Management September 2010 by mediaweb

We reveal NZ’s Most Reputable Organisations

In this issue:

PAGE 25

Reputation is everything Air NZ wins with people focus Bonuses are back p8 The power of your brand p42 Feltex’s threadbare governance p63 Deloitte/ Management Magazine

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Air NZ’s CEO Rob Fyfe with engineer Stuart Rentoul.

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TOP 2OO A Bold Spirit

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EDITOR’S LETTER

Reputation wins... Everyone in business knows Fortune magazine’s annual feature, The World’s Most Admired Companies. Those voted by their peers onto this prestigious list use it widely to define themselves. Those who languish off the list dream of finding their way onto it. This year for the first time in New Zealand, NZ Management magazine publishes this country’s own unique version of this – New Zealand’s Most Reputable Organisations – also researched by international consulting organisation Hay Group. We’ve broken new ground with our survey, extending it beyond just companies to also include state-owned enterprises, government departments and not-for-profit organisations. Unlike many awards, the judges are not a few hand-picked experts and advisers, but rather several hundred senior leaders, executives and directors from across all organisation types and industry sectors in New Zealand. They have selected the organisations they feel uphold the highest levels of business acumen and ethical behaviour; those with vision, robust strategies, trustworthiness and a commitment to the wider community. We congratulate the winners and finalists, as we reveal who tops the list as New Zealand’s most reputable in four categories – and those who follow close behind. For Rob Fyfe, CEO of Air New Zealand, and Deloitte/Management magazine Top 200 Executive of the Year 2009, it is yet another endorsement of the excellence of his leadership and the loyalty of those who work for him, as his company proudly becomes NZ’s Most Reputable Organisation. Particular thanks go to Hay Group for partnering with NZ Management in this significant project, and for making their Melbourne-based data centre available to do the survey analysis. Many long hours of work went into the research and analysis of the results, spearheaded by Hay Group NZ’s managing director Ian MacRae and NZ Management consulting editor Reg Birchfield. A great reputation is the highest prize a brand can own, winning the loyalty of customers and staff alike. In this issue, we also look at how the concept of brand is changing and the new rules of engagement, as part of our Deloitte/Management magazine Top 200 theme, Understanding the New World.

www.management.co.nz A MEDIAWEB MAGAZINE EDITOR Brenda Ward 09-575 8830, editor@management.co.nz CONTRIBUTING EDITOR Reg Birchfield reg@rjmedia.co.nz CONTRIBUTORS Andrew Bayly, Bob Edlin, Kevin Gaunt, Pauline Herbst, Colin James, Vicki Jayne, Keith McLea, Doug Matheson, Craig Morrison, Peter Neilson, Keith Stewart ADVERTISING MANAGER Clara Iqbal 09-271 3711, 021-930 887, admanager@management.co.nz DESIGNER Rachel Walker COPY & WEB EDITOR Gill Prentice PRODUCTION MANAGER Fran Marshall franm@mediaweb.co.nz NEW SUBSCRIPTIONS www.management.co.nz/subscribe SUBSCRIPTION ENQUIRIES subs@mediaweb.co.nz

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Brenda Ward, editor

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TOP 2OO A Bold Spirit

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contents

SEPTEMBER 2010 • Vol 57 No 8

25 COVER STORY

Understanding the new world

We reveal NZ's Most Reputable Organisations In New Zealand’s first major peer review of reputation, NZ Management magazine and global business consultancy Hay Group reveal our Most Reputable Organisations. Reg Birchfield analyses the insights that emerged.

THE TOP 200 CAMPAIGN

EDITOR’S LETTER

This year’s Deloitte/ Management Top 200 Companies campaign, ‘Understanding the New World’, examines of six major contemporary issues and opportunities for business. This month, an analysis of brands.

INBOX: News & Views

MANAGERS ABROAD: Josh Emett, Gordon Ramsay Inc

NZIM: Changes for the times Kevin Gaunt

FOCUS

EXECUTIVE DEVELOPMENT

EXECS ON THE MOVE

MANAGING SUSTAINABLY 14

CASE STUDY: Good for you – and for us all

SUSTAINABILITY: Buying wisely Peter Neilson

OPINION

Deloitte/ Management Magazine

TOP 2OO A Bold Spirit

POLITICS: After the makeover queen Colin James

ECONOMICS: Selling the family China Bob Edlin

ADVICE 50

EXEC TECH: Inspector Gadget Pauline Herbst

EXEC HEALTH: Beat the business travel blues Craig Morrison

BOOKCASE Reg Birchfield, Vicki Jayne

EXEC 10 TIPS: Safety starts at home Keith McLea

cover story MOST REPUTABLE ORGANISATIONS ANALYSIS: 25

REPUTATION IS EVERYTHING

ROB FYFE, CEO OF AIR NEW ZEALAND, NZ’S MOST REPUTABLE ORGANISATION

MOST REPUTABLE COMPANY FINALISTS

MOST REPUTABLE SOE AND FINALISTS

MOST REPUTABLE GOVERNMENT DEPARTMENT AND FINALISTS

MOST REPUTABLE NOT FOR PROFIT AND FINALISTS

features 42

UNDERSTANDING THE NEW WORLD: The power of your brand

As the consumers of this new world become more sophisticated and cynical, brands need to work harder and in different ways. Michael Crampin tells Brenda Ward the new rules of engagement for your company – and you. 46

VOICE/BRANDING: The world’s smartest logos International design judge, Kiwi Fraser Gardyne, says New Zealand’s logos rate among the best in the world.

CRISIS MANAGEMENT: The smartest turnaround A dysfunctional business unit has to be dealt with straight away. Consultant Gordon Davidson explains how to turn around a troubled business unit.

IWI WEALTH EXPLOSION Iwi trusts and community trusts manage and deliver substantial resources for the benefit of their communities. But a recent research report reveals they take very different governance approaches to managing their investment assets. Reg Birchfield analyses the findings.

