1. Copyright © 2011 Pearson Education CHAPTER 16

2. Copyright © 2011 Pearson Education  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 16 - 2

3. Copyright © 2011 Pearson Education  Innovative  Passionate  Willing to take risks  Adaptable Ch. 16: Building a Team & Succession Planning 16 - 3

4. Copyright © 2011 Pearson Education  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 16 - 4

5. Copyright © 2011 Pearson Education  Focus employees’ efforts on challenging and driving toward those goals.  Provide the resources employees need to achieve their goals.  Listen to 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 16 - 5 (continued)

6. Copyright © 2011 Pearson Education  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 16 - 6 (continued)

7. Copyright © 2011 Pearson Education 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 16 - 7

8. Copyright © 2011 Pearson Education  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 16 - 8

9. Copyright © 2011 Pearson Education Ch. 6: Franchising and the Entrepreneur 16 - 9 FIGURE 16.1 Annual Growth Rate in the U.S. Labor Force Source: U.S. Census Bureau, 2008.

10. Copyright © 2011 Pearson Education  Commit to hire the best talent.  Elevate recruiting to a strategic position. Ch. 16: Building a Team & Succession Planning 16 - 10

11. Copyright © 2011 Pearson Education  Look inside the company first.  Encourage employee referrals.  Make employment advertisements stand out.  Use multiple channels to recruit talent.  Recruit on campus. Ch. 16: Building a Team & Succession Planning 16 - 11

12. Copyright © 2011 Pearson Education  Get involved in a college internship program.  Recruit “retired” workers.  Consider using offbeat recruiting techniques.  Offer what workers want. Ch. 16: Building a Team & Succession Planning 16 - 12 (continued)

13. Copyright © 2011 Pearson Education  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 16 - 13 (continued)

14. Copyright © 2011 Pearson Education  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 16 - 14

15. Copyright © 2011 Pearson Education 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) Ch. 16: Building a Team & Succession Planning 16 - 15

16. Copyright © 2011 Pearson Education  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 16 - 16 (continued)

17. Copyright © 2011 Pearson Education  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 16 - 17

18. Copyright © 2011 Pearson Education  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 16 - 18 (continued)

19. Copyright © 2011 Pearson Education  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 16 - 19 (continued)

20. Copyright © 2011 Pearson Education  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 16 - 20

21. Copyright © 2011 Pearson Education  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 16 - 21 (continued)

22. Copyright © 2011 Pearson Education 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 16 - 22

23. Copyright © 2011 Pearson Education  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 16 - 23

24. Copyright © 2011 Pearson Education  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 16 - 24

25. Copyright © 2011 Pearson Education Ch. 16: Building a Team & Succession Planning FIGURE 16.2Composition 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. 16 - 25

26. Copyright © 2011 Pearson Education  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 16 - 26

27. Copyright © 2011 Pearson Education  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 16 - 27 (continued)

28. Copyright © 2011 Pearson Education  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 16 - 28 (continued)

29. Copyright © 2011 Pearson Education  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 16 - 29 (continued)

30. Copyright © 2011 Pearson Education  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 16 - 30

31. Copyright © 2011 Pearson Education  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 16 - 31

32. Copyright © 2011 Pearson Education Ch. 16: Building a Team & Succession Planning FIGURE 16.3 U.S. Workforce by Generation 16 - 32

33. Copyright © 2011 Pearson Education  Make up 90% of all U.S. 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 16 - 33

34. Copyright © 2011 Pearson Education  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 16 - 34 (continued)

35. Copyright © 2011 Pearson Education  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 16 - 35

36. Copyright © 2011 Pearson Education 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 16 - 36

37. Copyright © 2011 Pearson Education  Buy/Sell agreement  Lifetime gifting  Setting up a trust ◦ Bypass 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 16 - 37

38. Copyright © 2011 Pearson Education  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 16 - 38

39. Copyright © 2011 Pearson Education 16 - 39 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.