{"id":142,"date":"2018-12-27T16:15:03","date_gmt":"2018-12-27T21:15:03","guid":{"rendered":"http:\/\/pressbooks.library.upei.ca\/smallbusinessmanagement\/chapter\/people-and-organization\/"},"modified":"2020-01-06T09:58:33","modified_gmt":"2020-01-06T14:58:33","slug":"people-and-organization","status":"publish","type":"chapter","link":"https:\/\/pressbooks.library.upei.ca\/smallbusinessmanagement\/chapter\/people-and-organization\/","title":{"raw":"Chapter 13: People and Organization","rendered":"Chapter 13: People and Organization"},"content":{"raw":"
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The idea for <\/span>Unnamed Publisher<\/a>, the publisher of this book, started on a business trip to Chicago in 2006. Co-founders Jeff Shelstad and Eric Frank, who were both working at a large educational publisher at the time, decided they wanted to move away from the limitations and the frustrations of the traditional publishing industry. Veterans of the higher education publishing industry. Their vision was to create a new publishing company that offered a lot more choices to students, professors, and authors.<\/span><\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n

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\u201cStudents can\u2019t afford to pay $200 for a textbook. The old business model wasn\u2019t adapting fast enough to the Internet, where so much information was available for free or low-cost,\u201d says Jeff, referring to traditional publishers. \u201cWe knew there had to be a better way to publish high-quality material and eliminate price and access barriers.\u201d<\/p>\r\n

Since its beginning in 2007, more than thirty employees have joined this fast-growing start-up, located just north of New York City, in Irvington, New York. The company has become a recognized pioneer in transforming higher educational publishing and textbook affordability.<\/p>\r\n

FWK is upending the $8 billion college textbook industry with a new business model that focuses on affordability and personalization. Professors who assign FWK books are free to revise and edit the material to match their course and help improve student success. Students have a choice of affordable print and digital formats that they can access online or on a laptop, tablet, e-reader or smartphone for a fraction of the price that most traditional publishers charge.<\/p>\r\n

Rather than hamper the company\u2019s growth, the economic downturn has actually highlighted the value of its products and the viability of its business model. Despite the bad economy, FWK has been able to raise over $30 million in venture capital. Clearly, they are doing something right.<\/p>\r\n

The numbers tell the story. Since the launch of their first ten books in spring 2009 (there are more than one hundred fifteen books to date), faculty at more than two thousand institutions in forty-four countries have adopted FWK books. As a result, more than 600,000 students have benefited from affordable textbook choices that lower costs, increase access and personalize learning.<\/p>\r\n

In 2010, 2011 and 2012, EContent magazine named FWK as one of the top one hundred companies that matter most in the digital content industry. FWK was also named 2010 Best Discount Textbook Provider by the Education Resources People\u2019s Choice Awards.<\/p>\r\n

What is particularly refreshing is Jeff\u2019s philosophy about people and work. \u201cGive talented people an opportunity to build something meaningful, the tools to do it, and the freedom to do one\u2019s best.\u201d He believes in flexibility with people and their jobs, and, to that end, employees have the option to work remotely. There is no question that FWK is an innovator in the educational publishing industry, but it also knows how to treat people well and provide a challenging environment that fosters personal growth.<\/span>[footnote]Source: Interview with Jeff Shelstad, March 31, 2011; \u201c<\/span>Unnamed Publisher<\/a> Named to EContent Magazine Top 100 Digital Companies of 2010,\u201d Pressitt, December 15, 2010, accessed February 2, 2012, <\/span>http:\/\/pressitt.com\/smnr\/Flat-World-Knowledge-Named-to-EContent-Magazines-2010-List-of-Top-100-Digital-Companies-\/2961\/<\/a>[\/footnote]\u00a0<\/span>[footnote]Alexandra Torres, \u201cCompany Offers Alternatives to Enter the World of Knowledge,\u201d The Ticker, October 10, 2010, accessed February 2, 2012, <\/span>http:\/\/www.theticker.org\/mobile\/company-offers-alternatives-to-enter-the-world-of-knowledge-1.2360719<\/a>[\/footnote]\u00a0<\/span>[footnote]John Tozzi, \u201cOnline Startups Target College Book Costs,\u201d Bloomberg BusinessWeek, September 23, 2010, accessed February 2, 2012, <\/span>www.BusinessWeek.com\/smallbiz\/content\/sep2010\/sb20100922_892919.htm<\/a>.<\/span>[\/footnote]<\/span><\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n

