The Employment Tax Incentive is a boon for entrepreneurs who want to hire and develop talented junior employees. However, a recent SARS private ruling highlights that there are limits to how far business owners can take advantage of the ETI.

The ruling concerns a company that enrolled student employees in an external training program managed by a non-profit organisation. The students received a tablet, data and monthly cash stipend as incentives for persevering with their training.

However, while the students were employed for a year, they had to forfeit their salary for the duration of the training program with no guarantee that their employment would be extended thereafter. Furthermore, instead of performing any actual work, their only duty was to attend the virtual training courses.

SARS had to determine whether these students qualified as employees for the purpose of the ETI. According to the ETI Act, an "employee" is any natural person (excluding independent contractors) who:

1. Works directly for someone; and

2. Either receives, or is entitled to receive, remuneration from their employer.

SARS concluded that the students did not satisfy these requirements and, therefore, that the company was not entitled to claim from the ETI.

While this is a private binding ruling and limited to the company in question, it does set a precedent for other entrepreneurs. The ETI is a great opportunity for SMEs to grow their teams cost-efficiently, but creative schemes that border on exploitation won't cut the mustard.

Why do we hire people? As an entrepreneur, it should fundamentally be to increase profit. If a job’s output is less than its input, then that job is eating your profits.

This is the fundamental tenet of sustainability. Anything that needs more energy than it puts out will eventually die.

As a business owner, profit should be a critical metric on your dashboard. (Otherwise why are you in business?) It’s obviously a financial measure, but we could also supplement it with other dashboard indicators, like customer retention, quality, social impact etc. But ultimately these all lead to profits.

Whatever your preferred metric, do you know how each person you’ve hired adds value versus deducts from your profits?

It might be easier to answer this in a small businesses. It’s more likely that one or two dozen people will know what everyone is doing and share accountability than in a company of 20,000 people.

That being said, though, I’ve yet to meet a small business owner who can readily answer how each job in the business affects profits.

The inability to model a role’s value to the organisation’s strategic imperatives is, I believe, a fundamental reason why managers make marginal hiring decisions and why businesses ultimately fail.

It’s most noticeable in big organisations. Think government! The bigger the business, the easier it is for mediocrity to shelter in the shadows, sucking value from the system.

Of course, it’s easy to see how a sales job adds to revenue, or how a quality controller saves costs. But think beyond the individual: if teams succeed due to synergy, do you know how to attribute profits to that team’s effectiveness?

On what basis do you make hiring decisions? If you can’t model how a job—or a team or department—increases revenue or reduces costs, how do you know that job adds more value than it takes?

If you’re a small business owner planning on growth, now is the time to get clear on how each job influences profits. Do it before indifference calcifies. Model it. Quantify it. Talk about it. Make it part of the culture and everyday conversation.

If your people can’t clearly describe how their role adds to profits, don’t expect to stay in business for too long.

Don’t you hate it when colleagues meddle in your job area? Or they make big decisions solo when they should have included you in the process? Or when even minor decisions get bogged down by committees dithering over trivialities?

These are just three of the typical complaints we’ve encountered when working with business owners in family-run companies. And although these ailments aren’t unique to family businesses, they’re far more common and far more damaging in family companies than “regular” companies.

We’ve seen first-hand how family business with family members who are under-involved or over-involved often struggle to realise their full potential in generating wealth and financial freedom for their owning families.

As I wrote recently on the ownership structure of family businesses, they can thrive or suffer from the heavy influence of family relationships on how the business is run. In the ideal family business, family relationships are healthy, everyone likes each other, and decisions and conflict are handled in a consistent way in both family and business environments.

It might seem pedestrian or even touchy-feely, but liking each other plays an outsize role in pre-disposing a culture at work of collaboration, trust, and the benefit of the doubt when mistakes are made. If you’re spending chunks of your leisure time and 40 hours a week at work with the same crowd, not getting along could be traumatic.

The solution to meddlesome families in family businesses is to clarify your governance structures. Specifically, it’s about role clarity and managing boundaries.