FELTEX DECISION: A case of threadbare governance Directors can take no comfort from the recent decision to dismiss all charges against five Feltex directors. The case shows the sad state of governance in too many New Zealand companies, writes expert Doug Matheson. 59

INBOX Plane talking winner

Brendon McWilliam.

is job may be based on the ground, but Brendon McWilliam’s achievements at Christchurch Airport have made him a high-flyer among executives. Under his guidance, the Christchurch Engine Centre’s V2500 jet engine product line has now positioned itself as the world’s number-one-ranked overhaul facility. McWilliam, a 33-year-old operations manager at Christchurch Airport, has been announced as the New Zealand Institute of Management’s southern region Young Executive of the Year winner. “Over the past three years I have worked hard to make the transition from a manager leading a business unit that was struggling to deliver on its operational and financial targets, through to developing and executing short and long-term strategies that have positioned the business as a world leader,” he says. “Customers are prepared to ship their engines literally from the other side of the globe and past competitors’ doorways to come to the Christchurch Engine Centre. I believe we offer service, quality and overall reliability that only New Zealanders can provide.” McWilliam’s role gives him responsibility for the Christchurch Engine Centre’s three jet engine product lines. His target is to deliver nearly $220 million in revenue and he is responsible for the welfare of around 200 employees of more than 20 different nationalities.

With 95 percent of Christchurch Engine’s work coming from offshore, McWilliam says it presents great challenges from a logistical point of view in getting engines to and from New Zealand, as well as being flexible enough to accommodate demands from various countries and cultures. In 2009, the V2500 line recorded its best ever financial year while at the same time recording 50 percent growth in volume and in employee numbers. McWilliam says he believes capable leaders need to have competence in many disciplines, such as motivation, strategic thinking, communication, developing talent, business innovation, business practices and ethics, as well as a focus on results and team work. “The one key area that I have spent time developing has been my adaptability and proactiveness,” he says. “Being a US dollar trading business that has a significant percentage of its costs in New Zealand dollars, you need to be aware of the global economic situation and foreign exchange fluctuations and have the ability to anticipate and adapt to suit your business needs.” In previous roles, McWilliam has worked as an aircraft engineer, a technical field representative and as a process engineer at the Engine Centre. He started his career with the Royal New Zealand Air Force before joining Safe Air as a civilian engineer. McWilliam believes his outgoing nature and confidence have helped his rapid promotion in business. “I find I adapt easily to new situations and my sense of humour makes my workplaces comfortable.” M

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Peter Walls.

On my iPod

eter Walls, CEO New Zealand Symphony Orchestra: I play my iPod when I’m walking to work, or back uphill to Kelburn at night. Thanks to the music I hardly notice all the steps! Here’s what I’m listening to: Simon O’Neill “Father and Son” (NZSO and Pietari Inkinen) I feel very proud of it in a million different ways. I’ve known Simon since student days, and it’s great to see him doing so well. Rossini, Barber of Seville complete (James Levine, LSO) I’ve been asked to conduct it soon. Mahler 5 (Simon Rattle and the Berlin Phil) This is coming up on the NZSO’s next tour. I I love the playing on this one, which is one of Freddy Kempf’s earliest CDs. Assimil 4 I listen to this when there’s loud music in the gym! Basically it’s endless dialogues in increasingly difficult German. I’m brushing up on my German before the NZSO tour in November. M

he number of technology projects failing worldwide has increased significantly to now be at its worst point in the past decade. From more than 30,000 projects surveyed globally by the US-based Standish Group, only 32 percent were considered successful. “These figures are truly alarming, not just to CIOs but to anyone involved in business,” says Iain Fraser, Project Plus group managing director. He says projects are more complex in scope and require greater funding , which increases organisational risk. “Having a clear understanding of your project management capability is vital to reduce risks of failure and to get the best out of your resources and budget.”

Tech wreck

Fit-out depreciation to stay

ompanies that own properties they occupy can take some comfort from a recent joint recommendation from Inland Revenue and Treasury to leave depreciation allowances on building fit-out largely untouched. A number of public companies have already flagged that the removal of depreciation allowances on buildings structures, announced in the Budget, will have a significant effect on after-tax profits. A further diminution of depreciation allowances would have had more impact on the bottom line. But some hard work by the

Property Council of New Zealand, with the support of KPMG, to demonstrate to IRD that commercial and industrial building fit-out assets do depreciate, both physically and financially, appears to have paid off. The policy review by IRD and the Treasury entitled “Post-budget depreciation issues” broadly proposes retention of the status quo for commercial and industrial property, allowing depreciation to continue to be claimed on building assets such as lifts, air-conditioning systems, plumbing and electrical reticulation. An analysis of eight recent

Depreciation allowances on building assets such as lifts look likely to remain.

commercial and industrial property depreciation valuations undertaken by Bayleys Valuations showed that between 32 percent and 87 percent of the total depreciation allowances currently claimed from a

Top 200 judges

strong line up of experts in the fields of business, corporate analysis and governance make up the judging panel for the 2010 Deloitte/ Management magazine Top 200 Awards. Two new judges will bring a fresh perspective to the main Top 200 awards. They are Janine Smith, a senior board member, lecturer and principal of Two new judges for this year’s Top 200 governance consultancy The Boardroom Practice, and awards... Janine Smith and Neil Paviour Smith. Neil Paviour-Smith, managing director of Forsyth Barr. They join Roger Kerr of Asia-Pacific Risk, who has served on the panel for several years, and NZ Management magazine consulting editor Reg Birchfield, who will be the facilitating judge. For the Young Executive of the Year Awards, the judging panel is Reg Birchfield; Leadership NZ chair and former CEO of the Auckland Regional Council, Jo Brosnahan; Dave Larsen, general manager of Rayglass Boats, who was last year’s winner; and Helen Robinson, Markit’s global managing director for environmental markets. In the new Responsible Governance section, judges will be governance expert and author Rodger Spiller; Doug Matheson, a consultant and former chief executive of Wellington City Council; and Reg Birchfield. Canberra-based Duncan Paterson, of CAER – Corporate Analysis, Enhanced Responsibility – joins the panel this year as consulting judge. M

