Harris Farm Markets chair Catherine Harris chats to Zilla Efrat about the trials and tribulations of running a family board.
These days, Harris Farm Markets has 21 outlets and employs over 1000 people. But running this family business hasn’t always been smooth sailing.
The business Catherine Harris PSM AO FAICD and her husband David started from a single shop in Villawood soon after they graduated from university in 1971 had grown to a chain of 35 stores in the mid 1980s. In fact, it had been expanding so fast that they were forced to bring in an equity partner to help them sustain this growth. And then everything went pear-shaped.
“The story was so similar to what we are seeing today,” says Harris. “The investor’s cash box ran out with a bad investment overseas. They went into receivership. They tried to sell us. We tried to hold it all together. The whole thing collapsed and we lost nearly everything.
“We took over their debt, but interest rates were running at between 14 and 17 per cent. We went from 35 to three stores. We worked with our bank, with which we had a very good relationship, and sold the other stores.
“It was a real trial of fire, but we learnt so much from that period.”
So what are the key lessons learnt since then? “Restrict your borrowings,” says Harris.
“These days, we also budget and forecast better than we did before. We do much better analysis of sites, of sales and of costs. We really do know and understand our margins in every category so much better than in the past. We used to just focus on sales, but now we focus on sales, costs and margins. Marketing is also very important, especially being quick and versatile. Marketing should also say something about you as a company, about your values. ”
The couple started all over. Harris was again forced to become the sole breadwinner of the family. She had done this before when the business was first started and no income was coming in by taking up a management role at what was then Grace Brothers.
And, when the equity partner came in later, it gave her the opportunity to do her own thing again. So she started an international marketing company in tourism and sat on the Federal Government’s Best Practice Demonstration Program and chaired St Margaret’s Women’s Hospital.
Soon she was headhunted to become the CEO of the Federal Government’s Affirmative Action Agency. “This job really involved looking inside the culture of organisations. The whole agency was turned around to be about cultural change. We had some big wins and I also became involved with other corporations,” she says.
By 2000, she was deputy Chancellor of the University of New South Wales (UNSW), on the board of the Australian Defence Force Academy and recognised by the Government with the Public Service Medal and an Order of Australia.
Meanwhile, David had built up the business up to five stores. “He rang me up one day and said: ‘You have had fifteen years in corporate Australia. I now need the constraints, infrastructure and the framework that big corporations have, so what happened to Harris Farm last time won’t happen again’.”
So Harris went back. “The expertise I brought related to the things that big corporates have in place, like key performance indicators, systems and disciplines. David, with his unparalleled knowledge of the industry, brought agility, lateral thinking and innovation. Part of the success of Harris Farm is that we bring this breadth to the board. It is a winning formula.”
The business has been rebuilt, but with little debt and certainly isn’t looking for any equity partners. And, at present, business couldn’t be better. “I am very aware of the impact the financial crisis is having. But in our business, we are benefiting from people bunkering down. People aren’t eating at restaurants. They are eating at home so they are shouting themselves berries and things they might not have bought before.
“We are not seeing people shifting from avocadoes to potatoes as they did in the last recession. They aren’t shifting because interest rates are low and petrol is cheap,” says Harris.
Commenting on the Harris Farm board, she says: “We don’t have a best practice traditional board, but in my opinion it works.
“We have a board that consists of a CEO who has created a whole new category of retailing that the likes of Woolworths are now copying. We also have a financial whizz kid who has a masters in finance and who was a quant analyst at JP Morgan. We have an operations manager who is an inspirational leader and has an unbelievable feel for retail. Then, we have a merchandising and marketing manager with an honours degree in engineering and who worked in marketing for [telecommunications group] Ericsson.
“But the issue is that all four of these people are members of the family.”
Harris adds: “The thinking behind bringing in an external member onto a family board is that this person will bring the discipline and an outside perspective. But in our case, that’s my role. If we ever have a board meeting where we can’t take off our family hats and put on our company hats, that’s the time when we will urgently need an independent person on our board.
“We have the discipline, reporting structures and the agenda of a large corporation, but we have the flexibility, ingenuity, honesty and the hands-on passion of a small company.”
