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Agroprosperis Group's partnership program stimulates internal entrepreneurship and allows production core specialists to earn money together with the investor.
Agroprosperis' financial director Aleksei Kolbasinskii told to Agromarket that, during the second year following its implementation, the partnership program attracted a record number of 965 participants. All of them are specialists from the core of production companies (Agroprosperis plants, or APPs), influence a financial result, and are entitled to receive a part of profit. This year, they even invested their own funds in working capital of companies employing them. 2017 results show the return on investments to reach 72%.
Philosophy of trust
The idea of such mechanism of motivation and attraction of key business persons to its development and efficient team formation is not new to the world. This is a true know-how to the Ukrainian agricultural sector though. In Agroprosperis, it became a logical continuation from the profit sharing program which was implemented and has efficiently functioned for many years, and allows employees to receive a percent of the company's operating profit.
Achievement of his or her KPIs by a specialist does not affect his/her share of profit in any way. This makes Agroprosperis' paradigm radically distinct from other agricultural businesses active in Ukraine.
Certainly, achievement of KPIs has its weight, but only from the point of view of further work in Agroprosperis, because this will determine if the specialist can participate in the next profit sharing program, and thus a partnership program. At the same time, the company's specialists know that, provided that APPs earn profit for the investor, they will receive a portion of this result – their fixed percent – irrespective of relations of an ordinary employee with e.g. his/her line manager (or a function, or even the investor). Even if his/her employment ends. This increases the level of loyalty and mutual trust, i.e. how the investor trusts the business and APP production core, and how production core teams trust the investor.
Implementing the idea
It is this that underlay the idea of a partnership program. At first sight, it appeared to be rather daring. However, there were quite objective preconditions for its starting up. Teams of our APPs yearly seek finance (current assets or seasonal working capital) from the investor to support their ideas of efficient conduct of business, relating to crop rotation, soil cultivation, use of agricultural technologies, their intensity, and so forth. It is impossible for an ordinary farmer to borrow 3-4 million of dollars from a bank. Making numerous various pledges is only one precondition. There is not any guarantee that a credit committee would provide such an amount only because one has a business plan. On the other hand, our APPs have every chance, and as it appears in practice, regularly return what is borrowed plus an interest to the investor (Agroprosperis system does not have any unprofitable businesses in). So why not to vote for your own ideas with your own means?
At the beginning, discussing such a possibility, people react in different ways. Is an APP manager actually ambitious to become a partner to his/her investor? Is he/she ready to put his/her money to attain, perhaps, optimistic results? The question seemed contradictory to many. However, the idea began gradually developing, thanks to positive response. The financial department, teams of lawyers and HRs joined in the development of the partnership program. It was necessary not only to 'polish up the formula' and align it with already functioning programs, but also to see to its competent stepwise implementation. This largely determined if the business buys the idea.
The year 2016 was a pilot one. Being the partnership program provider, I talked to all directors and concerned chief agronomists from APPs, proposing: "Let us try to earn money in the business together with the investor…". Those came who believed in efficiency of the proposed formula (as return on capital increases, profit from participation in the partnership program increases progressively).
During the first year, only 30 partners joined the program. These mainly were directors and agronomists of leading Agroprosperis plants. Two of them started in teams (which, apart from a director and an agronomist, included a controlling manager, a land specialist, and an engineer). In 2016, investments in APP working capital by these specialists total slightly less than 300,000 dollars. This is a significant amount considering that it comes from 30 persons. Especially as this money is not petty to them, but rather a real opportunity to buy a house or educate a child at a university. But the participants were sure of their results and loyal to the investor, and therefore voted with their own funds. As a consequence, the year 2016 saw about 80% return on an investment. After this, selling the partnership program to the business became significantly easier.
One's own investor
The partnership program is very loyal to the employee. It is logical that only those who create a financial result should participate in it. Therefore, during the period between partnership programs of the years 2016 and 2017, the main challenge to us became to develop certain criteria determining the so-called APP production core – specialists whose activities actually influence profitability of a business, and who will thus receive their portion of profit and be able to invest this or their own money and gain additional income within the framework of the partnership program.
In addition to APP director and managers, it was decided that the production core should also include equipment operators. Having received their share of profit, they became able to participate in the partnership program automatically, and began voting for its result with their means too. As early as in 2017, they invested in working capital of their APPs hundreds of thousands dollars as a part of the partnership program. Thus also a return on investments will be significant. For example, an equipment operator who invested 1,000 dollars in working capital of an agricultural business employing the same has every chance to double this amount, or even to earn 1.5 times as much. And this is a formidable challenge to both the employee him-/herself and the team as a member of which the employee can attain such a result.
Transforming the paradigm
We have developed internal entrepreneurship of APP senior and medium level specialists for a few years already. It appears to me that as soon as the investor and the service company changed their attitude to a role of the equipment operator in our production, radical transformations of the paradigm began. We made a fundamental step forward in long-term sustainability of functioning of the agricultural business.
From the entire chain of jobs in agricultural production, it is equipment operators who are closest to the field. They might not make decisions at the level of business directors. Nevertheless, tens of millions dollars of future profit depend on a speed and settings of a seed drill or a sprinkling machine moving in the field, how a machine operator services a tractor or a combine harvester, in how good condition towed machinery is during a process operation, in the same way as on managerial decisions.
Certainly, the company needs only the best specialists in the market. In order to provide the best financial conditions to the best professionals, there was a need for efficient business tools and new approaches to determination of KPIs of key specialists. And we managed to create them.
In general, each Agroprosperis production company is a separate business having its own decision making methods. All of them have the same purpose which is to grow cereals or oilseeds at the lowest costs possible. There is not any specific premise such as a higher yield or cheaper technologies, the main consideration is the business balance. It is simple: the borrowed money plus an interest should be returned. "Dollars grow in fields", our investor says repeatedly. Therefore APP teams regard growing crops as increasing money. They are interested in a long-term effect, which explains cost-effective treatment of resources and land. As a matter of fact, this requires appropriate tools. One of these tools is internal entrepreneurship. In particular, our partnership program.
This is a perfect way towards an organization functioning autonomously due to self-control, without being subject to compulsory centralized control from outside, no matter from where – from Kyiv, London, or New York. In an enterprise 'internally tailored' to earn money, I see a kind of the perpetuum mobile of the business. Internal entrepreneurs managing enormous resources are much more effective than the best specialists having prestigious educational background, invariably high salaries and demands, KPIs, and strong control systems. As a matter of fact, these are two different paradigms: a process and a result one. I believe that only entrepreneurship meets the result paradigm in the contemporary world of continuous changes.