(If “governance” sounds like a rude word and has you picture auditors and bureaucracy, it’s time to re-frame it: see my June 2020 primer on how governance affects your wealth. Governance guides how you achieve your vision.  It’s your business system as a wealth-creating asset.)

Managing boundaries between roles is vital in any business, but again, it’s a uniquely tougher challenge in family businesses because of how pre-existing family systems invariably dominate all other contexts, especially at work.

In the same way that your well-meaning aunt plays match-maker in your love life, so might she be just as inclined to insert herself into critical decisions at work. That she’s merely a minority shareholder and not actually employed in the business might be entirely irrelevant in her view.

So how do you ensure family members stay in their lane?

The easier-said-than-done answer is to clarify each family member’s job description or role profile. Starting with best practice for any owner-manager, define the boundaries between your roles as owner versus manager.

The owner role should be a relatively easy starting point: it’s defined in the companies act, plus the rights and obligations for owners of your specific business are set out in the shareholders agreement.

Don’t feel bad if this sounds foreign to you. Many entrepreneurs we’ve met don’t have a shareholders agreement and the companies act is known by name only, not its content!

Next, clarify each family member’s job at work, whether it’s as executive or non-exec director, manager, or even regular non-management employee. Key to this step is ensuring there are no gaps or overlaps between authority limits in the chain of command.

E.g. if the finance director has an upper limit of making investment decisions up to R 1 million, then the MD or board of directors to whom the FD reports should have a lower limit of no lessthan R 1 million. And so on down the reporting hierarchy.

The bigger the business, the more important it is to clarify the boundaries between each layer in the circle of control. After defining the owner role at the centre of the circle, radiate out into the CEO and board of directors layer, then to the management layer and staff layer on the outside.

Underpinning the full relationship map inside the business is the family system. Clarifying role boundaries makes it possible for even non-owning family members to still have touchpoints and visibility within the business, but their path to influence the business is through the clearly-defined layers in the overall governance structure.

The family-business clients we’ve seen succeed in solving family interference at work are those who already have a strong family foundation for resolving conflict. They also prioritise separating their roles in the business from their roles in their family. E.g. a family patriarch might step aside as CEO and report to his son, yet without undermining his family role as patriarch in the family system. (More on succession planning in family business in a future article!)

But that’s not to say prioritising family over business isn’t also a win. Making big changes too quickly at work could well ruffle some feathers at home. So no matter how much growth potential the business might have, allowing it to bumble along to rather preserve family unity is entirely your prerogative as the owners.

Either way, it’s your choice. Just know that fixing relationships at work and growing your family legacy is more achievable than you might think.

(Image credit: The Times of Israel)

An important driver motivating our work at Growth Surge is helping entrepreneurs achieve economic self-reliance and financial freedom. This can be measured by each client we help as well as in macro terms: the health of a country’s small business sector is a useful predictor of economic resilience. That’s why improving entrepreneurial success ought to be a key driver of economic growth.

So it’s good to see media quotes that president Ramaphosa and other top politicians seem to agree. But that’s about as far as my alignment with government goes. The problem is that government is prioritising some bad metrics.

Take for example the rhetoric around job creation and alleviating unemployment. Although it’s a blunt instrument, the unemployment rate* is nonetheless a good-enough indicator at a national level in measuring our collective progress or failure in addressing raging unemployment. (* Defining “unemployed” depends on the spin doctor.)

Except, there are two critical problems with the job creation metric: 1. it’s an output mis-used as an input and, 2. government’s macro targets trickle down the bureaucracies and are mis-applied at the micro level. Both these issues prejudice the small business.

For example, Small Enterprise Development Agency (SEDA) is measured on how many jobs it helps create through its clients, small businesses. Hence, an explicit criterion in SEDA’s grant funding decisions is a venture’s job creation propensity. For every small business funding application reviewed, SEDA asks, “How many jobs will this funding create?” The more jobs forecast, then perversely, the better the scorecard.

Why “perversely”?

If job creation is a relevant criterion in a funding decision, I’d be inclined to penalise it.

