ISSUE 135 - APRIL 2016
BUSINESSPLUS NEWS AND COMMENTARY FOR EMA MEMBERS
Pick your LED light colour from 16 million READ MORE: PAGE 30
MORE STORIES Page 6: Council jumping the gun Page 8: Justifying IT spend Page 12: Auckland Mayoral candidate Phil Goff on business Page 15: OSH: company policy just the beginning Page 24: Pricing your whole business
“THE BEST WAY TO DEAL WITH ANY EMPLOYMENT RELATIONS MATTER IS WHEN YOU KNOW THAT YOU ARE ON THE RIGHT TRACK, FOLLOWING THE RIGHT PROCESS. THE EMA SUPPORTS AND COACHES MEMBERS, LIKE US, TO BE PROFESSIONALS LIKE THEM” Marilou Cuison, Human Resources Manager | PAK’nSAVE Papakura
Do you need help with restructures, union negotiations, personal grievances or other staff issues? LET AN EMA CONSULTANT HELP YOU. Visit ema.co.nz or call 0800 300 362 to find an EMA consultant near you.
BUSINESSPLUS is published by The Employers and Manufacturers Association (Northern) Inc (EMA) EMA is the major shareholder of national lobby group, BusinessNZ. EMA head office: 159 Khyber Pass Rd, Grafton, Auckland, New Zealand Private Bag 92066, Victoria Street West, Auckland 1142, NZ Ph: +64-9-367 0900 Email: ema@ema.co.nz In Hamilton: EMA/ExportNZ Waikato 103 Tristram Street, Hamilton. PO Box 490 Waikato Mail Centre, Hamilton 3240. Ph: +64-7-839 2713 In Tauranga: ExportNZ Bay of Plenty Smart Business Centre, 65 Chapel Street, Bay Central, Tauranga, 3110. PO Box 13202, Tauranga Central, Tauranga 3141. Ph: +64-7-571 0600 AdviceLine: 0800 300 362 (in NZ) or 1800 300 362 (from AUS) or advice@ema.co.nz Phone 8am-8pm weekdays for information about employment and more, plus referrals to EMA Legal lawyers and your local EMA consultant in employment relations and/or occupational health and safety. Visit www.ema.co.nz for owner and staff training programmes, conferences and other events, employer guides and templates, manufacturer services, media statements and submissions, export development and more EMA contacts Chief executive: Kim Campbell Membership manager: Roger Carson External Relations manager: Val Hayes Advocacy and Industry Relations manager: Mark Champion Learning manager: David Foley Enterprises and Strategy manager: Mauro Barsi Head of Legal: Charlotte Hatlauf Industrial Relations and Safety manager: Paul Jarvie Finance and Technology manager: Paul Yeo Corporate and Building Services manager: Sheree Alcock ExportNZ manager: Catherine Lye
“To champion New Zealand business and help our members succeed”
On the cover... Bright Light was lucky to be a part of the creation of Te Ara I Whiti (The Lightpath) for pedestrians and cyclists in central Auckland City, providing Ingress Protection (IP)rated, coloured LED ribbon and assisting in the building of the LED light pillars: an ethereal magenta glow amidst the surrounding concrete jungle, says director Steve Marshal. Full story, p30.
Enterprises of all types and sizes belong to EMA for a variety of benefits: • The latest information and advice on everything to do with employing staff or managing contractors, and legal representation if employers require - at member rates; • A choice of 100-plus courses and tailored training options, plus specialist seminars and events on topics such as Lean practice and developing markets offshore through EMA’s Export New Zealand division – all providing opportunities to network; • Ensuring your voice is heard by local and central government, since our aim is to improve the environment in which your business operates.
Pick your LED light colour from 16 million READ MORE: PAGE 30
MORE STORIES Page 8: Justifying IT spend Page 12: Auckland Mayoral candidate Phil Goff on business Page 15: OSH: company policy just the beginning Page 24: Pricing your whole business
CONTENTS Commentary/news 5 6 8 9 10 11 12
EMA’s CEO Kim Campbell on: Strong but changing future for manufacturers Keeping regulators on their toes Proving the value of the IT team BusinessNZ CEO Kirk Hope on: Economic prospects are good Auckland city rail link: Construction disrupts city centre for years to come Callaghan Innovation: Making your ideas work 2016 Mayoral candidates series: Phil Goff, Auckland
Employment 14 15 16 18 20
Remuneration: Providing for departing CEOs Case law: New health and safety law – is your business ready? Employment Chat – Q and A: She’s leaving (I think)! She’s taking our data with her (I think)! I have to pay for maternity leave (I think)! Book it in now - Go Global is returning 26 May! Health and safety: the things we do to help you Employment changes this month
In business 22 23 24
EMA is yours
NEWS AND COMMENTARY FOR EMA MEMBERS
Page 6: Council jumping the gun
Photo credit: Monk Mackenzie Ltd.
19 Editor: Mary MacKinven, +64-9-367 0939, mob +21 636 089, email mary.mackinven@ema.co.nz Writer: Gilbert Peterson Designer: Ripeka Mikaere | Printer: MHP | Distributor: Rocket Mail Advertising sales: Colin Gestro, Affinity Ads, mob + 27 256 8014, colin@affinityads.com ISSN No. 1176-4953
ISSUE 135 - APRIL 2016
BUSINESSPLUS
Tax: Drawing the line: evading vs avoiding due tax Marketing: Easy ways to boost your website traffic via links Selling up: What is the business worth?
International trade 25 26 27
Manufacturing is doing well. Can we sustain it? Four countries and four opportunities Lessons in resisting temptation
Member profiles 28 30
Coastguard Northern Region: Volunteers - a force to be thankful for Ngatiwai Trust: Work ranges far and wide Bright Light: LED lighting burns ever brighter
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SuperTech conference – what the digital future holds
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+ Inside: TrainingPlus insert detailing April training courses, and more
We could tell you why it’s good to offer your employees Southern Cross health insurance, but kids like Brya put it best. Read about how Brya’s dad’s employer, Foster Construction, helped them by offering Southern Cross health insurance at healthybusiness.co.nz Call us on 0800 GET COVER or talk to your Adviser.
Let’s get a healthier team
“EMA invests in … hosting an interactive forum on the future of manufacturing, developing conferences such as SuperTech 2016 to help members be ready for the digital age, and building our state-of-the-art conference and learning centre. We are here to help our members succeed.”
CEO COMMENTARY By Kim Campbell
Strong but changing future for manufacturers With the US primary elections in full swing, and having been lucky enough to spend a couple of weeks in the States in March, I am fascinated by the rhetoric of both sides of the political spectrum: in particular, the focus on manufacturing. There is a strong mood, whatever your political persuasion, to bring those jobs back to the States. Trade is not so much a topic of discussion, but the domestic economy is high on the list. What does this mean for New Zealand? It goes without saying that the States is a well-resourced and fierce competitor which when mobilised will send ripples around the globe. The interventionist nature of the US means they are very good at gearing up around these types of issues, when they get serious about it. For us, this means we need to ensure we have a vibrant manufacturing sector, as this is a key component of our exporting framework. We will always struggle to compete in the US market on volume. For instance, trying to get a product into Walmart will be nigh on impossible. Often, the volumes required for sampling can suck up the capacity of the manufacturer for a couple of years, and that’s before they have even got in the door. We need to be prepared to walk away from producing products where scale like this is vital. Therefore, we need to be smarter. We need to concentrate on areas where clever design, innovation and automation add value. Manufacturing is not what it was 50 years ago. Today’s successful manufacturers are
smart and agile – pipe stacks are being replaced by iPhones. We need to continue to invest in ourselves and upskilling our workforces of today and tomorrow. Skills and education are becoming more important than ever, particularly when you consider that manufacturing jobs contribute twice as much to GDP as others.
Moving along
Just think how 3D printing is changing the way we make things. What sort of skills or capability do we need to build on now, to meet the needs of future technology? Our ongoing skills shortage needs to be addressed and as a nation we need to focus our efforts on areas where we create jobs and wealth. We know that technology is changing at a rapid pace, and we will struggle to stay ahead of what the next big thing will be. However, it is how we harness this momentum and adapt to these changes that will signal our success. That is why the EMA invests in providing different ways for our members to engage in these conversations. These ways include hosting an interactive forum on the future of manufacturing, developing conferences such as SuperTech 2016 to help members be ready for the digital age, and building our state-of-the-art conference and learning centre. We are here to help our members succeed.
“Today’s successful manufacturers are smart and agile – pipe stacks are being replaced by iPhones.” Think of the changes we have all experienced in the past decades. Remember when computer hard drives used to take up a whole room and needed climate control to function effectively. Nowadays, most of us walk around with one in our pockets – and sometimes we even use it to make phone calls. Think of the phenomenon of driverless cars; or the robotic cleaners now being used at Auckland airport; or how our car mechanics need to be computer-savvy today, in order to carry out the standard warrant of fitness. What this says is that manufacturing as a sector is a vital component of our economy and our future wealth. It is a vital export dollar earner, a significant employer and a key indicator of our future success. • Kim Campbell is the CEO of EMA. Email kim.campbell@ema.co.nz
BusinessPlus April 2016
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COMMENTARY By Alan McDonald
Keeping regulators on their toes The summer round of Member Briefings has just wrapped up, with nearly 2000 members attending the 20-plus meetings around the EMA region and tuning into the webinar. The Briefings are a great opportunity for the EMA policy team to hear about regional issues. It’s clear the implementation of the new occupational health and safety (OH&S) legislation early this month is front of mind for many EMA members. There was a good level of feedback on the pay equity discussions arising out of Government’s decision to park the “Terranova” court case and task a working group with devising a framework to help manage the complex issue of pay equity. EMA is on that group with BusinessNZ, union representatives and others, and progress continues. It’s going to be a complex negotiation but our approach is focused on ensuring individual businesses retain their rights to negotiate with their own workforces rather than Government introduce a form of national-scale bargaining. The new Employment Standards Legislation Act also raised some questions as it passed while the Briefings were underway. We’re analysing the impacts for members at this point, and will look to update you with key points from the legislation next month. Another issue that is clearly causing concern across the regions is Fonterra’s response to the very difficult dairy industry environment. Payout was cut to just $3.90 per kg milk solids during the Briefings but a number of members were seriously concerned with Fonterra’s decision to move to 60- and 90-day payment cycles for
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“Our campaign for that reform process continues to gain momentum as we are involved in several working groups looking at the need for total reform.” suppliers, while at the same time asking for a cut of 10 per cent across the board to suppliers’ invoice costs. The change in payment cycles for invoices is causing issues for our members who supply services to Fonterra while also making their own payments on the more traditional 30day New Zealand business cycle. Several also pointed out the 10 per cent cut was greater than their existing margins. Perceived poor communication from Fonterra and a lack of responsiveness to queries was not helping allay members’ concerns.
