The Psychology of Start-Ups

Startup

By Adrian Furnham

Every generation likes to believe that they are different from those that came before them – “new and improved” as advertisers like to call it. But are the young people entering the workforce today very different from those that have come before them?

There are doubts about how you define these different generations: what you call them and precisely how many there are in the workforce. The Veterans (or Traditionalists) have around 1925-1945 as their birth dates; the Baby Boomers around 1945-1965; Generation X and Y from 1965 to 1985, the Millennials from 1985 to 2002 and anyone since is classified as the newly emerging Generation Z.

So how many are there now in the workforce? About 5-10% are Traditionalists; 30-40% Baby Boomers; 30% Generation Xers; the remainder (20-30%) Millenials. It is argued that different generations have different values, motivations and work styles. We have heard it all before…young people want to have good work/life balance; is that a commitment to a healthy lifestyle or have they lost work ethic? They prefer a flat hierarchy; is that to foster closer relationships with their manager or are they are deeply cynical about authority? They are empowered by roles that have positive social impact and do not tolerate deviations from that goal; is that a commitment to social good or an excuse for lack of commitment to organisations?

Vocational Choice

I have been studying young people and working with them in my more than 35 year career as an academic. I am an I/O psychologist interested in many things including vocational choice. I both research the topic and teach under-and post-graduates. My question has been are there changes in what we used to call vocational preference: what sort of jobs young people look for when they leave school or university?

When I left university (Oxford 1981) my peers wanted jobs in the media, the Government, or the City. They were exciting, stimulating and, supposedly, lead to fame, money and power. These preferences remained throughout the Thatcher/Regan years. But all three have lost their lustre for different reasons. All have been tainted one way or another

There have been other fashions. One that has been going some time is the social impulse to work, often abroad, in non-for-profit organisations that promote ecological, educational and health issues. These are the young people who have turned their back on the material world preferring to “make a difference” and help other people.

Start Up Mentality

Now the Bright Young Things all echo the same mantra: start-up. We want to be entrepreneurs they chant!

The stereotype is of a group of friends working in a casual/funky environment (look at the exponential growth of co-working spaces: such as WeWork, Work.life, TechHub and Second Home) on their computers, having great fun and coming up with (here is the key adjective) disruptive concepts, products and processes. Their aim is to destroy the lazy, old-fashioned behemoths of the past.

Three of my best PhD students who initially wanted to become academics have chosen this route. Others I have interviewed started “serious” jobs in consultancy, finance and the media but all “dropped out” lured by the appeal of the start up.

There are many obvious appeals of the stereotypic start-up. They are (allegedly) places of fun and creativity, unrestricted by slow bureaucratic processes, incommunicative silos and general risk aversion. There is less hierarchy and less politics than in a big old-fashioned organization.

The office is a playroom. There are no stuffy rules; no petty supervisors; no dull and monotonous tasks. Indeed, it is difficult to distinguish work from play.

This is Millennial heaven. This is the current generation (20-35 year olds), with their need to invent something new, because they believe they are special and can do special things, something most likely that the generation before them instilled in them. There are also plentiful sources of investment and lots of venture capitalists looking for these very special people. So money is supposedly not a problem though that seems to be changing.

The cost of entry for the kind of start-up that interests Millennials is at an all-time low (you can create and upload an app over a weekend!). Young people are masters of technology and social media. The use of social media platforms enables entrepreneurs to build a product, a brand, and grow the company with high interaction and relatively little cash.

Start-up founders are mostly young, talented individuals, frustrated with hierarchies and the old order. They don’t have employees, colleagues, managers or support-staff, but ‘friends’. They are usually prepared to take risks – and are in a situation to do so.

People in start-ups do, or pretend to, enjoy teamwork and networking. They see continuous learning as highly desirable and virtuous. And they are prepared to work for low pay…until, of course, they discover a must-have app and get really rich.

So this is the new vs the old: on-trend geniuses vs stale, pale, frail males. But is it? Is it any more than the well-known differences between big and small organizations?

Most studies show that big organizational units are bad, in the sense that there is more absenteeism, higher turnover and lower morale. Big units lead to a poorer sense of cohesion, greater task specialisation and less good communication. Yet size is not closely related to productivity, but more to the way in which people work.

The research on staffing looks at differences in behaviour between large and small-populated environments or settings: big and small businesses, schools and towns. When a setting is understaffed, there are usually barely enough people to ensure that it functions effectively. So, in order to maintain it, people tend to be more active and involved in what they are doing.

The data from ecological psychologists, who study these sorts of things, show that in comparison with those working in overstaffed environments, those in understaffed settings: are more committed to their organisation and have higher job performance.

A start-up is classically a small, understaffed unit with the advantages and disadvantages that bestows. The salaries are not great, but there are promises of shares. Often the owners spend more time talking to venture capitalists than “running the business”. Lack of commercial insight means that start-up geniuses are bent on inventing things before they even consider if anybody wants the product.

Ironically, start-ups are often trying to solve the problems of big organisations, the old favourites: big media firms, the government or investment banks. So how would someone with no experience of a big organisation have the understanding to build a product to solve their problems? They are unlikely to even know what those problems are.

Furthermore, individuals who leave big organisations with their infinite resources, to pursue the entrepreneurs dream, soon realise that constantly not having enough resources, which is synonymous with start-ups, means that you are constrained to introduce processes to direct those limited resources. So you are teased with freedom from rules but inevitability have to deal with them.

You may implement more efficient processes but that is what the generation before you did and it is inevitable that the “efficient processes” created by Millenials will be obsolete by the time Generation Z enter the work force. And so the cycle will begin again with news names and new adjectives but the same premise – we are different and we can do things better – but if every generation says that then aren’t you more alike than different to those that came before you?

About the Author

Adrian Furnham

Adrian Furnham is Principal Behaviour Psychologist at Stamford Associates in London. He was Professor of Psychology at University College London 1981 to 2018, and now Professor in the Department of Leadership and Organizational Behaviour at the Norwegian Business School in Oslo. He has written over 1300 scientific papers and 90 books

References

  • Almeida, P. I. L., Ahmetoglu, G., and Chamorro-Premuzic, T. (2014). Who wants to be an entrepreneur? The relationship between vocational interests and individual differences in entrepreneurship. J. Career Assess. 22, 102–112
  • Bonnett, C. , & Furnham, A. 1991. Who wants to be an entrepreneur? A study of adolescents interested in a Young Enterprise scheme. Journal of Economic Psychology, 12: 465-478
  • Henderson, R. and Robertson, M. (1999), Who wants to be an entrepreneur? Young adult attitudes to entrepreneurship as a career. Education + Training, Vol. 41 No. 5, pp. 236-245.

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