Business Stripped Bare Page 3

  Later on, we'll be returning to Virgin's African adventures, and some of the wider political questions this story throws up. For now, though – since we have to start somewhere – let's start at home. Let's start with you. Wouldn't it be wonderful if your company were full of people like the seamstress who accosted me that day in Ulusaba? Think what you could achieve.

  Well, there's no reason why it can't be, and in this chapter I'm going to tell you how Virgin tries to foster the entrepreneurial spirit at every level of its business.

  First of all, take a cold, hard look at your present surroundings.

  Are you really going to be able to empower the people around you? I ask because, for all I know, your workplace may be a sink of despair. And while we've had a few notable successes in this area, it is, I would say, superhumanly difficult to change a company's existing culture.

  Virgin learned this the hard way in 1996, when we acquired Euro Belgian Airlines and turned it into a cheap, cheerful, go-getting budget airline called Virgin Express. Well, that was what Virgin Express was supposed to become. We rebranded the airline and floated 49 per cent of its stock on the Brussels and NASDAQ stock markets. We knew it wouldn't be easy, because we'd be in competition with solid low-cost airlines such as easyJet, Ryanair and Go, with all the benefits they had of being based in the UK. Not only that, we would be based in Belgium (remembering how much it cost us to operate there brings tears to my eyes to this day). Nevertheless, I believed that with a quick transfusion of the Virgin spirit, we could make a go of it.

  Boy, was I wrong.

  Our Brussels-based low-cost carrier was one of the toughest challenges we have faced. Debilitating European regulations on the thirty-five-hour working week and high fixed costs meant that there was little room for radical changes. This is a nightmare when you are trying to run a low-cost operation and arrange rosters and crew patterns. But if it was bad for us, imagine what it was like for the staff. They were cynical about the business, for the very good reason that there was no fun, no camaraderie and no real sense of ownership.

  We set about changing all that – or tried to – and landed feet first in a can of worms: strict union regulations, tortuous pay negotiations, constant strike threats. I had to go in myself and try to sort it out, and it taxed my own legendary reserves of karma. The crucial lesson I learned was: avoid taking on someone else's legacy. In June 1999 I wrote in my notebook with reference to the turmoil at Virgin Express: 'Almost for the first time in my life I can't sleep at night. Fighting the outside world is easy. Trying to make peace among one's own staff is hell. We must never allow another company to get into this mess.'

  As life turned out, shortly after that diary entry we made Neil Burrows the CEO and he set about turning the business around with incredible hard work and great leadership. However, just as Neil had got the costs into line with the most competitive in Europe and finally turned Virgin Express into a credible people business which worked, 9/11 bankrupted our biggest partner SABENA. Eventually, in March 2006, Virgin Express and SN Brussels Airlines merged to create Brussels Airlines and Neil went on to lead the combined businesses merging the two cultures and creating what is today a very successful airline in the capital of Europe. It was a salutary experience, and the business message is clear: if you're in the mood to buy a new business – wait. It can take a long time to change a business culture. Are you sure you wouldn't be better off starting one from scratch? So many business acquisitions end up being disasters because the people involved fail to understand the real challenges involved with getting different types of people to all work together and share the same goals. They look only at the numbers.

  This lesson can be applied more widely, and that's what I want you to do now. Look around you. If the people you're responsible for have already been crushed beyond recognition, and if your bosses are more interested in putting you right than in listening to what you have to say, you are better off hunting out more promising surroundings for yourself.

  Even better, start from scratch. Seek out people with the right spirit, bubbling just beneath the surface, and get working with them.

  The people you need are rare, but they're not hard to spot, so let's start with them.

  You will find the 'Virgin type' of person all over the world. I bump into them frequently in bars, cafes, hotels and small businesses, in libraries, post offices, in hospitals, at the jetty in the Caribbean, even in government offices and the civil service. Virgin types pop up everywhere, and in every nation. These people don't know they're special, but they are; they are out there, and you can spot them.

  If you're in charge of a company, or a human resources department (I hate this description – I call them 'people' departments!), you should be searching for them, too. These people, by their nature and their outlook on life, enjoy working with others. They're attentive. They smile freely. They're often lively, and fun to be with. I don't underestimate qualifications – I just don't assume they're going to tell me anything about a person's character. Having 'savvy' is much more important than having a formal education. The things you learn can only complement who you are – and in my book, who you are counts for a whole lot.