Busy period for key submissions We have had a busy month writing submissions, taking part in interviews and appearances before Auckland Council. This activity has been to oppose a revamped Transport Levy in Auckland,
“At some point our mayoral candidates in Auckland might want to stop to consider the costs behind some of these promises and what the city might better spend the money on, that is if the city had the funds in the first place.”
asking for reform of the Resource Management Act (RMA) to ease difficulties with urban planning and commenting on further proposed changes to the RMA. The EMA appeared before the bulk of Auckland’s Council at a stakeholder consultation session on Auckland’s Annual Plan ( the budget) where we opposed proposals to force businesses in the city to carry the majority of the cost of the three-year temporary Transport Levy. Businesses currently pay $183 but the new proposals could see all businesses pay up to $407 or in the worst case proposal, costs could rise to beyond $100,000. The EMA argued forcefully for the status quo as business has agreed to a three-year fixed cost and could not accept a change in the rules just a third of the way through the “contract” with Council. Council seems obsessed with finding new ways to squeeze more money out of existing groups of ratepayers rather than using its own balance sheet and assets to better effect. Squeezing business and other ratepayers and changing the rules in mid-stride can only lead to further erosion of trust in Council and diminishing support for future Council initiatives. EMA has asked in both verbal and written submissions to the Productivity Commission’s investigation into Urban Planning, for total reform of the RMA and the associated planning Acts (Local Government Act and Land Transport Management Act). It’s needed to create new planning and environmental legislation that actually supports and enables rapid growth. The RMA just does not cope with growth and is a handbrake on
economic development, especially when linked to the difficulty it creates in providing critical infrastructure for both business and residential growth. While welcoming the proposed amendments in the RMA Amendment Bill which will streamline process and provide some national guidelines for implementation of the current Act, the EMA would still prefer the Act, which has been amended more than 170 times since 1992, was totally reformed. Our campaign for that reform process continues to gain momentum as we are involved in several working groups looking at the need for total reform.
Moving a port The promises keep coming out of the Auckland mayoral election campaign, with the latest new arrival being a return to the proposal for an Auckland waterfront stadium, which pre-dated New Zealand’s hosting of the Rugby World Cup.
The new stadium would be built on port land with the port moving “somewhere else.” At some point our mayoral candidates in Auckland might want to stop to consider the costs behind some of these promises and what the city might better spend the money on, that is if the city had the funds in the first place. The candidates may also want to consider the outcome of the current Council-mandated Ports Future Study Group. The Group is now considering a short-list of port location options, one of which is the port remaining where it is.
Forums opened up to all members Members may be aware of our regular forums about policy and issues for employers and manufacturers that help the EMA shape its policy direction.
These have recently been opened up for members to attend on issues of interest to them. This year we’ve already hosted: • WorkSafe NZ CEO Gordon MacDonald, • Minister for Women Louise Upston discussing pay equity and equal pay issues, and • Futurist Roger Dennis on his view of the trends and issues emerging in manufacturing as increasingly sophisticated technology takes root across the business spectrum. Access to these forums is free to members, with invites included in regular EMA marketing emails and in the fortnightly e-report newsletters. If you see a topic that interests you - for example, our early April Policy Forum is on transport and freight issues in Auckland - then please register and come along.
• Alan McDonald is policy director at EMA. Email alan.mcdonald@ema.co.nz
BusinessPlus April 2016
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“Show me any major ERP or CRM implementation that was built in New Zealand in the late 1990s or early 2000s and is still running today, and I will show you technical debt consisting of…systems that drive the business decisions rather than the reverse…”
COMMENTARY By David Spratt
Proving the value of the IT team I had lunch with an old friend last week and he raised the issue of technical debt: the notion that complexity breeds complexity until a business’ IT systems are a burden rather than a benefit. The realisation came, like a bolt from the blue, that this was the reason my beloved IT industry had moved from being creative and savvy to being seen as a dull cost centre, distrusted and feared by many businesses and their management. That sounds harsh perhaps, but why else have we seen the chief information officer (CIO) - a key executive team member in the 90s - relegated to the IT manager, reporting instead to finance? Technical debt got us here. So what am I talking about? This is a typical scenario: Every three years the CIO goes cap in hand to the chief executive (CEO) asking for more cash to stay “supported”. There is no real value proposition. The CEO agrees to the absolute minimum, corners are cut, decisions deferred and quick fixes are implemented. The business keeps using the systems, and users comply while under their breaths all swear never to invite the geeks to another Christmas do. Technical debt is repaid with sullen compliance and decreasing budgets. So how has this arisen? Complexity, cost, and increasing competitive inertia is how. IT systems have been built incrementally, one update at a time, and we have added feature after feature with little or no business value. Systems have become more complex, problems that don’t exist are solved for clients and staff who don’t care. Our IT systems have become so unwieldy and complex that change, no matter how small, is greeted with a project plan, budget forecast and endless handwringing over:
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· “Business risk” (translation: IT is too scared to change anything lest the whole spider’s web collapse);
• •
· “Security” (translation: complex systems can only be kept safe by denying access to non-geeks); · “Privacy” (translation: data is entrusted only to an anointed few); · “Sovereignty” (translation: if it wasn’t built here it can’t be trusted). Naturally all this can only be solved with huge amounts of money and time, none of which is forthcoming because, frustrated by it all, the CEO assigns a finance team member to address the need for change. The result?
Analysis entrenches “technical debt” After six months of careful analysis the chief financial officer returns to the CEO with a statement like: “We can try to change but the risk is enormous; the time and costs ill-defined. I suggest we put off major changes for at least two years, and in the meantime upgrade the most ancient of our servers, applications and network security devices.” Translation: “We are stuffed. Our IT providers and their friends in the IT department have our nuts in the wringer, there is little or nothing we can do about it except minimise the damage by cutting our budget.” Does that sound too strong? Show me any major ERP or CRM implementation that was built in New Zealand in the late 1990s or early 2000s and is still running today, and I will show you technical debt consisting of: • Bloated software and clunky reporting; • Excessive maintenance and service
•
charges; Systems that drive the business decisions rather than the reverse; A cost to upgrade or exit running into millions of dollars and years of pain; Proposals to change met with a jaded cynicism: “We spent massive time and money before and what did we get?!”
So while our established businesses face cost and complexity to the extent where nothing can move without huge pain and risk, out of left field comes the modern, nimble, aggressive and connected newkid-on-the-block-competitor. These guys have built businesses from scratch in less than a year. They have grabbed share across the industry while being smarter, more customer-focussed and more cost-effective. They use IT for strategic advantage by using world class services at a fraction of the cost of old-school computing. Don’t believe me? Consider these examples: • The recording industry: Meet Apple and Spotify. • Video rentals: Meet Netflix. • Everyone: Meet Trade Me. • Camera film, local bookshops, photo developers and second hand shops? Meet oblivion. Whilst technically-indebted businesses struggle with falling sales, margins and ever more demanding customers, the IT department can’t or won’t address the issues because of “business risk, security, policy, sovereignty and privacy concerns”. That is of course unless the business agrees to spend money it doesn’t have, on an outcome it doesn’t trust, over a time period that is uncertain…. What can the CEO do? See BusinessPlus next month (May 2016 issue). • David Spratt is Director of ICT at Total Utilities. Email david@tumg.co.nz.
BusinessNZ COMMENTARY By Kirk Hope
Economic prospects are good “The economy is in trouble, and it’s all dairy’s fault.” That is the most common complaint I hear today. The drop in global dairy prices has sparked a bit of pessimism. Commentators are calling out the dairy industry as an obstacle to a healthy economy. It’s right to be concerned about conditions facing the dairy industry, but the complaint doesn’t fully represent what’s going on in the New Zealand economy. The economy has much better prospects than that criticism suggests. Our GDP growth - a bit below 3 per cent - is better than in most developed countries: the current rate of growth in the US is 2.4 per cent, in the UK 2.2 per cent, Germany 1.7 per cent and Japan 1.6 per cent. Our growth comes from a lot of sectors: tourism, construction, manufacturing of all kinds, international education, ICT, services, oil and petroleum, and a full range of primary industries. We have a broad-based economy, not as devastated by the drop in dairy prices as might have been the case a few years ago. It’s difficult for dairy right now, but the spirit and resilience of businesses in the industry is outstanding, along
“We have a broadbased economy, not as devastated by the drop in dairy prices as might have been the case a few years ago.”
with the understanding that long-term prospects are good. Meanwhile, other parts of the economy are performing impressively. Tourism has overtaken dairy as the country’s leading export earner. Large numbers of tourism, travel and hospitality operators are delivering great returns connecting with tourists and showcasing our beautiful country. The manufacturing sector is very strong. Food and beverage manufacturing – processing the amazing array of fruits, vegetables, meat, seafood and other desirable foods produced in provinces all around New Zealand, mostly for export markets – is a major earner. High-tech manufacturing is growing fast.
But wait, there’s more
Brilliant software and ICT products and services are being produced in several parts of the country, again mostly for export. International education tends to be an overlooked sector, but is also a major earner, involving many schools and tertiary institutions and communities. Many other enterprises in the services sector are creating value and earning wealth in the domestic and export markets. I also see many small businesses and start-ups that are innovative and exciting. They are the future for more growth and development. I’m privileged to be in touch with outstanding businesses all around New Zealand. I can see how their competitiveness, innovation and hard work are delivering New Zealand’s envied economic growth.
“I also see many small businesses and start-ups that are innovative and exciting. They are the future for more growth and development.”
