1. Copyright © 2008 by Nelson, a division of Thomson Canada Limited ENTREPRENEURSHIP A PROCESS PERSPECTIVE Robert A. Baron Scott A. Shane A. Rebecca Reuber Slides Prepared by: Sandra Malach, University of Calgary

2. Copyright © 2008 by Nelson, a division of Thomson Canada Limited. 12 BUILDING THE NEW VENTURE’S HUMAN RESOURCES 1

3. Copyright © 2008 by Nelson, a division of Thomson Canada Limited LEARNING OBJECTIVES 1.Explain why information about recruiting, motivating, and retaining high-quality employees is useful to entrepreneurs. 2.Describe the relationship of number of employees to new venture success. 3.Describe the role of social networks in new ventures’ efforts to hire additional employees. 4.Define “job analysis” and “job description” and explain why they are important initial steps in the search for new employees.

4. Copyright © 2008 by Nelson, a division of Thomson Canada Limited LEARNING OBJECTIVES 5.Define “reliability” and “validity” and explain why all techniques used for selection must be high on both. Describe structured interviews and explain why they are higher in validity than traditional employment interviews. 6.Describe the requirements for setting effective goals, and why it is so important to tie rewards to performance. 7.Describe the role of fairness in motivating employees. 8.Define “job enlargement” and “job enrichment” and why they are important in motivating employees.

5. Copyright © 2008 by Nelson, a division of Thomson Canada Limited LEARNING OBJECTIVES 9.List the relative advantages and disadvantages of temporary and permanent employees. 10.Describe various means for relating pay and other rewards to performance. 11.Define “continuance commitment,” “affective commitment,” and “normative commitment” and explain their role in the retention of high-quality employees. 12.Define the “control barrier” and explain why it is so important for entrepreneurs to learn how to delegate authority to others.

6. Copyright © 2008 by Nelson, a division of Thomson Canada Limited “Genius begins great things; labour alone finishes them.” Joseph Joubert, 1974-1824

7. Copyright © 2008 by Nelson, a division of Thomson Canada Limited ULTIMATE SUCCESS Success for new ventures… derives from a smooth and orderly shift… to a state in which the entrepreneur has assembled a first-rate team of employees… to whom she or he can delegate many of the growing venture’s key processes.

8. Copyright © 2008 by Nelson, a division of Thomson Canada Limited HUMAN RESOURCES AND SUCCESS Larger founding teams with more varied experience will: increase the likelihood of success and have faster rates of growth The more employees the larger the earnings and profits. The more employees the greater the number and size of projects can be undertaken.

9. Copyright © 2008 by Nelson, a division of Thomson Canada Limited ATTRACTING, MOTIVATING, AND RETAINING EMPLOYEES Why are these topics important? In the early stages, you perform them. You can place your personal “stamp” on these processes. When it’s time to delegate, you’ll choose the best people for the job.

10. Copyright © 2008 by Nelson, a division of Thomson Canada Limited SOCIAL NETWORKS New firms often use social networks to hire as they do not have the legitimacy or security of established firms. Advantages of using social networks: Quick and inexpensive to hire Easier to convince individuals about the value of the opportunity Lack clearly established rules or culture

11. Copyright © 2008 by Nelson, a division of Thomson Canada Limited RECRUITING AND SELECTION The search for high-performance employees begins with two questions: Where should you search for high- quality employees? What specific techniques should you use to identify the best among them?

12. Copyright © 2008 by Nelson, a division of Thomson Canada Limited KNOWING WHAT YOU NEED Job analysis—what knowledge, skills, and abilities are required? Job description—an overview of what the job involves

13. Copyright © 2008 by Nelson, a division of Thomson Canada Limited BEGINNING THE SEARCH: ADVERTISING THE POSITION Social networks Trade journals, newspapers, etc. College and university employment centres Internet sites Current customers Headhunters

14. Copyright © 2008 by Nelson, a division of Thomson Canada Limited SELECTION Selection tools and techniques must be Reliable Consistent measurements across time Valid Measurements reflect underlying dimensions Legal Human Rights Legislation

