Risk Management - A Case Study on the Consequences of Bad Risk Management

Introduction

Risk in business is a reality. When these risks are successfully managed the rewards can be substantial. If not, a business can run into serious problems and even collapse. It is unnecessary (and stupid) to ignore risks.

Over more than a decade we advised and assisted companies in growing and managing their businesses. Over time we observed many companies that ran into trouble because they ignored specific risks. This case study focuses on a few companies that each ignored one important aspect of risk management and then paid the price. The discussion is done under the following headings:

Risk Management - A Case Study on the Consequences of Bad Risk Management

Insufficient planning; Bad relationships; No hedging; Lack of discipline.
Insufficient Planning

Risk is drastically reduced by proper preparation and detailed planning. Planning includes feasibilities studies, business planning, cashflow projections and financial planning.

We were recently approached by Hypothesis Toys to assist them with additional financing. At that stage they were already in dire straits and had invested a small fortune. The company was established to make one specific type of toy. The management made the following assumptions:

That customers would pay a premium (double the price) on their products compared to other existing products due to the fact that their products look different and was branded with the logos of professional sport bodies. That all the major supermarkets will sell their products. That the total market consists out of every toddler in the (developing) country that they operate in. That they would get 10% of this market within the first year and 50% by year three.

This company did not have a chance from the beginning. The haphazard way that they came to their assumptions was mind-boggling. The market penetration figures were absolutely unrealistic. No research was done to get the real facts (except for the number of toddlers in the country). The scary part of this story is that it is not an isolated incident. Many entrepreneurs, and even established companies, expose themselves to the unforgiving risk of not doing proper market research when they embark on a new venture.

Bad Relationships

Human relationships can never be ignored. It is potentially one of the most fatal risk factors in a business. Relationships should be nurtured with all stakeholders in a business - including the investors, financiers, suppliers, employees and customers.

A while back one of our clients asked us to handle a possible merger and acquisition on their behalf. They were approached by Fuzzy Manufacturers to buy out their total operations over a few years (they do a lot of business with this company).

The owners of Fuzzy Manufacturers managed some of their relationships during the negotiations as follows:

They never kept any commitments that they made with us or with our clients. They were not transparent with the relevant stakeholders - including the financiers. They did not involve their senior management with any aspect surrounding the proposed deal.

The negotiations were finally called of due to financiers that withdrew. Everybody lost their respect for the owners of Fuzzy Manufacturers and some companies are very uncomfortable to do business with them. Eventually some of their senior employees left and joined the competition. Their business became a shadow of what it used to be.

No Hedging

Financial risks (such as currency risk and commodity price risk) can often be hedged with sophisticated products. Operational hedging is also possible (to a large extent) by spreading the risk through a variety of suppliers, products, distribution channels, customers, back-up facilities, etc.

Focused Systems specialises in IT networks. They were exceptionally successful, especially after landing a big national concern. Thereafter they made some serious errors when they did not hedge their operational risks, including the following:

They focused on this client and regarded all other clients as less important. This client contribution grew to more than 35% of their turnover and they were responsible for most of their profits. They ceased to do any more international work.

The big national concern became the target of an international listed entity. This group had their own IT specialists and Focused Systems lost the account. The company nearly went under. Fortunately the owners learned from their mistakes and with a concerted effort they broadened their product and service offering, their customer base and their geographic representation. Today the company is really formidable. No customer can keep them ransom due to the fact that not one of them is responsible for more than 5% of the company's turnover.

Lack of Discipline

There is probably no better way to reduce risks in a business than to be properly prepared and to be well-disciplined. This is true for planning, relationships and hedging as well as for being disciplined in aspects such as keeping a lid on expenditure, to grow within sustainable levels, to not fall into the debt-trap and to manage cashflow with an iron fist.

