Reflection from guest lecture-middle manager

Comparing with CEO, the role of middle manager seems trivial, a drop in the ocean, but I agree with the Lecturer’s opinion that in knowledge intensive industries middle managers are definitely needed. Personally, I had working experience, I couldn’t talk to the top mangers directly but I have many chances to share my opinions with middle managers. And I think middle manager always exist no matter the structure of organization it is, always some people in between work as negotiator, interpreter.

Middle managers act as intermediary within the organization between the top management and low layer employees (Balogun. J, 2003). According to Balogun, middle managers are acting as a strategic asset. And it is mentioned in the lecture that middle managers are big contributors to strategy development and execution. But the thing is that it requires senor manager’s acknowledgement. Middle managers are given information about the new structure and job role during the appointment process, which are granted by senior managers. Middle managers should understand first, and enhance their understanding of strategies or business concepts through their activities with their peers, with employees, and themselves.

Several tools were mentioned in the class, for example, vision, goal/target, business plan, interface description, feedback, etc. Each tool is effective to influence the business, and its effectiveness is based on the friendly environment of inclusion and motivation. High quality of communication system might be a method to make middle manager get included. But middle managers may either be excluded or included in such “strategic conversations”. It is addressed by the researcher Westley (1990) if organizations want a middle management group that is responsive, they need greater sensitivity to how meaning is made in organizations and how to include middle management as actors in that process. Correspondingly, middle managers’ emotions are stricken if they are not recognized for attention. And the role of middle mangers in radical change directly affects the operational continuity. To maintain operational continuity during radical change, middle managers’ emotions have to be carefully managed (Huy, 2002).

To sum up, the value of middle manager can not be denied. And they are assets in the organization. Keep them, motivate them, value them, and you will get great return. Especially for the senior managers, they should realize their value and harness the potentials from middle managers.

Reference:
Balogun, J. (2003) From Blaming the middle to harnessing its potential: Creating change intermediaries, British Journal of Management, Vol. 14, 69-83

Westley Frances R. (1990) Middle managers and strategy: Microdynamics of inclusion, Strategic Management Journal, Vol. 11, 337-351

Huy, N. Q. (2002) Emotional Balancing of Organizational Continuity and Radical Change, Administrative Science Quarterly, 47(1), 31-69

Ownership&Governance seminar reflection

As we know that ownership and governance actually influence the process and content of business creation and growth. And, ownership and government are interrelated. How do managers handle business depends on the governance structure under which they operate and the stance taken on corporate responsibility. Before proceeding with the organizational strategic purpose, an important managerial task is to express its strategic purpose through statement of clarified corporate values, mission and statements because these factors will influence the overall purpose of an organization. We analyze the case from several aspects of its organization strategic purpose.

Firstly, we start with checking the corporate values, mission and statements. In the case from the interview with the present chief executive Mark Rodol, he says over years, they have pursued a number of opportunities that they shouldn’t have done. They spent too much time in examining what the core of Ministry of Sound actually is. It shows the business doesn’t have a clear picture of its corporate values, mission and statement before the strategic purpose. Therefore, their corresponding strategic purpose equally departures the right tracks. From the chapter 4 we know that strategic purpose is the purpose of an organization and its strategy for the benefit of stakeholders. And the purpose of organization will be influenced by the expectations of its stakeholders, governance structure, and social responsibility and ethics. Without an explicit corporate value, mission and statements, it will directly influence the strategic purpose and further harms its stakeholders.

Secondly, discuss the governance structure in Ministry of Sound. Palumbo is the business founder and he works as the chief executive in the board, and also member of top management. He keeps the controlling position in the company. Therefore, the firm is largely conditioned by the coupling the ownership and control in the hands of Palumbo. Palumbo has largely unchallenged discretion to share with trusted associates. It is suggested that wide discretion from expertise and professional employees promotes the organization agility to exploit versatile resources and unmet market needs (Gedajlovic, Lubatkin and Schulze).

Thirdly, social responsibility and ethics are the purposes an organization should fulfill. And strategic purpose of the organization whether should be determined in the expectation of stakeholders is the paper discussed. With the growth of dance club, its social responsibility consistently changed, especially the mode that ranging from defensive situation to reactive to outside pressure. Meanwhile, as the club aims to form long-term relationship brands Philip and Bacardio, the stakeholder relationship gradually become to the partner style.