Manage your Taxi Spend with Innovation and Technology

combination of building and fit-out allowances were for the fit-out. “Property depreciation allowances obviously won’t be as significant given the removal of building depreciation,” says John Freeman, a depreciation expert and Wellington-based director for valuations and advisory services for Bayleys Valuations. “However, it is likely a substantial portion of the depreciation that has been able to be claimed will continue to be allowed.” However, Freeman says if no commercially acceptable segregation of commercial building fit-out from the building itself is undertaken such assets will be treated the same as the building, meaning a zero rating in terms of depreciation claims. “It therefore behoves all property owners who want to maximise the after-tax income return from their property investment to get the allocation of cost between commercial buildings and their fitouts sorted out.” M

tel: 09 306 1790 email: enquiries@taxicharge.co.nz

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INBOX Bonuses bounce back

onuses are on the comeback trail and while there is evidence of new disciplines around variable pay policy, concerns remain that too many companies are getting it wrong, according a to a justreleased global research report. A survey of over 1300 companies in over 80 countries, including New Zealand, by international management consultancy Hay Group has found 39 percent of companies have or plan to increase the proportion of variable pay in employees’ pay packets and

26 percent are bringing more of their employees into variable pay schemes. But it’s not business as usual. The research also found that boards and senior management are taking a greater role in decision making on variable pay and nearly two thirds of companies were changing their variable pay programmes to better align with their business strategy. “Bonuses may be back, but they look different – strongly tied to the bottom line, with more challenging targets and a greater focus on

DRIVERS OF CHANGE TO VARIABLE PAY PROGRAMMES Better alignment with business strategy

61%

Improve company or team performance

40%

Create better alignment between corporate and individual performance

36%

Ensure market competitiveness

29%

Reinforce specific business priorities

25%

Improve individual performance

25%

Improve employee engagement

21%

Ensure retention

15%

Better balance of fixed and variable costs

11%

Ease with which the programme can be communicated and understood

Satisfy external stakeholders’ demands (investors, media, community)

Comply with regulations or governance requirements

Reduce risk

Other

and reputational – and have simply put the question aside.” Implementation issues: A common problem is that programmes link reward to strategy, but are poorly implemented. Variable pay will not drive performance if the connection between employee actions and company strategy is not clearly understood by the programme participants. Problems arise with overly complex or poorly communicated programmes or lack of buy-in or performance management skills from line managers. Short-term financial focus: The focus on financial metrics indicates that many companies have still failed to grasp the link between sustainable performance and nonfinancial measures of performance. A narrow focus on financial return has the potential to skew behaviour towards ‘revenue/sales/cost savings’ by whatever means necessary. This also presents problems for employee activities that are not directly related to the bottom line, such as support and non-sales functions. It tends to disengage the majority of employees, who are motivated by more than financial success and who want to be part of an enterprise or goal that they can believe in. M

BIG/VER621/NNM1

Source: Hay Group

return on investment,” the Hay Group report says. “The volatility in the global economy over the past two years has led companies to re-examine the measures they use to assess performance, to reduce the risk of disproportionate or undeserved bonuses. There is a new discipline around the subject, with companies conscious that variable pay must be closely aligned to corporate strategy and communicated well if it is to be effective.” However, while the focus on strategy is encouraging, there are indications that many companies may not be getting it right, Hay Group says. Areas of particular concern are: Risky programmes: Overall, few companies are concerned about risk and compliance. “It is possible that companies are addressing risk through the alignment with business strategy. We would welcome this to some extent as there is a real danger that an over-reaction to risk could stifle innovative reward strategy. However, we remain concerned that many companies have yet to come to terms with the level of risk that they carry in a variable pay programme – financial, operational

Just shows the lengths we go to for our customers.

8 | www.management.co.nz | SEPTEMBER 2010

vero.co.nz/win

Nothing is certain but death and taxes.

Recognising great governance

here is no greater validation of a company’s moral and ethical philosophies than to receive the 2010 Kensington Swan Responsible Governance Award, part of the Deloitte/Management magazine Top 200 Awards programme. Unlike the other awards in the Top 200, this major category award requires organisations to complete and return an entry form. This year’s entries close at 5pm on Thursday, September 23. This year, the award criteria have been revised and broadened to reflect global trends in good governance. “Investors, employees, customers, suppliers and other stakeholders view responsible governance practices as a measure of organisational integrity,” says Reg Birchfield, who has been on the judging panel since the award’s inception. “Every successful, sustainable, responsible and futurefocused enterprise should aspire to win this award. It reflects a company’s genuine understanding of our new world in which responsible, ethical and sustainable governance defines real success.” Companies can take this opportunity to be recognised for commitment to responsible governance, or can nominate another enterprise they believe is governing responsibly. “We want to identify and acknowledge role models, companies that make an outstanding contribution to New Zealand’s standing in the world by governing responsibly and ethically,” says Birchfield. For entry details, go to: www.management.co.nz/ top200/responsiblegovernance.html M

Dead right

death notification service is helping business groups such as the legal, accounting and insurance industries identify clients who have died. It’s being developed off the back of website, www.amemorytree.co.nz, which was established to help grieving family members mark the passing of loved ones, but has also proved helpful for businesses. The site’s 100,000th online Remembrance Page has just been created. Site creator and managing director, Sue Skeet, says marketers and professionals, in particular lawyers and trust managers, are finding the site useful to manage client records, Says Skeet: “Our notification services and remembrance pages help at this sensitive time. With the ongoing cost to business of not getting it right for the surviving family so high, it’s a no-brainer to log in and get the notification service that best suits your business.” Complete published death records date back to 2006. A further 20 percent of death listings from 2000 to 2006 were added in July. M

