WHAT MAKES A GREAT ENTREPRENEUR? - Hay · PDF fileWHAT MAKES A GREAT ENTREPRENEUR? ... opportunities for long term future growth ... from 32 through to late 60s and

WHAT MAKES A GREAT ENTREPRENEUR?

Hay Entrepeneur Bro. 27/3/01 9:18 am Page 1

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CONFIDENCEA willingness and an ability to act with courage andconviction in increasingly challenging situations

INTEGRITYWorks in an open and principled way


SELF DIRECTIONRecognises emotions and feelings and organises their life to maximise positive experiences

INITIATIVEDeals with the here and now and creates opportunities for long term future growth


SELLINGPersuades, influences or sells to others using a number of different argumentsand able to articulate their vision in a powerful and memorable way

COMMITMENTAligns self with the vision and goals of the business and challenges others to do the same

SELLINGPersuades, influences or sells to others using a number of different argumentsand able to articulate their vision in a powerful and memorable way


DRIVE & DETERMINATIONA relentless drive to achieve world class results, taking risks to makethings happen and constantly measuring performance outcomes

DIRECTIVENESSHolds others accountable and addressesperformance when it does not meet expectations


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LEADERSHIPLeads and directs others to meet their full potential, rewarding talent and sharing success


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Throughout the world governments

are engaged in systematic efforts to

boost enterprise. In the UK there is

clear evidence of a sea change in

attitudes towards enterprise and

entrepreneurs; entrepreneurial role

models are celebrated, aspiring

entrepreneurs are given the

opportunity to raise money on TV and

league tables ranking a whole range

of entrepreneurial businesses are

published regularly. But what makes

entrepreneurs tick?

This question has been the centre of

much entrepreneurial research for

many years; yet the limitation of much

of this work has been its rather

narrow focus on the personality

attributes believed to characterise

entrepreneurs and the associated

difficulty of distinguishing between

those characteristics that are the

hallmark of entrepreneurs from those

associated with successful senior

executives. A particular value of What

Makes a Great Entrepreneur is its

focus on competencies, rather than

personality traits, and the use of these

defining competencies as a basis for

distinguishing between entrepreneurs

and successful executives. The wealth

of interview data sheds rich light on

the question of what makes

entrepreneurs tick and what sets them

apart? The report brings to life the

reality of entrepreneurship.

Perhaps common to all entrepreneurs

is the desire to change things. This

desire may not always be

‘reasonable’ but it may be the very

unreasonableness of entrepreneurs

that is the motor of change. Perhaps

George Bernard Shaw perfectly

encapsulated the essence of

entrepreneurship.

“The reasonable man adapts himself

to the world. The unreasonable man

persists in trying to adapt the world to

himself. Therefore all progress

depends on the unreasonable man.”

ENTREPRENEURSHIP IS IN THE AIR

Contents8. Entrepreneurship 12. Competencies 16. Case Studies 18. Entrepreneurs v. CEOs 19. What value does the research havefor the budding enrtrepeneur? 20. What value does the research have for venture capitalists? 21. What value does theresearch have for the entrepreneur in a large corporate organisation? 22. What the research tells us about howentrepreneurs work with others in their team.

Professor Michael Hay,

Director of the Foundation for Entrepreneurial Management,

London Business School.

Michael is responsible for all entrepreneurship activities at the London Business School. He co–directs the Global Entrepreneur

Monitor which examines levels and determinates of entrepreneurial activity in over 30 countries.


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Do you want to unleash creativity in

your organisation?

Have you been losing your brightest

and best innovators?

Are you trying to decide whether to

back an idea or a business?

Is there a part of your business

that might flourish, given

greater autonomy?

Are you wondering whether you

have got what it takes to be a

successful entrepreneur?

Have you been thinking about how

to balance the leadership team in a

start-up or VC-backed business?

This study gives some critical insights into the behaviours of successful entrepreneurs andthe conditions that help them tofocus their energy and passion.

Whether you are starting your own business, or makinginvestment decisions, or seekingto foster entrepreneurialinnovation within a largerbusiness, the picture we paint of successful entrepreneurshipwill help you to get more valuefrom your investment of time, energy or capital.

It is quite healthy to think occasionallyabout wanting to change the world.However, few of us can say, hand onheart, that we’ve actually doneanything about it. We all have ourown very good reasons why we’recomfortable where we are, doingwhat we’re doing. Why rock the boat?

Good question. One that we have putto a group of high-profile individualswho, in a small or not so small wayhave harnessed their passion and theirdetermination to change the way thebusiness world works and to achievephenomenal success in doing so.

Who are we talking about? Rebels?Revolutionaries? Pioneers? Probably allof those things. These people aresuccessful entrepreneurs.

Take an individual like Robin Saxby, of ARM Holdings. He embodies thevery best entrepreneurialcharacteristics, including the ability tospot future potential; to turn simpleconcepts into huge profits; to tackleand take advantage of long termopportunities; to push out theboundaries and create the conditionsfor success; to invest heavily in thefuture; to achieve the impossible.We wanted to know what makespeople like Robin so special, whatmakes them tick, what they do, say,think and feel that makes themsuccessful. And what makes them get out of bed seven days a week atsome unearthly hour in the morning,with the kind of sustained energy andenthusiasm that would exhaust mostpeople just thinking about it. And we thought that you might want toknow too.

