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Master Thesis MSc Business Administration
Specialization: Small Business & EntrepreneurshipAthenos adviesgroep Entrepreneurial- and Business diagnoses model
Can the Athenos adviesgroep Entrepreneurial- and Business diagnoses model be improved according to scientific literature and models used by consultancy companies
in practice?
by
BJORN REDMEIJER
University of Groningen Faculty of Economics and Business
22nd of June 2015
Supervisor: prof. dr. P.S. Zwart Co-assessor: R. van der Eijk
Magna Petestraat 4 9741 CH Groningen b.redmeijer@student.rug.nl
Student number: 2535920
Word count: 23.419 (excl. appendixes)
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Management Summary
This Master Thesis is written in cooperation with Athenos adviesgroep, which is a consultancy company for insurance companies. The objective of this research is to investigate whether the Entrepreneurial- and Business diagnoses model of Athenos adviesgroep can be improved according to scientific literature and models used by consultancy companies in practice. Although, there exists a lot of scientific literature regarding Entrepreneurial- and Business diagnoses models, only few conclusive Entrepreneurial- and Business diagnoses models exist. Furthermore, few authors linked their developed models to one single firm or specific business context.
In this report entrepreneurship is defined as the recognition and exploitation of opportunities (Shane & Venkataraman, 2000). Entrepreneurs are defined as: someone who pursues and exploits a recognized opportunity by taking responsibility for and making judgemental decisions that affect the location, form, and the use of goods, resources or institutions.
An extensive literature review has been written describing various business diagnoses models including: the Balance Scorecard, McKinsey 7-S Framework, the INK-Management model and the SME-business plan model. Next, theory has been described regarding diagnosing an entrepreneur, including the E-scan of Driessen (2006). This resulted in a comprehensive model based on the literature review. This model has been compared to the model used by Athenos adviesgroep, to see if any improvements could be made. The literature review resulted in no suggestions for improvement regarding the Entrepreneurial- and Business diagnoses model used by Athenos adviesgroep.
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Next, the questionnaire, containing of 100 practical questions/statements, used by Athenos adviesgroep during the intake phase of a consultancy project, has been critically assessed by the owner of Athenos adviesgroep, the fifteen consultants working for Athenos adviesgroep and me. This critical review revealed that some questions/statements of the questionnaire are rather similar. Next, the owner of Athenos adviesgroep and I developed fifteen new questions/statements which could improve the questionnaire. Then, all fifteen consultants of Athenos adviesgroep were asked to rate these fifteen questions/statements, to see which questions/statements are considered to be most important in order to gain insight into the functioning of an entrepreneur and an organization. This critical assessment resulted in five questions/statements that could improve the questionnaire used by Athenos adviesgroep, during the intake phase of a consultancy project.
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Preface
This master thesis has been written for the completion of my Master degree: Master of Business Administration; specialization Small Business and Entrepreneurship at the University of Groningen.
The first time I thought about writing my Master thesis, I wanted to do something more then just choosing a standard subject provided by the Faculty Business and Economics of the University of Groningen. I wanted to choose a subject myself and I wanted my Master thesis to add value for practitioners, preferably for a company. I wanted to complement my curriculum vitae by writing a master thesis for a company. Therefore, I chose to write my Master thesis for Athenos adviesgroep, a consultancy company for the insurance sector in The Netherlands.
I enjoyed writing my Master Thesis in cooperation with Athenos adviesgroep. Writing my Master thesis for Athenos adviesgroep improved my practical knowledge and experience. Furthermore, by writing this Master thesis my business English has been improved and I gained more knowledge about business administration and the consultancy sector in particular.
I want to thank Mr. Redmeijer of Athenos adviesgroep for offering me the opportunity to write my Master Thesis for Athenos adviesgroep and his time, effort, cooperation, valuable input, critical view and constructive feedback during the whole process. Furthermore, I would like to thank Daniel Bies of Rendementors, Richard Veldkamp of the Chamber of Commerce, Rogert Mulder of Vuurkracht, Jaap Luchies of MKB adviseurs, Roelof ter Mors of RTM Business Development BV and Erwin Matthijssen of Friedeberg Consultancy BV for their input during the interviews.
Finally, I would like to express my sincere appreciation to my supervisor of the University of Groningen, prof. dr. P.S. Zwart for his time, patience, constructive feedback, and critical view during the whole process.
5 Table of Contents Management Summary ... 2 Preface ... 4 1. Introduction ... 8 2. Literature review ... 11
2.1 Entrepreneurship and entrepreneur ... 11
2.2 Business diagnoses models ... 12
2.2.1. Financial criteria ... 12
2.2.2. Non-financial criteria... 13
2.2.3. The Balance Scorecard ... 15
2.2.4. The McKinsey 7-S Framework ... 16
2.2.5. The INK- management model... 18
2.2.6. The SME (Small- and Medium Sized) - Business plan model ... 21
2.2.7. Comparative analyses of different business diagnoses models ... 23
2.3.1. Personality traits of entrepreneurs... 25
2.3.2. Entrepreneurial competencies ... 29
2.3.3. Different types of entrepreneurs ... 32
2.4 The Entrepreneur-scan (E-scan) ... 33
2.5 Entrepreneurial- and Business diagnoses model based on literature ... 37
2.6 Athenos adviesgroep Entrepreneurial- and Business diagnoses model ... 42
2.7 The Athenos adviesgroep Entrepreneurial- and Business diagnoses model compared with findings from theory... 54
2.7.1. Differences and similarities regarding diagnosing an entrepreneur ... 54
2.7.2. Differences and similarities regarding diagnosing an organization ... 56
2.7.3. Conclusion literature review ... 57
3. Research design ... 58
3.1 Population/Case Study ... 58
3.2 Data gathering ... 59
3.3. Data analysis ... 63
3.4. Controllability, Reliability and Validity ... 63
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4.1 Entrepreneurial- and Business diagnoses model used by the Chamber of
Commerce (former Syntens) ... 65
4.1.1. Evaluation of the Entrepreneurial- and Business diagnoses model used by the Chamber of Commerce ... 67
4.2 Entrepreneurial- and Business diagnoses model used by Vuurkracht ... 68
4.2.1. Evaluation of the Entrepreneurial- and Business diagnoses model used by Vuurkracht ... 69
4.3 Entrepreneurial- and Business diagnoses model used by MKB adviseurs . 70 4.3.1. Evaluation of the Entrepreneurial- and Business diagnoses model used by MKB adviseurs... 71
4.4 Entrepreneurial- and Business diagnoses model used by RTM Business Development BV... 72
