“I’m a builder. I view business as a puzzle. I picture it, work out what needs to go where in terms of skills, capabilities and solutions, and then I put it together,” explains Karl Westvig, co-founder of Retail Capital.
In 1999, Karl was instrumental in launching and growing RCS, the Foschini Group’s consumer finance business. “We monetised Foschini’s store-card base by creating personal loan products. Once we’d proven the model, we offered third-party credit to the customer bases of others.”
Then, in 2005, Standard Bank acquired a 45% equity stake in RCS, buying out the management share, and giving Karl and his management team an exit. Karl had a three-year contract to work out, but by 2008 he had a decent bank balance, and a blank piece of paper to fill.
“I could have had a small retirement, but I really wasn’t ready for that. I was in my 30s, and I’d had too much fun building RCS. I wanted to build something new. I took a sabbatical to Lake Como in Italy, and set up an Angel investment fund, Como Capital. I wanted to look for interesting opportunities and build them out, but I didn’t want to be involved in the day-to-day operations.”
He invested in five different businesses over two years — and learnt a host of expensive lessons.
“Lesson one, if you don’t have a deep understanding of an industry, you’re unlikely to be successful,” says Karl. “The credit-related businesses I’m involved in are a success; others have been less successful. You can read extensively, but if it’s not your core industry, you don’t know what you don’t know.”
For example, one of the businesses Karl invested in is a self-service recruitment portal. “Our idea was to cut out the middle man — agencies — which made sense to us. We thought we’d revolutionise the industry with our app. But, good tech and great people aren’t enough if you don’t understand your industry. Recruitment is entrenched in corporates. We needed buy-in from people who didn’t engage with technology, and felt the value proposition of our offering threatened their positions. We couldn’t get traction. Plus, the most successful recruitment platform, LinkedIn, was already happening, mobilising people and data.”
Karl’s second big lesson was that it’s easy to start one, even five businesses — but when they all need you at the same time, you have five failing companies. “Start-ups are fun,” he says. “You need a white board, you brainstorm cool stuff, you partner with great people and put some cash in. What’s hard is when things aren’t going well and the business needs you full-time.
“Some of the businesses lost money, one broke-even, one made money, and one’s a great business — that’s Retail Capital. The difference between it and the other four was that as a credit-related business, it was in my wheelhouse. My founding partner also came from a credit background. He spotted the opportunity and we launched together. I was very involved in the start-up — underwriting deals, policies and hiring people, but as the business grew, Dave handled the day-to-day operations. The company didn’t need two bosses.”
For Karl, a successful business needs two things: Passion and knowledge. “We had both. When Dave stepped down and I took over the reins, I knew that to continue feeding my passion as a builder, I had to view the platform we were building as a launchpad for other initiatives. Instead of being involved in other start-ups, I added other products by leveraging the Retail Capital brand, balance sheet and credibility. When you build a business, you create a credit history and a track record. If you leave, you start again from zero. That’s how I continue to tick my personal boxes.”
Karl continues to be a builder within the business. “There are always areas to improve and grow,” he says. “High-growth organisations have different needs to start-ups, but they are still puzzles that need solutions. That’s my focus. Finding ways to continuously build and improve this organisation, for the business and everyone who works for it or does business with us.”
It’s all about the people: The Inner workings of Retail Capital
Here are the top nine lessons Karl Westvig and his team have learnt about motivating, retaining and managing employees.
1. Equity is a misnomer
People place more emotional than economic value on shares. A minority shareholding in a small or untraded business has limited liquidity. The only way you can get something out is if a big buyer comes along.
I believe it’s better to create a structure where top employees participate in the economics of the business and feel like shareholders, but they have an exit opportunity through share option schemes. If you’re using shares to reward or retain top employees, make sure there’s an exit plan.
2. Without net promoter scores, how can you know what’s going on in your business?
We spend a lot of time on our culture internally, and we use net promoter scores for staff and customers to ensure we’re on the right track. At the end of each month we phone every customer we’ve advanced to during the previous month and ask them if they’d recommend us to another company for funding. If we don’t score a 9 or 10, we ask why, and then immediately follow up. We have a full time CRM manager who visits customers to resolve issues.
We run a staff engagement survey biannually, including a net promoter score that asks whether staff would recommend us as a workplace. 9s and 10s are promoters, passives score 7s and 8s, and anyone who scores a 6 and below is a detractor.
3. We take employee experiences seriously
Net promoter scores aren’t just about gauging how happy your employees are. We implemented Gallup’s Q12 survey in 2015, and it’s helped us tackle challenges head-on. The questions are straightforward: Do you understand what’s required of you? Do you have a best friend at work? Do you have all the tools required for you to do your job? Do your peers do as good a job as you do? Have you received recognition in the last seven days from your manager and so on. These questions hone in on your business. We present the findings back to our staff — it’s completely transparent — but we’re also able to pick up on underlying issues that might otherwise be missed.
