NZ Management March 2012 by mediaweb

THE DIRECTOR – PAGE 57

management.co.nz

PARCHED PLANET

PARCHED

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LEADING IN A WORLD WITH LESS WATER P28

MARCH 2012

MARCH 2012 $7.10 INCL GST

RIO+20: WHAT BUSINESS CAN LEARN FROM NATURE P44

How to boost productivity p34 + John Botica: financial services damage controller p40 + Technology on the hoof: 5 leaders’ solutions p48

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Scarcity & abundance

n the face of it, we’re focusing on scarcity in this issue. We’re homing in on a future world in which water will be in short supply and teasing out what that could mean for New Zealand and its leaders in business and beyond. For, unsettling though the thought may be, it’s time we all start to face up to a future in which access to clean water is likely to be far more fraught than we have ever known it to be. We could have picked any number of examples of probable future scarcity. Oil, gas, fish, and many other essential foods are distributed unevenly around the globe. For the most part, here in New Zealand we’ve already got what we need or are pretty good at sourcing what we don’t have. Problem is, we’re also pretty good at squandering some of our best resources too: water being a prime example. Yet, I’d argue that this issue of NZ Management explores the polar opposite of scarcity. It’s a celebration of the abundance that manifests itself at every turn if we only know where to look and how to tap into it. It’s all about the opportunities that surround us as we chart a new and different future together. As world leaders gear up to meet at the Rio+20 environmental summit in June, for example, we’re focusing on one radically different option that comes teaming with possibilities. Cradle to cradle thinking draws on lessons from nature to show how products can be designed from the outset to provide nourishment for something new even after their own demise. What’s more, it works (page 44). And we review Richard Branson’s new book Screw business as usual in which he displays a generosity of spirit that

is quite extraordinary. I reckon if I ever got to sit down and chat with Richard Branson he’d tell me he’s just an ordinary bloke trying to do the best he can. Such a spirit of generous authenticity was why it was such a joy to join Leadership New Zealand one recent Friday evening to help them welcome a whole new raft of mid-career leaders to their 2012 programme (see pictures on page 14). Their generous authenticity shows how the best partnerships slip from relationship to friendship and ultimately settle as a sense of family. It’s why the word whanau booms with resonance in this tiny part of the planet. It’s about finding that sweet spot where robust debate and differences are part and parcel of everyday life and we all know that, testing as they may be, they come wrapped with the best possible motivations. Leadership New Zealand’s heartwarming celebration made for the best possible start to a weekend which propelled me out of Auckland the next day to tackle the Okataina West walkway with family and then over to the Bay of Plenty coast to celebrate an 80th birthday (not mine, honest). Sitting at the table cocooned by family and friends, and watching the surfers ride the Papamoa waves, I felt a deep sense of abundance and, indeed, hope for our collective future. That’s just one of the abundant pleasures of being in New Zealand.

Ruth Le Pla, Managing Editor

www.management.co.nz A MEDIAWEB MAGAZINE PUBLISHER Toni Myers MANAGING EDITOR Ruth Le Pla editor@management.co.nz CONTRIBUTORS Hayley Barnett, Reg Birchfield, Rick Boven, Don Braid, Bob Edlin, Sharon Fraser, Chris Gray, Max Harris, Colin James, Gill Lawrence, Iain McCormick, Doug Matheson, Jens Mueller, Andrew Sibley, Peter Tynan ADVERTISING MANAGER Rod Myers 09-372 6444, 027-484 8046, admanager@management.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

Phone 09-529 3000, Fax 09-529 3001 enquiries@mediaweb.co.nz www.mediaweb.co.nz PO Box 5544, Wellesley Street, Auckland 1141

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 2 • ISSN 1174-5339 (Print), 1179-3910 (Online)

MARCH 2012

| management.co.nz | 3

contents 28 COVER STORY

Parched planet Leading in a world with less water Access to clean water will become one of the defining concerns of our lifetime. Business leaders must plan for a world in which water and other natural resources will become increasingly scarce. By Ruth Le Pla. 3

EDITOR’S LETTER

INBOX: News and views

FOCUS: Leadership NZ 2012 programme launch

16 AS I SEE IT: Max Harris 17 MANAGERS ABROAD: Sharon Fraser 18 NZIM: Simply productive … but needs managing Reg Birchfield 26 TOP 200 THINKING: Don Braid 22

54 EXECS ON THE MOVE 55 EXECUTIVE DEVELOPMENT OPINION 20 POLITICS: Interest rates: from low to woe Colin James 21 ECONOMICS: Parties square off over growth Bob Edlin 22 LEADERSHIP: Memorable leadership? Reg Birchfield 23 THOUGHT LEADER: Collaborate + compete Rick Boven 24 BOOKCASE: Find your next; Screw business as usual; That used to be us Reg Birchfield, Gill Lawrence, Ruth Le Pla ADVICE 53 EXEC HEALTH: When a colleague has cancer Peter Tynan

56 TOP TIPS: Get smart with info management Chris Gray

MARCH 2012 • Vol 59 No 2

features 34 Productivity Series: Part How to boost productivity

2 34

Organisations must have singular, sustained and people-focused management and leadership if they want to hike their productivity. Reg Birchfield says that means treating people with respect.

40 Face to Face: John Botica – Damage controller

The reputation of the financial services industry didn’t smell too good for a while. Reg Birchfield talks with Guardian Trust’s managing director John Botica about how he’s trying to freshen up his company’s image.

44 Sustainability: Drawing on nature

As world leaders prepare for Rio+20, Desso’s Andrew Sibley sketches out the new environmental agenda. Cradle to cradle thinking, he says, provides a blueprint for manufacturing.

48 Mobile Managers: Technology on the hoof

Five NZ business leaders share how they stay connected and on top of their game while on the move. By Hayley Barnett.

40 44

The Director 58 Corporate corruption: Are we as clean as we seem? Reg Birchfield 61 Making directors more productive Iain McCormick

62 Stand and deliver: Board and director accountability Doug Matheson 64 How to avoid the director’s use by date Jens Mueller

INBOX

Photo: thinkstockphotos.com

THE CURSE OF THE BABY BOOMERS The troublesome issue of our aging population and its impact on the labour market got a sound airing at a National Institute of Demographic and Economic Analysis (NIDEA) workshop in Hamilton recently. Presenters suggested there is no silver bullet and that answers must lie in policy intervention across a range of contributing areas. They also concluded that timing is key. Like many other OECD countries facing their own similar issues, New Zealand cannot afford to spend 10 to 15 years debating the implications of having an aging workforce. Decisions must be made and actions taken sooner rather than later. Papers presented at the workshop suggest the baby boomer effect will see an inevitable and marked impact on the New Zealand and Australian workforce, and that differences are not merely related to age but also span personal characteristics, values and ethnicities. Here in New Zealand, we are also seeing changes in the spatial distribution of the workforce as people leave rural areas, the young move to urban environs and older people continue to exit the workforce. NIDEA, which is part of the University of Waikato’s Faculty of Arts and Social Sciences, provides research, advisory and consultancy services and demographic training to a range of end-users, including government, the non-government sector and industry. The New Zealand Department of Labour’s David Paterson and Simon Brown warned that recent growth in labour force participation

6 | management.co.nz | MARCH 2012

Debate hots up over NZ’s aging population.

is likely to come to an end as New Zealand’s population continues to age, putting pressure on economic growth. Participation has risen significantly over the past 20 years, they said, despite an increase in the average age of the working-age population. By contrast, average hours worked has declined over the past 20 years. Professor Graeme Hugo from the University of Adelaide, told delegates at the NIDEA workshop that Australia has a more marked “post war baby boom” effect than most OECD countries with baby boomers making up 42 percent of the current workforce. Hugo is professor of geography and a director of the university’s Australian Population and Migration Research Centre. He suggested that, too often, workforce interventions are seen only from a narrow numbers perspective when issues such as health, training, retraining and workplace organisation need also to be carefully considered. He also argued that government policy initiatives are only part of what is needed and that substantial cultural change on the part of employers and other key stakeholders is also required. The baby boomer effect is exacerbated in particular sectors of the labour market and in particular regions and cities. The Australian government’s strategy for coping with the impacts of aging includes three “Ps” initiatives focusing on population, participation and productivity – all of which relate to policies and programmes involving the workforce. M

INBOX

Ranking banking Some 86.6 percent of business decision makers rate the service being provided by their banks as good, very good or excellent. They are less likely to give their banks an excellent rating (32.4 percent) than the adult population overall (36.7 percent). Their “poor” rating is almost the same as that of the overall population (1.6 percent, compared with 1.5 percent). Banks scoring the highest “excellent” ratings were TSB, ASB and Kiwibank. Thinking about all the dealings you have with the bank, how would you describe the service you receive from the bank you deal with most?

PAY PRESSURE PILES UP Salary expectations are a growing source of tension between businesses and employees, according to Hudson’s “Salary and Employment Insights 2012” series of reports. “Employers are under pressure to simultaneously improve the quality of their hires and control the cost of these hires – they need valuable employees to take the business forward, but not at any cost,” says Roman Rogers, executive general manager of Hudson New Zealand. “Facing the tension of trying to do more with less is especially difficult when salary is the top driver for 36 percent of employees, with many believing that it will be ‘easy’ or ‘very easy’ to find a similar job with comparable pay and conditions.” Nearly seven out of 10 employees are considering moving jobs in 2012, while two-thirds of employers say they are worried about losing their existing high performers. Across the board, nearly 28 percent of employers intend to increase permanent staff levels. Candidates with business acumen, cross-functional knowledge and an ability to contribute to the organisation’s overall strategic direction are highly sought-after across all sectors. This is particularly evident as key business functions, including IT and finance, become a major driver of business performance. Almost half of hiring managers report the salary expectations of preferred candidates exceed their budget, with 43 percent increasing their budget to secure the best candidate, and the remaining employers settling for their second choice. Furthermore, about six out of 10 employees feel that they deserve a pay rise in 2012. “Salaries are increasing, particularly for talented mid to senior hires,” says Rogers. “In challenging times, businesses can’t afford to compromise on investing in their people, but at the same time they face a dilemma with corporate growth rates lagging employees’ heightened salary

ALL NEW ZEALAND

DECISION MAKERS

A. Excellent

36.7%

32.4%

B. Very good

34.7%

36%

C. Good

15.2%

18.2%

D. Adequate

11%

11.8%

E. Poor

1.5%

1.6%

F. Don’t know

0.9%

Source: Horizon Research September, 2011. 1645 respondents including 301 business decision makers (business managers, executives, proprietors, self-employed, professionals and senior government officials). Maximum margin of error +/- 2.4%. On the web: www. horizonpoll.co.nz

expectations. We suggest they fine-tune their recruitment strategies to find and retain high performers who can make the biggest difference to the bottom line.” The skills shortage is intensifying competition for the most talented candidates – almost half (46 percent) of employers said it was harder to secure the right candidates in 2011, particularly for senior strategic and managerial roles. “In order for managers to cope with the increasing salary pressure being placed on them, they need to understand the difference between ‘cost’ and ‘value’ when choosing their teams and allocating their salaries,” says Rogers. M

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INBOX

Options for Christchurch City Council Calls for an overhaul of the beleaguered Christchurch City Council raise far-reaching constitutional issues. What are the options available to the Government and how might these work? Local government legal expert Michael Garbett, of Anderson Lloyd, examines the alternatives.

he structure and election of local councils is seen as a fundamental part of our democracy. Where there are existing statutory procedures enabling those structures to change, normally there is public consultation and opportunities for councils to remedy problems that arise. Outside the existing structures, Parliament has the power to create any special arrangements or changes it sees as appropriate by new legislation. Critical decisions need to be made on who leads Christchurch through the rebuild and beyond. The city will benefit from cohesive leadership at this time. Regardless of how the current debate plays out, it is also important that the people of Canterbury have the opportunity to have their say on the makeup of the city council, either through normal elections, existing statutory procedures or any special intervention that the Government may make. Existing local body legislation arms Local Government Minister Nick Smith with a range of legal options to intervene in local government if necessary. Most of these options have checks and balances to ensure elected councillors are fairly dealt with before any move to intervene. Under the Local Government Act, Smith could appoint a review authority to look at the performance of any council. There are limits on this power and to do so the minister must decide: • If there has been a significant or persistent failure by the local authority to meet its statutory obligations, or • If there has been significant and identifiable mismanagement of the local authority’s resources, or • If there is a significant and identifiable deficiency in the local authority’s management or decision-making processes. Following any such review, the minister could require the council to implement any recommendations. But if the local authority fails to adopt those recommendations, he could appoint a person, or people, to take over the functions of the council and act in its place. Nick Smith could also call an early election for the council. This process has previously been used to review the Rodney District Council in 2000. This review led to then Local Government Minister Sandra Lee appointing a commissioner to take the place of councillors and to call for an early election. Such a process is likely to take many months for a review and requires ministerial action. This process also gives the council a chance to comply with recommendations of the minister before ministerial intervention. Commissioner Under present law, the Minister of Local Government can alternatively appoint a commissioner to run a council or to hold a new election if the local authority: • Is unable to operate because it cannot hold meetings for lack of a quorum, or

8 | management.co.nz | MARCH 2012

• Requests the appointment of a commissioner to perform its duties, or • Is refusing to perform its duties and that impairs good government of the local authority or endangers public health or safety. If the local authority does not request a commissioner, then the minister can only act if the local authority is unable or refuses to carry out its duties. This is an extreme situation and one that is rarely used. Local Government Commission There are also powers under the Local Government Act for the public to request “reorganisation” of councils. A reorganisation can be commenced by a council request, the Minister of Local Government or a petition from 10 percent of electors. Generally, a reorganisation focuses on the boundaries of councils or merger of councils. Currently this power is being considered by the Local Government Commission for a proposed merger of Nelson City Council and Tasman District. Such a reorganisation is not normally designed to consider alleged dysfunction of councils. Special Legislation Recently two councils have been the subject of significant reorganisation by special legislation. The Auckland “Super City” had its own special legislation which abolished the existing councils. This reorganisation followed a Royal Commission of Inquiry which considered numerous public submissions. In the local setting, Environment Canterbury Regional Council (ECan) councillors were recently replaced by government-appointed commissioners for a specified term following the passing of special legislation. Special legislation is a tool that enables the Government to tailor a structure and timeframes for a council that it wishes to achieve. Potentially this can happen very quickly (as was the case for ECan).

Michael Garbett.

Chief Executive Neither the Minister of Local Government, nor the Government, have any specific powers under existing legislation to affect the employment of chief executive Tony Marryatt, or for that matter, the chief executive of any council. A chief executive is employed by the council and their relationship is governed by normal employment law. It is only the council that has any power to manage the employment of a chief executive. New legislation would be required to effect any changes of this nature. M Michael Garbett is a specialist local government partner in law firm Anderson Lloyd. michael.garbett@andersonlloyd.co.nz

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INBOX

Letters to the editor I relished Reg Birchfield’s article “Flawed governance” (NZ Management, February 2012, page 22) and applaud him for stating the facts. It may have created some angst in boardrooms but he is spot on in his assessment of the situation. Cases currently before the courts lend further substance to his findings. I similarly enjoyed Reg’s first delivery on productivity (“Solving NZ’s productivity puzzle” NZ Management, February 2012, page 34) in which he points out that lack of management and direction are largely to blame for New Zealand’s poor productivity performance. Reg’s re-entry as the leading contributor to the magazine is lifting its profile and puts it in the forefront as a thought leader. I thank you for it. – Ralph Penning, director and trustee

I enjoyed the article “Flawed governance” (NZ Management, February 2012, page 22). If you changed the word directors for elected reps we have the same issue in local government. I know I had better be careful as I came ‘off the street’ and into local government and would never have had the opportunity to gain the experience I have had otherwise. What I have attempted to do is run our council more like a corporate entity and shift the management of our assets into CCOs with very capable and focused directors. Those CCOs also suffer from lack of women, not because we don’t want them, but because those who we have invited to become involved are usually over-committed already. Thanks for the read. – Maureen Pugh, mayor, Westland District Council 10 | management.co.nz | MARCH 2012

Hawke’s Bay District Health Board’s employment initiative: 2011 EEO Supreme Award winner.

