Management & Ownership

1. Management & Ownership Business Plan Workshops TL Hill tlhill@temple.edu 215-204-3079

2. Business plan workshops • Feb 12: Financial Analysis for Entrepreneurs • Feb 19: Matching Products and Services with Markets • Feb 26: Competitive Analysis • Mar 18: Strategy & Business Model • Mar 25: Marketing and Sales Strategies • Apr 1: Management & Ownership • Apr 8: Professional Presentations • Weds: Financing New Ventures • Wednesday mornings through Apr 28, 9:30-11:30, TUCC

3. Business plan outlinewww.sbm.temple.edu/IEI/word/planigenttemplateoutline_003.doc • Technology Plan • Management & Organization • Social Responsibility • Development & Milestones • Financials • Including Capital Requirements & Financial Statements • Appendix • Executive Summary • Company Description • Including product/service & technology/core knowledge • Industry Analysis & Trends • Target Market • Competition • Strategy/Business Model • Marketing and Sales Plan • Production/Operations Plan

4. Business model • What a firm does, and how, to build and capture wealth for stakeholders. • Translates strategic position into a business structure and a set of functional strategies. • Includes a trajectory of growth: • a timeline, milestones, infusions of capital, growing revenues, growing, changing expenses.

5. People Power

6. People power • Success depends on teams of people • Right skills • Right personalities • Right arrangement • Right structure • More important even than capital • More versatile • Most difficult to find, to keep, to manage

7. Execution • Reliable delivery on tasks • Accurate • As promised • On time • On budget • Right people, right resources • Systems, controls, incentives • Relentless attention

8. Know-how • Tacit knowledge • Experience-based knowledge of how to do certain things • Skill-based, knowledge-based, practice-based • Typing, pipe-laying, negotiating, keeping books • Core competencies • Highly developed, specialized tacit knowledge • Important, rare, inimitable, irreplaceable • Shared, embedded in relationships • Drives innovation, builds & sustains advantages

9. Bridging • Bridges to scarce resources • Information, skills, customers, physicalassets, cash • Map links…

10. Relationships • Business is very personal • Sex & money • Identity & self respect • Relationships are central to business • Partnership for coping with uncertainty • Grow together • Spend a lot of time together • Business relationships demand trust& authenticity

11. Relationships evolve • Relationships grow through four stages • Incremental process of building trust & learning to work together STORM NORM FORM PERFORM

12. Trust is directly proportional to authenticity & experience • Project open, genuine interest • Demonstrate respectful equality • Through language, posture, listening, performance. • Respond honestly and directly • Find ways to work together • Do what you promise • Attend to the little things • Respect confidentiality

13. Relationships thrive onmanaged expectations • Clear roles & boundaries • Clear deliverables • Clear communications • Clear rewards & consequences • Opportunities for feedback & learning

14. Entrepreneurial leadership • Inherent aptitude • Learned skills and approach • Passion • Perseverance • Opportunity (calling)

15. Entrepreneurial leadership • Entrepreneurs have little trouble • Holding on to a vision • Acting on new ideas • Pushing themselves and others • Entrepreneurs typically have more trouble • Sharing their vision • Measuring results in useful ways • Empowering their managers • Disciplining their action towards building the organization

16. Building blocks of motivation Incentives Participation Feedback Education Vision

17. Learning-based progress • The goal is to create a circle of learning and change rolling towards the vision... Participatory Change Action Vision Learning Rewards MeasuredPerformance

18. Vision grounds action • Help the entrepreneur articulate her/his core values and driving vision • Builds trust • Relate recommendations to the vision • Releases energy for change • Examples • Food delivery: On-time & profitable • Publishing: Editorial & financial independence

19. Education enables action • Root recommendations in what the entrepreneur knows • Link theory to practice • Examples • Food delivery: Profitable cherries • Publishing: Reduce 300-day operating cycle

20. Feedback disciplines action • Develop user-friendly measures that track recommendations and how they affect firm performance • Challenge of structure • Examples • Food delivery: Profit per truckload delivered • Publishing: Turnover (months inventory), plus reprint guidelines

21. Meaningful participation energizes action • Expand participation • To those who know and can make a difference • The challenge of sharing control • Reward participation to avoid educated fans • Bonuses, stock options, phantom stock • Expanded scope of control • Examples • Food delivery: Bonuses tied to per-truck profit • Publishing: Improved cash flow linked to more influence and less stress

22. Exercise: People power inventory • What does your business model require? • Skill sets, customer types, resources, attitude? • Who do you have on board? • What do they bring to the firm? • Is the group compatible? • Who do you need? • In what roles?

23. Organizational Structure

24. Management responsibilities • Vision • Blends personal & organizational visions • Fosters common culture • Strategy • Environmental scanning • Strategy • Measurable objectives • Resource development • Tools, systems, education

25. Management responsibilities • Systems • Efficient, effective processes • Fit between systems • Coordination • Execution • Relationships • Staff development The mix of responsibilities changes with growth.

