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At 21 Rodney Norman’s Business Owed R1 Million. Today He Has A R100 Million Turnover

When Rodney Norman was 21, his first business ended up R1 million in debt. With so much owing to suppliers, he couldn’t continue trading. Instead, he needed to take stock of what had gone wrong, pull himself together, and come up with a plan.

Nadine Todd

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Rodney Norman

Vital stats

  • Player: Rodney Norman
  • Company: Chrome Supplements and Accessories
  • Launched: 2009
  • Turnover: R100 million
  • Visit: www.chromesa.co.za

Ask Rodney Norman why Chrome Supplements and Accessories has grown to a company with a turnover of R100 million, and he’ll say it’s because things just go his way. He’s lucky like that. Except things haven’t always gone his way.

He was kicked out of school when he was 15. At 21 his business wasn’t just in debt — he owed suppliers R1 million. And just when he found out his wife was pregnant, he lost a distribution deal that wiped out 70% of his business overnight.

Keep a positive attitude and you’re half way there

It’s safe to say that things haven’t always gone Rodney’s way, and yet his positive outlook on life and business, his trust that things will work out, and his ability to put his head down and outwork everyone around him have enabled him to turn even the most hopeless situations around.

He’s also a born trader. If he’s not making deals, growing a customer base and finding solutions to all the daily challenges that running a business brings, he’s not truly living. Chrome SA is the result of taking life’s knocks on the chin, and then manning up, facing the music, and growing stronger through adversity. A lesson he began to learn at the tender age of 15.

I hated following the rules at school. I bucked the system and had a bad attitude

The result? Rodney was kicked out of school in Grade 10. His parents were not impressed. Determined to teach their son to face the consequences of his actions, they told him to find a job, pay rent, or move out. It was the greatest gift they could have given him.

“I got a job at the local gym as a weight packer. But my studies through Intec College cost R650 a month, my rent was R650, and I only earned R1 050. I needed to find a way to supplement my income.”

chrome-supplements-and-accessories

When opportunity knocks, answer

Rodney was athletic; he worked out, and was interested in supplements. Soon people at the gym started asking his advice on supplements, and he saw an opportunity. He offered to organise products for them, adding a small mark-up for himself.

“The gym had a strict no-supplements policy, so I’d deliver the products before and after my shifts. I once cycled from Edenvale to Isando to make a delivery that was worth R50. I was that serious about building up my client base.” It worked. That customer is still a Chrome client today.

“I kept every contact detail I ever received. Soon I had this incredible data base. I found a Durban-based company that agreed to supply me — I couldn’t pay cash upfront, so it took a while to find the right supplier, but from there my small side business started to soar. I made a profit of R95 000 in my first few months. That first year I didn’t even go on holiday in December because I was so focused on building my business. Soon my cell phone bill was higher than my gym salary.”

For 12 months Rodney ran his business from inside the gym. His managers turned a blind eye for as long as they could, but when people started phoning the gym and asking for Rodney or enquiring where their orders were, it was time to part ways.

Standing on your own two feet

By then Rodney had a large database, and could continue trading from his bedroom for the next three years. “I did try employment for a year. My supplier moved to Joburg and opened a store in Edenglen next to the gym where I had worked. My personal sales exceeded the store’s sales, so he offered me a job. Within 12 months I realised that I was better off running my own business, and went back to servicing clients from the boot of my car and my bedroom. Employment has never been for me.”

And then an old friend approached him with an idea. “He had a connection inside a small gym chain, and could organise a small pop up store for us in their Bedfordview branch. He just wanted to join the business as a 50/50 partner in return.”

Rodney agreed, and G-Force Nutrition, as his company was called, opened its first branch. The business took off, exceeding the wildest expectations of the partners. Within two years they had grown from one to 15 satellite stores, with the growth funded by their suppliers. “If I couldn’t negotiate payment terms with a supplier, we walked away,” says Rodney.

Cultivate relationships with your suppliers

“When we started we didn’t have the cash for COD terms, so we worked with suppliers who agreed to be paid 30 days from statement. As long as we could make the stock move, we had the cash to pay our suppliers. They could see the potential — I had built up good relationships, and good value. We were selling between R400 000 and R500 000 a month. We were not their biggest distributors, but they saw that we’d keep growing.”

If a supplier insisted on COD only, Rodney would renegotiate after two months based on the value of their orders, asking for terms of 50% upfront and 50% in 30 days. Two months later he’d renegotiate again, this time to the full settlement 30 days from statement. “You just have to ask. Never be afraid to negotiate. You need to convince people to take a chance on you.”

Rodney’s tenacious negotiating skills allowed the business to grow at an exhilarating rate — but that would also ultimately be what killed it and landed him in enormous debt.

We were R1 million in debt — and I had no idea

What happened next would teach Rodney two of his most valuable lessons. First, you need to always know what’s happening inside your company. “I didn’t understand margins; I just knew we needed to be trading, getting cash in, and making a small profit.

“I was 100% focused on negotiating the best terms I could, and moving stock. That was the secret — use supplier cash to fund the business, and then move stock so you could pay the statements on time.

Always know who you’re working with

“But I wasn’t paying any attention to my business partner, or his side of the business. One of his jobs was to collect the cash from stores and deposit it into our suppliers’ accounts. We would settle bills at 30 days, but pay in batches as we could, so there was a steady flow of money. Then one day I fetched stock from USN and they said, sorry Rodney, you’re very behind in your payments. We’re not releasing stock until you’ve settled your debt.

“USN had been a supportive supplier, so the exchange surprised me, but I thought it was just a misunderstanding. I called my partner and left him a message asking him to send me the deposit slips for USN. He didn’t return my call. I tried again. When it became clear I wasn’t going to reach him, I started calling the rest of our suppliers.

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“There was a pit in my stomach that grew deeper with each call. It wasn’t just USN. We owed money to all of our suppliers. None of them would service us. We were R1 million in the hole. I felt furious and betrayed, but I also needed to face the facts. I’d let this happen. I’d been trading, and not paying attention to the signs.

