This Document Contains Chapters 16 to 18 Chapter 16 Professional Small Business Management Teaching Tips • Use the chapter opener to discuss the variety of tasks and skills that small business owners use every day. Ask students if they believe they have the combination of skills needed. • This is a good chapter during which to have a local businessperson come as a guest speaker on managing his or her small business. • Use the Reality Check Leadership Playbook, to have students identify their personal management style. Ask the advantages, limitations, and most useful application of their management style. • Ask students how furniture maker Bill Mork’s motivation techniques fit into Herzberg’s satisfiers and dissatisfiers in Figure 16.3. Bonuses are not cited by Herzberg, but Mork is motivating people with achievement (as evidenced with money). • Use the case, What Would You Do? to test students’ abilities to identify growth issues. Role-playing can be an effective tool to test their abilities. • This chapter closing case on Accurate Perforating addresses issues on a business changing with times, motivating long-established employees, and family succession. Read the case setup to your class from the beginning to “The Decision” (it is available at www.inc.com). Then you can either begin class discussion with the whole group or break the class into groups of three or four and have them brainstorm strategies before opening discussion to all. After you hear students’ recommended strategies, read “The Decision” and “The Experts Weigh In” to share what really happened. Lecture Outline Opening Vignette: Samples of what small business owners do What’s the Point? The point of this chapter opener is to show students the variety of things that small business owners do on a daily basis. Concept Module 16.1 Managing Small Business LO1 Describe the functions and activities involved in managing a small business. A. A main point of this chapter is to show how managing a small business is a complex job. A small business manager must do many things well and without the resources of large organizations. Customer, associate, and employee expectations are high, so professional management is needed. B. The Four Functions of Management Planning involves the conscious decisions of what to do in running a business. Organization is the assembly of resources needed. Leading is the process of getting the most output from those resources. Control involves comparison of what was initially planned with what was actually accomplished—and making new plans. The functions are interrelated and continuous. (See Figure 16.1, The Four Functions of Management.) C. What Managers Do 1. Management is getting things done through other people. Small business managers must strike a balance between doing and managing. Not that managers don’t “do” anything, but time spent on daily operational tasks is not managing. Use the analogy of a small business manager as a conductor leading an orchestra, rather than as a musician. 2. Mintzberg’s study showed that front-line managers (like small business owners) averaged 583 activities per eight-hour day. Major activities for small business managers include: a) Develop relationships with peers. b) Carry out negotiations. c) Motivate subordinates. d) Resolve conflicts. e) Establish information networks and then disseminate information. f) Make decisions in allocating resources under conditions of extreme uncertainty. g) Most important, be willing to continually learn on the job. Entre-Perspectives: Help Me, Help Me, Help Me Small business portals are one-stop shops for information. Some of the best include: • startupjournal.com • bizjournals.com • Allbusiness.com • toolkit.cch.com • inc.com • fastcompany.com • businessweek.com/small-business Concept Check Questions 1. Give examples of efficiency and effectiveness in managing your everyday life. Students could cite examples of efficiency and effectiveness in managing their everyday lives, such as going to the grocery store to buy food and trying to buy what they like and would use, which is being effective. Trying to purchase a less expensive private brand instead of name brands to save money is being efficient in making the most of the resources available. 2. Refer to the chapter opening story. List two differing activities in which each manager engages. Answers will, of course, vary. 1. Bill Mork (Furniture Maker): • Manages production and ensures product quality. • Motivates employees using achievement-driven incentives like bonuses. 2. Accurate Perforating: • Adapts the business to modern times by updating technology and processes. • Handles family succession planning and motivates long-established employees to embrace change. Concept Module 16.2 Small Business Growth LO2 Explain the stages of small business growth and their consequences for managing your business. A. Growth is a natural, and usually desirable, consequence of being in business. Businesses experience growth in revenue, total sales, number of customers, number of employees, products offered, and facilities needed. Businesses experience “growing pains” through these transitions. (See Figure 16.2, Stages of Business Growth.) B. Your Growing Firm As a business grows, so too does the way it must be managed. There are roughly five stages of growth of a business. Not all will pass through each. 1. Existence stage—Entrepreneur runs business alone. 2. Survival stage—Employees are added, so the entrepreneur is no longer responsible just for his or her own efforts. 3. Success-Disengagement/Success-Growth stage—When the business grows to the point where employees operate within several departments, the entrepreneur must either become a professional manager or hire managerial expertise. A level of supervision is added. 4. Takeoff stage—The owner is now more responsible for conceptual rather than technical matters of the business. Multiple departments have been formed. 5. Resource Maturity—At this stage the entrepreneur and the business are separate entities. Most pure “entrepreneurs” leave the business at this stage. C. Transition to Professional Management 1. The transition from entrepreneurial style of running a business to a managerial approach can be complicated by various factors. (See Table 16.1, What’s Bugging You? to view startup and growth problems.) Main factors include: a) A highly centralized decision-making system in which few or none of the business decisions are made by employees b) An overdependence on one or two key individuals, with little delegation c) An entrepreneur’s inadequate repertoire of managerial skills and training in all areas of the business d) A paternalistic atmosphere within the company, which leads to employees’ reluctance to act without clearance from the entrepreneur 2. Attributes that distinguish professionally managed small businesses include: a) Be automated b) Be competitive c) Be resourceful d) Be planned e) Be experienced D. Balance: A Manager’s Goal As a business grows, owners try to maintain a balance between retaining the innovation and flexibility of an entrepreneur and the administrative skill of a manager. E. The Next Step: An Exit Strategy At some point every small business owner must leave the business. The bottom line is they can sell, merge, or close it. Specific exit options include: Sell to financial buyer Sell to strategic buyer Sell to key employee(s) Sell to all employees via Employee Stock Ownership Plan (ESOP) Take the company public via Initial Public Offering (IPO) Create family succession Undertake a planned liquidation What Would You Do? 1. Linda Turner will face different challenges as her company progresses through the four stages of growth described in this chapter. Describe how you believe her business would change in each of the four stages. At the solo stage, Turner would have trouble producing and marketing 1,000 Bellybras by herself—and forget about 10,000—talk about challenges! Since she chose to license her product to Basic Comfort, she will not go through the stages of adding employees, but we can imagine. In the growth stage, Turner would probably have few problems working with supervisors who oversee the different areas. If she stayed with one product, then the supervisors would most likely specialize in the different functional areas of the business. At the formal organization stage, we can imagine that Turner has added product lines in addition to the Bellybra. Ask students what kind of products they think she would diversify with? How would those new product lines affect the organization structure? 