NZ Management September 2012 by mediaweb

DAME ANNE SALMOND: NZ NEEDS A NEW KIND OF LEADERSHIP P6

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ORGANISATIONS WHY GOOD LEADERS MATTER P26

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BUILDING BETTER BONDS: WORK & LIFE AWARDS P36 Why we must listen to the Land & Water Forum p18 Managers as futurists p21 No going back: Retailing in the age of difference p42

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What’s in a name?

’m blessed with a surname that many people manage to mangle (that’s OK), so I’ve always been sensitive to the nuances of names. But what’s in an organisation’s name? I like to think of it as a stack of metadata that defines what lies at the very heart of the firm. For the past few months, NZ Management magazine has been working with Hay Group to survey senior executives and identify NZ’s most reputable organisations. The end results form this month’s cover story (see page 26). With the survey now in its third year, we’re starting to gather trend data and longer-term insights that help us build a body of knowledge around not only who has a good reputation but how they build, manage and maintain it. The ‘who’ bit is the simplest. If you’re looking for Kiwi exemplars of good rep check out Air NZ, Fonterra and Beca who consistently top our rankings. These three companies, this year’s survey respondents tell us, are the crème de la crème of Kiwi reputational achievement. Within specific sub-groups, similar patterns are emerging. NZ Police, the Department of Conservation and Treasury, for example, consistently rank well as our most reputable government departments. Meanwhile, Mighty River Power’s reputational star is rising, while Fulton Hogan and Landcorp Farming pop up on the radar for the first time. On top of this, the introduction of a new professional services category has shed light on the good names of both PricewaterhouseCoopers and Deloitte. The ‘how’ bit is more intriguing. There are, of course, some common threads. Most CEOs share with us twin messages. First, that every single person within their organisation shares the responsibility and privilege of protecting its good name. Second, the tone stems from the top. That notwithstanding, while all of the

CEOs I interviewed told me they highly value their organisation’s reputation (who wouldn’t say that?) I was struck by their very different takes on what they believe drives it, how they measure it and where it sits within their organisational framework. Like so many other facets of managing and leading, reputation is finely balanced, highly contextual and template-free. Intriguing too, were the insights we gained from the survey respondents themselves about their own organisations. When we asked them whether they have a leadership development strategy in their own organisation 70 percent of them said yes. More revealing still were the nonattributable comments that our survey respondents made when asked to describe their own organisation’s leadership. Safely anonymous, this bunch shared the good (and there is some stunningly good stuff happening out there), the bad and the downright damning. “High level and remote from the troops in the trenches”, said one. “Historical – tenure based”, “improved after a dodgy period of change”, and “lacking strategic direction”, said others. Another person said their firm’s leadership was “internally focussed. Keen but thinly spread”. Yet another reckoned theirs was “above average but no way leading edge”. If we were holding a black tie prizegiving for candour, I’d be clapping all evening. What does this tell us? That while there is undoubtedly much to celebrate in management-land, we still have a long, long way to go.

www.management.co.nz A MEDIAWEB MAGAZINE PUBLISHER Toni Myers MANAGING EDITOR Ruth Le Pla 021-266 3978, editor@management.co.nz CONTRIBUTORS Mark Ashcroft, Reg Birchfield, Bob Edlin, Colin James, Iain McCormick, Vivienne McLean, Stephen Millett, Carolyn Smith, Peter Tynan, Kapu Waretini, Rosemary Williams BUSINESS DEVELOPMENT MANAGER Rod Myers, 09-372 6444, 027-484 8046, admanager@management.co.nz ADVERTISING MANAGER Trish Day, 027-561 6556, trishd@mediaweb.co.nz DESIGNER Jennifer Adams COPY & WEB EDITOR Gill Prentice PRODUCTION MANAGER Fran Marshall franm@mediaweb.co.nz NEW SUBSCRIPTIONS www.management.co.nz/subscribe SUBSCRIPTION ENQUIRIES subs@mediaweb.co.nz

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NZ MANAGEMENT magazine is independently owned by Mediaweb Limited and is published 11 times a year. It is the officially recognised magazine of the New Zealand Institute of Management Incorporated. Editorial material does not necessarily reflect the views of NZIM. Copyright © 2012: Mediaweb Limited. All material appearing in NZ MANAGEMENT is copyright and cannot be reproduced without prior permission of the publisher. Editorial contributions are welcomed. Letters to the editor are also welcomed, but pen names are not acceptable. NZ MANAGEMENT is printed by PMP. Subscriptions: One-year NZ subscription (11 issues) $78.15 (GST incl). Overseas (airmail only): Australia $NZ130; rest of the world $NZ250. Enquiries: Mediaweb Limited, PO Box 5544, Wellesley Street, Auckland 1141, New Zealand. Phone: 09-529 3000, Fax 09-529 3001, enquiries@mediaweb.co.nz www.management.co.nz New Zealand Institute of Management enquiries to: NZIM Inc, Box 67, Wellington; Northern, Box 6600, Epsom; Central, Box 11781, Wellington; Southern, Box 13044, Christchurch.

Vol 59 No 8 • ISSN 1174-5339 (Print), 1179-3910 (Online)

Ruth Le Pla, Managing Editor SEPTEMBER 2012

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contents 26 COVER STORY

NZ’s most reputable organisations Why good leaders matter Air New Zealand is this year’s Hay Group/ NZ Management magazine Most Reputable Organisation. Our research says senior leadership is key. So what, exactly, underpins a good name? Ruth Le Pla investigates.

EDITOR’S LETTER

INBOX: News and views

FOCUS: Dame Anne Salmond’s Inaugural Reeves Lecture

AS I SEE IT: Kapu Waretini

MANAGERS ABROAD: Carolyn Smith

NZIM: Signposts to the future Reg Birchfield

EXECS ON THE MOVE

EXECUTIVE DEVELOPMENT

OPINION

POLITICS: Watery grave for collaboration? Colin James

ECONOMICS: Jobs for the statisticians? Bob Edlin

LEADERSHIP: Squandering time at the tiller Reg Birchfield

THOUGHT LEADER: Why managers must be futurists Stephen Millett

BOOKCASE: There is an I in team; Management in 10 words Ruth Le Pla, Reg Birchfield

ADVICE 54

EXECUTIVE HEALTH: The plain truth about packaging Peter Tynan

SEPTEMBER 2012 • Vol 59 No 8

features 42 Stories of NZ Enterprise Success No going back: Retailing in the age of difference

Debt-averse, bargain-minded and technology-driven, consumers are laying down some new rules for retailers. Those who respond in kind can still stuff their tills with dollars. By Nick Grant.

36 Work & Life Awards: Building better bonds

Smart organisations tap in to the energies, interests and abilities of each and every member of their workforce. Rosemary Williams showcases the winners of this year’s ANZ New Zealand & EEO Trust Work & Life Awards.

48 Conferences: A meeting of minds

The best conferences and conventions now pack an even more powerful punch as they align themselves to the new demands of business. By Vivienne McLean. 48

The Director 58 Boards blasé about corruption

Directors don’t think fraud and corruption is much of a problem in corporate New Zealand. Retiring Serious Fraud Office chief executive Adam Feeley thinks otherwise. He talked to Reg Birchfield about the consequences of governance complacency.

61 Recruiting at the top 62 Four Pillars rebuilt 64 Why boards must innovate

INBOX

LEADING BEYOND THE BINARY Can we as New Zealanders escape the old, frozen binary oppositions between town and country, nature and culture, men and women, young and old, Maori and Pakeha, left and right? Is it possible to explore the creative spaces in between? Could we use collaborative decision-making based on impartial, reliable evidence to move towards shared interests? Yes, yes and yes, according to Dame Anne Salmond who challenged her audience at the inaugural Sir Paul Reeves Memorial Lecture recently to unlock the new ways of thinking that are required to shape our future as a people. In a talk which spanned the legacy of the Enlightenment, Rogernomics, Maori philosophy and the science of self-organising systems, Dame Anne examined the potential of relational thinking for politics, economic life, environmental questions and identity in New Zealand. She urged people to move “beyond the binary” with new styles of leadership and decision-making that are needed in a world where we can explore the fertile spaces between locked-in oppositions. A distinguished professor in Maori studies and anthropology at the University of Auckland, Dame Anne was delivering her lecture at Auckland’s Holy Trinity Cathedral, Parnell, in honour of the late Sir Paul Reeves. She described Sir Paul – a longstanding supporter of the lecture’s sponsors Leadership NZ and AUT University – as a “thoughtful, robust and astute” great New Zealander. “He lived a passionate life, inspired by a quest for the shared good and the common ground, and a deep and abiding sense of justice,” she said. Such a sense of justice, she said, led both herself and Sir Paul in their own ways to voice their concerns that over the past 30 years we have been “busily recreating” a stratified society in this beautiful land. “With rising indicators of disparity and distress, many people fear and detest the widening chasms in our society, and yearn for greater amity and cohesion.” Genuine differences do exist between Maori and Pakeha, men and women, left and right, she said. “But so do interlocking relations, shared values and mutual dependency. Rather than excluding the middle ground, the challenge is to get the networks of relations across it working in ways that are mutually positive and creative, not hostile and destructive. This, I think, is the task that Sir Paul set himself, and why his life mattered so much to us all.” Kiwis collectively set aside “the divisions that haunt us”, said Dame Anne, and were seized by a collective euphoria for the Rugby World Cup. “Fuelled by a love of the sport and a sense that we were on show to the world, there were moments when our country did seem like a ‘stadium of four million people’. Black flags with silver ferns fluttered off car aerials, people’s houses in the cities, and across rural landscapes. When the Cup was won, almost everyone celebrated. It felt fantastic. “I know that most New Zealanders would love to feel this way more often. It will require new styles of leadership and decision-making, however, which I for one, would find refreshing.” Dame Anne said the world is changing “in ways that challenge the old 6 | management.co.nz | SEPTEMBER 2012

Dame Anne Salmond.

sharp-edged silos: nation states, government departments, ethnic groups, the disciplines”. She urged that, in our small, intimate society, the tyranny of distance may at last be cancelled. “If we are smart and agile, the legacies of our ancestors can help us to make the most of new global exchanges, and thrive and prosper. While other, older societies remain trapped in non-adaptive rigidities, we can organise ourselves flexibly and quickly, and in ways that give us joy, contributing to greater equity and prosperity. “In order to achieve this, it is possible to draw on Maori and Pacific philosophies as well as the best of contemporary science.” In places, inclusive, relational styles of governance are already emerging that work across the ramparts, she said. The Land and Water Forum, for example, is an “exciting experiment with collaborative styles of decision-making”, used to tackle the vexed question of water use in New Zealand. “Instead of fighting each other in the courts, key players [have] decided to come together. Rather than resorting to ‘end runs’ to the law or Government, they agreed to engage with the facts of the matter, and work towards optimal policies for water use based on shared values as well as divergent interests. “As a model of smart, flexible, evidence-based decision-making for a small country, this is terrific. One can see how in this process, different values and ways of understanding the environment might converge.” So, too, could this approach be applied to other contentious areas in our national life: “superannuation, maybe, and land use regimes, for example”, she said. “The outcomes are likely to be infinitely superior to those achieved by the old, bipolar arm wrestling. Such a flexible, nimble approach, based on fostering collaboration across various networks of relations, would be a major step towards a new kind of democracy in New Zealand.” M

INBOX

SIR PAUL’S LEGACY LIVES ON Leadership New Zealand (LNZ) has launched the Sir Paul and Lady Reeves Scholarship Fund in memory of Bishop Sir Paul Reeves (1932-2011). Announced at the inaugural Sir Paul Reeves Memorial Lecture at Holy Trinity Cathedral, Parnell, Auckland, last month, the fund aims to support those people who may otherwise be unable to take part in LNZ’s leadership programmes. A not-for-profit incorporated charity, LNZ’s mission is to develop and nurture future generations of New Zealand’s leaders. Its programmes bring together leaders from every generation and sector, connecting them through conversation and challenging them to make a difference. LNZ says it believes there should be no unreasonable economic barrier for an individual to participate in its programmes. It envisages the new fund will become the primary source of scholarships in the future. Investor and philanthropist Sir David Levene has already donated to the fund and LNZ says it welcomes additional funding support from others. www.leadershipnz.co.nz M

Sir Paul Reeves.

Culture club

Ta NE lk W to Ta RE xi L Ch E ar AS ge E N S O W !

Zero impact growth continues to confuse and confound many business leaders, according to a new Deloitte report. The authors of “Towards Zero Impact Growth: Strategies of Leading Companies in 10 Industries” say the proliferation of, and confusion around, long-term paradigms and growth definitions is leading to unclear strategies. Their findings suggest that many of the companies assessed in the report are doing “too much, but only for a bit”. This prolongs the life of organisational cultures that aim to ‘be less bad’ instead of actually ‘being good’. It also keeps the focus on strategies that are efficient rather than effective, they say. “The latter would require more collaboration between industries.” The report calls for a collective understanding of what all industries need to achieve together in order to jointly arrive at a sustainable economy. “Clear measurement and monetisation of resource use and external effects are crucial, as well as the measured contribution to human well-being,” says the report. “This would support a better understanding of the sustainability context and would increase the quality of stakeholder dialogues. “We need to innovate and take action in the areas of measurement, leadership, new business models and education. A consolidated approach and an adaptation plan towards zero impact growth can be a valuable contribution.” M

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INBOX

senior leadership team, Voyce is jointly responsible for establishing the long-term business strategy for the New Zealand business. When Lauren Voyce joined the senior leadership team Wilson says Voyce also “consults at McDonald’s NZ she was just 26 years old. Her role with and influences our 54 as a youthful head of HR and talent chimes well with a franchisee owners: all highly skilled predominantly Gen Y 10,000-person workforce where business owners in their own right, she’s already made significant improvements to both in order to be able to deliver the employee retention and talent management practices. business strategy”. Now she’s been picked as this year’s northern region Since joining McDonald’s, Voyce New Zealand Institute of Management (NZIM) / Eagle has overseen a complete overhaul Technology Young Executive of the Year. The awards, of all HR and talent processes, a longstanding feature of New Zealand’s business providing more rigour and process landscape, recognise and celebrate the talents of New in performance management and Zealand’s executives aged 35 and under. personal development. In taking out the award, Voyce faced stiff competition “The significant improvement in from a talented field of young executives. the people part of our business,” McDonald’s NZ MD Patrick Wilson says Voyce has says Wilson, “saw us recognised, already been recognised by McDonald’s globally for her for the first time, as Retail Employer innovative approach to people practices. Several of her of the Year (large employer) for initiatives are being adopted for roll out in other major Lauren Voyce. 2011. markets. “The improvement has also, without doubt, contributed to a 41 She was one of three HR leaders from all 37 countries in the firm’s percent improvement in our customer satisfaction scores and ultimately Asia Pacific Middle East and Africa (APMEA) region to be awarded an Outstanding HR Leadership Award. And the New Zealand HR department broader business results.” Voyce will now go forward to the Young Executive of the Year won the APMEA HR Team of the Year. nationwide selections later this year. She will compete with other regional Voyce leads the McDonald’s NZ people team. She is responsible winners to determine who will be this year’s NZIM/Eagle Technology for human resources, training, learning and development, and talent Young Executive of the Year. management for McDonald’s 160 restaurants in NZ and 12 restaurants The result will be revealed at the Deloitte/Management magazine Top across the Pacific Islands (Fiji, Samoa, American Samoa, Tahiti and New 200 Awards on Thursday 29 November. To find out more and book a Caledonia). seat: www.management.co.nz/top200. To read judges’ comments on the McDonald’s is one of New Zealand’s largest employers of youth, with finalists: www.management.co.nz/nzim. M over 65 percent of its employees aged under 25. As a member of the

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INBOX

Safety 2012 Ellis, chief executive of Brightwater Group, on leading workplace safety. The Ministry of Business Innovation and Employment is running a workshop titled ‘Australasian approaches and perspectives on workplace safety, promotion and regulation’, and a further 57 oral or interactive poster presentations focus on workplace injury prevention and safety. A number of satellite conferences and meetings are also being held. Safety 2012 is organised by ACC, the Safe Communities Foundation NZ and the University of Otago’s Injury Prevention Research Unit, with support from colleagues in New Zealand and around the world. For more information: www.safety2012.org.nz. M

INTERNS ADD VALUE

When Hamilton-based IT firm NetValue enlisted the help of 496 intern and accounting student Jamie Powell to look into job costing, he also found ways to save the firm considerable costs in over-runs on some jobs. “It was an eye opener for us,” says NetValue CEO Graham Gaylard. “Having an intern do some of the things that we just didn’t have the capacity to do was of great help. In the end it turned out to be a very profitable experience.” The programme’s convenor Glyndwr Jones says the course is unapologetically competitive. “Students are essentially competing for places at the companies that sign up. The business only wants the best, and we only want to give them the best. “In the past two years we have seen real value creation for companies, which has led to job offers for our students, and shows the business community what our graduates are capable of. It’s a win-win-win situation.” M

From creating a new recruitment website for a national logistics company, to identifying cost over-runs at a local IT firm, Waikato Management School (WMS) students are making real impacts in the business community thanks to an exclusive internship programme. The internship paper, known as a “496”, is available only to the very best management students in their final year of study. Students must apply for a position and are matched to an organisation seeking an intern to work on a specialised project. WMS student Rebecca Foote recently completed a project with logistics giant Mainfreight. She was initially brought on board to research how to improve its recruitment communication. The company valued her input and kept her on to help create its new graduate recruitment website.

