Are Entrepreneurs Happier Than Wage Slaves?
Studies differ. But it really depends on your definition of happy
Q: I am interested in knowing if any researcher has studied the difference
in happiness between entrepreneurs and employees. I'm convinced that
most entrepreneurs are working harder for less, at least in the beginning,
but are happier when pursuing their own dreams.
--D.C., Huntington Woods, Mich.
A: An interesting question, but one that is not easily answered. In
fact, studies done on the topic by social scientists have tended to be
contradictory, leading some experts to conclude that it's impossible
to reach a definitive answer.
In 1987, the American Journal of Small Business published a study
called "The Quality of Working Life and the Self-Employed Manager" that investigated
the possible differences in quality of life between self-employed and salaried managers
based on national surveys from various demographic and industry groups. It found
that entrepreneurs reported higher levels of job satisfaction and autonomy than salaried
managers, despite the fact that the self-employed spent significantly
more hours on the job.
That study, however, contradicted a similar report published
in 1975 by Organizational Behavior & Human Performance entitled "Organizational
Membership vs. Self-Employment: Another Blow to the American Dream."
"There are some conflicting views on this, which represent the bane of
social science research," says Ray Bagby, executive editor of Baylor University's
journal, Entrepreneurship Theory & Practice, which has reported
on the conundrum. "It's very difficult to ask people about subjective things
like how happy they are. The answers change based on when and who you ask."
Bill Gartner, professor of entrepreneurship at the University of Southern
California's Marshall School of Business, says he has concluded that
entrepreneurs -- as a group -- are not necessarily happier or unhappier
than employees. "There have been a series of surveys done over the past
20 years, with mixed results based on the sampling size and who is being talked
to. People think that entrepreneurs have more freedom and independence
than employees. But to a great extent, the company and the customers tend
to control the entrepreneur -- even if a boss doesn't. And the fact is, there are
huge numbers of very happy employees in the world."
That fact is borne out by a study conducted over three years by Hewitt &
Associates, a human resources consultancy in Lincolnshire, Ill. Hewitt surveyed
more than 46,000 employees and found that 86% reported being satisfied with
their work, 88% with their co-workers, and 78% with their benefits.
Certainly, entrepreneurs can also be happy with their jobs. The National
Federation of Independent Business, a nonprofit, small-business advocacy
group, tracked startups for three years. Jim Weidman, an NFIB spokesman
in Washington, D.C., says the majority of small-business owners reported
starting their own companies to pursue personal interests. "When you're
doing something that you enjoy, you tend to be more satisfied," he says.
"Of course, even when you do something you really enjoy, if you can't make your
bills, that rains on your parade a little."
The NFIB's salary surveys found small-business owners, on
average, take home from $30,000 to $40,000 annually. "Many of them make between
$15,000 and $20,000, which translates to way below minimum wage when
you look at the hours they put in," says Weidman. "What that tells me is that
they're doing something they enjoy. They can set their own hours, wear whatever
they want, work where they want. And so they stay with it even if they're
not making a killing financially because they find it satisfying."
When it comes down to it, people who have the drive and determination
to be entrepreneurs tend to be happy running their own companies, says Leslie
Godwin, a career and life-transition coach in Calabasas, Calif. Those who lack
a similar passion should probably keep their jobs. "People sometimes are in
a bad situation at work or they don't like their boss,
and they decide they should work for themselves without really knowing
what they're getting into," says Godwin. "I tell them to spend some time
volunteering at a friend's business and getting an idea what their
day and their week would look like: how much travel they would do, what kind
of hours they'd keep, how much time they'd have to spend doing bookkeeping."
The key to being a happy entrepreneur is to not become
a slave to your business. Says Godwin: "People dream of freedom when they think about
owning their own business. But that's not always the case. The first year
you can run on adrenaline. The second year you can run on fear of failure. And by
the third year, you're burned out. The people who are in successful businesses
10, 15, or 20 years stay with it because it's meaningful, and they become good
employers to themselves. When they find that balance, even years later they still
love what they do."
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