AWARDS SEEKING WINNERS Entries are now open for the EEO Trust Work & Life Awards 2012. Now in their 15th year, the awards showcase employers who help employees make the most of their time and talents, leading to greater productivity and a better bottom line. Over the years, the awards have celebrated flexible work programmes, literacy and numeracy training, and projects to encourage greater workforce cohesion. Sharing success stories attracts positive publicity, according to Wynn Schollum, manager of Programme Incubator, the Hawkes’ Bay District Health Board employment initiative that inspires teenagers into health careers and winner of last year’s Supreme Award. “The resulting publicity from radio, publications and networking has increased awareness about Programme Incubator,” he says, “and we have subsequently received invitations to present at conferences and promote the concept to new audiences.” EEO Trust chairman Michael Barnett says that the awards are a good opportunity for employers to demonstrate what they are Programme Incubator doing to help drive greater engagement and productivity. “We all manager Wynn Schollum. want our companies to be successful,” he says, “and people are the key to that success.” There are five categories in the EEO Trust Work & Life Awards, with a Supreme Winner chosen from the winners of each category. The categories are: • Tomorrow’s Workforce Award, which recognises innovative responses to tomorrow’s employment challenges; • The Diversity Award, for organisations which make the most of employee diversity; • The Work & Life Award, which celebrates initiatives that create opportunities for greater engagement and productivity; • The Skills Highway Award, which recognises workplaces which can show how they have helped improve their employees’ reading, maths and communication skills; • The Walk the Talk Award, which celebrates effective diversity leaders. Entries for the EEO Trust Work & Life Awards 2012 close on Thursday May 17. The awards gala dinner will be held in Auckland on August 30. Organisations of any size or sector can enter, whether or not they are members of the EEO Trust. Find out more at www.eeotrust.org.nz, and see the stories of past entrants at www.youtube.com/eeotrust. M

INBOX

TRUST SEEKS EMERGING LEADERS The Sir Peter Blake Trust once again is searching to recognise individuals who have Dared to Dream as part of the country’s premier leadership awards. The Sir Peter Blake Emerging Leader Awards, announced as part of the Trust’s annual Leadership Week from 22–29 June, identify six leaders between the ages of 25 and 45 who have inspired and achieved across many walks of life, sometimes in relative obscurity. Anyone can nominate a worthy emerging Kiwi leader, with a deadline this year of 30 March. Chief executive of the Sir Peter Blake Trust Shelley Campbell says the awards aim to encourage New Zealanders to develop the kind of leadership demonstrated by Sir Peter Blake during his legendary yachting and environmental feats. “True leaders dare to dream. They are willing to stand tall and put a stake in the ground, to believe. It’s their vision, their ability to inspire and their belief that makes them stand above the rest.” Last year’s Emerging Leaders included the founder of triathlon movement IronMaori, a talented young lawyer exploring international conflict resolution, and a young entrepreneur who believes passionately in philanthropy. Nominations are encouraged from all sectors of society. Each one is considered seriously in a rigorous review process. The Emerging Leaders are announced alongside the Blake Medal, which celebrates a great New Zealander who has made an outstanding contribution to the country. The Sir Peter Blake Leadership Awards were established in 2005 to inspire and celebrate great leadership. They are open to all New Zealanders. For more information visit www.sirpeterblaketrust.org or contact Siobhan O’Kane, Siobhan@sirpeterblaketrust.org. M Sir Peter Blake.

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MARCH 2012

| management.co.nz | 11

INBOX

WANTED: TOP BUSINESS SCHOLARS One of New Zealand’s most valuable academic prizes is up for grabs again as applications open for the 2012 Cranfield New Zealand Alumni Scholarship. The successful applicant will complete an MBA at Cranfield School of Management, one of Europe’s top business schools. Cranfield New Zealand alumni, Cranfield School of Management, and the NZ-UK Link Foundation together offer the scholarship which is worth around $80,000. Speaking on behalf of Cranfield alumni in New Zealand, David Ryan describes the programme as a “very arduous and demanding experience”. Ryan, who completed his own Cranfield MBA in 2001, says it’s a great chance for a young professional to learn about best business practice around the world. “New Zealanders have shone on the Cranfield course,” he says, “taking top academic and leadership prizes in the past five years.” The scholarship targets graduates with good academic credentials who already have had worthwhile management careers. “This is because the Cranfield MBA is not just about individual study,” says Ryan. “Students, who come from all over the world, are expected to use their experience to contribute fully to lectures and study groups.” Scholarship winners in recent years have come from all parts of

New Zealand from the insurance, government, product development, biomedical and infrastructure sectors. In addition to the main scholarship which is open to anyone of New Zealand origin, Cranfield is also offering two partial scholarships for Maori, to help develop talent to boost Maori economic development. Applications close in May this year. Situated just north of London, Cranfield School of Management has offered postgraduate management courses, research and consultancy for over 40 years. The current full-time MBA course has 79 participants from 31 countries. In a recent survey by Forbes magazine, alumni ranked Cranfield as the top non-US school in terms of satisfaction for MBA education and preparedness. The NZ-UK Link Foundation – originally the Waitangi Foundation – creates and promotes educational and cultural exchanges between New Zealand and the UK. • For more information on the scholarship: www.cranfieldmba.info/NZscholarship • Cranfield School of Management: www.som.cranfield.ac.uk • The NZ-UK Link Foundation: www.nzuklinkfoundation.org M

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INBOX

raise funds for FYD’s proven youth programmes. “We’re hoping all New Zealanders will get involved in our Big Walk event – either by participating in their local region or making a donation to support our cause,” says FYD co-founder and mountaineer Graeme Dingle. Got boots: will walk. “We work with over 17,500 young people every year, Business leaders are invited to lace up their walking shoes, grab a water developing motivation, self-belief and optimism in the future. We know bottle and join New Zealanders from all walks of life for the Big Walk many more youngsters could benefit from our programmes and we are 2012. This is the Foundation for Youth Development’s (FYD) major annual driving our fundraising efforts towards this. We’d love all Kiwis to get event in which it aims to raise funds for the youth programmes that it behind us.” runs throughout the year. FYD programmes use the great outdoors, inspirational classroom Big Walk participants can join groups in six locations around New leaders and world-class mentors to help kids from age five to 18 keep Zealand: at Mt Maunganui and Wellington on Saturday 31 March, and on track, develop confidence and self-belief, and create goals for the Auckland, Coromandel, Hamilton and Christchurch on Sunday 1 April. future. They can choose to do a two, five or 10 kilometre walk in some of New Cost to take part in the Big Walk: $5 for students, $10 for adults or Zealand’s most beautiful spots. All proceeds from The Big Walk will help $20 for the whole family. More information: www.fyd.org.nz. M

Keeping kids on track

Organisation learning stories in the wake of the quakes. Speakers include:

Roger Sutton CE, Canterbury Earthquake Recovery Authority

Dr Colin Harrison IBM Smarter Cities, USA

Dr Allan Freeth CEO, TelstraClear

Peter Townsend CEO, Canterbury Employers’ Chamber of Commerce

Mary Devine MD, J. Ballantyne and Co. Ltd.

Dr Rod Carr, Vice Chancellor, University of Canterbury

Organisational Resilience Recovery, Rethinking & Refocus • Knowledge sharing forum • Organisation visits • High level networking

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For full programme visit www.smartnet.co.nz

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MARCH 2012

| management.co.nz | 13

FOCUS

5 Leadership New Zealand 2012 Programme Launch

1 Ceremony. 2 Rewi Spraggon (Leadership NZ alumnus 2005). 3 Sarah Hipkiss (KPMG and Leadership NZ class of 2012), Tracey Lonergan (Sovereign and Leadership NZ class of 2012), Robert Wikaira (Te Runanga a Iwi o Ngapuhi and Leadership NZ class of 2012). 4 Mark Dunlop (MV Consultants) and Tony Nowell (The Foodbank). 5 Darryl Gray with Fenella Gray (ACC and Leadership NZ class of 2012). 6 Ewen Anderson (Fletcher Building and Leadership NZ class of 2012) and Penny Strang (partner). 7 Austin Kim (Auckland Council) and Ian Leader (Inspiring Communities). 8 Penny Hulse (Auckland Council, Leadership NZ alumnus 2008) and Jo Brosnahan (Leadership NZ). 9 Mike Brooker (Foodstuffs NZ and Leadership NZ alumnus 2011), Marie HullBrown (Mental Health Foundation), Alison Taylor (Leadership NZ alumnus 2011) and Judy Whiteman (Leadership NZ). 10 Isabella Moore (soprano), Claire Caldwell (pianist), Vicky Pond Dunlop (Leadership NZ) and Jenny Green (Southern Cross Hospitals).

14 | management.co.nz | MARCH 2012

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AS I SEE IT

Max Harris 2012 Rhodes Scholar Elect Max Harris was a keynote speaker at the latest Deloitte/ Management magazine Top 200 Awards. What are New Zealand’s major challenges for 2012? I’m no economist and as a 23-year-old I still have much to learn. But my tentative view is that in 2012 we mustn’t allow scepticism about economic trends in Europe and America, or other distractions, to take our eyes off the imperative to address some deep economic weaknesses: our neglect of entrepreneurship, our failure to focus on strengthening management skills, our low rates of internationalisation amongst businesses and our need to improve our export profile. We need to front up to these weaknesses, in an inclusive and socially minded way – with four million pairs of hands. How well prepared are Kiwi business leaders to face these challenges? Speaking cautiously (since I know only a few business leaders), my perception is that our leaders in the business sphere are alert to challenges of productivity, international growth, and leadership – but perhaps could sometimes do more to engage with Government on these challenges, and to speak out publicly about this country’s overall direction. Some of the challenges may require business leaders to view the Government as more of a partner than a threat, and to be willing to voice their views on larger questions of identity or national purpose. The late Lloyd Morrison provides a model for others to follow. What more could we do as a country to thrive in the current global economic climate? Dr Rhema Vaithianathan, a senior economist with The University of Auckland Business School, has written well on how we need to build better management skills to improve our productivity. His point is supported by recent research by the NZ Institute of Economic Research. That seems a good start. Secondly, we need a strategy to attract smart, innovative people to this country and to create, in Sir Paul Callaghan’s words, “a place where talent wants to live”. Thirdly, relatedly, I think we need to harness the power of young people (and reverse the waste that comes from youth unemployment), as noted recently by the NZ Institute. We have the ideas. We need to act on them. M

16 | management.co.nz | MARCH 2012

MANAGERS ABROAD

Sharon Fraser General manager of the Intercontinental Chongqing, Sharon Fraser had already worked in Malaysia and Vietnam before moving to China. After five years in Shanghai she moved to Chongqing which, home to 32 million people, is the largest metropolis in the world. What prompted you to seek work out of New Zealand? I was attracted by the larger opportunities that exist offshore and that we don’t have in New Zealand: especially in growth and development in the hospitality industry. IHG is the largest international management company in China with 165 hotels and another 100 or so projects planned for the next five years. There’s obviously nothing of that scale in New Zealand or many other countries. It’s very exciting to be part of the incredible growth here. I enjoy the exposure to so many different cultures and to our guests who are of so many different nationalities. We’re operating on such a large international scale. I also enjoy the competitive challenge in the business, and dealing with so many different sectors including local and international government, the corporate sector, meetings and conference business, and tourists. I’m frequently coordinating and hosting high-level international delegations at the hotel. I work pretty long hours – usually 12-14 hour days – but it’s great fun and very rewarding. I especially enjoy working with my Chinese staff who are very keen to learn. How are your experiences overseas shaping your understanding of New Zealand? My experiences here make me love and value New Zealand even more, and keep me aware of how we need to look after what we have. How can offshore Kiwis contribute to New Zealand? I personally try to support using New Zealand food and beverage products in my hotel as much as possible. We only serve New Zealand ice cream: NZ Natural has been a huge hit in this city with my guests. People love it. I only have New Zealand dairy products, Anchor butter in my restaurants, and Anchor milk and cream for our chefs to use. New Zealand wines feature on my wine list and in special promotions. M Sharon Fraser is a member of Kea, New Zealand’s global talent community. www.keanewzealand.com

MARCH 2012

| management.co.nz | 17

NZIM

Simply productive … but needs managing The New Zealand Institute of Management is dedicated to lifting management competency. The nation needs good managers to boost productivity. And productivity determines the state of our economic and individual wellbeing. Reg Birchfield asks if it can be that simple.

anagers determine just how productive or otherwise an enterprise is. And, by and large, the cumulative performance of every individual business determines the state of every nation’s economy and, thereby, the standard of living of its people. Given the current state of western world economies in particular, a cynic might say managers have a lot to answer for. Being practical and pragmatic about it, we need better managers to get us out of the mess. Conventional wisdom still holds that economic growth, despite the stresses and strains it puts on the world’s resources, is still the only game in town that delivers a better future as we most commonly measure it. And, as Endgame author and investment guru John Mauldin wrote in his book last year, there are “two and only two ways” to grow an economy – “… either increase your working age population or increase productivity”. Our current reality is that the pool of working age New Zealanders is not growing, according to statistics released last month. The problem will worsen as aging baby boomers exit the workforce and younger, skilled Kiwis migrate to Australia and elsewhere. So a productivity flush looks like the only hand left to play.

18 | management.co.nz | MARCH 2012

The Government is now taking the topic more seriously. It has established a Productivity Commission and assigned it to work on a joint study with Australia’s similar, though somewhat larger and better resourced, body of the same name. Both governments want to find productive answers to some of the curly questions that schemes designed to increase productivity raise. CHANGED FOREVER Globalisation and technological innovation are changing the world economy forever. Changes to the structure of the labour market are among the most significant. Consequently, managers must be schooled to understand both the implications and the applications that accompany these two dramatic workplace and work process changes. “The pace and scale of organisational change is both quickening and expanding,” says NZIM chief executive Kevin Gaunt. “And while Government works to get the macro regulatory settings and infrastructure priorities right to encourage more productive enterprises, NZIM must help individual managers who, in the end, deliver the desired outcomes. “We need to help managers understand what is going on in the marketplace and in their work environment and show

them, by example, what can be done to make the most of emerging opportunities. “If the world economy is, as an increasing body of evidence suggests, facing a period of protracted growth, higher unemployment, volatile markets and even, heaven forbid, recurring recessions, managers must understand the implications of all that. They need to be aware of and, be able to implement, relevant people management and process strategies and to effectively lead change in their organisations,” says Gaunt. NZIM wants to help educate managers about productivity. It wants to work with the new Productivity Commission which, by its own admission, is limited in what it can do to “spread the news” about what productivity really means and how managers can deliver it. According to commission chair Murray Sherwin, the productivity story is economically and socially essential. But he will need the help of organisations like NZIM to get his message across, to explain productivity processes, and to reassure managers and employees alike that greater productivity is critical to them individually and the nation collectively. “Our funding doesn’t allow for much [industry education],” he says. “The messages [from the commission] will have to be part and parcel of what we do on our

enquiries and with our strategic partners. Our job is to provide the policy advice – not educate the marketplace.” SUSPICION Sherwin acknowledges the existence of a “good deal” of employer and employee suspicion and misunderstanding around the word productivity. However, he agrees that enhanced productivity is the outcome of sustained (workplace) improvements and best practice management of everyday business activities. Gaunt agrees that New Zealand needs to lift its productive performance and says NZIM has a role to play in making that happen. A report by the HSBC Bank last month suggested the country is already on the right track to lifting its growth performance. By 2020 our annual productivity rate will have increased to around three percent, it said. “New Zealand businesses will need to be more productive and grow faster if they want to sustainably deliver improvements in their profitability and in the country’s standard of living and quality of life,” says Gaunt. “That doesn’t mean greater productivity is the only answer to overcoming some of the problems facing the economy. But productivity is a significant weapon in the nation’s economic armoury. We need it to help deal with some of the other important social pressures New Zealand will face over the next 10 or 20 years.” Productivity increases can’t, however, be delivered at any price, says Gaunt. The US is currently enjoying remarkable improvements in productivity which are, according to some reports, delivered on the back of hard-pressed employees. Some US companies are, according to workforce surveys, “starving organisations to see what they can do with lower cost structures”. TERRIFIED Britain’s The Economist magazine suggests two things are keeping productivity rising in the US. Workers are reportedly terrified of losing their jobs and therefore willing to accept extra work hours

or shoulder additional tasks. Secondly, “tough times are forcing firms to strain every brain cell to become more efficient” – which might not seem such a bad thing to many enterprises. The economic pressures that are collectively forcing New Zealand to refocus on productivity are both real and significant. “That’s why it’s important for organisations to also focus on developing their people,” says Gaunt. “They need to build management capability and enhance leadership skills.” Cliché it may be, but increased productivity is about working smarter not harder or for more hours every day. Working smarter involves bringing management and everyone else on the team up to speed with what it means to run a good operation in today’s world. “It’s also about building trust and integrity within the organisation,” says Gaunt. “The myths surrounding the word productivity can only be dispelled if everyone knows what is going on and why things are being done differently, or indeed being done at all. “Increased productivity is an outcome of team focus, consistent leadership, individual accountability, reinforcement of what’s important and all the other best practice management and leadership disciplines we promote.” Australian economist Saul Eslake believes productivity growth will help both New Zealand and Australia deal with the demographic changes confronting both economies. It will also help reconcile potential conflicts between environmental constraints on economic growth and widely held aspirations for improved living standards. But reversing the decline in productivity performance that both countries have experienced in recent years calls for a “re-invigorated economic reform effort, improvements to education and training, improved governance of infrastructure investment and a heightened innovation effort”, he says. Gaunt agrees. M Reg Birchfield FNZIM is a writer on leadership, governance & management. reg@rjmedia.co.nz

