What is Entrepreneurial Organisation ?
An entity involved in practicing intrapreneurship of corporate entrepreneurship is known as Entrepreneurial Organisation (EO). Corporate entrepreneurship here can be understood as an entrepreneurial approach and behavior of an organisation. This entrepreneurial approach includes dedication of organisation to follow latest prospects, designing new divisions and business ideas; to come up with innovative products, services. and processes; being proactive, self-renewal ability. risk-taking ability, etc. A characteristic feature of an entrepreneurial organisation is having an entrepreneurial dominant logic.
According Meyer and Happard, 'an entrepreneurial dominant logic' is nothing but a mind-set which helps the firm in acquiring information, extracting relevant information for developing new product ideas and innovative processes, and in the meanwhile, attaining huge profits. The need for an entrepreneurial organisation calls for practicing corporate entrepreneurship. Hence, importance of corporate entrepreneurship can be recognized by the need for entrepreneurial organisation. It is also vital to determine the ways which would help in creation of such an entrepreneurial organisation.
Entrepreneurial organisation helps in promoting entrepreneurial activities by allowing flexibility of structure, administration, and processes, which would help in attaining the requisite alertness, speediness, and creativity towards seeking profitable opportunities. Entrepreneurial organisation is the one which fulfills the following two conditions :
- It has an organised structure which helps in disseminating the information to its members and provides them with the needed tools, which would help them in availing these opportunities us per their abilities in accordance with the defined objectives of the firm.
- It has an environment which would encourage. individuals to try and to commit mistakes; and where failure while attempting to excel is considered to be a sign of personal as well as organisational growth.
Environment of Entrepreneurial Organisation
An entrepreneurial organisation is said to be the one whose essence is providing opportunism and bringing innovation which would help in generating financial and social worthiness. Yet, many organisations consider this as only a short period of progression. In fact, most of the organisation emerged from the entrepreneurial state following a natural cycle which starts with growth, sustainability, wastage of resources, loss, followed by either disappearance or makeover.
An entrepreneurial organisation is the finishing point. This type of organisation has entrepreneurial thinking and actions. It requires developing and maintaining favorable climate to sustain its growth, however, such climate has to be maintained dynamically. A favorable entrepreneurial climate helps in smooth functioning of all components of the organisation together as one unit.
Structures or Characteristics of Entrepreneurial Organisation
Following are the essential components of a conducive entrepreneurial climate found in an organisation :
1) Leadership :
An entrepreneurial organisation follows leadership criteria. It guides the individuals instead of trying to manage their actions. This implies that though the objectives and plans associated with the organisation are fixed by the senior administration; yet each individual acts as a leader, irrespective of the fact whether he/she has been assigned any formal or not. One of the primary roles leadership role or not of the leadership in any organisation is to find a significant mission and a long-term plan; but in an entrepreneurial organisation, the employees are given more authorities and hence, they are expected to have a deeper insight, which would enable them to think and act in a particular situation or in a highly versatile environment.
Besides communicating the objectives of the organisation to the employees, the leaders should develop a strong vision as far as the values and the desired behavior are concerned. They should also motivate their employees to inculcate the desired entrepreneurial behaviors (such as open minded attitude, freedom of expression, honesty, truthfulness, boldness, politeness, etc.) and should help in promoting entrepreneurial values (such as behavior, resourcefulness, pro-activeness, opportunistic aspirations, innovativeness, etc.). The leaders should know when to adopt a directive leadership style and to adopt authoritarian leadership style. This is because excess of directive and authoritarian approach may lead zing the to downsizing the innovativeness among the employees; however, being too liberal may lead to failure in accomplishing the productive ideas. Hence, a balanced approach should be exercised by the leader.
While undertaking decision-making on certain matter, it is importance to analyse the amount of risk a leader can take. As compared to actual entrepreneurs who are more impulsive in their actions, leaders seem to be less confident. Consequently, they are unable to realize their full I and prefer to settle on generating profits than aiming record-breaking at rather developments. Thus, these leaders have little desire for risk-taking and lower degree of tolerance for risk; and such an attitude hinders creativity and expansion.
