Why soft skills don’t always translate into hard profits

March 8, 2016

IMAGE_STORY_Albena_PergelovaBusiness prof wants to change the conversation around “underperforming” female entrepreneurs

When Albena Pergelova, an associate professor in the School of Business, was on maternity leave two years ago, she found inspiration for a new thread in her research on entrepreneurship.

“You start thinking about things in a different light when you have a baby and I found myself reflecting on how motherhood impacts life and work,” she says. “It got me thinking about women who are entrepreneurs and wondering about how they deal with the multiple demands and challenges they face.”

Albena began looking through the literature and discovered a theme called “female underperformance hypothesis”—that businesses run by women tend to be smaller and less profitable.

“Part of the literature was saying that special programs should be put in place so that female entrepreneurs could increase the growth, profit and sales of their businesses, but another part said that if you look beyond profits, these businesses are doing just fine,” explains Albena.

So she decided to do some research using a broader set of indicators. Focusing on the retail industry where a large number of female-led enterprises tend to concentrate, she found that female entrepreneurs are generally better at using their intangible marketing capabilities—skills like relationship building—to create a competitive advantage, but those capabilities don’t necessarily translate into higher profits compared to their male counterparts.

That got Albena thinking about whether the bottom line was actually the main motivator for female entrepreneurs. “Of course, money matters, but it’s not the only thing that matters. Perhaps these entrepreneurs were interested in different outcomes, things like the impact they are having and the relationships they enjoy with their clients.”

Albena is planning to augment her earlier quantitative findings with qualitative research—doing interviews to see which measures and performance indicators are most important to these small business owners—and looking at the possibility that female entrepreneurs are choosing to spend more money on things that matter to them as a way to explain lower profits.

“We are looking at whether these business owners may have other motivations and interests—paying their employees more or giving them more vacation—and whether overspending in those areas may explain the lack of capitalizing on their soft skills to achieve higher profits,” says Albena.

The research, she says, is also about trying to change the conversation within the field of entrepreneurship, where the literature has traditionally focused on the economic value entrepreneurs create. This view, explains Albena, has been challenged by some academics in favour of another that sees entrepreneurs as individuals whose activities bring change not only in terms of economics, but also socially, culturally and institutionally.

“Figures show the bottom line, but they don’t necessarily tell the whole story. We need to consider how we look at businesses and what we expect from them. If an entrepreneur is happy with what they’re achieving, who’s to say that they are underperforming.”

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