How to Manage a Business Effectively

Table of contents

Your firm then has the time and skills needed to respond to changes and take advantage of evolving opportunities.

Balancing Schedules Stress and Personnel

Without organization and good management, the compressed time schedules associated with modern business can cause stress and make extraordinary demands on people. An effective management structure can reduce stress and channel the productive capacity of employees into business growth and profits.

Setting Duties Tasks and Responsibilities

An organization is characterized by the nature and determination of employees’ duties tasks and responsibilities. While many organizations use different methods for determining these it is essential that they be clearly defined. The core of any organization is its people and their functions. Duties, tasks and responsibilities often evolve in an ad hoc manner. A typical firm starts with a few people, with often one person performing most duties. As the firm grows, others are hired to fill specific roles often on a functional basis. Roles that were handled by consultants and specialists outside the firm now are handled internally. As new needs emerge, new roles are developed.

Just as an emerging business develops an accounting system it should also develop a human resource system. For instance the following employee information should be available and checked for accuracy at least once each year.

  • Name
  • Address
  • Marital status and dependents
  • Hire date
  • Company
  • Job history
  • Salary rate and history
  • Education including degrees
  • Professional licenses or certificates
  • Professional publication

Review your personnel files periodically to ensure that the information is correct and current.

Implement a system that will make updating human resource files a fairly simple routine.

Business Team

The apex of an effective organization lies in developing the business team. Such a team involves delegating authority and increasing productivity. Assess the effectiveness of your business team(s) with the following checklist: Team is respected by the members. The abilities of all team members are respected. A team parity is evident through activities. Mistakes result in corrective action not retribution.

Each member understands the importance of his or her contribution. The team can explore new areas of activity. Security of employment is evident.

Controlling Conflict

Another key to successful management lies in controlling conflict. Conflict cannot be eliminated from either the business or the interpersonal activities of the enterprise. A measure of the organization’s success is the degree to which conflict can be exposed and the energies associated with it, channeled to develop the firm.

Although establishing policies and procedures represent the tangible aspect of organization and management, the mechanisms developed to tolerate and embody challenges to the established operation will serve as the real essence of a firm.

Structural Issues Organization

The effectiveness of a particular organizational form depends on a variety of internal and external events for example:

  1. Competitors (number or activity)
  2. Technology (internal or external)
  3. Regulatory environment
  4. Customer characteristics
  5. Supplier characteristics
  6. Economic environment
  7. Key employees
  8. Growth
  9. Strategy (including new products and markets)

Even though you may discover that certain events are affecting your business, be careful not to change the organizational structure of your firm without discussing it with your management team. Employees generally can accomplish goals despite organizational structures imposed by management. Because restructuring involves spending a lot of time learning new rules and implementing a new organizational structure is costly.

U. S. Small Business Administration

Policy and Procedural Issues Authority

The central element of organizational management is authority. Through authority your firm develops the structure necessary to achieve its objectives. The authority that once was conferred by either owning a small business or having a position in the bureaucracy of a larger firm has been replaced by technical competence (including that of forming and running the business). Forces external to your business may emphasize the elements of granted suppliers, customers, unions and the government have severely limited the ability of the business owner-manager to take independent action.

A primary component of authority is the exercise of control within the organization. A thorough system of controls ensures the firm’s operation and provides a mechanism for imposing authority. Internal controls include the provision that authority be delegated and circumscribed; examples of these provisions follow. Place a check by the provisions that apply to your firm. Consider implementing controls over areas that you have not checked.

Approval for disbursements of cash and regular accounting Reconciliation of bank statements Periodic count and reconciliation of inventory records Approval of pricing policies and exemptions Approval of credit policies and exemptions Review of expense and commission accounts Approval of purchasing and receiving policies Review of payments to vendors and employees Approval of signature authorities for payments Review of policies Delegation is a key to the effective exercise of authority in your business.

By delegating limited authority to accomplish specific tasks, the talents of employees in the organization can be used to upgrade the skills and experience of the manager. The following checklist enables you to determine if you are taking advantage of opportunities to delegate authority. Is your time consumed by daily chores? Do you eave time for the following: Training and development of subordinates? Planning? Coordinating and controlling work of subordinates? Visiting customers and subordinates regularly? U. S. Small Business Administration 8 Remaining involved in new product development?

