entrepreneurship development and management · entrepreneur is concerned with trading activities...

ENTREPRENEURSHIP DEVELOPMENT AND

MANAGEMENT

THE CONCEPT OF AN ENTREPRENEURTHE CONCEPT OF AN ENTREPRENEURTHE CONCEPT OF AN ENTREPRENEURTHE CONCEPT OF AN ENTREPRENEUR

� DEFINITION,NATURE AND CHARACTERISTICS OF AN ENTREPRENEUR

� WORKING PROFILE OF AN INTREPRENEUR

� TYPES OF ENTREPRENEUR

� INTRAPRENEUR

� FUNCTIONS OF AN ENTREPRENEUR

� ENTREPRENEUR AND MANAGER----DISTINCTION� ENTREPRENEUR AND MANAGER----DISTINCTION

DEFINITION,NATURE AND CHARACTERISTICS OF AN DEFINITION,NATURE AND CHARACTERISTICS OF AN DEFINITION,NATURE AND CHARACTERISTICS OF AN DEFINITION,NATURE AND CHARACTERISTICS OF AN

ENTREPRENEURENTREPRENEURENTREPRENEURENTREPRENEUR

• HISTORY:

The word ‘entrepreneur' is derived from the French word

‘entreprendre’which means ‘to undertake’. In the early 16th

century the French men who organised and led military

expeditions were referred to as ‘entrepreneur'. After 1700,the term expeditions were referred to as ‘entrepreneur'. After 1700,the term

was applied to other types of adventures, mainly civil engineering

like constructions of roads etc.

DEFINITIONDEFINITIONDEFINITIONDEFINITION

• J.B.SAY: J.B.SAY: J.B.SAY: J.B.SAY: Is another Frenchman, expanded Cantillon’s

ideas and conceptualised the entrepreneur as an

organiser of the business firm, central to its distributive

and productive functions.

• E.E.HAGEN: E.E.HAGEN: E.E.HAGEN: E.E.HAGEN: The entrepreneur is an economic • E.E.HAGEN: E.E.HAGEN: E.E.HAGEN: E.E.HAGEN: The entrepreneur is an economic

man,who tries to maximise his profits by innovations.

• GALBRAITH: GALBRAITH: GALBRAITH: GALBRAITH: ‘People are poor because they prefer in

that way’. An entrepreneur must accept the challenge and

should be willing hard to achieve something.

CHARACTERISTICS OF AN CHARACTERISTICS OF AN CHARACTERISTICS OF AN CHARACTERISTICS OF AN


1. Calculated Risk-taker

2. Innovator

3. Organiser

4. Creative

5. Achievement Motivated5. Achievement Motivated

6. Technically Competent

7. Self-confident

8. Socially Responsible

9. Optimistic

10. Equipped with Capability to drive

11. Blessed with Mental Ability

12. Human Relations Ability

13. Communication Ability

14. Decision-Making

15. Business Planning

16. A venture Capitalist

17. Visionary

18. Entrepreneur make significant differences

19. Ability to Spot and Exploit Opportunities19. Ability to Spot and Exploit Opportunities

20. Courage to Face Adversities

21. Leadership---An essential trait of the entrepreneur

Manager Characteristics Leader Characteristics

• Administers

• A copy

• Maintain

• Focus and systems and structure

• Innovates

• An original

• Develops

• Focuses on people

MANAGER VERSUS LEADERMANAGER VERSUS LEADERMANAGER VERSUS LEADERMANAGER VERSUS LEADER

• Focus and systems and structure

• Relies on control

• Short-range view

• Asks how and when

• Eye on the bottomline

• Imitates

• Accepts the status quo

• Classic good soldier

• Does things right

• Focuses on people

• Inspires trust

• Long-range perspective

• Asks what and why

• Eye on the horizon

• Originates

• Challenges the status quo

• Own person

• Does the right thing

CharacteristicsCharacteristicsCharacteristicsCharacteristics TraitsTraitsTraitsTraits

• Self-confidence

• Drive

• Confidence, Independence,

Optimism, Individuality.

• Responsibility,Vigour, Initiative,

persistence, Ambition.

WORKING PROFILE OF ENTREPRENEURWORKING PROFILE OF ENTREPRENEURWORKING PROFILE OF ENTREPRENEURWORKING PROFILE OF ENTREPRENEUR

• Task-result oriented

• Risk-taker

• Mental Ability

• Leadership

persistence, Ambition.

• Need for achievement, Profit-

oriented, Energy.

• Risk taking ability, Likes

challenges.

• Overall intelligence(IQ),Creative

thinking, Analytical thinking ability.

• Leadership behaviour, Gets

alongwith others, Responsive to

situations, Criticism.