Ready for GST day?

he GST rate increase from 12.5% to 15% on 1 October, is posing some challenges for office software systems. James Page, Microsoft Dynamics AX service line lead for Intergen, New Zealand’s Microsoft partner, says some common questions are emerging which companies should be addressing: • Which systems handle GST calculations? Organisations must carry out checks to ensure all systems are set up to cater for the new rate. • Can you easily change the GST rate? Older, legacy applications can have hard coded GST rate calculations which require changing and rigorous testing. • Can you change the GST rate retrospectively? In the transition period after 1 October, how will you deal with

situations involving both rates? • Will open purchase and sales order lines be updated by the GST rate? There is likely to be an impact on GST calculations for uninvoiced sales and purchase orders. This has implications for maintaining systems. • Does your system manage credits for purchase and sales? Will your system be able to credit back at the 12.5% GST rate for credits to orders raised prior to the GST rate change? • Will your systems require updates to existing, recurring customer orders, laybys and deposits? In some cases, systems can manage these changes automatically; however other systems and manually-managed spreadsheets will require scripts and/or manual manipulation. M

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and when it does you want QBE on your side Imagine: torrential rain leading to landslides. People losing their homes. Theyâ&#x20AC;&#x2122;ll look to find someone to blame and to pay. What follows will change the financial landscape for a number of businesses. The legal onslaught will engulf not only the builders and sub-contractors who have worked on the properties, but also the developers, engineers, surveyors, architects, and local authorities â&#x20AC;&#x201C; in fact anyone who had provided professional advice or services. Would your business survive the risks of the real disaster â&#x20AC;&#x201C; its after effects? QBE has more than 200 different liability and property insurance policies working to help protect New Zealand businesses. So when it hits the fan, you want QBE on your side. Talk to your insurance broker today about QBE Insurance. www.qbe.co.nz

QBE-019 MGMT Rapport Ls

Seeking super Kiwis

Ray Avery... last year’s Kiwibank New Zealander of the Year.

he search is on for extraordinary New Zealanders d l d who will be acknowledged in the Kiwibank New Zealander of the Year Awards 2011. The awards recognise people

from all walks of life and honour exceptional individuals, organisations and community groups who inspire others through their hard work and achievement. Last year’s overall winner Ray Avery is a former street kid turned scientist whose low-cost, sustainable medical devices are making a difference to millions of the world’s poorest people. Any New Zealand citizen over the age of 15 can be nominated in one or more of the five award categories: Kiwibank New Zealander of the Year: Honouring the inspirational achievements of a remarkable person.

Countdown Senior New Zealander of the Year: Recognising over 60s making a positive contribution to the nation. Coca-Cola Amatil Young New Zealander of the Year: Role models aged between 15 and 30 who are inspiring young New Zealanders. Mitre 10 Community of the Year: Acknowledging groups and organisations working together to build better communities. Kiwibank Local Heroes: Rewarding everyday people doing extraordinary things in their communities. Up to 250 Kiwibank local hero medals will be awarded in up to 25 regions across the

country. One national winner will be celebrated at the gala awards dinner. Nominations close on Friday October 22, 2010. Nomination forms are available online at www. nzawards.org.nz or at Kiwibank, Countdown and Mitre 10 stores. The winners and runners-up in each category will be honoured at a gala awards dinner on Wednesday, February 2, 2011. “Ideal candidates are inspirational New Zealanders who are stepping up, making the most of what they have to offer, helping others and seeking new ways of making society better,” says awards patron, former Prime Minister Jim Bolger. M

Executive Pulse

Ngatarawa’s London coup

REPUTATION ENHANCER third of business decision makers think sustainable management practices have protected their organisation’s reputation and 28% think such practices have enhanced brand value in the past year. Nearly half think they have contributed to reduced costs.

Thinking of the business case for sustainable development, please indicate which of the outcomes below have been of most value to your organisation over the past 12 months as a result of your sustainable development practices or initiatives? Reduced costs Reduced risks Attracting and retaining staff Identifying new business opportunities Enhanced stakeholder relations Enhanced brand value Protect your reputation Higher share price Inclusion in sustainability indices

48% 22% 25% 27% 21% 28% 34% 3% 6%

Source: N = 428 Business managers, proprietors, self employed and professionals. ShapeNZ July-August, 2010 national online survey.Weighted to represent the national population. Maximum margin of error on the national sample +/- 2.2%. Shape NZ is operated by the NZ Business Council for Sustainable Development. www.shapenz.org.nz, www.nzbcsd.org.nz

awke’s Bay winery Ngatarawa Wines, one of the sponsors of the Deloitte/ Management magazine Top 200 awards, has taken out the award for Best New Zealand White Wine at the International Wine Challenge (IWC) in London. The IWC is the largest blind tasting event in the world, with more than 10,000 wines entered this year. Alwyn Corban... Latest global award caps After winning gold (gold off a great run for Ngatarawa. wines must score more than 95 out of 100 marks) in the preliminary rounds where the wines are tasted by more than 350 different judges, Ngatarawa’s Alwyn Chardonnay 2007 went on to take out the trophy for Best Hawke’s Bay Chardonnay, Best New Zealand Chardonnay and Best New Zealand White Wine. Alwyn Corban, Ngatarawa’s managing director and chief winemaker, said that scooping three trophies, eight medals and two commended awards in this year’s IWC was an, “absolute highlight of our year and also testament to the skill, hard work and perseverance by Ngatarawa’s viticulture and winemaking team. The London IWC result caps off a great run for Ngatarawa on the awards front.” Ngatarawa’s Alwyn Merlot Cabernet recently won a gold medal in the influential 2010 Decanter World Wine Awards. This follows a gold medal for Glazebrook Noble Harvest Riesling 2009 and gold medal and trophy for Farmgate Noble Harvest Riesling 2007 at the Air New Zealand Wine Awards late last year. M

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New Zealand has some of the highest recorded negative youth statistics in the developed world. The Graeme Dingle Foundation is committed to turning this around through its work with FYD. Help transform the lives of thousands of Kiwi children each year and make a lasting difference to New Zealand society through making a bequest, donation or endowment to the Graeme Dingle Foundation. The Graeme Dingle Foundation has been set-up as a permanent endowment to ensure the longevity of the Foundation for Youth Development’s (FYD) programmes – Kiwi Can, Stars, Project K and MYND. FYD currently helps over 18,000 young people to be confident healthy individuals who contribute positively to NZ society. FYD’s programmes are supported by robust research and evaluation including Auckland, Massey, AUT and Hong Kong universities. Results show that the programmes work. FYD students perform better over a range of factors including improved academic performance, improved behaviour and attitudes and boosted self-confidence – all leading to a positive sense of purpose and direction.