Fourthly, strategic purpose is influenced by stakeholders’ expectations. Manager has to point out the key players and people with low interest but high power. The business developed in many directions before Palumbo’s quit. Such as magazine, radio, touring, super-club opened in Bangkok and Taipei, etc. Its stakeholders are spread over the world. Palumbo has too much parties to think about and it make company lose core products. Especially for such young companies, in the end the companies have to develop some core values which become the basis of their existence for external stakeholders.

Literature summary for Ownership&Governance Seninar

The case study, a company of Ministry of Sound (MOS), tells us a story about its operation from start-up to maturity in 12 years. And the Business founder James Palumbo makes it from the scratch to flourish in the beginning 10 years. Two years later, Palumbo has quit as chief executive and the ministry of sound is looking for a new strategic direction. With regard to the analysis of case study, three literatures are used and deliver several hints to us of its ownership and governance.

Literature of “Stages of corporate citizenship” explains the corporate citizenship at different stage for an organization. And there are five stages, from the bottom up, elementary stage, engaged stage, innovation stage, integrated stage, and transforming stage. Accordingly, the firm gains value from the relevant stages of corporate citizenship, more value comes from the upper stage, vice versa.

Literature of “A governance perspective” gives a suggestion to threshold firms to transit from founder management to professional management to obtain the resources needed to surmount the threshold. It reveals the capabilities and disabilities of FMF (Founder Managed Firms), and FMFs are less well suited to exploit opportunities in complex environments, organizational and ecological evolutionary forces can propel the successful FMF, and changes to an organization’s resources, processes, values and culture cause the challenges faced by threshold firms.

The chapter of strategic purpose identifies the three components of the governance chain of an organization (corporate governance, stakeholder expectation and social responsibility and ethics), two different governance structures across the world and their advantages and disadvantages, shareholder model of governance and stakeholder model. In shareholder model, it is believed that the management should focus on maximizing benefits on maximizing shareholders and it in turn will benefit the other stakeholder as well. The stakeholder model not only focuses on the wealth maximization to shareholders and stakeholders but also look at the long term development. The chapter also expresses the strategic purpose of an organization in terms of statement of values, vision, mission or objectives.

Franchise or not in Michael Bregman Business

Let's contine the discussion with franchise. 5 preconditions are mentioned in the previous post. The case of Michael Bregman who is trying to find strategy to expand his business. He is considering to choose either internal growth or franchise.

The first precondition cannot be satisfied that consumers can easily find substitutes in the market even thought those bakeries are not as fresh as Michael sold. But it demonstrates that the business’s product or service is not unique.

Secondly, the longer business has been running for 7 months, the other business 3 months so far, the business is so young that it is hard to predict it will have consistent profitability as it has at present. And, on the basis of financial analysis on June 30 we can see that profitbility ratio of the units are not good. ROCE and ROI are negative while, gross profit margin is really poor. However, the infant business is not stable in the early stage of development. One week later, the net profit on July 5, 1980 is $ 21455. The growth has further increased by July 5. The business has a substantial changes in the first few months. But the problem is that his liquidity is not good and he has no cash balance left. Franchise is a cheap way of expansion, but still need investment of time and capital.

Thirdly, Micheal's business lasts less than a year. And starts to gain profit from July 5. It is not a convincing business to franchisees.

Fourthly, despite there is an operation manual with everything, Michael is responsible for all controls and procedure monitoring without enough time.

Fifth, Michael has not sufficient arrangement for the tasks of training, supporting, supervising, and nurturing franchisees. It is difficult for Michael to have a franchise system with one or more franchisees if there are no particular operation manual and relative preparations. Again both of his business don’t have any patent or brand image and are very common in the market. Based on such situation, it is hard to get franchisee do investment.

Therefore, he should not be hectic in growth of his business by franchising. Rather he should focus on the stabilizing his existing units and select slow growth strategy so that the existing units get sufficient times to gain financial resistance.

Preconditions of Franchising

In the lecture we know that franchise is a external method for business expansion through using another person's business philosophy. And franchise can benefit both franchisor and franchisee.

