Entrepreneurial Self-efficacy (ESE) Explained: A Journey of Professional Self Discovery

Becoming an entrepreneur is one of the boldest vocational moves that a person can make. For centuries, psychologists, historians, and economists have tried to understand precisely what it takes to become an entrepreneur.

In recent decades, modern economists readily agree that the heartbeat of a flourishing economy is its prolific display of entrepreneurial activity.

But are entrepreneurs made or born? 

If made, what circumstances transpire to cultivate more entrepreneurial activity?

The ever-growing consensus is that “entrepreneurship is not an innate characteristic but a phenomenon,” a phenomenon triggered by certain factors, such as entrepreneurial intention (EI) or entrepreneurial self-efficacy (ESE).

That’s “fancy talk” for “this thing called entrepreneurship seems to happen without any rhyme or reason. As smart as we are, we don’t fully understand why some people become entrepreneurs.”

In accordance with the scientific method, experts label the phenomenon to study it. And the label these scientists have chosen is Entrepreneurial Self-efficacy or ESE.

What is Self-efficacy?

Some call it confidence, but it’s much more than that.

Self-efficacy is a belief in my ability to exert influence over the factors that affect my life in a positive way. 

In the face of difficulty, self-efficacy says, “I don’t know what to do yet, but I’m certain that I can figure it out.”

Much like the serenity prayer at your local AA gathering, self-efficacy is wise enough to accept the things it can’t control and courageous enough to change the things it can.

When failure inevitably occurs, self-efficacy says, “Well, that didn’t work. There are solutions here that I am not seeing, so I need to keep at it until I figure it out.”

Self-efficacy is confidence in my capacity to learn, adapt, and apply new knowledge to influence outcomes. 

As such, self-efficacy is the ultimate growth mentality. Becoming an entrepreneur looks much the same way.

And with enough determination, Entrepreneurial Self-efficacy fulfills its own prophecy – its entrepreneurial intent – and succeeds, regardless of how many “failures” it took to get there.

Entrepreneurs “preach perfection but practice progress.” (Thai Nguyen from Entrepreneur)

Becoming an entrepreneur is a journey and not an identity inherited at birth. Entrepreneurs come from all personality types, generations, and professions. In fact, entrepreneurs exist as business owners, freelancers, executives, and enterprising employees.

The journey toward entrepreneurship can be explained through a particular cycle of self-improvement, the Entrepreneurial Self-Efficacy Cycle.

Becoming an Entrepreneur: Creating Entrepreneurial Self-efficacy (ESE)

The Entrepreneurial Self-efficacy Cycle of Professional Growth

The journey toward becoming an entrepreneur often begins with a growing sense of self-awareness on a personal level that eventually takes on professional dimensions.

Early on in their journey, “would-be entrepreneurs” begin clumsily branching out in an attempt to understand their place in the world. They accurately perceive their own needs and find that they are uniquely capable of meeting the needs of others.

Abraham Maslow is credited for his Hierarchy of Needs – a model visualized as a five-level pyramid. 

The base of Maslow’s pyramid identifies basic physiological needs that must be met before an individual can meet more abstract needs higher on the pyramid.

The tip of Maslow’s pyramid represents what intellects call self-actualization. Once a person begins to self-actualize, they’re pushing their personal limits on creativity, innovation, and problem-solving. Their world also begins rapidly expanding.

Consequently, growth into entrepreneurial self-efficacy is growth into professional self-actualization.

Recently, I began committing to paper a method I’ve put into practice combining the insights and encouragement of my professional and spiritual mentors. I’ve used this framework to push myself, peers, and even acquaintances who’ve come to me for assistance.

This deliberate process of entrepreneurial self-efficacy is what I call the Self-efficacy Cycle.

One can enter the Self-efficacy Cycle at any point in the loop. It is a cycle because the process can occur over and over in a single lifetime.

You and I can journey through the loop as quickly as a few minutes or over a period of several years. The result is an ever-increasing capacity to affect positive change in an ever-growing realm of influence.