So I believe there are good grounds for optimism and confidence. We also have a reasonably positive environment for business: stable policy settings; an education sector that is increasingly providing for the skills needs of business; and a relatively welcoming environment for investment – these are all helpful for future growth. Just as important, we are fortunate to have escaped one of the key mistakes made in other parts of the world in the aftermath of the global financial crisis. While other countries chose to expand their money supply with quantitative easing to shore up their economies, New Zealand instead opted for investing in infrastructure – roads and broadband - a far more growth-enhancing approach. Of course, the environment for business could be better. Corporate tax is higher here in real terms than in most other developed countries – business needs a tax cut. Significant change is needed to key laws like the Resource Management Act. Education for skills for enterprise could be improved. But the business sector is working hard and delivering growth, and prospects are good. • Kirk Hope is chief executive of BusinessNZ, of which EMA is the main stakeholder. www.businessnz.org.nz
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COMMENTARY By Alan McDonald
Construction disrupts city centre for years to come As works begins on the Auckland City Rail Link (CRL), EMA members in the city centre and those visiting the main downtown areas face serious congestion and disruption to both public and private transport options. Auckland Transport is suggesting more walking, cycling and public transport use to help alleviate downtown congestion but the flow-on effects from constrained access to Albert St are already being felt all over the downtown precinct. Even relatively light traffic flows over the weekend are facing serious delays on Queen and Albert Streets and the linking streets of Wellesley and Victoria Streets. With major building projects also scheduled in the area, particularly the new Downtown Centre, this constrained access
Enabling works construction areas
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to the city and lengthy delays are expected to continue for several years.
Upside downtown There is an upside with the CRL project enhancing capacity on the rail link by more than 50 per cent, an improvement that has already encouraged some large-scale employers to stay in the area because of the eventual enhanced public transport access. The CRL will also be critical in helping to manage access to the estimated 100,000 new jobs predicted for the city centre and fringes as more than 700,000 new Aucklanders are expected by 2041. The certainty provided by Government’s recent announcement to bring forward and confirm its financial backing of the project means that contracts for the early phases
of construction are going ahead with confidence, while contracts for the later construction phases can also go ahead. Shifting utilities underground is already underway in Victoria St while the cut and cover tunnel work begins in Albert St in May. Enabling work for the tunnels out of Britomart transport centre and under the new Downtown Centre (as depicted below) are also underway while the main tunnelling work from Wyndham St to Mt Eden is expected to start in 2018. Around 50 per cent of all current bus departure points are having to be shifted while Albert St will be reduced to single lanes, with buses taking priority. Predictions for congestion in and around the city centre add weight to the argument for the CRL’s completion. Considering the funds already spent on rail line double-tracking, electrification and new carriages across Auckland City, a project to fully maximise the capacity of the system is a logical next step.
Making your ideas work In this first article from Callaghan Innovation, you can read how it operates to support New Zealand business. In the following months’ articles you can read their client case studies.
the venture capital community, industry associations, local industry and global industry experts specialising in multiple industries and sectors.
Callaghan Innovation has been helping Kiwi businesses make their ideas happen for three years. How can it help your business?
Through Global Expert we can connect you to innovation experts and resources that will help boost your R&D.
Callaghan Innovation was formed in 2013, combining the research and development (R&D) capability of Industrial Research Ltd with parts of the Ministry of Science and Innovation to form an organisation which supports businesses to succeed through using technology.
Technology and product development
The organisation is well known for providing R&D grants, but in fact Callaghan Innovation provides a range of other services which support hundreds of businesses every year to turn a good idea into a thriving business. Below is a small taste of what being a Callaghan Innovation client can mean in terms of support, advice and access to capability to succeed as a 21st century business.
Access to experts We identify the expertise you need, and connect you with our national and international networks. Callaghan Innovation can introduce you to like-minded businesses, provide you with access to shared facilities and use of our partnerships to help you take your idea to commercial reality. We work with New Zealand Trade and Enterprise, economic development agencies, business incubators, universities, polytechnics, Crown Research Institutes,
Not every innovative business can support an in-house R&D team. With hundreds of researchers in diverse fields including data analytics, we can help take an idea from concept to commercial reality with tailored R&D solutions. Whether it’s help with lowering your cost of production or managing changing technologies – the end-to-end support provided by our experienced advisors, researchers, scientists and engineers will help you identify each step to commercialise your idea. We can help you develop your components, products, processes and technology by applying or adapting existing technology, or develop your own ground-breaking research – we have the facilities and expertise to help you research, develop, test, measure, analyse and calibrate your products – from proof of concept to commercialisation.
increase customer satisfaction.
Business collaboration Sometimes it takes a business to help a business. We work with hundreds of innovative businesses so we know the opportunities there are for your business in targeted projects with other businesses, industry associations and research organisations. We’ll provide you with every opportunity to collaborate with other businesses for maximum return: by reducing costs, solving common industry problems, joining missions to international events, visiting world-class facilities, or widening your personal networks of industry contacts. A problem shared is a problem halved. We’re a mix of entrepreneurs, practitioners, scientists and specialists using real world experience to connect you with other world class innovators and rapid adopters of new ideas, standards and ways of thinking.
Grants And of course, we offer a range of R&D grants to add scale, depth and return on your R&D investment.
Innovation skills
Our R&D grants are structured to meet your business needs - whether you’re a young start-up, an established R&D performer, or wanting to bring students on board to assist in your R&D activities.
Having an idea is one thing; knowing how to grow, protect and profit from it is another. We offer a range of programmes, training and workshops to help your business improve performance, eliminate inefficiencies and
When we know what you need, we connect you with the right funding. Visit callaghaninnovation.govt.nz or give us a call on 0800 422 552.
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COMMENTARY
2016 Mayoral
candidates series: Phil Goff 2016 is local body election year - is this important for business? Yes, and there are two key reasons why, says BusinessNZ chief executive Kirk Hope.
The elections are important to ensure any local government policy does not reduce the capacity of any region to do business, or affect its attractiveness as a place to do business. Also, voting is important to make sure the links between local and central government, particularly in infrastructure, are as strong as they should be.
BusinessPlus is showcasing key contenders for mayor in the main cities where our members are located, in the editions leading up to the local body elections on October 8. Candidates can register for election up till August 16. First up, we report the responses to our questions from Auckland mayoral candidate Phil Goff (62), who is the Labour Party MP for Mt Roskill, living in Auckland’s Ardmore/Clevedon area. Q1. What are your views on how the Resource Management Act (RMA) can balance business growth with environmental protections?
Outside the Act, delays and inefficiencies in court processes also need to be addressed. At the same time Council processes must be transparent and democratic, not opaque and bureaucratic. Business growth and environmental sustainability should be complementary not contradictory objectives. Q2. What are your views on Auckland transport congestion? Transport congestion is Auckland’s biggest problem. The Productivity Commission puts the annual cost of Auckland’s congestion in time alone at $1.5 billion and the NZ Council for Infrastructure Development, at closer to $3 billion. That is money totally wasted with nothing to show for it. The solution lies in a combination of things including the City Rail Link which will double the capacity of heavy rail. We need a light rail system which most modern cities have, likely to have to be funded through a PPP. We need more busways, and cycle and walkways in particular aimed at allowing kids to get to school safely without being driven, and improved roading. The key is where the funding comes from. Rates cannot fund infrastructure and there are prudential limits on borrowing. It will need to involve some form of road charging and greater commitment from central government and to examine the feasibility of local government bonds. Q3. …on the future of Auckland’s port?
The RMA must allow for efficient processing of consents and we should reform mechanisms which unnecessarily obstruct measures to address housing shortages and affordability.
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The results of the Ports Future Study may be instructive but the study suffers from too little time and resourcing and lack of central government involvement necessary
to consider a regional or national strategy. The perspective has to be long term, over 50 years rather than a stop-gap solution. I am opposed to expansion of the Port further into the harbour. Sydney’s solution was several decades ago to move its port from the CBD to close to the airport. My preference, if it proves feasible, would be to move the port, freeing up 77ha of the city’s most valuable land and reducing inner city and motorway truck congestion. Q4. …on the business differential? I want to consider the arguments around where the balance lies between residential and commercial rates. Q5. What are key issues you would like to progress or change that will enhance business and job creation? Business and job growth is critical for advancing Auckland’s prosperity and wellbeing. Big growth areas for the future are in the service sector and high tech industry. I think Sir Paul Callaghan’s vision of making Auckland/New Zealand a place where talent wants to live is the correct one. It parallels KPMG’s thinking around “magnet cities’. Auckland can attract talent by being innovative, creative and entrepreneurial. It should be a place of learning tourism, events and culture. It needs to tackle the problems of congestion and housing affordability. The city needs to be business-friendly and the Mayor can play an important role in promoting the city to the world to enhance trade and investment.
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The real knockout blow comes if you are late paying or do not pay provisional tax. IRD will charge you late payment penalties of up to 20 percent per annum and interest of 9.21 percent. If there is a chance that you might struggle to pay your 7 May provisional tax, or are thinking about using your overdraft facility, there is an IRD-approved method that can give you some much-needed breathing room. You can put in place an arrangement with Tax Management NZ (TMNZ) to defer payment of 7 May provisional tax to a time that suits you, without incurring IRD late payment penalties and interest. Rates start from lower than the floating mortgage rate and the arrangement does not affect existing lines of credit. Approval is guaranteed.
How it works Say you wish to defer a $10,000 provisional tax payment due on 7 May for six months. You would pay TMNZ a one-off, taxdeductible finance fee, which is based on the amount tax required and when you wish to pay. In this instance, the fee would be $243*.
The provisional tax will be treated as if it was paid on 7 May 2016 once IRD processes the transfer, eliminating any late payment penalties and interest incurred.
have the right, but not the obligation, to pay the principal at the agreed upon date in the future. What happens if I do not require all the tax? Nothing. You only pay for what you need. There are no further costs. Am I able to extend the length of the finance arrangement? Yes, you can. You are able to extend the maturity date up to 75 days after your terminal tax date by paying TMNZ an additional interest component. The interest component is based on the new date you wish to pay.
About TMNZ Frequently asked questions How can I be sure this service is legal? TMNZ is an IRD-registered tax pooling intermediary and operates under legislation set out in the Income Tax Act 2007 and Tax Administration Act 1994. Can I use TMNZ to defer payment of GST or PAYE? No, you can only defer upcoming payments of provisional tax?
TMNZ is New Zealand’s first and largest tax pooling intermediary. Since 2003, it has helped more than 25,000 small and medium sized businesses save more than $70 million in IRD compliance costs. *The finance fee was correct at the time of writing, but is subject to change.
