Unit 4: Entrepreneurial Tasks and Leadership Challenges

4a. Compare and contrast models for effective decision-making and critical thinking skills

  • What are the two main types of decisions, and what method would you use to make these decisions?
  • How does emotional intelligence impact decision-making?
  • What are the barriers to effective decision-making?

One of the important things entrepreneurs and leaders do is make decisions. We can divide decision-making into two main types of decisions: reactive decision-making and reflective decision-making.

Reactive decision-making means making decisions based on intuition, and these decisions are usually made quickly. Reflection decision-making involves making a complex and novel decision, where time will be spent trying to make the best decision. Managers typically make both types of decisions based on the situation.

Similarly, managers often make programmed decisions, which are decisions repeated over time, using heuristics, which are mental shortcuts used to make these decisions. Non-programmed decisions are unusual decisions where we don't have a set of heuristics to help guide us.

The decision-making process consists of six steps:

  1. Recognize a decision needs to be made
  2. Generate multiple alternatives
  3. Analyze the alternatives
  4. Select the best options
  5. Implement the alternative
  6. Evaluate the effectiveness of the decision.

Emotional intelligence is the ability to recognize, understand, pay attention to, and manage one's own emotions and the emotions of others. Emotional intelligence has four main factors, which include self-awareness (the ability to understand one's emotions), self-regulation (the ability to handle one's self in a variety of situations and not overreact or underreact), social skills (the ability to read a room, for example), and empathy (the ability to understand another's situation).

There are barriers to effective decision-making, which include bounded rationality (the idea for complex issues, we can't be completely rational due to all of the unknowns), escalation of commitment (when a person remains committed to a poor decision), time constraints, uncertainty, and our personal biases. 

Logical fallacies can impact decision-making too, such as false cause, which means that because two things are related, one causes the other, and ad hominem, which relates to personal biases toward a person and their suggestions rather than considering the merit of their input.

To review, see Decision-Making as a Leader.


4b. Determine the most effective change management model as an entrepreneur

  • What are the different types of change an organization can undergo?
  • How might a leader apply a change model to ensure employees accept change?
  • How might an entrepreneurial leader look for abundance-based changes?

There are three main types of organizational changes. A structural change is a type of change where an organization may restructure, such as by reorganizing departments. Sometimes, these changes are needed as a business venture grows or offers different products and services. A technological change is implementing new technology, such as a human resource management system. A culture change focuses on creating different thinking patterns and behaviors within an organization.

Within these major types of changes, companies can have incremental change, which is small refinements. Transformational change is a significant shift in the organization. Strategic change can be incremental or transformational and allows a company to align its strategy with the other necessary support systems. When we think about change, we can think of it as abundance-based change (aiming for greater success) or deficit-based change (something that is not working and needs to change). Within this, some changes may come from the top down (such as when change comes from the upper levels of management), while others may be emergent or come from the bottom up (such as when employees initiate change).

Depending on an organization's stage, it may need to adhere to a more simplistic organizational structure but then develop more formal systems and structures as it grows. 

Leaders must harness the ability to change quickly and frequently. Several models for implementing change, such as Lewin's Three-Step Model and Kotter's Eight-Step Plan, can help managers and leaders shepherd change in their organizations. 

To review, see Types of Organizational Changes and Change Management.
 

4c. Distinguish the principles required for effective team dynamics to assist in meeting entrepreneurial goals

  • Why are teams important in entrepreneurial organizations?
  • Why are team and group norms important to understand as a leader?
  • What five team dysfunctions should you be aware of as a leader?

A team is a small number of people with complementary skills committed to a common purchase, goals, and approach to meet the goals. The five elements that make a team function include common commitment, specific performance goals, complementary skills, commitment to how the work gets done, and mutual accountability. There are two main types of teams: formal and informal. Formal teams are usually permanent and work under a single supervision. They are always created with proper authority, such as by the nature of the organizational chart. Informal teams are usually formed by the team members themselves and are outside of the form hierarchy of the organizational structure.

Every team goes through the team development process. Tuckman's Model of Team Development consists of four stages, and in each stage, there is more of a focus on the task versus the relationship building. The stages are forming, storming, norming, and performing.

Within teams, individuals are expected to behave in a certain way. Role identity refers to the actions and attitudes consistent within a particular role, while role perception is our view of how we should act in certain situations. Role expectations are how others believe one should act in a given situation, and role conflict occurs when the duties of one role conflict with those of another. Teams also have norms, which are the things commonly accepted in the team. These can be performance norms, appearance norms, social arrangement norms, and allocation of resources norms. When teams have high performance norms and high cohesiveness norms, the team usually has increased productivity.

Conflict is inevitable in teams, and team members can take a constructive or destructive, active or passive approach to conflict. When leading teams, the goal should be to take a constructive-active approach.

Besides conflict, teams should be aware of dysfunctions. The five dysfunctions of a team, according to Patrick Lencioni, include:

  1. The absence of trust
  2. Fear of conflict
  3. Lack of commitment
  4. Avoidance of accountability
  5. Inattention to team results

To review, see:


4d. Evaluate principles as they relate to talent management, such as performance management approaches

  • What are some methods that can be used to manage employee performance?
  • How do you see the progressive discipline process in your current or past organization?
  • What are the advantages of using a Total Rewards Strategy for employees?