• Human Relations Ability

• Originality

•Communication Ability

• Emotional stability, Healthy personal

relations, Sociability, Tactfulness,

Consideration.

•Innovative, Creative, Resourceful,

knowledge.

•Perceptive, Foresight, Future oriented.

TYPES OF ENTREPRENEURTYPES OF ENTREPRENEURTYPES OF ENTREPRENEURTYPES OF ENTREPRENEUR

1.1.1.1. According to the Type of BusinessAccording to the Type of BusinessAccording to the Type of BusinessAccording to the Type of Business

i.i.i.i. Business entrepreneur: Business entrepreneur: Business entrepreneur: Business entrepreneur: Business entrepreneurs are those

entrepreneurs who conceive the idea of a new product or

service and then translate their ideas into reality.

ii.ii.ii.ii. Trading entrepreneur: Trading entrepreneur: Trading entrepreneur: Trading entrepreneur: As the very name indicates trading

entrepreneur is concerned with trading activities and not entrepreneur is concerned with trading activities and not

manufacturing.

iii.iii.iii.iii. Industrial entrepreneur: Industrial entrepreneur: Industrial entrepreneur: Industrial entrepreneur: As the very name indicates, an

industrial entrepreneur is one who sets up an industrial unit.

iv.iv.iv.iv. Corporate entrepreneur: Corporate entrepreneur: Corporate entrepreneur: Corporate entrepreneur: Corporate entrepreneur is the one

who plans,develops and manages a corporate body.

v.v.v.v. Agricultural entrepreneur: Agricultural entrepreneur: Agricultural entrepreneur: Agricultural entrepreneur: Agricultural entrepreneur is the

one who is engaged in the agricultural activities.

2. According to Motivation2. According to Motivation2. According to Motivation2. According to Motivationi.i.i.i. Pure entrepreneur: Pure entrepreneur: Pure entrepreneur: Pure entrepreneur: Pure entrepreneur is one who may or

may not possess an aptitude for entrepreneurship but is

tempted by the monetary rewards or profits to be earned

from the business venture.

ii.ii.ii.ii. Induced entrepreneur: Induced entrepreneur: Induced entrepreneur: Induced entrepreneur: Induced entrepreneur is attracted by

the various incentives, subsidies and facilities offered by the

government.government.

3.According to the Use of Technology3.According to the Use of Technology3.According to the Use of Technology3.According to the Use of Technology

i.i.i.i. Technical entrepreneur: Technical entrepreneur: Technical entrepreneur: Technical entrepreneur: The strength of a technical

entrepreneur is in his skill in production techniques. . . . He

concentrates more on production than on marketing.

ii.ii.ii.ii. NonNonNonNon----technical entrepreneur: technical entrepreneur: technical entrepreneur: technical entrepreneur: Unlike technical entrepreneur,

non-technical entrepreneur is not concerned with the non-technical entrepreneur is not concerned with the

technical aspect of the product rather he spends more time in

developing alternative strategies of the marketing and

distribution to promote his business.

iii.iii.iii.iii. Professional entrepreneur: Professional entrepreneur: Professional entrepreneur: Professional entrepreneur: Professional entrepreneur means

an entrepreneur who is interested in floating a business but

does not want to manage or operate it.

4.According to stages of Development4.According to stages of Development4.According to stages of Development4.According to stages of Development

i.i.i.i. First generation entrepreneur: First generation entrepreneur: First generation entrepreneur: First generation entrepreneur: First generation entrepreneur are

those entrepreneur who do not possess any entrepreneurial

background.

ii.ii.ii.ii. Second generation entrepreneur: Second generation entrepreneur: Second generation entrepreneur: Second generation entrepreneur: Second generation

entrepreneur are those entrepreneurs who inherit the family entrepreneur are those entrepreneurs who inherit the family

business firms and pass it from one generation to another.

iii.iii.iii.iii. Classical entrepreneurClassical entrepreneurClassical entrepreneurClassical entrepreneur: A classical entrepreneur is a stereotype

entrepreneur whose aim is to maximize his economic returns at

a level consistent with the survival of the unit but with or without

an element of growth.

5.Classification Given by 5.Classification Given by 5.Classification Given by 5.Classification Given by DanhofDanhofDanhofDanhof

i.i.i.i. Innovating entrepreneur: Innovating entrepreneur: Innovating entrepreneur: Innovating entrepreneur: Innovative entrepreneurs are generally aggressive and possess the art of cleverly putting the attractive possibilities into practice.

ii.ii.ii.ii. Imitative entrepreneursImitative entrepreneursImitative entrepreneursImitative entrepreneurs: Imitative entrepreneurs are characterised by readiness to adopt successful innovations inaugurated by successful innovating entrepreneurs.inaugurated by successful innovating entrepreneurs.

iii.iii.iii.iii. Fabian entrepreneurFabian entrepreneurFabian entrepreneurFabian entrepreneur: Fabian entrepreneurs are cautions and skeptical in experimenting change in their enterprises. Such entrepreneurs are shy, lazy and lethargic.

iv.iv.iv.iv. Drone entrepreneurDrone entrepreneurDrone entrepreneurDrone entrepreneur: Drone entrepreneurs are characterisedby a refusal to adopt opportunities to make changes in production formulae even at the cost of severly reduced returns.