“You don’t get R1 million into debt with a business our size overnight. It happened gradually and I’d missed the signs. My partner had problems, and he left. I was the one who had built up relationships with our suppliers and convinced them to trust me. This was on me.”

Turning your business around: Anything is possible if you just get started

Which is when Rodney learnt the second — and most valuable — lesson: Anything is possible if you just get started. Start somewhere, anywhere. But start.

“At 21 I had this enormous debt. Where the hell do you get R1 million? It was a defining moment for me. I could call it quits, or get stuck in and make it happen. I managed to pay it back in two years. That’s all it took. I just had to start. I remember my dad telling me he would never see R1 million in his lifetime. It was this huge sum. So how could I do it? The answer? Slowly.

“I was young, but that was also to my benefit. My life wasn’t over. I knew it would be a rough few years, but I also knew that if I didn’t man up and make this right, I would never build the business I now knew I was capable of building. The first thing I did was speak to all of my suppliers. I explained the situation, and that I would be fixing it and paying off our debt — I just needed time.

“Then I went and found a buyer for my business. We had a name, clientele and premises — but we couldn’t pay for stock up front, and our suppliers wouldn’t do business with us until our debt was settled. I found a buyer who would take over the business and pay me R350 000 in two instalments. They would also hire me. It was an employee in my own business. I’d never been good at taking orders, but I knew it was time to learn. I needed the salary and commissions to pay off my debts.

Pay your debts, even if it’s a little at a time

“I’m proud that nothing was handed over to attorneys. I answered every phone call. They were tough; these are not nice calls to answer, but I did it, and I let every accounts manager who called me know what was happening, how much I was expecting to pay them, and by when.

“I made small deposits consistently, and that was enough. As long as it was being paid, and the needle was moving, everyone who I owed money to was happy. That’s the secret: Consistency. Don’t avoid the tough calls; take them and face the music.”

The result is that when Rodney opened Chrome SA a few years later, all of his previous suppliers were happy to start working with him again. They trusted his integrity.

By 24 I was debt free, and I immediately quit my job.

Unfortunately, although Rodney could now go back to being self-employed, he still had a 12-month non-compete clause. He needed to find something to do other than supplements, and so he sold surfwear for a year. “That’s what I do — trade,” he says. “I’m a salesman. I shared a showroom with a friend who had the rights to Fox. It did well but I realised I had no passion for the products I was selling; it was just a means to an end.”

Launching a business out of the ashes of another

And yet Rodney still maintains he’s incredibly lucky. Things have a way of falling into place. “On the day my restraint of trade ended, I got an email from an old supplier saying he was closing down his store, and did I know anyone who’d be interested in buying his PC and shelving.

“I had a better idea — I’d buy everything for R65 000, but I also wanted to take over the store. I even had a supplier — the friend I’d been sharing a showroom with had another friend in Durban who was launching a new supplements product and was looking for a distributor in Joburg. I had a store and a product. I contacted my entire client list, which I’d kept, and let everyone know I was back in business.”

The birth of Chrome

Rodney ran his new business with his girlfriend (now wife), Erienne. He handled sales and distribution, and she took care of the administration and finances. They registered the name Chrome Supplements and Accessories, and while they were waiting to move into the store, they filled her old bedroom in her parents’ house with stock and started trading.

“In our first month we did R76 000 worth of sales. Within six months we’d sold R1 million worth of products, and business was picking up. There were three of us; myself, Erienne and Gareth-Ashley Munthri, who had worked with me at G-Force. Gareth-Ashley and I did everything, from sales to sweeping the floors. We worked 24/7.”

But, while the store was doing well, Rodney was learning that being a distributor brought its own problems. “The more people we supplied, the bigger our cash flow issues became,” he explains.

“Many of our customers didn’t settle their debts, and we were starting to spend all of our time and energy collecting cash. It was when I realised I couldn’t buy the Corsa Utility I needed to make deliveries because I’d just written off R144 000 in bad debts that I decided to start operating on a COD basis only.

“I firmly believed that fewer clients who paid cash upfront was the smarter business decision, and would keep us cash flow positive.”

Unfortunately, Rodney’s supplier disagreed. They saw their own orders declining as a result of Rodney’s new strategy, and made the decision to take over Gauteng’s distribution themselves. The move couldn’t have come at a worse time.

You need contracts to protect you

“We had no formal contract in place. Our entire working relationship was based on the strength of a handshake. I learnt the hard way that you need contracts to protect you, although it’s still not a reality I like — I’d rather do business on trust and a handshake, even though I’ve been burnt so many times.”

The lack of a contract meant the supplier could cancel the contract overnight. Rodney and Erienne had just found out they were expecting their first child, and Chrome lost 70% of its business. It was a major blow.

“To balance the COD strategy I had promised our supplier that we would open more Chrome stores and boost sales in that way. By the time they cancelled their contract with us we had four stores, and so we poured ourselves into the retail side of our business. We needed to make this work. We were about to be a family.”

I learnt my limit was five stores — as soon as I opened my sixth, the wheels started falling off

The problem with growth is that with each new development, the business becomes exponentially more complex. “We wanted to grow; that was our strategy. But it’s very difficult for one person to manage more than five stores,” says Rodney. “After the fifth store, I started losing control.

“The good thing about opening multiple stores is that each new store is easier to open. One to two is a massive struggle; it’s expensive. But then it becomes easier. Two stores pay for the next one, then three stores pay for the fourth. And so we just kept rolling out new stores. But we didn’t have a proper plan.

Have a consistent brand image and business model

“I kept changing my mind about how the stores should look; merchandising wasn’t consistent, and we ended up with a confused brand. The stores didn’t do consistently well, and I needed to be at a store for it to perform well.

“I looked at other chain stores and realised I was getting it wrong. Our stores didn’t look the same. We needed to slow down, fix the model, do a revamp and develop a firm expansion strategy. We’d been winging it a bit, and the results were evident. This was no way to build a strong brand.”

