Assignment: Structuring a Business Transcript
It has always been your dream to have your own business. You and your childhood friend Ravi have developed a product called Sunburst that could be used by the growing solar energy industry Tanya, a friend you met through an alumni group, has experience in marketing. The three of you agreed to form the startup team for Sunburst and you gather together one Partday morning to discuss the legal form and organizational structure your business should take.
We're going to need additional investors and expertise to get this business off the ground, Ravi says. We should develop a business plan that will be attractive to potential investors and partners. They're going to have concerns about joining a new startup, Tanya says. We should work to address these from the start.
Ravi looks to you. Can you prepare a PowerPoint presentation for potential investors? Let them know what legal form the business is going to take and explain why it works for our company. You should include your analysis on personal liability, taxes, interests of contributing parties, and management of the business. We want them to know we've done our homework.
Tanya interrupts, the other thing is we have to decide what organization structure would best serve our goals. That's right, Ravi says. We've already identified innovation and timely customer service as our top priorities for Sunburst. We know we need staff to handle product development, production, finance and accounting, and marketing and sales.
We're definitely going to need human resources functions, Tanya says. Outsourcing is one option we should look into. We need to do some research before we make a decision. Ravi looks to you again. I think we need to develop a clear mission statement and an organization chart and explain the rationale for our decisions in a short paper. You're the most detail-oriented. You think you can handle it?
In this project, you are determining the best legal form and organizational structure for your new business. The nature of the organization's business and the environment the business operates in are factors you must consider. Initially, Sunburst will operate locally, but within five years operations will go national (or international). Read about how you might plan these stages in Creating and Managing a New Business.
In the first part of this project, you will create a narrated PowerPoint presentation for potential investors and partners in your new company. In this presentation, you will analyze the pros and cons of various forms of business and recommend the best legal form of business to achieve your organization's goals.
In the second part of this project you will design an effective organizational structure for the business at its inception and in its next phase of growth. To achieve this, you'll need to create one short paper with three sections: (1) a brief mission statement reflecting the primary goals of the business, (2) a detailed organization chart, and (3) a rationale statement that explains and supports, thoroughly but succinctly, the mission statement and structural decisions reflected in the organization chart.
When you submit your project, your work will be evaluated using the competencies listed below. You can use the list below to self-check your work before submission.
Step 1: Determine the Legal Structure of Your Business: Gather and Analyze Information
You go to your office to begin the task at hand-the preparation of a narrated PowerPoint presentation to potential investors that will address all of the issues involved in making this decision. For critical background information, see Creating Sunburst: Legal and Organizational Considerations. You will need this information to make the best legal and organizational decisions for your business.
Since one of the investors will not be able to attend a presentation in person, you need to prepare and record a narrated PowerPoint, so she can listen at her convenience. In order to complete this task, you realize that you must do some research to address the legal and strategic implications if your business is to get off the ground.
• What types of business organizations are available to entrepreneurs?
• What are the advantages and disadvantages of each alternative?
• What are the two best choices and why?
• How would you explain your choices to your investors?
Be sure to discuss the following information in your plan (refer to Legal Forms of Business before you begin writing):
• What are the different legal forms of business that you might consider? You remember that there are at least six factors that will influence your choice:
o creation and maintenance
o continuity
o ownership and control
o personal liability
o compensation and division of profits
o taxation
• What is your proposed choice for the legal form of business? Include your reasoning based on the preceding six factors and any other relevant factors.
When your research is complete, continue to the next step, in which you will create the Powerpoint presentation for your investors.
Creating Sunburst: Legal and Organizational Considerations
Ravi, who has a degree from State University in mechanical engineering, was previously employed by a start-up firm in New York City. He worked long hours for little pay, but when the business sold, his stock options paid off. As a result, he now has some time and $100,000 to invest in Sunburst. More importantly, Ravi has the knowledge and know-how to setup and manage production. Tanya, a friend you met through your alumni association, has a degree in marketing and has a few years of experience working in marketing roles. The three of you agree to form the start-up team for Sunburst.
The team estimates that it will take approximately two years to develop Sunburst into a marketable product, but that once the product is on the market, there is excellent growth potential. You know that you will need additional investors and expertise to get the business off the ground. You need to develop a plan for a business form that will be attractive to potential investors and partners, and will address their concerns.
Finance and politics are not your strong suits, and you aren't very interested in the day-to-day business operations of Sunburst-you'd rather spend most of your time inventing new products. The start-up team believes that the business will need someone with finance skills. You also need a visionary CEO. Ideally, this person should have connections and experience in the solar industry. You have asked Elon Helios, a forward-thinking figure in the solar energy field, who is known for being a rainmaker. Helios has expressed some interest, but it will take significant incentives to get him on board.
