Chapter 8 - Entrepreneurship leadership

Question 1

Entrepreneur

Answer 1

someone who identifies opportunities to exploit for the realisation of profit

Question 2

Leadership

Answer 2

the ability to influentially lead people towards a desired vision

Question 3

Entrepreneurship leadership

Answer 3

Renko, El Tarabishy, Carsrud, & Brännback (2015)
defines entrepreneurial leadership as leadership that entails influencing and directing the performance of
group members toward the achievement of organisational goals that involve recognising and exploiting entrepreneurial opportunities.

Question 4

Essence of entrepreneurship

Answer 4

Entrepreneurial leadership goes beyond organising people from a ranked chain of command position. While it can be said that the position of the leader legitimises their voice, entrepreneurial leadership recognises the importance of knowing
individual skills and pursuing the goals of the business in an opportunity-driven way.
Entrepreneurial leadership creates an environment for followers at all levels in the business, to influence business decisions by promoting creativity,
proactiveness and the spirit of shared responsibility. Entrepreneurial leadership often emerges when the business attains a level of formalisation.
For an entrepreneur to be successful in this endeavour, they need to develop a compelling vision forthe business.

Question 5

Vision

Answer 5

The vision of a business describes the ultimate picture of the future that business strives to create. A good vision allows followers to interpret their role in realising
this desired future for the business. A good vision is a tool that can be used to:
Further develop the mission and goals of the business

Understand the position of the business in the existing environment

Distinguish the business from other similar businesses

Provide direction for the followers

Inspire followers to take action

Guide planning in the business

Attract like-minded followers to the business.

A vision is often left to interpretation, which means that people will understand it differently. It is important that the vision of the business is supported by the
mission and business goals so that followers’ behaviour is better aligned to the desired future of the business.

Question 6

Mission

Answer 6

The mission of the business describes the current activities that the business is involved in. The mission if often generated from the vision of the business. Unlike
the vision, the mission explains more explicitly the activities of the business. The mission of the business should answer the following questions:
What do we do?
How do we do it?
Why are we doing it?
Who are we doing it for?
Why is it important to do it?
What difference does what we do make?

Question 7

Goals

Answer 7

Goals direct action in the business. Business goals are derived from the mission statement of the business. These goals should not be set too broadly as this makes them difficult to measure. Niewenhuizen (2008)
advises that goals must be clear, specific, measurable and realistic. Setting vague goals makes it difficult to achieve them.

For example, a goal like ‘To make our first R1 million’ is too vague. A better set goal would be: ‘To make our first R1 million in 18 months by hiring three more sales people’. Clear, specific and measurable goals help measure progress and keep track of events affecting the business. Entrepreneurial leaders and followers need to track their progress in terms of the goals they have set for themselves and adjust their goals if need be.

Question 8

Effectuation

Answer 8

In contrast to goal setting at the onset of business development is effectuation.
Effectuation is entrepreneurial thinking that is the opposite of causal thinking used in highly unpredictable environments, which proposes working with available means to create a desired effect instead of setting goals at the onset.
Entrepreneurial leaders do not know it all and cannot always predict the future. Even though they pursue risk actively, entering new and unfamiliar territory may
be challenging for the entrepreneur who often has to work with limited resources.
Effectuation may be seen as the opposite of causal behaviour where often the results are predictable. The effectuation theory proposes that entrepreneurs start
with an idea and a few resources and create business ventures as they go along.
For this reason, it is difficult to set goals in the beginning as there is no predetermined path because of uncertainties and entrepreneurs are not pursuing
a specific goal (Stokes, Wilson & Mador, 2010)

Question 9

Advantages of effectuation

Answer 9

Processes are not directed at the achievement of one goal but various goals.

Effectuation starts from understanding entrepreneurs’ characteristics such as their traits, tastes and abilities as well as what they know and their social networks.

Effectuation is especially effective where human action is important in shaping the future.

Effectuation is useful when aiming to enter international markets and the environment difficult to predict.

Effectuation is concerned with both the individual and the business and not just the business.

Decisions using effectuation are based on interactions with others inside and outside the organisation.

Question 10

Entrepreneurial values

Answer 10

Entrepreneurial leaders need to develop a set of codes by which they do business. Entrepreneurial values are the fundamental beliefs in the entrepreneurial venture
that guide behaviour and actions. Entrepreneurial values set the moral tone for what is right and wrong in the entrepreneurial venture. Entrepreneurial values
should be embodied in entrepreneurial leaders and the followers they choose for their entrepreneurial venture.

Question 11

Entrepreunerial values continued

Answer 11

Honesty: Honesty in business creates trust in relationships. Entrepreneurial leaders should not distort the truth even if it means that they own interests are compromised.