It all begins with understanding yourself on a deeper level. As emotional creatures, the loop most often begins with a little bit of Emotional Intelligence (EQ).

Emotional Intelligence in the Self-efficacy Cycle

ESE Cycle: Emotional Intelligence

What are you feeling right now? 

When did you begin feeling this way?

What happened just before you started feeling this way? 

Having the mindfulness to ask yourself these questions on a daily basis builds the foundation for your emotional intelligence (EQ).

Emotional intelligence does not make you “an emotional person,” but it does mean you are in the habit of paying attention to your emotions. 

In a way, EQ is your ability to be your own therapist.

By learning to detach and be curious about human emotions, you come to understand why they exist and how they can grant you incredible insight into yourself and others.

People with high emotional intelligence are better able to detach from their emotions and read difficult social situations. They also intuitively practice self-care, which in turn produces more positivity and ongoing health benefits.

Psychologist and EQ scholar Daniel Goleman writes,

“Perhaps the biggest surprise for me has been the impact of [emotional intelligence] in the world of business, particularly in the areas of leadership and employee development (a form of adult education). The Harvard Business Review has hailed emotional intelligence as ‘a ground-breaking, paradigm-shattering idea,’ one of the most influential business ideas of the decade.”

DanielGoleman.info

Emotional intelligence (EQ) is a rare and precious skill. Most people are strangers to themselves. EQ helps you know yourself and gain a little more self-awareness. Psychologists now suggest that EQ is more valuable than IQ (raw intelligence).

This reality makes sense: we can possess raw intelligence and hard skills without ever really understanding why those competencies exist and how to harness them to their full potential. That’s why employers seek soft skills (signs of emotional intelligence) during their hiring process.

Emotional intelligence plays a particular role in entrepreneurial self-efficacy, where the goal is to create novel solutions for needs that most people have not yet recognized that they possess.

A deeper understanding of human emotions can clue you into customer pain points. Additionally, emotional intelligence (EQ), unlike mere intelligence (IQ), will equip you with the emotional agility to navigate changes in demand with less stress.

Entrepreneurs learn to respond calmly to change. Their very jobs depend upon an extraordinary ability to assess data, make predictions, and pivot spontaneously.

It’s only once we see certain products that we realize that, in fact, in a vague inarticulate way, we wanted them all along. We have the needs, but we can’t pin them down. A central task of creative thinking is therefore to be the detector and interpreter of the unspoken and – up to that point – hidden needs of mankind. Surveys – for all their other merits – can never do this, for the big reason that we just don’t know our needs well enough. So the real secret to understanding customer-needs lies elsewhere; in using the tools of Introspection and Empathy.”

The Book of Life

Gaining emotional intelligence helps us onto the next phase: perception awareness.

Perception Awareness in the Self-efficacy Cycle

ESE Cycle: Perception Awareness

A psychologist friend once told me:

“Emotions do not lie. Perceptions, however, may or may not be correct. Emotions are often the result of our perceptions, regardless of how correct or incorrect they may be.”

Emotions, like the tip of an iceberg, are clues to our underlying perceptions about ourselves, others, and the world around us. Perceptions powerfully shape the way we interact with others and our circumstances. 

The primary way we form our perceptions is through our experience. Unfortunately, our anecdotal experiences can seriously limit us and produce grossly inaccurate misperceptions.

If we can step out in faith, acknowledging that the world is bigger than we previously thought, we can discover and adjust our perceptions accordingly. Thus, our experience becomes a starting point rather than a final authority in the way we move through our lives.

Entrepreneurs are naturally curious and often grow to love having their “minds blown.” 

In this stage of perception awareness, we exercise our ability to identify rising emotions and trace them back to underlying perceptions. 

Upon uncovering our perceptions, we can first judge their validity using common sense. Misperceptions often endure simply because we have no idea that they exist in the first place.

Have you ever verbalized your thoughts out loud and said, “That sounds so ridiculous once I hear myself say it”? That light bulb moment you had was common sense challenging your misperception.

Bringing perceptions to our conscious awareness is frequently enough to create lifechanging “aha” moments. 

