Whether your small business employs two people in one location, or dozens of people in multiple locations, the success or failure of that business depends largely upon how it's managed. But, just what is "management"? And, does the management of a business differ from ownership? Yes!
The function of ownership is to supply the capital necessary to start a business. And the purpose of starting a business is to meet consumer demand and, in the process, make a profit from supplying that demand-the owner's reward for risking the initial capital.
The primary function of a business manager is to oversee the day-to-day operations of a business, with the goal of ensuring a profit. The owner of a business may or may not play an active role in managing it.
Any owner unable to accept that the functions of ownership and management are different is similar to the doctor who diagnoses or treats his own illness or the lawyer who becomes her own client - competency may be threatened by a lack of objectivity. The owner of a company, who, in the larger sense, is part of the management team, may choose to delegate day-to-day operations to a business manager or partner-a professional able to make the objective decisions necessary to run the business, and the clout to see them implemented.
A business manager's essential responsibilities include overseeing four areas of a business: Money, People, Time and Product/Service. Although these four categories appropriate to small and large businesses alike, they are not listed in order of importance-though if the Money area is mismanaged, no amount of success in managing People, Time and Product/Service will keep the business afloat.
There is nothing mystical about managing money, although those with little experience in it fear it surpasses all understanding. The key to handling money is information: It is the responsibility of a business manager to see that all financial records are kept up-to-date and accessible, in enough detail, to ensure informed decisions and choices can be made.
Overseeing record-keeping is not the same as doing it. In a large organization, this task may be delegated to someone other than the business manager, but an effective business manager will make certain they are informed at all times of all details concerning the income and/or expenditures. When this is not so, the business manager more accurately serves as an "assistant" or "floor manager," because lack of information prevents the adequate fulfillment of the major function of the job. Many decisions involving money can, and generally should, be shared-not only between the business manager and the owner, but with employees whose skills and knowledge may have profound bearing on these decisions.
This doesn't mean that every dollar wending its way through the corporate till needs to be discussed in agonizing detail with every employee. Information is power, and, concerning money, the power must rest with the business manager, whose concern with overall profitability is a crucial factor in making good business decisions. Even though the business manager must be informed of all money matters, there is nothing to be gained by keeping money information from other employees; secrecy within a business is generally counter-productive. The shop foreman campaigning for new equipment is more likely to maintain existing equipment, or do some creative problem-solving, if he is aware that no funds are available for replacements. And, who knows the company's machinery better than those who operate it? The information coming from production people is extremely valuable to the business manager when drawing up budgets and timetables, and it behooves him or her to encourage sharing of this information among departments.
The department head requesting additional finishing personnel will be more willing to reorganize existing staff if it's known how much it costs to hire and train employees and provide them with benefits. Also, when a department head's input regarding wages, raises and bonuses is respected by management, they are empowered to better perform their supervisory role.
A company's buyer cannot perform the job effectively without complete information on how his her expenditures affect the business. She can keep her own purchase records and take inventory to determine stock on hand, but if financial figures indicating actual sales and business costs are withheld, she will not only be unable to make intelligent, cost-effective purchasing decisions, but her frustration will increase job dissatisfaction.
Broadly speaking, a business manager should first focus money-management skills on costs (accounts payable, payroll and overhead), then on income (accounts receivable and sales) -though both are equally important to a company's financial well-being. Determining how, and when, costs are met is a significant part of successful money management, regardless of who writes the checks. This includes taking advantage of discounts for early or on-time payments; avoiding late fees or interest charges on accounts payable, taxes and loans; and balancing cash flow, so that the company is neither cash-poor nor has a currency surplus that's not being used to build the business.
Although it is feasible to delegate the short-term money management of a company to someone other than the business manager, he or she must make frequent hands-on inspections of records, which must be faithfully kept. This, of course, means trusting employees, which brings us to the second responsibility of good business management: People.
