Week 5 homework assignment | Management homework help

5.0 MANAGEMENT PLAN

         5.1     Board of Directors – Names and Qualifications

         5.2     Senior Managers – Names, Positions, and Qualifications

         5.3     Advisers – Names, Roles and Qualifications

         5.4     Retained and Other Professionals – Names, Roles and Qualifications

        5.5     Organization Chart

        5.6     Gaps in the Management Structure and How those will be Addressed

        5.7     Management Team Ownership and Compensation

        5.8     How the Management Team Will Adjust for Business Growth

Section 5.1 through 5.4:

The first part of the management plan will describe the Management Organization. Include all aspects of management including the Board of Directors, Senior Management Team as well as Advisers and Retained and Other Professionals. 

1. A Board of Directors is a panel of individuals who are elected by a corporation’s shareholders to oversee the management of the firm. Many firms have active boards of directors that provide guidance and lend legitimacy to the firm. Board members often consist of a mix of external directors drawn from outside the company, as well as some of the senior managers (sometimes called “Officers”), who are both members of management and internal board members.
2. The Senior Management Team consists of the senior executives of your business.  For a small start-up business, this is pretty straight forward.  Usually, the team of promoters that decide to collaborate and form a new business recognizes that they need to play a role in managing the business.  Fledgling businesses seldom have cash resources to hire professional managers.  So the promoters assume management roles.  For purposes of this assignment, assume that each team member assumes a senior management role.  Typical initial roles might include Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), Chief Technology Officer (CTO) and Chief Marketing Officer (CMO).  It’s not uncommon for the initial management team to double up on responsibilities, because there are more responsibilities than people available.   Briefly describe your management team. A good way to do this is to create a management team skill profile. This is a brief summary of the skills and experience that each team member brings to the business. 
3. An Advisory Board is a panel of experts who are asked by a firm’s managers to provide counsel and advice on an ongoing basis.  These are usually uncompensated positions, that are an opportunity for highly skilled and experienced managers to “pay it forward” by providing guidance for a new company.  These individuals don’t have actual job responsibilities in the company.  They simply meet with the company management to provide suggestions and provide diversity to the decisions the management makes.
4. At times, Retained Professionals such as attorneys and accountants, and other professionals, such as Information Technology Consultants, Technical Consultants, or others who are brought on board in a compensated, contractual situation, assume important roles in a new venture’s success. These individuals and firms should be identified and included as part of a firm’s overall management team in the firm’s business plan.

What you want to include in these sections is a brief “bio-data”  for each of the individuals you identify for the various positions.  A bio-data is a brief couple of paragraphs that describe a person’s education, work experience, and skills that enable them to be successful in the position they occupy.  It’s not a full resume, and shouldn’t be that detailed.

Decide how many positions you will have and then describe the candidates that occupy those positions.  For the Senior Management Team, the names are simple – they are the members of your team.  For the Board of Directors, Board of Advisors, and Professionals sections, you can just make up fictitious names.  Have fun with this – such as the Law Firm of Dewey, Cheatum and Howe.   They shouldn’t be real people unless you’re describing an actual real business that one of your team members is already operating.  

Section 5.5:

After introducing the entire team, show how they interact using an organization chart.

Discuss and display in a chart, how the company’s management will be organized – the organization structure.   This will be demonstrated through an Organization Chart that shows the various management positions, their reporting relationships, and the names of the parties filling the positions.  Since this is a young company, the organization chart should reflect your relatively modest size and not be overly complex.  You can add complexity to the Organization Structure as the company grows. 

Section 5.6:

However, even small companies have a minimum requirement for management responsibilities, and initially, there may be more responsibilities than available managers.  In such cases, the unfilled/open/vacant responsibilities should be shown on the Organization Chart and described, indicating both the plan for filling the vacancy, as well as the manner in which the responsibility will be handled in the interim (usually by the available managers doubling up on their responsibility areas). 

When describing these “management gaps” include a graphic.   Use the chart that is described in the textbook. List the responsibilities across the top and the names of onboard managers down the side.  It uses X symbols to show filled positions, and O symbols to show vacancies (gaps in the management structure.)