2) Culture :
The cultural environment of every organisation consists of its values and beliefs which influence the behavior and experience of employees, as well as the way employees interact with others. As the conduct of the employees shaped by the cultural environment of the organisation, so it is of utmost importance that the cultural environment of the organisation should also help in developing the desired entrepreneurial behavior. A cultural environment of the organisation is open and inclusive, which allows active exchange of ideas and social interactions. Open communication enables the employees to exchange their ideas, perception and approaches within the organisation. Advancement of social networks helps in better employ-ability of knowledge and information.
For example, the employees would be able to explore the hidden expertise of a person by interacting with him/her and would be able to learn from his/her experience and knowledge.
An entrepreneurial cultural environment is the one which supports, appreciates and value aspirations. Liberal thoughts, freedom of expression, etc. The employees should be given opportunities to come up with innovative ideas, irrespective of their failure or success rate (as the risk factors can be allowed by the leader up to a certain extent). Several individuals resort to self employment as either they fail to get chances to come up with innovative ideas or the organisation fails to appreciate their efforts in bringing such ideas. Therefore, any organisation which aims at becoming entrepreneurial should ensure to develop a conducive environment. which is able to support intrapreneurship employees acting as entrepreneurs.
3) Structure :
The structure of an organisation is also vital as it helps in defining the formal division of work, its collaboration in groups and coordination. The structure of an entrepreneurial organisation should be such that it helps in supporting the optimum exploration and utilization of prospective opportunities. For achieving this, following three aspects should be given consideration :
i) Work Specialization :
It is commonly known as the division of labour which refers to the extent to which a work is sub divided into different jobs. Though division of labour is highly efficient, yet its extremeness might lead to fatigue due to repetitive jobs and would lead to fall in productivity and quality. The lower levels of division of labour also lead to similar results. Hence, it is important for the entrepreneurial organisation to give due attention to when to raise or lower the levels of division of labour. The narrow perspective about the organisational operations would never allow the employees to have 'out-of-the-box thinking. It has been shown through studies that the employees feel more contended and come-up with innovative ideas when subjected to varying roles; as it would allow. them to use their experiences and adopt varying perspectives regarding the operational procedures.
ii) Departmentalization :
As the name suggests, dividing the work into departments based on the nature of job is known as departmentalization. Sales, finance, marketing, and human resource are some of the major departments based on which jobs are allocated in an organisation. Every organisation has numerous treasure of talent hidden under the mask of departmentalization. Free flow of creative. thought is possible only by eliminating barriers of departments and promoting liberal exchange of ideas between different divisions and subdivisions. Moreover, direct communication between different departments would help in sharing of knowledge, experience and expertise between individuals from different backgrounds (based on experience, qualification, abilities, etc.). This enables the employees in exploiting and utilizing their skills and knowledge in a better way.
iii) Chain of Command and Span of Control :
The hierarchy of commands refers to the flow of authority from the top management to the lower levels. The span of control refers to the number of individuals effectively and efficiently managed under the direct authority of a manager.
The success of the entrepreneurs is determined by their ability to immediately respond and utilize the opportunity as soon as it emerges. An extensive chain of command and prolonged span of control creates hindrance while quickly grasping the prospective opportunities. On the contrary, entrepreneurs can succeed if there is a low chain of command and greater degree of independence given to the subordinates. This is to say that a 'flat' hierarchy helps in quick decision-making.
4) Teams :
History shows that the survival of human race is based on its ability to adapt as per the surroundings and coordinate with the fellow beings. The organisation can also be successful on the same lines. Opposite to the popular belief that innovation generates in isolation'; people tend to be more creative and efficient when they work in teams or social groups, be it their department or subdivision. Entrepreneurial teams refer to a small group which comprises of individuals who are coming up with the innovative and creative ideas and trying to make the best out of every opportunity. One of the general features of under achieving teams is mutual feelings of disinterest and laziness, yet, this type of attitude can be lowered by assigning the members with their direct and indirect roles. For this purpose, functional conflict can be motivated, where the members are given liberty to constructively criticize and challenge the decisions, ideas and assumptions applying at positive approach,
5) Employee Profile :
An entrepreneurial organisation is not formed by employing only entrepreneurs; as such an organisation would not be able to function efficiently. Instead, it should have the following features :
- A cultural environment which promotes entrepreneurial activities.
