Frontiers of Entrepreneurship Research 1995

Frontiers of Entrepreneurship Research
1995 Edition

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    FRONTIERS OF ENTREPRENEURSHIP RESEARCH 1995.


    ENTREPRENEURSHIP IN ORGANISATIONS - THE AVIALL STUDIES A MODEL FOR CORPORATE GROWTH

    Richard Y Weaver, Glasgow Caledonian University
    Stephen Henderson, Aviall Caledonian

    ABSTRACT

    This paper reports on a study of entrepreneurship within a mature and growing organisation. The study was based upon organisational re-engineering at Aviall Caledonian Engine Services, whose corporate structure was re-designed from a flow to a process form. The company was considered as re-visiting the entrepreneurial stage of organisational growth. It was therefore appropriate to investigate managerial behaviour and to compare and contrast the characteristic set with a normative model of entrepreneurial behaviour. Using a cross functional approach the study examined the propensity of a random sample of managers to exhibit entrepreneurship. The method adopted was, first of all, to identify through a three stage attitudinal survey the degree to which the characteristics of commitment I leadership I motivation I opportunism I risk and creativity were held. The outcome of the attitudinal study was then contrasted with an organisational culture diagnosis and the resulting data combined to form a three dimensional behavioural surface known as a cusp catastrophe which suggests the possibility of a general theory of entrepreneurship in organisations.

    INTRODUCTION

    Entrepreneurship in growing organisations is an area of research and investigation which has received significantly less attention than other areas of enquiry in the field of entrepreneurship. This is surprising, in that latent intellectual capital released into an organisation, through active promotion of entrepreneurial behaviour, promises to harvest significant economic gain. It appears logical that if an organisation is intent on pursuing a growth strategy, it will create an initial stage of growth best described as entrepreneurial. It therefore follows that organisation members, both management and staff, should exhibit, in some way, entrepreneurial behaviour. Aviall Caledonian Engine Services Limited, a leading company in the aerospace industry, is at a stage of entrepreneurial growth. The company employs approximately 900 people and has a turnover of some $200 million, through the servicing of jet engines which power 747 aircraft. It is Aviall's objective to increase the business to $300 million sales with a $30 million net return by the end of 1996. Business process re-engineering has resulted in dramatic structural change within Aviall, and has established the basis for cultural reformation. This paper, the first in a series which examines entrepreneurship within Aviall, attempts to construct a framework of enquiry, beginning with individual managers' behaviour, set in the context of organisational culture.

    Entrepreneurial Catastrophe - An Initial Hypothesis

    An eternal problem yet to be effectively addressed by organisational theory has been to describe the behaviour of people at work in such a way that continuous and discontinuous behavioural events can be modelled together. Simple observation shows that people can be motivated one minute and de-motivated the next and that their behaviour as a consequence can change from what the organisation may consider to be good to what it considers to be bad. The initiation of this behavioural change can have many reasons, but can be most likely attributed to the organisational environment in which the individual works, particularly if it is subjected to change.

    When organisational change takes place, individuals feel threatened due simply to their lack of familiarity with the new order of things. If the process of change is continuous and smooth and reaches a steady state, the trauma of transition can generally be managed. If, however, the change process does not reach a steady state and change remains continuous then the implications for behaviour are serious and significant. Such a situation arises when organisations are at the entrepreneurial stage of their life cycle.

    Having matured in their business environment, Aviall Caledonian have undergone a life stretching exercise through business process re-engineering, placing the organisation firmly at the entrepreneurial stage of growth. Clearly, to match the demands imposed by this stage of growth, managers and supervisors should in some way exhibit the characteristics of an entrepreneur. These characteristics, synthesised by Timmons et al. (1990, p.l66), are: commitment and determination, opportunity obsession, tolerance of risk, ambiguity and uncertainty, creativity, self reliance and ability to adapt, motivation to excel and leadership. Table 1 illustrates the nature of these characteristics. If these are set in an environment or organisational culture conducive to them, then the resulting behaviour is most likely to be seen by the organisation as good. Conversely, if the culture is not conducive to them, then it is most likely that the exhibited behaviour will be viewed as unacceptable. In order to model the propensity of an individual to exhibit entrepreneurial behaviour it would be necessary to have a construct which allows for that behaviour to change continuously and discontinuously.

