We were lucky enough to have a really incredible chat with Mainfreight CEO Don Braid about what he has learnt as the CEO of Mainfreight. Mainfreight is the fourth largest company in NZ, doing over $3 billion in sales and over $300 million in EBITDA, with physical assets of $1.5 billion and debt of less than $200 million. They have over 8500 staff in 280+ locations across 28 countries, so it was pretty cool (and humbling) for us to be able to chat to Don with some of our Business Changing clients recently. See the full transcript below.
Zac: Mainfreight was started back in the late seventies by Bruce Plested, who is the chairman now. Don joined in 1994 and he’s been on the board since 2000 and the CEO for a heck of a long time. So Don, my first question is what’s been your main focus the past two months during Covid times and leading Mainfreight and global business?
Don: It’s been interesting! We got a taste of what was to come early in the piece with our Chinese business and seeing what they were going through. Once it became a global pandemic we needed to react and adapt as quickly as we could. The NZ team, who had really done a great job through the Kaikoura and Christchurch earthquakes, quickly put together a plan on how to react. So the idea was to make sure that our people were right, that our systems were ok, what customers could trade, and how we could help those customers as an essential service. What we put in place here in New Zealand became the blueprint for the organization around the world.
So we’ve got eight and a half thousand people and 282 locations. They’re all networked, but they’re all distanced so we knew we needed to communicate really well with them and have a blueprint that we know would work. Then we just sat back and allowed the de-centralized process to take over and allowed people to take responsibility to get their businesses sorted and in line. And then it was a matter of communication and staying in touch, making sure everyone was okay, making sure any questions were answered. And I suppose the key thing that we had in our mind was how are we going to run this business to survive and not make anybody redundant. That was uppermost in our mind.
What’s interesting when you go into a pandemic or an event like this is what the balance sheet looks like. Leading into this, we had a number of market analysts suggesting our balance sheet was lazy and you know, undercooked. But well and behold, we’re in the perfect position — not a lot of debt, trading really well, coming off a really good financial year the year before. Yes, we’d committed an enormous amount of capital expenditure coming into this new financial year, but we were in good shape in that the balance sheet looks pretty good. So for the first couple of weeks of lockdown in New Zealand, we were wondering, how deep is this going to go? Then we got some momentum and we saw some of the other regions doing better than what we thought so we felt better about it. And in applying that New Zealand blueprint to all regions, we knew we were pretty much in control.
Zac: What is the Mainfreight way when it comes to culture?
Don: The culture is really important and our culture starts with those closest to the customer. So we have these 282 locations across 20 countries — how do we get them each operating at their peak, every day? The trick is to decentralize it and to give them control of the profit and loss, allow them to have sufficient KPIs, and measurement systems to monitor those as quickly as possible so that nothing gets out of control. Getting decisions made as close to the customer as possible is probably our secret — and giving that responsibility to those in the branches. That’s the best way of being able to manage an event like we’re in right now, but I’d say it’s the best way to run a business at all times.
We have some really good systems. As an example, we know what money we’ve made or lost last week in every single one of those 282 branches as of about half an hour ago. More importantly, the people in those branches know what they did last week, and which were the right decisions or the wrong decisions. They know that now and can alter those decisions as they head into the week in front of them. That’s the key.
Zac: Don, having a decentralized business, what’s been your approach to leadership? And what do you believe leaders need to excel at?
Don: With this decentralized approach, those P&Ls we’re talking about, they’re part of everyday life at Mainfreight — those P&Ls go up on the cafeteria wall. So it doesn’t matter whether you’re loading freight, taking customer service calls, out making sales calls, or an operations transport manager, you understand those disciplines early on in the piece. I suppose we’re grooming people all the time for those loaded leadership roles.
Early in the piece at Mainfreight, leaders are given responsibility, so the ability to take responsibility and to make decisions is pretty important. For us it’s about pushing the decision-making as close to the customer as possible, getting those people to make decisions rather than pushing them upstairs for someone else to make. Those people become good leaders early in the piece — they might be only leading a couple of people by the time they make branch manager status but they understand the roles of leadership within Mainfreight. The branch managers are the kings and queens, by the way, because that’s where the money’s made — the national team is just there to support the branch managers.
