People power and the new wave of entrepreneurs

Sel Watts, Founder of successful HR Firm Watts Next, discusses the idea that 'Your Business is your People', the importance of strong company values and how they impact culture. Sel goes on to share her new incubator, Scrappi, and how she is building a start up with her son called Your Secret Sauce. Sel's story is a great one and her insights into start-up businesses and how a lot of new, young entrepreneurs are missing out by not getting their hands dirty are pure gold.

Sel Watts, Watts Next

Interview Transcript

Mark Engelmann: Alright, hello everyone and welcome to today's episode of The Go For Growth show. My name's Mark Engelmann and I will be your host today. I'm really happy to have Sel Watts, the managing director at Watts Next, an HR consulting firm based in Brisbane.

Welcome to the show Sel.

Sel Watts: Thanks Mark.

Mark Engelmann: Sel, let's get straight into it. Your roots are obviously in human resources, can you tell me about the most common HR challenge you see in businesses today and how is that challenge best addressed?

Sel Watts: The question that we get asked the most would be around how do I get people to increase performance. Obviously, there's things around risk, most businesses are concerned about protecting themselves and we have a lot of people come to us in a reactive capacity, so they've had a claim against them or they've got someone not performing but if we're talking to people proactively about what's their biggest concern it's I want to increase performance, I know my team have got more in them and how do I get them to go to that next level?

Mark Engelmann: Interesting, interesting. Another thing that I find interesting about HR and it's something that I picked up on my post grad business studies was that there's no C-suite position for a human resources officer, there's no chief human resources officer in most organisations. It's kind of a bit overlooked in business, a lot of people probably think that HR just equals payroll and employee relations but it's so much more than that. Can you tell me about what your view is on HR and why is it so important to get right in business?

Sel Watts: Look, I think it's definitely changing in a lot of businesses where certainly in larger organisations you are finding that there are human resource professionals sitting in the C suite but in the space that we're in small to medium enterprise it still is seen as just one of those annoying things that you have to have to deal with, as you said, payroll which for me payroll sits with finance so we've never touched that but I know a lot of people think that HR is payroll and obviously dealing with issues or even organising the Christmas party, that sort of things is what's considered to be HR. I think if you ask any business owner they will all agree the people in their business is the most important aspect of their business.

Now, people say it's your most valuable asset well, yeah, if the people are good but it can also be the thing that brings your business down pretty quickly because they're the ones that are either customer facing or they're the ones building your product so if we don't have our people right then really nothing else is going to work. It's interesting actually because we have no problems with investing in accountants and people to look after our money but then we put the people side apart.

I think a lot of the time we think that as individuals we're people so we know how to deal with people related issues and staff within organisations and I don't know, I think it's a lot harder than what we all realise and we are in an incredibly interesting time at the moment because our workforce is changing so much where we have five generations working together for the first time, our generation Z's coming in and that is really going to change how our businesses are led and run and that's really exciting and interesting for me, our focus is really on the future of work so it's got to become the biggest priority for any business owner, what is happening with their people in their organisation.

Mark Engelmann: Tell me a little bit about what's next. From what I can tell it's your first business and it's been going for quite a while now and obviously going strong, how did the business come about and what did you do prior to Watts Next?

Sel Watts: We celebrated our tenth birthday this year so that was pretty exciting but when it started, it's quite interesting. Really, I started Watts Next because I was really underwhelmed by the HR industry so I started as a recruiter and then I went into an internal HR role. As part of my development I started getting HR mentors and joining HR network groups and I thought wow, these guys are really not dynamic at all. I remember when I replaced someone in my new role and I was working for a law firm and there was just no commercial thinking in the HR team whatsoever. They really were more the employee advocate. I was on a mission to change that in that organisation and really work for the partners, for the business owners to achieve the strategic goals of the organisation and that was great but still everywhere I looked I just wasn't inspired by my own industry, I didn't want to go to any HR conferences, I just didn't want anything to do with the industry.

I thought this is a bit of a problem here. When I started Watts Next it was really, it was sort of like “I hate HR so I'm going to start a business and I'm going to change it” and really that was what drove me. I think it's quite interesting because I actually dropped out of uni three times so I was never qualified yet I built the business on what I understood around small to medium business, commerciality, people achieving an ultimate goal and really focusing on the stuff that matters. It's interesting now that Watts Next has probably been more successful than any other HR consulting firm, small consulting firm in Australia because of that fact, that we have actually focused on what is real, what is actually happening in a workplace.