6.According to Capital ownership6.According to Capital ownership6.According to Capital ownership6.According to Capital ownership

i.i.i.i. Private entrepreneur: Private entrepreneur: Private entrepreneur: Private entrepreneur: When an individual or a group of

individuals set up an enterprise, arrange finance, bear the risk

and adopt the latest techniques in the business with the

intention to earn profits, he or the group is called as private

entrepreneur/entrepreneurs.

ii.ii.ii.ii. State entrepreneurState entrepreneurState entrepreneurState entrepreneur: As the name indicates, state entrepreneur

means the trading or industrial venture undertaken by the state

or the government itself.

iii.iii.iii.iii. Joint entrepreneurJoint entrepreneurJoint entrepreneurJoint entrepreneur: Joint entrepreneur means the combination

of private entrepreneur and state entrepreneur who join hands.

7 According to Gender and AgeAccording to Gender and AgeAccording to Gender and AgeAccording to Gender and Age

i.i.i.i. Man entrepreneurMan entrepreneurMan entrepreneurMan entrepreneur

ii.ii.ii.ii. Woman entrepreneurWoman entrepreneurWoman entrepreneurWoman entrepreneur

iii.iii.iii.iii. Young entrepreneurYoung entrepreneurYoung entrepreneurYoung entrepreneur

iv.iv.iv.iv. Old entrepreneurOld entrepreneurOld entrepreneurOld entrepreneuriv.iv.iv.iv. Old entrepreneurOld entrepreneurOld entrepreneurOld entrepreneur

v.v.v.v. MiddleMiddleMiddleMiddle----aged entrepreneuraged entrepreneuraged entrepreneuraged entrepreneur

8.According to Area8.According to Area8.According to Area8.According to Area

i.i.i.i. Urban entrepreneurUrban entrepreneurUrban entrepreneurUrban entrepreneur

ii.ii.ii.ii. Rural entrepreneurRural entrepreneurRural entrepreneurRural entrepreneur

9.According to Scale9.According to Scale9.According to Scale9.According to Scale

i.i.i.i. Large scale industry entrepreneurLarge scale industry entrepreneurLarge scale industry entrepreneurLarge scale industry entrepreneur

ii.ii.ii.ii. Medium scale industry entrepreneurMedium scale industry entrepreneurMedium scale industry entrepreneurMedium scale industry entrepreneur

iii.iii.iii.iii. Small scale industry entrepreneurSmall scale industry entrepreneurSmall scale industry entrepreneurSmall scale industry entrepreneur

iv.iv.iv.iv. Tiny industry entrepreneurTiny industry entrepreneurTiny industry entrepreneurTiny industry entrepreneuriv.iv.iv.iv. Tiny industry entrepreneurTiny industry entrepreneurTiny industry entrepreneurTiny industry entrepreneur

INTRAPRENEURINTRAPRENEURINTRAPRENEURINTRAPRENEUR

The term ‘intrapreneur’ was coined in the United States of America

in the late seventies.

Gifford Pinchot Gifford Pinchot Gifford Pinchot Gifford Pinchot defined intrapreneurs as the persons who resigned

from their well paid executive positions to launch their own

ventures. Gifford devised the way by which such executives could ventures. Gifford devised the way by which such executives could

be retained in the industry and their entrepreneurial urge was also

satisfied by their bosses.

So a system was devised whereby such executives would operate as

entrepreneurs with full independence and autonomy

but withbut withbut withbut with

in the organisation.in the organisation.in the organisation.in the organisation.

Difference between entrepreneur and Difference between entrepreneur and Difference between entrepreneur and Difference between entrepreneur and intrapreneurintrapreneurintrapreneurintrapreneur

1. An entrepreneur is an independence person who starts his

venture and bears full risk of his failure and enjoys the fruit of

his success whereas intrapreneur is partially independent and

is sponsored by the corporation in which he is working. He is

also not liable to bear the losses in case of his failure.

An entrepreneur raises the finance from various sources and 2. An entrepreneur raises the finance from various sources and

also guarantees their return whereas an intrapreneur does not

own responsibility to raise the capital or to return it.