4.4.1. Evaluation of the Entrepreneurial- and Business diagnoses model used by RTM Business Development BV ... 75
4.5 Entrepreneurial- and Business diagnoses model used by Friedeberg Consultancy BV ... 76
4.5.1. Evaluation of the Entrepreneurial- and Business diagnoses model used by Friedeberg Consultancy BV... 77
4.6 Data matrix providing relevant quotes of respondents ... 78
4.6 Conclusion practice research ... 86
5. Conclusions ... 88
5.1 Central research question ... 88
5.1.1. Conclusion literature review ... 88
5.1.2. Conclusion practice research ... 89
5.1.3. Critical review of the questionnaire used by Athenos adviesgroep ... 91
5.2 Implications of the findings ... 92
5.3 Limitations of the research ... 93
5.4 Recommendations for future research... 94
Bibliography ... 95
Appendix I Different types of Entrepreneurs ... 100
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Appendix III Explanation of the Leidse Otaëder model and “het Trechter Model
(De Witte)” ... 104
Appendix IV 100 questions/statements Entrepreneurial- and Business diagnoses model Athenos adviesgroep ... 106
Appendix V Examples results of questionnaire used by Athenos adviesgroep .. 112
Appendix VI Questions asked during intake phase by Athenos adviesgroep in addition to the 100 practical questions/statements ... 115
Appendix VII Interview guide Athenos adviesgroep ... 118
Appendix VIII Interview guide Rendementors ... 121
Appendix IX Interview guide consultancy companies ... 125
Appendix X Entrepreneurial- and Business diagnoses model of the Chamber of Commerce (former Syntens) ... 128
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1. Introduction
The purpose of this first section is to provide an introduction with background information and a justification of the research topic. It reveals the research question and the methodology of this study to answer the research question. Furthermore, the relevance of this study will be discussed and a preview finalizes this section.
Entrepreneurship in general came to existence at the end of the eighteenth century (Wickham, 2006), (Carter & Jones-Evans, 2006). One of the first persons defined the notion of entrepreneurship is Richard Cantillon (des Bruslons, 1723). He defined entrepreneurs as people who pay a certain price for a product to resell it at an uncertain price, making decisions about obtaining and using resources while consequently admitting the risk of enterprise (Lazanyi, 2014). More than a century later, major academic contributions were made by the Austrian economists Joseph Schumpeter (1934) and Israel Kizner (1973). At that time, entrepreneurship was defined as a market disequilibrium phenomenon (Rocha, 2012). The field of entrepreneurship has received growing attention the last few decades. Nowadays, Shane & Venkataraman (2000) define the field of entrepreneurship as the scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited. This definition of entrepreneurship still holds.
A lot has been written in the literature regarding Entrepreneurial- and Business diagnoses models. Despite this extensive literature, there exist only a few conclusive Entrepreneurial- and Business diagnoses models. Authors of previous research developed their own diagnoses models or theories regarding Entrepreneurial- and Business diagnose models. Furthermore, few authors linked their developed models or theories to one single firm or specific business context.
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Furthermore, information obtained during interviews with several consultancy companies, will be compared to the Entrepreneurial- and Business diagnoses model of Athenos adviesgroep to see if any improvements can be made.
Athenos adviesgroep is an independent consultancy company, which is specialized in providing personalized advice to entrepreneurs concerning business/management problems. Athenos adviesgroep works throughout all of The Netherlands. Athenos adviesgroep is a partner for insurance companies, which are also their clients. The added value of the service provided by Athenos adviesgroep is threefold: (1) limitations of claims: financial gains, since Athenos adviesgroep helps entrepreneurs / businesses, therefore insurance pay-outs can be reduced, (2) increased customer satisfaction: because entrepreneurs / businesses feel supported in a more personalized way by the insurance company, the image of the insurance company will be positively influenced and (3) Corporate Social Responsibility: through Athenos adviesgroep insurance companies give substance to this, since Athenos adviesgroep helps entrepreneurs / businesses thereby securing the continuity of the business, employment is preserved and entrepreneurs will earn money again. A consultancy project consists of two phases: an intake phase and an advice phase. In order to diagnose an entrepreneur and an organization, Athenos adviesgroep uses an Entrepreneurial- and Business diagnoses model. This diagnoses model provides clear insights into the problem(s) an entrepreneur is facing and represents the intake phase and the advice phase of a consultancy project. During the intake phase of a consultancy project, Athenos adviesgroep uses a questionnaire of 100 practical questions/statements in order to quickly find the critical areas of an entrepreneur and an organization. Finally, Sioo (2013) implies that the consultancy sector is changing and that traditional models (e.g. five forces of Porter, the BCG-matrix, etc.) may not be applicable anymore, in order to diagnose an organization.
The research question of this paper is:
“Can the Athenos adviesgroep Entrepreneurial- and Business diagnoses model be improved according to scientific literature and models used by consultancy
10 Methodology
Considering the research question the approach of “theory development” fits best. Even though there exists a lot of literature regarding Entrepreneurial- and Business diagnoses models, few authors attempted to provide a comprehensive overview. Furthermore, few attempts have been made in the past to link theory to an existing model that is used in practice. Knowledge about existing theories and models regarding Entrepreneurial- and Business diagnoses will be gathered trough an in-depth literature research. The aim is to use recent literature (±25 years old) regarding Entrepreneurial- and Business diagnoses models.
Knowledge of the Entrepreneurial- and Business diagnoses model of Athenos adviesgroep will be gathered through a semi-structured interview with the owner of Athenos adviesgroep and the owner of Rendementors. Furthermore, a semi-structured interview will be held with five other consultancy companies, which are expected to also use an Entrepreneurial- and Business diagnoses model, in order to obtain knowledge of models used in practice by consultancy companies.
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2. Literature review
This section contains relevant literature regarding Entrepreneurial- and Business diagnoses models and theories. First, key concepts like entrepreneurship and entrepreneur are clearly defined. This section concludes with an Entrepreneurial- and Business diagnoses model that has been developed based on the literature review. Finally, this model will be compared to the Entrepreneurial- and Business diagnoses model used by the Athenos adviesgroep, to see if any improvements can be made based on the literature review.
