Entrepreneur CEOs Dark Side Personal Characteristics And their Effect on middle management lack of authority in decision Making

in business growth phase

Dr. Mona Kadry Khaled Hosny Ahmed MBA Program (3rd General) Graduate School of Business ( AAGSB) Academic Year (Spring 2011)

Abstract This research concentrates on studying the effect of the dark side of entrepreneur personal characteristics in certain segment of entrepreneur CEOs and how this will affect the authority of decision making in middle management in the same organization. In this research we will consider three dark side characteristics that are generally attached at different degrees- to the personality of an Entrepreneur which are Desire of Control, Lack of Trust and Ego. We will study the effect of Desire of Control, Lack of Trust and Ego on middle management authority in one company which is managed by CEO who is well recognized in their field for their Entrepreneurship skills and their innovations in starting new business opportunities and his business acumen in an effort to transform innovations into economic goods. This CEO started his own small business 10-20 years ago and he assigned himself as CEO of his own company. His company is known for their middle management high turnover rate. The Hypothesis of this research is There is a correlation between Desire of Control, Lack of Trust and Ego appears in certain segment of entrepreneur CEOs (Small Business Owners) on one side and middle management lack of authority in decision making on the other side A ready made five-point Likert scale questionnaire is used to measure the effect of each of Desire of Control, Lack of Trust and Ego on the decision making of 4 middle managers in four companies with same criteria mentioned above. Interviews done with four managers reporting directly to four entrepreneur CEOs (Small Business Owners) through structured interviews by the questioner questions. The questionnaire consists of 30 questions divided into 2 groups. 1st group is of 15 questions which will measure the 3 characteristics and the 2nd group is of 15 questions which will measure the effect on decision making. Minitab will be used to analyze the provided data, and explore the findings.

Page | 1

Introduction Most of the researches in the last 2 decades concentrated on studying the personal, social and psychological characteristics of the Entrepreneurs which enabled them to hunt the business opportunities & start their own businesses booming them up in short time. Some researchers looked at the Dark Side of the Entrepreneurs from the telescope of entrepreneur that uses his gifted entrepreneurship skills in doing what is not ethically accepted by their society. Only few researches digged inside the facts of the entrepreneurs personal characteristics and how these amazing personal characteristics may be turned into harmful tools affecting his business while he is not aware. Certain Segment of entrepreneurs CEOs called Small Business Owners is people who started their life from a scratch, they started their small businesses because they trusted only in themselves, and they know that they are smart. They used to keep their business secrets to themselves because they believed that the business at a starting phase can be easily beaten, so they prefer to start a business in a foxy and foggy environment. Same type of entrepreneur CEOs keep managing their companies in same foxy way along the years without considering the growth of their business and the dynamics of economy. They think that the characteristics helped them starting the business are the same which will keep them successful. This idea reflects on the Entrepreneur through 3 main behaviors they apply upon

The managers and employees which are, Desire of Control, Lack of Trust and Ego. In this research we will examine the Negative Impact of these three characteristics - Desire of Control, Lack of Trust and Ego on middle management lack of authority in decision making at the business growth phase. As middle management lack of authority at the decision making is the dependent variable which affected by three independent variables Desire of control, Lack of trust and Ego of CEOs entrepreneurs. Literature Review
In our research we followed (Webster, 1977) classification of entrepreneurs as follows: -The Cantillon Entrepreneur (classic type) brings people, money and materials together to create an entirely new organisation. -The Industry Maker goes beyond merely creating a new firm; their innovation is such important that a whole industry is created on the back of it. -Administrative Entrepreneur (Intrapreneur) a manager who operates within an established firm but does so in an entrepreneurial manner. -The Small Business Owner an entrepreneur who takes responsibility for owning and running their own venture. Our research is studying the entrepreneur CEO who is under the classification of small business owners (Class4). Manfred Kets as a psychoanalyst and professor of management concentrated on examining the behavior of entrepreneurs through a psychoanalytic lens. In his researches; he concentrated on the psychology of the entrepreneurs and how this affects the organization as a whole. Kets reached some characteristics which commonly exist at Page | 2

different concentration as a part of this type of Entrepreneur personality. These characteristics are DISTRUST, DESIRE TO CONTROL and EGO or what is called desire for applause.