One of the important duties of managers and leaders is to manage the performance of their employees. Pay-for-performance models are focused on how the best employees can be rewarded in organizations. Many companies also look at a total rewards strategy to motivate, which includes compensation, benefits, work-life balance, recognition, performance management, and talent development. 

There are both internal and external factors that may impact performance. Internal performance factors include conflict within the organization, such as when employees have poor time management skills, don't enjoy the job, or have career goals that are not met. External performance factors could include poor job design, lack of management support, or a mismatch between employee skills and job.

At times, it may be necessary to discipline an employee based on actions that are not acceptable. A specific process that is fair and the same for everyone should be followed when handling such issues. Organizations might have mandated issues, or they may see performance issues as being a single incident or a behavior pattern. Many organizations use a progressive discipline process, which involves taking corrective action to improve employee performance. 

There are several types of employee separations, such as absconding, when an employee stops showing up to work with no formal resignation. A severance package, that is, compensation given to an employee when they leave the organization, will vary greatly based on the individual employee contract and the country in which they are working.

Part of managing performance is developing a system where you can give formal and informal feedback. A performance appraisal system is typically a formal system in which feedback can be given. Several methods can be used to rate employee performance, and each has advantages and disadvantages.

To review, see Feedback and Performance and Managing Performance and Non-Performance.

4e. Analyze power and politics, and conflict management as it relates to entrepreneurship

  • What are the different types of power?
  • Which types of power are most effective in leadership?
  • What types of conflict have you been involved in personally or professionally?
  • What tips would you give someone who is negotiating a pay raise?

The concept of power is related to authority, which is the right to seek compliance from others, and leadership, as you already know, is focused on getting desired responses beyond just having an employee listen to you because of your power in the organization.

There are several bases of power leaders might use in various situations.

  • Referent power is the power someone may have if people look up to them because of their personal qualities.
  • Expert power is the type of power that occurs as a result of expertise and experience.
  • Legitimate power is the type of power that occurs due to someone's position or title in an organization.
  • Reward power is the type of power that occurs when a person has power over someone because they can give them rewards, such as a pay raise.
  • Coercive power is power derived from the ability of one person to punish another, such as by writing them up, or physical power based on physical strength.

Usually, there will be more employee cooperation and commitment when a leader uses referent or expert power.

In organizations, people sometimes use power tactics, which might include controlling information, controlling access to people, controlling an agenda, and several others. Of course, as leaders, we want to use our power ethically. 

In many organizations, there is also politics. Politics often occurs in organizations with high employee competition and high organizational complexity. Limited resources and change are all reasons people might use power in an organization.

Conflict in organizations is inevitable, as we've discussed earlier. There are four main types of conflict:

  1. Intrapersonal conflict (within oneself)
  2. Interpersonal conflict (between two people)
  3. Intragroup conflict (in a team)
  4. Intergroup conflict (groups or teams in conflict with each other).

People deal with conflict by competing, collaborating, avoiding, accommodating, and compromising. There is no best method – often, the method depends on the individuals involved and the conflict itself.

When we look at negotiations, there are four common characteristics:

  1. The parties are interdependent
  2. Each party wants to achieve the best for themselves
  3. The parties are motivated and capable of influencing one another
  4. The parties believe they can reach an agreement

To successfully negotiate, one first should prepare and plan, define ground rules, clarify what the other party wants, justify your wants, bargain and problem-solve, and close and implement. Personality, gender, and cultural differences influence negotiations.

Leaders often will set goals. It is important to set goals using the SMART method: specific, measurable, attainable, realistic, and time-bound.

To review, see:


4f. Apply goal-setting principles to motivate an organization

  • What personal and business/career or entrepreneurship goals do you have?
  • How can you make sure your goals are SMART?
  • What kind of self-reflection should you do to help you meet your goals?

The first step in a leadership plan is determining your goals as a person and leader in your organization. The SMART goal method should be used, and short-term, medium-term, and long-term goals will be considered. 

Once you've set goals, you can look at what skills you may need to meet your goals. For example, perhaps you want to open a financial analysis firm but need more work understanding personal investing. In this step, you'd address the skills required to meet your goals. The next step is to write plans to meet the goals. In other words, what are the smaller, specific steps you need to take to reach your SMART goals and develop the skills you've identified earlier? Also, working on self-assessment, such as identifying the personality traits you might need, is important here.

To review, see You Try It: Create a Leadership Development Plan.

Unit 4 Vocabulary

This vocabulary list includes terms you will need to know to successfully complete the final exam.

  • absconding
  • abundance-based change
  • bounded rationality
  • coercive power
  • culture change
  • deficit-based change
  • empathy
  • escalation of commitment
  • expert power
  • external performance factor
  • formal team
  • incremental change
  • informal team
  • intergroup conflict
  • internal performance factor
  • interpersonal conflict
  • intragroup conflict
  • intrapersonal conflict
  • legitimate power
  • non-programmed decision
  • norm
  • pay-for-performance
  • performance appraisal system
  • programmed decision
  • reactive decision-making
  • referent power
  • reflection decision-making
  • reward power
  • role conflict
  • role expectations
  • role identity
  • self-awareness
  • self-regulation
  • social skills
  • strategic change
  • structural change
  • team
  • technological change
  • total rewards strategy
  • transformational change
  • Tuckman's Model of Team Development