Professional Management

1
Professional Management Going Public

• The Transition to Professional Management

2
Stages of Growth

• Start-up entrepreneurs vision is key to the
  success of the venture
• highly centralized decision making, informal
  structure
• requires creativity, high need for achievement,
  risk taking
• Growth when this becomes the goal or is
  necessitated by increases in sale volume, head
  count and the complexity of managing the firm
• formalization is required in the organizational
  process
• Decision making, planning, structure and the
  hiring of Professional management become
  necessary
• The decision for a public offering is made in the
  early part of this stage

3
Comparing the Entrepreneurial and Professional
Management styles

• The Entrepreneurial Style
• Vision
• Intuitive
• high-centralized decision-making
• One-person show
• Informal
• Creative
• Risk-taker

• The Professional Style
• Planning
• Systematic
• Delegation of power
• Team player
• Formal
• Conformist
• Cautious

4
Detecting the need for Professional Management

• The typical problems that signal a need for
  change
• The Entrepreneur feels over-whelmed with
  management activities
• The Entrepreneur feels unqualified to handle the
  many issues surrounding a growth strategy --
  marketing, finance, human resource management
• Financial strain caused by growth
• Communication, co-ordination and motivation are
  becoming increasingly difficult -- informal
  structure is inadequate
• Problems with customers or suppliers due to
  backlog of orders
• The number of mistakes are increasing -- causing
  a decline in performance

5
The Transition to Professional Management

• The success of a growth strategy is dependent
  upon the ability of the management
  (Entrepreneurs) to manage the change to a formal
  management structure (Professional Management)
• Two common problems
• Reluctance to let go the emotional attachment of
  the entrepreneur, lack of confidence in the
  Professional Managers abilities and the cost of
  hiring professional is perceived as to costly
• The entrepreneurial culture the values and
  organization culture that are built around the
  entrepreneur -- employees are used to an informal
  environment, following one leader and having a
  flexible work environment

6
Managing the Transition

• Setting organizational policies and procedures to
  guide the actions of the organization -- adding
  bureaucratic processes to the firm
• H/R is usually the first step to organizing the
  firm
• Establish guidelines for the various functional
  areas i.e. production procedures, marketing and
  sales tactics etc.
• The focus of management becomes centered on
  coordination given that one person can no
  longer manage everything
• Delegating more activities to organization
  members -- a decentralized decision making
  process
• Create job descriptions and departments to handle
  specific tasks
• Create Layers of management -- to coordinate
  functional activities
• A functional structure is created
• Professional managers are hired to fill the gaps
  in management
• A new president is brought in to manage the
  transformed company (this depends on the
  entrepreneurs willingness to relinquish control)
  
• Adapting the organization structure and culture
  -- modifying the structure and processes while
  developing the attitudes and behaviors of
  employees to fit with the new organization
• Provide training, communicate openly about
  company changes, involve employees in the change
  process this will help prevent resistance
• Monitoring to ensure the transition is smooth a
  change agent can be used -- consultant
• Continually evaluate the firms structure and
  management processes

7
Attracting Professional Management

• Human resource planning is essential for an
  effective change in management
• Continuous support must be provided to managers
• Efforts must be rewarded
• Training and career development must be clearly
  stated
• The compensation must be comparable to other
  available positions to attract desirable talents