview of the three levels of the PACE program. The followingmaterials are contained in the student's guide: activities to becompleted in preparation for the unit, unit objectives, studentreading materials, individual and group learning activities, casestudy, discussion questions, assessment questions, and references.Among the topics discussed in the unit are the following: leadershipphilosophy, management responsibilities, the decision-making process,management tasks, communication practices, and code of ethics.

(KC)

UNIT 13LEVEL 3

PACETHIRD EDITION

*ENTER ON EDUCATIONANO TRAMING FOR EMPLOYMENT

COLLEGE OF EDUCATIONTHE GADO STATE UNFIERSITY

Program for AcquiringCompetence inEntrepreneurship

neelopttlent ,:eries So, .10.1 A

Objectives:

Develop your leadership philosophy.

Identify management responsibi::ties of the entrepre-neur.

Implement the decision-making process for your busi-ness goals and objectives.

Design management tasks for your business.

Establish communication practices for your business.

Develop a code of ethics for your business.

tiS OF PART NIENT OF EDUCATION

E DtIATIONAL RESOURCES INFORMATRACENTER :ERIC,

11 !^ ,,monl 11,y, Et)\_frneen.ed from the person or organo7Alion

eToatnrg itt,tmer i tsiories have been IFTIFir Inif Ilprt 0.0 fopn,durnon tit1,11I'i

Points, r)1 1,S,,V! DI op pions staled in misrtmnrnent do not necessarily representothcial 0041 poaltion or policy

"PERMISSION TO REPRODUCE THISMATERIAL HAS BEEN GRANTED BY

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TO THE EDUCATIONAL RESOURCESINFORMATION CENTER (ERIC)."

Unit 13

Business ManagementLevel 3

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 Guide for assistance in focusingyour teaching delivery. The 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 to 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.

BEST COPY AVAILABLE

Objectives Teaching Suggestions

1. DEVELOP YOUR LEADERSHIPPHILOSOPHY

What kind of work does a mana-ger do?

What is the mission of your busi-ness?

What are business goals?

What leadership philosophy willyou develop as you manage yourbusiness?

2. IDENTIFY MANAGEMENTRESPONSIBILITIES OF THEENTREPRENEUR

What is involved in controlling?

What control devices are avail-able?

Briefly introduce the SWOT analysis. Use the SWOT analysishandout included at the end of this instructor guide. Teach stu-dents how to fill in each quadrant with appropriate informationon government regulations, competition, customers, suppliers,research and development programs of the firm, and other fac-tors mentioned in the text. Show how both internal factors inthe company (sales force, research and development programs,management, etc.) and factors external to the firm (market de-mand, government regulations, competition, suppliers, etc.) affectthe company's competitiveness.

Have students suggest different missions for their (potential)businesses. Ask several businesses to send company brochuresto give students an idea of how e.,trepreneurs formulate missionsfor their business.

Openly show that profitability is the ultimate (if not exclusive)goal in business.

Explain to students in simple terms what a leadership philosophyis. Have them link the business missions they proposed previ-ously with an appropriate leadership philosophy.

Have students define controlling in their own words.

List budgets, schedules, and feedback on an overhead or chalk-board. tiave students explain how these tools help the entre-preneur control business activities.

Objectives Teaching Suggestions

3. IMPLEMENT THE DECISION-MAKING PROCESS FOR YOURBUSINESS GOALS ANDOBJECTIVES

Why is it important to make goodbusiness decisions?

What are the steps involved inmaking business decisions?

Why do you need to identify theproblem?

What about alternatives?

Do you need to know your objec-tives?

Is new information important?

Why is this information necessaryto the process?

Are positive and negative conse-quences important?

What about formulating a plan ofaction?

Use a simple management case on decision-making and havestudents discuss the importance of decision-making process as it

relates to the case.

Use an overhead or chalkboard to list the steps involved in mak-

ing business decisions. Leave enough space for each to add

information as more detailed discussion follows.

Reconsider the case presented previously to pinpoint each one of

the steps involved in the decision-making process.

Have students present problems they had to solve in real busi-ness situations or situations they know about from other busi-

nesses. Have them suggest alternatives to solve the problems.The teacher could also use articles from various magazines ld

newspapers to create simple cases.

Highlight the importance of correctly defining objectives in thedecision-making process. Have students suggest examples of ob-

jectives in business decision-making (e.g., open a new store,increase sales by 5 percent during the next quarter, etc.)

Invite a local entrepreneur to share his/her experience as itrelates to business decision making. The speaker should stressthe importance of new information in the process (e.g., informa-tion on competition's moves, new technological developments,suppliers, market demand, etc.)

Continue above suggestion.

Engage students in a discussion on the relationship between posi-

tive and negative consequences in decision-making and feedback.

Have students debate the importance of plan formulation and de-

vising alternatives to the plan.

4

Objectives Teaching Suggestions

4. DESIGN MANAGEMENTTASKS FOR YOUR BUSINESS

What's involved in the planningfunction?

What is the master plan?

What are short-term plans?

What are other types of planning?

How important is it to gatherinformation for planning yourbusiness?

What is involved in organizing?

How many forms can your organi-zation take?

How can your business be organ-ized effectively?

Are there steps you can follow inorganizing?

How can you organize your busi-ness?