All other factors being equal, if only one of two companies can be funded, I’d expect the company with fewer workers to be more likely to succeed. The business with more workers will likely suffer higher management overheads and – importantly from an investor and growth perspective – it’s much harder to scale a business that’s heavily reliant on talent.

And job creation is simply not a priority for entrepreneurs. In all my mentoring and consulting, I’ve not met one business owner who started or expanded their business in order to create jobs. Entrepreneurs’ drivers are either self-preservation or self-enrichment. Benefitting others or at least not harming others is merely an incidental bonus.

There are far more relevant metrics at a micro level that ought to be counted, all of which are standard questions relevant to any investor, including the business owner. E.g. ROI on the funding amount requested, market traction, detailed forecasts built on solid customer- and technical research, and management’s track record, to name a few.

In short, government has FUBARed the cause-effect relationship between the economy and unemployment. Here’s the reality:

Creating more jobs does not grow an economy; instead, jobs grow when the economy grows.

Whether applied at the micro or macro level, the job count (or unemployment rates) is only ever an output metric. The success of neither small business nor the national economy is predicated on creating jobs.

Even at the most micro level where the entrepreneur is the only employee, that worker has a job only because other business factors are in place, notably, there’s at least one paying customer. Hiring more people won’t be justified unless the business can grow its revenue base. Business success drives jobs.

So, whether you’re in business or government, the message is the same: fix (your) business first, then job creation will follow.

Krulak’s Law of Leadership states that the future of an organisation is in the hands of the privates in the field, not the generals back home. To grow a business that can make a difference in the world and create ownership wealth for you, it’s imperative that you grow your people

Charles Krulak is a retired US Marine Corps general who, in a 1999 Marines Magazine article, coined the term “strategic corporal”. His article introduces the Three-Block War concept, where troops simultaneously engage in full-out battle, peacekeeping and humanitarian aid all within three city blocks.

Mission failure – and the death of your team and civilians – is almost guaranteed if decisions cannot be made in the moment at ground level. It’s near-impossible to write policies and train unit leaders for every possible situation that might arise. Instead, the corporals – the lowest-ranking leaders – must be able to think for themselves and immediately lead their teams to execute their decisions.

Increasingly, the world of work is pushing us into situations where it’s not possible to succeed if we must wait for an answer to, “What do I do next?” Agility depends on split-second decisions to exploit time-critical information, and this could have a major impact on your company’s reputation, good or bad.

As the general of your business, you’ve invested your sweat and money in building your business and looking after hard-earned, loyal clients. That could all be decimated in seconds by a junior employee whose public relations blunder is videoed and plastered all over social media. Not only is this an entrepreneur’s nightmare, we see major brands hurt by this almost every week.

Or the right decision by an employee to solve a problem for a delighted customer could be worth thousands in the PR and brand-awareness effect. That worker has  a multiplier effect where their value far exceeds their salary.

In other words, as a high-level leader, it’s your job to empower your front-line leaders to make independent and high-impact decisions.

But how do you do this? Krulak offers 5 principles:

Offer them the freedom to fail and with it, the opportunity to succeed.

Micro-management must become a thing of the past.

Supervision must be complemented by proactive mentoring.

Empower them, hold them strictly accountable for their actions.

Allow the leadership potential within each of them to flourish.

(Brand Minds)

“Leaders are judged, ultimately, by the quality of the leadership reflected in their subordinates.” — Krulak.

Are you employing biological robots, or are you leading leaders?

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(Image credit: UN News Women in Peacekeeping https://news.un.org/en/story/2019/04/1036511)

Gemba is "the actual place", where the work happens. A gemba walk can not only save costs, but improve learning and relationships. Here’s how it works…

If you’ve heard of “kaizen” – continual, iterative improvement through small changes – you’ll easily see how gemba fits in.

Pronounced gem-ba, gemba is more formally defined as “genchi genbutsu”. If you think that sounds Japanese, you’re right! It roughly means, “Go see for yourself to understand.”

In business, gemba is where value is created. For a retail shop, it’s at the shopping aisles and tills; for an actor, it’s on stage; for a farmer, it’s where stuff grows. It’s listening to a call centre agent helping a customer. If you think this is just like the 1970s fad of management by walking around (MBWA), then you’re right again. Sort of.