At the same time, Rodney had started importing international products to give Chrome a competitive edge. The problem was that he couldn’t pay suppliers within 30 days of the stock arriving. He needed a different way to approach imports that still kept the business cash positive.

The solution seemed obvious. “We’d received so many franchising enquiries, we thought this was the perfect growth strategy. We could use franchisee cash to buy stock, instead of the bank’s cash. Plus, there was the control factor. With a franchise system, we could have a unified brand and get rid of the inconsistencies that plagued us.”

Chrome evolved into a franchise

There were seven stores when Chrome moved to a franchising model. This soon grew to 12 stores. Franchisees had a buy and sell agreement with Chrome. They had to buy stock exclusively from Chrome unless they could find the same product at a better price. Rodney put a small mark-up on Chrome’s product range and handled all the marketing for his franchisees.

Within two years it became clear that franchising had not been the right growth path. “We had more stores and a bigger footprint, but our control issues were even worse. Now we were trying to control people with their own vision for the business — and it didn’t align with our own. I wasn’t a good franchisor, that was the long and short of it, and I needed to accept that. It was time for a shift again.”

Trying to franchise the business was a failure. It just didn’t work for us

Although the franchising model wasn’t what Rodney had expected, the business had been growing and making a profit, and so he was able to buy all the franchised stores back bar one.

Franchising isn’t for every business

Now the real work began. It was time to get serious about growing his brand. Continuity, systems, finding good managers, incentivising them, formulating one vision and sharing it with the company — these all became paramount.

“I also decided that I would be based in head office only, and not in stores. I needed the retail side of the business to function well without me on the floor. I needed to learn how to hire and incentivise the right store managers.”

This is always a challenge for organisations whose previous success has been driven by the entrepreneur’s hard work, charisma and personal relationships with clients.

Chrome on the verge of exponential growth

Today, Chrome stocks 59 different brands, with four ‘house’ brands. One of those brands, Amplify, has 17 lines. Chrome is made up of a retail arm with 19 stores and a distribution arm. “We’ve maintained our COD policy,” says Rodney. “We occasionally give bigger pharmacies terms, but on the whole we would rather have fewer clients with a healthier cash flow.”

It’s taken Rodney almost eight years to build his business into a R100 million organisation, but he’s now poised for exponential growth.

“I needed to figure out who we were going to be, what the brand was going to look like, and what our growth strategy was. It took a while, and we had a few stumbles along the way. Once we found the model that worked, the business started taking off.

“Two years ago we built our first warehouse. Since then we’ve built a second warehouse that’s twice the size.” Rodney isn’t targeting unrealistic goals. He’s learnt that the best growth is slow, steady and sustainable. And a little luck goes a long way.

Lessons learnt

1. What seems like an expensive lesson is actually the best thing that could have happened to you

I wasn’t paying attention to my partner or my books. We ended up owing R1 million. In hindsight, it was a cheap lesson to learn. Imagine if that happened today? The fallout would be much greater. We have 19 stores and nearly 100 staff members. It would hurt everyone, not just me.

2. Increase your revenue streams

By becoming an e-tailer we not only have an online presence in South Africa, but we’ve been able to launch in the UK without funding a physical store.

3. Hire for attitude, not for skill

No qualifications can take the place of hard work. When we decided to launch our website and online store, I recruited a friend of mine from school, Chad Costa. He had a marketing background but no online experience. It didn’t matter. I knew he was a hard worker, and that he’d do what it took to upskill himself and build the platforms we needed. He’s got an incredible work ethic and I value that above all else.

4. Promote from within

Gareth-Ashley, my first employee who used to sweep floors with me at our first store, is now our warehouse manager. I’ve learnt that if you find good people who are willing to work hard for your brand, they’re more valuable than someone with highly specialised skills. It’s amazing what you can learn on the job with the right attitude. Hard workers will always figure it out.

5. Good management is crucial

This goes for store management, warehouse management and head office management. Everyone needs to treat the brand and the store like it’s their own, so you need to incentivise them appropriately, and value their contributions.

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

Entrepreneur Profiles

Expert Advice From Property Point On Taking Your Start-Up To The Next Level

Through Property Point, Shawn Theunissen and Desigan Chetty have worked with more than 170 businesses to help them scale. Here’s what your start-up should be focusing on, based on what they’ve learnt.

Nadine Todd

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shawn-theunissen-and-desigan-chetty

Vital Stats

  • Players: Shawn Theunissen and Desigan Chetty
  • Company: Property Point
  • What they do: Property Point is an enterprise development initiative created by Growthpoint Properties, and is dedicated to unlocking opportunities for SMEs operating in South Africa’s property sector.
  • Launched: 2008
  • Visit: propertypoint.org.za

Through Property Point, Shawn Theunissen and his team have spent ten years learning what makes entrepreneurs tick and what small business owners need to implement to become medium and large business owners. In that time, over 170 businesses have moved through the programme.

While Property Point is an enterprise development (ED) initiative, the lessons are universal. If you want to take your start-up to the next level, this is a good place to start.

Risk, reputation and relationships

“We believe that everything in business comes down to the 3Rs: Risk, Reputation and Relationships. If you understand these three factors and how they influence your business and its growth, your chances of success will increase exponentially,” says Shawn Theunissen, Executive Corporate Social Responsibility at Growthpoint Properties and founder of Property Point.

So, how do the 3Rs work, and what should business owners be doing based on them?

Risk: We can all agree that there will always be risks in business. It’s how you approach and mitigate those risks that counts, which means you first need to recognise and accept them.

“We always straddle the line between hardcore business fundamentals and the relational elements and people components of doing business,” says Shawn. “For example, one of the risks that everyone faces in South Africa is that we all make decisions based on unconscious biases. As a business owner, we need to recognise how this affects potential customers, employees, stakeholders and even ourselves as entrepreneurs.”

Reputation: Because Property Point is an ED initiative, its 170 alumni are black business owners, and so this is an area of bias that they focus on, but the rule holds true for all biases. “In the context of South Africa, small black businesses are seen as higher risk. To overcome this, black-owned businesses should focus on the reputational component of their companies. What’s the track record of the business?”