Have students give examples of what activities are devised ineach one of the types of plans listed in the text (master, crisis,day-to-day, and special event planning).

Define master plans and give a brief example (e.g., introductionof a new product, sales promotion, strategic planning for nextyear, etc.)

Help students define short-term planning and review the exam-ples they gave previously.

Have students suggest special event plans in different businessactivities (finance, marketing, transportation and logistics, etc.).

Conclude the discussion on the importance of information indecision-making.

Briefly define organizing. Engage students in a brief discussionon differences in organization of small versus large companies.

Define stages one and two of supervision. Tell students aboutthe tendency in today's organizations to eliminate ._Itage two (i.e.,companies seek to organize themselves horizontally versus verti-cally, as in the past). This in effect reduces the number of mid-dle level management positions. Explain the positive and nega-tive consequences of shrinking middle management. You mayalso want to discuss "quality" as it relates to organizations.

Use a chalkboard or overhead to list activities critical to effec-tive business organization.

Use the situation presented in the text or another situation toillustrate steps which can be followed in organization.

Use the line and staff organization chart and job descriptionshown in the text to make students understand the underlyingconcepts. Have students design their own (potential) organiza-tions' line and staff organization charts and job descriptions.

5

Objectives Teaching Suggestions

How does directing fit in?

5. ESTABLISH COMMUNICATIONPRACTICES FOR YOURBUSINESS

What communication techniquesand practices will you employ inyour business?

6. DEVELOP A CODE OF ETHICSFOR YOUR BUSINESS

What standards should be includedin your code of ethics?

Relate the directing function to the topic of communication inbusiness.

Have students help to draw a chart to show communication flowamong entrepreneurs, customers, competitors, suppliers, consul-tants, government regulators, bankers, etc. Engage students in adiscussion on communication barriers and how they can beovercome. Barriers to effective communication is a popular andinteresting topic. Encourage students to do outside reading andreport to the class.

Invite a local business attorney to speak about differences be-tween legal and ethical issues and how they relate to each otherin regards to small business.

MODEL ASSESSMENT RESPONSES

1. A business' mission statement reflects the philosophy of the company regarding its customers, employees,products/service-, and business community. The mission statement stresses the relationship of the firm'sphilosophy with profitability goals.

2. The answer should vary from student to student. It should include specific themes such as leadership stylesused at different stages of business growth, employee motivation, ways to overcome stress, feedback fromemployees, customers, distributors and suppliers, and other issues the students believe to be important.

3. The decision-making process is based on the following steps: (1) identifying the problem, (2) illustratingalternatives, balancing objectives and values implicated in the choice, (3) gathering new information to fur-ther evaluate alternatives, (4) assimilating and using all the information made available through the researchprocess, (5) re-examining the consequences of all known alternatives, (6) formulating a plan of action, and(7) implementing the plan.

4. The long-term plan (or the master plan) is vital to the business. The master plan helps the company growin the direction chosen by the entrepreneur. To be feasible, the plan trust consider the human and financialresources and limitations of the business.

5. Organizing a business effectively involves setting up a structure that defines, groups, and assigns responsi-bilities to each employee. It also links jobs to each other. The organizing function ensures that people,machinery, equipment and materials are in the right place at the right time.

POSITIVE

STRENGTHS

NEGATIVE

WEAKNESSES

OPPORTUNITIES

SWOT ANALYSIS

THREATS

Program for Acquiring.Competence inEntrepreneurship

Incorporates the needed competencies for creating and operating a small business at three levels of learning, with experiences andoutcomes 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 answersto the questions, case studies, individual activities, group activities, module assessment references. Instructor Guides include the full textof each student module and lesson plans, instructional suggestions, and other resources. PACE,Third Edition, Resource Guide includesteaching 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, 1900 Kenny Road, Columbus, Ohio 43210-1090

(614) 292-4353, (800) 848-4815.

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

International Consortium for Entrepreneurship Education The Coleman Foundationand

International Enterprise AcademyCenter on Education and Training for Employment

The Ohio State University

9 Center for Entrepreneurial Leadership Inc.Ewing Marion Kauffman Foundation

Your Potentialas an

Entrepreneur

BusinessManagement

Nature ofSmall Business

Help forthe

Entrepreneur

LegalIssues

RecordKeeping

9 k

Types ofOwnership

FinancialAnalysis

BusinessOpportunities

MarketingAnalysis

HumanResources

Global Markets

Location

UNIT 13LEVEL 3

TheBusiness Plan

PricingStrategy

Promotion

CustomerCredit

Financingthe Business

Selling

RiskManagement

Operations

Program for Acquiringh Competence in

Entrepreneurship

CENTER ON EDUCATIONAND TRAINING FOR EMPLOYMENT

COLLEGE OF EDUCATIONTHE OHIO STATE UNIVERSITY

Research & Development Series No. 303-13

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. These objectives were met in Level 1 and Level 2...

Level 1

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.

Identify the rewards of management.

Level 2

Describe the role of management in your potential business.

Describe the pros and cons of various leadership styles.

Examine the decision-making process as it applies to small business.

Identify the steps in the planning process.

Describe organizational tools for a small business.

Identify control procedures for a small business.

Describe methods of evaluation.

Identify ethical issues.

Explain the importance of communication in a business.