The overlap between gemba and MBWA is that both eliminate the problems of being a “paper” manager, the risk of managing your project or business through reports and second-hand information. There’s no better way to get in touch with reality than a gemba walk.

Gemba walks with my clients help me quickly see how their business really works. (And sometimes how it doesn’t work, or else why would a management consultant visit, right?) I can take in the actual production line, the smells and sounds, and actually feel the intangible culture. So much more than what financial statements and customer research could ever reveal.

But gemba builds on MBWA by applying some fundamental principles. For example, the main approach of gemba is to observe and learn – it’s not a debate or a witch-hunt. The focus is not the people, but the process. Hence, key values are respect, humility, truthfulness, and tenacity to question until we understand.

It helps to assume the person doing the work has the best knowledge and insights to solve problems. This might not hold true for very small businesses, where the owner-manager is likely to also be the technical expert.

Either way, gemba walks help push down decision-making and support agile process improvement in your business. Why not let your workers write the procedure manual? Resistance to change is minimised. Small changes emphasize common sense and low-cost instead of using big-change, method-oriented consultants.

The economic benefits are obvious: a lean, motivated and self-reliant team will surely perform better and create more owner wealth than a business that’s highly dependent on you.

But don’t do gemba just for the money! Even if there’s no financial pay-off, which is unlikely, gemba offers one of the best ways to strengthen collaborative relationships with your team. Observing and enquiring, as opposed to directing and giving orders, makes for a far more harmonious workplace, doesn’t it?

As much as gemba is good for lean production, kaizen, and efficient processes, it’s a key factor in engaging with people. Through gemba, we strengthen our human connections and, ultimately, we do work that makes a difference.

Because who wants to run a business just for the money?

"When good governance goes missing, so does investor money." As a maxim to encourage good corporate governance, I think Martin Woods hits the nail on the head with this punchy line in his Compliance Week article (29 May, 2020).

Although Woods focusses on rooting out fraud and corruption, governance is not limited to compliance and ethics. In a broader meaning, governance assures that an organisation achieves its vision and strategic goals.

Cheap lawyers and compliance consultants will spin you a yarn about governance involving policies, checklists, due diligence and red tape. Although governance is rooted in the concept of laws for governing, it’s not about making laws for the sake of having laws.

Having a documented strategy (one that’s not out of date!), standard operating procedures (SOPs), policies, templates, records of important decisions, and even culture all have a place under the “governance” banner. They all conspire to ensure that every time a job is done, it’s done right.

Woods references VW’s penalties for defeating EU vehicle emissions tests as an anecdote to encourage whistle-blowing to limit financial- and reputational losses. Cutting corners or cheating a customer might be profitable in the short term, but it will probably catch up with you and cost more later. Exposing wrong-doing is important, but it’s merely a minimum threshold to tick the governance box.

Governance is about the rules for winning, winning whatever it is you’re aiming to achieve. Good governance doesn’t need bureaucracy and paperwork. It shouldn’t be a grudge purchase. Governance is your business system, the engine of your business as a wealth-creating asset.

If you want to build a business that feeds your wealth, start with governance – it starts with you.

Earlier this year, I recommended "Never Split The Difference" (by Chris Voss) and "Start With No" (by Jim Camp). Both books eschew a win-win approach to negotiations that encourages unnecessary concessions and increases the risk of exploitation. Instead, they argue that you should insist on fair value for your solutions and not allow yourself to be manipulated into one-sided agreements.

But what about extreme situations where someone appears to have all the leverage, has no concern for your interests whatsoever, and wants to win at your expense?

For many, the tempting solution is to walk away. However, this won't always be practical. If you are highly dependent on a single customer or supplier, walking away might put everything that you have worked so hard for in jeopardy. It could also have devastating consequences for your staff and other stakeholders.

Even if you can afford to walk away, there will still be a lost opportunity cost. Only negotiating with nice, reasonable people will limit your growth potential. If you can swim with the sharks without being eaten alive, then you will unlock more opportunities for creating wealth and scaling your impact.