For example, let us say that I am in a season of fear and frustration. I wake up each morning nervous about what the day might bring, looking at my to-do list with a high level of anxiety and self-doubt. 

After reflecting on these emotions, I discern that I have been feeling this way for some time. I ask myself when it began and realize that I started feeling this after someone raised their voice at me while at work. For some reason, this conflict rattled me to my core, and I’ve lost my confidence as a result.

I could continue this internal investigation. Who was it that yelled at me? Do I get yelled at all the time, or was this conflict unusual? What other circumstances could have brought on this kind of response from a co-worker?

Right, I’ve made a key observation: one lousy interaction has caused me to feel that I might be worthless or ineffective at my work.  

Common sense leads me to challenge this misperception. 

“I feel like worthless. But am I really a failure? I receive high marks on my performance reviews. In general, I have strong professional relationships with everyone else in the office.”

I’m resisting the misperception that I am worthless until it slowly dissipates into a thought that I no longer feel I must take seriously. With practice, I can quickly attack these value-based intrusive thoughts with,

“That’s just ridiculous. Just because one bad thing happened to me doesn’t mean that I’m a failure at life.”

In the case of more deeply held beliefs, it can be helpful to bring in a third party. Surrounding ourselves with emotionally intelligent people can help us rigorously challenge our perceptions, changing the ones that lack substance and solidifying others that are healthy.

Expert data is also a great way to hold your perceptions accountable. That said, be careful that you’re not just looking for data that supports your views. Do your research while learning to “take things with a grain of salt.” 

People that learn to challenge their misperceptions are often able to revisit moments of conflict and help the other individual process their frustrations in a teambuilding way. It may be that that colleague yelled at me because they went through some terrible at work or at home. If I have the confidence and emotional margin to do so, I can re-approach that coworker, ask for specific feedback, and offer a little empathy (we will talk about this in more depth during the Collaboration stage).

The main point is this: Practicing perception awareness increases our ability to spot misperceptions more easily

The real goal here with perception awareness is mental clarity.  Individuals exhibiting entrepreneurial self-efficacy seek mental clarity at all times.

Many of us plow through our day, unable to identify the noise within our minds, operating with only a vague awareness that we lack the mental clarity needed to make difficult decisions. Consequently, mental clarity does not mean the absence of internal noise. Instead, it means we know where the internal noise comes from, make emotional space for the noise, but we don’t allow that noise to hijack our decisions.

We arrive at clarity when we can pinpoint our perceptions, evaluate their accuracy, and adjust them when necessary.

[Just as a disclaimer, some perceptions – particularly those stemming from traumatic life events – are best addressed with the help of a professional. If you suspect your perceptions are rooted in trauma, you should seek assistance from a mental health professional. These professionals are trained to help you safely navigate and eventually deconstruct your misperceptions and arrive at a healthier place of self-awareness and mental/emotional health.]

Self Ownership in the Self-efficacy Cycle

ESE Cycle: Self Ownership

As you grow in your emotional intelligence and perception awareness, you may be surprised by how many negative thoughts and feelings rise to the surface.

Our brains ingrain negative thoughts, emotions, and memories far more deeply than their positive counterparts. Psychologists call this “negativity bias:” the preference our minds give to negative experiences over positive ones.

Our brains’ top priority is survival, and in theory, it only takes one bad experience to end our existence. Contrast this to many positive experiences, which pleasant as they may be, do not have any direct impact on our immediate, physical survival.

The problem with negativity bias is that it often subjects us to our “monkey brains,” and we lose the ability to love, thrive, and create.

It’s essential to understand negativity bias so that we do not allow our perceptions and emotions to hijack genuinely great moments.

In my example of the colleague that raised their voice, my perception was that I might have deserved the verbal abuse due to my lack of worth. What I should have chalked up to as a single bad experience became something much greater. One negative experience nearly threatened my ability to love, thrive, and create.

When I challenged my misperception with facts – that I had, in fact, enjoyed mostly positive interactions from my colleagues – I was able to take ownership of myself. As a result, I could reflect on the negative moment with a sense of curiosity that would aid me in securing more sales in the future.

