Handshake or Punch?

Two generations have puzzled the Hungarian and international labour markets as well as the business world in recent years, both in terms of understanding and managing them: ‘Diplomats’, defined as Individual 1 in the RISE system, born between 1973 and 1984, and the Ruler 3 generation, a.k.a. the ‘Ambitionists’, born between 1985 and 1996. These generations are not merely a challenge anymore but are the key to progress and an essential element of survival.

Reasons, causes, & consequences

In the ex-communist region, and as such in Hungary as well, getting to know, understanding, and managing these two generations typically posed a great challenge.  Companies decidedly turned towards these two generations. But why? The predominant role of older generations has been decreasing.  They are not the ones setting the direction of economic development anymore, meaning the road to business progress is marked by these two generations. Just to be on the safe side, I would like to emphasise that when we talk about generations, we mean a general discussion of certain processes. We outline some trends, which does not mean that there are no exceptions to any of the statements below. Naturally, there are CEOs or company owners above 50 who can keep up with the challenges of the modern business world. But it is also true that the reason they can do this is that they surround themselves in time with representatives of the aforementioned two generations. I would also like to point out that these two generations are powerful even if they are not the CEOs or company owners in Hungary today. But time after time, we witness that regardless of whether they are in top leadership positions, their influence on crucial business decisions is significant. So how did they gain this influence? This can be traced back to different qualities in the case of each generation.

The key to the Individual 1 generation’s rise to power is well reflected in their name (Diplomats). We talk about businesspeople here who grew up at the perfect time. They have experienced communism; their childhood was defined by a quantitative approach and a multitude of misconceptions typical of the mentality of the Soviet Union. It did not scare them, did not poison them, but they could learn a lot from the theories of the ‘70s and ‘80s. As it is also said about parents: if you have a really bad father or mother model, chances are that you will do whatever it takes to do the exact opposite of what that parent would do throughout your life. And the other influencing factor in their case was the rise of the so-called free market economy. It was also a fine display of fair and foul play alike. We all remember how VAT-related incomes were swallowed up by private pockets, which was stopped by the generous amnesty granted by the tax authority. Meanwhile, businesspeople who had been avoiding taxes were outraged when they heard that they had to pay back even a tenth of all the taxes they failed to pay before. Managers born between 1973 and 1984 learned that it is no use living in fear, as we cannot take for granted anymore that the Hungarian tax authority will keep letting itself be outsmarted by entrepreneurs forever. Online cash registers and the recently introduced online invoicing systems are perfect examples of this. Altogether, the Individual generation started its business career in the spirit of conducting their affairs with more integrity, forward thinking, and most of all uniqueness, of course, being Individuals. The ones who opted for the career path of an employee did not have difficulty climbing the ladder, as this generation already spoke English, they had an IT user background, and they enjoyed the benefits of an international take on business. They had the opportunity to study modern business sciences, which was highly appreciated by multinational companies setting up camp in Hungary. Not to mention that this generation was born to network, and their diplomacy was a great asset for finding their way in the international business network. And later, they wisely switched to Hungarian companies that grew into large enterprises or influential SMEs, who were glad to have their international knowledge. Truth be told, many of them failed afterwards, because they were unable to perform well enough in the Hungarian business sector after working for multinational companies, but many of these managers have become influential decision-makers in this sector. As company owners, they had a much more challenging time than the generations before them, as the period of ‘looting’ was over, which also meant that they had to build their business much more cautiously and deliberately, they did everything with much more integrity. This made their development more predictable. They were the lucky ones who could see the international borders open for them, they created the first big start-ups, and they were the first to look beyond the neighbouring countries when thinking about the international market. I guess I do not have to list the great success stories of all those who made it big in the US, Australia, Asia, and of course in good old Europe.