Benefit s to franchisor, it helps the organization grow quickly with providing the majority of the capital. And saves cost, because franchisees share many of franchsor's cost. Compare with manager in the firm, franchisees are high controled and bounded by contractual agreement.

Franchisees are more committed and motivated to the success of their individual units than the managers. Market expansion is low because franchisees provide most of the cost. Franchisees increase buying powers by enlarging the size of their business system, allowing then to purchase products.

However, the advantages for both parties do not always exist. Several preconditions should be fulfilled for franchisor, otherwise it will not work out positive feedback. Before deciding to franchise, a firm should consider the following analysis before doing franchising (Barrubger & Ireland, 2004).

1. The business’s product or service should be unique along some dimension that customers value.

2. The business should be consistently profitable, and the future profitability of the business should be fairly easy to predict.

3. The business should be profitable year-round, not only during the specific seasons.

4. The system and procedures for operating the business should be polished and the procedure documented in written form. The system and procedure should also be fairly easy to teach to qualified candidates.

5. The business proposition should be crystal clear so that the prospective franchisee fully understands the business proposition to which he or she is committing. The relationship between the franchisor and the franchisees should be completely open, and communication between them should be candid.

Reference:

Barrubger, B. R. & Ireland, R.D., (2004). Entrepreneurship successfully launching new ventures, New Jersey: Pearson Education Ltd.

The necessity of transition for small entrepreneurial management firms

The ambition of any entrepreneur is to expand his or her business as bigger as possible. In the early stage of the business, the size normally small with few capital, and entrepreneur does his or her best to make the business become bigger and move to prosper. It is necessary for small sized firms do management transition from entrepreneurial to managerial.

In the process of development, the entrepreneurs development are normally neglected, because the decision making process is centralized by the entrepreneur individually. But it is impossible to centralize all decision making in any firm. If the entrepreneur involves in all the level of decision making, he or she has no time to create general strategy. Entrepreneur can decentralize his duties to capable employees and let them have right to make decisions in the business. And it is not necessary for entrepreneur to be involved in low level of decision and personal problems of subordinates. Thus, entrepreneur needs an over-dependence on one or two key individuals for its survival and growth. With regarding to the entrepreneurs’ managerial skill and training, it varies entirely depending on their competence. But entrepreneur is not a versatile person that he or she is insufficient in certain fields and needs help from the others. What’s more, the final key characteristic of entrepreneurial firms is their highly paternalistic climate. Because they are small and have a relatively stable group of “core” employees, these firms develop a high sense of family among their members.

When the firm grows rapidly fast, a small problem can terminate its progress. Those characteristic mentioned above should be noted and they are essential to the success of the small, entrepreneurial managed firms at least up to a point. Beyond that point, however, they can become barriers to the firm in its efforts to capitalize on further market opportunities. As an entrepeneur, when these characteristics start turing into barriersk, he/she must realize that the mode of managing his/her business require a change from entrepreneurial to professional management.

Reference:

Hofer, C.W.,&Charan, R. (1984). The transition to professional mangement: Mission impossible. American Journal of Small Business, 9(1).

Relationship between company size and growing pain

The research made by Flamholtz, E.G. (1990) says that growing pains tend to increase until companies reach a significantly large size. There is no direct relationship between growing pain and company size. Growing pains still exist in large size organizations. It is not objective to say large organizations have less or no growing pain than small sized ones. The growing pain rate is varied from industry to industry, can not be judged by size.

When firms grow in size, sales volume become more important than profit. In small firms the managers can conceptualize the whole business and he can keep the profit in his mind in every transaction or decisions. But when the firms become huge in size the managers have certain goals. The goals are achieving the sales target instead of the profit. This happens because of the economic theory of diseconomies of scale. Growing pains exist both in small sized firm and big sized firms, and the pains might vary.

We have to bear in mind that growth is not the ultimate thing. Rather unnecessary faster growth might cause the unavoidable pain for the business and for the management. Therefore, the management should to find the optimum rate of growth for the business and they have to implement control mechanisms to control the rate of growth to optimum.

Reference:

Flamholtz, E.G.(1990). Growing pains: How to make the transition from an entrepreneurship to a professional managed firm(pp. 53-72). San Francisco: Jossey-Bass Inc.