Managing your most important asset - people
The most common metaphors for people management in business originate with jargon used in the military ("the general deploying his troops") and sports ("the team captain calling the plays.") Neither metaphor, however, is appropriate in describing present-day U.S. business management. The "general" may be too removed from his "troops" to understand their lack of morale, and troops just "following orders" are not going to lead a company to success in a competitive market. The "team captain" may be too caught up in the play-by-play action to keep an eye on the big picture, and though his teammates willingly follow his lead and adhere to the rules-lose to the competitor.
A better model for successful people management might be parenting-not the "father-knows-best" or "ask-your-mother" variety, but parenting where the objective is to produce thinking individuals who act independently for their own good and that of others. The wise parent listens as much as he talks, offers guidance and dispenses loving discipline in ways that maintain the dignity and self-worth of all involved. Today's business managers would do well to emulate this type of parenting.
This is not to imply that a good business manager regards employees as children. Rather, because he is accountable for employees' job performance and work behavior, a good business manager should treat employees as adults-and as individuals-in order to gain respect and garner cooperation. He should know which employees are unchallenged by doing only what is expected of them and which cannot function without detailed instruction, meting out responsibility accordingly. He should monitor employees' performance and moods in order to assist them in their personal and professional growth.
A good business manager must also strike a balance between being "one of the guys" and hiding out in the office, away from office interaction. To be effective, he must be sincere in his interest in his employees and their ideas; insincerity is easily detected, causing trust to deteriorate. And he must be approachable enough that employees feel comfortable seeking his advice-creating a family-like atmosphere in which every member can contribute their best.
Hiring the right employees is only the first step, managing them from there on becomes a fascinating, yet fickle, dimension of the job. At once, employees can be lazy and energetic, wary of change and eager for a challenge, anxious to be part of the group and determined to stand out in the crowd. In comparison, managing money is a snap, because numbers can be logically and neatly lined up without unexpected complications. Managing people, however, is an extraordinarily important part of the success of any business.
Managing time, like money, is quantifiable and amenable to orderly charting and tidy rules. But when you add people to the equation, tidy rules become untidy. Just as business equipment is subject to breakdown, so are employees, and the best time-plan in the world can be blown sky-high by the unexpected.
The experienced business manager keeps production scheduling flexible and builds in only as much redundancy as is affordable. She is quick to shift tasks as needed, and she knows which employees are able, and willing, to take on more than their share on short notice. She is lavish with praise for those who pitch in when the schedule falls apart, and reliable when promising overtime, bonus or "comp-time" payment. She also sets a good example by pitching in herself when plans need altering.
Drawing up production schedules is a task that may be delegated, but the business manager should intercede when problems arise. This can be tricky; though the authority of those doing the scheduling may be reinforced by the business manager, any hint of "playing favorites" by the scheduler is bad for morale. That's because the days and hours employees are expected to work can be even more important to them than their wages, at least in the short run.
This short-sightedness can work to a manager's benefit when juggling schedules. Oddly, even those who need every penny of their income greet unexpected, unpaid time-off like a kid enjoying a snow-day from school. Judicious manipulation of scheduling can make everyone in a business happier, including those who must labor harder, and smarter, to catch up.
The fourth responsibility of a business manager is to monitor the product or service from which the company derives its income. And although it is the last on the list, it is not, in any way, the least in importance. For a long time, however, American business schools have been training managers as if it makes no difference what their establishment produces although this appears to be changing in response to international competition, particularly from Asia.
The idea that one widget is much like another, and that managerial skills are infinitely transferable, defies common sense, as well as the experience of those who do business in the real world. Granted, the responsibilities of any business manager are comparable, no matter what product or service their company offers. But management effectiveness is strengthened by specific knowledge of, and enthusiasm for, the product or service offered
When it comes to effective business management, however, the bottom line is the bottom line: Whether it be Money, People, Time or Product/Service management, anything that aids the primary function of the business manager in producing profit is worthy of attention.