About a decade ago Expansion Chemicals was very well known and respected in the industry that they operated in. Their vision was to be the market leader. Unfortunately they were not very disciplined and made the following serious mistakes:

They sold products at any price just to get the sale. Their actual gross profit margins were much lower than their projected margins and their net profitability were very low. They grew at an alarming rate that was not sustainable with internal financing or through debt. The expenses of the owners (who also managed the company) skyrocketed and it included luxuries such as private planes and sport cars.

Unfortunately this once profitable business failed. The owners are now employees in other companies.

Summary

The companies discussed above all basically ignored one specific type of risk. It can only take one unexpected claim against a company, a major customer that is lost or not enough cash to pay a big supplier, to cripple a company. When a business plan diligently, work on all its relationships, hedge its financial transactions and operations as far as possible and work in a disciplined way they reduce the risks in a company tremendously.

Copyright© 2008 - Wim Venter

Risk Management - A Case Study on the Consequences of Bad Risk Management
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Wim Venter is the founder of Ventex Consultants, a business development consultancy. To receive more information on how to start a new venture, to grow it sustainably and to finally harvest it successfully, you can contact us via our website.

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Risk Management - Security - What is It?

Security Risk Management

How can it help me and my business?

Risk management is always evolving and becoming more important in today's climate and in the future.
You may have a small business or large, you may be running a function or other special event.

Risk Management - Security - What is It?

Whatever you are doing and wherever you are, risk is all around you.

Imagine a world or your state without security risk management. Look at your city and take out all of the security systems, key pads, security staff, police, army reserve, insurances, cameras, security barriers, stop lights, car security systems, street lighting, security procedures, banking passwords and codes, doors that lock etc.

What would we have? How would we live without it?

In this brief article, I have an example of risk management, and the importance of excellent security risk management.

When planning it is advised to use a security risk professional

Security risk management in business is all about putting the correct security procedures / polices in place now, and planning for the future.

Think of a flat line

Think of a circle

The flat line represents a business with little or no security risk management.

However, the circle represents complete and comprehensive management, and correct planning for the future.

The flat line is open, venerable, and open to the elements, things can fall off or jump on and there is an end and no future. The line is venerable to poor communication, misunderstanding, security breaches, possible internal theft, and site theft from external sources.

However, the circle is complete, secure and impregnable. It has a future and everything is linked within its own organization. Management and staff are confident and understand the organizations security goals and objectives.

How does your business or upcoming activity compare?

Do you think you may have a flat line, half circle, a circle with a segment still missing, or a complete circle?
How did the flat line work towards becoming a circle?

The flat line found that after a security risk analysis had been conducted, they were inefficient, unsecured, had possible insurance liability issues and they needed immediate change.

The flat line implemented security procedures and polices that managed these identified risks and threats.

In this example, the flat line implemented identification procedures, sign in/out procedures, secure handling and storage of records, communication between various groups and teams, and security audits that would be conducted once per year. The flat line ensured that building security, evacuation procedures, polices, and personal security being internal and external were comprehensive.

Regular meetings were conducted with the groups and teams that focused on security risk management, and associated business risk management.

However, after all of this work it was a square not a circle.

There was no complete flow, and communication still needed some improvement if they were to gain the objective of a complete circle.

How do they achieve a circle?

Through continuing to become familiar with all the procedures and polices, upgrades and security education that have just been put into place.

Continuing to be diligent, motivational, and dedicated to correct and complete security risk management.
Then they found their circle.

Is your organization, relevant department or activity a circle?, why not?

Would you like it to be a secure circle?

Risk Management - Security - What is It?
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Successful Management - 10 Simple People Skills

Getting the best from your people is vital if you are to make the best progress in your business or organization. Much comes from the way you interact personally and here are just ten key actions to take to build great, fulfilling and productive relationships...

This might be a bit of a no-brainer for you.

If you have any role at all in managing people, you need to ensure that you develop great people skills.

Successful Management - 10 Simple People Skills

By building rapport, you will develop ongoing, productive relationships with all of your people, which will give you an enormous return on the efforts you put in.

