Business First Magazine - Dec/Jan 2014 by Associated Media Group Pty Ltd

BUSINESSFIRST for Business Leaders

Dec/Jan 2014

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ALLAN JONES CLEAN VISION FOR THE HARBOUR CITY

BOOM NOT BUST

Why the mining industry’s outlook is not so bleak BUSINESS FIRST MAGAZINE Vol 1 Issue 1

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ADAPT AND SURVIVE: BUSINESS IN THE ASIAN CENTURY

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Why the technology giant still leads the way

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INSIDE: Business // Finance // Leadership // Lifestyle // Marketing

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BF | CONTENTS

BUSINESS FIRST CONTENT

4 Editorial 6 News 10 Executive Analysis Nothing is sacred when it comes to the scrutinisation of CEO’s paypackets, but are these high levels executives really worth tens of millions of dollars?

CONT

COVER STORY 14 Under the guidance of Allan Jones, Sydney City intends to be clean, mean and green by 2030.

PEER TO PEER 18 Image in the Asian Century by Jon Michail 20 How to be competitive in the Asian Century by Pamela Young 30 Is MacBank really flying by Blake Stirling 32 The most powerful business tool by Alex Pirouz 42 5 keys: Have your team work with you by Petar Lackovic 52 Building your A team by Tim Reed 54 What I learned the second time around by Fred Schebetsa 64 Starting businesses with exit strategies by Martin Martinez 66 The Ten Commandments for family business by Bernard Marin 72 Reduce your international money transfer costs by Sean Barrett 74 Unlock your leadership superpower by Steven and Chutisa Bowman 76 Why you need to improve your marketing team’s performance by Mellissah Smith

LIFESTYLE 78 Health – CEOs must look after themselves writes Lauretta Stace. 80 Eat and drink – Luke Nguyen takes us on a journey to Vietnam to talk about all things taste. 84 Fast Lane – Aston Martin has outdone itself with the new DB9. 86 Hideaway – Escape to Necker Island. 88 Extravagance – 3 Christmas gifts.

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CONTENTS | BF

ENTS 22

BUSINESS FIRST LOUNGE 22 Relative values – Distribution is a tough business, so when you launch into the distribution sector you need a point of difference. At A&W Hollier their family values make them a unique proposition. 26 Mine your own business – No matter what you believe about the efficacy of coal to produce clean energy, there is no doubt that the production of coal is necessary for future energy requirements. Business First’s Jonathan Jackson speaks with Cuesta Coal founders Matt Crawford and Keith McKnight to discuss the importance of coal and how it is contributing to Australia’s future in Asia. 34 A code of ethics – In June 2013, Mark Davis the founder and director of the Australian Lending & Investment Centre (ALIC) had written a total of $507 million in funds under management. Mark puts his success down to client relationships and dedication. He speaks with Business First about bringing ethics back into the banking sector. 38 Casting a wide net – When Martin Barrett took over CEO duties from Wide Bay Australia founder and managing director Ron Hancock, who had been leading the way since 1966, he had some big shoes to fill. Yet he has been quick to implement change and transition the bank into the 21st century.

44 The grand design – At the forefront of technological change is Sony DADC and leading the charge in Australia is managing director Darren Houghton. 48 The art of flight – Running a business is like piloting a plane; you can be flying high one minute and crash landing the next. Office Brands CEO Gavin Ward takes us through the processes of staying airborne and landing softly.

56 A display of goodwill – The business of construction and development can be a cutthroat one, however Firstyle Homes is proving adept at developing homes that people want to live in. Firstyle founder Romeo Tamburri, speaks about turning his passion into a business. 60 Key links in the chain – Luke Herbert started his own business because he felt service levels in engineering firms could be improved. He speaks with Business First’s Jonathan Jackson about the importance of customer service in conjunction with the rise of Linkforce Engineering.

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68 The sweet ride to success – There is energy about Alessandro Garofalo. It is reflected in the way he leads. It is reflected in the way he conducts himself and it is evident in his successes. He speaks with Bob Forshaw about the art and energy of distribution.

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BF | EDITOR’S DESK

Business First: The business of being a leader The life of a CEO can be lonely. Decisions need to be made that are sometimes unpopular, harsh or even against the grain of a personal stance. CEOs may at times be at loggerheads with staff, upper management and even business partners. Generally, CEOs make decisions that are in the best interests of the company and its shareholders. Meanwhile they have to balance these decisions with the best interest of its clients or consumers. Being the CEO can be the greatest juggling act in the world. Business First’s purpose is to make it easier for CEOs to make the hard decisions. This is a peer-topeer magazine: written by CEOs and other high level executives, with interviews with some of the country’s best leaders. Take Sony DADC’s Darren Houghton for instance. Here’s a man who steered Sony UK through the worst of the London riots, lost millions of dollars worth of stock, but still managed to turn a profit. He was seconded to Australia and has overseen some large acquisitions as well as a major change on the technology front. Darren has a lot of advice to offer on several issues that affect the day-to-day running of a business, as well as the importance of looking ahead. Our cover story features Allan Jones. Not the shock jock, or the singer, but the English engineer who during his time at Woking, reduced CO2 emissions by 77.5% from 1990 levels to 2004 and undertook groundbreaking work on energy and water efficiency. He did the same in the Greater City of London, when then Mayor Ken Livingston recruited Jones to head up his new climate change agency as chief executive officer. Jones has been hired by the City of Sydney to turn Sydney into one of the most sustainable cities in the world. Some of Jones’ battles in achieving this have included regulatory restrictions and private company risk assessment concerns. Allan is well versed in overcoming a large number of hurdles, but you get the feeling that by 2030, Sydney will have easily reached its energy reduction targets. There are some great features in this inaugural issue of Business First. We speak with Arthur Essey and Alessandro Garofalo about distribution, Gavin Ward about the competitive nature of office supplies, Mark Davis about customer service in banking and Luke Herbert about the value of team players. There are many other great CEOs featured in this issue and we hope you learn as much from them as we have. Some of the contributors you will become familiar with are MYOB CEO Tim Reed, Image Group International CEO Jon Michail, Asia expert Pamela Young and Marketing Eye MD Mellissah Smith. Meanwhile Lauretta Stace, CEO of Fitness Australia will give her views on how important it is to stay healthy while dealing with the stresses of the day. Finally, when all the hard work is done, it’s time to relax with a fine bottle of wine, a good place to eat, a relaxing place to rest and a comfortable car to drive. You’ve worked hard, you deserve to be pampered. So welcome to Business First, a magazine for you, written by your peers.

Jonathan Jackson Editor, Business First Magazine

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www.businessfirstmagazine.com.au PUBLISHER Alan Hyman EDITOR Jonathan Jackson MEDIA DIRECTOR Bob Forshaw COMMS. DIRECTOR Matthew Nutt SUB-EDITOR Judy Hyman DESIGN Gino Hawkins Head Office: Suite 7, Level 1 174 Willoughby Road St Leonards NSW 2065 Australia Advertising enquiries: Phone: 02 9437 5155 Email: bfadvertising@amgroup.net.au Subscription enquiries: Phone: 02 9437 5155 Email: bfsubscriptions@amgroup.net.au Contributors: Blake Stirling, Bernard Marin, Sean Barrett, Mellissah Smith, Lauretta Stace, Fred Schebesta, Tim Reed, Pamela Young, Alex Pirouz, Peter Lackovic, Martin Martinez, Jon Michail, Chutisa & Steven Bowman

Publishing, adve CILTA AWARDS by Associated M Associated Media Group Pty Ltd ABN 68 123 058 926 Copyright ©2013 Associated Media Group au.linkedin.com/in/bfmag DISCLAIMER Readers are advised that Business First Magazine and Associated Media Group (AMG) cannot be held responsible for the accuracy of statements made in the advertising. Opinions expressed throughout the publication are the contributors own and do not necessarily reflect views or policy of Business First Magazine or AMG. While every reasonable effort has been taken to ensure the accuracy of the information contained in this publication, AMG takes no responsibility for those relying on the information. AMG and Business First Magazine disclaim all responsibility for any loss or damage suffered by readers of third parties in connection with the information contained in this publication. WARRANTY AND INDEMNITY Advertisers and/or advertising agencies upon and by lodging material with AMG for publication or authorizing or approving of the publication of any material indemnify Business First Magazine and AMG, its servants and agents against all liability claims or proceedings whatsoever arising from the publication and without limiting the generality of the foregoing to indemnify each of them in relation to defamation, slander of title, breach of copyright, infringement of trademark or names of publication titles, unfair competition or trade practices, royalties or violation of rights or privacy regulations and that its publication will not give rise to any rights against or liabilities against AMG, its servants or agents and in particular, that nothing therein is capable of being misleading or deception or www.businessfirstmagazine.com.au otherwise in breach of Part V of the Trade Practices Act 1974.

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BF | NEWS

Super report under fire

Industry Super Network (ISN) has expressed concern at the publication of the CPA Australian report “Twenty years of the Superannuation Guarantee: The Verdict”, saying it is irresponsible. ISN Chief Executive, David Whiteley, said the methodology of the report was flawed and the central premise that super has triggered an

explosion in household debt contradicts the Reserve Bank of Australia. “The report incorrectly suggests that increases in household debt are explicitly linked to the increase in superannuation savings,” Mr. Whiteley said. “This ignores evidence that household debt has increased in almost every advanced

economy irrespective of their retirement income systems. In 2010 the Reserve Bank Deputy Governor Ric Battellino, noted: “The current household debt ratio in Australia is similar to that in most developed countries... All countries have experienced rises in household debt ratios over recent decades...Clearly, therefore the forces that drove the increase in the household debt ratio were not unique to Australia.” (RBA Bulletin September Quarter 2010) Mr. Whiteley also said the report overstated the rise in household debt to household assets (including super) by excluding the value of housing assets worth $4.2 trillion. “The report flies in the face of clear evidence that home ownership significantly improves retirement outcomes.” Mr. Whitely cites other benefits of the super system. He says, “The Super Guarantee will increase disposable income after retirement and reduce pressure on the age pension. “When mature the superannuation system combined with the age pension will deliver replacement rates of around 80% of pre-retirement income for average earners with super delivering 50% more income than the full age pension alone. “In respect to reducing reliance on the age pension, super has been a factor in reducing reliance on age pensions with the proportion of part-rate pensioners increasing from 31.9% in 1999 to 40.2% in 2011. Treasury has estimated as the system matures, part rate pensioners will exceed full rate pensioners by around 2035.” BF

Bottom line threat Billions of dollars worth of revenue from Australian business could be under threat from out of date enterprise risk management (ERM) practices. While the Australian financial services industry is waking up to the competitive advantage of implementing ERM practices, actuaries think more work needs to be done in making businesses resilient and adaptable to external threats. These could include the pace of technological change, the impact of climate change and the rise in the power of the consumer, all of which could lead to hefty company losses if not managed appropriately. Joshua Corrigan, chair of the Institute’s Risk Management Practice Committee, explained that resilience is about ensuring organisations are adaptable in an ever-changing environment, so that companies can remain in the game and competitive when others are falling by the wayside. “Businesses fail all the time because they are not resilient; they don’t adapt and don’t have

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the robustness to deal with downturns. Having a proper ERM framework and thinking about embedding resilience is going to become a source of significant competitive advantage,” said Mr. Corrigan. According to Mr. Corrigan, corporate Australia needs the next evolution of ERM, a phase he has dubbed ERM 3.0, to truly succeed in the future. The first phase was all about assessing basic sensitivity levels of outcomes such as profitability to risk drivers, which was highly quantitative in nature. The second phase is all about aggregating the various types of risks to try to predict what they mean at the enterprise level. The third phase, which the financial services industry is increasingly moving into, is all about understanding and explaining uncertainty holistically and how it relates to enterprise strategy. “People now have a greater understand-

ing of risk and we now also have the tools, techniques, systems, and processes for dealing with complex enterprise risk problems which we didn’t have before. Those organisations that embrace these are more likely to not only protect themselves against significant risk events, but also derive competitive advantages through more sustainable performance.” BF www.businessfirstmagazine.com.au

NEWS | BF

Business resilience Reports show that confidence is down, however for some Australian businesses, post election governments – along with their policies – will come and go. It is those that have taken an approach of resilience and look beyond the election cycle that have their business strategies intact. Typically elections cycles and the period post-elections are marked by poor market performance and consumer confidence, “Uncertainty created by the election has certainly not helped support business action and this is probably not going to be addressed immediately after,” commented Rupert Posner, CEO for Good Environmental Choice Australia and Advisory Board member for Australian Sustainability Conference. Many businesses within the sustainability sector have seen both strategic and financial benefits of an approach of resilience that not only successfully navigates disruptions, such as election cycles, but can also create longterm value. Highlighting the importance of this approach is a recent study showing that: 1. Over 90% of businesses were committing to sustainability and environmental policies and the same number had a dedicated environ-

mental team. 2. The number of organisations that had completed energy efficiency and reduction plans to make their business more resilience and profitable was over 80% “From the discussions that we have with businesses within the sector, there is no doubt that if companies fully understand and address

sustainability issues from a long-term perspective they will enjoy economic and business benefits irrespective of the vagaries of elections and government policies,” said Posner. “This is, of course, not to diminish the importance of well thought out government policy and working with both sides of government to see business action supported.” BF

The dollar’s effect on import and export insurable event,” said Mr. Phillips. “This is huge risk to take for any importer. For instance, if your goods are suddenly unavailable due to a disaster or theft, for example, you could lose a significant chunk of your income and compound the impact of the higher dollar.” The rising US dollar will also most likely lead to imported stock increasing in value, meaning it may no longer be adequately covered.

For more than two years from late-2010, the Australian dollar was usually valued above the US dollar. This created unprecedented value for local importers and squeezed the margins of exporters, particularly manufacturers and farmers. However, the Australian dollar dipped back below parity with the greenback in May this year and has recently hovered on either side of the 90-cent mark. This has reversed the conditions. Many small businesses that trade in imported goods are now feeling the pinch thanks to reduced www.businessfirstmagazine.com.au

cash flows. On the other side of the depreciating Australian coin, export conditions are much more favourable. Risks to importers Despite the tighter cash flows, Mr. John Phillips, Vero’s chief underwriting & portfolio manager – commercial, has urged importers to resist the temptation to reduce their insurance coverage. “Unfortunately, insurance is often a low priority for small businesses, even at the best of times. However, the minor savings you will make by reducing your coverage will be heavily outweighed by the potential losses after an

Risks to exporters For exporters, the current conditions will encourage an increase in export activity. Some small businesses may even take the opportunity to enter export markets for the first time. Importantly though, as soon a business begins to export overseas, it becomes exposed to new risks. “Most businesses will have product liability insurance in place to cover themselves from any loss, damage or injuries caused by their product. However, many product liability policies only cover domestic sales, not overseas exports,” said Mr. Phillips. “Once you export your products overseas, particularly to markets like the USA, you have to extend your insurance to cover your new risk exposures.” BF

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BF | NEWS

INTEGRATION AID

Changes for small business regulation The Council of Small Business Australia (COSBOA) recently congratulated The Productivity Commission on the release of the final version of its small business regulation. The report focused on the needs of small business and promises to change the way this crucial business segment is regulated. Peter Strong, executive director of COSBOA said the report is a landmark moment for the entire small business community for it is a review that focuses squarely on the specific needs of small businesses. “Is a report that sets up a template for regulators to better work with small business people in order to help them – not hinder – to achieve the best outcomes for business, for the community and for individuals,” said Mr. Strong. COSBOA in its consultations with small business people has found that they are tired of rhetoric about the importance of small business people, for it has rarely been matched by outcomes. However, COSBOA says this report has the power to change all that. “This report is a positive and constructive response that shows we have been heard. The

message from this report is loud and clear – stop and consider the impact of regulation on the small business person, their business and their capacity to continue in business,” added Mr. Strong. “This report was developed by the Gillard Government in response to issues raised by COSBOA. We know that the Tony Abbott Government values its findings and with the Minister for Small Business Bruce Billson in charge, we are confident we can expect good results for all concerned. “We see the report’s key points as a way to achieve the win-wins we need between small business people and regulators, for example, the report cites regulators’ communication could be more responsive to small business needs and capacities in the area of data collected by businesses and great use of industry associations to disseminate information, better websites and enabling timely access to regulatory staff. “This is music to our ears. The good regulators can feel proud of how they behave and the others, many in local government, will hopefully learn how to engage in a more helpful manner,” added Mr. Strong. BF

Roger Simnett, Scientia professor of accounting at the Australian School of Business, and member of the IIRC’s technical task force, has conducted research into the importance of integrated reporting, which he says provides a significant opportunity for NFP companies. “Demand for integrated reporting is coming from the private sector, particularly large institutional investors such as pension funds. The irony is that while integrated reporting will be a good thing for the private sector, it will be a game changing development for NFP companies that have never been well catered for under the current reporting model. “When I am looking to assess the value of a social business, I’m only marginally interested in how much profit the company made or how it made that profit. Social businesses are not established to make a profit so to assess their value according to a financial reporting model is unhelpful. Integrated reporting allows funders and supporters to measure all aspects of company value such as strategy, management, social good and governance.” The research shows that the current regulatory burden on the limited resources of NFP companies in Australia is significant and in need of streamlining and reform. BF

Social innovators given a leg up Entrepreneurs and start-ups in this country have had a hard time recently trying to secure funds. In many cases, businesses have been driven overseas to seek opportunity, when they should have been encouraged to stay. The Early Stage Social Enterprise Fund aims to reverse the trend of businesses moving offshore by providing social enterprise entrepreneurs with access to capital for improving financial resilience, extending services or products and improving their ability to deliver on their organisation’s mission. Behind the Fund is Forester’s Community Finance. The organisation’s, Belinda Drew, advised that the finance fund had been created to meet the needs of Australia’s changing social landscape, with both social enterprise and social entrepreneurship on the rise.

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“We are seeing more and more social enterprises emerge which is great news for Australia’s social sector, but unfortunately many of these new enterprises are challenged to find the capital and support their need in the early stages of their development. “Our Early Stage Social Enterprise Fund has been designed with a view put recipients on the road to long-term sustainability. Through capital investment and access to our skills and knowledge network, recipients will be better positioned to deliver on their social enterprise mission.” Foresters Early Stage Social Enterprise Fund was launched by Allan English, founder of ASX listed Silver Chef and the 2012 Queensland Community Philanthropist of the Year. BF www.businessfirstmagazine.com.au

NEWS | BF

The science of super You don’t normally think of science and superannuation mixing too often in the laboratory, but a new $9m research program between CSIRO and four universities is doing just that. The CSIRO-Monash Superannuation Research Cluster is built around a $3m Flagship Cluster Fund grant from CSIRO, and $3m in-kind research contribution from university partners led by Monash University. Another $3m will come from industry partners and government agencies. Aimed at addressing two key themes of Superannuation and the Economy, and Australians Over 60, the cluster will bring together researchers from Monash and Griffith Universities, the University of Western Australia and the University of Warwick in the UK. The Superannuation Research Cluster will look at what are the optimal forms of asset allocation by super funds, and how will this impact on economic growth as the pool of funds under management grows ever larger. It will also investigate what other products and services could be made available to retirees, and how can super funds continue to assist their members post-retirement.

CSIRO Chairman Simon McKeon said the cluster fitted well in CSIRO. “This is an exciting new development for our organisation which provides advice on many of our nation’s most profound challenges. For the first time we will be involved in research in superannuation, an industry that is reshaping our economy as funds under management grow exponentially,” Mr. McKeon said.