2. Business growth that occurs too quickly can present some significant problems and challenges compared with a business’s growing at a slow, steady pace (of course, zero growth or decline makes for a whole new set of problems). Describe the challenges of hypergrowth that Turner could face and how she should respond as a small business owner. Hypergrowth problems generally boil down to three areas—financial, with cash flow demands; human resources, with hiring and keeping competent employees; and production, with outsourcing production to plants with excess capacity or increasing capacity of existing plants. Concept Check Questions 1. Discuss some of the skills or characteristics that are needed by a manager in the startup phase of a business that differ from those needed later to manage a larger, established firm. Startup managers have to spend a certain amount of time doing the actual duties and tasks of the business. They have to decide the balance between doing and managing. Small business managers have to plan, organize, lead, and control. They have to develop relationships with others, carry out negotiations for the business, motivate, resolve conflicts that may occur, establish information networks and get the information out to the public, allocate resources, and must be continually willing to learn on the job. They must also be able to use their resources effectively and efficiently. 2. This Concept Module described five stages a business goes through as it grows. How would management style need to change from stage to stage. After studying the six styles of management, students could say, for example, “I am the classic type. I don’t delegate well. I like to be a part of every decision made. Currently, I am working part-time at the local Comfort Inn. My manager uses the employee team approach. She trusts that things will run smoothly without her watching over our shoulders all of the time. She delegates jobs to certain employees, and that makes us feel good about ourselves.” 3. Which exit strategy discussed in the chapter would you consider ideal? What would a downside of that strategy be? This question will lead students to consider all facets of a strategy of choice. The sale of the business to another company or entrepreneur could be an ideal exit strategy. It allows the owner to cash out and potentially see the business continue to grow under new management. Downside: There is a risk that the new owners may change the company's culture or fail to maintain its success, which could damage its legacy or lead to job losses for long-standing employees. 4. Review the five stages of business growth. Which of these five would you aspire to for your own business. Be prepared to justify your answer. The importance of this question is for students to understand WHY they would aspire to one of these levels of business size. By now they realize that bigger is not better. A business with no employees would be Stage 1 of this model and classified as “Existence.” Students could have good reasons for this being the highest stage desired. Right now we want to get them to realize what has to be done at each stage. I approach this by writing the stages on the board and go around the classroom having students put their name in one of the columns. Then discussion can follow with them providing justification for their choice in front of the group. Concept Module 16.3 Leadership in Action LO3 Discuss the significance of leadership and motivation in regard to employees of small business. A. Small businesses need managers who are also leaders, because building an organization requires every employee to contribute to productivity and efficiently use every resource. B. Leadership Attributes Management Review identified attributes of business leaders: 1. Vision 2. Communication 3. Integrity 4. Trust 5. Commitment 6. Creative Ability 7. Toughness 8. The Ability to Take Action Reality Check: Leadership Playbook Even though they have fewer employees, small business owners must still be leaders in a variety of ways. This box discusses some important leadership ideas. C. Negotiation The art of negotiation—offering what you will give or do for what you can receive—is continuous in running a small business. Every negotiation has four possible outcomes: Lose-lose Win-lose Win-win No outcome Many books and articles have been written about negotiation. Some of the best advice from them includes: Stay rationally focused. Preparation is more important than aggressive arguing. The more options you identify, the stronger your negotiating position. Talk less, listen more. Let the other side make the first offer. D. Delegation Many small business owners have difficulty in delegating both the responsibility and authority needed to accomplish a task—but it is necessary for the manager to maximize the efforts and talents of everyone in the business. E. Motivating Employees 1. Motivations are forces that act on or within a person that cause him or her to behave in a certain manner. Small business owners need to be interested in what motivates those who work for them. 'Trep Connections: Social Media Do's and Don'ts Tips for using social media as a producer rather than a consumer 2. Motivation Theories—Many business textbooks include Maslow’s hierarchy of needs. The question is how to apply the theory in running a small business. The recognition of “pop-up” needs helps. Needs arise in the order shown on the hierarchy—when a lower level need pops up, an employee cannot concentrate on a higher level need until the lower one is taken care of. If an employee gets a call to tell him that his child just broke an arm on the playground, an astute manager says, “Go, take care of the kid—come back to work when you can.” An example by extreme, but it makes the application point. (See Figure 16.3, Job Satisfiers and Dissatisfiers, to view Herzberg’s hygiene and motivator factors.) 3. Motivation Techniques—The key to motivating employees is to know what is important to them. Don’t try to reward someone with something he or she doesn’t want. The story of Bill Mork illustrates this point well. 4. Motivation Myths a) All employees need external motivation. b) Some employees don’t need any motivation. c) Attempts to motivate always increase performance and productivity. d) Money always motivates people. e) Intrinsic rewards provide more motivation than money. f) Fear is the best motivator. g) Satisfied workers are always productive. h) This generation of workers is less motivated than the last. F. Can You Motivate? To determine how effective you are at motivating, ask yourself the following questions: 1. Do you know what motivates each of the people who report to you? 2. To what extent are they motivated by money? 3. To what extent are they motivated by recognition? 4. To what extent are they motivated by opportunity for growth? 5. Have you done anything in the last week that was intended to motivate someone else? 6. Have you done anything lately that would undermine an employee’s motivation—such as embarrassing or criticizing an employee in front of others? 7. Have you praised anyone today? Entre-Perspectives: Just So Many Hours Time is the most precious resource a small business owner controls. This box features some tips and techniques to use it better. G. Employee Theft Fraud and employee theft cost over $400 million per year. Concept Check Questions 1. How can the owner of a small business apply Maslow’s hierarchy of needs to working with employees? The owner of a small business can apply Maslow’s hierarchy of needs to working with employees by first understanding that employees are at different levels in the pyramid at different times. The biggest contribution of Maslow’s theory about motivating employees is its recognition that people have needs that “pop up” and require attention until satisfied. 2. What are positive and negative aspects of delegation? Some positive aspects of delegation are that it allows the manager freedom from making every decision. It also empowers the employees and increases their involvement in their work. This holds employees accountable for their own actions. Some negative aspects of delegation are that business owners may not be willing to delegate the authority because it’s difficult to give up control. This could lead to the employees not showing initiative or quitting the business all together. 3. As a business owner, in which of the leadership attributes discussed in the text are you the weakest? How could you help yourself improve in this area? How could others help you? What is your strongest skill? Student opinions will vary. They could say, “I think that the leadership area that I would be weakest in would be the vision part of it. If I don’t know exactly what could happen or where things could go in any situation, I have a hard time visualizing the future. I could help myself by trying to be more creative in understanding where business decisions could lead to. Others could help me by showing how the business could grow in the future. My strongest skill would be trust. I trust people if they don’t prove me wrong, and I am also very trustworthy.” 