Small Firms Adopt Big-biz Techniques

Beth Mattson Contributing Writer

Say goodbye to the mom-and-pop management of the past and hello to the savvy new entrepreneurial structures of the future.

It's not enough to hang out a shingle anymore. Small business owners are finding that the latest management practices unleashed by Fortune 500 companies --- from total quality management to employee empowerment --- can be implemented on a smaller scale as well. Led both by the market and changing technology, that's just what many of them are doing.

Consider the case of St. Paul-based Cadware Inc. Cadware has been gradually introducing a new team-oriented management structure to its 12-person firm over the past few years. The reseller and systems integrator of CAD-CAM systems plans to decentralize its management by implementing self-managed work-teams.

The teams are expected to enhance business operations and will affect every aspect of the company, from the way meetings are run to how clients are served, said John Fennig, CEO of DRI Consulting in Edina. DRI Consulting is assisting the firm's management restructuring.

Cadware picked up on the new strategies by recognizing what other firms were doing. "A lot of the companies that we deal within the manufacturing arena are moving towards more of those methods, and we also felt that it was the best method for our future," said Erling Noeker, Cadware president and co-owner. "We're interested in bringing our employees farther into the process of managing the company and giving them the chance for more input into the decision-making process," Noeker said.

Another aspect of Cadware's restructuring is focusing on a complete overhaul that will involve continual upgrades and improvements. Most companies focus on implementing a piece at a time, but Cadware's strategy is to put the components together in a cohesive program. "All of the pieces need to be in place for them to work well."

Cadware is not alone. Across a number of industries, small business owners are practicing what the management gurus preach. In varying forms, growing companies have introduced total quality management, restructured job descriptions, and otherwise empowered employees.

Of course objectives remain the same: to put out a good product and service at a fair price. But reaching that goal has changed quite a bit. And the driving force behind that change is innovation--both in technology and management theories--as companies struggle to cut costs and beat the competition.

One of the key differences today is that these innovative approaches are not only readily available, but a growing number of widely touted examples range from major corporations down to the neighborhood store. "In the past, companies could get by with not optimizing innovations within their organization because the information wasn't so readily available. But one of the explosions of the information age is that information is available to just about everyone if they care to seek it out," said Paul Hansen, and adjunct instructor at the University of St. Thomas' Center for Entrepreneurship.

Small business have placed a strong emphasis on total quality management for years, but what is changing is that there are no plateaus anymore; the changes required to stay competitive are constant, said F. David Williams, president and CEO of Schwartz Williams Cos. Inc., a St. Louis Par-based consulting firm. "Change has become a norm rather than a happening. It's just part of the culture that's there all the time," he said.

Team efforts

The small business owner is undoubtedly more sophisticated today, and owners are utilizing a growing number of resources to improve their management techniques. The biggest transition that is occurring in small business management is the decentralization of power from the traditional CEO hierarchy to a more level playing field of "teams" and "coaches."

While the buzz words reflecting management structures vary, the basic concept is the same. Managers are handing down more responsibility, decision-making ability, and accountability to staff members. In some cases, these programs are putting a new spin on old ideals. But new or old, the application of these new ideas is providing a much-needed jumpstart to outdated management practices.
Utilizing the team approach allows companies to leverage the individual skills of each employee, and the implementation of teams is being driven by two major factors. The first reason is pure economics. "In order to be competitive, you have to do more with fewer people," Fennig said. The more hats the individual can wear, the more money the business can save, he said.
A second factor involves the demographics of the workforce itself. Ever since the 1970's, people have been growing up more impatient to advance their careers. Employees are looking to get on a fast track to gain more control and decision-making opportunities much sooner than their parents, Fennig said. This generation is not looking for the sort of management that was common up through the 1960's, he adds.

Management theories focus on companies treating all employees as business people first, and employees second. In a sense, employees are becoming a "partner" in the company, and the employer is providing the individuals with full disclosure on company information, strategies, and objectives to allow employees to make the best decisions for the company, Hansen said.

Companies often use the term "empowerment" in relation to some of these same ideas. However, to be truly successful, companies have to back up that empowerment by educating employees on how to make those decisions, Hansen said. "It's one thing to say go ahead and make the decision. It's another to give them the education to make that decision," he said.

And this increased responsibility is being pushed as far down the business ladder as possible, Hansen said. "The cutting edge companies are those that can truly harness all of the energy of the employees working towards the same goals and objectives," he said.

Rating Performance

The emphasis on employee autonomy is creating a need for some revisions to management's current checks and balances systems. "I think that the management of the future is going to have to be comfortable with decentralizing power and responsibility, while retaining the appropriate control mechanisms," Hansen said. That may mean throwing out the time clock in favor of a system that evaluates productivity on accomplishment rather than time in the office. The old paradigm that focuses on whether an employee is showing up for an 8-to-5 stretch is becoming obsolete. The new structure focuses on the end result of whether the job is getting done, Hansen said. Utilizing people that work at home, for example, is a great cost savings measure for some businesses, but instead of trying to track hours the employer simply relies on evaluating the productivity.

However, analyzing productivity comes with its own set of challenges. It may be far easier to evaluate quantitative results in sales, for example, where work easily boils down to dollars and cents results. In other fields, analysis is not so easy when owners have to question the quality of the work that is being produced.

But as performance becomes a higher priority, it is knocking out tenure when it comes to compensation issues. Companies are linking pay increases and bonuses to performance and skill improvement, rather than cost-of-living raises or the length of time an individual has been with the company, Williams said.

Establishing company benefits also is becoming more of a management decision as rising costs create a significant impact on any company's bottom line. Small business managers are realizing that because of the volume of displaced people through corporate downsizing, mergers and acquisitions, they have greater access to some highly talented people.

So in order to compete for labor, small businesses are accelerating benefit packages to be more in line with large companies that have pension plans and profit sharing. I addition to increasing perks, it's becoming more common for small businesses to look at attractive ways of giving up part ownership to key personnel as a way to retain top management people.

Motivation for change

Technology has been perhaps the biggest influence in motivating change amid management structures. In order to keep costs down, businesses are looking to continue automating the business as much as possible, doing away with paperwork and switching to more computerization.

"Obviously the whole area of information technology is having a major impact on small business, and management is trying to keep abreast of the changes that are happening so rapidly," said Max Fallek, president of the American Institute of Small Business in St. Louis Park.

Undoubtedly, new management concepts will continue to emerge and evolve. But while business owners can pick and choose which of these many models will work best for their company, manipulating emerging technologies is not as easy. Features such as e-mail, Web pages, and integrated telephone systems are all becoming standard business tools, not rare phenomena.

The easy access on information on how to run a business is creating more savvy operations and the next five years will breed phenomenal changes as the technology continues to impact all levels of the business world. "People leading small companies are going to have to be technically sophisticated, otherwise the staff that they hire is going to have the key to the kingdom," Fennig said.