Here are ten things you can do, all of them easy, which will remarkably change the response you get from your people, the key asset you have in your business or organization:-

Just Have Conversations About anything! Talking to and more importantly, listening to your people regularly and informally is a great asset. It doesn't matter what it's about, Your understanding of them and their trust in you will magnify if you devote priority time to this each and every day. Listen & Show you are Listening Take the time to really listen to each of your people, rather than just tell. If you truly hear, they will respond. Hearing is more - it is about what you do with the stuff you've listened to. And by using your face, your body language, eye contact and what you say (see 3 below), you will go a long way to showing that you are listening closely. Ask Another Question Such a simple tactic. Ask secondary questions about what you've been told. Nothing, but nothing builds rapport and relationships like this. It shows that what they have been telling you is valuable, is interesting and builds their confidence. And you have been there to make that happen. Support Your people need you to help them along the way. With your support, they will flower and grow. Support is what they hear from you - it works both ways. Coach Don't get bogged down with technicalities. Coaching is about helping them see where they want to get to from where they are now. It's about exploring the possibilities - their possibilities, not yours and calling to action. Simple as that. Clear Expectations By ensuring that all your people know exactly what you expect of them, they will tune in to delivering it. Confusion over performance is demoralizing and saps energy. Take the time to be clear. Pay attention In any conversation with your people, take the time to give your full attention. Do your utmost to avoid being interrupted or distracted and truly value them for what they are saying to you - or the message you are giving them. Show an Interest in Them These are real people and if you delve a little, it will show up. Having a real interest in who they are, their hopes and fears, their passions and what's important to them makes a big, big difference to how they perceive you. Get to know the name of their dog, if their dog is their most prized possession! Follow Through During conversations you may offer actions that will be of value to them. Responses to what they have said to you. Make sure that you deliver these. Follow up and report back. Take actions you say you will. If you can't, tell them why. Remember Conversations When you have subsequent conversations, recall something that was said previously and bring it up. This is hugely rewarding for them and lets them know that they said something of value.

Great managers really understand their people and work out ways to get the best out of every one of them.

Maximizing value from the most valuable asset you have in your business.

Your people.

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(c) 2008 Martin Haworth is the author of Super Successful Manager!, an easy to use, step-by-step weekly development program for managers of EVERY skill level. You can get a sample lesson for free at http://www.SuperSuccessfulManager.com

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Management - 7 Key Management Qualities

Management might not on the face of it appear to be that difficult compared to the technical aspects of the role. Yet succeeding as a manager is as much about who you are and how you behave as it is about what you do. So what are some of the key management qualities?

Quality 1: Honesty

You will have to deal with many problems and challenges. From time to time you will have to make some tough choices. Those that you manage will look to you for re-assurance that everything will be okay. It is not always going to be possible to do that so learn to be honest with people.

Management - 7 Key Management Qualities

Quality 2: Act with integrity

Acting with integrity is about behaving in a way that demonstrates professionalism. There will be times, especially when under pressure where you might be tempted to breach your own standards. Notice when this is happening and catch yourself before you say or do something that conflicts with your values.

Quality 3: Reliability

Your team will look to you for support and help when things are difficult for them. Be there for them and show them that they can rely on you through good and not so good times.

Quality 4: Being accountable

Part of the deal of being a manager is being accountable for what is and what is not delivered. If you are happy taking the rewards that comes with a management role, it is important to make sure that you are willing to take responsibility for results.

Quality 5: Resilience

Good managers have a knack of bouncing back from setbacks and disappointments. In other words they are resilient. They believe in themselves and what they can achieve and see setbacks as an obstacle to overcome.

Quality 6: Determination

Getting results requires both inspiration and determination. Determination is a willingness to keep looking for ways to get the result you want, even when the odds appear to be stacked against you.

Quality 7: Common sense

The final quality that good managers have in abundance and is often overlooked is common sense. When faced with a host of challenges, it is all too easy to lose sight of the obvious solutions.