A business owner who approaches deals in this way can focus on building the value proposition of the business, outlining the capacity and capabilities of the business and its core team to deliver how the business is run, and specific service offerings.

“From a business development perspective, if you can provide a good track record, it diminishes the customer’s unconscious bias,” says Shawn. “Now the entrepreneur isn’t just being judged through one lens, but rather based on what they have done and delivered.”

Related: Property Point Creates R1bn In Procurement Opportunities For Small Businesses

Relationship: “We believe that fundamentally people do business with people,” says Shawn. “There needs to be culture match and fluency in terms of relations to make the job easier. As a general rule, the ease of doing business increases if there is a culture match.”

This relates to understanding what your client needs, how they want to do business, their user experience and customer experience. “We like to call it sharpening the pencil,” says Desigan Chetty, Property Point’s Head of Operations.

“In terms of value proposition, does your service offering focus on solving the client’s needs? Is there a culture match between you and your client? And if you realise there isn’t, can you walk away, or do you continue to focus time and energy on the wrong type of service offering to the wrong client? This isn’t learnt over- night. It takes time and small but constant adjustments to the direction you’re taking.”

In fact, Desigan advises walking away from the wrong business so that you can focus on your core competencies. “If you reach a space where you work well with a client and you’ve stuck to your core competencies, business is just going to be easier. It becomes easier for you to deliver. Sometimes entrepreneurs stretch themselves to try to provide a service to a client that’s not serving either of their needs. This strategy will never lead to growth — at least not sustainable growth.”

Instead, Desigan recommends choosing an entry point through a specific offering based on an explicit need. “Too often we see entrepreneurs whose offerings are so broad that they don’t focus,” he says. “Instead, understand what your client’s need is and address that need, even if it means that it’s only one out of your five offerings. Your likelihood of success if you go where the need is, is much higher.

“Once you get in, prove yourself through service delivery. It’s a lot easier to on-sell and cross sell once you have a foot in the door. You’re now building a relationship, learning the internal culture, how things work, what processes are followed and so on — the client’s landscape is easier to navigate. The challenge is to get in. Once you’re in, you can entrench yourself.”

Desigan and Shawn agree that this is one of the reasons why suppliers to large corporates become so entrenched. “Once you’re in, you can capitalise from other needs that may have emanated from your entry point and unlock opportunities,” says Shawn.

Building a sustainable start-up

While all start-ups are different, there are challenges most entrepreneurs share and key areas they should focus on.

Shawn and Desigan share the top five areas you should focus on.

1. Align and partner with the right people

This includes your staff, stakeholders, partners, suppliers and clients. Partnerships are the best thing to take you forward. The key is to collaborate and partner with the right people based on an alignment of objectives and culture. It’s when you don’t tick all the boxes that things don’t work out.

2. Make sure you get the basics right

Never neglect business fundamentals. Do you have the processes and systems in place to scale the business?

3. Understand your value proposition

Are you on a journey with your clients? Is your value proposition aligned to the need you’re trying to solve for your clients? Are you looking ahead of the curve — what’s the problem, what are your clients saying and are you being proactive in leveraging that relationship?

Related: Want To Start A Property Business That Buys Property And Rents It Out?

4. Unpack your value chain

If you want to diversify, understand your value chain. What is it, where are the opportunities both horizontally and vertically within your client base, and what other solutions can you offer based on your areas of expertise?

8. Don’t ignore technology

Be aware of what’s happening in the tech space and where you can use it to enable your business. Tech impacts everything, even more traditional industries. Businesses that embrace technology work smarter, faster and often at a lower cost base.

Ultimately, Desigan and Shawn believe that success often just comes down to attitude. “We have one entrepreneur in our programme who applied twice,” says Shawn. “When he was rejected, he listened to the feedback we gave him and instead of thinking we were wrong, went away, made changes and came back. He was willing to learn and open himself up to different ways of approaching things. That business has grown from R300 000 per annum to R20 million since joining us.

“Too many business owners aren’t willing to evaluate and adjust how they do things. It’s those who want to learn and embrace change and growth that excel.”

Networking, collaborating and mentoring

Property Point holds regular networking sessions called Entrepreneurship To The Point. They are open to the public and have two core aims. First, to provide entrepreneurs access to top speakers and entrepreneurs, and second, to give like-minded business owners an opportunity to network and possibly even collaborate.

“We believe in the power of collaboration and networking,” says Desigan.

“Most of our alumni become mentors themselves to new entrants to the programme. They want to share what they have learnt with other entrepreneurs, but they also know that they can learn from newer and younger entrepreneurs. The business landscape is always changing. Insights can come from anywhere and everywhere.”

The To The Point sessions are designed to help business owners widen their network, whether they are Property Point entrepreneurs or not.

To find out more, visit www.ettp.co.za

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Entrepreneur Profiles

Bain & Company Give You The Data On How To Become 40% More Productive

Top performing organisations get more done by 10am on a Thursday than most companies achieve in a full week. They don’t have more talented employees than everyone else though — they’re working with the same people and tools as you. Michael Mankins unpacks what separates these businesses from everyone else, and how you can learn to be more like them.

Nadine Todd

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michael-mankins

Vital Stats

“Engaged employees are 45% more productive than satisfied employees. An inspired employee is 55% more productive than an engaged employee and 125% more productive than a satisfied employee.”

When Bain & Company partner, Michael Mankins evaluates businesses, he clearly distinguishes between efficiency and productivity. Efficiency is producing the same amount with less — in other words, finding and eliminating wastages. Productivity, on the other hand, is producing more with the same, which requires an increased output per unit of input and removing obstacles to productivity.

Interestingly, when businesses face challenges or tough operating conditions, the first response is always to become more efficient, instead of more productive. Restructuring and ‘rightsizing’ are the result. The problem, says Michael, is that when companies take people out, they don’t take the work out, and so the people end up coming back, along with the costs.

A better response, he says, is to identify the work that could be removed to free up time, which could then be invested in producing higher levels of output.