2.1 Entrepreneurship and entrepreneur
First two constructs that need to be clearly defined are entrepreneurship and entrepreneur. There exist a wide range of definitions of entrepreneurship and an entrepreneur. Perhaps the largest obstacle in creating a conceptual framework for the field of entrepreneurship has been its definition. To date, most researchers have defined the field solely in terms of who the entrepreneur is and what he or she does (Shane & Venkataraman, 2000). Shane & Venkataraman (2000) define entrepreneurship as: the scholarly examination of how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited
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This definition still holds nowadays. In this report I will also use the definition of Shane & Venkataraman (2000) to define entrepreneurship, so entrepreneurship is defined as: the recognition and exploitation of opportunities. I will use this definition because it covers behavioural aspects as well as it makes clear that entrepreneurship is about seeing and exploiting opportunities. Furthermore, this definition implies that entrepreneurship is more than just owning an enterprise.12
In this report an entrepreneur is defined as: someone who pursues and exploits a
recognized opportunity by taking responsibility for and making judgemental decisions that affect the location, form, and the use of goods, resources or institutions. I will
use this definition because it includes the concept of entrepreneurship and this definition makes clear that an entrepreneur is a real person taking responsibilities by makes judgemental decisions about the allocation of scarce resources.
2.2 Business diagnoses models
There exist a wide range of literature regarding business diagnoses models and theories. A business diagnoses model is a holistic and systemic approach for measuring business performance (Kanji, 2002). Furthermore, a business diagnoses model provides a set of metrics (critical success factors) that track a firm’s progress against goals and objectives to meet company’s strategic initiatives (Gumbus & Lussier, 2006).
Jenning et al. (1997) defined small business success as: the sustained satisfaction of owners’ aspiration. Success of a small business can be defined through financial and non-financial criteria. Success criteria are the elements that small business owners use to measure the success of their business.
2.2.1. Financial criteria
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Economic measures of performance have generally been popular due to the ease with which they can be administered and applied since they are very much ‘hard’ and objective measures (Walker & Brown, 2004). Financial criteria have the advantage of being an objective measure and allows for easy comparisons among different companies or industries. The disadvantage of this data is that access to financial data can be very difficult and the reliability is often questionable (Rosseu & Shperling, 2003).
2.2.2. Non-financial criteria
Non-financial criteria can be appropriate for measuring business success as well.
Non-financial measures of success used by business owners are: autonomy, job satisfaction, career progress, pride, independence, flexibility or the ability to balance work and family responsibilities (Buttner & Moore, 1997); (Green & Cohen, 1995); (Kuratko, Hornsby, & Naffziger, 1997); (Parasuraman, Purohit, Godshalk, & Beutell, 1996); Walker & Brown, 2004). Non-financial measures are based on criteria that are personally determined by the individual business owner (subjective) and hard to quantify. These non-financial measures presume that there is a given level of financial security already established; it may be that this is within the business, or that the business owner does not require the business to be the primary source of income (Walker & Brown, 2004). Furthermore, it is difficult to make comparisons between companies and industries based on non-financial success criteria because they are defined by the perception of the business owner.
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For the purpose of this research the following business diagnoses models are used: The Balance Scorecard (Kaplan & Norton, 1992), The McKinsey 7-S Framework (Waterman & Peters, 1982), The INK-management model (Dutch Quality Institute, 1992; (Tillema & Markerink, 2004) and The SME- (Small & Medium- Sized Enterprises) Business plan model (Risseeuw & Thurik, 2003).
The Balance Scorecard is used because this business diagnose model includes financial criteria and non-financial criteria for measuring business performances. Furthermore, The Balance Scorecard measures business performance according to internal and external factors and it enables a focus on long-term growth versus a short-term focus on quarterly results (Kaplan & Norton, 1992). Furthermore, it is one of the best-known business diagnoses model.
The McKinsey 7-S Framework is used because this model combines rational and hard elements with emotional and soft elements for measuring business performances. The McKinsey 7-S Framework is very useful for determining the strengths and weaknesses of an organization (Waterman & Peters, 1982). Finally, The McKinsey 7-S Framework is also one of the best-known business diagnoses model.
The INK-management model is used because this model consists of nine elements, which summarize the huge variations in operations of profit and non-profit organizations. The INK-Management model shows the relationship between the various fields. The strength of the INK-Management model is the focus on the connections between the various elements. The INK-Management model scores particularly high on the following points: (1) explicit attention is given to the development phase of an organization; (2) multiple result variables are distinguished, which are all made measurable and (3) the focus lies more on the processes of an organization then other models do (Risseeuw & Thurik, 2003). Furthermore, the INK-management model is practical orientated, broadly used and also well known (Dutch Quality Institute, 1992); (Tillema & Markerink, 2004).
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multiple approaches can lead to acceptable solutions. Finally, this model is used because it is based on several other business administration theories (e.g. SWOT-analyses) (Risseeuw & Thurik, 2003).
2.2.3. The Balance Scorecard
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Figure 1: the Balance Scorecard (Kaplan & Norton, 1992)
2.2.4. The McKinsey 7-S Framework
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Table 1: Definition of the elements of McKinsey 7S model (Hanafizadeh & Zare Ravasan, 2011)
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Figure 2: The McKinsey model (Hanafizadeh & Zare Ravasan, 2011)
The 7-S diagram illustrates the multiplicity interconnectedness of elements. To be effective, an organization must have a high degree of fit, or internal alignment between all the seven S’s. Each S must be consistent with and reinforce the other S’s. All S’s are interrelated, so a change in one has a ripple effect on all the others. It is impossible to make progress on one without making progress on all. There is no starting point or implied hierarchy – different factors may drive the business in any one organization (Doelen & Weber, 2006).