3. An entrepreneur has no relation with any organisation

whereas an intrapreneur operates within the organisation

where he is working.

FUNCTIONS OF AN ENTREPRENEURFUNCTIONS OF AN ENTREPRENEURFUNCTIONS OF AN ENTREPRENEURFUNCTIONS OF AN ENTREPRENEURThere has been a great deal of confusion and contradiction in

literature on the functions of an entrepreneur.

FUNCTIONSFUNCTIONSFUNCTIONSFUNCTIONS

1.1.1.1. InnovationsInnovationsInnovationsInnovations: J.Schumpeter has made substantial contribution

to the literature of entrepreneurship. The process of

innovations may be in the form of:innovations may be in the form of:

a) Introduction of a new product.

b) Use of new methods of production.

c) Opening of a new market.

d) The conquest of new source of supply of raw material.

e) A new form of organisation.

2. Risk2. Risk2. Risk2. Risk----taking: taking: taking: taking: Richard cantillon states that entrepreneur is an

agent who buys means of production at certain prices and sells

them at uncertain prices.

The entrepreneur performs the function of reducing uncertainty in

his plan of investment and expansion of the enterprise.

J.b. Say also stresses risk-taking as the specific function of an

entrepreneur.

3. Decision Maker: 3. Decision Maker: 3. Decision Maker: 3. Decision Maker: Entrepreneur as a decision maker describes

the following functions of an entrepreneur.the following functions of an entrepreneur.

a) The determination of objectives of an enterprise and the

change of those objectives as conditions required or made

advantageous,

b) The development of an organisation including efficient

relations with subordinates and all employees,

c) c) c) c) Securing adequate financial resources,the relations with

existing and potential

Investors,

d) The acquisition of efficient technological equipment and

the revision of it as new machinery appears,

e)The development of a market for the products and the

devising of new products to meet or anticipate consumer’s

demand,

f) The maintenance of good relations with public authorities

and with society at large.

4. Organisation and Management: 4. Organisation and Management: 4. Organisation and Management: 4. Organisation and Management: Marshall recognised organisation

and management of the enterprise as the important functions of an

entrepreneur.

When the organisation grows bigger, the entrepreneur effectively

delegates authority and finds responsibility at various levels of

management. The network of decision making becomes more

complex.

The functions of organisation and management includes:

a) Planning of an enterprise,

b) Co-ordination, administration and control,

c) Routine type of supervision.

ENTREPRENEURSENTREPRENEURSENTREPRENEURSENTREPRENEURS MANAGERSMANAGERSMANAGERSMANAGERS

1.1.1.1. Status: Status: Status: Status: An entrepreneur is the

owner of his enterprise. He

makes his own investment and

owns his business.

1.1.1.1. Status: Status: Status: Status: A manager is just an

employee in the enterprise which

is owned and run by

entrepreneur.

DISTINCTION BETWEEN AN DISTINCTION BETWEEN AN DISTINCTION BETWEEN AN DISTINCTION BETWEEN AN

ENTREPRENEUR AND A MANAGERENTREPRENEUR AND A MANAGERENTREPRENEUR AND A MANAGERENTREPRENEUR AND A MANAGER

owns his business.

2.2.2.2. Target: Target: Target: Target: The main target of an

entrepreneur is to start his

venture by setting up as a sole-

trader or firm or a company.

2.2.2.2. Target: Target: Target: Target: The main goal or

motive of a manager is give his

services to an enterprise set up by

someone else i.e. an

entrepreneur.


3. 3. 3. 3. Decision making: Decision making: Decision making: Decision making: All of the policies and strategic decisions, like

those comprising of expansion

diversification, take-over etc are

taken by the entrepreneur.

3. Decision making: 3. Decision making: 3. Decision making: 3. Decision making: While all

those managerial, operational

decisions which would have impact

on the short-and medium-term

results are taken by the managers.

4. Rectification of wrong 4. Rectification of wrong 4. Rectification of wrong 4. Rectification of wrong 4.Rectification of wrong 4.Rectification of wrong 4.Rectification of wrong 4.Rectification of wrong

decisions: decisions: decisions: decisions: The wrong decisions taken by the entrepreneur may not

be rectificable and may result in

losses or even closure of the unit.

4. Rectification of wrong 4. Rectification of wrong 4. Rectification of wrong 4. Rectification of wrong

decisions: decisions: decisions: decisions: Whereas the wrong

decisions taken by the managers

can be amended and rectified by

the entrepreneur.


5. Innovations: 5. Innovations: 5. Innovations: 5. Innovations: An entrepreneur innovates and exploits his

innovation commercially.