While businesses have become very good at tracking the productivity levels of blue-collar and manufacturing workers, tracking the productivity of knowledge workers is entirely different.

“There’s no data around white-collar productivity,” says Michael. “The problem is that the world is shifting towards knowledge work, and so, if we can’t measure productivity, output and obstacles in that space, businesses will never get the great levels of performance they’re looking for.”

Because of a complete lack of statistics in this area, when Michael and his colleague, Eric Garton, were approached by Harvard Business Review Press to write a book dealing with this issue, they had to devise a way of looking at the relative productivity of organisations comprised of white-collar workers.

The results were unexpected. “We were asked to research the difference between top performing organisations (the top quartile) compared to average organisations. I honestly thought the answers would be obvious, even if we didn’t yet have the tools to track them. I thought the best companies would have the best people. That’s 90% of the answer. Simple as that.”

As it turned out, it wasn’t that simple at all. Of the 308 organisations in the study, drawn from a global pool, the average star performer or A-player was one in seven employees. This statistic held true whether the company was in the top 25% of performers or an average performer. The difference was that the top performing businesses were 40% more productive than their counterparts — and yet their mix of talent, on average, was the same.

“There were some exceptions, but on the whole, the best in our research accomplishes as much by 10am on a Thursday as the rest do the whole week. And they continue to innovate, serve customers and execute on great ideas — all with the same percentage of A-players as other, more mediocre businesses.”

Related: (Slideshow) Top Advice From Local Entrepreneurs That Will Change Your Business In 2019

So, what were the differentiating factors?

What’s dragging your organisation down?

First, we need to understand how Michael and Eric approached their research before we can understand — and implement — their conclusions.

“We began with the notion that every company starts with the ability to produce 100 if they have a workforce that’s comprised of average talent, that’s reasonably satisfied with their job and can dedicate 100% of their time to productivity — bearing in mind that no-one can dedicate 100% of their time to productive tasks.

“The question we were focusing on was around bureaucratic procedures, complex processes and anything else that wastes time and gets in the way of people getting things done, but doesn’t lead to higher quality output or better service to customers. That’s what we call organisational drag. You start at 100 and then the organisation drags you down. The good news is that you can make up for organisational drag in three ways: First, you can make better use of everyone’s time. Second, you can manage your talent better by deploying it in smarter ways, which includes placing it in the right roles, teaming it more effectively and leading it more effectively. Third, you can unleash the discretionary energy of your workforce by engaging them more effectively.”

This trifecta — time, talent and energy — became the basis for Michael and Eric’s book, Time, Talent, Energy: Overcome Organizational Drag & Unleash Your Team’s Productive Power. “The way you manage the scarce resource of talent can make up for some, potentially even all, of what you lose to organisational drag,” says Michael.

What the research revealed: Time

time-management-productivity

“Wasted time is not an individual problem,” says Michael. “It’s an organisational problem. The symptoms include excess emails and meetings and far more reports being generated than the business needs to operate.”

These are all manifestations of an underlying pathology of organisational complexity, which is managed by senior leadership. “The best companies lose about 13% of their productive activity to organisational drag. The rest lose 25%. The most important thing is to reduce the number of unnecessary interactions that workers are having. That means meetings and ecommunications need to be relooked.”

The easiest manifestation for Michael and Eric to observe were hours committed to meetings and how much time workers spend dealing with ecommunications. What’s left-over is the time people can actually get some work done.

What they found is that the average mid-level manager works 46 hours a week. 23 hours are dedicated to meetings and another ten hours to ecommunication. That leaves 13 hours to get some work done — except that it doesn’t.

“It’s difficult to do deep work in periods of time less than 20 minutes. When we subtracted all the other distractions that happen daily, we were left with just six and a half hours each week to do work.” What’s even scarier about this statistic is the fact that meeting work and ecommunication time is increasing by 7% to 8% each year and doubles every nine years. If left unchecked, no-one will have the time to get any work done. “This is why everyone plays catch-up after hours and on weekends,” says Michael.

“One of my clients told me that his most productive meeting is at 6.30am on a Saturday, because it doesn’t involve one minute that isn’t required or one individual that doesn’t absolutely need to be there. If the same meeting was held at 2pm on a Tuesday, there’d be twice as many people, it would be twice as long and there’d probably be biscuits.”

The point is clear: We don’t treat time as the precious resource that it is, and if we did, we would radically shift our behaviour.

Start by asking what work needs to be done and then figure out the best structure to do that work. “Don’t confuse having a lean structure that does the wrong work with being effective,” says Michael. “One of the biggest problems we see is that companies are not particularly good at stopping things. Things get added incrementally, but nothing ever gets taken away. For example, we found that 62% of the reports generated by one of our clients had a producer — but no consumer. Time, attention and energy was invested in reports that no one needed and no one read.

“Ask yourself: How many initiatives have you shut down? If you made the decision that you could only do ten initiatives effectively, and each time you added an initiative, one had to be eliminated, what would your organisation look like?

“Unless you routinely clean your house, it gets cluttered. The same is true of companies. Initiatives spawn meetings, ecommunications and reports, which all lead to organisational drag.”

What the research revealed: Talent

According to Michael, the biggest element in their research that explained the 40% differential in productivity is the way that top performing organisations manage talent.

“We conducted research in 2017 that revealed the productivity difference between the best workers and average employees. Everyone knows that A-level talent can make a big difference to an organisation’s performance, but not everyone knows just how big that difference is.”

To put it in context, the top developer at Apple writes nine times more usable code than the average software developer in Silicon Valley. The best blackjack dealer at Caesars Palace in Las Vegas keeps his table playing at least five times as long as the average dealer on the Strip. The best sales associate at Nordstrom sells at least eight times as much as the average sales associate walking the floor at other department stores. The best transplant surgeon at Cleveland Clinic has a patient survival rate at least six times longer than that of the average transplant surgeon. And the best fish butcher at Le Bernadin restaurant in New York can portion as much fish in an hour as the average prep cook can manage in three hours.

