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The secret to efficient entrepreneurial teams

Posted on from HEC Paris

The term ‘entrepreneur’ isn’t usually associated with teams – how does an entrepreneurial team work?

As the African saying goes: “If you want to go fast, go alone. If you want to go far, go together”. This applies perfectly to entrepreneurs. Creating a truly innovative and successful business is rarely the work of one person, due to the diversity of tasks and the different skills required. 

Though entrepreneurship is often seen as a largely solo career path, it is actually the environment in which the best and most effective collaborations can happen, and also where such activities are vital for business success. A study we undertook in 2014 with Thomas Littée into the make-up of start-up ventures, involving 166 creators and managers of new innovative businesses showed that only 12% of start-ups are run with just one person making all of the strategic decisions, whereas in 72% of cases these decisions are made by two or three partners. 

On the other hand, managing a successful start-up is never effective when a large number of people are making the decisions either. So in launching, and making a success of, a fledgling business how can entrepreneurs go about selecting the right people to collaborate with?

“If you want to go fast, go alone. If you want to go far, go together”

This graph shows the number of founding partners of 166 startups surveyed in 2015. Most startups are created by 2 or 3 partners.                           

Avoid clones

One of the main challenges for entrepreneurs is to unite complementary partners. People who share the same outlook, values and objectives, or at least those similar enough to be compatible. However, as tempting as it may be to surround yourself with “yes men” who will not object to or challenge your plans, it is of no benefit to work with clones – those who have the same skills and the same personality as you. A founder must take care to combine different profiles, whilst understanding that these differences will simultaneously cause synergy and, at times, antagonism, as success largely hinges on the ability to overcome these differences.

Create a structure

To set expectations and avoid confusion or conflict, initial capital should be divided up according to the personal involvement and skills of each person. It must be motivating and fair so that the founders are inclined to involve themselves fully in the venture when uncertainty is high and so are the sacrifices people have made in terms of remuneration. It was no surprise to find during our study with Thomas Littée that the most valued roles in a start-up are linked to development and marketing. The R&D-production duo therefore obtains an average of 38% of the capital, followed closely by marketing and sales, taking 36%. In fact, general management is often handled by a founder with technical or commercial skills.

This graph shows the relative importance of a startup’s main managerial functions. This relative importance is expressed in terms of percentage of equity for the corresponding founder holding this position: e.g. 13.6% of equity for the CEA, with a standard deviation of +/- 11.1%.

Keep the team diverse

While it is not too difficult to evaluate the “technical” skills of a potential partner, evaluating their psychological profile and their compatibility with other team members is a highly complex, yet useful, task. 

Before jumping into a start-up with other people, it is important to take the time to get to know each another, exchange views on success, and reinforce trust within the team. This reciprocal understanding is quickly established when the group gets down to defining the first steps in the development of the business and divides up the resulting tasks, whether they be scientific, technical, commercial, financial or administrative. This exercise often makes it easier to identify those who are really involved in developing the business, and those who are more than just talk and good intentions. 

This graph shows the average percentage of equity for a startup’s founding partners, according to the number of associates. For instance, the main shareholder of a company comprising two founders will get 61% of shareholding, whereas the second founder will get an average shareholding of 39%.

It also helps in sharing out expected responsibilities and time commitments. As much as an under-motivated team member can cause problems, a partner who has little involvement can also strongly risk upsetting the group dynamic. Hence the problem with choosing partners too quickly and, as a result, on a misunderstanding. It is unwise to avoid asking the questions that must be asked for fear of upsetting the apple cart, as doing so could lead to catastrophe further down the line when you realise your vision and fundamental goals are at odds with those of your team.

Plan for problems

Anticipating complications, and dealing with conflict are the privilege of entrepreneurial teams. If problems happen early on so much the better, but regardless of when they occur, when they are dealt with in a constructive manner they can help the team to grow and bond just as much as success does.

Two centuries ago the philosopher Holbach, claimed that reason is the “balance of passions”: this maxim applies to many entrepreneurs, who defy reality and manage to give their team direction, as well as energy and meaning to their work.

The ingredients for success

The ability to unite such different profiles - creative, organised, calm, impulsive, empathic or charming people - makes it possible to create a business like no other. Rather than the image of the conductor leading an orchestra, we prefer to think of the leader of a jazz ensemble, where a handful of musicians work effortlessly together, showing their talent and captivating their audience through their joy at creating something together.

Unsurprisingly, a large proportion of would-be entrepreneurs make the decision to go to business school, to brush-up on their skills ahead of taking the plunge and launching their own ventures. Such environments should be fully utilised by these individuals as a place for such collaborations – either by joining with fellow students to launch a venture or to float and test an idea within a network of supportive peers.

Authors

Étienne Krieger is scientific director of the entrepreneurship centre at HEC PARIS, and Anne-Claire Lethbridge is coach and deputy director of LIVINGSTONE RH.

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