4. 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.

Ethics MissionLeadership philosophy Short-term goalsLong-term goals

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

BUSINESS MANAGEMENT

WHAT ARE 'ME OBJECTIVES FOR THIS UNIT?

Upon completion of this unit you will be able to

develop your leadership philosophy,

identify management responsibilities of the entrepreneur,

implement the decision-making process for your business goals and

objectives,

design management tasks for your business,

establish communication practices for your business, and

develop a code of ethics for your business.

WHAT IS THIS UNIT ABOUT?

Good management is the key to success forany business. Such success will depend onyour ability to develop or improve your ownmanagement skills.

The purpose of this unit is to give you adetailed overview of the management pro-cess. You will learn about the responsi-bilities of the manager of a business. Youwill also learn how to apply decision-makingskills to planning, organizing, and control-ling functions within your business.

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You will develop long- and short - *- -m goalsfor your business; organize facilities, work-ers, and materials; and develop control andevaluation procedures to find out if yourbusiness has reached its goals and objectives.

You will also begin to develop your personalleadership philosophy; design communica-tion standards and approaches; and developa code of ethics to guide your businessactions.

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4

Planning

L,:ganizing

Directing

Controlling

WHAT KIND OF WORK DOESA MANAGER DO?

A manager's job is built around the pro-cesses of planning, organizing, directing,controlling and evaluating. At the heart ofa manager's activities, however, is decisionmakinga basic skill that all entrepreneursmust possess.

One method used in helping a manager eval-uate the profitability of a business isStrengths, Weaknesses, Opportunities,Threats Analysis (SWOT). SWOT analysishelps entrepreneurs judge their planning,organizing, directing, and controlling per-formances by assessing the business's com-petitive position in the market. This can bedone by evaluating the strengths and weak-nesses of the business, as well as oppor-tunities and threats in the marketplace.

Examples of a business's weaknesses arepoor management or weak sales force, andproblems related to human resources, suppli-ers, and customer relationships. However iftroubles are detected in a timely manner andappropriate actions are taken, the business'sweaknesses may turn into strengths overtime. Examples of a business's strengths arecontinuous growth from operations, an effec-tive sales force, reliable supplier relation-ships, a strong research and developmentprogram, or a strong customer base.

Companies face threats in the marketplacefrom domestic or -foreign competitors orfrom various government regulations. Anew competitor entering their market with aupscaled, high-quality improved product orperhaps new government regulationsbothcan be threats businesses face continuously.Often times, threats can be turned into grow-th opportunities if the entrepreneur under-stands the intricacies of the market. Forexample, if a bakery next to your business

offers a special sales promotion, you mighttake advantage of this event which couldbring new customers into your store. Thus,you might want to offer a better, more ad-vantageous promotion and gain more saleswith less advertising expense.

WHAT IS THE MISSION OFYOUR BUSINESS?

The first, and most important decision youwill have to make in establishing a success-ful business is to answer the question, "Whatbusiness am I in?" The answer to this ques-tion will set the mission for your business.An example of a mission statement for aspecific business is:

"To provide overnight package delivery tocommercial customers anywhere in theUnited States."

Expect to spend a considerable amount oftime struggling with refining the missionstatement for your company. Do not ruleout alternatives or neglect the informationgathering steps while developing your mis-sion statement.

Critical questions that face all businessesrevolve around three key areas:

Providing for your customer's needs

Developing the highest quality processesand outputs

The aggressive pursuit and elimination ofwaste

14

5

Management functions are usually so inter-related that it is difficult to separate them.For example, while planning a project, youare also considering how to organize, direct,control, and evaluate it. However, eachfunction will be examined individually inthis unit. Mastering these processes is avitally important part of becoming a suc-cessful manager.

WHAT ARE BUSINESSGOALS?

The goal of all businesses is to run effi-ciently and return a profit to the owners.Goals must include successful decision mak-ing in order to remain viable in today'smarket place. Entrepreneurs shoula use thedecision-making process as an aid while performing management functions to attain theirgoals.

WHAT LEADERSHIPPHILOSOPHY WILLYOU DEVELOP AS YOUMANAGE YOUR BUSINESS?

Motivating employees is another importantcomponent of the directing managementfunction. People generally need to feel theyare an important part of the organization.Each employee wants to know, "What's in itfor me?"

Basically, most of us are interested in ourown welfare first. Loyalty comes aboutwhen employees see themselves as importantpersons within the firm and believe the

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company needs their contributions. Youshould recognize each employee as a totalperson. Company morale will be higherwhen this is done. Another result will bemore effective and efficient employees. (SeePACE Unit 14 on Human Resources for amore detailed discussion of this managementfunction.)

Leadership styles refer to the alternativeways in which managers carry out their deci-sion-making responsibilities in relation totheir employees. Each manager's style candiffer from day to day as different problemsare encountered and different business goalsare approached. However, it is worth youreffort to develop an overall philosophywhich matches your personality and yourbusiness situation.

You can view your leadership philosophy asvarying from one extreme that stresses yourefforts to totally control all aspects of yourwork environment and employees to anotherwhich involves completely involving workerparticipation for every decision.

Letting employees work without supervisionor feedback in a "hands-off' manner, is nota middle ground between the above posi-tions, but a recipe for disaster. As busi-nesses grow, business owners often find thatthe style that suited the early stages of theirenterprise no longer matches the needs oftheir organization.

