Welcome to Part Five in my series of musings on entrepreneurship. I dedicate this long overdue blog post to my friend and business co-collaborator Lincoln Schultz who recently and quite unexpectedly passed away. I can almost hear Lincoln saying, “Why haven’t you finished your next blog post yet?” Apologies for the tardiness.
Things are certainly different this year. How the world has changed since December 2019 when in my most recent blog post of The Martin Haese Report we looked at the vital role of Social Entrepreneurs. There has been no script for 2020 and today’s blog post is intended to help you consider the role that entrepreneurial leadership plays in pivoting your business, career or organisation as we slowly emerge from one of the most turbulent years in living history.
While sounding something like a spacecraft that has invaded earth from afar, COVID-19 has proven itself to be not only alien to our recent experiences, but a profound health risk and the ultimate disruption to business as usual. When you pause to think about it, you would not be entirely honest with yourself if you did not admit to having experienced a range of emotions over recent months including fear, frustration, skepticism, resignation, acceptance, hope or even positivity. Truth be told, I’ve felt them all, but it’s pragmatism that has won me over.
Irrespective of how we are each processing things, this is surely a re-set moment for the global entrepreneurial community.
So, what role does entrepreneurial thinking play in the current context of COVID-19, in an environment where an ever-increasing number of corporations and businesses are looking to government and government administrations to support them through the turbulence? Before we address that, let’s first acknowledge that we’ve all seen examples where business owners and entrepreneurs have already “pivoted” their business model to adapt to the current environment. “Bravo”, I say to those who have done so. Well done. However, not every business can manufacture PPE (personal protective equipment), digitise their services, re-set their supply chain or flip their channel strategy, so this issue runs deeper, much deeper.
Leadership
Much has been said and written about society’s cravings for political, cultural, environmental and commercial leadership and rarely does a day go by without someone, somewhere crying out for leadership as if it was something that could readily be downloaded on demand.
I have always been interested in what makes a good leader. I am equally interested in the difference between a good leader and a great leader. In my 25 years in business, I have met some impressive leaders. As Lord Mayor of Adelaide (2014-2018), I met many more.
Leadership is often defined as the ability to motivate a group of people or an organisation to achieve a worthwhile common goal. The link between leadership and motivation is not to be under-estimated.
I have come across many people who have either innate or learned leadership qualities, yet in my experience relatively few are prepared to step forward and pay the price for consistently applying them. Leadership involves both choice and sacrifice and the choices a leader makes are not often easy, and the sacrifices almost always include opportunity costs. However, irrespective of the circumstances, leaders do have common traits. They have vision, inspire trust, are good communicators and, most importantly, great leaders always accept accountability.
Entrepreneurial Leadership
Let’s now consider entrepreneurial leadership. What is it? Why is it different and is it any more or less relevant today than it was only a few months ago?
I recently read a meme that said, “entrepreneurial leaders work 80 hours a week, so they don’t need to work 40”. Although hard work is a given, I’m not entirely sure that this is correct as working hours are not a badge of honour, and results are a better measure on any level. The reality is that it sometimes it takes a monumental effort to achieve a result and sometimes it doesn’t, as timing and opportunity both play a role in determining many outcomes. Just ask a forex trader.
The key ingredient that defines an entrepreneurial leader is their ability to lead an organisation in a fast changing and highly uncertain environment. Entrepreneurial leaders understand ambiguity, and they realise that perfect decisions are not always possible because they are operating in an imperfect environment. Sound familiar? Yes, it describes 2020 to a tee.
Change and uncertainty impact each of us differently. Some of us shine and some of us shrink. An entrepreneurial leader has the ability to remain calm, deconstruct the situation and reconstruct it so that the organisation not only survives, it prospers. Most tellingly, entrepreneurial leaders are able to do this in an environment where the “unknowns” often far outweigh the “knowns”.
Entrepreneurial Leadership and Adversity
Entrepreneurial leaders also have a unique relationship with adversity. They seem to see through it with a vision of what things may look like out the other end. That’s because change almost always brings opportunity. Whether that comes from changes in technology, markets, legislation, regulation or consumer tastes and preferences, change is an open door for entrepreneurs.
History is littered with stories about leaders and businesses born out of adversity. As I reflect on my own past experiences, two of my own businesses were born out of adversity, one of which was launched in a recession and went on to become a successful national enterprise. Although I didn’t plan to launch my business in a recession, it was a gap in the market and my frustration at not being able to secure the kind of job that enabled me to feel that I was contributing in a meaningful way, that motivated me to act.