15. Copyright © 2008 by Nelson, a division of Thomson Canada Limited UNSTRUCTURED EMPLOYMENT INTERVIEWS This selection technique is low in validity because: Interviews are largely unstructured Interviewers may ask different questions of applicants Interviewers may be biased Assessing others is more difficult than most people realize

16. Copyright © 2008 by Nelson, a division of Thomson Canada Limited IMPROVING INTERVIEWS The validity of interviews can be improved with Structured interviews Common questions & time allotment Biodata Information from application forms Reference checks

17. Copyright © 2008 by Nelson, a division of Thomson Canada Limited MOTIVATION The processes that arouse, direct, and maintain human behaviour toward attaining some goal. ArousalDirectionPersistence GOAL

18. Copyright © 2008 by Nelson, a division of Thomson Canada Limited GOALS & MOTIVATION Goals must be Challenging Attainable Specific Accepted Reinforced with feedback

19. Copyright © 2008 by Nelson, a division of Thomson Canada Limited EXPECTANCY THEORY People will be motivated when they believe that: 1.Expending effort will improve their performance 2.Good performance will be rewarded 3.The rewards offered are the ones they really want or value

20. Copyright © 2008 by Nelson, a division of Thomson Canada Limited MAINTAINING MOTIVATION Provide the training and resources necessary to ensure that effort leads to good performance Recognize and reward good performance Provide the rewards employees really value

21. Copyright © 2008 by Nelson, a division of Thomson Canada Limited FAIRNESS AND MOTIVATION Unfairness leads to a strong drop in motivation. Unfairness is perceived when there’s an imbalance between contributions and outcomes relative to those of other persons.

22. Copyright © 2008 by Nelson, a division of Thomson Canada Limited IT’S NOT FAIR We seek Distributive Justice Rewards are divided fairly Procedural justice Process for reward division Interactional justice Reward distributors must explain decisions adequately

23. Copyright © 2008 by Nelson, a division of Thomson Canada Limited FAIRNESS & MOTIVATION 1.Link rewards closely to performance 2.Establish fair procedures for employee evaluations and rewards 3.Treat employees with courtesy and respect

24. Copyright © 2008 by Nelson, a division of Thomson Canada Limited MAKING JOBS MOTIVATING Job design—structuring jobs so they increase people’s interest Job enlargement Wider variety of tasks Job enrichment Tasks that require a higher level of skill & responsibility

25. Copyright © 2008 by Nelson, a division of Thomson Canada Limited TEMPORARY vs. PERMANENT EMPLOYEES Temporary Employees are beneficial: Flexibility Speed of acquiring new sets of knowledge & expertise Permanent Employees Employee commitment & retention

26. Copyright © 2008 by Nelson, a division of Thomson Canada Limited RETENTION STRATEGIES Developing excellent reward systems Building a high level of commitment & loyalty.

27. Copyright © 2008 by Nelson, a division of Thomson Canada Limited PAY FOR PERFORMANCE Merit pay plans Bonuses, awards, and stock options Employee equity plans result in faster growth Team-based incentives Profit sharing Employee stock ownership plans

28. Copyright © 2008 by Nelson, a division of Thomson Canada Limited ORGANIZATIONAL COMMITMENT The extent to which an individual identifies with and is involved with his or her organization and is, therefore, unwilling to leave it

29. Copyright © 2008 by Nelson, a division of Thomson Canada Limited TYPES OF COMMITMENT Continuance commitment High cost of leaving Affective commitment Positive feelings toward the organization Normative commitment Feeling of obligation to others who would be adversely affected by departure

30. Copyright © 2008 by Nelson, a division of Thomson Canada Limited PHASES OF COMPANY GROWTH 1.Conception/existence 2.Survival 3.Profitability and stabilization 4.Profitability and growth 5.Take-off 6.Maturity

31. Copyright © 2008 by Nelson, a division of Thomson Canada Limited The Control Barrier Phase One Phase Two Phase Three Phase Four Phase Five Phase Six Entrepreneurs’ skills and abilities are essential to success CONTROL BARRIER Delegation, recruiting, motivation, and retention are crucial factors

32. Copyright © 2008 by Nelson, a division of Thomson Canada Limited FINAL LESSON At some point founders must truly “let go.”