Matthäus Tekathen is the department chair and associate professor in the Department of Accountancy at Concordia’s John Molson School of Business. His research has been published in international peer-reviewed journals, and has been funded by FRQSC, CPA Canada-CAAA, DAAD, and the National Bank Initiative in Entrepreneurship and Family Business.
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How entrepreneurs can navigate unprecedented times
‘Sensemaking starts with self-awareness’
Operating in the unknown is frightening for most individuals, yet entrepreneurs regularly take on this challenge when starting a new business venture. At the onset of a business crisis, when the organization is doing its best to manage the situation, they are in the “firefighting” mode. They are simply trying to extinguish the fire. Once the fire is out, entrepreneurs face the difficult trade-off between initiating necessary changes to the way the business is run or leaving the business to remain as-is given the frequent time and resource constraints.
‘Entrepreneurs must be self-aware of their shortcomings and learn from them in order to adapt the business accordingly.’ | Photo by Mario Heller on Unsplash
The aim of this research is to understand how entrepreneurs of small and medium sized enterprises (SMEs) manage crises situations, learn from them, and how their sensemaking of the experienced crisis situation might impact their response to the aforementioned trade-off:
Should I change or should I keep the management control systems?
In this context, management control systems refer to managerial processes, planning procedures, monitoring techniques, company policies, etc. that are used to steer the business.
Researcher Matthäus Tekathen, department chair and associate professor in the department of accountancy at the John Molson School of Business, connected with practitioners first hand by conducting interviews, case studies and field observations. The conversations with Quebec-based entrepreneurs confirmed that there were three different types of potential risks that their business could face:
- internal/ in-house risks (e.g. employee quits without adequate replacement, fraud, etc.)
- strategy risks (e.g. acquiring new business, changing distribution channels, etc.), and
- external/ market-driven risks (e.g. supply chain disruption, pandemic, etc.).
Regardless of the type of risk, once a business challenge materializes, and the business experiences the control crisis (i.e., no more sales due to Covid lockdown), there is a chain reaction of events that follow.
First, the entrepreneur launches an immediate ad-hoc reaction to solve the problem – they are fighting the fire. Upon solving for the problem at hand, the entrepreneur must decide whether he/she believes this control crisis is a one-time event or whether this event may re-occur in the future. This period of reflection or thought process is defined as sensemaking of the control crisis, and is crucial in affecting how the entrepreneur will make changes to the existing management control systems.
What is sensemaking?
Sensemaking influences whether the entrepreneur will move forward with permanent structural adjustments for the future by implementing a change to their management control systems. Often times, if the entrepreneur perceives that an event like this could eventually re-occur in the future, they will take the necessary precautions or preventions and be “forward-thinking”. That said, they will have a long-term response and amend their management control systems.
Conversely, if the entrepreneur perceives that this is a singular, one-time event, they will put out the fire and move on without making any future contingency plans or changes to the management control systems. They will no longer continue allocating valuable time and resources to this issue.
Sensemaking is an important skill for entrepreneurs because it influences how a business will operate in the long-term.
For this reason, a key takeaway of this study for business practitioners is to understand that sensemaking starts with self-awareness. To be aware of how our interpretation or perception of an experienced control crisis influences our decisions moving forward. Entrepreneurs must be self-aware of their shortcomings and learn from them in order to adapt the business accordingly. As such, there will constantly be challenges, but how you choose to interpret or perceive the lessons learned from these challenges will have a lasting impact on the business – every bump in the road is a lesson learned on the path to success.