LEADERS BUILDING LEADERS Our aim is to build management capability through Research, Learning, and Recognition. 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. NATIONAL BOARD GARY STURGESS LIFE FNZIM (CHAIRMAN) LYNDA CARROLL AFNZIM DAN COWARD AFNZIM MOHS MICHAEL WEUSTEN FNZIM JOHN SANDFORD FNZIM ASH DIXON MNZIM JOANNE O’CONNOR MNZIM MARK WOODARD AFNZIM NZIM Inc Chairman: Gary Sturgess Life FNZIM Deputy Chair: Lynda Carroll AFNZIM PO Box 67, Wellington 6140 Ph 0-4-473 0470, Fax 0-4-473 0479 Email national_office@nzim.co.nz Website: www.nzim.co.nz CEO: Kevin Gaunt FNZIM, FAIM PO Box 6600, Wellesley St, Auckland 1141 Ph 0-9-303 9100, Fax 0-9-303 9109 Email kevin_gaunt@nzimnorthern.co.nz Northern Region Regional Director: John Sandford FNZIM Regional Contact: Tait Grindley PO Box 6600, Wellesley St, Auckland 1141 Ph 0-9-303 9100, Fax 0-9-303 9109 Email enquiries@nzimnorthern.co.nz Website www.nzimnorthern.co.nz Central Region Regional Director: Lynda Carroll AFNZIM Regional Contact: Stacey Coulthard PO Box 11781, Wellington 6142 Ph 0-4-495 8300, Fax 0-4-495 8301 Email enquiries@nzimcentral.co.nz Website www.nzimcentral.co.nz Southern Region Regional Director: Michael Weusten FNZIM Regional 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

MARCH 2012

| management.co.nz | 19

POLITICS COLIN JAMES

Interest rates: from low to woe

lan Bollard delivers his third-tolast monetary policy statement this month. The good news is that last year inflation dropped into the bottom half of his 1-3 percent target range. So, is he going out on a high? Central banks are supposed to be dead boring. Over the past three years they have become truly central to much of the global economy, doing things sober central bankers are not supposed to do to remedy what market bankers caused by doing things they were not supposed to do. Here the Reserve Bank has stuck pretty much to inflation targeting, embedded in the 1989 legislation and in policy targets agreements (PTAs) successive finance ministers signed with Don Brash and then Bollard. Inflation targeting assumes that keeping inflation low, in a band or close to a number, will promote economic stability. In fact, inflation targeting did not stop us joining much of the “developed” world in a binge, from which we now have a hangover – in some countries a crushing one. Through the 1990s the explosive growth of low-cost manufacturing in China drove down consumer goods prices and computerisation drove down the price of many services. Even allowing for some drivers in the other direction – for example, costly new medical interventions – overall prices should logically have been going down, not up. But Alan Greenspan at the Federal Reserve reckoned all was well as long as prices didn’t go up too much. He, then Ben Bernanke, ran that line through the 2000s. The Reserve Bank and politicians here agreed. In fact, Winston Peters in 1996 and Michael Cullen in 1999 lifted

20 | management.co.nz | MARCH 2012

the PTA target, Peters from 0-2 percent to 0-3 percent (midpoint 1.5 percent) and Cullen to 1-3 percent (midpoint 2 percent). Moreover, politicians always prefer inflation in the top half of the target band. That way, the official and market interest rates can be slightly lower and homeowners, manufacturers and unions get less agitated. Politicians have not minded much when inflation has gone through the top of the band, even if not driven by the likes of the 2010 GST increase. They would mind very much if it went through the bottom of the band because they would be accused of standing by while jobs were destroyed.

Alan Bollard.

“Bollard has timed his exit well.” The result of letting inflation run at even 2-3 percent when it should have been sub-zero – deflation – was a money blowout. The result of that was a bubble, the antithesis of good monetary policy. Here at least, unlike Greenspan and Bernanke, Brash, then Bollard did bother about the bubble. Bollard took the official cash rate up to 8.25 percent in 2007-08. One result of that was a high exchange rate which destroyed jobs in export and import-substitution industries. High interest rates also deterred investment which could have created jobs and lifted wages. Now in the United States, Japan, Britain and Europe central bank interest rates are at or near zero. Central banks are also printing money furiously. This, coupled with “fiscal stimulation”, is supposed to generate “recovery”. But persistent very low interest rates can, perversely, hamper growth. For

example, they send a signal that the economy is at best iffy and at worst in peril which is likely to make consumers wary of spending and instead prefer to pay down mortgages and other debt and to make companies wary of investing, even if (as now in the United States and Europe) they have stacks of cash. And if interest rates stay low, those trying to save for retirement figure they need a higher level of capital to generate their target income – so those people save more and spend less and dampen “recovery”. This growth-arresting theory about low interest rates is one element in a flourishing worldwide first-principles debate on what central banks should do. Bollard has timed his exit well. M Colin James is New Zealand’s leading political commentator and NZ Management’s regular political columnist. ColinJames@synapsis.co.nz

BOB EDLIN ECONOMICS

Parties square off over growth

ood news, if you were disquieted by the gloomy outlook painted in this column last month or are thinking about emigrating. National’s Paul Goldsmith was among the first MPs to put questions to Ministers when Parliament got down to business last month. It was a patsy, of course, and a positive answer was inevitable: what progress is the Government making in implementing its economic growth agenda? More accurately, it was a positive answer up to a point. The Government believes it is doing nicely, thank you, in terms of creating the conditions for business people to do the things – invest and hire – that will make the economy grow. Steven Joyce, still settling in as Minister for Economic Development, said the Government was making “very good progress in addressing the barriers that prevent businesses from getting ahead”. Before the election, National had released its 120-point economic development action plan detailing key steps the Government was taking to build modern, productive infrastructure, cut red tape, bolster industries, innovation, and trade, and build a skilled workforce. “A number” of these steps already had been completed, Joyce said, “and 2012 will be about further progressing them across all sectors”. The agenda was built around the simple premise that if we want more and better jobs for New Zealanders, we need to encourage more businesses to be based here. Trouble is, progress is being frustrated by people who lack understanding and realism about economic growth. They say they want jobs. In the next breath they say: “But you can’t do that. You can’t build that here. You can’t expand that, you can’t explore for that, you can’t invest in property here, and you can’t do that.” That attitude had made it much harder

for New Zealand to pay its way in the world during the 2000s and – according to the Minister – explains why we went into recession before the rest of the world, in early 2008. If you want economic growth, he said, you have to be prepared to let businesses grow and expand. Joyce expanded on this theme in an article in the New Zealand Herald in which he made the case for creating an environment that was encouraging to entrepreneurs and ideas people. This didn’t mean handouts. It just meant removing more of the roadblocks that stopped people from doing things. A small country like New Zealand had to make the best of all its natural advantages to lift incomes and give more

Steven Joyce.

“Preferring ‘can’ to ‘can’t’ carries its costs, too.” people more chances to make it while staying right here. Each time we say “you can’t” a cost is incurred. Labour’s economic development spokesman, David Cunliffe, next day questioned the Government’s strategy. His critique embraced a raft of things that (he contended) can’t be done. “We can’t simply milk more cows, ship more logs, dig more coal and close a 40 percent value gap. There isn’t enough water, you run into environmental constraints, there’s not enough arable land, so therefore an alternative strategy is required that will require the migration of parts of the economy to higher value activities.” Labour differed from National – according to Cunliffe – in being ready to intervene in markets and sectors where they were not working properly (as it had done to challenge Telecom’s dominance of the telecommunications industry last decade).

Joyce, unabashedly, was heralding the Government’s lowering – and perhaps removing – of some regulatory hurdles to pave the way for businesses wanting to explore for oil, dig for minerals and so on. But he insisted this doesn’t mean you don’t take care. “Big developments need to have the right environmental protections and mitigations, industry needs good health and safety law, and foreign investment should be sought where it adds value. Ensuring those safeguards are in place is a far healthier approach than just saying no.” Cunliffe’s point was to caution that the prosperity from developing some opportunities might be short-term and outweighed by other considerations (such as environmental). Preferring “can” to “can’t” carries its costs, too. M Bob Edlin is a leading economic commentator and NZ Management’s regular economics columnist.

MARCH 2012

| management.co.nz | 21

LEADERSHIP REG BIRCHFIELD

Memorable leadership?

e might, or maybe not, soon witness some inspired, intelligent and thoughtful leadership. The time is right and the need for it is unquestionably great. The question, however, is whether the leader is up to the job. The man in question is the nation’s chief executive. John Key is at the defining point in his career – at least in his political career. The decisions he is now either making or endorsing will determine his place in the history of this country’s political leadership. His decisions and leadership skills will also, however, in large measure determine whether or not New Zealand will enjoy the kind of good economic “ fortune the HSBC Bank thinks awaits us. According to the bank’s report entitled “The World in 2050” and released last month, New Zealand will be in good economic shape 38 years from now. We will, apparently, have one of the developed world’s highest annual growth rates at around three percent, though we will still struggle with being small. Investment in education, tools and technology will deliver our enhanced performance and growth-focused economy. We should be less indebted too. Paul Bloxham, HSBC chief economist for New Zealand, attributed the prospect of our good fortune to the burgeoning middle classes in emerging markets. “Demand for commodities will rocket suggesting that New Zealand is well placed to take advantage of the growth in the world’s fastest growing market in Asia and Latin America,” he said. That all makes some economic sense but poor leadership can thwart the most promising of circumstances. The most extreme example of that must be Zimbabwe. Once Africa’s bread 22 | management.co.nz | MARCH 2012

basket and richest nation, it is now that continent’s beggar. Leadership is invariably all, when it comes to realising on promise and potential. Will John Key rise to the occasion and lead, not just competently but inspirationally? Does he look like a leader determined to deliver us the promised land? The measure of Key’s leadership will depend on his ability to resist the aphrodisiac of political power, and think and act outside the constraints of his, and his party colleagues’, defining ideologies. Does he even want to be a great leader? Is he in the job for the same reason many clamour to occupy the top slot – for self gratification and the slaking of an ego? Presumably he’s not in it for the money. That may be a plus but not necessarily. Key’s ego is overt. And generally, inflated egos and political leadership are constant companions. More relevant is whether or not he has a vision for New Zealand. If he has, he has steadfastly refused to share it. That’s usually a bad sign but, again, it’s prevalent in political leaders. Key’s disinclination to share his vision suggests a lack of willingness to commit and reluctance to be honest about future intentions. That in turn suggests a leadership approach based on knowing what’s best, and believing that what’s best is not for sharing. That’s strange, because principled and well-articulated visions generally stand up to scrutiny. And great visions are worth defending. The best leaders even use them to inspire people to help realise the dream. These are complicated times. The issues confronting nations like ours are complex. Great leaders have the capacity to distil and explain issues, and to take the team with them. Key seems to have

John Key.

a strong personal following. He could probably sell his vision if he had one and if he believed it was truly worth pursuing. The fact that he doesn’t suggests a leadership strategy based more on expedience than inspiration. Watching leaders in action delivers invaluable lessons – both good and bad. To successfully tackle the difficult economic and social issues confronting New Zealand will require some outstanding leadership. Without it, all the promise suggested by the HSBC report will likely come to very little. Hopefully, John Key will use his second term to deliver a lesson we can all learn from. Hopefully, he wants the generation of leaders and followers contemplating their circumstances in 2050, including his kids, to remember him fondly. If he’s not so inclined, the next three years will be best forgotten, even before we enjoy them. M Reg Birchfield is a writer on leadership, governance & management. reg@rjmedia.co.nz

RICK BOVEN THOUGHT LEADER

Collaborate + compete

ompetition has been an important contributor to the rapid economic growth achieved during the past 200 years. The most effective businesses are rewarded with profitable growth while the least effective fail and their resources are redeployed. Late last year I participated on a conference panel with Franceska Banga (CEO, NZVIF), Peter Chrisp (CEO, NZTE) and Murray Bain (CEO, MSI). The topic was competitiveness, yet we all praised progress on collaboration to lift the performance of New Zealand’s innovation ecosystem. So what’s going on? Has something fundamental changed? There is an important change resulting from three adjustments of priorities. The first is Government’s greater emphasis on increasing effort to improve New Zealand’s economic performance. The second is greater commitment to growing high-value exports following more widespread recognition of the potential of differentiated goods and services, combined with the realisation that commodity exports cannot be relied upon to provide prosperity. The third is recognition that success of high-value exporters requires much better innovation ecosystem performance and that, in turn, requires more effective collaboration among the government agencies that manage the ecosystem, and provide funding and services to innovative businesses. The economic management approach of the past relied a lot on competition to encourage performance improvement. The CRIs were meant to compete with one another. Researchers were meant to compete for funding. Firms were meant to compete to secure the resources they needed for success. Government agencies worked relatively independently to provide services to

individual firms. Competition drove performance. Fragmentation ensured competition. Silos were the norm. The approach is changing now as more people recognise that New Zealand’s real economic competitors are in other countries. We now see more clearly that New Zealand’s small and remote internationalising businesses need a supportive innovation ecosystem. Other countries have done a lot more to improve their ecosystems and support their internationalising businesses. The change is not a shift from competition to collaboration. It is integrating collaboration with competition to develop an innovation ecosystem that will help more of New Zealand’s emerging and established businesses to succeed in international competition. The leaders of New Zealand’s innovation ecosystem are doing what leaders do; setting a direction for development with shared goals, including a more prominent role for collaboration, motivating participants in the innovation ecosystem, and aligning people so they can collaborate more effectively. Peter Chrisp, CEO of NZTE, said: “The institution is dispensable, the cause is not. If you come at it that way you can collaborate and co-operate, and not worry about your patch. What you worry about most is the group of companies that you’re working with and whether they are growing or not.” There is great potential to improve New Zealand’s economic performance via more effective collaboration, partly because the past approach has produced an innovation ecosystem where businesses struggle to secure the talent, capital, knowledge and connections required for success, and those deficiencies may now be addressed.

Rick Boven.

There are also risks that must be managed. In the past, New Zealand has scored well on international measures of corruption and trust. Critics of the change in direction sometimes point out that increasing collaboration brings greater risks from cronyism, regulatory capture or other forms of corruption, as well as from group-think and complacency. On balance, the gains available from collaboration far outweigh these risks, especially if the risks are recognised and managed. Alongside growing collaboration should be increased emphasis on values, institutional design that encourages good practices, increased vigilance and effective enforcement. Many countries are turning to innovation as the engine of economic growth. New Zealanders will succeed best by collaborating to compete successfully. M Rick Boven is director of the New Zealand Institute.

MARCH 2012

| management.co.nz | 23

BOOKCASE

Stealing ideas from nature FIND YOUR NEXT By Andrea Kates • McGraw Hill • RRP $49.00

Constant genetic modification is as natural as – well, nature really. Genomes make us unique but the similarities they deliver ensure we remain members of the same species. Andrea Kates argues that the uniqueness and similarities of businesses can be exploited to inject some structured thinking into the need enterprises now have to find their next big thing in business innovation. Kates’ Business Genome project has convinced some fairly high profile management commentators and corporate executives that she is on to something. What she offers is a fourpoint transformative guide to mapping a company’s business DNA. She formulates principles that she thinks organisations need to follow to survive in today’s increasingly competitive business environment. And it’s based

SCREW BUSINESS AS USUAL

By Richard Branson • Virgin/Random House • RRP $36.99

For anyone who five years ago read Richard Branson’s book Screw it, let’s do it, his latest book is both more hefty in the physical sense and carries more weighty ideas. Screw business as usual expands on Branson’s belief that life must carry more meaning for both businesses and individuals. Branson shares his increasing conviction that people bounce out of bed in the morning not just to earn dollars but to do some good. He’s tapping into, and driving, 24 | management.co.nz | MARCH 2012

on comparing similarities that exist between not so obviously related businesses. The author spent 15 years researching and compiling some intriguing case studies to construct and validate her hypothesis. Her business genome approach is deliberately stolen from the medical science of biology because, to her mind, it provides the most graphic and accurate way to identify and illustrate a company’s next competitive edge. The approach “propelled me to look differently at the world of business innovation”, she says. By understanding and breaking down a company’s core DNA into six elements which she thinks all successful businesses are built on, entrepreneurial leaders can breathe new life into an enterprise. The six genomic elements are product and service innovation; customer impact; process design; talent and leadership; secret sauce (the recipe of differentiation and competitive advantage); and, trendability (foresight).