During the earliest stages of the businessformation and growth the owner has to playthe role of the creator of the organizationwho must gain control over all aspects ofhis/her environment. As the company grows

and matures, it is crucial that the entre-preneur adopt a leadership style that allowshim/her to more effectively delegate work.

The transition from control-oriented entre-preneur into effective manager is a challengethat often poses a critical problem for thefirm. Many successful entrepreneurs fail tomake this transition and are forced out bytheir boards of directors or lead their com-panies into problems. The entrepreneur mustcontinue to study his/her style of manage-ment and respond to the changing needs ofthe size and complexity of the environmentin which he/she operates.

As a manager, you need to seek feedback re-garding the leadership style others perceivethat you are using. You should compareother peoples' perceptions with your ownand continually act to reduce any differ-ences.

WHAT IS INVOLVEDIN CONTROLLING?

Controlling is actually guiding a business toachieve its goals. Controlling devices, there-fore, are designed to tell managers when thebusiness is deviating from its chosen objec-tives. The manager is the person who takesaction to get the business "back on course."

The control process involves three basic ac-tivities: (1) establishing standards (theplanning process), (2) comparing perfor-mance against these standards, and (3) takingcorrective action if needed.

WHAT CONTROL DEVICESARE AVAILABLE?

As the owner of a business you can employseveral control measures. First, you willneed to compare your present results to thestandards that were in the planning process.You can make comparisons between plannedbudgets and actual budgets, as well as be-tween planned schedules and actual sched-ules. Such comparisons will allow you todetermine if your planning has been success-ful.

But, whatever control system you institute, itmust provide timely feedback. Problemsmust be identified before it's too late. Agood control system can provide this infor-mation.

As the owner of a business, your successwill depend on how well you apply decision-making skills to planning, organizing, direct-ing, and controlling your business activities.Good management is the key to businesssuccess, and rememberyour success willdepend on developing and improving yourown management skills.

WHY IS IT IMPORTANT TOMAKE GOOD BUSINESSDECISIONS?

Business owners and managers Llike mustmake many decisions each day which willultimately prove either successful or unsuc-cessful to the business. The overriding

7

assumption is that each decision-makingstrategy needs to be pertinent for each newdecision. The optimum strategy is to choosea course of action which will have the high-est payoff for the business.

WHAT ARE THE STEPSINVOLVED IN MAKINGBUSINESS DECISIONS?

Most experienced managers would notattempt to solve problems with limitedamounts of information. Besides gatheringas much information as possible, they wouldalso follow a logical decision-making pro-cess to select the best solution. Use of thisprocess ensures that a number of possiblesolutions are identified and that only the bestones are considered for final selection. Alogical decision-making process is based onthe following steps:

Identifying the problem

Canvassing alternative solutions

Surveying the range of objectives to befulfilled and the values implicated by thechoice

Searching for any new information rele-vant to further evaluation of the alterna-tives

Msimilating and taking account of allinformation, even if it does not supportan initially preferred course of action

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Re-examining the positive and negativeconsequences of all known alternatives,including those originally regarded asunacceptable, before making a finalchoice

Implementing the chosen plan of actionwith special attention to contingencyplans that might be required if variousknown risks were to materialize

Evaluating the results of the decision andmodifying the choice if necessary

An entrepreneur should use this decision-making process while performing all man-agement functions.

WHY DO YOU NEED TOIDENTIFY THE PROBLEM?

The first step, identifying the problem, isthe foundation for success in decision mak-ing. If the problem is not correctly iden-tified, the solution will be worthless.

For example, you are in a situation whereerrors are occurring on a production line.You assume that the problem is a poorlytrained workforce. Actually, the problem isin the equipment on the line. If you developa training program as the solution, it will beworthless because it is not addressing thecorrect problem.

WHAT ABOUTALTERNATIVES?

It is importa-u to remember that some timemust be spent in looking at alternative ac-tions which could be taken. If a decision ismade hastily without looking at other possi-ble solutions, the decisions could havevere consequences the business owner failedto realize. Make a list of all possible solu-tions, even those which may not seem work-able at this point, because the more choicesyou have to examine the better decision youcan make.

DO YOU NEED TO KNOWYOUR OBJECTIVES?

The decision maker needs to evaluate theobjectives which are to be accomplished bythis choice along with all alternatives. Itmight also be helpful to ask others for theirinput. Perhaps someone else can be moreobjective in viewing your objectives andhelp you sort out what your real objectivesshould be. Remember, you are not the onlyone ever to be in this decision-makingsituation.

IS NEW INFORMATIONIMPORTANT?

The next step is to examine new informa-tion. As an entrepreneur you may find yourproblem unique at first, but after examining

M.

new information about the problem, theremay be solutions you did not know about.It is this searching strategy which willuncover that new information for you to test.Compile everything you have learned even ifit is not what you initially thought yourdecision would be.

WHY IS THIS INFORMA-TION NECESSARY TOTHE PROCESS?

When you assimilate or receive new infor-mation many times it will be discounted if itdoes not fit into a prior plan of action. Taketime to think what results you really want toachieve and then evaluate what you havelearned. It is easier to do this now than aftermaking the wrong decision.

