Leading Rapid Growth,

Crises and Recovery

Business Entrepreneurship (BUS 301) Faculty of Management and Computing

The Maldives National University

Week 12

Chapter 17

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New Organisational Paradigm

• Flat structure.

• Adaptive/flexible.

• Interlocking circles.

• Integrate with customers.

• Learning and influence.

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Leaders not Managers

• Opportunities focus.

• Allocating resources.

• Encouraging innovation.

• Different set of assumptions.

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Traditional General Management

• Pyramidal/hierarchical.

• Incremental improvement.

• Risk avoidance/embrace

stability.

• Avoid and punish failure.

• Resource allocation,

budget driven.

• Central command and

control.

• Resource optimisation.

• Cost oriented.

• Linear, sequential.

• Local focus.

• Compensate and reward.

• Manage and control.

• Zero defects/error free.

17-5 © McGraw-Hill Australia Pty Ltd 2011 PowerPoint slides for New Venture Creation: Entrepreneurship for the 21st Century (A Pacific Rim Focus) by Timmons et al.

Entrepreneurial Leadership and

Organisation

• Flat, flexible, think/act like

an owner

• Stepwise and disruptive

change

• Fearless, relentless

experimentation

• Specialize in new mistakes

• Opportunity obsessed

• Frontline, customer driven

• Creativity – capital

• Resource frugality and

parsimony

• Systems and nonlinear

• Global perspective

• Create and share the

wealth

• People want to be led, not

managed

• Manage risk, reward and

fit.

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Core Leadership Modes

• Employees

• Sales

• Doing

• Managing

• Leading team leaders

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Core Leadership Modes

• Opportunity overload:

• Choosing from among an abundance of sales or new market opportunity.

• Abundance of capital:

• Evaluating investors as ‘partners’ and the terms of deals with which they were presented.

• Misalignment of cash burn and collection rates:

• Cash burn rates racing ahead of collections.

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Core Leadership Modes

• Decision making:

• Executing functional day-to-day and week-to-week decisions, rather than strategising.

• Expanding facilities and space . . . and surprises:

• Coping with surprises, delays, organisational difficulties and system interruptions spawned by space or facility expansion.

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External Causes for Failure

• Recession.

• Interest rate changes.

• Changes in government policy.

• Inflation.

• The entry of new competition.

• Industry/product obsolescence.

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Internal Causes for Failure

• Inattention to strategic issues:

• Misunderstood market niche.

• Mismanaged relationships with suppliers and customers.

• Diversification into an unrelated business area.

• Mousetrap myopia.

• The big project.

• Lack of contingency planning.

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Internal Causes for Failure

• Leadership issues:

• Lack of management skills, experience and know-how.

• Weak finance function.

• Turnover in key management personnel.

• Big-company influence in accounting.

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Internal Causes for Failure

• Poor planning, financial/accounting systems, practices, and controls:

• Poor pricing, overextension of credit, and excessive leverage.

• Lack of cash budgets/projections.

• Poor management reporting.

• Lack of standard costing.

• Poorly understood cost behaviour.

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Non-quantitative Signals of Trouble

• Inability to produce financial statements on time.

• Changes in behaviour of the lead entrepreneur.

• Change in management or advisors, such as directors, accountants or other professional advisors.

• Accountant’s opinion that is qualified and not certified.

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Non-Quantitative Signals of Trouble

• New competition.

• Launching of a ‘big project’.

• Lower research and development expenditures.

• Special write-offs of assets and/or addition of ‘new’ liabilities.

• Reduction of credit line.

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Telltale Trends of Organisations in

Trouble

• Ignore outside advice.

• People (including and especially, the entrepreneur) have stopped making decisions and also have stopped answering the phone.

• Nobody in authority has talked to the employees.

• Rumours are flying.

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Telltale Trends of Organisations in

Trouble

• Inventory is out of balance.

• Accounts receivable aging is increasing.

• Customers are becoming afraid of new commitments.

• A general malaise has settled in while a still high-stressed environment exists (an unusual combination).

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Turning Around a Troubled Company

• Diagnosis of the problem:

• Strategic analysis.

• Management analysis.

• The numbers.

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Cash Flow Analysis

• Steps in identifying and quantifying the profitable core of the business:

• Determine available cash.

• Determine where money is going.

• Calculate percent-of-sales ratios for different areas of a business and then analyse trends in costs.

• Reconstruct the business.

• Determine differences.

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Potential Cuts/Improvements

• Most common areas for potential cuts / improvements:

• Working capital management.

• Payroll.

• Overcapacity and underutilised assets.

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Potential Cuts/Improvements

• Systems and procedures.

• Asset plays.

• Creative solutions.

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Organisational Climate

• Six basic dimensions:

• Clarity

• Standards

• Commitment

• Responsibility

• Recognition

• Esprit de corps

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Common Approaches to Successful

Leadership

• E-Leadership:

• Roles, tasks, responsibilities, accountabilities, and appropriate approvals clearly defined.

• Leadership based on expertise, not authority

• Emphasis placed on performing task-oriented roles.

• Consensus Building:

• Emphasis placed on overall goals.

• Emphasis on participation and listening.

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Common Approaches to Successful

Leadership

• Communication:

• Information sharing.

• Willingness to alter individual views.

• Encouragement:

• Encouragement of innovation and calculated risk-taking.

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Common Approaches to Successful

Leadership

• Trust:

• Do what they say they are going to do.

• Traits include openness, spontaneity, and straightforwardness.

• Development:

• Develop human capital.

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