Personality of the starter has an impact on business performance
This post originally appeared on blog.up.co
This article was written by by Michiel Crommelinck from Securex. More info about Securex and its services to starters.
Increasingly you hear investors saying: "We don’t just look at the idea, but also the founder of the startup team, before we make an investment." Rightly so, as it turns out, because research shows that someone’s personality has an impact both on the intentions to become an entrepreneur, and later on business performance.
Although in practice a wide variety of personality tests are popular (e.g. the MBTI), researchers agree that the Big 5 is the most reliable way to determine someone’s personality. The Big 5 combines five personality traits, namely:
- Openness: people who score high on openness are curious, creative and keen to find new ideas and experiences.
- Conscientiousness: conscientious people are those with a high level of organization, planning and responsibility, are often highly work motivated and have a lot of self-control.
- Extroversion: extroverted people are social, energetic, active, friendly, optimistic, and are often dominant in social situations.
- Agreeableness: people who score high on agreeableness are modest, cooperative, altruistic, and trust people quickly.
- Neuroticism: neurotic people have low emotional stability. They often have more worries, are less well to handle stress, and often have less self-confidence.
Based on an analysis of more than 15,000 entrepreneurs, recent research concluded that openness, conscientiousness and extroversion have positive relationships with entrepreneurial intentions and business performance. Neuroticism, on the other hand, has a negative impact, and only the trait of the agreeableness shows no relationship to intentions or performance.
Through what mechanism does the effect of personality work? The role of teamwork
Researchers have shown that there can be two types of conflict in teams: task conflict and relationship conflict. In teams with a lot of task conflict there is frequent discussion about the best ways of doing things, a lot of information is shared to support arguments, and team members are open to the opinions of others. In teams with a lot of relationship conflict there is often a great deal of hostility and incompatibility. Team members are often less inclined to share information that is relevant to a task or project, and frequently launch personal attacks.
In a study of 323 startups it was found that task conflict firm increased business performance (measured by the gross margin), while relationship conflict decreased business performance. Moreover, it appeared that the effects of two personality traits, neuroticism and openness, on business performance could be partly explained by these two types of team conflict. Personality thus appears to have an effect on business performance, including through the impact on team conflict.
There are many factors that affect the performance of a new company. Often one automatically thinks of the sector in which the business is located and the innovativeness of the idea. On the basis of recent scientific research, we can conclude that it is also important, for example for investors, to look at the founder and the team. The personality of the entrepreneur appears to be able to account for 10 % of the variation in business performance.
de Jong, A., Song, M., & Song, L.Z. (2013). How Lead Founder Personality Affects New Venture Performance: The Mediating Role of Team Conflict. Journal of Management, 39, p. 1825-1854.
Zhao, H., Seibert, S.E., Lumpkin, G.T. (2010). The Relationship of Personality to Entrepreneurial Intentions and Performance: A Meta-Analytic Review. Journal of Management, 36, p. 381-404