Entrepreneurship in Organizations: Change from the Bottom Up

Created by James Caton |

In a story about entrepreneurship, you might not expect the main character to be a military colonel. Common perception tends to see the entrepreneur as one who builds a firm, attempting to earn profits in the marketplace. While this example of an entrepreneur is correct, our understanding of the world is improved if we think of entrepreneurs as actors who attempt to create value.

All acts aimed at value creation inherently incur a cost for the actor. In economics, we assert that the actor always attempts to create the most value in light of such costs. “Skin in the game,” as it has been popularly termed, incentivizes the entrepreneur to be involved in the pursuit of true value creation, rather than the pursuit of public perception that he or she is creating value.

Wherever you find yourself, you can find opportunities to act entrepreneurially. In his book Adapt [1], Tim Harford tells the story of Col. H. R. McMaster (now Lt. Gen. H. R. McMaster) pacifying insurgency in Tal Afar, Iraq. The key, McMaster realized, was to show that the U.S. military would not leave those who cooperated with them to the violence of warring factions in Tal Afar.

McMaster saw the lengths to which local insurgents would push the conflict:

‘In one case,’ recalls Col. H., ‘terrorists murdered a young boy in his hospital bed, boobytrapped the body, and when the family came to pick up the body they detonated the explosives to kill the father.’

He expected that these types of actions by insurgents would not find local support. He worked with soldiers under his command to build rapport:

Before they had even left American soil, Col. H. had been training them, buying pocket histories of Iraq in bulk, instructing his men to behave more respectfully toward Iraqis. . . ‘Every time you treat an Iraqi disrespectfully, you are working for the enemy.’

McMaster bore costs in these efforts. He was successful, but his actions created friction in the military hierarchy. McMaster pushed against the incentives of the military when he believed they were destructive to the efforts of pacifying conflict:

It would be hard to exaggerate quite how far Col. H. stuck his neck out when he pacified Tal Afar. His strategy was little short of a rebellion against his own commanding officers, General Casey and General Abizaid. He apparently had little time for Donald Rumsfeld’s Orwellian epiphany, bluntly telling journalists that ‘militarily, you’ve got to call it an insurgency, because we have a counterinsurgency doctrine and theory that you want to access.’ He also short-circuited the chain of command, speaking freely to senior officers who were not his immediate superiors. Those immediate superiors gave him little backing. One of them warned him ‘to stop thinking strategically’ – that is, to shut his big mouth and stop thinking above his rank. When he asked for 800 men as reinforcements, he received no response at all, and later figured out that his request had never been passed up the chain of command.

And later, according to one account, when General Casey was pinning a medal on Col. H.’s chest in recognition of his achievements at Tal Afar, he warned that he was making too many enemies among his commanding officers – for his own sake, Col. H. needed to listen more and argue less.

. . . He had paid a price for his courageous independence. Despite his early promise, a PhD in history, and his proven achievements both in Desert Storm and at Tal Afar, Col. H. was twice passed over for promotion to Brigadier-General – junior general’s rank – first in 2006 and again in 2007. His superiors focused not on his performance, but on what they saw as a troublemaker’s attitude. . . Col H. was H.R. McMaster, the author of Dereliction of Duty, the definitive account of how faulty leadership from the President, the secretary of defense and the senior Army generals had led to disaster in Vietnam. He literally wrote the book on how an organisation can fail from the top down. And if he had any say in the matter, he wasn’t going to let the US Army defeat itself a second time.

McMaster is not the only member of the military showing entrepreneurial orientation. Harford notes that before becoming general, David Petraeus was told by Major General Jack Galvin, “It’s my job to run the division, and it’s your job to critique me.” His experience taught him the significance of communication in orienting an organization toward the realization of a goal. Harford observes that Petraeus “was using the media as a way of talking to everyone from the greenest private to the commander and chief” when rigidities in the existing hierarchy were leading to a disaster on the ground in Iraq.

The success of this organization, and any other, is dependent upon communication, including objections to existing policies by those who are tasked to carry them out. In an organization that does not receive the same frequency and strength of feedback as firms in the marketplace, a culture that enables entrepreneurial orientation is a necessary element for success.

Learn more

Students at NDSU interested in learning more about entrepreneurial orientation can apply for the fall 2018 Mancur Olson Reading Group. The group, titled “Evolution in Entrepreneurship,” will explore the role of entrepreneurship in driving institutional change.

 Meet the Author

James Caton is a fellow at the Center for the Study of Public Choice and Private Enterprise (PCPE) and an assistant professor in the NDSU Department of Agribusiness and Applied Economics. Read his bio.


[1] All excerpts taken from Tim Harford, Adapt: Why Success Always Starts with Failure, 2011

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