Trust, not avocados, matters to millennials
The radio was always on in our house when I was growing up. One day I heard an ad for the "king of fruit" and it turned my head. Kiwis were being imported into Ireland for the first time and, being eight, this seemed kind of a big deal to me. I begged my mother to buy one of these rare luxuries, and the following Saturday we went shopping and brought one home.
We stared at it in wonder. Having plucked up the courage to slice it in two, we gazed at its succulent green flesh. It's going to taste like strawberries and Dairy Milk, all rolled into one. But better, much better. Because with just one taste we would be transported far from rainy Ireland, to a land with glaciers and sunshine and volcanoes and maybe unicorns.
We ate a piece each and sat back, chewing cautiously and screwing up our faces as a wave of disappointment rolled over us.
It turned out to be an avocado, not a kiwi.
This brings me to that much-maligned generation, the millennials. They were recently accused by an Australian millionaire of wasting money on smashed avocado toast rather than saving for a house. Given my job as an investor in software startups, this wild generalisation got me thinking about millennials in the workplace and the companies that seek to satisfy their needs.
Many of these companies aim to transform how Human Resources works, so it's worth taking a closer look at the HR function itself.
Two functions typically determine success in tech companies: Engineering and Sales. Usually in that order. You build products and sell them. But for a company to be successful in the long-term, all the major functions - finance, legal, support, facilities, PR, etc - must fire in unison. In my experience, the most maddening function of all is HR.
I've worked with a handful of world-class HR people in my career and they've shown me what's possible. They've helped to create a culture of high performance; built metrics-driven recruitment machines to hire the best talent; pushed my management team to think about succession planning when all we seemed to talk about was revenue; predicted employee attrition before anyone else.
The best HR people have understood their privileged role as trusted advisers and their pivotal role as change agents and have been essential members of any high-performing management team I have led or been a part of.
Yet great HR teams have been the exception. More often than not, HR has lagged way behind, serving an administrative rather than leadership role and often belittled or ignored. In the ultimate humiliation, it's sometimes put in the corner, reporting to the CFO. Yikes.
Where there's a gap between reality and potential, there's an opportunity.
Over the past few months I've met a lot of startups that tackle people-related issues in the workplace. (Most of these companies refuse even to admit they're in HR, which says something about its image problem.) It's a busy investment space, which has not yet coalesced into well-defined categories. Instead, there's a kind of fog of overlapping solutions that seem to fall roughly into these areas:
• Feedback and Performance Management. The trend is towards systems that are real-time (more accurate), lightweight (less work), and development-focused (more motivating).
• Culture and Engagement. Employee morale drives productivity and retention. While great managers have the emotional radar to monitor this intuitively, it's hard to do at scale - which is where technology comes in.
• Health. Performance, mindset, stress, and wellness are connected to physical symptoms in ways that we don't fully understand - yet.
• Learning & Development. The trend towards online learning produces two unresolved conflicts. First, employee-initiated learning generates a tyranny of choice and, second, instructor-led training is more expensive but when done well is more effective than online-only.
• Flexible working. The explosion in contingent workers - skilled and unskilled - means that more people are facing the joys and perils of being self-employed.
• Hiring. A top priority for every growing business. Although LinkedIn thankfully blew up opaque private talent markets, its airbrushed profiles result in insidious homogeneity. Good candidates and bad often look indistinguishable.
• People Analytics. Vast lakes of employee data lie untouched and unexamined. Insights that are obvious when you're small disappear into your HR systems when you're big. Does commute time drive employee churn?
When I meet startups in any of these categories, the meetings have one thing in common. Someone mentions millennials and asserts that they are fundamentally different from previous generations. I'm not so sure.
Most venture capital partners are in their 40s or 50s. I'm 41. We relate to millennials with all the understanding of a patronising older sibling. (I know a thing or two about older siblings. I have six of them.) And untested assumptions can cause bad investment decisions. While it's a truism that millennials are more attuned to digital media and tech, I don't think that tells us much. I'm reminded of the quote: "The children now love luxury. They have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise." This was attributed to Socrates two and a half thousand years ago.
When an investment decision hinges on the assumption that kids today are fundamentally different from kids yesterday, beware.
There is, however, one generational difference that is supported by research and I have observed. According to Pew, millennials are less trusting than prior generations.
When asked, "Generally speaking, would you say that most people can be trusted," just 19pc of millennials agreed. Think about that for a moment. Trust is the basis of so much in life and work. How do you behave in a world in which you trust nobody? Not your employer, not your bank, your church, your Government.
Young people are always idealistic. It was true of Generation X and Boomers and it's true of millennials. They want to believe and to belong. But millennials are slower to trust authority, for good reason. They are sceptical, alert to corporate hypocrisy, more than willing to switch companies if they're not fully engaged. They crave authenticity.
Which brings me back to investing in HR, and how to find companies that will unlock the talents of today's workforce. Trust is at the heart of high performance. Yet today's millennial workforce is less trusting.
This conflict at the heart of today's organisations remains mostly unnoticed and unexamined. Nonetheless, it is a driver of disengagement, stress, and ultimately attrition in the workplace.
As I meet startups that seek to revolutionise the workplace, I'll ask myself how they are attempting to repair the crucial bond of trust that has been lost between our largest generation and their employers.
And then I'll buy myself a smashed avocado on toast for €12.
Frontline Ventures is an early-stage venture capital firm that invests in and accelerates ambitious B2B software entrepreneurs. The fund is managed by partners Shay Garvey, Will Prendergast, William McQuillan and Stephen McIntyre from offices in Dublin and London. www.frontline.vc.