Ideal traits we want to see in leaders are integrity, being trustworthy and capable of bottom up decision-making, not top down. Part of our recruitment process is to get them to go through the system and learn the business from the floor up: you start by pushing a broom or running documents to Customs. Their understanding of disciplines and what the expectations are embedded early on so our culture is strong… and then you give them responsibility. Some people don’t want any more responsibility — they find their own ceiling and that’s fine. It’s Mainfreight’s style to offer career progression, giving people here a long-term career in the business, allowing them to find that space to develop the leadership traits. We offer lots of training as well, internally and externally.
Zac: Don, your 100-year vision — how does that work?
Don: For us, it’s not about the short game, it’s about the long game. We’re thinking about being around for a hundred years. We’re not thinking about selling our shares, we’re not thinking of getting out when the going’s good — we’re here for the good and the bad — so we’re preparing the business for that next 100 years. So we are developing our people to be the best they possibly can be. We’d rather own assets than lease them. If we’re going to build facilities for our people, we build very good facilities to be around for a long time. The relationships we develop, both with suppliers and with customers, are there for the long term. We’d prefer to shake hands and know that our integrity and the way that we do business works with our partners long term. So everything that we do is about being here for a long time.
Zac: I’m keen to understand what do you think are common reasons why many businesses fail to reach their maximum potential?
Don: Sometimes I think people don’t recognise or believe or have enough passion in what they’ve developed. And sometimes, particularly so in New Zealand, they see the market ultimately being as quite small, when in fact their product or service is good enough to take to the world. The opportunities offshore and the populations that exist in some of those other countries are large; you only have to get something half right in some of those countries and you’re growing a big business compared to what you have here in New Zealand. So you need to be committed for the long term.
The cliché about the beach, the BMW and the boat — it looks pretty attractive after 10 years of hard work but what could you have created after a hundred years and have you got something that’s a bit special?
I think you need passion, energy, belief and the ability to develop people to run the business for the future. Bruce would be the first person to say he needed to have great leadership following him if he wanted to bring his hundred year vision to life. So you need to make sure you’ve got succession planning to be able to work on the dream that you’re creating.
Zac: As the leader of Mainfreight, what do you personally focus on to get the team going in the right direction?
Don: I get out of the way. I give them the ability and the responsibility to deliver, and I give them great support and lots of guidance. With Covid, the New Zealand team would meet every day for the first four weeks during lockdown. We would meet with them once a week and they’d share what they’d discovered and what they hadn’t discovered and we’d give them some guidance but then get out of their way and let them get on with the job. The reality is, this leadership team in New Zealand has been through the earthquakes and the GFC and now the pandemic. So long term, we have a really experienced leadership team. It doesn’t matter what the world’s thrown at them, they’ve shown they are capable of dealing with it. The worst thing we could do is slow them down with bureaucracy, making them tick a lot of boxes. I think it’s about ready-fire-aim: making sure we’re steady, allowing decisions to be made, and shaking them up as we get on. Not living as a question mark but instead getting on with it and making those decisions.
Zac: How do you prioritise where to spend your time in a normal week?
Don: It should be where your skills are. For me it’s being in the business, with people and in particular with customers. Early in my career I understood that I enjoyed the interaction with customers and in fact I enjoy the challenge of helping win new customers. The key for me is to be in the business as much as possible, to be visible. That means a lot of travel, but the reality is I thought my skills were best used in front of a customer so that’s what I focused on.
Zac: Aside from being in front of customers, what else do you spend your weeks focusing on as the global CEO of Mainfreight?
