SA can learn from 3G Capital

AB InBev shareholder has a transparent, no-frills management style that brews success, writes Stephen Asbury

Business Day – Oct 20, 2015

AS A roadmap to success and executive skills development, most insights from global entrepreneurs are next to useless for South African managers looking to improve their performance and multiply related financial rewards.

You get a similar take on making millions whether you research Elon Musk (Tesla), Sergei Brin and Larry Page (Google), Mark Zuckerberg (Facebook) or Jeff Bezos (Amazon). They tell you to be brilliant, parlay one game-changing idea into big money and move up from there.

Fortunately for wannabe management go-getters who did not turn a college website into a mega money-spinner, the proposed R1-trillion takeover of SABMiller by Anheuser-Busch InBev (AB InBev) provides a more useful heads-up.

For those interested in how-to information on value creation, the transaction shines a light on the wealth-building business models and operating methods of some highly resourceful (and extremely rich) global players.

The deal — whether consummated or not and whatever shape it takes — is confirmation that developing markets can produce global winners. Ambitious South African managers could share in substantial rewards if the model influences other emerging market players (and burnout doesn’t get them first).

LOCAL managers without the brilliance of Musk and Zuckerberg share some common ground with the AB InBev buyers, aka The Boys from Brazil. They also come from an emerging market and confront tough business conditions. SABMiller shares several similarities.

SABMiller has strong domestic roots, going back to 1895 at Charles Glass’s Castle Brewery. Growth and local dominance were early priorities. Big competitors Ohlssons and Chandlers were bought in 1955, delivering local dominance and ultimately creating a platform for international expansion.

SAB first focused on Africa, China and Eastern Europe. Access to capital through a London listing in 1999 freed SAB to move out its emerging market playpen and it entered the US in 2002 with the Miller Brewing takeover, showing high regard for strong brands every step of the way. Those driving growth became legendary as value creators: Meyer Kahn (chairman 1990-2012), strategist Graham Mackay (group CEO 1997-2012), deal maker Malcolm Wyman (corporate finance director from 1990 and chief financial officer 2001-11) and roving MD and Mr Fixit, Norman Adami (retired 2014).

SABMiller and its top people are proud of their roots. Five of the nine London-based executive committee members are South Africans. A major driver was always the ability to execute, usually because of homegrown talent. SAB developed a managerial talent factory at an early date, while establishing a culture of performance and accountability.

Integrated management processes drive goal-setting and goal-getting for individuals and teams and ensure continual management interaction with subordinates, backed by formal performance reviews, management incentivisation and behaviour that reflects core values. Merit is remarked and rewarded.

THE inspiration and driving force behind AB InBev is another legend. Jorge Lemann grew a Rio brokerage into Banco Garantia (at one time Brazil’s leading investment bank), then teamed up with a couple of high-energy partners and launched a private equity business that went on to become 3G Capital.

3G Capital concluded a string of megadeals under its mantra of “dream, people, culture”. It bought Burger King and partnered with Berkshire Hathaway’s Warren Buffett to buy HJ Heinz, followed by the Kraft Foods acquisition and the creation of Kraft Heinz.

In 1989, 3G Capital bought a small. under-performing Brazilian brewer, then acquired a major competitor to secure local dominance. Further acquisitions followed across Latin America before the 2004 merger with Belgium’s Interbrew. InBev subsequently bought Anheuser-Busch, the owner of Budweiser, to become the world’s biggest brewer. Lemann and partners transact with a big chunk of their own money, making them hands-on, activist owners and directors. They set strategy at board level. Managers implement it … relentlessly. They develop or hire workaholic managers; invariably PSDs – poor, smart and desperate (to get rich). 3G Capital trusts and challenges its Brazilian go-getters, often inserting them into important positions at acquisition targets.

The managers cut costs and waste, making big impression, as 3G Capital frequently buys firms with fragmented ownership that might also be lazy and weak. Jobs often face the axe along with costs. Efficiencies and margins are pushed ever higher. I saw the 3G Capital management style at America Latina Logistica, a state-owned Brazilian railway the partners bought and transformed, doubling revenue and driving a 17-fold earnings before interest, taxes, depreciation, and amortisation increase in four years.

