Can psychometric tests be used effectively to improve programmes for startup founders?

- July 2, 2015 8 MIN READ

Psychometric tests, which typically involve answering brief open-ended questions around ethics, attitudes, skills and emotional intelligence, have long been used to identify the entrepreneurs of tomorrow as well as calibre potential within high-growth businesses. Recently, the New Venture Institute at Flinders University in South Australia analysed the Myers-Briggs data of over 100 founders who participated in the Venture Dorm programme over the past two and a half years and found a strong correlation between certain personality types and startup success. Specifically, the Institute found a link between ENTJs – those who are natural-born leaders – and generating revenue or raising capital.

ENTJs (also known as ‘commanders’) are people who prefer extraversion (interacting with people) over introversion, intuition (perceiving new possibilities) over sensing, thinking (making decisions using objective logic) over feeling, and judgement (an organised lifestyle) over perception. In one description, ENTJs are summed up as people who “embody the gifts of charisma and confidence, and project authority in a way that draws crowds together behind a common goal … ENTJs are characterized by an often ruthless level of rationality, using their drive, determination and sharp minds to achieve whatever end they’ve set for themselves.”

The New Venture Institute also found a less strong yet noticeable connection between ENFJ (‘protagonists’), INTJ (‘architects’) and INFJ (‘advocates’) personality types and startup success. Interestingly, INTPs (‘logicians’), who have been responsible for many scientific discoveries throughout history like Albert Einstein, were least likely to raise capital or have businesses that generate revenue, according to the Institute.

While the data was collected on application to the Venture Dorm programme, Matt Salier, Director at the New Venture Institute, said applicants’ personality types are not part of the programme’s eligibility criteria. However, by analysing the Myers-Briggs data, Salier said the Institute is able to gain a better understanding of its founders’ strengths and weaknesses, which will in turn help the Institute identify ways to improve its Venture Dorm programme so that it delivers value to founders of all personality types (or founders with varying strengths and weaknesses).

“As you gather more and more data, you can see nuances and identify what needs to be added to programmes to enhance the prospects of success and enhance what you gain from being involved in this sort of acceleration programme. We also think it would be really valuable to share this information to help others shape their programmes,” said Salier.

He also said the results will allow founders to use their entrepreneurial competencies more effectively, while also recognising gaps in traits that need to be filled – for instance, by hiring people with those particular traits or by partnering with other businesses that can offer value in certain areas of business development.

Salier stressed that if founders lack certain personality traits, it doesn’t necessarily mean they’re disadvantaged or that their businesses are destined for failure. A 2013 study by Uschi Backes-Gellner and Petra Moog, found that entrepreneurs are jacks-of-all-trades, but masters of none – or in other words, generalists. Their employees are the specialists, so founders and employees need each other.

“If you’ve got someone who’s a ‘commander’, they’re going to need those innovative/advocate types behind the scenes as well. How do you build the right blend unless you know exactly what you have and don’t have?” said Salier.

“Whilst there is that seed capital and external investment correlation with certain personality types, it doesn’t mean that one is better than the other. It just means that there is a really interesting insight to be gleaned from as we keep gathering data.”

Salier said most successful startup founders are fully cognisant of their weaknesses and have built great teams around them to help drive their businesses forward.

“When founders are growing their businesses, whether organically or through external investment, we want them to be able to go ‘You know what? I’m not really a natural hustler. I’m actually the innovator who can build cutting-edge tech or a new disruptive business model. I need someone who can go out there and sell what I passionately know is true’,” said Salier.

“The real advantage for all of our founders is that they get to understand what makes them tick. A founder might finally realise why they push certain tasks to the bottom of their ‘to do’ list and the solution might be to find someone else with particular skill sets to do it. I think that insight is really critical, so we see our (New Venture Institute’s) role to constantly iterate our programmes, to help people understand that they need to build highly capable teams around their ideas.

“We want to give these passionate emerging founders the best chance at creating a startup or business model of value, so all of our activities are focused around this. The personality profiling is just one aspect of that.”

