Ch. 16: Building a Team & Succession Planning Copyright © 2014 Pearson Education

Copyright © 2014 Pearson Education 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

Copyright © 2014 Pearson Education Business Leaders Are… Innovative Passionate Willing to take risks Adaptable Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education 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. Develop a strategic plan that gives the company a competitive advantage. Respect and support their employees. Set the example for their employees. Create a climate of trust in the organization. Build credibility with their employees. Are authentic Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Effective Leaders Focus employees’ efforts on challenging and driving toward those goals. Provide the resources employees need to achieve their goals. Communicate with their employees. Value the diversity of their workers. Celebrate their workers’ successes. Are willing to take risks. Encourage creativity among their workers. Maintain a sense of humor Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education 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. Develop leadership talent. Keep their eyes on the horizon Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education Servant Leadership There is no one single “best” style of leadership. Many workers respond well to servant leadership: a leader takes on the role of servant first and leader second. What do people need? How can I help them get it? What does my organization need to do? How can I help my organization do it? Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Three Vital Tasks of a Leader 1.Add the right employees and constantly improve their skills. 2.Create a culture for retaining employees. 3.Plan for “passing the torch” to the next generation of leadership Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Building an Entrepreneurial Team Study: 80% of employees turnover is caused by bad hiring decisions. Most common causes of poor hiring decisions: Relying on candidate’s description of themselves rather than requiring the candidate to demonstrate their abilities. Failing to follow a consistent, evidence-based selection process. Failing to provide candidates with sufficient information about what the jobs for which they are hiring actually entail. Succumbing to pressure to fill a job quickly. Failing to check candidates’ references Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Annual Growth Rate in the U.S. Labor Force Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education How to Hire Winners Commit to hire the best talent. Elevate recruiting to a strategic position Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Strategic Recruiting Look inside the company first. Look for employees with whom your customers can identify. Make employment advertisements stand out. Use multiple channels to recruit talent. Encourage employee referrals Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Strategic Recruiting Recruit on campus. Forge relationships with schools and other sources of workers. Recruit “retired” workers. Consider using offbeat recruiting techniques. Offer what workers want Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education How to Hire Winners Commit to hire the best talent. Elevate recruiting to a strategic position. Create practical job descriptions and job specifications Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education 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

Copyright © 2014 Pearson Education 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. (# in D.O.T) Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education How to Hire Winners Commit to hire the best talent. Elevate recruiting to a strategic position. Create practical job descriptions and job specifications. Plan an effective interview Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education 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 Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education 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 Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education How to Hire Winners Commit to hire the best talent. Elevate recruiting to a strategic position. Create practical job descriptions and job specifications. Plan an effective interview. Conduct the interview Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education Conducting an Effective Interview Break the ice. Goal: to diffuse nervous tension. Ask questions. Puzzle interviews. Remember the 25/75 Rule. Be respectful and keep it legal! Sell the candidate on the company. 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

Copyright © 2014 Pearson Education How to Hire Winners Commit to hire the best talent. Elevate recruiting to a strategic position. Create practical job descriptions and job specifications. Plan an effective interview. Conduct the interview. Contact references and conduct a background check Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education 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, 53% of all candidates either exaggerate or falsify information about their previous employment on their résumés Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Why Hiring Managers Check Job Candidates’ Social Networking Sites Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education 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

Copyright © 2014 Pearson Education Characteristics of a Positive Culture Respect for work and life balance Sense of purpose Sense of fun Engagement Diversity Integrity Participative management Learning environment Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Drivers of Employee Engagement Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Composition of U.S. Workforce Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education 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

Copyright © 2014 Pearson Education 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: 1. Skill variety 2. Task identity 3. Task significance 4. Autonomy 5. Feedback Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education 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 Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education 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 Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education 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. Pay-for-performance systems Profit-sharing plans Open book management Cafeteria benefit plan Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Rewards and Compensation Intangible rewards – such as praise, recognition, celebrations, and others – can be powerful, yet inexpensive, motivators. Entrepreneurs tend to rely on non-monetary rewards Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Family Businesses Make up more than 80% of all U.S. businesses. Account for 57% of U.S. GDP. Employ 60% of private sector work force. Comprise 35% of the Fortune 500 companies. Created 78% of the U.S. economy’s net new jobs over the last two decades Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education 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 Ch. 16: Building a Team & Succession Planning (continued)

Copyright © 2014 Pearson Education Why is Management Succession So Difficult? 81% of all business founders intend to pass their companies on to their children. Survey: 47% of family business owners have no management succession plans in place Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education How to Develop a Management Succession Plan Step 1. Select the successor. 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

Copyright © 2014 Pearson Education Coping with Estate Taxes Buy/Sell agreement Lifetime gifting Setting up a trust Irrevocable life insurance trust Irrevocable asset trust Grantor Retained Annuity Trust (GRAT) Estate freeze Family Limited Partnership (FLP) Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Exit Strategies Entrepreneurs planning to retire often use two exit strategies: Sell to outsiders Sell to insiders Leveraged buyout (LBO) Employee Stock Ownership Plan (ESOP) Ch. 16: Building a Team & Succession Planning

Copyright © 2014 Pearson Education Ch. 16: Building a Team & Succession Planning Conclusion Leadership is the process of influencing and inspiring others. 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.

Copyright © 2014 Pearson Education Ch. 16: Building a Team & Succession Planning