The goal of this blog post is to share my own experiences in entrepreneurial leadership so I can assist you with yours. This blog briefly tells the story of my own retail business, a story that I have rarely if ever told until today. I now share it with you.
Youthworks Retail Co
After seeing an opportunity to capitalise on an emerging international streetwear trend, I founded the Youthworks fashion retail business in Adelaide South Australia in May 1993. I was inexperienced, under-prepared and under-capitalised. Coincidently, a good friend of mine had told me that if you over analyse every risk associated with launching a new business, you would probably never do it. Thankfully, I did not over analyse things. In this instance, my ignorance was my saviour. Instead, I had a huge amount of energy and I was very persistent. I asked a lot of questions and I was determined to find the answers.
When I launched the first shop, I had little idea how big it would become. At that point in time I was more focused on getting the formula right and more focused on survival than growth.
Some years later, as a lateral expansion of the Youthworks fashion business, I also opened the Sole Shoes “sneaker” chain. Both businesses developed a highly engaged and positive workplace culture, a strong track record for creativity and innovation and the company went on to win numerous industry awards, culminating in the Retailer of the Year Award in 2003.
Youthworks Retail Co, Rundle Mall Adelaide South Australia.
In the formative years of the business in the early 1990s, due to my own inexperience as a business owner, I employed an experienced and talented store manager and adopted a highly collaborative leadership style. In fact, over the years, I maintained that philosophy whereby almost everyone in the company was more skilled than myself in their own field of expertise.
I leaned heavily into my team and they responded. This is sometimes called “referent leadership” and it served me and my small team well. But, as the number of employees grew, my leadership style showed its limitations and I found it increasingly difficult to manage and lead a growing number of team members. I had to start working on the business as well as working in it. The need for policy, procedures, rewards and a more hierarchical management structure soon became apparent. As my own technical, financial and leadership expertise improved, I embraced the use of financial and non-financial rewards as a means of motivating and directing what became a larger team of over 220 employees. Occasionally, I also had to trust my instincts and make the hard call. When I later completed an MBA, I learned that the academics call these techniques “rewards power” and “coercive power”. Sounds a little sinister, doesn’t it? It isn’t.
Leadership Lessons
As the company grew to $25M annual sales across two states in Australia, I did not abandon the use of my referent leadership style, and along with a healthy dose of “gut feeling”, I embraced referent, reward and even coercive leadership as the situation required.
An example of rewards power was the development of a staff induction, training and development program where team members were rated on their participation in the training as well as their subsequent sales results obtained through applying their knowledge. These ratings were then used in assessing future managers and leaders within the company. This program resulted in lower staff turnover and a strong “promote from within the ranks” ideology where team members viewed the retail industry as a valued career and a promotion within the company as recognition of their efforts. I firmly advocated that the most important relationship that anyone held in the company (other than that with the customer) was with the person to whom they immediately reported.
With a workforce made up of full-timers, permanent part-timers and casuals, I also recall being entirely upfront with everyone about how retailing and customer service skills were a pre-requisite for success in almost any industry. Working with people and working in teams are skills not mutually exclusive to the retail industry, they are highly transferable and serve you well irrespective of the career path you follow. On of my other “mantras” was a total aversion to anyone who would even vaguely suggest that they would start to perform only when they were promoted to the next level. My immediate thought was “why would I consider promoting you if you are not performing now?”. Needless to say, those folks never lasted very long in my company. Lastly, the workplace needed to sometimes be spontaneous and fun. We ensured that it was.
These, along with other initiatives, developed a particularly strong company culture that could be considered customer-centric, action orientated and one that valued creativity, innovation and rewarded results.
However, the company’s growth trajectory was not always smooth. Having expanded into the Melbourne market in the late 1990s incurring substantial set-ups costs and trading losses in the early years of doing so, the introduction of GST in year 2000 saw a softening in consumer demand for several months. With flat sales and rising costs, I remember questioning my own sanity. Cash flow was awful. Thankfully, things improved.
However, one of my greatest lessons was the counter intuitive relationship between success and reinvention. I learned that the best time to reinvent the business was when things were going well, not badly. Although this sounds simple, it is not, as when things are going well, every fibre of your being tells you not to change anything. For businesses operating within fast-moving consumer goods sectors, this is especially relevant. When I look back, the Youthworks business successfully reinvented itself three times in twelve years. Starting out as a niche supplier of clothing and accessories for the underground dance club scene, Youthworks purposely evolved into a youth fashion lifestyle brand. It was both evolution and revolution as I was forcing change on the company as much as the marketplace was demanding and accepting it. In the highly competitive arena of youth fashion, it kept us out front.