Shirt-sleeved executives sit with their teams in open-plan offices. There are no frills. Transparency is built in. A boss’s targets and actuals are taped to the wall behind his desk, open to subordinates and workers. 3G Capital businesses generally offer low pay and high incentives. Junior managers have the chance to nail down 16-times their salary in annual bonuses. Stock options are also available and partnerships are offered to exceptional performers.

FOR overachievers from poor homes, a 3G Capital job fast-tracks financial independence, but at a price. Some former 3G Capital executives say taking calls in the early hours to confirm one figure in a report wears you down. They quit, pocket their perks and usually do exceptionally well elsewhere. The business model builds wealth for shareholders, while creating a cadre of super managers with super remuneration.

If the SABMiller bid goes through, an already efficient South African brewer will doubtless be expected to deliver even higher returns. The 29% AB InBev margin may become one target (quite a leap from the current 22%).

For local managers — not necessarily at SABMiller but in businesses across the country — some net positives might accrue. Our managers are quite capable of achieving ongoing savings and volume growth while driving up productivity.

Bewildered managers are our dark secret

First published in Business Day 22 July 2015

Greater transparency is heavily punted in the King III report on corporate governance and consequently is embraced as an organisational goal by management nationwide. Unfortunately, transparency is not nearly so evident when looking closely at the managers rather than their companies.

Close scrutiny suggests a significant number of managers at various levels in a wide range of operations have only sketchy knowledge of the management basics. Some have no grounding at all in fundamental management techniques.

Often they are desperate to learn and when they do, they show surprising aptitude and deliver impressive results.

But first they have to make a deeply embarrassing confession: they hold down a managerial position, perhaps have done so for a number of years, and receive managerial remuneration … but don’t know how to manage.

In fact, they never did.

How can this happen?

Five scenarios suggest themselves …

  • They parachute into management from on high. They held equity in a business that was taken over by a major concern. They can no longer sit at the top of the pile, but have to be accommodated somewhere in the enlarged structure and end up with a job in management, sometimes quite senior, though managing others hardly features on the CV.
  • They achieved success in some other sphere and were hired on the assumption that seniority in their original area of expertise implies managerial experience.
  • They were specialist over-achievers. In their niche – working with fellow professionals – they achieved notable success. To keep them and reward them, senior management made them departmental heads, assuming management skills that simply were not there.
  • They were victims of fast-tracking. Their companies were slow to develop black staff and belatedly decided some catching up was necessary. They promoted promising candidates into management, but neglected to provide management training, assuming a little hand-holding by mentors would suffice.
  • Experience-driven elevation – unkindly and inaccurately described as reaching your level of incompetence. Promotion based on length of service can ease an individual into management. The person is too loyal to sack and demotion seems cruel. After all, the mystified manager puts in the hours, makes an effort and may be no better and no worse than several colleagues.

In all scenarios, the rational response is to take the job or promotion, hang on to pay and perks and quietly muddle along. This may be enough to ensure managerial survival. By not rocking the boat the individuals concerned may even move up a few grades.

These managers then guard a big, personal secret (they don’t know much about management).

In situations like this, two frequently encountered survival tactics are consensus-seeking and high visibility activity.

The tactics may take the form of attendance at long, arduous meetings, striving for agreement with your peers on some issue or other.

Your secretary holds your calls. You put in a long day. You may be exhausted afterwards, but essentially you are an absentee boss who avoids day-by-day management.

In extreme cases, all the other participants in the meeting are engaged in similar survival tactics; so no one is going to call a halt any time soon. As a result, one day-long meeting follows the next while the organisation lurches along on cruise control.

In effect, broad swathes of the operation are run by routine and standard practice rather than management. Tough problems go unaddressed. Productivity stalls. Costs mount.

In benign economic or industry conditions, the consequences might not be too dire, but that can’t last forever.

Ultimately, corrective measures have to be taken. The situation won’t rectify itself. But in the short, even medium, term, perpetuation of the malaise is most likely.