Reliability: If entrepreneurial leaders are not reliable, then stakeholders cannot trust their products. Entrepreneurial leaders should deliver on their
promises and contractual obligations in order to maintain reliability amongst their stakeholders.

Fairness: The entrepreneurial leader should act in a way that ensures that the rights and interests of others are considered. They should not discriminate
anyone on the basis of race, gender, religion or sexual orientation.

Consistency: When faced with similar situations, entrepreneurial leaders should be counted on to take the same decision time and time again. Exceptions to rules should be kept at a minimum.

Loyalty: Entrepreneurs should not place their own interests above those of other people in the venture. However, loyalty should not be used as an excuse
for unethical behaviour. For example, practices such as nepotism, favouritism and unethical procurement should not be allowed underthe veil of ‘ethics’.

Question 12

Business ethics

Answer 12

Business ethics are the rules of moral values that guide decision-making and stakeholder understanding of the difference between right and wrong (Hatten,
2016). In an entrepreneurial venture, the entrepreneurial leader sets the standard for
acceptable and unacceptable behaviour. This is determined through consistent examination and demonstration of what constitutes tolerable and non-tolerable behaviour. Business ethics focuses on the responsibility of the organisation towards stakeholders and the underlying values that impact on the behaviour of the individuals in the workplace (Bendeman, 2014).

Question 13

Ethical culture

Answer 13

Ethics are not always explicitly stated but often observed through actions and behaviours. It is for this reason that the entrepreneurial leader should lead by
example. The way a small business conducts its business can make or break it in the eyes of its stakeholders. Ethics are also important in ensuring the
sustainability of the entrepreneurial venture.

Question 14

Code of ethics

Answer 14

In small entrepreneurial ventures, entrepreneurial leaders might not see the importance of formally documenting the ethical guidelines of the entrepreneurial venture. Unlike larger organisations, the entrepreneurial venture might not have
an ethics officer who deals solely with the organisation’s ethics. This responsibility of steering ethics often rests on the entrepreneurial leader.
Developing a code of ethics can assist the entrepreneurial leader to guide and reinforce ethical behaviour with stakeholders. A code of ethics is a formal statement of what a business expects regarding ethical behaviour. This formal document can also serve as a guideline for which behaviours are acceptable and
which are unacceptable (Hatten, 2016).

Question 15

Structure for the code of ethics

Answer 15

Bendeman (2014) suggests the following structure of the code of ethics:
Preamble: Written by the leader based on the values of the business

Application of the code: Section indicating to whom the code applies

General obligations: Commitments and general duties to which the business is bound

Specific issues: Various risk areas identified within the specific industry

Specific stakeholders: Indicate specific guidelines for behaviour when dealing with various stakeholds.

Question 16

Traits of an entrepreneurial leader

Answer 16

Passion: The common misconception about entrepreneurial leaders is that they need to have a big and extroverted personality. This is not true.
Entrepreneurial leaders are passionate about what it is that they do and exhibit enthusiasm for their ideas. This often leads to the development of a compelling vision fortheirfollowers to enact.

Commitment: Commitment for the entrepreneurial leader does not mean they are rigid and inflexible. Entrepreneurial leaders are dedicated to what they
believe in and invest their time and energy in people and moving the business forward.

Team spirit: The entrepreneurial leader recognises that every follower in the entrepreneurial venture has a purpose. The entrepreneurial leader does not
have a ‘know-it-all’ attitude. Even though they have a leadership role within the entrepreneurial venture, they understand that they form part of a team and
work together with the team members to achieve the goals of the business.

Communication skills: Since the entrepreneurial leader is team-spirited, it is also important that they possess good communication skills. Followers need to
be informed on the progress they are making as a team in achieving the desired vision of the organisation. Entrepreneurial leaders communicate
honestly, timeously and effectively with their followers.

Empowerment: An inherent leadership practice of entrepreneurial leaders is that they allow empowerment at all levels in the business. This means that followers are empowered with skills, authority, opportunities and initiatives to make decisions and be accountable forthese decisions.

Risk-tolerance: Entrepreneurial leaders actively pursue risk and encourage this spirit in their followers. They are comfortable with exploring what many
people are not and exploiting opportunities when they occur.

Competent: Entrepreneurial leaders possess the ability and knowledge to do something well. They may not know it all, but they are able to sufficiently
perform certain tasks. It is important that entrepreneurial leaders are competent in what they do as competency improves their credibility with
followers.

Integrity: An entrepreneurial leader is honest and has an honourable character. This trait of an entrepreneurial leader inspires trust in his followers.
Leaders who display integrity are not corruptible and strive to always do the right thing.