The process approach to “finding your next” is, in turn, based on four instinctive and experience-based steps that Kates designed to help organisational strategists look across industries with an eye more likely to spot innovative similarity and less predictable but more profitable opportunity. Company strategists should: • Sort through their options and assess their hunches; • Match the company’s genome to that of other successful businesses already headed in a similar direction; • Hybridise the business by grafting on ideas that work in other companies; and • Adapt and thrive by breaking out of old habits and fostering new traditions. There’s not a lot in this book that already focused strategists and ideasoriented executives haven’t already considered or stumbled across. Its value lies in the ordered assembly of the thinking and, the conclusions that can be drawn from some of the case studies. – Reg Birchfield

a force that looks to turn capitalism upside down, focusing away from profit for profit’s sake and towards caring for people, planet and communities. At Virgin Unite, they call it Capitalism 24902, reflecting the idea that each individual is part of a global village that spans the 24,902 miles of the earth’s circumference. At its simplest, this book is, at times, a rambling account of who Branson has met and what everyone said. It reads like a who’s who of people he feels he must somehow acknowledge. And while that doesn’t aid the book’s readability, it does underscore the depth of his passion for generously crediting where credit is due. At heart, Branson sees his mission as

bringing people together around brilliant ideas. Over the years he’s done this to an astonishing degree, opening up his homes for the kind of wild all-night talkfests that most people used to abandon when they left college and were told by their parents to get a ‘real’ job. And that’s Branson’s point, really. ‘Real’ jobs must carry meaning. Branson quotes Ben Cohen – of Ben & Jerry’s ice cream fame – who, when asked how he felt about his company being bought out by Unilever, said he could see opportunities to act as a “virus for good” within the larger organisation. Branson himself has gone so wildly viral that he’s the touchpoint for schemes too numerous to mention. They span green

BOOKCASE

electricity schemes in Texas, right through to the sport and lifestyle PUMAVision paradigm of corporate, social and environmental sustainability that spreads its tentacles right across the globe. He supports HIV and AIDS initiatives in South Africa, and he spoke out when then South

THAT USED TO BE US

By Thomas L Friedman & Michael Mandelbaum • Little, Brown • RRP $39.99

Pulitzer Prize-winning Tom Friedman (the man behind The World is Flat) collaborates with foreign policy university professor Michael Mandelbaum to reflect on what has gone wrong in America, and what changes are needed to rediscover its power and prowess. The end result is a stimulating challenge for lateral thinkers here in New Zealand to apply their analysis to our own situation. The authors posit that there are four major challenges – how to adapt to globalisation, to adjust to the information

African Health Minister Manto Tshabalala-Msimang made the astounding proclamation that beetroot, garlic, lemons and African potatoes were an effective cure for HIV. Together with Nelson Mandela and human rights activist (and former Genesis frontman) Peter Gabriel, he

technology revolution, to cope with chronic budget deficits, and how to address rising energy consumption and climate threats. They describe how America reached this situation, then address three areas that have led to the problems – education, maths and physics (the intersection of energy and climate), and politics. Written in a highly-readable style, That used to be us: what went wrong with America – and how it can come back suggests that America is in the equivalent of the ‘terrible twos’ development stage; that 9/11 was diabetes, not cancer; and that a picture drawn of America today

helped birth the creation of The Elders, a group of senior statespeople whose status can bring focus to seemingly intractable problems such as climate change, poverty and armed conflict. And he co-founded the Carbon War Room which harnesses entrepreneurs to market-driven solutions to climate change. Oh, to be a fly on his wall. – Ruth Le Pla

could be represented by a rocket with a leaky booster. The material draws widely from both authors’ global experiences, interviews, books and articles. Back in 2005, when Friedman released The World is Flat, Facebook, Twitter, 3G and Skype were still to be conceived. Now, Flat World 2.0 with its hyper-connectivity is changing the way that information is shared and the way we do business. This change has occurred in a short period and the challenge is how we adapt. While this book looks at the major changes facing America today, these are not America’s challenges alone. There must be opportunities for New Zealand too. Read and see the possibilities. – Gill Lawrence

MARCH 2012

| management.co.nz | 25

TOP 200 THINKING

DON BRAID DELOITTE/MANAGEMENT MAGAZINE EXECUTIVE OF THE YEAR 2011

WHAT WILL THE BUSINESS ENVIRONMENT BE LIKE OVER THE NEXT 12 MONTHS? The tough economic conditions around the world which have dominated the news look likely to continue, particularly in Europe and the United States. Closer to home, Asia and Australia retain a measure of resilience. In New Zealand we will be influenced by these outside currents but will chart our own course with the rebuild of Christchurch getting underway, strong leadership and policies from our Government, and with more of our companies expanding their horizons around the world, spearheaded by New Zealand’s exporters of quality foodstuffs.

WHAT SHOULD NZ BUSINESS PEOPLE BE FOCUSING ON? We wouldn’t presume to tell others what to do but here at Mainfreight we will keep doing what we always do – relying on our team of fantastic people to strive for quality, maintain tight control of our costs, be alert to every sales

opportunity that allows us to improve our business, and deliver on our intention to establish Mainfreight in all the major trading nations of the world. We would encourage more New Zealand companies to develop their businesses further by establishing themselves offshore. The opportunities abound.

WHAT ADVICE WOULD YOU GIVE TO NZ BUSINESS PEOPLE? Again, we can’t speak for others or tell them how to run their businesses. Here at Mainfreight we have a strong culture that values each member of our team, rewards hard work, has an ego for the company not the individual, and supports our wider community. Focusing on the basics of great service, ethical business decisions, and working hard – and with momentum – continues to bring us success.

COVER STORY

PARCHED

PLANET

LEADING IN A WORLD

WITH LESS WATER

Access to clean water will become one of the defining concerns of our lifetime. Business leaders must plan for a world in which water and other natural resources will become increasingly scarce. By Ruth Le Pla.

COVER STORY

Photo: thinkstockphotos.com

et’s be clear. This is not an alarmist piece about pending water wars. No nations have gone to war specifically over water for hundreds, some researchers say thousands, of years. Even at the height of fighting in the Kashmir, India and Pakistan still managed a measure of cooperation over their shared water resources albeit with some dirty tricks thrown in for good measure. Likewise, Israel and Jordan, formally at war for many decades, have cooperated on the management of their shared water resources. Yet geopolitical tension may be just one manifestation of a water-constrained future. The United Nations notes the world population has doubled since 1950 while water usage has trebled. It predicts we could be squashing a fifth more people onto planet earth in the next 20 years. And half of us will face water vulnerability by 2030. It’s no coincidence that “rivalry” stems from “rivalis” or “one using the same river as another”. Water is the ultimate commodity. We all need it and there’s no substitute. As with other commodities, the drivers behind any future water scarcity are complex and highly interrelated. So, too, may be the solutions. (See box stories “Braided themes” and “Water, water, everywhere”.) For now, the main lines of tension tend to be forming within countries, often between different user groups and often for good reason. Government, NGOs, industry, agriculture, townies, local communities, boaties, fisherfolk and others all want to dip into the same pond. Here in New Zealand, anyone doubting the number and complexity of stakeholders in this issue need only check the list of Land and Water Forum members who span everyone from industry groups, environmental and recreational NGOs, to iwi, scientists, and a host of other organisations with an interest in freshwater and land management. Despite the National Party’s best endeavours, our current national conversation about water is also becoming entangled with the debate about the pending part-sale of state-owned MARCH 2012 management.co.nz | 29

Water smarts Mt Cook Alpine Salmon Out in the man-made hydro canals of the South Island’s upper Waitaki power scheme, Mt Cook Alpine Salmon makes secondary use of a water resource that already generates a significant portion of New Zealand’s total electricity needs. The 4.8kph (3mph) pure glacier current provides the highest water flow of any salmon farm in the world. All that vigorous exercise in cold water means the salmon work up a healthy appetite, convert food efficiently into lean muscle and taste delicious. Mt Cook also creates a third economic use of the water through a recreational fishery that provides economic benefit to the region through tourism. CEO Geoff Matthews adds that, at maximum capacity, the organic discharge into the waterways will be less than two grains of sand per one tonne of water and the company has been certified as non-polluting by Environment Canterbury (ECan). “You can drink the water after it’s passed through our farm,” he says. www.mtcookalpinesalmon.com

Mt Difficulty Wines Over in Bannockburn, in Central Otago, winemaker and general manager Matt Dicey says Mt Difficulty Wines has always had a bent towards conservation. Mindful that wineries are, in general, large users of water he’s installed a wastewater treatment system that enables water from the winery to be reused for a native revegetation project. For this, he’s teamed up with Otago Polytech, together looking at the plants that were in Central Otago prior to human settlement. “It’s all about trying to get as much value out of the water as possible,” says Dicey. www.mtdifficulty.co.nz

Ernst & Young Britomart Building People going to the loo in Ernst & Young’s new downtown Auckland building may not be aware of the part they’re playing in saving water. The low-rise building in the CBD’s Britomart precinct is fitted with a rainwater harvesting system which catches water on the roof and stores up to 84,000 litres of it in the basement. That water feeds the toilet system throughout the whole building. Floor-by-floor intelligent metering keeps tabs on water usage in offices and toilets. This, and a raft of other nifty tricks, has won it a New Zealand Green Building Council fivestar rating. That places it among the most environmentally-friendly buildings in the country.

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energy companies, as Mighty River Power is prepped to be the first to go on the block. Further focusing minds, last month, lawyer Donna Hall lodged the “national water and geothermal claim” in the Waitangi Tribunal. Filed on behalf of Sir Graham Latimer, the New Zealand Maori Council and “all Maori”, it says the Crown has breached the Treaty of Waitangi by failing to recognise Maori control and rangatiratanga over fresh water resources. It accuses the Crown of expropriating these resources without Maori consent and without providing compensation. It’s as plain as the rain on a Kiwi statutory holiday that we will increasingly need robust water-related policies in place to ensure a balance of economic, social, recreational and environmental needs. A recent Deloitte report “Water Tight 2012: The top issues in the global water sector” states that while the challenge of increased competition for water is global, the issues must be resolved on a local level by governments, businesses, nongovernmental organisations and domestic consumers all working together. The report outlines eight key themes around which much discussion, and

work, will inevitably focus (see box story “Braided themes”). Paul Callow, infrastructure leader for Deloitte New Zealand, says that while the global Deloitte group has been looking at water issues for the past decade or so, it’s only recently that water scarcity has started to bubble up in wider non-specialist circles. One of New Zealand’s problems, he says, is that although we sure have plenty of rainfall, we’re sub-optimising our water resource. Individual bore holes, and small community schemes and irrigation systems don’t help. “You end up with a patchwork that doesn’t make particularly efficient use of the underlying resource.” Given our high rainfall and lush landscape, here in New Zealand it’s often hard to imagine the dry patch spreading over the horizon. (Globally, for example, most inter-state tension is in the Middle East which has five percent of the world’s population

Deloitte NZ’s Paul Callow.

Braided themes Deloitte’s global energy & resources water practice team has just released a report highlighting eight key themes to watch in an increasingly water-constrained future. As with other resource issues these ideas are all interconnected, it says, and should not be considered in isolation. 1 There is growing demand for a finite resource: The future is not bright On a global level, the numbers don’t add up: we have a finite resource for which demand will soon outstrip supply. The world’s population is not distributed according to the availability of water. There are regions where water scarcity is, and will, remain critical. If we do not address these issues by creating frameworks at a global level and take action locally, there is the increasing threat of conflict as competition for water sources intensifies. 2 Climate change: A volatile future Climate change increases the risk of volatility in water supply thus making it impossible for industry to rely on historical data for future planning. 3 Managing demand: The era of cheap water is over In many countries, pricing systems must be rethought: pricing should reflect the issue of growing demand and diminishing supplies. Utilities should be able to recover the increasing costs of providing the service while at the same time investing in more efficient infrastructure. Higher water prices should also encourage water conservation and efficiency programmes in agriculture, industry and in homes. A tiered pricing system could help address availability issues. 4 Managing demand: The water and energy nexus The futures of the water and energy industries are inextricably linked. Increased energy demand will require more water, which utilities may struggle to provide. Increased water demand, especially in areas of

scarcity, will lead to higher energy costs and additional investment in water infrastructure. This symbiotic relationship can no longer be ignored. 5 Increasing supply: Technology in the driving seat The water sector could benefit enormously from closer collaboration with technology providers to achieve sustainable and effective water usage. Smart meters and cost-efficient desalination, as well as innovative water reuse technologies, can become essential tools in easing supply-side constraints. 6 Sources of funding: Going private The large amount of capital needed in the coming decades to upgrade aging infrastructure in the industrialised world and build new water systems in developing and emerging countries will stretch public finances and test the ability of countries to borrow. 7 Water as the next ‘hot’ commodity: Has its turn come? Given that it is our most precious resource, we expect to see more initiatives to trade water and rights to water based on market dynamics. These could include setting up local markets, selling abstraction licences or more radical steps such as long-term water trade agreements. 8 Water stewardship: The way forward Efforts to demonstrate water stewardship will be a key theme for utilities and water users in coming years. For utilities, placing water stewardship at the heart of operations can result in better relations with customers and regulators. At the same time, identifying and measuring waterrelated risks will enable companies to devise appropriate mitigation measures.

Source: “Water Tight 2012: The top issues in the global water sector.”

MARCH 2012 management.co.nz | 31

COVER STORY

and just one percent of global freshwater.) Economic, business and individual interconnectedness will put paid to such isolationist thinking. Callow says New Zealand may never become a global leader in providing smart meter technology for water but we could be at the leading edge with how we use such technology, even if it comes from elsewhere. Over in their office by Lake Pupuke on Auckland’s North Shore, Paul Brownsey and John Berry have also long been steeped in conversations about water. As executive directors of Pathfinder Asset Management, they help investors put their money into the water industry through a series of Photos: thinkstockphotos.com

Water, water, everywhere Four key themes will emerge as awareness of global water constraints increases. 1 Pricing Countries round the globe will start to face up to how to reflect the scarcity value of water in their pricing. They’ll need to balance the fact that water is essential for life – so must be affordable – while, at the same time, set a price that prevents wastage. They’ll also have to make some hard decisions around who’s going to fork out for the myriad hydropower stations, dams, water treatment plants and associated networks needed to keep bringing water from source to stomach. Emerging economies, with their rapidly growing cities and populations, are in urgent need of new infrastructure. In the developed world, existing plant and systems are starting to crumble. In the US, for example, the average age of water infrastructure is now 50 years. This all means big bikkies. The OECD estimates its member countries alone will need to be injecting around US$600 billion a year into water infrastructure by 2025. That’s somewhere between one and two percent of GDP in the OECD. Add in the BRIC countries and investment demand looks set to top US$1 trillion.

2 Industry relocation The world’s water-intensive industries will relocate to countries offering a plentiful supply of water, strong continuity of supply and fair pricing mechanisms. This may open up opportunities for New Zealand. No-one’s suggesting we should welcome holus-bolus the Middle East’s aluminium smelting industry, for example. But there’s an opportunity for New Zealand to capture not just the agricultural sector but also high-value industries such as biotech or pharmaceuticals. We’d

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also be in line to attract other high-tech manufacturing niches such as microchip processing which is heavily reliant on abundant supplies of high-purity water.

3 Virtual water Consumers will increasingly catch on to the implications of water constraints. In Europe, some well-heeled consumers are already counting virtual water: the amount of water used throughout a product’s entire production process. Pioneering research by London University’s professor John Anthony Allan shows it takes 120 litres of water to produce a glass of wine. A morning cup of coffee may need up to 140 litres of water, and up to 1000 litres of water may have gone into producing one single litre of milk. Such awareness may stand water-abundant New Zealand in good stead as clued-up consumers shift their shopping preferences away from water-stressed countries where their buying behaviours may deplete much-needed resources.

4 Water niches The world will demand more smart ways to work with water. This represents a huge opportunity for New Zealand to piggyback on its abundant supplies of water into developing and strengthening its international advantage in associated technologies and expertise such as hydropower and geothermal technology. Desalination know-how will be in high demand.

Source: John Berry and Paul Brownsey, executive directors at specialist investment funds management company Pathfinder Asset Management.

COVER STORY

specialist global and regional indices. These end-companies span everything from water treatment, storage and distribution, to irrigation, equipment manufacturing and specialist construction. Last year, Brownsey warned a packed roomful of investors at a Responsible Investment Briefing in Auckland, that any summary of the world’s water-related challenges can sound quite bleak. Growing global demographics look set to collide with burgeoning industrialisation as country-dwellers seek new lives in towns and cities. “In 2010 more people globally lived in an urban rather than a rural environment for the first time ever,” he says, “and by 2030, the UN expects more than 60 percent of the world’s population will be living in urban areas.” All of which means more need for water to produce the urban infrastructure and less land devoted to agriculture: our biggest collective water-related headache. For agriculture, as Brownsey points out, is extremely water-intensive. “On average, it takes around one litre of water to produce one calorie of food,” he says. “A person requires 1800 calories of food per day just to survive. So that implies on average, at subsistence level, we need two tonnes of water per person per day.” Like it or not, he says, the genetically modified debate is going to get louder in coming years if we are to feed the world’s population. Deloitte’s Callow says that in a water-constrained future the role of business will remain what it’s always been: to go out

and create economic wellbeing for people. For businesses that use water the onus will be on efficiency and environmental responsibility. “However, the role of business as a supplier of water is the area where there’s the most opportunity to make a contribution in New Zealand,” he says. More than mindful that privatisation of water remains a huge political issue, he suggests there could be a role for private capital in certain parts of the water sector to drive better performance from an environmental and productionefficiency point of view. Callow anticipates a model for New Zealand water company ownership that blends the best of public and private ownership, perhaps bringing together “the discipline of private sector capital with the role of government as regulator and setter of environmental standards”. Meanwhile, at the individual company level, the notion of scarcity is already opening up new thinking around new products that are either created from fewer resources or that allow end-consumers to gobble up fewer resources while using them. Procter & Gamble, for example, is developing cleaning and laundry products that use less water, cold water, non-potable water and even salt water. Its new product development water sustainability guidelines tell staff: “As you improve current products, or develop new-to-the-world products and services, think about how you could apply our technologies to use less water, use water differently, or use no water at all.” Similarly Coca-Cola, a big water guzzler with a network of over 1000 manufacturing plants in nearly 200 countries, uses a source protection planning programme to reduce its water costs, improve the health of local ecosystems and benefit the communities where it operates. Despite our high rainfall, a growing number of companies in New Zealand are getting wise about water (see box story “Water smarts”). Ultimately, many specialists working in the field of water predict a positive future: maybe because the alternative is too awful to contemplate. In the academic world, Aaron T Wolf, Annika Kramer, Alexander Carius and Geoffrey D Dabelko have pooled their thinking in a paper “Water can be a pathway to peace, not war”. Here they argue that water is so important, nations cannot afford to fight over it. Instead, they say, water fuels greater interdependence. “By coming together to jointly manage their shared water resources, countries can build trust and prevent conflict. Water can be a negotiating tool too: it can offer a communication lifeline connecting countries in the midst of crisis.” These academics reckon that by crying “water wars” doomsayers are turning their back on a promising way to help prevent war. “Cooperative water resources management,” they say, “is the path to the future.” M MARCH 2012 management.co.nz | 33

PRODUCTIVITY

How to boost productivity

Organisations must have singular, sustained and people-focused management and leadership if they want to hike their productivity. Reg Birchfield says that means treating people with respect.

