Sources of personal income include activities from being an employee, an entrepreneur and/or a business enterprise owner, or an investor. The strength of an individual’s competencies determines their success or failure in these activities, and their willingness to learn from failure so as to enable future successes. Competencies are about domain knowledge in academic and vocational disciplines, and in the related mental and physical technical skills. Disciplines are rules of conduct and subject areas of teaching. Individual competencies comprise personal, professional, and enterpriship (entrepreneurship, leadership, and management) knowledge and skills.
Personal, professional, and enterpriship competencies…
Personal competencies are about the self (intra-personal) and how an individual relates to others (inter-personal). Intra-personal competencies are both qualitative and quantitative. Beyond the fundamental satisfaction of human needs, the most basic competencies are the ability to read and write and to perform arithmetic operations. The ability to manage risk is essential to survival. Other inter-personal competencies include analysis, comprehension, logic, mathematics, and reasoning. Inter-personal competencies include oral and written communications, relationship building, and participating in and contributing to teams, communities, and work-places both socially and professionally.
Performance in an activity is a function of aptitude, ability, and proficiency. Qualifications are standard conditions or requirements for performing a role. Aptitude determines the suitability of an individual for a role; ability determines their expected quality of performance for an activity; and proficiency defines their level of competence.
Personal and professional competencies determine preferences for values, attitudes, beliefs, and behaviors, including appearance and communications; motivation, conflict handling, and stress tolerance; decision making, learning, occupation, recreation, and relationships; and fiscal matters.
Professional competencies address domain functional subject areas and knowledge such as law, finance and accounting, human resources, information technology, program management, engineering, operations, and business development in both product-driven and service-driven industries, and the associated technical skills.
Domain competencies also address subject areas such as arts, cookery, entertainment, numismatics, philately, and sports from which activities arise that can be monetized, such as collecting, trading, and investing in items including art, coins, sports memorabilia, and stamps.
Enterpriship competencies are enabling and embrace the entrepreneurship, leadership, and management disciplines. Enterpriship competencies determine how to transform ideas into value, how to set direction that influences others to follow, and how to apply resources to activities to achieve results.
Every individual earning income as an employee, as an entrepreneur, or as an investor must be able to apply personal, professional, and enterpriship competencies in order to create or respond to opportunities and threats. Wherever there is crisis, there is opportunity.
Being an employee…
Being an employee means working for somebody else for income (although shareholder officers of “Subchapter S” corporations are also considered employees, even though they are owner-operators). Types of employment income include wages, salaries, and incentives such as bonuses, commissions, and tips. Opportunity for ownership may also be offered to employees through awards of stock options and shares if the enterprise is a corporation, admission as a partner if a partnership, or admission as a member if a limited liability company. Benefit packages may also be available including paid vacations, healthcare, profit sharing, and retirement plans.
Some employees remain as hourly paid administrative staff or operational labor throughout their entire careers. Others become salaried professionals and rise into management and executive ranks with substantial leadership and managerial roles. In these cases, a component of income is usually incentive-based according to the performance of the enterprise and an individual’s own area of responsibility. Whereas some employees prefer the predictability of a fixed wage per hour or salary per year, others prefer a high variable component with commissions and bonuses commensurate with their individual or team’s performance.
Some employees want to be associated with an enterprise that is well respected for product and/or service innovation; for constituencies served; for quality, efficiency and effectiveness; for values and guiding principles; or for sustainability. Others are solely concerned about the income potential. For some, working for somebody else, especially in a well established institution creates a sense of pride or duty; for others being self-employed is more satisfying, and in some cases a necessity because of shortages of work opportunities, or because of barriers to employment such as the “glass ceiling.”
Being an entrepreneur and/or business owner…
Being an entrepreneur means starting, developing, and assuming risk for either an upwardly mobile or lifestyle business enterprise, or performing as an independent contractor. Upwardly mobile enterprises are aimed at large markets with local-to-global aspirations. They are started through the “sweat equity” of founders and are initially financed by angel and venture capital investors, and may eventually become publicly traded enterprises. Lifestyle business enterprises are usually owner-operated and form the heart of “Main Street.” They are financed from the owner’s capital and also from secured debt if adequate collateral is available. Unsecured debt opportunities may be available if guarantors can be provided, or once steady cash flows have been established. To be successful, a lifestyle business enterprise usually needs a lot of “tender loving care” from the owner. However, such care can be a differentiator from large enterprises through detailed product and/or service knowledge and quality of service delivery.
Independent contractors are in effect enterprises in their own right and have to be entrepreneurial in order to find assignments. Individuals and enterprises who engage independent contractors have a right to control or direct only the result of the work performed, but not the methods by which it is accomplished.
Some entrepreneurs want to build an enterprise that is respected; for others, financial considerations are the motivating factors.
Artists, authors, composers, and entertainers require entrepreneurial competencies in order to earn sales, fee and royalty revenues from their work.