26. Development & start-up • Focus: Bringing product to market • Identify opportunity • Assess feasibility • Identify & accumulate resources & networks • $$, people, information, intellectual property • Plan details • Assemble team and resources • Launch…

27. Development & start-updecision making • Centralized • Informal • Non-specialized • Extremely flexible • Increasingly short time horizon

28. Growth • Focus: Execution – and adjusting plans and strategy to reality • Building market share • Building management team • Building product delivery system • Transitioning from entrepreneurial to more managerial leadership • Surviving a rapid succession of challenges as approach growth wall

29. Growth decision making • Centralized and informal • But transition to team decisions • Flexible • But increasing structure and specialization • Short time horizon

30. Stabilization • Focus: Profitability and long-term prospects • Consolidating market share • Tweaking internal systems • Coping with slowing sales growth • Coping with increased competition • Institutionalizing innovation • Planning for next five years • Considering exit – is the entrepreneur a manager?

31. Stabilization decision making • Formalized • Process driven, not opportunity driven • Decentralized • Requires delegation and coordination • Specialized • Implies more indirect control • Long- & short-time horizon

32. Organization design • Because they face undefined tasks and high levels of uncertainty, early-stage organizations demonstrate little structure in form of job specialization, rules, or formality – and depend on entrepreneur’s direct contact with people, functional areas and projects

33. Functional organizational design General Management • Vision & strategy • Hiring & culture • Resources & controls Marketing Sales Product Finance • Research oriented • Supervises making of materials • Organize by region • Incentive plans are crucial • Engineering • Sales support • Customer support • Statements • Cash flow • HR details • Office management • Management to add later: • HR, Logistics, IT, Counsel

34. Advisory groups expand ability • Networks • Bridges beyond the management team • Know-how • Affordable experience • Accountability • Deadlines and reporting help execution • Support • Been there, done that • Burn-out prevention

35. Responsibility charting • Provides a language and forum for discussing decision making at governance, management or staff levels. • Creates greater clarity about how decisions are to be made and who will be accountable for those decisions. • Helps raise difficult issues of power & authority.

36. DECISION: Roles Involved Fin. CEO Oper. Sales Approve Responsible Types of Participation Consult Informed Responsibility chart

37. Responsibility chart details • Approve • Sign off & veto power • Final responsibility to commit resources • Shares accountability • Responsible • Takes the initiative, develops alternatives, recommends, implements • Accountable for results • Consult • Input but no veto power • Inform • Notify only

38. Exercise: Organizational design • Necessary functions • Organizational design • Internal or external functions (in-house or outsourced • Management team vs advisory group functions • Structure – flat or hierarchical

39. Governance

40. Governance • Structured relationship between stakeholders • Key agreements that distribute power and responsibility • Includes legal and ownership structures

41. OwnershipPressures Family/StakeholderPressures ManagerialPressures Business systems

42. Business systems dynamics • Each system has its own logic, its own bottom line • Ownership: Wealth creation & maintenance • Institution: Increasing density of relations • Management: Efficiency & replicability • Each has its own time horizon • Ownership: Ten years or one working life • Institutional: Reproduction • Management: Quarterly results

43. Business systems diagnostic • What is the next task for this organization? • Securing ownership? • Strengthening culture? • Improving operations or systems? • Finding a measure of integration?

44. Governance defines the circles and the relationships • Who decides what • Owners, key employees, key customers, family members, professional advisors • Decision makers for each circle • Owners (board of directors) • Managers (management team) • Family/stakeholders (council, shareholder meeting) • Scope of each circle’s decisions • Responsibility of circles to each other • Conflict resolution between interests

45. Governance tools • Direction • Vision, values, culture • Agreements • Contracts, bylaws, charters • Support • Facilitators, advisors, models

46. Governance example • Company with strong family ties & 3 sons • Owner’s retirement needs drive succession • Two sons buy business (not land) from father • CEO-in-training - 50.+%; Sales manager 50-% • Board advisors • Family needs led to side business: • Graphic artist, co-owned by CEO-in-training and serving main business • Family council • Oriented towards growth of sons, management of estate • Board of advisors for larger business • Management of larger business • Management teams as appropriate

47. Exercise: Governance • Who are your stakeholders? • What influence will they have? • What structures might organize that influence?

48. Legal structures • Grow out of governance concerns • But have liability and task implications • Sole proprietorships • Partnerships • Corporations • S corporation • C corportaion • Stakeholder Corporations • ESOPs, cooperatives, joint ventures, community corporations, professional corporations (LLC)

49. Sole proprietorships • Disadvantages • Unlimited liability • Lack of continuity • Limited availability of capital & financing • Limited viewpoint & experience • Advantages • Ease of formation • Sole ownership of profits • One controlling party • Flexibility • Relative freedom from government control • No corporate business taxes

50. Partnerships • Disadvantages • Unlimited liability of general partners • Bound by acts of partners • Lack of continuity • Difficulty in obtaining financing • Difficulty of disposing of partnership interest • Advantages • Ease of formation • Flexible • Facilitates growth and performance through direct rewards • Relative freedom from governmental control and regulation • Possible tax advantage