Our research has importantimplications. The competenciesidentified provide huge potential for the financial community to raise the quality of their investmentdecisions by making tangible, theintangible characteristics of successfulentrepreneurs. It will also help seniorexecutives develop a moreentrepreneurial culture within theexisting business: or to set up a new one, to carefully balance therequirements of the entrepreneursthey need to recruit, with those of the organisation itself.

“We know that the nature of genius is to provide idiots with ideas twenty years later.”Louis Aragon, French Poet and Author

Entrepreneurship


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Entrepreneurship is at the top of the social, political and economicagenda. It has become a fashionablebuzz word and yet in the UK it’scertainly more about talk than action.For example, the US registerproportionately more patents than the UK. Despite the interest and theeconomic arguments, the UK is not tobe found amongst the front ranks ofentrepreneurial activity. Yet.

In a recent White Paper onCompetitiveness, the Government hadthis to say: “Entrepreneurship andinnovation are central to the creativeprocesses in the economy, topromoting growth, increasingproductivity and creating jobs.Entrepreneurs sense opportunities andtake risks in the face of uncertainty toopen new markets, design newproducts and develop innovativeprocesses. In the knowledge–driveneconomy this process is critical in largeand small businesses alike.”

It is, of course, all very well sayingthat. But what is an entrepreneur?Who is an entrepreneur? How do yourecognise an entrepreneur?

To find the answers to thesequestions, we interviewed a total of17 successful entrepreneurs from arange of industries and countries who:had been responsible for establishingtheir business, and it had grown at therate of 100% each year for the pastthree years or was now at least£100m pa turnover. We comparedthem to 18 business leaders andsenior executives. The interviews weretranscribed, yielding approximately1200 pages of detailed text and more

than 1000 data points. Theseinterviews were then analysed forcompetencies and behavioural themes by trained expert coders using Hay’s standard definitions ofcompetencies. As a result weidentified nine competencies that canpredict, with about 80% accuracy,which individuals have thecharacteristics of successfulentrepreneurs of the future.

What our interviewees told us showedthem to be people who are driven andfocused, with a huge capacity forwork. They also revealed themselvesas individuals with high levels ofintegrity and a democratic andgenerous approach to sharing success.They had an eye for developing abusiness that would stand the test oftime and that would contribute to thelocal community.

But what makes them trulyoutstanding is the passion they havefor what they are doing. That passionfeeds their success, as well asproviding the foundation for the othercompetencies we’ve identified.

Our research has importantimplications. For example, thecompetencies we identified will enableventure capitalists to identifypotentially successful entrepreneursand their investment–worthiness withgreater accuracy. It will also helporganisations keen to develop a moreentrepreneurial culture, or who hopeto recruit entrepreneurs into theirbusiness, or who need to establish anew business division.

We have talked to entrepreneurs fromthe broadest possible cross section ofindustries including: software,consulting, telecommunications,catering, financial services,pharmaceutical, retailing over theinternet, sports and leisure, andautomotive sales.

All organisations (with the exceptionof the most recent dot.com start-ups)had been established a number ofyears and had a proven track record ofsuccess. The organisations establishedby our entrepreneurs consistentlydelivered outstanding performanceresults – 45% average compoundsales growth over the past four years.

Our entrepreneurs ranged in age from 32 through to late 60s and age was certainly not a differentiatingfactor in the nature of the responses.All but five were university educatedand only 2 of the 17 came from whatmight be described as ‘less privilegedbackgrounds’. It is neither appropriate,nor accurate, to assume that lack of money was the major driver of our entrepreneurs.

Only three of our longer establishedentrepreneurs had only ever workedfor themselves and many were able todemonstrate successful early careersworking for others.

So what made them set up on their own?

“What is passion? It is surely the becoming of a person.”John Boorman, British Film Director

Entrepreneurs sense opportunities and take risks in the

face of uncertainty to open new markets


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Before we asked specific questionsabout their personal business histories,which would be the foundation fordescribing their way of working, theirunique qualities and theircompetencies, we asked them todescribe how they saw themselves.

Their responses revealed startlingsimilarities. ‘Individualistic’,‘competitive’,’ driven’, ‘workaholic’and ‘unconventional’ were some ofthe words most often used. Whatcame across was the feeling that theydidn’t quite fit the mould or belong in the established system. If they weregoing to realise their ambitions and bea success in their own eyes rather than in anyone else’s, they were goingto have to do it in their own way, on their own terms and in their own space.

Each demonstrated an infectious beliefin their own ability to make thingshappen and work. Success was, andindeed is, regarded as inevitable andfailure not an option.

The people we spoke to aren’t peoplewho talk about doing things. They justdo them. Why does someone climb amountain? Because it’s there.

Tim Connolly and Mark Smith wereboth on the partnership track withleading accountancy firm KPMGbefore resigning to start up Partnersfor Change. Since establishingPartners for Change in September1994, the organisation grew 100%

per annum in each of its first fiveyears and has projected turnover for the year 30th June 2001 of £13 million.

Individuals such as Robin Saxby ofARM Holdings, Frank Brake of BrakeBrothers, Mark Hunter of Axon andHans Snook of Orange all gave theirtime to the research as did neweconomy entrepreneurs such as BrentHoberman of lastminute.com andSherry Coutu of iii.