Professor Deborah Ralston, executive director of the Australian Centre for Financial Studies, drew the academic research program together for Monash. “This high impact research will provide an independent evidence base to inform policy and promote innovation within the superannuation system, which is shaping up to have a key influence on the economy and the lives of most Australians,” Professor Ralston said. BF

Growth in Asia and emerging markets Boutique fund manager Metisq Capital says emerging markets are becoming increasingly interdependent; with Asian economies and broader global emerging markets set to become more reliant on each other than on developed markets to generate sustainable economic growth. Key economic and demographic trends have driven growth across emerging markets over the past decade and this has translated into positive outcomes for equity investors. In Australia meeting with clients, Metisq Capital Chief Investment Officer Kenny Tjan said he saw significant potential for emerging markets investors, but it would increasingly be the interdependence between emerging Asian

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economies and broader global emerging markets that would drive growth of both regions. “The steady rise in globalisation is creating positive cross border relationships across many of the emerging market economies, resulting in diversified income streams and reduced volatility of company returns,” Mr. Tjan said. Mr. Tjan used the example of the materials and mining sector to provide an insight into the interweaving of emerging market economies. The Asia (ex Japan) region is the world’s largest consumer of raw materials, its demand far outstripping Asian based commodity supply. As a result, Asia ex Japan producers

and consumers are forced to look toward the resource rich emerging markets to meet the increasing regional demand. The result is a positive lift for both Asia ex Japan and nonAsia ex Japan emerging market economies. Over the past ten years, the MSCI Global Emerging Markets index returned 13% per annum, closely following the MSCI Asia ex Japan index, which returned approximately 12% per annum. Traditionally, global emerging markets have been dominated by Asian economies, which contribute 60% of the total capitalisation of the MSCI Global Emerging Market Index. The remaining 40% is made up from Europe, Africa/ Middle East and the Americas. Metisq sees an opportunity for investors to take a global view of emerging markets to widen the pool of investible companies and tap into a range of exciting new investment themes. “While the Asia emerging markets region alone has provided investors with strong returns, a global view to emerging markets represents a more comprehensive investment universe to better meet investor needs,” Mr. Tjan said. Mr. Tjan oversees Metisq’s fundamental Asian equity research, targeting quality companies with attractive valuations and positive momentum characteristics for the Metisq Asian Share Fund and Metisq China Share Fund. BF

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BF | FEATURE

Pay it forward

CEO remuneration is one of the most contentious issues in the world today. The paypackets of toplevel executives have caused protests, riots and shareholder dissent. Are executives worth the money? Jonathan Jackson examines whether remuneration should be aligned with performance.

he most recent CEO to come under attack for the depth of his paypacket is Virgin Australia chief executive John Borghetti. Borghetti’s remuneration came into question by CGI Glass Lewis, who urged shareholders to vote against Virgin’s remuneration report and the granting of share options to Mr. Borghetti. CGI is an influential advisor. They are one of the leading, independent, governance analysis and proxy voting firms, serving institutional investors globally that collectively manage more than $15 trillion in assets. Their focus is the long-term financial impact of investment and proxy vote decisions. When they advise, people generally listen. In this case however, Virgin’s four largest shareholders – Singapore Airlines, Etihad, Air New Zealand and Richard Branson – are expected to vote in favour. CGI’s concerns over a lack of justification for high levels of pay will fall on deaf ears as the board moves to boost their CEO’s pay. Borghetti’s statutory pay totalled $3.7 million. The pay included a contractual bonus for the takeover of West Australian airline Skywest and the purchase of a controlling stake in Tigerair Australia. The board also boosted his base pay by $350,000 citing the fast tracking of Virgin’s restructure. Yet Borghetti oversaw a $98 million loss. Given the magnitude of the loss and the fact that his pay is approximately 70% higher than the median for his peers, CGI and Virgin’s shareholders are well within their rights to question the money. Speaking generally, Entourage CEO Petar Lackovic says, “It is commonly suggested that the success of most companies is often directly related to the quality of its executives and this ultimately affects the staff and families of these companies.” In other words, topline executives are usually worth the money. There is no substitute for experience and smarts. However, Petar does believe

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that companies should adopt models that suit them. “Being one of the most critical acquisitions, to attract top line executives there is thought that companies should seek to design the most efficient compensation packages possible in order to attract, retain, and motivate CEOs, executives, and managers and this often means aligning pay-packets with profitability. “What should always be taken into consideration are the values as well as the short, medium and long-term goals of the company before deciding on this and making sure they are clearly communicated and aligned with all parties.” It’s an important point to make. If you are considering paying the big

dollars, make sure that the money spent is in line with the values of the organisation. If not, you could bring the organisation down. Nick Raphaely is Director and Co-founder of Assetline, a leading Australian personal asset lender. Beginning his career at Merrill Lynch International (now Bank of America Merrill Lynch), Nick has 15 years of investment banking and funds management experience in the UK and Australia. Nick understands the intricacies of remuneration better than most. “In April this year, Sir James Crosby, who headed HBOS, which was once one of Britain’s largest banks, announced he was giving up 30% of his indexed pension, quitting his job with www.businessfirstmagazine.com.au

FEATURE | BF

a private-equity firm and handing back his knighthood,” Nick says. Why? “Crosby was the architect of the expansion plan that led the bank to take on billions of dollars in risky mortgages and move into Ireland and Australia where it lost more than $20 billion. At its peak in 2007, the bank was worth roughly $60 billion, but nearly all of that has been wiped out. Sir James was the ‘architect of the strategy that set the course for disaster’, according to a report by MPs and members of the House of Lords.” Nick says executive salaries should be an integral part of a business strategy, devised to incentivise executives to accomplish that strategy. www.businessfirstmagazine.com.au

He believes the key things to focus on are: • Do salary packages address both company performance and its sustainability? Revenue growth is worth little, if the long-term effect is massive write-downs. • Do salary packages avoid a ‘swing for the fences’ mentality at the expense of long-term company viability? • Do the incentive measures focus on what’s best for the long-term strategy for the company, instead of just emulating competitors? • Do the company’s stock ownership and/or retention policies have a clawback clause if the company underperforms? Since 2009, cases like Crosby’s have gained prominence. In Australia in that year, the Australian Prudential Regulatory Authority (APRA) released a paper titled: ‘Executive Remuneration – The Regulatory Debate’. APRA executive member John Trowbridge led it with CGI Glass Lewis and Guerdon Associates. It asked the question of justification: “For the public, executive remuneration is an easy target when share prices are falling and some executives are highly rewarded. There is public outrage at large payments to executives of loss-making businesses; and the public has a general sense of unease around the topic of executive remuneration. “Around the globe, politicians and governments are finding themselves not only responding to public concerns about executive remuneration. They also believe that unreasonable things have happened that have contributed to the global financial crisis and the economic downturn in which we now find ourselves. They are rightly concerned at excessive risk-taking, conflicts of interest and apparent examples of individual greed taking priority over the interests of shareholders and customers. “Investors and shareholders have become concerned that executive remuneration arrangements have contributed to risk-taking that has undermined the quality of corporate decisions and strategy, creating conflicts of interest and compromising shareholders. “Regulators need to analyse this debate and the associated circumstances, and to influence where they can the actions of boards of companies, in order to create more appropriate and better balanced remuneration arrangements. In APRA’s case, there is the possibility of influencing directly the boards of financial institutions which are regulat-

ed by APRA, namely banks, building societies, credit unions, insurance companies and friendly societies, and also superannuation fund trustees.” In April 2010, APRA introduced various prudential requirements in relations to remuneration. The purpose was to ensure effective governance. Three years later they have seen positive signs that the level of risk taking has decreased. “We found that all of the boards we met with had well-established Remuneration Committees, with reasonably clear and robust governance arrangements. In most cases, the Chair of the Board attended meetings (either as a full or ex-officio member). Given our focus on the linkage between risk and reward, it was also pleasing to see a strong linkage between the Remuneration Committee and the Board Risk Committee: the most common model observed was for there to be at least two directors who sat on both committees (and often the Chair of the Risk Committee was a member of the Remuneration Committee). “We were pleased to see considerable evidence that, as appropriate, Remuneration Committees sought advice from external sources, independent of that obtained by management. The conduct of the Remuneration Committees’ work varied considerably. Some committees met only on a quarterly cycle, while others met more frequently. This seemed to reflect differences in the depth of review and analysis being undertaken: for example, some committees focused on policy setting and the arrangements for only the most senior individuals, whereas others examined the remuneration arrangements for a much larger number of individual staff members.” APRA’s sentiments echo that of Nick and Petar’s. APRA believes that consideration for the following should occur: 1. Is the Remuneration Committee well established, with clear governance arrangements? 2. Are there strong linkages between remuneration and risk management oversight by the board or its committees? Executive level remuneration is a complex matter and should not be taken lightly. It is up to individual companies to set their rates. However, clear guidelines are necessary so that governance issues are met. You can’t predict a CEO’s performance, but you can ensure that the pay structure reflects that performance. BF

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16.6% $4.7

MILLION.

- the number of women on ASX 200 Boards A PriceWaterhouseCoopers survey revealed: • 64% of Australia’s CEOs say China is the biggest growth opportunity, US 52%, India 23% • 82% of Australia’s CEOs see the need for M&A, JV or strategic alliance • 55% have listed M&A, strategic alliances and JV in next 12 months, as an investment priority • 39% say most growth will be organic and in Australia 80% plan to continue cost cutting Meanwhile the survey further revealed that in the next 12 months the changes Australia’s CEOs see the need to make include: • M&A, joint venture, strategic alliance - 82% (61% global) • Technology investments - 82% (74% global) • Increase in capital investments 77% (64% global) • Customer growth/retention/ loyalty strategies - 80% (82% global) • Organisational structure - 86% (74% global) • Talent management - 77% (77% global)

$9.2m:

the amount Westpac boss Gail Kelly received in 2013.

– the average salary paid to CEOs, including bonuses SHE SAID:

“

I always did something that I was a little not ready to do. I think that, that is how you grow. When there’s a moment of ‘Wow, I’m not sure that I can do this’, and you push through those moments, it’s then that you have a breakthrough. Sometimes that’s a sign that something really great is about to happen. You’re about to grow and learn a lot more about yourself.” – Marissa Mayer, CEO of Yahoo.

3.5%

Only of ASX200 companies have female CEOs, making it one of the lowest rates in the Western world, behind Hong Kong, Thailand and China.

CEOs of the top 100 listed companies earned 67 times the national average.

ANZ BOSS MIKE SMITH’S COMBINED EARNINGS TAKING INTO ACCOUNT VESTED SHARES WAS 19.1 MILLION.

HE SAID:

“

We are really competing against ourselves, we have no control over how other people perform.” – Peter Cashmore, CEO of Mashable.

SINCE 2002, EXECUTIVE FIXED PAY HAS INCREASED THREE TIMES AS FAST AS INFLATION. The average cash bonus for an ASX 100 executive rose 4.8 per cent to

$1.32 million. www.businessfirstmagazine.com.au

There are about 2,200 stocks listed on the ASX at any one time.

In the period 2002-2012, Westfeld’s Frank and Peter Lowy were the highest paid executives with collective packages worth $21 million per year excluding vested equity incentives. BUSINESSFIRST MAGAZINE

BF | COVER STORY

Tomorrow’s energy

today

14 BUSINESSFIRST MAGAZINE

www.businessfirstmagazine.com.au

COVER STORY | BF

The City of Sydney has undertaken the enormous task of reducing city greenhouse gas emissions by 70% and leading the way is Allan Jones MBE, the man who reduced Woking’s emissions by 77.5% and was instrumental in removing the regulatory barriers to decentralised energy in London. Allan speaks with Bob Forshaw about a vision for a clean future.

or once, business and bureaucrats seem to be on the same page. Local government and major business groups want to see more efficient energy systems in Australia. In fact, the City of Sydney has created a blueprint to be adopted by 2030 that creates a green, global and connected landscape. To achieve this vision the city is implementing climate change initiatives including: • Energy efficiency retrofits, LED street and park lighting and rolling out Australia’s largest building mounted solar panel project on the City’s own buildings and operations • Better Buildings Partnership and Environmental Upgrade Agreements to help business to reduce energy bills and emissions • Green Infrastructure Plan – Trigeneration, Renewable Energy, Advanced Waste Treatment and Decentralised Water Master Plans to detail the infrastructure needed to deliver Sustainable Sydney 2030. The City of Sydney recently urged members of the NSW Parliament to reform outdated electricity regulations preventing the installation of low-carbon trigeneration electricity precincts. At a hearing of the NSW Parliament’s Public Accounts Committee into trigeneration, the City of Sydney’s Chief Development Officer Energy and Climate Change, Allan Jones, said major businesses groups that want to bring more efficient energy systems to Australia echoed the City’s views. “Trigeneration is a proven way to produce electricity locally and to recycle the waste heat that would otherwise be thrown away at remote power stations and not only slash carbon emissions but reduce energy costs at the same time,” Allan says. “While the current regulations allow installation of a trigeneration plant in a single building, they make it very difficult to install bigger, more efficient plants which could supply electricity, heating and cooling to a cluster of neighbouring buildings because of

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the prohibitive cost of transporting electricity short distances.” The way the regulations work now, the network charges to move electricity across the road is the same as bringing electricity on the network all the way down from the Hunter Valley. “In many other countries regulations that make these plants more economically viable have led to the installation of thousands of megawatts of trigeneration power and significantly slashed carbon emissions. “Trigeneration networks in the US, UK, Russia, China, Germany, India and Japan offer a cheaper and cleaner alternative to coal-fired power, proving this is a safe and reliable way to produce local electricity, heating and cooling. There are currently more than 330 gigawatts of electricity produced worldwide using trigeneration. With the rest of the world moving in this direction, it’s time for Australia to join the 21st century on this critical issue.” Allan was brought into the Sydney project in late 2008 due to his vast experience in meeting a city’s energy requirements. He says the difference in the UK, where he had extraordinary results, to Australia was regulation. “In Woking we had a better regulatory regime. We were able to form joint ventures with the private sector. By the time I left Woking I’d implemented more than 80 private decentralised energy systems. “Over here local government is not recognised in your constitution, so anything that we try to do in this area is subject to ministerial approval and that’s just too big a risk for the private sector to want to participate with the public sector.” The public and private sectors working together is necessary to deliver Sustainable Sydney 2030 so this was one of the first things that Allan had to address through such initiatives as the Better Buildings Partnership and Environmental Upgrade Agreements. Without too many barriers, certainly at the government level in Woking,

BUSINESSFIRST MAGAZINE

BF | COVER STORY Allan helped reduce CO2 emissions by 77.5% from 1990 levels to 2004, improved the energy efficiency of the existing housing stock within its area by 30% from 1996 to 2004 and undertook groundbreaking work on energy and water efficiency, private wire CHP cogeneration and trigeneration decentralised energy systems, environmentally friendly waste recycling/recovery and energy from waste technologies, alternative fuels for transport, renewable energy and fuel cells. Woking installed 81 private wire decentralised energy systems, nearly 10% of the UK’s total installed solar energy photovoltaics and the first fuel cell CHP in the UK. Woking was able to able to implement private wire networks under the UK’s exempt licensing regime. He repeated these achievements in 2004, when the then Mayor of London, Ken Livingstone recruited Jones to head up his new climate change agency for London as chief executive officer (2004 to 2008) of the London Climate Change Agency Ltd. Allan is credited with the removal of the regulatory barriers to decentralised energy in the UK with the high level advocacy and lobbying that

led to the creation of a separate electricity supply licence for decentralised energy or distributed generation to supply electricity over the local distribution network, otherwise known as the ‘virtual private wire’ over public wires principle. Allan has thus had to approach things differently in Australia. We want the same outcome for Syd-

ney, so we need to press for electricity regulatory reform for decentralised energy. The City is doing all that it can, so for trigeneration for example, it is looking at enabling thermal energy networks between buildings so that surplus thermal energy can be supplied to other buildings in the precinct. Some schemes are moving ahead via environmental upgrade agreements

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COVER STORY | BF and the better buildings partnership, a partnership between the City and 15 of the city’s major landlords who own more than 50% of the commercial real estate in the city. So things are happening despite the regulatory barriers. The City of Sydney already has approximately 15 trigeneration systems in place but Allan wants to see those move away from building only systems to supply other buildings very high levels of efficiency and a much greater reduction in greenhouse gas emissions. A part of Allan’s role when he moved to Australia just under four years ago was to upskill staff. Neither he nor the City wanted someone to fly in and fly out after making changes, but have nobody understand what was done. This would make it impossible to continue the work. “There’s been quite a significant upskilling of people inside this organisation; whether it’s design or operation maintenance or the actual delivery of the projects that I helped develop like building energy efficiency have been allocated to different departments for them to manage the contracts going forward because I really didn’t need to be a contract manager as well.” It is a long process to get everybody on board, including staff and outside elements, but Allan believes that the best way to convince someone of the efficacy of a program is to take them on the journey with you. “When we developed the trigeneration masterplan, one of the first things I did was to involve Ausgrid, the electricity network operator and Jemena, the gas network operator into the project team. The technical detail of how energy is consumed in the city and at what point can you inject surplus electricity into the local electricity network at particular capacities was provided by

Building a greener Sydney pitt&sherry, with project partner Exergy Australia Ltd, is working closely with the City of Sydney to improve energy efficiency in buildings as part of the Green Infrastructure Plan. As a leading multi-specialist consultancy, pitt&sherry has been delivering intelligent and sustainable solutions to industry, government and communities for over 50 years. – pitt&sherry

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Ausgrid. ‘The trigeneration masterplan is a detailed technical document that can be used by anyone who wants to develop a trigeneration network.’ Similarly we’ve done the same thing with the renewable energy and the decentralised water masterplans. The private sector on its own would have never have done that, they need a business case, so you involve them in the process and they understand they should get a return on investment.” Another problem Allan has had to overcome is a lack of knowledge in this area. Australia is behind Europe, America and Asia in the adoption of decentralised energy and advanced renewable energy programmes. For example, new ‘power to gas’ technologies converting surplus wind and solar into renewable gas used in Europe could unlock Australia’s vast renewable energy mining and export potential. Australia’s solar energy resource alone is 10,000 times Australia’s total annual energy consumption and less than 1% of this resource would equal Australia’s current black coal and natural gas exports at an economic value of $31 billion. No holes would have to be drilled or dug, the resource would never run out and Australia could be reducing global emissions rather than increasing them if it adopted these technologies. “One of the benefits of me being here is that I can show people that this isn’t rocket science. Germany’s doing it, Denmark’s doing it, California’s doing it, the UK is doing it. Countries

like South Korea, India, Japan, and even China are doing this, however I find that a lot of people involved in this project area are totally unaware of that. So just providing them with the information and making them aware that this is already being done elsewhere makes it much easier for them to get on with the project rather than thinking that they’re working at some kind of leading edge level that they feel uncomfortable with.” “I guess a lot of what I’ve done to unlock the potential in Australia is the sort of dissemination of information and knowledge that makes people aware of how you go about designing, building and operating these systems.” Other countries and world cities may be ahead individually with trigeneration, solar, wind, renewable gas from waste, decentralised water and so on but not, as yet, as an integrated solution for sustainability, climate change mitigation and adaptation.’ Where the City of Sydney has actually become a world leader is not, as yet, in the delivery of sustainable energy, water or waste of the scale that has already been delivered in other world cities, but in joining up the dots and showing how a world city can become 100% sustainable and self-sufficient through the application of its green infrastructure and other plans that both mitigates and is resilient to climate change. “How you go about decarbonising the cities in a matter of a couple of decades is of key interest to the rest of the world. We’re actually getting a lot of enquiries from overseas cities. We make all that technical documentation available to people on the ‘Powering Sydney’ website; it can be freely downloaded, and so we’re working with other world cities around to copy what we’re doing in terms of the masterplanning process – of how you actually go about decarbonising the city to a 100% renewable energy city, a sustainable water supply and so on.” For decades now, Allan has been involved in best practice renewable energy solutions. Though Australia has been behind in knowledge and implementation, it is hoped that the City of Sydney project will have nationwide impact. All it takes is simple things like converting waste into renewable gases for injection into the gas grid to supply the planned trigeneration network and using LED lights in the city streets. Allan is now four years into the project, but already he feels that the 2030 target will be achieved beforehand. BF

BUSINESSFIRST MAGAZINE

BF | ASIA

Image in the Asian Century Australian entrepreneurship in the Asian Century will open up many opportunities. Historically, there has never been a better time to engage Asia writes Jon Michail.

U Jon Michail

is the founder and CEO of Image Group International.

nderstanding culture and image plays an integral part in conducting business in different Asian countries, but you should never assume that doing business in these countries is the same in each region. China is different from Thailand and even more so than India. And dependent on what business you are in, there are also large differences you can’t ignore. For instance, large businesses and government will engage differently from SMEs or non-profits. The one thing that does unite the Asian region and that Australian businesses should be aware of is that businesses in these regions are very entrepreneurial and hungry to do a deal. They are highly competitive, ambitious and engaging. Yet, there are several different elements we must understand about the different cultures. Singapore is regarded as clean and above board with very professional and Western processes in play. Indonesia on the other hand can be quite duplicitous – have you ever been ripped off changing Australian

18 BUSINESSFIRST MAGAZINE

currency at an exchange in Bali? That’s a good indicator of the business culture that exists there starting from a very low base. Duplicity is common in Asia in general from politics to business. Yet Indonesia is becoming one of our most important allies, which means we must be respectful of their practices and understand how to deal with them. China is vast and booming, but there are so many aspects in play across a broad range of industries that it is difficult to keep up with their processes. One of the most important things to remember is that image is vitally important. In Chinese culture a solid gold Rolex at times speaks much louder than the colour of your money. I have launched several eclectic businesses in China on and off for over 20 years. The most important lesson I have discovered is to pick the right partners. For instance during my involvement in China as an importer, business was conducted in a fairly straightforward manner; you buy their goods, haggle, pay their price and wait for delivery. There were the typical importing problems including quality control,

products delivered that were different from sample and under delivering. These are common problems, but can be negated by choosing the right sources. In recent times I have been exporting our services. This is a much more difficult practice as the Chinese do not like to pay for services if they perceive they can get those services for nothing. This is where a good partner will make a difference in building your business by positioning and selling the value of your proposition – especially if it’s a new concept. This is also where image comes into play. Asia and China in general are very image conscious. You can’t afford to openly offend your hosts. There will be severe consequences if you do. For instance one client I have was invited to dinner. Now there are certain foods that don’t naturally appeal and you don’t have to eat them, although sometimes it doesn’t hurt to go with the flow. However if you are to decline you must do this in a very sensitive manner. If you are too rigid in your approach then you offend the host. My client has

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ASIA| BF

a strong personality and failed to realise there was a sense of etiquette involved. She insulted the cuisine, dressed too casually for the meeting and missed her opportunity. She noted to me that her host contacted others in the company and politely mentioned if they could send someone else. There are other etiquette-based protocols including the consumption of alcohol and invitations to clubs, where sometimes it is important to attend. However, if you must decline, do it politely and with respect. Some academics or government leaders may try to underplay these differences in culture, image and etiquette, however in my experience every Australian business planning to enter the Asian market must observe these protocols. Unfortunately, my client who is a renowned businesswoman in Australia did not understand the hierarchies in play and the nuances that she should for someone in her position. She failed to make the right first impression. To understand the image and culture you are dealing with, you must again find an able and willing partner. Keeping with China, your partner

‘

must speak Chinese and side with you when in discussions. However, it’s not uncommon to have a duplicitous translator, agent or associate, therefore always be aware that all may not be what it seems. Always remember Asia is not Australia. You can negate some of these problems by displaying strength, excellent branding, maturity, respect and an association with wealth. These will be seen to be in your favour. The ultimate respect is doing business yourself: don’t send a young kid to do the job of the senior executive. Maturity in personality and age are big advantages. Social awareness is an imperative. Understanding the protocols and etiquette of your hosts is paramount even if you are the buyer. For a long time to come the Asian region will offer the world business opportunities that will create extraordinary wealth for the disciplined and well-planned. To take advantage of this be professional, well researched and always look the part even if your host doesn’t. You will be judged constantly, even if the relationship ‘feels’ perfect. BF

Understanding culture and image plays an integral part in conducting business in different Asian countries.’