4. What is motivation? Can managers really motivate employees? Motivation is the reason an individual takes an action in satisfying a need. It is the reason people do what they do. Managers can motivate their employees if they know what is important to the employees. If something is to be used as a reward, and an employee who is receiving the reward doesn’t like it, it will not be a motivating factor. Concept Module 16.4 Special Management Concerns LO4 Discuss time and stress management as they relate to small business. A. Beyond the standard functions of management lie many other duties and responsibilities. Besides running a business, personal, family, and social activities must be tended to. B. Time Management The key to effective time management for a small business owner is investing time in what is important in life—including the business. Indicators of possible time management problems are: 1. Frequently late for or forget meetings and appointments 2. Consistently behind in responsibilities 3. Never have enough time for basics—eating, sleeping, family 4. Constantly working and still miss deadlines 5. Often fatigued, both mentally and physically C. Stress Management 1. One of the most ambiguous words in the English language is stress. Distress is the unfavorable psychological, physical, or behavioral consequences that may or may not result from stressful situations. For a situation to create distress, two conditions are necessary: its outcome must be uncertain, and it must be a matter of importance to the person. 2. Sources of stress for small business owners are role conflict, task overload, and role ambiguity. 3. Preventative Stress Management 4. Relaxation Techniques 5. Social Support Systems 6. Physical Exercise Concept Check Questions 1. Are you a good manager of time in your personal life? How will this affect your ability to manage your time as a business owner? Students’ answers will vary. They could say, “I feel that I manage my personal time very well. I write things down, and I make sure that I get the things done that need to be done when they need to be done. This asset would make my ability to manage fairly good. Making lists will always help me keep things in priority order so the important stuff is always taken care of, and I have time to do other things in the business as well.” 2. Give examples of stress and distress. An example of stress is task overload, when there are not enough hours in the day to have all of your work done by the deadlines you have to meet. An example of distress is that there is no such thing as a “sure thing,” so when business owners are not making a profit from the business, it could lead to a distressful situation. Experience This…bonus student exercise Experience can be the best teacher—see what you can learn from others’ experience. Contact five small business owners in your community for a one-question mini-interview. Ask them what they would do differently if they could build their business all over again. You—and they—may be surprised at the responses. Answers, of course, will vary. But, once again, every experienced business owner will have some insight they may not even realize they had until asked. Responses will include “I knew employees were important to the business, but I didn’t realize the extent that they can make or break us.” Chapter Closing Case Family Matters Questions - 1. Put yourself in Larry Cohen's position. What would you see as your most immediate problem? What are your long-term problems? The immediate problem is negative cash flow - more money going out than coming in - leading to insolvency. The long-term problems involve complacency all across the company and inability to compete in a commodity market with outdated processes and equipment. 2. Would you keep Aaron Kamins as CEO? Why or why not? If you fire him, who would do the job? Since the problems involve short-term, long-term, and family issues, students will likely be conflicted. Bottom line - to get through the short-term issues, there is no time or cash to replace Kamins as CEO. And if he as successful in solving the immediate crisis, hasn't he earned the chance of running the company long-term? 3. What do you recommend Cohen do to save Accurate Perforating? Short term - accurate must go into what football coaches call "a two-minute offense" meaning working as quickly and efficiently as possible to maximize results. They need to cut costs to bone and generate as much revenue as possible in order to survive. Long term - the need to diversify beyond the commodity "punching holes in metal" business into more profitable lines. The Decision In early January 2004, Cohen called Kamins into his office and gave him 90 days to prove that he could save the business. If not, family or no family, he would be replaced. Cohen disliked threatening his own nephew, but, he says, “It was the only thing I had left to motivate him” to make big changes. Rather than feeling ambushed, Kamins was relieved. He had spent the previous year expecting to be fired, so the 90-day trial felt like a vote of confidence. With the help of a new consultant, Irwin Friedman, who replaced the turnaround firm recommended by the bank, Kamins moved quickly to assert himself as Accurate’s leader. He called a meeting of his top five executives and announced across-the-board salary cuts of as much as 50 percent. Kamins took a 50 percent pay cut, and Cohen agreed to work unpaid. “We had to move from being a family business to a more corporate one,” Kamins says. Kamins warned his executives that they were likely to be fired if things didn’t improve quickly. But the person most in need of improvement, Kamins realized, was himself. In the spring of 2004, he enrolled in an executive education course at Chicago’s Loyola University. “It was inspirational,” he says. “The most valuable thing was being in a room with people and getting outside input on how things are done.” Kamins also began working closely with Friedman, who helped him develop a strategy for the business, as well as for his personal life. Thanks, in part, to Friedman’s mentoring, Kamins lost 80 pounds in one year. Kamins’s business classes prompted him to embrace many of the changes Zarnott and Beck had been advocating for years. Friedman leveraged his connections, and Accurate’s revamped business plan, to help the company land a line of credit from Bank One, now part of JP Morgan Chase. In March, Kamins used the line of credit to pay off Accurate’s loan from Cole Taylor (which declined to comment for this story). Next, Kamins invested in new computer systems, high-tech machinery, and training for factory workers. He hired 20 part-time salespeople and increased Accurate’s marketing budget to $200,000 a year. Zarnott hired a Chicago marketing firm called Symmetri to develop a new website and glossy brochure that emphasized the beauty of Accurate’s products, rather than low prices. Symmetri changed Accurate’s slogan from “Quality workmanship makes us Accurate” to “We teach light to dance.” The new focus, Zarnott says, has helped attract architects and other high-end clients. “American catalogs were all geared to technical aspects,” he says. “We thought, here’s a way we can set ourselves apart.” The marketing push represented “the rebirth of the company,” says Kamins. Accurate’s architectural sales soared from $300,000 in 2004 to $2.5 million last year, boosting overall profit margins to 16 percent. In 2005, Accurate’s revenue increased 70 percent, to $25.5 million, 40 percent of which was generated by sales of fabricated metal. On the commodity side, improved efficiency, an expanded sales force, and demand from China increased sales and bumped up profit margins to 5 percent. Back in 2004, Cohen allowed the 90-day deadline to come and go, confident that his nephew was up to the task. Kamins officially became Accurate’s president early last year. Though the company is back on track, Kamins has sworn not to let himself—or his employees—revert to the just-collecting-a-paycheck mentality. “The memory of where we were a very short time ago pushes me to move this place further,” Kamins says. “I’m still not satisfied.” SOURCE: www.inc.com/magazine/20070801/family-ties.html Max Chafkin, “Case Study,” Inc., June 2006, 58–60 Chapter 17 Human Resource Management Teaching Tips • Use Concept Module 17.4 to make the point that employee orientation is one of the most overlooked areas of a business, but following this checklist will turn a new hire into a productive employee quickly. • Use Entre-Perspectives, Sixty-Second Guide to Hiring the Right Employee, to lead students in a discussion of the nuts-and-bolts of the hiring process. • Use Reality Check, We Need to Talk, to discuss the process of firing an employee under several combinations of circumstances. • Give students experience writing job descriptions and specifications. It is also good to give them experience on the “other side of the desk” in practice interviews and applicant evaluation. Many students have practiced being interviewed, but if they plan to go into business for themselves, they will soon be in the position of hiring employees. • This chapter closing case involves one of the biggest challenges facing small businesses—providing health care to employees. Have students read the case before