Photo: thinkstockphotos.com

The 11th World Conference on Injury Prevention and Safety Promotion (Safety 2012) is expected to provide valuable learning and networking opportunities for New Zealand businesses. The organisers have confirmed as speakers some of the world’s foremost experts on injury and violence prevention, workplace safety, health outcomes and building safer communities. Scheduled for 1-4 October in Wellington, Safety 2012 includes a ‘Safe at Work’ segment. Keynote speaker, Judith Hackitt, chair of the UK’s Health and Safety Commission, will present on workplace injury prevention and Chris

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INBOX

Creating a pipeline of talent New Zealand’s businesses and public sector organisations will have accelerated access to innovation, commercialisation and entrepreneurial skills if a Fulbright New Zealand business award scheme gets the support it needs to expand. In line with the Government’s push for fast-tracking the economy, partly on the back of innovation, the educational organisation has opened up its Fulbright-Platinum Triangle Award in Business. “It’s about creating a pipeline of talent at a point in New Zealand’s economic development where there is a clear need for the next generation of outstanding business leaders,” says Fulbright New Zealand executive director Mele Wendt, “but we need help.” For the past six years, Fulbright New Zealand has awarded one two-year MBA course each year at American universities like Harvard, Stanford, Babson and UCLA, which not only teach the latest management best practice but develop innovation and commercialisation skills. Wendt says it’s clear from discussions with the corporate and public sectors that there is a growing shortage of tomorrow’s business managers with these skills. To date, the NZ$100,000 cost of the courses has been funded by a network of New Zealand and American business benefactors who are committed to helping New Zealand build its economic capability and strengthen its trading relationship with the United States. “The problem is that one New Zealander a year is not a recipe for accelerated business growth, so we’ve been talking with the market about what it wants,” says Wendt. There are two clear messages: • There needs to be a critical mass of at least 10 grantees each year to offer our key business and public sectors both choice and reliability of supply. • Pathways need to be created for those sectors to access this pool of

talent and create the openings for which grant recipients will want to come home. “The Fulbright New Zealand board has accepted that, as Fulbright’s contribution to building business capability, we should seek to meet these two goals by 2013-14.” Wendt says everything now depends on the willingness of the market to invest in talent, knowing that there will be a significant return on that investment for them and for the New Zealand economy. She says the six Platinum Triangle grantees who have completed their awards are standouts in their areas of specialisation. In June this year the Minister of Business & Innovation Steven Joyce presented the seventh grantee, Mahara Inglis of Wellington, with his award at Parliament. Inglis is heading for the University of California, Berkeley, to complete an MBA specialising in clean technology entrepreneurship. Fulbright New Zealand has appointed Chris Turver, an experienced business and corporate relations manager, as its business development manager (chris@fulbright.org.nz). M

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4 2

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7 Dame Anne Salmond delivers the Inaugural Bishop Sir Paul Reeves Memorial Lecture

1 Dame Anne Salmond. 2 Rewi Spraggon (Leadership NZ alumnus 2005). 3 Holy Trinity Cathedral, Parnell, Auckland. 4 Jo Brosnahan (Leadership NZ). 5 Jeremy Salmond, Dame Anne Salmond, Merimeri Penfold and James Penfold. 6 Jeremy Salmond, Merimeri Penfold and Dame Anne Salmond. 7 Lady Beverley Reeves and daughter Jane. 8 Dame Catherine Tizard.

For more on Dame Anne Salmond’s speech see the article “Leading beyond the binary” on page four of this issue.

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AS I SEE IT

Strive for change Kapu Waretini, programmes manager diversity at Committee for Auckland, is a recipient of a 2012 Sir Peter Blake Leadership Award. What could NZ do better? Lose the ego and start working together. We enjoy projecting an egalitarian persona, however, this can often serve as a mask to our subconscious intention. If NZ is to be truly recognised as an innovative economy and bring about change to our challenges â&#x20AC;&#x201C; social or otherwise â&#x20AC;&#x201C; we need to recognise that we can only do it together. As a nation we can learn a lot from the awesome way we respond well to crises such as natural disasters, social deprivation and even supporting our girl Val. How could our business leaders help with this? Look in the mirror. If you see a gold-plated crown, try taking it off for a second. More often than not those who mean to follow you do so because of your experience, intention and/or vision, not because of your crown or title. While you are where you are because you have the proven smarts, courage and confidence you can only achieve your intention or vision with the aid of your people. What would it take for everyone to make a difference? Work together. In isolation it is highly unlikely any single individual or company can achieve the change we strive for. It is important to remember that while the public and third sectors strive to make a difference to challenging issues such as social inequality, it isnâ&#x20AC;&#x2122;t necessarily up to them alone. The private sector can play a part too and working together devoid of ego will carry us to exactly where we need to be. Together and proud. M

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MANAGERS ABROAD

A career by degrees Carolyn Smith is GM of China’s Westin Guangzhou. What prompted you to seek work out of New Zealand? When I started work in my first Auckland hotel I didn’t intend to have an international career. My three children had all reached school age and I was gathering ideas as to what type of career I would enjoy. Over the next 17 years I developed my passion for the hospitality industry, my career gathered momentum, I gained my university degree and, with my children grown up and living overseas, took the opportunity to transfer to Sydney in 2003. At the time the decision wasn’t too difficult as my plan was to remain in Sydney for maybe two years and then return to New Zealand. Nine years later here I am living an amazing life in China and New Zealand is feeling rather remote. How are your experiences overseas shaping your understanding of New Zealand? Travelling and living in a different culture has broadened my view of the world and opened my eyes to the hardship people experience in their lives. I can see first-hand how they work through such difficulties to succeed. We New Zealanders are very fortunate to come from a country that is clean, green, healthy and located far from the political turmoil that many countries endure. How can offshore Kiwis contribute to New Zealand? It’s important that New Zealanders aspiring to do business in another country take the time to understand its culture, business ethics and local government legislation. Our New Zealand modus operandi for doing business can not necessarily be replicated elsewhere. This is particularly true of a country such as China where relationships are vitally important and developed over a long period of time. Living overseas, we’re able to identify potential opportunities for New Zealand. Through our networks we can provide links for New Zealanders to the local market, and share experiences on the hazards and challenges of doing business abroad, especially in developing countries. M

Carolyn Smith is a member of Kea, New Zealand’s global talent community. www.keanewzealand.com

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NZIM

Signposts

to the future Management thinkers are the direction finders for business, writes Reg Birchfield. That’s why NZIM works at the point where theory and practice interlock.

anagers are confronted with a fast-changing world. The collective impacts of globalisation, the internet and social change have made it that way. There’s more to come because, as the cliché says, change happens – constantly. Wise managers commit themselves to keeping in touch with management thinking to make sense of what is going on around them and, hopefully, to capitalise on the opportunities change presents. Management theory, then, provides context. But, nothing quite matches the experience provided by watching, listening to and working with successful managers and leaders. Experience converts theory into fact. Management theory has its critics. But as Adrian Wooldridge, author of Masters of Management and Schumpeter columnist of The Economist writes, “the vitality of business ensures that the study of business is equally vital... management theory is not the intellectual desert that many critics imagine”. True, there are charlatans lurking among the inflated ranks of management theorists. However, a thorough investigation by two reputable economists, one from the London School of Economics and the other from Stanford, on the impact of management ideas on productivity in many countries discovered that they do dispense more than snake oil.

16 | management.co.nz | SEPTEMBER 2012

The researchers found that companies which use the most widely accepted management techniques outperform their peers in all meaningful measures, such as productivity, sales growth and return on capital. And it’s impossible to dismiss the impact American quality gurus like W Edwards Deming and James Juran had on Japan’s devastated manufacturing industry after the Second World War. That truly was management theory turned to account. Management theorists are now grappling with the most complex organisational issues the world has ever seen. Managers and organisational leaders can’t, in addition to their day-to-day

duties, be expected to get their heads around the myriad ramifications of this changing world without a little help. As Wooldridge also points out, it’s not just who, what and how managers manage or leaders lead that is changing: corporate forms and business models are simultaneously imploding and exploding. Management theorists provide windows on a fast-changing management and organisational landscape. They are direction finders helping to signpost routes to the future. “Theorists are essential to management development and to explaining organisational evolution,” says NZIM chief executive Kevin Gaunt. “We identify and

Get with the programme, stupid Some management theories are designed more to boost consultants’ fees than productivity. Others wreak organisational havoc, intended or otherwise. American business writer Geoffrey James names his eight “stupidest management fads” of all time: • The Six Sigma quality management process. • Business process reengineering. • Matrix management. • The Plato collective decision-making process. • Michael Porter’s “core competency” conviction. • Peter Drucker’s “management by objectives”. • Tom Peters’ “search for excellence”. • “Management by God” created by Girolamo Savonarola and based on the belief that company success resides in God’s hands.

learning, project-based learning or some other form of experiential learning. These experiences are enhanced through “structured reflection”, for example through coaching. “And that’s pretty much the approach we take to helping executives and organisations,” says Gaunt. “It’s the combination of thoughtful learning and shared experiences. “The New Zealand economy is undoubtedly going through tough times and organisational resources are stretched,” says Gaunt. “But to survive and succeed, companies must equip their managers and leaders with both a wellinformed understanding of the evolving new world in which they are expected to perform and the opportunity to apply what they learn.” IBM’s Global CEO study has consistently shown that senior managers are struggling with the complexities of business life. Less than half of them felt “prepared for the complexity ahead”. Organisations need to address this anxiety, says Gaunt. And as part of that learning process, there needs to be a better understanding of the “false dichotomy” around leadership and management. “The debate around which is more important and relevant doesn’t help organisational development and simply confuses the issue,” says Gaunt. “The debate about which is better totally misses the point. They are different roles that produce different results but the individual needs both capabilities.” According to John Kotter, author of What Leaders Really Do, if leaders cannot manage what they create, then their leadership is not effective and serves no end. And as Warren Bennis, author of the classic On Becoming a Leader, said in a recent interview: “The best leaders I know are both leaders and managers.” “That’s the way it is and the way it needs to be,” says Gaunt. M Reg Birchfield FNZIM is a writer on leadership, governance & management. reg@rjmedia.co.nz

INSPIRING MANAGERS Our aim is to build management capability through membership, development and research. Our focus is to: • Research leading management trends and practice and promote a constantly developing model of best management capability for New Zealand. • Enable managers and aspiring managers to participate in learning programmes, mentoring, and events that provide the information and experience they need to develop their capability. • To identify leading management role models and provide awards that recognise the career and educational achievements of managers.

NZIM Inc CEO: Kevin Gaunt FNZIM, FAIM Email kevin_gaunt@nzimnorthern.co.nz Auckland Offices Contact: Tait Grindley PO Box 6600, Wellesley St, Auckland 1141 Ph 0-9-303 9100, 0800 800 NZIM Email enquiries@nzimnorthern.co.nz Website www.nzim.co.nz Wellington Offices Contact: Shaun Sheldrake PO Box 11781, Wellington 6142 Ph 0-4-495 8300, 0800 800 NZIM Email enquiries@nzimcentral.co.nz Website www.nzim.co.nz NZIM Southern Regional Director: Michael Weusten FNZIM CEO: Joseph Thomas AFNZIM PO Box 13044, Christchurch 8141 Ph 0-3-379 2302, Fax 0-3-357 8003 Email admin@nzimsouthern.co.nz Website www.nzimsouthern.co.nz

NZIM FOUNDATION CHAIRPERSON: DAVID MOLONEY FNZIM SECRETARY: JIM THOMSON PO BOX 67 WELLINGTON, PH 0-4-473 0470 NATIONAL_OFFICE@NZIM.CO.NZ

SEPTEMBER 2012

| management.co.nz | 17

Photo: thinkstockphotos.com

distil some of their most useful and relevant work, and bring it to the attention of [NZIM] members and managers generally and then, overlay it with exposure to practical management programmes. Theory and practice are as interlocking as, say, management and leadership.” Management theory is, of course, based on the observation of management and leadership in action. That’s why it can boost productivity. Good companies, just like good managers, borrow ideas from better companies and more successful managers. Jim Collins, author of Built to Last, Good to Great and other similar titles, relies on his researchers’ observations of the best performing businesses to identify their leadership, innovation and new production techniques. The result of all this constant searching for enterprises that excel is higher productivity and sometimes happier workers. Admittedly, some management theories generate more heat than light. (See box story “Get with the programme, stupid” for American business writer Geoffrey James’ pick of the eight worst fads of all time.) As a consequence, the management theory industry is coming under greater scrutiny. Business school clients are demanding more responsive and relevant programmes and consultants are, at least according to Wooldridge, “being forced to be more transparent”. Theory has its place, and managers and leaders that reject it out of hand or pay it little mind shortchange themselves, particularly now that transition and transformation are the organisational, economic, social and political orders of the day. As a Global Leaders study released by the UK’s Ashbridge Business School revealed earlier this year, 82 percent of senior executives believe they “need to better understand the business risks and opportunities of social, political, cultural and environmental trends”. Most of the executives surveyed believed that effective learning and skills development comes from “practical experience”, whether through on-the-job

POLITICS COLIN JAMES

Watery grave for collaboration?

18 | management.co.nz | SEPTEMBER 2012

managed. Manage it better and it can grow more plants and animals – a lot more. Water storage and irrigation are earmarked as a major destination for capital from the state-owned enterprise selldowns. Back in July ministers began to get edgy. Some thought the first report was too green – even though agricultural and industrial interests are integrated into the forum and so the consensus in the May report was hard won with a lot of give and take with greens and recreationists.

Photo: thinkstockphotos.com

his month is the deadline for the Land and Water Forum to finalise consensus on water management. A lot hangs on this. The forum is a policymaking experiment in collaborative governance, a variant on a Scandinavian technique used to resolve complex policy conundrums. At issue is whether this will be New Zealand’s one and only attempt. Environmentalist Guy Salmon wrote a report on the Scandinavians’ practices and put the case to the National Bluegreens in 2006. National party MP Nick Smith mandated the Land and Water Forum in 2009 to apply it. The forum comprises 58 relevant interest groups from environmentalists to dairy farmers and iwi. A “small group” of about 20 of them committed in October 2009 to seek consensus, worked out the broad outlines of an agreement in September 2010 and has since developed the detail in working groups. Ministers told the interest groups not to come to them but instead to pursue consensus in the forum. Officials worked with the forum to keep abreast of its deliberations, and to supply guidance and research but not to interfere. In May it issued a detailed consensus report on water flow limits and pollution controls and how to set them. This month it is due to report on allocation and transfer of water rights. These are highly contentious issues, as attested in the July Waitangi Tribunal hearing on Maori Council claims of an iwi association with waterways akin to proprietorial rights. Ministers are impatient for the allocation report. That is because they see water as a foundation ingredient in economic development. Water is inefficiently and ineffectively

“Water is inefficiently and ineffectively managed.” Labour, the Greens and the Maori party all backed the May report. Even though all had reservations, they valued the consensus. Ministers said little. Cabinet insiders say the sceptical ministers are now being inducted into the process – implying those ministers will see the value in consensus as generating durable policy that survives changes of government. But will they? The Government needs development runs on the board before the next election, which requires legislation to be drafted this year and passed in 2013. The word when this column was written was that if the forum didn’t report in September, ministers would take over and if it issued a report with some matters undecided, ministers would decide them – even if, with another month or two, consensus might have been reached. Officials have been working to that timetable. There are four risks. One is that ministerial impatience and the officials’ separate advice may make consensus more difficult to achieve if some groups figure they can do

better by negotiating separately with ministers. At the time of writing the word was that consensus would be reached and ministers would write it into legislation. If not, there is a political risk for National: most in the forum are National-leaning and would resent being gazumped by ministers after risking a lot themselves making concessions it turned out they didn’t need to make. The risk for the country would be unstable policy. The next Labour-Green government (post-2014 or post-2017) would change the settings. Policy would seesaw. And, critically, a promising way of resolving hard issues would be lost for a generation. Interest groups would shy off trading their positions for consensus if they think ministers will go their own way anyway. The odds have been on consensus, translated into enduring policy. Later this month we get to test those odds. M Colin James is New Zealand’s leading political commentator and NZ Management’s regular political columnist. ColinJames@synapsis.co.nz

BOB EDLIN ECONOMICS

Jobs for the statisticians?

hen it comes to reducing unemployment, the Government has had precious little to boast about, essentially because economic growth has been sluggish. When asked if he had confidence in his Minister of Finance, Prime Minister John Key said an inability to downscale unemployment is the consequence of “very difficult economic times”. These included the Christchurch earthquakes, the global financial crisis “and the absolute mess we inherited from Labour”. So how, he was then asked, could he have confidence in a minister who predicted in Budget 2011 that unemployment would be a full one percent below the level recorded in the March quarter? Key riposted by highlighting employment growth rather than the unemployment rate. New Zealand had more jobs than ever before in the country’s history. “I do not call that failure,” he said. He repeated this observation during this year’s Budget debate on May 24. The unemployment rate was higher than the Government would like, at 6.7 percent, he said. “But let us also acknowledge the following: more people have jobs in New Zealand than ever before in our history…” That claim went unchallenged until Rob Salmond, contributing to the Pundit blog on May 28, had a go. Now assistant professor in the Department of Political Science at the University of Michigan, his post included a chart showing the unemployment rate at its highest level in some 10 years. And he recorded Key’s rejoinder – that New Zealand now has more jobs than ever before in the country’s history. Then he pointed out the obvious: more people have jobs now because New Zealand has more people now, which has little to do with the Government or its policies. Another of

his charts showed the number of people in work rises pretty much every quarter, unless there is a large-scale problem like a global financial crisis. The unemployment rate was a much better indicator of government economic management than the raw number of jobs, Salmond insisted. But what if we did adopt “more jobs than ever before” as the standard for judging government economic success? Well, Labour achieved it in 30 of its 36 quarters in office, whereas National had achieved it in only four of its 13 quarters in office. Labour could boast an 83 percent success rate; National scored just 31 percent. But that was in May. The latest household labour force survey showed the unemployment rate nudged up from 6.7 percent to 6.8 percent in the June quarter, the highest for two years. Since the March 2011 quarter, the employment rate has remained around 63.9 percent. Statistics NZ said this indicates employment growth is only keeping pace with the working-age population. Key had a facile explanation. The increase in the unemployment rate was “a very small, technical rise”. He was not overly concerned, although the Government had hoped the number would fall slightly. “From what we can see, employment is rising in all parts of the country: except Christchurch. So the Christchurch numbers are dragging it down a little bit.” But isn’t the Christchurch recovery

being led by the governmentestablished Canterbury Earthquake Recovery Authority? CERA certainly claims on its website that its role includes providing leadership and coordination for the ongoing recovery effort, focusing on business recovery, restoring local communities and making sure the right structures are in place for rebuilding, enabling an effective and timely rebuilding… And so on. It reports to the Minister for Canterbury Earthquake Recovery Gerry Brownlee who is responsible for coordinating the planning, spending and actual rebuilding work needed for the recovery. Brownlee and CERA have been armed with special powers “to enable an effective, timely and coordinated rebuilding and recovery effort”. The Government accordingly can’t duck taking some of the responsibility for the Canterbury impact on rising unemployment. More important, Statistics NZ’s latest Household Labour Force Survey shows the number of people employed fell by 2000 in the June quarter. The employment rate dropped 0.3 percentage points to 63.8 percent, because employment was decreasing while the working-age population continued to grow. By the PM’s standard, the Government therefore scored another “fail” mark during the quarter. M Bob Edlin is a leading economic commentator and NZ Management’s regular economics columnist.