For more information, please contact Debbie Brown on the details below:

Graeme Dingle Foundation Phone 09 477 6237 Email office@fyd.org.nz Website www.fyd.org.nz PO Box 305 474, Triton Plaza, North Shore 0757

MANAGERS ABROAD M

Culinary colonist Josh Emett is building a growing reputation on the global restaurant scene. He talked to Keith Stewart about the challenges of managing the newest outpost of Gordon Ramsay Inc.

e is one of the most famous chefs in the world; Gordon Ramsay, the potty mouth chef, television celebrity, kitchen bully, philanderer, multi-starred Michelin phenomenon, super-chef – choose your persona and Ramsay probably fits it, at least in some branch of the media, if not in his own head. However, the manager of Maze by Gordon Ramsay in Melbourne, the newest outpost of the continually expanding global Ramsay culinary empire, is not a multi-faceted gustatory phenomenon, but a country boy from the Waikato ‘done good’. Not that Josh Emett is fazed by the challenge of setting up luxury food venues, having done the same job for Gordon Ramsay Inc in London and New York before arriving back in the Southern Hemisphere. This is not about bringing recipes to new destinations – it is about establishing outposts of Ramsay excellence that have the same capacity for winning three Michelin stars as those in northern metropolitan centres such as London or Paris. “It is not like McDonald’s, where you set up a logo over the front door, have a plan for decor, canned music and a bunch of recipes created at head office,” says Emett. “That is a franchise, this is an extension of Gordon’s philosophy of excellence.” His position is weird, he acknowledges. “Technically this place is Gordon’s, but I

Josh Emett... “It’s very nice to have the freedom to operate as I see fit.”

can only be successful if I treat it as my own. Whether I am buying equipment, or setting up the menu, I have freedom to operate. What I have to achieve is standards and commercial performance, and I can only achieve those by assuming this is my place, taking on ownership.” And that obliges him to take ownership of Ramsay’s standards, to exercise them as if they were his own. Indeed, they are his own, gathered over 10 years of working in Ramsay kitchens, of conforming to Ramsay philosophies and encouraging them in others who work beneath him. “You can’t teach somebody something you have learned over 10 years; you can only create a place where they learn by practice. It is all the little things that make the difference at this level of operation, attention to detail and making sure you get everything dead right. “Some of this stuff you can teach by telling people, but other things they only learn when they get their work rejected

every time they get it wrong,” he says. “If there is one feature of the way Gordon operates, it is a really strict operation back of house. For a lot of people who have never come across that sort of attitude it is a real shock and many of them walk away because they just can’t handle it.” The other key point insisted on by Ramsay is that there is no recipe for operations. What needs to be done is to fit the restaurant into its local cultural environment by making sure the menu and service delivers what locals expect, not what is considered exceptional in London. “It is very nice to have the freedom to operate as I see fit,” Emett admits. “But if you think about it, that is the only way it can work in different locations. To understand the local climate, you have to be in the local climate, and the decisions need to be made by people on the ground, not at head office.” M

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

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MANAGING SUSTAINABLY: CASE STUDY

Good for you –

and for us all When Hubbard Foods’ founding shareholders wanted an appropriate strategic partner to help grow the business, they looked to a charitable trust, says Andrew Bayly.

ove over private equity – there’s another strategy flexing muscle in the food and beverage investment space. And the bonus for New Zealand companies is it’s highly sustainable. Before the world economy weakened in 2008, private equity firms were a rapidly growing power in the investment world. Now the business community is taking into consideration other essentials seen in the new financial climate as important as monetary stimulations. Dynamics behind some recent transactions in the food sector on which Cranleigh Merchant Bankers has advised, show business leaders are considering other critical elements of success when making their decisions. While successful deal flows can be driven by trade buyers, they can also be found in professional institutional investors with altruistic aims. A marriage between a well-known industrial player and a charitable trust with good track records of investments presents a healthy balance of monetary focus and social interest aspirations. Take the recent transaction between Hubbard Foods and Rotorua Energy Charitable Trust. Hubbard’s founding shareholders wanted an appropriate strategic partner to help grow the business, rather than sell the business as a

14 | www.management.co.nz | SEPTEMBER 2010

whole. They saw it as the right move to maximise enterprise value. Rotorua Energy Charitable Trust has a well balanced portfolio of investment interests in several New Zealand companies. As an investment partner the trust will not only provide capital for Hubbard Foods to pursue further expansion, but also brings additional professionalism and expertise to the company board. As the investment strategy of the trust has a medium to long term focus, this transaction presents a certain degree of stability and longevity – a critical advantage over deals led by more opportunistic investors, such as private equity firms. A key feature which makes this deal outstanding, however, is the charitable nature of the new investor. What makes a partnership work at the first stage and will be strengthened over the long-term is not only profitable growth, but also the expectation that parties entering the relationship share the same fundamental values. In this case the trust’s philanthropic aspirations underscore and strengthen Hubbards’ image as a socially responsible brand and support the company and its founding shareholders’ commitment to philanthropic aspirations, including sponsoring Outward Bound. Another deal which Cranleigh

facilitated last year, DB Breweries’ sale of Liquorland to supermarket chain Foodstuffs, shows similar success fundamentals. This time the successful purchaser is an experienced franchise operator, which runs as a co-operative and is owned by a community of New Zealand supermarket operators. Owners of robust businesses with good potential should consider a range of other things when they search for investors and business partners. We expect greater merger and acquisition (M&A) opportunities on the horizon for good business operators and professional investors. I am always of the view that apart from monetary focus, long-term strategic fit and fundamental alignment of business values are key drivers of successful transactions. M Andrew Bayly is director, Cranleigh Merchant Bankers.