Being an investor…
Being an investor means placing excess or leveraged capital for a future return in assets that either are expected to appreciate in value or produce income, or both. Assets include durable items such as art, equipment, furniture, numismatic, philatelic, sports memorabilia, real estate, and securities (financial instruments representing money, debt, and equity capital and derivatives).
Capital can be accumulated wealth or leveraged through borrowings. Successful investing is about achieving returns through capital appreciation and cash flows from dividends, fees, interest, rentals, and royalties commensurate with risk. Short-term gains can be obtained from trading activities, whereas long-term gains are obtained from buying-to-hold.
Passive investors primarily buy-to-hold; active investors seek advice, make decisions for themselves, trade and buy-to-hold, and sometimes seek board positions to influence the direction of the enterprises in which they have invested. Buy-to-hold means that investments will be held in a portfolio until maturity (if applicable), or will be available for sale at some time in the future. Being an active investor means having analytical and quantitative capabilities, being willing to take risk, and being able to make decisions with anticipation and deliberation.
Whereas employees think in terms of wage per hour or salary per year, entrepreneurs and investors think in terms of returns from capital appreciation and cash flows.
Some individuals invest in stocks and bonds through employer sponsored plans, whereas others take responsibility for their own portfolios. Some individuals start early, sometimes borrowing on margin; others start late using excess cash. For some, the biggest investment is the one-time purchase of their home; for others, flipping to gain from capital appreciation in real estate properties or buying-to-hold for rental income is a routine activity, as is investing in other assets.
All investors have access to public secondary money and capital markets, but only accredited high net worth individuals and insiders have access to private offerings in primary markets. Some successful entrepreneurs put returns from their own endeavors back into the community by investing in other early stage enterprises.
Investors can become entrepreneurs by becoming dealers in certain assets and trading them. For example, collectors can generate revenue by trading collectible assets in both physical and electronic marketplaces.
Applying personal, professional, and enterpriship competencies to employment, entrepreneurship, and investment activities…
Basic personal competencies fundamental to all activities to starting, building, operating, participating, contributing, and investing in an enterprise include the ability to communicate and relate to others, and in the twenty first century, to use electronic devices for written communication and computations effectively and efficiently. Managing risk against the reward potential in terms of identifying, assessing, prioritizing, and treating opportunities and threats is essential to personal and economic survival.
Professional competencies result from the extent to which an individual pursues academic or vocational disciplines based upon personal preferences. Academic disciplines lead to occupations in law, finance and accounting, human resources, information technology, product and infrastructure engineering, marketing, and operations. Vocational disciplines lead to occupations in the trades and crafts, such as clerks, carpenters, electricians, laborers, mechanics, metal workers, operating engineers, painters, plumbers, and salespeople. Professional competencies are fundamental to getting work done.
Regardless of the academic and vocational training, understanding basic economic, business, finance, and accounting concepts, and marketing and sales techniques is essential to success as an executive, entrepreneur, or investor.
Inter-personal competencies are just as important as professional competencies because without the ability to relate to other people, it is very difficult to get anything accomplished in an enterprise on an ongoing basis. Individuals who have difficulty in building relationships with others need strong professional competencies to compensate so as to be effective as individual contributors. Being teachable is extremely important. Coaching provides guidance on the enabling competencies: entrepreneurship, leadership, and management; mentoring provides guidance on the domain competences – guidance on subject matter, developing functional knowledge and technical skills.
Enterpriship competencies determine the effectiveness of the entrepreneurial, leadership, and managerial roles played by an individual whether as an employee, an entrepreneur, or an investor.
The entrepreneurial role is about creating or acquiring new opportunities or responding to threats – in effect, enacting change. The entrepreneurial role is essential when developing new products and/or services and processes, and improving existing ones. It applies to those who can offer suggestions that earn and add value. The entrepreneurial role is essential when changing jobs, when innovating and starting a new enterprise, and when investing in or divesting from enterprises.
The leadership role is about influencing people through aspirational, inspirational, and motivational communications. This role is applicable to anybody who has to entertain, inform, convince, and persuade others. It applies to those seeking employment opportunities; to entrepreneurs, business owners, executives or managers seeking employees, customers, suppliers, and investors; or to proactive members of an investor community attempting to influence other investors, management teams including both boards and officers, and other interested parties.
The managerial role is about planning, execution, and control of processes by any individual who has to achieve results, whether as an employee, an entrepreneur, or an investor.
Understanding individual competencies…
All individuals must understand their strengths and weaknesses so as to be able to take advantage of opportunities and respond to threats accordingly. Effective personal and professional competencies are essential for gaining entry level positions in enterprises, and the initial promotions thereafter. However, the enterpriship competencies in entrepreneurship, leadership, and management disciplines determine long-term success from turning ideas into value, influencing others to follow direction, and applying resources to activities to gain results in employment, entrepreneurial, and investor capacities.