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Top 5 Best Practices DO’S 1. Relationships are essential – elitism is rife – getting introduced by the ‘right’ contacts makes a huge difference. 2. Don’t embarrass your hosts. A direct no is rare – when they say YES it doesn’t always mean yes. Don’t criticise your host – remember the concept of saving face. 3. Be patient – build trust. Negotiate win-win and aim for a resolution via compromise. 4. Always include extra fees in your budgets – your commissions, introductions or favours – remember this is common practice and not regarded as bribery or corruption as it maybe in the west – however be clear of all the ‘rules of the game’ and Australian laws. 5. Understand the protocols and etiquette – including after hours – as much business networking is conducted then. DON’TS 1. Don’t expect business to be conducted similarly to your country. “When in Rome do as the Romans.” 2. Don’t rush the relationship – don’t expect a deal to happen from one or two meetings. 3. Don’t ask direct family questions unless they have volunteered them. 4. Don’t turn down refreshments during a meeting – go with the flow. 5. Don’t expect them to be your friend – they are some of the world’s best negotiators therefore be clear of your end game before your start.

BUSINESSFIRST MAGAZINE

BF | ASIA

How to be competitive in the Asian Century In the Asian Century it’s time to look at the make up of our boards and leadership structures writes Pamela Young.

20 BUSINESSFIRST MAGAZINE

ustralia looks like a multicultural nation on paper, with 47%1 of our population having at least one parent born overseas. But multiculturalism is clearly not evident at the top levels of government and industry. In Tony Abbott’s new Cabinet, for instance, there is not one person of nonAnglo-Saxon descent and in a review of our top-tier ASX100 companies, only 3% of our business leaders were born in Asia2. With a similar paucity of nonAnglo-Saxon people on the executive teams of most Australian businesses, it has to be said that, while Australia has the multicultural numbers, we are a long way from being a truly diverse society. Going forward, we need to ask ourselves, ‘Why haven’t many more immigrants who have made Australia their home since WWII featured more prominently as leaders in business, society and government?’ and ‘What implications will our lack of cultural diversity at the top of our organisations have for our future?’ How might we have fared if we had more fully utilised the skills and experience of all the people that now call Australia home? In the 21st century, as the world continues to globalise and workforce mobility increases, we need to consider our global position. If we continue on our present path, not encouraging and nurturing cultural diversity at the top levels of our organisations, the world will notice. The net effect is likely to dampen our prospects for international trade and limit our growth potential with our closest neighbours in Asia. How we can move forward? We must adapt to survive. The Australian economy is too small and growth of just 2.5-3% annually is too low to sustain the quality of life to which we have become accustomed. The obvious solution is to close the ‘cultural gap’ between our island home and Asia, our fast-growing neighbours. In doing so, we face a challenge: many European nations have made earlier and greater commitments to working with Asia and now understand their customs, practices and their languages. They www.businessfirstmagazine.com.au

ASIA | BF are significantly more experienced at working cross-culturally than us. While we retain the advantage of proximity, operating in the same time zone, being neighbours alone won’t be enough if we fail to build relationships and communicate without shared meanings. How do we become competitive in the Asian century? Firstly, we can encourage greater cultural diversity in the workplace in Australia at all levels. This would improve our domestic productivity and performance, and allow us to develop greater skills for operating across Asia. By working alongside people of different cultures, our leaders could deepen their understanding – and develop organisational capability – for working with the many cultures that make up the workforce of our Asian neighbours. Secondly, we could encourage and reward those who have taken the time to learn the languages that will help us forge new relationships with our Asian neighbours. Sharing languages builds social cohesion, improves cultural understanding and builds respect, cooperation and productivity in the workplace. Language is more than words; it helps us to understanding cultural differences, attitudes and behaviours. As we strengthen our language abilities, relationships with trade partners are more likely to improve. When I interviewed Australian expatriates working in China for my book, ‘Stepping Up’, they told me that the foreigners who were connecting best with Chinese businesspeople were Russians, Germans and Italians because they spoke Mandarin and were culturally sensitive to the Chinese way of doing things. By contrast, I heard that some Australians operating in China who hadn’t taken the time to learn Mandarin, were considered culturally insensitive or arrogant, especially when they presumed ‘their way was better’. On the international stage, we stand out as being monolingual and monocultural. We can change both these conditions if we are prepared to invest in our development: to advance our society and culture, we must realise that our project of building a true multicultural society is not yet complete. Australia has come a long way in encouraging and embracing diversity and in learning to embrace the cultures and cuisine of many races. Yet the facts remain. The project isn’t complete. In the top jobs in industry, business and government we don’t have true egalitarian leadership with many races – it’s just a few. www.businessfirstmagazine.com.au

How do we go about investing in the future? There is a broad discussion in ‘Stepping Up’ about how to address the challenges of our island culture, but let me share this extract, which illustrates what we are up against as a nation on the world stage: “Learning foreign languages to advance the nation’s people is a priority elsewhere: • In China children get one class of English tuition each weekday • 21 of the 31 European countries require students to study another language for at least nine years (and the European Parliament is in favour of pupils learning two foreign languages citing multilingualism as ‘a nations great potential’); • In Switzerland it is compulsory to learn two foreign languages from age eight: generally three hours per week; • In Norway, Malta and Luxembourg language learning starts at age six; • In German-speaking parts of Belgium and Spain they start at the age of three.’ Extract from Stepping Up: Lead culture change for diversity and growth in the Asian century. The culturally savvy heads of state of

these nations have invested in language learning that reflects their local population as it helps to build social cohesion, plus they are investing in languages that will equip them to be internationally competitive. In contrast, the primary school curriculum in Australian provides only one hour of language learning each week. In Great Britain students only come into contact with another language at the age of 11. And in the USA, students are aged 14 years before they start learning a language! What are the business costs of not making the change? Countries, cities, industries and businesses that resist building cultural diversity will continue to block growth and opportunity for themselves and their people. The world is moving and if you don’t move ahead of it or with it, you get left behind. Those who fail to build culturally diverse work groups and embrace Asians and other people who live in Australia are less equipped to recognise the diverse needs of their customers and shareholders. Our culture must be freed to evolve: it is an economic imperative that we allow other cultures to blend into the prevailing national culture and reflect all of Australia. BF

Pamela Young is a strategic change consultant.

1 2011 Census – Australia Bureau of Statistics Generations in Australia. First generation Australians are people living in Australia who were born overseas. This is a diverse group of people including Australian citizens, permanent residents and long-term temporary residents. In 2011, there were 5.3 million first generation Australians (27% of the population)(a). Second generation Australians are Australian-born people living in Australia, with at least one overseas-born parent. In 2011, there were 4.1 million second generation Australians (20% of the population)(a). Third-plus generation Australians are Australian-born people whose parents were both born in Australia. One or more of their grandparents may have been born overseas or they may have several generations of ancestors born in Australia. This group also includes most Aboriginal and Torres Strait Islander people. In 2011, there were 10.6 million third-plus generation Australians (53% of the population). 2http:// www.afr.com/p/national/boards_fail_asia_born_test_ec9rDQEC9Y8viIB8walxRL

BUSINESSFIRST MAGAZINE

BF | PROFILE

Relative values

Distribution is a tough business, so when you launch into the distribution sector you need a point of difference. At A&W Hollier their family values make them a unique proposition. Business First speaks with general manager Rodney Cassetari and owner Arthur Essey about the growth of the company and the need for outstanding customer service.

rthur Essey, a man who believes that you do the best you can do, believes that A&W Hollier is a baby in the distribution industry. The company is 25 years old and Arthur has been in distribution since 1973, however infant or not, this is a business that has been operating on decades of customer value, led by Arthur and his wife Wanda. Arthur started in the wholesale industry in 1983 with his brothers, by 1988 he had founded A&W Wholesalers with Wanda and three years later this highly successful husband and wife team purchased Hollier confectionery, creating A & W Hollier. Today they are a major player in wholesale distribution with a substantial fleet, a team of approximately 250 people and thousands of products. Through this growth they have not lost sight of the family values that brought them success and it is these values that drive their personal service. As an interesting aside, Rodney has shared those family values for years. “I knew Rodney personally as he was friends with my son and I knew he was very intelligent, very capable,” Arthur

22 BUSINESSFIRST MAGAZINE

says. “From day one he’s shown the aptitude to be a leader and he’s grabbed the reigns. I take the credit for this because I brought him along and into this industry and it’s been very rewarding. From a one-man show, so to speak, he’s turned the business into one with a lot more direction. And that’s really given the company longevity. He is close enough to being family to develop the business into areas where it gave the company longevity and also gave us foresight.” Rodney, who has worked in several family businesses including his father’s, believes that the care a family business has for its staff and clients is its greatest asset. And this translates to service. While Rodney has brought in systems and processes to facilitate growth, service is key. For instance at Hollier there is a 24hour turnaround on all orders placed, personal service is guaranteed by the sales team and telephone support is offered by team members who understand particular businesses. More specifically their vision is to be acknowledged by their customers, employees and suppliers as the premier

distribution company in their marketplace. It is this vision that surely attracted the more mature and iconic Dicksons into a recent merger. Dicksons has over 150 years in distribution and is also a family-owned entity. Its directors Richard and Andrew Lloyd are the fourth generation of Lloyds to work in the business. “I think that the businesses had very similar values, but we also brought contrasting skills and I think complementary skills to create a successful marriage,” Rodney says. “We both have areas of strength and it was great that they acutely complemented each other and added value to the business overall. The long term benefits are national procurement, system integration, one purchasing department, an aligned sales force and what we pride ourselves on: a greater service level. This merger will help us deliver a unified or uniform service level across the country.” So you get a sense that Hollier is a business above and beyond distribution; values and service make successful distribution possible. And successful distribution equates to growth.

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PROFILE | BF

A&W HOLLIER MILESTONES • Expanded out of single state distribution in 2007 (opened up QLD branch) • Sold off Hospitality supply division in August 2008 • A&W Hollier & Dicksons Merger date April 2012 • Acquired a WA wholesale business Sept 2012 • Controlling interest in a SA wholesale business March 2013 • Purchased Marketing co-operative Jan 2013

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PROFILE | BF

‘

Every business requires a modicum of flexibility. Technologies, customer requirements and attitudes are constantly shifting; it means those who fail to change are left behind.’

But this is growth with structure, not for the sake of it. Hence the Dicksons merger and other acquisitions. “We’ve acquired three businesses and merged with another one of equal size, all in a space of 18 months,” Rodney says. Mergers and acquisitions allow Hollier to continue to evolve strategically and therefore add greater value. One value-add that sets this company apart is the flat management structure. “Our national supply chain flat management structure and flexibility are probably our greatest assets and set us apart from our competition,” Arthur says. “We can offer truly national supply, where nobody else in our field can do that.” Every business requires a modicum of flexibility. Technologies, customer requirements and attitudes are constantly shifting; it means those who fail to change are left behind. Yet Hollier continues to forge forward and Rodney puts this down to the flexibility the company has in working with suppliers. “I don’t want to go directly into comparison to any competitors, but I think that flexibility in working closely with our suppliers and their customers delivers everybody exactly what they need. These relationships add a lot of value and ensure we can maximise consumer engagement and market opportunities.” Rodney says trust is key when dealing with suppliers. Hollier is a company that from day one made it clear to suppliers that they would pay their bills on time. This was crucial to the company’s value offering during the establishment years. “I think we’re seen as people that have a moral obligation to pay our bills and that’s something that we implemented from day one and it’s something that I personally value,” Arthur says. Rodney takes this further. “Cash is king within a business, but no more so than a capital intensive industry such as ours. Over the years we’ve formed a great relationship with suppliers through accessible levels of data and measurables. I guess once again it comes back to the flexibility, our willingness to work with suppliers on projects that are probably greater or better than some of their competitors.” www.businessfirstmagazine.com.au

Among the suppliers Hollier is renowned for setting high standards and working with integrity. They are known as fair and a company that can be trusted on its word. “When we make an agreement with a company, we follow through,” Arthur says. Beyond that the flat management structure allows Hollier to be hands on with clients. “Key management will speak to our key suppliers and key customers daily or weekly to ensure that everybody through the mutual partnerships that we develop continue to be fostered,” Rodney says. “I’ll manage highend customer accounts directly rather than delegating that. Having management take care of these key accounts means suppliers know they’re speaking to the guys that are making the decisions and that gives them the confidence to take on projects.” Suffice to say that Hollier offer a service that is well respected. It comes from a place where values are priority and where customer is king. This is a company where internal support reflects external engagement. There is very little turnover in staff because respect starts at the top and it filters through the entire company, which resonates in the way clients are treated. This is a measured company that looks at how to add value and ways that value can be attributed to sustainable growth. And that is a business philosophy that can’t be taken lightly, particularly in the tough business of distribution. BF

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BF | PROFILE

Mine your own business

26 BUSINESSFIRST MAGAZINE

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PROFILE | BF

No matter what you believe about the efficacy of coal to produce clean energy, there is no doubt that the production of coal is necessary for future energy requirements. Jonathan Jackson speaks with Cuesta Coal founders Matt Crawford and Keith McKnight to discuss the importance of coal and how it is contributing to Australia’s future in Asia.

n some circles mining is a dirty word, but it is naïve to think that the disbandment of the mining industry, particularly with fuels such as coal, would create a more sustainable future. In fact, some would argue the opposite is true. It was this contrarian vision to coal that brought Matt Crawford and Keith McKnight together to form Cuesta Coal. “The coal industry is a good industry, it has a long term future,” Matt says. “We should all be mindful about future energy requirements, particularly in developing countries including India and China. And I think Australia can play a big role in providing forms of energy in these growing economies.” For those unfamiliar with Cuesta Coal Limited, it is an ASX listed coal exploration company with a pipeline of coal projects ranging from development to Greenfield exploration. The Company is supported by a strong cornerstone investor and is targeting production from its Moorlands Project in a 3–5 year timeframe. The Moorlands Project is an open cut thermal coal project with a resource of 146Mt, with significant exploration upside. Cuesta has a diverse portfolio of thermal and coking coal exploration prospects within the Bowen, Surat and Galilee basins, with the company’s core projects well situated geographically and close to existing infrastructure. Cuesta’s founders came together at the White Energy Company. Matt had been in the energy industry since 2000, when he joined Australian Char and was seconded to work for the Griffin Coal Mining Company on a variety of projects. These projects included trial shipments of coal to export markets, carbonisation and coking trials and evaluation of coal drying technologies and various business development activities associated in the coal sector. In 2005 Matt began work as an engineering consultant servicing areas of the mining sector. Then between 2006 and 2010 he consulted to White Energy Company and played a key role in the

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BF | PROFILE commercialisation of the Binderless Coal Briquetting Technology taking lead site based and head office management and commissioning roles for plants both in Australia and Indonesia. Meanwhile Keith, whose first experiences in mining was in Ireland in 1999 after graduating university with a Mechanical Engineers degree, became engineering manager at White Energy Company in 2009. Keith also worked on development of their Binderless Coal Briquetting (BCB) Demonstration Facility in the Hunter Region of NSW and on their first commercial plant in East Kalimantan, Indonesia. The pair had a good working relationship and found they had complementary skills. So they took the leap into starting their own business. “Keith is very good on the detail and project management, while I bring skills to the big picture view,” Matt says. Keith continues, “We have a very complementary skillset. I can be very officious in some ways, while Matt is always looking 12 months or even further down the line. My role in the business and in the partnership is to focus on delivering value to investors in an operational sense.”

Like Matt, Keith always had it in the back of his mind to start his own business. His attitude to business has always been to focus on getting the best results with the least amount of fuss. However he says it is imperative to find the right partner before making that leap. “We were lucky to come across each other and I suppose Matt had the foresight to commence a business. It’s been a rollercoaster so far, but a very enjoyable one.” From Matt’s point of view they came to this industry late and had difficulties in establishing themselves in Queensland. Undeterred, the vision was to establish a portfolio with one flagship project that could be brought into production in the quickest timeframe possible. It was to create a cashflow positive business and replicate what was happening in the Pilbara, by mid-tier mining companies. The main project is Moorlands. The project was formed by consolidating the Company’s Moorlands Deposit with the Orion Coal Project, which Cuesta acquired on

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Matt Crawford

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PROFILE | BF

12 December 2012. The Moorlands Project is located 30km to the west of Clermont in the Western Bowen Basin and has a combined JORC resource of 146.1Mt. The coal is a high-volatile bituminous thermal coal with low shipping ratios (3.2:1). This provides the company with a significant development project 14km from the existing infrastructure at the Blair Athol Mine. The Company is progressing with its development programme and aiming for first coal production in 2016 “We bought Moorlands a couple of years ago and then we acquired another project called Orion,” Matt says. “We bought that for $18 million in February 2013 and the Orion Project was a bolton acquisition of our existing Moorlands project to give us a much larger footprint and larger resource from the start.” Keith continues, “Moorlands fits perfectly with our business development strategy and that is to take the company from explorer to developer into producer.” To do this properly an investor was required to underwrite the project. They also wanted to turn the company public to attract a greater shareholding. They were lucky to attract Beijing Guoli. Beijing Guoli is a 4 billion RMB conglomerate focused on diversified private power generation, real estate development and investment. A further $12m was invested by Guoli in July this year. Beijing Guoli www.businessfirstmagazine.com.au

invested $20 million dollars in two stages, $5 million dollars pre-IPO (initial public offering) and $20 million at IPO. That investment became the backbone of the project. “They are a great partner,” Keith says. “Everything they said they’re going to do, they do it – they’re very professional. I understand capital markets and I also understand the mining industry can be volatile, but they’ve been great to deal with. Partnering with a professional Chinese group like Beijing Guoli who understand the economy within China, how it works, where it’s going is a great asset especially with the growing demand from China.” One element of the business that makes Cuesta attractive is its understanding that there needs to be a balance struck between renewable energy and fossil fuel. Australia already produces higher quality coal. Matt and Keith believe restrictions on poorer quality coal will benefit Australian companies long-term. Even though there is a slight movement away from fossil fuels. “There’s no real substitute for base load power stations apart from thermal coal,” Matt says. “However we have to do things cleaner and makes things more efficient. The industry has

already started to do those things.” Cuesta has nine projects under management, but the main focus is Moorlands. Keith and Matt pay tribute to the team, including the very experienced board, to be able to manage the workload, especially in a company that is still establishing itself. “Everyone works bloody hard and they’re all working for a common cause, which I think is important,” Matt says. Keith says communication has been paramount. “I think communication and the hard work is really paying off for us because we’re ambitious. We had to work pretty hard to get where we are today and we’re firmly focused on delivering a return for shareholders. When you develop a company like Cuesta, as a junior explorer with ambition to become a producer you need faith from your shareholders and you need a lot of support and we hope we can repay that.” The pair is under no illusion that this will take time. The mining industry no longer offers instant rewards, however everyone knows where they stand and Cuesta is committed to reaching its targets. BF

Keith McKnight

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BF | SHARE MARKET

Is Mac Bank really flying? The sale of Sydney Airport shares by Macquarie Bank raises some interesting questions for the bank and its shareholders writes Blake Stirling.