While psychometric tests can help organisations obtain insights that can then be used to implement startup or other high-growth business programmes, an overemphasis on personality traits can end up marginalising certain types of people. For instance, INTPs (‘logicians’) – the least likely to have businesses that generate revenue – can be dismissed as being unequipped with the qualities necessary to run a thriving business. This, of course, is only if we focus on one individual behind a business, rather than the entire team.

Personality vs. Attitude

In the process of defining the ‘entrepreneurial personality’, many theorists have come to see particular personality traits being ancillary to behaviours that are more likely to lead to business success. The personality perspective takes the premise that certain individuals possess fixed personality traits which predispose them to entrepreneurial activity – such as self-efficacy, self-confidence, internal locus of control, conscientiousness, risk-taking propensity, a high need for achievement, orientation toward intuitive rather than sensate thinking, and so on (Stokes et al., 2010, p. 16). This perspective is limiting as it doesn’t take into account an individual’s ability to develop, learn and change as they undertake entrepreneurial activities.

Also, the personality traits associated with startup success, as mentioned above, may only be critical in the early stages of a business – like during its launch phase. Whether these traits are essential to a business’ growth is debatable; it’s unlikely that businesses would be able to move forward without a team of specialists with various skill sets and strengths.

Professor Allan Gibb’s model of the entrepreneur takes a slightly different approach and centres on values – like strong sense of independence and ownership, distrust of bureaucracy, and strong action orientation, among others – rather than personality traits. These values relate to “the ways of doing things, organising things, feeling things, communicating things, understanding and thinking things, and learning things” (Gibb in Stokes et al., 2010, p. 19).

If we go one step further and shift our focus away from personality traits and towards attitude, we may be able to obtain more valuable insights about founders. This way, it’s less about who founders are than what they do – specifically, “the functions, activities, and actions associated with the perceiving of opportunities and the creation of organisations to pursue them” (Bygrave & Hofer in Stokes et al., 2010, p, 18).

In their book Entrepreneurship (2010) David Stokes, Nicholas Wilson and Martha Mador argue that psychometric tests are unlikely to provide reliable indicators of who will be successful because, “[i]t is precisely the capacity of human beings to develop their personalities, to learn and absorb new knowledge and to act unpredictably that makes entrepreneurship such a fascinating phenomenon in the first place,” (Stokes et al., 2010, p. 15).

Attitudes towards various aspects of entrepreneurship are certainly more measurable and potentially better indicators of business outcomes. According to Stokes et al., the study of entrepreneurship is a “dynamic process involving behaviours and attitudes, rather than a set of traits”, and therefore attitude theory may prove to be more effective in understanding founders than psychological personality theories on which psychometrics are based (McLine et al. in Stokes et al., 2010, p. 15).

In Entrepreneurship, it states: “Attitudes are shaped by social context and have the advantage of being more accessible to research investigation than are underlying personality traits. Attitudes are also closer to actual behaviours than traits. The conceptual development of the attitude scale centres on entrepreneurial cognition, or the mental processes of the entrepreneur, rather than on a particular set of personality traits. The focus of measurement is not on the ‘creativity’ or the ‘leadership’ traits of an entrepreneur, but rather on the attitudes towards using ‘creativity’ and so on,” (Stokes et al., 2010, p. 15).

It’s worth noting at this point that entrepreneur and entrepreneurship are two different phenomena. According to Stokes et al. “[w]hen we talk about entrepreneurs, we are usually interested in their particular behaviours, attributes and skills. When we talk about entrepreneurship we have a process in mind – a process which involves specific outcomes relating to the introduction of new economic activity (2010, p. 30). The personality perspective focuses on the entrepreneur, whereas the attitude perspective sits in the space between entrepreneur and entrepreneurship, almost acting as the link between the two. An entrepreneur’s attitude would undeniably have an impact on the process of exploiting an opportunity, assuming entrepreneurship is “opportunity identification, evaluation and exploitation” rather than just “new venture creation” (Stokes et al., 2010, p. 28).