Harris says there have been times when family members have gone through tremendous stress in their personal lives and yet they could always sit down at the boardroom table without any of it crossing into their business lives.
“I sit on a number of boards and I’ve seen people bring their personal agendas to the board. At the moment, the only agenda we bring to the board is to do what’s good for the company,” she says.
Harris Farm’s board meetings are held on the last Thursday of every month in a meeting room – never around the dining room table. There are strict, formal rules about how board meetings are addressed. There are formal board papers that go out a week before the meeting, as well as minutes of the meeting and matters arising out of the meeting. Advisors, such as the external accountant, also attend these meetings.
“We make sure we keep matters top level and we try to keep the focus on the business and not in the business. Each of the three sons in the business head a division, but when we make decisions, they are wearing their directors’ hats, not their divisional hats.”
As a succession-planning exercise in case any thing happens to family members, the family has established what Harris calls a “shadow board”. It consists of people who are involved one way or another in the company, know the business well and have the skills Harris Farm would want on its board.
“This year, the entire family went sailing in Croatia for David’s 60th birthday and it gave us the confidence that we could leave the business,” says Harris.
What’s also worked well for Harris Farm is having a set of agreed core company values, which emphasise key “F words”: fairness, fair dinkum and fair go.
“If we have a tough decision to make during a board meeting, we bring out the value sheet. The answers so often just come out,” says Harris. “The values are passed down through the organisation and explained to everyone who joins the company. Sometimes, they throw it back at us – for example, if they think something isn’t fair. That makes us stop and think about what we are doing.”
Two of Harris’ five sons have chosen not to join the family business. One works in Prime Minister Kevin Rudd’s office while the other runs a backpacker’s at Bondi Beach.
Her advice to other families is to encourage their children to do different things outside the family business. “All of our sons had different careers before they came into the business. They have also had to prove themselves in the ‘lowlands’ and they have had to earn the respect of the managers in the business. Also, if you bring your kids into the business, they must come into a defined role with a written job description and, once they have this, it’s up to you to guide them through the business.”
Harris says many family businesses don’t have the disciplines that larger public sector bodies or corporations have, like ensuring that things are in writing and filed.
“They haven’t had experience in working inside a larger corporation. The reason why corporations exist and last is because they have structures. Two of our sons have corporate experience and so do I,” she says.
“What is funny is that when I go onto bigger boards, I am chosen for having agility, lateral thinking and an entrepreneurial spirit, but when I sit on the Harris Farm board, they think I am regulatory, bossy and boring.”
Harris has been choosey about which other boards she sits on and thinks she has “the best gigs in town”. She is a trustee of the Sydney Cricket Ground and a director of the Museum of Contemporary Art, the National Gallery of Australia Foundation, the Australia-Japan Foundation and the Australian School of Business at UNSW
“I have to be involved and interested,” she says. “I have not chosen to go onto any commercial boards at this time because I am putting so much into Harris Farm. The other positions are interesting because they fill our lives outside of fruit and vegetables.”
She says she’s often surprised at how few women sit on boards and believes that not having women on a board reflects small thinking in a company. “It says to me this company does not think big, does not choose on merit and is old-fashioned, which is probably an unfair statement to all those mining companies out there.”
She adds: “It’s a bit sad to see women get up to really high positions in companies – finance directors, operations managers – and then leave to join a board. They don’t stay to be that last thing, the CEO. Going on a board should not be a goal. It should be to give something back,” says Harris.
Harris is also the Honorary Consul for Bhutan in Australia. “That’s the country where they don’t measure gross national product. They measure gross national happiness. We’ve always had a passion for the country and have been visiting it since the 1980s. And, we’ve just attended the coronation of the king there,” she says.
When she’s not babysitting her two grandchildren or sitting around a boardroom, she can be found on her farm in the Megalong Valley riding her horses and engaged in sustainable farming – two activities she and David are extremely passionate about.
On Harris Farm’s future, she says: “We are happy at the moment and have a very good lifestyle, but we always ensure that the business is ‘sale ready’ in case we do one day go for a trade sale. But the ideal situation would be to remain family owned.”
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