2.2.5. The INK- management model
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The INK- management model is used by numerous organizations (profit and non-profit) to improve their performance (Dutch Quality Institute, 1992). The INK-management model consists of nine critical elements. The INK- INK-management model distinguishes five organizational elements and four result elements and focuses on “improvement and innovation”. The organizational fields describe how an organization is structured. The strategically relevant metrics are chosen in the four result areas and identifies what is actually realized. The "tenth focus' is the feedback loop which represents if and to what extent an organization learns from their experiences and achievements and is looking for new ways to accomplish their goals. The core of the INK-management model is formed by working on the consistency and growth in all areas of the model. Important is the relationship between the ten areas (Dutch Quality Institute, 1992; Risseeuw & Thurik, 2003; Tillema & Markerink, 2004). The INK-management model scores particularly high on the following points: (1) explicit attention is given to the development phase of an organization; (2) multiple result variables are distinguished, which are all made measurable and (3) the focus lies more on the processes of an organization then other models do (Risseeuw & Thurik, 2003). The INK-management model consists of the following nine elements:
Leadership
This involves inspiration and improvement of an organization through involvement of the board of directors, recognition, and appreciation for the commitment of its employees and policies aimed at supporting and improving (Risseeuw & Thurik, 2003).
Strategy and policy
Is about the way of designing policies and strategy, the information used, implementation and reviewing of the policy and the way communication takes place (Risseeuw & Thurik, 2003).
Management of employees (Human Resource Management)
20 Management of resources
Is about making optimal use of financial resources, the information system, materials and services, technology and knowledge management (Risseeuw & Thurik, 2003).
Management of processes
With respect to the primary, supportive and control processes this element is about the identification of the processes, the management and control of the processes, reviewing and improving of the processes and innovation (Risseeuw & Thurik, 2003).
Appreciation by customers
By measuring customer satisfaction and customer loyalty, an organization knows to what extent it meets the needs and expectations of their customers (Risseeuw & Thurik, 2003).
Appreciation of employees
Through surveys, performance appraisals, and absenteeism registrations, an organization can gain insight in the appreciation of their employees for the organization. The measurement criteria are divided into the areas of organization leadership, strategy and policy, management of employees, management of resources and management of processes (Risseeuw & Thurik, 2003).
Appreciation of the society
Corporate social responsibility is regarded as an increasingly important phenomenon. The criteria might be related to: contribution to the labour market, place in society, provision of educational facilities, community activities and the environment (Risseeuw & Thurik, 2003).
Results of an organization
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Below you can find the INK-management model in a diagram, see figure 3.
Figure 3: The INK-management model (Dutch Quality Institute, 1992)
2.2.6. The SME (Small- and Medium Sized) - Business plan model
The SME- Business plan model is a synthesis between preventive and project based models, takes into account the selected paradigms holisms and contingencies and takes into account the most salient feature of SME’s: the dominant independent position of the entrepreneur/owner. Central to this model is the entrepreneur/owner, this model takes the whole organization and it’s relevant external environment into consideration and accepts that multiple approaches can lead to acceptable solutions (Risseeuw & Thurik, 2003).
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Figure 4: The SME- Business diagnoses model (Risseeuw & Thurik, 2003)
Particularly, part one and part two of this model are important for diagnosing an organization. These two parts will be elaborated now.
Part 1 Mission/Business philosophy
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This part is specifically mentioned for diagnosing an organization and its relevant environment. The SME- Business plan model distinguishes five variables: market, money, production, people/organization and environment. Within these five variables, the following subjects are taken into consideration (Risseeuw & Thurik, 2003).
Market: Market position and competition, marketing, communication and sales promotion, market research and innovation, overview of analysis and external developments.
Money: Financial analyses and financing, business economics and financial management, business information, overview of analysis and external developments. Production: Quality, purchase- and flow of goods management, production and innovation, overview of analysis and external developments.
People/organization: Organization and leadership, Human Resource Management, hiring/replacing and external developments.
Environment: External contacts, environment, legislation and external developments.
Each variable is about the most important strengths, weaknesses, opportunities and threats. By making an internal and external analysis, regarding each element, the strengths, weaknesses, opportunities and threats will emerge (Risseeuw & Thurik, 2003).
2.2.7. Comparative analyses of different business diagnoses models
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Table 2: Comparative analyses of different business diagnoses models based on the literature review
indicates positive scoreindicates negative score ± indicates average score
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2.3 Entrepreneurial diagnoses models
The previous section described four well-known business diagnoses models. However, these business diagnoses models provide little attention for the entrepreneur. This section addresses this issue, by providing relevant literature related to an entrepreneur. There exist a lot of literature regarding personality traits, competencies, and different types of entrepreneurs. An entrepreneurial diagnoses model enables entrepreneurs to reflect their weak and strong entrepreneurial traits and capabilities and they can find out if they posses the right traits and capabilities to become a successful entrepreneur (Driessen, 2006).
2.3.1. Personality traits of entrepreneurs
Personality traits are defined as dispositions to exhibit a certain kind of response across various situations (Caprana & Cervone, 2000) personality traits are also enduring and show a high degree of stability across time (Roccas, Sagiv, Schwartz, & Knafo, 2002). Brandstätter (2011) conducted research into the personality of entrepreneurs. Brandstätter (2011) stated that the fact that personality has some influence at all, should be evident from basic characteristics of the entrepreneurial role: initiating a life of self-determination and independence (Emotional Stability), finding new opportunities and ways of structuring and developing the enterprise (Openness to experience), hard working and persistent in goal striving (achievement motivation component of Conscientiousness), establishing a social network (Extraversion), and taking the risk of failure (risk propensity, possibly a combination of Emotional Stability, Openness, and Extraversion).
Brandstätter (2011) focussed primarily at five personality traits (also known as “Big five” or “OCEAN”), namely: Openness to Experience, Conscientiousness, Extraversion, Agreeableness and Neuroticism. These five personality traits will be elaborated now.
Openness to Experience
26 Conscientiousness
Conscientiousness describes socially prescribed impulse control that facilitates task- and goal-directed behavior, such as thinking before acting, delaying gratification, following norms and rules, and planning, organizing, and prioritizing tasks (Brandstätter, 2011). Entrepreneurs score higher on conscientiousness then managers, according to Zhao and Seibert (2006).
Extraversion
Extraversion implies an energetic approach toward the social and material world and includes traits such as sociability, activity, assertiveness, and positive emotionality (Brandstätter, 2011). Entrepreneurs are somewhat more extraverted than managers (Zhao & Seibert, 2006).
Agreeableness
Agreeableness contrasts a pro-social and communal orientation toward others with antagonism and includes traits such as altruism, tender- mindedness, trust, and modesty (Brandstätter, 2011). Entrepreneurs have lower scores in this dimension than managers (Zhao & Seibert, 2006).