ARE POSITIVE ANDNEGATIVE CONSE-QUENCES IMPORTANT?

Again, look at the consequences of the al-ternatives. Remember each alternative has apositive consequence if it works but a nega-tive consequence if it fails. Rely on feed-back from others who have gone throughsimilar problems. If you have not foundothers with similar problems, look for localgroups of business leaders or high school/college business departments for assistance.

9

WHAT ABOUTFORMULATING APLAN OF ACTION?

After all information has been reviewed, theentrepreneur must decide on the best courseof action to pursue and then implement thatdecision. A manager needs to realize, how-ever, that he or she is not required to keepthis plan of action if he or she sees it is notproducing the desired results. All he or shemust do is review the other alternatives, addthis new information, and select another al-ternative to implement. It is the goal of themanager to select the best plan of action thefirst time, but it is foolish to live with a planof action which clearly does not address theproblems of the company.

WHAT'S INVOLVED IN THEPLANNING FUNCTION?

Planning can take place at many differentlevels: the master plan or long-term plan,the short-term plan, special events planning,and crisis planning. The manager is respon-sible for planning at all levels.

WHAT IS THEMASTER PLAN?

The most important plan for any business isthe master or long-term plan. This plan,which you and other responsible employeesprepare, sets the firm's goals or objectives.To be effective at master planning, you

10

should develop certain abilities. You mustbe:

able to see the situation as a whole

capable of dividing the whole into work-able parts

objective and analytical

able to work with the unknown

able to avoid getting mired in details

When developing your master plan, objec-tives and timetables must be established foreach operational area of the business. Forexample:

I. Product Developmenta. Market Surveyb. Test of Marketc. Product generation

II. Market Developmenta. Sales/Promotionb. Distributionc. Pricing/Credit Policies

III. Financea. Profitb. Budgetc. Financial Analysisd. Accounting

IV. Human Resourcesa. Recruitingb. Trainingc. Retentiond. Compensation

V. Operationsa. Process Design/Facilitiesb. Capacity Planning/Schedulingc. Inventory Acquisition/Controld. Quality Managemente. Technology Strategy

Specific employees should be assigned re-sponsibilities for each objective.

A formalized master plan has many advan-tages for a business. Most importantly, theplan helps the company grow in the direc-tion you intend it to grow. The plan outlinesthe general action to be taken to reach yourobjectives. Of course, as you develop theseobjectives, you must take stock of your com-pany's situation, its strengths and weakness-es, and the changes needed to get the firmwhere you want it to be. While doing this,you can also get a good idea of future needssuch as new employees, new facilities, andnew machinery. Master plans help put thepieces of the business puzzle together.

WHAT ARE SHORT-TERM PLANS?

After the master or long-term plan is pre-pared, short-term plans may be made.Short-term plans set forth those objectivesthat must be accomplished in order toachieve the master plan. Short-term plansare based on the master plan. Usually theseobjectives are accomplished in days, weeks,or months; the long-term plan may requireseveral months or a year or more.

Short-term planning is essential to the suc-cess of the small business. Through short-term planning, managers can deal with prob-

lems that could not be anticipated when themaster plan was set. They can try new alter-natives and get immediate feedback to seehow plans are working. Short-term planningforms the backbone for day-to-day opera-tions.

You may find it helpful to establish a masterplanning calendar and post it in a locationaccessible to each of your employees. Thiscalendar can contain "coded" references fromyour master plan objectives, as well as se-lected shorter term plans. Each employeecan then be responsible for annotating eachobjective as it is reached or modified. Thistool, if used in a positive spirit, can lead to"team" orientation by helping each employeesee their contribution to the overall businessgoals.

WHAT ARE OTHE1TYPES OF PLANNING?

Special event planning is quite similar toother methods of planning, except that it isapart from the everyday business routine.The key to special event planning is inte-grating it with other work that must be done.Do not let the special event become so im-portant that it disturbs other necessarybusiness activities.

Good planning techniques should eliminatedaily or weekly crises. But even with goodplanning you'll have to do some crisis pia&ning to handle a crisis situation. When acrisis decision has to be made, the followingguidelines might help:

11

Get into a relaxed state of mind

Focus on the logical outcomes of differ-ent solutions

Don't put off making the decision

Act decisively once you reach a decision

Don't be afraid of failure

Both crisis planning and special event plan-ning supplement your business's long-termand short-term plans.

HOW IMPORTANT IS ITTO GATHER INFORMATIONFOR PLANNING YOURBUSINESS?

Often you will need special information be-fore you can finalize a plan. Research cansupply you with the needed data. Researchinformation about the market or other areascan be gathered in a number of ways.

I can hire someone to collect the data ordo it yourself. The main concern is that thedata be accurate and reliable. Sometimesyou can get needed data from communitysources such as credit agencies and banks,county clerk's offices, U.S. Census reports,published market analyses, trade asso-ciations, and general economic base studies.

Any existing business should make every ef-fort to utilize information gathered fromcustomers that result from their day-to-dayinteractions with the business. For example,

12

if you wanted to know where the majority ofprospective customers were located, datacould be collected by analyzing all previousorders to determine your customers' ad-dresses or by surveying each customer todetermine their area of residence.

WHAT IS INVOLVED INORGANIZING?