Blake Stirling

is an analyst with Wealth Within.

nce known as ‘The Millionaire Factory’ times have certainly changed for Macquarie Group. Prior to the Global Financial Crisis, Australia’s premier investment bank was busily earning tens of millions of dollars from management and consulting fees through a business strategy that was commonly known as the ‘Macquarie model’. This strategy involved purchasing assets, leveraging said assets to the hilt before revaluing and then selling the same assets into an infrastructure or similar investment fund. This process would create ‘satellite’ companies that were linked to the Macquarie mothership. The bank would then sit back and watch the money roll through the door in the guise of the aforementioned management and consulting fees. This model however ultimately fell over during the GFC as investors worryingly pulled money from higher risk ventures. This forced Macquarie to rejuvenate its business and take a more conservative approach opting to turn to an ‘annuity style’ business model where revenues

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are now more predictable. Focus on this new business model has seen Macquarie gobble up smaller asset and funds management businesses around the globe and grow its total assets under management from 100 billion in 2005 to 334 billion today. And now it appears Macquarie has offloaded the final legacy of the ‘Macquarie model’, its 20% stake or 340 million shares in Sydney Airport valued at 1.4 billion. This stake has in fact been on the market for quite some time, presumably Macquarie chiefs were looking to a cashed up private investor to take the stake off their hands, however it appears no suitable buyers were prepared to part with the kind of money the head honchos at Macquarie were looking for. The result is that this stake is now, subject to approval, to be ‘gifted’ to Macquarie shareholders through a security distribution. Under the proposal for every share held in the bank, shareholders will receive one stapled security in Sydney Airport. Whilst this might seem

generous of Australia’s leading investment bank there are a few catches. Let me explain. In early November Macquarie announced that its financial result was back on track with a $501 million half-year profit. It was also during this announcement that CEO Ian Moore shared: “With Macquarie’s strong balance sheet and excess regulatory capital, we believe that it is a good time for Macquarie to distribute Sydney Airport stapled securities to our shareholders, so they can directly participate in its ownership.” The only thing is Macquarie shareholders already have exposure to Sydney Airport by owning Macquarie shares in the first place. Of course, if approved the proposal means shareholders own the asset in a physical sense. One of the great aspects of owning shares in a company like Macquarie, however, means you have a vested interest in all the assets under the company’s business umbrella. If Sydney Airport continues to trade above $4.00 (its recent trading price) www.businessfirstmagazine.com.au

SHARE MARKET | BF

‘

If Sydney Airport continues to trade above $4.00 (its recent trading price) Macquarie is set to net around $350 million from the distribution of Sydney Airport shares.’

Macquarie is set to net around $350 million from the distribution of Sydney Airport shares. Further (and favourably) as the investment bank is selling its stake via a distribution to shareholders, it avoids paying Capital Gains tax on the sale – this gets passed onto Macquarie shareholders should they decide to sell on the open market. Some proceeds from the sale of Sydney Airport are likely to be shared as part of Macquarie’s staff bonus pool. Regardless of all this information as a Macquarie shareholder is this a good deal? Yes and no. Looking at Sydney Airport from a technical perspective, price action has been in a long-term uptrend since 2009. Momentum is strong however price is closing in on the all-time high of $4.46 achieved in 2007. For those not familiar with stock charts, an all-time high is a significant price level for any stock and it is quite common to see strong resistance and a subsequent reversal as price touches this point. Being a technical analyst I tend to base my investment decision primarily on what price action or a www.businessfirstmagazine.com.au

chart tells me and I back this up with fundamental analysis. In other words I’m looking for both price action and fundamental data to tell me whether a company is a good buy. Technically, Sydney Airport looks okay, however it’s a different story fundamentally. Whilst there are opportunities to expand the current Sydney Airport business including growing the car park business, using surplus land for commercial opportunities and catering to rising Asian tourism in the region, as it stands the investment itself is a very expensive deal. Sydney Airports P/E (price over earnings) ratio is a hefty 40.85 at the time of writing. The sector average is 16.04. I must admit I tend not to pay too much attention to this figure but when coupled with a low Earnings per Share (a sign of growth) of just 10 cents currently, moving into a forecasted 12 cents next year and massively high debt levels standing at over 300% of equity, these figures paint a pretty daunting picture for shareholders. As Macquarie shareholders, until now, have only had general exposure

to Sydney Airport through holding Macquarie shares such figures could have been pushed to one side. The bank was still receiving management and consulting fees and by all accounts doing quite well income-wise from its stake. With the turnaround in Macquarie’s main business any downside risk to shareholders from Sydney Airport is minimised. Direct exposure through the proposed distribution turns this investment on its head and I’m sure if the deal does go ahead a number of shareholders will be looking at these same numbers and thinking their money could be better placed in a more attractive investment. Such an event could be the catalyst for a large sell down of the Sydney Airport share price. Importantly, you also need to wonder that if Macquarie has been unable to sell their stake to a private investor and through the proposed distribution are virtually wiping their hands of this asset (making a tidy sum and avoiding tax payments whilst doing so), do they know something we don’t? BF

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BF | NETWORK

The most powerful business tool

Whether you recognise it or not, all successful organisations regardless of what they do or sell have one thing in common: their owners, senior management and front line staff know how to build and maintain relationships. Without strong relationships, it is impossible to have success in business writes Alex Pirouz.

W Alex Pirouz

is the founder of Linkfluencer.

e’ve all heard it before: it’s not what you know, but who you know. But what we should be thinking is: ‘It’s not who you know, but it’s about who knows you’. I would also go as far as saying: ‘It’s not who you call but who calls you’. And thanks to LinkedIn’s powerful platform, reaching out and building your network has never been easier with over 80% of Australia’s five million professionals now on LinkedIn. With one click of a button you can connect with millions of new potential customers, find new potential partners to help grow your organisation, connect with the media to build your personal or company brand and even hire new staff. And best of all every connection you make is targeted. Gone are the days where you need to spend countless amount of hours implementing marketing strategies in order to get in front of key decision makers for your product or service. LinkedIn allows you to search, connect and develop relationships in real time with anyone around the world 24 hours a day 7 days a week. I am getting excited just writing about it. Take a moment now, stop and think about the possibilities this creates for you and your organisation. No longer will you have to pay high recruitment fees to find new potential employees, simply use LinkedIn’s powerful recruitment features to search, find and connect with talent all over the world.

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No longer will you have to spend hours and hours travelling to networking functions, in the hope that you will make a valuable contact. With LinkedIn you can connect with hundreds of targeted business professionals every week. In a business world that is rapidly changing, learning and implementing the latest sales and marketing strategies is not a choice it is a necessity if you are to stay relevant. Whether you are a newbie, have an account but not active or would like to further your education here are my top three tips in order to plan, connect and ultimately profit through LinkedIn: 1. First and foremost you need a compelling LinkedIn profile. In fact if you are ‘NOT’ on LinkedIn, I recommend stopping everything you’re doing right now and create a profile. Your profile is one of if not the most important aspects of building your personal and professional network. Unlike 5-10 years ago, today people buy into you, before they even look into your company let alone your product. “We are CEOs of our own companies: Me Inc. To be in business today, our most important job is to be head marketer for the brand called You.” –Tom Peters 2. Once you have completed your profile step two is all about creating a plan. I am sure you have heard of the saying: In life people don’t plan to fail they fail to plan. Well business is no different; planning gives you a sense of purpose and direction.

Think about some of the goals you would like to achieve within your current role over the next 3, 6, 12 months. Once you have written this down, now start to think about all the people you need to connect with in order to help you reach those milestones. For example if you are looking to increase your personal or company profile you may want to start connecting with journalists and editors in business. If your aim is to increase revenue you may want to start connecting with potential joint venture partners. The point is make sure that the connections you make are meaningful and targeted in helping you achieve your goals. 3. And finally add value. To be successful on LinkedIn and in business overall you have to think about WIIFT (What’s In It For Them) rather then WIIFU (What’s In It For You) initially. Just because they accepted your connection invite doesn’t mean they are interested in what you have to say, remember: to be interesting you have to be interested. Building relationships through LinkedIn is no different to dealing with people in a network function, it’s all about adding value and creating a winwin scenario. BF Alex Pirouz is an entrepreneur, author and business mentor who assists companies to successfully start, grow and exit their business. Connect with Alex on LinkedIn. www.businessfirstmagazine.com.au

PROFILE

IT’S A NEW BRAND DAY.

The road less travelled. Choosing to take that path, defines a person. It establishes that they value curiosity over conformity. Exploration over the established. And state-of-the-art over the status quo. It is a decision that requires you to engage both your heart and your head.

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BF | PROFILE

CEO Mark Davis

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PROFILE | BF

A code of ethics In June 2013, Mark Davis the founder and director of the Australian Lending & Investment Centre (ALIC) had written a total of $507 million in funds under management. Mark puts his success down to client relationships and dedication. He speaks with Business First about bringing ethics back into the banking sector.

fter 21 years working in bank management, you’d be forgiven for being institutionalised: for looking at a sector a certain way and remaining with the status quo. When you are nominated as the premier national mortgage broker for seven consecutive years, it’s easy to remain comfortable. However, the best CEOs are those who seek change within themselves and the industries they associate themselves. For Mark Davis awards were a nice endorsement of his commitment to cause. “The reason behind my success was that I found a niche in the market. The bank allowed me to fill that niche and educate my clients about financial planning and property and areas where there was always a lack of knowledge and skills. “It is also an industry I feel very strongly about. If you do what you love, you’ll automatically be great at what you do. I have a passion for investing, gearing and wealth creation, markets, property, planning and tax. If you combine all of your passions you should be successful.” History has recorded Mark’s success with the ANZ and he is grateful to them for allowing a lending manager, someone he says is akin to a car salesman, to design and develop the structure of the lending business. Yet the respect of the public for banks and the officials within them has waned since he first joined the sector in the 1980s, due in part to the banks’ treatment of customers and clients. Mark wanted to implement a new way of thinking to reverse the negative attitude towards lenders and to service his clients in a way that he felt appropriate.

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He had begun this process while with the bank. Mark set up an advisory around performing in poor markets. He wanted people to realise that the best times to invest are when markets are lacking confidence. Finally he wanted to bond with clients and develop close working relationships that would see them refer business. As the basic attitude of the banks was unlikely to change, Mark left ANZ to form ALIC, which in a short period of time has become an award-winning financial brokerage that assists clients in achieving their investment goals and building personal wealth through ensuring the right lending structure is implemented. ALIC is strategy focused and adopts a holistic approach when developing loan structures to ensure the best financial results. Mark says that while most people are risk averse when dealing with finance, particularly in lean times, ALIC clients are risk-tolerant; they understand investment and are seeking long-term wealth creation in an honest and transparent environment. The company is made up of market specialists including accountants, tax advisors, stockbrokers, buyers’ advocates, financial planners, quantity surveyors and legal specialists. It has also maintained tier one relationships with all the major banks and leading financial institutions. ALIC’s a combination of expertise and relationship-building keeps clients coming back. “Customers come to us because they understand that we have investment knowledge. They understand that we setup loan structures. They understand that we are succeeding in getting clients to where their end

goal is. And they understand that we practice and live and breathe it.” If clients have questions about his own expertise, Mark is forward in his response. “I am asked regularly, ‘Why should I listen to you? What have you got? What’s your network? How many properties do you own?’ I respect those questions. I ask the same questions if I go and see a specialist. People should ask the hard questions.” It is this transparency that saw ALIC named Australian New Brokerage of the Year 2011 at the Australian Mortgage Awards (AMA). Mark was also honoured with an Australian Broker of the Year 2012 and Westpac Australian Broker of the Year award. “People come to us because they already know the feedback is extremely strong. I want every client walking through my door to be well down the path of what I do. I’m actually quite disappointed if someone comes in and they don’t know what I do.” Mark didn’t headhunt clients or chase existing ANZ customers. He let his clients know what he was doing and he waited. He is still yet to approach former ANZ clients. It is part of his ethical approach to business. “You do things ethically and correctly and now we’ve got a really strong relationship with ANZ.” Mark does believe he should have set up his own business seven years ago. He says, “There’s a lot of good operators in the industry that are just afraid and they sit under the bank system and don’t think they can do it themselves. I was one of those. I was writing $200 million a year for ANZ, and I thought ‘ANZ are paying me enough, I’ll just stay there. But then

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BF | PROFILE ANZ were great at allowing me to do things and grow as a person. So who knows if I would have been better off leaving earlier, or if I would have grown and set up a business model such as this without that long-term experience.” No matter the timeframe, Mark’s commitment and love for his craft would have yielded the same result: a successful company built by response to clientele and a model that yields the best financial results for investors, particularly in difficult times. The growth has been significant. ALIC is currently a creditor with 14 different banks. “We have access to 14 banks, rather than using one. That is a massive advantage compared to working for the one bank. Hence, why I probably should have left the ANZ earlier. My clients would have had better flexibility. Previously, I had to sell an ancient product and if the structures weren’t right, it was too bad. Now, I can actually talk to the banks and we can educate them about what we want and setup structures and change their policies and speak to their risk people. If ANZ want to close up shop today and

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not lend money, I can go to the other banks. So my opportunity for looking out for clients now is far greater, especially if I can get those banks to change and meet all those requirements.” The business is run in the best interests of the client. It is run following Mark’s ethic to deliver the best personal service; this is how he defines his leadership skills. “When I was at ANZ I always wanted to change the way the banks think about money. Money is not just about rates and products and generating profits. It’s about lending money out correctly and doing it responsibly. I also believe in changing the whole brokerage industry. “When you’ve got 96% of brokers out there or 98% of brokers who just believe you’re giving money out, it’s going to be a very hard thing to do. But we’re slowly doing it. So I suppose my leadership qualities include building a brand that is very different to the average broker and branch.” Mark is someone who leads by example. He says he could be a better manager, but he is someone who is excellent with customers and better at getting his hands dirty. The irony is this leader is someone who knows his limitations

and has therefore done what all great leaders do, hired more suitable people for a particular position. Jason Back is the managing director and has over 20 years in management and leadership roles. He shares the same customer focus as Mark and has a passion for people development. Jason’s involvement frees Mark up to provide motive free, ethical investment lending advice without the product pitch. It frees up his time to source likeminded partners. “When we select a partner we make sure they’re share the same morals and ethics as our business. We want to partner with a non revenue-driven business. They’ve got to be the best at what they do, then we will quite often initiate some kind of relationship with them to determine whether we do want to deal with them moving forward.” The agreement with partners is a handshake agreement. Mark believes this holds partners more accountable. For instance if he refers a property advisor in Sydney, he will take no money, but he will reserve the right to catch up every six to 12 months to find out how the investment that has been advised is doing and what the growth rate is.

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PROFILE | BF “I can actually ask a lot more from him because I didn’t pay him anything,” Mark says. It is this attention to detail that is behind the success of ALIC. While Mark himself has written over $500 million in funds, ALIC has over $1 billion to its name. However, Mark’s ambition kicks in here and he is determined to write $1 billion a year by 2017. Currently the company is writing $400 million. He also aims to have eight of the best 100 writers in the country. Once achieved, he will go back to the banks and sell the model. “Imagine going to speak to one of the execs at ANZ and saying, “Right, I’m going to give you eight of the top hundred writers in Australia. They’re all wealth management. We’ve got the best clients in Australia. The lowest run-off. The highest average loan size. The highest average loan term. And I’m going to give you a whole concept that your bank isn’t close to having.” That’s a powerful exit plan, but certainly achievable. It would bring Mark full circle, but he would be confident and comfortable in the knowledge that 7:06:23 WW A5BusinessFirstAd_O.pdf 28/8/13 he had changed the banking sector in a positive way. BF

‘

It’s about lending money out correctly and doing it responsibly. I also believe in changing the whole brokerage industry.’ PM

BF | PROFILE

Casting a wide net

Change in business is vital for success, but a shift in thinking can be a difficult proposition when one man has run a business for almost 50 years. When Martin Barrett took over CEO duties from Wide Bay Australia founder and Managing Director Ron Hancock, who had been leading the way since 1966, he had some big shoes to fill. Yet he has been quick to implement change and transition the bank into the 21st century.

he problem with change is that there are casualties. And the question for the incumbent is how to minimize the casualties. For Martin, who has been in the position for just over six months, it was about assessing capabilities. “Despite the very significant successes, mergers, acquisitions that Wide Bay has had over the years, probably the last couple of years have been quite challenging,” Martin says. “It’s required me to come in and very quickly define what the strategy for Wide Bay will be over the course ahead. And I guess in that regard, I’ve needed to steer into the capabilities of the business. I’ve needed to steer into the capabilities of the people. I’ve needed to look at our product offerings. I’ve needed to look at our positioning in the market place. I’ve needed to look at particular segments that we had not perhaps taken advantage of and really look across the whole opportunity.” In the first six months, Martin has made some difficult decisions based on the challenges he mentions above. One decision was to write down an entire investment to avoid any surprises that may rise in this financial year or years ahead. That, however, is tempered by the new products he is launching. The first was the introduction of a personal loan. “What we were seeing was some of our younger customers, ages eighteen, nineteen through to about twenty-two, come to Wide Bay for a personal loan

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and when they couldn’t get one go somewhere else and we would lose that client. “So we plugged that gap and we put personal loans in place. We’ve been able to do that very quickly and quite successfully in the sense of winning new business in that particular space.” Another problem was a lack of IT sensibility. Most banking is now mobile. It can be done via tablets and pads; it is instant. “We looked across our IT relevance and our ability to be able to appeal to the new age; those banking on tablets and on phones and so forth,” Martin says. “We now have a mobile app in the market place that fills that particular hole for us.” Martin also needed to integrate new products into the core demographic – the area he sees as having the most brand awareness. Building the core demographic was one of his predecessor’s greatest successes. In fact Wide Bay has a long history in that area of Queensland, which stretches from Mackay to the Sunshine Coast. Its footprint is impressive. A brief history shows that Wide Bay Australia has its roots in several regional Queensland-based building societies that were created to provide low-deposit home loans and needed competition to the banks. Initially, Ron was the founder of the Burnett Permanent Building Society. He says, “As we obtained funds, we

had a queue a mile long of local people trying to get into a house on 10% deposit – it hadn’t been heard of before. As $10,000 or $20,000 was invested we were able to take some more loan applications and it just kept on growing from there.” In 1979 Burnett Permanent merged with the local Maryborough Permanent Building Society to form Wide Bay Capricorn Building Society. Two years later Wide Bay Capricorn amalgamated with the Gympie and North Coast Building Society. Another merger occurred with the Gladstone-based Port Curtis Building Society. In 2008, Wide Bay Australia took over the ASX listed Mackay Permanent Building Society Limited. Wide Bay also has strong presence in Melbourne and Sydney, but it is Queensland that is key and Martin wants to further consolidate Wide Bay’s reputation in this region. “We’ll be commencing business banking from October this year. So we are underway with building the credit policies, processes and interviewing business banking managers.” It is no surprise that Martin has been busy; he’s an experienced executive who understands the need to move forward. He came to Wide Bay after holding the position of state manager for St. George Queensland and West Australia and previously held roles at regional financial institutions in the UK and at National Australia Bank.

RIGHT: CEO Martin Barrett

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PROFILE | BF

“

We looked across our IT relevance and our ability to be able to appeal to the new age; those banking on tablets and on phones and so forth.’

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BF | PROFILE Martin’s history has taught him a great deal. “I’ve understood that in business banking there is a golden level of opportunity for organisations outside the big banks. Many of the smaller business banking customers get lost in a big sea as the banks manage the small and medium sized businesses to a cost. They’ll load up business bankers with potentially three hundred or four hundred customers, which also really means the relationship tends to be quite loose and they’re very reactive. Clients then find themselves having to go through long processes of call centres because they find it difficult to talk to someone to take care of their particular affairs. So I think an organisation like Wide Bay has a real opportunity to put in place a much stronger service and relationship model and can be very profitable.” The retail client will also be given the same levels of service as the business clientele. Wide Bay is extremely proactive when it comes to community engagement. “We spend more money on sponsorships and donations than probably all the banks combined in that particular region,” Martin says. “I was calculating the other day over the course of the last three years, we’ve spent in excess

MRH Lawyers is a client centric Bundaberg based law firm that has acted for Wide Bay Australia since its inception. Clients who work with MRH Lawyers find their approach to be genuine and are left with no doubt that the client’s interests always come first. Managing Partner Peter Marles said “Our skills combined with our comprehensive practice areas mean that we are able to ensure our clients always receive quality advice.” Being based in the prosperous coastal city of Bundaberg with easy access to the fast growing areas of Central and Northern Queensland as well as the South East Corner means

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‘

It is no surprise that Martin has been busy; he’s an experienced executive who understands the need to move forward.’

MRH can provide personal attention to a client’s needs on a convenient basis. The firm has clients that are located all throughout Queensland, stretching from Brisbane, and the Sunshine Coast , the South Burnett through the Bowen Basin, Gladstone, Mackay and up to Cairns. MRH Lawyers, are trusted legal advisors to large corporate clients (including Wide Bay Australia), property investors and public authorities. “CBD law firms are often surprised at the quality of our client base. We feel we attract and hold quality clients as we take an approach that puts our client’s needs and concerns at the forefront. We

are frank with our clients about risks, opportunity and costs. We know what we are talking about because of the level of experience and skills within our firm. In our firm you get to deal with a partner; not a partner, senior associate, associate and junior lawyer all working on your matter with the junior lawyer getting an education at your expense. We understand that clients do not want to waste money on unnecessary over servicing by having multiple lawyers working on the one matter when it is clearly not justified”, Mr Marles said. Accessibility is another attribute that draws clients to MRH Lawyers.

“When clients contact us they need to talk to the right person right then. Tomorrow may be too late. We make sure that our lawyers are always connected to our clients and able to act at a moment’s notice”.