If we allow our negative perceptions and emotions to control us, then we remain victims. By contrast, if we assume the role of self-ownership, then we become survivors

Victims carry the weight of things done to them. Survivors embrace the challenge of taking ownership of their actions (not the actions of others) and choose to move forward toward a world much bigger than their limited experience.

We may have lost something of extreme value: our innocence, health, financial stability, or even a loved one. But if we are still breathing, it means that we can leverage the very next to moment and do something worthwhile.

We have the opportunity to own our thoughts, feelings, and decisions by taking ownership of them. The negative experiences become valuable data points that yield insights to propel us toward greater entrepreneurial self-efficacy.

Self-ownership is an empowering attitude: we recognize that, despite the difficulty, we can affect positive change in our lives and in the lives of others.

We suddenly realize that our failures don’t define us unless we want them to. Being wrong just became a moment of growth rather than a catalyst for decline.

Calculated Risk-taking in the Self-efficacy Cycle

ESE Cycle: Calculated Risk-taking

The journey you take through emotional intelligence, perception awareness, and self-ownership gradually enables you to handle yourself skillfully in unfamiliar environments. Developing entrepreneurial self-efficacy demands that you take risks.

Rather than operating from a self-absorbed state of survival, you begin to take risks that can carry you toward a place of thriving. You can train yourself to associate calculated risk with opportunity.

I worked for many years in the small business funding industry. In my work, I interacted with a lot of emotions. Entrepreneurs everywhere typically found themselves in the position of needing more business funding. My clients wanted desperately to risk as little as possible, and I had to continually urge my clients to graduate to a calculated risk-taking mentality over avoiding risk altogether.

When you learn to confront your misperceptions, you begin to see the value of exposing yourself to new things. For some, this means building more diverse relationships and engaging customers more often. Others choose to tackle a new skill that adds value to their business. For many more, it means confronting their deepest professional fears.

You must dethrone your ego for the sake of moving forward. As you embrace discomfort and take calculated risks, you will experience positive change both within yourself and in the world around you.

When looking to make a large-risk decision such as “when to launch” and “where to seek business funding,” you will need to develop sound habits of calculated risk-taking.

As you take more calculated risks you take, your skills will become sharper, the world will start to feel less intimidating, and you will nurture more entrepreneurial self-efficacy.

Collaboration in the Self-efficacy Cycle

ESE Cycle: Collaboration

As you take more calculated risks, you will quickly discover that there is a lot you don’t know. Chances are, you became aware of this problem way back during the perception awareness stage.

But you don’t have to let a lack of knowledge and experience hold you back. Collaboration is your next step.

Collaboration can take the form of research, feedback, or a group discussion that informs your perspective. To be innovative, you must expand your perspective. By far, the best form of collaboration is real-time discussions with people who think differently than you.

To collaborate effectively, you need to master two things: validation and pushback

Validation is acknowledging the reality of another person’s experiences and their emotional response to those experiences. It looks like active listening and empathy. You step out of your shoes and put yourself into another’s.

You do not have to agree with that person on anything. Instead, your job is to acknowledge that his/her experiences and emotional responses are real, and most importantly, that they matter.

A mind in a defensive state cannot offer validation. So if you find yourself listening to opposing viewpoints with defensiveness, then you must resist your emotional reactions lest you hijack the collaborative moment.

From time to time, we must collaborate with extremely unreasonable people.

Instead of getting defensive, you validate.

You let them talk, and you can validate their experience without agreeing with their point of view. If you refuse to validate the other’s experience properly, they will not feel at liberty to share information that might prove vital to your endeavor.

But collaboration doesn’t usually stop with validation.

The second key piece to the collaborative process is respectful pushback. Respectful pushback only works after validating the individual with the opposing viewpoint. When it is appropriate to challenge someone by offering a counter-viewpoint, consider the following script:

Would you be willing to merely consider an alternative perspective?

“Would you be willing…” – Don’t demand to insert your opinion, as informed as it might be. You deserve to collaborate with people who will willingly consider your perspective (and vice versa). If your conversation partner does not seem able or inclined to listen to your viewpoint with the intent to offer validation and possibly learn from you, you shouldn’t try to force that mindset into others.