The reason why attitude is important in the context of entrepreneurship education – whether that’s a university course, an accelerator programme, an incubator programme, or any other founder programme – is because self-discovery, independence and other behaviours (as informed by attitudes) sits more comfortably with our current understanding of what being entrepreneurial is about. It endorses the view that “the most important driver of value creation is the enterprise and the creativity of individuals, ‘assets which only the individuals themselves can own’” while also resonating with the “proactive, risk-taking image of the entrepreneur” we’ve come to accept (Home in Stokes et al., 2010, p. 18).

The personality perspective, which assumes that individuals have stable and enduring characteristics, clashes with the peoplist view that “individuals own and control the most important factor of production: their human ability” (Reed, 2001, p. xii). If behaviours, attributes and skills can be developed through learning, then personalised entrepreneurial education can drive that learning process towards successful outcomes. Attitude tests, if designed well, can obtain measurable results and contribute to the successful implementation of accelerator, incubator and other education programmes for high-growth and dynamic businesses. After all, the goal of the programmes is to not only initiate, but accelerate the activities that are intended to culminate in a viable startup.

Though it was targeted towards young people (between 16 and 18 years of age), the Small Business Research Centre at Kingston University developed an interesting scale called the Attitudes To Enterprise (ATE) Test to measure a constellation of attitudes. These include: “attitudes towards creativity (beliefs about the importance of creativity and personal assessment of creativity, e.g. ‘How creative am I?’); attitudes to personal control over future career (internal, e.g. ‘I am in control’; or external, e.g. ‘others are in control’); attitudes towards achievement in project work (seeing things through, taking pride in project work); attitudes towards using intuition in problem-solving (preferring informality to formality; coping with uncertainty, being prepared to take risks in problem-solving); and attitudes to leading others (bringing people together, achieving consensus, persuading others)” (Stokes et al., 2010, p. 15). The ATE can certainly be used as a foundation for a much more relevant evaluation method.

What’s great about the New Venture Institute’s Venture Dorm programme is that it recognises the importance of psychology. Salier said the Institute has access to an array of resources, including reputable psychologists and sociologists. Flinders University psychologists can deconstruct psychometric survey results and help founders understand what the results mean or could man for their businesses.

“One of our real missions is to make sure that we continue to – through our programs, through our activities, through our events – access those resources to help our founders have the best chance of creating a startup with real value. We go beyond the survey; we provide founders with insights they may not have been able to pick out from a generic one-off report,” said Salier.

It’s worth noting that Australian startups do have access to a great support network at the base level, however, incubators, accelerators and other programmes still have a long way to go if they want to produce viable startups in increasing numbers.

If you look at the portfolios of various accelerators and incubators, the failed companies significantly outnumber successful companies. Some might argue that a majority of startups will fail anyway – the most cited number being 90 percent. Others might argue that the companies that do survive achieve greater success in a shorter period of time because of the services offered by incubator or accelerator programmes. However, if programmes don’t improve the percentage of success – this might mean discouraging the continuation of businesses that haven’t achieved product-market fit – then ultimately they’re not making a significant enough difference to the startup ecosystem or the Australian economy.

Even San Francisco-based entrepreneur, investor and mentor John Ramey thinks most of these “startup community things suck”. In his article, Improving Startup Accelerators (Or Anything Helping Entrepreneurs), Ramey acknowledges that incubators, accelerators, schools, government initiatives and conferences around the world are well-intended, but firmly argues they “don’t deliver real value”.

Though the article is written from an American perspective, his viewpoints are universally relevant. A couple of reasons why “startup community things suck”, according to Ramey, is because “no one tells the founder the truth, which does more harm to the founder than the possibility of ‘turning them off’ to this life” and “[m]ost of the mentorship startups receive is complete, utter, worthless crap at best and harmful poison at worst.” 

As such, the attitudes of investors, mentors and directors of startup programmes are just as important as the attitudes of founders and team members. Rather than focusing on founders’ behaviours, it might also be worth evaluating attitudes of industry professionals, especially if we want to achieve an equitable balance between the ecosystem’s diverse interests. Creating evaluation methods, however, is something that will require collaboration between university researchers, programme directors, founders, investors and other industry stakeholders. It may take some time and effort, but could be a worthwhile challenge.