Richard Pratt knows what works in business: being nimble, fighting bureaucracy and finding the best people – even if they aren’t ‘available’. By Leon Gettler
With Visy Industries getting bigger all the time, billionaire Richard Pratt concedes that the challenge is to keep ideas and innovation fresh. The keys: be nimble, fight bureaucracy and develop the right people. Staying on top requires the kind of leadership and vision not found in management books.
“I can only speak from the experience I have of what has and hasn’t worked for me,” Pratt says. “There are any number of books about managing. Most are not worth reading, because they are written by people who are long on theory and short on practice. In any company it’s important to distinguish between managing and leading. Both are important, but you need strong leadership. People talk about managing change, but you need leadership to set the vision for making the change in the first place.”
Lessons in boxing
The story of how Pratt built an international company from a box factory in Melbourne has been told many times. He came from Poland, where his father, Leon, ran a bicycle shop. He arrived in Australia with his family as a refugee from Nazism. Initially, they joined a group of perhaps 50 Jewish families in a community of orchardists at Shepparton in Victoria and later moved to Melbourne, where they began a cardboard box business in 1948. Pratt started as a salesman at the Visy Board factory and took over when his father died in 1969. A decade later, he went into making paper from recycled waste.
Over the past 55 years, the business has averaged 15% growth a year. Pratt, an inveterate risk-taker, has continued to build the privately owned Visy. It recently integrated Southcorp Packaging Assets – now called Visy Pak – which it acquired in 2001. In 2002, he bought Coca- Cola Amatil’s PET packaging business for $180 million. His only son, Anthony, has turned Visy into the seventh-biggest paper and packaging group in the United States, covering 13 states. Visy has annual sales of about $3 billion, and 7000 staff in Australia and the US.
Pratt has his critics but he commands attention and knows how to draw a crowd. When he opened a recycling plant near Atlanta, Georgia, in 1995, former US president George Bush cut the ribbon. When he opened one in New York, the special guest was Muhammad Ali.
He says that getting the right people is crucial for business success. “We have a saying in my company that goes like this: hire the best person for the job, not the best available; if they’re available, they’re not the best. Give them the best resources. Train them well and tell them exactly what you want them to achieve. Give them a feedback system so they can see how they are doing and show them how to get help. Then, leave them alone to get on with it.”
The most important part of managing people is communicating the vision. “Keep focused on the outcome and don’t get fixated on process. If you have the right people, they will reach the objective. As the business gets bigger, all this becomes harder and harder to do. So, communication becomes even more important, and fighting bureaucracy becomes an obsession.”
Thinking out of the box
The group is now in four business lines: Visy Recycling, Visy Paper, Visy Board and Visy Pak. The big move came . in the 1970s when the company went into paper the initiative took Pratt’s rivals by surprise and transformed the box maker into a very different organisation.
Pratt insists that going into paper was not lateral thinking. The group was “integrating backwards” to provide its own raw material, helping to underwrite the growth that has put Visy where it is today.
“It seemed a natural step at the time. However, we were forced to think laterally about how we did it because we had major capital constraints and that sent us down the path of lower cost: new technology recycling mills that used waste paper rather than huge forestbased, expensive pulp mills.
“As they say, necessity can be the mother of invention. I’d also say that one of the best ways to keep moving forward and encourage creative thinking is to fight complacency before it even has a chance to take hold.
Complacency is the mortal enemy and has probably been the major factor in the slow death of many companies that were previously considered to be invincible.
“As a manager or business leader you must continually ask: Is that the best way to do things? Perhaps there’s a better way. Ask the question of everybody you see from inside and outside the company. I often say if you have an issue or problem, get your five best people in a room. Share your problem with them and pretty soon you’ll have the who, what, when, and where of how to fix it.”
He maintains that a privately run company has advantages over listed competitors. “We can afford to take a long-term view without the pressure of the investment institutions looking for quick returns and dictating our strategy.”
But doesn’t that make access to capital a challenge? Not at all, he says. “We maintain a good, frank and open relationship with our bankers, and capital has never been an issue for us. In fact, we’ve always had access to more capital than we need. The biggest constraint on our growth is people. There are more opportunities to pursue in this country than I could ever name. Visy has the strongest, most dynamic senior management team than at any time in its 55-year history, but one of the biggest challenges we face is people development.”
