Business

Breaking stereotypes about female entrepreneurs

By Nanette Byrnes     

From: Magazine

For decades the symbol of women entrepreneurship has been, to many, the Avon lady. On its website, Avon describes this amalgamation of past Avon representatives, who made their livings selling the company’s beauty products, as “one of the most enduring and iconic images of women’s entrepreneurship.”

The icon reinforces the picture research has painted of female entrepreneurs. Some studies suggest that women work less and earn less than male entrepreneurs. Others suggest that women are inferior networkers to men, relying too much on friends and family and not enough on a broad network of contacts. Picture a female entrepreneur and you might imagine a woman at the helm of a small business, perhaps in a female-focused industry such as cosmetics or childcare. Perhaps your imagined entrepreneur got there after hitting a glass ceiling, or maybe she struck out on her own as a way to gain balance between household duties and work responsibilities.

But Tulane’s Jennifer Merluzzi, who earned a PhD from Chicago Booth, is unsettled by these descriptors, which she considers broad and often inaccurate generalizations. She says the studies behind them are limited by their approach and end up either producing a universal definition of the female entrepreneur that lacks nuance or drawing conclusions about female entrepreneurs only as they relate to their male counterparts. “The comparison should not be men versus women or entrepreneurs versus not. There are lots of shades of gray,” Merluzzi claims.

Her ongoing research about women entrepreneurs with Ronald S. Burt, Hobart W. Williams Professor of Sociology and Strategy, contradicts these conventional views. Using a proprietary data sample, the two researchers craft a more detailed picture, not simply of female entrepreneurs, but of a variety of women who move in and out of the labor market at various points in their careers.

Harvard Business School acknowledges that only 8% of the case studies used in its MBA courses have women protagonists, while Ernst and Young’s Entrepreneurial Winning Women Program is in its sixth year of identifying female entrepreneurs who need to “think bigger,” with the aim of helping them do that.

It begs the question, in the Decade of the Women Entrepreneur (so named by the Ewing Marion Kauffman Foundation), what do we know about today’s women business leaders, and what do we only think we know?

A long-buried survey has its day

In some cases, studies about female entrepreneurs rely on small, homogenous datasets of a few dozen women in a single location. Other research relies on large datasets—from census surveys, for example—that can wipe out nuances. Merluzzi and Burt, by contrast, use data that offers a sufficiently big but also detailed look at the career choices of working women. The sample includes 814 respondents from their 20s to their 80s. Some are entrepreneurs; others are not. They have two things in common: they are women, and they have MBAs from Chicago Booth.

The source is a 1998 Booth alumnae survey Burt conducted, to coincide with the school’s 100th year. In an effort to learn more about women graduates and their engagement (or lack thereof) with the school, he mailed a 31-page questionnaire to every living female MBA alumna who had graduated since 1937. It took as long as two hours to complete and asked about the alumna’s household, current job, network of contacts, values and opinions on work, and barriers to women in business. About one in five returned the survey.

Burt shared the survey with the school’s leadership and then put it down to focus on other research, much of it about social networks. Years later he offered it to Merluzzi, his former PhD advisee, whom he knew had an interest in women entrepreneurs.

What sets these survey data apart, says Merluzzi, is the chance they offer to look at women entrepreneurs, as well as the many more graduates who chose other routes. Investigators can compare career women to each other, not simply to men. It also allows them to consider female entrepreneurs in the context of their labor-market counterparts and of women who chose to leave paid employment.

One in four women in the survey became an entrepreneur at some point, the data show, though entrepreneurship right out of school was rare: 97% of the 814 respondents went straight from graduation to working for others. But the entrepreneurial bug took hold in time—eventually 15% of the group left employment to strike out on their own full-time, and 9% more went on to build side businesses of their own, while continuing to work as employees.

The researchers find some clues as to how and why some women become entrepreneurs while others do not. Many who became entrepreneurs experienced major life events, such as divorce or parenthood, just as they started their own ventures. Earlier entrepreneurial research credited women’s struggle to balance home and work obligations as a major cause of their striking out on their own, but Merluzzi and Burt find evidence that those women were going to become entrepreneurs anyway. “Over the course of their lives, entrepreneurs and nonentrepreneurs are equally likely to be married, have children, get divorced, or remarry,” they write. “However, as a woman goes through one these events, the odds of her becoming an entrepreneur go up. In some window of time around the event, a woman predisposed by other factors to become an entrepreneur in fact makes the transition.” Family seems to predict when, not whether, a woman becomes an entrepreneur.

Another factor is the field in which a woman works. Women in service industries were more likely to try part- or full-time self-employment than those in other industries.

The size of an employer mattered too, as did career progression. Graduates who started out working at large organizations were far more likely to stay employed by others than those in smaller companies. Women who reached the senior management ranks in any organization were unlikely to then strike out on their own—they were already running their own businesses inside a larger corporation.  

Three groups of entrepreneurs

Using the data Burt gathered, Merluzzi and Burt categorize female entrepreneurs into three groups rather than one homogenous set. “Primary entrepreneurs” work for themselves full-time. “Interrupted primary entrepreneurs” go from full-time entrepreneur, to employee, and back again. “Secondary entrepreneurs” work full time as employees in a firm, but also run their own ventures on the side.

All three groups are represented among the 23% of graduates surveyed who took a job after graduation, but later started their own business. The Booth alumnae most likely to become primary entrepreneurs, according to the report’s analysis, were employees below senior rank in small consulting service firms.