Don: We do weekly reporting on a Monday so you always understand how well you’ve gone across the business and across the network. It’s an intimate touch with the P&L; the weeklies tell us lot. Aside from travel (usually), customers, and communicating with those in other countries I spend my time in front of our people and our leadership team, no matter where they are located. And then it’s about exploring the long game. What have we got right? What haven’t we got right? Where do we need to be? Where should we open next? What do those customers look for from us? How are we changing the business accordingly? I’m always exploring those opportunities and may be experimenting in particular regions or with particular customers before implementing that across the rest of the business. Early on, New Zealand had great lessons to take to the rest of our network. As we’ve matured and grown around the rest of network, we’re now learning things that we can bring back to New Zealand. So a lot is about the long game.
Zac: Can you share what some of the great ideas you’ve actually brought from overseas have been?
Don: There’s been lots of things actually, like electric forklifts, the use of solar power… Here’s a good example: in New Zealand we’ve never had time clocks. You know, people arrive when they arrive and they leave when they leave. It’s the individual’s responsibility to arrive on time and stay until the job’s finished. Well in Europe they had these time clocks. Once we convinced them that they didn’t need a time clock, they took to them with a sledgehammer. There’s a video of it happening and what was really exciting was once the clock came off the wall, you could hear the laughter and the clapping and the voices of approval from those who were watching. They couldn’t believe we trusted them to turn up when we needed them to turn up and leave when we needed them to leave. Us taking away that clock was about responsibility and about taking away that control from head office. Out of that, I think we’ve got the culture really starting to develop.
Zac: Let’s talk more about those weekly P&Ls…
Don: Well, the numbers never lie, right? So the weekly P&L puts them on the spot. At the end of the day, the decisions they made will be seen in the weekly results. If they’re not on their game, you can see that really quickly so you either get alongside them and help them or if it goes on for too long you realise we’ve got the wrong person in the wrong role and we’ve got to change them. And that’s that.
By the way, it’s not just about us seeing those numbers. It’s about the other employees seeing the numbers; don’t forget, we share those profits with our people too so there’s internal pressure to perform too. If our team on the dock is seeing poor decision-making that’s eroding profitability, they will suffer because they share that profit so there comes internal pressure just as much from them as there is from us, looking at how the business is progressing.
Zac: Can you share more about your profit share? How does that actually work, practically?
Don: What we do is measure profit before tax at the branch level and that includes interest and depreciation. There’s no bullshit in the numbers, they are what the business has earned. There’s no cross subsidies. Everyone stands on their own two feet. So what you produce in terms of profitability is real. Initially we’d take 10% of that profit and share it equally with everybody in the branch but as we’ve developed and gotten a little more sophisticated, we’ve applied quality stats to the numbers. So each person can earn some more money by not just making profit, but keeping customers happy, keeping claims to a lower amount, making sure we’re collecting cash, making sure that we’re delivering freight in full and on time… but the base bonus, everybody gets the same amount no matter whether you’ve been there for one year or for 40 years and no matter what your position is. You need to have been there 12 months to earn the full bonus that everybody else gets. And if you don’t make a profit, there’s no bonus that year.
Zac: Don, if you owned your own SME business at the moment, what would you be focusing on going forward to be as successful as you could be under this environment?
Don: With this event in front of us right now, I think cash is king, and the collection of cash. The government is pushing really hard for the major New Zealand companies to pay their suppliers on time, within 30 days. We applaud that; we’ve always paid every supplier on the 20th of the month following and we ask the same of our customers. You can be profitable and not collect the cash and go broke. So I think cashflow is king and I’d be focused on that.
I’d also be really focused on being in touch with customers. What’s changed? What are their requirements? Is our service or a product still current? Should it change? What else do we need to do to satisfy that bunch of customers? How do I gain more customers? What more could I be doing in the business to actually grow my revenues in these difficult times? We’ve got examples of that in our business right now. We’ve needed to adjust, particularly in the international sector, air freight charters rather than just normal air freight — our people had never had any experience in chartering a full plane. I think we’ve done 17 to date since Covid and we’ve got another six or eight for the next two weeks just for New Zealand and they’ve adapted.
It’s important to be as flexible as we can to bring an offering that the customer requires during a really tough time.