David Lloyd, formerly Britains leadingtennis player and now owner of oneof the UK’s largest sport and fitnessorganisations, sums it up:

“I had to be in control of my own life,I had to do my own thing, be it atennis player, be it in business. I don’tthink I’m built to take orders fromother people. I’m not autocratic inrunning the business but I do need tobe able to make my own decisions, bethey right or wrong and live by them. Ithink that was something I always did,and always wanted to do.”

“Living inside the System is like riding across the country in a bus driven by a maniac bent on suicide.”Thomas Pynchon – US Novelist, from ‘Gravity’s Rainbow’

I’m not autocratic in running the business but I do need

to be able to make my own decisions.Entrepreneurship


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“It is our choices, Harry, that show what we truly are, far more than our abilities.”J.K. Rowling - from ‘Harry Potter and the Chamber of Secrets’

Doing only what you choose to do,doing what you’re good at, doingyour own thing. Isn’t that a little bitselfish? Maybe, but it’s the focus, totalself-belief and self-knowledge thatgoes hand-in-hand with that thinkingthat sets the entrepreneur apart.

It will come as no surprise to hear thatentrepreneurs take huge personal risksand make extreme sacrifices to gettheir business off the ground. Theyalso have a tremendous capacity forwork – often working 16 to 18 hoursa day for 6 or 7 days each week - andthis doesn’t tail off when the ventureis successful.

Although these successfulentrepreneurs are commercially astute,financial goals were not the drivingforce. Nor was making money the endgoal. For them, money is an importantmeans of measuring performance andsuccess. Working long hours wasabout personal motivation, fulfilmentand satisfaction in the long term.Entrepreneurs are not out to make afast buck; they want to invest in theircompany’s success, in its future and in its people - if they are the right people.

People management is viewed with arefreshingly childlike simplicity.Entrepreneurs are inspirational leaders and influence others through theirenergy, enthusiasm and their vision.

They do not, however, suffer foolsgladly and will sever even long termties with people if their performance isnot up to scratch. That’s not to saythey are ruthless or impulsive.

Entrepreneurs are reflective, play totheir strengths and avoid aggravatingsituations. They work in an open andhighly principled way and are simplyhugely disappointed when othersdon’t play by the same rules. Theybuild loyalty and commitment and arequick to spot potential. For those who do perform well, entrepreneursreward loyalty and share success. Theyprefer to be surrounded by peoplewho are like them.


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Competencies

So we’ve interviewed and we’velistened and we’ve assessed andmeasured - and from this work we’vebeen able to identify the nine mostsignificant competencies which drovesuccess and which characterised these individuals as entrepreneurs,distinct from different kinds ofbusiness leaders.

These are:

Confidence IntegritySelf DirectionInitiativeSellingCommitmentDrive and DeterminationDirectivenessLeadership

What is a competency? It’s much morethan simply an aptitude, ability, or skillthat has been learned. We define andunderstand it as an underlyingcharacteristic that is related specificallyto outstanding performance in a job.Underlying characteristics mean thatthe competency is a fundamental,deep rooted and enduring part of a person’s personality – part of whothey are, what they do, and how they do it.

If we can better understand thosecompetencies and the attitudes,beliefs and motives which drive thatindividual, we can certainly appreciatetheir achievements more and capitaliseon the positive impact they create.

Entrepreneurs are quite possiblyeverything you thought they were,and everything you thought they weren’t.


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Confidence

A willingness and an ability to actwith courage and conviction inincreasingly challenging situations

Not surprisingly, practically all theentrepreneurs intervieweddemonstrated high levels of self-confidence. This confidence and inner belief enables them to carve outan independent role for themselvesand their business, and enables themto commit to actions where otherswould prefer further information ormore time to think things through.The flipside is that they may at timesappear stubborn.

This confidence is linked with passion,and with the excitement that any newbusiness venture can create. It is a goanywhere, do anything attitude and itcan be infectious.

“What I now tell people, if they ask,what they should do to be successful,is: Do what you want to do, do whatyou like, do something that you feelpassionate about, do something thatyou feel interested in. Don’t do a jobjust to do a job. And don’t do a jobbecause you think it’s going to makeyou money. Do it because you like toand do it because it makes you feelexcited and vibrant.”

Hans Snook, Orange

Integrity

Works in an open and principled way

Well over three-quarters of thoseinterviewed displayed high levels of integrity. This means that they areprepared to stick to their principles,even when that might mean taking afinancial loss.

Entrepreneurs work in an open andhighly principled way and are hugelydisappointed when others don’t playby the same rules. Their values guidehow they conduct themselves on aday-to-day basis. They often makeassumptions that others work in thesame way, but are surprised and hurtwhen colleagues ‘break’ their ownunspoken rules.

The entrepreneur fosters a culture thatis open and flat, the sort of culturewhere ideas are freely expressed,mistakes are openly admitted andpeople are rewarded based on theirindividual contribution. Standards areuncompromisingly high and theyexpect their people not only to meetbut also to exceed those standards.

Self Direction

Recognises emotions and feelings and organises their life tomaximise positive experiences

Entrepreneurs reflect on situations andhow they feel about things and thisenables them to play to their strengthsand avoid situations or individuals thataggravate them. Half of thoseinterviewed displayed a strong senseof self-awareness which allowed themto recognise situations or people likelyto arouse certain, particularly negative, feelings.

They are able to look ahead and tomove on quickly, not dwelling on thethings that haven’t gone well. Mostimportantly, they are able to channeltheir energies into areas which aremore interesting or rewarding. Nearlyall view corporate life as a hugecompromise and one that they are not prepared to make.