Fortunately, there is a definitive handbook for dealing with people who inspire revulsion or dread: "Getting Past No" by William Ury. It focuses exclusively on hostile situations where there is no pretense of civility or cooperation; where the stakes are high and the emotions are higher; where you're sitting across people who have no qualms about being deceitful, manipulative or blatantly coercive.

There is no padding, navel-gazing, or self-aggrandising. The book is crammed with practical advice that you can apply immediately, covering everything from maintaining your composure, defusing antagonists, turning conflict into cooperation, as well as breaking deadlocks and resolving standoffs.

It's impractical to recount everything that I have learnt from Ury's masterpiece. However, some of my favourites include looking for low-cost, high-benefit trades to expand the pool of benefits and avoid zero-sum arguments; helping others save face so that they are more receptive to pivoting from their original position; and disarming belligerent adversaries by querying the legitimacy of their dirty tactics for your own use.

If you've ever felt like David going up against Goliath, this book will be your slingshot.

If there’s one thing we’re learning from the coronavirus debacle, it’s that the slow-to-adapt are likely to perish. And fundamental to adapting to any situation is the ability to learn.

Whether it’s watching a few YouTube tutorials on how to video conference effectively – boy, have I seen some sad Zoom meetings! – or re-inventing your business to sell entirely new products to an entirely new audience, learning is the starting point.

This is not about the luck of a crisis boosting demand, or bad luck if you’re in a “wrong” industry. E-commerce companies are predisposed to thrive in a lockdown –illogical government limits aside – while most manufacturers, retailers and small businesses are suffering.

But unless your business really is at the extreme “unlucky” end of the continuum, there’s a lot you can do to avoid shutting down and maybe even limit downsizing.

Here are 4 principles we use that are not only good for long-term strategy, but can be applied tactically for quick solutions:

1. An intrinsic culture of learning and striving for self-mastery is paramount. This is integral to our philosophy at Growth Surge and how we choose our clients. Tolerate and even encourage acceptable mistakes and risk-taking. This shows up in agile principles of short development cycles, trial and error, and continual feedback. Review key events and decisions. Then make it explicit – see #2.

2. Systemise both individual and organisation learning. E.g. share personal on-the-job learning in master class-style forums. Keeping track of work and progress is a learning function e.g. a central dashboard of key goals for the week. Share and retain institutional knowledge through collaboration tools like Slack, MS Teams, and up-to-date job descriptions, policies and procedure for important processes.

3. Integrate learning into key functions and decisions. E.g. regularly survey customers after each major interaction to learn what worked and what needs fixing. With this, pivoting out of a crisis is more likely to succeed not only because of better market intel, but because you’re certain and confident.

4. Lastly – though there are many more points! – I’ve written about Learning To Learn (Feb. 2020) and I think this applies perfectly here. Budget the time and investment for at least 5 days every 3 months for continuing professional development. Lead by example: don't take a course and keep it secret. Apply point 2 e.g. talk about it, update your business systems.

If you’re trying to keep your business alive and survive the new normal, how is learning supporting this?

In coping with the social distancing response to the Coronavirus pandemic, getting your team out the office and working from home is the best thing we can do to help flatten the curve of infections (New York Times).

It’s easy to rush into hasty decisions – they’re so darn urgent! But as serious as Coronavirus is, it’s not a burning building. You can afford to take an hour or 5 to plan a strategic approach to having your team work from home. So here are 6 areas you need to get right to survive the switch both strategically and immediately. I’ve drawn from my decades of local and international work in virtual project teams as well as some interesting research to back up my anecdotes.

For the Coronavirus pandemic, the effects of social distancing will go far beyond the economic impact of lost revenue, low productivity, and defaulting debtors. Hardest hit will be companies and workers in in-person services or handling physical products – tourism, transport, factories, retail, maintenance, cleaning, and any secondary business supporting these. For these industries, the prognosis is ugly: remote work will be impossible to implement at scale. With little to counter the loss in revenue, reserves will be stretched to protect staff and idle production assets while you hunker through the storm.

