Management aspect of a small developing enterprise development problem — the concept of the information problem
Studying the problem of the SDE management, we come to the conclusion that «the information problem» is, on the one hand, a factor indicating the growth of the enterprise, and, on the other hand, is an obstacle in its development. It should be noted that this term has not been found in academic works and is proposed for the purpose of applying a new approach to considering the SDE development problem. The advantage of this approach is that, in spite of the diversity of individual personality characteristics of entrepreneurs, and the external environment (including market conditions, etc.), it gives the opportunity to find the objective regularities of the development, inherent to small-scale developing enterprises, regardless of individual conditions of their functioning.
This approach allows of detecting general preconditions for small-scale enterprises development and regarding as a key one the emergence of «the information problem», referring to achieving the critical level of information flows that exceeds the perception capacity of the entrepreneur’s intelligence, which is limited owing to the objective laws of the human psyche, which, in turn, leads to the inability for timely and adequately responding to information requests of the enterprise, as well as to the inefficient use of resources of the organization (small-scale developing enterprises), first of all, time resources.
As mentioned above, the organization development process inevitably leads to increasing in information flows. Moreover, the increase in these flows takes place both at the qualitative level — the perceived information becomes more complicated — and the quantitative level — the number of the input and output information flows increases, and that inevitably results in increasing the number of internal flows. It seems that these quantitative changes in the amounts of information characterize these processes as ones of development, leading to the quality change of the organization, which corresponds to the overall logic of the dialectical development.
The ability of the small-scale developing enterprise as an open system for adapting to changing conditions of the external environment and the internal one leads to its transformation. The transformation of the organization means its transition to a new quality and is one of the stages of developing the organization as a system.
The development is qualitative changes. In other words, movement and development are variations of the process of changes which are distinguished depending on the level of orderliness of this process, which necessarily means the appearance of sustainable structural components — elements, relations, regularities, i.e. the development process is related to the transformation of the system’s structure.
These processes cause objective challenges for representatives of small-scale business regardless of the industry specifics of their activities, and in what degree the businesspersons are aware of the objective nature of these challenges, will determine the fate of their initiatives. This process is akin to the process of human maturation. Many, if not all, people have to face challenges of the coming of age which is the transition from childhood to adulthood, and only the awareness of objective nature of these processes, causing them to be inevitable, often assists to cope with them. And in this regard, maturation is understood not as a time lag, but as accumulation of experience, and even more importantly, the maturity of self-consciousness. «The information problem» is the same inevitable consequence of the business development as the pubertal period of the person’s maturation. Therefore, entrepreneurs’ awareness of the objective nature of these processes will help to smooth the way for the business development. The competently formulated question largely guarantees that the answer will be correct. And since modern science admits the psychological component of business activities to be important, if not crucial, along with existing micro- and macroeconomic laws, recognition of this problem, and accordingly, and finding ways of its solution, undoubtedly, will promote the small- and medium-scale enterprises development. The entrepreneur should learn that the challenges (s)he faces in the process of development of their business, are not individual problems of their own, but logical consequences of the business development. The awareness of these laws, understanding their essence, the ability and the skills to use them will allow to solve serious problems of increasing the efficiency of the SDE activity.
At all stages of life the person faces this or that particular problem corresponding to the period of life, but it is the pubertal period that is of great importance as it determines the further life of the person. It seems that for evolutionary developing enterprises the transition from small-scale business to medium-scale one is the most significant stage since it is the period when the basis for their successful development is created, and the potential for this transition appears.
In this regard it should be noted that scientifically term «organization» has several meanings, each of which is reflected in the information problem theory, namely:
organization as a system of relations that take place in the process of joint work; in this meaning the organization is considered as an open system with the objectivized structure:
ORGANIZATION = SYSTEM
organization as the process by which the system structure (organizing function) is created and saved:
ORGANIZATION = PROCESS
organization as any association of people who have common goals:
ORGANIZATION = SOCIAL MEDIUM
Because in the present work we proceed from the fact that the process of business development inevitably leads to creating a certain system of interrelated information flows, the degree of orderliness of which at this stage the efficiency of the organization’s activities will depend on. For the future we will consider the organization, first of all, as an open system. In this connection it should be noted that, in order the organization might properly function in conditions of market relations, the information within the system should move steadily and interacting with other social systems.
This conclusion is entirely consistent with the law of awareness-orderliness, that states, «the more information of the internal environment and the external one is available to the organization, the more probability of its sustainable operation (self-preservation)».
Picture 1 — The organization as an open system [2, p. 80]
Thus, the enterprise as an open system is characterized by interaction with the external environment, within which there are processes of transforming information. The peculiarity of the organizational development is the inevitable increase of information flows, which makes «the small-scale developing enterprise» adapt to changing conditions of the external environment and the internal one in order to transit to the higher level of development.
It should be noted that term «organizational development» is a central notion in the concept of organizational development, which appeared in the mid-1960s. In this concept «organizational development» means systematic and long-term application of scientific knowledge about the behavior as a means of increasing the efficiency of the organization in the aspect of its ability for adapting its objectives, structure, style of work, etc., to changes of the environment. According to D. Stuart, the organizational development is about creating an organizational form, which will be more capable of self-management of changes by its nature [5, p. 177].
In accordance with N. Tom’s definition, the organizational development is «a long-term, careful, comprehensive process of changing and developing the organizations and people working in them» [3, p. 70]. This definition outlines main provisions, according to which any changes within the organization can be implemented by its members, and this implies elements of the management system.