Why are there no credit checks? TMNZ holds the tax deposit as security. If you not pay the principal, it does not organise the transfer of the provisional tax to your IRD account. Why does this service not affect existing lines of credit? It is not treated as a liability because it is an option. It means you
BusinessPlus April 2016
13
EMPLOYMENT By David Shannon
Providing for departing CEOs This article continues our series on employment contracts for chief executive officers (CEOs). Two basic aspects need to be weighed up in the severance terms in executive contracts. In this issue I will discuss “golden parachute” provisions, which benefit the executive. In the next article (June 2016 issue) I look at “restraint of trade” provisions, which protect the employer. Parachutes are legal contracts between the executive and the company which can be invoked in certain defined circumstances when the executive departs from the company. Those circumstances include either involuntary redundancy of the executive, or changes in the position such as his/her duties, responsibilities, authority or reporting lines that are so significant the job is fundamentally different - and generally lesser in stature. An important, but more difficult to define, function of the parachute is to enable the executive to depart if his/her position, while technically unchanged, is subject to hostility or other adverse managerial conditions in a changed environment.
Usually the company wants to be reasonably considerate and make the termination conditions reasonably cordial.
Golden parachute considerations The design of the “parachute” part of the contract depends on a number of factors, such as: 1.
Age of executive: This affects the executive’s ability to secure an equivalent position elsewhere after leaving the company.
2.
Length of service and company attitude: This affects any obligation the company may feel toward the executive, and reflects the employer’s desire to be generous or parsimonious.
3.
Level of the executive in the organisation: This relates to his/her established income and life-style and affects the opportunities of finding similar employment.
4.
Skills, education and experience of the executive: These have a serious impact on the executive’s ability to locate a suitable new position.
5.
Provisions already made through retirement gratuity or superannuation arrangements: These affect the financial security of the executive. Golden parachutes are generally in addition to these arrangements.
Dismissal outside the standard provisions of the employment contract may also serve to trigger the parachute. Depending on how the contract is written, the parachute provides the executive with a gentle landing after departing from the company, usually through a lump sum payment and possible other benefits such as medical coverage and continued use of the company car or office facilities for a defined period.
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The most “golden” of parachutes in New Zealand have provided three years’ salary with continued use of a car for two years, and liberal access to company offices and facilities for the first year. However, a parachute of this calibre would be the exception. In view of the recent mobility of executives in New Zealand, with correspondingly shorter average tenures, the typical parachute payment would be in the order of one year’s salary, with two years being given mainly in recognition of long service or other conditions. The executive would also be allowed to use a company vehicle for three to six months, possibly with an option to purchase it at a discount at the end of that time or until taking up a new job if that occurs first. An executive below top management level would likely receive a “tin parachute” of one, two or three months’ salary in lieu of notice, and little else. If the parachute is to be exercised voluntarily by the executive, there is generally a window or specified time frame in which to exercise the option. Parachutes are meant to respond to specific events, not provide an easy out for the remainder of a career. It is also not unusual for a contract to include a confidentiality clause relating to the terms of termination payments or arrangements.
6.
Intention of the parachute: Is it really a “safety net”, or merely an “exit of convenience”?
One other consideration must be kept in mind: no executive is priceless. That is, no executive should be considered so valuable that the parachute payment puts the company into financial strife.
7.
Ability of the executive to demand the special protection of a parachute: This reflects the overall value to the organisation.
• David Shannon is EMA”s remuneration consultant. Email advice@ema.co.nz
“The company should have ensured, by ongoing training and, most importantly, ongoing monitoring, that its health and safety protocols were being adequately adhered to by its relevant staff.”
EMPLOYMENT By Persia Templeton and Diako Ishmael
New health and safety law – is your business ready?
adhered to by its relevant staff. The above findings were considered by the Court to be “critical company failures”, and there were “obvious, practicable steps” that Affco failed to adequately appreciate and act upon. Sentencing is expected to occur this month.
A court case under recently-repealed health and safety law has demonstrated the no-nonsense approach that will be taken towards employers in the future as well. The case involved Mr Matahiki as an experienced night cleaner and member of the night cleaning gang at the Rangiruru works of Affco New Zealand (Affco). In August 2014 he suffered a serious workplace accident, when a hook on a moving chain impaled him. The hook carried Mr Matahiki for a short distance before his cries alerted workmates to hit the emergency stop button. WorkSafe New Zealand investigated the incident and charged Affco with failing to take all practical steps to ensure that its employee was not exposed to the hazard of the moving chain; that it had breached sections 6 and 50(1)(a) of the Health and Safety in Employment Act 1992 (HSE Act). This Act is repealed, and replaced by the Health and Safety at Work Act 2015 from April 4, 2016. The Court found that in this case, the incident was not a matter of employee causation, and Affco had failed to comply with its statutory obligations. In the District Court Tauranga, it was demonstrated that Affco had internal safety procedures in place, as well as external audits of their health and safety practices. Procedures in place included: • Workers undertook annual inductions, including tuition on company policies and procedures; • Monthly health and safety meetings were being held with the plant manager; • Weekly “tool-box” health and safety meetings were conducted by Affco’s
health and safety representatives; and • In particular, the night cleaning gang members including Mr Matahiki received specific health and safety training from time to time. The Court accepted that Affco’s health and safety processes, protocols and some of its practices were satisfactorily compliant with the HSE Act’s requirements, and that the company intended to provide a safe and healthy workplace.
Good but not good enough However, the further issue was whether Affco’s health and safety steps taken in this particular case were adequate. The Court’s key factual findings included the following: • That not withstanding the purported training, meetings and other reviews, the night cleaning staff did not fully follow the company’s training, as apparently taught and specified in its workplace instructions. • The night cleaning supervisor did not appear to know or recall many of the essential safety requirements or be familiar with the company’s safety documentation, and the health and safety representative displayed no greater apparent knowledge of those practices. Mr Matahiki did not know them. • The practice of detailing with the chains moving was unsafe, and contrary to the company’s clear instructions. • The relevant chain, and its associated machines, should have been appropriately locked-out, as Affco’s then health and safety protocols dictated. The company should have ensured, by ongoing training and, most importantly, on-going monitoring, that its health and safety protocols were being adequately
Furthermore, the Court found that these circumstances illustrated the ongoing need for all employers to ensure that, beyond their training processes, scheduled and also random monitoring is required to ensure full and ongoing understanding and necessary compliance by relevant employees with all health and safety expectations, obligations and requirements when in the workplace.
What does it mean for your business? The Health and Safety at Work Act 2015 becomes law on April 4, 2016. While the above decision was under the repealed legislation, it is a clear example of the Court’s increased firming of its stance towards health and safety in the workplace, and the ‘no-nonsense’ approach that can be expected in the future. In light of the above circumstances, employers could take these two key, proactive steps: • Even if your business has existing health and safety precautions in place, these may not be adequate under the new law. At the very least, a close review would be wise. • Check whether your workplace health and safety measures monitor employees’ understanding of their own compliance – don’t assume and be caught out. And contact EMA to discuss what we can do for you. • Persia Templeton is a senior solicitor at EMA Legal. Email Persia.templeton@ ema.co.nz. Diako Ishmael is an intern at EMA Legal.
BusinessPlus April 2016
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Employment CHAT
She’s leaving (I think)! She’s taking our data with her (I th Q. One of our workers has resigned to go and work for a competitor I don’t want her to get access to any more of our IP in the weeks she works out her notice period. Can I ask her to leave now? – Seb
Dear Seb Yes you can, if you have confirmation from her directly about her plans. Don’t act on a hunch or a rumour, and don’t ask. You will need to refer to her employment agreement and look for a “payment in lieu of notice” clause. This allows you to pay the employee for the notice period without having her at work. This also requires her to return all company property and essentially end the employment relationship. On top of that you will owe her any unused holiday pay and benefits. Another alternative is to put the employee on “garden leave” if the employment agreement has a provision for you to do this. This allows the employee to remain on the payroll without having to be at work, and with no access to any company property at this time, depending on the wording of the agreement. During the period of garden leave the duties of trust, confidence and fidelity still apply. However, most employment agreements have an implied duty of good faith, restraint of trade clauses, non-solicitation and
ADVICE AND SUPPORT WHEN YOU NEED IT. Free call NZ 0800 300 362 AU 1800 300 362 Visit www.ema.co.nz
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BusinessPlus April 2016
because I will have to pay them maternity leave and have to replace them all the time! So, can I only invite men or older women to apply for jobs – why not?! The business will go under otherwise. – Ben
“Consider this: people with certain skills are likely to work for like employers, in other words, competitors, so you can’t prevent them doing that but the clauses mentioned above protect your interests if an employee does work for a competitor.”
Dear Ben I have good news for you. You do not have to pay a cent in maternity leave – the Government covers the lot. It’s called Paid Parental Leave and women have to apply through Inland Revenue (IRD) for it. The full 18 weeks of payments are funded and managed by IRD and the Ministry of Business, Innovation and Employment (MBIE). The paid period increased to 18 weeks from April 1 2016.
confidentiality clauses, which mean an employer and an employee still have duties to act in good faith towards each other even after the employment relationship ends. Consider this: people with certain skills are likely to work for like employers, in other words, competitors, so you can’t prevent them doing that but the clauses mentioned above protect your interests if an employee does work for a competitor. What you can aim for is a safe and trusting work environment that reduces the likelihood of employees stealing your assets – both tangible and intangible! You want them to respect you enough not to steal; and you need clauses in employment agreements (that we can help you draw up), for restraint of trade and handling confidential information. Q. I do not want to employ women under 40
You have to give the woman (or a man applying to care for the child) information and forms from MBIE. Your and the employee’s responsibilities are governed in detail by the Parental Leave and Employment Protection Act. But the employee has to give you three months’ notice of the due birthdate of the baby (and slightly different rules if adopting). Then you must respond within 21 days about their eligibility to take leave and if their job can be held open – and if not, why not, and that this is open for discussion. Secondly, it’s illegal to actually discriminate against people in job ads or pay levels or any
We’ve got a team of advisors, lawyers and consultants who’ll do more than take the case - they’ll help you build a workplace for the future. AdviceLine
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Employment CHAT
hink)! I have to pay for maternity leave (I think)! part of the employment relationship, on the basis of their gender or age. I’d like to assure you that not all women have babies, and not all will have them while working for you, and not all take lots of time off, and the law says you have to consider flexible working arrangements with any staff member for any reason (not just because they have children) if they request it – but you can offer it too. And…there’s more reassurance. Give us a call. Q. I’ve heard rumours that a valued employee is going to leave and move overseas. Can I ask them outright to clear it up and start planning for their departure, or encourage them to stay? – Roge
Dear Roge No, you would be breaching their privacy. And if it could be found that you were discriminating against them on the basis of a rumour, all hell could break loose. This is just one of those damn annoying things about being an employer. But you could consider rewarding them more highly anyway…as a potential counter to their leaving for whatever reason might be on their mind. An intention to resign is not considered to
“It’s called Paid Parental Leave and women have to apply through Inland Revenue (IRD) for it. The full 18 weeks of payments are funded and managed by IRD and the Ministry of Business, Innovation and Employment.” be a resignation, and neither is a resignation received through rumours. Until the employee communicates in writing that they wish to leave, it would not be considered a formal resignation. Unfortunately you have to treat them as an employee as usual, and not persuade them to leave, as that would lead to a constructive dismissal claim.
