Posted on 21 August 2014.
By Christian Glupker, SCORE Counselor
The Small Business Administration lists poor management as one of the major causes of business failures. Successful entrepreneurs overcome this by recognizing three functions of business management: Planning, organizing, and leadership.
The planning function answers three key questions: Where are we now? Where do we want to be? How do we get there? It’s like planning a family vacation. You know where you are starting and you know you want go on vacation. You just need to decide how to get to your destination. There are four different methods to successful planning: strategic, objective, operational and contingency.
Strategic planning involves deciding where you want to go on vacation. How much do you want spend? Do you want to go to the beach or skiing in the mountains? Apply the same logic to your business. Strategic planning will establish the long-term goals for your organization, as well as the policies, mission and overall direction. A solid strategic plan is one of the key drivers to a successful business.
Objective planning, also known as tactical planning, takes your vacation destination (strategic plan) and determines how you will pay for the trip and maps out how to get there. Objective planning will answer the following questions: How does the family budget change? Do we want to drive or fly? For an organization, it’s setting the short-term actions and goals needed to achieve the strategic plan. A strategic plan may cover a period greater than three years while an objective plan will cover up to three years. You will not arrive at your destination without clear directions on how to get there.
Operational planning is actually traveling to your destination. This could include plugging the information into a GPS unit or driving to an airport. For an organization, the operational plan assigns specific goals to a department and/or employees. These goals are based on the desired outcome of the objective plan. Giving your employees ownership of these goals will provide a sense of empowerment, which will significantly increase your chances of success.
Contingency planning is the possibility of unforeseen changes in your plan. For your vacation, this could include lost luggage or a flat tire. For an organization, the business environment is very dynamic, therefore remain flexible to adapt to changing customer needs and new opportunities. Remaining too rigid to your plans may result in missing key opportunities.
The second function of business management is organizing. This function establishes the organizations structure in terms of ownership and management. A well-defined organizational plan will help employees understand the leadership hierarchy, thus giving them direction when it comes to meeting the organizations goals.
The organizing function also deals with human resources. The recruitment, staffing and maintaining of skilled employees is one of the most challenging tasks for all entrepreneurs and managers. When employees have a sense of empowerment, job satisfaction and loyalty, this will ultimately lead to an increase in productivity and success.
The final function of business management is leadership. A leader is somebody who creates a vision for the organization and then rally’s the employees around that vision. How a leader rally’s the employees depends on their individual leadership style. To be a successful leader, you should seek the input of your employees when it comes to setting goals. This will make them feel a part of the organization, thus giving them a sense of ownership in the success of the company.
Given the dynamics of the business environment, a good leader will recognize the need for change, form a new vision, and then rally the employees around that new vision. Resisting change will result in missed opportunities, as well as decreasing the chances of achieving the existing strategic plan. An organization with strong leadership recognizes that and quickly adapts to seize those opportunities.
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