Illustration by Frazer Williamson

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he New Zealand and Australian governments are getting serious about productivity. Why else would they commit their respective Productivity Commissions to undertake a “joint productivity study” as they did last month? Together, the commissions will identify options for more economic reform and integration between the transTasman neighbours. Both governments clearly see the pursuit of a single market agenda as the route to greater productivity and economic growth, and as a counter to global economic instability. Productivity is about building national and individual wealth and wellbeing by working smarter, not harder. Clearly neither country has got a good grasp on the concept because productivity is reportedly slipping on both sides of the ditch. “Productivity,” according to America’s Nobel Prize winning economist and writer Paul Krugman “isn’t everything, but in the long run it’s nearly everything”. Governments look to economic growth through increased productivity to fund a nation’s future. The joint transTasman study is, therefore, politically understandable. Productivity increases in both countries, particularly New Zealand, have faltered recently. As Saul Eslake, chief economist at Bank of America Merrill Lynch Australia, said last year: “Reversing the decline in Australia’s productivity performance calls for a re-invigorated economic reform effort, improvements to education

and training, improved governance of infrastructure investment and a heightened innovation effort.” Much the same could be said for New Zealand’s wilting productivity performance. Macro measures, such as deploying the right regulatory policy settings to create a sympathetic business environment and others identified by Eslake, undoubtedly go some way to solving lagging productivity. But more than anything, productivity rises or falls on the back of wise or wasteful management and leadership practices employed at each and every organisation in the land. And therein rests an issue. Generally speaking, productivity is not uppermost in the minds of most managers, according to David Hand, managing director of management consultancy Newport Consulting. “Survival is the key management driver,” he notes. “It determines almost everything organisations do.” And more businesses need higher productivity to survive in today’s increasingly competitive world, according to Murray Sherwin, chair of New Zealand’s Productivity Commission. “But it doesn’t work for boards to simply say

they need higher productivity, even if it is the only answer to economic survival.” Focusing on survival is understandable in today’s tough economic climate. But, according to Hand, it has always been that way. Survival is what managers think about most. Profit, he admits, is also a driver but he thinks companies change to survive, not to be more productive. An upside to the current drive to survive is that managers are developing new products and services, according to a Newport survey of 242 New Zealand and Australian business leaders, conducted last year. It found that innovation is increasingly a component of companies’ survival strategy. Innovation is not, however, a silver bullet with which to dispatch the productivity problem. It’s an outcome of necessity, says Hand. “As business gets tougher, so managers look for other survival options.” Whether productivity increases are intended or simply the byproduct of a survival or profit-driven strategy, they are accomplished mainly through singular, sustained and people-focused management and leadership. Productivity increases result from

Exclusive series This is the second of an exclusive three-part series on productivity by Reg Birchfield. In next month’s final article, he examines productivity measures and asks how relevant and meaningful they are. He wonders if there are other ways to look at this increasingly critical management and organisational issue, and suggests alternatives.

MARCH 2012 management.co.nz | 35

PRODUCTIVITY

Who ‘gets’ productivity? Shaun McCarthy, chairman of organisational culture consultancy Human Synergistics, picks Air New Zealand, Lion, IAG, the New Zealand Lotteries Commission and DB Breweries as good local examples of companies that focus on their people to ensure they perform better than the also-rans in the economy. Also on his list is Australasian outdoor advertising company Adshel, which has transformed itself over the past six or so years. “They made a commitment to change in 2004/2005,” says McCarthy. “They grew revenue by five percent in what seemed like a declining market and lifted profitability by 50 percent.” The Adshel transformation involved simplifying work processes, reducing internal competition and pushing employee energies outward rather than looking inward to control behaviour. Leadership development programmes encouraged individuals to act as leaders rather than managers, and employees were asked to talk about, and identify, things that were not working for the enterprise. “The result,” according to McCarthy, “is a top-performing and highly-productive enterprise with a new lease on life.”

36 | management.co.nz | MARCH 2012

Photo: Jan-Michael David

Watch and learn

cumulative, sector-by-sector, site-bysite, individual-by-individual process and leadership improvements. Sherwin agrees. “Productivity is all about sustained [business] improvement delivered mainly through micro activity. Even small improvements in productivity growth, if sustained, can have a big impact on income and wellbeing.” Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research, says enhanced productivity accrues from the cumulative impact of micro changes across enterprise. “It is about business doing things better. That’s why it takes time to see changes in productive performance.” New Zealand must focus on the “quality” of its labour and its management as well as on its capital and regulatory environment, according to IER’s Industry Productivity and the Australia-New Zealand Income Gap report, released in September last year. The consistent implementation of management practices that deliver higher productivity aren’t the long suit of Kiwi business leaders. Shaun McCarthy, chairman of organisational culture consultancy Human Synergistics, thinks too many Australasian business leaders don’t understand “how to get the best” from their employees. He attributes most of our poor productivity performance to our poor management practices and a steadfast, top-end refusal to accept that a better management culture delivers better results. “There is a disconnect between the desire [to manage differently] and the reality of doing so – between the exhortations and the execution,” he adds. Individuals must be committed to an organisation. And in turn, they need to feel that the organisation is committed to them. “Both the individual’s and the organisation’s needs must be in balance as opposed to one side being either superior or subordinate,” says McCarthy. A study by global management consultancy Hay Group last year identified productivity as the “next big challenge”

Newport Consulting’s David Hand.

for Australasian businesses. It pinpointed management and leadership failings as the principal inhibitors to better productivity performance. The study found nine productivity drivers which Hay Group’s general manager Pacific Henriette Rothschild says are essential to growing productivity. “Productivity is directly linked by factors such as clear direction, organisational design, reward, leadership, performance management, engagement and diversity,” she says. The combination of engagement and employee enablement is, she says, productivity’s missing link. “On average, 15 percent of employees are engaged but not enabled. This leads to frustration.” The Hay Group findings are helpful but hardly surprising. They point to the essential management and leadership priorities and practices that Kiwi companies need to embrace to seriously tackle the productivity problem. They also illustrate the essence of managing for productivity growth – a need to focus on the aspirations, abilities and worth of the individual – from the top to the bottom of the enterprise. Hand thinks senior executives and directors focus too much on rewarding themselves and a cadre at the top of the enterprise. “Remuneration at the top end

PRODUCTIVITY

Step by step Nine ways to boost your organisation’s productivity. Clarity and direction Clearly communicate organisational goals and direction. Confidence in leaders Understand why it is important to individuals to have strong and capable direct line managers to report to. Quality and customer focus Know what customers want and create a sustainable structure to deliver it. Bank of America Merrill Lynch Australia’s Saul Eslake.

of many organisations is outrageously over the top,” he says. “Executives and directors give themselves ridiculous increases and bonuses because they can, not because they either deserve or earn them. This is an enormously destructive leadership and management issue.” Employees can’t be expected to act positively or think productively when they see they are being ripped off, he adds. He does not buy the argument that companies have to pay “outrageously” to attract the best individuals. Appropriate reward is, however, critical to building more productive enterprises according to Hay Group’s executive reward expert Trevor Warden. He thinks management performance packages should be properly linked to productive performance. But this seldom happens. When companies sometimes try, the package structure and its implementation are more often than not poorly conceived, implemented and monitored. “Performance measurement suffers from poor differentiation,” he says. According to Warden, performance and reward are legitimate tools for more effectively managing and enhancing productivity. “Reward systems are a critical part of good leadership,” he says. Good managers respond to the right reward

Hay Group’s Trevor Warden.

systems and having the right managers in place is critical to productive performance. “The single most important reason people underperform or leave an organisation is that they do not get on with their boss,” he says. “Time and again research shows this to be true.” Some industry sectors are, for inherently obvious reasons, more productive than others. Scale, natural advantages, infrastructure, ownership models and, most compelling of all, global or local demand, all play a part. In New Zealand that means a highly productive agriculture sector. In Australia, the minerals sector scoops up the productivity accolades. For most sectors, however, productivity is closely linked to individual performance. And individuals are influenced most by organisational culture. “The quality of the boss beats at the heart of the matter,” says Warden. “What happens at work on a daily basis determines productive attitudes.” Bosses must understand their people, what motivates them and what turns them on to work. “People need to be treated as people,” he says. “The more effort bosses put in to the individuality of an employee, the more likely he or she is to have an impact on that employee’s approach to being productive.”

Reward only the best Differentiate and identify good people and then retain them. Measure the ROI in reward Use pay as a strong communicator of what is valued. Performance management Align and manage the link between individual and business performance. Many Australasian leaders struggle to get this right. Workforce empowerment and authority Have the confidence to let team leaders lead. Collaboration Understand that diverse and well-managed workforces deliver results. Structure, work and process Create an internally well-designed and automated organisation.

Source: Hay Group global management consultancy.

However, changing organisational culture is not easy. That, too, is a leadership issue. Few companies put sufficient effort into the leadership and management development required to build a company-wide understanding of what change means and how to accomplish it. “The organisations I see haven’t made much progress linking the skills training and development programmes they implement to their desired productivity outcomes,” says Hand. MARCH 2012 management.co.nz | 37

PRODUCTIVITY

Human Synergistics’ McCarthy believes managers often grasp intellectually what constitutes a different and more relevant management approach, but they lack the self confidence to act as they know they should. “Strong leaders think and work differently,” he says. “They have the confidence to lead and manage as the research tells them they should.” The first step toward building enterprise productivity comes with an acceptance of the need to change. The development of people-focused organisations almost automatically leads to an acceptance of the value of more innovation in the enterprise which both enables companies to cope with harder times and leads to greater productivity. The Newport survey suggested that more companies are looking to develop more innovative products and services. But equally, more innovative and simplified internal processes can enhance

organisational performance. “Innovation should be a way of business life,” says Hand. “But management must ensure that the business is able to capture and foster it as a unique and constantly changing way of doing business.” A significant and sustained lift in productivity rests primarily with the competency and commitment of directors and senior executives. The extent to which they understand the need to upgrade their business performance through better leadership and management practices is in doubt. Most existing research paints a gloomy picture of Kiwi director and management capability. Whether New Zealand has “sufficient governance capability to lift the productivity act is a good question”, says Sherwin. The commission has “not done enough work on this but we need to”, he adds. “On the management side however, our largest company, Fonterra,

Integration and

Balance

We specialise in assisting clients to increase productivity by integrating and balancing the 4-P’s through portfolio, programme and project management. Get in touch to discuss how we can assist you.

www.projectplusgroup.co.nz or 04 495 9100

38 | management.co.nz | MARCH 2012

definitely had to go offshore to find the people it thought it needed to deliver global success.” But he does at least concede that New Zealand’s home-grown global transport company Mainfreight is an outstanding example of how to build a business through annual increases in productivity and without imported management. It’s also hardly coincidental that Mainfreight has invested heavily in building its organisational culture, focuses on its people, does not pay outrageous wages, aligns pay with performance and tells everyone in the business exactly where they are headed. There has to be a productive lesson in there somewhere. M Reg Birchfield is a writer on leadership, governance & management. reg@rjmedia.co.nz Illustration by Frazer Williamson.

TODAY

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FACE TO FACE

John Botica

Damage controller The reputation of the financial services industry didn’t smell too good for a while. Reg Birchfield talks with Guardian Trust’s managing director John Botica about how he’s trying to freshen up his company’s image.

he financial services industry put product before people and paid a heavy price, says Guardian Trust’s managing director John Botica. The price the industry paid was, of course, nothing compared with the injury it inflicted on the investment portfolios of its customers. But lessons have been learned, according to Botica, who has been in his

40 | management.co.nz | MARCH 2012

current role for a little over a year now. The feeding frenzy prompted by excess investment funds and throwing investment caution and client care to the winds proved just too much when the global financial crisis (GFC) hit. The financial services sector became obsessed with “creating investment products and taking them to the market rather than focusing on the risks they

were creating for investors and their customers”, says an understating Botica. “We stopped asking what it was that clients really needed to both generate income and simultaneously protect their investment.” The upshot of this reverse thinking is that investors now fret over losses in their portfolios which could, and should, have been avoided. As Botica

Photo: Jan-Michael David

now puts it: “Investors are, quite rightly, unhappy with the financial services sector. They thought they were taking professional advice, only to find they were let down. Larger institutions in particular have not been client centric.” The industry outcome is, he says, that the financial services sector is “now at a critical recovery point” in its evolution. Guardian Trust’s particular response

to the industry’s predicament is to invest more in the training and development of its employees, says Botica. “I’ve only been with the company a little over a year. However, staff turnover is and has traditionally been low. Their technical competency has undoubtedly been well catered for. But we need more than technical competency to turn things, particularly attitudes, around.

We’ve got to learn to build relationships and appreciate the value of those relationships.” The company’s business model is, he says, already more “client centric”. The company’s processing and transaction activities have been centralised, freeing up employees to spend more time with clients. “It is a change in business focus,” he adds. MARCH 2012 management.co.nz | 41

FACE TO FACE

That might not seem particularly revolutionary to businesses that have always understood the importance of the customer. But Botica’s admission that the finance and investment sector lost the plot and thought less about the needs and interests of its clients and infinitely more about processes

porting the changes introduced by the Government’s AFA programme and related regulations is simple enough. “It’s about lifting New Zealand’s financial and investment literacy. You can put as many legislative and regulatory changes in place to try and protect investors as you like but, unless those

The financial services sector is now at a critical recovery point in its evolution. by which to extract more funds from them is, however many times you hear it, still a disconcerting and discordant note of recent finance market history. Money, to most of us, is so goddamned precious and difficult to acquire and retain that we don’t seek professional help to lose it. Remodelling Guardian has not, he concedes, been easy. The need for change was obvious but, “change is always difficult to push through”. Redundancies that accompanied the company’s restructuring took about 20 percent of the people costs out of the business, and no doubt a dollop of goodwill. The end result, however, is to have the people with the right skills in the right jobs, says Botica. On the upside, the changes have “lifted employee confidence dramatically over the past 12 to 24 months. We are investing more in our people than we ever have before and they feel better equipped to do their job.” To hone its competitive edge, Guardian has encouraged 60 of it employees to take the new Authorised Financial Advisers (AFA) qualification. “They are not required to, but we decided to go the extra mile to ensure our people are confident when they talk to clients,” he adds. Botica’s rationalisation for sup42 | management.co.nz | MARCH 2012

actions are embraced by the industry we’ll be no better off tomorrow than we were yesterday.” To Botica’s mind, introducing additional layers of legislative complexity does not, of itself, afford any great investor protection. On the other hand, he thinks the changes introduced along with the establishment of the Financial Markets Authority (FMA) to more effectively monitor and regulate New Zealand’s financial services industry are making a difference. There is, he says, no one regulatory model anywhere that offers a panacea to all the problems associated with opportunist investment professionals. “New Zealand seems to have adopted a safer way of managing the problems than many other countries.” The financial services business and environment might have changed post global financial crisis (GFC), but has Botica’s personal management style and approach changed with it? His answer is somewhat circuitous. “I have had to change my business focus. The market was moving faster than you could manage it. It moved so rapidly that decisions were likely to be successful whether they were appropriate or not. The market would carry you through,” he says reflecting on pre-crash days. “That has changed. My focus is now

more strategic. I am now more reliant on my management team. I gather more market intelligence to equip myself better to lead and direct, and focus on where next to turn the ship.” His job, therefore, is a little more intellectual but that, apparently, “makes it more personally interesting”. Botica concedes that this personal and organisational transformation does, however, leave him more “vulnerable” as a manager. On the other hand, “having more skin in the game delivers more rewards when you’re successful”. His success as a chief executive is now measured by the positive reaction his employees have toward the implementation of key strategic decisions. Decisions such as last year’s purchase by the Australian Trust Company of The New Zealand Guardian Trust Company. “We got a 95 percent positive tick on that,” he adds. The move was not, he says, “a New Zealand financial services company being bought by an Australian financial services company – quite the opposite. It was and is a blending of two distinct companies and strengthens our position in this niche trustee company market.” The abuse tossed at the antics of the financial services sector notwithstanding, Botica enjoys the business. “I always have,” he adds. “The onus now is on us to restore investor trust. No matter what business cycles we are working through, this is an intellectually stimulating business. “My personal values include a strong desire to give something back to the community. We do that by looking after the wellbeing of our clients. What I like about the trustee investment company model is that we look after the inter-generational wealth of our customers, their families and their communities. “What gets me up in the morning is the opportunity to make a positive difference to people’s lives. It’s what I want to do. I left a fantastic and well-paid job at AXA and took a risk on where I was

