Why we divide surplus profit at Webmart
Simon Biltcliffe, February 16, 2017
Money is neither inherently good or bad. Having enough, however, is powerful
Having too much money does not make you happier and poverty is no fun, so I use the redistributive powers of Marxism to create a fairer distribution of this finite resource.
First we use capitalism to create value. It’s called profit, and from this all good things emanate. Nothing creates value but business – everything else distributes the surplus. As long as you retain enough to develop and reinvest, and as long as the ownership group have enough that they continue to support, guide, and nurture the leadership team and its successors, there is usually surplus. Webmart shares this out equally; we divide the surplus profits by the base salary of everybody who has been there two years or more.
You need to give the biggest opportunities to the brightest people (irrespective of seniority), wrapped in a comfort blanket of appreciation whether they succeed or fail.
Make those developing services and products the same age as those you’re selling to. It’s critical not to have 51-year-old blokes (like me) creating ways of working with customers who are in their twenties. I have inverted our management structure so I am at the bottom looking up supporting the leadership team, who in turn support their management team, who in turn support the frontline troops, who are usually around the age of the majority of customers.
But getting the right kind of people is really difficult. We try and filter out the wrong sort at the earliest opportunity. It starts with a Skype ‘chat’… even if they’re just down the road. That’s there as a Darwinian selection tool so those not comfortable with technology self-select out.
To stay in the team (everybody has a minimum six months’ probation) we vote on each person after three months, anonymously. It asks everybody to rank the person on engagement with the business, personal traits, and if they have a long-term Webmarteer inside them. We do this again at the six-month mark and every six months thereafter. As CEO mine is the only one made public, which keeps the accountability all the way through the organisation.
By combining all these things you get a business that is self-aligning (the profit motive ensures this), and self-regulating (nobody generally does anything that would hurt somebody else because it would hurt them). And it doesn’t need a HR department because the purpose is clear, the running of the business is transparent, and the people are intellectually, emotionally and financially rewarded, so it more or less self-runs.
It’s not utopian and there are things you can always improve. But it’s served us well as a print procurement business. In a very mature market that has been through significant change we have consistently made profit for 20 years without ever borrowing a penny.
Capitalism is very good at allocating resources to maximise the value it creates, but very inefficient in distributing that to benefit all. It’s also poor at taking into account externalities such as environmental cost and human exploitation. Marxist principles work for distributing value back to its creators, but is pretty pathetic at creating any value in the first place. So we need a combination of the two. Simple.
Simon Biltcliffe is founder and CEO of Webmart