Flexibility: Entrepreneurial leaders are not set in their ways but are open to new ideas from their followers. Circumstances change and problems can be
solved in various ways. Entrepreneurial leaders are able to recognise that they do not know it all and can operate with the input of their followers within
certain boundaries.

Genuine concern for followers: While achieving the goals of the entrepreneurial venture is important, entrepreneurial leaders have a genuine
concern for the well-being of their followers. They emphasise the valued importance of caring for the followers within the organisation besides the
duties these followers have to execute

Question 17

Why does entrepreneurship leadership exist

Answer 17

Corporate organisations: Organisations today experience greater competition than ever before. This increased competition creates a greater need for
leadership that expands beyond the scope of management.

Entrepreneurial ventures: Entrepreneurs are most likely to take on a leadership role as the business grows.

Academic institutions: Academics interested in the entrepreneurial leadership conduct dedicated research to understanding and developing theory in this
field of research.

Question 18

Management functions

Answer 18

Businesses work with resources, which are often quite limited in the entrepreneurial venture. These resources are what the business needs to achieve
its goals. Enacting the management role as an entrepreneur leader includes determining and directing how these resources will be spent. This can be done
through the use of the four basic management functions explained in Table 8.3. While emphasis regarding entrepreneurial leadership is placed on influencing people towards a desired vision, Wickham (2001) states that entrepreneurial management is characterised by the following features:

A focus on change: Entrepreneurs do not leave the world in the state they found it in. Entrepreneurial managers are not concerned with maintaining
the status quo but driving change through ideas, resources and people.

A focus on opportunity: Unlike normal managers, entrepreneurial managers expose theirresources to risk in orderto pursue opportunities.

Organisation-wide management: The entrepreneur manages with an eye for the entire organisation and not just some aspects of the organisation.

Question 19

Linking management to entrepreneurial leadership

Answer 19

The traditional manager ensures that business success is achieved by using the four basic management tasks; the entrepreneurial leader moves people to actively
participate in realising the businesses vision. This is done through encouraging self-management and opportunity-driven pursuit of business opportunities.
It becomes clearer that management and leadership do not mean the same thing but have similar concepts that link them together. These two concepts
should not be viewed in isolation. Both managers and leaders work with people to ensure that goals that contribute to the bigger picture are achieved.
Entrepreneurial leaders need management skills to operate successful businesses. Determining which role to enact as the entrepreneurial leader should depend on the context and issue at hand. A great distinction between managers and entrepreneurial leaders is that entrepreneurial leaders will manage themselves
and lead others. To do this successfully, entrepreneurial leaders need to know their strengths and weaknesses.

Question 20

Culture in the entrepreneurially led business

Answer 20

Learn from past: Entrepreneurial leaders have experiences from which they can draw valuable lessons. It is from these experiences that they can establish an idea about what works and what does not.
Evaluating what created success in previous ventures and places of employment may help entrepreneurial leaders shape their own business’s culture.

Align culture to the core values: An entrepreneurial leader is the driver of business culture. It is the leader who develops founding values of the organisation. Therefore, it is important for the entrepreneurial leader to reflect on who they are, the culture they want to create, and if this culture is a fit for their brand.

Find people who complement you: It is important for the entrepreneurial leader to hire people with different experiences. This requires a thorough
understanding of strengths and weaknesses on the part of the entrepreneur. Differing perspectives that are grounded in a shared vision are worth the
investment.

Communicate: Entrepreneurial leaders need to create honest relationships through communication. When developing the culture of the business, it is
important to talk to followers who are able to freely share ideas without fear.

Balance work by allowing some downtime: As an entrepreneurial leader, do something out of context and allow followers to relax.

Invite people to share the vision: Followers need to be believers of the vision the entrepreneurial leader has for the business. If you invite followers who do not understand or share your vision, this could lead to poor execution of your
dreams.

Work as a team: Entrepreneurial leaders should not view people as just ‘employees’ and ‘departments’. It is important to build unity and community
in the business to foster culture.

Maintain and carefully evolve culture: Culture is not stagnant and needs to be nurtured. It is important to protect culture. However, entrepreneurial leaders
need to be careful not to hold on too tight. Maintaining culture will also mean evaluating people against the backdrop of organisational culture

Question 21

Entrepreneurial team

Answer 21

The entrepreneurial team may be defined as the collection of individuals who bring with them particular skills, knowledge and contacts to the team and are a collective unit which operates more orless effectively together(Stokes, 2010). Swanepoel (2014) states that an entrepreneurial team may be made up of the following people:
The co-founders
The management team
Employees
Consultants.