SEPTEMBER 2012

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LEADERSHIP REG BIRCHFIELD

Squandering time at the tiller Photo: thinkstockphotos.com

himon Peres, Israel’s ninth president and an extraordinarily resilient leader, thinks the only leaders worthy of the title are individuals with “ambition for a cause greater than themselves”. That’s a reasonable observation. It is, however, in conflict with the motivation of most practising business leaders. The focus now is consistently on self – usually expressed in excessive remuneration, outrageous professional fees and splendid benefits. The point is the generous treatment with which the world’s commercial and political leaders endow themselves is now the root cause of an escalating and particularly virulent global problem. Leaders fitting the Peres description are few and far between, the consequence of which is an increasingly inequitable, divided and disillusioned world. Consider the World Economic Forum’s latest Global Risks report. There are, says the Forum, three distinct constellations of risk that present “serious threats” to the world’s future prosperity and security. It calls the first of these risk clusters “dystopia” – the opposite of utopia. It’s a place full of hardship and devoid of hope. The report warns that the links between fiscal, demographic and societal risks are “signalling a dystopia future for much of humanity”. Large populations of chronically unemployed youth and millions of aged individuals dependent on survival funding from over-indebted states are two critical factors. Heap onto that the dramatic shift in global wealth to an increasingly small percentage of citizens and things do look increasingly dystopian. The forum warns that declining economic conditions now threaten existing social contracts between states and citizens, evidence of which plays out daily in every conceivable

20 | management.co.nz | SEPTEMBER 2012

communication medium. “In the absence of viable alternatives, this process could precipitate a downward spiral of the global economy fuelled by protectionism, nationalism and populism,” it says. Many leaders have already resorted to protectionism of the personal kind which makes it difficult for the hoi polloi to know where to turn for fairness and direction. Which takes me to the Forum’s second risk grouping. It seems that the world’s increasing complexity and interdependence is accompanied by a diminished capacity to manage the systems that underpin our prosperity and safety. Now there’s a dichotomy, or rather a conundrum, if ever there was one. Does getting ever smarter deliver solutions for the general good or breed contempt by the ambitious and connected few? The Forum suggests emerging technologies, financial interdependence, resource depletion and climate change have exposed “the weak and brittle nature” of the safeguards that our policies, norms, regulations and institutions once provided. “Our safeguards may no longer be fit to manage vital resources, and ensure orderly markets and public safety,” it adds. And to cheer you up, here’s risk constellation three. Virtual world crime, terrorism and war are becoming increasingly more threatening than similar activities of the physical kind. Hyperconnectivity is a reality and it has its dark side. With more than five billion mobile phones coupled with internet connectivity and cloud-based applications, daily life is more vulnerable to cyber threats and digital disruptions. And, warns the Forum, “incentives are misaligned with respect to managing this global threat”. On the other hand, online

security is now considered a “public good” and there seems to be some urgency about reducing vulnerability to key information technologies. The Forum identified 50 prevalent global risks to make up its three clusters. The five specific risks most likely to happen in the next 10 years are: severe income disparity; chronic fiscal imbalances; rising greenhouse gas emissions; cyber attacks; and water supply crises. And the five risks likely to have the most profound global impacts in the next 10 years include: major systemic financial failure; water supply crises; food shortage crises; chronic fiscal imbalances; and extreme volatility in energy and agriculture prices. The Forum points out that the nature of the risks facing the world is changing from environmental to socioeconomic. I believe these kinds of risks are more tricky to tackle. They will need more selfless leadership to solve. On current global and local evidence, there’s not a lot of that kind of leadership about. And given the reward processes that business, in particular, has created, there won’t be any time soon. Indeed, leaders seem to be heading for lifeboats packed to the gunwales with the spoils of their brief terms at the tiller of some sadly mispiloted enterprise. M Reg Birchfield is a writer on leadership, governance & management. reg@rjmedia.co.nz

STEPHEN MILLETT THOUGHT LEADER

Why managers must be futurists

of consulting futurists. This means managers have access to forecasting resources that they did not have before, but it also means that they have to rely more heavily on their own expert judgement to generate relevant and meaningful views of the future. Futuring and visioning are fundamentally different. Many managers will do visioning, including strategic planning, without doing futuring. The result may be plans that miss emerging business

“Leaders cannot rely on consultants to do futuring for them.” of thinking about the future. Old trends and assumptions about the future as a continuation of the past have turned out to be dead wrong. Now managers have to do their own futuring because they may not have budgets for external experts. Many managers now rely on internet foresight services that provide trend information, expert opinions and forecasting tools. The fees for accessing online services are much less than the professional fees

opportunities. It may leave strategic plans as little more than wishful thinking. Futuring is the process of forecasting, and anticipating trends and potential events in external business environments. It provides a forwardlooking perspective on the broader context of business. It also prepares managers mentally to deal with potential issues beyond their immediate control. In the past, managers may not

have done futuring at all. Over the past three decades, planning has become a critical skill for all levels of managers. Yet the managers who acquired the skills of planning did not necessarily gain the complementary skills of futuring. Worst of all, they may have simply ignored external trends and written up business plans in a vacuum. This will not do in the future. Managers must learn to generate their own forecasts, or at least how to use their own intuition given the facts that they can so easily acquire over the internet. I recommend the following steps to any manager wishing to improve their skills in both futuring and visioning: • Learn the theories, best practices and skills of futuring to supplement strategic planning. This includes trend analysis beyond trend extrapolation, methods for expert judgement and scenario generation. • Directly relate the trends and issues of futuring to specific patterns in customer behavior and emerging business opportunities. Seek ways to directly link futuring with visioning. • Develop your own point of view of the future, combining both external and internal elements, and communicate it with others. Aim to engage others in a discussion of different potential points of view. This engenders participation, buy-in and cooperation. M Stephen Millett is the founder and president of Futuring Associates LLC, a Columbus, Ohio-based futures consultancy.

SEPTEMBER 2012

| management.co.nz | 21

Photo: thinkstockphotos.com

n the past, managers who engaged in serious thinking about the future of customers, competitors, economics and government regulations typically relied heavily on external consultants. They did not have the education or experience in forecasting to do their own futuring. Managers must now learn to become their own futurists. Why? Because leaders cannot rely on consultants to do futuring for them. And they have to know the trends and issues of futuring in order to achieve prescient strategic planning. The recession has fundamentally changed many business models and operations, and turned thinking about the future upside down. A large number of foresight consultants have gone out of business in the recession. Ironically, perhaps, the visionaries, trend extrapolators and scenario facilitators failed to anticipate the demise of their own industry. In the meanwhile, managers have taken more personal interest in forecasting. They have had to. The recession has turned upside down a lot

BOOKCASE

The truth about teams THERE IS AN I IN TEAM

By Mark de Rond • Harvard Business Review Press • RRP $49.99

For those people who, like me, feel numbed by the hackneyed and simplistic catch-cry that we must all be team players, this book wafts into our lives a welcome breath of fresh air. For it peels back the mantras behind team dynamics to reveal a more nuanced, and intuitively sensed, truth about what happens when a bunch of people are told to all pull together. As the title suggests, Mark de Rond champions the idea that self-centred and even selfish attitudes do not necessarily detonate a team to Kingdom Come. Viewed openly and honestly, such attitudes can serve as a strengthening agent for the wider group. Drawing extensively on his work with high-performing sports teams, de Rond reviews chapter-by-chapter the multiple pieces of research that suggest that to turn teams of high performers into high-performing teams, inequality can be useful. He believes conflict happens even

MANAGEMENT IN 10 WORDS By Terry Leahy • Random House • RRP $37.99

It’s difficult not to feel cynical about business books that offer magic numbers. I admit, therefore, to feeling ambivalent about the read ahead as I flicked open Management in 10 Words by Tesco chief executive Sir Terry Leahy. And, I’m sorry to say, I don’t feel all that different now that it’s been relegated to my bookcase. 22 | management.co.nz | SEPTEMBER 2012

as intentions are perfectly aligned. He argues that likeability in a team member can triumph over technical competence: thereby suggesting that high performance in a team context must include some measure of social and emotional intelligence. Yay to that. And he concludes that too much harmony can actually hurt team performance. “In that sense,” writes de Rond, “this book is faithful to the lived experience of those who inhabit high performance teams. It takes people for what they are, not for what they might be. It assumes that people are in principle self-interested, and that no matter how genuine the effort of senior management, a rallying cry around the firm’s mission will only have limited traction.” At the heart of de Rond’s thinking lies his acknowledgement that humans are refreshingly different from automata. “Their shared humanity,” he says, “is

a cacophony of qualities: genius, suspicion, frailty, fallibility, altruism, self-centredness, superstition, pride and anxiety.” That’s why we get process losses, disagreements and relational conflicts. That’s why some combinations of teams work better than others. And it’s why some very functional teams can feel a bit rocky from the inside looking out. “But a team’s humanity also holds the key to its effectiveness,” de Rond concludes, “in that having recognized the vulnerability of others we may allow ourselves to be vulnerable in turn, able to connect by means of a shared humanity.” For anyone who has ever felt a sneaking sense of rivalry towards a team member even as they have collaborated with them, this book tells you you’re normal and could well be an asset to that team. Yay and double yay. – Ruth Le Pla

The popular evidence suggests that the slum kid who made good by turning a mediocre supermarket chain into the largest in the UK knew what he was doing. But in reading his tale of success, I’m unsure whether he came up with his 10 key management words before or after the writing. The text and the words don’t always fit comfortably and contradictions are a little too prevalent. There were, however, a couple of sentences in Leahy’s introduction that snared me into reading this book. The

essential truth of what he said was encouraging. “... I have been struck by how basic, simple truths about life – not just business – have been forgotten or are dismissed as ‘too obvious to matter’ by clever people who mistake ‘simple’ for ‘simplistic’,” he wrote. “We have allowed ourselves to think that, because the world in which we live is complicated, the solutions must be complicated as well.” Sticking to the basics and the simple skills running a supermarket chain took Leahy to the top, as it has a few

BOOKCASE

others that American management guru Jim Collins identified in his best seller, Built to Last. Enigmatic leaders like 3M’s William McKnight for example. Leahy didn’t really need 10 words to describe the essential success of his career – Clubcard would have been quite sufficient. But one word that encapsulated and gave form to his deep understanding of the power of data mining as the key to locking

in customers would not, at least in the management genre, have worked. So he, and perhaps his editors, came up instead with truth, loyalty, courage, values, act, balance, simple, lean, compete and trust – a collection that surely widened his readership catchment. The more I read, the less convinced I was that the author felt entirely comfortable with, and always lived, his list. None of that is to take anything away from the

success he had running what became a very large ship under his captaincy. Leahy is right about the essential simplicity of good business management. Perhaps his own reportedly essential simplicity is responsible for his approach and conviction that making things too complex is not the way to do or think about things. Leahy is not an insufferable egoist as are so many high flyers. His book is simply written. His thoughts, though sometimes conflicted, provide the occasional insight into what makes this successful man. The tale, therefore, rings relatively true. – Reg Birchfield

SEPTEMBER 2012

| management.co.nz | 23

IT TAKES VISION...

There are few business leaders with true vision; those who can see the big picture; the possibilities that others can’t or won’t see. Lloyd Morrison had a vision for his company that saw past any challenges that stood in his way. That’s what it takes to be a Top 200 Great.

Traditional Businesses Businesses That Talk About Vision Businesses With True Vision

...TO BE A

GREAT

COVER STORY

NZ’S MOST REPUTABLE

ORGANISATIONS WHY GOOD LEADERS MATTER

COVER STORY

Air New Zealand is this year’s Hay Group/ NZ Management magazine Most Reputable Organisation. Our research says senior leadership is key. So what, exactly, underpins a good name? Ruth Le Pla investigates.

ow can some organisations weather economic storms better than others? How do some face up to challenges – even tragedies – and still have customers, staff and stakeholders stand loyal by their side? What does it take to be trusted by your peers? In short, what underpins good reputation? Ask Air NZ CEO Rob Fyfe, Beca’s Greg Lowe and Fonterra’s Theo Spierings. Have a word with Salvation Army commissioner Don Bell or Kiwibank CEO Paul Brock. For they, and a select group of others, head what are considered to be some of New Zealand’s most solid organisations. Their insights lie at the heart of this year’s Hay Group/NZ Management magazine Most Reputable Organisations (MRO) survey which year-by-year is building a body of knowledge around reputational prowess in a Kiwi context. Reputation is a complex blend of multiple parts: hard won and easily ruined. Yet, as our survey reveals, in the current climate three key attributes are underpinning reputation like never before. The organisations topping this year’s survey show superior senior leadership, a vision for the future, and excellent product or service quality. Internationally, Hay Group conducts global research on corporate reputation with Fortune magazine. In Australia it works with AFR BOSS

AIR NZ CEO ROB FYFE

SEPTEMBER 2012 management.co.nz | 27

COVER STORY

Fonterra CEO Theo Spierings Theo Spierings reckons if he had a special “Next to the All Blacks, Fonterra is CEO’s shirt it would have the word “reputaone of the few New Zealand brands tion” sewn on to it. That logo must sit on his that travels internationally,” he says. The shirt “first and foremost”, he says, because company has a customer base in over 140 Fonterra’s good name must be woven into the countries and exports 95 percent of the very fabric of the organisation. milk collected in New Zealand. So important is Fonterra’s reputation to “With such a big export play in dairy Spierings that one of his first moves as incomand nutrition we address two key quesing CEO a year ago was to go out on a milk tions in the world. These are around food tanker to see firsthand the company’s interacsecurity (the availability of food), and food tion with farmers. Then he joined his sales safety and quality.” people to get an insight into the other end of Here in New Zealand, Spierings says the giant dairy pipeline that is Fonterra. Fonterra must continue to connect to the By experiencing for himself the distant community “and make sure our communitouchpoints of the dairy giant’s vast operaties are proud of what we’re doing in the tions, Spierings crafts a personal understandworld”. ing of how some of its various stakeholders “We build our reputation on three view the organisation. pillars: strategy and performance; sustain“Our group marketing people have lots ability and grass-root connections; and Fonterra CEO Theo Spierings. of different measures for different groups building our own people and their pride of stakeholders,” he says. “We measure our in their work.” reputation at the customer, farmer and community levels… but, for The last one is very important, he says. “If there’s no pride in your me, word of mouth is just as important.” own team, good reputation will never come.” Spierings’ repeat message to staff and stakeholders is that Fonterra must be a star performer in the world with a very strong connect to its grass roots. He’s also mindful that the reputations of Fonterra and New Zealand are inextricably linked. Fonterra carries with it the stamp, Organisations selected in this year’s Hay Group/NZ Management or brand, of New Zealand, he says, “and we have to protect that magazine survey of Most Reputable Organisations were judged country brand offshore”. against the following criteria:

The criteria that count

magazine. Here in New Zealand since 2010 it has teamed up with NZ Management magazine asking C-suite executives and board directors to nominate the organisations they deem to be the most reputable and why. Probing further into their thinking, each respondent is asked to rate the organisation they have selected against a suite of 10 attributes. (See box “The criteria that count”.) The end-result is a 3D picture of some of the best organisations in town. Now in its third year here, the survey continues to gather pace with over 50 percent more responses than last year. More than 46 percent of this year’s respondents are board members, CEOs or senior executives. The remaining respondents are senior managers, managers or similar level leaders. For the past two years, the MRO has been identifying reputable organisations across four categories: private sector companies, state-owned enterprises, government departments, 28 | management.co.nz | SEPTEMBER 2012

• Corporate social responsibility • Financial performance • Implementation of strategic objectives • Innovation • Operating model • Organisational structure • Quality of product or service • Senior leadership • Stakeholder relationships • Vision for the future.

and not-for-profit organisations. Now for the first time, the pool has been expanded to also include professional services companies. It’s a pool that this year brings to light the reputational achievements of PricewaterhouseCoopers and Deloitte NZ, and highlights once more the firm foundations on which Beca stands.

