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Softline: Ivan Epstein

Ivan Epstein and his partners founded Softline in 1988, introducing South Africa to accounting and payroll software, a market which the company leads to this day. More than 250 000 businesses in South Africa use Softline products and 5,4 million people are paid with Softline payslips. In 2003, the company was acquired by Sage Group and Epstein became CEO of Sage Southern Hemisphere, comprising Softline and Sage Australia. Since then, Softline has more than quadrupled in size. Epstein is responsible for formulating strategy for his region in addition to being on the group’s global management team, a role he fulfils by continuing to look five steps ahead of the competition. He tells Entrepreneur how he did it.

Monique Verduyn

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Ivan Epstein of Softline

I had always dreamed of starting a business that would enable me to earn a good living and gain financial independence, and allow me to build something that was tangible.

At 26, I was about to go into accounting, when I stopped, took stock, and realised that I wanted my own business. I did not come from a wealthy family. My dad owned a small import business and I had been exposed to the ups and downs he went through. I think that’s what drove me to succeed. When you grow up with limited resources, it makes you want to be able to afford the things that come with money. After school I did an accounting degree. Because I had limited resources I studied part-time through Unisa and was employed as an articled clerk at Pricewaterhouse. I completed the degree, but I did not write the board exams. I was not comfortable in accounting. I’m not saying I was too clever, but I looked around me and realised that I could never fit into that type of controlled and structured environment. It was too restrictive for a young, ambitious guy.

I knew even then that you don’t start a venture unless you are absolutely sure it will consume you. That is the only way to come close to any guarantee of success. And Softline has consumed me. From the start, I have been 120% committed to the business. People say that I am all about work, work, work, and it’s true, although I’ve probably become better at balance over the years. In the beginning I worked six days a week at the office and took my job home on Sundays. That’s a big sacrifice to make, but it’s been worth it. It’s quite hectic to be an insecure overachiever like I was then, but there were definitely some advantages to that too – I just never stopped. That’s what it’s like to be an entrepreneur who is truly consumed by the business. When you work for someone else, you have the opportunity to switch off, no matter how hard you may have to work; when it’s your business, there’s no chance of doing that. But it gave me a lot of fulfilment.

I was too driven to let anything stop me and I knew that I was creating something amazing. If you have a good business idea, get it off the ground, build your reputation, and grow your business by creating a satisfied client base. If your idea is so brilliant, the best thing you can do is invest in it yourself. That’s exactly what Allan Osrin and I did. He was my mate from school and varsity and today he’s the MD of Sage Software Australia and HandiSoft Software Australia. We had no set agenda, but we had a vision – we wanted to build a global company. Allan and I had grown up together. We came from similar homes and were great friends. Because we’d had to make do without a lot of things, we were equally driven to make something of our lives and we had many similar motivators. One of them was the fact that we wanted to make money. Back then, we didn’t have any lofty ideas about giving back to the community; we just wanted to see cash. That was why we agreed to build a business together, and then someone suggested that we go into software support because it was becoming quite popular.

We took a gamble and went to the bank. It was 1988, and the maximum they were prepared to loan us was the princely sum of R5 000, only because we had degrees. We certainly weren’t in a unique situation. Some 90% of entrepreneurs around the world struggle to get funding. There was no thinking about things too deeply; we had to go ahead and work with what we had. We were extremely careful about what we did with that small bit of money because we had to make it work for us, or fail. And failure was just not an option. That’s why it’s vital to have a vision and big ideas. We positioned the company for growth from the start. If you want to be the greatest company, you have to start acting the part from day one. I believe that nothing is impossible if you don’t know your limits. There was no great business plan.