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Case Study: Pumpkin Patch

How literacy training helped Pumpkin Patch improve accuracy and communication in its warehouse.

umpkin Patch designs and retails its own brand of children’s wear. Grown from a mail order business run from the founder’s garage in 1991, it is a New Zealand success story employing over 3,000 people. It has over 200 stores in four countries along with wholesale operations in 14 countries. Mark Hall is the Warehouse Supervisor at Pumpkin Patch’s Head Ofﬁce in East Tamaki, Auckland. The warehouse is responsible for getting orders out for its New Zealand, Australian & US markets; they also service their online purchasers (mail order) in the US, Ireland, UK, Australia and New Zealand. So with continual growth in different markets spread around the world and very limited timeframes in terms of getting new season stock on the shop ﬂoor and a sevenday door-to-door delivery for online purchasers, the pressure is on to deliver quickly and accurately. Says Mark: “We close for a week annually for stock take. When we are stock taking we do random spot checks after staff have counted an aisle. It was during spot checking that the percentage of wrong counts was a little high for our liking. “After investigation and talking with a number of staff we quickly realised that in some cases they had forgotten the basics like addition and subtraction because school was such a long time ago and ‘use it or lose it’ was a factor. “It became clear very quickly that if we could upskill our employees there

was potentially a ‘win-win scenario’ for both the business and each individual.” The Workbase programme targeted written communication and numeracy to help with stock take efficiency and in the accuracy of all picking activities, which is the basis of all its processes. Currently over 60 employees have participated in the two, year-long programmes. Funding support for the programmes is provided by the Tertiary Education Commission. Since the training Mark has noticed a significant improvement. “We now operate with less contract or casual staff due to a combination of new technology and the right staff with the right skill set. With regard to stock take, we have reduced the time needed to be closed by two days due to accuracy and efficiencies gained.

“Picking accuracy, and hence order fulﬁlment, has improved dramatically.” “Picking accuracy, and hence order fulﬁlment, has improved dramatically and we can tell by the reduction in ‘trouble shooting’ that fewer mistakes are being made across the board. “Absenteeism has reduced – the opportunity to do the training generates

Mark Hall, Warehouse Supervisor.

a greater sense of loyalty to the company. The company is committed to support its employees to reach their full potential, and in return I believe the employees will go the extra mile. I never have any problems getting volunteers to do overtime. “They are hungry for knowing how the company is doing and where it is going and are not afraid to make suggestions about their work environment or the processes within it. “We have been able to promote employees into positions that, prior to the programme, they would not have had the confidence or the skill set to even apply for. The benefit is we can retain that person and their product knowledge, which is a huge saving on training and recruitment costs. Both Pumpkin Patch and the participants of the programme have benefited immensely.” For more information about workplace literacy programmes, contact nmiles@workbase.org.nz.

The New Zealand Centre for Workforce Literacy Development Katherine Percy – Chief Executive phone: 09 361 3800 email: kpercy@workbase.org.nz www.workbase.org.nz

SEPTEMBER 2010

| www.management.co.nz | 15

M MANAGING SUSTAINABLY PETER NEILSON

Buying wisely As the world speeds along on procurement practices built on sustainability values, New Zealand is ﬁnally waking up to their bottom-line beneﬁts, says Peter Neilson.

ustainable procurement has taken a major hold among New Zealand executives with the greatest buying power. A recent survey showed 44 percent of people with the personal authority to spend more than $100,000 on behalf of their organisations now buy solely or mostly on a whole-of-life cost basis, not just a day-one price. This is up from 36 percent last year. This will affect billions of dollars a year in buying decisions. Whole-of-life buying means the true cost of using goods and services is considered, often including their environmental and social impacts. Recent nationwide ShapeNZ research covering 1245 business decisionmakers, commissioned by the New Zealand Business Council for Sustainable Development, shows close to half of the most powerful buyers have shifted to sustainable procurement. We are fast reaching a tipping point where cheaper day-one price deals become a poor way to do most business. Businesses and governments, which have introduced sustainable procurement, report between eight percent and 30 percent efficiency improvements – which go straight to the bottom line. Applied in New Zealand, this could save the central Government alone more than $1.6 billion a year. Sustainable procurement is often cheapest long term – and businesses and tax and ratepayers stand to save millions as it takes hold.

16 | www.management.co.nz | SEPTEMBER 2010

Energy-efficient cars like the Toyota Prius have better resale value and are less costly to run.

At the New Zealand Business Council for Sustainable Development we believe whole-of-life cost buying should be extended to local government throughout the country. Other ShapeNZ research shows 75 percent of New Zealanders support this, including 88 percent of Act voters, 79 percent each of National and Labour voters and 89 percent of Green voters. The principles of value-based tendering, as opposed to pricebased, should also be adopted for major projects. This includes using whole-of-life costing in financial assessments and sustainability assessment criteria. The fast shift of the most powerful Kiwi buyers to sustainable procurement reflects worldwide trends to more sophisticated procurement practices built on the sustainability values of consumers and voters. Recent experience has played a part as well. Companies which bought

traditional energy-inefficient sixcylinder cars for a lower day-one price got burnt when they could only be sold for $10,000 to $15,000, while more energy-efficient cars were selling for more and had been less costly to run since day one. Also according to GSB Supply Corp, the country’s leading vehiclebuying specialist, if a GPS device were deployed on all central and local government tool-of-trade vehicles, the total cost of ownership over their lease life would be cut by more than $50.2 million. GSB describes this as “completely doable”. We have this low-hanging fruit ripe for the picking. The concern is that many of our overseas competitors have already done so and have been enjoying the benefits for years. M Peter Neilson is chief executive of the New Zealand Business Council for Sustainable Development. www.nzbcsd.org.nz, www.shapenz.org.nz

