Educated Entrepreneurs

A recent post at A VC makes the argument that entrepreneurs do not need degrees.

"Entrepreneurs don't need degrees like lawyers and doctors do. They are credentialed by virtue of their track record. The first startup is hard but if they make that one work, they end up with something much better than a college degree. They have a notch in their belt. They've got a track record of success. Even if the first one is a failure, I'd say that they've got something more than a degree. They've shown they can start something from nothing, build a team, a product, and maybe even a business."

While I agree with the idea that you don't need a degree, research clearly indicates that entrepreneurs are more successful when they have an education. But don't take my word for it. Here are some examples from the research on this topic:

Education of entrepreneurs has a positive influence on:
1. your ability to marshal the necessary resources (tangible and intangible, financial and psychological) to be able to start the business
2. your ability to identify new opportunities as well as learn about what is going on in your market and the technological domain that applies to your business
3. more educated entrepreneurs have more positive expectancies for the growth of their businesses, possibly leading to higher levels of effort and resilience
4. the firms of more highly educated entrepreneurs tend to have higher performance, and better survival rates.

There are some important caveats here. First, education is typically used as a proxy for intelligence. It is much more difficult to measure intelligence, but it is intelligence rather than education level that is expected to produce the benefits listed above.

Second, it is important to acknowledge that education is not the same as getting a degree. So many famous entrepreneurs (Richard Branson, Steve Jobs, Bill Gates) got the major part of their educations from their experience and the opportunities they created. Their formal educations, or lack thereof, are not what helped them succeed so much as their intellect coupled with their environments.

However, for all those bloggers and twitterers out there re-blogging and re-tweeting the meme in the form 'education doesn't matter for entrepreneurship' beware! The evidence is against you on this one.

Cosa Nostra

What is it about family firms? While they are ubiquitous in the economy of the US and internationally, only relatively recently have we seen an increase in research attention. In our own research we have examined family firms to try and see what makes them different, and in particular how family firms may be able to maintain an entrepreneurial orientation.

In the the first study, coauthored with Shaker Zahra (University of Minnesota) and Carlo Salvato (Bocconi University), we explored what it is about the cultures of family firms that is supportive of entrepreneurship. We found that a number of aspects of organizational culture were significantly associated with entrepreneurship in family firms and that these aspects of culture were generally more important for family than for non-family firms.
1. External orientation: an emphasis on learning from the external environment was positively associated with entrepreneurship in family firms.
2. Coordination & control - entrepreneurial family firms tend to have a decentralized approach to decision making.
3. Orientation to time - entrepreneurial firms tend to emphasize the long-run when allocating resources.
4. Regardless of family status, entrepreneurial firms are able to balance their emphasis on the individual versus the group. While individuals are an important source of ideas, the integration of the collective organization is essential to the exploitation of new opportunities.

In a second study, my colleagues (Gaylen Chandler, Utah State University and Dawn DeTienne, Colorado State University) and I examined how family firms differ from non family firms in the entrepreneurial processes that they use. We were particularly interested in the ways in which family firms identify opportunities and then the strategic decision making processes they use. We found two interesting differences for family firms.

1. Family firms tend to be less spontaneous and creative than non-family firms in their opportunity identification processes they prefer.
2. Perhaps as a result of the unique social networks surrounding family firms, the entrepreneurial opportunities they do identify tend to be less unique and innovative than those found by non-family firms.
3. When they are exploiting these new entrepreneurial opportunities, family firms tend to use a different decision making style. Non-family firms use a text-book approach to strategic decision making, starting from the goals they want to achieve, and working back towards the resources and capabilities needed to reach those goals. The family firms score less strongly on this approach to decision making. They may prefer the alternative model, where they start from the resources at hand and try to identify goals that may be achievable from this starting point.

Family firms tend to be characterized as more staid and less risk oriented - perhaps because a primary goal is the creation and preservation of family wealth. The decision styles and opportunity identification processes we have observed support this view. Interestingly, these preferences of family firms may inhibit them from being the next Google .

*Update: since this blog was first published last year, we have now begun investigating how family versus non family firms in China may differ, and in particular how this may influence their approach to HR and entrepreneurship. Please come back soon for the new results!

On the way up, or down?

A majority of adults don't know what social networking is, and a growing number of those who do are losing interest according to this survey reported on Mashable.com. So, is this a slowly bursting bubble? Is it a case of people not yet seeing the potential to leverage a technology in a way that has a low investment of time in exchange for positive returns?

There are clearly some folks who are leveraging these technologies to create value. Specialized social networks are springing up to support professional communities such as this one, and this one... Companies, consultants, and even academics are leveraging them.

So, is this 'fad' on the way up or on the way down?

Job Hunting 2.0?