Competencies


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Initiative

Deals with the here and now andcreates opportunities for long termfuture growth

Entrepreneurs take a long term viewand are not out to make quick buck.Contrary to popular belief, ourentrepreneurs were more than happyto invest in their businesses and werecontinually scanning the marketplacefor opportunities to expand theiroperations. It is in their make up togrow, to change or even to diversify if the time and the opportunity are right.

None of our entrepreneurs werefollowing others into the market. Allwere first to market with their idea.They had an uncanny knack ofspotting the ‘hot issue’ and unlikemany others, saw this issue through tofruition. Their ability to turn what areoften quite simple ideas into profits isusually based on their own personal orbusiness experiences.

A simple experience like trying tonegotiate a late travel booking at areduced price was enough to inspireBrent Hoberman. His initiativetransformed what many peoplelooked upon as a frustrating necessity– doing it all at the last minute, into abusiness that literally solved thatproblem – Voilà. lastminute.com

Selling

Persuades, influences or sells toothers using a number of differentarguments and is able to articulatetheir vision in a powerful andmemorable way

Entrepreneurs don’t necessarily usehighly sophisticated influencing tacticsbut influence through their energy,enthusiasm and vision. Their sheerwillpower and commitment mean theywill persist with an argument untilthey are able to convince others.

“I wanted some money, I sat in theguy’s kitchen until almost 3 o’clock inthe morning. He said something to me and I knew as soon as I turnedthat around and said it in a differentway back to him, he’d sign, so I didand he signed.”

Hans Snook, Orange

Entrepreneurs are highly effectivecommunicators, they can hit the right note with what they say and hit the spot with the way that they say it. They tell it like it is. They sell itlike it is.

Commitment

Aligns self with the vision andgoals of the business andchallenges others to do the same

Entrepreneurs have a tremendouscapacity for hard work – oftenworking 16 to 18 hours each day for6 or 7 days a week. Ask Sherry Coutu.During the first four years ofestablishing iii Sherry had absolutelyno personal life, but she didn’t seemto notice!

“I was very excited about what I wasdoing, and I believed in it so muchthat I wanted to work that hard.”Shehardly saw her friends and socialcommitments fell by the wayside. “I’dbe invited to a party and say I’d go.But I’d look at the time and it wouldbe 2 a.m. and I’d realise that I’dmissed the party.” This was a Saturdaynight. (From flametree.co.uk)

Sherry Coutu, iii

Entrepreneurs commit themselves totheir business heart and soul, butrather than resent the personalsacrifices they have to make, they areenergised and excited by the potentialopportunity of their venture.

They know where they want to goand what they want to achieve andthey energise people to go with them,to be a part of the venture and toshare in its success.

Fifty years down the line and BobbyDay still feels ‘guilty’ when notworking each and every Saturday.

Competencies


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Drive and Determination

A relentless drive to achieve worldclass results, taking risks to makethings happen and constantlymeasuring performance outcomes

Entrepreneurs take huge personal risksin getting their business off theground. Sacrifices, such as taking onpersonal loans or second mortgages,were not uncommon, with thebusiness coming before everythingelse, including family and friends.Nearly half of the entrepreneursquestioned, had taken risks, includingpersonal loans, to grow theirbusinesses - but these are seen less asrisks as the individuals are so sure ofthe success of the venture.

“I went in with a dream and there was nothing in the country … and it was difficult to persuade people tobelieve you. The only thing going on my side was the fact that I put£100,000 of my own money, which was everything, my house, in the pot.”

David Lloyd

Entrepreneurs are not, however, naiveor without commercial know-how.They make decisions after weighingup the costs and benefits and decidingwhat makes best commercial sense.Not academic or given to research,they can and will work their waymethodically through a spread sheetor a set of figures to pinpoint lossmaking areas or highlight areas forimprovement. They love to measureprogress and continually measure theirbusiness’s performance against thebest in industry.

“Although many of us at ARM havenow achieved a position of personalfinancial security, it is the non-financialachievements that are the mostmotivating and satisfying.”

Robin Saxby, ARM Holdings

Directiveness

Holds others accountable andaddresses performance when itdoes not meet expectations

Entrepreneurs will not tolerate poorperformance and will sever long term ties with individuals for the good of the business. Their strongcommercial sense, leads themconstantly to monitor performance so that they can identify areas whereperformance can be improved. Theyare competitive and will set upconditions that create a challengingrather than complacent environment.

Of those questioned, the majoritywere highly directive. Nearly halfshowed it at the highest level, andwere likely to monitor people’sperformance very closely.

“I used to display it on the wall howall the technicians performed, who didhow many hours and what theirefficiency was. I was trying to windthem up because no one wants toalways be on the bottom and from mypoint of view if it’s the same one onthe bottom, I don’t want him.”

Bobby Day, Alan Day Motors

Leadership

Leads and directs others to meettheir full potential, rewardingtalent and sharing success

For those who do perform well,entrepreneurs will reward loyalty and share success. Successfulentrepreneurs recognise theimportance of committed staff and are willing to share the success of the business with their people. They are born leaders in the sense that they can inspire others to follow themand can create a working culture andenvironment in which success isrecognised and rewarded.

Entrepreneurs look beyond theobvious choices when identifying newtalent and are prepared to invest inothers to ensure their long termsuccess. Not surprisingly, over half ofthe entrepreneurs interviewed wereshown to be good at spotting talent in others.