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Principles of Management and Organization<\/h1>\r\n
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Learning Objectives<\/h3>\r\n
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  1. Understand the functions of management.<\/li>\r\n \t
  2. Explain the three basic leadership styles.<\/li>\r\n \t
  3. Explain the three basic levels of management.<\/li>\r\n \t
  4. Understand the management skills that are important for a successful small business.<\/li>\r\n \t
  5. Understand the steps in ethical decision making.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n
    All small businesses need to be concerned about management principles. Management decisions will impact the success of a business, the health of its work environment, its growth if growth is an objective, and customer value and satisfaction. Seat-of-the-pants management may work temporarily, but its folly will inevitably take a toll on a business. This section discusses management principles, levels, and skills\u2014all areas that small business owners should understand so that they can make informed and effective choices for their businesses.<\/div>\r\n
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    What Is Management?<\/h2>\r\n

    There is no universally accepted definition for management. The definitions run the gamut from very simple to very complex. For our purposes, we define [pb_glossary id=\"629\"]management[\/pb_glossary]<\/a><\/span> as \u201cthe application of planning, organizing, staffing, directing, and controlling functions in the most efficient manner possible to accomplish meaningful organizational objectives.\u201d[footnote]John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices<\/em> (Mason, OH: Atomic Dog Publishing, 2007), 172[\/footnote]<\/span> Put more simply, management is all about achieving organizational objectives through people and other resources.[footnote]David L. Kurtz, Contemporary Business<\/em> (Hoboken, NJ: John Wiley & Sons, 2011), 254.[\/footnote]<\/span><\/p>\r\n

    Management principles apply to all organizations\u2014large or small, for-profit or not-for-profit. Even one-person small businesses need to be concerned about management principles because without a fundamental understanding of how businesses are managed, there can be no realistic expectation of success. Remember that the most common reason attributed to small business failure is failure on the part of management.<\/p>\r\n\r\n<\/div>\r\n

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    Management Functions<\/h2>\r\n

    On any given day, small business owners and managers will engage in a mix of many different kinds of activities\u2014for example, deal with crises as they arise, read, think, write, talk to people, arrange for things to be done, have meetings, send e-mails, conduct performance evaluations, and plan. Although the amount of time that is spent on each activity will vary, all the activities can be assigned to one or more of the five management functions: planning, organizing, staffing, directing, and controlling (Figure 13.1 \"Management Functions\"<\/a>).<\/p>\r\n\r\n

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    <\/h3>\r\n[caption id=\"\" align=\"aligncenter\" width=\"446\"]\"image\" Figure 13.1 Management Functions[\/caption]\r\n\r\n<\/div>\r\n
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    Planning<\/h2>\r\n

    <\/a><\/span>[pb_glossary id=\"810\"]Planning<\/strong><\/em><\/a><\/span>\u00a0[\/pb_glossary]\u201cis the process of anticipating future events and conditions and determining courses of action for achieving organizational objectives.\u201d[footnote]David L. Kurtz, Contemporary Business<\/em> (Hoboken, NJ: John Wiley & Sons, 2011), 257[\/footnote]<\/span> It is the one step in running a small business that is most commonly skipped, but it is the one thing that can keep a business on track and keep it there.[footnote]\u201cManagement Principles,\u201d Small Business Notes<\/em>, accessed February 2, 2012, www.smallbusinessnotes.com\/managing-your-business\/management-principles<\/a>.[\/footnote]<\/span> Planning helps a business realize its vision, get things done, show when things cannot get done and why they may not have been done right, avoid costly mistakes, and determine the resources that will be needed to get things done.[footnote]John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices<\/em> (Mason, OH: Atomic Dog Publishing, 2007), 176[\/footnote] [footnote]David L. Kurtz, Contemporary Business<\/em> (Hoboken, NJ: John Wiley & Sons, 2011), 257.[\/footnote]<\/span><\/p>\r\n\r\n<\/div>\r\n