  I am always on the lookout for talent – it's not easy to find energetic and enthusiastic people with the right attitude. We look for people who can grow into their work, and respond with excitement when we give them greater responsibility. Jobs, after all, can be learned. Recently, we noticed two guys doing a brilliant job of running the water-sports activities at a rival hotel. Everyone loved them. We didn't need water-sports people. But we needed managers: and we asked these guys to run our island home in the Caribbean, Necker. In business, someone who can stay cool and calm under pressure is an asset. This is especially true for the Virgin Group, as so much of what we do involves dealing directly with the public. Today's consumer can be very demanding, especially when things aren't going according to plan.

  I want to keep the Virgin Group fresh. So I have tried very hard to re-create, in every company, the atmosphere of Virgin's early years. There's no rule book. The past is the past. We can't preserve it; it would be silly for us to try. But what we can do is look for the next generation of the right sort of people. Like everybody else, we're looking for dedication, and belief, and a willingness to go that extra mile for colleagues and customers. But we keep certain other thoughts in mind, too. It seems to me that when you love what you do, you're too busy to stand on your dignity. When you're good at what you do, you don't worry so much about your image. So I think it's a positive sign when people don't take themselves too seriously.

  Good people have always been at the heart of the Virgin business, and that's largely because we have tried to keep our businesses small, and our management teams tight-knit. I feel that small, compact companies are, generally, better run. This is partly because people feel more connected in smaller companies.

  In an ideal business environment, everybody should have a rough idea of what everyone else is going through. People should be free to talk. Banter is essential. Anonymous, over-formal, regimented surroundings produce mediocre results. Niggling problems either fester, or they end up on your desk. No one runs that extra mile for you.

  And there's another thing you should take into consideration: if your people aren't talking to each other, how are they ever going to get ideas? It was the physicist Albert Einstein who said: 'What a person does on his own, without being stimulated by the thoughts and experiences of others, is even in the best cases rather paltry and monotonous.'

  There are few places more depressing than a room full of people who have nothing to say to each other. So put people together in a way that will have them bouncing ideas off each other, befriending each other, and taking care of each other, and suddenly they are coming to you, not with gripes and problems, but with solutions and great ideas.

  Of course, there'll be friction. People working in small teams, in close proximity with each other, will rub each other up the wron
g way from time to time. But nothing festers. Nothing stalls. People get over their problems. They come into work curious about what the day will bring. They're not having to contend with that dreadful, low-level headache that comes from not quite connecting with the people with whom they're spending most of their day.

  As a manager, you're going to need a modest amount of psychological insight to build great management teams. But practice pays off, and you don't have to agonise over finding exceptional 'characters'. Given the right conditions, exceptional people will reveal themselves. The buzz of Virgin's early years was generated by a diverse mixture of incredible characters. I remember the brilliant Simon Draper, a student from South Africa who became the music buyer for our fledgling business. At Virgin Records, he was our musical sounding board. He was hip, cool, loved music and therefore had an unerring ability for finding fantastic music. He signed some of our best bands, and the music he fostered was the bedrock of our success.

  There's another thing about teams: they don't last for ever. Think of a team as being like the cast in a theatrical play. Actors who work too long together on the same show for too long grow stale. When the business lets you, shake things up a little.

  In the early days, when one of our Virgin companies ended up employing more than a hundred staff, I would ask to see the deputy managing director, the deputy sales manager and the deputy marketing director. I would say to them: 'You are now the managing director, the sales manager and the marketing director of a new company.' Then we would split the company in two. And when either of those companies got to a hundred people, I would once again ask to see the deputies and split the company again.

  Virgin Records birthed nearly twenty different companies in the Notting Hill area of London. Each one would be independent and competing in the marketplace, but they would share the same accounts and invoicing department. Being the managing director of something small – rather than the assistant to the assistant MD of something big – gave people more clout. They were able to take pride in their successes, and they had to learn quickly and well from their failures. They were offered incentives according to how well they did. Although each company was relatively small, collectively the group turned into the largest independent record company in the world, and the most successful. If we'd kept everyone in the same building, I don't think we would have generated the ideas that led to our success.

  Even today, each Virgin company is relatively small, although our airlines and train businesses, by their very nature, have grown significantly. I can't say that I know everyone's name now – indeed, it's been a while since that was the case, but we have tried to retain a culture of intimacy. If we set up a new airline we create a completely separate, stand-alone entity. Virgin Blue in Australia, Virgin Atlantic and Virgin America are independent companies. Our new airline in Russia will be independent, as is Virgin Nigeria, although we have pulled in technical people from Virgin Atlantic to help establish it. We pass and exchange expertise at arm's length. This makes the Virgin Group a fascinating environment for people who work in the airline businesses. One year Virgin people might be working in Britain or South Africa, the next spending time down under in Australia. This is a wonderful way of keeping hold of good people for longer. At Virgin, secondment is a way of life. There has to be a bit of give and take because some of our companies have different ownership structures. But our managing directors usually realise their people can benefit from a cross-fertilisation of ideas and culture.