Joan Treistman, a survey respondent from the class of 1969 (see “There’s no one ‘right’ way"), is an interrupted primary entrepreneur. When Treistman suggested she and two colleagues offer to buy the company they had been working for, “it was a gut reaction,” Treistman explained recently. In four decades as a marketing researcher and consultant, she has variously worked for other people and herself. Most comfortable making decisions on her own, she has sometimes needed the resources a larger firm can offer.

Among all the female entrepreneurs who responded to the survey, on average the women became entrepreneurs in their mid-thirties, and their first solo venture lasted an average of eight-and-a-half years. Their firms had an average of seven employees, including the entrepreneur herself, and recorded peak gross income in the firm’s best year of between $322,000 and $14 million. Almost all of the entrepreneurs, 96%, started service businesses of some kind, including investment advisory firms, marketing and management consultancies, and professional offices such as legal and medical practices. One woman started a health-care services company that had 600 employees at its peak. But while many worked with colleagues and employees, 61% worked alone, many as consultants.

When the researchers look only at firms owned by full-time entrepreneurs, and exclude those run by interrupted primary entrepreneurs and secondary entrepreneurs, they find that firms owned by full-time entrepreneurs were generally larger, employing an average of a dozen people, and ringing up gross income in their best years of between $580,000 and $14 million.

Secondary entrepreneurs mainly ran project-based side businesses, often consulting projects in their fields, which were most typically education, law, medicine, or scientific research.

What women want

Merluzzi and Burt discover that success means something quite different to an entrepreneur than it does to her counterpart employed by a business. For an entrepreneur, success is defined as having a wide network of relationships and control over her life. Senior managers, on the other hand, measure success by recognition and a wide sphere of influence, factors that were at the bottom of the list for entrepreneurs surveyed. This tradeoff between independence and recognition is typically cited when comparing male and female entrepreneurs, and the same tradeoff arises when comparing women on separate career paths.

For secondary entrepreneurs, the most important dimension of success is security.

Although entrepreneurs such as Treistman describe their work as sometimes stressful, they appreciate the control it gives them over their lives—and according to Merluzzi and Burt’s research, entrepreneurs are the happiest with work of all the alumnae surveyed. Some 20% of women graduates who moved in and out of entrepreneurship described themselves as “completely satisfied” in their current or most recent full-time jobs. Primary entrepreneurs, who stuck with self-employment, were the happiest with work, with 36% describing themselves as completely satisfied.

Both were happier with work than their employee counterparts. Among those working for an employer, the happiest were those who had risen to senior positions. Some 18% of that group described themselves as completely satisfied. Those in more junior positions were far less happy, with only 9% saying they were satisfied with their jobs. Unfortunately, two-thirds of entrepreneurs who eventually returned to employment did so below senior rank, where job satisfaction was much lower. Across all groups, the women least satisfied with work, or who at least had the most unhappy memories of it, were those who had left the labor market.

In keeping with their different career paths, entrepreneurs and employees voiced concerns about different career issues. Entrepreneurs were most troubled by conflict between their personal and professional values, and the stress of work. Full-time managers voiced concerns about the lack of women with senior experience. They listed among their tradeoffs for success: personal time, a balanced life, and meaningful relationships. Entrepreneurs put this at the bottom of their list—their work is inherently personal.

Achieving success

Merluzzi and Burt’s research debunks a long-held belief that women have weaker networks and rely excessively on family and friends to build their business. The entrepreneurs surveyed reported broad networks. When asked about key client contacts, graduate school contacts, and their most valued contacts for career advice and support, entrepreneurs of all stripes reported high numbers of contacts beyond family and work, consistent with the kind of broad network believed essential to entrepreneurial success.

Full-time entrepreneurs, whether primary or interrupted, had the broadest networks, which reached distant contacts. Secondary entrepreneurs had networks similar to nonentrepreneurs, reporting a greater concentration of family and work contacts. The women most reliant on family and friends were those who were no longer in the paid workforce.

Booth alumna Mary Moosbrugger built her network and a successful market research firm, which caters to academic medical centers and pharmaceutical companies, largely by word-of-mouth recommendations from customers. “One client would recommend me to another. I didn’t try to develop it except by doing a good job,” she now says.

Moosbrugger worked for eight years for large firms including Leo Burnett, Booz Allen, and Sara Lee. After adopting two children and freelancing for several years, she went back to school for her MBA and then launched a firm that she ran for 35 years. At its height, the firm had billings of $1 million a year and a staff of ten people.

“At the time I was doing it, I was having a ball. I liked creating something from nothing. I liked being the boss,” says Moosbrugger. She says the 80-hour weeks and administrative responsibilities were stressful, but she achieved what she had wanted when she started the business, including flexibility and the control that comes with being the boss.

Now retired and living in the foothills of the Great Smoky Mountains in Salem, South Carolina, Moosbrugger finally has a chance to slow down, her days filled with volunteering and water skiing. “I was a workaholic and very good at what I did, but I didn’t have a balanced life,” she says.

She represents another picture of female entrepreneurship—a more complete image than has existed in the past, and one that research is starting to reveal.

Work cited

Jennifer Merluzzi and Ronald S. Burt, “Creating Careers: Women’s Paths through Entrepreneurship,” Research report, 2013.