    Catastrophe theory, developed by the French mathematician Rene Thom in 1972, provides a mathematical model, the construct of which appears to fit the criteria to model entrepreneurial behaviour. Applications of catastrophe theory have been well documented - for example, by Zeeman (1977) - and have been used to represent behaviour as diverse as prison riots, aggression in dogs, anorexia nervosa, biology and the vagaries of the stock market (for a full mathematical treatment of catastrophe theory see ibid. Figure 1 below applies the theory to entrepreneurship. The figure illustrates a cusp catastrophe, the second of Thom's seven elementary catastrophes. The cusp represents three dimensional behavioural space (M), the behavioural axis of which is an individual's propensity to exhibit entrepreneurship. This propensity is the function of two control factors shown on the set (C). The first is known as a splitting factor (SP), which is multivariate and represents a set of entrepreneurial characteristics assumed to be held by people at large, and a normal factor (N), again multivariate, representing the organisation's culture.

    TABLE 1
    (Source: Adapted from Timmons et al. (1990. p. 166)

    The degree to which an individual possesses entrepreneurial characteristics may be assumed to be in the range, low to high, and the organisation's culture may be assumed to be in the range, negative to positive, intimating the degree to which the organisation's culture is conducive to entrepreneurial behaviour. Specifically, negative behaviour would be considered as Administrative/Bureaucratic and positive behaviour could be considered as Achievement/People oriented.

    FIGURE 1.

    A Model Of Entrepreneurial Catastrophe

    The properties of the model allow description of changes in behaviour ranging from continuous and smooth to discontinuous and sudden (catastrophic), by allowing for divergence and hysteresis. The former generates behaviour in either of two states i.e. the upper or lower surface of the cusp, which ultimately embodies the discontinuities. The shaded area (LL) represents an inaccessible behavioural area or an unstable region. Hence, under the influence of the splitting factor, the model is such that only two behavioural states are possible, represented by the upper or lower surfaces of the cusp. A change of state from one to the other will be catastrophic ((Q1) or (Q2))

    The latter term describes the condition where a sudden change is not immediately reversible. An example from Physics would be residual magnetism in ferric metals. In behavioural terms hesitancy seems to be a reasonable descriptor with the degree of hysteresis being a function of the individual concerned. From this elementary description of the cusp catastrophe it can be seen that continuous or discontinuous change, divergence and hysteresis provide, at least initially, some useful descriptors of human behaviour at work.

    Figure 1 specifically describes an individual's propensity to exhibit entrepreneurial behaviour and does so by first of all suggesting that the splitting factor (SP) is a function of a set of entrepreneurial characteristics. These characteristics are those previously described in Table 1.

    ln effect these are mind set characteristics. The degree to which an individual possesses them will dictate their natural tendency towards the upper or lower surface of the cusp. Secondly, the normal factor (N) identifies a set of characteristics which describes an organisation's culture. Descriptions of culture vary enormously but for the purposes of this study they are considered as a spectrum ranging from administrative/bureaucratic to achievement and people oriented. Thus, as it is important to define culture from within and by organisational members (see Schein, 1992), these descriptors will vary according to the particular organisation. As a basic classification the negative reference on the normal factor is described as administrative/bureaucratic and the positive reference is described as achievement/people orientated. To understand the model operationally it is necessary to generate a scenario which describes one individual's behaviour.