6. Risk bearing: 6. Risk bearing: 6. Risk bearing: 6. Risk bearing: An entrepreneur being the owner of his

unit undertakes all risks and

5. Innovations: 5. Innovations: 5. Innovations: 5. Innovations: A manager is

merely an officer or an executive

who is appointed for the promotion

of the unit.

6. Risk bearing6. Risk bearing6. Risk bearing6. Risk bearing: A manager

doesn’t bear any risk because he is

paid fixed salary.unit undertakes all risks and

uncertainty of running his

enterprise.

7. Skills: 7. Skills: 7. Skills: 7. Skills: The skill expected from

an entrepreneur is in the form of

creativity, innovation, desire for high

achievement, intuition etc.

paid fixed salary.

7. Skills: 7. Skills: 7. Skills: 7. Skills: Whereas manger depends

on public dealing abilities and

conceptual abilities.


8. Qualification: 8. Qualification: 8. Qualification: 8. Qualification: An entrepreneur doesn’t need to have

distinct degree from a reputed

university.

9. Rewards: 9. Rewards: 9. Rewards: 9. Rewards: The reward of an

8. Qualification: 8. Qualification: 8. Qualification: 8. Qualification: On the other

hand, a manager now a days need to

possess degree in the stream of

management theory and practice.

9. Rewards: 9. Rewards: 9. Rewards: 9. Rewards: A manager gets his

monthly salary as his reward for the 9. Rewards: 9. Rewards: 9. Rewards: 9. Rewards: The reward of an entrepreneur is the profit earned by

him.

monthly salary as his reward for the

services rendered by him.

TIPS TO BECOME A SUCCESSFUL TIPS TO BECOME A SUCCESSFUL TIPS TO BECOME A SUCCESSFUL TIPS TO BECOME A SUCCESSFUL


1. Acquire sufficient and all-round knowledge about an enterprise you intend

to start.

2. Be conservative in calculating income and lavish in calculating expenditure.

3. Don’t expect quick and easy returns from your venture.

4. Be prepared for delegation of work when needed.

5. Take moderate risks; neither too high nor too low.5. Take moderate risks; neither too high nor too low.

6. Plan systematically and march ahead step by step according to the plan to

achieve your goal.

7. Time management is necessary to maximum utilisation of your resources.

8. Collect maximum information about your competitor on continuous basis.

9. Don’t avoid or run away from problems.

10. Take the help of experts and experienced persons or rntrepreneur,when in

doubt.

ConclusionConclusionConclusionConclusion

An entrepreneur performs various type of functions. An entrepreneur performs various type of functions. An entrepreneur performs various type of functions. An entrepreneur performs various type of functions.

Growth of his enterprise depends upon the way, he Growth of his enterprise depends upon the way, he Growth of his enterprise depends upon the way, he Growth of his enterprise depends upon the way, he

performs various functions like innovation, riskperforms various functions like innovation, riskperforms various functions like innovation, riskperforms various functions like innovation, risk----taking, taking, taking, taking,

decisiondecisiondecisiondecision----making, organisation and management.making, organisation and management.making, organisation and management.making, organisation and management.

Henri Fayol’s 14 Principles Of Management

1. Division Of Work

Specialization allows the individual to build up experience, and to continuously improve his skills. Thereby he can be more productive.

2. Authority

The right to issue commands, along with which must go the balanced responsibility for its function.

3. Discipline

Employees must obey, but this is two-sided: employees will only obey orders if management play their part by providing good leadership.

4. Unity Of Command

Each worker should have only one boss with no other conflicting lines of command.

5. Unity of Direction

People engaged in the same kind of activities must have the same objectives in a single plan. This is essential to ensure unity and coordination in the enterprise. Unity of command does not exist without unity of direction but does not necessarily without unity of direction but does not necessarily flows from it.

6. Subordination of individual interest

Management must see that the goals of the firms are always paramount.

7. Remuneration

Payment is an important motivator although by analyzing a number of possibilities, Fayol points out that there is no such thing as a perfect system

8. Centralization (Or Decentralization)

This is a matter of degree depending on the condition of the business and the quality of its personnel.

9. Scalar chain (Line of Authority)

A hierarchy is necessary for unity of direction. But lateral communication is also fundamental, as long as superiors know that such communication is taking place. Scalar chain refers to the number of levels in the hierarchy from the ultimate authority to the the hierarchy from the ultimate authority to the lowest level in the organization. It should not be over-stretched and consist of too-many levels

10. Order

Both material order and social order are necessary. The former minimizes lost time and useless handling of materials. The latter is achieved through organization and selection.

11. Equity

In running a business a ‘combination of kindliness and justice’ is needed. Treating employees well is important to achieve equity.

12. Stability of Tenure of Personnel

Employees work better if job security and career progress are assured to them. An insecure tenure and a high rate of employee turnover will affect the organization adversely.

