In December 2014 Professor Jason Heyes, along with Dr Paul Lewis from the University of Birmingham, co-hosted a one-day workshop on ‘Regulating work and employment: recent changes/future prospects’. The event was attended by representatives of ACAS, the Department of Business, Innovation and Skills (BIS), the CIPD and the Gangmasters Licensing Authority (GLA), as well as leading academics and early career researchers. The workshop was the culmination of a two-year project, funded by the British Academy and Leverhulme Trust, which has assessed the consequences of labour market policy reforms in the EU since the start of the economic crisis in 2008. During the workshop, Jason Heyes, Paul Lewis and Mark Beatson – chief economist at the CIPD – discussed the implications of employment rights reforms for workers and employers while Dr Tim Vorley (Sheffield), Professor Ute Stephan (Aston) and Professor Simon Down (Anglia Ruskin) spoke about the impact of employment regulations on small businesses. Mark Heath from the GLA and Professor Linda Dickens from the University of Warwick assessed long-standing and emerging challenges facing government agencies responsible for ensuring compliance with employment rights while Tony Thomas and Paula Lovitt provided insights into BIS’ review of employment status. We are hosting many slides from this event on Slideshare. Find out more about the Work, Organisation & Employment Relations Research Centre (WOERRC) here: http://www.woerrc.group.shef.ac.uk/

1. Entrepreneurs as Employers:
Barriers to taking on first employees
Dr Tim Vorley
University of Sheffield
Prof Ute Stephan
Aston University

2. Research Foci
To understand the real and perceived barriers to entrepreneurs
taking on employees and how entrepreneurs have sought to
manage and overcome these barriers

3. Research Context & Rationale
• Project undertaken initially with BIS Enterprise Directorate
designed to investigate barriers to entrepreneurial growth
• Policymakers interested to highlighting interventions to support
entrepreneurs and very small businesses employing staff

4. Context: Academic Literature
• Extensive literature on entrepreneurship and growth (reviews by
Davidsson et al., 2010; Wright & Stigliani, 2013), but much left to do, e.g.
– Often lack of clear definition of growth (intention to grow,
actual growth, growth in revenues vs. employees)
– Surprisingly little research on the role of the entrepreneur,
their mindsets and decision-making processes
Impact of employment regulation on taking on employees treated as
highly rational, strategic decision

Yet entrepreneurs known to rely on heuristic (biased) decision-making
processes including influence from informal network
(Baron et al., 2012; Markman & Baron, 2003)

5. Context: Academic Literature
• Quantitative research exploiting variation in regulation across
countries suggests negative relationship with the intention to
employ (e.g. Estrin et al., 2013; Levie & Autio, 2011), but
– intention ≠ action
– UK seems to have relatively ‘light’ regulation
• Qualitative research paints a more differentiated picture:
opportunities emerging from regulation (Kitching, Hart & Wilson, 2013)
• Taking on first employee = particular psychological threshold,
learning effect for hiring subsequent employees

6. Emerging Research Questions
• What are the reasons, incentives and disincentives for
entrepreneurs to employ?
• What barriers do entrepreneurs and very small businesses
foresee/have experienced in taking on first employees?
• What approaches do entrepreneurs adopt to overcome these
real and perceived barriers?
• What forms of support are available to entrepreneurs in
employing – and what more might be done?

7. Empirical Project
• Initial pilot project involved focus group with entrepreneurs in
Sheffield from CDIT/professional services with the
Entrepreneur in Residence from BIS
• Review of secondary data from the one-off very small
business survey undertaken by BIS
• Two phases of qualitative project:
– Pilot study in Sheffield (16 interviews)
– Extended study across the SCR (48 interviews)
• Interviews double blind coded

8. Emerging Findings
Mind-set about Employing
• Transition to becoming employer had positive and negative implications for work
and continuing development
• Main concerns orientated around quality assurance and issues of control, rather
than around day-to-day line management
Entrepreneurs prefer to focus
on business development
than management
Recognition by entrepreneurs
about the conscious shift to
become a people manager

9. Emerging Findings
Perceptions on Employing & Employment Needs
• Entrepreneurs demonstrated desire for growth and intention to employ (esp
technical roles) but didn’t see employment as a preference to grow.
Ambition to grow was high
among the entrepreneurs
and employment necessary
Translating ambition into
the reality of becoming
an employer is difficult
Networks and close contacts are valuable when
trying to identify potential recruits – but
suggests limited options and knowledge

10. Emerging Findings
Views on Employment Rights
• Need for an appreciation of broad employment rights and regulations – but they
are largely a responsive issue
• Particular issues around maternity rights; redundancy entitlements; unfair
dismissal tribunals; abuse of sickness entitlement
Regulation is often not
regarded as problematic
by entrepreneurs
Limited concerns
about the cost, process
and implication of
regulatory compliance
Fear of the ‘unknown’
or the imperfectly
understood.

11. Emerging Findings
Supporting Entrepreneurs
• Networks were highly valuable when seeking advice but also restrictive
• Difficulty identifying trusted sources of advice and support – preference for
informal unless matters escalate
• No substitute for experience – been there and done that
• Difficult to identify single most authoritative sources
Entrepreneurs have
limited time but
are eager to seek
and use support
Advice and support services
are fragmented – don’t
know where to go /
information too technical
Source and forms of
information are critical -
in real time in an
accessible format

12. So What?
• That many of the issues and barriers facing entrepreneurs are
perceived as opposed to real
• Regulation generally seen as negative and not in the interest of
employees
• The regulatory environment is less of a problem than the
asymmetries around understanding the regulatory environment
• Frequent changes to regulation – even if well-intended – can be
a challenge for entrepreneurs to keep up
• Support for entrepreneurs is fragmented and there is a need for
more consolidated and accessible in real-time