COVER STORY

CRACKING THE CODE It would be fair to say that Beca, Fonterra and this year’s top performer, Air New Zealand, have cracked the code to corporate reputation. As our chart shows, they have all been reliably in our top three rankings for the past three years. (See table “New Zealand’s Most Reputable Organisations”.) This time, Air New Zealand takes the top slot in the overall rankings, followed by Fonterra and then Beca. There are other stalwarts across the sectors. Kiwibank ranked first this year among most reputable stateowned enterprises after listing second the year before and first in our initial survey in 2010. NZ Police reigns supreme as the number one government department three years in a row: joined in equal top place this year by the Department of Conservation which has jumped from fourth place in 2011. Similarly, the Salvation Army continues into a third year as the most reputable not-for-profit organisation. NZ Red Cross sticks in second place and

New Zealand’s Most Reputable Organisations MOST REPUTABLE ORGANISATIONS – OVERALL 2012 Position

2011

2010

Air New Zealand

Fonterra

Beca

2012 Position

2011

2010

Air New Zealand

Beca

Fonterra

Fulton Hogan

–

MOST REPUTABLE COMPANIES

MOST REPUTABLE STATE OWNED ENTERPRISES 2012 Position

2011

2010

Kiwibank

Mighty River Power

–

Solid Energy

Meridian Energy

Genesis Energy

Landcorp Farming

–

MOST REPUTABLE GOVERNMENT DEPARTMENTS 2012 Position

2011

2010

NZ Police

Department of Conservation

The Treasury

MOST REPUTABLE NOT FOR PROFIT ORGANISATIONS 2012 Position

2011

2010

Salvation Army

NZ Red Cross

–

St John Ambulance

–

MOST REPUTABLE PROFESSIONAL SERVICES ORGANISATIONS 2012 Position

2011

2010

PricewaterhouseCoopers

N/A

Beca

N/A

Deloitte

N/A

Air NZ deputy CEO Norm Thompson.

SEPTEMBER 2012 management.co.nz | 29

COVER STORY

In their own words Landcorp CEO Chris Kelly Until recently, Landcorp was relatively reticent. We didn’t tend to share our successes and failures. We shied away from undertaking external benchmarking or sharing the management practices undertaken on our farms. Latterly, the company has been much more open. We share key performance indicators with the industry. We communicate best practice activities which have proven successful for the company, as well as sharing activities which are less successful. In addition, we hold numerous fieldays and other public events on our properties. Our reputation has been built on an increasing realisation that largeChris Kelly. scale farming can be profitable, and environmentally and socially responsible. The key thing is to be open and honest, and share experiences with peers and peer organisations. Landcorp has a “no surprises” policy extending from on-farm and management issues to the board and to our shareholder. I firmly believe the success of Landcorp lies in its people and their training. If an organisation has a favourable reputation, there is no doubt it attracts superior employees. Also important is the commitment shown by the directors of the company. We can undoubtedly pinpoint a direct link between reputation and shareholder value. A superior reputation attracts superior personnel from

directors right through the organisation. Superior personnel deliver superior results and shareholder value. Reputation is significantly enhanced when all staff are aware of their role in the company, and go the extra mile to deliver results which they themselves have a role in setting. In order to do that, communication up, down and across the company is vital. This in turn promotes teamwork, commitment and stronger bonds within the company. Landcorp uses a Balanced Scorecard methodology to track its success including a corporate scorecard which, among other things, measures its success economically, environmentally and socially. Measures relating to reputation include workplace health and safety, labour resource through recruitment and training, research and development, and the standard economic measures. Landcorp manages its organisational reputation indirectly by trusting all staff to be open, honest, sharing success and failures, and engaging in community and other activities which enhance the status of the company. Reputation has to be earned. It cannot be bought by superficial things such as sponsorships and other monetary activities. Farmers tend to be rather taciturn people and reputation can only be earned over time and with consistent behaviour that is honest, ethical and fair.

Salvation Army commissioner Don Bell I’m proud The Salvation Army has been recognised again as a Most Reputable Organisation in New Zealand. In the past year, we have increased our profile in New Zealand particularly through our work in Christchurch in the Eastern Suburbs with fallout from the earthquakes. Our services have also been in increasing demand in South and West Auckland where we have been working to support the poor and disadvantaged from our Community Ministries centres. The Salvation Army’s work is underpinned by our belief in Christ. We are directed out of fundamental beliefs in Christian principles to do what we do for the least, the lost Don Bell. and the lowest; many people who others in society are not particularly interested to help. Last year The Salvation Army provided 62,300 people with food assistance, 7400 clients with budgeting advice, 24,300 counselling clients, 41,500 social work clients and we provided 170,300 bed nights of accommodation in the community. What underpins all this demand for care and support is a belief by the Army that all life and all people are sacred. We believe that, with help and support, people can transform their own lives and this is best achieved by the partnership of faith in God and works of Christian charity. Our reputation is therefore a result of the strength of our faith and works, and not a desire to purposefully develop our own reputation. Organisations must remain true to their mission. We rely on the 30 | management.co.nz | SEPTEMBER 2012

goodwill of the public to support our Red Shield Appeal and for their in-kind donations to our Family Stores. The current economic recession has made Government contracting more challenging and donations to The Salvation Army are also constrained. We rely on our good reputation for God’s providence from these sources in this difficult economic climate. The Salvation Army’s Red Shield carries a tremendous amount of trust in the community at all levels. We do not engage in activities which specifically are aimed at building our reputation, however, The Salvation Army does aim to meet the needs of poor and vulnerable people in New Zealand who require pastoral care, advocacy, food support, supportive and emergency housing, second chance employment training, addiction treatment, family tracing, disaster relief or early childhood education. Over the last 123 years, these activities have developed a significant reputation for The Salvation Army. The Salvation Army has over 3000 officers and lay staff and is recognised as a high value employer. Externally, we hold the Red Shield Appeal which asks the public for support. The amount of money received in each year’s appeal is a direct indication of our reputation. We continue to grow the support enjoyed by The Salvation Army each year. Our reputation as an organisation stands or falls on the quality of the care and support we offer to those in great and ever-increasing need.

COVER STORY

Deloitte chief executive Thomas Pippos

Deloitte chief executive Thomas Pippos.

St John Ambulance in third. When it comes to the non-profit sector, it seems these three organisations have got more than a decent rep. That certain companies hover at the top of our tables year after year comes as no surprise. For building a good name is a long-term business. That they can do it in within the constraints of the current economic climate is testament to their ability to focus on the stuff that matters to all their stakeholders. This year’s survey respondents praised many aspects of Air New Zealand’s performance: its strong leadership, customer service orientation, innovation, brand and corporate values, and its role as a strong ambassador for NZ. “Its branding and image align to how Kiwis would like their values portrayed – innovative, reliable and fun – and how we perceive ourselves internationally as leaders in technology,” said one person. “It’s an iconic Kiwi brand”, it “has set the benchmark for customer service and ethics” and makes “no compromise in service and values”, say others. Another respondent praised Air NZ’s fun culture and ability to embrace Kiwi diversity. Many comments focused on the airline’s innovative streak: “constantly developing the business” and an “innovative approach to everything they do”. Air NZ’s ongoing success in a tough marketplace is attributed to its “honest” and “strong” leadership from the top with leaders who “walk the talk and engage with their people”. Deputy CEO Norm Thompson says he and CEO Rob Fyfe are very flattered the airline is recognised for its strong reputation. The organisation works hard to get loyalty and support from its people and its customers. “We have 11,000 staff who live and breathe four key brand values that underpin the service we deliver to our customers,

Risk and reputation permeate everything they do at Deloitte NZ, says CEO Thomas Pippos. Illustrating the point, he flicks to a page on the firm’s intranet. It’s a detailed exposition of the firm’s structures, policies and practices around the twin topics of risk and reputation. For, at Deloitte, the two are deeply entwined. The “deep level of granularity” with which Deloitte engages with risk and reputation often surprises people when they come across it for the first time, says Pippos. “There’s everything here about risk and reputation (R&R) right through to client engagement and acceptance,” he says. “Every time we target a client or undertake a particular project we have to be comfortable from an R&R point of view. “We categorise work in accordance with different guidelines in terms of whether it’s ‘much greater than normal risk’ to ‘normal risk’ and that categorisation is different across different service offerings.” Pippos sees R&R as critically important. “It’s about our morals. It’s about trust. Fundamentally, organisations such as ours are predicated on trust: not only trust in the marketplace but also trust within the organisation, amongst the partners and between the partners and the other people who work with us.” Pippos acknowledges it can sometimes be difficult to measure the positive effects of R&R “because they are intangible” but it’s clearly possible to see the negative side. “The biggest and most noticeable negative effect is when the marketplace loses trust in a brand. We saw that with the collapse of [Enron audit firm Arthur] Andersen.” Deloitte NZ’s investment in R&R includes a designated risk and reputation leader who is one of the firm’s senior audit partners, a string of functional risk leaders, an independence director and an ethics leader. R&R leader Ian Marshall plugs in to Deloitte’s global network of peer group specialists and reports independently to the local firm’s board. R&R, says Pippos, is not only part of the fabric of the organisation “there’s also a huge amount of discipline that the organisation has put through to reinforce what we’re doing”. Pippos says it’s hard to perceive of another industry that has risk and reputation as such an overt part of its fabric. “Effectively, we’ve got zero tolerance around R&R.” Even so, he acknowledges that all the processes in the world can’t prevent things going pear-shaped. “You can’t eliminate risk. All you can do is try and manage it.”

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COVER STORY

Beca CEO Greg Lowe Beca CEO Greg Lowe likes to point out his firm has been working with some of its clients for the past 30, 40, even 50 years. Such long-term commitment means Beca truly understands clients’ business and can help them achieve their goals, he says. Reputation is vital to a professional services business, he says. “A client’s trust in us to do the job is very important and having a good reputation in the market is critical to the sustainability of our business.” All 3000 staff members share responsibility for enhancing and maintaining Beca’s good name, he says. “How we are seen in the marketplace is very important to us and one project that’s not going well can harm that reputation. Everybody in our organisation understands we have to do a good job for all our clients all the time.” CFO and executive director Chye Heng says Beca tries, in turn, to lend its growing reputation in the Asia-Pacific region to promote New Zealand’s wider interests “with Beca joining the New Zealand Prime Minister on recent trade missions to Indonesia and China and helping to take the lead in a number of ways”. He says the firm outlines a list of attributes that prospective shareholders need to exhibit before they can expect to be considered for a Beca shareholding. At the top of this list is ‘Supporting Beca’s vision, values and strategy by their personal actions and behaviours’. “There is a reason that this goal appears on the list ahead of some of the more profit-focused attributes such as ‘Win work’ and ‘Contributing to a profitable operation’,” he says. “It underlines the fact that, for Beca, how we go about conducting our business is more important than the profit we make at the end of the day. “As our founder, Sir Ron Carter says, you’re only as good as your last job. With thousands of jobs completed, our reputation is now built on a much broader and well established foundation than one job alone. However, we still maintain that keen sense of pride and personal trustworthiness on every job we do.”

which has created a high degree of loyalty to the airline,” he says. “This in turn allows us to deliver results to our shareholders.” In Thompson’s view, people and innovation underpin Air NZ’s good name. “Rob and the executive team have long employed a strategy that people, rather than planes, are our greatest asset. Great people creating and delivering innovative product and fantastic service is what enables us to constantly surprise and delight our customers.” Thompson says organisations can best sustain their reputation in the current difficult economic climate by operating with integrity and authenticity in everything they do. “Continually seek to innovate and improve the experience 32 | management.co.nz | SEPTEMBER 2012

Beca CEO Greg Lowe.

you provide to your customers. Always look to do better. Listen, and respond, to customer feedback.” Thompson rates a good reputation as “hugely significant” on many levels. “Having a world-class reputation is critical to driving revenue,” he says. “Equally, it is critical to ensure we can attract and retain the best talent to our business. In a service industry people are going to support you based on your reputation, what they experience when they interact with you, and what they hear about you from their friends and family.” Corporate reputation and shareholder value are inextricably linked, he says. “A CEO and their management team are scrutinised by investors who are looking for confident, able leadership combined with a visionary growth agenda. Trust plays a large part in a decision to invest in a company, so a CEO and senior management team whose reputation is strong by extension adds value to their shareholders. If more people are willing to invest in the company, existing shareholders will realise value as a result.” Thompson says senior leadership at Air NZ value customer feedback – both positive and negative. “It’s hugely important to Rob as CEO. He personally responds to every email that he receives from a customer or from one of our people. “And whilst we’ve laid a fantastic foundation with our culture, our reputation, our innovation and our world-class service, our goal is to provide our shareholders with a better return than we’ve been able to in recent times.” UNAPOLOGETICALLY NZ Respondents were fulsome in their praise of many of this year’s star performers. Beca, they said, is a “class act both internally

COVER STORY

and externally”. They cited its ownership model which “creates a high level of participation and ownership of outcomes and culture”. Fonterra was selected for its “strong performance and dedication to farmers”. Kiwibank is “unapologetically NZ”. One respondent said they had been a member of the bank since it began “and continue to be impressed. They are in a league of their own.” The Department of Conservation “consistently performs in increasingly tough budget votes and delivers outstanding results”. In the not-for-profit sector, The Salvation Army “is the most integrated and loyal: always there”. It is, as one person said, “a great organisation that is dedicated to the community”. Another replied, “the strength of the senior leadership can be seen through the actions and belief of the staff in the organisation”. STABILITY IN VOLATILE TIMES Hay Group NZ general manager Jacqui Millar says this year’s survey findings mirror what her company sees in its interactions with clients. There is, she says, an increasing focus on leadership by companies across the board. “Leadership is pivotal in realising organisational strategy,” she says, “particularly in what is an ongoing volatile environment. Organisations are increasingly investing in leadership training and coaching, and leadership team effectiveness, as well as developing their attraction and reward strategies to ensure they are selecting and retaining the best leaders for their organisation.” Millar notes that reputation is shaped over time by all of an organisation’s activities. “It is wider than what a company seeks to communicate to its stakeholders and the market. Hay Group’s global research over the years has shown there are common factors across organisations with great reputations. And this year’s research highlights the main ones as well as showing that a diverse range of factors contribute to reputation.” Millar says reputable organisations have a clear and compelling strategy, with strong leaders accountable for delivering the strategy and communicating it within and outside the organisation. “These factors were highlighted in the research as important to respondents when they nominated companies.” In an earlier article published in NZ Management, Millar said Hay Group’s 15 years’ of research and experience shows that organisations need to build their reputation on solid foundations. Some of the key ingredients that

Fulton Hogan executive manager corporate services Jules Fulton Fulton Hogan has a video of a woman thanking staff for helping carry her shopping across roadworks. A stroke victim, she says every time she pulled up her car near her house the Fulton Hogan site workers would down tools and give her a hand. Executive manager corporate services Jules Fulton says the video helps signal to other Fulton Hogan workers that good connection with the public counts. “We work hard on our reputation indirectly by championing our people who go the extra mile,” he says. The company values every scrap of feedback from members of the public who take the time to write or ring to share their stories of their encounters with staff at work. These tiny slivers of positive feedback are converted into Fulton Hogan’s in-house Extra Mile Awards that reinforce the value of constructive encounters. “In many ways, the most risk out there is our customer,” says Fulton. “So when you can convert members of the public from being frustrated about people working on the roads to giving a friendly wave and a smile, that’s good reputation.” It’s also “incredibly empowering” for his people, he says. “Instead of being abused, they’re acknowledged and feel good about what they’re doing for the community.” He sees the entire workforce as responsible for Fulton Hogan’s reputation. “On some occasions we’ve been let down and we work hard to isolate the behaviour and respond to it.” Fulton Hogan is “fundamentally built on ownership”, he says. “When my grandfather started the company in 1933 in the height of the depression, it was him and Bob Hogan. They’d both been made redundant, got together and had a crack. Ever since then, the core value of Fulton Hogan has been ownership.” Approximately a third of Fulton Hogan’s 3500 people in New Zealand now have some form of shareholding in the company and each business unit is expected to be standalone and successful in its own right. “Our people run their part of the business like it’s their own,” says Fulton. He sees a good reputation as absolutely essential in tough economic times when everyone is spending less. “The work you have is more critical to you. Everyone is nervous about what the tight economy means for their job and for their family. Reputation is everything.” Fulton Hogan executive manager corporate services Jules Fulton.

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COVER STORY

PwC CEO Bruce Hassall About 10 years ago one of PwC’s partners told current CEO Bruce Hassall you don’t realise the value of your reputation until you don’t have one. It’s something he’s never forgotten. “We were talking about a company that had just imploded,” he says. “They still had all their assets but their reputation was gone and so, therefore, was their business.” Hassall says PwC’s own reputation is based on culture, people and quality. It’s measured in a number of ways, including through over 200 “very comprehensive” client satisfaction surveys conducted on a rolling basis and handled by senior partners who don’t work with the client in question. The surveys probe to discover the extent to which PwC’s work is making a positive difference for clients’ business, the perceived quality of its work, and whether its teams are delivering to expectations. Hassall does about 20 to 30 of the surveys each year himself. It is, he says, one of the most important things he does. “It’s a great way of connecting with clients, understanding their issues and getting real-time feedback on the quality of the service and the value that we’re adding to their organisation. “I remember a piece of advice early on in my career,” he says, “that told me to be careful not to believe my own press releases. That advice is a bit tongue in cheek but there’s nothing like getting feedback firsthand from clients.” You can’t have a successful organisation, Hassall believes, without listening to clients. PwC also conducts comprehensive people surveys each year in which, among other questions, it asks if staff are proud to work at the firm. “I’m happy to tell you that 91 percent of them last time said they were,” says Hassall. The same survey asks staff how they view the reputation of the firm. “These are very important measures that we track very closely,” says Hassall. “You won’t have a sustainable business if you don’t have a great reputation.” He notes that leadership has become more important in driving an organisation’s reputation in a post-GFC world. “I’ve always believed you only really see the quality of leadership when the going gets tougher,” he says, “because in a more challenging environment leaders have to front issues and make more decisions.” It is incumbent on today’s leaders, he says, to PwC CEO remain positive and confident around change. Bruce Hassall.