Companies with a slightly easier ability to survive are those where remote work is possible in some way. But a good internet connection and the right software are merely 2 elements in a long list of requirements to survive an urgent shift to virtual work. Whether working from home has been a dream or you’ve already experimented with it, now is a good time to make it work for your whole business.

If you’re equivocating the merits of remote work and expecting massive productivity drops, think again. Although there are many pitfalls – a February 2020 Harvard article details some common challenges – many more studies across a variety of industries have shown that remote work generally has greater benefits than disadvantages. For example, Forbes reported in 2012 a study of a Chinese company randomly assigning workers to work from home. Not only did productivity shoot up 13%, but morale improved, sick leave dropped and staff turnover decreased.

As with any decision for a radical change, look beyond the tactical and operational knee-jerk reactions. For a strategic, systemic and systematic approach, here’s what you need to prioritise:

1. First, optimise business processes: organise work streams and job roles so that a person’s wholejob can be done remotely. Remote work is optimised when workers can work from anywhere, all the time, not just some of the time.

2. Standardise your collaboration tools: more than email and WhatsApp, there’s a plethora of apps to satisfy common functions in many industries. The more each worker needs to switch between teams, the greater the need to limit tool variety across teams. For example:

- For shared file storage: DropBox and Google Drive.

- For task management and document collaboration: Office 365, G Suite (Google Docs, Sheets etc.), Trello and Slack.

- Free virtual meeting platforms: Skype, Zoom, WebEx, Discord.

3. Collaboration rules: ensure collaboration works without friction. When everyone’s in the same office, it’s easy calling an ad hoc meeting by just shouting loud enough. That’s impossible in a remote set-up. But having the right tool is no good if people have different ways of using it. E.g. when more than one person speaks at a time in a video call, it’s nearly impossible to actually take in what’s said. So agree on team practices for daily or weekly meeting times, time slots where everyone is expected to be available impromptu, rules of procedure, like how you take turns to speak, and which content is allowed on chat forums, plus a plethora of other courtesies and considerations to ease the flow.

4. Evolve the governance: for co-located teams, a surprisingly high ratio of work allocation and progress updating happens informally. Getting work done without these touchpoints needs formal protocols. A simple team dashboard to plan capacity, track work in progress and see each other’s pipeline helps everyone stay attuned to who is busy with what, keeping the team unified around the common objectives.

5. Support self-management: Working from home is loaded with distractions. No matter how much we love our family, I know many parents who gleefully return to work after maternity leave and school holidays for the pleasure of starting and finishing a task in one go. Help your team manage their work hours and integrate the demands on their schedule between work and domestic duties. The more the physical work space can be separated from the kitchen counter, the easier it is to manage distractions. “Distraction” goes both ways: a physical work space boundary helps workers switch off work mode when they aren’t “at work”. This area is easiest for mature-minded, goal-oriented workers, regardless of their age.

6. Adapt your leadership style: the biggest challenge with losing in-person contact is literally losing the connection with each other. In-office working relationships are underpinned by continual non-work “check-ins”, banter and gossip. Each encounter is loaded with visual and other non-verbal messages which, aggregated over time, are like a movie’s soundtrack, adding depth and meaning to our work experience. Remote work almost completely eliminates the opportunities for social interaction. Even with good quality video meetings, subtle gestures and facial nuances are depleted, leaving mainly gross motion sight and audio as the only sensory channels. The loss compared to in-person communication is like downscaling from a 50-piece chamber orchestra to an out-of-sync amateur quartet. When the background music is bad or missing, it’s easy to misinterpret a playful jibe on a text or email as “that guy just being a jerk again”. This all adds to the most common complaint of remote workers being the loneliness. So as leader, consciously design your team’s interactions to compensate for this loss of connection.

With the world’s current and correct focus on flattening the Coronavirus infection curve, joining the panic would be effortless. So stop, breathe deeply, and think about the big picture like the visionary you are.

Now, tell me how you can strategically exploit the benefits of remote working. Let’s share the learning.