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Complete a brief (20-minute) survey and you have a unique opportunity to receive a FREE benchmarking report. See how your organisation compares to the rest of the world in key areas like: • How has the economic downturn impacted conÀdence in leadership? • How are leaders dealing with leadership transitions? • What are the best-in-class strategies for selecting, promoting, and developing tomorrow’s leaders? • What are the trends in your industry and region? • What is the relationship between leadership practices and bottom-line company performance? • How does your organisation stack up on measures of management innovation?

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NZIM RESTRUCTURE

Changes for

the times The New Zealand Institute of Management starts another stage of its evolution as the country’s leading management learning enterprise, says Northern chief executive Kevin Gaunt.

“

oday, the overriding problem for every organisation is how to change, deeply and continually, and at an accelerating place. We live in a world where change is shaken, not stirred,” management guru Gary Hammel, wrote last year. And that’s how it is for NZIM and every one of our membership organisations. The majority of our members assume that we are a single, integrated, organisation. In fact, we deliver our services to the market as four individual legal entities. NZIM is looking at changing this and, as a consequence, aims to deliver even better and more relevant management and leadership advice and career development than it has in the past. NZIM has been working towards becoming a fully integrated organisation for several months. The move is a considered response to different membership needs, a shifting economy and the need to both tap and utilise global resources to deliver solutions that meet rapidly changing management learning demands. NZIM has been building management capability in New Zealand since 1946. It was set up following the trauma of the Second World War to help managers gain on-the-ground practical man-

18 | www.management.co.nz | SEPTEMBER 2010

agement experience denied them by the interruption of the war. From this modest beginning NZIM has developed into a leading national organisation with centres in Auckland, Wellington, Christchurch, Dunedin, and Invercargill. NZIM has three major strategic roles, all focused on building management capability. They are research, learning, and recognition. Our research role draws information on management development and trends from both international and domestic sources. The aim is to identify what is really happening with the science of management and to communicate it through articles and case studies, to managers wanting to build their personal or organisation’s capability. The main output from this research is the continually evolving NZIM Management Model which effectively identifies development needs. The learning role has resulted in NZIM becoming one of the country’s largest providers of management education. NZIM’s recognition role covers the presentation of certificates and diplomas, often linked directly to the New Zealand Qualifications Framework. It also covers the awarding of member professional gradings which recognise individuals’

advancing skills and experience. Finally, we recognise role model managers through our involvement in the Deloitte/ Management magazine Top 200 Awards and the NZIM/Eagle Technology Young Executive of the Year Awards. As NZIM developed, it formed regional organisations with their own constitutions and boards. Consequently, the current organisation consists of four legal entities, NZIM Northern, NZIM Central, NZIM Southern, and the national NZIM Inc. This structure has served NZIM members well for many years. But the world is changing and new technologies in particular, provide NZIM with exciting opportunities to work more effectively through its National Board and deliver enhanced stakeholder benefits by operating as a single legal entity. The current structure inevitably involves some resource duplication and infrastructure overlap. Moving to a single entity will enable much of this multiplication to be removed, releasing resources to deliver increased efficiency and enhanced services. The National Board’s vision to reestablish NZIM as a single legal entity with one constitution will open the pathway for NZIM to develop as an integrated organisation and to leverage

NZIM is becoming one of the country’s largest providers of management education.

its resources and increase stakeholder value. Some benefits include: • Systems and processes standardised across the whole organisation leading to more effective use of resources, higher levels of systems operation expertise, and the opportunity to develop smart online services through the integration of data into one database. • Integrating NZIM will result in a single website and will enable it to allocate more resource to the development and management of the website. • One of NZIM’s key roles is research. The integration will enable resources to be allocated to this role which will develop NZIM’s capability in delivering on its strategic goals. • Integration will also enable NZIM to allocate more to the market development of its programmes and services. • Further integration will open up leveraging opportunities, for example group purchasing. • NZIM will focus on the global development of the people working at NZIM and create opportunities for career development across the organisation. The National Board initiated the

single legal entity process just over two years ago. An independent consultant’s report was commissioned in late 2008. The report recommended an integrated structure to deliver the future. The NZIM president visited all regions to present the results of the report and to discuss options for the future. From this, the National Board started the process of gradually moving towards an integrated structure. In early 2009 the National Board passed two resolutions: 1. To support NZIM becoming a single legal entity to gain internal efficiencies and become the pre-eminent organisation promoting management capability in New Zealand. 2. To develop a pathway towards achieving this goal for the future. The process is now underway. Members are being asked by their regional boards if they support NZIM integrating and becoming a single legal entity with one constitution. The National Board doesn’t envisage major structural change initially. “The legal integration will open up a channel for shaping NZIM effectively for the future,” says NZIM National president Phillip Meyer. The initial intent is to have a structure similar to the current one with a National Board of seven members – three regional chairs and four voted for by members. Regional committees will operate in the same manner as the current regional boards. They will monitor and review regional performance, develop strategy, business plans, and budgets. The initial change will be that strategies, business plans, budgets, and remuneration reviews will be planned locally but signed off finally by the National Board. Also there will be one audit process for the whole institute. The National Board will work on a longer-term plan to achieving the perceived benefits of the integrated NZIM. The changes will be gradual as opportunity and experience develop and members and staff will be fully consulted, says Meyer. M