    Scenario

    The individual will be called Morph. When Morph was born he/she entered a family environment which nurtured the characteristic set described in the model. Although none of the family owned or had formed a business of their own, they each possessed those characteristics in some measure. By simple virtue of being a family member, Morph's experiences created his or her value system, and those characteristics described above were, like other family members', present to a high degree. The manifestation of them throughout Morph' s life was observed through behaviour at school, sporting activities and other social pursuits. Entering the workplace Morph naturally adopts position A (Motivated) in Figure 1. Unfortunately, the organisation to which Morph entered is highly bureaucratic and administrative. Over time Morph's initially high propensity to exhibit entrepreneurship declines to point (Q2). At this stage Morph grows tired of being innovative, of making suggestions, and showing commitment, because the prevailing culture mitigates strongly against it. Suddenly (catastrophically), Morph's propensity to exhibit entrepreneurship switches to low. This is depicted at point C (Discouraged). If no change takes place in the organisation's culture then the characteristic set held in significant measure will gradually decline to the point E (Disillusioned). Morph will remain at this position indefinitely until some external intervention takes place, either to reform or rekindle the entrepreneurial characteristic set or organisation culture shifts towards the positive reference point. Indeed both may change but not necessarily at the same rate. From position E assume that no intervention is made to adjust the entrepreneurial characteristics of Morph but that an intervention has taken place with respect to culture. This intervention would possibly be seen as the organisation restructuring say, from a hierarchical structure to a more lateral structure, by the adoption of more effective communication processes and through delegation of authority. These structural changes signal a desire for the organisation to move towards the positive reference.

    The response taken by Morph could be to travel from the point E and return to the point A, passing through a stage of encouragement at D, thus restoring Morph to the original point on the upper surface of the cusp. This represents a process of continuous change without intervention into the entrepreneurial characteristic set, i.e. the natural tendency of Morph will be restored. This condition is suggested to be like riding a bicycle once learned, never forgotten. The rate at which restoration would take place could be enhanced by intervention to improve the entrepreneurial characteristic set.

    Assuming that intervention takes place with respect to the entrepreneurial characteristic set, and no change takes place with respect to the organisation's culture, Morph initially returns to position C. Unless the intervention is sustained then Morph will return to E, the indirect consequences being disillusionment either in Morph or in those seeking a return for the investment in Morph's mind set development. Assume that arriving at point C the organisation to which Morph belongs enters the process of re-engineering previously described, and this process moves quickly, Morph cannot immediately return to the upper surface through point (Q2). At this point Morph is hesitant (hysteresis) and will monitor changes carefully, moving incrementally across the lower surface to point (Q1). Eventually, Morph's natural tendencies, in terms of entrepreneurial characteristics and the positive culture conducive to them, combine in such a way to inspire Morph to suddenly change (catastrophe) to point A on the upper surface of the three dimensional behavioural cusp.

    Hypothesis Summary

    (1)Individuals possess entrepreneurial characteristics naturally to some degree and these characteristics can be measured.
    (2)Culture will inhibit an individual's propensity to behave entrepreneurially the higher its degree of administration and bureaucracy
    (3)Catastrophe theory, and specifically the cusp catastrophe, provides a revealing model of entrepreneurial behaviour

    Methodology

    The study adopted two research instruments: a self administered questionnaire to identify the degree to which individuals identified with each of the six entrepreneurial characteristics, and an organisational culture inventory to identify the nature of the prevailing culture. The questionnaire was designed by the researchers and pilot tested for any structural errors. It presented to a sample group of managers (N=25) a series of statements with which they were asked to indicate on a 7 point scale their level of agreement whether they strongly agreed or strongly disagreed. To support the results, each respondent attended a structured interview which presented to them a characteristic profile based upon their response data. This process smoothed the raw data obtained from the questionnaire. Lastly, comparative data was generated by a colleague with whom the respondent worked closely and who was asked to comment on the respondent's characteristic profile. Any significant deviations were noted.