34 | management.co.nz | SEPTEMBER 2012

are common across organisations with great reputations include having a clear direction, an enabling culture and strong leadership. STRATEGY, WHAT STRATEGY? The rise of leadership as one of New Zealand’s most pressing challenges prompted the Hay Group/NZ Management magazine team to include questions around leadership development strategy in the survey for the first time this year. “We were keen to see how many organisations have formal strategies in place and how they describe the current state of leadership in their own organisations,” says Millar. Of those who have an active leadership development strategy in their organisation, the largest proportion (at just over 36 percent) was privately-owned companies. Fifteen percent of them were government owned and marginally less than that were publicly-listed businesses. The survey showed that those organisations that had strategies in place most often described leadership in their organisation as consultative, collaborative, strong and open, says Millar. “They also identified leadership as evolving, describing leadership as growing, emerging and improving. This is very healthy and encouraging.” Asked to describe in more detail the leadership of their own organisation, respondents poured out a mixed bag of positive, negative and sometimes quite alarming feedback. “A few months after amalgamation, there is little evidence of active leadership, only reactive,” said one. “Messianic,” said another, ambiguously. Those disenchanted with leadership told us it was everything from ad hoc, adequate, autocratic and average to confused, dictatorial and inconsistent. “Patchy”, “paternalistic” and “poor” were frequent comments. On the positive side, a more happy bunch of respondents described their organisation’s leadership variously as accessible, balanced, collaborative and considered. Others said it was democratic, dynamic and empowering. Flexible, inclusive, informed, inspiring, thoughtful, relevant and vigorous… someone, somewhere is doing it well. Yet, as this year’s MRO survey companies know, strong leadership and the good reputation it drives remains a delicate creature. A good name, built brick-by-brick over decades, can be laid waste in an instant. M

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WORK & LIFE AWARDS

Skills Highway winner – City Care.

Building

better bonds

ith skills shortages looming in many industries and the Government tinkering with workforce training, organisations must take a strong lead to ensure New Zealand keeps up with other first world nations in attracting and retaining staff. But where is the staff to come from, especially in the healthcare sector? New Zealand must compete with other western nations for qualified and experienced healthcare professionals when there is

36 | management.co.nz | SEPTEMBER 2012

already a global shortage. And with continuous changes to immigration rules and the expense of overseas recruitment, that can only be a partial solution. It is this conundrum that prompted one of the country’s largest health providers, the Counties Manukau District Health Board (CMDHB), to develop a new initiative that won it the Tomorrow’s Workforce Award and subsequently the Supreme Award at this year’s ANZ New Zealand & EEO Trust Work & Life Awards. CMDHB looks after half a million

people many of whom are Maori or Pacific Islanders, and living with poverty. Through its Health Science Academies initiative it is offering bright Pacific Island and Maori secondary school students a head start for a career in the health sector. The health board’s long-term ambition is to be able to fill some of its positions for qualified clinical staff with students from the same culture as many of its patients. CMDHB workforce consultant Christine Hanley says the board set up health science academies in two local secondary

WORK & LIFE AWARDS

Thames Timber – Skills Highway category.

schools in 2010 to help Maori and Pacific students go on to further education, instead of dropping out of school early or not pursuing tertiary study. “We partnered with James Cook High School and Tangaroa College with funding from The Tindall Foundation,” she says, “while Otahuhu College is working in partnership with the Pasifika Medical Association, with funding from the Ministry of Health.” Hanley says the trio of academies has worked together to develop science curricula with a focus on preparing the students for a tertiary health qualification and then eventual employment with CMDHB or other health employers in the district. EEO Trust chair Michael Barnett says that, interestingly, of the five award categories, Tomorrow’s Workforce attracted the largest number of the 62 entries (in itself the largest total ever) this year. “This tells me that organisations are being more strategic with their initiative and are aiming at nurturing their future workforces. CMDHB’s supreme award win also shows that big organisations are really planning for the long-term future.” Highly commended under this award was the Department of Corrections which has focused on upskilling offenders by operating 180 different businesses in 18 prisons. In five years the number of offenders who’ve had employment

Department of Corrections – Tomorrow’s Workforce category.

training grew by 67 percent; the number of national certificates awarded increased by 159 percent. OFTEN INVISIBLE An initiative to train staff to make sure disabled customers get the service they deserve in their own community, won the Upper Hutt City Council the Diversity Award. Barnett says it is great to see a council starting a programme to include people with disabilities through staff training and education. Not only does it mean the inclusion of a larger number of people in their community but that someone with a disability may also feel more confident to apply for a job there, as a result. “I’m also really impressed the council is offering the resource at no cost to other businesses and councils.” REDUCING INJURY DAYS When Albany-based Electrix realised everyday physical work was leading its workforce to take regular injury days, it developed a fitness programme to help combat the problem. The initiative impressed the judges enough to award the company the Work & Life Award. Graeme Johnson, technical manager for Electrix’s distribution services division, says the company saw a rise in the number of musculoskeletal injuries to linesmen, caused by the awkward posi-

tions they tend to adopt above and below ground as they fix power problems. Their shoulders, knees and spinal areas were most commonly affected. Until then, Johnson says ‘lineys’ were sent to a GP for assessment and put on sick leave or light duties for three days while they recovered. It was a no-questions-asked, reactive approach typical of the industry. But it didn’t help productivity, he adds, saying that it probably wasn’t the best way to help them heal. Not only that, although new employees had medical checks on eyesight, hearing, lung function, drug use and other concerns, there was nothing to confirm they could cope with the physical demands of the work. This meant the company discovered too late that some new staff weren’t able to do the work without risking injury. It became clear that a preventative wellness programme was needed to reduce injury, help recovery and provide a way to screen potential employees. Staff were filmed undertaking a variety of line-related tasks both above and below ground. With the help of a personal trainer, Electrix developed a strength-conditioning programme to build up areas where linesmen are susceptible to injury. The company set up a 60 square metre gym in a corner of its warehouse, and Johnson was one of 18 guinea pigs who tested out the activities using free weights, SEPTEMBER 2012 management.co.nz | 37

WORK & LIFE AWARDS

Walk the Talk winner – Shaun Brown from Bupa Care Services.

filled bags and Swiss balls. As a result, two programmes were developed and implemented in 2010. Every candidate for a linesman’s job now takes a pre-employment physical assessment (PEPA). Carried out by Productive Biomechanics in the Electrix gym, they involve timed events or exercises to failure – until no more repetitions can be done. Candidates also undergo spinal x-rays and a full musculoskeletal examination, which leads to a recommendation whether to employ. Some candidates may be offered work on the condition they attend the second programme lineFIT. This a voluntary 12-week challenge that is delivered by a trainer to groups of six to 12 people.

Some employees were initially sceptical about the programme, says Johnson – before they started seeing the benefits enjoyed by their fitter, newly glowing colleagues. “It’s the group dynamic that gets people through.” So far, more than 72 field staff have completed or are taking part in lineFIT, and the company now has a defined pathway to help rehabilitate those injured. The not-for-profit Far North REAP (Rural Education Activities Programme) was highly commended under the Work & Life Award for its initiative in giving staff flexible hours to help reduce the burnout that often comes with working with high-risk families. It delivers a wide

The power of collective clout Entrants for this year’s ANZ New Zealand & EEO Trust Work & Life Awards. Supreme Winner Counties Manukau District Health Board – Health Science Academies Diversity Award Winner – Upper Hutt City Council BNZ – Women BNZ – Maori Business CORE Education Department of Corrections Far North REAP Society Sachie’s Kitchen Sinclair Knight Merz Unitec Institute of Technology Veolia Transport Auckland Waikato District Health Board Work & Life Award Winner – Electrix (Highly commended – Far North REAP Society) AECOM NZ Auckland Disability Law Coca-Cola Amatil NZ CORE Education Crown Forestry Rental Trust Fisher & Paykel Finance

38 | management.co.nz | SEPTEMBER 2012

Fishpond ITL Engineering Mental Health Foundation of NZ Sport Waitakere Women’s Health Action Walk the Talk Award Winner – Shaun Brown, Midlands operations manager, Bupa Care Services Dean Kimpton, MD, AECOM NZ Jo Ann Field, GM of residential and high needs services, Child Youth and Family Paul O’Brien, CEO, EasiYo Ben Powles, CEO, Fishpond Ngaire Phillips, line leader, Hansells Food Group Sachie Nomura, MD, Sachie’s Kitchen Sarah Sinclair, water networks team leader and client manager, Sinclair Knight Merz Ian Blair, GM business banking, Westpac NZ Mike Bennetts, CEO, Z Energy Tomorrow’s Workforce Award Winner – Counties Manukau District Health Board – Health Science Academies (Highly commended – Department of Corrections) An Extra Pair of Hands Asian Health Support Services, Waitemata District Health Board and Northern DHB Support Agency Contact Energy and Mighty River Power

CORE Education Counties Manukau District Health Board – Pacific Nurses Child Youth and Family, and Ministry of Social Development Downer NZ Electricity Supply Industry Training Organisation, Northpower and Electrix Grow Wellington and Hansells Food Group Oceania Group – Certificate in Residential Care Oceania Group – Training Planner The University of Waikato Toi Te Ora – Public Health Service of the Bay of Plenty District Health Board Unitec Institute of Technology Waikato District Health Board Westpac NZ Skills Highway Award Winner – City Care (Highly commended – Thames Timber) Acma Industries Counties Manukau District Health Board Creative Abilities & Associates Hansells Food Group Metal Skills Oceana Gold (NZ) Snap Fresh Foods Spotless Facility Services (NZ)

Supreme winner, and winner of Tomorrow’s Workforce Award – Counties Manukau District Health Board. Health Science Academies.

Scientifically speaking Counties Manukau District Health Board’s long-term strategy to attract more Maori and Pacific people into its workforce is gathering pace. Just under 140 students are now enrolled in the health board’s future workforce engagement programme through health science academies set up in selected local schools. Within the first year, 87 percent of students have achieved NCEA Level 1, many with merit and excellence in external tests. The academies – in James Cook High School (Manurewa), Tangaroa College (Otara), and Otahuhu College – focus on year 11 students who show a good work ethic, self-direction, motivation and reasonable academic levels. The students attend four mandatory subject classes a week including science, and health science. They are expected to attend up to three extra weekly tutorials during term time and in their holidays, undertake revision, study skills and mock exam classes. CMDHB workforce consultant Christine Hanley says participating students now have a sense of direction, are motivated and more confident. “An unexpected bonus has been that other senior students who are not in the academies are also opting to continue with science subjects. In one school, this number has doubled.” She says such a promising start means students are well on track to being part of the solution to health service challenges the region is facing in the near future.

range of community and educational services throughout the region with government funding. BELIEVING IN STAFF One man’s dedication to his staff, clients and industry has won him the Walk the Talk Award. Bupa Care Services’ Shaun Brown started out as a caregiver and trained as a registered nurse, then moved on to become a clinical leader before taking up his role as a care home manager. He has generated a culture of caring throughout his company from management through to elderly clients, and his

hands-on experience in the sector means he relates well to his staff and boosts their confidence and capability, says Bupa’s general manager of homes Grainne Moss. This is reflected in employee engagement surveys where 90 percent of staff agree that Bupa is well led under Brown’s management and that he provides the support they need to do their jobs well. “On top of that, 96 percent of the employees in his team say they really enjoy their jobs. This positive endorsement is also reflected in the company’s bottom line – there has been an increase in occupancy and profitability per bed since he became

the operations manager,” says Moss. Bupa has a number of rest homes and hospitals, retirement villages and a monitored medical alarm service. Brown has been operations manager for Bupa’s Midland region for three-and-a-half years and has a staff of about 700. He also focuses on the care of resthome clients and introduced a ‘falls focus’ team to reduce the number of elderly residents taking a tumble. A survey of clients in his region shows their satisfaction levels have risen to 89 percent since Brown has been on board – a six percent increase, Moss adds. TRAINING When Christchurch’s City Care realised that a significant number of its 1350 staff working in water, wastewater, parks, roading, construction and facilities management across New Zealand had literacy and numeracy problems, it decided to do something about it. It was this proactive move that won City Care the Skills Highway Award. Human resources manager Adrian Watson says the quality of written language in City Care forms, reports and other documents was causing concern and the company also wanted to boost SEPTEMBER 2012 management.co.nz | 39

WORK & LIFE AWARDS

Resourceful stuff The notion was simple. Upper Hutt City Council wanted every member of the community – especially those with disabilities – to have a positive experience of all the council’s departments from its libraries to its swimming pools. For those working in the community, the end result is a specialist resource kit. For the council, the project has claimed the Diversity Award at this year’s ANZ New Zealand & EEO Trust Work & Life Awards. Developed after research with staff and people with disabilities, the DIScover initiative includes booklets and staff training workshops that increase disability awareness. Council community development advisor Frances McEwen says the project’s scope spans both physical access, and attitudes and understanding. “The initiative has also provided council with an opportunity to promote the importance of disability awareness inhouse.” Now staff are coming up with their own ideas on how to improve access for disabled customers. “The library has reconfigured its seating so it’s more accessible for wheelchairs and it is looking at lowering one of the self-issue machines so it’s more user-friendly.” HR manager Diane du Toit says DIScover has not only been outwardly focused but is also addressing the need for a culture shift within council to accept and understand those on staff with disabilities. The resource has been promoted to local businesses and there has been national interest in the project with 30 organisations – including Work and Income, Hamilton City Council and Mitre 10 – requesting training and access to the DIScover resource.

employees’ computer literacy. City Care partnered with the Tertiary Education Commission and Hagley Adult Literacy Centre to initiate literacy and numeracy training after initial assessments showed some staff had a reading level of six-year-olds. Its successful 2010 pilot programme was later extended to everyone else. Watson estimates the training has saved up to $783,000 per 100 employees in terms of the value of their time. Tallied across the company, this amounted to more than $1.2 million each year as people now fill out forms more quickly and accurately. “We hadn’t realised how high the 40 | management.co.nz | SEPTEMBER 2012

literacy demands of some of our forms were,” Watson says. “One manager commented that for the first time she had received all the information required on an incident form and this had saved her a lot of time and effort.” Analysis showed that arborists were inputting data to spreadsheets three times faster, tradesmen were able to read the health and safety manuals more easily, road-surfacing foremen were completing job sheets properly, and managers were reading and analysing documents more efficiently. A total of 47 employees said they were saving time each day by filling out forms

Diversity award winner – The Upper Hutt City Council.

faster, understanding instructions better and communicating more with staff and clients. Others benefited from a dramatic increase in computer skills. “One operations manager told me it used to take a couple of days of sweating it out over his computer to do his monthly report and it now takes him 20 minutes,” Watson adds. Barnett says it was impressive that the size of the company’s workforce and its diversity didn’t stop City Care from investing in their ongoing education, including everyone from managers to unskilled road gangs. Thames Timber was highly commended in this award for its literacy and numeracy programme for its 140 largely unskilled staff. The programme helps staff better deal with problems in a busy and potentially dangerous workplace. Barnett says the 10 entries in this category were all training staff in these skills with a huge side benefit in staff retention and fewer work place injuries. “Snap Fresh Foods reduced its (mostly Chinese) staff turnover by about 70 percent, because of the ongoing training offered. Thames Timber found it led to less wastage of wood because staff were working smarter.” M Rosemary Williams is a freelance writer and editor. rwilliams@family.net.nz

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NO GOING BACK Retailing in the age of difference Debt-averse, bargain-minded and technology-driven, consumers are laying down some new rules for retailers. Those who respond in kind can still stuff their tills with dollars. By Nick Grant.

he importance of the retail sector to the New Zealand economy is beyond dispute. That it serves a twofold purpose as both a channel for a significant proportion of household consumption and a leading indicator of confidence in the local economy only boosts its value. As such, it comes as no surprise that the sector’s previously steadily-rising sales revenue has been stunted by the impact of the global recession. (See box story “Ouch!”) At the same time, New Zealand retailers

42 | management.co.nz | SEPTEMBER 2012

remain beset by other challenges. Not least of these are the opportunities and threats presented by technological innovations that constantly fine-tune consumer behaviour. The rise and rise of online retail channels continues apace. Yet many argue retail’s chief challenge is that recessionary pressures have already caused consumers to evolve. They now exhibit a lack of appetite for debt alongside a much more prudent attitude to saving. What’s more, this new, risk-averse, increasingly assertive

consumer looks likely to be here to stay. “We all have to realise there’s no going back,” says John Albertson, CEO of the New Zealand Retailers Association (NZRA). “Any retailer hoping we’re going to return to the market of 2003-2004 is in for a shock, because it’s a whole new ball game.” So while, as The Warehouse CEO Mark Powell notes, “retail remains pretty simple”, it’s certainly not getting any easier. The value of sticking to one’s knitting is demonstrated by Kathmandu, the

ENTERPRISE SUCCESS

Photo: thinkstockphotos.com

and retail margins, as a result of eschewing selling them via wholesale channels. The company’s growth, meanwhile, is fuelled by the rollout of new stores. With 46 stores in 2006, its store footprint had increased to 110 by mid-2011. A further 15 stores will have been opened by the end of 2012. Little wonder that, although cautious

Stories of NZ enterprise success This is the sixth article in a major eight-part NZ Management series: Stories of NZ enterprise success. Senior business journalists Nick Grant and Vicki Jayne draw on insights from the Deloitte/Management magazine Top 200 Awards and associated lists of the country’s leading companies to conduct a sector-by-sector review of the underlying drivers of success in key parts of New Zealand’s economy. Next month: The food & beverage sector.

