The ‘Entrepreneur Penalty’

Leaders constantly say they want employees with innovative ideas who can revolutionize products and processes. The good news is that there’s a big pool of start-up founders and entrepreneurial-minded people who have made their careers coming up with interesting ideas.

The bad news is that these candidates often can’t get a job interview. Researchers at Rutgers University recently asked recruiters to evaluate mock résumés for candidates with comparable levels of education and experience in traditional companies, start-ups, or both. The study found that 60% of recruiters responded less favorably to the mock résumé of a former entrepreneur. Those results back up earlier research: According to a 2021 study from the London Business School, former entrepreneurs are 35% less likely to get a job interview. This trend is often referred to as the “entrepreneurship penalty.”

Experts say that many recruiters believe entrepreneurs aren’t good fits culturally at bigger organizations. Indeed, bringing a founder or similar-minded employee into a company unused to fast-paced change can be a recipe for disaster. “Founders and entrepreneurs have a really hard time putting up with slow-moving bureaucracies,” says John Long, sector leader of Korn Ferry’s North America Retail practice.

The friction around founders and entrepreneurs is particularly relevant in 2024, since companies are indirectly hiring more of them. Dealmaking overall increased 160% in the first two months of the year, compared to the same period in 2023, with much of the volume growth coming from bigger firms’ acquisitions of much smaller companies or start-ups. Along with intellectual property and equipment, firms are often paying for the smaller company’s workforces—which may be populated by employees with entrepreneurial mindsets.

To be sure, not every organization or recruiter shies away from entrepreneurial-minded candidates or founders. Deepali Vyas, global head of Korn Ferry’s FinTech, Payments, and Crypto practice, says that her clients ask her to find those people. “If the company culture allows them to have flexibility and agility, and the people themselves are bringing in new ideas, then it can work out really well,” she says.

The more disrupted an industry is, the more it needs workers who think like entrepreneurs, according to Korn Ferry research. Entrepreneurial-minded workers tend to cope better and remain engaged during periods of significant change, says James Bywater, a business psychologist and co-author of the Korn Ferry research. “Since COVID, this is frankly most of us, for most of the time,” he says.

Experts say that an organization wanting more entrepreneurial-minded employees first needs to make sure its culture can handle them. Conduct a survey with existing employees and ask them to identify the roadblocks they perceive to creating new systems or products. If they say “corporate bureaucracy,” or something similar, then bringing in an entrepreneurial-minded worker or two isn’t going to make a substantial difference.

If a company is in fact ready for an influx of entrepreneurial talent, it needs to make sure its recruiters can effectively evaluate this kind of candidate. Recruiters sometimes struggle with the résumé of an entrepreneur: It can feature experience at firms which lasted only a short time, never made a profit, or never had a commercial product. “It can be hard to find comps for an entrepreneur’s work experience,” Vyas says. To get around that, recruiters should further assess a candidate’s traits and skills rather than relying on their experience alone.

Learn more about Korn Ferry’s Talent Recruitment capabilities.

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