Driving adversity to advantage

By Selwyn Parker

Most people would worry about somebody who planned to launch a freight business without transport. They might also think him foolhardy to do so against three long-established rivals. If they also knew he had only $7200 in capital and had just been fired from his last job which was ominously also in the freight business, they would certainly think the enterprise was doomed.

And if he'd told the doubters he intended this precarious business to endure for the next 100 years, they would probably think him mentally unhinged.

But that's the Mainfreight story - the freight company that in 1978 didn't have trucks, much capital, appropriate licences, or even customers.

By normal standards, its prospects were deeply inauspicious.

But here it is nearly 22 years later, a public company with 1989/99 after-tax profits of $6.9 million on revenue of $286 million, wholly-owned operations in Australia and the United States, and low debt. Two of those rivals - Brambles and TNT - have effectively been driven out of New Zealand and Mainfreight owns the third, Freightways.

As for the hopelessly optimistic entrepreneur, Bruce Plested, he's still managing director at 57 and hasn't retreated a step from the vision of the 100-year company that he had at the outset.

Mainfreight clearly offers a few lessons in managing for the long term. What are its secrets?

According to Plested, one of them is his experience with working men who couldn't abide pretension. After dropping out of teaching eight year-olds at Avondale's New Windsor School, he got a job as a concrete contractor which he remembers as a life-shaping experience.

"Apart from becoming quite a proficient concrete layer, cesspit maker, kerb and channel layer, stormwater drainer, quarry loader driver, truck driver, tea boy and pontoon player, I learned a whole lot of things about working men," he recalls.

"All of them [were] honest and straightforward things, and yet things which I consciously think of most weeks of my life.

"We stuck together, performed work miracles if we perceived it as necessary, mostly did an honest day's work, got our own back for injustices, teased the young or those who couldn't take it, had fun, put down anyone whose self-importance ran away, and laughed at ourselves," he said.

Plested also bears a naked disrespect for those who use authority badly. Having grown up in Grey Lynn with his mother and younger brother, he was always something of a rebel who was once nearly arrested for trying to pay the Auckland Harbour Bridge toll with an Aussie coin and roaring away from the remonstrating toll-collector as fast as his 1953 Hillman Minx would allow.

Much later, he got sacked for insubordination from a freight forwarding subsidiary of Brambles, in spite of running it very profitably.

But by then, armed with a night-school ACA and eight years at Fisher & Paykel - a company he admires enormously and whose former chief executive, Don Rowlands, is Mainfreight's chairman, he was ready to launch his own company.

"I immediately decided to turn this adversity to advantage," remembers Plested. This was 1978.

He recruited an ex-workman, Howard Smith, as a partner, put up his $7200, and went into business. Perhaps the partners' only commercial merits were that they had their feet permanently on the ground, knew the freight-forwarding industry inside out, and understood the value of every last dollar. By luck and a rough-hewn charm, they managed to acquire the essential tools of the business on a shoestring - a depot at half rent for six months, a forklift similarly without cash up front, and a truck on hire purchase.

Having launched cheaply, they barely took a subsistence income out of the business for the next decade. The partners drew just $7000 a year each in salary, which was less than half of Plested's pay at Brambles.

"Don't rob your company," advises Plested.

They managed to do without a bank overdraft for three years, mainly by persuading good customers to pay promptly. And they watched the cashflow like hawks. Weekly and monthly estimates of profits and losses were drawn up - and still are. And they told all their employees what those figures were - and still do.

"We set out to have the lowest real costs in the industry," explains Plested.

Within a few months Plested persuaded a long-time friend, Neil Graham, to join Mainfreight and share responsibilities as joint managing director, an unusual arrangement he swears by, although Graham has since retired from the company.

"The success of Mainfreight has come about very much through us being able to share the responsibilities in the good and bad times," Plested says. "I couldn't make a stronger recommendation than joint managing directors. When we went on sales calls together, the person we called on didn't stand a chance."

Staff at Mainfreight appear somehow to have inherited the partners' rage to succeed and routinely work like steam engines to beat much bigger competitors.

"There have been hundreds and hundreds of times when we jammed our freight through the system under circumstances that seemed impossible," says Plested. They also used every trick in the book to beat the existing competition-stifling transport regulations and to stay in business against what was a Government-backed cartel in everything but name.

Mainfreight doesn't bury its mistakes; indeed the instinctively candid Plested almost advertises them. The setbacks almost always occurred when the partners ventured outside their own industry. In the early 80s they lost several hundred thousand dollars in deer and deer velvet. They lost a further $150,000 when they tried to beat sky-high local interest rates by borrowing offshore. And they lost $1 million on deposit with the financial institution, AIC, when it went under.

Plested's conclusion: "Stick to the knitting. Very few people make fast money and even fewer hold on to it." Possessing a natural curiosity, Plested has strengthened his commonsense approach to management by reading books like Up the Organisation, In Search of Excellence, and Thriving on Chaos.

But none of these books told Mainfreight's partners how to launch a 100-year company on prospects that made even 100 days seem unlikely. The 100-year philosophy is home-grown. "I've always believed that there is a short-term profit and a long-term profit," Plested explains.

"The first is what you must make now, today. The second is the development of a product, service or style that takes time to develop. Not many companies will survive without both." Mainfreight's employment policy also underpins its durability. Very much reflecting the founders' early working lives, it's essentially based on a good day's pay for a big day's work. Mainfreight aims to employ only young, bright and energetic people, preferably between 18 and 24. It pays them well, including divvying up equally 10 per cent of the profit of each branch as an annual bonus.

"Your selling prices should not be subsidised by low salaries," suggests Plested. "Encourage your people to be capitalists. They should be motivated by the profits that the company makes and the opportunities that it creates for them." In return, staff often have to give big hours.

Promotion is almost always from within, but it's deliberately slow, so staff don't overreach themselves. And nearly everybody, including graduates, starts in operations, loading and unloading trucks in the depots.

Individuals matter. At bonus time, just about every employee has a lengthy audience with the managers at which everything's on the table - goals, complaints, performance, everything.

Mainfreight's culture is conscientiously democratic - witness their canteens which have a single long table as a ploy to force everybody to sit together. Dartboards, snooker tables and other diversions are notable by their absence, because the company wants people to converse rather than break up into groups.

As he gets older, adds Plested, he increasingly appreciates the value of the less tangible aspects of management.

"I try and put more emphasis on excellence in everything we do," he explains. "I have to grab some of the younger people and remind them of the importance of excellence. Some of them think it's about profits, but I say 'no, it's about excellence. From that, the profits will come'."

* Contributing writer Selwyn Parker is available at wordz@xtra.co.nz