Entrepreneurship and Small Business Management

Entrepreneurship and Small Business Management Chapter 20 Leadership and Ethical Practices

Ch. 20 Performance Objectives • Identify leadership styles. • Organize for effective time management. • Pursue ethical leadership to build an ethical organization.

Ch. 20 Performance Objectives(continued) • Make sure your business is run in an ethical manner. • Maintain your integrity. • Incorporate social responsibility into your company.

A Leader… • Gets things done through influence by guiding or inspiring others to voluntarily participate in a cause • Has self-esteem • Inspires confidence in others • Thinks positively

Leadership Styles Coercive—pressure/commanding approach • Pro: effective in disasters or with employees who need forceful management • Con: hurts employee morale and creativity Authoritative—leader sets goal but allows process flexibility (“come with me” approach) • Pro: works well if the leader is an expert • Con: not effective if the leader is not an expert and is trying to lead people who are

Leadership Styles (continued) Affiliative—”people come first” approach • Pro: gets employees on board • Con: can fail to give adequate direction Democratic—gives employees strong voice in company • Pro: builds morale • Con: can result in endless meetings and stagnation

Leadership Styles (continued) Pacesetting—sets high standards for self, and challenges employees to meet them, too • Pro: great when employees are self-motivated • Con: can overwhelm less committed employees Coaching—focuses on helping employees learn and grow • Pro: good approach with new employees • Con: may not work with long-term employees who are resistant to change

How Will You Pay Yourself? • Commission • A set percentage of every sale • Variable operating cost (fluctuates with sales) • Salary • Fixed amount of money paid at set intervals • Fixed operating cost (does not change with sales) • Wage • Fixed amount per hour • Cost of goods sold (COGS) • Dividend—share of company profits deducted from net profit (after taxes)

Manage Time Wisely

Time Management Tips • Prioritize; know what’s important • Set realistic daily goals; allow for flexibility • Check e-mail a limited number of times a day • Avoid distractions from electronic devices • Try stand-up meetings • Accept meeting invitations when your presence is required for progress • Delegate responsibility and authority • Allow for downtime and creative-thinking time

Ethical Leadership in Organizations • Ethics—principles that define a code of behavior to distinguish between right & wrong • Your values and behavior set the ethical tone for your company. • A behavior may be legal but still not ethical. • Customers return to businesses that treat them ethically. • Employees who feel used by their employers will not do their best work. • To build an ethical organization, values and standards of conduct must be clearly defined.

Establishing Ethical Standards • Code of ethics—a statement of the company’s values • Code of conduct—set of official standards of employee behavior • Code of ethics and business conduct—combines the written statement of values with the official standards of employee behavior

Six Pillars of Character

Making Sure Your Business is Run in an Ethical Manner • Give employees the opportunity to learn, understand, and adopt the code of ethics as part of their formal training and orientation. • Implement methods to collect information and make changes. • Open communications • “Tip line” or “tip box” to identify ethical problems • Protection for whistle-blowers

Corporate Ethical Scandals • Companies that published false financial statements, inflating their earnings and misleading investors: • Enron • WorldCom-MCI • Tyco • Global Crossing • Stock investors and employees with retirement funds in company stock lost millions of dollars. • These scandals were failures of corporate governance: there were no rules or safeguards in place to ensure that executives behaved legally and ethically.

Corporate Governance • Do not treat company profits as personal funds. Choose a wage, salary, or dividend arrangement and document it. • Keep accurate financial records and have them checked once a year by a reputable accountant. • Use financial controls. • Create an advisory board of people with strong ethics.

Maintaining Your Integrity • Integrity—upholding behavioral standards • All codes of ethics and conduct are worthless without the integrity to put words into action. • Acting ethically is not something done only when convenient or not costly. • Integrity is a daily, decision-by-decision process. • Maintain compliance with government laws by staying up-to-date on regulation changes.

Encourage Social Responsibility • Recycle in the office. • Donate a portion of business profits to a charity that employees support. • Refuse to use animals for testing products. • Offer employees incentives to volunteer in their communities. • Establish a safe, healthy workplace. • Emphasize being a sustainable business.

Entrepreneurship and Small Business Management