Who are the real heroes?
The unjust stigmatization of failed entrepreneurs
Good judgment comes from experience,
and experience comes from bad judgment. (Rita Mae Brown)
Entrepreneurship and young business start-ups are promoted and embraced in every ecosystem, every economical environment in the world because of the positive influence to drive innovation and change by bringing pioneering and disrupting ideas to the market. By focusing on the promotion of these young business “disruptors” we have lost track of the big picture and the entrepreneurial business demography at a whole. In fact, 13 out of 28 EU countries have a negative business balance, meaning that more businesses are yearly dying than they are born. According to eurofond, in Q1 2014, business closure and bankruptcy accounted for 7% to job losses in Europe. This figure increased to 15% in Q1 2015 and to 22% in Q1 2016 and even 45% in Q2. The question should be raised if we are promoting the right group of people or if we should rather start rolling the field from behind and promote the real heroes?
Starting up a business is a risky act and those who dare to take this step are courageous. In literature described as “disruptors”, “risk takers” or “agents of change”, the entrepreneurial act is glorified and successful entrepreneurs serve as role models for the act of starting up businesses. Nevertheless, succes stories are rare and succeeding immediately and infinitely is not the normal case and usually far from reality.
Despite the high probability of a failure event, this outcome is hardly accepted by society and its advantage as a source of learning is often neglected. In theory, somebody who has already started a business and gained ownership experience has less difficulties to start a business anew, given his increased knowledge of entrepreneurship. In order to do so, the entrepreneur must understand his failure and turn it into a learning experience. In the literature, entrepreneurial learning is a very broad topic and many different types exist. Entrepreneurial learning can be categorized in 3 learning strategies: (1) learning by the acquisition of competences and capabilities (education), (2) learning by doing and exploring and (3) learning by trial and error (mistakes and learning what works and what doesn’t). Failure can be unserstood a source of learning comparable to the trial-and-error-method.
In order to turn a failure into a learning experience, the entrepreneur needs to enter a process of learning and sensemaking in which he understands and attributes the causes of his mistakes in order to be able to learn from them and prevent a repetition in a future activity.
Even though this re-evaluation of the failure event is everything else than instantly and automatically, unfortunately, this learning process is neither encouraged, nor supported or facilitated by any institution or agent in the market. In reality, it is the opposite: the failed entrepreneur has higher barriers to overcome when willing to restart after a failure event than the entrepreneur who starts from a blank page. This is because often, the failure event is misleadingly blamed on the entrepreneur’s fault, unjustly understood as fraudulent bankruptcy and not accepted as a natural and possible outcome, despite the riskyness of entrepreneurship. Entrepreneurial failure has numerous reasons and can be generally understood as a suffered or forced discontinuity of the business ownership. Its reasons are various: economical, financial or organizational (…) but also because the business outcome did not meet the entrepreneurs personal expectations. Most important, the entrepreneurial failure event has a negative side effect for the entrepreneur himself, “the aftermath of failure” which is characterized by the three main “costs of failure” : besides the (1) financial problems that follow such an event, the stigmatisation, the misunderstanding and the misattribution of the causes of the failure event result in (2) emotional and psychological problems for the entrepreneur and a (3) social hostility of his failure event and the entrepreneur himself. In my studies (2016), I have found that there is also physiological costs (stress, sleeplessness, illness etc) and judicial costs (fraudulent bankruptcy, prohibition of a business startup) linked to the failure event. Instead of receiving support or creating an environment in which the learning process would be encouraged, the destruction of his status quo, his self-efficacity and his credibility are largely impacting the barriers to re-enter the entrepreneurial activity (either by the individual himself or by his social environment).
The non-acceptance of entrepreneurial failure is leading to another undesired and much bigger problem: the fear of failure. The fear of failure can become a major problem for the entrepreneurial environment of a whole economy. According to the Global Entrepreneurship Monitor 2011, 7 out of 10 people see business opportunities but the fear of failing hinders them to act accordingly. In fact, in economies with a high fear of failure, the young business ownership rate remains low even when opportunities and capabilities are perceived high. This problem is equally applicable to those entrepreneurs that already failed and would consider a restart, they would simply not try it again. Nevertheless, it exists “determined entrepreneurs” who, despite their failure, have the courage to start again.
But, what if they would fail again?
The biggest problem is when the fear of failure becomes an influencer of business performance of a following business activity. Entrepreneurs who fear to fail again usually act more prudent. Ironically, McGrath (1999) has found that this risk aversion and prudent decision making would make the entrepreneur commit even more mistakes and decrease his performance.
Finally, the stigma of the failure becomes a negative force with a double effect: (1) it increases the fear of failure and decreases the willingness to startup/restart a business on the one hand, and (2) creates an environment in which the entrepreneur wouldn’t make advantage of his experience and rather fail again than to succeed.
Isn’t then the real hero the entrepreneur that falls, learns, stands up again, defies the barriers and problems and at least tries to succeed anew?
Nowadays, we have hundreds of support structures for the entrepreneur to start up a business correctly, to get in contact with investors and important other entrepreneurs in the market or sector. Why isn’t there no structure for those who have already proven to be capable of starting up a business, but failed? Today we glorify the success stories of entrepreneurs around the world, we give prices, trophies, certificates, best practice sharing and rankings. Why isn’t there no trophy for the best “second chance entrepreneur” or “restarter of the year”? In fact, he seems to be the real hero of this story!
Time has come to overcome the stigma of failure, to de-dramatize the failure event and the failed entrepreneur and to give restarters a new perspective, — one in which their competences are equally appreciated, supported and valued as their successful and “disruptice” novice colleagues.
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