class. Then you can either begin class discussion with the whole group or break the class into groups of three or four and have them brainstorm strategies before opening discussion to all. After you hear students’ recommended strategies, read “The Decision” and “The Experts Weigh In” to share what really happened. Lecture Outline Opening Vignette: examples of small business hiring situation . What’s the Point? The point of this story is to illustrate a variety of needs and reasons for small business hiring. Concept Module 17.1 Hiring the Right Employees LO1 Discuss the importance of hiring the right employees A study by the Roper Organization showed what many already knew—finding competent workers and motivating them to perform is the biggest problem facing small business owners. The costs and risks associated with human resource management are too great for any company to ignore. Small business owners need to realize that their most valuable assets walk out the door at closing time. The Job Analysis Process A. The recruitment process involves attracting talented individuals to the business. To accomplish this, a small business owner must define the positions to be filled, and state the qualifications needed to perform them successfully. B. A job analysis indicates what is done on the job, how it is done, who does it, and to what degree. It is the foundation on which all other human resource activities are based and, if necessary, defended in court. C. Job Description The purpose of the job description is to identify the duties, tasks, and responsibilities of the position. (See Figure 17.1, Sample Job Description.) It should include: 1. A job identification section 2. A job summary 3. The essential duties to be performed by the jobholder 4. A list of tasks associated with each duty 5. Task statements D. Job Specifications A job specification indicates the skills, abilities, knowledge, and other personal requirements a worker needs to successfully perform the job. Reality Check: Eeny Meany Miney... Small business owners must carefully hire one of their most valuable assets - employees. This box goes beyond interview questions into what else to look for. Concept Check Questions 1. What is the difference between a job analysis and a job description? A job analysis is an essential human resource technique. It is the systematic process of determining all the information about a particular job. It provides a summary of a job’s duties, responsibilities, skills, and the way it relates to other jobs. A job description is a document that provides information of a nonmanagement position, which covers the title, duties, and responsibilities involved for the job. 2. Discuss three key pieces of legislation that are used to prevent job discrimination. • Civil Rights Act: Based on the Thirteenth Amendment to the U.S. Constitution, prohibits racial discrimination in the making and enforcement of contracts. Amended in 1972, prohibits discrimination based on race, color, sex, religion, or national origin. This act created the EEOC. • Age Discrimination in Employment Act (1967): Amended in 1978 and 1986. Prohibited employers from discriminating against individuals who are over 40 years old. • Americans with Disabilities Act: Passed in 1990. Prohibits discrimination against qualified individuals with disabilities. Concept Module 17.2 Employee Recruitment LO2 Evaluate the advantages and disadvantages of the six major sources of employee recruitment. A. The point of recruitment is to create a large enough pool of applicants to have viable candidates. Employees may be recruited from a variety of sources. B. Advertising for Employees Help wanted ads in newspapers, trade publications, or storefronts generate a large number of responses, but the quality of applicants is generally not equal to other sources. C. Employment Agencies Government-funded employment agencies focus primarily on assisting blue- and pink-collar employees. Private employment agencies can also be useful in finding more skilled labor. Fees for professional and management jobs are usually paid by the hiring company. D. Internet Job Sites There is no shortage of Internet job sites (including Monster.com, HotJobs.com, Headhunter.net, and JobsOnline.com) and applicants posting résumés on them. E. Executive Recruiters (Headhunters) These firms can be useful for small businesses looking for a key person or two in high-skill positions. F. Employee Referrals Current employees know the jobs in a business, working conditions, and talent needed better than anyone—why not pay them for referrals that lead to hired candidates? G. Relatives and Friends Hiring relatives and friends can lead to some serious problems. According to Peter Drucker: 1. Family members working in the business must be at least as able and hard working as any nonrelated employee. 2. Family-managed businesses, except perhaps for the very smallest ones, increasingly need to staff key positions with nonfamily professionals. 3. No matter how many family members are in a company’s management, no matter how effective they are, one top job must be filled by a nonrelative. 4. Before the situation becomes acute, the issue of management succession should be entrusted to someone who is neither part of the family nor part of the business. H. Other Sources Job fairs, trade association meetings, and specialized Internet sites run by professional organizations (accountants, environmental specialists, etc.) can be good sources. Factors to keep in mind as you try to hire the best include: 1. Keep your focus on hiring the best. 2. Have a written job description. 3. Use a written rating system so that you don’t forget about attributes of early candidates. 4. “Overqualified” is better than “underqualified.” 5. A person with a long history of self-employment will in all probability return to self-employment as soon as possible. Hire this person as a consultant if you need his or her skills. 6. Test specific skills and industry knowledge. You want to observe the candidate performing the work to be done during testing. 7. Check the candidate’s background and all references thoroughly. 8. Keep a written record of all terms of employment. 'Trep connections: Linking In to Employment Matches This box discusses some unique characteristics of building a presence on the professional social media site LinkedIn. Concept Check Questions 1. As a young entrepreneur, you may soon be in the position of hiring one or more of your college friends in your own business. What are the advantages of hiring your friends? What are the potential pitfalls? Hiring friends as employees can put serious strains on friendships. Being “friendly” with employees is great, but there are times when employees must abide by decisions of a business owner, even if they don’t agree. The separation of boss and employee roles is difficult to maintain with old friends. Concept Module 17.3 Selecting Employees LO3 Describe the four tools commonly used in employee selection. A. Once a pool of applicants is created, you should match the applicants with the job requirements. Three common tools are application forms, interviewing, and testing. B. Application Forms and Résumés 1. In addition to having information on how to contact a candidate, you need to see their desire for the position, a profile of the applicant, a foundation to build a personnel record, and a means of measuring the effectiveness of the selection process. 2. Don’t forget that résumés can be the best fiction written, so view them with a degree of skepticism. C. Interviewing Many employers consider interviewing to be the most critical step in the selection process. The interview is a chance to ask about employment gaps on the résumé and to learn more about the persons’ strengths and weaknesses. Some tips for interviewing: 1. Be Prepared. 2. Set the Stage for the Interview. 3. Use a Structured Interview Format. 4. Use a Variety of Questioning Techniques. 5. No Matter the Type of Question, It Must be Job Related. 6. Keep Good Records, Including Notes from the Interview. Entre-Perspectives: Don’t Even Ask! This box discusses interview questions to avoid. D. Testing Employment tests used by small businesses must demonstrate job reliability and validity. All test results should be kept strictly confidential and in a file other than the employees personnel file. Commonly used tests include: 1. Achievement Tests—These measure specific skills a person has attained as a result of his or her experiences or education. 2. Performance (Ability) Tests—These assess the applicant’s ability to perform the job. 3. Physical Examinations—Generally the last step in the screening process, these are given to discover any physical or medical limitations that might prevent the applicant from performing the duties of the job. 4. Drug Tests—To justify the cost and privacy concerns caused by these tests, you must be able to demonstrate a strong need for safety within the workplace. 