They believe if their rules are followed; the business will perform the best, not considering the effect on other employees.

In this research we are going to examine in depth the Small Business Owner entrepreneurs individual acts and with their cooperate performance when their business starts growing.
Dark Side and Bright Side Personal Characteristics DISTRUST and DESIRE TO CONTROL and EGO are two sides Bright and Dark- of the same coin, these personal characteristics of the entrepreneur are real drivers of the entrepreneur success in business startup phase. Also the same characteristics are becoming destructive once the business starts growing up Need for control According to Kets de Viies is a significant theme in the life and personality of many entrepreneurs. Some entrepreneurs are filled with contradictions when it comes to their need for control. They feel that they are filled with Influence, power, and authority, yet also feel helpless. They have fears from losing their efforts and years they spent starting and growing their businesses by a wrong decision of one of their managers. This type of entrepreneurs usually doesnt have the flexibility to understand, or give the chance to understand a subordinate way of thinking as most of them did not or werent successful in playing the role of subordinate. They find it very difficult to work with others in structured sequence unless they design the structure themselves, so as owners and CEOs of their companies they enforce their structure like train reels and they apply all types of control to keep their managers on these reels.

Ego According to Brian Wu (2005) describes the ego of this category of entrepreneurs as a function in confidence. They have "overconfidence in their ability" this explains the start up entry of entrepreneurs; he also explains that most entrepreneurs might not bear risk as average persons, but they value most their abilities. In spite that confidence is not certainly ego but sometimes when the risk is taken by the entrepreneur and turns to be of success and he runs a big organization rather than a small business, more confidence is grown to be a faith that I am invincible , I cannot fail , I am superior. He starts under estimating the vision of his employees.

Entrepreneurs CEOs with such ego simply change their characters once they are out of their company boundaries, and always treat their employees with such ego to remind them that they have reached this position due to their extraordinary capabilities which employees dont have, so it goes without saying that they are always right , and opposing their decisions has one meaning which is you shouldn't be so confident , so the ego turns to be a defensive mechanism against what they believe the tool that brought them there where everybody told them you are not going to make it. Distrust Can anyone complete a business transaction in absence of the minimum portion of trust between both parties? even the fraud business had cherished the importance of gaining trust of others as a condition to complete a fraud According to Stephen M. R. Covey; distrust is like a tax dividend companies who lack it they pay at least 6% of their revenues to overcome this trust issue, he also referred to a Watson Page | 3

Wyatt study which showed that high trust environment companies outperform low trust companies with 300%. The Entrepreneur CEOs under this research trust only themselves at the beginning to ensure their success, they give their full time observing each detail of their work, they watch their customer behavior toward competitors, but eventually when they are capable of hiring good talents they start to feel that everybody is envying them. With such entrepreneurs they care about details of daily work, they leave nothing without their approval, you find that their authority pattern is limited only to the CEO, they spend lots of time In reading their employees mails, some even check who's coming in and out to the office, and Comes to the extreme when they hire their old semi-trustable employees to acknowledge them with rumors, relations, and discussion of new comer employees, regardless of their position. Usually the distrust issue leads the innovative capable managers to leave, the company never turns to be at any form of the four entrepreneur cooperation styles, and it starts to shrink to the extent until the entrepreneur can manage by himself only. Negative effect on middle managers According to David Osborne and Peter Plastrik (2000); Most of the middle managers also have trouble letting go of power. Their professional identity has become wrapped up with being in command. When middle managers figure out that they are not the decision makers for their departments anymore and if they decide to stay in the same organization they will avoid taking any decision because they know they will be on the hook if things go wrong. Even if things go right they will not receive the credit. Continuum of decision making procedures According to Gary A. Yukl, decision procedure has four grades as follows: 1- Delegating High influence by others 2- Joint Decision.