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    Organizing<\/h2>\r\n

    [pb_glossary id=\"812\"]Organizing <\/strong>[\/pb_glossary]<\/em> <\/a><\/span>consists of grouping people and assigning activities so that job tasks and the mission can be properly carried out.[footnote]John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices<\/em> (Mason, OH: Atomic Dog Publishing, 2007), 176[\/footnote]<\/span> Establishing a management hierarchy is the foundation for carrying out the organizing function.<\/p>\r\n

    Contrary to what some people may believe, the principle of organizing is not dead. Rather, it is clearly important \u201cto both the organization and its workers because both the effectiveness of organizations and worker satisfaction require that there be clear and decisive direction from leadership; clarity of responsibilities, authorities, and accountabilities; authority that is commensurate with responsibility and accountability; unified command (each employee has one boss); a clear approval process; and, rules governing acceptable employee behavior.\u201d[footnote]\u201cTraditional Management Principles,\u201d Small Business Notes<\/em>, accessed February 2, 2012, www.smallbusinessnotes.com\/managing-your-business\/traditional-management -principles.html<\/a>.[\/footnote]<\/span> Except for a small business run solely by its owner, every small business needs a management hierarchy\u2014no matter how small. Each person in the business should know who is responsible for what, have the authority to carry out his or her responsibilities, and not get conflicting instructions from different bosses. The absence of these things can have debilitating consequences for the employees in particular and the business in general.[footnote]\u201cTraditional Management Principles,\u201d Small Business Notes<\/em>, accessed February 2, 2012, www.smallbusinessnotes.com\/managing-your-business\/traditional-management -principles.html<\/a>.[\/footnote]<\/span><\/p>\r\n\r\n

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    Video Link 13.1\u00a0Glassblowing Business Thrives<\/h3>\r\n

    Lesson learned: Everyone should know his or her role in the business.<\/p>\r\n

    www.cnn.com\/video\/#\/video\/living\/2010\/10\/15\/mxp.sbs.glass.business.hln?iref=videosearch<\/a><\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n

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    Staffing<\/h2>\r\n

    The <\/a><\/span>[pb_glossary id=\"813\"]staffing<\/strong><\/em><\/a><\/span>\u00a0[\/pb_glossary]function involves selecting, placing, training, developing, compensating, and evaluating (the performance appraisal) employees.[footnote]John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices<\/em> (Mason, OH: Atomic Dog Publishing, 2007), 176[\/footnote]<\/span> Small businesses need to be staffed with competent people who can do the work that is necessary to make the business a success. It would also be extremely helpful if these people could be retained. Many of the issues associated with staffing in a small business are discussed in Section 13.4 \"People\"<\/a>.<\/p>\r\n\r\n<\/div>\r\n

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    Directing<\/h2>\r\n

    [pb_glossary id=\"914\"]Directing<\/strong>[\/pb_glossary]<\/em><\/a><\/span><\/span> is the managerial function that initiates action: issuing directives, assignments, and instructions; building an effective group of subordinates who are motivated to do what must be done; explaining procedures; issuing orders; and making sure that mistakes are corrected.[footnote]John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices<\/em> (Mason, OH: Atomic Dog Publishing, 2007), 177[\/footnote][footnote]David L. Kurtz, Contemporary Business<\/em> (Hoboken, NJ: John Wiley & Sons, 2011), 257[\/footnote]<\/span> Directing is part of the job for every small business owner or manager. [pb_glossary id=\"916\"]Leading<\/strong><\/em><\/a><\/span>[\/pb_glossary] <\/a><\/span>\u201cis the process of influencing people to work toward a common goal [and] [pb_glossary id=\"917\"]motivating<\/strong><\/em><\/a><\/span>[\/pb_glossary] is the process of providing reasons for people to work in the best interests of an organization.\u201d [footnote]William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business<\/em> (Boston: Houghton Mifflin, 2008), 224.[\/footnote]<\/span><\/p>\r\n

