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Yola: Vinny Lingham

In the middle of a global financial crisis that has everyone talking about how funding is impossible to get and how all you can do is focus on survival, one South African entrepreneur has landed a $20 million investment for his Silicon Valley start-up.

Juliet Pitman

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Vinny Lingham

“I grew up in a small town in South Africa, a boy watching movies like Wall Street and wanting to be something more. I always knew I wanted to run my own successful business, that I didn’t want to lead a boring life. It’s probably a fairly typical story of many entrepreneurs, but I guess what sets me apart from others is that I don’t fear failure in the same way that many do. Sure, I don’t want to fail, and I do everything I can to avoid it, but the fear of failure doesn’t prevent me from taking big risks. I think I have courage. And this willingness to take risks with my own money was definitely a big factor in landing the funding we did for Yola. I think it made a big difference that I had personally invested about R2 million of my own money into the business. It showed a willingness to put my own neck on the line, which showed a real commitment to making the business work. And I think that we had a great idea as well.

It all started in Cape Town. I was running one of my previous companies called Clicks2Customers, and we created website-building software for our own internal use to build websites faster for our customers. We realised there was a market for businesses to be able to build their own websites, instead of having to pay someone else to do it for them. The idea made a lot of sense, particularly in the mass market targeting small to medium-sized businesses.

Every business needs a web presence, but entrepreneurs often lack the capital to pay a company to create one for them. If we could give them the tools to create their own website for free, we would be on to something big. We also knew that the world was changing and that software was moving increasingly to the web, so the idea was to put the software online instead of selling it to people on a CD which they would then have to install. Taking the company online would also open up access to an enormous global market. With that, I decided to leave Clicks2Customers in 2007. I bought the technology and the intellectual property out of the company and spun off a new company, SynthaSite in March 2007 which is what eventually became Yola in April 2009.

I tried unsuccessfully for about five months to get funding in both South Africa and the United States. But the South African venture capitalists didn’t really get the business concept – they didn’t think it would work – and the US venture capitalists weren’t really looking to invest in a South African-based company. So it made sense to run the company from the United States. However that brought with it its own set of problems.

The funders wanted to know how I was going to get into the States, how I was going to organise work permits and the like. At the time I didn’t have any really good answers to those questions. I had to do research to find out about the visa process, and let me tell you, it’s complicated. The only way to really get into the US is to apply for what’s called an L1 Visa which means you have to work for a South African company and then get transferred to an associated company in the United States. So that’s what we did. We set up SynthaSite in South Africa and an associated US company, and then applied for visas. It took four months and a lot of paperwork, but we succeeded. I had given myself a timeline of three to four months to get funding, but it took me closer to nine in the end. Fortunately I had equity built up that I could draw on and I liquidated some shares I had in other companies in order to keep the company afloat.

In 2007, we managed to raise $5 million from Columbus Venture Capital, which at the time was part of Johann Rupert’s Richemont. Getting that initial investment was a big boost for us. It enabled us to set up offices in the United States and to keep paying salaries so that we could continue to work on developing and improving the product. Landing that initial amount wasn’t easy. Generally you need to have something to show funders before they are willing to invest. So firstly, we raised what’s known as a convertible note – a small amount of funding which was put in by family and friends just to keep the business afloat. This stabilised things and allowed us to get to the point where we had built something that investors might be interested in taking a bite out of. It’s easier to start with lower funding requirements and then build up to the bigger investment amounts.

The process involves paperwork and patience. The first thing you have to do is put together a short business plan – something readable that you can distribute to potential investors. This is the pre-funding business plan. It focuses on the core market, shows the opportunity and reveals why the business is scalable. It really speaks more to the ‘blue sky’ and the business model, while the post-funding business plan gets down to the nitty gritty of how you are going to make it happen. Part of writing a winning business plan is to understand the difference between the two. The first is a sales pitch; the second an execution plan. You put together the post-funding business plan once you have a term sheet from interested funders – it’s longer and shows the details of how you are planning to spend their investment to make the business work. I was very fortunate when we were writing the business plans to have a Harvard MBA intern, Brian Elliot, working in the company. This is one of the many benefits of being selected as an Endeavor entrepreneur. Endeavor is an NGO that mentors and grows entrepreneurs in developing countries, of which South Africa is just one. Having Brian as an intern was an enormous help in putting together the post-funding business plan.

Getting the initial funding is only the first step, however. If you’re hoping to attract more funding, as we were, you need to show investors that you can really run with the business and make a success of it. So we worked really hard at optimising the Yola product. The first thing we needed to do was make it easy to use. We’re technology people but we understand that most business owners are technophobic and that they’d only use Yola if it was simple. We developed it so that users can choose a template and then simply drag and drop text and images on to the site. You can add whatever capabilities you want and then you simply hit the ‘publish’ button and it goes live to the web. It can take ten minutes to build a simple site or a couple of hours to build something more complex.

So how do we make money from a free product?

It’s simple really. Users can choose if they want to have their own domain name, such as www.entrepreneurmag.co.za, or a Yola domain name like www.entrepreneurmag.yolasite.com. The Yola domain name is free but we sell the other domain names. This is one income stream and we’ve calculated that if one in every 30 people purchases a domain name, it covers the costs of the other 29 who choose the free option, and allows us to make a profit. As the ratio of paying to non-paying customers improves, so the business makes more money.

We also have plans to launch a template marketplace, which will provide a second income stream. We will buy templates from designers and sell them on to users who want them. It’s a bit like iTunes where the software is free but the content is paid for. However, users are still able to get a completely free website if they want – that’s our selling point. They will just have paid-for options as well, should they wish to choose those. In 12 months we’ve added more than two million users to our database. People embrace the product because it’s easy to use and we help them along the way. We’ve developed comprehensive tutorials and help pages so that people have access to as much assistance and information as they might need. There’s 24/7 email assistance and a community forum where users give each other help and advice.