An example of the chart is provided in the attachment below.

After presenting the chart, you should explain all the gaps with O symbols.  How are you solving those gaps presently?  Presumably, you are doubling up on responsibilities for those individuals who are currently engaged (or perhaps you are hiring a consultant, or a temp).  And what is your longer-range strategy and timetable for filling those gaps?

Since these are management team gaps, you should show the position on the org chart and then indicate the position is vacant, open, or unfilled.

Section 5.7:

The next part of the management plan will describe the compensation and ownership interests that the management team personnel have in the business venture. This will enable investors to assess how “invested” the management team is in the success of the business. It is necessary to fully disclose the ownership structure of the new venture and the compensation of the members of the management team in the business plan. A table should be created that shows the names of each of the owners of the firm, along with their age, their percent ownership in the company, and their compensation if they work for the firm.

Ownership is based entirely on cash contributed.  So if Manager A contributes $40,000 and Manager B contributes only half of that, then they won’t have equal shares of the company.  In fact, A will have 2/3 of the shares and B will have 1/3 of the shares. 

So, for example, if the CEO contributes $200K out of a total of $500K, then the equation would be CEO % ownership = 200K / (500K/.8) = 32%   The reason why the total investment is divided by .8 is that the business declared an options pool of 20%.    And definitely, the percent ownership is never based on a whim – (I’m the CEO and want control of the company, so I’ll assign myself to have 51% of the ownership!) 

The suggested table is provided in the attachment below.

Section 5.8:

The final section of the management plan will talk about the future prospects of the venture in terms of what is envisioned for future development in the management of the company and how the growth of the venture will be managed. For example, if the original entrepreneur starting the business recognizes a lack of general management skills, then identifying when a professional general manager will be brought on board will lend comfort to investors who may otherwise imagine a roadblock to future growth.

Essentially what you want to write about in section 5.8 is how the management team will be adjusted as the business grows and expands. The response typically tends in two possible directions.

First, the original management team of the fledgling business is small (usually only consisting of the original team of collaborators) and each member of management typically has a broad spectrum of responsibilities. For example, the CEO may also double up as the HR head, taking care of the hiring function while the company gets started. And the COO may double up as the head of R&D and Engineering in the beginning. The CFO will probably assume responsibilities for purchasing and administration in addition to financial duties. As the business grows, the needs of each of the business areas increase, and it becomes increasingly hard for the original management team to continue to wear multiple hats. The trend in management as the business grows is toward more specialization, and thus new management positions are created as the doubled-up responsibilities are hived off from the original management team.

Second, you may find that your original complement of business promoters (who make up your original management team) may have great entrepreneurial skills, but lack the capabilities required to take their respective management responsibilities to the peak levels demanded in a growing company. Consequently, sometimes more skilled personnel are brought in to assume responsibility for those roles. Most typically, the CEO position may be filled by a trained and skillful professional, when the original promoters find themselves “over their heads.” Sometimes this is self-evident and planned. In such cases, it’s worthy of mention in the business plan.

What goes in section 5.8 is how the senior management team is expected to change as the business grows. It’s all future-driven and is a prediction, so the team can simply describe the scenario that seems the most reasonable for your company’s situation. There’s no research involved.

General Instructions: 

A frequent question is how to deal with the naming of staff members in the Introduction to Management – should you use real names, fictitious names, or names of real people in similar businesses? The answer is – Use real names for yourself and fictitious names for any others.  Show any unfilled positions as Open.  

But never leave the naming issue undefined, i.e. “to be determined later.”  The underlying assumption – for a real-world company that has reached the point of soliciting investor funding – is that most of the business decisions have been made, such as who the officers of the company are and where the company is located. The description of these decisions in the business plan is a key element of persuading an investor to put hard cash money into the business.

Similarly, the organization that you should describe is the one that is needed to operate the business at its current level of business. So, if you have just recently started, you will have a lean organization. As volume grows you will likely add further positions, and tend towards specialization in each position, as compared to the jack of all trades approach that most startups have initially. That is where the section that deals with future plans for management come into play.  Describe your plans to modify the management organization as the business grows. This would spell out how you intend to add new positions, and when.