Ouch! For New Zealand’s retail sector, 2004 was a banner growth year. Total retail sales of $52.6 billion represented a 9.3 percent improvement over 2003. Then, the slide began. In 2005 sales growth slipped back to 6.5 percent, then to 6.1 percent in 2006. A small bump to 6.2 percent in 2007 was followed by a precipitous drop to just 0.3 percent in 2008. That’s when the sector – and the New Zealand economy in general – hit the recessionary wall. In 2009, retail slumped further into that wonderfully oxymoronic term: negative growth (-0.8 percent). Retail rallied in 2010, with a 3.7 percent improvement over the previous year, and this welcome trend continued in 2011, with 5.5 percent growth on 2010’s sales resulting in a total take of $68.7 billion. That increase, however, has come at the cost of an appreciable erosion of margins in the sector. The figures? Back in 2003, the industry enjoyed a 6.3 percent net profit before tax as a percentage of total income. By 2010 that was just 2.9 percent. Ouch again.

adventure apparel and equipment retailer, which earned the Marsh Most Improved Performance Award at last year’s Deloitte/ Management magazine Top 200 Awards. In its first full year listed on the New Zealand and Australian stock exchanges, the company gave what one awards judge described as “a stellar performance”. It grew sales by 23.5 percent to $306 million, with net profit before extraordinaries improving 47 percent and gross profit margin up by 65.5 percent. This success is underpinned by Kathmandu’s focus on creating quality branded products for which it reaps both wholesale

about the ongoing challenges of the economic environment, Kathmandu CEO Peter Halkett has told shareholders “our performance through the past year gives us confidence that our focused growth strategies should continue”. Such confidence was underscored by the June opening of a new distribution centre in Christchurch that doubled distribution capacity. A key success factor for Kathmandu is clearly the position it occupies in the quality end of its market and the point of difference the exclusivity of its brand affords. This is in stark contrast to much of the

retail market, which has been engaged in a downward spiral of price slashing for short-term cashflow. “Over the past six years or so, it’s been a fiercely competitive market and margins have been halved,” says NZRA’s Albertson. “So if you’re looking at a $1 million business, the owner’s taking out $30,000 a year on average. That’s a huge risk for very little return.” Noting “there’s a point where no one can go any lower on price and still have businesses that are viable”, Albertson suggests that sooner or later (and his personal preference is sooner) retailers need to adopt a longer term, more sustainable strategy. Retailers run the risk of huge discounts being bedded into consumers’ expectations. “Some years ago if you offered a 10 percent discount, it sounded like a good deal,” he says. “These days you’re probably looking at 30-40 percent. It’s a long road back from there especially when you up the ante with the prices offered by some of the online operators… particularly around daily deals.” Other than those operating their business as discount structures, then, Albertson reckons retailers could do well to shift their focus from price to the total purchase experience. “If price really was the be-all and end-all, by this stage the stores operating at the bottom end of the market would have it all,” he says. It’s a point not lost on Mark Powell, who took over as CEO of The Warehouse just over a year ago. The iconic New Zealand retailer – which in May celebrated the 30th anniversary of its first store opening – boasts a scale and reach that’s a legitimate cause for envy. Around 20 percent of Kiwis visit one of its stores each week. Nonetheless, the Deloitte/Management magazine Top 200 figures clearly show The Warehouse has been in decline for some years. Since peaking at $2.26 billion in 2004, its revenue has fallen each successive year, recording a total of just under $1.68 billion in 2011, the company’s lowest since 2001’s $1.66 billion. Given the opportunity to blame this SEPTEMBER 2012 management.co.nz | 43

ENTERPRISE SUCCESS

The Warehouse’s Mark Powell.

underperformance on fallout from the global financial crisis, Powell demurs. “You could argue The Warehouse is a price-led retailer and so should benefit in a recession,” he says. “While it’s certainly a very competitive environment out there, lots of our issues go back over the past decade.” Although he appreciates there were valid distractions for senior management during this time – including an ill-fated attempt to expand into the Australian market and being the target of a potential corporate takeover – Powell says these issues fundamentally stemmed from long-term, systemic lack of reinvestment in the business. “As a retailer you need to be refitting stores every seven years. So if you have 89 as we do, you should be doing about 15 to 20 stores a year on a regular basis. The Warehouse only refitted about 15 of them in 10 years. That’s a substantial underinvestment.” Now faced with playing catch-up, the company has committed $130 million to a store investment programme. “We have just done the first 10 refits, and we’ll roll into another 20-odd next year and about 24 the year after, to really bring our stores up to standard, so they’re clean, contemporary, operate well and give a good customer experience.” That customer experience is being further enhanced by increasing the 44 | management.co.nz | SEPTEMBER 2012

New Zealand Retailers Association’s John Albertson.

number of shop-floor employees. “We got into a loop of trying to hold our profit by reducing costs rather than driving sales, which isn’t sustainable long term. In any retail business you’ve got to control costs tightly but it’s a fine line. And when you start removing costs that actually hurt the customer experience to the degree that you start losing sales, it becomes self-defeating,” says Powell. “So we’ve put 300-odd people back into our stores in the past year to improve service to our customers and there’ve been a lot of good results from that. During the 2000s we had many years of seeing same-

Ezibuy’s Simon West.

store sales decline, for instance, and now we’re starting to see consistency in the sales group, which is what you really want.” Another leg of The Warehouse’s turnaround strategy (it has six legs in total) is what Powell refers to as “multi-channel and direct customer engagement” – leveraging the opportunities offered by technology. In other words, direct customer engagement includes the recent rollout of a BizRewards account card aimed at small businesses and the soon-to-be launched ‘Your Warehouse’ that, for now, remains a commercially sensitive secret.

Team text When it comes to making sure staff are all on the same page, nothing beats a good book. The Warehouse bases it team model on Patrick Lencioni’s 2002 “business fable” The Five Dysfunctions of a Team. “It’s probably the best book ever written on teams and has been very influential for us,” says The Warehouse CEO Mark Powell. Exploring the causes of team failure and its fellow traveller organisational politics, the book identifies a handful of dysfunction harbingers: • Absence of trust: leading to an unwillingness to be vulnerable within the group. • Fear of conflict: with artificial harmony preferred to constructive, passionate debate. • Lack of commitment and feigning buy-in for group decisions: which cause ambiguity throughout the organisation. • Avoidance of accountability: low standards resulting from refusing the responsibility of calling peers on counterproductive behaviour. • Inattention to results: team success being neglected in favour of personal status and ego.

Search & deploy

Photo: thinkstockphotos.com

It also includes the installation of a new customer relationship management system (Oracle CRM) in order to fully understand and benefit from the data captured during direct engagement. Meanwhile, multi-channel initiatives include the launch of ‘Red Alert’, a website offering online-only daily deals, “having virtually all our range online within the next month”, and a trial that sees The Warehouse making around 600 of its products available via Trade Me. “I’m not one of these people who subscribes to the view that brick-and-mortar is dead,” says Powell. “It’ll always be the dominant channel for most people when they do their shopping. But multi-channel works for a lot of customers as well and will continue to grow. Our intention is to be the largest channel merchandise retailer online in New Zealand.” Powell is not alone in his faith in bricks-and-mortar retailing. Asked to provide predictions about the shape of New Zealand retailing in 5-10 years’ time, John Albertson foresees the endurance of a multi-channel environment. “We’ll have customers with quite different expectations depending on where they shop.” While he notes that many bricks-andmortar retailers have now embraced the online space and gone multi-channel, “the decision about whether you do that really comes down to what your customers want: though you obviously also need to assess

“During the height of the recession we noticed retailers’ executive teams were downsized, and good staff were hesitant to leave their roles as job security was more important to them.” So says Trish McLean, CEO of Retailworld Resourcing, a trans-Tasman company that’s New Zealand’s only specialist retail recruiter. “More recently the world has settled to a new norm and we have candidates again looking to progress their careers and consider new opportunities. Consequently the executive division of our business Trish McLean. has doubled in the past 18 months.” McLean notes a shortage of qualified candidates with experience managing teams of 15 or more, and with handling the large stock volumes and the financial and logistical demands typical of large format stores. Meanwhile, the past year has seen an uptick in demand for those with e-commerce retail expertise, “both in terms of dual channel offers and pure play online businesses”. McLean doesn’t have any current New Zealand data on the subject. But when Retailworld recently surveyed Australians on the most important factor when looking for a role, the opportunity for career progression topped their wishlists. Salary expectations and extra benefits came next. Anecdotal evidence from Retailworld’s 2011 Retail Employer of the Year Awards backs up this finding, she says.

what your competition’s doing as well”. Anderson suggests that, “if between your customers and competition the majority of the business is being done instore, then maybe you have more time before you need to go online”. That said, recent surveys putting online retail purchases at around 5.5 percent of the total New Zealand market suggest to Albertson the sector may be on the cusp of a significant shift. “You can say it’s not very big – there’s still 94.5 percent being done in brickand-mortar, so why are we getting all het up about it?” he says. “I think the more meaningful stat is over 50 percent of all adults have made at least one purchase online in the past year, with the average number of purchases about three or four. “And if you’ve got half your population happy to make an average three to four online purchases annually, how close to a tipping point are we? Because that only has to become six to eight purchases a year and suddenly there’s a big 10 percent chunk of the market that’s gone online.

“So retailers have to be cognisant of the fact it’s not simply about the share of business that’s going through the online space, it’s the number of consumers participating in it.” Even so, Albertson cautions that entering the online retail space is “a big step. It’s not just a matter of building a site and putting it up there – maintaining a sales site is a time-consuming process.” The conundrum that multi-channel choice represents isn’t peculiar to bricksand-mortar retailers, either. Established over 30 years ago in Palmerston North as a mail order catalogue company, today EziBuy is a multi-channel trans-Tasman retailer with an annual turnover in the hundreds of millions. Its CEO Simon West admits his company’s biggest challenge for the past couple of years, “as it has been for most retailers, has been understanding channel convergence”. While online transactions now account for over 60 percent of EziBuy’s volume, “we still have other supporting channels like the catalogue and an instore SEPTEMBER 2012 management.co.nz | 45

ENTERPRISE SUCCESS

46 | management.co.nz | SEPTEMBER 2012

Tech tools In Minority Report Tom Cruise’s character walks into a mall and is assailed by personalised blandishments from billboards that have recognised him via a retinal scanner. Released a decade ago, the movie’s set in 2054. What was science fiction back then is on the cusp of becoming quotidian reality. A current product offered by New Zealand-based Reveal, for example, uses a combination of video cameras and advanced tracking algorithms to record pedestrian movements, identify problem areas and provide corrective measures. Meanwhile, facial recognition technology was employed earlier this year in a two-week trial in London that saw a different advertisement played to passersby based on a high definition scanner’s determination of their gender. And using the search term “Tesco Korea” on YouTube turns up an example of an innovative and effective use of the QR code readers on cellphones. “Information is, in many ways, retail’s new currency,” says John Albertson, CEO of the New Zealand Retailers Association. “In the future, basing decisions on data is increasingly going to be what separates the really good retailers from the not-so-good ones.” Albertson says a proliferation of products allows retailers to capture and understand that information. “They range from the relatively simple to very sophisticated. “The level of data you can get out of some products is quite phenomenal, right down to a three-step recommendation as to what the manager should do today to correct the problems evident yesterday.” And tomorrow there’ll be even more high tech retail tools available. Despite the trend towards an increasingly data-driven retail sector, Albertson believes the requirement for a degree of intuition will remain, “because that’s where you get the flair and difference”. He likens it to a glass of good beer. “You need the froth on top and the substance underneath. In the same way, retail will still need a combination of art and science.” But the balance, he says, is definitely shifting towards the latter.

framework and our team model.” (See box story “Team text”.) This is underpinned by the second leg of the Red Shed’s strategy – laying out a clear way of working that’s understood by all staff but eliminates the rigid bureaucracy that had begun to blunt the organisation’s original entrepreneurial spirit. “We use the phrase ‘freedom in framework’,” says Powell. “The framework sets the boundary – the non-negotiables – and within that staff have the freedom to flourish.” According to Powell, the strategy is now bearing fruit. “We measure engagement annually and it’s pleasing to see an upward trend. Engagement is critical. The

last thing I want is mere compliance when what we need is commitment.” EziBuy exhibits a similar attitude. West says the company looks externally to source some of the skill sets required to keep pace with the constant change in the multi-channel space. “But we mainly invest in developing internal staff and providing them with a career path with us. Rather than rely on there being bright shiny buttons out there that you can just drop in to change your organisation for you, we continue to try and evolve the business and its thinking by evolving existing staff.” M Nick Grant is a freelance journalist. nof.grant@gmail.com

Photo: thinkstockphotos.com

network. So getting our heads around the requirements of channel convergence – not just from a challenge point of view but also in terms of where the opportunities lie – is a major focus.” EziBuy has always employed data analytics to identify opportunities and sharpen its offerings. Now, with the rise of online, “the availability of data – its speed and volume – has changed. Because our model is multi-channel, we’re having to really look at the relevance of online data and what we can practically utilise across the channels, rather than have it all available.” Those burgeoning bits and bytes of data can be sliced and diced by an increasingly sophisticated array of technological tools. (See box story “Tech tools”.) Still, all this software and hardware is no substitute for the crucial competitive advantage offered by the ‘wetware’ of employees. Larger players – as well as the-notso-large with a big online focus – are investing in specialist, cyber-savvy staff, notes Albertson. Meanwhile, those in the bricks-andmortar space, whatever their size, need to increasingly focus on ensuring “the in-store experience as delivered by the staff is really great”, he says. That’s a matter of good staff training, as well as encouraging employees to see retail as a valid and rewarding career path – a view prevalent in Europe but not yet all that evident in New Zealand. “That’s particularly important for independent retailers who hope to one day sell the business and retire on the proceeds,” says Albertson. “They’ve got to realise that, when they walk out of the shop at lunchtime or take days off, they’re leaving their staff with their pension fund.” There’s a demonstrable appreciation of the key role staff training and development play in business success at both The Warehouse and EziBuy. “It’s all about people,” says Powell, who points to “the 3000-plus staff we’ve put through our Thinking Smarter training, which essentially teaches problemsolving skills and a common language. We’ve also rolled out our leadership

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A meeting of minds

The best conferences and conventions now pack an even more powerful punch as they align themselves to the new demands of business. By Vivienne McLean.

hen the going gets tough, the tough get going – to a conference. In tight economic times, focus fixes firmly on developing people. Conferences and conventions play an important role in transferring knowledge, connecting and motivating people. Within a wider framework of continuing economic constraint, organisers report conference activity has held up “reasonably well”. Now, they say, there are signs of growth. As corporates adjust their conference spend, they are fine-tuning their priorities.

48 | management.co.nz | SEPTEMBER 2012

In most sectors, conference social events are being trimmed as emphasis shifts further towards investment in content and speakers. Today’s focus is on smarter thinking and new technology to ensure time-pressured delegates get maximum value from their conference experience – before, during and after the event. Gillian Officer, Sky City Entertainment Group’s director of sales – conventions and outcatering, says although the market has held up quite well, the number of delegates has declined. “Where companies would once send

four or five attendees, they have been sending one or two. We’re seeing some recovery although it’s slow. People are a lot more conscious about where they spend their money, especially around non-essential items such as theming, and are spending where they see the value – on speakers rather than flowers.” Tracey Thomas, director of Conference Innovations in Christchurch, says conferences are slightly shorter, with some forgoing the welcoming cocktail function and opting to launch straight into the conference. However, he cautions,

CONFERENCES & CONVENTIONS

it’s important to balance this quick-start approach with, for example, ensuring value for exhibitors. DINE & DASH? Annual conferences may still feature a gala dinner but in many cases dinners have become a stand-up affair, which is seen as more effective in providing networking opportunities. Amidst signs of recovery, James Chatterley, managing director of Event Dynamics in Auckland, says he is starting to see conference organisers looking to move to better venues, menus and hotels. Paula Cleghorn, director – conferences at Conferenz, says people still expect a high level of conference experience, regardless of the economic climate. “If they invest in a conference they want to be comfortable and hosted well in a professional environment. They expect speakers to contribute to a high level in terms of content and delivery. ” Sponsorships and trade exhibitions have become vital components in balancing any conference’s books. Robyn Gosden of the Insurance Brokers Association of New Zealand (IBANZ) says one of the biggest effects on IBANZ conferences, apart from the Christchurch earthquakes, has been sponsorship. “There’s such a pull-back on sponsorship these days. Sponsors want much more for their dollar and they’re seeing different options to get it.” Real estate company Harcourts has a busy events calendar, with five regional awards events every quarter, each attracting 300 to 400 people. It also holds an annual business development conference for around 300 franchise owners plus a major annual national conference, which currently is limited to 1000 delegates. “We use our events for connection, recognition and camaraderie,” says CEO Hayden Duncan. “With 175 offices in our New Zealand operation that connection is so important. “The tougher the conditions, the more you need to look after people. We cut our cloth to suit but at the same time our events, awards, recognition and people

Techno-rethink New technology is revamping the conference experience. Everything’s being redesigned, rethought and rescheduled: from pre-event bookings and registration, to how delegates and speakers interact on the day, and post-event follow-up. Social media, and the use of apps for information, speakers’ notes, directories and reminders, all enable organisations such as Harcourts to run more complicated schedules than ever before. According to Harcourts CEO Hayden Duncan, programmes can now easily be tailored for small groups of delegates “rather than having one major conference room where you have a speaker on the main stage”. It starts right from the get-go, he says, “from the way people register for conferences and book where they’re staying. Processing is a lot quicker and the error rate lower. Technology has allowed us to handle streaming more efficiently and effectively because it’s easier to direct people to where they need to be, avoiding confusion without huge manpower.” The Conference Company’s Jan Tonkin regards technology as a “fantastic” marketing tool. “You might have three or four different groups you want to reach. So, personal URLs enable well-targeted and on-message marketing that can be subtly different for each.” At present, webinars are largely viewed as more appropriate for education and training. Christchurch-based director of Conference Innovations Tracey Thomas uses them as a promotional tool to provide more information about a conference and New Zealand, for example. Craig Fenwick of the Ellerslie Events Centre says day sheets and delegate feedback are IML’s Connector in action. now all distributed by iPad. His organisation has installed a 30MB/second upload/download fibre connection, which has more than enough capacity for video conferencing and webcasts of AGMs, for example. Elsewhere, IML’s Connector – a small handheld device that combines microphone, speaker, keyboard and screen – enables delegates at question time to share comments or ask questions by talking into the microphone. Its interlinked technology eliminates the long disruptive wait for a roving microphone. The audience can use their connectors to vote on issues, or text in questions or comments to a moderator to respond to questions, display comments to the audience or steer discussion towards areas of interest for the audience. Pete Eyre, managing director, IML Australia and NZ, says the company aims to help organisations maximise the value of their meetings and events using the collaborative power of audiences, and the content and insight that they can create. “The IML Connector is so easy to use that even people totally unfamiliar with the device are able to provide feedback and communicate in an instant. Its use at meetings and conferences completely opens up interactive possibilities for event owners both in terms of providing entertainment and providing a wealth of really valuable feedback. Ultimately it is all about helping to maximise the ROI for the event.”