Quite frankly, I did not believe in creating a five-year plan. But we were always chasing the same dream and we were always on the same page. We approached each challenge together as it arose. Because we knew each other so well, it was easy to communicate and to talk informally about problems and opportunities, especially as we were so determined to make the business work. We would discuss our course of action every day, make the strategy changes or adjustments needed to take the company forward, and re-adjust the business model along the way. Although we had no written document, our discussions provided us with a living, breathing roadmap for the business that guided our every move as we went from start-up to an established company. It’s essential to remember how important it is to revisit and re-evaluate your plan – whether it’s on paper or in your head – because that’s what enables you to execute it.

Early successes

There was a computer distribution company which distributed an accounting package called TAS. They sold a lot of product, but there were few people around to set it up and where there is mystery, there is margin. So we went to them and said, “We know about accounting. You sell the product and bring us in to install it.” We had to work really hard to extract leads out of them, often promising clients that we would do the job for nothing and that they could pay us if they were happy with the outcome. You have no idea how important it is to be convincing. You need to find that one guy who will let you do the work, just so you can get the next one. Eventually, that company became convinced that we were doing a really good job, and we became contracted as their support outlet and installation and training organisation. But from our point of view the business was always vulnerable as we were entirely dependent on them. We had nothing that we ourselves could sell.

Six months after we started the business, Allan and I liked what we were doing and seeing. Sure, we were stressed out and working too hard, but it’s easy to work long hours when you are young. And you have to do that in the early years if you want to make a go of it. That was when we knew it was time to develop something ourselves – a solution that we owned and controlled. We employed a developer and eventually we got a product written for us that we branded Brilliant Accounting (and which later became Pastel). It was an entry-level, off-the-shelf solution that sold for around R1 000, and it complemented the more high-end installations we were doing. We took it to the few stores that had started opening. This was the time of the emergence of the computer retailer – they sold computers, printers and some software, including ours.

We built our reputation slowly, through good work, solid installations, and holding the client’s hand throughout the process. I remember sitting next to clients, one-on-one, teaching them to use the system. We’d bill them as soon as it was up. There was no 30-day invoicing – we had to collect the cash then and there, because we were bootstrapping the business. Within two years, Brilliant became the number two accounting product in the country. We set up branches in Cape Town, Durban and Bloemfontein. None of us were great technologists by any means, but we built the business through marketing. I can’t tell you what a kick it still gives me to see the brand we grew on billboards around the country. Then my brother-in-law Steven Cohen (today the MD of Softline Pastel) joined the business as our third partner in 1990. He’s an accountant who also has a great love for software. He really became the architect and glue behind our solutions. He was always looking at features and functionality, and we always believed that he would build a great product. We had such faith in each other; we did not do anything like a SWOT analysis or any of those other analyses that the business schools recommend.

In my experience, entrepreneurship is natural. People can learn the principles of entrepreneurship, but I think it’s very hard to train someone to be an entrepreneur. To really understand how it works, you have to do it yourself. It’s OK to have a mentor, but I think the most important thing you can do is trust your own gut. That’s what we did. Sometimes we got it wrong, but mostly we were right. I don’t read business books that tell you how to succeed because I don’t think they have any value for me, although many people find them motivational. I enjoy reading the biographies of successful people from around the world. That’s what I find inspirational.
I believe business is one part strategy, nine parts execution. We simply ran the business together on the basis of trust. Whatever we made or lost, we split three ways. There was rarely any jealousy or resentment of any kind. It’s one of the reasons why I cannot emphasise enough how important it is to choose the right partners. It would have been a lot more difficult had we not done so.

Allan handled sales – he was really good at that – he could convince a client to buy just about anything. I was constantly the one marketing the company. My vision for the business has always been five steps ahead of where it actually is at any moment in time. I always keep a close watch on what competitors are doing and I read about what is happening in my own industry and in the broader technological, economic and social environment. It’s critical to observe the world around you and to let those observations inform your goals for the future. You should always continue to build on your vision, but don’t forget that vision without execution is hallucination.

Some good fortune in the mix

Then we had a windfall: VAT was introduced in South Africa in 1991 to replace GST and every one of our clients had to buy our new system. That gave us some capital inflow and enabled us to finance the business going forward. The power of the upgrade has always been a big factor for Softline – when you have thousands of users who have to be upgraded, you automatically have access to cash flows.