“There was a young man in the partsdepartment who, whenever I used to go down there and say who did that,would have something on the walland he was selling or doing somespecial deal and I thought he’s good.He was always thinking about what toget up to and so I put him in chargeand it’s the best thing I ever did.”

Bobby Day, Alan Day Motors


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Robin Saxby has a long and successfulhistory in business. By far his biggestsuccess to date has been as chairmanand CEO of ARM Holdings. Over thepast ten years he has built aninternational company, which hasbeen floated on the London StockExchange and Nasdaq, and currentlyhas a valuation of greater than £3 billion and employs more than 650 people worldwide.

The company’s designs for low-cost,high performance microprocessors canbe found in many mobile electronicdevices including mobile telephones,PDAs, games consoles, and digitalcameras, as well as in storage, securityand networking devices

Robin is a serial entrepreneur bynature. At the age of 13 he had athriving business sideline, carrying outtelevision repairs after school forfriends and colleagues of his father.While studying electronics atuniversity, he ran some of the bestand most profitable dances in theuniversity and with the profitsequipped each block of the universityhall with a washing machine.

Early roles as a design engineer, salesengineer, and finally, as managingdirector, provided Robin withinvaluable experience in the world ofhigh-tech. Robin’s entrepreneurial flairallowed him to establish ARM as aforce to be reckoned with and hiscurrent role is a mixture of managinghigh-level partner relationships,investor relations, external speaking,

setting future strategy and acting as a‘catalyst’ within the business.

“As the company is growing so fastyou’ve got to continually work on the organisation and I’m a majorcatalyst in changing and reshaping the organisation.”

Robin demonstrated a number of ourentrepreneurial characteristicsincluding an ability to spot futurepotential and take advantage of longterm opportunities. The secret ofARM’s success is in the philosophy ofits founders. They regard it as anintellectual property company,licensing the design ofmicroprocessors for chips and,perhaps most essentially, developingan intelligence that permits thecompany to be at the forefront of thedesign market and a world leader insales management.

Robin likes to “use the technology inorder to understand what the needsof the consumer are” and findstechnology hard to resist. He recently took three days off to install a complex music system throughouthis house.

Robin has created a culture at ARMthat reflects his own values. “One ofthe things we’ve got here is a healthyenvironment where people can makemistakes, where people can be open,where we can treat each other ashuman beings and that is very, veryimportant.”

The future for ARM looks positivelybuoyant with Robin and hismanagement team continuing to pushout the boundaries and creating theconditions for success His confidenceis infectious: “We’ve done theimpossible for the last ten years, whycan’t we continue?” He is alsoinvesting in the future success of hisbusiness. “We’re focused on thearchitecture of the future, the R&D,where the world is going, we’ll getthere ahead of anybody else and bringall the best players along with usbecause they’ll need our technology.”

Case Study 1

From start to FTSE 100 in ten years

“As the company is growing so fast you’ve got to

continually work on the organisation and I’m a major

catalyst in changing and reshaping the organisation.”

Robin Saxby, ARM Holdings


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Toni Cocozza, at 37 years old, hasestablished one of the fastest growingcompanies in the UK. DP Connect Ltd,a UK based ITC recruitment solutionsconsultancy, last year turned over £20million, employs 80 people and iscontinuing to outgrow competition ina market which has probably 40,000jobs begging to be filled.

Prior to establishing DP Connect, Tonihad held a number of senior salespositions in recruitment consultanciesand magazine houses. She hadbecome increasingly disillusioned withthe style of management that existedin recruitment as well as the lack ofprofessionalism of the industry. “It hadforgotten that its staff are the mostimportant asset you can have.Recruiters were getting a badreputation like estate agents had inthe 1980’s. They were all trying forquick, sharp deals, running around inwonderful cars, charging silly moneyand giving poor service.”

Toni felt that on her own she “wouldbe self sufficient, could give a betterservice to the client and wouldn’t haveto play anybody else’s game”.

Toni demonstrates a pragmatic andpeople focused approach to business.When, earlier on in DP’s development,she could not afford full time salaries,Toni set up a commission based

employment process to enable a newmother to work from home and bepaid for the jobs she filled.

She builds loyalty and commitment in her team and is quick to spotpotential. One of her first recruits, a 16–year–old first jobber, wasrecruited through a YTS scheme.Instead of teaching her fairly junioradministrative tasks, Toni showed her how to be a successful salesconsultant. She is still with her today after eight–and–a–half years,consistently DP’s top sales consultant.“I believed in her and I gave her anopportunity, trained her, looked at it through her eyes. My whole style of management is telling them what’s in it for them here, not what’sin it for me.”

Case Study 2

Connecting with Customers

“My whole style of management is telling them

what’s in it for them here, not what’s in it for me.”

Toni Cocozza, DP Connect


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“Some people are born great, someachieve greatness, and some havegreatness thrust upon them.” That probably applies to bothentrepreneurs and senior executives,so what are the real distinctions.

It’s clear that both have thecompetencies to make successfulleaders. But while the entrepreneur, by the very nature of what he or sheis doing, has to some extent to ‘goit alone’ and stand or fall on theirown drive and initiative, the CEO hasto demonstrate a much strongercapability to work successfully with others.