SEPTEMBER 2012 management.co.nz | 49

CONFERENCES & CONVENTIONS

connections are the last things we ever look at with regard to reducing budgets. “We’ve been through some of the toughest market environments in real estate on record over the last three years and our events haven’t changed. If anything, we stepped them up a bit more to really lift people. Our people’s attitude is a major part of their performance so it’s an opportunity to make sure they’ve got their mindset in the right place.” MINDSET MATTERS Conference content is a fine balance between information and inspiration. “Content has to be really sharp,” agrees Thomas. “It has to be targeted and focused on specific topics. We’re seeing a real increase in streaming. At the same time we’re seeing no interest in teambuilding activities at all.” Duncan says content is always a challenge. “You have people at a conference for

50 | management.co.nz | SEPTEMBER 2012

three days. There’s a lot of information and a very fine balance between making it a training and development programme, and having people go away with the right mindset. Breakout sessions where we deliver specific content are a big part of what we do. But people remember and take action on the motivational and inspirational speakers.” Driven by demand for shorter, sharper sessions, business conference organisers are tightening up timeframes but using streaming to provide focussed topics and delegate choice. “In some segments of the market there’s a demand for one day conferences,” says Cleghorn. “Many of the one day events that Conferenz creates include streamed sessions. This allows people to choose their preferred presentation and provides diverse perspectives, experiences and the opportunity for smaller groups.” The association market is seen as somewhat resistant to fluctuations in

Sky City Auckland.

CONFERENCES & CONVENTIONS

the economy because organisations and members must meet to hold AGMs and fulfil professional development requirements. MORE FOR LESS Donna Peffers of the Real Estate Institute of NZ (REINZ) says her organisation focuses on providing the best events it can while keeping costs low. “We’re running on a tight budget because we’re here to offer value for our members. Our conferences tend to focus on specific sectors such as business brokers or residential property managers. They’re very much focused on what’s happening within the New Zealand market, and legal and technical things that are specifically related to their sector. “We don’t engage many motivational speakers any more because members say they want information that helps them do our job properly. So we’ve reduced our expenditure on the bells and whistles.

We’re really putting our money into the speakers.” Gosden says IBANZ has gone through a similar process. Like REINZ, members are affected by the new Financial Advisers’ Act. “Our members have had to get up to speed with that and with CPD requirements. They have to be better qualified to register and to know what they’re doing before they can give advice, so our conference must deliver quality. We’ve stopped having motivational speakers. We still try and provide a really good gala dinner but we try and do it on a budget, without making that obvious.” Jan Tonkin of The Conference Company specialises in associations from the healthcare, sciences, education and professional services sector. She says for these markets conferences are a vital communications tool, with different drivers and different audience expectations from the typical business conference.

Free parking.

Makes having your next meeting at Ellerslie that

much easier.

Just a short trot from downtown Auckland, Ellerslie is the perfect place to book your next meeting. Contact our Events Team on (09) 524 4069 or at functions@ellerslie.co.nz

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SEPTEMBER 2012 management.co.nz | 51

CONFERENCES & CONVENTIONS

“Attendees are very focused on highquality educational outcomes and takeaways that can be actioned immediately. They’re looking to immerse themselves and be exposed to the very best of ‘the now, the new and the future’. Delegates want solid, sound content with more interactive workshops, streaming and formats that allow them to catch on to information quickly and then discuss it. “Time is as important a factor as cost. The length of conferences – two and a half to three days – hasn’t changed but the time of week (or year) can be important for a particular market.”

Sky City Auckland.

Use of professional conference organisers (PCOs) appears to be on the rise, and even organisations with their own event management team (such as IBANZ, REINZ and Harcourts) will usually call on a PCO or specialists in, say theming or AV, for large, complex events. Alan Trotter, CEO of Conventions and Incentives New Zealand (CINZ), says CINZ-approved PCOs go through a rigorous process to gain accreditation. “We’ve always promoted high ethical standards. Accreditation ensures each PCO adheres to good business practice

NOW, PLEASE Conference organisers have also noted a recent trend to much shorter lead times. James Chatterley says he fielded an enquiry in August for a 700-person conference in May 2013. The normal lead time would once have been more like three years.

or Transmit?

Harness?

around money, and is open, honest and transparent. “Managing a conference, particularly an international convention, is a lot more difficult and demands a lot more expertise than event management. With new convention centres signalled for Auckland, Christchurch and Queenstown, if they all go ahead the industry will go to the next level and PCOs will face a lot more demands. It will be good to have these standards in place in advance.” M Vivienne McLean is a freelance business writer.

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EXECUTIVE HEALTH PETER TYNAN

The plain truth about packaging those opposed to the New York proposal seems to be – we’re all adults, we know the risks, let us make our own decisions. An alternative approach is to enforce informed choice. In 2008, New York became the first US city to require chain restaurants to display the calorie count of menu items. Federal law will come into effect later this year making it compulsory in all US chain restaurants with 20 or more outlets. In Australia, Victoria and New South Wales implemented a similar mandate in 2011, and Ireland has recently put a voluntary code in place. Back in New Zealand, some health researchers are calling for consumers to be given more digestible information than currently provided by the mandatory back-of-packet nutritional information panel. In the UK many food manufacturers print traffic light colour-coding on the front of food packets. This tells you at a glance if the food has high (red), medium (orange) or low (green) amounts of fat, saturated fat, sugars and salt, and is one of the options being debated here. Opponents argue the system is too simplistic, as it doesn’t give a complete picture of the food’s nutritional value. For example, cheddar cheese gets a red light for fat. However, cheese is also a good source of calcium. Critics have also pointed out that there’s no definitive evidence that calorie display actually

Small steps Food friendly Morning and afternoon teas can be an obstacle to anyone trying to manage their health. Encourage healthier choices by providing fruit platters or low-fat options, and ordering bite-size portions. Lead me not into temptation Common advice for healthy eating is to simply not have junk food in the house. When Southern Cross Health Society moved offices in 2011, our employees encouraged us to replace our vending machines with a twice-weekly fresh fruit delivery. Bring in the experts Nutrition seminars are a great way to empower people to make healthier choices. After all, there’s no point in knowing how many calories are in a burger if you have no benchmark as to what’s an acceptable portion size or daily calorie intake. Take the stairs It never ceases to amaze me how many people take the lift for a single floor. The stairs is a much healthier option.

changes consumer behaviour. These issues are food for thought if you’re thinking about how to help your employees make healthier choices. I’d suggest it’s all about encouragement, information and support. M Peter Tynan is chief executive of Southern Cross Health Society.

Healthy staff means higher productivity Covering staff with Southern Cross health insurance means less sick days, quicker return to work1 and it’s an attractive incentive for retaining and recruiting employees. It all adds up to a more

productive and profitable business. Your profits, not ours. Because we’re not for profit, we’re for you. To find out more, call Southern Cross Health Society on 0800 323 555 or visit our website healthybusiness.co.nz

1 TNS research 2004

Healthy people healthy business Southern Cross Medical Care Society, Level 1, Ernst & Young Building, 2 Takutai Square, Auckland 1010

54 | management.co.nz | SEPTEMBER 2012

Photo: thinkstockphotos.com

magine a time in the not too distant future. Chocolate bars are sold in uniform plain packaging, stored behind a grey screen and available only upon request by those aged over 18. It seems like a pretty extreme scenario. But it’s exactly what the New Zealand Government is looking to do for all tobacco products. In July it was made compulsory to store these items out of sight, and the Government is currently undertaking a public consultation in relation to the proposal for tobacco products to be sold in uniform plain packaging, as proposed in Australia. In both countries, tobacco companies are campaigning against the changes. Among other arguments, British American Tobacco Australia has suggested ‘plain packaging’ legislation will open the floodgates for “costly and intrusive” legislation on other products such as fast food and alcohol. Though plain packaging of junk food might seem far-fetched, methods used to ward us off tobacco, such as label warnings and point-of-sale restrictions, are already being used around the world for certain foods. In New York, Mayor Michael Bloomberg has proposed to ban the sale of any nondiet soft drinks larger than 500ml within the city limits (supermarkets/dairies being exempt). However, restricting freedom of choice is a contentious issue. The consensus from

EXECS ON THE MOVE

Lion has announced the appointment of Stuart Irvine as its next CEO. He takes over the role in January 2013 when current CEO Rob Murray steps down. Irvine has extensive experience in fast moving consumer goods across a diverse range of markets and complex business models and is currently CEO of Nestlé Russia and Eurasia, a $2 billion beverage and food business. He joins Lion mid-November. Dynasty Hotel Group (DHG) which operates Heritage Hotel Management in NZ has promoted Graham Yan, formerly chief financial officer of the group, to the new position of chief executive officer. He will report to the DHG managing director, Jeffrey Tang, supported by the newly appointed deputy managing director Ho Chai Kun. YWCA Auckland welcomes Monica Briggs as its new chief executive. National education setting manager at the National Heart Foundation since 2008, Briggs was general manager of the Auckland Regional Public Health Service from 2001-2008. Her appointment takes effect from mid September. She replaces Hilary Sumpter, who has been the CEO since September 2008. The Public Trust’s new chief executive is Graeme Hansen. Chief executive

of the New Zealand Racing Board from 2004 to 2009, Hansen has an extensive background in the financial services industry both in New Zealand and overseas where he has held chief executive positions in the Barclays Banking Group. He replaces Grenville Gaskell who has held the CEO role for five and half years. Adam Feeley has been named as Queenstown Lakes District Council’s new chief executive, and will replace Debra Lawson. Feeley, a qualified solicitor, was appointed as head of the Serious Fraud Office in November 2009. He is also renowned as the chief executive behind the transformation of Auckland’s Eden Park. North Port Events has appointed a new general manager. Steve Duck brings more than two decades of event management experience to the role. He has worked both in NZ and overseas and was most recently an independent marketing consultant. He succeeds Rebecca Stewart, who has left to concentrate her energies on raising her second child. Caroline Ada has been appointed Visa country manager New Zealand and South Pacific, effective October 1. She replaces Sean Preston who has been appointed to a new role with Visa as

executive manager, Southeast Asia and Australasia, based in Singapore. Ada will move to NZ to take up her new role from Suncorp Bank in Brisbane, where she was regional general manager. Having worked in senior management and in directorship positions for Telecom New Zealand, IBM, AT&T and AlcatelLucent, Steve Lowe brings extensive local and international experience in IT infrastructure to his new role as chief executive officer of IT solutions company Splice Group. Murray Sherwin, CNZM, chair of the Government’s Productivity Commission and former CEO of the Ministry of Agriculture and Forestry, has received a University of Waikato Distinguished Alumni Award. Sherwin graduated from Waikato University with a masters degree in economics and worked for the Reserve Bank for 25 years – seven as its deputy governor. His career also includes a twoyear secondment to the World Bank. Pharmaceutical company Merck Sharp & Dohme NZ (MSD) has appointed Paul Smith as New Zealand director. Previously with MSD Australia in business management roles in primary care and specialty care, Smith will be responsible for supplying pharmaceuticals and vaccines for New Zealand patients across a wide number of therapeutic areas.

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SEPTEMBER 2012

Vol 10 No 4

Recruiting 62 at the top Four Pillars 63 revisited Why boards 65 must innovate

Boards blasé about corruption Says departing SFO boss Adam Feeley p58 EDITOR: Reg Birchfield reg@rjmedia.co.nz

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COVERSTORY

Boards blasé

about corruption W

hen it comes to thinking about organisational crime, directors need to change their mindset, says soon-toexit Serious Fraud Office (SFO) boss Adam Feeley. He’s genuinely nonplussed by board attitudes and ambivalence about treating fraud and corruption as a governance priority. Despite the recent spectacle of the collapse of almost all the country’s finance companies, fraud and corruption is hardly on their radar, he muses. How can that be when corporate crime threatens to “cost their organisations a great deal of money” on the one hand and, could “get them into heaps of personal hot water” on the other, he asks? Notwithstanding disturbing statistics and a plethora of anecdotal evidence that there’s more corporate crime about, New Zealand’s listed companies and organisations think they are bullet proof. “Whether it’s internally or externally hatched, crime costs,” says Feeley. “And why is ignoring the prospect that it could negatively impact the bottom line any less a strategy than implementing a new business growth plan to enhance profitability? It doesn’t make sense.” Most boards ignore what Feeley sees as a

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growing problem. Directors think their internal processes will deal with it. “Saying ‘we have processes’ is such an inane comment,” he says. “And we hear that rationale time and again. In any large scale fraud, be it Enron, Libor or anything else, the organisations defrauded all had processes. Processes count for very little when faced with determined fraudsters – internal or external. “Boards need to acknowledge that financial crime and corruption is a daily occurrence in every industry sector. Directors should ask themselves how they can be sure their business is not somewhere, somehow exposed to or involved in it. And that’s about board ethics, organisational culture and a commitment to tackling the problem differently and seriously,” he adds. Fraud barometer Earlier this year, global consultancy KPMG released its latest fraud barometer. It showed the value of local fraud cases climbed almost $80 million to $279 million last year. Admittedly most of the increase involved fraud against financial institutions, including some very large ones. “Fact is,” says Feeley, “businesses’ increasing

complexities, speed and exposure to external markets are collectively changing the ball game. Directors should be changing their practices and priorities to reflect the impacts of these changes. New Zealand’s board practices are shaped by, and based on historical perceptions that are no longer relevant. History provides no guarantees or guidelines by which to measure future corruption trends,” he adds. “Crime, fraud, corruption, call it what you will, is a growing part of organisational reality. We are socially, ethnically and financially – in terms of rich and poor in our society – a very different country than we were a few years ago and, particularly since the global financial crisis [GFC].” Feeley is involved in organising a meeting of global law enforcement agencies in the United Kingdom before he leaves the SFO. “We need to work more closely with the world’s law enforcers – there are so many cross-border contacts now. And the legal framework in our jurisdictions is not as good as the operational network that we can create,” he says. Boards need to determine and articulate their organisational ethics and values.

Companies are inanimate but in reality they reflect people that represent them, says Feeley. Boards don’t, in his opinion, seem to put much effort into deciding their values. Even when they agree on a values-driven approach they fail to “operationalise” those values. Principles and values “It is not enough to sit around the board table and say: ‘we agree that we’ll do business fairly and lawfully, we’ll be ethical and we are good people and our staff understand that and it will happen’ – it doesn’t,” he says. “Employees don’t necessarily share their directors’ values. So directors and senior management must clearly state the values and everyone on the payroll must know that, while they are at work, those values apply. The principles and values must be clearly stated, put in place and enforced.” That doesn’t often happen in New Zealand. For example, only 44 percent of the top 50 NZX companies have formal policies prohibiting bribery. Only 18 percent have policies on regulating facilitating payments. By contrast, 72 percent of UK’s top 100 companies by market capitalisation have explicitly prohibited giving and receiving bribes. In Europe it’s 57

percent and in the US 69 percent. Only 16 percent of NZX companies have a code of ethics that is rated ‘Advanced’ by Corporate Analysis. Enhanced Responsibility (CAER), the Australia-based centre for ethical research. “It may be a cliché, but the tone at the top [of business] is not good in New Zealand,” according to Feeley. In his opinion the tone set by directors who overtly live their organisational values is fundamental to good governance and building a values-based organisational culture. There are, says Feeley, fundamental misconceptions about New Zealand’s ranking as one of the world’s least corrupt countries. And that “incorrect” perception is, he thinks, part of the reason directors feel so smug about resisting formalised anti-corruption and values-based corporate policies. He dismisses the value of the emphasis placed on Transparency International’s Corruption Perceptions Index (CPI) that ranks New Zealand as the world’s least corrupt nation. “All that survey tells us is how people feel about life here. How they feel and what is actually happening are quite different things. The CPI is nothing more than a perception.”