Within management ranks a culture develops of ‘don’t ask, don’t tell’.

This reluctance to own up is entrenched by a South African blind-spot. We are very bad at asking for help.

Anglo-Saxon precedents favour the managerial equivalent of the strong, silent type who lets results do his or her talking. This is not the only managerial model, however.

One alternative comes from the East.

Korean and Japanese managers are influenced by Confucian philosophy. In their organisations, junior managers are loyal and obedient. They support their superiors. The quid pro quo is that those at senior level share information and give hands-on assistance to those coming through the ranks.

In these inclusive structures, asking for help is not a sign of weakness. It is an opportunity for interaction and growth.

The system of mutual respect has some characteristics in common with Ubuntu.

A philosophical shift like this may be helpful in the long term, but here and now there is urgent need for simple, practical help with the management ABCs at organisations afflicted by a managerial malady brought on by big gaps in basic knowledge.

Fortunately, affected managers don’t need a year’s sabbatical at Harvard Business School. They don’t need firing, either.

Huge improvements can be made by handing over a simple management toolkit supported by how-to training on core managerial functions.

Experience in the field indicates that once the basics have been absorbed, big productivity gains can be made – measurable improvements in output, motivation and effectiveness that make their way to the bottom line month after month.

In a young, growing country that struggles to manage a 2% gain in GDP that’s got to be good news.

Want to get the job done? Get a good manager

First Published in Business Day 8 July 2015

The distinction between leaders and managers has been stacked in favour of leaders, so we have to celebrate what it means to be a great manager, writes Stephen Asbury

LEADERS are wonderful. Everyone seems to think so. Leaders do the vision-thing. They head the organisation. They are admired, rewarded and feted. Leaders lead. Others follow. Managers only manage.

For years, the distinction between leaders and managers has been stacked in favour of leaders. The catalyst was probably author and Harvard Business School professor John Kotter, and his work on the differences between the disciplines.

To Kotter’s credit, he stresses the crucial importance of management but, since he highlighted the leadership versus management issue, the plaudits have all gone to the leaders, while managers have become the poor relations.

Leaders handle strategy. Managers handle issues that get their hands dirty like putting in a new production line, service delivery or maintenance.

Leaders inspire. Managers perspire. It’s as simple as that.

Leadership’s aspirational aspects help to explain the huge growth of the leadership industry, not only in SA, but worldwide.

You can attend leadership courses, sign up for leadership seminars, go to leadership workshops. Everyone wants to be a leader.

Ask MBA students to name great leaders and names trip off the tongue: Ford turnaround king Alan Mulally, Apple pioneer Steve Jobs, Amazon CEO Jeff Bezos, FedEx founder Fred Smith, Alibaba boss Jack Ma and so on.

Ask them to name great managers and they do a detour to sports and spotlight Sir Alex Ferguson, former manager of Manchester United.

The great managers in business go unsung, but they are indispensable to improved performance. Kotter’s comparisons confirm this, for those prepared to look. He lists three key differences:
• Leaders set direction; managers plan and budget.
• Leaders align people; managers organise and staff.
• Leaders motivate people; managers control and solve problems.
It’s clear that the vision-thing is totally dependent on management capacity if anything is to be achieved.

In a South African context, the nature of the challenge and the vital importance of good managers can be illustrated by reference to national policy-making.

In the past 20 years we’ve had the Reconstruction and Development Programme; Growth Employment and Redistribution; Accelerated and Shared Growth Initiative for SA; the New Growth Path; and the National Development Plan for 2030.

All set out a compelling vision. Worthy results were achieved along the way, but one plan followed the next without

achieving anything like the full set of objectives. Why?
One reason must surely be the mismatch between strategy and implementation — SA’s so-called execution deficit.

Of course, when it comes to implementation and capacity on the ground, you look for great managers rather than great leaders.

There’s no political agenda behind the reference to national strategy. South African policy makers are not the only ones who suffer because backup is lacking further down the line from those who have to manage, support, report back, tackle shortcomings, solve problems, achieve day-by-day improvements and keep people focused. These challenges face company after company right across the national economy.

