Markus Jooste, CEO of high-flying Steinhoff, says Investec will miss Stephen Koseff’s strategic brain and "rainmaker" qualities when he retires as CEO.
Jooste has been one of Investec’s clients since the 1980s, dealing directly with Koseff and Bernard Kantor in constructing Steinhoff’s huge cross-border deals. "The top guys are always available for a big deal. You have access to them and the decision-making process is quick," he says.
Nonetheless, Jooste says an institution like Investec is "bigger than any single individual" and that Koseff has an excellent team.
Replacing him won’t be easy. But the skills that built a company to a certain position aren’t necessarily the ones required during its next phase of growth, says Debbie Goodman-Bhyat, CEO of executive search firm Jack Hammer.
It’s a critical point for a company such as Investec, which must soon grapple with the prospect of seeing its CEO, Koseff, depart — a man who built the company from a small bank with less than R1bn in assets to one with more than R2.5 trillion.
The problem is, there’s a big difference between being a founding owner who epitomises the brand, and an employee with share options. (Investec employees, incidentally, do receive shares after six months.)
Investors will be well aware of a large body of research that suggests founder-led companies are more successful than those led by professional managers.
In The Founder’s Mentality, Chris Zook and James Allen, partners at Bain & Company, say there are three consistent qualities in the 200 founder-led companies they analysed: insurgency, a frontline obsession, and an owner’s mind-set.
Insurgents challenge the status quo, "waging war on industry norms", says Allen. This has been true not only of Investec but of companies such as Discovery and Outsurance, which did things differently in the traditionally mundane sectors of medical aid and short-term insurance, respectively.
Discovery’s Adrian Gore and Outsurance’s Willem Roos work hard to keep the spirit of insurgency alive.
"You’ve got such talented and competent people working at Outsurance ... a big part of my job is to make their lives easier, roll rocks out of the way and minimise red tape so they can do their thing," says Roos, who co-founded Outsurance in 1998. He says his job is to fight bureaucracy.
Gore, who co-founded Discovery in 1992 at the age of 28, says: "We’ve tried to instil a culture of continuous innovation [at the company]".
"Our businesses are required to come up with innovative products every year. The positive pressure created by our annual deadline structure ensures that creativity and innovation are institutionalised as part of the company DNA," he says.
Investec’s "frontline obsession" is highlighted by its mission to "break china for the client".
"This means you go out of your way to deliver for the client and that if you don’t think that what the client wants you to do is doable, you tell them upfront," Koseff says.
It is undoubtedly this obsession with customer service that has ensured that the likes of Jooste have remained loyal clients for decades.
"Great leaders do everything they can to reduce the distance between the leadership and the frontline," says Bain’s Zook.
As companies grow larger, "decisions are often made by people who have never made a product or served a customer. Companies with a frontline obsession still make heroes of people in the frontline."
Shoprite’s Whitey Basson understood "frontline obsession" long before management consultants coined the phrase. In the retailer’s early days, Basson would take time off from the office to work as a store clerk, which earned great staff loyalty.
Basson told the Financial Mail: "People said ‘he understands what goes on in the shops, he’s one of our people’. Most of the frustrations experienced by frontline managers were caused by instructions that came from the top."
Basson would then regularly discuss the business with senior managers and buyers.
"People weren’t frightened to share their thoughts with me. We were all the same. We earned different salaries, but we respected each other."
This bred an owner-manager culture, where everyone felt responsible for the business’s performance.
Says Zook: "Founders take full responsibility for decisions. They have a bias to attack problems fast, rather than to delay things or deal with issues via committees."
Leadership, says FirstRand’s Paul Harris, is facilitating good decision making rather than making good decisions. "But then I must be prepared to sit at a round table, not a rectangular table with me at the head.
"That is [FirstRand’s] philosophy and that is why I think our group will continue."
The reason founder CEOs enjoy so much success, says Harris, is that they are prepared to "crawl over the last piece of broken glass to be successful ... They live it, they’ve got the most skin in the game, they’re obsessed with their companies. They have more to lose, and more passion."
Asked what would sustain Discovery long after he’s gone, Gore said its purpose and values — changing lives by helping people live longer and healthier — would sustain the group indefinitely.
"I don’t think of retirement in terms of age. Any leader reaches their sell-by date when they no longer add value. I am still as passionate as when I started out," 53-year-old Gore says.
For Pick n Pay, the transition from founder CEO Raymond Ackerman to Sean Summers was a seamless one, says independent analyst Syd Vianello. Summers came up through the ranks, joining the grocery retailer as a trainee in the 1970s before taking over as CEO in 1999.
Still, interference from Ackerman did give rise to some problems, Vianello adds. For instance, the decision to delay central distribution was Ackerman’s, Vianello believes.
"This was one of the main examples of where they went wrong. It was not so much in the handover as it was in certain strategic decisions where management wanted to go a certain route and the founder decided that was not the way to go."
But his point is that it’s difficult letting go. And whoever takes over from a founder needs to be encouraged to put his or her own stamp on the business, Vianello argues.
Shoprite’s newly appointed CEO, Pieter Engelbrecht, should not try to be "Whitey the second", he says. "There will be no Koseff or Kantor the second."
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.