The word is overused and misused. I’ve already commented after the last Forum that a session used entrepreneurs and their impact as being the answer to many of our ills, which is at best unlikely. The great majority of businesses have little entrepreneurial characteristics but still should have a valuable place in a modern society.
My empirical data, from 30+ years of working with UK SMEs divides business owners into 4 main groups:
|Type||Description||Percentage of Businesses|
|Survivors||Low income goals, not risk takers, poor management capabilities and poor decision takers. Hungry for advice, seldom implement.||50|
|Low Growth (LG)||Significant income ambition. Potential limited by control. Superb doers, risk-oriented. Poor people managers and delegators. Often assertive style creates culture issues.||20|
|Lifestylers||Desire visible signs of lifestyle that proves ‘difference’. Fast learners, sound management and entrepreneurial nous. After scaling, switch to risk aversion.||25|
|High Growth Potential (HG)||Capital gain ambition. Good management and entrepreneurial nous. Often team based, high value adding, early export orientation.||5|
It is the 5% HG that is truly entrepreneurial and where governments invest most money, time and effort. Government support provides good statistics and headlines, but is the result a good use of our tax revenues? As they are more likely to succeed anyway, this seems somewhat misguided.
Characteristics of businesses
Survivors are mainly small businesses, employing a few people – small retailers or similar. They are buffeted by the day to day challenges of business life, and spend little time on planning or deeply understanding how their market works. Tomorrow’s problems are not today’s: they are consumed by today. Most are good technicians, picking up some business knowledge piecemeal as they need it. Their main problem is that they have some pieces of the jigsaw, but they don’t have the box with the picture, so they don’t relate one part to another very well.
LG businesses might be family owned or small engineering companies for example, operating with large or fixed overheads so they have a cautious outlook. They may operate in more static environments where change is gradual, and so have more traditional management processes. Many businesses still inhabit this world. Not everyone can be a headline grabbing start-up. Someone has to do the heavy lifting so that we can buy screws and milk and other necessities.
Lifestylers might start as an entrepreneurial venture, but once a certain scale is reached, the owner will reassess work life balance and reduce the rate of growth. These entities can be successful in their chosen field. They simply don’t have the aspirations to expand beyond a certain point.
It is only HG enterprises which are truly engaged in scaling quickly, maybe with a view to a possible sale, and then perhaps to do it all over again.
There are 2 other groups worthy of mention – freelancers and the self-employed, those who either work on a project by project basis or work alone. It is these last – self-employed – who are largely ignored in considering how work is changing as digitisation takes over so many jobs. Whilst they are also Survivors (as are freelancers), they tend to work on their own, with no employees.
It is the growth in Survivor numbers that has the most capacity for rapid expansion as digitisation allows small businesses to reach wider markets and personalise their customers’ experience.
Aligning objectives – the myth of an entrepreneurial workforce
HG entrepreneurs have personal and business objectives which are congruent and remain that way. My work leads me to say that it is this alignment of objectives that makes the real difference in growing a new enterprise easily and quickly.
Little account is taken of personal objectives in management thinking. It is possible that better understanding of how both owners and staff balance personal and business objectives will enable faster growth. After all, no one has ever gone to work to fulfil a corporate objective, only a personal one by the means of corporate goals. Peoples’ personal objectives are hardly ever known to management. So it hardly surprising that employee engagement programs are not producing the level of desired improvement, or that firms bemoan the lack of entrepreneurial initiative in their workforce.
Firms want their people to be entrepreneurial, yet do their best to prevent it. Many firms, large and small, encircle their people with internal bureaucracy, push corporate objectives at them, and still use mechanical measures in preference to any other management method. Push marketing is less effective when trying to influence a better informed and sophisticated customer base, but businesses have yet to recognise that employees use the same thought processes in evaluating their job as they do when buying something. It shouldn’t be a stretch of logic, but it seems to be.
Whilst older management methods are still appropriate for businesses which are not in a dynamic environment, or which need to respond to fast changing markets using established processes, management in either case is being hopeful at best if it expects employees to act in an entrepreneurial way. Only in an environment which changes often and which tends to tailor products and services is there likely to be scope for an entrepreneurial approach throughout the organisation.
Lifelong education has been mooted as a necessary driver of better employment and business prospects. It will no doubt assist employees to keep relevant and up to date, but that is just to keep in employment. As well as learning initiatives, balancing objectives works to develop businesses by developing people, as I have proved, at least to myself. This brings natural growth, hence job retention and creation, that need not rely on government’s latest “help” or anything else.
Let’s broaden the term of who needs help and how, to inform the conversation.
About the author:
Nick Hixson is a business adviser and accountant, helping small and medium size business in strategy, leadership, management and team engagement. He also moderates the Drucker blog series.