- A structure which teams-up the individuals by effectively combining their entrepreneurial features.
Entrepreneurial features found in employees may be categorized as follows as per the META's research :
i) Creativity :
It refers to the capability of an individual to come-up with creative business ideas. It is associated with non-conformity, innovation and desire for new experiences.
ii) Opportunism :
It refers to inclination towards identifying novel business prospects. It is associated with alertness, awareness, and foresightedness to identify prospective developments.
iii) Pro-activity :
It refers to inclination towards being proactive regarding accomplishing tasks and projects. It is associated with high energy level, self-confidence and willpower.
iv) Vision :
It refers to ability of an individual to visualize broader perspective, and desire to bring change and realize path of progression. It is associated with the values and ability of an individual to have a wider objective in mind.
However, these set of features are possessed together by very few individuals, yet most of the entrepreneurs who are starting with their new ventures have one or more of these characteristics. The key to success is not the possession of all these features by a single individual but a right combination of these characteristics among all team members or within departments.
Advantages of Entrepreneurial Organisation
Following are the main advantages or importance of entrepreneurial organisation :
1) Rapid Decision-Making :
An entrepreneurial organisation helps in making decisions quickly. which is one of its greatest advantages. In such organisations, it is possible to take quick decisions and implement them without requiring a prolonged process of meetings, discussions, approvals, etc. Such a situation allows business operations to rapidly match with the changing market scenarios.
2) Useful for Governmental Bodies :
Entrepreneurial organisation also acts as a style of leadership and is used by the governmental bodies in case of emergencies, where the authority to take decisions is given in hands of one governmental official who takes all important decisions during that time. Almost every country allows the law to supersede the parliament or the like bodies, when there is need for quick response and action.
3) Cost Effectiveness :
It is one of the most cost effective business structures and in several cases would prove to be the most economic one. The cost effectiveness comes from the fact that it does not require any middle executives/managers and hence, helps in cutting down expenses that would have incurred in maintenance such as salaries, travelling allowances, perks, etc.
4) Less Confusion about Responsibility and Accountability :
Under entrepreneurial organisation, the duties of employees and workers are clearly stated and there is less confusion of accountability and responsibility as everyone knows whom they are accountable to. For example, when the workers are asked to devote more time on the products for enhancing their quality by the production department, and at the same time, the accounts department asks them to raise the amount of production for bringing more profits. In both the situations, the employees are well-aware to which authority they have to give the progress report and what purpose the employees are asked to serve.
5) Improved Congruency of Goals :
A low level of chain of command in a small-sized organisation enables the entrepreneur to exercise effective control over the workforce and decisions that he takes. Such an effective control leads to better congruency of entrepreneurial goals with fewer chances of disagreements.
Disadvantages of Entrepreneurial Organisation
Though there are many advantages of the entrepreneurial business structure, yet it is not free from various disadvantages, which are explained as follows :
1) Chances of Demotivation :
As it is autocratic by its nature, where the employees are being dictated only about what to do', without the "why' behind the action, there are chances that the employees might get demotivated and lose morale in case they do not agree with the decision of the authority. However, the degree of this discouragement would depend upon several factors, like extent of disagreement, level of explanation given/not given regarding the decision, etc.
2) Probability of Incorrect Decision-Making :
Under entrepreneurial organizations, it might happen that the decision-making authorities are not fully acquainted with the market conditions and the problems to the extent they think they are. In such cases, quick decisions taken by these authorities may not prove to be of much benefit. Instead, it would be better if the authorities seek help from specialists or field experts.
3) Inappropriate for Large Organization :
Entrepreneurial organizations are often inappropriate for continuously growing businesses as the decision-making authority has to take several decisions. Under entrepreneurial business structure, decisions are made quickly. But when there are numerous decisions to take (causing delay in decision-making as satisfactory reason behind each decision has to be communicated first to the employees), the best option is to recruit a manager and assign him the responsibility of taking decisions.