Clearly, a dearth of management capacity is not the only challenge. We face strategic constraints such as an unreliable power grid. Without growing electricity capacity, sustained economic expansion is tough to achieve.

AS GROWTH stalls we are in danger of becoming a make-do-and-mend economy — which again highlights the need for managerial skill, because when you have to make the best of what you’ve got, you need gifted managers.

Thankfully, they are still there. They work in small-and medium-sized enterprises, major corporations, parastatals, official departments, and local, regional and national government offices around the country. But there are not nearly enough of them. They are the national resource SA forgot.

We need to reverse that situation and start encouraging and growing the ranks of managers who can drive rising productivity and bolster economic growth.

We have to celebrate the role and what it means to be a great manager. This shouldn’t be difficult. There’s a lot to admire:

• Great managers care; about the task, the results and the people who do the job.

• Great managers commit to the success of their subordinates because success from the bottom up ensures results are achieved.

• Great managers help their workers grow.

They are also are unafraid. They don’t duck accountability. They know they will be measured and they set up simple, practical yardsticks for every member of their team.

Great managers are disciplined. They show up every day and get the job done.

They know when subordinates are doing a good job and when they’re not. They discriminate on performance, reward and take remedial action.

Great managers are not afraid of hard work. They thrive on it.

FORTUNATELY, an international reassessment is quietly gathering momentum.

This may ultimately result in greater focus on the transformation — departmental, divisional and national — that can be achieved when management skill is properly developed.

Professor Roy Green, dean of Sydney’s UTS Business School and part of the Australian government’s Manufacturing Leaders’ Group, recently focused renewed attention on management’s role in lifting productivity.

Work at the London School of Economics suggests a one-point improvement in management practices (on a five-point

scale) drives up productivity by 25%.

A UK government report, Engaging for Success — Enhancing Performance through Employee Engagement, indicates a link between employee engagement and business results, and, of course, companies depend on good managers for worker engagement.

Other studies show best-practice management development can drive a 23% rise in organisational performance. …

THESE positives are supported by analysis of a US Census Bureau survey of management practices at more than 30,000 plants.

A key finding was that companies that adopted more structured management practices for performance monitoring, target setting and incentives, achieved greater productivity, higher profits, better rates of innovation and faster employment growth.

The effect on job creation has to be interesting in a country where unemployment officially hovers near 25%, one of the highest rates in the world, according to the International Labour Organisation.

Strategies abound for creating jobs in SA. It would be ironic if great leaders failed to make an impact on the numbers, but management got the job done.

But, then, getting the job done is the hallmark of any good manager.

~oOo~

Business Performance is People Performance – Joined Up

Whatever we are working on with our clients, we try to build an underlying performance platform in the business.

As we all know, execution – be it routine operations or strategic initiatives – needs people to be connected, aligned and motivated to do their part in concert with everyone else. A tall order, as evidenced by the age-old cry “We just can’t seem to get it done!”

Frontera goes back to the basics on this. We find that focusing on a few key levers builds execution discipline and capability.

5 Key Levers of Business Performance 280515We’ve also seen clearly the kinds of basic everyday skills that managers need to keep their people engaged, focused and productive from Monday to Friday. Have a look at the next post or go to The Manager’s Toolkit website.

What we’ve lost sight of in this technology-driven world is that organisations perform when the people in them have real working relationships. Relationships particularly between team leaders and team members in which performance counselling and coaching for growth can flourish.

This is the basic tenet of people performance. And business performance is people performance – joined up.

 

The Manager’s Toolkit

In our experience, half the job of execution lies in building capacity to do the work and keep it going in a sustainable way.

A critical deficiency that we routinely encounter in South African organisations is limited capability in everyday management – the set of basic skills and tools a manager needs to keep his or her people engaged and productive from Monday to Friday.

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© 2015 Frontera Strategic Performance Consulting (Pty) Ltd

 

Without a solid platform of basic management capability, organisations struggle to maintain robust operational routines, execute projects and achieve strategic goals.