The formation of a new Youthworks Group corporate entity in 2002 brought about several challenges. Some of those challenges were identified and openly debated by myself and my new business partner prior to the expansion, others were not. Leadership was always going to be a critical factor in determining the success of the proposed expansion program. My business partner had joined Youthworks with a proven ability to found, build, float and divest an international retail group with almost three thousand employees and along with his role as Chairman of the Board, my business partner had huge legitimacy. His track record of achieving results over many years was beyond repute. Youthworks was re-capitalised and plans were laid down to open another retail store every three-months and for the company to migrate more of its supply chain from Australia to various offshore destinations.
Leading Growth
The company moved into a period of rapid growth. We favoured the use of rewards power and the buying staff were soon individually signed up to an attractive bonus incentive program where financial rewards were levied on their ability to move production offshore and improve margins, mark-ups and gross profits. The sales managers and sales teams were similarly signed up to sales reward programs which incentivised them to lift sales in line with the budgets set. Youthworks embraced technology as a means of accelerating information flow and implemented new accounting, point of sale, payroll and inventory management software. The offices and warehousing were both relocated to larger premises.
In an environment of such rapid change, operational challenges were inevitable and some of those challenges were a consequence of our differing leadership styles. With heightened time pressures, managers and buying staff became less consultative which resulted in less buy-in from the sales team. With the sales team making up 80% of the company’s workforce, this provided new challenges and management needed to find more effective ways of communicating the decision-making process. Although Youthworks was by no means in a state of crisis, time constraints became a common excuse for lack of consultation on many issues. In some instances, this resulted in expensive re-working becoming necessary.
The very first store. Youthworks Retail Co, Regent Arcade Adelaide South Australia
Myself and my business partner had differing leadership styles, but not in all instances. I had long subscribed to “The Action-Observation-Reflection Model” and was uncomfortable about not having time to think before making large decisions. In this rapidly changing environment, I sometimes deferred to my business partner’s experience and relied less on my own instincts. This deferment had varied outcomes, some positive, others negative. Our strong focus on financial incentives brought about the rise of more of a “me” based culture, sometimes at the expense of teamwork. It created silos and cliques. While I did not disagree with the role that financial rewards played as a motivational tool, I believed that non-financial rewards were equally important.
I prided myself on being a consistent leader who trusted the company’s employees and applied change by securing buy-in and then empowering the team to deliver. I was not overly rigid in my leadership and management style; however, I was always consistent.
To secure a desired result, my business partner was more willing to attempt various courses of action to secure the best outcome. This leadership approach sometimes left team members not knowing where they stood on a particular issue. On occasion, this approach was viewed as inconsistent and brought about skepticism, discord and even de-motivation. However, as long as we applied our leadership to a situation that best matched our individual leadership styles, the outcome was positive and our leadership effective. If we inadvertently or even purposely attempted to play each other’s role, the consequences were almost always ineffective.
This was a valuable lesson for me, and I hope for you too, as role definition is critically important for any entrepreneurial leader in a fast-moving environment. So is communication, and lots of it.
Youthworks and Sole Shoes went on to achieve annual sales of $25M and sales per square metre measurably above industry averages. In 2005, Youthworks was sold to a publicly listed company and six months later Sole Shoes was sold to a private company. As I look back, the company’s most valuable assets were not its brand, stock, shop fittings or intellectual property, it was its unique culture and talented people. By good fortune, good design or both, Youthworks had an extraordinary workplace culture that undoubtedly helped the company maintain is market leading position.
We have discussed several topics in this blog post, many under the auspices of entrepreneurial leadership. We have also touched upon the topic of reinvention. If you would like to learn more about reinvention, in my role as CEO of Business SA (Chamber of Commerce and Industry South Australia), I invite you to join me for the first of a new series of FREE webinars on the topic. Following on from the success of our recent business RESILIENCE and RECOVERY webinar series, REINVENTION is the third instalment in our regular webinar series where experienced industry practitioners will share their insight.
With restrictions slowly easing, now is the time to make sure your own goals and business model is robust enough to be sustainable and reinventing your products, services or your business itself may be amongst the most important actions you take to navigate the turbulence of 2020.
Our first live webinar event in the REINVENTION webinar series called “Will your business shrink or shine this year?” focuses on the key principles for personal and business success and I look forward to sharing with you my seven key principles for personal and business REINVENTION.
To register for this FREE webinar held on Thursday 30 July 2020 from 6:30 – 7:30pm (Australian Central Standard Time), click ‘Register Here’ below.
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Vale Lincoln. This blog post is in honour of you my friend.
With kind regards,
Martin Haese MBA