Correction: Easter holidays We must correct a typo in the March 2016 issue of BusinessPlus (page 17) where you will think we have led you astray! We said “Easter Sunday is one of those [statutory holiday] days for people who work that date too”. We left out the “not”. It is NOT a statutory holiday. Sorry! · By the EMA communications team in consultation with EMA Advice, and loosely based on real calls to EMA’s AdviceLine. All names are fictional.
The information in this article is a guide only and not to be used as business advice without further consultation. EMA members can start with our free AdviceLine team at phone 09-367 0909 or 0800 300 362 (within NZ), and 1800 300 362 (from Australia), 8am-8pm weekdays. Alternatively, email advice@ema.co.nz or read or print information such as the A-Z of Employing – a manager’s guide on more than 100 specific employment topics, at www.ema.co.nz
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BusinessPlus April 2016
17
Gary Bolles
Diane Wang
Jacqueline Smart
Hon Todd McClay
Book it in now – Go Global is returning 26 May! Kiwi exporting stars will be sharing lessons and advice with you on succeeding in overseas markets, at the Go Global conference - this year, at The Langham Auckland hotel on May 26.
Gary is also the co-producer of Closing The Gap, a new event focused on strategies for increasing economic mobility in the face of tech-driven disruption, in Florida.
Hear real stories from real exporting experiences – what works, what doesn’t, the benefits of collaborating, future-proofing, e-commerce and how to make online marketing and social media really work for your business.
Focusing on future-proofing and learning to love disruption, Bolles will share tips on how to: understand the impact of automation and globalization; develop a culture of risk-taking and learning from failure; and create a resilient and adaptive workforce.
Here are a few tasters from our confirmed speakers for Go Global 2016:
Diane Wang: Founder and CEO of DHgate. com
Family of Twelve:
In 2004, Diane founded DHgate.com. Under her leadership and guidance, it has grown over the past eight years to become China’s leading B2B e-commerce transaction platform for connecting Chinese small-medium enterprise suppliers with overseas global buyers.
This is a real story of collaboration: 12 dedicated New Zealand wine producers, bound by a common love for the craft of fine wine growing. Founded in 2005, the Family of Twelve’s vision is to nurture long term relationships with an emphasis on education, both at home and in their key export markets. Hear about how they work together exchanging ideas, sharing information and best practice and sometimes even secrets. How have they benefited from being part of a group collective? Gary Bolles: Co-founder of eParachute eParachute is a San Francisco Bay Area-based start-up focused on helping job-hunters and career changers.
Diane has also been an integral member of the APEC Business Advisory Committee since 2011, spearheading its cross-border ecommerce initiative. This global e-commerce super star will be beaming into Go Global live from China, to tell her story of where she has come from and where DHGate is going. Jacqueline Smart: Head of Planning at J Walter Thompson NZ J Walter Thompson NZ is a full service agency, with a team of experts who bring to life
whatever idea and action they can imagine, with their clients. Jacqueline is the voice of the consumer within J. Walter Thompson. As a senior figure within the research industry, she has spent her life understanding people and culture. She will be talking about next generation brand love. New research shows Millennials have a decidedly different take on what they value, compared with other generations. How do brands stay relevant for the new wave of customers? Hon Todd McClay: Trade Minister Hear from Ministeof Trade Todd McClay about what the Trans Pacific Partnership Agreement (TPP) really means for New Zealand exporters, and its progress. He will then chat with four New Zealand Ambassadors who will share the opportunities and help available in their markets. On the day there will be plenty of opportunity to ask questions and engage in panel discussions, plus plenty of networking opportunities during the breaks and after the presentations. Go to www.nzgoglobal.co.nz for the full programme and to register now - Early Bird tickets on sale till May 1.
SAVE THE DATE FUTURE FOCUS HOW TO KEEP AHEAD OF THE CURVE 18
BusinessPlus April 2016
@ THE LANGHAM, AUCKLAND
EMPLOYMENT By Paul Jarvie
Health and safety: the things we do to help you Bob Dylan’s song, The Times They are a-Changing, is apt for where we are as a country in regards to occupational health and safety (OH&S). We have a new regulator, WorksafeNZ, which is just over two years in place; we have a new Health and Safety at Work Act 2015 (implemented on April 4, 2016) plus a suite of regulations to implement the Act. But don’t worry: we are pleased to say much of this change is what EMA has advocated over the years, on your behalf. Back in February 2009 EMA developed a White Paper called “ACC Reforms” when ACC was undergoing a major reform process. This paper was distributed widely within the major Parliamentary parties and key Government ministers of the day, as well as the Department of Labour (as it was then) and ACC. This paper explored ways New Zealand
could better deliver both injury prevention activities and a range of ACC products and services. It proposed six optional models and we find that our Option 4 proposing an expanded Department of Labour (now WorksafeNZ) was fairly close to what New Zealand has ended up with. In brief, this model created a prime injury prevention provider with oversight of other agencies including ACC, Civil Aviation, Maritime NZ and Land Transport NZ. The model advocated joint ventures with these bodies to improve the use of funds as well as the messaging and effectiveness. It is pleasing that the new model fits well with what we advocated back in 2009, well before the Pike River mine tragedy that created the momentum for sustained and significant change in OH&S. Our message has been clear: Keep it simple but practical and allowing individual
companies to find solutions that work for them. An example of our prolonged advocacy is around the concepts of OH&S representatives and/or committees. We advocated that existing participation systems should be allowed to continue if they were working both for the PCBU (business entity) and workers. The new law does allow the status quo in a company if its representation systems are in line with the new framework. This is just one small yet important example. And we will continue to advocate on matters under our remit. Now we are starting to think about what the WorksafeNZ/ACC system might or could look like in the next 10–15 years. We will be producing a discussion paper on that. • Paul Jarvie is EMA’s Employment Relations and Safety Manager. Email paul. jarvie@ema.co.nz
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BusinessPlus April 2016
19
EMPLOYMENT NEWS
Employment changes this month The Employment Standards Legislation Act has been passed and comes into force on April 1, 2016. It amends New Zealand employment law to: • Extend paid parental leave to more workers and increase the flexibility of the scheme. In addition, paid leave is extended to 18 weeks. • Strengthen enforcement of employment standards; and • Address issues such as “zerohour contracts” and other unfair employment practices. The Employment Agreement must make clear agreed terms. The Act makes changes to the following legislation: • Employment Relations Act 2000 • The Parental Leave and Employment Protection Act 1987 • Minimum Wage Act 1983
• •
Holidays Act 2003 Wages Protection Act 1983
All the changes are covered in EMA courses such as “Managing Employee Leave” and in discussion in many other programmes. And from April 4 this year, the Health and Safety at Work Act 2015 comes into force. You can read more on pages 15 and 19. Get your copy of our refreshed Employer Guide - Health and Safety for your readyreference on all the issues in the Act. You can download for free the pdf of the 40-page, A5 booklet at www.ema.co.nz using your member password, or order a hard copy that incurs a charge. Please email advice@ema.co.nz for your copy now, or phone 0800 300 362 (within
New Zealand) or 1800 300 362 (from Australia).
Provisional tax doesn’t have to be scary. With Tax FINANCE you can delay payments to a time that suits you. Avoid more expensive funding options and keep cash in your business. For a better tax outcome visit tmnz.co.nz, talk to your tax adviser or call 0800 829 888.
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BusinessPlus April 2016
Find the middle ground. Keep your precious staff.
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IN BUSINESS By Joanna Doolan and Claire Dilks
Drawing the line: evading vs avoiding due tax
Also, business owners are all-too-often not inclined to document why they are doing something, but they need to. Ensure all that intellectual know-how sitting in your brain finds its way onto paper/screen, and make sure this is done at the time any transaction is being contemplated - not after the event.
“The difference between tax avoidance and tax evasion is the thickness of a prison wall”, said former British Chancellor of the Exchequer, Denis Healey. A more apt explanation is tax avoidance is often a difference in opinion on how the tax laws should be applied, whereas tax evasion is criminal and illegal.
The type of process the Commissioner will go through is outlined via a few examples in the document, and here is one summarised below.
The OECD estimates the shadow economy in New Zealand averages 12.2 per cent of gross domestic product (GDP). If GDP is $245 billion this would mean a gross shadow economy of nearly $30bn, and a loss to the tax take of around $8bn each year to the so-called cash economy where taxes are not paid. IRD estimated this at $7.1bn in 2011.
Let’s say shareholders sell their shares in a profit company to a loss company, with an option to repurchase the shares at a later date. The profit company continues trading and now pays a management fee to the loss company, which then uses this to pay for the shares. Surprise: this is of course considered to be tax avoidance, as the money for the sale of the shares is not taxable, and the profit company is getting a tax deduction for the management fee able to be offset against tax losses in the other company.