Corruption free? Feeley points to a recently completed SFO survey to support his argument. The survey of around 800 randomly chosen New Zealanders found that more of us think we have a fraud and corruption problem than don’t. “This independent and valid survey on corruption says that perceptions about our corruption-free society are wrong and that New Zealanders do not, indeed, have that perception of their country. “According to our survey, only 37 percent of us think New Zealand is ‘largely free’ of serious fraud and corruption. In other words, 63 percent don’t think this country is ‘largely free’ of serious fraud and corruption. And 50 percent of the respondents think New Zealand is a safe place in which to invest while 60 percent don’t think those who commit financial crime are held to account.” Feeley’s work-life experiences and threeyear stint heading the SFO have together provided him with all the evidence he needs to claim emphatically that corporate crime and corruption is alive and well and growing rapidly in both incidence and scale in New Zealand. Meanwhile, like Nero, directors fiddle with the facts, allowing them to feel SEPTEMBER 2012 | THE DIRECTOR | 59

COVERSTORY

comfortable in the belief that they won’t get burned. “We are conditioned, in part by the media, to believe that we live in a cosy and comfortable corner of the world. Law enforcement simply can’t operate on that assumption,” he says. Boards and politicians need to accept that both the New Zealand private and public sectors are increasingly: • influenced by transnational organised crime • dependent on local companies that trade internationally • confronted by rising social inequity • demographically more diverse, fragmented and values conflicted. Governance reform Feeley, on the other hand, is heartened by conversations he’s been having with the Institute of Directors. “We are talking about changes. I’ve been invited to speak to IoD branch meetings around the country. We are also pleased by some of the media comments IoD has made about directors who have been found wanting in some of the finance company trials,” he adds. He thinks the IoD should become a more profession-based, rather than membership-

driven, society. He thinks it should be harder to become a director and easier to toss unprofessional practitioners out. “That’s a direction I’d like to see the Institute go and I believe they are starting to think seriously about it.” He also thinks professional organisations like IoD and the New Zealand Institute of Management, the media and politicians should help the governance reform process by getting involved in a searching and extensive debate about public expectations around ethical corporate behaviour. And New Zealand should get its corruption act together by ratifying the United Nations Convention Against Corruption (UNCAC). “The Convention lifts the bar considerably on what companies should be doing to set their organisations up to manage resistance to crime and corruption. It’s a UN convention to which we are a signatory. We have an obligation to fulfil our signalled commitment,” he reasons. “New Zealand will be visited by the UN this year and we will be crucified for not having ratified that particular Convention.” Feeley also wants the Ministry of Justice to get on with modernising New Zealand’s deficient and outdated bribery and corruption legislation. “But policy development works slowly,” he sighs. “We [at SFO] are operational

Crime will hit director insurance Directors and company officers can expect a hike in their professional indemnity cover if scandals like the Libor interbank lending one keep popping up – which they will. Europe’s professional insurance experts recently warned that some carriers of directors and officers (D&O) cover, particularly for financial institutions, are pulling back from the market and that rapid premium rate increases are on the horizon. Gary Young, CEO of New Zealand’s Insurance Brokers Association (IBANZ), says it’s inevitable that global influences will affect the market. “If nothing else, the earthquakes in Canterbury have shown how much influence global players have on our market. It may take a little time to filter through but no doubt we will see changes [to D&O cover rates],” he added. The more corrupt practices find their way into New Zealand enterprise, the more directors and officers can expect to pay for professional cover. European insurance experts believe the Libor scandal will cost insurers billions of pounds in losses. Proportionately, New Zealand’s finance sector scandal with the collapse of so many finance companies is just as serious. Finance company investors lost $8.6 billion. And the collapse was, according to analysts, more about corrupt governance than the impact of the global financial crisis. As New Zealand’s exposure to global and local corporate crime increases, so directors and officers will pay more when their internal governance practices are found wanting.

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THE DIRECTOR | SEPTEMBER 2012

and therefore think things should be done yesterday. There’s always a natural tension between policy and operations.” Corporate crime exponents are annoyingly recidivist, according to international studies. The SFO reported that many of those taken to court recently were the same individuals who behaved badly back in the post-market crash days of the late 1980s and early 1990s. By noting global research, the SFO tries to establish the drivers and enablers of financial crime. But Feeley firmly believes ethical behavioural comes from the top. When boards fail, for instance, to prosecute individuals they catch defrauding the organisation, the action sends a signal that undermines the enterprise. And when they don’t set standards and behavioural rules, fraud and corruption are understandable outcomes. And don’t think all New Zealand’s white collar crime happens only in the financial sector, Feeley warns. The accounting practices that led to the demise of so many finance companies when the GFC tide receded to reveal just how, as America’s investment guru Warren Buffet put it, “naked the swimmers were”, are everywhere. Only best practice and ethical governance and management policies prevent organisations from getting caught in a rip. “What is acceptable accounting practice and what is truly ethical and prudent financial practice are often not the same thing. There should be less opacity in the way our companies report. When things look more opaque and convoluted there is, in our experience, usually an underlying reason why. And the reason is usually a board that is trying to cover something up,” says Feeley. Adam Feeley believes directors and legislators are sweeping New Zealand’s growing crime and corruption problem under the board table. They are comforted in their inactivity by global CPI perceptions that have nothing to do with marketplace and criminal realities. “Our society is changing and our governance and management practices must reflect those changes. So must our criminal and bribery and corruption laws. New Zealanders, it seems, are already aware of the new realities. Directors don’t seem to be,” says Feeley.

MATTERSARISING

Recruiting at the top By Mark Ashcroft

here are many misconceptions about senior executive interviews and what the post global financial crisis world means for top-level recruitment. Stylistically, interviews range from the informal chat to structured behavioural ‘grillings’. The approach generally depends on the interviewer’s preference and personality. How, then, do both sides get the most from the process? I usually come to a decision about a chief or senior executive candidate in the first five minutes of the interview. My gut instinct serves me well about 85 percent of the time. The next 90-120 minutes are spent validating my hypothesis. Many CEOs are similarly quick to make decisions. They don’t, however, have the time or inclination to review their instinctive choices. First impressions are therefore critical. Neverthless, some basics shouldn’t be forgotten. Candidates should, for example, have an open demeanour, be articulate, dress appropriately and be on time. Obviously they should be prepared to discuss the organisation and its environment, to offer insights and analysis and, ask thoughtful, well-structured questions. Confident yet humble is good; cocky is disastrous. The candidate similarly uses the meeting to assess the company and the interviewer/s. If they are not using a professional recruiter, CEOs or chairmen who conduct interviews should think about the following:

approach. Instead, have preconceived set themes in mind that allow you to incorporate questions into an informal and interactive discussion.

Be prepared Read the candidate’s CV and the search firm’s report. Check out LinkedIn and the web for other commentary. I’m constantly shocked by the number of CEOs who embarrass themselves by asking questions that reveal they haven’t read the CV of the person sitting opposite.

Now for the candidate. If he or she got the basics right and made a good first impression, what next? Avoid these potential pitfalls.

Created a relaxed environment Avoid a formal, structured ‘question and answer’

Set expectations In a first-round interview, couch the discussion on the basis that it is an introductory meeting and there are several people to see in following weeks. This way the meeting can be to cut short if necessary. Be prepared to talk about the company and role Make the explanation clear, concise and objective. The candidate will be evaluating your insights and understanding of the organisation’s culture, business mechanics and market position. Interviewers should reacquaint themselves with the core business to ensure that basic questions are answered well. I’ve seen unprepared chairmen fail to provide a credible briefing to the extent that prospective non-executive directors opt out of the appointment process. Act appropriately There is, with all senior hires, an expectation that the meeting is a two-way process that gives both parties the opportunity to qualify things. I’ve watched chairmen and CEOs adopt a “why should we hire you?” attitude in settings where the candidate is highly passive. Scenarios like this usually end with the candidate feeling that the company’s agent is not smart enough to read the tea leaves and the candidate is put off.

Detail Take note of the questions and the interviewer’s body language and avoid inappropriate detail unless prompted. Candidates shouldn’t spend too long answering a question when the interviewer was looking for a very brief response.

Name dropping This is a small, interconnected market. It’s amazing who knows who. Be wary of who your interviewer may know and think carefully before boasting. Success has many fathers Be wary of taking credit for or alluding to successes which are not truly yours. Similarly, don’t pretend there hasn’t been loss or failure. Talk openly about when you got it wrong. Even emphasise what you learned from the experience. Individuals who seem unable to do wrong should start alarm bells ringing. GFC desperation Show interest in the role and the organisation, but don’t seem overkeen. This can raise concerns about real motivation and potential marketability. Chairs or CEOs will, hopefully, impress candidates with their compelling presentation of the job, the quality of their questioning, and the time taken to understand the candidate’s abilities, career motivations and concerns. Now what? Be clear about the next steps and timeframes to ensure expectations are managed. Give validation to people who impress. Highlight gaps to those you seek to counsel out of the process. Alternatively, use the expectation of an ongoing process to be more opaque and manage candidates after firming up your views. Remember, the process needs to reflect well on both the candidate and the organisation. Mark Ashcroft is a partner at SEQEL, the executive search, board appointments and succession planning firm.

SEPTEMBER 2012 | THE DIRECTOR | 61

BOARD BOOKS

Four Pillars rebuilt Reviewed by Reg Birchfield

he Institute of Directors’ relaunch, restoration, facelift – call it what you will – of its Four Pillars of Governance Best Practice text is welcome. It is, in its significantly modernised format, an excellent documentation of governance best practice, with some emphasis on compliance. But it is a membership organisation’s view of best practice. Governance is at an important point in its evolution. And the number of individuals wanting to become directors is steadily growing. Directors today must sustain and continually improve company and organisational performance through improving their own governance and collective board performance and the performance of the chief executive. The continuing publicity generated by court cases against directors since the collapse of the finance company sector in particular, is having a significant effect on the image and the scrutiny of directors and boards both at home and abroad. These are challenging times for directors and boards. So the revamped and much more accessible publication is grist to the Institute’s education mill. “The loD believes that a preoccupation with creating and adding value must underpin all governance practice… Corporate governance for boards and directors does not exist as an end in itself, it exists for a purpose and that is to help the company achieve its fundamental purpose as articulated and subscribed to by its shareholders and stakeholders,” according to the book’s foreword. The four pillars on which the IoD builds its case for best practice governance are: • determining purpose • effective governance culture • holding to account • effective compliance. The case around each is systematically and logically constructed. The first pillar, purpose, covers the ground by explaining what

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THE DIRECTOR | SEPTEMBER 2012

corporate governance is, the role of directors, governance theory, law and compliance and so on through governance of SMEs, notfor-profits, family company boards, strategic planning and analysis and finally corporate social responsibility. The construction of an effective governance culture starts with the board architecture and composition through key competencies, the role of the chair, reporting, succession planning, conflicts of interest, risk management and finally information technology and the board. Holding to account, the third pillar, tackles accountability, setting a CEO’s employment agreement, management incentive schemes, director appointments in other entities and the ticklish matter of board and director performance evaluation. Finally pillar four, effective compliance. Compliance, financial reporting, board committees, director remuneration, insurance and indemnities, subsidiary companies and boards are all heaped into a section that begins by warning that boards add value by “ensuring the company is, and remains, solvent”. Risk management, it says, is a key figure of board capability. IoD is a membership organisation. Four Pillars is a practice manual that focuses on just that. It does not address, understandably, the more important but also more contentious issues of governance responsibility and performance measurement. To be effective in today’s world, governance requires directors and boards to perform to much higher standards than past practices have delivered. Like the book, governance in action needs a dramatic make-over and rethink to comply with high codes of conduct. Directors and chairs should retain their places on boards only if they perform satisfactorily, just as individuals in every other professional role do. The United Kingdom has faced the issues with the introduction of

The UK Corporate Governance Code. New Zealand should do the same. Government sets the rules but there is a case, as Adam Feeley of the Serious Fraud Office suggests in this issue’s cover story, for the IoD to take a lead and become more than just a membership organisation. Board and director evaluation is a developing practice, but it is not yet sufficiently focused on continuous performance improvement and seldom deals adequately with the indicators and impacts of poor performance. Poor or non-performing CEOs, for example, are a significant board problem. Directors, for some reason, find it difficult to deal effectively with poor CEO performance. They seldom handle the termination of a CEO’s contract promptly and properly. And they seem unable to tackle the contentious issue of excessive executive remuneration which, more often than not, is made worse by the fact the high compensation is inadequately linked to performance measures. Four Pillars does not, perhaps understandably, address these important executive leadership-linked governance matters. The manual’s third pillar, holding to account, addresses accountability in respect of management but it does not address the requirement for governance accountability. There is a prevailing reluctance to address the issue of director and chief executive performance despite the fact it is critical to organisational success. Four Pillars does not address the issue and yet it seems to be exactly the place in which the issue should be addressed and expectations set. Good governance practice is well articu-

ONBOARD

lated in a plethora of practice literature. But the consequences of non-performance are seldom addressed, not practised nor even considered part of governance culture. The courts every day deal with directors and boards for failing to perform their duties and meet their legal obligations. This increase in traffic to the court room is a measure of a failure to address non-performing governance. There is also an accompanying danger that governance is becoming overly focused on protecting itself. And then there is the business of board composition. Chairs and directors must think more deeply about who joins the board. To perform effectively, boards must be free to consider independent and objective views and to make independent decisions. Board actions are compromised by a lack of independent membership. The culture and effectiveness of a board’s management oversight is watered down when executives sit on a board. All this said, the reconstructed Four Pillars is a vast improvement on what has gone before. It reflects some positive and equally overdue changes taking place at IoD. Finally, the price of Four Pillars reflects its “house rules” and membership catchment role. Members get a free copy. Additional copies cost $75 a throw. Non-members will pay $545 – the price rationale presumably being that it’s better to become a paying member of IoD. The cost of joining the IoD is a one-off joining fee of $129 and an annual subscription of $425.

Fonterra director John Wilson will replace Sir Henry van der Heyden as the company’s chairman when Sir Henry steps down in December. Wilson has been on the board since 2003 and is a previous chairman of the co-operative’s Shareholders’ Council. He’s also the chairman of South Auckland Independent Testing Society and a director of Turners and Growers. Ian Brown and Philip Palmer have been elected chairman and deputy chair respectively of Fonterra’s Shareholders’ Council. Paul Smith, formerly in management roles with Merck Sharp & Dohme in Australia, has been appointed New Zealand director of MSD. Competenz, the engineering, manufacturing, baking and food and beverage manufacturing industries Industry Training Organisation, has appointed Mike Simm to chair its board. Simm is a professional director who chairs Nelson-based Brightwater Group and is deputy chair of Top Energy, a far north electricity company. He is also a director of Security North, Selwyn Properties and several smaller entities. Two other directors appointed to the Competenz board are Kelly Smith and Tom Barratt. Carmen Keller of insurance company Swiss Re and Tom Reddacliff of MLC Advice Solutions, have been elected to the board of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF). Anne Stephenson, a principal of Wellington accounting firm Stephenson Thorner, and Neil Paviour-Smith, managing director of sharebroking and investment banking firm Forsyth Barr, have been elected trustees of the New Zealand Affordable Art Trust. Paul Mersi has been appointed as an independent non executive director of Brook Asset Management. Mersi is also chair of Grow Wellington and was for 16 years a financial services and tax partner at global consultancy PricewaterhouseCoopers. Northland Port Corporation chairman Colin Mitten has been appointed as chairman of Destination Northland for two years to help spearhead a new direction for Northland’s newly integrated economic development and tourism body.

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Why boards must innovate By Iain McCormick

ithout relentless innovation, success will be fleeting, management guru Gary Hamel argues in his 2012 book What Matters Now. Less than one company in 100 makes innovation everyone’s job, every day. In most organisations innovation happens “despite the system” rather than because of it. That’s a problem because innovation is the only sustainable strategy for creating long-term value, writes Hamel. How many boards can take credit for their organisation’s innovation or even vigorously support and champion it? In my experience, both here and abroad, boards are better at reviewing the financials, ensuring regulatory compliance and challenging business plans than they are at contributing to innovation or fostering an innovation-led culture. Boards everywhere have battened down the hatches. But despite these stringent financial times, innovation is critical to survival. Our ability to adapt and innovate delivers both progress and prosperity. Global per capita income rose just 50 percent between AD 1000 and 1820 according to the OECD. In the next 120 years it grew 800 percent. Innovation leads to full stomachs, warm beds, effective waste disposal and an array of digital delights. It’s also a vital issue for the country. New Zealand ranked 24th in this year’s IMD Global Competitiveness Index. The index specifically noted New Zealand’s lack of innovation as one factor determining its poor ranking. This is a critical governance issue. How do boards contribute to innovation and foster creative, smart, risk-taking cultures? Hamel offers some fascinating ideas. Listen for trends that whisper. Innovators are individuals who observe the little things that constantly change but go unnoticed or are discounted by ‘experts’. Innovators look for small trends they can integrate into new products and services.

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As an example, I chair the board of Nexus6, a local company that produces devices that remotely monitor inhaled medications. This great little company, founded by Garth Sutherland in 2003, is a global leader in an area of disease that directly impacts 500 million people worldwide. Challenge orthodoxy. Directors can foster innovation by challenging beliefs that others take for granted. Ways of doing things and their associated mental models converge over time. Ask your fellow directors what newspapers they subscribe to, what trade magazines or websites they read, what conferences they attend, what cars they drive and what suburbs they live in? Consider how diverse your intellectual gene pool is. Has success shrunk divergent thinking? When did the board last appoint someone who is not a lawyer, accountant or former senior executive from the sector? How many directors on the board are under 30, members of a minority group or could be described as zany? When did the board last ask whether the business was offering a product or service that is unique or rare in its market? Has a customer ever described your products or services as insanely great? Has the business strategy been totally re-invented in the past five years? Mainfreight is an example of a great New Zealand company that challenges the orthodox. It’s 100 years old, has sales of almost $2 billion, a market capitalisation of more than $1 billion and 214 branches operating across New Zealand, Australia, the US, Europe and Asia. Yet it has no written strategic plan and no budgets and prides itself on constantly reinventing its business. Underutilised skills or assets. Redeploying neglected competencies and resources in new and different ways can produce innova-

tion and growth. Hamel thinks innovation gets stymied when organisations define themselves by what they do rather than what they know or own. Innovation flows from deploying core competencies and strategic assets not simply modifying existing products and services. Disney successfully redeployed its competencies. It has used its menagerie of Disney characters to revitalise and re-energise English language lessons, a cruise ship line and hotels, to name a few examples. Unarticulated needs. Successful innovators understand inconveniences, unnecessary hassles or customer headaches. Innovation amazes customers with breathtakingly beautiful products or intuitively easy-to- use services. It is about developing offerings that, once experienced cannot be done without. TradeMe founder Sam Morgan apparently started his hugely successful website when, despite searching online, he couldn’t find a heater for his flat. So he built an online auction service that was better than eBay, in this country. He sold the business in 2006 to Australian media giant Fairfax for more than NZ$700 million. A stunning result generated by a frustrating hassle on a cold Wellington day. Boards are critical to developing and supporting innovation. The first step is for directors to start viewing the world through a new and rather more optimistic lens. Iain McCormick PhD is a governance coach who heads DirectorEvaluation.com – www. directorevaluation.com and runs the Sport NZ Governance Evaluation System.

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