    Culture is a complex interaction of individual value systems and is extremely difficult to measure. The approach suggested by Schein (ibid) whereby the researcher acts as a catalyst, and groups are regressed through three stages of identification, beginning with observable behaviour (artifacts) through attitudes to finally their basic value set, is considered to be the most effective method. This is simply so because the individuals themselves eventually articulate their own values, in contrast with an interpretation by a third party. The method is costly in terms of time, and this study, approached as an exploratory enquiry, utilised a tested organisational culture inventory (Human synergistics - Verax 1991). This inventory has been widely administered in many different forms of organisations world wide. A cross-functional approach was taken which effectively examined a diagonal organisational 'slice' from director level to shop-floor worker. It is important to state here that hierarchical power, and specifically those who wield it, will have a significant role to play in influencing organisational culture. Thus, the sample included all directors and general managers and a proportion of all other groups. Of the sample population of 117 (representing approximately 12% of total personnel), those individuals who were not directors or general managers were selected randomly. The inventory generates a circumflex of 12 points, which are listed in Table 2 below.

    TABLE 2

    Organisational Culture Inventory Circumflex

    1.Humanistic helpful:Organisations are constructive and people-centred
    2.Affiliative:Organisations are friendly, happy, considerate places to work.
    3.Approval:Organisations avoid conflict and maintain good working relationships, at least superficially.
    4.Conventional:Organisations are conservative and traditional.
    5.Dependent:Organisations are controlled and run from the top.
    6.Avoidance:Organisations threaten to punish mistakes.
    7.Oppositional:Organisations value the devil's advocate.
    8.Power:Organisations make decisions made on rank, position, and authority.
    9.Competitive:Organisations expect people to out-perform each other.
    10.Perfectionists:Organisations value persistence and hard work.
    11.Achievement:Organisations do things well and value people who set their own goals and accomplish them.
    12.Self-Actualising:Organisations want to see the job get done, and want people to enjoy their work.

    The principal inventory was supported by two pilot studies. Pilot A presented to the organisation's managerial strata (N=56) an organisational questionnaire which identified the degree to which the managers considered each of six organisational issues to be a strength or a weakness. These issues were defined as Planning and Control, Motivation, Corporate Awareness, Managerial Style, Supportive Relationships and Task Orientation. These group broadly into two sets which can be described as administrative/bureaucratic and achievement and people orientated. The former group comprises Planning and Control, Corporate Awareness and Task Orientation; while the latter is made up of Motivation, Supportive Relationships and Managerial Style. Although indirect, this pilot gave useful intimation of which factors were held in respect.

    Pilot B used a small cross-functional sample (N=9) of high flier managers. This group completed an organisational culture questionnaire based on the work of Charles Handy (1993, pp.l83-6). The respondents were presented with a set of statements which described an organisation's culture. They were asked to identify which statement best described their own organisation as it is now and which of the statements represented how it should be in order to implement the organisation's growth ambitions. The key cultural descriptors were Power, Role, Achievement and People

    Discussion on Outcomes

    Analysis of the entrepreneurial characteristic data highlights that the characteristic set was held significantly(>50% score) by all respondents. Figure 2 illustrates the total set of responses and Figure 3 illustrates the high - low points for each characteristic. The characteristic dealing with an individual's tolerance of ambiguity achieved the lowest overall score. This can be related to the rate of the change process at Aviall where even the most entrepreneurial will have difficulty in coping. Most significantly the enigma was identified, where the individual's natural tendency towards entrepreneurship, although significantly high, did not lead to that individual exhibiting entrepreneurial behaviour to anything like the same degree.

    FIGURE 2

    Entrepreneurial Characteristics - Total Responses

    There are two possible explanations for why this enigma should exist. The first concerns the relationship of behaviour with attitudes and values. This study has identified attitudes of an individual towards a set of entrepreneurial characteristics. Therefore it is possible that negative behaviour plus positive attitude = negative value, where the positive attitude is a normative response i.e., what people or managers should, in particular, believe. An individual responding in this way may in all truth be unaware of the psychological relationship. This situation parallels a research study into small business managers attitude to training and development (Weaver et al., 1985). Here a number of entrepreneurs (N=130) expressed a highly positive attitude towards training and development but less than 50 had actually attended a development programme of one type or another over the previous two years.

