Dr Gorkan Ahmetoglu is a Lecturer of Business Psychology at University College London and has previously held the positions of Director of Management and Entrepreneurship, Director of Digital Entrepreneurship, and Director of Consumer Behaviour at Goldsmiths, University of London. He is a leading expert in psychological profiling and assessment.
There are two main reason why people set up their own business. The first is that they enjoy the idea of being an entrepreneur and the challenges it brings, as well as the opportunities it creates for them. These are the individuals who will tend to find multitasking more enjoyable and part of the lifestyle that they sign up for.
However, and contrary to popular opinion, this first group of business owners are not the majority. In fact what we see from research is that most small business owners start a small business because they have to, not because they want to. This is reflected in research that shows you’re more likely to start a business if you’re unemployed for example, or have a lower than average level of formal education.
What country has the most entrepreneurs? It’s actually Guinea, followed by Rwanda. Globally, there is a negative correlation between GDP and entrepreneurship. Basically, this suggests that the majority of business owners embrace the juggling of jobs because they have to, not because they actually like doing it as part of their work.
Unfortunately, there is no “on the whole” when it comes to small businesses. It’s a catch-all phrase that lumps together sole traders with senior managers of 50+ employee businesses. And this is not just a problem with your specific question; for years academic literature has wanted to chunk entrepreneurs all into one bucket, and it’s only been in the last decade that this big group has started to be explored in deeper detail.
What I suspect you’d find if you examined the population of small business owners closely is that their levels of confidence will mirror the distribution of the general population. You’d perhaps see greater concentrations of confidence at one end with larger SME owners, and weaker levels of confidence towards the smaller end of the business scale, with most business owners in the middle ground between the two extremes.
That’s a great point, and one that I think academic literature has yet to cover. It’s an area I am particularly interested in exploring in the future. A related topic that has had research into it has looked at whether certain character traits mean you are more likely to start, or be successful at, a business venture.
For example, there’s a positive relationship between optimism and starting a business; more optimists starts businesses than pessimists. However the evidence shows that optimism doesn’t increase the likelihood that your business will be a success. The same goes for risk-taking behaviour. One trait that positively corresponds to both the likelihood of starting a business and the likelihood of that business being successful is extraversion. As a rule, extroverts start more and have more successful businesses than introverts.
Theoretically, yes. We’re running a research survey in 32 cities in Brazil looking at what personality traits of entrepreneurs lead to successful businesses, and how these change based on the specific city that entrepreneur is working in. We’re finding that proactivity for example, correlates positively in some cities, but not in others. This means that if you are a proactive person this can actively works against your chances of business success in some cities in Brazil, which we were all really surprised by!
Essentially, you could look at the relationship between personality and environment from two perspectives. The first argument would be that environment doesn’t affect small business owners as much as it does more regulated roles. If you’re a nuclear technician or an airline pilot it doesn’t matter if you are confident or creative, introvert or extrovert – the work is structured in such a way that it removes the impact of personality on actual output. By contrast, small business owners are their own bosses so these restrictions are not placed on them, hence they are potentially freer for their personality to have a greater effect on the business.
The other way that you can look at it is that the environment a small business owner inhabits is “strong”, not “weak”. What we see in poorer environments is that personality differences between different groups are reduced because the environment is “stronger” and encourages people to act the same way. In this light, entrepreneurs might not have time for their personality to shine because they spend all their waking hours doing business chores, balancing the books etc. – they have no spare capacity to work on their vision for the company.
Conscientious individuals are more successful at organising themselves and industrious people manage the chaos of running a small business better than unorganised entrepreneurs. The problem is that it is hard to manage yourself into becoming more organised; orderliness is a personality trait and personality is half the result of genetics. People also tend to place themselves in situations or environments that match their personality, so change is hard to come about from external influences either.
Ways of making the world more ordered, through technology streamlining laborious process for instance, could help business owners overcome disorderly personality traits. I’ve got no evidence on this in front of me today but I definitely think it would be of great help for them. It’s an area I’d like to see more research on in the future.
Interested in learning more about the personality of small business owners? Read about the results of our recent survey.