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Improving Entrepreneurship Success and Profitability by Using Corporate Ways of Doing Business

Cojocaru C.
University of Bucharest, Faculty of Business and Administration, Bucharest, Romania

Summary: The path of people careers is changed in many ways nowadays, comparing with the last century. The people could be engaged in self-employment for various periods of time during their working life. Participating in a new business creation could alternate with working for corporations on various positions. These new entrepreneurs having a corporate background are very likely to develop a new business initiative based on their expertise as employees. Having this in view, this Paper aims to focus its scope towards understanding the impact of the people career background in having success in entrepreneurship. A set of two hypotheses were tested and validated during our research among a number of entrepreneurs, using the information provided by a survey based on a questionnaire. The research revealed new aspects with regard to the using of usually corporate ways of assessing financial and operational issues, within entrepreneurship initiatives, in order to assure increase their efficiency and profit. Keywords: entrepreneurship, management tools, employee experience, management needs 1. Introduction Entrepreneurs are among the most celebrated people in our culture. Celebrity entrepreneurs such as Steve Jobs, Bill Gates, and Mark Zuckerberg are often on the covers of prominent publications and become well-known by the public. (Zacharakis, 2008) These company founders and innovators fuel economic growth and give the nation its competitive edge. On the other side, extensive reports released by the administrations and academic researches revealed that small firms had a high percentage of contributions to a nation employment and wealth. However, very little is known today how the professional backgrounds and life histories of the founders of businesses are influencing the path of success of all these new companies. Several founders have been asked more detailed questions about their backgrounds, motivations, and experiences in launching companies. While this research cannot be generalized to the entire behaviour of entrepreneurs, it is meant to show how the career backgrounds of entrepreneurs could be helpful in their new enterprise. Here are some of the key findings. Detailed statistics and charts are available in extended paper. 2. Materials and Methods Giving a definition to entrepreneurs and entrepreneurship is not an easy task. Entrepreneurship is often identified with the creation of new business ventures or with self-employed individuals. Entrepreneurship, however, is a much broader phenomenon. Whether starting a new business, individuals are always on the alert to the possibility of changes that may improve their life, even if in very small ways. All individuals are potential innovators seeking new and better ways to do things. Thus, entrepreneurship is a characteristic of human behaviour consisting in the identification of new end-means frameworks. (Minniti, Koppl, 2003) Schumpeter (1911; 1939) has a well-known concept of the entrepreneur as innovator. Schumpeters entrepreneur introduces new combinations new products, production methods,

markets, sources of supply, or industrial combinations shaking the economy out of its previous equilibrium through a process Schumpeter termed creative destruction. Perhaps Kirzner best described the market impact of Schumpeters entrepreneur when he wrote: for Schumpeter the essence of entrepreneurship is the ability to break away from routine, to destroy existing structures, to move the system away from the even, circular flow of equilibrium (1973). My idea of entrepreneurship includes everyone who starts a new business. The entrepreneur is the person who perceives an opportunity and creates an organization to pursue it. And the entrepreneurial process includes all the functions, activities, and actions associated with perceiving opportunities and creating organizations to pursue them. (Bygrave, Zacharakis, 2011) Despite all stereotypes promoted by the mass-media, it seems that, according to the study The Anatomy of an Entrepreneur (2009), the company founders tend to be middle-aged and welleducated. These entrepreneurs tend to come from middle-class or upper-lower-class backgrounds, were better educated and more entrepreneurial than their parents. Theirs motivations for becoming entrepreneurs are, among others: building wealth, owning a company, start-up culture, and capitalizing on a business idea. Most had significant industry experience when starting their companies. According to the same research, the majority of respondents had worked as employees at other companies for more than six years before launching their own companies. The highest percentage of entrepreneurs launched their companies after working as employees for other companies for between one and ten years. However, significant percentages of respondents started their first companies after working for someone else. In other words, while entrepreneurs do tend to launch companies early in their careers on average, significant portions (47.9%) wait until much later in their careers, after passing ten-plus years in the workforce before launching a company. A similar theory is presented by Tervo (2011). This described selfemployment in later life as a form of partial retirement or a career option. Another approach we are going to bring into attention is this related to the reasons for which entrepreneurial initiatives fail. As described by Pasanen (2005), in many cases, the root cause of failure can be traced to problems in management and to the lack of strategic management in particular of the new small companies. It has often been argued that a firm failed because it had run out of money, whereas the root cause may be poor or ineffective management, or not paying attention to strategic issues, for example. A firm failure could be due to the lack of a business plan. Lack of planning and especially strategic planning is associated to failed companies (Boyle, Desai, 1991). In my opinion, the people who have enough professional experience are more likely to leave the employee status and to establish their own company. We are imagining well-trained persons between 30-40 years, having most likely a middle-management position in a large company or a corporation. The entrepreneurs who have chosen this alternative are engaged in professional services, having small business, started before the crisis, aiming to have an independent life. Most of these entrepreneurs activate in consulting, marketing, branding, financial services, audit, accounting, sales and project management. Most of these companies have been launched after a thorough analysis of the market. Top managers launching their own companies after working for international companies tend to be more successful in their new career then inexperienced entrepreneurs. The former top managers enter business just due to their previous experience (both theoretical and practical), which could justify their success. If there is negative aspect they mention in their new life, there is the lack of social exposure and the glamour offered by an international company.