13. Initiative

Allowing all personnel to show their initiative in some way is a source of strength for the organization. Even though it may well involve a sacrifice of ‘personal vanity’ on the part of many managers.managers.

14. Esprit de Corps

Management must foster the morale of its employees. He further suggests that: “real talent is needed to coordinate effort, encourage keenness, use each person’s abilities, and reward each one’s merit without arousing possible jealousies and disturbing without arousing possible jealousies and disturbing harmonious relations.”

What Is Management? (According To Fayol)

Fayol's definition of management roles and actions distinguishes between Five Elements:

� Prevoyance. (Forecast & Plan). Examining the future and drawing up a plan of action. The elements of strategy.

� To organize. Build up the structure, both material and human, of the � To organize. Build up the structure, both material and human, of the undertaking.

� To command. Maintain the activity among the personnel.

� To coordinate. Binding together, unifying and harmonizing all activity and effort.

� To control. Seeing that everything occurs in conformity with established rule and expressed command.

Application Of Fayol’s Principles

� Change and Organization.

� Decision-making.

� Skills. Can be used to improve the basic effectiveness of a manager.

� Understand that management can be seen as a variety of activities, which can be listed and grouped.

Leadership and motivation

Motivation-- Motivation can be defined as “the extent to

which persistent effort is directed toward a goal” (Campbell,

Dunnette, Lawler &Weick)

. Effort: The first aspect of motivation refers to the amount of

effort being applied to the job. This effort must be defined in

relation to its appropriateness to the objectives being

pursued. One may, for example, apply tremendous effort to

inappropriate tasks that do not contribute to the achievement inappropriate tasks that do not contribute to the achievement

of the stated goals.

Persistence: The second characteristic relates to the

willingness of the individual to stay with a task until it is

complete. For example, an important task that gets

accomplished with effort but allows the person to rest on their

laurels for an extended period does not display persistence.

Leadership Matters, Character MattersInfluence others toward goal and achievement of

those goals

Process where an individual influences others to do what s/he wants them to

“A leader is a person who has the ability to get other people to do what they don’t want to do and like it” - Harry Truman

A leader is best

when people barely know he exists

Not so good

when people obey and acclaim him

Worse when they despise him

But of a good leader

who talks littlewho talks little

when this work is done

his aim fulfilled

they will say:

“WE DID IT OURSELVES”

- Lao-tse (c. 565 B.C.)

� Why do people follow?

� Why do people lead?

� Why are some people successful and why are some unsuccessful?

� Psychological contract (Schein, 1970) and have expectations of things in returnexpectations of things in return

� Influenced by how view authority and past experiences

What does it take to be a leader?� Trust your subordinates – you can’t expect them to go all out for

you if they think you don’t believe in them

� Develop a vision – people want to follow someone who knows where he or she is going

� Keep your cool – the best leaders show their mettle under fire

� Encourage risk – nothing demoralizes the troops like knowing the slightest failure could jeopardize their entire career

� Be an expert – from boardroom to mailroom, everyone had better � Be an expert – from boardroom to mailroom, everyone had better understand that you know what you’re talking about

� Invite dissent – your people aren’t giving you their best … if they are afraid to speak up

� Simplify – you need to see the big picture in order to set a course, communicate it, and maintain it

Kenneth Labich – article in Fortune

What does it take to be a leader?

� Learn from others

� Expertise

� Create trust

� Patience, Persistence, Focus, and Passion� Patience, Persistence, Focus, and Passion

� Communication

� Compassion and respect

10 Commandments of Leadership1. Treat everyone with respect and dignity

2. Set the example for others to follow

3. Be active

4. Maintain the highest standards of honesty and dignity

5. Insist on excellence and hold your people 5. Insist on excellence and hold your people accountable

6. Build group cohesiveness and pride

7. Show confidence in your people

8. Maintain a strong sense of urgency

9. Be available and visible to your staff

10. Develop yourself to your highest potential

Leadership is broader than managerial functions

� Managing and leading

� Manager and leader

� Management and leadership

Management� Getting things done with and through people

� Goal attainment, organizing, and monitoring performance

� Management versus Leadership

� Are managers leaders?� Leaders manage

� Managers lead

*Yet not synonymous

Management and Leadership

� Two distinctive and complementary systems

� Ideal world, they’re balanced, integrated� One person is both

*A good leader needs to manage, but not always *A good leader needs to manage, but not always the case, sometimes more necessary than others

MANAGERS

� Plan, coordinate

� Evaluate and supervise

� Negotiate, budget

� Reality check, sets time limits, copes with complexity

LEADERS

� Facilitate interpersonal interaction

� Charisma

� Innovate, inspire

� Vision, communicate it

� Ability to change things, set direction, look at larger picture, align people, look at competition and do better and different, willing to listen and learn, sensitive to concerns