    FIGURE 3

    Entrepreneurial Characteristics (High-Low)

    Further enquiry highlighted the fact that 95% of those taking part considered their educational experiences, from their formative years (5-16 yrs) and further or higher education thereafter, as unsatisfactory. This suggests that it is extremely likely that those experiences had established a negative value towards education in general. The significance of this simple truth can be seen by observing the behaviour, during the 1980s, of Government agencies and training organisations which developed at enormous cost innovative programmes and advertising campaigns to support them in an endeavour to improve the participation rate. In reality, they were only surfacing the negative value. The outcome achieved was the same - managers did not attend in any meaningful number (ibid). This study, therefore, in anticipation of this type of response, reinforced the completed questionnaire by face to face interview where the respondents were presented with their profile in an adversarial way. This interview explored the respondent's natural disposition with regard to each of the characteristics in an endeavour to improve accuracy. The data presented in Figures 2 and 3 represent the adjusted scores of respondents. The comparative data study revealed no significant deviations.

    The second possibility to explain the enigma concerns the organisation's culture. The organisation culture inventory data, illustrated by the resultant circumflex in Figure 4, emphasises the 10/4 axis which is the perfectionism/conventional axis, emphasising the importance of procedures and doing the traditional things well. It reflects a culture where risks are not taken, sometimes to the point of over-cautiousness, the level of bureaucracy is high, and individuals are expected to conform. The circumflex further shows that perfectionism is higher than achievement, indicating that there is a danger of being more product or process orientated than result or customer orientated, and that the organisation does not expect people to be innovative or creative. The lower scores in achievement and humanistic/helpful, coupled with the higher scores in avoidance and oppositional, suggest that it is difficult to build the drivers for change. Setting this against the many changes and the rate of change experienced by the organisation, the culture inventory does not reflect a readiness to take on board transforming levels of change. The high oppositional/avoidance feature indicates that constructive conflict is likely to be avoided but criticism is made in private. This aspect can make it difficult to surface, and therefore manage, resistance to change.

    FIGURE 4

    Organisational Culture Inventory Responses

    It is clear, therefore, that the organisational culture inventory describes the situation as being negative with respect to nurturing an entrepreneurial spirit. Pilot study A, the results of which are illustrated in Table 4, approached the issue of culture identification indirectly. Approximately 95% of the management strata were surveyed (N=56). Their responses indicated that Planning and Control, Corporate Awareness and Task Orientation were seen to be major organisational assets. Similarly, but to a much lesser degree, the strengths of Motivation, Supportive Relationships and Managerial Style were also identified. This tends to suggest, albeit implicitly, that the organisational culture is best described as administrative and bureaucratic.

    (Table 3)(table 4)

    Pilot B, illustrated in Figure 5, highlights that the existing organisational culture is predominantly one of power - role. The translation to an administrative bureaucratic description is clearly implicit. This study added a further interesting piece of information viz., the identification by the respondents of the need for cultural change to that of an achievement/people orientation.

    FIGURE 5

    Power - Role - Achievement - People Response (Pilot B)

    Summarising these cultural enquiries it is concluded that relative to the normal factor (see Figure 1), previously defined as a range from negative to positive, the prevailing culture is significantly biased towards the negative, i.e. the administrative/bureaucratic, end of the spectrum.

    Given the two scenarios presented above, to explain the enigma of high entrepreneurial characteristics and low propensity to exhibit entrepreneurial behaviour, it is considered that sufficient enquiry through interview and peer assessment has reduced the likelihood of normative error in the entrepreneurial characteristic responses to a level where it is more likely that the second scenario i.e., the dominance of an administrative/bureaucratic culture, is the determinant of low entrepreneurial propensity.

    Figure 6 below illustrates the most likely behavioural position currently adopted by the managerial group under enquiry. This shows a feasible region (XX) located by the level of entrepreneurial characteristics (high) and the normal factor (N) being negative.

