Business Best Practices

In the realm of business, the terms “leadership” and “management” are often used interchangeably, but they represent distinct approaches that play crucial roles in the success of an organization. While both are essential, understanding the differences between leadership and management can unlock new perspectives on how to effectively guide teams, drive innovation, and achieve organizational goals. In this article, we explore the nuanced differences between leadership and management and delve into the unique contributions each makes to the dynamic business landscape.

Leadership: Guiding with Vision and Inspiration

At its core, leadership centers around inspiring and influencing individuals to align with a shared vision. Leaders are visionary trailblazers who empower their teams by setting a compelling direction, fostering a sense of purpose, and motivating employees to transcend their limits. A true leader operates on the principles of authenticity and integrity, nurturing an environment where trust and collaboration flourish. Effective leaders are change agents who embrace ambiguity, take calculated risks, and adapt to dynamic challenges. They stimulate innovation, encourage creativity, and encourage the growth of their team members.

Management: Organizing and Executing Efficiently

Management, on the other hand, is the art of planning, organizing, and executing tasks to achieve established goals and objectives. Managers are responsible for optimizing processes, allocating resources, and ensuring tasks are completed efficiently and effectively. A skilled manager excels in decision-making, delegation, and problem-solving, ensuring the day-to-day operations of the organization run smoothly. They prioritize tasks, maintain schedules, and enforce accountability to maintain the overall structure and functionality of the business.

Leadership and Management: A Harmonious Symbiosis

While leadership and management are distinct concepts, they are not mutually exclusive. The most successful organizations strike a balance between the two, recognizing that effective leadership complements efficient management. Leaders provide the visionary direction, while managers execute that vision methodically. The symbiotic relationship between leadership and management creates a harmonious environment that fosters growth, innovation, and operational excellence.

Cultivating Leadership and Management Skills

1. Leadership Skills: To become an effective leader, hone skills in emotional intelligence, communication, empathy, and the ability to inspire and motivate others. Embrace a growth mindset, continuously learn, and model the behavior you expect from your team.
2. Management Skills: Developing management skills involves mastering organizational abilities, decision-making, time management, and efficient resource allocation. Effective managers communicate clearly, set realistic expectations, and empower team members to perform at their best.

In the dynamic world of business, leadership and management are two sides of the same coin. Both are essential for achieving organizational success, yet they offer distinct approaches to guiding teams and achieving goals. Effective leaders inspire with vision and purpose, while skilled managers ensure efficiency and execution. Striking a harmonious balance between leadership and management fosters an environment of innovation, collaboration, and growth, propelling businesses toward sustained excellence in today’s competitive landscape.

Motivated employees typically perform at a higher level than employees who are disengaged from their work. They are willing to go beyond their job description to see a project through to completion. Very often, their enthusiasm inspires and pushes coworkers to excel.

Certain strategies can help foster a culture of motivation and enthusiasm within the workplace. When consistently applied, they can motivate previously disengaged employees while supporting employees who are already self-driven and motivated. Here are five such strategies.

Communicate Corporate Goals

Engaged employees work toward common goals. However, they need to see the big picture first, and it is up to you to paint that picture for them. You do so by communicating your expectations to them clearly and regularly. That involves spelling out the duties, responsibilities, and the objectives of each employee’s job, ideally when they first start working for you. You also need to explain how each employee’s efforts affect the company and its bottom line. The goals of your company must be aligned to the goals of the employees if all employees are to work together to make the company successful.

Identify What Motivates Employees

Try to understand the factors that drive each employee to excel and to deliver exceptional performance. You may find that some employees are motivated by external recognition or by a sense of personal achievement or satisfaction. Others may be motivated by money. Bonuses and other forms of incentive pay are effective monetary motivators. Non-monetary incentives, such “employee of the month” awards and special, reserved parking spots can appeal to employees who are motivated by external recognition.

Give Employees the Tools They Need

Follow through by ensuring that employees have the right tools and resources to do their jobs. In fact, ask them what they need to perform at the highest levels possible. Soliciting employees’ opinions empowers them.

Conduct Regular Performance Reviews

Performance reviews are an effective tool for tracking the progress of your employees in meeting their stated goals. They are also helpful in keeping employees motivated and productive. Consider scheduling performance reviews quarterly or even monthly instead of annually or biannually so that employees receive more consistent and regular feedback about their performance.

Provide Additional Training and Education

Give employees the opportunity to acquire additional skills related to their fields — sales, technical, mechanical, etc. Employees gain from the additional training by adding to their skill sets, and the business may gain from having a workforce with enhanced capabilities and a higher level of motivation.

