EQ and the Entrepreneur

(MoneyWatch)  In "The Humm Handbook: Lifting Your Level of Emotional Intelligence" there is a chapter on leadership that defines and discusses the three necessary core emotional drives of the successful leader. For those familiar with the Humm, great leaders have high H, M and P drives. President Bill Clinton is a good example of such a personality.

One innovation I introduced in my 23 years as a venture capitalist was to obtain a psychographic profile of our prospective entrepreneurs. Initially we were seeking mini-Bill Clintons. Unfortunately, over time we discovered that while these people are great at running large organisations, they were poor entrepreneurs.

We had forgotten that critical piece of Australian advice: "A good builder of a mine is rarely a good operator of one".

On the other hand when we looked at the profiles of entrepreneurs who had generated the best returns, we discovered that we were seeking the wrong people. Our best performers were builders rather than operators. They saw building a business as an engineering project, and were very task focussed. They wanted to build a business and then sell it. The process was all consuming and they spent a lot of time planning the next steps and closely monitoring the progress. They all had a high E drive.

The other common factor was a high H drive. These people were shrewd with people and shrewd with money. They knew it was important to build a team of people in order to get the job done, not just an exercise in team building. If there were individuals who had joined them at the start but had reached their level of competence, the successful entrepreneurs were able to either keep them in their former positions and temper their expectations or be ruthless enough to fire them.

The other interesting discovery was that the successful entrepreneurs had a high level of numeracy. To be successful, entrepreneurs need to be good communicators and everyone we tested (around 3 percent of the prospective applicants) had a high verbal IQ. Again we thought we could compensate for the poor numerical IQ of what we thought were outstanding prospects by hiring a good CFO. We were wrong. In nearly every case a business led by a CEO with a poor understanding of numbers performed below expectations.

Unless the entrepreneur has an understanding of the numbers, he or she never gets the intense focus necessary on how the business actually makes money.