INTRODUCTION

We studied a national sample of 112 entrepreneurial companies with a total of 1097 raters. We focused on: 1) The leadership and management skills of the CEO; 2) The management team functioning (CEO’s direct reports); and 3) The organization’s culture and climate. Using three new-generation 360 degree instruments, the Entrepreneurial Performance Indicators (Eggers & Leahy, 1996), we collected perceptions of the CEO, and the CEO’s direct reports and subordinates. We also collected a comprehensive set of financial performance data from each company. Our purpose was to further understand how CEO and management team behavior affect both organizational culture and company financial performance.

METHODS

We constructed a national sample pool of 1040 companies. This pool was stratified for geography and gender from three sources: (1) A national random sample of small businesses from Dun & Bradstreet’s database in Washington, DC (N=309); 2) Participants in an entrepreneurial leadership development program (N=38); and 3) Members of two award-winning groups of entrepreneurs acknowledged for their excellence (N=693).

Data Collection

Each entrepreneur was invited to participate in a national instrument validation study. In exchange they would receive a personalized comparison of their survey results with national norms. Those who volunteered were sent three new Likert-scaled skill inventories designed to measure the critical skills of entrepreneurial CEOs, their management teams, and their company’s culture.

The surveys were the Entrepreneurial Performance Indicators: (1) the Leadership Survey (20 behavior scales), which measures CEO leadership and management skills; (2) the Management Team Survey (12 behavior scales), which measures management team performance and composition; and (3) the Organizational Culture Survey (26 behavior scales), which measures organizational culture, climate, and system functioning. These surveys measure each construct from three different perspectives, along with company demographics, financial performance indicators, and critical problems faced by the company.

The scales on each instrument were designed to measure frequency of behavior. The rater was asked, "How often is each behavior observed?" Responses were collected on a 5-point Likert scale ranging from 0 to 4 (0 = Never, 1 = Rarely, 2 = Sometimes, 3 = Frequently, 4 = Always). On the Leadership Survey an additional scale was also included, which asked respondents, "How well is each behavior done?" These judgments were also collected on a 5-point Likert scale. However, this scale was anchored with: -2 = Extremely Poorly, -1 = Below Average, 0 = Average, 1 = Above Average, 2 = Excellently. Raters also had the option to respond with either "Not enough information" or "Not applicable." Coefficient Alphas for each instrument scale used in the sample indicated an average reliability of .80 or better (75% of the scales). Preliminary confirmatory principal components analysis supported the construct validity of each measurement scale.

Each company in the study was given 14 Leadership Surveys, 9 Management Team Surveys, and 12 Organizational Culture Surveys. This allowed us to collect data at three primary levels of experience and perception: 1) CEO, 2) Management team members (the CEO’s direct reports), and 3) Subordinates (below CEO’s direct reports). The Management Team Survey did not necessarily collect the perceptions of subordinates, but instead asked for the impressions of individuals who knew the activities and climate of the management team well. This 360 degree approach to data collection has received wide support for: 1) its accuracy from a psychometric viewpoint, and 2) its usefulness in providing feedback to the participants (Van Velsor & Leslie, 1991). See Figure 1 for an overview of each instrument.

Sample Demographics

Our current research sample consists of 112 companies reflecting a response rate of 11 percent. Our final sample is highly representative of the national population of entrepreneurs in gender, geography, and industry dispersion as established by the Small Business Administration (SBA, 1992). Except for ethnicity and the retail trade industry, the demographics of the final sample match national demographics. The number of companies in each group broke out as follows: Dun & Bradstreet sample, N = 40; Entrepreneurial Leadership Program participants, N = 38; and award-winning entrepreneurs, N = 34.

Figure 1

We received 3,016 surveys from the following raters: 224 surveys from CEOs, 1239 surveys from management team members, 1322 surveys from subordinates, 182 surveys from others (a wild-card reporting category, chosen by the CEO), and 49 surveys on which relationship was unmarked. The median company was 18 years old, had current annual sales of 10 million, with 70 full-time employees. The business regions covered were divided almost evenly between local, regional, national and international.

The average CEO was a 45 year old white male with a college degree, owned 62% of the company, and had been in his current position for 8 1/2 years. Regarding founder status, our sample was 58 percent founder CEOs and 42 percent nonfounder CEOs. Using the Eggers, Leahy, & Churchill (1994) model as a guide, most CEOs reported their businesses were in the Growth Orientation phase of management development. The distribution of companies among the phases was slightly negatively skewed with 0 in Conception, five in Survival, 22 in Stabilization, 54 in Growth Orientation, 23 in Rapid Growth, and 8 in Maturity.

 

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Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

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