� Bring order and consistency

� Planning complement to direction

� Gains trust, empowers, enable others to reach potential

LEADERS

� Innovates

� Is an original

� Develops

� Investigates it

� Focuses on people

� Inspires trust

� Has a long-range plan

MANAGERS

� Administers

� Is a copy

� Maintains

� Accepts reality

� Focuses on system & structure

� Relies on control � Has a long-range plan

� Asks what and why

� Has eye on horizon

� Originates

� Challenges it

� Does the right thing

� Relies on control

� Has short-range view

� Asks how and when

� Has eye on bottom

� Imitates

� Accepts status quo

� Does things right

Motivation Theories

� Part of leadership process by which someone gets another to do what s/he wants to do

� For this it helps to know what motivates people

� Motivation – understanding the construct is closely linked to leadershiplinked to leadership

� Motivation is traced back to the 1930s (Murray)

� Simple terms – has to do with one’s willingness to do something

� Relates to need satisfaction and behavior is goal oriented.

Maslow’s Hierarchy of Needs

� Abraham Maslow� Brandeis professor in the 50-60s, died in 70s

� Ahead of his time

� Worked with company in DelMar, CA (Non-Linear Systems) in 1960s and noticed workers were most productive at end of the line due to fact produced a sense of accomplishmentof the line due to fact produced a sense of accomplishment

� He coined “Enlightened Management” to describe work conditions, leading to self actualization or achievement of one’s potential (trust, teamwork, recognition)


� Abraham Maslow

� He found teams made better workers and better workers made better teams

� Creativity flowed from ambiguity

� Knowledge breads knowledge

� Used term “Synergy” to describe self-reinforcing process and wrote:process and wrote:

� “The more influence and power you give to someone else in the team situation, the more you have for yourself”

� “Business was not a “chain of links or a chain of cause and effect, but rather a web in which every part is related to every other part”

� Urged pursuit of “continued improvement”


� People are motivated on the basis of five classes of needs ordered in hierarchy of power or force

� Once lower order needs are satisfied externally, other levels become more important externally, other levels become more important and then motivate and dominant behavior� Higher order are satisfied internally

Expectancy Model� The strength of a tendency to act in a certain

way depends of the strength of an expectation that the act will be followed by a given outcome and on the attractiveness of that outcome (Nader & Lawler)� Attractiveness – importance an individual places on � Attractiveness – importance an individual places on

the potential outcome or reward than can be achieved on the job

� Performance – reward linkage – degree to which the individual believes that performance at a particular level will lead to the attainment of a desired outcome

� Effort – performance linkage – the perceived probability by the individual that exerting a given amount of effort will lead to performance

Expectancy Model� The strength of a person’s motivation to perform

(effort) depends on how strongly s/he believes that s/he can achieve what is attempted

� And if s/he works to achieve the goal � And if s/he works to achieve the goal (performance), will s/he be adequately rewarded and will that reward satisfy the goals?

Expectancy Model� Maximize pleasure and minimize pain

� Drives are influenced by outcome of actions

� Based on subjective assessment of likelihood of certain outcomes – perceived outcome is the “expectancy”“expectancy”

David McClelland� Examined leadership motives and identified three

needs

� Need for AFFILIATION� Desire to be liked and accepted

� Stay in good terms with people

Need for ACHIEVEMENT� Need for ACHIEVEMENT� Desire to be challenged, enjoy risk taking

� Competitive, thrive in moderate to difficult goals

� Willing to assume responsibility

� Seeks feedback

� Need for POWER� Self-serving power

� Institutionally minded power

Inventory and EOQ

Inventory Management

The objective of inventory The objective of inventory management is to strike a balance management is to strike a balance between inventory investment and between inventory investment and

© 2011 Pearson Education, Inc. publishing as

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between inventory investment and between inventory investment and customer servicecustomer service

Functions of Inventory1. To decouple various parts of the

production process by covering delays

2. To protect the company againstfluctuations in demand


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fluctuations in demand

3. To provide a selection for customers

4. To take advantage of quantity discounts

5. To hedge against inflation

Problems Caused by Inventory

� Inventory ties up working capital

� Inventory takes up space

� Inventory is prone to:

�Damage, Pilferage and Obsolescence

� Inventory hides problems

ABC Classification System

Classifying inventory according to some measure of importance and allocating control efforts accordingly.

