Customs behind the scene of small business industry
Each group of businesses tends to have their precise set of cultures and norms. Their norms and cultures are foundation elements for the operation of these organizations.
Organizational culture and norms are set of shared assumptions, beliefs and values created and maintained by the behavior of the people operating in the organization. Every sort of cultures has their respective advantages and disadvantages.
Small businesses around the world have a most diversified culture and norms around the globe. But there are some chunks of practices and norms which are sought to be quite alike regardless of businesses’ geographical locality. These practices often place small businesses in either a strengthening or a weakening position as compared to rather larger organizations.
Authoritarian culture:
Authoritarian culture is often a foundational culture in most of the small businesses. Business owners are very much involved in the day to day management of the business. Hence Authoritarian culture suits their needs as they can directly instruct and manage their business as per their will.
A positive side of this culture is which has been beneficial for the businesses are following:
It enables the business to attain and execute quick decision making. Direct involvement of the owners enables them to have a real-time assessment of the situation and instruct best possible solution.
Direct supervision of the owner enables the business to be most efficient and client friendly. Employees often are less worrisome regardless the critical success factors of the company. Factors which guarantee the long-term success of the business. With this Culture, owners of the business can directly ensure that these factors are being met at all times.
A downside of the culture in small to medium size businesses are as follows:
Direct involvement of the owners demotivates employees as they are in less control of the situation.
It generates a sense not being trusted in employees.
An input of the employees for business improvement is ignored. Often employees being involved in operations directly can better suggest business improvements.
Policies:
In small businesses often business policies are flexible and are often overridden depending on the situation. Policies are not in written format and it enables the organization to best fit the environment.
Whereas in large businesses, policies are in a written format and it enables the businesses to make a uniform treatment for the uprising issues.
Benefits of Written policies are as follows:
Written policies are considered to be smearing a sense of uniformity throughout the organization. Often in smaller businesses policies applied are not uniform and it generates unfair and unjust treatment of certain situations in the organization.
Written policies help the employees understand the consequences of certain actions beforehand. It enables them to carefully reflect upon their actions within the jurisdiction of the organization. Oral policies often depend on the owner's desires and can change the policies without any prior notice. This type of work environment is annoying for the employees as they are always at risk and have to please the owner in order to stay safe in an organization.
Compliance Requirement:
Compliance is considered a huge cost on part of a medium and large organization. Various regulatory institutions require an organization to comply with a certain set of prescribed policies. These regulations are imposed in order to ensure the long-term safety of the organization and the people associated with that organization. In small business industry, smaller organizations are often exempt from various compliances.
Compliance often comes at a cost and delivers benefits. It is a general perception that if the benefits driven from the compliance to a certain set of policies should not exceed the cost of delivering the benefit. A proper cost-benefit analysis has to be conducted in order to decide whether a certain compliance will add or reduce value for the business.
Small businesses because of the lower risk being involved are less likely to comply with certain long procedural compliances. Often the benefit of these compliances for the smaller businesses because of the smaller volume of a business transaction doesn’t exceed the cost of applying that compliance. Often the maximum cost of the compliances are relatively fixed and are decreased by the unit when volume exceeds a certain size.
Planning:
Planning which seems to be one of the critical success factors for any business in the modern era. Smaller businesses often are placing less emphasis on planning. Their haphazard decision making exposes those businesses with certain risks and benefits.
World-class organizations often have 100 years business plan. Planning out each and every phase of their course of action. These plans are then kept being adjusted as actual events turn out to be.
Advantages of spending a huge sum of planning beforehand help the company prevent itself from sequential losses. Small business is often simpler but planning at appropriate times can help them execute better strategies. If the cost of planning is kept under control this could end up being a very beneficial process for even smaller businesses.
Disadvantages of planning are often that it is a time-consuming process and it delays the quick decision-making process of the small businesses. Small businesses are known to adapt as per the changing needs of the business. But extensive planning processes hinder the benefits of the small business industry.
Technology:
Technology has been a phenomenal part of a business industry in the modern era. Back in the early day’s technology was limited to the large enterprises because of their affordability. Smart technology has evolved over time and it has become more affordable to the smaller businesses. Businesses in various countries still lack knowledge of how important technological aspects of a business can be.
Affordable technological packages can enable the business problem to be resolved in the most efficient manner. Small businesses are seeking to maximize their business performance and profitability. Often business problems are unable to be resolved from traditional management practices.
A benefit of incorporating technology in the small business environment is as follows:
Technology is constantly improving and it can be effectively modified according to the evolving business needs. Every industry sector and every business has their own unique set of problems which need a solution from technology. Smart technological affordable solutions have answered the call of the business owners
A downside of this technological advancement is that traditional businessman is still not very reliant and trusting when it comes to technology. Businessmen belonging to small business pertaining to old times still believe that manual working and traditional management solutions are better for their business. Because small business sector lacks awareness regarding the importance and excellence of information technology for business prosperity.
Limited Liability:
Small businesses are often sole proprietor or partnership businesses with unlimited liability towards their owners. As the businesses start to expand the liability exposure of the business owners increases as well. Often when businesses are dissolved owners are supposed to clear off the wealth in order to clear the pending liabilities of their business.
Benefits of transforming an unlimited liability business into a limited liability company are that the risk exposure of the owners is reduced. Owners can only be made liable to the extent of wealth which is invested in the limited liability company. This saves the owners from extensive losses and bankruptcy if the company fails. Compliance imposed by the regulators as often to safeguard assets and manage risk. This
The downside of this option is that limited liability companies are supposed to have an extensive compliance in order to meet the requirement by the regulators. This not only increases the cost of operations but also enhance the complexity within the organization. Registering a limited liability company is an extensive legal procedure. It often requires legal assistance to complete the process.
There are several options for the business seeking to upgrade their businesses into limited liability businesses. The first option is that business owners can themselves learn about the extensive procedure and prepare documentation to file to the relevant regulatory body. This step is prone to application rejection due to inexperience filer.
Another option of the hiring a professional consultant to guide and take charge of registering a company process. There are several online company formation services and all across the United Kingdom. Businesses can hire the company which provides the legal solution at the most affordable rates because it will save them from the fess of complicated documentation and extensive procedural work.
Conclusion:
In short, Small businesses have their unique set of practices which differentiates these businesses from other businesses. Which are the source of their strength and weaknesses at the same time? Because each set of practices have their positives and negatives attached with, and businesses have to accept them as a complete package.