For example, one of our top sales consultants became a sales manager. Because he was so good, his team kept growing — until it outgrew him. Without this survey, we wouldn’t have realised he needed help until he left or we lost important members of his team. Instead, we were able to scale his team back and put him on a more controlled growth path. This also alerted us to the consequences of outpacing our own growth. There’s always a lag between growth and resources, but if we can see how this affects our employees, we can manage it.
4. Sales is a personal experience, support this
A few years ago, we implemented an ‘explorers’ programme by partnering one call centre agent with two sales consultants. Instead of cold calling, the explorers worked with their sales consultants to set up strategic meetings in specific areas each day, attending some as training. This enabled explorers to develop into consultants.
But something unexpected happened. The number of appointments booked doubled. We realised it was because instead of following a script, hitting a call quota each day and then starting from zero again, the outbound call centre agents were booking meetings for a specific person, and then receiving feedback. The loop was being closed, and it was highly motivating.
5. Think long-term
As we started growing, we needed managers, particularly in sales, and the natural inclination was to promote someone from within. Because we didn’t want to miss out on sales, we let our sales managers continue to sell, competing with their own teams. We soon realised that this was in conflict with the long term value they offered as the team’s support structure.
6. Create a higher purpose for everyone
It’s natural within a sales-driven organisation to have a big sales conference each year and ignore everyone else. We realised this was damaging the company’s morale, and driving a wedge between sales and back-office staff, who needed to work together.
People are scared of changing structures because they fear losing sales people, but by doing so, we reenergised the company. We turned the sales conference into a company conference, bringing everyone together. This led to a marked increase in commitment and overall performance.
When I first arrived, there was unproductive rivalry between sales and underwriting. Sales pushed deals and underwriting said no. By bringing them together at a conference, they started chatting to each other and understanding the process and what would and wouldn’t go through. It broke down barriers and helped deal flow.
As soon as you create a higher purpose, much of that kind of rivalry goes away, and everyone starts looking at the bigger picture, and how things can be achieved together.
7. Belief is half the battle won
We rebranded the business in March 2017. This was the culmination of a lot of changes, and we wanted to pull them all together and give everyone a sense of unified purpose.
Throughout the journey we kept talking about growth. At that stage we were growing at 15% per annum, and we said our aim was 50%. Our sales team said it wasn’t possible. It is, we said. Within two years, instead of doing R15 million a month, we will do R30 million. They still didn’t believe us, and then the metrics started ticking up because of all the other changes we’d made. As the metrics climbed, everyone started believing, and the metrics climbed higher. Belief is a self-fulfilling prophecy.
8. Anything is possible
Two years ago, it took five days to process a deal. I asked our executive responsible for underwriting why it couldn’t be one day. He said that wasn’t possible. ‘Of course it’s possible. Your task is to find a way. How long will you need?’ His response was two months. I told him he had one week, but he didn’t need to do it alone. ‘Gather everyone involved in the process into a room and map it out, then figure out what needs to be fixed.’
By that Friday he reported back to me completely excited. ‘We don’t need to do all the stuff we’ve been doing that takes so long,’ he said. The exercise had revealed how many steps in the process were unnecessary, and they were able to cut deal processing down from five days to two days.
Within two months this simple change radically improved customer experience, gave more visibility to sales people who could understand the process, automated a lot of our business, but most importantly, it changed everyone’s mindsets.
When you have unrealistic expectations of people, it’s amazing how they surprise themselves — and then become the biggest advocates of that change.
This is why an organisation’s belief system is so important. You can have great people, but if they don’t believe, you’ll never have the business you can have. Once they believe, it’s amazing what you can achieve.
9. Foster an active culture
Every business either has an active or passive culture. In passive cultures, the business operates and people carry on. Within that environment, a person might be positively impacting those around them, or doing the exact opposite. In business terms this is known as ‘white anting’, eating the ant’s nest from the inside out. It’s highly destructive. There will always be a passive majority. They don’t hold strong views about the organisation and they just operate. The active minority share their views. These can be positive or negative. If they’re negative in a passive culture, they start controlling the information flow and views within your organisation — like a cancer. But if you’re actively managing your culture, they get exposed.
You can quickly identify who doesn’t want to be there and who is disengaged. Sitting in their office, they won’t be noticed, but on an office breakaway you’ll see who is engaged and who isn’t. Once you’ve identified them you need to determine if you can convert them. These are people with views — if you understand why they are negative and can convert them, you can create a powerful positive influencer within the organisation, but if you can’t you need to exit them.
Whatever you do, foster an active culture. The passive majority will push back at white-anters if you manage your culture. They won’t tolerate negativity in their midst. If you don’t, they take over.