5. Honesty Tests—Due to suspect of validity, the use of honesty tests are not recommended without proper legal council. E. Temporary Employees and Employee Leasing 1. Reasons to use temporary employees rather than hiring permanent ones include the need to fill new or highly specialized positions, to ensure a full work force during periods of labor shortages, and to take advantage of the growing pool of workers who like the flexibility and challenge of working for multiple employers. 2. Employment costs of temporary employees are often lower than those of permanent or full-time employees. Government reporting records are handled by the employment agency. Training costs, workers’ compensation, unemployment insurance, and benefits are paid by the agency—not the company. 3. Employee leasing is a relatively recent trend in which an employee leasing company becomes the legal employer that handles all HRM functions. Since the employees working are part of a larger group than the small business, benefits are typically much better. Concept Check Questions 1. When would you, as a small business owner, prefer to receive a résumé rather than an application form? A small business owner would prefer to receive a résumé when he or she is looking for a key person. Essentially, application forms and résumés contain the same information. Application forms are prepared by your company, and résumés are personal profiles prepared by the candidates. 2. How is the use of temporary employees different from employee leasing? What are the advantages and disadvantages of each? Temporary employees are called in when demand suddenly exceeds capacity or someone is absent. Other circumstances would be the need to fill highly specialized positions to ensure a full work force during periods of labor shortages. These employees are there for a temporary period. Advantages of temporary employees are that they lower the company’s overhead cost, employment cost, and temporary workers can be laid off quickly without the worry of wrongful discharge claims. Disadvantages could be lack of company loyalty and knowledge of the company’s culture. Leased employees are individuals provided by an outside firm. The leasing company assumes all the legal responsibilities of being the employer, including health insurance and HRM. Some advantages of leasing: • It allows a company to be flexible under various business conditions. • The employees who are leased are well trained and provide cost savings for a small firm. Some disadvantages: • Employees are not as loyal to your firm as they are to the leasing company who pays for their benefits and salaries. • The leasing company does not administer your company’s policies, and if it goes out of business or fails to pay for insurance, the small business is faced with these issues. 3. Hiring an employee is a big step for a small business. How can you make a wise hiring decision if so many limitations are put on the interview questions you can legally ask? There are many restrictions placed on employers during the hiring process, especially in regard to asking personal information. But how much personal information beyond the allowed basics is needed? Anything and everything you ask must be job-related. Concept Module 17.4 Placing and Training Employees LO4 discuss the need for employee training and name the sevel methods of providing this training. A. Every employee, no matter how experienced, will need to be introduced to the methods and procedures of the job and the rules of the company—an employee orientation. (See Figure 17.2, Professional or Technical Employee Orientation Checklist.) B. Employee Training and Development An important means of motivating employees often overlooked by managers is employee training and development. A trained work force can give you a competitive advantage that, once gained, is not easily duplicated by competitors. C. Ways to Train Some commonly used techniques include: 1. On-the-Job (OJT)—Everyone experiences OJT from the time they join the company. The most familiar types are coaching and mentoring. 2. Lecture—Low cost, speed of communication, and the large number of individuals that can be accommodated are advantages of lecturing. 3. Conferences—Group discussions get employees more actively involved in learning. 4. Programmed Learning—Employees work at their own pace via computerized instruction or printed material. Entre-Perspectives Sixty-Second Guide to Hiring the Right Employee OK, so maybe it can’t be done in 60 seconds literally. But a solid fundamentally hiring program will reduce employee turnover 5. Role-playing—Employees take on new roles within the company, acting out the situation as realistically as possible. 6. Job Rotation—Employees move from one job to another within the company. This technique provides employees with a variety of job skills and knowledge and trained replacements to fill in if employees leave. 7. Correspondence Courses—These courses are generally sponsored by a professional association or university. Concept Check Questions 1. What are the differences between hard and soft issues during a job orientation? Is one more important than the other? Hard issues cover specifics like benefits, pay, the company’s policies and procedures, and how the job is to be performed. Soft issues include the company’s interest in producing a quality product, profit, being socially responsible, and providing a safe and productive work environment. Both are important, and for orientation to be complete, both topics should be covered. 2. Review the section on training new employees. Give examples of types of jobs that would best lend themselves to each training method. Lecture—teaching Conferences—doctors Programmed learning—data processing Role-playing—sales jobs Job rotation—fast food, grocery Correspondence—bookkeeping Concept Module 17.5 Compensating Employees LO5 Explain the two components of a compensation plan and the variable elements of a benefits system. A. Employees expect to be paid a fair and equitable wage. Deciding what is fair and equitable is a challenge for small business owners who must look at two components—wages and benefits. B. Determining Wage Rates Wages and incentives, including health care and other benefits, are necessary to keep employees alive, healthy, and motivated. Four possible forms include: 1. Hourly Wages 2. All-Salaried Employees 3. Piecework Rates 4. Commissions C. Incentive Pay Programs Incentive pay is a reward system that ties performance to compensation. Bonuses are one-time rewards provided to an employee for meeting objectives set for attendance, production, cost savings, quality, or performance. Profit-sharing plans provide employees with additional compensation based on the profitability of the entire company. D. Benefits Benefits are compensation paid to employees in addition to their wages. The cost of offering and administering benefits constitutes about 38 percent of a company’s total payroll—much more than most employees realize. Benefit packages can include: 1. Flexible Benefit Packages—A cafeteria approach allows employees to select the benefits that best suit his or her financial and lifestyle needs. 2. Health Insurance—One of the most common and valued benefits. 3. Pension Plans—To assist employees in saving for their retirement needs. (See Table 17.1, Retirement Plan Preview, which highlights the major provisions of Simple IRA, SEP-IRA, 401(k), and KEOGH plans.) 4. Individual Retirement Accounts 5. Simplified Employee Pension Plans 6. 401(k) Plans 7. Keogh Plans 8. Child Care—As the number of dual-income families continues to increase, many businesses are offering in-house child care. 9. Miscellaneous Benefits—Table 17.2, Benefits Provided by Small Private Employers, summarizes types of benefits. Concept Check Questions 1. List the advantages of a flexible benefit package to employees and to the employer. To the employees, a flexible benefit package means they can tailor their benefit package to their own needs. Also, employees have the choice between taxable and nontaxable benefits. This can reduce their taxable income and increase their benefit choices. For the employer, a flexible benefit plan means that employees are involved and happier with their benefit packages. This can also increase morale and production. The employer is not wasting money on a plan that doesn’t fit its employees’ needs. Also, this type of benefit plan can be an excellent selling point to potential employees. 2. What factors influence the type and amount of employee benefits that a small business can offer? It depends on the generosity of the employer and his or her ability to pay. The number of employees and the hours they work are also factors. Concept Module 17.6 When Problems Arise: Employee Discipline and Termination LO6 Profile an effective sequence for disciplining and terminating employees. A. While you strive for harmony in the workplace, problems do arise. When they do, a small business owner needs policies for discipline and dismissal of employees. B. Disciplinary Measures 1. Discipline involves taking timely and appropriate actions to modify or correct the performance of employees. Employees need to receive a comprehensive set of rules and regulations in an employee handbook. 