Ask Clem Sunter about what business should be doing to stay relevant and competitive, and he has a wealth of experiences to draw from, from his days as an executive of Anglo American Chairman’s Fund, to his current roles as entrepreneur and scenario planner.
Here are his three top tips for staying ahead of the game (and the competition).
1. Use small business to grow your big business
When Anglo American launched Zimele in the 1990s, it was originally a CSI project. Today, it’s a strategic component of the group’s business model. Why? Because by setting up a venture capital arm that aimed to promote small business and do its bit for the economy, Anglo learnt two very important lessons: One, don’t do what’s not your core.
There will be a supplier who does it better than you, at a lower cost. And two, SMEs are flexible in a way that big business is not – and there are ways to use this to your advantage, even if you yourself have lost that small business agility you once had.
“We designed Zimele to assist SMEs in gearing up for our contracts,” Sunter explains.
“We invested money into these businesses, simplified our tendering procedures, gave them mentors and installed Anglo managers on their boards. The project has grown to such a degree that today there are 1 200 businesses employing 25 000 who operate under the Zimele banner.”
Despite the fact that this started out as a CSI initiative, Anglo soon learnt some interesting things.
“In many cases, these SMEs now supply the food at the mines we operate. We are not in the catering business, and so these small, agile, expert businesses do a better job, at a lower cost. It made us realise that in order to remain competitive in today’s market, you should focus on your core – what it is you actually do – and outsource the rest to experts in that category.
“It also means you can lower your labour force. It’s commercially sensible, and even though it’s still classified CSI, the reality is that it’s an important part of Anglo’s strategy.”
2. Cultivate the mind of a fox
In 1982 Anglo created a scenario planning division headed up by Sunter. The idea was to create and evaluate the various scenarios the future of South Africa might hold, and adjust Anglo’s business plan accordingly. At the time, there was a high road, and a low road.
The low road did not include a democratic government in South Africa, and ultimately led to high levels of unrest and a failing economy in which Anglo realised it would no longer be able to operate.
The high road led to an inclusive, democratic government which the company knew was essential to future growth and sustainability.
While most businesses cannot impact the political environment, scenario planning remains an essential factor in real business growth.
“You need to become what we call a foxy leader,” affirms Sunter. “Foxes are always paying attention to their surroundings, they’re looking ahead, but also at what’s taking place around them. While it’s impossible to forecast exactly what the future holds, by paying attention to what’s happening outside of your business, you can determine a few likely scenarios, and begin preparing accordingly – and then have the speed and agility to react to what you see.”
For example, Sunter currently has two scenarios. One predicts that the global economy will remain flat. Two of the largest economic blocs (Japan and the EU) have ageing populations, and this does not correspond well with high economic growth. In this scenario, business owners need to evaluate what they can do to grow their businesses in a flat world.
“The emphasis must be on innovation and new products to create new markets. You need to live your brand in such a way that differentiates you from the crowd, because the economy isn’t growing, which means you need a larger slice of what’s already available.”
The second scenario is coined the ultra violet scenario. In this scenario, while the economies with ageing demographics go through the long U, younger, more vibrant economies are chasing the short V – they’ve hit the bottom and are aggressively pursuing economic growth.
“This will take place in the emerging economies: India, Africa and South America,” says Sunter.“In this scenario, businesses must target these economies: Create products that work for them, create strategic alliances with businesses on the ground to grow your brand. Find ways to tap into these growing markets.”
Sunter offers flags to help business owners determine which scenario is more likely to develop. “One of these is China. If China experiences 8% to 10% growth, this will galvanise growth in the emerging economies, and we’ll be in the second scenario. But if China’s growth falls to 5% or less, then we’re in the flat economy scenario and it’s hard times for everyone.”
The takeaway lesson? Your business does not operate in a bubble – pay attention to what’s happening around you, on both a micro and macro scale.
3. Encourage an entrepreneurial economy
As your business grows bigger and more corporate, don’t forget about the value of smaller businesses to the economy.
The most vibrant economies enjoying the highest percentage of growth in Africa have strong entrepreneurial spirits. South Africa, while Africa’s largest economy, is by no stretch its most vivacious.
“I work with an entrepreneur who travels extensively. He quips that in other countries they roll out the red carpet, and in South Africa, they roll out the red tape.”
While he’s a firm proponent that government’s mantra shouldn’t be five million jobs by 2020, but one million businesses (and the rest will take care of itself), Sunter believes that much can be done if the corporate and big business mindset changes.
“A vibrant economy is good for everyone. If you want your business to grow, no matter its current size, you need to support small business. The economics of this work, we’ve already proven that, but it also starts with a mindset. Start with the question: How can I involve smaller businesses in what I do? And take it from there.”
Giving Our Youths The Edge That The Need To Succeed
With youth month just past, LFP Training posed a challenge to corporates via its online platforms. Using a hashtag campaign, we looked to remind the private sector of its crucial role in educating and empowering the youth.