Your most valuable asset isn’t your real estate or the tech stocks you bought in the 90s that have done well. It isn’t even your business per se. Your most valuable asset is you — specifically your ability to run a profitable company and make money.

Are you protecting that asset from the risk that a disabling illness or accident might prevent you from working? If you don’t have disability income insurance, you’re not protected.

What Are the Odds?

People generally think the odds of becoming disabled are low. But the numbers say otherwise: More than one in four 20-year-old workers become disabled before reaching retirement age. Here’s another reality check: Serious accidents are not the leading cause of long-term disability; chronic conditions are. Muscle and bone disorders (such as a back disorder or joint or muscle pain) are responsible for more than one in four disabilities.

How Long Could You Go Without an Income?

Even a short period of disability could be devastating. The average group long-term disability claim lasts 2.6 years. Even if you have reserves you 3 could tap, your personal finances would take a hit. If and when you were able to start earning an income again, you might have to start all over.

What Would Happen to Your Business?

Your involvement is vital to your company’s financial success. If you’re unable to work, you might have to hire someone to take your place and borrow money to pay the bills until you’re back on the job. Bottom line? If you’re sidelined by a long disability, it could jeopardize the success or even the survival of your business.

What Can You Do?

Call your financial professional to review and discuss this important issue.

There are distinct pluses and minuses that small business owners should consider when looking for a loan.

New small business owners typically enter the marketplace with high expectations — they want to build sales and increase profits quarter to quarter. More often than not, they hope to add employees and, perhaps, open up additional locations. To help turn their dreams of growth into reality, they often seek out financing.

The big question is when to borrow money and on what terms. The decision isn’t always clear-cut, as there are distinct pluses and minuses that small business owners should consider.

The Pluses of Business Borrowing…

Seeking financing can make sense from a business perspective if the loan is intended to help the business expand and grow. For example, using debt to add to or introduce a new line of products, acquire additional property, or take other actions that are expected to boost revenues is an appropriate business strategy. A loan can also make sense when it is used to repay the owner of the business some of what he or she put into the business using personal funds.

…And the Minuses

A business loan impacts cash flow as it is being repaid, often in monthly installments. The interest cost may be an important consideration, depending on the interest rate environment. Business borrowers should understand that their tax deduction for interest expense may be limited to 30% of the business’s adjusted taxable income. However, smaller businesses may be permitted to deduct more. A tax professional can provide details on these rules.

Excessive Debt

Business owners also need to consider other possible negative ramifications from taking on excessive debt. For example, the owner of a small business is typically required to personally guarantee loans to the business. If the business defaults on the loan, then the owner is personally liable for repaying the loan balance. It is possible that in such a situation, the lender would take steps to seize the owner’s auto, home, and other assets in order to settle the debt. Moreover, if the business ended up with more liabilities than assets and was unable to repay what it owed, then the business might be forced to file for bankruptcy.

Seek Professional Input

Before taking on debt, small business owners may want to consult with an experienced financial professional. A professional analysis of the business’s financial health, cash flow, and prospects can help the owner determine whether a business loan at this stage makes sense and how much debt the business can afford to take on.

Fire, floods, hurricanes, earthquakes. When they happen, they can destroy buildings, equipment, and hard-to-replace data, and even injure or kill employees. It can take a business weeks, sometimes months, to resume operations after a disaster. Some businesses never recover. You can’t pin down the time or day when a disaster may strike your business. However, you can certainly prepare for one. Preparing for a disaster can minimize the potential damage and may protect you and your employees from harm.

Knowing what to do if a disaster strikes your business is half the battle. Savvy business owners draw up a disaster plan and update it regularly. They consult with experts and draw on lessons learned from the past. Moreover, they designate alternate business sites, emphasize data preservation, and ensure that the business’ insurance coverage is sufficient.

Drawing Up a Disaster Plan

If your business does not already have a disaster plan, now may be a very good time to develop one. Consider forming a disaster planning committee and assign it the task of crafting and implementing a disaster plan for your business. Give committee members the opportunity to attend seminars, meet with experts, and take training courses related to disaster planning.

If your disaster plan is to have any value at all, it must, at a minimum, outline in detail all of the steps managers and employees need to take if disaster hits your business. An effective and workable disaster plan should cover personnel safety and management succession.

Personnel Safety and Management Succession

An effective disaster plan should clearly identify safety areas for employees as well as an evacuation route. Specific individuals should be responsible for confirming that all employees have reached the safety area. The plan should outline a chain of command, indicating the responsibilities and duties assigned to each manager or employee during a disaster.