At the same time, awareness of the computer was growing, and that worked in our favour too. Those were the formative years of computing. When we started the business, big corporates had huge mainframe systems and their software was developed in-house by their own engineers. For smaller businesses, technology then was mostly about hardware, DOS and word processing. The move from manual to automated accounts was largely by word of mouth – customers would tell their friends that they had bought a computer for their business to run their accounts and they would go, “wow, maybe I must do that too.” The client base just grew and grew. It was a fantastic combination of people and personalities, because we all drove and inspired one another in different ways. I used to be careful about phoning Steven on the weekend because I knew that once I got him going on the business, there was no way he would be able to switch off again. On one occasion during the change to VAT Steven stayed at our office right through the night to make sure the software was bug-free. That’s what you do when you are consumed by the business; there were a number of occasions where we worked through the night.

Together, we aspired to build a great, global company. We were doing extremely well in South Africa and we believed that our solutions could travel. Local technology development in general has been very successful and South African developers have a good reputation overseas. But even more important than that was the drive to build something global. We started with Australia because of the language, and because it was a place in which Allan was particularly keen on setting up a business. We found someone in Australia to sell our products there, but it was a failure as he was not committed and we did not really know how to set up the venture properly. But the important thing is that we always had a vision that we would do something huge. That’s vital – if you can’t see it from the start, there’s no way you’ll get it going. We had lots of ups and downs, and many tough times, but that dream helped us to keep it all together. The fact that we started as a team and we are all still here today as good friends who have built a hugely successful accounting and payroll solutions business is amazing.

We subsequently learnt that the best way to infiltrate an overseas market is to buy existing businesses which already have an established client base. We wanted to be sure, though, that we were able to do something different and better to improve the companies we bought. One of the first businesses we eventually acquired in Australia had a 35% market share. In addition, we were able to develop the next version of its software product far more cost-effectively from our South African research and development resources. The Australian market has turned out to be very good for us, but we made sure that we filled our management teams with Australians, as they understand the mentality and the business ethics of that country. The culture in Australia is very different from ours. It’s a far more regulated society which I find quite controlled, but Allan loves it.

Listing on the JSE

When we listed the company in 1997, I was 34. The technology boom was in full swing and companies everywhere were clamouring for IT stocks. It was a technology gold rush. As Softline’s customer base grew, so too did the industry we were creating in the country.  I knew that to achieve real growth and global reach, we had to start buying other companies. To do that, we had to list so that we could get some cash into the business.

I didn’t realise what I was letting myself in for. The listing brought tremendous success to this business. It made Softline what it is today. But with listing comes other hurdles. I think that the JSE should run courses so that companies know what to expect and what will be expected of them. It’s unbelievably hard to move from the private into the public sphere. It’s not solely your company anymore – it has public shareholders and other stakeholders. I recall the time when a Merrill Lynch analyst came to see me; he was asking me about all sorts of facts and figures and I gave him most of what he was looking for, but there were some things I refused to tell him until he pointed out that I had no choice in the matter.

The listing and acquisition strategy worked brilliantly. By 2000, we had bought 35 companies – our policy was generally to buy 100% or nothing – and 60% of our revenues were generated offshore. One of our most successful competitors was a business called Pastel, which we acquired in 1999 for R220 million. It is now hugely profitable and successful under Steven’s leadership. Then in March 2000, the dotcom bubble burst. According to the Los Angeles Times, this wiped out $5 trillion dollars in market value for tech companies.

More than half of the Internet companies created since 1995 were gone by 2004 – and hundreds of thousands of skilled technology workers were out of jobs. Softline’s share price plummeted – even though our profitability kept going up, we were trading well, and the business was growing. We were a great company with great potential and we could not see the benefit of being listed anymore. To give you some indication of the situation we were in, Softline stock had been trading at R12,80 at the height of all the IT hype, but had fallen to between 85 cents and 95 cents by 2003.

