To retain former entrepreneurs as employees, companies must challenge them

Buffalo, N.Y. — Former entrepreneurs in paid employment quit their jobs sooner than employees without such experience — unless their role offers significant opportunity to develop new ideas, make decisions, take risks and implement meaningful projects, according to research from the University at Buffalo School of Management.

Organizations seeking a spark of innovation may consider hiring employees with experience in launching their own business ventures. But companies often hesitate to hire these high-potential employees because they fear they may soon leave if they do not fit into their corporate culture.

These concerns are well founded, but can be managed, according to two studies published together in Personnel Psychology that examined the behavior of former entrepreneurs in paid employment.

In the first study, the researchers collected data from 22 small-to-medium-sized firms in a high-tech research park in Northern China. They found that former entrepreneurs in paid employment were three times more likely quit their jobs in the three-year observation window.

“Interestingly, it was those who retained a sense of identity as an entrepreneur when they accepted the job who were most likely to quit,” says Scott Seibert, PhD, professor of organization and human resources and faculty director of the Center for Entrepreneurial Leadership in the UB School of Management. “That is, some people drop their identity as an entrepreneur and move on to paid employment. These individuals are no more likely to quit paid employment than other employees with no previous experience as an entrepreneur. Others continue to hold a lingering identity as an entrepreneur.”

The researchers say that this phenomenon may occur because former entrepreneurs like this view of themselves and want to retain the feeling that they are capable of owning and running a business. It is these individuals who are likely to quit sooner than other employees.

This situation creates a puzzle for both job seekers and hiring organizations. On the one hand, the job seeker will feel a need to discuss their work experiences as an entrepreneur to make themselves a desirable candidate. On the other hand, too much emphasis on their experience as a business founder might lead the employer to question if they would be happier as an entrepreneur rather than a paid employee.

A second study used a longitudinal dataset including more than 12,000 men and women working in the U.S. to study these turnover dynamics further. Following these respondents over 35 years, the data examined more than 14,000 periods of paid employment to understand turnover rates of former entrepreneurs in paid employment relative to employees with no such experience.

‘We found that that, again, those with previous experience as entrepreneurs were likely to quit their jobs sooner than those without such work experience, with differences starting as soon as 30 weeks after being hired and persisting over the next decade,” says Seibert. “And, once again, this effect was evident only for those former entrepreneurs who retained a lingering identity as an entrepreneur.”

To be sure they understood the nature of the turnover decision, the researchers used the data to track turnover destinations and found that former entrepreneurs were indeed more likely to quit and start a new business venture than they were to quit and take another job in paid employment.

Taking the research further, the researchers explored whether there was anything the organizations could do to retain these uniquely talented employees. To answer this question, they examined the type of role the former entrepreneurs held in paid employment, and coded jobs to understand the extent to which the demands of the paid job role mimicked the demands and opportunities of entrepreneurial work. They defined intrapreneurial opportunity jobs as those that required creativity and new ideas to solve work-related problems and/or provided a great deal of autonomy to implement those solutions.

Results showed that, while all employees were less likely to turn over when their jobs offered intrapreneurial opportunities, former entrepreneurs who retained their identity as an entrepreneur reacted even more positively in terms of retention.

“If a company wants to keep these uniquely qualified employees, they should be sure to put them in roles that challenge them to be creative and allow them the freedom to implement their creative solutions,” says Seibert.

The UB School of Management is recognized for its emphasis on real-world learning, community and impact, and the global perspective of its faculty, students and alumni. The school also has been ranked by Bloomberg Businessweek, Forbes and U.S. News & World Report for the quality of its programs and the return on investment it provides its graduates. For more information about the UB School of Management, visit management.buffalo.edu.