Ph: 07 4154 5500 info@mrh.com.au | www.mrh.com.au

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PROFILE | BF

of $1.2M on donations, sponsorships, support to clubs, events, which is a fair amount of contribution to the local region. So we can leverage that better, but we also need to focus on our relevance.” What Martin means by that is that Building Societies are the long lost relative of the bank and the understanding of their purpose among communities has waned. Martin expects the conversion to be complete by the end of this calendar year or early into 2014. This will raise further issues around brand, but Martin believes that by balancing the culture of the Building Society, including personal engagement and community connection with the services that a bank can provide, then Wide Bay will possess the perfect service offering for the region. “There is a need to be a little bit sharper, in the sense of our ability to be able to identify what our customers want and not be shy to actually provide services and products that we offer to those particular customers. We can realistically grow market share in this region. We offer more distribution points, we employ more people, and we have strong brand awareness and a very strong community www.businessfirstmagazine.com.au

link across this particular region. We also have a very good reputation. So, in that core region, there’s no reason why we cannot compete very strongly with all the other financial institutions including the big boys.” As far as Wide Bay’s other distribution centres are concerned from Townsville and Cairns, down to Brisbane and the Gold Coast, there needs to be a bit more disruption to grow the brand. Martin feels there should be a particular focus on winning customers across the business-banking field, but mostly winning clients in the home lending sector. Outside of Queensland in Sydney and Melbourne the focus is on broker distribution networks. “We’ll be improving our offering to brokers; well be improving the ease of brokers to do deals and we’ll be looking to win more quality opportunities from our broker network for the cities of Sydney and Melbourne and to a degree, Brisbane.” Supply chain and stable partnership is also a priority. Wide Bay has a number of partners including product partners, service partners and advice partners, ranging from insurance sup-

pliers Allianz, through to organisations like travel expert providers with foreign exchange capability, lawyers and brokers among others. “I’ve actually appointed a leader who looks after the broker channel and the strategic partners. So that’s a matter of regular conversation with those partners, setting joint targets and meeting their expectations. And that’s proven to be very positive over the course of the last few months. We’ve certainly gained more support as a result of it. And I think there’s been far more clarity in terms of the expectations our partners have and the expectations that we have.” Wide Bay holds 15 key relationships, with a further 20 that Martin considers important and has regular contact with in terms of how to support each other. String relationships have been critical in the success of Wide Bay throughout its history and Martin understands the value of strong relationships. “Effectively our money is the same colour and does the same thing as anyone else’s. So, really what you have is your service proposition and you have your relationship proposition and those elements I hold out as being absolutely critical.” They will be even more critical as Martin transitions Wide Bay into the bank landscape and gets the business banking capability up and running. “We’re embarking upon a branch revitalisation program so we’re selecting our top 12 branches by customer and by opportunity and we’re going to be completely revamping the look, feel, functionality and attractiveness of those particular branches. Again, this is to make us current and relevant for the customer of today. Our new website will reflect our front door and give people a sense of who we are and what we offer. And, that is the same for all businesses. People will gauge your service level on the ease of navigation and the functionality provided by that particular website.” Essentially this move forward is about brand recognition and making people aware of what can be expected from Wide Bay as an alternative banking institution. In six months Martin has done so much, not least revamp the entire business model. His entry into Wide Bay is a study in change management and getting the best out of your product, service offering, community relationship and brand. Some CEOs may say that this is the only way to push a 50-year-old company into the modern era. BF

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5 keys:

Have your team work with you Finding the right people can always be a challenge, however as leaders we must be able to create the culture in the business and have the ability to set up an environment that is conducive to high performance writes Petar Lackovic.

Petar Lackovic is CEO with The Entourage.

ou’ve probably heard that to grow a successful business it’s all about finding the right people and then being able to effectively drive the people. The challenge we face now is that the people we are employing are changing. It used to be: go to school, graduate, go to university, graduate, go to a job interview, get a job, start at the bottom, do whatyou’re told and work your way up. Once upon a time we would have a team that we would expect to want to work for the company, as that’s what was always expected. Experience now shows us that this is no longer the case. The following five keys highlight how leaders can motivate their employees and have their team work with them, rather than for them. Vision What I am NOT going to do is tell you how to write a vision or what should be in the vision and why you should have a vision. More importantly,

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to have a team that works with you, it’s not just about the vision of the business or company but where does your team fit into the vision. I always ask myself, “Have I given my team a vision to get out of bed today and have I communicated this effectively to them?” When your team has complete clarity in the vision and what the company stands for and where they are on this path, it creates ownership in the brand. One of the biggest mistakes I hear and see regularly is that vision is communicated during staff induction and then that is it. We must regularly be recapping the vision and the WHY behind the business and where your team fits into this vision. Vital signs Most businesses will have Key Performance Indicators (KPIs) that they utilise to track and measure data and therefore the success of their team.

I suggest you look at this data as your vital signs. Like a doctor will regularly monitor your vital signs, your heart rate and your blood pressure, we too should be looking at our KPIs as vital signs. If you can constantly show your team that the vital signs are telling us they succeeded because of XYZ reason, they will then embrace these and take regular action to keep achieving the success you just praised them on. This is also one of the most effective ways to replicate ongoing success. Does your team have the right vital signs in place to know when they are doing a great job? Involvement There are many thoughts behind how much information you should share with your team. Some say it should be on a need to know basis and others say open all the books up and have complete transparency in all areas.

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TEAM BUILDING | BF

I don’t feel it’s about how much information you share throughout the organisation but more of how to share the information throughout the organisation. By involving your team in some of the decision making and why we are making these decisions, it makes them feel like the decisions and the initiatives are theirs and the follow through will massively increase. Catch your team doing right When your team feel like your sole purpose is to help them look good, they keep going out of their way to do the actions that make them look good.

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How are you helping your team achieve and exceed targets and expectations? Have you given them the best opportunity, resources, tools? When is the last time you asked your team “What else can I do or provide you with to make your role easier, more efficient, more effective and more productive?” Personalised Communication One of the most challenging aspects of running a business is that your team are not the same. Firstly, understanding there are different behaviours and drivers that your team possess is critical. Secondly,

knowing that business and the people within your business will never be able to be driven with a one size fits all approach is imperative. When you speak the language of your team and deliver information the way their brain needs to hear it, it’s like gaining direct access to their personal success roadmap. Immersing yourself in understanding human behaviour should be on the top of the list for any leader. The overriding theme here, is that if we can create a culture of ownership in the organisation then your team will feel like they are responsible at a greater level and this drives a massive want to deliver. The desire to deliver day in day out will have your team ignoring the start and finish time and focus more on productivity, which is almost all we dream about. BF Petar Lackovic is a highly sought after international speaker, coach and business adviser, who specialises in implementing successful strategies that produce consistent world class results. He is also the CEO of leading entrepreneur education facility, The Entourage. the-entourage.com.au

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BF | PROFILE

The Grand

Design

Technologies change daily. The successful companies in this space have to adapt quickly. They have to understand market needs, consumer demands and where the space is heading. At the forefront of technological change is Sony DADC and leading the charge in Australia is managing director Darren Houghton. Darren spoke with Bob Forshaw about adaptation, development and advancement in this most demanding of markets.

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ack in 2009, when the global financial crisis was at its zenith, Sony Disc and Digital Solutions president Dieter Daum, commented, “When market conditions are difficult it is entirely understandable when companies become more conservative in their outlook and more averse to risk. However, we live in an evolving technological landscape and people’s media consumption patterns are changing quite rapidly. We see it as a priority to keep abreast of these new developments. In particular, consumers are looking for increased mobility. Digital Copy is one example of how new technology can enhance our ability to watch our favourite movies and TV programmes on the move. At Sony DADC, we continue to invest in the future of the home entertainment industry. Investing to make sure that we continue to provide best in class service and support to our customers.” Daum is known to have his finger on the pulse. So is Darren Houghton. Darren came to Sony with a vast background beginning his career in finance, he moved into logistics, (working for a company that supplied parts for Jaguar

cars, Land Rover and BMW among others). He credits this company’s training programme with his early development. He then held positions in client services, marketing and operations. “We were running global distribution & manufacturing sites and delivered significant improvements in efficiencies using lean principles and Kaizen philosophies, the target was to move away from whole batch process and move to a just in time service” In 1999 Darren was offered a contract with Jaguar’s North America division. While his previous role with the company taught him operations management, this was a more logistical experience. “I spent a few years running the North American market which is a challenge because if you plan to bring parts over to the US, you had to try to find a port that wouldn’t go on strike. You had to find a way through Canada and the Panama Canal.” He learnt a lot in the US, but due to family commitments he decided to move back to the UK. Back in the UK Darren picked up a job with Deluxe Media as a project director. He immediately www.businessfirstmagazine.com.au

PROFILE | BF saw a necessity for change. They had made a lot of transition in the business, but I knew there was an issue when I first went in. I kept seeing all the signs in the warehouse. Staff was talking about RDL. I asked them what that was and they told me it was ‘recently departed label’. That didn’t sound too good. “What Deluxe Media had done was taken over another company, then poured in a lot of smaller ones. However they didn’t realise that every company needs a significant amount of focus on managing their business, because every business is different. They were used to managing very well organised big film studios, but all these little independents needed a completely different mindset. “They didn’t put enough focus, enough resource, supply and service into the operations.” Darren turned the operations around and looked at different opportunities to integrate some of the business models into Europe. He spent time in France and Sweden, but the landscape changed when Sony bought Deluxe Media in 2006. Fortunately for Darren they kept him on, but he was challenged to prove himself by the Sony executives and was determined to demonstrate his ability.

He says the good thing about Sony is that they are focused on people, processes, performance and relationships. “Sony gave me the opportunity and the first year we were running the business in the UK we were doing about 27 million units in film and music. The following year we grew that to 50 million units but didn’t make a profit. The reason for this was that we were taking on a lot of new clients, which proved cost prohibitive. We were also building a business at a fast rate, so it was a challenging time.” Darren’s goal was to streamline the UK division and define it. He put structures into place and the following year the UK arm turned a profit, after two more successful and profitable years he was offered a job in Australia. The plan was to head to Australia in November 2011, but fate had other ideas and delayed the move. In August 2011 the London riots occurred. London burned for 12 days. Sony DADC’s clients lost 28 million units. According to Darren it was the complete disaster scenario that you never expect. Nothing can really prepare you for this level of disaster. Images around the world showed a country gone mad, but as the entertainment clients Sony deal

with would say, the show had to go on. “We were fortunate. We had a business continuity plan in place. The fire broke out at 10.30pm, by one o’clock in the morning my senior management team assembled in a hotel with the plans for what to do. By 8am the following morning they already had all the fastest moving titles ready to be replicated. Within 24-48 hours, we were distributing out of a temporary site next to the manufacturing site.” There’s a lot more to this story as you can imagine, but a crisis of this nature gives you a great idea of how a successful company operates in times of turmoil. The clean up was efficient, no nonsense and everybody knew what role they had to play and the new facility was ready by June 2012 – built on the same site ensuring the future for the remarkable team. Darren describes the event as character building, but would hate to see anything like that happen again. In the UK Darren was the general manager running distribution. In Australia, the country he has resided in since March 2012, he has the responsibility for the distribution, manufacturing, printing, graphic services and digital business and the New Zealand distribution site as well.

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BF | PROFILE “It’s a pretty broad role and really challenging, but enjoyable because you’re involved in so many different things. Every day is dynamic and every day is very different. The entertainment industry is challenging, it’s fast paced and we’ve got to adapt and change the way we do things to actually stay ahead of the competition but also support our existing clients and potential future clients. We’re offering something different. Retail is becoming tough, but we’ve got to focus on working with the retailers, to make it easier to for the stores to support the category. We need to streamline our processes to delivery cost effective solutions for our clients.” The challenge in Australia, as it is around the world, is that in an age of digital download, the physical package is declining. “It’s going to happen, there’s nothing that’s going to change that; look around, you’ve got tablets, you’ve got live streaming, you’ve got downloads and you can do all of that through your TV. I remember as a kid I had three channels. A child today with only three channels, how would they survive? No matter where you go you can get product, whether you download it to a tablet, to your phone, or on your TV. It’s

a challenging market, but there is still a market for physical package media.” In fact the numbers are still quite healthy. Darren says they will manufacture 60 million units in 2013 including CDs, DVDs, Blu-ray and games. This year the Australian arm of Sony DADC has undergone a significant transition to meet those challenges. “We started the year off with some very clear strategic initiatives. We outlined where we want to be in 12 months, three years and five years. When I first came over last year we had a 12-month strategy that we reviewed 12 months later.” The refocus is clearly working. Under Darren’s guidance Sony DADC has won new clients for including Beyond Home Entertainment, Disney, Twentieth Century Fox as well as winning back old business. “The strategy for winning it back was proving to be the best at what we do at an affordable price. It also meant having the team all on the

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PROFILE | BF same page, where everyone is treated equally while being really focused on delivering results.” Darren has form in facilitating mergers having overseen the 2013 acquisition of Entertainment Distribution Company, which was previously owned as a joint venture between Sony Music, EMI and Warner Music. Decisions also had to be made in the shrinking New Zealand market. There were three different distributors, in a small market including Village Roadshow and MDG. “We already distribute for Sony Music, Universal Music and Universal Pictures (including FOX and Paramount). There was no way three companies were going to survive, so we made a decision to take over Village Roadshow’s distribution center and also take over MDG. We have moved Sony Music, Universal Music, Fox and Paramount into the one site and will be moving Sony Pictures, Disney and Warner into the new site in QTR1 2014. It means we’ll be working very closely with the clients and retailers to deliver a simplified supply chain model.” Finally, Darren is overseeing the print side of the business, which he says is an exciting, dynamic part of the business.

Sony had invested heavily in this area and they are now designing, printing and assembling point of sale displays that are being used in most retail outlets including the grocers. They design a lot of product for launch including PlayStation and Sony Music. “We really do everything from start to finish with regard to the entertainment product. We can say to a client: ‘give us your content to manage, we’ll produce, manufacture, distribute and deliver it into retail. We’ll collect the cash, we’ll pay you the money, then you can just focus on what you need to do, which is focus on getting some good content because that’s what consumers are crying out for’. We are seeing growth in TV content and have just finished the manufacturing and distribution of the hit TV series Breaking Bad which has had a phenomenal success.” Darren has a great deal on his plate, but there is so much more to achieve. The future growth will come from the Digital space where DADC is a key player in content management and aggregation, TV Commercial and Music Video clip distribution. Sony DADC has recently added new major clients providing asset management and global digital distribution

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Digital is an area where we really need to grow, but we’re still focused on growing all areas of the business including graphic design, physical distribution, manufacturing and print. Whilst continuing to grow our traditional business we are investing in new technologies and broadening our service offering to other business sectors. “It’s not only about growing the business but how do we continue to be profitable because ultimately we’ve got to deliver a profit. We do this through investing in future development to leave another legacy to go forward with.” Which brings us back to fast moving technology. Sony is at the forefront leading the way in phone support technology, media and the balance between how people want their content delivered. And Darren is clearly aware of what needs to be done to stay ahead of the game. BF

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BF | PROFILE

The art of flight Running a business is like piloting a plane; you can be flying high one minute and crash landing the next. Office Brands CEO Gavin Ward takes us through the processes of staying airborne and landing softly.

avin Ward is a pilot. Sure he can fly a plane, but he has also proved himself adept at steering a business. In fact, he has a long and storied journey through heavy clouds and blue skies: he has run large organisations including Leading Edge Group where he served for 21 years and The Australian Music Retailers’ Association (AMRA). He also served as General Manager – sales and marketing for Akai Electronics. That’s a lot of navigation and even more experience. If running a business was measured in flight hours, Gavin-

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could fly a light plane to China, where he is currently procuring business for Office Brands. It was his time at Leading Edge, which really proved his mettle as a leader/pilot. When Gavin arrived there, the company was a two-man operation. When he left the Australian franchised buying group operation expanded to cater for 10 different vertical markets including Computers, Electronics, Digital Photography, Telecoms, Jewellery, Lingerie, Golf, Books, Video and Music meeting the needs of over 1500 franchised stores and a broad base of over 450 suppliers.

So when he went to Office Brands, Gavin knew a thing or two about growth propositions, which is exactly what this supplies company wanted. In fact Gavin has been tasked with swelling the office products industry under three franchise banners. One is Office National, the predominant brand with 100 stores across Australia. Office Products Depot is a brand bought from New Zealand, which has 30 stores in the land of the long white cloud. Then there’s a separate entity entirely. O-Net is an unbranded proposition for

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PROFILE | BF

specialist and smaller operators. Gavin is also charged with overseeing the Office National brand in Africa. When he left Leading Edge, his goal was to take some time off and learn how to fly a plane. He did that. He is a man up for a challenge. However the lure of the business challenge is always one that a CEO can’t ignore. “I took a bit of time off and learned to fly an aircraft but to be honest, I really enjoy the buying group business. I love working with individual franchisees who in their own right are well motivated and have good independent opinions of what they need to do to succeed in their business.” So Gavin once again found himself in a leadership position facing unique challenges that a franchise entity throws up. “The challenge is to understand the needs of all those businesses in so many different markets,” Gavin says. “The opportunity for retail or business-to-business or online are quite varied. To be able to understand all those challenges, to be able to create a philosophy and a best fit approach creates and adds efficiency and provides a market power that they couldn’t otherwise obtain. “The challenge is to create a system which can give franchisees reputable, high quality performance, not only for www.businessfirstmagazine.com.au

their own business but in the service that they offer their clients.” The chiefs at Office Brands had already started the process before Gavin arrived. The board had made a significant investment in an IBM e-commerce platform. It is the same platform used by the Good Guys, Office Works and National One in the USA. It is a powerful system designed to meet the needs of customers “That customer first ethos permeates the whole organisation,” Gavin says. That ethos is one thing Gavin didn’t have to change when he entered the company. What he did want to do was improve the team environment. “I believe greatly that people are a massive asset to the company and I believe that each member of the team needs to understand what the objectives are of the business as a whole and of its component parts. This way they can work to achieve the goal together. So when we talk about our merchandising, our marketing teams, our operational teams or IT, whenever we have an objective within one of those parts of the business, we always let everybody know what those key goals and achievements are to see how each team member can change their part of the business to help to support those goals. “The responsibility for continuous

ABOVE: CEO Gavin Ward LEFT: Proposed shopfront

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PROFILE | BF

improvement flows across the team as much as it does within the individual areas of responsibility. My role in that is to create efficiency through really good process and an outcome focus. We are focused on an outcome, an objective and a timeline. This increases our ability to get to market with the initiative that we need to be competitive quickly.” Another change Gavin has implemented is to expand the company’s digital presence. Though the board had already activated change, there was a great deal to be done to expand the marketing. “We have a new marketing manager and a new digital agency which we’ve appointed and we have a new brand specialist which we’re using to update our image. “We’re working with some databases with individual members who track their sales through our web facility. We’ve got 143 individual front facing websites. We have those under different brands; there is a lot of customisation for each of those people. So people who are into workwear or furniture-wear are customised. We’ve created an ability to vary the proposition for each end user to be sure that if we’re dealing with a large corporate or individual the system meets the needs of that entity.” Expansion of this type means a focus on quality and the ability to deal with customer needs on a day-to-day basis. This is necessary, along with the expansion of product offering when the stationery market is in decline. In fact the entire office supplies industry has had to rethink their proposition. This is where Gavin’s www.businessfirstmagazine.com.au

expertise and navigation skills really make a difference: to see the future of the industry. “The stationery market is in decline, this means our growth has to be through category expansion. This also means seeking different clients including pushing into local government and large commercial enterprise.” Gavin is in discussion with overseas distributors to source new product. He is also creating a logistics capability to help Office Brands become cost competitive and fill the needs of larger organisations that are looking for ways to reduce cost but to maintain quality. The other main challenge, and one that is shared by all franchise-based businesses is how to engage the franchisees and keep them on message. The most important element of this is personal contact. Office Brands hosts an annual AGM and expo where they talk about plans, directions and strategies for the year. They do this in each state. “There is nothing better than hitting the road on a regular basis and getting in front of the customers and really hearing about what they do.” Gavin says. “Every time we engage at that level there will be elements that come out about how we can improve the organisation and move forward. The customer first ethos is very, very important to us. So as we move forward, as our data gets better, as our range gets better, we can solve each challenge and the challenges behind. “One of the very important things we need to do is to understand

FACT With an impressive annual turnover of $445M and 160 outlets, Office Brands members enjoy productive and profitable businesses, backed by a hard-working Support Office and supplier network.

through our business intelligence systems and our one on one conversations why some customers are doing better than others and how to communicate those strategies and successes into other organisations so that they adopt them and lift their performance.” This is a competitive industry, but what sets Office Brands apart is its customer ethos and dedication to quality. The company is also in the hands of a more than capable pilot who can steer through the turbulence and make sure the skies ahead are as clear as can be. BF

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BF | MANAGEMENT

BUILDING YOUR A-TEAM

How to develop a winning team in your business Building a strong team is critical to the success of any business. Finding employees who are the best fit for your business is essential – and it’s not just about talent, writes MYOB CEO Tim Reed.

T Tim Reed

is the CEO of MYOB.

here are many factors at play when you are considering how to build the most effective team possible, including communication, ongoing learning and mentorship. A lot of your success will be based on your own approach as a leader. From the employment process to working together, your commitment to training and developing your employees is a major factor in determining the ongoing success of your team. Employ the right people Hiring for the first time can be a major learning experience for first-time employers. From advertising the position to selecting the right candidates, it’s important you focus on getting the employment process right the first time – or the results can be costly.