What I think is interesting is that the business has got better and better over the years, as you would hope and expect but the reason it's got better and better is because I've had more experiences as a leader of people and so I know exactly what it's like for our clients as business owners in dealing with the everyday issues that we have with having staff. I've always been of the focus that we need to be commercial around our businesses because ultimately if we're not we're not going to be able to employ people and pay them and all of those really important things and, so I think for me, ultimately the vision was always to change the way businesses or SME's utilised HR. I think that we do that really well but it's a really huge job because people already have this perception, "Oh, you're in HR so you're a recruiter or you're a payroll person" or "You're the fun police." Ultimately we're really business strategists ultimately and our tool is people so how do we use that to make business better.

Mark Engelmann: Tell me a little bit more about your different approach. There's obviously the orthodox approach to human resources that you learn about in university and you probably see applied in lots of government agencies and then civil or public bodies, how is what you guys do different?

Sel Watts: I think that it's different in one sense because I'm always saying to me team throw out the paperwork, I want conversations to be had between employers and employees. I want us to understand what's really going to make the different in whatever the problem is. I'm a big believer in getting the foundations of staff engagement right from the beginning and so for me that is having really clear vision mission and values within an organisation. I'm not talking for a marketing perspective, I'm not talking about things that you put on your website for your customers, I'm talking about business owners truly understanding how they feel about their own business and then being able to tell that story to the employees. Ultimately your employees treat your business like it's their own, that's my ultimate goal. We, as business owners, we have more freedom if our staff are treating our businesses like it's their own.

That's the first thing I'm interested in when I go into any organisation. The other thing that I find, and I feel like maybe I'm not answering your question exactly how you asked me but I'm just going to keep going, that a lot of the time what I see is that one of the biggest issues in organisations are the structure of the organisation isn't right. What I mean by that is that we have, over time our businesses become an organisation chart that they've become because of time and just individuals within it and we never stop to actually look and say does this actually work? If we were going to start out business tomorrow would we structure it how it is right now, would we have those particular positions and would those positions be made up the way that they currently are? In most cases they aren't so I'm very particular about looking at an organisation and saying, "Does this actually make sense? When was the last time we looked at this?"

Most of the time when I look at businesses they don't make sense anymore and they become that way over time. In relation to your question we have lots of people coming just saying, "Oh we need performance reviews" or, "We need training, we need a salary benchmark." I'm like, "Great, I'm really happy to do that." But I'm not doing any of that until I know that there's some really important business foundations in place because otherwise everything's Silo’ed and it's really just there to tick a box and it doesn't make any difference to the impact or results that you get in a business. I could go on and on and on Mark, just to give you a bit of an insight.

Mark Engelmann: Interesting. HR, I guess, has traditionally been a very compliance focused pursuit and hence all the paperwork. It's good to hear that there is a world beyond check boxes and ticking forms so excellent. Outside of HR and Watts Next, you've got a couple of other things on the go, you recently co-founded a business called Scrappi, can you tell me a little bit about that?

Sel Watts: Yeah, sure. After being in Watts Next for nearly, well 10 years but it was nearly 10 years as I started Scrappi. The business has been running well and it's great but it was time for me to do a few different things and I had spent the last few years travelling a lot overseas particularly to the US and that was starting to get some juices flowing that I really wanted to embark on something different so I had a bit of a think about what is it that I want to do and there was a couple of things. I spent a week in Silicon Valley last year on this incredible tour where we went and visited all the amazing tech companies. Yeah, it was a week and it was the best trip I've ever done I think and I think I've done some really cool trips but this one was, I don't know, it was awesome. I walked away from that, well actually on that trip every business we went into referred to themselves as being Scrappi which is sort of they're agile, not everything needs to be perfect, but change and try things and every time we got on the bus to go the next business we would joke about the different terminologies that they would always use.

One was having the secret sauce, one was knowing your north star and one was Scrappi. Anyway over that five days I realised I really want to do a tech business and I've never been in tech before and I thought I really want to do something that I can scale globally, I really want to move something particularly into the US market. I thought I'm going to start a business and I'm going to call it Scrappi. In this week in Silicon Valley I registered the name and I got the logo done and on the last night I said to our group that we'd been travelling with I've just started a new business here in Silicon Valley, it's called Scrappi and they were like, "That's amazing. What is it?" I said, "I have no idea."