“…to merely consider…” – You are not proselytizing a new convert. He/she should not feel pressured to agree with you. Considering something is harmless. If your point has validity, merely considering it allows him/her to recognize and benefit from its merit.

“…an alternative perspective?” – The perspective you want to share is just that, a perspective. Prepare him/her to hear an opposing point of view that you are ready to introduce respectfully. Most of the time, the other person will gladly listen. Generally, they will also feel comfortable enough to reciprocate by offering validation and respectful pushback of their own.

If someone absolutely refuses to listen to your perspective, then one of two things are true. 

First, they may not be willing or able to offer the kind of collaboration you seek. If this is the case, do not extend the conversation any longer than you have to.

Or second, they may feel disrespected or insufficiently validated. If you did not validate another person’s perspective, it will be tough for them to collaborate with you. 

Most of the time, you will find the latter to be true: you probably didn’t validate the other individual properly.

Validation takes practice. And validation does not occur until the other person feels validated. If this reality scares you, you might have a control problem. But with a little emotional intelligence and perception awareness, you can confront your desire for control over how other people think.

Collaboration is successful when you and your collaborators agree on a root problem and the parameters for solving it. When you and your team members reach such an agreement, you have created an environment ripe for innovation.

Through collaboration, you not only achieve clarity for yourself and your team, but you also demonstrate to everyone around you a sustainable leadership model. Each team member feels valued, and everyone will be more inclined to share feedback and entertain different approaches.

Collaboration eliminates the zero-sum game in professional work teams. Unfair dichotomies – we must do either x or y, or else! – become effective multiple-choice tests wherein there exists more than one possible solution out of several options.

If you learn to collaborate in this way, you will significantly inspire those in your realm of influence. Additionally, you will be able to grow your sphere of influence to include a larger crowd of prospects, colleagues, and followers.

Innovation in the Self-efficacy Cycle

ESE Cycle: Innovation

Now is the time to develop your solutions in the form of business deliverables. In your journey of entrepreneurial self-efficacy, you have learned to understand better what it means to be human.

Your mind and emotions are now limber and able to explore the needs of your market and work toward creative solutions. You may need to partner with consultants who specialize in the product development process.

Chances are, you chose the entrepreneur life because of one specific product/service idea that you believed would solve problems. Now you need to develop your seed idea into a marketable solution.

Your innovative stage must include developing successful solutions (i.e., proof of concept). For instance, if your solution is a product, you need a prototype with a track record of success. If your solution is technology or software, you need beta testing. If your solution is a service, you need a handful of happy clients.

The purpose of developing ideas is to test them in the business environment and, if no insoluble problems are discovered, prepare them for implementation.”

While testing your ideas, problems will arise: failed technology, missed deadlines, lack of funds, and more. Dedicating yourself to a process of entrepreneurial self-efficacy will elevate your capacity to solve increasingly complex problems. In time, you will feel quite comfortable with the iteration process.

It is vital to prioritize your personal issues over those of others. In your role as an entrepreneur, your mental and emotional clarity is your life-blood. If you lose this clarity, you will project your own unresolved issues onto those you seek to serve, further hindering the innovative process.

Allow intrusive thoughts to rise and fall without attacking or embracing them. Proactively absorb new information and resist the urge to react in an effort to prevent mistakes. Rise above the “monkey brain,” and seek always to view the bigger picture. Ask for help from those you trust and tinker with your ideas.

The Entrepreneurial Self-efficacy Cycle: A Recap

Learning is the essence of entrepreneurship – achieving higher levels of self-efficacy, as illustrated by the Self-Efficacy Cycle.

I hope that no matter what stage of your professional journey you find yourself in, you will feel empowered to intentionally know yourself, take ownership, favor calculated risk-taking, engage people collaboratively, and innovate.

The way I see it, the world becomes a better place, not through government legislation or religion, but through individuals taking the initiative to solve society’s problems at the root and promote a sustainably better quality of life.