While it is easy to say paying people in cash gives you a cheaper price and they need the money, the harsh reality is these people are making it difficult for tax-abiding citizens to compete, by cheating the system and undercutting your prices. After that soap box moment, there are some more serious matters we need to address: where do you draw the line when it comes to deciding what is, or is not, tax avoidance? The Inland Revenue Commissioner has given us 133 pages to help us decide this very question – the IS 13/01 - Tax Avoidance and the interpretation of sections BG 1 and GA 1 of the Income Tax Act 2007 available at www.ird.govt.nz/resources. For tax geeks this is a well-written statement based on the relevant legislation and case law, and delves into the meaning of words and the Parliamentary contemplation test. For business operators, the likelihood is the tax avoidance interpretation statement may seem like illegible gobbledygook of no practical use other than a potential present
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BusinessPlus April 2016
too good to be true, so do not do it, or at the very least get a proper tax sign-off on it. Ask the question: “If there was not a favourable tax outcome, would I do this transaction?”
for your least favourite in-laws. Regardless, if the driving force for any action you are undertaking is a tax saving, you have to adopt the crouch, touch, pause, engage policy. Step back to determine whether you should be engaging in that transaction just to save a few dollars that will, however, give you a future headache.
Too good to be true? As business owners you should never engage in tax evasion unless you are lacking in retirement savings and would like to spend a good stretch of time locked away courtesy of the Government; even then, do not bank on this, as more often than not, tax evaders are getting home detention. If a transaction is giving you a tax benefit without costing you anything, then it is
In other words, this type of transaction smells. Despite this, sadly too many taxpayers have got themselves into this type of situation and are still smarting from the Commissioner throwing the book-plus at them. Most other situations are not as clear-cut as this. The one most likely to upset shareholderrun companies is the Penny and Hooper decision: the IRD made an edict that shareholder employees must distribute 80 per cent of the company profits to themselves. • Joanna Doolan is a tax partner and Claire Dilks is a senior tax manager at EY. Email joanna.doolan@nz.ey.com; claire.dilks@nz.ey.com
“By default, search engines work on the premise that if other people are finding your information helpful, then it must be good, so they will increase your ranking in that area.”
Easy ways to boost your website traffic via links In last month’s article (BusinessPlus, March 2016) we covered On Page Search Engine Optimisation (SEO) and the role it had to play in driving quality traffic to your website. This time we cover the role of Off Page SEO. SEO is a term used to describe the way that websites “speak” to search engines in a language they can understand, to provide the search engines with more detail about your website. Search engines utilise complex algorithms to determine where and how website pages appear. On Page SEO is the term for optimising the listing and ranking of your website on search engines within the boundaries of your website itself. Off Page SE Optimisation uses techniques that are off or outside the boundaries of your website pages, generally in the form of links, to increase your search engine rankings. Off Page Optimisation techniques include: • Link building • Video clips • Social networking • Blogs • Online articles • Social bookmarking links • Press releases online Search engines endeavour to bring the highest quality website search results and rankings to given criteria. Off Page SEO tends to indicate to search engines how useful the “world” views that particular website.
Website rankings improve with: Link building »» Get as many other websites as possible to link to yours. If you post an article or information that other people find helpful or interesting, they may post a
link from their blog or Facebook to your website, about that information, thus driving more traffic to your site. »» By default, search engines work on the premise that if other people are finding your information helpful, then it must be good, so they will increase your ranking in that area. »» An “endorsement link” from a wellrespected source or industry guru adds more kudos to your site as opposed to an “average Joe” linking to you. However, they need to be “natural links”, ie, with the user choosing to link to you. Video clips »» Video content may be practical such as how to install a kitchen, or may be more of an advert for your product. It brings the user “another level” of information where they can actually view the product in motion, doing what it does as opposed to just being an image. »» These clips can be loaded onto multiple channels such as YouTube, your website and Facebook. Google owns YouTube, so loading your video onto YouTube will also result in increased search engine ranking results. Social networking »» Facebook, Twitter, Instagram, Pinterest … the list goes on. Determine what social networks work best for your target market and get in amongst it! »» Ensure content is posted regularly, is interesting and accurate and that it has links back to your website.
IN BUSINESS By Rosina Webb
“The information needs to be newsworthy, high quality, relevant and timely to warrant a press release.”
articles on an article directory with a link back to your site. Bookmarking If users find your site appealing and informative, or they will want to reference it time and time again, eg, for tips or trends, they will “bookmark” your site, allowing them to return easily to it. Press releases online »» Any newsworthy information you have to release to the press via online sources should also be utilized via links to your site. »» The information needs to be newsworthy, high quality, relevant and timely to warrant a press release. »» Press releases have a large, influential audience; can add trust to your brand; and can enhance your expertise in your chosen field. Newsworthy press releases also tend to be spread virally. The search engines generally index them, so they are permanently stored inside the search engine’s database for easy accessibility to clients, potential clients, journalists, etc, whenever they choose to search for them. Combining both On Page and Off Page SEO is an excellent strategy to drive traffic to your website: not just any traffic, but quality traffic (people) who will be interested in the information you have on offer, and will tend not to bounce off your site.
Blogs Quality is key, in terms of the blogger being an industry expert, for example, and the information being relevant to the audience and accurate.
If you have the knowledge and confidence to take on board these strategies yourself – great! If you find the concepts a little complex, don’t be afraid to engage professional help from a digital/SEO specialist, then watch your traffic grow!
Online articles If you are a competent writer, or have a quality copywriter, publish industry-related
• Rosina Webb is founder and managing director of Energise & Associates. www. energise.net.nz
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IN BUSINESS By Mike Fokkens
Selling up: what is the business worth? In the last issue (BusinessPlus, March 2016) we covered briefly the key tasks required to prepare your business for sale. Now, we look in more detail at establishing the value of your business.
Also taken into account are the “barriers to entry”. This involves evaluating the degree of difficulty or barriers a competitor may face should they decide to establish a similar business.
Business owners sometimes have in mind a figure value for their business, but this can be inflated because of their emotional attachment.
Most businesses are valued on a “going concern” basis rather that the value of company shares, as purchasers are often reluctant to buy company shares for a variety of reasons.
On the other hand, many owners undervalue their businesses because they do not understand the technicalities of the various valuation methodologies and which one is the most appropriate for their specific business type. Experience has shown me that there is also a large percentage of business owners who do not know what their business is worth, or how to go about establishing its true market value.
The price of a business is usually made up of three components: intangible assets, tangible assets and stock. But other factors also come into play, depending on the type and success of the business. Generally, two or more of the following methods are used when appraising the value of a business: 1. Industry Ratios 2. Asset Based 3. Earnings Based 4. Market Based
The most accurate and effective way to establish the value of your business is to apply a combination of established valuation methodologies to establish the most accurate figure. This figure should then be scrutinised by comparing the theoretical value with current and historical sales information. This ensures that the valuation appraisal accurately represents what a purchaser will pay in the current market.
Industry Ratios The value of the business is based on its sales record compared with industry averages. This method is often used for small businesses and franchises where there is established data and track records from within a specific industry.
Profitability and risk are part of the valuation
A formula of multiples of weekly sales is sometimes also used.
Most businesses are valued based on a combination of assets and the cash surpluses generated, as described below. But the risk factor of the specific business is also taken into account and includes factors such as the degree of threat from existing or potential competitors, or from changes in technology or consumer trends and many other factors that may affect earnings or costs.
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Asset Based Where there is a history of low earnings or losses, the Asset Based approach is generally used. This method uses the value of the collective assets (both tangible and intangible) to determine the value of the business. Earnings Based Generally used for larger businesses, the
Earnings Based approach places emphasis on earnings rather than assets. There are various methods used with the Earnings Based approach including Return on Investment (ROI), capitalisation of earnings or earnings multiples. The Earnings Based value is determined by considering the level of return, ”industry average” multipliers on true earnings and the fair market value of tangible assets along with intangible assets. Market Based There will be certain instances where no amount of sound theory or application of complicated methodologies alone will suffice, and it is not uncommon that a willing seller and willing buyer will agree on a value that defies traditional appraisal methodologies. In other cases, the use of the traditional appraisal approach produces unrealistic values that have no bearing on market realities. It is vital that any appraisal overlays with relevant market data and multiples achieved in similar businesses “in the real world”. The appraised value is then subjected to the “sanity test”. Many factors affect the true market value of a business, including business sector, industry growth or decline, economic conditions, business cycles, interest rates, labour availability and a whole range of other influences. Valuing trademarks, brands, other intellectual property and goodwill is not always easy to quantify. Balancing all these factors with the book valuation of businesses establishes the true market value. In the next issue (May 2016): More detail on marketing your business for sale. • Mike Fokkens is a business broker at Link Business Broking Ltd (Licenced REAA08), email michaelf@linkbusiness.co.nz
International trade By Catherine Beard
Manufacturing is doing well.
Can we sustain it? Manufacturing in New Zealand remains in remarkably good shape as 2016 gets underway. This success is driven by a number of factors including: positive immigration; housing and construction activity (up by 2.5 per cent in the last quarter of 2015); buoyant consumer demand; and general confidence. New Zealand’s last quarter GDP growth at 0.9 per cent outperformed all the countries in the OECD and we are getting similar results in the monthly Performance of Manufacturing Index (PMI). So it’s a good place to be right now, despite the challenges in the dairy sector. Those who service this sector could take a leaf out of the book of the Gallagher Group, whose diversification of electric fence technology into the security market helps cushion the swings and roundabouts of commodity cycles in agriculture and exporting, helping spread the risk.
“The strategies the companies used to manage those intangible assets involved intricate revenue models, highly iterative quality assurance, collaborative planning processes and constant information sharing.”