3- Consultation. 4- Autocratic High influence by others Usually entrepreneurs follow the autocratic way in starting their businesses; the autocratic decision making is the best choice for entrepreneurs at this stage as they are not ready to have opinions to put obstacles in their way. They start their vision and they calculate the risk without consulting others. When the business starts growing the entrepreneur CEO should move through the decision making model gradually, start depending on others and starts getting others opinions because as the business grows, hundreds of new variable in all aspects are being added to the business to the extent that exceeds the capabilities of the entrepreneur, but at that stage the entrepreneur can listen but will not go the next step which is Joint decision as the shadow of mentioned three characteristics prevent him to dont complete the complete he decision procedure matrix.

Methodology of the research

Sampling To highlight a specific subgroup (Small Business Owners Entrepreneurs) within the population of Entrepreneurs; Stratified random sampling techniques will be used to select our sample. The sample covered one manager from each of 4 companies which are managed by

Entrepreneur CEOs who are well known for having personal characteristics similar for the segment we are studying in this research. All these companies are growing and expanding. To ensure the understanding of the manager to his boss personality and the fair testing for our hypothesis, we selected managers with fair personalities, above 40 years old,
Page | 4

with more than two years of experience reporting directly to the Entrepreneur CEOs.
Questionnaire and Data Analysis Two readymade questionnaires have been used to lead the structure interviews for collecting the data. First questionnaire is testing the personality of the CEOs as a function in the perception of his managers. The questionnaire consists of 15 question each 5 questions are measuring one of the personal characteristics (Desire of Control,

Findings
Carrying one way ANOVA testing on the data collected from first questionnaire, resulted in 0.788 P value>> 5%. Which means there is no significant difference among the perception of the managers in their CEOs? The means of the 15 questions are 1.933, 2.200, 1.800, and 1.867 - very near to each other- and skewed toward 1 which proves the significance of existence of Desire of Control, Lack of Trust and Ego within the personality of the Entrepreneur CEOs under this research. (Fig.1) Carrying one way ANOVA testing on the data collected from Second questionnaire, resulted in 0.765 P value>> 5%. Which means there is no significant difference among the negative effect applied on all mangers decision making behavior? The means of the 15 questions are 1.733, 2.133, 1.733, and 2.000 - very near to each other- and skewed toward 1 which proves that there is significant negative effect on the mangers ability and willingness to take business decisions. . (Fig.2) Carrying one way ANOVA for the means of questionaire1 and means of questionnaire 2 proofs no significant difference between the means of both questionnaires resulted 0.998 P value >> 5% . The results supports our hypothesis of : There

Lack of Trust and Ego), the questions are mixed together and we didnt inform our sample about the personal characteristics we
are measuring. The questionnaire is five-point Likert scale questionnaire; answer 5 (Strongly agree) means that personal characteristic under testing does not exist within the Entrepreneur CEO personal characteristics. Answer 1 (Strongly Disagree) means that personal characteristic under testing is significantly existing within the Entrepreneur CEO personal characteristics. Second questionnaire, is testing the negative effect on middle management lack of authority in decision making in business growth phase The questionnaire consists of 15 questions all are measuring the ability and the willingness of the manager to take business decisions that are related to the daily routine work. The questionnaire is five-point Likert scale questionnaire; answer 5 (Strongly agree) means that there is no negative effect on the mangers ability and willingness to take business decisions. Answer 1 (Strongly Disagree) means that there is significant negative effect on the mangers ability and willingness to take business decisions. Analysis of Variance (ANOVA) using Minitab has been carried out to test the hypothesis.

is a correlation between Desire of Control, Lack of Trust and Ego appears in certain segment of entrepreneur CEOs (Small Business Owners) on one side and middle management lack of authority in decision making on the other side