OK This is a great story. Over at the blog 'One Day One Job' Willy Franzen is reporting on a cool experiment. They encouraged new graduates to advertise themselves to employers using Faceook. The results were pretty interesting.

This story reflects an updated version of what we learned in research by Mark Granovetter some 30 years ago: people find jobs from 'weak' ties rather than strong ties. Strong ties are close friends and family, people with whom you have frequent and repeated interactions. These kinds of ties are great for trust and friendship exchanges, however when it comes to finding out about unique opportunities, they are less useful. Why? Because these networks of strong ties are quite 'dense' - everyone has similar, and therefore redundant information. What you need for finding unique information (e.g. job opportunities) is connections to a diverse network. This means weaker connectioned to a broader range of unconnected people.

Facebook, linked-in and other similar social networks are exactly the sort of networks that can provide a broad range of 'weak' ties. What Willy Franzen has demonstrated with this experiment is how we can leverage these technologies to exploit a true fact about job hunting: the strength of weak ties!

Management 2.0?

An interesting post by Richard Denison suggesting that in the so-called 2.0 environment, management must change it's ways. In particular, he notes:

It strikes me, that to be a successful 2.0 manager, you need to:

• know when to sit and watch
• know when to let things run their course and for how long
• know when to intervene (or engage) and how to do that without alienating everyone
• realise that management and control are not the same thing … relinquishing control can be a good management technique … and …
• be humble enough to accept that there may be more than one way to get things done and our way might not suit everyone’s needs.

Well, this is rather interesting. As noted by one commentor, these rules seem to reflect coaching, and also leadership, versus management. After all, in a world where the employee knows more than the 'boss' about customers/processes/opportunities, we have to find ways to support and encourage sharing and cooperation - shotgun weddings don't work here!

What can we learn from web2.0 and social networking? Learning how to build relationships, nurture conversations and grow communities online can also spill over into 'real life' where the manager.as.coach can do a better job of providing resources, feedback, goals and constructive advice, and standing back when necessary.

Estimating the R as well as the I

Great post over at Fistful of Talent (again) by Kris Dunn. (yes, it does seem to be FOT week this week). The crux is, you can have your food fast, good, or cheap. In fact, you can get two out of three, but you won't get all three in the same meal. OK, so maybe it's strange to talk about recruiting as a food analogy. The point is a great one. Except, we can add something...

None of this really matters unless you also have a good handle on the returns you can expect from your talent investments. If you have no insight as to the value that is created or destroyed by the right and wrong hires, how can you determine if you need your food fast, or good, or just cheap?

When I am hiring someone to iron my shirts, I can afford to take some risks. Fast and cheap may work ok for this recruitment process. I can quickly detect a mistake, and one or two mistakes don't cause my life to fall apart. On the other hand, I cannot afford to do a poor job on my next research assistant. I will be stuck with this person for a while, and the difference between a good RA and an average RA can amount to significant differences in my productivity.

So my business is easy to understand. But in most organizations, the question of how recruiting leads to value creation is something that you must map out quite carefully. Where are the A-positions (value creators) and which are the dispensible positions? What do those positions do, and importantly, what is the monetary value of hiring someone who is above average, as opposed to simply average (or worse!). These are the key questions to help in deciding WHICH of those metrics (fast, cheap, or good) you need to apply to evaluating recruitment.

Do you hear chuckling when you tweet?

A great post over at Fistful Of Talent (FOT) today made me think. I was recently at a meeting of colleagues in the HR teaching/research game. We were discussing ways to build a community of practice around improving our teaching in HRM. I mentioned a couple of possible technologies, including Twitter and Ning, which may be useful in building and maintaining a social network around this focus. We use both of these for developing and maintaining our social network: www.HRMtheJournal.com

Anyway, the response was consistent with that identified by the survey by Third Age/JWT Boom and discussed by Kris Dunn at FOT: Snort... why would we be interested in that... kid's stuff... what the xxxx is Tweeter (sic)... etc etc. Some of you may recall similar responses when trying to get colleagues, family members, or god forbid bosses (!) to use email about 15 years ago. The chart tells the story:

So what's the harm? Can't we just leave it to the young-un's? Well sure, you might do that. The problem is, you will be slower, less well informed, and less capable of communicating with your future peers (as those young-uns race up the hierarchy and eventually out-pace you in promotions!).

For us Academics/Writers/Researchers/Consultants the need is no less powerful. Staying abreast of the latest tech is what separates the winners from the losers in a world of freelancing, independent, long-tail livin' knowledge peeps... Just ask the guys at FOT!

Of course, perhaps blogging about the need to be tech savvy no matter what your generation is a little like heading to Salt Lake City, Utah and recruiting for the Church of the Latter Day Saints. (disclosure: I spent 3 years living in Utah before making my escape)