I noted that in the latest statistics, investment in plant and machinery had reduced by 5.7 per cent. But that was down from previous quarter increases in investment when businesses were probably taking advantage of the high New Zealand dollar to improve their productivity with new kit. So while times are relatively good, how does a business ensure ongoing resilience? The New Zealand Pacific Economic Cooperation Council has recently released research that analyses how New Zealand companies compare to others worldwide. The research considers our integration into global value chains and networks, and takes a close look at what a few of our most successful exporting companies have in common. The two reports – on value chains and networks - are worth reading and can be found at nzpecc.org.nz. A few key points are outlined below. · While the companies that the Council studied differed widely, they all had in common intangible assets that were hard to replicate or duplicate including some form of intellectual property, processes that ensure high but constantly evolving quality, and trust relationships with all the people in their value network. The strategies the companies used to manage those assets involved intricate revenue models, highly iterative quality assurance, collaborative planning processes and constant information sharing. · When the firms were designing “value propositions” they all offered more than just the goods or services their customers were paying for. The firms enhance their offerings and cement relationships by
“The firms enhance their offerings and cement relationships by bundling up free services and information. Their constant innovation to keep pace with changing customer needs was another core attribute.” bundling up free services and information. Their constant innovation to keep pace with changing customer needs was another core attribute. · Talent-led innovation is always at the core of good performance and to attract and retain talent, leadership and good management skills are a must. Firms should be thinking about the pipeline of talent they need, before they need it, and if the market is not delivering, they should think of strategies to create their own talent pipeline. All the tertiary institutions I speak to would love to have better pathways to jobs for their graduates. · One of the positive findings from the Council’s report was that the small scale of our companies and distance from market need not be barriers to success – if companies adopt agile strategies to integrate into global value networks. All the firms they studied agreed that understanding the international value networks in which they participated was more important than building domestic scale. • Catherine Beard is executive director at Manufacturing NZ and ExportNZ, divisions of BusinessNZ. Email cbeard@ businessnz.org.nz
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International trade By Garth Wyllie
Four countries and four opportunities I have travelled for business to France, Sweden, the US and Thailand in the past six months, which is great for air points, but more importantly for the market knowledge and observations I have picked up in meetings with business leaders there. This is a summary of both the conversations and impressions I have gained.
France Most business leaders I met see opportunity for growth in the market but France is a highly regulated market, not only due to the broader EU compliance but also the complex registration systems and obligations on business. Interestingly those business leaders were quite comfortable with that level of regulation and found ways to work within it. I have seen an increasing willingness to speak English to assist travellers (business and tourist alike) and while locals appreciate the effort to speak French, it is not the barrier it was historically. This is not a market for the feint-hearted but if you can secure a key local distributor and show him a unique selling proposition (USP), France is open for business. There is a strong consumer trend to preferring locally produced foods and farmer’s market products; and a strong opportunity for organic and environmentally friendly products.
Sweden This is not an EU currency country so be aware of the impact on prices. Pricing for premium products was in many cases higher than in the EU for similar products when you did the exchange rate conversions. So price can be less of an issue. Business leaders saw the ability to grow
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and were less impacted by the immigration influx, so there was an expectation of full employment and higher incomes as a result. It is essentially a cold weather climate so summer-oriented products are not likely to sell well, but in spite of that, most Swedes enjoy the outdoors and traditions such as heading out to the hundreds of small islands that surround the coast over the summer break. New Zealanders targeting products around camping or holiday homes appear to do well, while those selling high SPF sunscreen struggle, for example! The general population is sophisticated and well educated so the best opportunity is in premium products that have a USP.
US You can supply Walmart and the like (low priced retail) as long as your price point is low enough but with a moving exchange rate that can be difficult from New Zealand. For most New Zealand exporters the opportunity is in the premium and in the US this is a significant market. My best experience of this was, when a business leader took me to a top restaurant in San Antonio, seeing the majority of the wine list comprising New Zealand wines - and all commanding premium prices. I sampled the local alternative and understood why! Breaking into retail and particularly high end retail in the US is difficult but not unachievable. The best method seems to be to get a sample or trial run across a limited range of stores and that does mean you getting on a plane and meeting the respective buyers. You have to be able to put up capital to literally buy your placement and if it works, the opportunity can be significant due to the scale. US businesses are open to New Zealand suppliers of services or business tools
but generally they like to see some local footprint to demonstrate commitment to the market. So the opportunity does have a cost. The biggest fly in the ointment for exporters with any form of chemical based products is California, which has taken a strong lead on environmental regulation.
Thailand We have a free trade agreement with Thailand that has largely gone untapped. There is scope for quality supermarket products, and for services. However, Thailand has quite a level of bureaucracy and unseen corruption that can impact on getting into this market. Research on your regulatory requirements is essential so you have the correct paperwork ready. It is a market of differences, with high end products no longer the bargains they used to be, and at the low end, a strong street trader market where haggling remains the norm. But to get into this latter market you may want to look at alternative channels such as direct selling to end consumers. Those wanting to place products in high end retail will have to pay to get a front-ofshop space for a limited time and similar to the US, this is an expensive exercise that can drain the capital from smaller businesses. Shoppers in the high end stores in Bangkok are mostly foreigners but are mostly locals outside the city centre, so price and place your product for your target market. There is opportunity for food and beverage products, however, a good distribution arrangement is critical to avoid passing through multiple layers of supply, affecting the final price. Service opportunities are particularly within the building sector, including in infrastructure. • Garth Wyllie is EMA’s executive officer manufacturing and industry groups. Email Garth.wyllie@ema.co.nz
“What started as innovative contract ideas to maintain business became a world-visible scandal, with damage potentially in the billions of dollars.”
International trade By Brendon Wilson
Lessons in resisting temptation Bribery and corruption are considered to be among the fastest-growing economic crimes reported by New Zealand companies. A recent report from PWC shows that, for New Zealand companies reporting fraudulent activity, the proportion experiencing bribery and corruption more than doubled between 2011 and 2014. It’s the fastest growth category of economic crime that includes the likes of asset misappropriation, procurement fraud, cybercrime, accounting fraud or money laundering.
What are bribery and corruption? Bribery and corruption can broadly be thought of as “unlawful inducement, either offer or acceptance, in cash or kind or other value, for personal or business benefit”. “Inducement” may involve gentle suggestion right through to aggressive intimidation. But if it is a benefit and could alter business possibilities, it is probably illegal – and once started will be very hard to stop. This culture spreads, and there is no easy going back, for individual or organisation. With a definition this broad, bribery and corruption can occur in virtually any part of an organisation, however, some high-risk areas are procurement processes, and the sales and distribution chains. When business is good and running profitably, this is when the guard may be down and the culture relaxed and vulnerable to bribery and corruption. But in fact evidence shows when times are tough and pressures are higher on individuals to perform, the temptations can become irresistible. Unfortunately, the temptation can lead to a corporate attitude which turns a blind eye, or even actively condones corrupt practice. Don’t let this creep up on you, on your organisation’s culture or your employees or agents. We strongly suggest that in
addition to a strong ethics and anticorruption policy, you look for the points in your business operation which offer vulnerable opportunity or temptation to take a “short cut to success”.
Cultural attitudes within AWB at pivotal times in this sad story must have enabled the eventual result that became a worldvisible scandal, with damage potentially in the billions of dollars.
Two large-scale international examples can indicate the size these problems can grow to. In later articles we will discuss smallerscale New Zealand cases.
The case of Siemens
The case of the Australian Wheat Board
In this well-documented bribery scandal, widely regarded as the greatest in Germany’s history, Siemens’ strong corporate growth strategy around 2000 may have led to some managers paying bribes to ensure meeting performance targets. Decentralised reporting obscured these practices, but some informed opinion holds that central corporate attitudes accepted their “necessity”.
The Australian Wheat Board (later AWB) was the government’s single-desk handler of all wheat marketing for Australia. Towards the end of the 20th century it managed to capture up to 90 per cent of Iraq’s wheat market, especially under But their losses to the UN’s financial reputation, profit, and trade sanctions investor values, against Iraq.
future opportunity
Between 2006 and 2008 various enquiries and court actions found Siemens’ managers had given bribes in many world markets totalling at least E1.3 billion, resulting in fines of E1.6 bn. Associated legal and accounting costs added a further, probably equal, amount to Siemens’ pain.
What started as and individual AWB’s innovative lives can never be contract approaches calculated. intended to resecure business In turning this corporate position around, against the threat of market loss, became at great cost, Siemens totally revised its a programme seemingly designed to structure and committed to successive circumvent international law and reward remedial programmes to change ethical local Iraqi administrators to the tune of attitudes. By 2011 Siemens seemed to have hundreds of millions of dollars in providing turned the corner. and delivering wheat to Iraq. Worse, some of the funds paid out in this way came But their losses to reputation, profit, through UN humanitarian funds under the investor values, future opportunity and Oil-for-Food programme. individual lives can never be calculated. After Saddam Hussein’s loss of Iraq, These spectacular examples represent UN enquiries then court actions began the high end of world corrupt practice, internationally and within Australia. but sadly are only a tiny fraction of the Individuals in responsible roles and worldwide problem. In New Zealand this senior management were the subject of level of illegality won’t occur, however, serious cases, some of which continue company attitude and vigilance is key, to this day. Other outcomes were the whether the stakes are high or low. dismantling of the single-desk role for AWB, the replacement of the main management, restructuring and then the • Brendon Wilson is a board member sale of the organisation to an international of Transparency International New corporation. Zealand. www.ti.org.nz
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MEMBER PROFILE
Coastguard volunteers
- a force to be thankful for A thousand volunteers are on hand just in the northern region of New Zealand to head out to sea to rescue people in trouble, and operate the Coastguard marine communications channels. That same number again are based around the rest of the country. Coastguard Northern Region, which recently joined the EMA, employs 20 staff to support its volunteers who are spread across 23 communities from Raglan to Houhora in the Far North, and east to Thames. In all, the service has 30 rescue vessels, two search aircraft and a dedicated Operations Centre based in Auckland’s Mechanics Bay. The Centre is where essential information is held and where search and rescue operations are co-ordinated. Chief executive Callum Gillespie says, “Our volunteers are an incredible asset for New Zealand. They’re everyday kiwis dedicating many hours preparing for, and saving, lives at sea.” The priority spend is to ensure the volunteers have the right tools to do their jobs safely.
Coastguard relies on subscription income (45 per cent) from its 21,000 members, along with funding from local and central government. Community partners such as Foundation North, NZCT and the Lion Foundation also contribute generously, and there is ongoing “support from some of New Zealand’s greatest businesses including New Zealand lifejacket manufacturer Hutchwilco and our vehicle sponsor the Giltrap Group.” A significant amount of staff resource goes into the training of new recruits – it takes about a year for a volunteer to reach operational crew member standard - and to continually upgrade the skills of other team members. That, and running high profile community safe boating programmes such as the “Old4New Lifejacket Upgrade” campaign. Most recently the team focused on raising people’s awareness of the risks associated with crossing a harbour bar. Callum recalls the emphasis on this occurred just as he started in the role a year ago. On the Thursday before Easter weekend a vessel capsized at the mouth of Manukau Harbour with the loss of one life and the rescue of two others. On the following Monday another two drownings occurred on the bar at Port Waikato.
