Chapter 1:The Foundations of EntrepreneurshipBuilding a New Venture
Team
and
CHAPTER 16
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Leadership
The process of influencing and inspiring others to work to achieve
a common goal and then giving them the power and the freedom to
achieve it.
Entrepreneurs must take on many roles in their companies, but none
is more important than that of leader.
Ch. 16: Building a Team & Succession Planning
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Business Leaders Are…
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Effective Leaders
Create a set of values and beliefs for employees and passionately
pursue them.
Establish a culture of ethics.
Define and then constantly reinforce
the vision they have for the company.
Respect and support their employees.
Set the example for their employees.
Create a climate of trust in the organization.
Build credibility with their employees.
Ch. 16: Building a Team & Succession Planning
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Effective Leaders
Focus employees’ efforts on challenging and driving toward those
goals.
Provide the resources employees need to achieve their goals.
Listen to their employees.
Celebrate their workers’ successes.
(continued)
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Effective Leaders
Create an environment in which people have the motivation, the
training, and the freedom to achieve the goals they have set.
Create a work climate that encourages maximum performance.
Become a catalyst for change
when change is needed.
(continued)
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Three Vital Tasks of a Leader
Add the right employees and constantly improve their skills.
Create a culture for
retaining employees.
Plan for “passing the torch” to the next generation of
leadership.
Ch. 16: Building a Team & Succession Planning
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Building an
Entrepreneurial Team
Study: 80% of employees turnover is caused by bad hiring
decisions.
Leadership IQ study:
46% of newly hired employees will fail in their jobs within 18
months.
19% of newly hired employees will achieve unequivocal
success.
Study: 34% of hiring managers admit to making bad hiring decisions
because they were under pressure to fill a job.
Ch. 16: Building a Team & Succession Planning
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Ch. 6: Franchising and the Entrepreneur
FIGURE 16.1 Annual Growth Rate in the U.S. Labor Force Source: U.S.
Census Bureau, 2008.
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How to Hire Winners
Ch. 16: Building a Team & Succession Planning
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Strategic Recruiting
Encourage employee referrals.
Use multiple channels to recruit talent.
Recruit on campus.
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Strategic Recruiting
Recruit “retired” workers.
Offer what workers want.
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How to Hire Winners
Create practical job descriptions and job specifications.
(continued)
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Conducting a Job Analysis
Create a job description - a written statement of the duties,
responsibilities, reporting relationships, working conditions, and
materials and equipment used in a job.
Handy tool: Dictionary of Occupational Titles
Create a job specification - written statement of the
qualifications and characteristics needed for a job, stated in
terms such as education, skills, and experience.
Ch. 16: Building a Team & Succession Planning
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Sample Job Description from the
Dictionary of Occupational Titles
Worm Picker - gathers worms to be used as fish bait; walks about
grassy areas, such as gardens, parks, and golf courses and picks up
earthworms (commonly called dew worms and nightcrawlers). Sprinkles
chlorinated water on lawn to cause worms to come to the surface and
locates worms by use of lantern or flashlight. Counts worms, sorts
them, and packs them into containers for shipment.
(# 413.687-014 in D.O.T)
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How to Hire Winners
Create practical job descriptions and job specifications.
Plan an effective interview.
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Planning an Effective Interview
Involve others in the interview process.
Develop a series of core questions and ask them of every job
candidate.
Ask open-ended questions rather than questions calling for “yes or
no” answers.
Create hypothetical situations candidates would encounter on the
job and ask how they would handle them.
Situational interviews
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Planning an Effective Interview
Probe for specific examples in the candidate’s work history that
demonstrate the necessary traits and characteristics.
Ask candidates to describe a recent success and a recent failure
and how they dealt with them.
Arrange a “non-interview” setting that allows others to observe the
candidate in an informal setting.
(continued)
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How to Hire Winners
Create practical job descriptions and job specifications.
Plan an effective interview.
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Conducting an
Effective Interview
Ask questions.
Puzzle interviews.
Best candidates will have other job offers.
Your job: to convince the best candidates that your company is a
great place to work.