    Different situations call for different leadership styles. In a very influential research study, Kurt Lewin established three major leadership styles: autocratic, democratic, and laissez-faire.[footnote]Kurt Lewin, Ronald Lippitt, and Ralph K. White, \u201cPatterns of Aggressive Behavior in Experimentally Created \u2018Social Climates,\u2019\u201d Journal of Social Psychology<\/em> 10, no. 2 (1939): 269\u201399[\/footnote]<\/span> Although good leaders will use all three styles depending on the situation, with one style normally dominant, bad leaders tend to stick with only one style.[footnote]Don Clark, \u201cLeadership Styles,\u201d Big Dog and Little Dog\u2019s Performance Juxtaposition<\/em>, June 13, 2010, accessed February 2, 2012, www.nwlink.com\/~donclark\/leader\/leadstl.html<\/a>.[\/footnote]<\/span><\/p>\r\n

    [pb_glossary id=\"922\"]Autocratic leadership<\/strong>[\/pb_glossary]<\/a><\/span> occurs when a leader makes decisions without involving others; the leader tells the employees what is to be done and how it should be accomplished.[footnote]Kurt Lewin, \u201cLewin\u2019s Leadership Styles,\u201d Changing Minds<\/em>, accessed February 2, 2012, changingminds.org\/disciplines\/leadership\/styles\/lewin_style.htm<\/a>[\/footnote][footnote]Don Clark, \u201cLeadership Styles,\u201d Big Dog and Little Dog\u2019s Performance Juxtaposition<\/em>, June 13, 2010, accessed February 2, 2012, www.nwlink.com\/~donclark\/leader\/leadstl.html<\/a>.[\/footnote]<\/span> Lewin et al. found that this style creates the most discontent.[footnote]Kurt Lewin, Ronald Lippitt, and Ralph K. White, \u201cPatterns of Aggressive Behavior in Experimentally Created \u2018Social Climates,\u2019\u201d Journal of Social Psychology<\/em> 10, no. 2 (1939): 269\u201399[\/footnote]<\/span> However, this style works when all the information needed for a decision is present, there is little time to make a decision, the decision would not change as a result of the participation of others, the employees are well motivated, and the motivation of the people who will carry out subsequent actions would not be affected by whether they are involved in the decision or not.[footnote]Kurt Lewin, \u201cLewin\u2019s Leadership Styles,\u201d Changing Minds<\/em>, accessed February 2, 2012, changingminds.org\/disciplines\/leadership\/styles\/lewin_style.htm<\/a>[\/footnote][footnote]Don Clark, \u201cLeadership Styles,\u201d Big Dog and Little Dog\u2019s Performance Juxtaposition<\/em>, June 13, 2010, accessed February 2, 2012, www.nwlink.com\/~donclark\/leader\/leadstl.html<\/a>.[\/footnote]<\/span> This leadership style should not be used very often.<\/p>\r\n

    [pb_glossary id=\"923\"]Democratic leadership<\/strong>[\/pb_glossary]<\/em> <\/a><\/span>involves other people in the decision making\u2014for example, subordinates, peers, superiors, and other stakeholders\u2014but the leader makes the final decision. Rather than being a sign of weakness, this participative form of leadership is a sign of strength because it demonstrates respect for the opinions of others. The extent of participation will vary depending on the leader\u2019s strengths, preferences, beliefs, and the decision to be made, but it can be as extreme as fully delegating a decision to the team.[footnote]\u201cParticipative Leadership,\u201d Changing Minds<\/em>, accessed February 2, 2012, changingminds.org\/disciplines\/leadership\/styles\/participative_leadership.htm<\/a>.[\/footnote]<\/span> This leadership style works well when the leader has only part of the information and the employees have the other part. The participation is a win-win situation, where the benefits are mutual. Others usually appreciate this leadership style, but it can be problematic if there is a wide range of opinions and no clear path for making an equitable, final decision.[footnote]Kurt Lewin, \u201cLewin\u2019s Leadership Styles,\u201d Changing Minds<\/em>, accessed February 2, 2012, changingminds.org\/disciplines\/leadership\/styles\/lewin_style.htm<\/a>[\/footnote][footnote]Don Clark, \u201cLeadership Styles,\u201d Big Dog and Little Dog\u2019s Performance Juxtaposition<\/em>, June 13, 2010, accessed February 2, 2012, www.nwlink.com\/~donclark\/leader\/leadstl.html<\/a>.[\/footnote]<\/span> In experiments that Lewin et al. conducted with others, the democratic leadership style was revealed as the most effective.[footnote]Kurt Lewin, Ronald Lippitt, and Ralph K. White, \u201cPatterns of Aggressive Behavior in Experimentally Created \u2018Social Climates,\u2019\u201d Journal of Social Psychology<\/em> 10, no. 2 (1939): 269\u201399[\/footnote]<\/span><\/p>\r\n