Bottom line - All managers face challenges. What sets apart those that excel from those that flounder are their qualities. So what qualities are you going to develop?

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Duncan Brodie of Goals and Achievements (G&A) works with individuals, teams and organisations to develop their management and leadership capability.

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What is Project Management Approach?

Project management (PM) is a well planned approach for a process from start to end. It is concerned with the planning and guiding of the project from start to finish. Any process needs to be guide in usually five stages. They are initiation, planning, execution, controlling and closing. PM can be applied to almost all type of projects but especially it is applicable in software development projects to control the complex process. It is an organized effort and it is planned very carefully. To accomplish a specific project, PM is essential.

PM is handled by project manager to implement the project successfully towards its goal. For successful completion of any project it is necessary to have a proper PM. The main objective of the PM is to attain its goal successfully.

Numbers of approaches are there to manage the activities of the project. They are:

What is Project Management Approach?

The traditional approach-This approach aims towards the completion of the project in sequence or in traditional manner. For the completion of the project there are five stages in this approach. They are:

* The stage of initiation
* The stage of design or planning
* The stage of production or execution
* Monitoring and controlling systems
* The stage of completion

Extreme PM- To execute project task, the critical chain project management give more emphasis to human and physical resources. By this method of planning and managing projects all the constraints are exploited and priority is also given to it. In critical chain project management all the projects are planned and managed only when the resources are ready.

Extreme PM- Complex type of project is handled in extreme PM. In this PM experts always try to identify the different models which is 'light weight' such as Agile Project Management.

Scrum techniques and extreme programming for the development of software are used in this method. It is the combination of management of human interaction and process modeling.

Event chain methodology- The complement to the critical path method and the methodologies of critical chain project management is another method that is Event chain methodology. This PM deals with the model of uncertainty. The main focus of this management is towards identifying and managing the events or the chain of events which will affect the schedule of the project. Event chain methodology follows the following principles:

* Event chains
* Tracking with events
* Probabilistic moment of risk
* Tracking with events
* Event chain visualization

What is Project Management Approach?
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Copyright © Ryan Mutt, All Rights Reserved. If you want to use this article on your website or in your ezine, make all the urls (links) active.

Read information on ERP Project Management and Definition of ERP.

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Understand 4 Basic Management Styles to Be an Effective Manager

In the corporate world, there needs to have a formal structure that organizes the tasks to manage the corporate office in its controllable manner. It is often ruled by a hierarchy of organization structure. This structure is commonly termed as organization chart.

 In order to be effective as a manager at various level in the organization structure, he or she are often challenged by work environment. How does his or her management style help to manage the situation. The four basic Management Styles is listed below:-

1)  Autocratic Style

Understand 4 Basic Management Styles to Be an Effective Manager

Perhaps is the oldest style in managing a group of people to get things done. This style of management is very obvious in the olden days of slavery where only the "master" give command and the slaves just follow. However, it is by no means the is a slavery type of management.

If you pay attention to this style, what it indicates is that there is always a one way communication where the "commander give out order and expect it to get done without any question. Even until today, this style of managing still exist and effective in environment such as arm forces, emergency situation, crisis management etc where there is not time to wait or entertaining any feedback or suggestion.  And autocratic style of management is most effective.

2)  Democratic Style

Just the opposite to autocratic management style, tasks carry out only after getting people's opinion and rule by a majority vote.  A very obvious example is a general election of a country, election of certain official in an organization of society. However, a democratic management style can and often apply in business when the manager makes decision based on the agreement of the majority. 

However, the style of management is normally guided by the manager who has made certain evaluation of the possible solutions and let the employees pick one among the best options. 

3)  Participative Style

This style of management is quite similar to the democratic type of management in getting opinion from the mass employees. However, the decision is not necessary follow the majority vote. What it does is to seek feedback and opinion from employee and then make a decision on his own.

4)  Laissez Faire

This style of management is a free hand management style where managers do not make decision nor interfere. It just let the issue develop by itself whether to the better or worst. This type of management style is best to handle rumor. for an example, a conflict among two or more parties is best let the parties involved settle on their own.