The latest IMD report depicts a grim picture of youth unemployment in SA; we currently have approximately 3.3 million youths without employment and South Africa is ranked a poor 62 out of 63 in our global competitiveness ranking. With this in mind, LFP’s #YouthMonthChallenge was created. Our team challenged corporates to do even more: whatever you are doing now, double it!
Whilst many countries prioritise their youth, our country chose to overlook them. Those who get to lead our legacy and are responsible for moving the country forward, will inherit our baggage and are left to fight some of the toughest battles yet.
What can aptly be described as a ‘system in crisis’ has left very little hope for South Africans. AJ Jordaan, Sales Manager for LFP Training says that a weak foundation from pre-primary onwards has left us with my unemployed and uneducated people, with very little hope of a successful future. “At LFP, we provide learnerships to the unemployed and disabled thanks to the assistance of corporates. A key requirement is that the learner should have a Grade 10 qualification. We see learners of all ages – some fall into the youth category whilst others are still fighting unemployment at an old age,”
“Many lack confidence and are truly victims of a flawed system. Basic education at a public level has certainly failed many South Africans and as a result, us as private sector participants are left to pick up the pieces” says AJ.
AJ explains that with all the odds stacked against the learners who come onto their courses, it might be surprising to hear that LFP Training’s pass rate well-surpasses the industry norm. “When you think about it, we receive unemployed, disabled and often very destitute learners”
“We believe that LFP’s pass rate signifies the benchmark for what our country could be. If we go the extra mile, employ quality educators and provide more opportunities in a growth conducive environment, our youths certainly will flourish. LFP Training’s formula once again proved itself in April when we hosted a graduation for more than 500 learners; a record-breaking ceremony” says AJ.
The formula takes all the wrongs of the system and rights them. “Beyond theory and winning methodology, we connect with our learners. Every single facilitator, moderator and employee at LFP Training is fair, compassionate, patient, stern when needed, knowledgeable and truly understands that more than just a learnership, this is actually an emotional journey for our learners too. We take the time to recognise and address weaknesses, ensure that our facilitators have a firm understanding of our course materials and can connect with the learners”
“We want to equip people for the workplace and ensure that they are hungry and able to take on opportunities. By giving people the tools to succeed, we have seen them do exactly this. Beyond circumstances, we know what it takes to create great leaders and we don’t let their pasts dictate their futures” AJ concludes.
Building Organisational Wealth Through Greater Visibility And Increased Control
Using the right business systems can help improve operational transparency and give management more control over processes and workflows.
To effectively grow your business, you have to make sure that the correct management systems are in place to control of all aspects within the business.
If you are using multiple systems to control your business then you can expect an uphill battle as you need to analyse and report from different platforms and make decisions based on assumptions. Fortunately, integrated business management systems are specifically engineered to synchronise each division to facilitate inter-departmental information sharing as well as improve management’s visibility into operational activities.
In order to effectively identify areas of strengths and weaknesses within your business, complete transparency and visibility across each department is required. When transparency and visibility is achieved then a business is one step closer to building optimal organisational wealth.
Here is a quick overview of some of the ways in which the right business management platform can help you to achieve these goals:
Increased controls and strategic alerts
A single, integrated system will give managers complete insight into the daily operations of the business. This enables them to seamlessly monitor and manage company costs by having live visibility into cash flow. Businesses can use pre-determined and restricted system settings for increased management control. These include, among others:
- Setting authorisation parameters to give access to certain staff members when dealing with sensitive information
- Creating mandatory workflows between departments
- Allocating responsibility and accountability for tasks to adhere to best practices and industry standards
- Being alerted to any activity performed or amount processed based on management requests
Transparency and visibility
Having an integrated enterprise resource planning (ERP) system gives you complete access to all critical business information at the click of a button. This makes it much easier for managers to track task allocations, progress and costs. Having transparency allows management to maintain control over certain functions with pre-determined authorisations, without having to resort to time-consuming micro-management.
The instant sharing of information and storing of data in a single system eliminates duplication between different departments. This not only minimises the risk of errors, or the manipulation of data, but also empowers team members to plan and work more efficiently.
Here are a few examples of the benefits associated with increased transparency and visibility:
- Allocating responsibilities to specific team members to clearly define accountability
- Having real-time visibility over inventory and the location thereof helps to avoid stock-outs
- The ability to track and trace orders allows for greater efficiency in the returns, warranty and recall processes
- Visibility into financial operations assists in planning and monitoring cash flows
- The availability of accurate information facilitates forecasting and sound decision making
To proactively manage the many challenges of running and growing a business, it is crucial that you partner with the right software solution providers that will build a solid technological foundation for your business – one that promotes future growth, grows with your business and facilitates the adoption of modern technologies.
How King IV™ Will Better Your Business’s Long-Term Sustainability
Here’s what the IoDSA’s latest and most practical yet Report on Corporate Governance, the King IV™, means for your business, how it’ll improve your business’s long-term sustainability and how to get started.