2. An annual performance appraisal documents the need for possible discipline and is a chance to address problem areas before they become disciplinary concerns. 3. Managers are moving from a “hot-stove” principle, in which discipline is immediate and of consistent intensity, to a progressive approach, in which discipline is incremental and increasingly forceful. C. Employee Handbook To communicate a mission statement, code of ethics, and policies on topics like sexual harassment, a small business needs an employee handbook including: 1. Disclaimer—specifying that the handbook is not a contract of employment 2. Employment policies—work hours, regular and overtime pay, etc. 3. Benefits 4. Employee conduct—expectations of everything you classify as important 5. Glossary—terminology that is important to employee understanding 6. Organization chart D. Productive Disciplinary Steps • Determine whether discipline is needed. • Have clear goals to discuss with the employee. • Talk about the problem in private. • Keep your cool. • Watch the timing of the meeting. • Prepare opening remarks. • Get to the point. • Allow two-way communication. • Establish a follow-up plan. • End on a positive note. E. Dismissing Employees 1. Legitimate reasons for dismissing an employee may include unsatisfactory performance on the job or changing the requirements of the job, which makes an employee unqualified. 2. What you can and cannot do when firing an employee depends upon two things: 1) that the reason to discharge an employee is job related and not discriminatory, and 2) your at-will status. Under the at-will doctrine, unless an employment contract is signed, either the employer or the employee can terminate the employment relationship at will. Reality Check: We Need to Talk... Few managers handle the process of firing an employee well. The best way to handle the situation is to make it a quick, unambiguous act. This highlight box provides helpful scenarios of action. 3. Implied Contract 4. Good Faith and Fair Dealing 5. Public Policy Exception What Would You Do? A Hand in the Till 1. Is Todd within his legal rights to take this action? If his actions are legal, what are some possible consequences? Todd is on shaky legal ground by punishing all employees equally. In effect, he is saying that they are all guilty and should be punished without any evidence. Even if Todd could legally act in this manner, the blow to employee morale could be devastating. Employee reaction could range from them thinking, “If Todd is going to punish me for stealing, then I’ll go ahead and start ripping him off, even though I never have before” to “I don’t want to work for anyone who does not trust me. I’m looking for a new job, and he can stick this one.” 2. How would you have handled the situation differently if you were Todd? Todd could call an employee meeting and say that the register was short by $55 yesterday, but that he is not accusing anyone of stealing. He has no proof that anyone stole the money but, by saying the cash drawer was short, if an employee did steal the money, they would know it had not gone undetected. Todd should state that mistakes happen…if it was a mistake giving change back to a customer or whatever, just pay more attention when handling cash. Concept Check Questions 1. Explain the four components of an effective disciplinary system. • The employee handbook is a set of rules and regulations that informs employees of their rights and responsibilities in the employment relationship. • The performance appraisal is a documented process of evaluating employees’ job-related achievements. • The progressive approach is when discipline is incremental and increasingly forceful measures are applied to employees. • The appeal process is an open-door policy where the employee seeks a review of the disciplinary decision at the next level of management. 2. Define “at-will” employment status. An employer can discharge an employee for any reason at all. It does not have to be justified. Likewise, an employee can leave the company at any time. Experience This…bonus student experience Find a copy of a small business employee handbook, either from your current job or from a local small business owner. (It may be interesting just to find out how many don’t even have one.) Compare the sections with those listed in this chapter. Is everything that an employee would need to know included in this handbook? What is missing? Does everything included in this handbook appear to comply with employment law? This experience is contingent upon students ability to access an employee handbook. Once he/she has it in hand, then the comparisons will be fairly straight forward. Chapter Closing Case Lost in Translation Questions - 1. Could a new CEO do better? The question calls for students to speculate, but should prompt discussion as to what the Akorbi needs for the business. Someone needs to perform the duties of CEO, the question is who is best suited for that job? 2. Would you recommend the Mirzas hire their own boss? What would that new job description include? As discussed in the chapter, hiring involves matching the needs of the business with the skills and abilities of the applicant. If the Mirzas are deficient in skills, can they be developed? Can an outside person lead their company better than they can? Would everyone be better served if they hire outside talent in a capacity other than CEO, such as Sales Manager? 3. If hiring a CEO is not the answer, what should they do to get their business to the next level? Focusing the business strategies and direction is crucial. Can the Mirzas do that? Probably. Can they and the business be everything to everyone? Probably not. The Decision The actual decision the Mirzas made was not available for this case, but following are recommendations from Inc. team of experts: Investing in the Mirzas' sales team in India and divesting in Dallas would allow them to target companies doing business in and between South America and India and China. I see room to grow in these markets. Internet marketing should be seen as only a complement to a diverse sales strategy. Akorbi is going through a predictable phase of stagnation after rapid growth in the early years. The underlying success story is based on Claudia's drive to succeed. What more could an outsider at a CEO level bring to Akorbi? Maureen Rabotin Founder: Effective Global Leadership Paris The Mirzas should hire a professional sales manager, but not a CEO. Each salesperson should bring in at least $500,000, if not $1 million. To do that, Akorbi should resist the temptation of being everything to everyone. Focus instead on a couple of verticals, like insurance. The Mirzas can increase their average margins by pitching projects that require more languages. Their current approach catches the small fish but doesn't bring in real profitable projects. They should also talk about how they have helped existing clients. Renato Beninatto Partner: Common Sense Advisory Lowell, Massachusetts Instead of a new CEO, the Mirzas should create an advisory board to vet strategic decisions. They should have at least two clients on the board, as well as sales, marketing, PR, legal, operations, and financial and creative specialists. They should figure out a way to never have to make another cold call. It's better to simply ask for client referrals. The salespeople need to learn about client organizations: Who is in the clients' food chain? The idea is to stop treating jobs in isolation and think of clients as part of an ecosystem. Marty Avery Founder: What If Calgary, Alberta SOURCE: www.inc.com/magazine/20081001/they-aimed-high-but-now-their-translation-business-is-stuck.html Chapter 18 Operations Management Teaching Tips • Use the chapter opener to discuss the importance of achieving consistency in a finished product, and how it relates to operations management. • Use Figure 18.1 to show that every business, large or small, service or manufacturing, can use a systems approach to operations management. • Use Reality Check, How Good Is Good Enough? to show that close is often not good enough. • This is a good time to take the class on a field trip through a small manufacturing plant to see operations management in action. • In this chapter closing case, we see Tom and Mary Pastorius building, selling, and re-entering a microbrewery. Have students read the case before class. Then you can either begin class discussion with the whole group or break the class into groups of three or four and have them brainstorm strategies before opening discussion to all. After you hear students’ recommended strategies, read “The Decision” to share what really happened. Lecture Outline Opening Vignette: Water Entertainment Technologies What’s the Point? The point of this chapter opener is to