Now that you have any idea the four common management styles, you need to evaluated their differences and apply them.

Understand 4 Basic Management Styles to Be an Effective Manager
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How to Improve Working Capital Management

"Cash is the lifeblood of business" is an oft-repeated maxim amongst financial managers. Working capital management refers to the management of current or short-term assets and short-term liabilities. Components of short-term assets include inventories, loans and advances, debtors, investments and cash and bank balances. Short-term liabilities include creditors, trade advances, borrowings and provisions. The major emphasis is, however, on short-term assets, since short-term liabilities arise in the context of short-term assets. It is important that companies minimize risk by prudent working capital management.

What Affects Working Capital Management:

o Organizations are generally focused on cash, accounts payable and supply chain issues. On the hand, external issues like the legal and business environment, or internal mechanisms like organization structure, information systems, can significantly impact working capital.

How to Improve Working Capital Management

o Owing to market pressures, companies are led to paying a lot of attention to producing good quarterly results quarter after quarter. Undue focus on this may sometimes produce a flattering but inaccurate snapshot of working capital performance. This also happens in companies that have a marked seasonality of operations with working capital requirements varying widely from quarter to quarter.

Measures to Improve Working Capital Management:

o The essence of effective working capital management is proper cash flow forecasting. This should take into account the impact of unforeseen events, market cycles, loss of a prime customer and actions by competitors. The effect of unforeseen demands of working capital should be factored in.

o It pays to have contingency plans to tide over unexpected events. While market-leaders can manage uncertainty better, even other companies must have risk-management procedures. These must be based on objective and realistic view of the role of working capital.

o Addressing the issue of working capital on a corporate-wide basis has certain advantages. Cash generated at one location can well be utilized at another. For this to happen, information access, efficient banking channels, good linkages between production and billing, internal systems to move cash and good treasury practices should be in place.

o An innovative approach, combining operational and financial skills and an all-encompassing view of the company's operations will help in identifying and implementing strategies that generate short-term cash. This can be achieved by having the right set of executives who are responsible for setting targets and performance levels. They are then held accountable for delivering, encouraged to be enterprising and to act as change agents.

o Effective dispute management procedures in relation to customers will go along way in freeing up cash otherwise locked in due to disputes. It will also improve customer service and free up time for legitimate activities like sales, order entry and cash collection. Overall, efficiency will increase due to reduced operating costs.

o Collaborating with your customers instead of being focused only on own operations will also yield good results. If feasible, helping them to plan their inventory requirements efficiently to match your production with their consumption will help reduce inventory levels. This can be done with suppliers also.

Working capital management is an important yardstick to measure a company operational and financial efficiency. This aspect must form part of the company's strategic and operational thinking. Efforts should constantly be made to improve the working capital position. This will yield greater efficiencies and improve customer satisfaction.

How to Improve Working Capital Management
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Internal Audit and Public Sector Management Effectiveness

Introduction
In these difficult times for public sector finances, internal audit and the audit committee have an important role to play in ensuring continuing management effectiveness. Despite budget cuts and reduced staff numbers, management must ensure that controls continue to be effective, risks are managed and standards of corporate governance remain high. Internal audit must respond to these challenges by maintaining a robust, independent and objective stance and ensuring audit work focuses on what is most important in the organisation.

Strategic alignment
Internal audit must focus on those activities that contribute to the achievement of the organisation's strategic objectives. Internal audit should have its own strategic plan that is aligned with the organisation's strategy, while being flexible enough to take account of changing priorities and circumstances. The strategic audit plan should aim to cover all key strategic risks.

Focus on risk
Every public sector organisation should conduct regular risk assessments to ensure that risks to the achievement of its strategic objectives are identified and managed. Internal audit plans and work programmes must take these risks into account and be capable of responding to emerging risks. In addition, it is essential to audit the organisation's risk management process to ensure that it continues to identify changes in the risk profile of the organisation. An audit of the risk management process will also help to ensure that that all parts of the organisation have a common understanding of risk.