Neuroticism
Neuroticism contrasts Emotional Stability and even-temperedness with negative emotionality, such as feeling anxious, nervous, sad, and tense (Brandstätter, 2011). Zhao and Seibert (2006) report for entrepreneurs lower scores on Neuroticism than for managers.
27 Need for achievement
Need for achievement implies that one chooses tasks of moderate difficulty, accepts responsibility for results, and seeks feedback on action outcomes. It is important for entrepreneurship because entrepreneurs need to be interested in the tasks that they are doing to perform well (Rauch & Frese, 2007). McClelland (1961) showed that entrepreneurs have a higher need for achievement, then non-entrepreneurs.
Generalized self-efficacy
Generalized self-efficacy is defined as task-specific self-confidence (Bandura, 1997). Self-efficacy reflects not only past experience and attainment but, more important, the conclusion one draws about one’s capacity for performance attainment from these past experiences. Generalized self-efficacy is important for entrepreneurs because they must be confident in their capabilities to perform various (and often unanticipated) tasks in uncertain situations (Baum, Locke, & Smith, 2001). People with high generalized self-efficacy are likely to persevere when problems arise and search for challenges and, therefore, challenging opportunities; they also show a higher degree of personal initiative; they have higher hopes for success and, therefore, take a long-term perspective; they also actively search for information, which leads to a better knowledge (Rauch & Frese, 2007).
Innovativeness
Innovativeness assumes a person’s willingness and interest to look for novel ways of action (Rauch & Frese, 2007). The trait of innovativeness helps entrepreneurs to foster innovations in their firms. Innovation has been one of the core concepts of entrepreneurship (Rauch & Frese, 2007).
Stress tolerance
28 Need for autonomy
Need for autonomy is associated with entrepreneurs’ avoidance of restrictive environments; they prefer to make decisions independent of supervisors, to set their own goals and develop their own plans of actions, and to control goal achievement themselves. People high in need for autonomy want to be in control, they avoid the restrictions and rules of established organizations, and thus, choose the entrepreneurial role (Rauch & Frese, 2007).
Internal locus of control
Internal locus of control is related to entrepreneurship because owners must believe that their own actions determine the rewards (business outcomes) they obtain (Rotter, 1966). Since people with a high internal locus of control feel that they are able to control outcomes, they should exert more effort and persistence towards intended outcomes, which, in turn, should help to start an enterprise and to maintain it successfully (Rauch & Frese, 2007).
Risk taking
The tasks of entrepreneurship include taking risks, for example, because decisions are made in uncertain situations. Therefore, entrepreneurs show risk-taking propensity (Rauch & Frese, 2007).
Proactive personality
People high on proactive personality want to influence their environment (Crant, 1996) and proactive personality is a personal disposition for personal initiative behavior (Frese & Fay, 2001). Proactive personality is important for entrepreneurs because by definition, entrepreneurs have to be self-starting and influence their environment by founding new organizations and by identifying and acting upon opportunities (Rauch & Frese, 2007).
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Personality trait Relationship Entrepreneurs’ personality Openness to experience + Conscientiousness + Extraversion + Agreeableness - Neuroticism -
Need for achievement +
Generalized self-efficacy +
Innovativeness +
Stress tolerance +
Need for autonomy +
Internal locus of control +
Risk taking +
Proactive personality +
Table 3: overview personality traits and relationship entrepreneurs’ personality (mainly based on Brandstätter, 2011, and Rauch & Frese, 2007.).
2.3.2. Entrepreneurial competencies
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Man et al. (2002) identified six major competencies in their work: (1) opportunity, (2) organizing, (3) strategic, (4) relationship, (5) commitment, and (6) conceptual competencies. These six major competencies identified by Man et al. (2002) encompass more or less the competencies identified by the other authors.
Opportunity Competencies
One of the most distinguishing competencies for the entrepreneur is the opportunity related competency (Xiang, 2009). For instance, Shane & Venkataraman (2000) stated: to have entrepreneurship, you must first have entrepreneurial opportunities. The discovery of an opportunity is a necessary condition for entrepreneurship, but it is not sufficient. Subsequent to the discovery of an opportunity, a potential entrepreneur must decide to exploit the opportunity (Shane & Venkataraman, 2000). This category of competencies comprises of the entrepreneurial activities in spotting opportunities, actively seeking new opportunities, and exploiting the opportunities (Xiang, 2009).
Organizing competencies
This group of competencies calls for the ability to lead, control, monitor, organize, and develop the external and internal resources towards the firm’s capabilities through the entrepreneur’s organizing competencies in different areas (Xiang, 2009). Organizing competencies are: competencies related to the organization of different internal and external human, physical, financial and technological resources, including team-building, leading employees, training and controlling (Xiang, 2009).
Strategic competencies
31 Relationship competencies
This group of competencies relates to person-to-person or individual-to-group
based interactions, e.g., building a context of cooperation and trust, using contacts and connections, persuasive ability, communication and interpersonal skill (Man et al. 2002). To successfully do so, the entrepreneur needs to possess competencies in relationship building, communication, persuasive and interpersonal abilities (Xiang, 2009).
Commitment competencies
Successful entrepreneurs are often characterized as diligent people with a restless attitude in their work. In other words, they have a strong competency in totally
committing, determining and dedicating, as well as taking proactive actions towards their responsibilities and duties. This corresponds to the entrepreneurial role of the drive to see firm through to fruition applied by Chandler and Jansen (1992). To sum up, commitment competencies are those drive the entrepreneur to move ahead with the business (Xiang, 2009).
Conceptual Competencies
Conceptual competencies represent a category of competencies, which are not easily identifiable behaviours but are often considered to be important for entrepreneurial success. Conceptual competencies are related to different conceptual abilities, which are reflected in the behaviours of the entrepreneur, e.g., decision skills, absorbing and understanding complex information, risk taking and innovativeness (Xiang, 2009). Conceptual competencies are concerned with a shorter-term perspective, resolving instant events, or requiring intuitive responses (Man et al., 2002).
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Table 4: the six entrepreneurial competencies identified in the literature (Xiang, 2009, Man et al. 2002)
2.3.3. Different types of entrepreneurs
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Briefly stated, the personal achiever is a strong-willed person with high achievement needs. The real manager is a directive and decisive individual. The expert idea generator is a bright person with strong beliefs in his/her ideas. The empathic super salesperson is a caring and client-focused type of person. In addition Miner (1997) distinguishes a fifth category: the complex entrepreneur (CE) who combines two or more types (Miner, 1997). Driessen (2006) also grouped entrepreneurs based on their “style of thinking”. The next paragraph provides more insight about the way Driessen (2006) grouped entrepreneurs, based on their “style of thinking”. Appendix I presents different types of entrepreneurs described in the literature (Hisrich & Grant, 2007).