It doesn’t matter what industry you investigate, A-level talent is exponentially more productive than everyone else.

This is why Michael thought that the obvious answer to why some organisations perform better than others is the mix of talented employees they’ve attracted.

“When we asked senior leaders to estimate the percentage of their workforce that they would classify as top performers or A-level talent, the average response was slightly less than 15%. And that’s despite the fact that most companies have spent vast sums of money in the so-called war for talent.”

The big difference, as Michael and Eric discovered, is how that talent is deployed. “It’s what they do with that one in seven employees that makes the biggest difference,” says Michael. “Most companies use a model called unintentional egalitarianism, which basically means that they spread star talent across all roles. The best on the other hand, are more likely to deploy intentional non-egalitarianism. They ensure that business-critical roles are held by A-level talent.”

The challenge is that approximately 5% of the roles in most companies explain 95% of a company’s ability to execute its strategy, and very few organisations articulate which roles those are — but the ones that do tend to be top performers.

“There’s an excellent historical example of this at work,” says Michael. “Between 1988 and 1994, Gap was a high-flyer in the retail sector. They performed globally on all levels — they grew faster than anyone else, were more profitable, had higher shareholder returns, and were the most admired company.

“During that time period, the organisation was led by Mickey Drexler, and his strategy was to focus on what he believed was Gap’s critical role, which was merchandising. He wanted every merchandiser to be a star. ‘No one will tell us what the colour is this year — we’re going to tell the world. We’re going to determine which styles are in and what everyone will be wearing.’

“And they did. If you want proof that Gap’s merchandisers were in fact stars during that period, you can look at today’s CEOs and COOs of the world’s largest retailers. Most of them were merchandisers at Gap during those years.”

The challenge of course is that everyone is always trying to hire stars, and yet only 15% of employees can be described as A-level talent. What can organisations do to utilise their stars wisely?

“First, move a star into a different position if they’re not in a business-critical role. To achieve this, how you define a star might have to change. Some companies hire for positions, and others hire for skills across positions. Stars, in my view, are more the latter. They can learn different skills and fill different roles.

“Second, start defining your business-critical roles. If you ask executives what percentage of their roles are business critical, most say 54%. They’re not discerning. It’s unintentional, because they don’t want to signal to their workers who aren’t in a business-critical role that they’re not as valuable to the organisation, but the reality is that people figure it out anyway, and you just end up with business-critical roles that aren’t filled by the right people, and stars in positions that anyone else could fill.”

Related: Entrepreneur Erik Kruger On The Importance Of Clarity And Embracing Failure

Teams perform better than individuals

To understand how important teams are when deploying talent, Michael uses an example from the world of racing — Nascar in the US to be precise.

“Between 2008 and 2011, there was one pit crew that outperformed everyone else on the track,” he says. “A standard pit stop is 77 manoeuvres, and this crew could complete them in 12,12 seconds, which was faster than any other team. However, if you took one team member out and substituted them with an average team member, that time jumped to 23 seconds. Substitute a second team member, and it was now 45 seconds. The lesson is simple: As the percentage of star players on a team goes up, the productivity of that team goes up — and it’s not linear.”

Michael and Eric also discovered that the role leadership plays on team productivity is both measurable and exponential.

“In 2011, the National Bureau of Economic Research wanted to quantify the impact of a great boss on team productivity. They found that a great boss can increase the productivity of an average team by 11%, which is the same as adding another member to a nine-member team.

“If you take that same boss and put them in charge of an all-star team, productivity is increased by 18%, and this is with a team whose productivity was exponentially higher to begin with. Great bosses act as a force multiplier on the force multiplier of all-star teams.”

According to Michael and Eric’s research however, what most organisations tend to do is place a great boss with an under-performing team in the hopes of improving them, when what they should be doing is pairing great bosses with great teams.

“We did a survey that asked a simple question: When your company has a mission-critical initiative, how do you assemble the team? A: Based on whomever is available. B: Based on perceived subject matter expertise. C: We attempt to create balanced teams of A, B and C players to foster the development of the team. D: We create all-star teams and we put our best leaders in charge of them.

“We thought everyone would answer D. We were wrong. 30% of our bottom three quartiles answered B, closely followed by C, and then A. Only 8% of them answered D.

“The results were very different in our top-performing quartile though. There, 81% of respondents answered D. In other words, the 25% most productive companies in our study set were ten times more likely to assemble all-star teams with their best players than the remaining 75% of the organisations in our research.”

How talent is deployed makes a difference. “I recently had this highlighted for me through another sporting analogy. The world record for the 400-metre relay is faster than the 100-metre dash multiplied four times. How is that possible? When your role is clear and your position is clear, the handoff is seamless. Under these conditions, the best teams outperform a collection of the best individuals.” Michael does offer a word of advice though.

“Don’t fall into the trap of believing that if you do have the best talent, you don’t need to worry about anything else. I don’t believe that’s true. There are always higher levels of performance that can be achieved because there are always areas you can improve on.”

What the research reveals: Energy

According to Michael, employee engagement and inspiration is a hierarchy. “There are a set of qualifiers that have to be met just to feel satisfied in your job: You need to feel safe, have the resources you need, feel that you’re relatively unencumbered in getting your job done every day and that you’re rewarded fairly.

“To be engaged, these all need to meet, and more. Now you also need to feel part of a team, that you’re learning on the job, that you’re having an impact and that you have a level of autonomy.”

Inspiration takes this a step further. “Inspired employees either have a personal mission that is so aligned with the company’s mission that they’re inspired to come to work every day, or the leadership of their immediate supervisors is incredibly inspiring, or both.”

Why does this matter? Because how satisfied, engaged or inspired your employees are has a real, tangible impact on productivity. “Engaged employees are 45% more productive than satisfied employees. An inspired employee is 55% more productive than an engaged employee and 125% more productive than a satisfied employee.”