We’re aiming to have four to five million users this year, which we believe is totally doable. Because we focus on the SME market, the economic downturn is actually really good for us. Small to medium businesses are looking for ways to save money and boost their businesses – and a Yola website can help them do both at the same time. Based on our initial success, we landed a further $20 million in funding from Reinet in February this year. The deal is based on an equity structure and although we can’t mention the percentage of equity they own, we can say that it is less than 49%. We always knew that we’d need visionary investors to back this business, because although we weren’t reinventing the category, the concept was new. Of course, we had to sell the vision to them. But by then we had established a track record based on the initial $5 million investment and what we’d managed to achieve with it. Reinet was created out of Richemont, so there was a connection there.

For investors, I believe the entrepreneur is as important, if not more so than the business concept. For this reason it’s essential that you are a person with credibility and a reputation for doing business in an open, transparent and ethical way. I don’t think you can build credibility; I think it’s something that you prove. You either have it inherently or your don’t and then you prove that you have it by the way you conduct yourself. I know lots of guys who have no credibility because of the way they do business. They’re unethical and no one wants to invest in someone like that. And make no mistake, once you’ve earned a bad reputation, it sticks. You’ll never get away from it. I can honestly say that I could have made a lot more money being unethical in the past couple of years but that’s not what it’s about. Doing unethical business is cheating, and you might make millions but you can’t call yourself a businessman. How you build your wealth and how you make your money is what’s important, not how much you make.

People often ask how they can get in touch with investors, and for me it came down to personal networks. I add everyone I meet to one of my social networks, either Facebook or LinkedIn and I’m in those networks every day. I am very ‘out there’ media-wise and I try to maintain a good media presence, although until fairly recently I didn’t have a PR agency. I blog and I also attend lots of networking events. My philosophy is that if I only meet one worthwhile person at an event, it makes that event worthwhile. I also try to be personal with people because I believe personal relationships make all the difference. And I genuinely like people so that helps as well. But ultimately the key to successful networking is to stay in touch with people, and to offer them something valuable rather than to look for what they can give you. So I don’t look for opportunities – I look for the opportunity to build relationships. I think it also helps to learn as much about your subject as you can so that people can rely on you as an expert. This means they will use you as a valuable resource and this in turn will raise your profile and help build your network further. When you spread yourself too thin and you try to be the ‘go to’ person for everything, you make a mistake. Add value, give back, be genuine, interested and interesting. That’s what I tell people when they ask about how to build the kind of network that’s really valuable.

Ultimately, though, the funding journey comes down to persistence. And persistence pays off. Many people look at me and say, “He’s so lucky to have landed such a big investment in his company” but honestly, it has nothing to do with luck. It’s purely about hard work. Success may look like it happened overnight but that’s very rarely the case in reality. You have to be prepared to put in long hours, take risks and make personal sacrifices. And ideally, the best time to make them is when you’re young, which is why I encourage young entrepreneurs to go for it. Understand that it’s tough out there, be prepared to be patient but keep chipping away at your dream. You’ll get there eventually.

Been There, Done It

Vinny Lingham is not new to the challenge of starting a business and raising funding. In fact, he’s something of an old hand. To get his previous Internet search marketing company, incuBeta, off the ground, he had to overcome the fact that potential investors simply didn’t understand the business or how it would make money. It’s a common challenge for start-ups in the IT sector, particularly those that are pioneering new models and ways of doing business. Banks wanted to “see stock” before they’d invest. “It was clear that they just didn’t understand what Internet Search Marketing was and how it could make money,” he said.

But resourcefulness and a willingness to take big personal risks are part of Lingham’s DNA. He sold his house in order to fund incuBeta. “I thought if I lost the house and the business failed then I’d just get a job and rent accommodation for the rest of my life. To me the thought of not owning my own business was worse than the thought of losing my house and never being able to buy another one,” he says. To the R125 000 from the sale of his house he added a further R75 000 funded from his credit cards.

As with Yola, taking a personal risk paid off. incuBeta made a profit almost immediately and attracted a R700 000 sum from an angel investor who took 13% equity in the business. In finding funding for Yola, Lingham might have been talking bigger figures to bigger players, but his philosophy has remained the same: before you expect someone else to fund your business idea, invest your own money in it and create something worth investing in.

Juliet Pitman is a features writer at Entrepreneur Magazine.

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Entrepreneur Profiles

7 Self-Made Teenager Millionaire Entrepreneurs

These teenager entrepreneurs have already made their first million and more. How did they do it and what’s their secret to success?

Catherine Bristow

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1. Evan of YouTube

evan-of-youtube

Evan and his father Jarod started a youtube channel ‘Evantube’ to review kids’ toys. The channel was a resounding success with other kids – so much so that today it boasts just over 6 million subscribers.

Evantube brings in more than USD1.4 million a year from ad revenue generated on the channel.

How did it start? With a father-son fun project making Angry Birds Stop Animation videos, and morphed into doing reviews on toys and video games. But Jarod’s dad is aware of the responsibility of Evan’s sudden fame and hopes to teach Evan about the importance of being a good role model for others.

“Most recently, we had the opportunity to work with the Make-a-Wish Foundation, and were able to fulfill the wish of a young boy whose dream was to meet Evan and make a video with him at Legoland,” explains Jared. “It was a really incredible experience. YouTube has definitely opened many doors, and the kids have gotten to do some pretty amazing things.”

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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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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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