  There is nothing more demoralising than to work your pants off, only for strangers to be promoted to the senior positions you aspire to. At Virgin, we keep business in the family wherever we can, and we promote from within. The woman who was the managing director of Virgin's recording division started work for Virgin at the Manor Recording Studios; she was the cleaning lady. The manager of the Kasbah, our hotel in Asni, Morocco, first demonstrated her winning ways with people as a masseuse on Virgin Atlantic.

  By 1995, I estimated some thirty people had become millionaires or multimillionaires as a result of starting Virgin businesses – and this didn't include the hundred or so musicians who became millionaires through record sales. Since then we can probably say that another eighty Virgin people have become millionaires in our businesses. This reward is just a by-product of success in business.

  It's a fact of business life that people come and go. The offer of better prospects or career advancement elsewhere will naturally draw good people away from time to time. But what about the others – the ones who leave in order to do much the same thing, for much the same money, elsewhere? What went wrong?

  Managers often assume it's a question of pay. This is lazy of them. Yes, money is important. It's essential to pay people fairly for the job they do, and to share out the profits of a company's success. But throwing money at people isn't the point. When people leave a good company, it's often because they don't feel good themselves. They feel marginalised. They feel ignored. They feel underused. Few people spend every spare hour scouring the jobs pages hunting for a higher salary. Most are driven back into the jobs market by frustration. Their bosses don't listen to them.

  If you have a strong business idea and it falls on stony ground, there is only one possible response: 'Sod it, I'm fed up with this lot. I'm getting out of here.'

  So – managers should listen more?

  It wouldn't do any harm. At Virgin Blue, our Australian domestic air carrier, founder Brett Godfrey's management method dictates that all of the management team have to get out once every three months and 'chuck bags'. This means that they turn out at 4 a.m. and do a full shift with the baggage people. That way they get to understand the problems and the hassles of the job. And because turnaround time is so vital, he also wants to involve and reward the baggage handlers too. Brett has given them bigger incentives to help with getting the planes back on the runway again. He calls them the 'Pit Crew' and has decked them all out in Ferrari red. In some airports baggage handlers have been viewed as the lowest of the low. Not at Virgin Blue.

  For my own part, I always make it a rule, when I'm in a city, to stay, if possible, where the cabin crews hang out. I'm a regular at the Holiday Inn at Potts Point, Sydney, which has certainly enjoyed better days, but its location is superb. I'll stay there with 200 of our cabin crew, so I can spend time with them and hear how they're doing, and if there's anything we should be looking into.

  But we're still missing the point. Maybe your manager is a good listener. Maybe your manager is listening too much, to too many people at once, in too much detail. The thing is, if you have a good business idea, why should you have to ask permission every time? Why can't you just carry it out? Why can't you show it off to your manager in action? Why won't people give you the freedom to try, to succeed, even (horrors) to make mistakes?

  At Virgin, we try as far as we can to make people feel as if they are working for their own company. Our more senior people have share stakes or options in the companies they run and, as a result, we've created a lot of very successful people over the years. But however our staff are employed, every one of them should feel that, in some respect or other, they own their own work.

  Within reason, this is more important to people than their salary. I'll give you an example: Qantas's cabin crew earn $66,400 a year on average based on 'seniority'! Virgin Blue's much younger crews get $40,000. Our crews clock in for over 700 hours a year. Qantas's work for just 660 hours. This difference is likely to be eroded over time as the business matures, but in the meantime Virgin Blue's customers are reaping the advantage in lower fares.

  How is this possible? Are Virgin Blue's staff of poorer quality?

  Not a bit of it. Some people think airline hospitality is an easy job, and maybe it is – on paper. I've tried being an airline steward for a few days and I know just how hard it is. To get it right and have people come back again and again, the staff have to be absolute perfectionists in terms of their customer-service ability. So whereas at some air
lines you could literally go into a pub on a Saturday night, hand out some business cards, train a few people up and that would be it, Virgin Blue puts its guest-facing crew through a rigorous five-stage recruitment process.

  Why would they go through all that for a lower salary? Because Brett has introduced a reward system on Virgin Blue. Instead of creating a climate of fear, he has set things up so that the cabin attendants can take responsibility for their actions. He calls it 'First to Know, First to Fix', so that if cabin crew sort things out and it is recognised then they get a free flight ticket, which they can give out to anyone. This is typical of Brett's approach. Another point he insists on is that people with self-discipline don't need to be treated like naughty schoolchildren. It is important not to hammer people who make mistakes, provided they were made with honest intent.