Forming entrepreneurial teams

June 15, 2017

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Cyrine Ben-Hafaïedh

Professor Cyrine Ben-Hafaïedh

Based on an interview with Cyrine Ben-Hafaïedh and her forthcoming article: “La constitution des équipes entrepreneuriales: une quête d’affinités socio-psychologiques et de ressources”.
 
How are entrepreneurial teams formed? Rather than either natural affinity or purely economic, strategic decisions, the people who create these teams often combine the two approaches, explains Cyrine Ben-Hafaïedh, who analyses the levers that maximize the chances of success for entrepreneurs.


Biography

Cyrine Ben-Hafaïedh is professor of entrepreneurship (the subject in which she has a PhD) and strategy at IÉSEG. Her research focuses on collective entrepreneurship, especially entrepreneurial teams. Ben-Hafaïedh is responsible for the innovation consulting projects at IÉSEG,  a scheme that enables students from business and engineering schools to work together on innovation projects. She is also responsible for a social entrepreneurship initiative at the School, in which IÉSEG students support social entrepreneurs who have been nominated through the CREENSO awards as part of a skills-based sponsorship package.


Methodology

Ben-Hafaïedh’s study investigates how entrepreneurial teams are put together. It employed abductive reasoning, a method used to understand different phenomena by combining empirical data with theory. Ben-Hafaïedh applied the technique to a sample of eight entrepreneurial teams who created companies from scratch.


Entrepreneurship is not a solitary business. Half of all companies — and the majority of businesses operating in the field of high-tech — are created by teams. Possible reasons why range from the pre-eminence of the collective model to resource issues (time, money, skills, and so on). While it has been shown that companies created by multiple people together grow faster and generate more jobs than those founded by individuals acting alone, these firms also face a significant risk: the possibility that the entrepreneurial team will implode, which is actually one of the primary reasons that these businesses fail.

The question of how best to form entrepreneurial teams is clearly vital. Their make-up is different from that of management teams, which are in charge of coordinating and guiding sub-units under their responsibility, and whose membership is not self-determined. An entrepreneurial team is more akin to a project team: it consists of a temporary group responsible for developing and delivering a specific project, but the distinguishing feature of entrepreneurial teams is that members come together of their own free will.

Choosing team members: natural affinities or complementary skills?
Practitioners and researchers are wont to draw a distinction between two different approaches to establishing entrepreneurial teams. The socio-psychological method sees the issue as an inter-personal affair: project leaders select people from their network, eventually deciding on colleagues who have similar characteristics and share the same values. The economic-strategic approach, on the other hand, consists of picking individuals on the basis of their resources and skills. Ben-Hafaïedh’s study demonstrates that, in reality, both mechanisms tend to be at work.

As with any complex choice, project leaders follow a phased decision-making process: they do the rounds of people they know, identify individuals who might be interested in entrepreneurship, and then filter them. Their choice is based on a small number of people they already know, who are selected first according to their own vision of the company (which might be to develop a project to be re-sold in three years, for example, or to hand on the firm to their children). At this stage, project leaders consider everyone with whom they can get along, based on personality and value compatibilities.

Once this initial selection has been made, leaders pick individuals who will, in principle, offer the highest added economic and strategic value — members, in other words, who boast the “greatest functional utility”. These different stages are not necessarily conscious, and often occur in parallel. Choices are limited to very small numbers of people: the individuals known to the project leader who come to mind when he (or she) decides to set up a business. This fact means that such teams tend not to be blessed with a great degree of functional and cognitive diversity. Consequently, some practitioners and researchers argue that the decision-making process is irrational. It is true that proceeding by natural affinities — and checking that values and desires are compatible — has two positive consequences: it helps inspire confidence in project leaders and gives them the sense of security that they need to embark on an entrepreneurial adventure. At the same time, however, teams that are formed in this way are perceived as being less effective from an economic and strategic perspective. What, then, is the answer?

Maximizing an entrepreneurial team’s chances of success
Ben-Hafaïedh shows that entrepreneurial teams are created both by natural affinities and skills. The typical phased decision-making process in forming a team can provide sturdy foundations but also has a weakness: when project developers start by looking for affinities among individuals within their immediate environment, it limits their selection pool, particularly in terms of functional diversity. To optimize the chances of founding a successful entrepreneurial team, Ben-Hafaïedh suggests networking and taking every possible measure to increase the pool of potential co-creators. When project leaders receive professional support (as with incubators, for example), their coaches may introduce them to new faces by suggesting, inter alia, networking opportunities.

They might also provide assistance with recruitment, in particular to help leaders select and assess potential co-workers on the basis of functions that are not their own. By contrast, Ben-Hafaïedh warns against professionals (such as venture capitalists) choosing the members of the entrepreneurial team instead of the project leader. “That wouldn’t work,” she says, “because a company’s success is also linked to the compatibility of its members.” The ideal is to skillfully combine socio-psychological and economic-strategic approaches to maximize the advantages and minimize the disadvantages of the two respective methods.


Business applications

The formation of an entrepreneurial team is crucial to any startup’s success. When faced with this complex issue, entrepreneurs often decide to join forces with people from within their existing circles. Ben-Hafaïedh warns of the need to verify that each individual’s personal vision of the company is aligned as well as that the different personalities and values are compatible (which is often assumed to be the case).

She also suggests that leaders should enlarge their search to boost the chances of finding functional and cognitive diversity, which can significantly raise the team’s performance (provided that the earlier “interpersonal filter” has been implemented). Third-party players — especially professional coaches — also have a role to play but should not take over from the entrepreneurs themselves in deciding the make-up of teams.


The 2nd Developmental Workshop on Entrepreneurial Teams and
Collective Entrepreneurship Research will take place on September 18, 2017 at IÉSEG’s Paris-La Défense Campus, France.  More information on the event and the call for abstracts (deadline 30 June 2017) is available on the conference website.

* Forthcoming in the “Revue de l’Entrepreneuriat”

IÉSEG