show how a small business with stellar creativity and technology applied superb operations management to become one of the hottest businesses in the United States. Concept Module 18.1 Elements of an Operating System LO1 List the elements of an operating system. A. Operations management systems contain five basic elements: inputs, transformation processes, outputs, control systems, and feedback. These elements must be coordinated into a system to produce the business’s product or service. (See Figure 18.1, Control Systems illustrating inputs, transformation, outputs, feedback, and controls.) B. Inputs Inputs are all the physical and intangible resources that come into a business. Raw materials, skills and knowledge of the people, money, information, and energy are all necessary inputs. C. Transformation Processes Transformation processes are the active practices—including concepts, procedures, and technologies—that are implemented to produce outputs. These are what a business does to add value to inputs. D. Outputs The results of the transformation process are a business’s outputs. They are tangible goods, intangible services, or unintended outputs like pollution and waste. E. Control Systems Control systems provide the means to monitor and correct problems or deviations when they occur at any stage in the operating system. F. Feedback Feedback is the verbal, written, electronic, or observational information that a manager receives in monitoring the operation system. Concept Check Questions 1. Discuss the elements of an operations management system. The elements are inputs, transformation process, outputs, control systems, and feedback. Inputs are the resources that go into a business, such as money, information, energy, raw materials, skills, and knowledge. Transformation process involves changing inputs to outputs. The outputs are tangible or intangible products that the business produces. 2. What would happen if the control system were not included? Control systems are the means to monitor input, transformation, and output in order to identify problems. Feedback is the communication between control systems and the processes of the business. If control systems were not in place, there would be no progress, because a lack of monitoring leads to breakdown of the system. 3. What would happen if the feedback were not included? If feedback were not working, control systems would fail. Feedback is necessary to connect the control systems. Concept Module 17.2 Types of Operations Management LO2 Describe how manufacturers and service providers use operations management. A. Every business has an operating system, but they vary widely depending on whether the business is in the manufacturing, service, or retail sector. B. Operations Management for Manufacturing Businesses 1. Analytic systems reduce inputs into component parts to extract products. Synthetic systems combine inputs to create a finished product or change it into a different product. 2. Production by a continuous process is accomplished over long periods of time, making the same or similar products in long uninterrupted batches. Production runs that use an intermittent process involve short cycles and frequent stops to change products. C. Operations Management for Service Businesses Traditionally, all service businesses have been seen as intermittent process business because standardization didn’t seem possible for businesses like hair salons, accounting firms, and auto service centers. But service franchises like Merry Maids, Jiffy Lube, and Fantastic Sam’s are all using manufacturing techniques of continuous production. (See Table 18.1, Product and Service Operations Systems which that lists inputs and outputs of services and manufacturers.) Concept Check Questions 2. What is the difference between flexible production and mass customization? Flexible production is using automation to assist in production. It can help determine raw material needs, scheduling, and designing new products. Mass customization has already evolved past flexible production in order to meet the needs of individual customers. Concept Module 18.3 What Is Productivity? LO3 Explain how to measure productivity A. Productivity is the ratio of inputs used to outputs produced: the higher the ratio, the more efficient your operating system. Small business owners need to constantly look for ways to increase outputs while keeping inputs constant or to keep outputs constant while decreasing inputs. B. Measurement of Productivity 1. Total productivity can be determined by dividing total outputs by total inputs. 2. Productivity can be increased by increasing outputs, decreasing inputs, or a combination of both. Most productivity improvements come from changing processes used by the business, from employees’ accomplishing more, or from technology that speeds production. C. Ways Measure Service Productivity 1. Productivity in the service sector is difficult to change because service businesses are more labor-intensive. Manufacturing businesses can substitute machines for people, but can service businesses do the same? Actually, many technological innovations do just that. 2. Ergonomics, the study of interaction between people and machinery, can improve service productivity. Concept Check Questions 1. Define productivity. Productivity is the measure of outputs according to the inputs needed to produce them. It is a way to measure the efficiency of a business. 2. How can ergonomics be tied to productivity? To motivation? To Maslow’s hierarchy? Ergonomics involves the relationship between an employee and his or her work environment and machinery. Good ergonomics increases productivity. If an employee has a pleasant atmosphere to work in, his or her motivation is increased. Maslow’s hierarchy and ergonomics relate by the progression of physical, social, and psychological needs. Concept Module 18.4 What About Scheduling Operations? LO4 Recount the methods of scheduling operations. A. Scheduling is a basic operations management for both manufacturing and service businesses that involves the timing of production. The purpose of scheduling is to put your plans into motion by describing what each worker has to do. B. Scheduling Methods 1. With forward scheduling, materials and resources are allocated for production when a job order comes in. Backward scheduling involves arranging production activities around the due date for the product. 2. Henry Gantt devised a simple bar graph for scheduling work in any kind of operation. The Gantt chart shows the time required for each step and the current status of a job. (See Figure 18.2, The Gantt Chart for building a house.) C. Routing Routing shows the detailed breakdown of information explaining how your product or service will be produced. D. Sequencing Sequencing determines the order in which a job will go through your production system. Sequencing is more critical when more people or departments are involved. E. Dispatching Dispatching is the act of releasing work to employees according to priorities you determined in planning the work sequence. Entre-Perspectives: So How Do I Increase Productivity? Especially during economic downturns, every business has to do more with less - or be more productive. This box identifies several techniques. Reality Check: How Good is Good Enough? If 99.9 percent accuracy were good enough.... Concept Check Questions 1. Explain the difference between forward and backward scheduling. In forward scheduling, materials and resources are allocated for production when the job order comes in. Backward scheduling involves arranging production activities around the due date for the product. 2. Give examples of products that would be better suited to each of the dispatching rules. Dispatching is the act of releasing work to employees according to priority. Taxi companies use the first-come-first-served rule. A tailor uses the earliest-due-date rule. Orders that will take the longest and will be the largest (and most profitable) use the longest processing time. Concept Module 18.5 Quality-Centered Management LO5 Discuss the role of quality in operations management. A. To manage a small business centered on quality, two perspectives must be kept in mind. From a customer’s perspective, quality is how well the product or service satisfies their needs. From the business standpoint, quality means how closely the product conforms to the standards you have set. B. Six Sigma in Small Business 1. A common way to measure quality is to keep close track of the defect rate—the number of goods produced that were out of the company’s accepted tolerance range. 2. Perfection is not possible, but companies are striving for zero (or near zero) defects. Six sigma is the term that has come to signify the quality movement, not just in manufacturing, but throughout entire organizations. Sigma denotes the standard deviation of a set of data. It indicates how all data points in a distribution vary from the mean value. (See Table 18.2, Sigma Levels and Defect Rates.) 