The Bethlehem Businessman

In this Easter period of reflection, it struck me for how long human beings have been running governments and doing business. Take for example the Biblical story of Jesus’ birth. His parents lived in the village of Nazareth and as luck would have it the Roman government of the day, led by Caesar Augustus, demanded for a census to be held over all Roman occupied territory.

This was not about resource distribution to counties, constituencies and wards. It was quite likely a Roman government move to establish the scope of taxable revenues from colonized domains. Joseph, being the head of the home and a descendant of the house of King David, had to travel south with his very expectant wife to their native home in Bethlehem, “shags” as we would call it here. Bethlehem, according to Google maps, is a good 150.9 kilometres away via the Yitzhak Rabin Highway or Route 6 taking an expected one hour and 58 minutes in 2023. Well it took weeks in those days.

Arriving hot, dusty and exhausted beyond belief, Joseph looked for shelter. Now this is what I found interesting. There were inns in those days, as in places for travelers to sleep overnight. Which means that people used to crisscross the country for various reasons back in the day, be it trade, census or perhaps leisure? After all, Bethlehem is about 30 kilometres from the Dead Sea, a place that could likely have been a great tourist attraction.

But I digress. Even though Bethlehem was Joseph’s native home, it would appear that there were no relatives that could give him a place to sleep. Or maybe the relatives had relocated over the years to brighter lights and bigger cities. Whatever the case, the inn was full and the only shelter that the innkeeper had that could be safe for an expectant mother and deeply worried father was the animal pen next door. The innkeeper was all about finding simple solutions to complex problems. But the long term thinking he should have been having by this time was the need for expansion.

I give this story as last week someone asked me on Twitter when does a micro business start to think about governance structures. The answer to this question is the classic non-answer: it depends. Governance structures are usually put in place to ensure that stakeholder interests are equally monitored and protected. Stakeholders are many in a business and don’t necessarily rank equally in the need for monitoring and protection. They include shareholders, employees, suppliers, customers, the taxman and regulators. All these stakeholders have different demands on the organization and, commensurately, different levers that they can pull to get their demands met.

For a microbusiness, survival is the primary objective of the founder. The Bethlehem innkeeper, for instance, just needs to ensure he gets enough business to keep his doors open and feed his family. Revenues don’t feed families, profits (revenue minus costs) do. As business grows, he needs employees to clean the rooms, cook the food if he has a dining room and serve the guests. He has to pay suppliers of the food, the cleaning materials and whatever else is needed to keep the inn running smoothly. Caesar Augustus has his Kanjo representatives probably hounding the innkeeper for a business licence, a music license, a parking license for guest’s donkeys and then the Roman Revenue Authority officer also comes around every now and then to get income tax.

If he has borrowed from the local shylock to build more rooms, then the shylock is added to the growing list of stakeholders whose needs are to be monitored and protected. The innkeeper can manage all of this by himself, until he cannot. Eventually he will have to hire a manager and, as his business expands, managers.

As he gets older he has to take a step back from the business and appoint a general manager to run the business while he provides oversight. By this time, if the business is still surviving, it cannot be regarded as a microbusiness anymore. Growth and expansion should have taken it into a small or medium sized business. That is how a governance structures begin to set in as all the stakeholders, including the founder and his family want to ensure the business continues to survive beyond the founder. A board, whether advisory or statutory, would help provide the necessary governance oversight beyond the aging innkeeper’s capacity.

Have a restful Easter break.

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Twitter: @carolmusyoka

Founderitis

Uber’s Always Be Hustlin Doctrine

Always be hustlin’ is number seven out of fourteen core cultural values of Uber, the company that has globally transformed the way city residents commute. Well at least those were the 14 core cultural values when founder Travis Kalanick led the organization from 2010 until his game-faced resignation as CEO in 2017 following an embarrassing video recording of an altercation between Kalanick and an Uber driver together with reports of wide spread sexual harassment, bullying and discrimination within the firm. The reports were verified by an independent investigation undertaken by two law firms after interviewing over 400 staff and reviewing more than 3 million internal documents. Kalanick was recorded on video having an argument with one of his drivers about some of the company’s rate reductions. “People are not trusting you anymore,” to which Kalanick replied, “Some people don’t like to take responsibility for their own s***. They blame everything in their life on somebody else.” A conversation that was clearly straight out of the Uber core values play book, of which value number three states “Meritocracy and Toe-Stepping” read together with value number four which states “Principled Confrontation”.
Kalanick’s Oscar award winning apology quickly followed the video’s viral publication. “I must fundamentally change as a leader and grow up. This is the first time I’ve been willing to admit that I need leadership help and I intend to get it.”
Uber’s eight-year exponential growth into a global commuter solution provider, valued at $68 billion as at October 2017, is nothing to sniff at. Even though it came at the great cost of employee well-being and board room governance issues, its impact on the entrepreneurial capacity of ordinary citizens in multiple countries is praise worthy. I recently met Martin (not his real name) in Johannesburg, where he works as a senior manager at one of South Africa’s largest financial institutions. Martin’s 5-year-old son goes to a school about 7 kilometres from where they live and it was costing him 3,000 South African rand a month (Kes 25,800) to pay for school transportation. In an “always be hustlin” spark, Martin purchased a vehicle and recruited a driver. “It was a no-brainer,” Martin tells me. “The driver drops off my son and picks him up from school every day. In between, he makes up to 7,000 rand per week (Kes 60,200). After netting off fuel, the driver gives Martin about 2,000 rand (Kes 17,200) weekly which Martin entirely uses to pay for the car’s financing and insurance and the driver keeps the rest as his earnings which amount can range from 2,000-4,000 rand (Kes 17,200 – Kes 35,400) per week. “I will be breaking even for 18 months, after which the car will be fully paid off and then I can see profit,” he surmises. “But most importantly, I’ve found a cheaper solution to transport my son to school that gives someone employment and also puts money in my pocket.”I’m sure this story is replicated here in Kenya too.
One of the recommendations that came out of the Uber investigations were to reformulatethe company’s values (14 values are unusually many and quite difficult to inculcate as an organizational culture) especially seeing as some were seemingly promoting self-seeking (such as toe-stepping) at the expense of building a team spirit. More importantly, following protracted board room struggles to reduce Kalanick’s power on the board that culminated in a law suit, a refreshed governance structure was formulated following a billion-dollar investment by Softbank.The Uber board has now been expanded from eleven to seventeen members, four of whom are independent directors.
While a seventeen-member board is unwieldy at best, and a strain for any normal person to chair, it is the unintended outcome of a founder CEO’s unfettered grip to power over a fast growing global organization that has had an inarguable impact on urban commutes, entrepreneurship and employment. The jury remains out as to whether this new governance structure at the top, together with a new CEO Dara Khosrowshahi will be sufficient to change an unhealthy organizational culture while maintaining the strong growth momentum it has enjoyed. “Culture is written bottoms up,” was one of Khosrowshahi’s initial statements upon taking up the CEO job. Only time will tell whether the new CEO can upend the trend that cultural norms start at, and are set by, the apex of an organization.
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Twitter: @carolmusyoka