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 Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 Ch 20 Performance Objectives (continued) Make sure your business is run in an ethical manner Maintain your integrity Incorporate social responsibility into your company Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 How Will You Pay Yourself? Commission Salary Fixed amount of money paid at set intervals Fixed operating cost (does not change with sales) Wage A set percentage of every sale Variable operating cost (fluctuates with sales) Fixed amount per hour Cost of goods sold (COGS) Dividend—share of company profits deducted from net profit (after taxes) Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 Manage Time Wisely Entrepreneurship and Small Business Management, 1/e © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e 10 © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 their best work To build an ethical organization, values and standards of conduct must be clearly defined Entrepreneurship and Small Business Management, 1/e 11 © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e 12 © 2012 Pearson Education, Upper Saddle River, NJ 07458 Six Pillars of Character Value Actualized Form Trustworthine ss Honesty, integrity, reliability (promisekeeping), loyalty Respect Civility, courtesy, decency, dignity, autonomy, tolerance, acceptance Responsibility Accountability, pursuit of excellence, selfrestraint Caring Concern for others, compassion, benevolence, altruism Fairness Process (open and impartial), impartiality, equity Citizenship Law abiding, volunteerism, environmental awareness, action Entrepreneurship and Small Business Management, 1/e 13 © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e 14 © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e 15 © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e 16 © 2012 Pearson Education, Upper Saddle River, NJ 07458 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 Entrepreneurship and Small Business Management, 1/e 17 © 2012 Pearson Education, Upper Saddle River, NJ 07458 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, 1/e 18 © 2012 Pearson Education, Upper Saddle River, NJ 07458 ... taxes) Entrepreneurship and Small Business Management, 1/e © 201 2 Pearson Education, Upper Saddle River, NJ 07458 Manage Time Wisely Entrepreneurship and Small Business Management, 1/e © 201 2... values and standards of conduct must be clearly defined Entrepreneurship and Small Business Management, 1/e 11 © 201 2 Pearson Education, Upper Saddle River, NJ 07458 Establishing Ethical Standards... meetings and stagnation Entrepreneurship and Small Business Management, 1/e © 201 2 Pearson Education, Upper Saddle River, NJ 07458 Leadership Styles (continued) Pacesetting—sets high standards