Entrepreneurs are more passionate,better risk takers, and more timelywhen dealing with performanceissues. CEOs are generally betterat involving others in decision makingas well as ‘reading’ organisationalpolitics and understanding others’points of view.

Whilst 78% of the entrepreneursinterviewed displayed the highestpossible level of drive anddetermination, only one of the CEOsdisplayed such a high level ofachievement orientation.

Entrepreneurs, as might be expected,showed far higher levels of initiative.Displaying the highest level of this –looking over a year in advance toavoid crisis or create opportunity – was demonstrated by 60% of theentrepreneurs compared with only17% of CEOs.

Time and time again entrepreneursdemonstrated a willingness to makepersonal sacrifices and commitsignificant resources. The CEOs werenot necessarily put in a position wherethey had to put everything on the linepersonally, they did not demonstratethe same level of passion andcommitment. Their focus was onraising performance but with less at stake.

Entrepreneurs manage theperformance of others differently toCEOs. Where CEOs will demand highperformance and expect compliance,entrepreneurs are often prepared togo that one step further, publicly andintrusively monitoring performanceand dismissing people whennecessary. This could well beunderpinned by their strong value set- they despise waste and poorperformance. Their action orientationalso means that they spring intoaction faster than most.

The focus of the entrepreneurs ismuch longer term than that of ourCEOs and other senior executives, wellover a year in advance. This could wellbe because the entrepreneurs do notfeel constrained by business planningprocesses and are in a privilegedposition – they are uniquely placed atthe head of the business that theycreated and are completely in tunewith that business, its goals and itsfuture vision.

Whilst entrepreneurs recognise theimportance of organisational politicsand their existence, most chose toavoid it. The leadership approach ofCEOs and senior executivesdemonstrates a better understandingof individuals and of organisations.CEOs and senior executives oftendemonstrate a greater understanding

of the political relationships withintheir organisations and how thisaffected the business. Or at least theypaid more credence to its importancethan did the entrepreneurs.

Entrepreneurs were often ‘genuinely shocked, hurt, bothered,disappointed’ by the actions of others,whereas CEOs and senior executiveswere typically better able to ‘read’ andunderstand others. More importantly,the CEOs expressed a desire tounderstand others and saw this as anecessary part of their role as a leaderin the business.

The need to retain control over theirbusiness was a very basic characteristicof our entrepreneurs. Many of thoseinterviewed described themselves asfiercely competitive and independentand although they were prepared toinvolve people in their business andshare success, the end decision andthe ‘control’ clearly remained withthem. It comes as no surprise,therefore, that CEOs and seniorexecutives demonstrated strongerskills at teamworking and co-operating with others, butentrepreneurs obviously could notsucceed without a degree of relianceupon other members of the team.

“The toughest thing about success is that you’ve got to keep on being a success”Irving Berlin, American Songwriter

Entrepreneurs v. CEOs


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“Opinions cannot survive if one has no chance to fight for them”Thomas Mann - from ‘The Magic Mountain’

The individuals we spoke to are all fighters. They fight againstconvention, against bureaucracy andagainst established opinion. And theytend to win.

The guide to becoming a successfulentrepreneur is based upon thecompetencies we have identified. Butit is really who you are that will makeyour business what it is. If you are anaspiring entrepreneur, a useful startingpoint would be to assess your owncompetencies. Ask yourself: How do Imeasure up? What do I need todevelop to be a successfulentrepreneur? What do I want to fight for?

Dr David McClelland, EmeritusProfessor of Psychology at HarvardUniversity, founder of Hay McBer’sresearch institute and one of theworld’s leading authorities onleadership and motivation, proved that entrepreneurial behaviours can bedeveloped and that once these behaviours are developed, businessperformance improves.

Firstly, make sure your chosen field issomething that really grabs you,something you believe in completelyand can talk about confidently.Remember you will have to convinceothers it’s a good idea and there willbe some risk-taking involved! Knowyour stuff, know your market, know your limitations, and then go beyond them.

Take the initiative – if you don’t do itno one else will! Or if it is a reallygood idea, if you don't take theinitiative someone else might! Takethe lead on issues and set a goodexample for any employees you mighthave and also to the investors.

Set goals and performance measuresfor your people so that you can assessprogress. It’s a give and take world soreward your employees when they dowell (but only when they do well).

Be honest with yourself about howwell things are going. Communicateclosely with your employees and tellthem if they’re not up to scratch. Theycan either shape up or ship out.

Take care of yourself psychologically.You are the visionary, the leader.When things go right, make the mostof it, feel good about it and use thatto move on to the next challenge.

Beyond the competencies, there arepractical skills that the entrepreneurneeds to develop. There are 101things to consider, including businessplanning, identifying and securingfunding sources, pitching for businessand the everyday nitty gritty thingssuch as tax.

Above all, individuals must respect thehuge amount of personal sacrificessuccessful entrepreneurs have made along the way and also recognise thatsuccess owes a lot to hard graft,determination and long hours as wellas drive, commitment and a brilliant business concept.

What value does the research have for the budding enrtrepeneur?


20

A recent article aimed at venturecapitalists (VCs) and other financiersinvesting in new businesses statedthat ‘with markets more dynamic thanever, traditional valuation modelsalone are failing to provideinformation about the value ofintangible assets’. These intangibleassets, such as the management teamand the calibre of the untestedentrepreneur have proven difficult, ifnot impossible, for VCs to evaluate inthe past.