FACE TO FACE

going next. Now I have the opportunity to do what I really want to do.” That’s fine for John Botica, but what does he think the people who work for him believe he brings to his role as MD of Guardian Trust? “Security. I hope and believe they see me as a well-equipped individual who has the background and experience in the financial services industry to ensure that a company that has been around for 125 years and with a blue ribbon client list, won’t risk the company’s future. “I hope they see me as someone they can trust to do the right things in the right ways. I think I am someone they are able to freely talk to. I am probably more affiliate than many CEOs, particularly in this sector. My personal values are based on honesty and integrity and I care about others, particularly the community.” Botica accepts, however, that the e t th na ! u f s lk at Wa tnes gre ave 12 Big it all fi reat 5 h and e 20 to su for a g 35 77 FYD s at th ething nd all 800 4 p l u 0 e o h Join s, som kids a r call n o e nt t ? Wa time locatio t for th rg.nz e .o n sam zing me .fyd n a ww am rtai Six , ente out w s k l c e lev . Che ore! se m cau d out n to fi

banking, investment and financial world still has many miles to travel on the road to reputational redemption. “We’ll see market volatility for quite some time,” he says. “The future however, be it three, four, five or more years out, will be very different from what it has ever been before.” That seems pretty self evident, so, different how? “I don’t know. I am just absolutely certain it will be entirely different from anything we have seen or experienced before,” he says. “I don’t think any of the traditional cyclical market analysis will stack up in future. “While I can’t tell you what the future will look like, I know those that will be successful will be the companies that know and understand what their clients need. Get that right and the next steps will follow logically and easily,” he adds. Being more client-centric and transparent might be current vogue, but the

creative hound dogs roaming the world’s money markets are straining leashes everywhere. Raising New Zealand’s generally low level of financial literacy is, in Botica’s view, one of the most helpful weapons in the war on fiscal malfeasance. “It is essential that we tackle this problem. It is starting to change,” he says. “KiwiSaver has probably assisted in this education process because it has been far more successful than anyone expected it to be. “The Kiwi mindset is changing. More New Zealanders are waking up to the need to save and secure their future wellbeing. To successfully take responsibility for their personal savings, Kiwis must lift their level of financial literacy.” And that, says Botica, is a job for Guardian Trust. M Reg Birchfield is a writer on leadership, governance and management. reg@rjmedia.co.nz

what I wanted, when I wanted. My name is Sarah and I was an angry girl. I did me. for School didn’t really work I wasn’t there, Most of my time I spent in detention and when used to think that was fun. I rs. teache my with y Mainl . I was picking fights mme, I started to look at But after being selected for FYD’s Project K progra ly revolve around me. actual didn’t world the out d figure I ntly. things differe was no one to blame, Only I was responsible for my attitude and there except for myself. tunities they gave me, I Today, I think if it wasn’t for FYD and the oppor I would have made it to think even don’t I year. this ating wouldn’t be gradu 5th form. a donation at fyd.org.nz or To help other young people like me, please make ad. my g readin for s call 0800 435 775. Thank buIlDI Ng bIggER fuTuR ES, NOW.

KIWI CAN • STAR S • PROJ ECT K • MYND

MARCH 2012 management.co.nz | 43

SUSTAINABILITY

Drawing on

nature

As world leaders prepare for Rio+20, Desso’s Andrew Sibley sketches out the new environmental agenda. Cradle to cradle thinking, he says, provides a blueprint for manufacturing.

wenty years ago, leaders from 167 countries came together in Rio de Janeiro for an environmental summit that has shaped thinking on climate change and sustainable development ever since. The 1992 summit coined the phrase “ecoefficiency” in the pursuit of sustainable development. This, so it was hoped, would transform industry from a system that takes, makes, and wastes into one that integrates economic, environmental and ethical concerns. Essentially, eco-efficiency means doing more with less. The first principle of the Rio Declaration stated: “human beings are at the centre of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature.” Twenty years on, the main theme for Rio+20, which takes place in Brazil in

44 | management.co.nz | MARCH 2012

June, is “a green economy in the context of sustainable development and poverty eradication”. That theme indicates how the world economy has changed since the first Rio summit. In 1992, the consensus was that it was up to governments to ensure that economic development did not harm the environment. Now, the new consensus is that national governments can only do so much. The new environmentalism of the 21st century must embrace all stakeholders, including the industries that underpin economic prosperity. That sea-change also reflects another reality. In 1992, the developed countries were experiencing economic growth while the developing world needed jobs. Today, that paradigm has been reversed: the developed countries need jobs and much of the developing world is demonstrating solid economic performance.

GREEN JOBS While creating jobs, especially “green” ones, is a priority for Rio+20, so too is a transformational approach to how we grow our economies and how we measure that growth. Judging economic performance on the basis of production and consumption, as is the case now, merely encourages over-consumption and puts little value on the natural environment. Another driving factor towards a new kind of economic model is the rising cost of resources – everything from oil to food, from energy to other basic raw materials. The new economies of the 21st century must therefore look beyond eco-efficiency to adopt new thinking on how to make the very best possible use of all our natural resources. Doing more with less, the old mantra, is no longer the best-possible way forward.

SUSTAINABILITY

DESIGN IN ACTION European manufacturer Desso, which makes carpets, carpet tiles and artificial grass, takes inspiration from cradle to cradle design. Introduced in 2002 by the German chemist Michael Braungart and American architect William McDonough, the cradle to cradle philosophy models human industry on the natural world, in which materials are nutrients circulating in healthy, safe metabolisms. It’s a philosophy that uses nature as a template for how Desso can redesign everything it does – including the manufacturing process – to be more eco-effective. The 1992 Rio eco-efficient approach has meant assessing manufacturing and distribution processes and then finding ways to minimise impacts on the environment. It has been an enormous step forward in galvanising companies to think and behave in new ways and has brought significant environmental advances – often from companies thinking laterally and working collaboratively. For example, in the flooring sector, polyethylene terephthalate (PET) plastic beverage bottles are now being recycled in their millions to make polyester carpet fibers. But at Desso, and a growing number of manufacturing companies, it’s been about adopting the new theory of ecoeffectiveness, which looks at the manufacturing industry as regenerative rather than depletive, and designing goods that celebrate interdependence with other living systems. From an industrial design perspective it means making products that work within a circular rather than a linear economy.

CRADLE TO CRADLE In the living environment, materials are constantly being transformed without losing their capacity as nutrients. As in nature, so can we do the same, using innovative supply chain management to use materials from one industry to support others, eliminating the concept of waste because all waste becomes tomorrow’s raw materials or nutrients. Braungart and McDonough state that when designers employ the intelligence of natural systems – for example, the effectiveness of nutrient recycling or the abundance of the sun’s energy – they can create products, industrial systems, buildings, even regional plans that allow nature and commerce to fruitfully co-exist. In 2008, Desso entered into partnership with the Hamburg-based Environmental Protection Encouragement Agency (EPEA) – the brainchild of cradle to cradle co-founder Michael Braungart – and intends that all its products will be designed and produced according to cradle to cradle design principles by 2020. It’s an approach that works commercially as well as environmentally. Desso’s earnings (EBIT) have risen significantly between 2007 and 2010, and its cradle to cradle journey is now the subject of a case study by the London Business School. In implementing cradle to cradle Desso has, for example, introduced a carpet backing that can be entirely recycled back into carpet and announced that 60 percent of its carpet tile range will be made with a yarn made from 100 percent recycled content. In line with its cradle to cradle commitment, it has introduced a Take Back programme where it collects used carpet from its clients and ensures that it is properly reprocessed. Desso offers an international collection service on a

project basis, which includes all carpet, irrespective of brand and type – with the exception of carpet containing PVC, which is not considered suitable for reuse according to cradle to cradle principles. Collected carpet will be processed by a waste management company and used as secondary fuel within the cement industry or re-used for other recycling initiatives. NATURE & HUMAN NATURE Within the scope of the Take Back programme, logistics and recycling processes will continue to be further optimised, to provide the ideal solution for customers while contributing to Desso’s cradle to cradle ambitions. From a manufacturing perspective, that doesn’t mean making products more durable or designed to last longer. It doesn’t mean asking consumers to use their mobile phones or TV sets for longer, because consumption is bad. Cradle to cradle makes planned obsolescence good; it makes consumption good. It merely asks us, the consumer, to buy new products from companies committed to the most sustainable closed loop manufacturing methodologies. There are obvious benefits for all of us. First, it makes good business sense because, without waste, companies save money from having to source valuable new resources and, second, with nutrients being constantly recycled, it diminishes the need to extract any more new materials. That really does change the design of the world and as world leaders prepare once more to travel to Brazil, offers a valuable blueprint for manufacturing industries everywhere. M Andrew Sibley is Desso’s regional sales and marketing director.

MARCH 2012 management.co.nz | 45

The inaugural Premier

Taste of New Zealand

Awards

The Premier Award is the highest achievable Taste of New Zealand Award (TONZA) and recognises only the finest expression of regional cuisine in the country.

True South Dining Room at The Rees Hotel and Luxury Apartments, Queenstown TOP CLASS MEANS TOP PEOPLE by Keith Stewart

Southern whitetbait fritter with pickled cucumber and lime crème fraiche.

When you arrive at the True South dining room you get the immediate impression that this is a place for serious food. True, it has something of a reputation, and there is the expected plush undertone permeating its home, the Rees Hotel on the shores of Lake Wakatipu. Luxury springs to mind, but as always luxury does not always mean fine food, which is why the serious air as you enter True South is encouraging. Without question the special atmosphere, enhanced by spectacular mountains filling the view, complete with dark blue lake and the appropriate elements of sky, could focus attention on being tourists. However there is something in the convivial, matter-of-fact attitudes of service staff, the open kitchen and a decided lack of glitz that gives this small dining room more of the air of family auberge France than it does Michelin Three Star. A place where food is important, and service is in support of food, not in place of it. A place of substance, not glitter. “The Rees needs to represent something special, something more than its brilliant Queenstown location. Almost everybody in Queenstown has location, and here we have the extra value of rooms that are classy enough for top end accommodation. Our service is focused, our product is up there. But still there is a crowd at the top these days,” general manager of The Rees, Mark Rose says. So he had to put something of his own personality into the place, and that means giving food and wine the serious treatment. Not just culinary glamour, but substance that would be recognised by true gourmets and serve as a reassurance to the property’s owners that they are participating in an investment of real value. “There is a lot of talk about being the best you can be,” Rose says. “But really, is there much around in New Zealand that competes with

True South dining room.

Beyond employees, it is also about people relationships, securing trust from key suppliers. “We can’t just pretend to find the best local suppliers,” says Rose. “We have to actually find what is good, why it is good and make dishes that reflect that excellence.” This is all about managing those key relationships with all parties from the waitress to the pig farmer. Meeting and chatting, taking the time to get alongside those people you want to give that extra bit, and who trust you to handle their products’ qualities well. www.therees.co.nz the high quality food in Europe or Asia, and does it on our terms? To establish a place like that gives The Rees an element of surprise as well as extra value.” So, there is a reason. But how to make it happen? “It’s in the people you hire. I had to find those for whom food and service is as important as it is for me.” Rose says that chef Ben Batterbury has the attitude that is essential for making a high class kitchen work. Well organised, committed to creating fine food and maintaining standards, and, essential in a New Zealand environment, a hands-on operator, not a chef who stands and delivers orders to those around him. “Ben has that ability to construct his dishes around taste, so he is brilliant working in a situation like this, where he is finding new things in a new country all the time.”

Chef Batterbury’s wild rabbit terrine.

MOBILE MANAGERS

Technology on the hoof

Five NZ business leaders share how they stay connected and on top of their game while on the move. By Hayley Barnett.

emails while on the move and I always have it on hand. I always use my iPhone for email back-up and, of course, for phone calls and text.

When you’re away from the office, what types of technology do you use to keep in touch? Graeme Edmond: I use a laptop, iPad 2

iPhone 4 and use it to keep in touch and stay up-to-date. Our organisation is global so I have people contacting me at all times over a 24-hour period. I learned fast to turn off the audio notification of emails so it doesn’t ping all night.

xecutives are travelling more than ever, so it’s not surprising that technology improves daily to keep them connected and up-to-date wherever and whenever they need it.

and an iPhone. I use my iPad for viewing 48 | management.co.nz | MARCH 2012

Sue Watson: I’m very attached to my

Kenneth Leong: I use an iPhone and

iPad to access documents on our office server hosted on Amazon. Skype is handy for talking and the front camera on the iPhone is a game-changer. The Bria app on iPhone is linked to the office for seamless local calls when I’m on the road in Asia. No one needs to know that you’re not in town. Samantha Seath: I generally rely on my iPhone 3GS for most things, however I

MOBILE MANAGERS

have recently started using an iPad. If I know I will need to do more work I take my laptop. Ken Rivers: I take a Blackberry and

an iPad 2.

Our Panel: Clockwise from top right: Specsavers managing director Graeme Edmond, Euroasia director Kenneth Leong, EDANZ chief executive Samantha Seath, Refining NZ CEO Ken Rivers and Kea New Zealand global CEO Sue Watson.

How did you come to select these particular technologies? Edmond: I used to have a

Blackberry but found the email system limited, particularly in accessing attachments. A colleague suggested the iPhone and he later got an iPad. I saw firsthand the advantages of having one, so I purchased one at Melbourne airport on my way home from a business trip. Watson: Reviewing social media on my

iPhone is a good use of time when Iâ&#x20AC;&#x2122;m in transit. I find the Facebook and Twitter apps user-friendly and I like the camera function quality. I also want to know that wherever I am I can stay connected to the Kea community through our membership network on our website via email, a phone call, text or social media. With the iPhone 4 I feel as if I have the community in the palm of my hand. Leong: Trial and error. A lot of

online research. Seath: When I got my iPhone two years ago there were not as many smartphones on the market so the choice was between Blackberry and iPhone. While previously I had an older model Blackberry, I found emails were not as easy to read, especially those with attachments. When looking for a new phone I targeted those that were going to give me the best email functionality, as well as phone capability. The large screen on the iPhone suited this purpose. For trips that require more processing power I use my laptop. The iPad was to enable me to be more efficient with MARCH 2012 management.co.nz | 49

MOBILE MANAGERS

meeting notes and eliminate the need to take a laptop on day trips when I don’t need to access files. Rivers: The Blackberry gives me the

mobile phone that I need, as well as the ability to scan email traffic at the same time. The iPad lets me look at documents/attachments (my eyesight is not

need now, wait a week and it will probably appear. Rivers: Blackberry is great because of the instant access to email without having to set up internet connectivity. The iPad makes reading documents on the

I find it hugely reassuring to know that I can be reached wherever I am. – Sue Watson good enough for the Blackberry) and is particularly useful for pre-reading documents. I also use it to read while I’m on the road. What do you like most about them? Edmond: My iPad provides great ease

of use and an excellent screen for handling complex documents. It is light and simple to use, easy to carry around and has plenty of applications available. My iPhone can be with me always. Watson: I find it hugely reassuring to know that I can be reached wherever I am and that I can stay connected as events unfold. I also like that my staff and my son know more about mobile technologies than me so I am always being challenged to learn new applications. Leong: The ability to work seamlessly

when I’m offshore is a critical consideration in deciding which systems to employ. Seath: The iPad is a great size and it

can slip into my handbag – not so great for guys perhaps. Both the iPhone and iPad sync easily with my email accounts. There are an amazing number of apps to help make these devices more usable and, if you can’t find something you 50 | management.co.nz | MARCH 2012

go easy, unlike on a laptop, which doesn’t feel natural or comfortable. What are the frustrations and limitations? Edmond: Voice commu-

nication on the Blackberry is much clearer and reception stronger than the iPhone, but the iPhone makes up for it with all its other features. I miss not having a USB connection on the iPad so I can print documents. Watson: I’m the biggest limitation to making best use of my iPhone because I’m a reluctant and slow adopter of new technologies and applications. Leong: The myriad of apps and tools do not always talk to one another very well. For example, I can view a calendar invite sent using Outlook on my iPhone, but I can’t accept the invite until I get back to my PC. Saving and editing files via iPhone is not a seamless exercise either.

my laptop. The downside to having so many apps available is making the decision on what is useful and will really make life easier versus downloading apps that really add nothing to your productivity. Rivers: Cost prohibits me using the

internet on my iPad overseas. While I use Powerpoint and Excel on the iPad, I still find the PC better. It seems to me that Powerpoint presentations often screw up when transferred to the iPad. In an ideal world, what do you wish you could use and why? Edmond: I seem to be happy with what

Seath: The downside, in particular

I have until I see a colleague with something I had never even considered. This is particularly true with all the great apps available.

with the iPhone 3, is the limited battery life. The main limitation with the iPad is that you are unable to make changes to email attachments so I need to have

Watson: Great voice activation to turn voice into text. I’ve tried the Voice Actions app a couple of times but it

MOBILE MANAGERS

was too frustrating. Bring on VA that can understand the Kiwi accent and vernacular. Leong: An iPad which is a true desktop

replacement. Documents and spreadsheets still do not work well on tablets. I also wonder if we will ever see the day when Microsoft Office and Google docs work on both platforms. Seath: We are faced with a growing

amount of technology and making decisions about what is best will get harder. Understanding what you need it for and how it can help you be more productive is the first step in getting the right technology. Rivers: A device that combines a simple mobile phone with an iPad. M Hayley Barnett is Mediaweb’s writer-at-large.

he at t un k! f t al ess rea e g ig W fitn hav 012 B uit all great 75 d an he 2 g to s for a 35 7 4 t YD ll n p F us at methi and a l 0800 l e h l n , so s i a d o o i c t ns or ek nt ? J Wa time locatio t for th rg.nz e ng o . n m e d sa .fy azi inm ww am rta Six , ente out w s eck l e lev . Ch ore! se m cau d out n fi to

I was one of those kids who hated school, but I

couldn’t tell you why. I’d say I had better things to do than my work. But I didn’t. I was just difficult. Back then, school was about hanging out with my mates, talking to girls and lunchtime. I didn’t like learning, so I didn’t do any. Luckily I’m different now. Everything changed when FYD came to my schoo l. They showed me that learning could be fun and that I had lots of potential. They gave me new opportunities and taught me that anyth ing’s possible. You just have to work hard. That’s what I do now and it’s way better. If you want to help, please make a donation at fyd.org.nz or call 0800 435 775. If they can change me, I think they can change anyone. My name is James and I wrote this. build ing bigge r futur es, now.

