Profit could be loss
The philosophy that profit is a good indicator of the success of a business is flawed, according to Joseph Merz, who says businesses could end up losing out if their main focus is money.
Joseph Merz has spent more time in business than most 30 -year-olds and says while it may seem counter-intuitive, he believes one of the secrets to his success is his view that “profit for the sake of profit is a flawed business premise.”
Merz, the founder and CEO of Sterning Group, started his first company when he was 16 and was lucky enough to make a lot of money which, as young men sometimes do, he managed to blow having a lot of fun.
“When it was time to grow up, my brother suggested I give recruitment a try,” Merz says. “I did and hated it. I also noticed so many others who hated it. But it wasn’t the job they hated; it was the structure and the culture that was nurtured.
“Many of them wanted to start their own agencies, but with my experience in the realities of
business, and my knowledge of startup failure rates in Australia, I knew the odds were against them. I thought there was an opportunity to provide a framework for recruiters who wanted the best of both worlds: their own business, but with a similar chance of success and support they’d find in an agency.
“We put a lot of energy into things you can’t simply buy when starting up on your own as these are the things that boost your chance of success. And it’s worked.
“But, to nurture the culture we were after, I realised we needed to rethink the profit focus. We needed to build a truly distributive organisation that for once didn’t chase ever-increasing profits.”
So in mid-2014, Sterning Group launched with a unique business model and philosophy to shift the objective away from chasing profits, better rewarding its people with 80:85 per cent of everything they earn while the remaining 15-20 per cent of their billable fees were poured back into the group.
“The goal is to be the best recruiters we can be, build strong and enduring partnerships with clients and candidates,” Merz says. “But our unique model allows us to do this with authenticity.”
“We’re about to start employing recruiters also in a much more traditional way to give them an even softer landing into their own business. With the even newer ‘hybrid’ model, recruiters can join Sterning in a salaried position until they are ready to transition into their own Sterning license.”
He says their people know they are in control and are part of a group ruled by the belief that chasing profits above and beyond what is needed is wasteful - not only in terms of energy but also resources.
“If we want real change in this world, we need to be prepared to do away with archaic
concepts like perpetually chasing more than we need,” Merz says. “Obviously this approach is not going to resonate with everyone. A lot of people are in business to make money. And I’m not saying that is always a negative thing, I just think it wastes energy and resources unnecessarily and is not something I choose to do.
“When profit is the driving objective of a business, the focus for everyone in the business is understandably on exponential growth and this is often very draining for everyone involved. All that energy is wasted. It could be put into your people, and maintaining the business to thrive.”
Merz says that under the distributive structure created at Sterning, individuals are given scope to have the freedom of their own business to reach the best work-life balance goal they can - not being dictated by stressful targets or set hours.
He says the introduction of the new model resulted in an immediate shift where relationships with clients and candidates went from being transactional to something much more “authentic”.
“Some people don’t understand the model,” Merz says. “I guess they’re just so used to the way it’s always been. But that’s why we’ll only continue to bring in individuals who truly understand its importance and what it signifies for the future of work. Our values around viewing excess profit as waste are the first I’ve seen, but I am hopeful that one day it will become the norm.”
Merz’s key takeaways from introducing the distributive model where profit is not the
Constantly question everything
Stop chasing profit for profit’s sake
You can never look after your people enough
Never compare yourself to others - each person is unique
Don’t be afraid to be you