CHAPTER 16

Building a New Venture Team

and
Planning for the Next Generation

Copyright © 2011 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 a leader.

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Planning
Business Leaders Are…

 Innovative
 Passionate
 Willing to take risks
 Adaptable

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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.

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Planning
 (continued)

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 and Value the diversity of their workers.
 Celebrate their workers’ successes who are willing to take risks.
 Encourage creativity among their workers.
 Maintain a sense of humor.
 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.
 Keep their eyes on the horizon.

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Planning
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.

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Planning
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.

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Planning
 16 - 8
FIGURE 16.1 Annual Growth Rate in the U.S. Labor Force Source: U.S. Census Bureau,
2008.

Ch. 6: Franchising and the Entrepreneur

1-8
 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.

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Planning
 Strategic Recruiting
 Look inside the company first.
 Encourage employee referrals.
 Make employment advertisements stand out.
 Use multiple channels to recruit talent.
 Recruit on campus.
 Get involved in a college internship program.
 Recruit “retired” workers.
 Consider using offbeat recruiting techniques.
 Offer what workers want.

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Planning
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.

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Planning
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.

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Planning
 (continued)

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.

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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.

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Planning
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.

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Planning
Characteristics of a Positive Culture

 Respect for work and life balance

 Sense of purpose
 Sense of fun
 Engagement
 Diversity
 Integrity
 Participative management
 Learning environment

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Planning
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.

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Planning
 (continued)

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

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Planning
 (continued)

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.

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Planning
 (continued)

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.

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Planning
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

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Planning
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.

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 Family Businesses
 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.
 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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Planning
 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.

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Planning
 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.

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Planning
 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)

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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.

Ch. 16: Building a Team & Succession Planning 161 -- 27