Although Tanya has little money to invest, she has excellent networking skills, and she has found a potential investor, Carmen Santiago, who thinks that the product may have potential. Santiago does not want to be involved in running the business.
Ravi has identified a good candidate with finance experience. This individual does not want to invest in the company, but he would expect a good salary and benefits.
The team has created a tentative business plan, which has two target stages: The first stage involves local (geographical region) manufacturing with a focus on local solar energy providers; the second stage will begin five years from start-up, at which point the business will expand nationally (or possibly internationally) targeting the market of all potential solar energy customers.
The potential investors and participants want to know what legal form the business will take before they agree to participate. Your task is to prepare a presentation for the potential investors.
Legal Forms of Business
Business entities are an integral part of business practice and economic productivity. An effective business practitioner must understand the characteristics of the major types of business entities, as these attributes can dramatically affect the nature of the business's relationships. Before beginning to conduct business, one should always weigh the benefits and burdens of the different types of business entities and make a conscious decision about which type of entity to form to conduct one's business.
Depending on the type of business, the people involved, and the goals of the business, some entities may be more appropriate than others for a particular business. To make the decision about the appropriate type of entity to form, one should consider factors including the following:
• creation & maintenance-the effort associated with forming and maintaining the entity
• continuity-the continuity or stability of the organization upon given occurrences
• ownership & control-the ownership rights and control of those involved with the business
• personal liability-the potential for personal liability of those involved with the business
• compensation-the compensation and division of profits among business owners
• taxation-the taxation of the organization's earnings and its distributions of profits to the owners
Weighing these and related factors, which vary in consequence depending on the entity, informs the choice of the type of business entity best suited to one's business. Examination of these characteristics will make obvious the effect of these attributes on stakeholders of the business entity. The decision of which entity is right for a particular business impacts many facets of a business's operation, including accounting, management, and finance.
Step 2: Prepare Your Presentation
Using the information you gathered in the previous step, prepare a narrated PowerPoint. Because you will not deliver this presentation in person, it should follow the form of asynchronous presentations. Be sure to meet the following requirements:
• Include a title slide, with your name on it, introducing the presentation.
• On the presentation slides, include only the major bullet points for each issue.
• Include no more than 15 slides (not counting title page or references list).
• Cover all the elements of your plan as outlined in Step 1.
• Use your narration to provide the supporting rationale for each major bullet point.
• Include a script of your narration in the notes section of PowerPoint.
• The final slide must present a clear summary of your major conclusions and any recommendations.
• Include a reference page in APA format citing any sources you used to develop your presentation.
• Title your files using this protocol: yourlastname_BusinessForm_date.
When your presentation is complete, continue to the next step, in which you will gather information about the potential organization structure for your business.
Asynchronous Presentations
An asynchronous presentation is a pre-recorded presentation for a specific audience to whom you would ideally present in person or online in real time, but cannot for practical reasons. While MS PowerPoint is considered the default presentation tool for presentations, you may consider using other presentation platforms or tools. Be sure the tool supports pre-recorded narration. Dedicate enough time to the narrated presentation to get the timing for transitions right, and ensure that the sound is clear and the narration at the right volume. A good asynchronous presentation shares most of the same traits as a good live presentation. Your presentation should not be your academic paper cut into text-filled slides. Rather, consider how you might identify themes to discuss that are supported by pertinent facts from your paper. You are giving a talk to an audience, so your narrative should provide most of your ideas and argumentation. Be sure the themes either flow or transition appropriately from slide to slide. Use images and data visualization (tables, charts, or graphs, for example) where possible.
Step 3: Determine Your Organization's Structure: Gather and Analyze Information
Now that you have decided on a legal organization form for your business, which currently has a single location, you need to decide on an organization structure. Organization structure determines such things as what departments the organization will need, who will report to whom, how many levels you will have in your organization's hierarchy, and how many individuals will report to each manager (span of control). An effective structure should promote communication and coordination of efforts across the entire organization. See: Organization Structure and Design.
You begin your research by formulating a number of questions, the answers to which will be reflected in a short paper that includes your mission statement, organization chart, and your rationale for these recommendations.
1. Sunburst's primary goals are innovation and customer responsiveness. How should your mission statement articulate these goals? How can this statement be drafted so that it is clear, concise, and meaningful to organization stakeholders?
2. What key tasks must be accomplished in order to meet the organization's goals? What individuals or groups will have responsibility for delivering these processes or items?
3. Will individuals have titles and, if so, which individuals? What will those titles be?
4. To whom will individuals report? Why?
5. What are the possible impacts of outsourcing the HR function? What are the pros and cons of doing so? Make a recommendation in your paper. If you decide to keep HR in house, make sure its place in your business structure is reflected in your organization chart.
6. Consider all other relevant factors (for example, will your business structure be functional, centralized, or decentralized, etc.).