Page | 5

Source DF SS SS MSMS F F P P Factor 3 1.38 1.133 0.46 0.35 0.788 0.378 0.73 0.536 Error 56 28.800 1.31 73.47 0.514 Total 59 29.933 74.85 S = 0.7171 R-Sq = 3.79% R-Sq(adj) = 0.00% S = 0.7171 R-Sq = 3.79% R-Sq(adj) = 0.00% Level Level Manager1 Manager1 Manager2 Manager2 Manager3 Manager3 Manager4 Manager4 N N 15 15 15 15 15 Individual 95% Individual 95% CIs For PooledBased on CIs For Mean Based on Mean StDev Pooled StDev Mean StDev +---------+---------+---------+--------Mean StDev ---+---------+---------+---------+-----1.933 0.799 (-------------*--------------) 4.4667 1.082 0.6399 (-----------*-----------) 2.200 (--------------*--------------) 4.8000 1.082 0.4140 (--------------*--------------) (-----------*-----------) 1.800 4.7333 0.5936 (------------*-----------) 1.867 1.506 (--------------*-------------) 4.5333 1.0601 +---------+---------+---------+--------(-----------*-----------) 1.20 ---+---------+---------+---------+-----1.60 2.00 2.40 4.20 4.50 4.80 5.10

Fig1. One-way ANOVA First Questionnaire: Manager1, Manager2, Manager3, Manager4 with P value >> 5%

Source Factor Error Total

DF 3 56 59

SS 1.80 87.60 89.40

MS 0.60 1.56

F 0.38

P 0.765

S = 1.251

R-Sq = 2.01%

R-Sq(adj) = 0.00%

Individual 95% CIs For Mean Based on S = 1.111 R-Sq = 5.19% R-Sq(adj) = 0.11% Pooled StDev S = 0.7171 N R-Sq = 3.79% Level Mean StDev R-Sq(adj) = 0.00% --------+---------+---------+---------+Manager1 15 1.733 0.961 (------------*------------) Manager2 15 2.133 1.407 (------------*------------) Manager3 15 1.733 1.100 (------------*------------) Manager4 15 2.000 1.464 (------------*------------) --------+---------+---------+---------+1.50 2.00 2.50 3.00

Fig2. One-way ANOVA Second Questionnaire: Manager1, Manager2, Manager3, Manager4 with P value >> 5%

Page | 6

Source Factor Error Total

DF 1 6 7

SS 0.0000 0.1422 0.1422

MS 0.0000 0.0237

F 0.00

P 0.998

S = 1.251

R-Sq = 2.01%

R-Sq(adj) = 0.00%

Individual 95% CIs For Mean Based on S = 1.111 R-Sq = 5.19% R-Sq(adj) = 0.11% Pooled StDev S = 0.7171 R-Sq = 3.79% R-Sq(adj) = 0.00% Level N Mean StDev ---------+---------+---------+---------+ Questionnaire1 4 1.9000 0.0860 (------------------*------------------) Questionnaire2 4 1.8998 0.2001 (------------------*------------------) ---------+---------+---------+---------+

Fig3A. One-way ANOVA Questionnaire1 means VS Questionnaire2 means with P value >> 5%

Fig3B. One-way ANOVA Questionnaire1 means VS Questionnaire2 means with P value >> 5%

Page | 7

References
Ego Makes Entrepreneurs? (Article business week online) Edited by Rod Kurtz. How the Best Leaders Build Trust - By Stephen M. R. Covey. The Dark Side of Entrepreneurship By Manfred F.R. Kets de Vries 1985.

Inside the mind of the leader By Manfred F.R. Kets de Vries 2004.
The effect of managerial entrepreneurship behavior on employee satisfaction: Hospitality

managers dilemma - Ethem Duygulu and Osman Avar Kurgun. Employee Empowerment: Democracy or Delusion Howard A.Douhty.

Consistency can help leaders prevent lack of trust - Robert Whipple. The Ego by Art Ticknor. Management by Fear: Does It Really Work? By Wilf Voge.

Page | 8