The delisting debacle

A management buyout was considered because we felt the market had lost its appetite, and attitudes toward our sector were negative. Two unexpected things happened. First, our shareholders refused to sell their shares back to us. Although we offered a 35% premium to the share price at the time, they were not prepared to accept it because they felt it was not enough, even though the market was not recognising the value of the company. Maybe it’s true that we did not offer a good enough premium, but how was anyone going to measure that? With hindsight, it’s possible that our offer was too opportunistic.

We lacked commercial maturity in the context of the delisting. Second, a hostile takeover bid was launched against Softline by a company based in the Netherlands which was in cahoots with a former employee of ours. They saw the value of the company and that showed that we had become attractive to an international business. To give you an idea of how bad it was, they already owned 15% of Softline and we did not even know it until we learnt of the takeover bid. I had to think about what would be the best thing for Softline. Sage, which supplies business management software to SMEs, just like us, was a much better fit and would also give us global reach. I flew to the UK and met with the CEO of the Sage group. Our businesses were almost identical. They were decent people and had a great management team.

Sage was formed in 1981 and floated on the London Stock Exchange eight years later. They knew all about us and had heard what was going on. They saw value, good products and an equally great management team and so Softline was acquired by Sage in 2003. Although we were unsuccessful at the buyback, we weren’t prepared to give up. We had to make the best of the situation and selling to Sage turned out to be a very positive move for us, something we only fully appreciated later. So we went from being private, to being listed, to being part of a global group. The Sage business model is unique because it could be likened to a federation of companies. It allows individuals to take ownership of the business so that they achieve great results. People need that level of autonomy and independence to thrive – I know I do. But don’t ever believe that selling your company is easy, no matter how much money is involved.

After we closed the deal with Sage I was highly emotional and at first we felt a deep sense of loss. Thankfully, because we had already been listed, it was easier to get used to the idea of being a company that’s part of a worldwide group. Compromises are necessary sometimes in the best interests of the business. Today the Sage group has more than six million customers and 13 400 employees worldwide; it operates in 24 countries including the UK, Europe, North America, South Africa, Australia, India and China. All of our overseas business is under the Sage name, but our South African business continues to operate as Softline because we had already built such a strong brand. The biggest challenge to the group as a whole is how to collaborate better. There is duplication because we are spread so wide. If we manage to get that right, our profits will be even higher.

What the future holds

What drove me in the beginning was the desire to have financial freedom and security. When I started out I wasn’t driven to change the world like some entrepreneurs claim to be, but now that I have achieved some success I like to give back where I can.  I continue to look ahead and to see beyond where the business sits today. Your interest should always lie in the future. That is, after all, where you are going to spend the rest of your life.

Softline recently bought 100% of Netcash, which provides secure, online transaction processing services for SMEs in South Africa. The potential synergies between our two businesses are clear. We both serve SMEs and the addition of Netcash’s transaction services to Softline’s products will enable our customers to have access to a broad service offering under a single banner. In addition to that, we have launched Pastel My Business. It’s an online accounting package built on the software-as-a-service model. We have 2 000 users and we are not making any money on it at the moment, but it’s the future of accounting. When the kids of today go into business, they are not going to buy software in a box, they are going to download it from the Net. We are getting ready to take advantage of the fast-growing Internet user base in this country and we will be ready for SMEs when they turn to cloud computing to manage their businesses.

It’s about continuing to focus on what your customers want, which is something we have done really well. It’s what we did to differentiate Softline from the start – always innovate to create new revenue streams and make more money. It’s important to be a visionary like Richard Branson. As a leader, I’ve learnt that you must have the power to inspire others to believe in the same dream – and that the only limit to your impact is your imagination and commitment. Our experience has also shown that to build an industry as we did, you must enlist the help of trusted partners.

Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.

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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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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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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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brand-cartel

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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