Internal Audit and Public Sector Management Effectiveness

Promote continuous improvement
There are two aspects to the promotion of continuous improvement, the first in relation to the internal audit function itself and the second in relation to the organisation. Internal audit should continuously improve its own capabilities through ongoing review of its performance, providing training to staff, and conducting quality assessments and peer reviews. Periodically, an independent external quality assessment should be conducted to gain an objective view of how internal audit is performing against internal audit standards. The performance and role of the audit committee should be included in these reviews, the results of which should be used as benchmarks for further improvement objectives.

As audits are carried out over time, internal audit should observe trends that emerge in the organisation and not simply view each audit in isolation. Trends might point to deficiencies in the performance of the organisation that management needs to address. For example, if a number of audit investigations point to weaknesses in, say, procurement, management might be advised to examine procurement at an organisational level and fix the process, not just the specific weaknesses identified in an individual audit. In this way, the audit function can contribute to overall performance improvement and add value to the organisation.

Manage relationships effectively
The influence of internal audit and of the audit committee is critical to the success of the function. The relationship between the Audit Chair and the Head of Internal Audit should be strong so that the audit function has the independent support required to succeed. The Audit Chair should meet the Chief Executive regularly, perhaps after every audit committee meeting. The committee should be kept informed of key developments in the organisation so that it can take these into account, where relevant, in reaching its decisions. Good relationships are also essential with line management so that audit findings and recommendations are accepted and acted upon. Client satisfaction surveys are useful tools to use after an audit to ensure that the client has an opportunity to give feedback on the audit process and deal with any difficulties that may have arisen.

Value for money
Every public sector organisation should strive to achieve the best value for money in carrying out its functions. The means by which this can be achieved are now well documented. Internal audit should consider where opportunities arise to conduct value for money audits and should include these in its annual audit plan. The results of value for money audits, in particular, can help to inform management whether the organisation is achieving its strategic objectives and whether actions are required to mitigate risks.

Conclusion
An effective internal audit function can help to promote a frame of mind in the organisation that focuses on risk, controls and the achievement of value for money. This, in turn, can help the organisation to improve its performance and management effectiveness and increase the likelihood of achieving its strategic objectives.

Internal Audit and Public Sector Management Effectiveness
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John Lawlor is an IT manager and consultant and has been delivering large-scale technology and business solutions in major public and private sector organisations for over 25 years. He is the author and presenter of training courses on general management; strategic management; project management; communications skills and personal development. He speaks regularly at seminars on public sector governance; internal audit; public financial management and value for money. He also writes on technology, business and career matters.

For further advice or assistance on the topic covered by this article, please contact John through his website http://johnlawlor.ie

Disclaimer: The views expressed in this article are the author's alone and do not represent those of any employer or other organisation with which he is or was associated.

(c) Copyright - John J. Lawlor. All Rights Reserved Worldwide.

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What is Strategic Financial Management?

Strategic financial management is basically about the identification of the possible strategies capable of maximizing an organization's market value. It involves the allocation of scarce capital resources among competing opportunities. It also encompasses the implementation and monitoring of the chosen strategy so as to achieve agreed objectives.

The key decisions falling within the scope of financial strategy include the following:

1. Financial decisions - this deals with the mode of financing or mix of equity capital and debt capital. If it is possible to alter the total value of the company by alteration in the capital structure of the company, then an optimal financial mix would exist - where the market value of the company is maximized.

What is Strategic Financial Management?

2. Investment decision - this involves the profitable utilization of firm's funds especially in long-term projects (capital projects). Because the future benefits associated with such projects are not known with certainty, investment decisions necessarily involve risk. The projects are therefore evaluated in relation to their expected return and risk. For these are the factors that ultimately determine the market value of the company. To maximize the market value of the company, the financial manager will be interested in those projects with maximum returns and minimum risk. An understanding of cost of capital, capital structure and portfolio theory is a prerequisite here.