    [pb_glossary id=\"924\"]Laissez-faire leadership<\/strong>[\/pb_glossary]<\/a><\/span> (or delegative or free-reign leadership) minimizes the leader\u2019s involvement in decision making. Employees are allowed to make decisions, but the leader still has responsibility for the decisions that are made. The leader\u2019s role is that of a contact person who provides helpful guidance to accomplish objectives.[footnote]John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices<\/em> (Mason, OH: Atomic Dog Publishing, 2007), 178[\/footnote]<\/span> This style works best when employees are self-motivated and competent in making their own decisions, and there is no need for central coordination; it presumes full trust and confidence in the people below the leader in the hierarchy.[footnote]Kurt Lewin, \u201cLewin\u2019s Leadership Styles,\u201d Changing Minds<\/em>, accessed February 2, 2012, changingminds.org\/disciplines\/leadership\/styles\/lewin_style.htm<\/a>[\/footnote][footnote]Don Clark, \u201cLeadership Styles,\u201d Big Dog and Little Dog\u2019s Performance Juxtaposition<\/em>, June 13, 2010, accessed February 2, 2012, www.nwlink.com\/~donclark\/leader\/leadstl.html<\/a>.[\/footnote]<\/span> However, this is not the style to use if the leader wants to blame others when things go wrong.[footnote]Don Clark, \u201cLeadership Styles,\u201d Big Dog and Little Dog\u2019s Performance Juxtaposition<\/em>, June 13, 2010, accessed February 2, 2012, www.nwlink.com\/~donclark\/leader\/leadstl.html<\/a>.[\/footnote]<\/span> This style can be problematic because people may tend not to be coherent in their work and not inclined to put in the energy they did when having more visible and active leadership.[footnote]Kurt Lewin, Ronald Lippitt, and Ralph K. White, \u201cPatterns of Aggressive Behavior in Experimentally Created \u2018Social Climates,\u2019\u201d Journal of Social Psychology<\/em> 10, no. 2 (1939): 269\u201399[\/footnote][footnote]Kurt Lewin, \u201cLewin\u2019s Leadership Styles,\u201d Changing Minds<\/em>, accessed February 2, 2012, changingminds.org\/disciplines\/leadership\/styles\/lewin_style.htm<\/a>.[\/footnote]<\/span><\/p>\r\n

    Good leadership is necessary for all small businesses. Employees need someone to look up to, inspire and motivate them to do their best, and perhaps emulate. In the final analysis, leadership is necessary for success. Without leadership, \u201cthe ship that is your small business will aimlessly circle and eventually run out of power or run aground.\u201d[footnote]Susan Ward, \u201c5 Keys to Leadership for Small Business,\u201d About.com<\/em>, accessed February 2, 2012, sbinfocanada.about.com\/od\/smallbusinesslearning\/a\/leadership1.htm<\/a>.[\/footnote]<\/span><\/p>\r\n\r\n

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    Don\u2019t Be This Kind of Leader or Manager<\/h3>\r\n

    Here are some examples of common leadership styles that should be avoided.<\/p>\r\n\r\n