The really scary statistic is that 66% of all employees are only satisfied or even dissatisfied with their jobs, 21% are engaged, and only 13% are inspired. “These statistics are pretty constant, although top organisations can improve their engaged and inspired ratios,” says Michael. “What we found amongst those companies that did have more engaged and inspired workers was that they all tended to believe that inspiration can be taught. It’s not innate. You can become an inspirational leader with the right attitude and training.

“For example, one organisation surveys its employees every six months and specifically asks workers to rate how inspirational their leaders are. If you’re rated uninspiring by your team for the first time, you’re given training. If, six months later, you’re still rated uninspiring, you’re given access to a coach to evaluate why the tools aren’t working for you.

“By the third, two questions are asked: Should you be a leader, and should you be at the company? Many productive employees can be effective individual contributors but aren’t necessarily leaders, or aren’t happy as leaders, and would best serve the organisation in a different role. The second question is tougher, but even more important. If an inspired employee is 55% more productive than an engaged employee and 125% more than a satisfied employee, an uninspiring leader is a tax on the performance of the company, and there has to be a consequence to that. We have to constantly enrich our workforce and leaders need to be included in that.”

The problem is that very few organisations are asking how inspiring their leaders are. “If you don’t know if your employees are engaged or if your leadership is inspiring, you can’t address it,” he says. “You can take a satisfied employee and make them engaged, but you can’t inspire someone if they aren’t first engaged — that’s the hierarchy. Employee engagement is largely achieved through the way you manage teams. You have to give people the sense that they are having an impact, working within a team and learning. Get that right, and you’ll unlock a powerful level of discretionary energy that will drive productivity in your organisation.”

Related: How Yoco Successfully Secured Capital And The Importance Of A Pitch

Time, Talent, Energy: Overcome Organizational Drag and Unleash Your Team’s Productive Power, by Michael Mankins and Eric Garton, focuses on the scarcest resource companies possess — talent — and how it can be utilised to drive productivity.

Visit www.timetalentenergy.com to find out more.

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Entrepreneur Profiles

7 Foundational Values Of Brand Cartel And How They Grew an Iconic Business From The Ground Up

Marco Ferreira, Renate Albrecht and Dillon Warren built Brand Cartel, a through-the-line agency, that delivers exactly what they wanted — and has grown exponentially as a result.

Nadine Todd

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Vital Stats

  • Players: Marco Ferreira, Renate Albrecht and Dillon Warren
  • Company: Brand Cartel
  • Launched: 2013
  • Visit: brandcartel.co.za

“We’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do.”

When Dillon Warren, Renate Albrecht and Marco Ferreira launched Brand Cartel in 2013 they were in their early 20s with zero agency experience between them. The idea had started when Marco recognised that social media was taking off, but no agencies were playing in that space yet. It was a clear opportunity.

Printing flyers that said ‘Your social media is so last season’, Marco and Renate went from store to store in Sandton City, pitching their services. When Dillon joined them a few months later because they needed someone to handle the company’s finances, they had two laptops between them, R6 000, which Dillon had earned from a Ricoffy advert, and sheer will and tenacity.

“We shared a house to save on rent and split everything three ways,” says Renate. “At one point we hadn’t eaten in two days. My mom lent me R500 so I could buy Futurelife and a bag of apples for the three of us.”

The trio hired their first employee soon after launching Brand Cartel, and after prioritising salaries and bills, there wasn’t much leftover. “Dillon actually paid us R67 each one month,” laughs Marco. “That’s what was left — although I still can’t believe he actually sent it to us.” It was at this point that the young business owners realised they needed credit cards if they were going to make it through their start-up phase — not an easy feat when your bank balance is under R100.

Related: What Comfort Zones? Get Comfortable With Being Uncomfortable Says Co-Founder Of Curlec: Zac Liew

“Looking back, those days really taught us the value of money,” says Dillon

We spent a lot of time with very little, and we’re still careful with money today.” Through it all though, the partners kept their focus on building their business. “It almost didn’t work for a long time. We were young and naïve, but in a way, that was our strength. We didn’t have any responsibilities, and we’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do. All of our business has been referral business. It takes time, but we focused on being the best we could be and giving everything we had to our clients. Our differentiator was that we really cared, and were willing to offer any solutions as long as they aligned with our values.”

This is how Brand Cartel has grown from a social media agency into PR and Media Buying, SEO and PPC Strategy, Digital and Print Design, Web Development, Campaign Strategy and now an Influencer division. “It’s an incredibly competitive space with low barriers to entry, which meant it was easy to launch, but tougher to build a client base,” says Renate. “I’d sometimes cry in my car between sales pitches, and then walk in smiling. We had no idea if we’d make it.”

The perseverance has paid off though. Strong foundations have laid the groundwork for exponential growth over the past year, with turnover growing almost ten-fold in 2017 thanks to relationship-building, strong referrals and fostering an internal culture and set of values that has driven the business to new heights as a team.

Like many start-ups, Renate, Dillon and Marco have made their fair share of hiring mistakes, but as the business grew and matured, the young entrepreneurs began to realise that the success of their business lay in the quality of their team and the values they stood for.

This meant two things: Those values needed to be formalised so that they could permeate everything Brand Cartel does, and they needed a team that lived, breathed and believed in them.

“We’ve had some nasty experiences,” admits Dillon. “You should always hire slowly and fire fast, and for five years we did the opposite. We’ve hired incredible people, but we’ve also ended up with individuals who didn’t align with our values at all, and that can destroy your culture.

Dillon, Marco and Renate realised they needed to put their values on paper. “We did an exercise and actually plotted people based on a score grading them against our values, so we knew where our issues were. We knew what we wanted to stand for, and who was aligned with those values. We were right; within a few weeks resignations came in and we mutually parted ways.”

The team that stayed was different. They embraced Brand Cartel’s values, and more importantly, it gave the partners a hiring blueprint going forward.

“Values are intangibles that you somehow need to make real, so it’s important to think about the language you use, and how they can be used in a real-world work context,” says Marco.