Then I went home and I was like what else do I want? I thought I'd really like some co-founders because one, I had Watts Next on my own for all of that time and I knew that if I wanted to do scalable global businesses in tech I was going to need some partners because I didn't have any experience in any of that. That was when I went out and started talking about the things I wanted to do and ultimately what that led to was I wanted to do a number of different types of businesses and see where they go. Scrappi was formed and I joined up with two other entrepreneurs and said do you want to do this with me. Well, actually it was one person and then we said we really need a tech partner so then we found one, another entrepreneur who was about to start something new and so Scrappi was born.

Basically what it is is, I'm wary of using these words because again you automatically think of different things but it's an incubator but we're incubating the businesses so in a traditional incubator entrepreneurs come in with their business ideas, that's not what we are doing, they are our own start ups. We have three at the moment that we're building and probably the first one is Your Secret Sauce which was a term that came from Silicon Valley which is really about what's the secret sauce of your business or the DNA your business? That is the one that we've recently crowd funded so I think you're going to want to have a chat about that.

Mark Engelmann: Yeah. Tell me a little about Your Secret Sauce.

Sel Watts: This one was also co-founded with my 10 year old son, Digger.

Mark Engelmann: Cool.

Sel Watts: Yeah, cool. This was his idea and he said to me one day, "I really love writing." And I was like, "Do you?" I knew you liked reading." But I didn't realise he really loved writing and he said, "Yeah, I really do and I think kids should read and write more, do more writing." I was like, "That would be a great idea." Then we just started talking and he said, "I'd like to do this thing where we could start write a joint story together." Basically what your Secret Sauce is is a platform where a story is started by kids, a paragraph and then another child comes in, writes the next paragraph, another child comes in, writes the next paragraph and so on until they write a book together and can become a published author and you can share, read the stories together with the goal of one, increasing literacy, increasing engagement in reading and writing for kids but also connecting kids from all over the world and for them to be able to write stories together.

It's sort of like that Choose Your Own Adventure, I don't know if you read those sort of books.

Mark Engelmann: Yeah.

Sel Watts: I loved those books. When Digger said I want to do this I was like, "I really like it" so I took it to the Scrappi team and we were looking at eight different, we had about eight different businesses, ideas that we were looking at and saying which ones we're going to do, we can't do them all. I put Your Secret Sauce on the table and said, "Look, it's Digger's idea, if you don't think it's any good that's totally fine but let's just put it on the table with the others." It was agreed that we thought it was good. Then I thought, "You know what, this is an opportunity to really teach him an entrepreneurial journey, take him on an entrepreneurial journey so rather than us just fund this why we don't we crowd fund it?"

It’s not the idea business for crowd funding because it's not a product and something you can really easily show and see, show a potential backer. I knew it was risky but we thought the journey would be really interesting to teach him and also hopefully show other young kids that if you have an idea in this day and age you can actually bring ideas to reality which nothing against how old we are but crowd funding wasn't around at that stage  and it just wasn't possible. The crowd funding journey wow, man, that was extreme. I never realised, well I met with a couple of people who had done it successfully, but I think it's about a 38% success rate, the crowd funding projects.

I went into it thinking oh you know, I've got this, and it was full on, took over my life but we were successfully funded which is incredible and which meant that now, that was two weeks ago, now we're in development stage and it will come to life and hopefully we get a million subscribers.

Mark Engelmann: Awesome. When's that due to go live do you think?

Sel Watts: Our goal is pre-Christmas.

Mark Engelmann: Okay, wow.

Sel Watts: We're really busy developing at the moment and getting it all finalised and obviously also involved with that is looking after our backers because now we have 144 backers that we need to nurture through this process too. It's really cool. That's Your Secret Sauce and that's been a really interesting experience and I'm loving watching the development, it's cool because it's a very new space for me and also Digger, my son, he's really the face or the ambassador so he's doing lots of social media and video and things like that to keep promoting it and that's really cool to watch him learn and grow in that space too.