A very important thing that should be underlined is the fact that these new entrepreneurs will bring in their company their working stile acquired at the previous workplace. They will develop their company according to the model they learned at the previous workplace. It is well-known that the entrepreneurship is one of the most important drivers of economic development in the world. This is the reason why the formation of Romanian entrepreneurs represents a key element in order to create a strong economy and to cope with the economic crisis. Starting from the above discussion, some questions can be raised regarding the role of previous employee experience in the formation of Romanian entrepreneurs. They are: Which is the level of previous employee experience among the Romanian entrepreneurs? Which is the range of management tools requested to the entrepreneurs? Which are the management needs of the entrepreneurship? In order to get answers to these questions there were used a methodological approach based on a survey. 3. Research methodology The aim of this paper is to investigate the role of using previous employee experience and management tools in developing entrepreneurship. The objectives of this study are: O1. Identify the management tools used by the entrepreneurs; O2. Is there any connection between their previous careers experience and working for a larger organization and the use of modern management tools for the entrepreneurs? Consequently, the following hypotheses have been formulated: I1. Which is the need of business and management tools for the entrepreneurs? I2. The more diverse the previous working experience, the range of business and management tools known and used is wider? The study required carrying out a survey based on a questionnaire involving entrepreneurs. The sample comprised entrepreneurs who participated in the conferences of the Cloud Computing, organized and held in June 2012, by IDG, a local IT media group. Those conferences were widely advertised in the specific media and disseminated the information about new IT technologies and progress. Sampling was at random and probable. Selection of people was done through a statistic method from among the participants at the Conferences. Interviews were conducted both face-to-face and by email. The main activity domains of the respondents are: IT (Information Technology), consulting, and accounting. The interviews started in June 2012 and the results were analysed in July and August 2012. Overall, the survey has 23 questions addressed to 12 entrepreneurs and covers questions about their university studies, work and learning habits, attitudes, and job experiences. Included questions provided information about family background and schooling. Information about demographic variables, such as age or gender, is also available. The questions aimed to determine the perceptions and the easiness of using controlling instruments, such as: preparing plans, budgets and forecasts, preparing the Balanced Scorecard, as well as other subjects concerning the organizational performance management. The discussions included the use of key performance indicators at the individual and organizational level. These interviews aimed the exploration of their opinions concerning the level of understanding, and using of BSC in their own company, after using and implementing as employees. It was observed the way they used BSC in correlation with KPI, strategy map and the mission and the vision of the company.

4. Results The study tested two hypotheses: I1. Which is the need of business and management tools for the entrepreneurs? I2. The more diverse the previous working experience, the range of business and management tools known and used is wider? It was noticed that previous experience as employee, especially top and middle management, has a strong positive effect on the probability of successfully self-employment transitions. Deep knowledge of management tools, such as budgeting, financial analysis, BSC, have a strong positive effect on the entrepreneur success. Higher education increases the probability of entering self-employment at older ages. As for the first hypothesis, one can see the low level of addressing business and management tools at the beginning of entrepreneurship activity. After developing the company, the need for business and management tools increased in all cases. The percentage that shows that over 60% of the entrepreneurs intended to use management and controlling tools in their business is a good indicator that the entrepreneurs are totally aware of the information and decision support offered by such tools. 2/3 of the respondents declared that they turned to business and management tools and would improve this side turn in the future as well. It is interesting to note the shift towards using information and IT facilities (especially SAAS Software as a Service) in financial analysis, marketing strategies, project management and investment, while the company is increasing the size. Following the interviews, it has been noticed the effect of corporate background. Most of them use Microsoft Office in order to generate the reports and analysis, an easy technological alternative without additional costs, having a reasonable cost/benefit ratio. There is a real need for business and management tools to make the entrepreneurial development professional. The second hypothesis (I2) shows relevant statistical differences regarding addressing to business and management tools depending on their previous working in other companies. The entrepreneurs with previous working experience indicated in a larger way that using BSC is beneficial and implies other aspects also, such as: performances, strategy, align communication, resource allocation, decision-making processes and competitiveness. Thus, the results revealed that only a third part of the respondents indicated that in their company the strategic objectives are clearly described and communicated, and only a quarter think that they have a structured approach towards identifying and implementing improvements initiatives. Among other tools used by entrepreneurs, beside BSC, it is to be mentioned the followings: ABC (Activity based costing); Controlling; Evaluation 360; Strategy Map; ISO. Similar tools mentioned were: Key Performance Indicators (KPIs), Management by Objectives (MBO), Lean / Six Sigma, Dashboards and Benchmarking. 5. Conclusions These results clearly indicate that the respondents are familiarized with a large range of management and controlling tools. More than that, they are aware about the connections between the performance management, quality management, financial and human resources management.

This puts an emphasis on the fact that the Romanian entrepreneurs in IT and consulting business are connected to the management good practice. This research, though limited by its purpose and size of the people surveyed, represents a starting point for studying the relationship between entrepreneurs success and their previous career background. The obtained results can be used as working hypotheses for research on larger samples for many industries and Romanias regions.

References

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