Kiwi CAn • stArs • ProJeCt K • MYnd

52 | management.co.nz | MARCH 2012

PETER TYNAN EXECUTIVE HEALTH

When a colleague has cancer

BE FLEXIBLE It’s important to keep an open mind and understand that not everyone will want extended time off work during times of major illness. Aim to establish open and transparent communication with the employee and to find the solution that works best for them. Some people want to keep working for financial reasons, some to maintain a sense of normality and purpose. Others may look to work to divert their mind from the illness and to their relationships with colleagues to help them through their treatment. Many organisations are now wired to accommodate employees affected by serious illness, and there are a number of cases where employers have developed customised plans to help an employee return to work post-diagnosis. One example is where an employee has wanted to continue working

after being diagnosed with cancer. While receiving long-term treatment, the individual wanted to remain in the community that played such a key part in their life. Their company was extremely flexible, allowing the employee to choose their hours week by week, depending on how they felt physically. Job sharing is another option to lighten the load of an ill employee. Bear in mind, too, that people often enjoy social aspects of the workplace so include them in work social activities. Sometimes returning to work is not the best option. In these cases, employers will need to sensitively discuss the options with the person.

PROVIDE SUPPORT Sadly, there are times when a person’s illness will be terminal, and employers have an important support role to play in these circumstances. Initiatives such as sending care packs or offering assistance with housework are practical ways to ease the burden on the employee’s family. ‘Doing’ something can also help colleagues manage their own grief. If possible, extending this sort of support for some months is desirable – the comment is often made that families are overwhelmed by support initially, then it suddenly stops. Almost every company in New Zealand will have an employee affected

Photo: thinkstockphotos.com

recent Southern Cross Health Society survey of nearly 1500 adults showed that cancer is the most feared health condition of working age New Zealanders. Unfortunately having a colleague or staff member with a serious or terminal illness is not uncommon. As an employer, dealing with the challenges this can present in a positive and sensitive way can make a real difference to the sick person and their family, as well as other employees.

by long-term or terminal illness at some stage. With considerate and sensitive management, employers can help the employee, their family and colleagues through what is an incredibly stressful time. Other ways to offer support during terminal illness or following the death of an employee include: • Offering counselling services to staff and the family; • Giving staff time off work to visit their colleague and attend the funeral; and • Contributing to funeral costs. M Peter Tynan is chief executive of Southern Cross Health Society.

Healthy staff means higher productivity profitable business. Your profits, not ours. Because we’re not for profit, Covering staff with Southern Cross health insurance means less sick days1, so higher productivity and it’s an attractive incentive for retaining we’re for you. To find out more, call Southern Cross Health Society and recruiting employees. It all adds up to a more productive and on 0800 323 555 or visit our website healthybusiness.co.nz

Healthy people healthy business 1 TNS research 2011

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

MARCH 2012

| management.co.nz | 53

EXECS ON THE MOVE

Tim Bennett

NZX has appointed Singapore-based New Zealander Tim Bennett to take over from Mark Weldon as its chief executive, effective early May. Bennett has almost 20 years’ financial services consulting experience, the majority of which has been in Asia where he was most recently a partner in Oliver Wyman’s retail and business banking practice. NZX says Bennett will provide a continued focus on strengthening NZX’s domestic markets, while building its strategic options, particularly via the company’s integrated information, markets and infrastructure offerings.

Melanie Templeton

Online direct bank RaboDirect has appointed Melanie Templeton as its New Zealand general manager. Joining from RaboDirect Australia where she was marketing manager, Templeton has held senior roles with the bank both locally and internationally.

Christopher Theunissen

Manukau Institute of Technology has appointed Dr Christopher Theunissen as associate dean – postgraduate for the Faculty of Business and NZ director of Southern Cross University Masters and Doctoral programmes.

Theunissen comes from a management and political sciences background and was dean of the School of Graduate Studies at AIS St Helens.

David Carter

Asteron New Zealand’s new managing director David Carter has had more than 20 years’ experience in financial services including both adviser and supplier sides of life insurance. He was most recently head of direct distribution at Suncorp Life in Australia.

Gareth Fleming, Steven Fyfe

Following the resignation of both its chairman and chief executive, The Co-Operative Bank (formerly known as PSIS) has appointed Gareth Fleming, its general manager marketing and products, as acting chief executive. Steven Fyfe, deputy chief executive at ANZ National Bank before his retirement in 2011, takes over from long-serving chairman Sir David Gascoigne in April.

Girol Karacaoglu, Brendon Doyle

Two new appointments at the Treasury this month. Chief executive of The CoOperative Bank (formerly PSIS) for nine years, Dr Girol Karacaoglu, takes up the role of deputy secretary – macroeconomics and research. Brendon Doyle rejoins, after a previous nine-year stint, as deputy secretary – financial operations. He was most recently managing director of global capital markets for Westpac in New Zealand and Australia.

Colin McKenzie

Cavalier Corporation has appointed chief operating officer Colin McKenzie as its next chief executive, effective mid March. He succeeds Wayne Chung who is to retire from his executive role but will remain on the board as a non-executive director. McKenzie will also join the board.

Susan Coleman

Executive manager, community services at Nelson City Council, Susan Coleman takes over as the new chief executive at GirlGuiding New Zealand from March 19.

Jenni Deslandes

The Comfort Group has appointed company director and management consultant Jenni Deslandes to its board.

Peter Muggleston, Martin Price Foodstuffs has announced two senior appointments: Peter Muggleston (top) is the new chief information officer of Foodstuffs Auckland, and Martin Price is the new general manager property for Foodstuffs Wellington.

Plan, Do, Sustain – The Essence of Change Management The use of project-based approaches in a change environment is seen as crucial for sustainable success. For bold ideas, a compelling track record and pragmatic advice, contact us today.

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EXECUTIVE DEVELOPMENT Sponsored by The University of Auckland Business School Short Courses www.shortcourses.ac.nz 0800 800 875

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To Darren Levy, The University of Auckland Business School Thank you for tailoring a leadership programme for our organisation. New insights were gained that are closely aligned with our business strategies and values. Your team have motivated and engaged our people. Michelle McBride, Southern Cross Health Society

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| management.co.nz | 55

TOP TIPS

CHRIS GRAY

Get smart with info management

n a wired and wireless workplace, technology is meant to help manage the tidal wave of information that pours in each day. But it can end up complicating matters. Here are five ways to optimise your company’s performance and encourage more organised teamwork.

Ask around

Don’t guess what your team’s top time-wasters are: ask. Managers wear many hats but no-one expects you to be a mind-reader. Information management is meant to simplify processes, and create a user-friendly and efficient way for staff to work together to contribute to the overall success of a company. Every organisation’s needs are different. Is your team’s main priority web content management? Document sharing? Data storage and access? Before you can fix the issue, make sure you’re clear on your team’s needs.

Focus on people

Remember that software isn’t smart – your people are. As effective as software systems can be, no technology is truly intuitive. Technology systems are only as helpful as humans let them be. Why dedicate time and money identifying the need for a new system,

introducing it to your business and then allow it to go largely under-utilised? Your staff are the conduit to your business’ success. So provide adequate training so your team can utilise the full suite of tools now available to them.

Sidestep computer clutter

Does this scenario sound familiar? You’ve spent time drafting a document that needs to be reviewed by team members. You send it through as an email attachment, receive two rounds of edits in two new versions of your original document – which you have to resave and compare side-by-side to ensure consistency. “Track changes” is not an information management method. It’s computer clutter. There are smarter, more efficient ways for teams to collaborate to get the job done.

Click virtual buttons

Keep collaboration, community and creativity top of mind. More than ever before, New Zealand businesses are connecting with vendors, suppliers and partners in multiple time zones and languages, and across multi-functional teams. The collaboration afforded by technology is no longer a nice-to-have. One-at-a-time documents are becoming

Chris Gray.

outmoded. Many companies are reducing time by moving their entire administration function online, where all relevant parties can access pertinent information, fill in forms and provide sign-off at the click of a virtual button.

See info as currency

Here’s betting that when it comes to the critical financial aspects of your business such as cash flow and payroll, you’ve got a pretty firm grasp on how to stay on top of what comes in, what goes out and what stays where. So take the same approach to the information exchanged among your team members. Think of your company’s information – data, documents, files and more – as the currency of your team’s economy. M Chris Gray is New Zealand sales director, Adobe.

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MARCH 2012

Vol 10 No 1

Transparency International’s Susan Snively

61 Making directors more productive 62 Stand and deliver: board and director accountability 64 How to avoid the director’s use by date

Corporate corruption Are we as clean as we seem? p58

EDITOR: Reg Birchfield reg@rjmedia.co.nz CONTRIBUTORS: Iain McCormick, Doug Matheson, Jens Mueller ADVERTISING MANAGER: Rod Myers 09 372 6444, 027 484 8046 admanager@management.co.nz DESIGNER: Jennifer Adams PRODUCTION MANAGER: Fran Marshall franm@mediaweb.co.nz PRINTING & PREPRESS: PMP Print

A MEDIAWEB PUBLICATION

Copyright @ 2012: Mediaweb Limited. All material appearing in The Director 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.

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distributed to selected directors and leaders. Articles are archived on NZ Management’s website www.management.co.nz/archives. The Director is written for readers who need to know about governance in action.

COVERSTORY

Corporate corruption Are we as clean as we seem?

hould New Zealand companies take more notice of corporate and political corruption? The ongoing global financial crisis (GFC) means investors, customers, suppliers and distributors are being more specific about who they choose to deal with – according to Ethisphere, a United States-based organisation that each year selects 100 or so of the world’s most ethical companies; enterprises that demonstrate high standards of ethics are preferred over those that don’t. This “preference” results in better share prices and better deals with suppliers and distributors, thus improving profitability, which is a fundamental director responsibility. New Zealand has a strong reputation for having low levels of political and public sector corruption. That is backed up with good [public sector governance] standards, policies and practices. Regretfully, our private sector rides on this reputation with few companies

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THE DIRECTOR | MARCH 2012

enforcing the policies needed to ensure that they have a framework in place to support similar best practices. Are there indications that New Zealand’s strong global rating on low corruption levels is about to change? Global corruption measures are based on the international community’s perceptions of how NZ business interacts with the public sector. It’s unclear what actions our companies have taken to promote best practice corporate ethics. There are in fact two “flies in the ointment”. Almost all our listed companies lack specific, simple, published and implemented anti-corruption policies. And second, these largely unprepared New Zealand companies are increasingly exposed to global business where there is corruption. Their employees are exposed to transactions that breach New Zealand law. New Zealand society is growing and chang-

ing. Different standards and ethics will accompany those changes. It is even more important, therefore, to set and monitor clear standards in corporates and government departments with large staff numbers and high volumes of transactions. The IRD, Department of Labour, ACC and Otago/Southland District Health Board have all identified fraud and corruption issues. Private sector businesses are either not looking, or hiding what they find. What makes you think things are changing, or are likely to change at board level here? Despite legislative change in other jurisdictions, such as the UK, that will impact New Zealand companies, little seems to change on our boards. Some impetus for change might result from the listing of the three Australian banks – ANZ, NAB and Westpac – on the world’s 110 most ethical companies. They are exemplars for our corporate boards and other local trading banks.

New Zealand has an almost ‘corruption free’ global business and political reputation. Transparency International (TI), the world’s leading watchdog of corrupt practices, ranks us second only to Denmark as the least corrupt country in the world. But do our corporate directors and boards in particular, deserve this top ranking? Are perceptions and practices in fact aligned? And are our companies becoming increasingly vulnerable to corrupt business practices as we ramp up our dealings with significantly lower ranked, and rather more corrupt international markets? TI has established a New Zealand chapter, in part because it wants to ensure it has the good oil on our standard of governance and, because it wants to help our boards keep ahead of the game. Suzanne Snively, Wellington-based economist, company director, Fulbright Scholar and former PricewaterhouseCoopers partner, was appointed its chair last year. She talked to The Director’s editor Reg Birchfield about global corruption, our global governance reputation and the plans TI has for lifting the organisation’s best practice profile in New Zealand.

And banks play an important role in regard to money laundering. Given its reputation for low corruption, New Zealand is a target for this activity. In the past five years the trading banks have taken this risk in hand and sought advice from the Ministry of Economic Development and the Police about how to manage it. Are we becoming apathetic about our existing good reputation? It is debatable whether we are becoming apathetic or whether we have always been. Our listed companies have been reviewed several times and the results continue to be the same. But, our business policies and procedures are not as good as they are internationally perceived to be. New Zealand businesses think the perception itself will protect them. If companies fail to put training in place to prepare their staff, there is every probability that employees somewhere

are breaking the law. This reality is now a priority for the Serious Fraud Office (SFO). This year it will look more closely at some of our well-known companies and individuals.

resilience in the public sector and increase staff awareness through training, especially around procurement where products and services are sourced from offshore.