3. Dividend decision - dividend decision determines the division of earnings between payments to shareholders and reinvestment in the company. Retained earnings are one of the most significant sources of funds for financing corporate growth, dividends constitute the cash flows that accrue to shareholders. Although both growth and dividends are desirable, these goals are in conflict with each other. A higher dividend rate means rate means less retained earnings and consequently slower rate of growth in future earnings and share prices. The finance manager must provide reasonable answer to this conflict.

It should be noted that the theory of corporate finance is based on the assumption that the objective of management is to maximize the market value of the company. More specifically, it is settled in finance that the main objective of a company should be to maximize wealth of its ordinary shareholders.

What is Strategic Financial Management?
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Basic Management Skills - What Makes a Good Manager?

Basic management skills are necessary to run a small business. Some business owners believe that leading vs managing is most important. In reality, you need to be able to both lead and manage.

What makes a good manager? There are definite business management styles and skills to focus on; specifically for small business owners. If you're the owner or manager of a small business, it's important to understand what those basic management skills are and to try to incorporate them into your own behaviors. Why? Because some skills are more successful than others and because some styles will engage your employees, while others will dis-engage them.

Business management skills such as planning, decision making, problem solving, controlling and directing, and measuring and reporting are needed for the daily operation.

Basic Management Skills - What Makes a Good Manager?

Using their small business plan, effective managers direct the business operation. Communications, benchmarking, tracking and measuring are tactics and strategies that they use to check their direction, to adjust the plan (if necessary), and to move the business forward. Good managers act to achieve the desired results; and they manage people and resources to get where they want to go.

Understanding what makes a good manager, means understanding what motivates employees.  How do you build an environment and culture that encourages employees to participate? How do you increase employee productivity and employee satisfaction; simultaneously? How do you recruit the best talent, and then keep them? How do you train your staff to solve problems, make decisions, and involve others in the process? These are just some of the challenges, and responsibilities, of managing.

As a manager, you need to understand what the common business management styles are (autocratic, paternalistic, democratic, and passive are the most common styles). And you need to understand what your style is, and how that style affects business results.

Four Business Management Styles:

Autocratic: The manager makes all the decisions; a "command and control" (militaristic) management style. Focus is on business; doesn't want any personal 'stuff' to get in the way. The benefit is that decisions are made quickly. The cost is in high employee turn-over as employees find this style difficult, and stressful. Paternalistic: The manager makes all decisions (or most of them) but focuses on what's best for employees. The benefit is that employees feel the business is taking care of them. The cost is that employees don't take care of business - they are uninvolved and have little at risk. Democratic: The manager wants input from the whole 'team' and majority rules. Often good decisions are made and employees feel involved in the business (the benefit to this style) but the process is very slow and you can't always make everyone happy. Passive: The manager abdicates responsibility to the employees; and calls it delegation. The benefit is that employees often step forward and learn in this environment. The cost is that the direction is scattered and there can be numerous false starts because there is no real manager.

Managers typically use more than one style, depending on the situation. If brainstorming creative new product ideas is today's focus, then the manager may want to use a democratic or passive style. If a decision about keeping or firing an under-performing employee must be made, the manager may need to use an autocratic or paternalistic style (hopefully not a democratic or passive style).

In most small businesses, the business owner is also the manager and the leader. In your business, make sure that you have a good understanding of your own business management styles, skills and qualities and learn how to control them and use them as necessary.

Basic Management Skills - What Makes a Good Manager?
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To understand more about what makes a good manager, or the difference between leading vs managing, it is good to focus on the qualities of an effective manager as compared to the qualities of an effective leader.
Kris Bovay is the owner of Voice Marketing Inc, a business and marketing services company. Kris has 25 years of experience in leading large, medium and small businesses. For more pricing strategies and other small business resources and services go to the more-for-small-business website.
Copyright 2008 - 2009 Voice Marketing Inc.

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