Part of that development is geared towards an outwardlooking, globally focused culture. “At Visy we send some 300 people overseas each year; not just the senior management but people who work in the operations. It’s a great learning and personal development exercise for them. But the company also benefits hugely from their experience in getting first-hand knowledge of who is doing what in international best practice.”
However, it is an investment and Pratt expects it to deliver returns. “The people who travel are expected to make a real difference to their areas of operation, otherwise they will not get the opportunity to travel again.”
Marketing, one of Visy’s strengths, is about people and culture. And, according to Pratt, it all starts with relationships. “Everything else flows from that. If you have a good relationship with your customer, the business process flows that much more smoothly. In the past, I have been accused of doing business with my friends, to which my response is: ‘You want me to do business with my enemies?’
“At Visy we have a strong emphasis on building relationships with everybody that we do business with. So we have a lot of functions, we do a lot of entertaining, we encourage partner participation, and we try to make business fun. Making it fun is hard work at times, as it requires a lot of hosting and time away from home. But when a good relationship is established, the inevitable challenges of business can be faced together rather than in an adversarial manner.”
How, then, does he get the gorilla into his sales force? Once again, it’s a matter of creating and maintaining the right culture. “Although we do a lot of training of the sales force and in every other area of the business, our sales and marketing is more a cultural thing than a systematised process. People relish working in that culture and stay a long time because they know there will be unlimited opportunities, or they don’t like it and leave after a short time.”
Giving it back
The Pratt Foundation has given more than $10 million to charities in the past year. The foundation has focused on issues such as Aboriginal health, conservation, the arts and mental health. It has supported rural and regional communities and provided scholarships for Year- 12 students at Upfield Secondary College in Melbourne’s northern suburbs. It has assisted the Mirabel Foundation, which helps the orphaned or abandoned children of parents with drug dependency.
For Pratt, philanthropy and business are inextricably linked. “I learned about giving back to the community from my parents, who taught me that business people do not have rights and responsibilities – they only have opportunities and obligations.
“The community effectively gives a business a licence to operate. By being a good member of the community, a business earns the right to keep its licence.”
He believes that more needs to be done to develop philanthropy in Australia. Public companies could start by asking their shareholders to vote on allocating a percentage of profit for philanthropic purposes.
“There is a long tradition of philanthropy in the US. At the same time there is a strong view that welfare and other philanthropic activities are not the responsibility of governments. In Australia – at least partly because of our history and egalitarian culture – we tend to demand a higher level of involvement and support from the government sector.
“Australians are very generous. Just look at the response to a crisis like a drought, flood or bushfire. When faced with a crisis, they pull together and open their hearts and wallets.
“So, perhaps the issue of philanthropy is not being marketed enough to Australian businesses, and they are not seeing the benefits to the community and their own business that flow from it. Any act that a business makes to improve the community in which it operates is in fact an investment in the long-term success of that business.”
In more recent times, Pratt has put his political and financial muscle behind the issue of water conservation. He has offered to put up $100 million to improve the nation’s water infrastructure and efficiency and has called on the Federal Government to make radical changes, including a system of “water bonds” that would attract investors to schemes aimed at fixing the ageing regional water infrastructure. He has also called for tax breaks and low-interest technology loans for irrigators and other farmers.
Water is one of several big issues facing Australia. It is still the lucky country, Pratt says, but it could be a 21st century world leader in the economic, social, and environmental spheres. The problem is that there doesn’t seem to be a shared vision of how this might be achieved.
“More leadership from our business people and politicians would help. Specifically, I would nominate water as one of our biggest challenges. We keep talking about how Australia is the driest continent, yet our national water infrastructure is mostly in poor shape, inefficient and not well managed.
“Not nearly enough is being done to ensure that Australia will have sufficient and sustainable water supplies for our urban and agricultural needs in future generations. Obviously, salinity is linked to the water issue.
“Population is another big challenge. Most Australians still don’t understand the ageing population issue and the drain it is going to put on the entire economy in the decades ahead if we don’t resolve it. Many of them oppose immigration, yet the quality of life they enjoy today is a direct consequence of it.”
Then there is the challenge of education. “We are quite good at educating our elites. The real challenge is to lift the education standards of all our young people so that they can face the future with confidence and help Australia to realise its true potential.”