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After you have decided on the role, write a job description, including all the finer details of the position. This will help you focus on the kind of person who would be your ideal candidate. Then, when writing your ad, try to express what would appeal to them about working for you. To attract the best applicants, you will also need to advertise in the most appropriate media – so consider what your ideal candidate will be reading, or the sites they visit online. When interviewing your shortlist, be consistent and ask the same (open-ended) questions. Communicate clearly and be prepared to answer any questions they may have. A pre-screening telephone interview helps save time in whittling down this shortlist

even further, and always make sure you conduct background and reference checks. If there is any way you can utilise the assistance of someone you trust during this process for a second opinion on your top candidates, this will be very helpful when making your final decision. When you are making your selection, remember that finding the right person is not just about hiring someone with the skills that match your job description. You want someone who will fit in with your team, and reflect and support your business values and culture. It also helps to look at their strengths and how it can complement the strengths of your team. Try to tailor your interview questions to get an understanding of their actual experience and work style www.businessfirstmagazine.com.au

MANAGEMENT | BF them, you should have performance criteria outlined for each employee, as well as for your whole team. Setting goals and creating a sense of achievement is a great motivator. Appraisals should take place at regular intervals, however don’t wait for these meetings to give your employees feedback. Receiving ongoing constructive feedback helps maintain good staff morale and addresses any issues as they arise. Teams that are highly motivated and positive are not only fun to be part of, but they also accomplish far more than teams that are struggling with morale.

– how they manage certain situations and how they perform under pressure and within a team. And back that up by asking similar questions of their referees. Master the art of delegation Business owners can often be reluctant to delegate, but learning how to rely on others is an essential part of team development. You may think it is easier to do the job yourself than to spend time training someone else, but delegating tasks frees up your time to focus on building and developing your business. This can make all the difference to your business progress, as well as being the key to a positive, engaged team. Don’t wait for the pressure to be turned up before you start to delegate.

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Plan the tasks to delegate and identify the best person for each job. Make sure your instructions are clear, detailed and not rushed – and make yourself available for questions afterwards. Building a successful team is a process, which involves understanding what motivates your employees, as well as the key strengths of your team. Exercise patience and try not to only delegate the unpleasant tasks. Once you have mastered the art of delegation, your business will reap the benefits. Communicate effectively Communication at every level is the mark of a good leader. When employees share your vision and have goals to work towards it helps give them direction and purpose. To ensure they understand exactly what is expected of

Create a learning culture It is important to encourage your team to actively seek learning experiences and give them opportunities to develop their own expertise, skills and experience. The best way to develop people is to help them plan their career, provide support and encourage their training and growth. From informal coaching to mentoring staff for long-term development, show your team you care about improving their skills and helping them develop a satisfying career. On-going training and education will also help empower your team to take on bigger challenges as your business grows and changes. Creating a culture of continuous learning is a process – and will take a little time. But ultimately it will benefit the whole business. Succeeding in today’s business environment requires the ability to innovate, connect across boundaries and adapt to unparalleled change. Celebrating achievements and having fun is also the mark of a successful team. Ensure there are regular opportunities to celebrate success, to have fun and that milestones (ie. employee anniversaries, financial year-end, etc.) are marked wherever possible. Remember too that you and your team will be spending a lot of time together over the course of many workdays. So try and make the environment not just rewarding but also engaging and enjoyable. There’s no better way to create a great team than giving your staff a reason to look forward to coming to work each day. BF Tim Reed is the chief executive officer of Australia’s largest business management solutions provider, MYOB. He develops and drives the business’ strategic development, including its expansion into online business management solutions.

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BF | TALENT

much as you can during the interview process – that’s what it’s there for. Hire high quality people and you breed greatness into your organisation. Avoid people that need to be prompted to be motivated. Don’t bother with motivational programs, just hire a motivated person. Do some personality profiling to figure out if a person is motivated or not and you will save yourself a lot of time in the long run. Question if they believe in your business. The second time around, I learnt to gather a team of A+ players. Before you hire someone, show them what you stand for and why your business is as strong as it is today. My team has its goals and strives day to day to achieve them. Assess if the person you want to hire is hungry and believes in what your company stands for. Hiring someone who is passionate about the business as much as you are brings a special kind of quality to the team. Are they passionate about quality? When conducting your next interview, ask yourself, “What does this person view as quality? What is the highest quality piece of work that this person respects, and why?” This is a point that I now consider as I need the individual to match that standard or, even better, exceed it. Find people that respect high quality and they will bring high quality to your business. Share your vision. Share your vision with the potential team member in the interview process and make sure they understand this. Once employed, show them how each member of the team makes a difference to the output of the business. Everyone here at finder. com.au shares the same vision and values. One of our core values as a company is to genuinely help people, and I know that everyone here shares the view because they wouldn’t be working as hard as they do. Be transparent. Don’t pretend that you’re something you’re not and be very open and honest from the beginning. Bring your team together and show what direction the company is headed. Opening up to your team allows members with different specialties to offer up new ideas on how they can help. BF

What I learned the 5 second time round

A serial entrepreneur’s 7 steps to building a successful team

Any mistakes learned in founding my first business helped me thrive during the growth of my second, finder.com.au. I’ve always been a fast learner and it wasn’t long before I became quickly educated on what would work and what wouldn’t.

F Fred Schebesta

is the co-founder of finder.comau

inder.com.au originally started as Creditcardfinder.com.au with just three people at a shared office space in 2006. Growth since then has been so substantial that we now have a range of comparison sites under finder. com.au that are driven by 27+ staff. I am a firm believer that the success of our growth all comes down to the choice of a brilliant team. Reaching this point, however, hasn’t been a straight path and developing a process for securing profitable and motivated employees, who manage themselves to achieve results, has been my fundamental focus in business this time around. I developed a process that allows me to pick out the A+ players from the A players and have made a conscious effort to share my vision with these staff from the very beginning.

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I’ve developed seven steps for other business leaders based on this process. These are key factors that should be considered before you even begin advertising a position and should also be values that are shared with the whole team – not just new employees! Seven steps to building a successful team: Don’t hire average staff, or you will end up with an average company. Slow down – there should be no rush when it comes to hiring. It’s better to wait just that bit longer rather than hire the wrong person. Also, question if you need to hire; could you optimise your systems more effectively to decrease the need for another set of hands? Ask more questions, not less. Who you hire impacts the other top performers in your company. Find out as

Fred Schebesta is one of Australia’s most successful ‘under-35s’ entrepreneurs and is co-founder of Australia’s leading financial-product comparison website, finder.com.au. www.businessfirstmagazine.com.au

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BF | PROFILE

A display of

goodwill

The business of construction and development can be a cutthroat one, however Firstyle Homes is proving adept at developing homes that people want to live in. Firstyle founder Romeo Tamburri, speaks about turning his passion into a business.

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PROFILE | BF

here are many different factors that affect the home building industry. Certainly the last few years have been ripped open by the global financial crisis, low consumer confidence and a play-it-safe attitude among financial institutions as well as the general populace. When Firstyle launched in 1997 there was another crisis occurring; the global economy was showing signs of skittishness and more importantly, from an Australian point of view, Asia was in a cold sweat. Australians, however, are nothing if not resilient and the ones who make successes of themselves are generally the ones who take their risks or chances. The climate in 1997 wasn’t great, but for some it didn’t matter. Take Romeo Tamburri for instance. Romeo was in retail management and store development. He had wanted to start his own business, initially in retail, but fell into construction as a side project. This led him to try his hand at his own home building company in Sydney’s Southwest. “I have a passion towards the building industry. I had dabbled in proj-

ects: renovations, blocks of units and townhouses. In those days we were in the trenches with the shovel, but I took a liking to the building industry and the fact that I could look back and know that we built something special. There was also the lure of going to the marketplace and making profits.” In 2001, Firstyle looked at branching out from being primarily a building company into development. As builders Firstyle was doing quite well, so Romeo thought development was a natural growth point. He searched land-based development sites to buy with the aim of sub-dividing and building on the lots. Two years later the company was gaining traction as a builder and developer and attracting much needed attention. “In 2003, 2004, we started developing good relationships with some of the major players in the marketplace, particularly banks. We started doing some work in some of their developments around Southwest, Sydney.” By 2009, Firstyle had achieved the triumvirate and were displaying their homes; they were now builders, developers and display merchants.

They first cracked Southwest Sydney and became one of the third largest builders there. They also branched into Oran Park District where they have a display centre featuring three different homes. Today the company is expanding out into the northwest sector. We just opened up on the north side, which is a display centre in the Lincoln Subdivision This is not the only growth Romeo is looking at. “We’re trying to capitalise on the base that we have in our development division and develop 190 lots in the southwest. We’re also expanding into other centres and creating more displays centres. So there are two parts to our growth. One is to expand the development arm and the second is to expand the project home division, which is fundamentally a display centre. We want to have a bit more of a presence in the Sydney metro area as well and really just try to develop the brand a little bit harder because we’ve been predominantly southwest. We want Firstyle to be a better-known brand around Sydney.” As the company has grown, so has Romeo’s passion. Despite the upswings,

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PROFILE | BF downturns and dramatic changes to the industry, he has continued to forge forward. Romeo recognises these changes as being necessities. “Government regulations, changes to the energy efficiency ratings of homes and stringent compliance through local government and council have all had impact. We comply with a lot more restrictions and have implemented certain requirements that the industry brought upon itself. Having said this, it has been much better in the last few years.” With the industry more compliant as a whole, it has weaned out some of the cowboys, however this is a competitive industry; the development and supply of homes will always have a place and the demand is never really likely to wane, it is more likely to expand into little explored territory. This means that developers must be on the ball, ahead of the game and offer customers exceptional service. This is the value that Romeo believes sets Firstyle apart from others. “The private home industry is fundamentally the same, it’s about building houses,” Romeo says. “From Firstyle’s point of view, we really try and focus on the customer, the client and the quality of the build and we stand by

our product. We’re a small player in a pretty high market, but this allows us to be more hands-on and give the client the personal touch. We like to let our clients know that we do continue to keep up our relationship with them and if they have an issue, we’ll sort it out quickly. We stand by our brand and we stand by the product.” Clients can see what they are getting when they go to a display home. Romeo feels that these homes are a true representation of the brand. It is something he is proud of. His passion is further ignited by the way the brand is reflected in his 33 staff, who still have relationships with some of the early clients in Southwest Sydney. “When we drive past some of these houses that we built 10 years ago, they still look quite good and they’re all still standing. And I think the quality we built over a period of time speaks for itself.” Romeo is very hands-on with the business. Although he realises he can’t do everything himself, he likes to lead by example. Yet he is led by building the brand, ensuring the quality is up to standard and concentrating on the future development of the company. Can he step away? It seems Romeo is too passionate. BF

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Key links

in the chain

Luke Herbert started his own business because he felt service levels in engineering firms could be improved. He speaks with Jonathan Jackson about the importance of customer service in conjunction with the rise of Linkforce Engineering.

uke Herbert grew up in Northwest Australia on cattle stations. There is a tone in his voice that tells you he has the confidence of a cattleman. That same confidence is evident when he speaks about engineering, mining and running a business. Luke started his career working in engineering fabrication, found his way into the mining sector and worked his way up the ranks as a tradesman before entering into planning and maintenance of mine sites. “It was quite frustrating that no matter what I did from the planning and maintenance side to try and support the contractor, there was little support for the client in return,” Luke says.” Luke’s burning ambition to start his own company had been a long time coming. The fact he felt he could improve the service being offered was the catalyst for his start-up. I had looked at setting up my own business quite a few times over the years, but there was always a reason why it wasn’t quite right: finances, experience and timing all contributed to the delay in setting up the business.” However in 2007 the time was right. He had the experience, the financial support and the desire to improve current practices. It was a difficult process but as Luke says, anything that is worth doing is usually difficult to do. A month and a half after setting up the business, intense planning followed and Linkforce Engineering won its first job. The job was a success and the workflow continued to grow and gain momentum.

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“

“We just continued on from there,” Luke says. “We started with 10 people six years ago and that has quickly grown to around 800 people who all know the importance of providing the customer with a high level of service. You do your very best for them and offer suggestions and improvement ideas. They may not take your advice, but they understand that you are there to help their success. If you conduct

If people believe what you say and you’re upfront with them that holds a lot of weight.’ business at the highest end, you build a good reputation. All companies should remember that while it takes 10 years to build a good reputation, it only takes 10 minutes to destroy one.” While the mining industry is extremely large, it is also quite insular and word spreads quickly about a business and the quality of work for which they are measured, particularly by their previous performances. That is how Linkforce Engineering started. They did a good job, built a reputation and moved forward rapidly by always making sure that their last job was their best. A key part of the success for Linkforce Engineering is honesty and integrity.

“People need to believe what you say and you need to deliver on your promises. There are so many people in the industry that promise the world but don’t produce, so it all comes back to the way you conduct yourself and your business. If you say you’re going to do something, do it. And do it well.” Like any business there are challenges, particularly with something as large as Linkforce. The team doesn’t shy away from the difficulties. Controlling hundreds of people throws up significant issues. “We mobilise large numbers of skilled personnel and equipment around the country to execute the works for our clients. To be successful, recruitment, training and support of our personnel is critical. Everyone needs to be given the right tools to succeed and if they succeed then the team succeeds.” Also with significant growth day-today business becomes challenging, but Luke brings this back to the strength of the team. “You need to have a lot of good people and systems to ensure that the company’s expectations are achieved,” he says. “To lead people and be a good manager you need to ensure you are firm but fair and treat people the way you want to be treated. “You have to have compassion, but you can’t be a soft heart. You have to have discipline and structure so people understand what the expectations are of them.” In a business such as Linkforce www.businessfirstmagazine.com.au

PROFILE | BF

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PROFILE | BF

Engineering, which has evolved into one of West Australia’s most respected specialist engineering groups, team respect is paramount. The logistics in this business are large. They plan and deliver capital works. Linkforce’s Shutdown Services division tailors quick-response solutions that leverage experience, dedicated resources and commitment to safety, quality and service. Their Industrial Access Safety (IAS) division delivers reliable and innovative access scaffolding solutions to mining, civil and construction workplaces to suit onshore and offshore requirements throughout Australia. The range of industrial access safety equipment deliver improved solutions to key workplace safety issues, particularly working at heights and finally the extensive fleet of cranes and plant equipment is available for hire and delivery to any worksite. To offer all of the above means the team is paramount. “We have a team that is straightforward with clients. They know what our capabilities are and how we work with our clients to get the best result.” SCP has been partnering with the Linkforce team since 2010, supporting their hydraulic services requirements on a range of mining projects throughout the Pilbara. It is an inspiration & a personal credit to Luke to watch the outstanding growth that they have experienced over these years. ‘Keep up the Good work’ – SCP Midwest.

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They are also hands-on people. “I am a big believer in that people need to see the leaders of the organisation. Personnel need to be able to speak with leaders about improvement ideas and what happens at the coalface and the challenges they sometimes face. This helps develop plans and processes to support personnel who conduct the day-to-day works and to make the jobs successful. “Growing up on cattle stations in the North West can be a pretty hard life; you can work really hard for not much reward. You learn to improvise and make do and just because things are hard, you can’t quit, you just have to get on with it and finish the work.” By that statement you gain a sense of where Luke stands with regard to this business and what his expectations are of himself and his team. When asked about what he is most proud of it is his children. “It has been an extremely challenging six years and life has changed dramatically but I have had wonderful support from my wife and family which pushes you to continually strive to succeed and grow the business. Luke also says there are many great people in the business who have made things easier. “They’re very passionate about what they do and they care. That is quite unique and I believe that it has a lot to do with why Linkforce Engineering is so successful.” It is interesting to note that about 80% of staff is what Luke calls ‘homegrown’; they have all started on the tools and worked their way up in

LinkForce Engineering is a great company to work alongside, whether it be a small shutdown or a large construction project, seeing their rapid growth over the past few years is a real credit to Luke and his team. – Tasman Power. the business. They have also helped build the company from one division (shutdowns) and a staff of 10 to five divisions and a nationwide staff of 800. Linkforce Engineering is a whole-package business and that is why it is able to compete against the larger companies. Luke says success in this industry is about what you supply, how you supply and what you’re prepared to do. He admits to making mistakes, but doing everything possible to not repeat those mistakes. “My team cares about the success of our clients because we are partners with them in their business. We help them achieve their targets and in turn we hope to achieve ours by being here for a long time not a short time.” BF

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BF | MANAGEMENT

Built to sell

– starting businesses with exit strategies The biggest mistake made by entrepreneurs as they start a new business is to over think the amount of money they will make after the business has taken root and under think their growth and exit strategies writes Martin Martinez.

I Martin Martinez is the founder of Entrepreneur Card.

t is advisable in the early stages of business to meet with lawyers and business partners to discuss what will occur when one partner wants to leave the business. There are myriad reasons why people exit businesses. A number of unexpected or expected events can set the perfect stage for the owner to exit. Businesses that are setup by a couple of business partners will always experience a time when one of its partners decides that it’s time to decamp. Other than retirement or death, trigger events could result from the firing of an important employee who is paid with shares and incentives, bankruptcy or divorce of an owner. Businesses do not look forward to hearing from a bankruptcy trustee who

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announces his induced partnership and how he will embark on a liquidation mission. Neither do business owners want to hear divorce attorneys declare how an ex-spouse is set to join the partnership. To cut a long story short, exist strategies are set by business owners to act as a shield when something takes a turn for the worst. The piece is dedicated to business owners and co-partners and why they should think about exit strategies before even thinking of getting into business. Simply, if you skip the exit strategies step you will be likely to learn either or all of the following: • The company is not in possession of retained earnings to pay off the business owner who wants to decamp

with immediate effect. • You failed to set up the buy-out properly and now there are huge tax implications. In this regard, you should put into consideration the following things. Percentages Do all business partners hold the same percentages? If this is the case, it is an easy one to handle? This is the point where you have a meeting with both the accountant and your lawyer and decide how life insurance should pan out, how you may benefit from tax benefits for the company and how it will best take care of the deceased’s bereaved family. Should the partners have different ownership percentages, you should www.businessfirstmagazine.com.au

MANAGEMENT | BF formulate a solid plan that will take good care of the majority shareholders and cushion the lesser shareholders. Remember buying out a majority shareholder could totally destroy the business. On the other hand, buying out a minor shareholder can be as easy as cutting a cheque. Create a solid formula without causing financial strains on the company. Selling to third party If you have decided to sell your business either to an employee or an outsider buyer, then you should think of a smarter way of dealing with the business other than the immediate cash transaction. Remember, if you run a profitable business, only a lower percentage of people will have the ability to buy a thriving business at a high price. Nor should you forget about the capital gains issue. The best idea for a sale would be to have a pay out over time. As the owner, you can choose to retain a smaller salary and keep the voting right; this move would also mean that you are going to benefit from insurance and other perks that you have become dependent on. Unfortunately, not many owners believe in the abovementioned strategy as they hold the fear that the company is set to fail before they are paid their perks in full. However, if you still want to retain your say in the business, then the above strategy minimises the risk of the business failing. As an owner, you can still retain majority control of the business until a particular payment is forwarded to you. After which you should initiate a stepping down control of the company. If you have a clear plan made out like this in advance, you can start down this road earlier and be in the exact position that you envisioned instead of having to advertise for a single buyer with enough perks to buy you out of the business at one go. Share/stock value You should determine the value of your stock/shares in a corporation that is closely held. Figure out whether your shares or stocks are in any way marketable to an outside buyer. If your shares are not in any way marketable, then it becomes a difficult situation to locate a buyer for your business. It is an even harder task to sell your shares in a closely held corporation especially if you want to trade in an open www.businessfirstmagazine.com.au

market. If there is a person who has the money to buy the shares, it is possible that he or she is capable of starting up a business on their own. It becomes a difficult situation for the potential buyer to buy into a company that has other owners. For such a business to thrive, it takes all the right personalities to make it work. Many would-be buyers see this as a scenario where they would be eating from someone else’s plate. This does not appeal to them in any way. There are just too many problems that are bound to rise up. An entrepreneur with the right amount of capital will more than likely set up a business that they can run their own way. At this point, you should really search your soul deeply to determine whether there is a market for your shares. Valuing You should then decide on the procedure you will use when it comes to valuing your business or shares in the company. Are you going to use the straight book value or are you going to resort to another procedure that determines the company’s value? There are several ways you can to determine the value of a company; this is however dependent on whether or not the company has a substantial asset base or whether the company offers either intellectual property or services. Company owners need to settle on the perfect valuing process and form strategies that will help them revisit the valuing formula after every two years. They need to take a vote to determine whether the process they have set is relevant or realistic enough at its current point to value the business as it is. Determination Business owners should be able to determine whether they are going to retain the right to first refusal. They need to come up with clear rules pertaining to the departing owner’s capability of disposing his or her shares out in the open market. They should also discuss and see whether the company is permitted to buy the stock and hold it as treasury shares. Should the owners agree to have a right of refusal, it is crucial that the share value is known. The right by the rest of the owners should be exercised with caution and reason. Laws need to be set to refrain the remaining owners from unduly prolonging the event. Since personalities play a huge role in running a

‘

Business owners should possess the right business maturity that refrains them from engaging in a showdown with one of the owners who has decided to decamp.’

business, owners left behind will more than likely have a say in the matter. You should also set notification guidelines to govern the manner in which a departing owner should take. As it is the norm with a majority of the companies, stiff and strict penalties are set on an owner who decides to decamp by giving less than six months notice. The standard six months are set as enough time to find a replacement, should there be need of one. Less drama Business owners should possess the right business maturity that refrains them from engaging in a showdown with one of the owners who has decided to decamp. The decamping owner asks the rest of the owners to set a time in which they can completely buy him or her out of the shares he or she owns. Failure to do this will result in a sell off of all assets or attempts to sell the company completely. Such things happen especially if the decamping owner is the one with super majority shares. In such a scenario the shareholders with lesser shares should immediately start looking for opportunities elsewhere as the decamping majority shareholder will wind down the company if he pulls out all his shares. BF

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BF | BUSINESS

The Ten Commandments for family business In my 30-odd years of accounting practice, I have lost count of the number of times people have said to me, “My son hasn’t got the skills to carry on the family business.” Others grumble, “My children are irresponsible with money – they wouldn’t know how to run a business seriously.” Or, “I’m worried that my kids will sell up as soon as I’m gone,” writes Bernard Marin.