    FIGURE 6

    The Management Cusp

    Conclusions

    This study concerns the role of entrepreneurship in a rapidly changing and developing organisation. The host company, Aviall Caledonian Engine Services Limited, having undergone major organisational development through business process re-engineering, and now identified as being at the entrepreneurial stage of growth, was disappointed that the behaviour anticipated from the company's managers had not reached expectation. Examination of the human resource development strategy indicated a highly structured and professional programme of skill enhancement. Each managerial function was analysed thoroughly and a skills profile established. Individual managers were then assessed against this profile and any gaps identified were closed through the application of bespoke training programmes.

    The missing element from the HRD strategy was mind set development. However, this study identified that an entrepreneurial characteristic set, as defined in Table 1, was prevalent to a significant degree amongst the study group. It is therefore concluded that the existence of these characteristics is a natural phenomenon, and not the function of developmental intervention. The matching behaviour, as previously stated, did not reflect that given in Table 1. The reason for this situation is more likely to rest with organisational cultural influences than normative response error.

    The cultural data gathered indicates a strong tendency of the organisation to be administrative and bureaucratic, with hierarchical power being a highly significant factor. Hence this study concludes that the inter relationship of entrepreneurial characteristics and the prevailing culture at Aviall Caledonian combined to mitigate against individuals behaving in accordance with Table 1.

    The most interesting conclusion to be drawn from this study is by reference to Figure 6, where a feasible behavioural region is shown on the lower surface of a behavioural cusp catastrophe. This indicates the likelihood that a sudden change in behaviour could take place if an incremental shift was made in the normal factor, organisational culture. For Aviall to move the cultural reference towards the positive end of the normal factor spectrum is not regarded as difficult. It is intended that further structural changes, designed to be implemented from 1st March 1995, include the administration of an attractive bonus scheme. The bonus scheme is intended to emphasise the relationship of effort and award, and, indirectly, signals to all staff a positive move towards an achievement culture. Thus, it is to be anticipated that the organisation may experience a motivational surge consistent with the catastrophic change at (Q1) in Figure 6.

    By utilising the mathematical concepts of catastrophe theory, this paper is suggesting the existence of a general theory of entrepreneurial behaviour. Clearly much greater research has to take place with respect to the normal and splitting factors used and also to explore other dimensions of catastrophe theory, for example, the butterfly catastrophe. Confidence to suggest such a theory follows the work of Kauffman and Oliva (1994) and Oliva, Desarbo et al. (1987). The implications of such a theory are that mathematical rigour can be applied to managerial behaviour in such a way that continuous and discontinuous behaviour can be modelled under the same construct. It is the intention of the researchers to continue this work and to develop a more rigorous mathematical treatment of the approach. It is hoped that this will lead to a model which can be tested consistently across many organisational forms. This paper concludes by suggesting that, if individual behaviour can be modelled in this way, then the sum of individual cusp catastrophes may give rise to the notion of "a catastrophic department", the extension of which, through integration and summation, leads to "an integrated multivariate and multi-dimensional organisational catastrophe", representing the entrepreneurial organisation.

    REFERENCES

    Handy, C (1993) "Understanding Organizations" (4th edition). Harmondsworth, Penguin

    Human synergistics - Verax (1991) Organisational Culture Inventory Fleet, Verax

    Kauffman, R.G. and T.A. Oliva (1994). "Multivariate Catastrophe Model Estimation: Method and Application. "Academy of Management Journal 37(1): 206-221.

    Oliva, T.A., W.S. Desarbo, et al. (1987). "GEMCAT: A General Multivariate Methodology for Estimating Catastrophe Models." Behavioral Science 32: 121 137.

    Schein, Edgar (1992) Organisational Culture and Leadership. Jossey Bass, London.

    Timmons, J.A., with L.E. Smollen and A.L.M. Dingee (1990) New Venture Creation Entrepreneurship in the 1990's. (3rd edition) Homewood, III., Irwin

    Weaver, R.Y., G. Southern and D. Brownlie (1987) An Investigation into the Attitudes and Values of SMEs Managers to Education and Training. Glasgow, The Training Commission.

    Zeeman, E.C. Ed. (1977). Catastrophe Theory: Selected Papers 1972-1977 Reading, Massachusetts, Addison-Wesley.

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