Organizing is exactly what it saysorga-nizing the business so it operates effectivelyand efficiently. It involves setting up astructure that gives order to the tasks a busi-ness must conduct to achieve its objectives.

The organizing function is required to de-fin, group, and assign responsibility toothers. This divides the work load amongemployees. Organizing the work of a smallbusiness is a necessity if personnel, equip-ment, and supplies are to be in the rightplace at the right time. To organize workwell, you must group tasks to be done intoindividual jobs. You must also define howone job relates to another.

HOW MANY FORMS CANYOUR ORGANIZATIONTAKE?

The size of your business will probably dic-tate the type of organizational form youchoose. Most small businesses begin at thedirect supervision stage. At this stage, thebusiness owner directly supervises all thework done by all employees. But, as a com-pany grows, it will probably become impos-

sible for a business owner to supervise allemployees directly. The owner will have todelegate the responsibility of supervision toother capable employees who become mana-gers. Stage two is the supervised supervi-sors' stage. In this stage, an owner managesa number of supervisors who, in turn, directthe work of other employees.

HOW CAN YOUR BUSI-NESS BE ORGANIZEDEFFECTIVELY?

How would you go about organizing thework in a flower shop? The organizingfunction of management, like planning func-tions, has some rather well-defined steps.When organizing, you must

determine the activities necessary to car-ry out the plans,

define the activities and classify the ope-rations,

group the activities into job descriptionsto gain the best utilization of resources,

develop authority and direction channelsor each job description,

bring the jobs together to a commonfocal pointthat of achieving a certainrelated set of objectives.

When developing an organizational structurefor your business, remember that each busi-ness varies. The work of some types ofbusinesses may fluctuate almost daily. Even

though activities are different for each typeof business, some basic degree of organiza-tion must exist.

For example, a flower shop would probablyhave to conduct all the following activities:

Buying flowers

Caring for the flowers

Operating and maintaining equipment inthe store

Cutting flowers

Making displays or arrangements

Making sales

Delivering work

Handling store maintenance

Handling flowers by wire

Keeping records

Advertising

Hiring and training employees

Handling telephone sales

Pricing merchandise

Monitoring inventory

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Following up with customers to assureservice delivery

Analyzing the finances of the business

Disciplining employees

ARE THERE STEPS YOU CANFOLLOW IN ORGANIZING?

When organizing, you would define eachactivity, group similar activities, and assignresponsibility and authority. In addition toorganizing the work, there are many activi-ties required to help businesses reach theirgoals. Obviously, it would be impossible forone person to do all the tasks required tooperate their business. Therefore, responsi-bility and authority must be delegated so thatall the work gets done. In a small flowershop, for example, a given employee wouldcarry out tasks grouped as follows:

Employee X -

Caring for flowers; operating and maintain-ing store equipment, store maintenance, de-livery of work.

Employee Y

Cutting flowers; making displays; makingsales.

These task groupings are part of what is

called job description (see Figure 1 on thenext page).

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POSITION DESCRIPTION

Position Title: Sales Person I

Supervisor: Store Manager

Department Name: Ann's Flowers and Gift Shop

Overall Responsibilities and Specific Duties: Opens store. Prepares flowers for sale.Operates and maintains store equipment. Performs various tasks related to general storemaintenance. Receives deliveries and stores flowers and gifts in the store room. Performsflower care maintenance operations. Takes orders.

Relieves supervisor and staff of routine store maintenance duties (e.g. mops floors, cleanscounters, sinks, and store windows, removes trash two times a day, replenishes 'watercontainers in the store refrigerator, cleans shelves and flower display stands, coordinatesflower and gift item delivery (communicates with the delivery person over the phone andpicks up deliveries from the back door).

Takes orders over the phone and in the store. Enters orders on the order forms andcoordinates work load to get order ready in time. Arranges flowers, pots, baskets and giftitems from the store room. Assist sales person II in filling orders.

Specifications: As per Level I specifications.

Figure 1. Sample Job Description

HOW CAN YOU ORGANIZEYOUR BUSINESS?

Most businesses use two principal types ofinternal organization structures. These are(1) line organization and (2) line and stafforganization.

A line organization means that all authorityand responsibility may be traced in a directline from the owner down to the person atthe lowest level in the company.

A line and staff organization is used bybusinesses handling large amounts of com-plex work, resulting in line personnel notbeing skilled in all the specialties of thosethey supervise. To solve this problem, spe-cialists (advisors) are added to give adviceand assistance. However, the role of staffpersonnel is only to give assistance. Theydo not have authority over line personnel.On an organizational chart, staff personnelare usually indicated by broken or dottedlines (see the sample organization chart onpage 15).

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HOW DOES DIRECTINGFIT IN?

Directing is supervising the efforts of youremployees. To be successful in directing,you must communicate well. Expectationsand specific work procedures must be ex-plained to employees if you expect them tomeet your business goals.

The following questions will help you eval-uate your typical communication strategy:

Do you decide what the message is be-fore you begin to deliver it?

Do you decide what medium would com-municate the message most effectively toyour employees?

Do you take into account the values andbackgrounds of your employees andphrase the message so they will under-stand it?

Are you aware of the mental and physi-cal state of employees when you com-municate?

