Nearly half of new businesses don’t make it past the five-year mark, leading many ex-entrepreneurs to seek traditional employment. However, a recent study from Rutgers University sheds light on a surprising barrier: hiring bias.
In the study, researchers presented 219 individuals with experience in corporate recruitment with fictitious resumes. These resumes were identical in qualifications except for one key detail: some applicants were former business owners.
Entrepreneur bias
Despite similar qualifications, participants were less inclined to recommend hiring former business owners when presented with these resumes and a job description. This bias was consistent across various industries, including high-tech manufacturing, software development, and healthcare.
“This difference is statistically significant across various firms and industries, suggesting a systematic bias against hiring former entrepreneurs,” the researchers explain. “If you’re an entrepreneur, you raise more red flags.”
The researchers conducted the experiment both before and after the pandemic, yielding similar outcomes. Despite the changing landscape, the bias against former business owners remained consistent.
Fear of autonomy
But why are some recruiters biased against these individuals? It seems they fear hiring someone accustomed to autonomy and self-direction.
“Entrepreneurs behave differently,” the authors explain. “They value autonomy. They are used to making decisions on their own and taking risks. Some recruiters view that as a red flag. After all, large corporations like to minimize risks.”
Yet, the study uncovered three noteworthy exceptions. Women, recruiters new to the company, and those with entrepreneurial backgrounds themselves were more inclined to give former business owners a chance.
“Women are more open to applicants with a different identity or a different set of experiences,” the authors continue. “Newer recruiters are less constrained by organizational norms and more willing to consider an unconventional candidate. Former entrepreneurs can relate to those who have followed a similar path.”
The study emphasizes the importance of diversifying recruitment teams and providing training to address biases against non-traditional job candidates. By raising awareness of these biases, employers can create a more inclusive hiring process.
These findings contribute to existing research on the obstacles faced by former business owners. Previous studies have highlighted the “entrepreneurship penalty,” wherein these individuals often earn less than their counterparts.
“Unfortunately for many entrepreneurs, closing their business is just the beginning of a long and difficult road,” they conclude.