Mark Engelmann: I think it's awesome that you've been able to introduce your son at 10 years old to the world of business. I know the Australian government's a pretty big supporter of entrepreneurship but I think the government kind of sees the future of the country in small business. Having gone through this process with Digger what are your thoughts on our future generations and are we doing enough to raise super star entrepreneurs?

Sel Watts: Well, I have a few views on this and probably not necessarily in relation to kids. I'm really concerned about the start up space and what we're feeding young entrepreneurs around that world. I think the incubators have a lot to answer for to be honest. In my view, what I'm seeing is young entrepreneurs well one, we're telling everyone that you should be an entrepreneur and it's cool and it's awesome and you should do it and I just don't agree with that, I don't think everyone's built to be an entrepreneur and I don't think that we're sharing enough about the reality of what it actually means and the sacrifice and the impact it has on your whole life and all of those sorts of things.

The thing that's concerning me is that we seem to be teaching young entrepreneurs how to raise capital and pitch and that's about all. Nobody seems to be talking about how to actually run a business or create a service or product that someone's actually going to want to buy because we know there's no point asking our friends and family because they'll say it's amazing but would people actually put their hand in their pocket and pay for whatever it is you're building and if they did are they going to continue to do that and is there enough customers out there that would continue to do that so your business is still around in five and 10 years’ time. Nobody is talking about that, everyone is just talking about raising capital and pitching and we see article after article every day of young people, anyone raising all this money and we're not seeing the actual results of that, how many of these businesses are actually around in five years’ time that have actually given a return back to their investors.

I think it's a very scary space and I think we're going to have a lot of, graveyards full of startups in the coming years because we're not having the right conversation. I seriously believe that yes, some businesses may need funding but I certainly think that entrepreneurs are getting funding way too quickly. I'll give you an example which I think is really interesting. I was talking to a young guy who had done his start up, been going for five months and he said, "Oh, you know I've got these investors interested." And I was like, "Wow, you're going for investment already." He said, " Well, I wasn't but these guys approached me and so the ego kicks in, people are interested so that means my business must be good." I was like, "Okay, cool. What do you want these investors for?" He said, " I'm thinking mainly to open doors to customers but obviously a bit of cash but mainly to open doors." I said, "Okay, cool."

Then as the conversation went on over an hour breakfast what we realised over that time is that he hadn't actually worked out who his customer was yet, he was testing corporates, he was testing SME's and that's fine, he was seeing who was going to buy and utilise this platform that he had built. I said to him, "Do you realise that right now you're looking at taking on an investor to open doors for you and you're going to give away equity, you don't actually know what doors you want opened so what happens in 12 months time when you've been dating your business and you've been getting to know it and realise that these are the doors you want opened and this investor can't open those doors so then you're going to have to go away and give more equity away to the people who can open those doors and in three years’ time you own none of it and you've got no motivation for it anymore and so on."

He was like, " Oh, whoa." I was like, "Yeah, just give it some time dude. You need to get to know your own business before you start giving away equity and going down paths that you don't even know." I just thought this was really interesting because the ego was driving a decision that wasn't right. He just needed a year and he needed a year of ultimately he wanted someone to open doors for him as opposed to pounding the pavement himself which as you would have experienced and I experienced we had to do that, we had to pound the pavement and do the cold calls and have allthis stuff, we didn't have homeworking spaces, we didn't' have mentors. I didn't even know the word start up or entrepreneur or anything when I started out and so I'm really concerned about this.

The other day I went and visited and incubator and I was talking about my concerns about this and they were obviously disagreeing with me which is totally fine, we were having a good conversation about it and anyway the guy showed me this wall of amazing logos and you know it's amazing, these startups all have these fantastic brands, I don't know how they afford it but anyway, I look back on my first brand and it's just horrible but I said, "Okay, tell me about some of these amazing startups that you've got on your wall here." And he said, "Oh, this is a really awkward conversation actually because most of them aren't running anymore." I was like, "Oh, well, you know that's sort of the space. Tell me about one of the success stories on this wall." He said, "Well, there's only one." I was like, "Okay, that's cool so tell me about it." And he was like, "This is so awkward."

I didn't understand why, "Why?" He said, "Well, it's the only one that actually didn't go for capital raising and actually grew their business through picking up clients and drawing through revenue." I was like, "Wow, isn't that new age?" We are completely forgetting the fundamentals and the foundations of business and teaching kids about sustainability but at the moment all about speed and I get that but I don't actually think it's required as much as what we expect or about as much as what we think so yeah, that's my rant on that.