2.4 The Entrepreneur-scan (E-scan)
In 2006 Martijn Driessen developed the E-scan. The E-Scan is a scan that is developed for (potential) entrepreneurs. By using the E-scan, entrepreneurs are able to reflect their weak and strong entrepreneurial traits and capabilities and they can find out if they possess the right traits and capabilities to become a successful entrepreneur. With this information, it is possible for entrepreneurs to work on their weak qualities and to control their strong qualities (Driessen, 2006). After answering 111 questions about their own personality on a 7-point Likert scale, it is possible for the entrepreneur to receive a personal report. In this personal report, the entrepreneur can find a score on each of the ten different traits and capabilities that are included in the E-Scan. The E-Scan includes seven traits and three capabilities. On each of the traits and capabilities, the entrepreneur gets a score after finishing the E-Scan. The different traits are: need for achievement, need for autonomy, need for dominance, social orientation, internal locus of control, endurance, and risk tolerance. The different capabilities are: market awareness, creativity and flexibility (Driessen, 2006). Furthermore, Driessen (2006) mention four different “styles of thinking”. These “styles of thinking” are: pioneer, salesman, manager and expert.
34 Need for dominance
Need for dominance refers to the need to be in control of others and to tell other people what to do. People are considered dominant as: they have strong intent/need to lead, organize, persuade, instruct other people; a strong need for control and a strong need to let others behave in a way they would not behave otherwise (Driessen, 2006).
Social orientation
Social Orientation is the extent in which a person is aiming at other people.
Successful entrepreneurs know that other people and social networks are very important to realize their ideas. They easily get in touch with other people and keep their business intentions in mind in their social life. Successful entrepreneurs can also ignore their social needs and focus their attention on the business (Driessen, 2006).
Endurance
Endurance is the drive to proceed in every circumstance and also on the long-term, even if there are problems or complaints (Driessen, 2006).
Next the different capabilities identified by Driessen (2006) will be elaborated. These capabilities are related to the start-up phase of an organization (Driessen, 2006).
Market awareness
Market awareness refers to imagining what the needs of the (potential) customers are and connects this to your own business. Successful entrepreneurs respond to the specific needs of a clearly defined target group of customers. They can also indicate precisely what their competitors are doing. They are aware of the content of the professional magazines and talk with customers so that they are able to anticipate on changes in the market (Driessen, 2006).
Creativity
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Due to this, they are able to transpose problems into new opportunities and they are willing to take risks (Driessen, 2006).
Flexibility
Flexibility is the ability to adapt. Successful entrepreneurs react to perceived changes they observe in the environment, like new desirability’s of customers or new competitors in the market. They interpret opportunities and threats on their effect and adapt their business plan to this (Driessen, 2006).
Capabilities related to the adult phase of an organization are: leadership, organizing and planning and financial management (Driessen, 2006).
Leadership
Leadership has to do with managing people in a human and task-oriented way (Driessen, 2006).
Organizing and Planning
Organizing and planning includes: the design and implementation of an efficient and effective system for the work of employees (Driessen, 2006).
Financial management
Managing finances means keeping good balance between costs and expenses (Driessen, 2006).
36 Styles of thinking
Pioneer
The thoughts of the pioneer are dominated by possibilities. He lives in the future and has a long-term vision. Through its strong imagination, he often already sees the whole picture, while others still have no idea. The pioneer thinks playful, fast and often outside the box. He can be distinguished by a passionate, optimistic, but sometimes naive style. He has the ability to change a situation into chaos or just save a situation from chaos. Where others accept the impossibilities or routine situation, the pioneer constantly wonders why things are going they way they are going, and why it cannot be different. His ideas about different or better are only limited by his own imagination (Driessen, 2006).
Salesman
The salesman loves people and is focused on developing relationships. He often trusts his own feelings. He has great interest in the people around him and attaches great importance to making contact, though he can be guided in this by business considerations. He understands better than anyone the needs of the customer. His great motive is to be accepted by his surroundings. He functions well in harmonic situations. In these situations, he is constantly looking for win-win situations. The salesman is loyal, flexible and enthusiastic. He is unable to make fast, hard or rational decisions. He rather cares for those experiencing the consequences, instead of realizing what the best decision is (Driessen, 2006).
Manager
37 Expert
The expert is well aware of all developments in his field of expertise. He knows all the “ins” and “outs” of his profession. He forms a picture of events from his prior knowledge and experience through which he independently and rationally comes to the right decisions. The expert is individualistic and realistic. He can be distinguished by the desire to be the best, at least in his field of expertise. He often is critical and must be convinced by himself that something works before he trusts it. Delivering quality is a top priority for the expert. (Driessen, 2006).
Driessen (2006) states that every entrepreneur has all “styles of thinking” in them, but every entrepreneur has a natural preference for one or several “styles of thinking”.
2.5 Entrepreneurial- and Business diagnoses model based on
literature
The literature review implies that an Entrepreneurial- and Business diagnoses model should include: financial and non-financial criteria, an internal and external view (strengths, weaknesses, opportunities, treats) and a continues “feedback loop” regarding innovation and learning. The entrepreneur should take a central place in an Entrepreneurial- and Business diagnoses model, since the entrepreneur is the most salient feature of SMEs. An entrepreneur should be diagnosed based on traits, competencies and “styles of thinking”.
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Figure 5: Entrepreneurial- and Business diagnoses model based on literature review
Explanation of the model
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Entrepreneurial competencies should include: opportunity competencies, organizing competencies, strategic competencies, relationship competencies, commitment competencies and conceptual competencies (Man et al. 2002; Xiang, 2009). And the competencies mentioned by Driessen (2006), but these competencies correspond to the competencies mentioned by Man et al. (2002).
Entrepreneurial “styles of thinking” should include: pioneer, salesman, manager and expert (Driessen, 2006). This four “styles of thinking” more or less comprise other “styles of thinking”, mentioned in the literature review and in appendix I.