The team has done this in a number of ways. First, they chose ‘value phrases’ that can be used in conversation, for example, ‘check it, don’t wreck it’, and ‘are you wagging your tail?’ Team members can gently remind each other of the value system and focus everyone on a task at hand simply by referring to the company’s values. “In addition, when someone is not behaving according to those values, you can call them out on the value, which is an external thing, rather than calling them out personally,” explains Dillon.

Related: How Matthew Piper And Karidas Tshintsholo Launched Their First Business From Their UCT Dorm Rooms

Second, all performance reviews are based on the values first. This means everyone in the organisation begins any interaction from a place of trust, knowing they are operating according to the same value system.

“When you’re in a production environment with jobs moving through a pipeline, there can be problems and delays,” explains Marco. “Instead of pointing fingers when something is over deadline or a mistake is made, our team can give each other the benefit of the doubt and work together. They trust each other, which creates cohesion. We all work as a team, which impacts the quality of our work and the service we offer our clients.”

The system is simple. Coaches will step in first if there is an issue before it escalates to the Head of Team Experience, Nicole Lambrou. If Nicole is called in, she will address the problem head on. “Inevitably it’s something fixable,” says Marco. “By addressing it immediately and in the context of our values it can be sorted out quickly. Ultimately, the overall quality of our team improves, and we are a more cohesive unit.”

The founders have seen this in action. “I recently arrived at a client event and three different people came up to me and complimented my team on the same things — all of which aligned with our values. Everyone at Brand Cartel lives them, internally and externally,” says Renate.

The value system has also shaped how the team hires new employees. “We used to meet people and hire for the position if they could do the job,” says Renate. “But then we started realising that anyone can hold up for an hour or two in an interview. You only learn who they really are three months and one day later.

“We need people who walk the talk, and we really only had a proper measurement of that once we articulated our values. Our interview style has changed, but so has what we look for.”

brand-cartel-south-african-agency

Here are the seven values that Dillon, Marco and Renate developed based on what they want their business to look like, how they want it to operate, and what they want to achieve, both internally, and in the market place.

1. Play with your work

Our goal is for everyone on our team to become so good at what they do that it’s no longer work. Once that happens you love your job because you’re killing it. It’s why sportsmen are called players, not workers, and it starts with the right mindset.

2. Wag your tail

The idea behind this value stems from Dale Carnegie, who said ‘have you ever met a Labrador you don’t like?’ In other words, we all respond well to people who are friendly. It needs to be genuine though, so again, it’s a mindset that you need to embrace.

We live these values whether we’re at the office or meeting clients. If you go into each and every situation with joy and excitement, from meeting someone new to a new brief coming in, you’ll be motivated and excited — and so will everyone around you.

3. Check it, don’t wreck it

The little things can make big differences. Previously it was too easy to pass the buck, which meant mistakes could — and did — happen. Once you instil a sense of ownership and create a space where people are comfortable admitting to a mistake however, two things happen. First, things get checked and caught before there’s a problem. Second, people will own up if something goes wrong. This can help avoid disasters, but it also leads to learnings, and the same thing not happening again.

4. What’s Plan B (aka make it happen)

We don’t want to hear about the problem; come to us with solutions, or better yet, already have solved the problem and made it happen. We reached a point where we had too many people coming to us with every small problem they encountered, or telling us that something wasn’t working so they just didn’t do it.

That wasn’t the way we operated, and it definitely wasn’t the way we wanted our company to operate. We also didn’t want to be spoon feeding our team. It’s normal for things to go wrong and problems to creep in — success lies in how those problems are handled.

Ignoring problems doesn’t make them go away, so we embrace them instead, encouraging everyone on our team to continuously look for solutions. For example, the PR department holds a ‘keep the paw-paw at Fruit & Veg City’ meeting every morning, where we deliberately look for where problems might arise so that we can handle them before they do. We start with what’s going wrong and then move to what’s going right. You need to give your team a safe and transparent space to air problems though. We don’t escalate. We need to know issues so that we can collectively fix them, not to find fault.

Related: The 5-Hour Rule Used By Bill Gates, Jack Ma And Elon Musk

5. Put your name to it

It’s about pride in work and making it your own. When someone has pride in what they’re doing, they’ll not only put in extra time and effort, but they’ll pull out all the stops to make their creative pop, or go the extra mile for a client.

We need to find the balance between great quality work and fast output though. One way we’ve achieved this is by everyone reviewing the client brief and then committing to how long their portion will take.

When someone gives an upfront commitment, they immediately take ownership of the job. It took time for us to find our groove with this, but today we can really see the difference. Our creative coaches also keep a close eye on time sheets and where everyone is in relation to the job as a whole to keep the entire brief on track. If someone is heading towards overtime we can immediately ask if something is wrong and if they need assistance.

We also celebrate everything that leaves our studio. Every morning we have a mandatory 15-minute catch up session where we check in on four core things: How am I feeling (which allows us to pick up on the mood in the room and the pressure levels of our teams); What’s the most important thing I did yesterday; What’s the most important thing I’m going to do today (both of which give intention and accountability); and ‘stucks’, issues that team members need help with. We then end off with our achievements so that we can celebrate them together.

6. Keep it real (aka check your ego at the door)

We believe in transparency. At the end of the day we’re all people trying to achieve the same thing, but it’s easy for ego to creep in — especially when things go wrong. You can’t be ego-driven and solutions-orientated. If clients or team members are having a bad day, you need to be able to focus on the solution. Take ego away and you can do just that. It’s how we deal with stucks as well. We can call each other out and say, ‘I’m waiting for you and can’t do my job until I receive what you owe me,’ and instead of getting a negative, ego-driven reaction, a colleague will say, ‘sorry, I’m on it.’

7. Walk the talk

For us, ‘walk the talk’ really pulls all our other values together. It’s about being realistic and communicating with each other. If you’ve made a mistake or run into a problem, tell your client. Don’t go silent while you try and fix it. Let them know what’s happening and fill them in on your plan of action.

Walk the talk also deals with the industry you’re in. For example, if you’re a publicist, you need to dress like a publicist, talk like a publicist, and live your craft. In everything we do, we keep this top of mind.

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