Question 22

Entrepreneurial team performance and success

Answer 22

When people work together, with them they bring different cultures, backgrounds
and personalities. These factors may contribute in the team achieving success and/or failure. Stokes (2010)
identifies the following characteristics of successful
teams:
Possess key skills needed to do the job well
Clear and effective performance in each role they perform
Have a good strategy in place
Good coaching is present in the team
Have access to good leadership that constantly motivates during performance
Effective equipment to execute duties
Work togetherto achieve goals
Possess shared commitment to winning.

Question 23

Listening

Answer 23

People should be given a chance to share their thoughts and ideas.

Contributions should be considered seriously and not rejected without evaluation.

Consider motivations and needs of team to ensure they are met.

Question 24

Questioning

Answer 24

Display genuine interest in people, the ideas they have, and what their objectives are.

Ask questions that allow more elaborate answers beyond the simple yes or no answers.

Provide useful information in response to questions similar to how you would like to be answered

Question 25

Balancing

Answer 25

Check that issues, tasks and ideas in the work group are addressed and attend to gaps that exist in the team.

Work across various roles to provide the team with roles they would not
otherwise have in the business.

Question 26

Conflict

Answer 26

Conflict refers to a situation in which two or more people have two or more conflicting points of view or make conflicting statements (Nieuwenhuizen, 2008)

Question 27

Reason for conflict

Answer 27

Nieuwenhuizen (2008) states that conflict may arise as a result of many reasons which include:
Sharing common objectives of which only one person can achieve

Competing for scarce resources when there are not enough resources in the venture

Expressing personal differences as a result of different personalities, points of view and ways of thinking

Having different perceptions and preconceived opinions

Communicating ineffectively about issues

Allowing uncertainty about job responsibility in an enterprise.

Question 28

Positive aspects of conflict

Answer 28

One should not think that all conflict is negative and could harm the business.
Botha (2013) asserts that conflict is natural within teams and groups of people and that it can be used positively. The Association of Business Executives (ABE)
(2011) states the following as positive aspects that arise from conflict:
Questions existing approaches to decision-making
Conflict may stimulate creative solutions
It may prompt individuals to assess their own feelings and choose between various options
Conflict may challenge the existing power base
It may create competition and act as a motivator for improved performance
Conflict helps indicate that things are going wrong and alerts

Question 29

Conflict resolution

Answer 29

It is not always possible for entrepreneurial leaders to prevent conflict. However, entrepreneurial leaders should strive to solve problems in their businesses using sound, fair and reasonable strategies.
Botha (2013) proposes the following conflict resolution process:
Understand the conflict.
State the problem in terms of actions and effects.
Listen to the responses.
Determine if the problem is acknowledged. If not, restate the problem.
Find a solution together.
Restate the solution.
Implement the solution

Question 30

Pitfalls for entrepreneurial leadership

Answer 30

Bottom line stress: One cannot ignore the importance of the bottom line for the continued existence of the business. Even though the entrepreneur
creatively generates ideas with followers, these should be commercially viable and make a meaningful contribution to the bottom line of the business. This is
important forthe sustained existence of the business.

Exercising discipline: Disciplining adults is not always an easy task for anyone. Entrepreneurial leaders have to consider post-discipline effects of their
relationship with followers.

Ultimate responsibility: Followers are led by the entrepreneurial leader. The ultimate responsibility of the entrepreneurial venture rests with the
entrepreneurial leader. This may create pressure forthe entrepreneur.

Work-life balance: The entrepreneurial leader is passionate about his ideas and is committed to the achievement of his goals. A lot of time is invested in
realising these ideas. This may lead to an unbalanced work−life situation. Entrepreneurial leaders should create work−life integration and learn to
develop time management skills that enable them to prioritise things inside and outside of work.

Ensuring sustained commitment: Entrepreneurial leaders gain and lose followers along the way. Ensuring commitment is not an easy task and this is
one of the pitfalls of leadership the entrepreneurial leader will encounter and needs to deal with.

Sharing control: Some entrepreneurial leaders do not like to let go of control and try to keep their fingers in all pies in the entrepreneurial venture. This is
often a recipe for disaster. Entrepreneurial leaders need to trust their followers, learn to delegate and oversee important functions in the business.

Limited resources: Unlike large, established organisations, entrepreneurial ventures have limited resources. These resources are spread thinly across the enterprise. This is a challenge for entrepreneurial leaders who have to worry about salaries and other utilities when they employ followers.

Fear of failure: Even though failure is not always a bad thing, entrepreneurial leaders worry that failure will affect their followers. When a business reaches a
level where other people are employed within the business, failure not only affects the lives of entrepreneurs, but that of their followers. This fear of failure may cause stress forthe entrepreneur.