The entrepreneurial competenciesidentified by our research provide huge potential for the financial community to raise the quality of their investment decisions by making tangible, hitherto intangible characteristics of successful entrepreneurs.

Our research will enable VCs toidentify the potential to succeed ofentrepreneurs with about 80%accuracy. We can help VCs to use thekey competencies – drive anddetermination, commitment,confidence, initiative, self-direction,directiveness, selling, integrity andleadership – so that they make betterinvestment decisions with a clearerview of the personal and managementrisks associated with the leadership ofthe entrepreneur. It would also level

the playing field for individuals whodo not have a track record in settingup a business. They can be assessedand evaluated against the samecompetency criteria as their moreexperienced counterparts and grantedor denied funding based on theiraptitude and potential rather than justtheir previous experience, or lack of it.

Potential ‘gaps’ or problem areas maybe identified by VCs and correctiveaction taken at a very early stage. Forinstance, if an individual is assessed aslacking skills in the competencies ofdirectiveness and leadership (bothpeople management competencies)there are obvious implications for thebusiness. The management team willneed to be supported by others whohave strong skills in these areas.

Our outstanding entrepreneurs weresupportive of their businesses over thelong term and were not in it for a‘fast buck’. VCs need to determine thelevels of commitment, drive anddetermination shown by the individualto reassure them that entrepreneurswill still be around over the long haul.

What value does the research have for venture capitalists?

Our research will enable VCs to identify the success

potential of entrepreneurs with about 80% accuracy.


21

In order to successfully ‘add anentrepreneur’ to an establishedorganisation there needs to be somecareful balancing between thecompetencies of the existingleadership and the entrepreneur, andthe requirements of the entrepreneurand the organisation itself. The goalsof the entrepreneur won’t becompromised, but an agreement willneed to be negotiated.

The first step is to align the goals ofthe organisation and those of theentrepreneur. The entrepreneur comeswith a brilliant business concept andhas to prove that the idea is aworkable one. Ownership of the ideais so important to the entrepreneurthat he or she is unlikely tocompromise in any way. If you thinkyou can change an entrepreneur’sattitude or way of working once he orshe is on board, simply because youare providing the cash, think again.

An entrepreneur has to provide areturn on investment to venturecapitalists and financiers in the sameway as a CEO has to generate returnsfor the shareholder, but entrepreneursneed freedom to act and need to beleft to pursue business returns in theirown way. This requires some risk-taking and a leap of faith on yourpart. If you take the line that you’veprovided the cash so you should sayhow it is spent, it will create the same‘interfering management’ culture thatwas the catalyst for someentrepreneurs to leave their previouscareers and launch their ownventures. All you may get in return is a thank you and goodbye.Monitoring is expected, it just needsto be appropriate and not intrusive.

And then there is the balancing actbetween the entrepreneur and thenew workforce. Entrepreneurs setchallenging goals and world-classstandards, which are useless unless the employees believe in them, followthem and try to achieve them. It’scrucial to motivate the newworkforce, encouraging them to ‘buyinto’ the vision without alienatingthem in the process.

The culture of the new venture orspin-off is going to be really differentfrom the ‘mother’ organisation. Make sure the employees are prepared for this.

The birth of a business is like anyother birth - it needs 24–hourattention, feeding, nurturing and lotsof love. People who are going to workfor this new business need tounderstand the commitment anddedication that is needed, and this will be a lot easier if they haveentrepreneurial interests themselves,want to learn new skills and broadentheir business experience. They will becoming in at ground zero where theycan have an immediate impact oncompany results and the formulationof work processes - this can be veryappealing to a certain type ofemployee who might otherwise leavean established organisation wherethey can feel constrained, frustratedand unappreciated.

The excitement, the energy and theenthusiasm all have to be sustained asthe pace of work will not slow down,if anything it will speed up. There hasto be more than simply a greatworking atmosphere. An entrepreneuris always ready to reward those who

have contributed to the venture. Aform of profit sharing or share options is a powerful motivator, butonly if the venture continues to beprofitable! The basis of performancemeasurement does not need to beprofit itself but could instead be lesstangible measures such as customersatisfaction and contribution toworking practice.

Once the venture has expanded andbecome established then thecompetencies of the CEO move intoplay. This is the point whenentrepreneurs can start to get itchyfeet. The prospect of another newbusiness idea and the adrenaline rushof starting again can often be toomuch of a temptation to resist. Someentrepreneurs can develop ‘CEO-like’competencies such as more effectiveteam working and stay on as theleader of that division. If the divisionoperates successfully as a separateentity from the parent company then there is no need to bring it ‘back into the fold’ and alienate theentrepreneur. And the organisationitself can probably learn many lessonsfrom the venture and potentially applythem internally to promote moreentrepreneurial and creative activitywithin the company.

What value does the research have for the entrepreneur in a large corporate organisation?


22

In the fast-paced world of innovationand growth, everyone associated witha new enterprise is likely to beworking at full stretch. If you arelucky, this will feel like a lot of fun.But there will be times when thingsdo not go well and stress levels rise.That's when people 'revert to type'.They behave the way that feels mostnatural or comfortable to them, given the situation. They tend to be less thoughtful about the way they behave.

Now we all have some flaws either of capability or character, andentrepreneurs are no different. Sohow do you get the right balance in ateam? How do you create a vibrant,cohesive, mutually supportive teamthat will survive the tests of time andunforeseen events? How do you avoiderrors of judgement under pressure?