Ambitious plans

2018 was the first year in Hungary when the Ruler 3 generation was the runner up behind the aforementioned Individual 1 generation regarding the number of company owners. There have been prolonged attempts at understanding businesspeople born between 1985 and 1996 for years, especially by members of the Individual 1 generation directly preceding them. Unfortunately, these attempts failed due to the overly global and generic generational theory of generations X, Y and Z. Obviously, you cannot make sense of an age group with a generational classification that puts people born in 1965 and 1977 in the same category. In Hungary, there is nothing that people born in these two eras have in common concerning opportunities, upbringings, or business careers. When digging deeper into the discussion on generation Y, it is important to point out that our own research projects also clearly show a stark difference among people born in the first, second, or third four-year period of this particular 12-year generational period. For instance, there is a significant difference in the degree to which the older generation accepts a businessperson born in 1986 and one born in 1992. The pace set by the market, technology, and the education system picked up so rapidly that it is becoming increasingly difficult to find common features in age groups spanning an entire decade. Ambitionists have their own cross to bear, so to say. They have a symbiotic relationship with Diplomats, which does not make them particularly happy. They are extremely dominant, have above-average determination, but they feel out of place in the market. The generation preceding them was excellent at building careers, the advantages of their linguistic and IT skills and their international mindset made them particularly adept at supplanting leaders born in older generations. They gained important management positions rather young. And representatives of the Ruler generation are paying the price for it, as these positions are not viable options for them because they are occupied by 30- to 40-year-old managers. Although the vision of the younger generation goes beyond that of businesspeople over 40, they lack adequate experience, and without experience, the theory remains a theory. But the Individual 1 generation embraces the opportunity to introduce this new mentality to their companies. At any rate, leaders and owners of a stronger character set the brand-new trajectory of their companies’ progress by utilising this. They intuitively feel the needs and weaknesses of the Ruler 3 generation, and so they are able to win them for themselves. Young workers want to learn, and they want to learn from successful business owners and CEOs. They want to have their own company in the long term, and they know that they need to learn from the best to achieve this. It is also apparent at job interviews that they are focusing on the company image and in particular the image of the face of the company. If they have the opportunity to work with a truly successful businessperson, contrary to popular belief, they are even willing to make financial sacrifices, as they are planning long term, they see the big picture. Regardless of their obvious, and apparently self-sacrificing efforts, they are still generally thought of as money-grubbing and disloyal employees. Whoever had this experience with this generation could certainly use some self-criticism, as the problem is not with the young workers, but the older CEO or company owner! Meaning that they are simply not the right role model for young professionals, and that is a fact that is rather hard to accept – at least in our experience. It also happens because, in the case of Hungarian business evaluations, experts markedly point out that generations older than the Individual 1 are still unwilling to let young people enter their companies. Although they are not exactly lining up for that opportunity either. Many Hungarian companies are under a lot of pressure, as they need a certain number of employees, but they are simply unable to recruit new ones or retain the old ones. I have met enough company owners through my own business development discussions to say: reality is often disappointing, with some honourable exceptions of course. Company owners sometimes say things that leave you gaping for minutes. One of my favourites: ‘we’ve always built the company by ourselves, we will manage anyway’ – and that was uttered in 2018, in Hungary, with decreasing turnover and profit of course, and in a situation where there are hardly any applications for open positions. ‘They are lazy, leeching on their mother’ – is probably not the best way to approach the management of the Ruler 3 generation. Of course, I’m not one to keep my opinion to myself in a situation like this, and I start listing the examples seen in my own or in 3B’s practice. All the companies in which members of this ‘decadent’ generation work 14–16 hours a day, giving up their weekends for years and propelling the company forward. I also tend to share that you obviously must work hard to earn their respect, as they will never look up to someone just for having the most companies across the globe if the leader otherwise lacks professional knowledge of the given field. The profit made by a company will not impress them either if it is not reflected in the leader’s lifestyle, and they see him pinching pennies instead of enjoying the advantages of having a profitable enterprise. They also do not care for company owners who are unable to show off their achievements. For them, it sends a rather negative message, as a large number of company owners over 50 did not risk buying a truly premium car back in the days for fear of drawing the attention of the tax authority on themselves. But this generation doesn’t want to mix with this crowd, it just isn’t ‘cool’. And if it is not trendy, they don’t want to build their lives along these principles.  I also had to learn over the years that you can’t change how everybody thinks. The business world will take care of these company owners and CEOs with their mistaken mentality, who often present their past luck as business know-how and proceed to build false confidence out of it. Genuine business developers like us have nothing to do with them. There are sensible managers in every generation, who have a modern mentality, who want progress, and who truly manage and understand people as people. We focus on them. Among 3B’s partners, the oldest manager is 71 years old, and the youngest one is 26. Although generational features do define some general directions of thinking, they do not limit business potential.