I Bernard Marin

is the CEO of Marin Accountants.

t’s important to remember that a family business – and its assets and wealth – should be the glue that holds the family together and the fuel that propels it towards happiness and success. However, if succession planning from one generation to the next is not managed properly, it can become the catalyst for blowing the family apart. Australian family businesses generate around 50% of GDP and employ almost 50% of the Australian work force. Given the potential catastrophic consequences it is frightening how little attention is paid to succession planning by family and business leaders. The Ten Commandments Clearly, families cannot just leave it to chance to sort things out. If they wish to enjoy peace and prosperity over the long term, they must take positive steps to establish formal strategies and structures that manage individual needs and interests, and facilitate interactions between the individuals, the family and the business. This is why it’s critical that families have rules to live by in running their businesses. I call these the ‘Ten Commandments of Family Business’. Observing them significantly improves the chances of a business succeeding across the generations. Increase wealth: the number of family members grows much faster than the family’s wealth. A family business therefore does more than just maintain its wealth – it needs to follow the FIRST commandment: “It is beholden on the family business to increase wealth.” Ideally, wealth should grow exponentially as family members increase. Failure to observe this commandment may result in a family’s financial demise. Structure: the family business must also produce income and plan for the future. If the business is to continue long-term, it is important that subsequent generations are encouraged and educated into the business, and

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structures are put in place to facilitate this process. Thus the SECOND commandment. “Thou shall establish structures.” Be objective, not subjective: families are an amalgam of power, love, money, jealousy, pride and a host of many other emotions. Each family business must develop its own objective systems and structures to ensure that these emotions are not imported into the business. Hence the THIRD commandment: “Make business decisions for commercial reasons and NOT for family reasons.” This is especially the case when it comes to employing family members. Employ family carefully: family members employed in the business need to feel that they have earned their position. Also, family members not employed in the business have a right to know that the family assets have not been squandered on ‘jobs for the boys’. Nepotism is an unhealthy message for all concerned. So the FOURTH commandment is: “Establish an objective job selection and employee policy.” Plan: all business involves risk. But if you run a business in a professional manner, you minimise the risk. Therefore, the all-important FIFTH commandment: “Create a business plan.” Do so after careful consideration. Build in a process to review and monitor this plan on a regular basis. Use independent directors: families do not have a monopoly on knowledge, so the SIXTH commandment is: “Appoint arms-length and independent managers and directors.” They not only contribute to the ongoing activities of the business but also add objectivity and commercial reality to the decision making process. Don’t pressure that independence: it is critical for family members to avoid putting unwarranted pressure on independent directors. Over-involvement by the family can result in the ‘tail wagging the dog’. Instead of the Board

5 6 7

making decisions, family members do so, to the detriment of the Board’s abilities to carry out its business in a professional and effective manner. The SEVENTH commandment is therefore: “Respect your independent directors and do not coerce them.” Succession planning: the EIGHTH commandment is critical to the longer term: “Create a succession plan.” The absence of a constructive succession plan has the potential to destroy the business and cause major disruption within the family. Transparency: this is also critical, to ensure that all relevant decisions are made openly and communicated to the entire family. The NINTH commandment therefore is: “Have regular family retreats.” A retreat should run for one or two days and preferably, all generations of the family should attend. It should encourage family members to table their aspirations, discuss their differences, develop policies and review all relevant matters. The Family Constitution: finally, the TENTH commandment of family business: “Write a family constitution.” All family members (say 13 years and over) should sign the constitution. The document should include the business objectives, the terms of employment for directors, managers and family employees, an outline of the Board’s decision-making process, and the way the business is managed. It should also set out clearly the shareholders’ obligations. Over the past 10 years, Australia has moved onto the leading edge of world’s best practice when it comes to family and private wealth management. Now we just have to get more families better organised to help ensure the smooth transition of wealth to the next generation. BF

Bernard Marin is the founder and CEO of Marin Accountants, a firm specialising in advice for individuals, investors and family businesses. www.businessfirstmagazine.com.au

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BF | PROFILE

The sweet ride to success There is energy about Alessandro Garofalo. It is reflected in the way he leads. It is reflected in the way he conducts himself and it is evident in his successes. He speaks with Bob Forshaw about the art and energy of distribution.

s he cycles through the streets of Sydney, Alessandro Garofalo, General Manager at The Distributors is aware that any wrong move could end in a world of pain. However, his business is distribution and he understands how to shift gears, change momentum and most importantly get from point A to B safely, intact, efficiently and effectively. Point A for Alessandro began with an MBA in Italy. Currently point B is his position with The Distributors, a leading independent, convenience segment wholesaler. The Distributors was founded in 1981 by a group of five wholesalers. Today, The Distributors is a Public Company limited by shares and structured as a co-operative comprising of 30 owners operating 38 warehouses nationally. The Distributors service in excess of 45,000 customers annually and supplies a diverse portfolio of products including Confectionery, Snackfood, Beverage, Grocery Food and NonFood. They stock on average 6000 to 8000 SKU lines per warehouse, double that in larger storage facilities. Their success is put down to their values: 1. Be attentive to the needs of local as well as national Customers. 2. Deliver superior service to the convenience and route market. 3. Develop specialised market knowledge and ensure our customers profit from our knowledge. Alessandro has been with the company for 18 months. In between point A and B he has developed global

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market leadership by successfully establishing FMCG and Office Products businesses and brands across Europe, North America, Asia, and Australia. “I worked for Barilla for about 11 years, then I moved into the paper business with Double A,” says Alessandro. “I worked there for about six years in Australia while also looking after the Company’s US projects. Then I moved to New York as director of sales for pasta, pasta sauces, olive oil company De Cecco. I worked in New York for about three years before coming back to Australia at the beginning of 2012. I have been with The Distributors since then.” These 18 months have been exciting, if not a little trying as the industry shifts its position and more competitors filter into the market. Some of those competitors are the very supermarkets that The Distributors route customers compete against. “You have new players come into the market like Costco or you have existing players like the big supermarkets that are wholesaling directly or indirectly to our positional customers which are the independents and petrol and convenience retailers.” Meanwhile, says Alessandro, manufacturers are willing to cut the complexity out of their supply chain. It means that distribution companies have to look at simplifying and optimising their service to gain the best outcome for their supply partners. “This is an ongoing transformation which will require us to continuously look at new avenues to simplify the way

to market and become more efficient and more effective.” It also means The Distributors must stand out from their competitors. Alessandro believes they are doing this by being a national organisation with local reach. “We have widespread coverage of the market. We also have regional people who work on the business day in day out; they are passionate about their business, about their customers and they can sell this locally and much more effectively than anyone out there.” While difference is good, they have to remain ahead of their competitors and this means looking to the future. It means expansion and working closely with customers and supply partners to facilitate the growth. “We need to sit down with our supply partners to find the most efficient, effective and simple way to get their products to market as we need to work beside our customers to understand them more, gauge what they are looking for from the wholesaling point of view and what they need from the supply partners who work with us. “That is probably one of the areas that we need to continue transforming towards. At the same time we need to expand our group. We need to have a broader portfolio that offers beverages, groceries and may potentially work with food service in the future.” Suppliers are the key to this growth and Alessandro feels that it is not enough just to do business. Like any successful business, building relationships is key. It is no more evident than

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PROFILE | BF

in distribution. “We need to understand their goals and objectives working together to a common ground. At the same time they are under a lot of pressure because of the squeeze of the major supermarkets and they are looking for new avenues to market, to get their products in front of the consumers. That’s where I think we can add significant value, but we can do it only if we know them and understand their constraints and their objectives.” This is easier said than done and the relationship has to work both ways. “They need to support us as well; they need to support our warehouses as well as our people in the field who can make the difference and can make it or break it out there. “Our people in the warehouses and in the field are an integral part of the group. They are not lone entities, but are actually involved at company level because they realise that group strength makes the local businesses stronger and healthier. “The group can allow much stronger purchasing power. It can nurture the relationship centrally and locally with supply partners and build stronger local customer relationships.” It is that strength that has secured supply partners such as Arnott’s, Kraft, Mars, Smiths, SBA, Nestle and plenty of others. The group has delivered on its services and its promises and most importantly on its values. www.businessfirstmagazine.com.au

“What the initial customers required and the others have been able to see is that we stick to our promises and we deliver on those promises. This is a very simple equation: you do your job, you do your job well and positive word of mouth follows. That’s how we grew our customer base. “In terms of supply partners it’s very similar. If a supply partner can see that we are able to work with them and understand what their goal is and develop a plan on common ground, then the success that is delivered becomes an invitation for other supply partners to come on board. This is why we keep adding new supply partners in different categories, not only the core categories of confectionery and snacks but also in other categories like beverages and grocery.” The sky is the limit for Alessandro and The Distributors. He is keen to develop new markets and different channels of trade, while also building the product offering. His goal is to facilitate this growth while maintaining the current level of service through providing ongoing improvement to existing systems and processes. The ultimate aim is to consolidate the strength of the group and become ‘The’ leading player. For some this could be a logistical nightmare, given the scale of the task; not for The Distributors who, says Alessandro, “know how to go from A to B in a collaborative, efficient and effective manner.” BF

“

What the initial customers required and the others have been able to see is that we stick to our promises and we deliver what we promise.’

BUSINESSFIRST MAGAZINE

BF | FINANCE

Be clever: reduce your international money transfer costs Companies with overseas customers and suppliers are returning their focus to the ongoing need to reduce expenses and increase the bottom line writes Sean Barrett.

I Sean Barrett

is a director with CurrencyFair.

n business there are few easy ways to make these savings happen. However, if you need to move money internationally, then ditching your bank in favour of a specialist money transfer company may be an excellent option. Traditional methods are expensive and banks are certainly guilty of overcharging for what is essentially a relatively simple product. The various levels of bank fees and charges make it difficult to understand the full costs. Typically there will be an upfront transfer fee and a hefty margin on the foreign exchange rate. This margin is the difference between the rate your bank gives you and the rate banks use when dealing with each other, or the interbank rate. It is the exchange rate that has the biggest impact when moving larger amounts as typically done by businesses. Intermediary and receiving banks may also take a slice of the transferred funds. Often these charges are not made clear at the time of the transfer. Specialist transfer companies can offer far better value. Thanks to the internet and its universal acceptance as a means of facilitating financial transactions, specialist international transfer companies can now offer a superior service at a fraction of the cost. By leveraging technology and global banking systems, they can reduce their margins and pass the savings on to businesses and individuals. Leading international transfer company, CurrencyFair, has taken it a step further and created a ‘peer to peer’ marketplace, effectively ‘crowd sourcing’ foreign exchange rates to reduce the costs even further. This peer-to-peer marketplace operates as a network of users, each offering to individually (but anonymously) trade money, rather than having a ‘client/server’ relationship with a bank at the centre. CurrencyFair’s role, as a regulated entity, is to provide security and convenience. Their task is to ensure that businesses can exchange safely and that the money gets where it needs to

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‘

Specialist transfer companies can offer far better value.’

go efficiently and quickly. This powerful peer-to-peer model means that fixed transfer fees are far lower than standard bank charges and exchange rates are significantly better. Processing payments through domestic banking systems can also eliminate the intermediary and receiving bank charges, which can often come as a nasty surprise. In order to access the excellent exchange rates and greatly reduced fees from a transfer service such as CurrencyFair, a business simply needs to register online (it’s free). It costs nothing to do a comparison and the savings speak for themselves. On a typical transaction

of AUD10,000 a business could be saving $400 in fees and foreign exchange rate margins. Any business that sends money internationally should consider putting its bank to the test. BF Sean Barrett is a co-founder and director at CurrencyFair with over 15 years experience in foreign exchange. Based in Newcastle, Sean heads up CurrencyFair’s Australian operations. *This information was prepared without taking into account your specific objectives or circumstances and cannot be considered financial advice. CurrencyFair Australia PTY LTD AFSL 402709.

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BF | LEADERSHIP

Unlock Your Leadership Super Power We live in an era of unprecedented and relentless change. Changes are occurring very rapidly and any individual leader that ignores this reality will struggle to adapt and this will impact their own lives and businesses writes Chutisa and Steven Bowman.

I Chustisa & Steven Bowman

are global business advisors.

n the current environment, making decisions and taking action have become more complex for business leaders in all industries and in all markets. Clearly leaders need different skills to take their businesses into the future. To make decisions efficiently, quickly, and strategically leaders must unlock their leadership superpower by developing the ability of a Pragmatic Futurist. When leaders develop their pragmatic futurist capacity they

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increase their power to shape their futures, even in the most turbulent of times. They will be equipped to take advantage of all the new opportunities that rapid social and technological progresses are creating. Business leaders can incorporate the pragmatic futuristâ&#x20AC;&#x2122;s power into their everyday operational practices, and begin to lead from the edge of possibilities. A key element of a Pragmatic Futurist is the ability to create future

potential possibilities. This is not to be confused with predicting the future. It is about being aware of future possibilities in order to act and influence them. Pragmatic Futurists can see different possibilities in seemingly random information, enabling them to take decisive action and to make the choices that bring strategic advantage, while their peers are still assessing a situation. They donâ&#x20AC;&#x2122;t just navigate future global trends, they actually shape them. This www.businessfirstmagazine.com.au

LEADERSHIP | BF

‘

You have to be willing to expand beyond this reality and to be willing to receive awareness from everyone and everything without judgement.’

your awareness as long as you are in your mind. You contract your awareness when you identify with your thoughts, feelings, and emotions; when you define yourself in a particular way; and when you try to ‘figure things out’. Expanding awareness means rising above thoughts, feelings, and emotions. Every time you stop identifying with your mind, your zone of awareness expands. Seek out ambiguity in everything you explore and let go of conclusion. Any time you come to a conclusion about anything, you cut off your receiving and your awareness. Nothing that doesn’t match your conclusion can come into your awareness. Your awareness will expand exponentially as you let go of your conclusion and become more present with what is actually going on around you. Ambiguity just means that you are open to all possibilities. Challenge all of your assumptions and be willing to go against traditional wisdom. An important feature of a pragmatic futurist is the capacity to get beyond the limitations of assumption. Seek to become aware of the assumption and the boundaries that define conventional practices, predictable routines, conformist behaviours, and business-as-usual approaches—and then deliberately step beyond them. Live in the question and not the answer. When you’re being the question with everything, you can have total awareness of it. Living in the question requires an open mind, a willingness to receive uncertainty, and the audacity to explore and investigate unfamiliar territory. BF

is about being present with what is and looking for what can be. Without this capacity, leaders will have no idea as to what they must do in order to thrive in an era of rapid change. So, how can you unlock your leadership superpower? In order to unlock your leadership superpower you have to be willing to embody and be a pragmatic futurist. This requires new ways of being. And it is about having total awareness of everything and having the curiosity to go beyond what is known, comfortable or predictable. You have to ask questions. Everything must be a question for you, a whole life of questions. You cannot www.businessfirstmagazine.com.au

do a decision, conclusion, or judgment about anything. To unlock your leadership superpower: You have to be willing to expand beyond this reality and to be willing to receive awareness from everyone and everything without judgement. Develop the ability to see the big picture as well as having total clarity about the details of a situation here and now. Become willing to perceive, know, be, and receive everything without any limitations, fixed points of view, or judgements. Embrace your knowing and stop identifying with your thinking mind. You will not be able to expand

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BF | MARKETING

Why you need to improve your marketing team’s performance – and how to do it Aligning the right people, processes and tools with your company vision and strategy can lead to sustainable results.

Mellissah Smith is the founder of Marketing Eye.

anaging a marketing team’s performance is a perennial issue that is faced by all company

leaders. While statistics on revenue growth and margins are laid out to see in black and white, it is more challenging to respond to the question of what value the business receives from its marketing investment. Three crucial reasons why marketers can struggle to develop sustainable measurement practices are: • They neglect using metrics to monitor increases in customer value to their company over time’ • They fail to look beyond the front of the pipeline to track the impact of their marketing, particularly among existing customers • They do not close the customer interaction loop with sales. Over my two decade-plus career in marketing in Australia and the US, I’ve come to acknowledge that to have the most efficient and effective marketing team, it is paramount to have the right marketing drivers in place. Implementing the right people, the right processes and the right tools, and ensuring all are aligned with the company’s vision and strategy are key elements to succeed. How Microsoft is leading the way In July, Microsoft announced a new marketing strategy under the banner of ‘One Strategy, One Microsoft’ after the failed launch of its new Xbox the month prior. The most significant change was in the organisational chart – for the

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first time, Microsoft’s chief marketing officer reports directly to the company CEO. I’ve seen many businesses fire blame towards marketing for poor sales performances, so it is an instrumental step forward to see a company of the stature of Microsoft making headway into taking the position more seriously. One Strategy, One Microsoft signals a tech giant coming to terms with an ever-changing market that requires agility and innovation, rather than four separate divisions that rarely communicate with each other. It goes without saying that Microsoft has lagged behind Apple in marketing performances over the past decade. Apple has positioned itself as a market leader – sexier, smarter, futuristic and people-orientated. I will watch with great interest how successful the shift towards One Microsoft is – and take heed that the world’s two largest tech companies have recognized that marketing is crucial to growth, expansion and impact. How a CEO can have an influence Your company’s marketing activities have a direct impact on the performance of your sales team. If your marketing team is not working effectively or to its potential, you will likely commence looking for ways to improve sales performance. This approach is misguided, based on reaction rather than forward-thinking strategy. Here are the questions that you, as a CEO, need to ask yourself:

• Who does the head of marketing report to? If it is not you, as CEO, what value does your organisation place on its purpose? • Is your marketing team high performance, or just existing? • What culture do you instil in your marketing and sales team and how can better results be driven through great integration, support and understanding? • Does your company have a marketing dashboard in place providing up to date analytics, to give you greater flexibility in changing your investment? • Do you have an efficient mode for the delivery of effective marketing? • Is your team experienced enough to deliver marketing underpinning your business goals? • How do you split the responsibilities between central and devoted marketing staff? • What marketing KPIs are appropriate and how can performance be monitored? • Do you spend too much or too little on marketing? Once you are equipped with the answers, you will be best positioned to improve your marketing’s team performance reap the long-term benefits. BF Mellissah Smith is a serial entrepreneur and business leader with more than 20 years’ experience in marketing. She runs an international marketing consultancy firm that provides small businesses with a marketing consultant and in-house team of creative, web development and PR experts. www.businessfirstmagazine.com.au

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BF | HEALTH

Leadership the key to improve health and wellbeing Fitness Australia CEO Lauretta Stace speaks about the value of corporate health and the roles CEOs play in establishing proper health practice.

T Lauretta Stace is Chief Executive Officer of Fitness Australia.

here are many benefits associated with being a CEO. You are in a leadership position. You have responsibilities and challenges to tackle. You have the ability to transform things, set goals, take action and influence outcomes. You have the opportunity to help others build their capability and achieve their goals. In short, you have power and influence. As a fellow CEO, what I would like to propose is that we, as business leaders, use this power and influence to make more meaningful, widespread and lasting improvements to the health and wellbeing of society. Where does this start from? It starts with you! In the modern economy, most of us are living fast-paced lives that are largely centred around work. But is this really serving the health and wellbeing of our society? As a CEO of a rapidly growing and fast-paced industry association, I know what the typical day holds for an executive and it’s often a 24/7 phenomenon. Commuting, traffic, meetings, emails, phone calls, tasklists, people to see, things to do, goals to achieve. We seem to be increasingly

‘

Over 60% of Australian adults are inactive or insufficiently active to achieve a health benefit.’