Is New Zealand business more vulnerable (to corruption) than our political scene – or vice versa? Our politicians work within a public sector that is less vulnerable than business because the public sector has focused on reducing fraud and corruption through the Auditor General’s Office (OAG). The OAG has had a zero tolerance approach to public sector fraud for more than 10 years. In 2011 it contracted [global accounting firm] PricewaterhouseCoopers to carry out an extensive survey focused on fraud awareness. The OAG launched a publication of insights based on the survey and, as a result, there is growing public sector awareness about fraud. The next key step is to improve

What is your strategy for taking the Transparency International message to company directors? We need to engage directors by demonstrating that TI can help improve their business outcomes. Our approach is consistent with the Institute of Directors’ motto of “Integrity and Enterprise”. The motto reflects directors’ desire to be committed to the principle that business performance, brand sustainability and delivery of shareholder value is underpinned and driven by good governance, and is necessary to create and support trust in their organisations. It means there is a positive ethical culture that rejects corruption, bribery and cynical practice. The IoD is collaborating with TI New MARCH 2012 | THE DIRECTOR |

COVERSTORY

Zealand and others to show that ethical decision-making confers a comparative business advantage. High [ethical] governance standards are core to building sustainable enterprise. IoD, TI-NZ, the Institute of Business Ethics [based in London], SFO, Financial Markets Authority (FMA) and New Zealand Police have initiated interactive programmes to support good business and governance. Can New Zealand companies use the country’s ‘corruption free’ reputation to even greater advantage? Yes – even though we know they are not as good as they are perceived. Because the rest of the world thinks otherwise, they can expect to do deals faster when selling or procuring from overseas. They might often be able to negotiate better terms – lower interest rates, better payment conditions, longer repayment times – and may be given preference over other suppliers. New Zealand companies enjoy privileges without knowing how lucky they are. Is there any indication that local boards and directors are, or will be, interested in the TI message? There seems to be considerable apathy amongst [our] listed companies. We don’t understand why directors are so disinterested in corruption management and good governance policies. Their low level of engagement may be due to a lack of understanding of the risks around not having protections in place. By contrast, several law firms and the big four professional services firms [Deloitte, Ernst &Young, KPMG and PwC] have shown considerable interest in TI’s messages on good governance. Who will TI work with to deliver regular [corruption] awareness training? We will work with strong partners. TI’s monitoring of systemic corruption is worldrenowned. But as a country-based chapter, we have fewer resources and so we have to focus on what’s most important. And what’s most important to New Zealand is improving prosperity through successful businesses that gain greater financial and economic returns by following practices that are as good as perceived. The big four have structures in place that are continuously tested and based

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THE DIRECTOR | MARCH 2012

on real-life experience in countries with more corruption than New Zealand. What about you? Why are you so involved in TI and what it is doing? I want New Zealand’s disadvantaged children to have the opportunities that a strong economy provides – specifically better education, better health, and access to jobs. As an economist, I want to promote increased prosperity through companies that are better equipped to leverage our strong reputation for good governance. The potential to develop business and exports based on a strong business ethic is compelling. Have your personal experiences as a director suggested the need for companies to be more vigilant about corruption? Yes. Directors still focus too much on [performance] history, financial statements and narrow governance mandates. Directors need to change the balance of board time toward setting policies for building [good] governance and trust. Historical financial and conflict reporting is important, but it needs to be balanced with non-financial reporting including regular training and monitoring of the effectiveness of training. Corruption seems to emerge when employees – often with previously good and trustworthy reputations – are left alone to manage significant high-risk transactions with little awareness of the consequences – or of what constitutes illegal transactions. Are there other forms of corruption than fraud and kickbacks? Yes. A corruption challenge for white collar professionals is that the personal gain is indirect. Systemic corruption can, for example, occur when personnel move between the public and private sectors. If a company is able to trade on a former public servant’s knowledge gained while working for the government, this is a form of corruption. It gives that business a potential competitive position over another. It’s a form of “insider trading”. Do you see excessive remuneration practices as a form of corruption? The issue around remuneration is transparency. At the moment there are bigger tasks New

Zealand needs to address. It’s most important that companies become aware of the threat of corruption, adopt strategies aimed at managing that threat, and then work together as a country to promote the New Zealand clean brand [reputation] as also meaning a country where the perceptions of low corruption are backed up by the behaviour. Does building and maintaining a good reputation start at the board table? Directors model ethics to each other, the chief executive, management, employees, clients/customers and to investors and other stakeholders. If the board comprises directors with reputations that are based on myth rather than authentic ethical behaviour, then the future viability of the company is at risk. We’ve seen the impact of this risk in the past 30 years. New Zealand’s reputation should have kept the economy up with the top-ranked economic performers. Instead, poor governance is a factor that has led to poor investment returns and a drop in our per capita GDP performance from fourth to around 25th of those ranked. Do directors care enough about building organisational reputation – is it high on their list of strategic priorities? Ask board members how important the [organisation’s] reputation is and the bulk will have it firmly at number one priority. Reputations take a long time and much effort to build. They can rapidly be destroyed when things go awry. However, it seems that the management of our listed companies believes that the things they do to support product branding are sufficient to carry through to their wider reputation. And popular brand rankings, such as the Reader’s Digest ranking, suggest that the public attitudes are heavily influenced by the everyday products they buy. But with more in-depth fund manager analysis and the increased expectations of the FMA, both companies and the public will become more aware of other ethical attributes of listed companies. Astute directors should start to adopt standards, policies and practices that define and implement frameworks for ensuring that their companies are truly ethical. I believe we can achieve increased prosperity through greater transparency.

Making directors more productive By Iain McCormick

oard behaviour analysis is a simple technique that can be use to improve governance and make meetings more effective. It’s based on classifying what directors say in board meetings and also classifying their contributions in a limited number of behavioural categories. The categories are easily learned through a series of exercises and can be used to: • Assess board effectiveness. • Analyse verbal exchanges between members. • Describe behaviour when talking or listening. • Plan behaviour tactics before a board meeting. A governance coach watches and listens to the directors’ communication at a meeting and identifies each verbal contribution, noting the name of the speaker and the category into which his or her remarks fall. There are seven behavioural categories. Seeking: Comments that set out to produce suggestions, clarification, reactions or information, eg, “Can you explain the risk involved in this?” Building consensus: Comments that advance an idea or proposal so as to involve others, eg, “We have had a suggestion about raising funds, what do board members think of this?” Telling: Comments that put forward information that effectively tells others what to do, eg, “We need to just push on with this!” Supporting: Comments that support, agree with or build on previous proposals. Disagreeing: Disagreeing with, blocking or placing difficulty in the path of an idea without offering alternatives, eg, “I can’t see the point of doing what has been suggested.” Giving information: Comments that offer facts, opinions etc in a neutral manner. Over-speaking/Interrupting: Comments

that reduce other members’ opportunity to hear or be heard. By the end of the observation the governance coach has recorded: • The total number of contributions made by the group. • The total contribution for each individual. • The individual and group figures for each category. The patterns frequently seen in board meetings include: The brain dump meeting This meeting is characterised by members giving information but low levels of “supporting or disagreeing”. Ideas flow but the board fails to pick up on the best of these or to understand which are most relevant for the discussion. It is frustrating being involved in a brain dump meeting because decisions are seldom made and time is usually wasted. Chairs should ensure that the best ideas form the basis of clear board decisions. The combative meeting This type of meeting comprises much “telling” and much “disagreement”. It is recognised by statements such as: “We just need to get on and set the targets in this area!” followed by: “There is no point in setting targets until we have a clearer strategic direction!” Robust boardroom debate is critical. It can, however, degenerate into unproductive conflict. The chair should encourage debate but ensure that it leads to common understanding and agreement. The unbalanced meeting The level of contribution from a few members is usually very high in these meetings. Individuals dominate the meeting and leave other directors with little opportunity to advance their views. The chair must draw out

contributions from quieter board members and politely close down talkative speakers. The balanced meeting Sound board meetings have clear characteristics: 1. All board members contribute – not to exactly the same extent but all clearly have the opportunity to put their ideas forward. 2. The level of “giving” information is balanced by suitable levels of “supporting and disagreeing” which indicates a robust debate. 3. There is a sound level of “consensusbuilding”, followed by good levels of “supporting and disagreeing”. 4. The level of “overspeaking/interrupting” is moderate and members can both hear and be heard. Good chairmanship is a delicate balancing act. Chairs must understand and make useful contributions to the content of the meeting while simultaneously understanding and monitoring the group dynamic and board behaviour. How board behaviour changes Board behaviour analysis helps directors understand what needs to be done to improve meeting productivity. Usually the governance coach observes half the meeting, provides survey results and feedback allowing the board to then agree on how it wants to change the group dynamic. The board then returns to its normal meeting and the coach observes again. Toward the end of the meeting the coach presents the results of both the first and second observations. Directors invariably see a major change and improvement in the board dynamic and their meeting productivity. Iain McCormick PhD is a governance coach who heads DirectorEvaluation.com – www.directorevaluation.com

MARCH 2012 | THE DIRECTOR |

THE DRAWINGBOARD

Stand and Deliver Board and director accountability By Doug Matheson

nderperforming boards and directors are delivering poor company performances and too many company failures. Companies that should be doing well are doing little more than surviving. Directors’ and boards’ reputations are, in the eyes of shareholders, investors, the media, public and regulatory agencies, taking a beating. The world and ways of corporate governance must change and adapt to meet new realities. The new economic and business paradigm, for example, has landed boards of directors with a principal role in delivering company performance. Their development and oversight of strategy and its execution, oversight of performance and identification and management of risk, collectively give directors a unique perspective and opportunity to provide good governance and leadership. Simultaneously however, directors must meet their fiduciary, legal and regulatory obligations and perform in ways that preempt the need for increased regulation while furthering the best interests of the enterprise. Directorships have too often been viewed as honorary positions. Directors now have real work to do. They have responsibilities and legally enforceable duties and accountabilities. Good governance is now critical to the long-term sustainable performance of organisations whether they are private sector, public sector or not-for-profit.

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Governance is an active, not passive, calling. The constitution or trust deed defines the rights, powers, duties and obligations of the company, the board, each director and the shareholders. A board’s activities are determined by the powers, duties, and responsibilities delegated to or conferred on it by the shareholders, through the constitution. Company performance is the directors’ and board’s responsibility. They strategise it, oversee it and are collectively accountable for it. A company board’s fundamental purpose is to grow wealth and value. It establishes aspirational strategic goals, determines short and long-term strategies to achieve them and oversees performance. But increasingly directors and boards are failing in their duties and responsibilities. Consequently, those duties will be more robustly enforced by government agencies in future. Despite the importance of and obligations to deliver good organisational performance, directors and boards comprise the only critical component of an organisation that is infrequently and often inadequately evaluated and, where job tenure is not performance-linked. Everyone else in the enterprise is accountable. In the public sector, the Crown Ownership Monitoring Unit (COMU) advises the minister responsible on the performance of each of the state’s 48 boards, identifies the skills and attributes required in each

board, identifies director candidates and chairman appointments and, manages the recruitment and appointment process. The private sector could learn from this process. The sagging state of governance demands that boards and directors be held significantly more accountable for their individual and group performance. It will take important governance process and formality changes to accomplish this. I have some suggestions. 1. Board governance committees Company constitutions should require the board to deal with non-performing directors or chairs and provide for the board to act. Boards should appoint a governance committee comprised of the chair and up to three experienced independent directors. The governance committee’s responsibilities would include: • An annual review of board composition, competency and diversity requirements. Identify the skills, experience, competencies, backgrounds, perspectives and mix of ages, gender and ethnicity required to deliver the coming year’s most effective board. • Review the chair and individual director’s performance evaluation. Confirm with the chair or director where performance evaluations are such that the individual should not be reappointed or be asked to retire. Discuss a chair’s performance when

ONBOARD

it is evaluated as “needs to improve” or “inadequate”. • Identify potential directors to match the requirements of the board. Board composition and succession plans should be prepared annually. • Boards should propose resignations and appointments to the next annual shareholders meeting or whoever appoints directors for approval. 2. Standards for board membership The selection and appointment of directors should be based on strict criteria. It’s not just the personalities on a board that are important. Good governance requires independence, the best possible mix of relevant skills, experience, competencies, backgrounds, perspectives and diversity at the board table. Directors must complete governance training before attending their first board meeting. 3. Greater board diversity A growing body of evidence confirms the value of director diversity. The term embraces diversity of experience, gender, age and ethnic background. A diverse board of directors provides better governance and better company performance. Different points of view bring a wider approach to decision making. The small percentage of female directors is a serious problem. A governance gender mix that reflects the view of wider society, customers and shareholders is important. The different thought processes, different views about risk and ways of approaching problems are critical. Women are more instinctive and intuitive and the different experiences they bring to the board table undoubtedly help deliver good governance. Age diversity is similarly important. Boards frequently lack a younger perspective and mindset at the table. Effective older directors bring wisdom, experience and an integrative perspective. Age diversity can provide the catalyst for fresh thinking and a balanced view. But prevailing board and director attitudes will need to change to deliver the advantages that come with diversity and

better governance training. Constitutional changes will be required to force the issue. 4. Performance evaluation and continuous improvement Evaluation of chief executive or other employee performance is commonplace. Boards must be required by their constitution to establish performance criteria against which the board, each director and the chair’s performance will be evaluated. Annual board performance assessments coupled with director education programmes to improve the effectiveness of the board, its committees and individual directors is best practice. 5. Deal with non-performers Boards have historically not faced up to director non-performance. Directors and chairs are responsible for their own nonperformance. They must deal with and address this reality as they would with any chief executive non-performance issues. Boards can no longer ignore poor individual director or chairman performance and failure to comprehend the depth of problems their inadequate performance causes. Boards must be required and enabled to address the problem. Boards need the constitutional ability to terminate directors’ and chair’s terms at the table. Boards can’t function as high-performing teams without demanding high performance from all members. In many cases decisive action may require shareholder approval. That is not, in my opinion, the problem. Directors must recognise the governance environment has changed and rules need to change to deliver a new performancefocused era. Governance leadership is more important than ever. Poor performance, individual or collective, is unacceptable. Accountability must become a basic requirement of everyone who aspires to occupy a seat in the boardroom. Doug Matheson is an experienced professional director and chair. He is the author of The Complete Guide to Good Governance in Organizations and Companies and Great Governance: How the Best Boards Work (www. management.co.nz). dougmath@xtra.co.nz

Australasian engineering and design company Harrison Grierson has appointed Stephen Finnermore and Poul Israelson to its board. Finnemore is an Auckland-based engineer with plenty of international experience, particularly in water and wastewater design. Israelson is a planning and project management specialist. Property industry and markets executive Angus McNaugton is now on the board of Kiwi Income Properties, manager of the Kiwi Income Property Trust. Independent director Susan Paterson has been appointed deputy chair of Abano Healthcare following the elevation of Trevor James to the chairmanship. Retired chair Alison Paterson remains on the board as an independent director. Former banker, journalist and diplomat Anne Blackburn has been appointed to the board of Kiwi-owned life insurance provider Fidelity Life. Blackburn spent 15 years in investment banking in New York and London, and returned to New Zealand in the mid 1990s. Another returned Kiwi, this time with a high tech and brand background, Ian Scherger is now on the board of Christchurch-based Jade Software Corporation. Scherger held senior management and marketing positions with Vodafone Australia, Clear Communications, Xtra and Apple Computer NZ. Former private and public sector executive, local and national government politician and dean of the Faculty of Business at the Manukau Institute of Technology, John Robertson is now chair of the NZ Foundation for Progress and Wellbeing, established by Anew New Zealand to discover “What Matters Most to New Zealanders”. Sue Lindsay, an inf luential South Island business leader in the rural sector and former winner of the New Zealand Institute of Management’s Young Executive of the Year Award, has been appointed to the Dairy Women’s Network Board. MARCH 2012 | THE DIRECTOR |

How to avoid the director’s “use by” date By Jens Mueller

y brother-in-law is fanatical about ‘use by’ dates on grocery store items. He would rather die of thirst than drink milk two days beyond its so-called expiry limit. A little extreme perhaps, especially when he then points out to the store manager which items should no longer be on the shelves. But then again, “used by” is supposed to provide some assurance of currency. And currency is what troubles me when I look at the committed and engaged directors who run many of New Zealand companies. If not knowing what you don’t know is a truism, then surely not knowing when you don’t know enough must run a pretty close second. We all have skills that were, we hope, at their peak at some point. But these can go stale if they’re not constantly refreshed, benchmarked against the best in the industry and, developed. So, how do we make sure that we remain in peak condition in order to lead firms that stakeholders assume we have the skills to build, sustain and grow in a competitive world? Any director worth his or her salt would agree that the legal requirements for diligence and performance have changed significantly in recent years. We expect directors to actively seek the answers they need to make informed decisions. This additional work means more time spent on due diligence, requires greater awareness of the

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early signs of trouble, and the development of a greater director sensitivity to selfpreservation – in addition to doing the best possible job for the client. Similarly, the diffuse notion of sustainability has moved to a complex triple-bottom line approach for testing social responsibility, environmental respect and financial stability. Few managers know how to compile a corporate TBL report, so how are directors expected to supervise the process? We now expect directors to be adept at networking, connecting with friends, professional acquaintances and even peers overseas. They must understand the competitive landscape beyond their own business and ward against being too inward-looking. So what is the solution to keeping up? There are few local opportunities for directors to get booster shots of governance training. Between the Institute of Directors, Massey University and Waikato Management School, the nationwide offerings are limited. That means directorship do-ityourself time. Tip 1: Find a local expert. That might be a professional with accounting or legal skills. Find a director from a company that has faced challenges similar to those now confronting you. I always respect the individual who calls me up and says: “Look, you don’t know me, but I know you care about good governance. Can I buy you a coffee and ask a few questions?” I have yet to turn down the coffee. Directors usually relish the opportunity to exchange views and simultaneously upgrade their business world knowledge. Tip 2: Spend some of your monthly board meeting discussing the quality of your decision-making. Circulate a list and, con-

fidentially, ask each director how well he or she understood the material presented at the meeting. Honest responses will identify the areas where a booster session and hour or so of training might help. Asking each director where the skills gaps exist and then acting on it, demonstrates to everyone that you take your role seriously and realise some details are beyond your immediate grasp. Tip 3: Look for excellence in your industry and beyond. Spend a few moments on the web to help understand why a business in Helsinki that sells similar products, has a great reputation. How did they get there? What long-term visionary leadership skills helped their directors arrive at this stellar point in their life cycle? I like reading case studies. Not the 14-page academic Clydesdales, but the racy four to six page ones written by company insiders. There is something wonderfully educational about being a voyeur and learning how other businesses develop core competencies and govern for long-term success. If a year from now, someone asks how you made the very board decision that is today in question, you will point to the process that kept you and the other directors razor sharp and focused. In law, it is seldom the decision that is in question, but rather the basis on which the decision has been made – the diligence, the competence. There are many ways in which to hone your directorship skills: Go and freshen up! Professor Jens Mueller is a governance expert at Waikato Management School. He sits on the boards of several multinational firms and works with many New Zealand businesses to develop sustainable governance strategies. M@usainfo.net, www.muellerjens.com

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