A list of emergency phone numbers — hospitals, doctors’ offices, and the company’s lawyers and accountants — is an important part of the plan. Be sure to include the home phone numbers of employees and the names of family members who can be contacted in an emergency.

Ensuring management continuity after a disaster should also be a top priority. That requires establishing procedures that detail the responsibilities and duties of each member of the management team in the days and weeks after a disaster. The procedures should clearly define a line of succession and give instructions on how to communicate any changes or information to employees, customers, vendors, and professional advisors. Creating and implementing these procedures helps keep your business operational during a difficult time.

Alternate Business Sites

Getting your business up and running after a disaster is much easier if you have an off-site facility for storing backed-up data vital to your operations. You’ll need to be able to access customer and vendor lists, accounts receivable records, and other critical records if you are to resume operations quickly. Make sure you identify and classify corporate data according to its importance and begin to back it up as soon as possible.

It may be worthwhile to look into alternate business sites, essentially office complexes with computers, work areas, and phones. When disaster strikes, you would move your personnel to the alternate site.

Insurance Coverage

Review your business insurance policies to identify any potential shortcomings in your coverage. Business interruption insurance, which compensates a business for the loss of all or a portion of operating income when normal operations are disrupted by disaster, is a key element in business insurance planning. Take the time to periodically reexamine your business’ umbrella liability, fire, vehicle, and property insurance. Keep several copies of all your policies at different locations.

Don’t Let Your Plan Gather Dust

Make sure key employees receive a copy of the disaster plan. Keep it updated. Practice emergency drills. A proactive approach can potentially minimize the impact of a disaster.

Like many small business owners, you may plan on working until you are ready to retire. And, once you reach that point, you may expect to sell your business and live off the proceeds. Or, you may have partners or children who can keep the business operating once you are ready to step away.

However, smart business owners plan for all eventualities. They plan for success but they have a fallback plan in case their efforts don’t bear fruit. As a business owner whose business is probably by far your biggest asset, it makes sense to think about those things that could go wrong and take steps to protect yourself now.

What steps should you consider taking that can protect your future financial security? Consider these contingency strategies:

Put a Retirement Plan in Place

The only constant in business is change. And many changes can harm a business’s financial viability. What would happen to your retirement dreams if your business experienced a serious setback? New technologies come along and make some businesses obsolete. New competitors erase older, established firms and economic downturns impact consumer and business spending. Natural disasters can seriously damage a business’s operations and cause widespread financial loss.

Funding a retirement plan during your working years can help protect your future financial well-being. Additionally, a retirement plan can provide important tax benefits. For example, your contributions to your retirement plan are typically tax deductible while earnings on investments in your retirement plan account grow tax deferred until you begin taking distributions.

As a small business owner, you can choose from a variety of tax-advantaged retirement plans. Each option has distinct advantages and disadvantages when it comes to costs and the burden involved in plan administration. The input from your financial professional can be helpful when reviewing the appropriateness of a particular retirement plan with regard to your business’s specific situation.

Establish a Buy-Sell Agreement

If you have one or more partners or co-owners, it makes sense to have a buy-sell agreement. A buy-sell agreement helps ensure that you (or your beneficiaries) will receive fair compensation for your ownership interest. The agreement also facilitates the orderly transfer of ownership and management. A buy-sell agreement can be drafted among shareholders of an S corporation, partners of a partnership or an LLC, or even between an owner and a key employee.

When carefully crafted, a buy-sell agreement can:

• Help provide a smooth transition of control, management, and ownership to those who wish to continue running the business
• Spell out the financial aspects of the transition
• Establish a fair and reasonable price
• Help ensure the financial security of your family and other beneficiaries in the event of your unexpected death
• Create a built-in buyer for your interest in the business
• Establish, under certain circumstances, an estate tax value for the stock.

There are two basic types of buy-sell agreements: cross purchase and entity purchase (stock redemption). With a cross purchase agreement, the remaining owners agree to buy the departing owner’s interest in the business individually. With an entity purchase agreement, the business itself agrees to buy the selling partner’s ownership interest.

Life insurance is a common way of funding a buy-sell agreement. The proceeds of the policy are used to buy out the departing owner’s interest in the business.

Develop a Disaster Plan

No matter where your business is located, it is a wise precaution to assume that a natural disaster will impact it at some point. Adequate preparation can minimize damage to your systems, your equipment, and your physical plant, and may even protect you and your employees from harm. A key component in preparing for a natural disaster is a disaster plan.

Your disaster plan should include sections on personnel safety, management succession, and data preservation. It should outline the steps employees and managers must take in the event of a disaster.