Things are changing a little bit and everyone’s suggesting that it’s all going to go to eCommerce. I don’t believe that. I’m sure that everyone on this video call will be wanting to shake hands and sit across the table and deal face to face because of the body language thing and being able to ask more questions, whereas the video is quite limiting. We will probably go back to normal but be ready to adapt, be flexible and look after your people — they’ll bring the answers to the table for you on what your business will look like in the future.
Zac: Mainfreight is obviously a massive employer with almost 9000 staff across the world. As you get bigger, staff engagement and culture becomes more difficult. How do you maintain a positive culture and a time of crisis? How do you measure this?
Don: The recruitment of our people sits with the branch managers. So you’re not only giving them a responsibility for the P&L, but you’re also giving them the responsibility of who’s going to join our family. We don’t call them staff — for us, they are our people or our team. We ask our people to recruit very good people with passion and energy; people good enough to become branch managers. I think the only measure of whether we’ve got the culture right will be seen in the numbers and in the customer service. And that’s why we travel a lot — when you visit, you can smell the morale in an instant. It’s whether the toilet’s clean, the cafeteria clean, have people got a smile on their face? Those are the real world indicators of whether you’ve got morale correct or not or whether you’ve got some issues going on you need to address.
You’ve got to break it down. You can’t see yourself as an employer of 8500 people. You’ve got to think about that as small groups of people looking after our customers and each group is important in their own right and they’ll have their own little traits. They’ll have the Mainfreight culture, but it’ll have a little twist — for example, the culture in Shanghai is different to the culture in Newark or the Netherlands or Sydney. It’s about making sure they don’t lose the disciplines that make us who we are but embracing them as people delivering for our customers.
Zac: What’s a bit of business advice you can share?
Don: I think empathy is really important. To trust your people too, to give them the responsibility. People thrive on being given responsibility. I learned that early in the piece and I think it’s stood me in good stead. If you trust your people, look after them and give them responsibility, they’ll deliver. Look after your people and they’ll look after the business.
Zac: How do you manage stress?
Don: I’m not sure it’s stress. I might get a little bit wound up about stuff, a bit passionate about things, but I think you can’t get so involved that you think about nothing else. You’ve got to have good outlets. I don’t see this as a job, so therefore the stress levels aren’t as strong. And if you surround yourself with really good people, the stress is actually spread across everybody and you don’t wear it all on your own shoulders. And I think ultimately, yes, I’m responsible for the business, but I enjoy what I do and having great people and a good lifestyle where I can stay fit and have some fun means the stress levels aren’t that high.
Zac: What are your thoughts on driverless trucks and how they will affect Mainfreight?
Don: I think it’s quite a long way off. We’ve sort of tucked on the back of some trials in Europe and in the States where they were running in threes and fours behind each other, all connected by a computer. While there was someone in the driver’s seat, the computer took over the vehicle. But they had different regulations for different countries: it was a metre between the two trucks, it was a metre and half in Belgium, and it was two meters in France. So all the bureaucracy that goes on is increasing the amount of time that we’ll see some of those things arrive. I think our owner drivers are a key component of the relationship with the customer. I think with a driverless truck, we’ll lose that ability of interaction with the customer on pickup or on delivery. I’m not sure we’ll see driverless trucks in NZ for some time to come.
Zac: Don, what makes you good? What are the things you do that maybe others don’t do that actually make you lead this organization?
Don: Um, I think it’s recognising good people. It’s having empathy and I think I’m patient, determined, have belief and energy. I really want to be in front of those customers! As a young salesperson aged 19, I couldn’t make a cold call. I could not get out of the car and go and meet a stranger to ask for the business — and now I actually prefer to do that! It’s even more exciting doing that in offshore markets with a really big customer where you’re actually sitting in front of them and we know we will turn our industry upside down by winning quite large business off the incumbents. It’s a huge level of success and there’s satisfaction you get from that. I feed off that and suppose the people in our business like seeing that and see it as an example and follow. I just have a belief and determination that we’ve got a pretty good business here. It’s great fun.