AA - very important

12-89

AA - very important

BB - mod. important

CC - least important Annual $ value

of items

AA

BB

CC

High

Low

Low HighPercentage of Items

ABC Worked Example

� Item Usage and Value

ABC Worked Example

� Annual Usage Values

ABC Worked Example

� Ascending Usage Values

ABC Worked Example

� ABC Chart Showing Classifications

ABC Classification System

�Policies employed for A items may include

�More emphasis on supplier development


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development

�Tighter physical inventory control

�More care in forecasting

What Is Economic Order Quantity (EOQ)?

Economic order quantity (EOQ) is the

ideal order quantity a company should

purchase to minimize inventory costs such

as holding costs, shortage costs, and as holding costs, shortage costs, and

order costs. This production-scheduling

model was developed in 1913 by Ford W.

Harris and has been refined over time.

Key Inventory Terms

� Lead time: time interval between ordering and receiving the order

� Holding (carrying) costs: cost to carry an item in inventory for a length of time, usually a year (heat, light, rent, security, deterioration, spoilage, breakage, depreciation, opportunity cost,…, etc.,)

Ordering costs: costs of ordering and receiving inventory � Ordering costs: costs of ordering and receiving inventory (shipping cost, preparing invoices, cost of inspecting goods upon arrival for quality and quantity, moving the goods to temporary storage)

� Set-up Cost: cost to prepare a machine or process for manufacturing an order

� Shortage costs: costs when demand exceeds supply, the opportunity cost of not making a sale

Basic EOQ Model

1. Demand is known, constant, and independent

2. Lead time is known and constant

Important assumptions


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2. Lead time is known and constant

3. Receipt of inventory is instantaneous and complete

4. Quantity discounts are not possible

5. Only variable costs are ordering and holding

6. Stockouts can be completely avoided

Inventory Usage Over Time

Order quantity = Q(maximum inventory

level)

Usage rate Average inventory on hand

Q

2

Inve

nto

ry l

eve

l


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Figure 12.3

level) 2

Minimum inventory

Inve

nto

ry l

eve

l

Time0

The Inventory Cycle

Quantityon hand(maximum İnventory)

Q Usage rate

Receive order

Placeorder

Receiveorder

Placeorder

Receiveorder

Lead time

Reorderpoint

Time

Minimizing CostsObjective is to minimize total costs

Total cost of holding and setup (order)

Minimum total cost


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Table 12.4(c)

An

nu

al

co

st

Order quantity

Holding cost

Setup (or order) cost

total cost

Optimal order quantity (Q*)

The EOQ ModelQ = Order QuantityQ* = Optimal number of pieces per order (EOQ)D = Annual demand in units for the inventory itemS = Setup or ordering cost for each orderH = Holding or carrying cost per unit per year

Annual setup cost = SD

Q


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Annual setup cost = (Number of orders placed per year) x (Setup or order cost per order)

Annual demand

Order QuantitySetup or order cost per order

=

= (S)D

Q



Q

Annual holding cost = HQ

2


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Annual holding cost = (Average inventory level) x (Holding cost per unit per year)

Order quantity

2= (Holding cost per unit per year)

= (H)Q

2


Optimal order quantity is found when annual setup cost equals annual holding cost or we take the derivative of


Q

Annual holding cost = HQ

2


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equals annual holding cost or we take the derivative of the total cost function and set the derivative (slope)

equal to zero and solve for QD

QS = HQ

2

Solving for Q* 2DS = Q2H

Q2 = 2DS/H

Q* = 2DS/H

An EOQ Example

Determine optimal number of needles to order (Q)D = 1,000 units per yearS = $10 per orderH = $.50 per unit per year


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Q* =2DSH

Q* =2(1,000)(10)

0.50= 40,000 = 200 units

An EOQ Example

Determine expected number orders per year (N)D = 1,000 units Q* = 200 unitsS = $10 per orderH = $.50 per unit per year


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= N = =Expected number of

orders

DemandOrder quantity

D

Q*

N = = 5 orders per year 1,000200

An EOQ Example

Determine expected time between orders (T)D = 1,000 units Q* = 200 unitsS = $10 per order N = 5 orders per yearH = $.50 per unit per year


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= T =Expected time

between orders

Number of working days per year

N

T = = 50 days between orders2505

An EOQ Example

Determine total annual cost:D = 1,000 units Q* = 200 unitsS = $10 per order N = 5 orders per yearH = $.50 per unit per year T = 50 days

Total annual cost = Setup cost + Holding cost


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Total annual cost = Setup cost + Holding cost

TC = S + HD

Q

Q

2

TC = ($10) + ($.50)1,000200

2002

TC = (5)($10) + (100)($.50) = $50 + $50 = $100

Robust Model

� The EOQ model is robust

� It works even if all parameters and assumptions are not met


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and assumptions are not met

Because the total cost curve is relatively flat in the area of the EOQ

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