Ch. 16: Building a Team & Succession Planning
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Hall
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How to Hire Winners
Create practical job descriptions and job specifications.
Plan an effective interview.
(continued)
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Checking References
Checking an applicant’s references is an important part of
protecting a company against making a “bad hire.”
Is it really necessary? Yes !
According to a CareerBuilder survey, 49% of all candidates either
exaggerate or falsify information about their previous employment
on their résumés.
Ch. 16: Building a Team & Succession Planning
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice
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Company Culture
Distinctive, unwritten, informal code of conduct that governs the
behavior, attitudes, relationships, and style of an
organization.
“The way we do things around here.”
In small companies, culture plays as important a part in gaining a
competitive edge as strategy does.
Ch. 16: Building a Team & Succession Planning
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Characteristics of a
Sense of purpose
Sense of fun
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Ch. 16: Building a Team & Succession Planning
FIGURE 16.2 Composition of U.S. Workforce
Source: Jennifer Cheeseman Day, “Population Profile of the United
States,” U.S. Census Bureau,
July 8, 2008,
http://www.census.gov/population/www/popprofile/natproj.html.
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Job Design Strategies
Job simplification - breaks work down into its simplest form and
standardizes each task.
Job enlargement (horizontal job loading) - adds more tasks to a job
to broaden its scope.
Job rotation - cross-trains workers so they can move from one job
in a company to others, giving them a greater number and variety of
tasks to perform. Often used with a skill-based pay system.
Ch. 16: Building a Team & Succession Planning
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Job Design Strategies
Job enrichment (vertical job loading) - builds motivators into a
job by increasing the planning, decision making, organizing and
controlling functions (which traditionally were managerial
tasks).
Five core characteristics:
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Job Design Strategies
Flextime - an arrangement under which employees build their work
schedules around a set of “core hours” - such as 11 a.m. to 2 p.m.
- but have flexibility about when they start and stop work.
Job sharing - a work arrangement in which two or more people share
a single full-time job.
(continued)
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Job Design Strategies
Flexplace - a work arrangement in which employees work at a place
other than the traditional office, such as a satellite branch
closer to their homes or, in some cases, at home.
Telecommuting - an arrangement in which employees have employees
working from their homes use modern communications equipment to
hook up to their workplaces.
(continued)
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Rewards and Compensation
The key to using rewards to motivate workers is tailoring them to
the needs and characteristics of individual workers.
Money is an effective motivator …
up to a point.
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Rewards and Compensation
Intangible rewards – such as praise, recognition, celebrations, and
others – can be powerful, yet inexpensive, motivators.
Entrepreneurs tend to rely
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Ch. 16: Building a Team & Succession Planning
FIGURE 16.3 U.S. Workforce by Generation
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Family Businesses
Account for 64% of U.S. GDP.
Employ 62% of private sector work force.
Comprise 37% of the Fortune 500 companies.
Created 80% of the U.S. economy’s net new jobs over the last two
decades.
Ch. 16: Building a Team & Succession Planning
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Family Businesses
Unfortunately, only 30% of first-generation businesses survive into
the second generation.
Of those that do survive to the second generation, only 12% make it
to the third generation.
Only 3% make it to the fourth
generation and beyond.
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Why is Management Succession So Difficult?
81% of all business founders intend to pass their companies on to
their children.
Just 29% of family business owners have prepared written management
succession plans.
Ch. 16: Building a Team & Succession Planning
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How to Develop a
Step 2. Create a survival kit for the successor.
Step 3. Groom the successor.
Step 4. Promote an environment of trust and respect.
Step 5. Cope with the financial realities of estate and gift
taxes.
Ch. 16: Building a Team & Succession Planning
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Coping with Estate Taxes
Estate freeze
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Exit Strategies
Sell to outsiders
Sell to insiders
Leveraged buyout (LBO)
Ch. 16: Building a Team & Succession Planning
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Conclusion
Leadership shapes company culture.
A succession plan is a crucial element in transferring
leadership.
An exit plan allows entrepreneurs to step down and benefit
most
from the sale of the company.
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Ch. 16: Building a Team & Succession Planning
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Ch. 16: Building a Team & Succession Planning