Entrepreneurs and Owners

Question 1

The Entrepreneur, The Executive, & The Manager

Answer 1

The Strategists and Their Role

Strategists are individuals who guide organisations by managing the interaction between the external context (environment) and the internal context (organisation).

They include:
1. Founders
- individuals who establish new organisations, often shaping their culture and identity

2. Entrepreneurs
   - visionaries who identify opportunities and bring innovation, often disrupting existing industries
3. Owners
   - stakeholders focused on the financial health and direction of the organisation
4. Managers
   - operational leaders who ensure day-to-day efficiency
5. Executives
   - decision-makers responsible for high-level strategy and coordination

Founders establish companies but may not always be entrepreneurial. Entrepreneurs drive innovation and change industries through creative destruction

Question 2

Imprinting Theory

Answer 2

Highlights the influence of founding moments on organisational culture and structure.

1. Founder & Founding Characteristics
   - organisations are particularly receptive to external and internal influences during the early stages
2. Imprint
   - the organisation develops distinct characteristics (e.g. values, norms, processes) reflective of its founding context
3. Persistence
   - these traits often persist even when the environment evolves

Question 3

Creative Destruction (Joseph Schumpeter)

Answer 3

A process where innovation revolutionises industries, displacing old products, technologies, or business models with new ones.

Question 4

Ownership and Control

Answer 4

Ownership and control differ based on the type of business entity.

1. Sole Trader
   - owner: an individual who owns and controls the business entirely
   - control: no separation, owner makes all decisions
   - e.g. a freelance hairdresser
2. Partnership
   - owner: two or more partners, equally liable
   - control: managed by partners, sometimes with hired managers for non-professional tasks
   - e.g. law firm
3. Private Company (B.V.)
   - owner: select shareholders, often founders or managers
   - control: directors and managers oversee day-to-day operations
4. Public Limited Company (N.V.)
   - owners: many shareholders
   - control: delegated to a board of directors and managers, separation of ownership and control
5. Public Sector Organisations
   - owners: government (funded by taxes)
   - control: directors and managers implement policy to run operations

Question 5

Agency Problem

Answer 5

Arises when ownership (principals) and control (agents) are separate, leading to a conflict of interest.
- principals (owners): focused on maximising profits and investments
- agents (managers): interested in higher compensation, job security, or personal perks

Examples of Agency Problems:
1. Moral hazard: managers may not act in the best interest of shareholders
2. Adverse selection: information asymmetry leads to suboptimal decisions
- misleading about the company’s financials

Solution:
- corporate governance ensures alignment through oversight (e.g. boards) and incentive structures (e.g. performance-linked pay)

Question 6

Roles of the Executive

Answer 6

Executives, including the CEO, focus on:
- defining purpose and strategy
- assigning responsibilities and maintaining communication
- establishing formal and informal structures for cooperation
- securing essential services and motivating the workforce

Question 7

Peter Drucker’s Insight on Effective Executives

Answer 7

Discusses different functions of executives on how to be an effective executive.
- base decisions on strength
- manage time effectively
- prioritise meaningful contributions
- focus on key tasks first

Question 8

Zones of Indifference (Chester Barnard)

Answer 8

Zones of Indifference: employees accept orders when motivated within this zone, influenced by authority of position (formal) or leadership (personal ability)
- this zone can be narrow or broad, depending on the extent to which people are motivated to contribute to the system
- also compared the authority of position to the authority of leadership
- in authority of position, people are assigned authority through the office they hold, to a a considerable extent independent of personal ability
- in authority of leadership, people are assigned authority due to superior ability
- when someone has both abilities, the zone of indifference of the executives and subordinates will be very broad

Question 9

Managerial Capacity

Answer 9

Managerial capacity reflects managerial services and the ability to capture management know-how, which exists in finite quantities.
- firms grow only as fast as their managerial resources allow
- excess managerial capacity is needed in rapid growth situations

Question 10

Middle Managers

Answer 10

Managerial resources are not just at the top or senior levels of the firm.

Quy Huy explains that it is important that executives at the top recognise, respect and deal very fairly with influential middle managers.
- turnover among the more senior levels of executives is higher than ever, so the balancing act of middle managers is increasingly important

Roles of middle managers:
- as an entrepreneur: spotting entrepreneurial opportunities
- as critical communicator: channelling information up and down the hierarchy
- as therapists: supporting employees’s emotional well-being
- as a tightrope artist: balancing continuity with necessary change