So we developed The Manager’s Toolkit – a simple 12 module programme in practical day-to-day management skills that is rapidly delivered in an engaging, fun way.

For more information go to www.managerstoolkit.co.za

 

“Strategy is a commodity. Execution is an art.”

Peter DruckerThe quote is classic Peter Drucker – that most enduring of management gurus.

And we would agree, mostly.

Strategy has become a commodity. We certainly go along with that. The useful frameworks are all readily available. There is any number of analytics and methods you can pick up and apply. Books to the moon and back. MBAs everywhere.

You don’t (usually) need to spend big on a global strategy firm to decide what to do. (Although sometimes the competitive problem is so nuanced and complex that hard, data-driven thinking is needed to solve it.)

The trick as always is getting it done.

Execution. An art? Well not exactly. In our world execution is a set of disciplines. A way of thinking about what the work of leaders and managers actually looks like. Execution is not conceptually difficult, but it is practically extremely challenging.

A lot of simple things need to be connected. Need to be done. Every day. Every week. Every month.

Execution needs persistence. Relentlessness. Resilience.

There is art in it though. The art in execution is in finding  balances. Driving and coaxing. Directing and empowering. Demanding and accepting.

Execution. At the end of the day it’s a people thing. And in that there is art.

HR: The CEO’s Big Ask

Or, what can HR put up its hand for that will make a real and lasting contribution to the business?

I was with groups of senior HR professionals a couple of times in the last fortnight – at an evening forum at GIBS in Illovo, and with the IPM in Namibia. On both occasions the discussion turned to how HR can make a real strategic difference.

Of course there’s plenty that is strategic about looking after human capital. But that’s not what they were talking about. HR wants to be seen as a core member of the team alongside the likes of operations and finance. It’s a longstanding aspiration and one that gurus like Dave Ulrich have virtually made an industry of.

At the GIBS event, the view though was that HR people don’t have the business smarts to really take their place at the table. That it is difficult for them to make the leap. I’m not so sure.

A few days later I was speaking at the Windhoek conference. My argument – more of an exhortation really – went like this…

There are two kinds of work in organisations. The first is the everyday effort of delivering products or services to customers, and everything that goes in support of that. Call this line work. The second kind is project work, the things the organisation has chosen to do outside of the frame of everyday delivery. (There’s probably a whole lot of work in most organisations that doesn’t fall into either category, but we’ll leave that for another day…)

‘Everything boils down to work in the end’
– Peter Drucker

Line work is about today, delivering value and making money. Project work is about tomorrow, working on things that will create the organisation of the future. Both are critically important.

Let’s start with project work. In most organisations, HR isn’t responsible for managing the project portfolio, or the workings of the Programme Management Office (PMO). But the CHRO can be the conscience of the executive when it comes to making sure projects are aligned to high-order objectives, culling projects that don’t qualify and building rock-solid project management disciplines. Often the senior HR executive is the person seen as the steward of change. What better way to wear that mantle?

My real thrust though is to do with line work – everyone’s day job. I say the HR chief should put up his or her hand and take accountability for the building blocks of performance. Not just performance management, but the actual performance of the organisation. Of course HR doesn’t directly manage the people we want to perform. However HR can provide the tools the line needs to deliver performance – and make sure they are used.

The factors that impact the performance of a complex enterprise are many, starting with leadership and going all the way over to, I don’t know, housing and health. But the foundation stones of a performance organisation are few, and they all fall squarely into HR’s traditional remit.

One: Accountability. In my experience, and notwithstanding all the job descriptions you care to parade, people are often not absolutely clear on what they are responsible for. Even at my sophisticated bank the other day, the person I was talking to lamented that particular lack of clarity. So HR, go onto the web and look up a little management tool called RACI. It stands for Responsible, Accountable, Consult, and Inform and it’s an easy way for any team at any level to work out who should take what role on any activity or decision. Train everybody to use it and make it part of the lexicon of everyday life in your business. “I’ll take the ‘A’?” should become part of the lingua franca. (Noting that we are talking about single-point accountability here. The ‘A’ can never be shared – surely a start in itself).