U. French and C. Bell define organizational development «…as a long-term work on improving processes of solving problems and updating the organization by the help of more effective co-regulatory principles of the organization, with special attention to the culture within the formal working groups» [2, p. 538]. Summarizing the aforesaid, it can be concluded that the authors relate the process of development to the professional staff of the organization, and the concept of organizational development primarily include the human resources aspect. Following the general logic of the concept of organizational development, the human resource executes functions of the processing system, resulting in redistribution of information flows, and hence the solution of «the information problem».
However, it is the aspect that cannot be taken into account in small-scale enterprises due to the fact that there in most cases functions of «the processing system» are performed solely by the entrepreneur. The lack of intellectual and financial resources are the main reasons causing difficulties for developing small-scale enterprises, so the source of both problems and ways of their solution is only the entrepreneur himself, because at this stage of the enterprise development the management structure is in its generation stage.
It is presumed that the process of creating the SDE structure occurs in the absence of professional management skills. In this connection, there raises practical difficulties in establishing functional duties for new employees, and, accordingly, methods of influence and control over their activities. It is the very aspect of the business development that causes the greatest challenges faced by the entrepreneur who is the manager of the small-scale enterprise. The existence of this problem can be explained as follows: at this stage of development of the manager’s functions and the actual work carried out by the entrepreneur, are not separated. The process of separating the functions will occur gradually with developing the enterprise. The logical completion of this process is the appearance of professional management that will characterize the transition of the small-scale enterprise to the qualitatively higher level and indicate its development.
You should pay attention to one of the most important issues regarding the process of distributing information flows. The problem is that the entrepreneur does not understand particular tasks and therefore functional duties that ought to be imposed on the employees. In the absence of clearly established management functions, which is the fact for SDEs, it is difficult to expect setting the specific tasks and delegating the appropriate powers.
The problem often is determined by the entrepreneur’s personality, since such positive features of his personality as the ability to risk, the response to financial opportunities and the ability to work long and hard, do not prove the probability that this person can effectively manage the organization as it becomes larger and larger. Moreover, most of entrepreneurs do not have the ability to effectively perform such management functions as planning, organizing, motivating and control .
With the organization development the need for coordinating its work increases, and the entrepreneur should know how to interpret the situation properly, taking into account the circumstances. This corresponds to the principles of the situational approach, which is the most comprehensive and satisfactory system designed to make management effective. The success of entrepreneurial initiatives will depend on the entrepreneur’s ability to organize the effective redistribution of information flows at the early stage of the enterprise development.
It should be noted that the cause of development is the contradiction between the structural relations within the organization and their interaction with the external environment. The external environment (in the form of external information flows) affects the management system. This effect leads to establishing new links both within the system and with the external environment, which, in its turn, complicates the ways of interaction between elements of the system. Thus, with increasing in the number of information flows, the entrepreneur starts feeling the need for giving some part of the information to employees. The appearance of employees means that there are new structural elements, relations, dependencies in the organization. The small-scale enterprise starts its process of development that will lead to creating the management structure.
In fact, at this stage the process of effective redistributing information flows results in establishing relations, which are the prototype of the system of professional management.
The increase of the SDE efficiency is associated with progressive development that is characterized by such a system property as complication. The main direction of development for any open system «is the emergence of new opportunities for implementing the main objectives of the system: internal requirements and those imposed from the outside» [1, p. 47]. For the entrepreneur the appearance of new opportunities is connected, first of all, with his ability for receiving and processing the input information. For the purpose of perceiving and processing new information, the entrepreneur must have the relevant resource. And this resource is time. It is the available time resource that will give the opportunity of creating the appropriate space, necessary for perception of new opportunities — new information flows. This space is possible to appear only in case of distributing information flows. Timely distributing these flows will make the process of achieving goals more efficient. In other words, the faster the process of distributing information flows starts, the better results the entrepreneur will achieve, the more effective the small-scale developing enterprise will be. This provision corresponds to the conclusions made by V.K. Prokhorenko in his «Methodological Principles of General Dynamics of the System». According to his opinion, «changing the internal structure of the thing results in corresponding transformation of the complex of external properties, and any change of the external world meets certain (significant or insignificant) change in the internal structure of the thing» [4, p. 67]. The effective redistribution of information flows will lead to establishing the hired staff, i.e. the process of formation of the enterprise structure will start, which, in turn, is a further motivation for development.
The information problem concept is based on the following statement: the inevitable emergence of the information problem characterizing processes of developing the organization as a system, is the motivation for further transformation of the system; how efficient the solution of the problem is, determines the direction of these reforms; the high efficiency of the information problem solution determines the positive vector of developing the organization.
The information problem concept is based on the following provisions:
- The entrepreneurial ability is a system of special qualities of the person, which the business entity has, a special gift, «the fourth factor of production». The presence of this gift implies the ability of the entrepreneur to prioritize information flows on his own and correctly. The entrepreneur’s personality is crucial for the enterprise development.
- The amount of information that a person can receive, process and remember, is limited by the amount of absolute estimates and the volume of direct memory. This means that small-scale business entities, when they develop, face the increasing information flow that cannot be efficiently processed, because the human body has some limit restricting our abilities. This mechanism is determined, in turn, by the structure of the human nervous system.
- The development of business activities is inevitably characterized, first, by increasing in the number of input and output information flows; secondly, by increasing in the amount of information in each information flow separately.
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