The most important thing you can dois to reflect honestly on how you stackup against the nine criticalentrepreneurial competencies. Whereare your strengths; where are yourweaknesses? Does your chiefoperating officer or chief financialofficer have balancing characteristics?These are the things that potentialinvestors will be asking themselves,because they know that one of thechief causes of business failure is theinability of leaders to control theirimpulses under pressure. Successfulexecutive teams help each other toretain their poise.

The role of the entrepreneur over thelong run may change in visiblecharacter, but essentially it involves

managing the conditions that allowthe other people driving the businessto succeed: a clear and challengingdirection, a well-designed structure,people who pay attention to thethoughts and feelings of theircolleagues, an organisation thatsupports them, and coaching anddevelopment advice.

Because the leadership team has totrust that they are all committed to acommon, interdependent goal, theentrepreneur needs to work withthem to establish a relatively enduringvision of future success. Together theyevolve and monitor a strategy toachieve their goal, and facilitate theacquisition and commitment ofresources. As the team matures, theleader may rely less on charisma,energy or intelligence and begins tofocus on leveraging the talent ofothers. As we have seen, the bestentrepreneurs take real pleasure inenabling others to share in success.

The close identity of entrepreneurswith their businesses can lead themunwittingly to adopt leadershipapproaches that seem coercive orleave people feeling that they cannot keep up. These feelings in thelong run reduce the effectiveness ofthe top team, and our research shows that the best entrepreneursmanage themselves well to allowothers to flourish whilst still holding them accountable for their behaviour and effort.

Finally, outstanding leadership teamspay attention to each others'concerns. They value and respect each

other enough to go beyond theimmediate pressures of the taskbecause they recognise that excessivetask focus can lead to suboptimaloutcomes. In the final analysis, at leastone senior person – not necessarilythe entrepreneur – must be preparedto be a 'moral leader' in the team.This involves standing up for what isright even when it is difficult orpersonally dangerous to do so.

These leadership team issues are asrelevant for entrepreneurs, venturecapitalists and corporate businessleaders, all of whom want to get highadded value from their investments.

What the research tells us about how entrepreneurs work with others in their team


APPENDICES

BIBLIOGRAPHY

Bates, Clare, “Breaking with Tradition,”

November 2000, Acquisitions Monthly

Goleman, Daniel, Emotional Intelligence, 1996,

Bloomsbury

Goleman, Daniel, Working with Emotional

Intelligence, 1998, Bloomsbury

McClelland, David. C., The Achieving Society,

1961, The Free Press

McClelland, D.C., & Winter, D., 1971,

Motivating Economic Achievement, New York:

Free Press.

Miron, D., & McClelland, D.C., 1979, “The

Effects of Achievement Motivation Training on

Small Business,” California Management

Review, 21(4), 13-28.

Reynolds, P.D. et al, “The Global

Entrepreneurship Monitor 2000 Executive

Report,” 2000, Kauffman Centre for

Entrepreneurial Leadership

Spencer, Lyle and Spencer, Signe, Competence

at Work, 1993, John Wiley & Sons

METHODOLOGY

The methodology used in the entrepreneur

study is based on a proprietary methodology

developed by the Hay Group over the last

35 years.

Sample

Our sample was made up of 17 successful

entrepreneurs who: had been responsible for

establishing their business, and it had grown at

the rate of 100% each year for the past three

years or was now at least £100m pa turnover.

Two of our 17 were female entrepreneurs.

Two interviews were conducted in the US, one

in Canada with the remaining interviews

conducted in the UK.

Interviews

We undertook a total of 17 ‘behavioural event

interviews’. Behavioural event interviews are

structured to elicit which behaviours were

demonstrated during the establishment of the

business and other more recent work based

‘events’. These interviews were conducted by

experienced Hay consultants accredited in the

behavioural event interview technique.

Transcription and Coding

The interviews were transcribed, yielding

approximately 1200 pages of detailed text and

more than 1000 data points. These interviews

were then analysed for competencies and

behavioural themes by trained expert coders

using Hay’s standard definitions of

competencies, along with any other

competencies that emerged from the text.

Unique competencies were also analysed so as

not to restrict the competencies to ones that

had been seen/developed before. These data

were collected on a central database (Hay

McBer On-Line Coder) for analysis.

Analysing the Data

All the transcripts as well as background

information on each individual and their

companies was analysed during a three day

process in December 2000. The steps were

as follows:

Thematic analysis – each interview was

examined for themes describing the behaviours

and the underlying intent behind these

behaviours. The data provided an

understanding of the patterns of behaviours

shown across the group data (competency)

analysis. Using the On-Line Coder and the

thematic analysis, data were sorted both by

interview and group to identify those

competencies that characterised entrepreneurs.

Comparing with the CEOs

The Hay world-wide competency database was

consulted to identify a similar size comparator

group of CEOs and/or senior executives from

around the world (18). Example job titles

included Chairman, Managing Director –

Europe, Chief Executive. A number of

industries were covered including FMCG,

financial services and IT. Five of the group were

female executives. We compared and

contrasted the competencies of the

entrepreneurs and CEOs and senior executives.


1

Hay Group,

33 Grosvenor Place, London. SW1X 7HG

Tel: 00 44 (0) 20 7856 7000 Fax: 00 44 (0) 20 7856 7100

Web: www.haygroup.co.uk

© 2001 HayGroup Inc.


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