Clicks Group's HR director Bertina Engelbrecht on how they got their ESOP right
The company's employee share ownership programme has transformed its talent attraction and retention efforts.
Clicks Group HR director Bertina Engelbrecht says HR has transformed quite significantly in the 12 years since she joined the company. For one thing, HR wasn’t recognised a critical function in the organisation but the CEO, who is now retiring, played a huge role in changing that. When she joined, there was no representative of HR on the executive leadership team. She was appointed to the board within a year and that was all down to the CEO.
She says the company was close to non-compliance when it came to transformation metrics and her immediate objective in the early days was simply to convey to the board that if it continued in that vein, it would have an adverse effect on the performance of the business. Essentially, the company was straying towards a culture of treating employees as commodities, which Bertina says only costs organisations more in the long run because, when that is the case, the only way to attract and retain the best talent is to pay them more money that they would be able to earn elsewhere.
“What you really want is people whose hearts and souls are with the organisation,” says Bertina, whose involvement in the introduction of an Employee Share Ownership Programme (ESOP) at Clicks is one of the things she has been most proud of in her time at the company.
The point of departure was to find a way to advance the transformation agenda of the organisation while also supporting the attraction and retention of scarce and critical skills. They also wanted to find a way to reward the loyalty of people who had been involved in building the company over an extended period of time. The share scheme was the answer. That said, very few companies had been able to get their ESOPs right, with many coming under criticisms for being skewed more towards the interests of management than those of employees. However, Clicks seems to have got it right, having made the first payout this year wherein employees received the first half of their benefit, the value of which amounted to almost double their annual salaries.
“When we started the programme in 2011, we were not the most empowered or diverse organisation in terms of gender equity but we have achieved that since then and that is reflected in the fact that more than 60 percent of our employees are now female,” says Bertina. “Our labour turnover rate has decreased quite significantly in that time as well, allowing us to keep our critical talent much longer than we had been able to do before the ESOP. It has also allowed us to improve our ability to attract the kind of talent that we are looking for. This is reflected in our time-to-hire metric, which reflects the time elapsed between the advertising and filling of a vacancy."
Fairness at the heart of it all
A mother of one, Bertina enjoys all types of music from hip-hop to classical music and jazz. She also loves reading, to the point that she is now running out of space for books in her home. Her husband is a religious leader, and her faith is an extremely important part of who she is and the values she espouses. It is perhaps the reason why fairness is tantamount to the way she executes her role. Its importance is reflected in the near-perfect record that Clicks has at the Commission for Conciliation, Mediation and Arbitration.
On how they managed to get the ESOP right, Bertina says she worked very closely with the finance director and that this was an important part of that process because, at around R150 million per month, Clicks’ staff costs are the largest single expense in the organisation. It therefore makes sense to put effort into getting the best out of those people and ensuring that they are putting great effort into their work. To do that, they embarked on finding ways to make employees feel committed to the growth and success of the business and giving them a stake in it was very effective in achieving that.
“We set aside 10 percent of the issued share capital of the company, which in total amounted to about R3 billion. It is one of the few ESOPs that have really delivered gains to employees.”
She says it also helped that there are only four people in the executive leadership team, which makes for a very close working relationship. They have always agreed to put people first because they are the most important asset in the business, and that has meant she has been able to avoid the challenges that some of her fellow HR leaders may have had with such programmes.
Says Bertina: “Finance also has to work closely with HR when it comes to incentive design. If you want to incentivise performance or a particular behavioural competency, you have to include finance in those discussions. If you want to incentivise collaboration, for example, you have to work with finance to come up with a model that can then be taken to the boardroom and presented as a business case. Otherwise, you might be able to come up with great ideas that the board will never approve because there are no tangible benefits that are presented alongside them.”
Communicate with and educate employees
Bertina says it was important to choose partners very well when introducing an ESOP. Clicks worked with Investec, along with a team of lawyers, on the design of the programme and to make sure they met all of the JSE’s requirements because it can be a very complex process when a company is listed on the stock exchange.
"Communication is also of the utmost importance because, when you are talking to your employees about the ESOP, you want to ensure that they are fully aware of their options and benefits. Otherwise, it defeats the purpose of having an ESOP in the first place."
“Our employees understand exactly how the ESOP works and they are able to calculate for themselves what their benefits should be. We made sure that we educated our employees to avoid horror stories of people spending their payouts on flashy cars and having nothing to show for it in the years that follow. Many of the employees used their payout to educate their children, take themselves on courses, or pay debts,” she says.
“There is one employee that came to me in one of our break rooms and told me that he had never been abroad but was now going to go to Japan in 2019 for the Rugby World Cup. It is really heart-warming to hear those kinds of stories.”
Reaping the benefits
The ESOP has undoubtedly been a success. And this is evidenced by the fact that Clicks CEO David Kneale is retiring in January and his successor is going to be appointed from within the business. Similarly, all structural changes in the organisation that result from that person’s promotion will be accommodated internally.
“It’s quite an achievement to be able to say we have all the people that we need in the organisation already. That alone is reason enough to believe the ESOP has been extremely successful,” says Bertina.