The traits, competencies and styles of thinking results in personal goals, which are influenced by the entrepreneur his network and his environment. Personal goals of the entrepreneur could be financial and/or non-financial as well (Buttner & Moore, 1997); (Green & Cohen, 1995); (Kuratko, Hornsby, & Naffziger, 1997); (Parasuraman, Purohit, Godshalk, & Beutell, 1996); Walker & Brown, 2004). Next, organizational goals will emerge, which needs to be aligned with the personal goals of the entrepreneur. This results in the “business definition”. At the “business definition” questions are answered like for example: on what customers are we focusing, with what products/services, what core competences do we nurture, what are our goals, as an organization and as a person (mission & vision) and what social responsibilities do we take (Risseeuw & Thurik, 2003).
The model is mainly based on the SME-business plan model, since the SME-business plan model is considered as the most appropriate Entrepreneurial- and Business diagnoses model, described in the literature review, for SME’s. Furthermore, the SME- business plan model scored highest on the comparative analyses, see section 2.2.7. The variables: entrepreneur, network, personal goals, influence of the environment, business definition, market, financial, product/service, organization and the environment (including SWOT), are adopted from the SME-Business plan model.
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The innovation and learning perspective has been adopted from the Balance Scorecard (see the loop of innovation and learning). Furthermore, the following variables of the INK-management model are adopted: management of employees, management of resources and appreciation of employees (see variable organization). Financial indicators (e.g. ROI and ROE) and delivery time are also adopted from the INK-management model.
No variables are adopted from the McKinsey 7-S framework, because the McKinsey 7-S framework is considered inappropriate for SME’s. The McKinsey 7-S framework is considered more applicable for larger organizations, since these organizations have clear structures, systems, shared values etc., which is something a SME not (always) has. But, some variables of the McKinsey 7-S framework more or less correspond to the variables included in the Entrepreneurial- and Business diagnoses model developed based on the literature. Such as: the variable structure of the McKinsey 7-S framework matches more or less with the variable organization and the variable shared values of the McKinsey 7-S framework with the variable business definition.
The various business diagnoses variables are: market, financial, product/service, organization and environment. An explanation of each variable follows:
Market: Market position and competition, marketing, communication and sales promotion, market research, customer needs and expectations, overview of analysis, and external developments.
Financial: Financial analyses and financing, business economics and financial management, business information, overview of analysis (profitability, growth, revenues, ROI, ROE), and external developments.
Product/service: Quality, purchase- and flow of goods management, production and innovation, delivery time, customer satisfaction, overview of analysis and external developments.
People/organization: organization and leadership, management of employees (HRM), management of resources, appreciation of employees and external developments.
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2.6 Athenos adviesgroep Entrepreneurial- and Business diagnoses
model
This section will elaborate the Athenos adviesgroep Entrepreneurial- and Business diagnoses model in detail and provides clear insight into the working method of Athenos adviesgroep.
Athenos adviesgroep has developed an own Entrepreneurial- and Business diagnoses model, which can be found in appendix II. The Athenos adviesgroep Entrepreneurial- and Business diagnoses model is based on a mix of various well-known business administration theories, such as the five forces model of Porter, the PEST theory, McKinsey, Treacy & Wiersma, Leidse Octaëder en “het Trechter Model” supplemented with practical experiences obtained from advising more then 1.000 SME’s (Redmeijer, 2015)1. The five forces model of Porter, the PEST theory, McKinsey and Treacy & Wiersma are considered as well-known business administration theories and will therefore not be further elaborated. A short explanation of the Leidse Octaëder (Boonstra, 2002) and “het Trechter model” (De Witte, 2002) can be found in appendix III. Furthermore, these business administration theories are not described in the previous literature review, because otherwise it would not be possible to find any differences or opportunities for improvement regarding the Athenos adviesgroep Entrepreneurial- and Business diagnoses model. Only similarities would then be emerged, which is not the goal of this report.
The Entrepreneurial- and Business diagnoses model of Athenos adviesgroep starts with the entrepreneur and the mission and vision. This represents the fact that first an entrepreneur needs to discover (and deciding to exploit) an opportunity and define a mission and vision, in order to start a business. Next, the following variables are included in the Athenos adviesgroep Entrepreneurial- and Business diagnoses model: market, product/service and organization. Athenos adviesgroep defines these variables as follows (Redmeijer, 2015):
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Market: For an organization that wants to be profitable (and this is a requisite to exist in the long term), it is required that there are customers who need the product or service of the organization and who are also willing to pay for that product or service. An organization has to deal, in the market (or environment), not only with (potential) customers but also with competitors and stakeholders such as banks, trade unions, influences from politics, the economy, society as a whole and technical developments.
Product/service: For an organization that wants to be profitable (and this is a requisite to exist in the long term), it is required that an organization offers products/services to the market (potential customers) that meet their specific needs (added value). A good entrepreneur is aware of this and maintains intensive contacts with its customers, uses market research and competitive analysis and adjust his offerings when the needs of the market changes.
Organization: For an organization that wants to be profitable (and this is a requisite to exist in the long term), it is required that an organization is effectively and efficiently organized. A well-organized organization has formulated concrete goals and also has an approach (or a plan) to achieve the goals. The organization has the right people in the right place, uses well-functioning systems (tools, ICT, etc.) and managed his work processes well.
Next, Athenos adviesgroep diagnoses an organization according to the following four aspects: management & organization, commercial policies, financial policies and product/service policies, which are divided into subgroups. These aspects, including subgroups, are as follows (Redmeijer, 2015):
Management & Organization
Formulation of goals and policies
Structure
Internal developments
Internal processes and quality assurance
44 Commercial policies
Ability to differentiate (distinctiveness)
Customer focus
Image
Acquisition and management of relations
External communication
Financial policies
Financial position
Internal control, cost awareness
Product/service policies
Ability to differentiate (distinctiveness)
Innovation and participation
Customer focus
These four aspects are connected to the three variables (market, product/service and organization), through the questionnaire containing of 100 practical questions/statements, which can be found in appendix IV. Appendix IV provides clear insight into how each of these questions/statements are connected to one of the variables (market, product/service or organization) and one of the aspects (management & organization, commercial policies, financial policies or product/service policies). An example of how the results of the questionnaire are presented can be found in appendix V. Results provide insight into the current functioning of an entrepreneur and an organization and the desired future state (Redmeijer, 2015).