Two: Measures. Yes of course you have measures, probably some version of the balanced scorecard. But are they few enough and clear enough for people to know when they are doing a great job? Three to five key metrics are enough.

Three: Disciplines. Organisations work if the teams within the organisation work, at all levels. That means teams have to meet effectively, use their information well and follow through. It’s not complicated. So HR, take the ‘A’ for building robust management cycles – daily, weekly or monthly – at all levels. In one organisation I worked in recently, the senior team of a large business unit hadn’t had a proper meeting for several months. Oh woe!

Four: Management skills. In my book, day-to-day management skills are a neglected essential. Perhaps they’ve become outmoded by leadership development. In our work we have found that the single most culture-changing skill we were able to transfer was how to run a good meeting. Performance coaching and problem solving come a close second and third. HR needs to develop a suite of simple daily management training modules along these lines, make sure everyone gets up to speed and then offer the coaching that’s required to entrench the new skills as habits.

Five: Performance discrimination. As the custodian of performance management, HR has a huge opportunity to make sure the system delivers real results, separating the weak from the strong, and then responding accordingly with coaching, sanction and reward. One of the scariest remarks I hear in organisation is ‘It makes no difference how hard you work here’. If your producers don’t think the organisation is a meritocracy they will be the first to go elsewhere . At a large JSE listed company a senior executive remarked to me that they know who their poor performers are, they even know how much they are costing them, but they can’t seem to do anything about it. At another big client HR was collecting performance contracts in the twelfth month of the financial year.

I’m not suggesting any of this is easy, but it’s not complicated either. Put your hand up for performance HR, and take the ‘A’.

The old black is the new black. Huh..?

Getting back to basics. We hear it all the time. In fact it’s almost a fad. Deja vu all over again, as Yogi Berra said. (He also said “When you come to a fork in the road, take it!” which has served me well more than once).

Everyone advocates getting back to basics. Problem is hardly anyone really knows what it means any more. And even fewer actually do it.

Terry Leahy is a name you may know. Sir Terry, as he is now, was the CEO of Tesco from 1997 til last year, overseeing one of the most extraordinary corporate transformations ever seen. He’s just written a new book Management in 10 Words and makes no apology for obsession with the basics. As he says in his introduction…

“…I have been struck by by how basic, simple truths about life – not just business – have been forgotten by clever people who mistake ‘simple’ for ‘simplistic’. We have allowed ourselves to think that, because the world in which we live is complicated, the solutions must be complicated as well”.

 There are a couple of problems with those simple basics though. First they aren’t glamourous, trendy or fun. Boring really. Who wants to be bothered with the basics when you have just invested zillions in the latest release of your ERP and loaded on a whole bunch of sexy business intelligence middleware? Why would you let that old simple stuff distract you from the annual trip to the industry facefest in Barcelona?

The other more fundamental difficulty about the basics though is that they are hard. Simple and easy aren’t nearly the same thing. And although it’s easy to talk about what will make your business sing like King’s College Choir, getting everyone to read the music, let alone croon in tune, is an oeuvre majeure in itself.

So the next time you are looking at the agenda for your (or your client’s) strategy breakaway ask these questions:

Do we have clear lines of reporting and accountability?

Does everyone have absolute certainty about what they are expected to deliver?

Can we measure performance in unambiguous terms for every person in every team in every unit?

Do we genuinely and fairly discriminate on that measured performance, challenging and rewarding the producers and helping and sanctioning the laggards?

Of course there’s much more to organisational success than these few things. But as far as the basics go, that’s probably 80% of it. And without these essentials, your strategy isn’t going anywhere anyway.

Getting back to Terry Leahy, he recounts how everything they did as they changed Tesco was underpinned by the Steering Wheel – their version of the Balanced Scorecard implemented at every single store everywhere as the cornerstone of all the basics.

Incidentally, as Leahy tells in his book, the Steering Wheel was devised and implemented by my colleague William Gordon, who worked directly with Sir Terry as his transformation leader on each facet of Tesco’s re-invention. Way to go William!

So, the basics. Always in style.