When you have formulated your preliminary thoughts and questions, begin your research. The resources below are a good start, but you should also conduct your own research to enhance your knowledge and the final product.
When your research is complete, continue to the next step, in which you will write your short paper, which will include a mission statement, organization chart, and summary of the rationale behind your decisions
Organization Structure and Design
The structure of an organization plays a pivotal role in how everyday tasks are handled, in how resources are allocated, in employee supervision and reporting, and in coordination amongst employees. It impacts employee behavior, demeanor, and psyche in ways that are still being studied by theorists today. Organizational structure may play a role in employee motivation and even productivity.
A primary factor in creating and managing a new business involves choosing the best organizational structure for it. Some types of business are better suited for a clear hierarchical structure, while others are more apt to work within a flatter organizational structure, with fewer or even no levels of authority. From time to time, a business may reorganize, as online shoe retailer Zappos did when moving from a hierarchy to a flatter "holacracy." There were reportedly mixed results spurring from this major shift in business structure.
As the Zappos case and others reveal, business structure plays an integral role in organizational success. Thus, one should clearly define the initial organizational structure at the outset of starting a new business and monitor it through the business life cycle, tweaking it and shifting it as necessary.
References
Reingold, J. (2016, March 4). How a Radical Shift Left Zappos Reeling. Retrieved February 07, 2017, from https://fortune.com/zappos-tony-hsieh-holacracy/
Mission Statement
In the contemporary economic environment, businesses must often take on roles beyond those of mere profit centers. A well-crafted mission statement assists in defining the role of a company by succinctly outlining its core purpose and values. All other organizational documents, such as codes of conduct, should be created to support the mission statement of the organization. Once crafted, a mission statement should play a role in employee training, advertising, and management. It is the core principle that states who (as a business) we are, and what (as a business) we do.
Outsourcing the HR Function
Outsourcing is a technique used by some companies in which they transfer or contract out certain work to external companies, typically in an effort to save costs. Outsourcing the human resources ("HR") function involves the transfer of the tasks usually performed internally by human resources employees to external companies. Depending on the structure of the organization, the human resources office often handles such matters as managing employee compensation and benefits, recruiting new employees, ensuring compliance with employee rights and safety laws, overseeing employee relations, and often the provision of certain employee training.
There are advantages and disadvantages associated with outsourcing the HR function. In addition to the potential cost savings, outsourcing the HR function provides companies with a means of garnering expertise in the growingly complex areas of employee rights and employment compliance without hiring additional staff. Outsourcing the HR function may also give companies, whether large or small, a layer of protection from some lawsuits. By outsourcing, a company can more readily focus on its primary purpose and avoid potential distractions.
Outsourcing the HR function, like any outsourcing, creates distance between the employees of a company and the outside contractors. This distance may lead to a culture mismatch between the company and its contractor, delays in processing, and reliance on another company to manage a critical function (i.e., loss of control). The best HR managers align their actions with the organization's strategic goals. HR managers typically have organizational and financial knowledge that comes from being a part of the company. Can the outside contractor provide the necessary alignment with the company's strategic interests? This outside contractor may or may not be as dedicated to making process improvements as your own company is, and so, particularly when in a long-term contract, may not expend resources to improve the quality of service.
For multinational organizations, there are special challenges. Best HR practices may not transfer effectively between countries due to cultural and institutional differences. Can the outside contractor adapt to local practices and customs while standardizing the best HR practices across country borders?
These, and other, advantages and disadvantages of outsourcing the HR function should be weighed carefully and discussed prior to action.
Step 4: Integrate Your Thoughts and Material
You've formulated your key questions; you've done your research; you've analyzed and refined your information and thoughts. Now it's time to put it all together and start drafting your deliverable.
• Assemble a short paper that contains the following:
o your mission statement of no more than one paragraph
o your organization chart
o your rationale, no more than five pages (12 point type, double-spaced), for your chosen mission statement and organization structure as displayed in your chart
• Be sure to attribute any sources you use in the creation of any of the documents you submit.
• Include a reference page in APA format citing any sources you used in your short paper.
When your mission statement, organization chart, and rationale statement are complete, continue to the next step, and submit your work.
Mission Statement
In the contemporary economic environment, businesses must often take on roles beyond those of mere profit centers. A well-crafted mission statement assists in defining the role of a company by succinctly outlining its core purpose and values. All other organizational documents, such as codes of conduct, should be created to support the mission statement of the organization. Once crafted, a mission statement should play a role in employee training, advertising, and management. It is the core principle that states who (as a business) we are, and what (as a business) we do.
Step 5: Submit Your Materials
By the end of Part 7, submit the following files to the Structuring a Business folder.
• narrated PowerPoint with recommended legal form of business
• short paper including mission statement, organization chart, and rationale.