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The goal of the RDA model is to describe human behaviour in terms of roles and interactions. The RDA model is not limited to aspects of human functioning, such as personality traits, but also analyses capabilities. Based on the outcomes, it is able to describe the functioning of entrepreneurs. It is then possible to determine effective and ineffective behaviour, thereby taking the specific situation of the entrepreneur and his organization as a starting point. The RDA model offers opportunities to turn ineffective behaviour into effective behaviour and gives a consultant insight into which ”role” is the most appropriate one to adopt, for that specific consultancy project. Consultancy projects always need to be customized, which also asks for flexibility of the consultant to vary among different consultancy roles. The RDA model and the corresponding personality tests are developed, validated and normed at a scientifically responsible way. The RDA model makes the ambitions of a person visible and develops indicators to achieve those ambitions with respect to current behaviour (Bies, 2015) 2.
The Entrepreneurial- and Business diagnoses model of Athenos adviesgroep diagnoses an entrepreneur according to the following aspects: “styles of thinking” and competencies. These two aspects will now be elaborated.
Athenos adviesgroep uses the same “styles of thinking”, as the “styles of thinking” developed by Driessen (2006), in order to diagnose an entrepreneur. Therefore, these “styles of thinking” will not be further elaborated. These “styles of thinking” are: Salesman, Pioneer, Manager and Expert.
Athenos adviesgroep distinguishes the following eight competencies regarding diagnosing entrepreneurs: market awareness, creativity, cooperative, reliable, organizing, realistic, independent and resolute. A short explanation regarding each competence follows on the next page.
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Market awareness: You can empathize with the needs of (potential) customers and other organizations in the market (environment) and link this to your own operations. You can build relationships and are interested in others.
Creativity: The ability to play with ideas and see new possibilities and willingness to try things out. You have an enthusiastic, positive and inspiring attitude.
Cooperative: You contribute to the joint result from the principle that a group leads to better results than an individual does. You attach to good relations and are a team player.
Reliable: You are reliable, helpful and stable. You have a great sense of responsibility. You are loyal to others and unselfishly. You put the common interest above your personal interest.
Organizing: You work with clear goals; a proper plan and you prepare activities well. You are persevering in it and perseverance.
Realistic: You have the ability to be objective and abstemious and you see things as they are.
Independent: No matter what the circumstances are or what situations you are in, you are yourself, you behave as you are. Freedom/space for yourself and others are considered important.
Resolute: The ability to “move on”/act in different situations, thereby keeping the other in its value.
Athenos adviesgroep states that every organization requires an entrepreneur/the owner having all eight competencies. Thereby acknowledging that perhaps the most important skills of entrepreneurs is to switch between these competencies. In several situations, entrepreneurs should be able to rely on various competencies. Furthermore, the phase an organization is located in at a particular moment, influences which competencies are needed. For example, during the initial phase an entrepreneur will rely more on interpersonal competencies and at a later phase on organizing and planning competencies (Redmeijer, 2015).
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Figure 6: the four quadrants including entrepreneurial competencies distinguished by Athenos adviesgroep (Redmeijer, 2015)
These four quadrants result from answering the 100 practical questions/statements. These four quadrants are based on the theory of the RDA model and provide clear insight into the scores of an entrepreneur, regarding each competence, compared to average scores. Furthermore, these four quadrants provide insight into the current and desired state regarding each competence. Furthermore, practical information can be obtained from this diagram. By using this diagram, it is easy to determine how ineffective behaviour should compensated by counting three axes clockwise. So, the diagram functions as a “compass” for consultants (Redmeijer, 2015).
For example, someone being too creative, can be chaotic and non-committal. This should always be compensated with the development of organizing behaviour.
Desired Current
48 These four quadrants will be explained now:
Extrovert: Someone who primarily focuses on the market/external environment, with the competencies market awareness and creativity.
Cooperative: Someone who primarily focuses on cooperation, with the competencies cooperative and reliable.
Results-oriented: Someone who plans and organize work and therefore works efficient and effective and is primarily focused on results, with the competencies organizing and realistic.
Autonomous: Someone who is self-conscious and works independently, with the competencies independent and resolute.
The eight axes are pictured in four combinations of two in the figure and are constantly directly opposite of each other. Therefore, they are mutually exclusive concepts.
One example: for someone who is very resolute and able to make decisions fast, it is difficult to simultaneously be very reliable (loyal) to the past. The reverse is also true: for someone being very reliable (loyal), it is difficult to be simultaneously being very resolute.
As mentioned earlier, the RDA model focuses on effective and ineffective behaviour. Effective behaviour is defined as: behaviour resulting in desired outcomes. Ineffective behaviour is defined as: behaviour resulting in undesired outcomes (Redmeijer, 2015 & Bies, 2015). Entrepreneurs should have all competencies and should be able to switch their behaviour, dependent on the specific situation. Balanced entrepreneurs scores around the average on all eight axes and are able to switch their behaviour, dependent on the specific situation. Ineffective behaviour needs to be changed into effective behaviour.
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The scores on the eight competencies together, is always 100%. An average score per competence has a value of 12,5%. The inner circle shows the average score. A score outside the inner circle implicates that an entrepreneur scores higher than average or wishes to score higher than average on that competence. A score on the inner circle implicates that an entrepreneur scores average or wishes to score average on that competence. A score inside the inner circle implicates that an entrepreneur scores lower than average or wishes to score lower than average on that competence.
The outcomes of the analysis can also be interpreted according to the following four dimensions: market awareness, strategic level, tactical level and operational level.
Market awareness: to give substance to this, an entrepreneur needs to score a combination of the following two axes; market awareness and resolute.
Strategic level: to give substance to this, an entrepreneur needs to score a combination of the following two axes; independent and creativity.
Tactical level: to give substance to this, an entrepreneur needs to score a combination of the following two axes; realistic and cooperative.
Operational level: to give substance to this, an entrepreneur needs to score a combination of the following two axes; organizing and reliable.
Relationship with the four “styles of thinking” Salesman: Market awareness
Pioneer: Strategic level Manager: Tactical level Expert: Operational level
Summarized, the four quadrants offer the opportunity to classify competences and “styles of thinking” into the following dimensions:
Operational: with the competences: organizing and reliable (Expert) Tactical: with the competences: realistic and cooperative (Manager) Strategic: with the competences: independent and creativity (Pioneer)