Diplomats vs Ambitionists

In the business world, the biggest concern of business strategists at the moment is how the relationship between these two generations will unfold in the upcoming years. We can see that the symbiotic relationship of these generations is interrupted more and more frequently by more aggressive actions. There is an increasing number of cases where workers in their twenties turn against their employers after a couple of years and start their own businesses. One thing is for sure, their ego will not stop them in doing so; this generation would rather run their head against the wall, several times if it comes to that, but they will not learn from their mistakes. But it is also true that in many cases the Individual 1 generation has wisely already made a deal with the Ruler 3 generation, giving them such a position, such a background in a company led by a 30- to 40-year-old businessperson that might as well make them stay at the company forever. Thus, the idea of ‘I have to rule the company’ has shifted to ‘I won’t bother with leading a company, I’ll just focus on living the good life’. And then some young people are unwanted and don’t have such opportunities. Many of them choose the world of multinational companies or move abroad thinking that money grows on trees there. Of course, the smarter ones have already realised their mistake, and following the big awakening, a host of people who left the country ten years ago started moving back home. Brexit reflects the feeling described by these young people perfectly: you may work and live abroad, you will even be accepted, but you will never truly belong. And the last thing the Ruler 3 generation wants is to be a merely tolerated, not accepted, or even excluded member of any given community.

What do we see relevant to business development? By all means, Hungarian businesses managed by 34- to 45-year-old leaders achieved significant progress since the international economic crisis. The past two to three years are undoubtedly marked by their success. It is also apparent that the transformation of the Hungarian consumer society, during which the solvent demand became polarised, split into premium and mass consumers, posed considerable challenges for these company owners, which they still must find a way to deal with. Successful business development projects of the past five to six years were all about pushing talented SMEs towards consumer groups of clearly defined premium needs. But the true premium is not inspired by Individuals but Rulers, and so the younger generation is much better at creating it – that is the environment they were brought up in, that is what they want to follow, that is how they were socialised. So, we can conclude that successful Hungarian companies of the future will be the ones in which these two generations are able to maintain their symbiotic relationship, deepening their co-operation along the lines of mutual interests. It is imperative that we handle emotions and other elusive factors separately, as those would only mislead us. The companies that achieve this won’t have to worry about labour shortage (they typically have to deal with an excess of applicants) or fluctuation (our partners had a fluctuation rate of 2.4% in 2018) and shifting to the premium market will not be an unmanageable and unfathomable challenge, only a clear development path! But the successful co-operation of the two generations calls not only for motivational methods or techniques but also the prevalence of a well-built and conscious motivational system and an environment permeated by it. Without exception, this first comes down to the professional image and lifestyle of the head of the company, then the company image, which should be something that these young people can be proud of. Serious professional work is absolutely vital. And remember: young people measure the market value of a business in professional challenges and new, exciting tasks!

Although the Ruler 3 generation risks direct confrontations increasingly due to its ambition, strategically fighting against the Individual 1 generation is bound to be a failure, as it would be a rather unwise step to take up arms against born diplomats with strong networking skills and secure business backgrounds.

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