3. If a business chooses six-sigma as a production goal, it will have 99.99966 percent of products within specification limits—only 3.4 defects per million. C. Quality Circles Quality circles involve the use of small groups of employees to analyze products and processes in order to improve quality. Entre-Perspectives: Six Sigma Online Online sites for more depth and breadth on Six Sigma. Concept Check Questions 1. Define six sigma both technically and as used as a business standard. Using statistics, six sigma is the term that signifies the quality movement throughout the entire organization. It is the goal of trying to reach as near zero defects as humanly possible. Sigma denotes the standard deviation of a set of data. Six means how many times that sigma level is carried out. 2. What type of small business would benefit from having ISO 9000 certification? ISO 9000 certification is a set of standards certifying that a business is using processes and principles in order to assure the production of quality products. Any small business that does business internationally would benefit from ISO 9000 certification. However, it is an expensive process. 3. This chapter concentrated on both productivity and quality. In running your small manufacturing business, can you increase both, or are they mutually exclusive? Productivity and quality are by no means mutually exclusive—improvements in both can be accomplished if a small business owner focuses on ways to be better. Improvement does not have to happen by huge steps—many small improvements accumulate. Concept Module 18.6 How Do You Control Operations? LO6 Identify the three ways to control operations A. The issue of quality affects the entire production process, so controls need to be built in at every stage. B. Feedforward Quality Control Control of quality begins by screening out inputs that are not good enough. Feedforward control applies to a company’s inputs. C. Concurrent Quality Control Concurrent quality control involves monitoring the quality of work in progress. An important tool for concurrent control is statistical process control, which is the process of gathering, plotting, and analyzing data to isolate problems in a specified sample of products. Using statistical analysis, you can determine the probability of a deviation’s being a simple, random, unimportant variation or a sign of a problem in a production process that must be corrected. (See Figure 18.3, The Control Chart showing target measurement and upper and lower control limits.) D. Feedback Quality Control Feedback control is inspecting and testing products after they are produced. A problem with many types of product inspection is that the product can no longer be used because of testing. Laser ultrasound and other electromagnetic and acoustic-based methods are examples of nondestructive testing. Reality Check: Six Sigma Beyond Manufacturing While Six Sigma is typically associated to manufacturing businesses - the concept and techniques apply just as well to service businesses. What Would You Do? 1. Using Figure 18.1 and Table 18.1 as models, describe your college's inputs, transformation process, outputs, feedback, and control systems. Colleges/University's inputs include physical facilities, technology and skilled employees. The transformation process involves following the new ideas, thoughts, actions, and creations that occur during the education process. The outputs are graduates and local economic impact that students bring to a community, but also waste like local infrastructure strains. Control systems include monitors to assure learning outcomes and accreditation standards. Feedback can be found via measurements taken of inputs, transformation, and outputs. 2. How would you apply six-sigma principles to making education? Six-sigma would not include precise measurement of learning specifics – rather, it would involve defining significant processes needed, determining what factors of production need to be measured, and assurance that all education within tolerance on those key variables. Concept Check Questions 1. As you have read about ISO 9000 certification in both Chapter 15 and this chapter, it is both expensive and time-consuming. Describe what type of small business should pursue such certification, assuming that not every manufacturing business should. Any business, large or small, that will be involved in international trade needs to do a serious cost-benefit analysis on becoming ISO certified. Experience This…bonus student exercise Some things are just better understood by seeing them, rather than by reading about them or visiting them online. For this exercise, lobby your instructor for a class plant tour of a local manufacturing business. Write a two- to three-page paper describing its feedforward, concurrent, and feedback control systems. The point of this experience is for students to put a practical application to the control systems described in the chapter. Feedforward control will be seen in the inspection of products and materials arriving to the business. Concurrent control will be seen by machine operators carefully measuring items as they are being manufactured. Feedback control will be seen with quality control inspectors comparing finished items to specifications. Chapter Closing Case Back in the Saddle Questions - 1. What alternatives does the Pastorius family have to resolve their conflict? The conflict in this case is both personal and business (a situation typical of many other family business examples shown throughout this book). To sort them out - we have a husband and wife team who have built a successful small business that is struggling since their retirement. Personal alternatives - both could come out of retirement; Tom could come out of retirement and Mary stay out of the business; or both could remain retired. Each has implications on the business. Tom has expertise and desire to make the business thrive again. Every business needs a champion - especially with a turnaround. 2. What operations management principles would apply to running a microbrewery? Students should be able to relate the Systems Approach to a microbrewery...have them identify inputs; transformation process; and outputs in class discussion. 3. What would your recommendation be to Tom and Mary Beth? Referring back to question 1 - since the problem involves both business and personal conflicts have students identify the business implications to each of the personal alternatives. From those, a recommendation can be reached. The Decision All summer long, the couple would hash it out at their big rustic kitchen table. Tom argued he could rebuild the company and their financial stake in it. Mary Beth countered that gambling with their retirement was foolhardy. "We don't have the luxury of time," she would say. "It's too risky at our age." But Mary Beth soon realized there was no reasoning with Tom. "I know Tom," she says. "He's very stubborn. If he is determined to do something, he will do it." Finally, after several more weeks of going around in circles with her husband, she relented: "If you want to do it, you are crazy," she told him. "But keep me out of it." Mary Beth had another condition as well. Tom could buy back into the business, but only if he found investors to share the risk. Tom agreed. He spent the next month tracking down potential investors, but most lost interest as the financial state of the brewery continued to deteriorate. Then, last September, he met an entrepreneur who co-owned a medical records business. The group had originally wanted the brewery building for its business, but Tom suggested investing in the brewery instead. "The brand has suffered, but the fact that Tom is coming back pushed us over," says Corey Little, one of three outside investors, who, like Tom, now each owns a 25 percent stake. Beer lovers braved a February snowstorm to come back to the brewery for a Mardi Gras preview night to down beer, pretzels, and Cajun food. The place had the same wooden tables and benches that Tom had built years ago and the same oversize copper kettles he had imported from Germany. But this time, Mary Beth was not by his side. A few weeks later, though, she agreed to return for one year to help Tom restart the restaurant. "I've been dreading coming back for months," Mary Beth said on her first day back. "I thought I would take one look at the place and run. But it wasn't as bad as I thought." In early May, Tom reopened the restaurant, with Mary Beth by his side. She then proceeded to work two back-to-back shifts. "Ah, Tom," she said. "The deal was that I didn't have to work the evening shift." Then Mary Beth saw another customer and put on her game face, greeting him inside the beer hall with a big hello. So much for retirement. SOURCE: www.inc.com/magazine/20100701/selling-a-business-when-a-married-couple-disagrees.html Solution Manual for Small Business Management: Entrepreneurship and Beyond Timothy S. Hatten 9781285866383
Download
Close
Close