Coastguard volunteers Kara Gribble (left) and Nigel Griffiths
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Coastguard’s “Raising the Bar” campaign responded to these disasters through a series of informal meetings in local communities to better prepare boaties to navigate
across harbour mouths - with some success, Callum says. “Last November three guys made it out alive (from an ill-fated crossing of the Manukau bar) because they had taken the time to check in with Coastguard and put their lifejackets on before starting their return. When their boat capsized we were able to start our search immediately and they lived to tell the tale because of the precautions they had taken.”
Our volunteers are an incredible asset for New Zealand. They’re everyday kiwis dedicating many hours preparing for, and saving, lives at sea. Over the past 12 months in the Northern Region the Coastguard responded to 1,971 calls for help and brought 4,381 people to safety. A total of 2,646 incidents occurred across the country in the same period. The big challenges for Callum are maintaining a culture of high performance across a geographically spread organisation and ensuring that the volunteers are engaged and equipped for success. Their work sees them liaising closely with search and rescue partners such as Maritime New Zealand, Police, Surf Lifesaving and the Westpac rescue helicopter. Callum says, “We want to make a success of being the Boatie’s Best Mate, so whether you need us urgently or for something less threatening, you can be sure we’ll be there for you.”
MEMBER PROFILE
Ngatiwai Trust work ranges far and wide Angeline Waetford is enjoying managing the sheer diversity and scope of the issues thrust before her daily, at the Ngatiwai Trust where she is acting chief executive. The Trust, based in Whangarei, represents 14 marae with some 7000 registered beneficiaries, located in the north west of Northland, extending from Whangaruru southwards to Omaha and Great Barrier Island. Angeline has many years’ experience as a chartered accountant, locally and in Australia. She recently moved back to the Trust’s area where her family has roots. “For me, from a chartered accountant’s background and spending a lot of time crunching numbers, learning how to deal with so many different people and across such a wide range of issues is a whole new experience,” she says. Angeline says she is constantly meeting and talking with people from all walks of life such as beneficiaries, kaumatua, business people, teachers, local council
Oceans Resort hotel at Tutukaka representatives and those with new investment proposals, who represent the whole scope of the Trust’s interests. Its responsibilities are wide ranging. The Trust employs 35 staff administering its commercial interests including fish quota that is leased out, office buildings in Whangarei, the Bland Bay camping ground, the Oceans Resort hotel at Tutukaka and an education organisation. Another department of two is charged with overseeing and advising on resource consents for significant sites in their tribal area. A further key Trust activity is issuing scholarships to qualifying applicants from amongst the iwi’s registered beneficiaries. Twenty to 30 averaging $500 in value are awarded each year to students undertaking tertiary study at university or Northtec, or for other post-compulsory education. Ngatiwai Trust’s education unit offers its
Angeline Waetford
own courses too, such as early childhood and youth suicide education. It’s looking at widening its business-related curricula, extending into hospitality, and working further with Northtec and the Te Matarau Education Trust. But the major challenge is dealing with all the different interests involved in the iwi’s Treaty of Waitangi claim. Angeline says the claim is acknowledged by the Crown and the iwi has a mandate to proceed but some claimants are opposed and are challenging their mandate. The iwi is navigating its way through the issues.
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BusinessPlus April 2016
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MEMBER PROFILE
LED lighting burns ever
brighter
Everyone knows LED lighting can be cheaper and more long-lasting than legacy incandescent or fluorescent options. Bet they don’t know it comes in millions of colours. The director of LED specialist company Bright Light, Steve Marshal, enthuses about the newer technology’s huge advantages, and the speed of change it’s undergoing. There’s much more to LED than just energy saving. Bright Light was founded by Steve’s business partner David Powley, a technical whiz; the company is growing exponentially due to their expertise and early entry (in 2004) to the market, with their exclusive focus on LED lighting. “LED is not like legacy incandescent lighting,” Steve says. “The things we can do with it are very different. We can subtly, or brutally, change colours - from the warmth of an incandescent bulb to the cold blue of fluorescence, from natural daylight to replicating moon light.” At the Auckland Zoo kiwis come out at “night” under this very moonlight for their unseen visitors to “ooh and aah” over them. Bright Light made that possible. Steve says the technology allows an unbelievable range of colour options: 16 million in fact. It’s possible to place the lights anywhere and achieve all manner of lighting effects hitherto not affordable. For example, Bright Light installed LED ribbon that illuminates the route of the new cycleway through the Auckland CBD. On offer are 82 different styles of the ribbon, from 10mm strip for an office wall or kitchen, or to create a wall of light.
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We can subtly, or brutally, change colours - from the warmth of an incandescent bulb to the cold blue of fluorescence, from natural daylight, to replicating moon light. The technology is used to light the hulls of big private yachts underwater for a fraction of what it used to cost, and at the highest quality. It’s used to light swimming pools underwater, and is a boon for lighting on board vessels of all types where battery recharging is an issue. Then there’s the opportunity to link it with solar-generated electricity for buildings of all types.
Cutting LED ribbon lighting
equivalent – but the incandescent lasts for one year compared to the LED’s 25 years. They can last for 50,000 hours, Steve says. Your living room may have 10 50W halogen bulbs racking up a bill equal to running a small heater all day. The LED equivalent requires just 10 7W bulbs, a saving of 430W. For the replacement market, Bright Light is currently launching an exact replica direct system to replace 12 volt halogen lights. New Zealand is running behind Australia on LED installations for new buildings, Steve says. Across the ditch energy efficient LED options are specified as the standard. Here they’re not, and since such things as lighting and carpets are the last things to go into new buildings they are often the casualties when budget constraints hit. A cheap legacy installation can be the result though it will cost far more to run and maintain over its lifetime, he says.
And this is just a beginning. The energy savings are “absolutely immense”, Steve says, but strictly on a whole-of-life basis. Whereas incandescent light creates 95 per cent heat and five per cent light, LED light generates 95 per cent light and just 5 per cent heat. However, an installation may cost two to three times more than a legacy set up. But the power savings and long life of the LED hardware will make a handsome return on the investment. For instance, replacing an incandescent bulb might cost $3 compared with $12 for an LED
Plus, there’s the aesthetic benefits, and LED is kind on the environment with no toxic heavy metals to dispose of. All these advantages are reflected in Bright Light’s growth. It’s “slowed” to 25 per cent a year. Three years ago the company had five staff, now it has 18 located at three branches. “And we’re happy to invest in training our people,” Steve says. Bright Light also runs a research and development facility and workshop where it designs and pre-cuts to order.
Correction To correct our article on The Pallet Warehouse in BusinessPlus (March issue, page 30): 90 per cent of its pallets are made from recycled wood, typically at an average cost of 40 per cent (not 75 per cent as previously stated) of those made from new wood, depending on the type of pallet required.
SuperTech conference – digital inspiration for businesses Bridging the gap between “digital minds” and “analogue hearts” was one of the key take-outs for attendees of EMA’s first SuperTech conference. The notion was explored by one of the keynote speakers, Anders Sorman-Nilsson, who is an internationally renowned Swedish/Australian futurist. He reinforced to the business audience that customers of the future will have digital minds but analogue hearts. Successful businesses will find ways to weave these together and bridge the gap between the two – he’s coined a phrase “digilogue” to explain this – rather than being protectionist and trying to fight change. He used examples such as “Who remembers their first music download?” and “Who remembers buying their first vinyl record?”, to demonstrate that while we live in a digital world, our emotional connections are still key. He outlined three key trends that businesses need to integrate into any successful business strategy. Those trends are: • We’re all getting hacked Businesses need to recognise that what has
worked previously is not a sure strategy for the future and they cannot rest on their laurels, as they’re all being hacked - whether by the more sinister cyberattack, or the changing ways of consumer behaviour. He challenged the audience to think about what could be automated, or rather what human interface was needed. For example, high-end hotel chains providing a self-check-in service guests can complete via a phone app can be a better customer experience than checking in on arrival at the hotel and waiting in a queue. • Taking matters into our own hands There is a myriad information at our fingertips, but it is how we use it and how we present it that will engage our customers. Visualisation of data is vital – such as the current rise of devices which consumers can use to monitor their own health metrics. He pointed out that IT budgets are not just for the IT department anymore, rather technology is an integral part of everyone’s role. • Digital minds, analogue hearts On the topic of designing new customer journeys, Anders cited Icebreaker as an example of a New Zealand company
Futurist Anders Sorman-Nilsson
that has lead the way in this. Customers pass through many touch points before becoming loyal, and businesses of the future will recognise the need to be customer-centric and digital-centric. Anders said the Kiwi “number eight wire” approach to innovation was one way we had an advantage over other countries. Anders wrapped up his session by challenging the audience to consider what answers they would have to the following questions, if they could leap forward five years and look back: • What trends did you miss? • What signals did you ignore? • What investment decisions were delayed? “Then ask yourselves, what change will you make today?” he said. SuperTech 2016 was developed by EMA to give Kiwi businesses inspiration in regards to their place in the digital world. It brought together leading digital practitioners and innovators, from New Zealand and overseas, to help attendees explore what a digital strategy looks like for their business and how it was integral to their business plan.
Continued from pg12 Q6. What is your background in employment/business? What do you bring to the role of mayor? I have extensive contacts and experience with business through the roles of being Minister of Foreign Affairs and Trade, and Minister of Trade Negotiations over nine years. I completed the China Free Trade and ASEAN Free Trade negotiations, and initiated the Trans-Pacific Partnership Agreement negotiations. I have led trade missions and understand how important markets like China work, and what enterprises need to do to succeed in them.
The role of the Mayor, however, is predominantly a political and governance one, rather than a business management one. The skills I bring are from having been a Minister over 15 years. I have run large ministries (Justice, Housing, Environment, Employment, Corrections, Foreign Affairs and Trade, Education, Defence). The skills those roles require are working with Chief Executives, living within your budget, learning to do more with less, problemsolving, communication, working with the media, and getting teams of people to work together to accomplish objectives. I know how central government works and what we need to do to ensure it is responsive
to the needs of a city that represents 35 per cent of this country’s production and population. Q7. What do you like to do in your spare time? There isn’t much spare time. I enjoy working on our small farm, motorbike riding, hunting and fishing when time permits (I’m keen for water quality and fishing sustainability to be restored to the Gulf!). I go to rugby and league games, enjoy concerts (recent ones are Fleetwood Mac and Don McGlashan) and time with my kids and family.
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