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busy at work and there are more and more demands placed on our time. Do you ever find yourself checking your mobile device at bed-time and then worrying about something that you read for hours into the night? Do you spend your ‘time-off ’ thinking about or worrying about work? Whilst it’s great to be challenged, to achieve results and success, to be considered diligent and hard-working, there is no doubt that the fast pace of work-life is contributing to poor health in our society. As business leaders, we have a responsibility for the health and wellbeing of those around us, but all too often we put others first and forget about ourselves. Over 60% of Australian adults are inactive or insufficiently active to achieve a health benefit. The incidence of non-communicable chronic diseases is increasing at an alarming rate, often due to poor lifestyle choices. Lack of physical activity and physical fitness is contributing to a range of mental and physical health issues. Recently, I came across this insightful opinion piece from Dr David Kratz in the Huffington Post: “If only we could manage our weight and our health with at least as great and reliable a ROI as we can get by managing our money. We could, if we choose to use what we know, eliminate 80 percent of our lifetime risk of chronic disease. The grim landscape of modern epidemiology is not for want of knowing – it’s for want of doing. It’s about cultural priorities. If we treated wealth like health, most of us would passively anticipate bankruptcy at midlife as a

rite of passage, and then deal with the consequences. Heart disease and diabetes are more preventable than bankruptcy – but millions upon millions get them anyway. That’s a little odd.” Odd indeed! In my own experience, I realised a few years ago that to be the best that I can be, for my family, my employer, my team, my career, I had to put my own health and wellbeing first. Why that took me almost 50 years to understand is beyond me, but I’m certainly not alone. So I embarked on a mission to improve my health through a more consistent approach to regular exercise and healthy eating. I now have more energy, less feelings of stress and anxiety and am physically fitter than I have ever been before. This has also translated into having a greater sense of purpose and achievement, so my self-esteem and confidence has been boosted. And guess what? It doesn’t take a massive change to your lifestyle to achieve this result. I now see this as both a leadership and an issue of organisational culture. In my workplace, we have sent a clear message that everyone’s health and wellness is a priority, so it has become an issue of cultural significance. By looking after my own health and wellbeing, and supporting others to do the same, I am sending a strong signal to everyone around me about my own priorities and the value that this brings to the workplace and to life in general. So, as CEOs and leaders, let’s not settle for midlife health bankruptcy. Let’s tackle this issue head-on, take care of ourselves and do our bit to make Australia a fitter, healthier nation. BF www.businessfirstmagazine.com.au

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BF | EAT & DRINK

Good morning

Vietnam

Luke Nguyen epitomises all that is good about Vietnamese cuisine and hospitality. He speaks with Jonathan Jackson about an undying love for the sights, sounds, tastes and smell of his ancestral homeland.

80 BUSINESSFIRST MAGAZINE

or those who have dined at the Red Lantern, seen the chef on SBS television’s Luke Nguyen’s Vietnam or even read his cookbooks, one thing is clear, Vietnam is a prominent player in all that he does. His love for Vietnam stems from his childhood: working in his parents’ Cabramatta restaurant where he would wait tables, entertain guests – as children are wont to do – and learn the processes of cooking tasty Vietnamese broth. It was a difficult childhood, but happy nonetheless. There was no rest; the Nguyen siblings grew up in the restaurant industry. They worked and went to school and it could have been enough to drive any normal kid out of the industry. But not Luke, he knew even in relative infancy that the restaurant industry was his calling. He fondly remembers the cooking process and learning all elements of a great Vietnamese soup. “It was all about the soup; the beautiful aromatic broth and how to extract all the flavour from the marrow and how to put the vegetables in a way where all the flavours would sift through,” Luke says. “There were 13 or 14 varieties of spice and I was learning the balance of flavour – what’s essential before actually completing a dish. It was like the 10-year process a sushi chef has to undergo before being allowed to prepare a piece of sushi for a guest.” Luke learnt how to make a full flavoured Pho. He also had instilled in him a work ethic that has carried through to this day. “It was ingrained in me,” Luke says. “You don’t want to be working the whole time, you want to hang out with friends, but we had to do well in school, we had to get top grades and

at the same time, we had to help the family business.” He decided that he would open his own dining establishment when he was 12. A year-six school discussion with regard to future professions raised all the likely suspects including fireman, astronaut and doctor, however Luke was adamant that he would open a Vietnamese restaurant. Thirteen years later, at the age of 23, Red Lantern opened for business, boasting the same colour scheme and rustic charm that he had envisioned all those years ago. With little money behind him, Red Lantern was designed to be an intimate and authentic experience. Luke rallied some friends and family and painted, bought the wines at auction and did everything on a very tight budget. “When we opened the doors, I had $100 left in my pocket, but I had no fear of failure.” With the ‘Open for Business’ sign facing the street, the only way to stop the restaurant from joining a host of others in hospitality heaven was to build reputation. According to Luke this was hard work, but he says the Sydney restaurant industry is extraordinarily supportive. “On a Monday at night, when most restaurants have closed for the day, we would get together and support each other. We would go to each other’s restaurants and really talk about what was going on. I found when Red Lantern opened, that we had all the great chefs come and offer support and talk about it. So it grew through word of mouth, because we never had a budget for advertising or marketing.” Another reason for Red Lantern’s success is its authenticity. This small 48-seater opened as one of the only Vietnamese restaurants in the city, however Luke wanted to make it a www.businessfirstmagazine.com.au

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BF | EAT & DRINK

complete Vietnamese experience. This meant providing a friendly, yet professional experience. “I found that what has made Red Lantern successful is not just the food there but it’s the warm, inviting and passionate people as well. We’re such a good team that the front of the house is as loving about Vietnamese cuisine as the chefs and I. “We hire on the basis that you have to love hospitality. And so it becomes a friendly, homey family style of restaurant. And I think that’s what people like; it’s real and it’s honest.” It means that while he is away on his frequent travels, the restaurant is in good hands. He does have family members who step in, most notably his sister Pauline who penned Secrets of the Red Lantern, which unravels the threads of the Nguyen family history from refugee status to Cabramatta restaurant owners and beyond. And as he becomes more and more committed to outside influences, those inside become more and more important. Luke has a lot on his plate. He conducts his travel tours with ATP, he is one of the judges on Masterchef Vietnam, he has his SBS cooking/travel shows, Greater Mekong, Vietnam and Luke Nguyen’s Vietnam, which have been viewed in more than 160 countries, and he is a celebrated author. Right now he is spruiking his follow up to Songs of Sapa, The Food of Vietnam, a sumptuously put together tome that evokes the food and feeling of this beautiful land. He is busy, but he wouldn’t have it any other way. “I really love it. I work hard but I really enjoy what I do. Everything, all the projects that I do are connected with food in some way. And I don’t see myself doing anything else. I’m pretty happy with showcasing great food, great culture, travel and cuisine.” Luke has been travelling to Vietnam for 15 years, researching the best recipes and searching for the most incredible street-food. It is these experiences that he shares when he hosts his tour groups. “It’s a real intimate authentic food

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experience that I do in partnership with APT. We eat at the hidden streetfood joints around Vietnam and at the best restaurants. I conduct cooking classes and we see the best of Vietnam, as a local would. You can’t get that experience with any other company, so it’s pretty special and I really enjoy sharing Vietnam this way.” Vietnamese history is attractive on many levels. From a culinary perspective the country was ruled by China for a thousand years. The Chinese introduced noodles and chopsticks. Then the French took over and colonised Vietnam for almost 100 years. The French introduced so many incredible ingredients and influenced cuisine in a huge way. They brought in a love for coffee, for pastries and baking. Then there is the Indochina influence, which involves Cambodia and Laos as well. “Vietnam has such a long history of the best culinary countries in the world, so it has defined and refined cuisine,” Luke says. “That’s why I think Vietnamese food is the most refined Southeast Asian food out there because it had so much history and influences.” This influence is reflected in his latest endeavour situated in Star City Casino in Sydney. Fat Noodle is mix of Chinese, sprinkled with Vietnamese, Thai and Malay. Nguyen’s signature dish is a 20-hour beef broth, with thinly sliced Angus sirloin and brisket, bean sprouts, fresh Thai basil, fresh chili and rice noodles. Luke is so immersed in the culture that even his charity work is Vietnam-centric. Partnering with charity organisation REACH Vietnam, he founded Little Lantern Foundation in 2009 with his partner Suzanna Boyd to give youths in Vietnam an opportunity to undertake a hospitality-training program. He explains, “My family worked hard, but we received an education and we finished school. There are so many opportunities here, but when I went to Vietnam for the very first time I met lots of children who were working really hard at a young age and they didn’t have education because they simply couldn’t afford it. Schooling was $100 a year and the parents could not afford that.

“So I wanted to give all the kids $100 to go to school, because we spend $100 on dinner. Then I thought, if I give that kid $100, they’ll spend it on necessities or give it to the parents so it’s not going to go a long way. “I came back to Australia and set up the Little Lantern Foundation so that we could fund education in the way of hospitality. I teamed up with another NGO from Vietnam, REACH Vietnam and now, they’re all through Vietnam from Hanoi to Saigon.” REACH runs the program, which includes basic English, cookery and a little bit of IT and graphic design. At the end of the course, 98% get a good job in a restaurant or a hotel. As you can see, Luke is passionate about food and about educating others www.businessfirstmagazine.com.au

EAT & DRINK | BF

in the language of cuisine. You can sense this when you speak with him, or when you step into one of his restaurants and when you watch him on television or read one of his books. His advice to budding hospitality aspirants is be prepared for extremely hard work. “If you don’t like hard work, in terms of working long hours, working seven days, having a different lifestyle to most people out there, if you can’t adapt to that, I think you should do something else, because it is strenuous. Do it for the love of cooking and the love of the hospitality industry.” In Luke’s world food is love; love of flavour, of history and of hospitality. He runs two top Sydney restaurants, has best selling cookbooks and audience-grabbing TV shows because that www.businessfirstmagazine.com.au

love is expressed in everything he put his heart to. Luke’s favourite dish from The Food of Vietnam

“My favourite recipe is definitely a dish that’s one of my preferences at Red Lantern as well. It’s my rice cakes. It’s the rice cakes with caremelised pork and tiger prawns. “It comes from simple street food dish, where they’re frying up cubes of rice cakes on the hot plate, cracking egg over it and adding duck sauce and spring onions. I put my own spin on it by adding pork and prawn. So that’s my favourite … at the moment anyway.” You can find this mouth-watering recipe on page 214 of The Food of Vietnam. BF

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BF | FAST LANE

Revolution

DB9

It costs as much as a one bedroom apartment in a reasonable area of town. It is made famous by James Bond. It is Martin, Aston Martin and their new DB9 is fit for a king, million-dollar executive, super spy or anyone with taste and a lot of money.

f you have a spare $200,000 in the bank, do yourself a favour. The new DB9 is an improvement on the old – if that is at all possible. In fact, how do you make the perfect car even better? First, you make it more powerful. The new DB9 boasts peak power of 517 PS, effortless torque of up to 620 NM and the new AM11 V12 engine ensures this is the most powerful DB9 ever produced. Of course these days, with great power comes great environmental responsibility. So the designers at Aston Martin decided a CO2 reduction, saving 12g/ km was a nice nod to increasing green sensibilities. However you can still get to 100kmh in 4.6 seconds and it still grunts like a fast car. Aiding the speed is the fact that the new DB9 is 15kg lighter. The braking system has also been improved. Engineers at Aston Martin have described the system as the best braking system since advanced carbon ceramic brakes were fitted on every car.

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The new brakes offer a better response with a longer life and bring improved performance with virtually no fade. They’ve also introduced adaptive damping to the all-round double wishbone suspension, which features three different modes – Normal, Sport and Track – that help transform the DB9 on the move. As for the interior, master craftsmen were brought in to work with master designers to produce a level of fit and finish unheard of in a Grand Tourer. The leather welts flow and are custom made by hand in new facilities, the control switches – made of real glass, the leather – the finest Bridge of Weir hides. The DB9 is the classic Aston Martin. If you want sport, buy yourself the Vanquish, if you want the apex of luxury Rapide should be on your menu. If you want classic, it’s DB9 all the way. This is more than just an upgrade. The result? The most luxurious Aston Martin DB9 in history. BF

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FAST LANE | BF

BODY Two-door coupe body style with 2+2 seating configuration • Extruded bonded aluminium VH body structure • Aluminium, magnesium alloy and composite body • Extruded aluminium door side impact beams • Single Bi-Xenon headlamps with integrated LED side lights and direction

ENGINE • All-alloy quad overhead CAM 48 valve 5,935CC V12 • Front mid-mounted engine, rear-wheel drive • Front mid-mounted engine, rear-wheel drive • Fully-catalysed stainless steel exhaust system with active bypass valves • 517 PS (510 BHP) at 6,500 RPM • 620 NM at5,500 RPM

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BF | HIDEAWAY

Necker Island

Richard Branson’s Necker Island is the paradise you dream of when it’s time to put the feet up, relax and take life easy. Necker is the way life was meant to be.

ecker, Sir Richard Branson’s private island paradise, is situated in the British Virgin Islands, a stunning and unspoilt area of the Caribbean. At 74 acres, Necker sits in turquoise waters surrounded by coral reefs and fringed with beautiful white sandy beaches. Necker can become your own private hideaway; away from the stresses and strains of daily life. The island can be hired exclusively for groups of up to 30 people, or if you’re not looking to hire it exclusively, you can still enjoy the Necker experience during Celebration Weeks when individual rooms can be booked by singles or couples to enjoy their fabulous island paradise ‘house party’ style. Accommodation on Necker Island Accommodation on Necker Island includes nine bedrooms in the Great House and six individual Bali Houses dotted around the island. There is also a bunkroom in the Great House that sleeps up to six children. All rooms have private ensuite bathrooms. The total number of guests that be accommodated on Necker Island is 30, plus six children in the bunkroom. The Great House Perched on Devil’s Hill and boasting amazing panoramic views. Also known as the heart of the island, the brand new Great House is bright and airy and has an outdoor terrace with hammocks and sofas. Each of the eight guest rooms has a balcony, and all come with king-size beds and en-suite bathrooms. On the upper level you’ll find the Master Suite, complete with private outdoor Jacuzzi and outdoor bath on the largest terrace of the three. The spacious bathroom is ensuite and there is also a wet bar, mini bar and a modern TV system. All rooms have king size beds which can be split into twin beds in most cases. The rooms in the Great House are fully airconditioned. There is also a bunkroom that can sleep an additional eight children

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or 6 children and a nanny. There is a separate ensuite shower room, a TV and games consoles. The Great House is the place where people come together, and has an expansive outdoor terrace with hammocks and sofas. There’s a state-of-the art kitchen where our resident chefs prepare their famous dishes and a large dining table for everyone to gather round to enjoy their meal. There is also a fully-stocked bar where our team can make you your favourite cocktails, or you can just help yourself! For a bit of fun there’s also a snooker table, piano, lots of comfortable sofas and cushions, an entertainment system with a large range of CDs and DVDs, and guest computers with internet access. Up on the roof you’ll find a cosy four-person Jacuzzi – perfect for sipping champagne as you watch the sun set. The Beaches There are plenty of places to lie on the beach and enjoy the sea. Main Beach is where most of our water activities are based and where you will find the Tennis and Beach Pavilion plus an aqua-trampoline anchored to the sea floor. Turtle Beach is a more peaceful palm-fringed beach, with hammocks hanging between the trees. There are many other places where guests can find a peaceful spot to relax and the more energetic can take the two-hour walk around the island to view the flora and fauna. Water Activities We have a large selection of state of the art equipment, enabling us to provide guests with the opportunity to try kite-surfing, sailing, windsurfing, water skiing, kayaking, power boat trips and plenty more. We also provide snorkelling equipment for those who want to go out and blow some bubbles with Necker’s underwater wildlife! The watersports building is located right on the main beach and not only is it a perfect place to find all the water toys

Necker Nymph, the world’s first aero submarine

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HIDE AWAY | BF Bali cliff

Sushi canoe

you need, but it is also somewhere to take it easy and enjoy the views. There is a decking area with chairs for spectators and even a hammock so you donâ&#x20AC;&#x2122;t have to be involved in the sports to come down and join the action. Not only do we have plenty of equipment in a fantastic location, but we also have highly qualified instructors who are all very eager to give you the chance to try all the sports that we have available. The Pools The Pool Pavilion has one of the most stunning pools around. This is located at Main Beach and can be accessed from both land and beach sides. There is a swim-up bar off the freeform infinity pool complete with rocks in the pool where guests can sit and enjoy a drink plus a huge Jacuzzi right on the beach with space for more than 20 people. Within the pool complex is our thatched Crocodile Pavilion, complete with a large solid teak crocodile table where guests can be served fresh food from the Pavilionâ&#x20AC;&#x2122;s gourmet kitchen. There is also an infinity pool at the Great House and a private pool shared by Bali Lo, Bali Buah and Bali Kukila. Bali Hi, Bali Cliff & Bali Beach all share a plunge pool. Beach house tennis courts

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Tennis Also located in the Main Beach

area; here guests have access to two floodlit courts. Equipment is provided, although enthusiasts may wish to bring their own. We also have a professional tennis coach who is normally resident at Necker for those who wish to perfect their game and also arrange tournaments. Food & Drink Fine food is the highlight of any guests stay and our rates are fully inclusive of all food and beverages, including champagne. Our wonderful chefs prepare food that we have become famous for and it is up to guests whether they want to dine on lobster and caviar or a Sunday roast. Dining can be formal or informal, inside or outside, themed or traditional or a mixture of everything. We stock a fine range of international wines, top quality spirits, international beers and excellent house champagne. If you would like us to ship in something special, simply give us plenty of notice (generally there is no extra charge unless the item is particularly rare or extra shipping is involved). No limit is placed on the amount of food or beverage consumed and guests are encouraged to treat Necker like their own home, therefore they are welcome to help themselves to anything they want, any time. BF

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BF | EXTRAVAGANCE

Christmas gifts

Isabella Islay Whisky When the Luxury Beverage Company of the United Kingdom released Ruwa a few years ago – an opulent beverage, immaculately presented and priced at $5.5 million – it definitely turned heads. Not least of all, because it’s a non-alcoholic drop. Within a short time, they turned their attention to the alcoholic variety, unveiling Isabella’s Islay, the world’s most luxurious whisky. At the time released, they claimed it to be the most expensive beverage product in the world. The Isabella’s Islay whisky is available in two editions. The Isabella Original retails for $6.2 million, and flaunts over 8,500 diamonds, almost 300 rubies and the equivalent of two bars of white gold all covering a fine English crystal decanter and the Very Old Single Malt cask

strength Islay whisky inside. Most impressively, each individual Isabella Islay is handcrafted to the buyer’s liking. If you’re looking for something a little more affordable, but would still like to sample the goodness inside, there is the Isabella Special Edition, which retails for £450,000 ($740,000). It boasts the finest British craftsmanship in crystal, white gold and diamond lettering. The whisky inside both the editions is also available in refills. On the launch, Luxury Beverage Company said, “This product was crafted to take the whisky and beverage market to a new level for the first time combining premium whisky and finest crystal with gold and diamonds encrusted by the most respected jewellers in London.”

Collect and invest They say advice doesn’t come cheap and they must have been referring to the book Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor by Seth Klarman. If you want to buy yourself a holiday present, or know someone really special who could benefit then this book could definitely be an impressive addition to the bookshelf. All you have to do is fork out between $1,979.95 to $2,399.99. If you want to go the rustic used look, Amazon has them for approximately $989.99. According to some Amazon comments, it

is one of the most-stolen library books. The reason is that it is a collector’s item. It has been out of print for about 20 years and very few copies were printed in the first place. Taking its title from Benjamin Graham’s often-repeated admonition to invest always with a margin of safety, Klarman’s ‘Margin of Safety’ explains the philosophy of value investing, and perhaps more importantly, the logic behind it, demonstrating why it succeeds while other approaches fail. The blueprint that Klarman offers, if carefully followed, offers the investor the strong possibility of investment success with limited risk.

A watch on your finger Those in the jewellery game will happily tell you that nowadays a watch is rarely worn to tell the time. With mobile phones, computer screens and even the humble desk phone proudly displaying the time, a watch is now being sold as much as a piece of fashionable jewellery as it is a practical time piece. And with the advent of the phone watch to be worn on your wrist (a la Maxwell Smart or James Bond), you almost have an all in one scenario. If you’d like to take that a step further, you

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may be interested in getting your fingers on a Ring Clock. Two years ago, the concept was announced with great interest, and now – through the modern trend of crowd-funding – you can have one for yourself. Sure to be a genuine talking point, the Ring Clock has three rings that rotate separately, displaying the hour, minutes and seconds. An indicator ensures that you put the ring on properly, and the current time is highlighted. Never be late again, or if you’re going to, at least be fashionably so. BF

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volkswagen.com.au

Why drive anything else?

The new Golf. There are plenty of cars on the road. But there’s only one World Car of the Year. Completely redesigned, the new Golf sports a roomier interior, more driver assistance systems, and BlueMotion Technologies as standard. And those aren’t the only reasons it’s leaving the competition behind – thanks to plenty of torque and tighter handling. There’s even the peace of mind that comes with Capped Price Servicing*. Find out more about the new Golf at volkswagen.com.au

*Capped Price Servicing is available at participating Volkswagen dealers on New Golf manual and DSG models first sold by an authorised Volkswagen dealer on or after 27 April 2013. Capped Price Servicing applies to the first 6 standard scheduled services of your vehicle which are scheduled to occur at every 15,000 km/12 month interval (whichever occurs first). Exclusions and conditions apply. For details on pricing, items not included in the capped price and for full terms and conditions please see volkswagen.com.au. Volkswagen Group Australia reserves the right to at any time modify or discontinue the Capped Price Servicing program.

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