Do you think through the timing, site,sequence of thought, and style of themessage?

Do you ask questions to make sure em-ployees understand the communication?

Do you follow up on whatever actionyou indicated in the communication?

If you do all these things when you corn-municaf important messages, you are an ef-fective communicator. If not, the aboveguidelines will assist you next time you needto give a message to your employees.

WHAT COMMUNICATIONTECHNIQUES AND PRAC-TICES WILL YOU EMPLOYIN YOUR BUSINESS?

Another vital aspect of management is com-municating with other groups and individualsimportant to the business success.

In business these communications occur be-tween the following critical individuals andgroups via any of these media: in person,writing, radio, TV, large meetings, tele-phone, FAX, or computer electronic mail(E-Mail):

Manager EmployeesEmployee CustomerManager SupplierManager Banker/InvestorEmployee EmployeeManager . . . . Government RegulatorsManager Outside professionals

Barriers to effective communication occurwhen any of the above steps are blocked ordistorted. For example, it is impossible toimplement a leadership style stressing work-er involvement unless you can understand themeaning of your workers' statements to you.You need to develop the highest possibleskills in written, oral and n.nverbal com-munication t. become a successful manager.

Specific communication barriers to avoid asyou develop your communication planinclude:

Inappropriate physical surroundings(noise, lack of privacy)

Differences in perception of the environ-

ment

Different word meanings (is your defini-tion of "immediately" the same as youremployees?)

Filtering out unfavorable messages (ap-plies to communications that flow both"up" and "down" the organizationalladder).

It is important to gain as much practice aspossible within each of the following specif-ic communication skill areas:

Written communication

Business letters

Advertising/brochure writing

Memos

Report writing

Oral communications

Oral presentations

Interviewing techniques

,7

17

Conducting meetings or conferences

Listening techniques

Effective telephone use

Nonverbal communication

Gestures

Facial expressions

Tone variation

Effective communication distance

WHAT STANDARDSSHOULD BE INCLUDEDIN YOUR CODE OF ETHICS?

In addition to your responsibility to make aprofit, you as a business owner, have abroader responsibility to a number of groupswithin your community. Ethical businesspractices include assuring that the highestlegal and moral standards are observed in

your relationships with business associatesand members of the community at large. Itis no longer sufficient to just meet generalsocio-economic needs of the community.Today, entrepreneurs are expected to contri-bute to solving ethical problems that con-front the community, such as pollution,safety, discrimination, and poverty.

Your written code of ethics should include

your general principals endorsing fair busi-ness practices (check with your industry

18

association for basic standards). It is alsovery important to include specific examplesof these general standards as they relate toyour particular business. For example, apolicy stating that persons with purchasingauthority should not accept gifts of materialvalue from suppliers should be backed up byexamples of what is meant by materialvalue.

You might think that there is nothing wrongwith promotional handouts, such as pens,agendas, and calendars. However, a surveyconducted by the National Association ofPurchasing Management shows that the an-nual value of vendor's gifts of material valueaccepted by purchasers ranged from $3,000to $5,000. These figures show that, eventhough companies try to develop a strongcode of ethics, many employees are still ig-noring ethical issues. It is crucial that youinvolve all of your employees in the devel-opment of this code and lead by your exam-ple in following each standard to the letter.

There are three basic codes of human con-duct that have been developed. First, com-pany codes use a general approach to high-light important aspects of employees' ethicalbehavior. Secondly, company operating pol-icies describe in detail ethical conditionsunder which employees are expeCted to com-ply. Examples of ethical operating policiesinclude customer complaints, hiring proce-dures, gifts received from purchasers andsuppliers, and employees' behavior in day-to-day business relationships. And finally,five codes of ethics are developed by profes-sional associates in various industries (e.g.,lawyers, suppliers, consultants, etc.). Thesecodes of ethics emphasize the community'sdirect involvement in ethical issues thatbusinesses face today.

Often times, you as an entrepreneur, mightbe enticed to inflate accounting numbers tomake you profits look better. Even thoughthis does rot necessarily mean that the entre-preneur "is cheating," he/she is misleadingpeople involved in the business. If all busi-nesses inflated their accounting numbers, no-body would be able to correctly assess thereal status of a firm. Moreover, the entre-preneur sets bad examples for his/heremployees.

The difficulty of tracing unethical issuesstems from the fact that it is almost impos-sible to declare a certain behavior right orwrong if illegal matters are not involved.Ethics questions do not have a unique fault-less answer. The same ethical issue couldbe debated by 100 people in 100 differentways. Therefore, people, must use reasonand common sense in establishing standardsof business ethical behavior.

Entrepreneurs should regard ethical problemsmore than a social responsibility. The futureof their business is highly dependant on thehealth of the company's environment. Theentrepreneur who respects and applies ethicalstandards appropriately sets a good examplefor his/her employee and other people she/hedoes business with. It is critical to under-stand that there is only one small step be-tween unethical and illegal. It depends com-pletely on the entrepreneur to determinewhat is ethical and encourage and enforcethe codes or policies.

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

INDIVIDUAL ACTIVITIES

A.

Obtain a copy of a management plan form

from your instructor. Then, for your busi-ness or a business of your choice, developthe following components of a managementplan:

1. Establish long-term and short-term goalsand objectives for this business for aone-year period. Be specific. Developa mission statement.