It’s been little over a year since the mandatory effective date of the IoDSA’s (Institute of Directors in Southern Africa) latest report – the King IV Report on Corporate Governance ™ – for all JSE listed companies.
Yet multiple smaller businesses and non-profits voluntarily implement the report into their company policy.
Why? Implementing the King Report is a pretty good way to ensure your company policy is up to standard in terms of your governing procedures.
If you’re not familiar with the King Reports: it’s a series of reports (each new report replacing the former) that translate international standards and big-time happenings on corporate governance into set of actionable principles relevant to South African companies.
I’ll be running you through the latest reports, the King IV™; how it will help you ensure the long-term sustainability of your business; and what voluntary implementation would mean for you.
What is exactly is the King IV™ Report and why should you care?
King IV™ is the fourth update of the IoDSA’s King Report on Corporate Governance and, unlike the former versions; it’s explicitly inclusive to smaller companies.
To help smaller businesses implement the report, King IV™ boiled King III™’s 75 vague ethical principles down to 17 simplified principles – each supplemented with recommended practices.
The aim of the report is to tackle modern-day governance issues, that might harm your company in the long run if left unnoticed, and limit them using company policy, management organisation and recommended practices.
Take Principle 14 for example on the Remuneration Governance. The King’s code advises that if only 25% of the company’s shareholders have an issue with the remuneration policy, they be given the right to pass non-binding advisory votes on the matter.
If Company A, implements the recommended practice, they ensure their remuneration is fair beyond reasonable doubt, their act as pro-active gatekeepers to creating just policies.
If Company B, does not implement the recommended practice, unfair remuneration might only come to light years later blowing it into a public indirection that threatens the credibility of your business.
In 2018, saying you didn’t know, isn’t a valid excuse anymore. You need to set systems in place that ensure the governing body keeps tabs on everything.
Most notably, King IV™ allows you to assign accountability and pinpoint mistakes or misconduct ASAP by requiring regular disclosures linked to each of the principles.
The 17 principles cover almost every modern-day governance subject – from fair and unbiased governance composition to the governance of technology and digital information. These disclosures make it increasingly difficult for involved parties to hide transgressions that can damage the company in the long run.
How to make King IV disclosures
Your governing body gets to choose where these King-related disclosures are made. You can do them in print or online; in your integrated report, in a sustainability report, an ethics committee report or split them among more than one – just avoid pure duplication.
The disclosures simply need to be formally approved, publically available and updated at least every year. The mantra of the report, and its recommended practices and disclosures, is “apply the principles and explain the practices”. There’s no need to methodically state whether the principles are being adhered to. It’s your job to explain what’s being done.
What King IV™ does quite differently from King III, is recommending the application of its principles within set timelines, reports and committees within it’s recommended practices.
How to get started on practical implementation of the King IV
It’s impossible to reduce the full King report down to a few steps in one-go.
To give you a feel for what implementation would mean for your business’s day-to-day running, I’ll run you a principle specifically related to your organisational structure and the required disclosures.
You can get the full King IV Report™ with all 17 principles, its recommended practices and its recommended disclosure on the IoDSA’s website.
Although the report is extensive, it’s an easy-read and clearly references applied recommended practices and disclosures for each of the 17 principles.
How to implement Principle 8: Committees of the Governing Body
In this principle, King IV™ advises that the governing body arrange delegation to ensure “independent judgement, assist with the balance of power, and to help the governing body to discharge its duties effectively”.
An example would be to set up a committee, consisting of lower management levels, with clearly identifiable responsibilities and then to measure their progress via reports.
One of the recommended practices include creation an Audit committee (which is statutory for some charger companies) both the head and all the members of that committee be “independent, non-executive members of the governing body”.
It’s recommended that the committee meet with both the internal and the external auditor once a year, in the absence of any members of the governing body.
If you implement the King IV™ recommendations you’ll have an upright and an independent committee that evaluates your company’s financial integrity and ensures no discrepancies go unnoticed by offering that’ll threaten the credibility of your company in the long run.
The recommended disclosure is a statement as to:
- The integrity of your financial statements;
- The quality of your internal audit;
- The effectiveness of your CFO and financial controls;
- The effectiveness of your company’s assurance;
- And whether the external auditor is believed to be independent and whether the audit is of high quality
If don’t follow the recommendations and you don’t appoint a Audit committee or create one using biased members, discrepancies might stay concealed and cause long-term damage that will eventually surface.
The report suggests other committees like a Nominations; Risk Governance; and Social and Ethics Committee.
King IV™ strongly propagates transparency, the delegation of responsibility and the implementation of accountability by putting pen to paper in term of officiated aims, bodies responsible for those aims and the provisions of consistent reports.
That way your governing body has a clear way to identify any issues – as it’s impossible to keep tabs on every area of your business yourself.
Essentially the King IV™ helps you create a measurable outline in your company policy that’ll ensure good corporate citizenship in present-day society and management that actions align with your company’s best interest and long-term sustainability.
In essence the King IV Report™ gives you a voluntary code of internationally and nationally relevant principles and practices.
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