Participating in civic affairs

To effectively delegate responsibility and authority in your organization you must: Accept the power of delegation. Know the capabilities of subordinates. Ensure that specific training is available. Select specific responsibilities to be delegated. Provide periodic monitoring and interest. Assess results and provide appropriate feedback. Praise and criticize (constructively). The skills and abilities of each level of authority can be increased by effectively delegating authority throughout any organization.

Management by Objectives Many firms have embraced management by objectives (MOB) as a way to effectively integrate people into the organization. An MOB system provides a structure to ensure coordination of the organization and to effectively delegate authority and the following steps:

  1. Subordinates submit proposals for objectives and means of measuring progress.
  2. A supervisor assesses proposed objectives in light of evolving business needs his or her personal perspective and the ability of the company to ensure rewards for attaining goals.
  3. Supervisor and subordinate discuss the objectives and the standards of measurement with appropriate timetables and potential corrective actions.
  4. Supervisor and subordinate appraise results.
  5. Supervisor and subordinate negotiate results (including changes necessitated during the year) establish rewards and begin the cycle again.

A successful MOB system is tricky to implement and maintain because it requires a high degree of honesty in the organization. Such a system can fail in many ways such as when: Managers don’t have clear objectives for their units.

Managers set objectives that are too high (maybe unconsciously). Subordinates neglect objectives (maybe unconsciously). Responsibilities are ill-defined and remain so. Authority is inconsistent with responsibilities. Simple measurable activities are emphasized over substantive decisions and other important activities. Success is measured by the ability to please. Managers emphasize how something is achieved rather than what is achieved.

Polices do not guide action.

U. S. Small Business Administration

At best the MOB system ensures coordination among the various aspects of the organization through the selfsameness evaluation process. At worst it forces employees into a situation in which they are perceived as being either poor performers (failing to meet personally set objectives) or poor managers (failing to set objectives high enough or to provide critical self-assessment). The success of an MOB system depends on the manager’s ability to ensure that objectives are fair and consistent with the firm’s needs and to reward successful performance.

Operating Reports Operating reports form the organizational basis of your business. Such reports mirror the organization, its structure and function. They define key relationships between employees and can either minimize or increase organizational stress. Reporting must be kept current to allow for timely identification and correction of problems before serious damage to the organization occurs. Too much reporting as well as inappropriate reporting can be as destructive as too little reporting.

For instance the CEO of a major industrial firm who receives daily production and inventory reports by model can lose his or her ability to maintain an overall perspective. Thus operating managers must attempt to identify and solve local problems and take advantage of local opportunities within their own authority. Inappropriate reporting compromises management’s ability to leverage individual skills and abilities. Operating reports not only provide essential data that enable management to accomplish its objectives, they also focus staffs attention on the organization’s goals.

If reporting is not taken seriously, employees may deal with customers, suppliers and each other in a similarly trivial manner. To avoid inappropriate reporting review reporting policies annually to ensure that reports are appropriate and contain the information needed to make sound management probability events that could have a potentially disastrous effect. A small or new business is no exception although it is easy to ignore the probability of such events under the pressures of developing and maintaining a business.

Identifying and quickly dealing with such unlikely events is primarily the responsibility of management. Also only management has the ability to assess the full potential impact of these events on the overall organization. Some of the potentially disastrous events that may affect your business are listed below. Theft of property Breach of laws Computer crimes Fraud Weather related damage Determine how vulnerable your business is to these and other such risks by assessing their probability and impact. Consider actions that you can take to lower the probability of their occurring, I. E. Ways to control your risk. Review the checklist each year to ensure the future of your firm is not imperiled through neglect.


U. S. Small Business Administration

Consultants can provide a valuable perspective in developing an organization. A variety of circumstances can trigger the need for a consultant including: need for unkind; development of a business plan (strategy); operational shortfalls; loss of market share; and, a lack of direction or sense of malaise. However consultants cannot solve problems. True solutions must come from within your organization and must be implemented daily.


Successful management is founded on the mastery of a myriad of details. While management schools teach the importance of focusing attention on major issues affecting the business, practical managers realize the major issues are the variety of small aspects that form the business. In an increasingly structured society, inattention to even one minor detail can result in significant disruption of the business or even its failure.

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