2. Locate or design any planning forms thisbusiness will need (for example, budgetsor schedules). Establish any standardsthat will be needed to determine if goalsand objectives have been attained.

3. Determine the number and types of em-ployees the business will need. Brieflydescribe the duties and responsibilities ofeach job. Focus on specifying the be-havioral aspects of each job descriptionas they relate to production, customercommunications, and ethical behavior.Draw an organization chart that will rep-resent the internal organization of thisbusiness.

19

4. Establish control procedures for thisbusiness. In other words, how will youdetermine if your business's goals andobjectives have been reached?

5. Establish a code of ethics appropriate forthe types of issues that will likely arisein its operations.

6. Establish a set of communication stan-dards for your business that covers allwritten communication. The purpose ofthese specific standards is to give em-ployees the information they need in car-rying out the communication tasks con-tained within their job descriptions.

Present a speech to your class, prepared forthe purpose of telling your shareholders the"state of the business." Provide informationabout what has happened in the last year andwhat plans there are for the future.

C.

There is a conflict between two employeesover the work schedule. How do you handle

this? Using the decision-making process,outline your course of action.

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GROUP ACTIVITIES

A.

Work in teams of four to six. You are theowner of a restaurant. You must plan allactivities from scheduling employees to pro-duction. Make a checklist in the ordereverything would occur. Compare your listwith other team members and agree on onegroup list. Check the team list with arestaurant owner in the area.

B.

Your team owns a restaurant that is notdoing well in the market place. Bills arepast due and employee paychecks were notissued on the last pay day. There is a greatdeal of food left over but it is past the daterecommended for use; some of it has spoil-ed. You can clean up most of it to wheremost customers will not notice. Will therestaurant serve this spoiled food to savemoney? How do you arrive at your deci-sion?

C.

The team is divided into one interviewerand several interviewees. Develop a stan-dard interview checklist for evaluation. Allinterviewees will remain to evaluate eachother's performance. All interviewees willbe interviewing for one opening in the com-pany. The manger will make a decision andthe interviewees will also make a decision.

Compare checklists as to why each personwas chosen for the job.

D.

Have three other people study the manage-ment plan you have designed for your busi-ness. Ask them to make suggestions. Arethere areas you haven't adequately covered?Are your goals and objectives realistic? Canyou determine when they have been reach-ed? Make any changes you feel are neededin your plan.

0

CASE STUDY

Southern Foods Corporation employs 402people. Under the leadership of its foundersand co-presidents, brothers Brandon and KalebHill, Southern expanded rapidly and offers thebest quality product in its market. A goodpart of this success is due to the personnelchoices made by Kaleb Hill. The only seriousdeficiency in the personnel area of Southern isthe total lack of female managers.

Southern is beginning to experience a numberof pressures. Consolidated Foods, SouthernFoods' main competitor, has implemented anextensive cost-cutting program, giving them apricing advantage over Southern. In addition,Southern Foods has been slow to acknowledgeshifts in consumer preferences toward low-saltand low-calorie foods. Robert Wilkerson, thecurrent CEO, shot down a proposal to enterthe now booming market for lightweight dehy-drated foodsa market now dominated byConsolidated Foods, the first company todevelop these products.

Wilkerson is a staunch adherent to the Hillfamily's conservative management philosophy.He believes that competition, money, and the

DISCUSSION QUESTIONS

21

work ethic are major forces that drive peopleto produce. Employees are simply expected toperform consistently at peak levels of produc-tivity and qualitythat's what they're paidfor. And, if they have any complaintsletthem go and work elsewhere. Employees whocontribute to producing the best bottom lineresults (profits) are the ones most likely to getthe raises and promotions. The other factorsconsidered when employees are reviewed bymanagers count very little in such decisions.Convinced that competition is the key to im-proving sales and productivity, Wilkerson re-organized the company into two autonomousdivisions. He makes it clear that the divisionswith the biggest increases in profits andmarket shares will be the ones to reap therewards when budgets, promotions, and salaryincreases are considered.

Brandon and Kaleb Hill begin the annualmeeting with the news that they are retiringdue to economic pressures. They want RobertWilkerson's daughter, Tammy, to succeedthem as President of the company. The re-quest is approved and Tammy Wilkerson ad-dresses the meeting. She is the first female ina management position.

1. What style of leadership will Tammy Wilkerson need to run Southern Foods Corporation?

2. Never holding a management position with the company, how will other managers view her?

3. What are the main objectives the company must face at this time?

4. As a manager what hard decisions must be made in order for the company to survive?

5. Does the company have a responsibility to the workers?

6. How would you like to work in this business, as a line employee and as a manager?

7. What can be done about the lack of women in management positions? What de you think arethe reasons Tammy Wilkerson was selected to be President?

00 1

22

ASSESSMENT

Read the following questions to check your knowledge of the topics pres. ;c1 in this unit.When you feel prepared, ask your instructor to assess your competency on th

1. What is the purpose of a mission statement for your company?

2. Describe your leadership philosophy as you see it in relation to your business.

3. Outline the decision-making steps and explain their importance to your business.

4. Why is long-term planning important for an organization?

5. What are the benefits of effectively organizing your business?

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 Moore, 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 3

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

c:> 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

.)" 4