Have you ever wondered why some small businesses are more successful than others? You may have concluded that luck, access to capital or life circumstances are determine factors. But the real answer may surprise you.
Research conducted by the Rensselaer Polytechnic Institute in Troy, New York suggests that your thoughts and social competence may be holding you back.
Researcher, Robert A. Baron argues that your cognitive skills (mental process) and social competence are directly related to your success as an entrepreneur.
As a man thinketh in his heart, so is he.Proverbs 23:7
A beautiful mind wired to achieve
Entrepreneurs tend to work in highly unpredictable, complex and high pressure situations. We also exhibit higher than normal intense commitment to new ventures. All of these qualities, according to Baron often propel us into the common experience of information overload.
But under these conditions, where other people fail repetitively––in the end entrepreneurs succeed. Why? All of the aforementioned circumstances cause people (including non-entrepreneurs) to rely on heuristics – better known as problem solving, learning and discovery skills – to guide decision making.
But for an entrepreneur, this perfect storm also makes us highly susceptible to what he calls cognitive error––which includes over-confidence and escalated commitment.
In general, successful entrepreneurs are hard wired to:
- Perceive greater potential for gain in highly uncertain situations;
- Not engage in counterfactual thinking; we don’t imagine outcomes different from those that actually occurred;
- Think future oriented coupled with overconfidence and unfounded optimism.
How your personality impacts your business
Do you interact well with people around you? Research indicates that successful entrepreneurs do; actually, they do it better than most.
You’ve likely noticed that some people have that ‘Je ne sais quoi’ or like, know and trust factor that draws others to them like bee’s to honey. And while you don’t have to be a social butterfly, social competence is a skill set you must develop if you want to be successful.
Improving social interactions will help you form strategic alliances and enable you to build faster and stronger through collaboration. Researchers have found that social competence plays a pivotal role in entrepreneurs’ success due to the fact that:
- Most new ventures are founded by two or more entrepreneurs
- Entrepreneurs must deal with a diverse group of people including bankers, employees, customers, suppliers, etc.
Social competence tied to financial success
Your ability to get along with other people will increase your likelihood for greater financial success. A study of several hundred entrepreneurs found that an entrepreneurs capability in the four factors below were directly related to their business related income.
- Social perception: Accuracy in perceiving others
- Impression management: Techniques for inducing positive reactions in others
- Persuasiveness: The ability to change others’ views or behavior in desired directions
- Social adaptability: The ability to adapt to a wide range of social settings.
Preventing a series of epic business failures
While all entrepreneurs may not have desired levels of mental or social competence, the great news is that cognitive skills can be taught and social competence can be learned.
Your thoughts and personality can be developed and rewired to prevent continuous epic fails.
Source: “Psychological Perspectives on Entrepreneurship: Cognitive and Social Factors in Entrepreneurs’ Success” by Robert A. Baror; Rensselawer Polytechnic Institute
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