Why Entrepreneurs Make Bad Employees

An alternate title I was considering for this article was "Why you do not want to encourage entrepreneurial behavior among your employees", but the shorter title sounded more catchy.

Before we jump into this topic, I'd like to articulate that I am in no way denouncing entrepreneurs or the entrepreneurial spirit that has helped launch countless successful small businesses from no more than an idea and a lot of hard work. Instead, what I will be advocating here is that entrepreneurial behavior is simply incompatible with today's modern workplace, due to the challenges that are present in this organizational model, as I presented in my own theory. By expressing entrepreneurial behavior in the workplace, employees are simply setting themselves up for failure in a system that is designed to resist change at almost any cost. Why? Read on.




Being an entrepreneur, practically by definition, means that you participate in a process called "creative destruction", a term popularized more than half a century ago by Austrian-American economist Joseph Schumpeter. This term, at least how I interpret it, means that destroying things, or taking your time away from things that don't generate a positive return on your investment of resources, can be just as valuable as spending your time on creating things that do. We can see this concept at work in our everyday lives, such as when a restaurant closes, and the owner chooses to open a new one with a different menu, or maybe even a different type of cuisine altogether. In this example, the restaurant owner has decided that their time, resources and money would be better spent on creating a new business that would hopefully attract a greater number of hungry customers. This is an example of creative destruction (the old restaurant disappearing enables a new one to open up), and ultimately an example of the free market at work. Entrepreneurs are varied in their skills and interests, and this type of activity occurs every day, in a large number of sectors in the economy.

If we agree, therefore, that entrepreneurs are justified in committing creative destruction when a greater opportunity exists in starting a new venture, what is the challenge with embracing this behavior in your own workplace? To help answer this question, consider the following points:

1) As an employee, you get rewarded for meeting goals, not creating value.

As an employee, you are tracked and evaluated on a set of abstract "goals", usually determined on a year-by-year basis. From a young age, we're taught that finishing all of the work we set out to do (or that we were assigned) is the only way we can determine our success, in school or at work. As a result, it's only natural to feel a little unworthy if you did not meet all of your work goals at the end of the year, no matter how irrelevant they have become. A major reason for this anxiety is that these types of annual evaluations are often tied to compensation increases and job promotions. As a result, sometimes a project that shouldn't carry on and waste everybody's time will continue mercilessly, simply because nobody wants to be singled out as the person that "killed the project". Thus, any opportunity for creative destruction, to liberate the project team's time for more valuable work, will be squandered.

2) The indirect customer (management) will always be more resistant to change than the real customer.

Unless you work in a sales or customer-facing role in your organization, you will likely face this common situation, where you are forced into making decisions or engaging in projects that offer questionable value to the end customer of your product or service. This is because your indirect customer, management, can often be bound by the same set of constraints in your organizational culture as described in the first point above. However, in today's complex, convenient and increasingly global consumer culture, customers face very little, if any, resistance to changing vendors for whatever product or service they are buying. As an employee, however, your performance will rarely (if ever) be evaluated by your organization's actual customers, so where does your loyalty rest?

3) Entrepreneurs respond to direct incentives (and disincentives).

When acting as an entrepreneur, there is rarely any "safe road" that can guarantee steady prosperity and anything more than short-term job security, so you don't naturally look for one. The usefulness of your activities, and the quality of your work, are judged on a near daily basis by how many customers there are willing to pay for your product or service. As a result, you respond way more effectively to direct incentives than indirect ones. If you're a salaried employee, on the other hand, as outlined in my previous article your own personal risk-reward matrix is simplified down to annual increases in pay and possibly an end-of-year bonus, so seizing an immediate opportunity will not necessarily translate into an immediate monetary gain. Likewise, there is often very little disincentive to maintaining status quo, even in situations where "rocking the boat" would be the correct course of action, because nobody wants to be singled out from the masses of public opinion, within the organization. This work environment removes the types of direct signals that an entrepreneur would respond to, and base their actions on.

I hope that this discussion has helped to outline some of the conflicts between entrepreneurial behavior and organizational behavior, as I have seen it for the last 10 years working in the IT field. I would love to hear your own point of view on this topic as well, feel free to sound off in the comments section! Until next time, keep on trucking.