Mark Engelmann: Yeah, no, that's interesting. You kind of raised the question how does an entrepreneur learn how to run a business if they don't do it themselves, they don't stuff the odd thing up here and there and someone just feeds them a whole heap of money and they just get people in to do everything for them.

Sel Watts: Yeah. The thing I think is really interesting is with Scrappi, there's three of us that are all experienced in business and all have money to invest into the business but our strategy from day one was lean and yet we're all experienced, and we could throw money in, we're like, "No, we're going to do that bit ourselves and we're going to do this." All of those things because we need to learn our own business, we need to understand it ourselves before we know where the best investment should come from if there should be investment. The other thing that concerns me about this is that we're then bringing kids into entrepreneurship for an end result and in my personal view you become an entrepreneur because you love the day to day, you love the journey, you love the grit, you love the grime, that's why you're doing it but if you're going in because you want to be a super star in three years time, turn around this and have this money it's not about that.

Any person that is a true entrepreneur is not driven by those things, yes, that's great, have the rewards and the money and the lifestyle and all that sort of stuff and we all deserve that because of how we work so hard but that's not why we’re in it and I just don't think, as I said before, I just don't think we're having the right conversations.

Mark Engelmann: Yeah, look, I agree with you totally. We're nearing the end of the interview Sel. What's your number one tip for business owners looking to grow their business?

Sel Watts: I had a think about this one and I thought the word within this question is about looking to grow.

Mark Engelmann: Whatever that means.

Sel Watts: Yeah, what does that mean? What does that mean? We all are all about growth, we've got to grow, we've got to grow, we've got to grow but in what way? Is that a revenue growth? Is that profit growth? Is it number of staff? Is it clientele or is it things as much as less clients but higher fees? There's all these things. I think I would say in the first instance what is the ideal because if we can take our ego out of it, I've gone through all the stages of ego throughout my journey in business, revenue's ego, staff numbers is ego, the fancy office is ego, blah blah blah but really at the end of the day what do you want from your business? Is it a lifestyle business? Is it a I want to be the leader in my industry, like really take out my industry? Do I want to be a niche boutique? Do I want to be the innovator?

Then, I think is we can work that out first, I want to have that conversation before we talk about growth because growth is going to be different depending on that. But if we're just saying well, people want to grow their business I would say patience and around taking the time because I think we're all obsessed with speed because we're all going to die tomorrow so we need to do everything today but if we can actually just slow it down, we know that if we can slow it down and do things properly then we'll ultimately get faster growth over a long period of  time, we just might start off a bit slower. That's my thoughts on that.

Mark Engelmann: Awesome. Have you used any new technology, apps or services recently that have really assisted you in saving time or again, growing and scaling your business?

Sel Watts: Yes, I think probably the biggest focus for us has been around social media so been using things like Buffer and HootSuite and that sort of stuff has been really important for us because all of my team, every employee within Watts Next has social media KPI's that they have to hit and so anything that we can do to support them to meet those KPIs has been probably the main technology that we've been using. The other thing that I would say is that we have gone pretty much, we hardly communicate at all via email, everything is via Slack now so we have different channels for different things even to the point where we'll have a family channel which is where you'll put your kids, your photos or any of those photos or whatever, our impact channel which is when we are making our B1 G1 impacts and doing our philanthropic stuff and then bell rings which is when we win clients and then general technical knowledge. We use those channels and that's how we communicate and keep track of everything and that's been awesome. They're probably, social media and Slack have been the main things that we've really implemented over the last little while.

Mark Engelmann: Great and how's Slack affected your email inbox?

Sel Watts: I think significantly actually. We really very rarely email, we never do any group emails with the team anymore and all that sort of stuff but even with Scrappi all our, so we've got so there's three startups in Scrappi at the moment, Your Secret Sauce, Zoota and People Beats so they've all got their own Slack channel and that's how we communicate as business partners for all of those different businesses as well so my inbox is much more friendly.

Mark Engelmann: Awesome, everyone likes a good looking inbox. Alright Sel, thanks for your time, it's been great, I've really enjoyed today's chat.

Sel Watts: My pleasure, thanks very much for having me.