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 PHILLIP MEYER FNZIM (CHAIRMAN) BRIAN SOUTAR AFNZIM LLOYD DAVIES FNZIM GARY STURGESS LIFE FNZIM JOHN SANDFORD FNZIM CHERYL DOIG FNZIM LYNDA CARROLL AFNZIM OFFICES NATIONAL OFFICE Acting CEO PHILLIP MEYER FNZIM Box 67, Wellington 6140 Ph 0-4-473 0470, Fax 0-4-473 0479 Email national_office@nzim.co.nz National website http://www.nzim.co.nz NORTHERN President: JOHN SANDFORD FNZIM CEO: KEVIN GAUNT FNZIM, FAIM Box 6600, Wellesley St, Auckland 1141 Ph 0-9-303 9100, Fax 0-9-303 9109 Email kevin_gaunt@nzimnorthern.co.nz Website www.nzimnorthern.co.nz CENTRAL President: PHILLIP MEYER FNZIM CEO: KARIN CALLAGHAN FNZIM, FIPAA Box 11781, Wellington 6142 Ph 0-4-495 8300, Fax 0-4-495 8301 Email karin_callaghan@nzimcentral.co.nz Website www.nzimcentral.co.nz SOUTHERN President: BRIAN SOUTAR AFNZIM CEO: JOSEPH THOMAS AFNZIM Box 13044, Christchurch 8141 Ph 0-3-379 2302, Fax 0-3-366 7069 Email joseph@nzimsouthern.co.nz Website www.nzimsouthern.co.nz

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

SEPTEMBER 2010

| www.management.co.nz | 19

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COLIN JAMES POLITICS M

After the makeover queen Political parties’ brands are deﬁned by their leaders. Can John Key build a brand as strong as the Helen Clark makeover, asks Colin James.

n 1996 Helen Clark got a big hairdo and flash make-up and went public with this near-unrecognisable persona. It was the boldest cosmetic rebranding since Bob Harvey remodelled Norman Kirk in 1972 from greasy slob to greying statesman. Julia Gillard had a cosmetic remake, for a women’s magazine, as a campaign manoeuvre in Australia’s election last month. As the polls plunged she then proclaimed that she was going back to the ‘real Julia’. These pirouettes state a fact of modern politics: the leader’s brand is a critical, near-defining, element of the party brand. It is John Key versus Phil Goff as much as National versus Labour. The same goes for Tariana Turia and Pita Sharples and the Maori party and Rodney Hide and ACT. The Greens, who have an enduring brand embedded in the environment, are the exception. The party brands its leaders more than the leaders brand the party. Leaders got into the branding because parties went marketing. They did that as the old-class loyalties frayed in the more diverse society and economy that developed from the 1960s. Marketers – which necessarily include the leaders – swapped ideology based on class interest for ‘values’. Helen Clark ran ‘values’ against Key’s ‘fresh’ in 2008. Marketing has not generated homogenised messages, despite the Labour-lite media tag on Key’s National by opponents – and some supporters. To win the 40 percent a big party needs

Helen Clark cemented her popularity with an airbrushed brand makeover, but now appears more natural.

to govern, the leader brand must be a credible fit with deep public assumptions about the party, in other words the party’s enduring underlying brand. A leader’s values must resonate with those of the party’s core vote, which can vary from suburb to suburb. Clark’s social legislation (civil unions, prostitution reform, the whacking ban) estranged swathes of suburban males in 2008 who otherwise agreed with Labour on core economic policy. National inked in the divider at its conference in July, with a raft of workplace law changes. National sees wages essentially as a cost. Labour sees wages essentially as sustenance. That difference is embedded in the party brands. Key and Goff are on opposing banks of a ravine that runs through the workplace. Still, the dividing line is not as sharply drawn as a century, or even half a century, ago. Fewer people work in factories in routine jobs. More work in

small service delivery firms and agencies. And the under-40s want workplaces more customised as much as they want goods and services more customised. That’s where brand Key has it over brand Goff. Key is nearer that younger generation in mentality. He is affability personified: agreeable, gregarious, easy to be with, self-deprecating, eager to customise his government to every segment of the community. That is a powerful brand. After Clark’s firmness, often eliding into severity, and strong alignment with favoured segments (not least, women), Key seems on everyone’s side and the public likes that. National is basking in that brand. But leaders pass. What happens post-Key? What happens if, before that, brand Key decays? Scope for Key’s multiple positioning will narrow. He will have to offend voting segments (as he had to do with Tuhoe and as he chose to do on workplace law). How will all-things-to-all-brand Key look then? When he goes, will there be a strong successor-brand to which there can be a smooth transition? The most promising so far is Steven Joyce. The decay or end of the brandKey will open room for a new-brand Labour leader. Post-Clark-brand Goff is not that. Clark had authority – like it or lump it. Goff does not. His brand is nice but indistinct: Keylite affable, agreeable, adaptable, but in the long shadow of the Clark-branded era. Next month Goff will front a friendly Labour conference. But it will also be a party in longer-range search of a leader whose personality can rebrand Labour with wide appeal and deserving office but also true to Labour. M Colin James is New Zealand’s leading political commentator and NZ Management ’s regular political columnist. ColinJames@synapsis.co.nz

SEPTEMBER 2010

| www.management.co.nz | 21

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Call 0800 627 744 or email info.marshnz@marsh.com Or visit www.marsh.co.nz for a comprehensive overview of our credentials.

BOB EDLIN ECONOMICS M

Selling the family China As the spotlight falls on foreign interests bidding for large land holdings, Bob Edlin examines the debate: to sell or not to sell?

statistical gap was revealed by Finance Minister Bill English, as public passions ran high over sales of New Zealand land to foreigners in general and dairy farms to Chinese interests in particular. No one knows how much New Zealand land is foreign-owned. Officials keep count when foreign purchases are approved, but they don’t know how much land has been sold by foreigners. News media have been reporting that an average 82 hectares of agricultural land a day has been approved for sale to offshore investors in recent years. They quoted Overseas Investment Office figures showing 235 consents for foreign investment in agricultural land were approved between July 1 2005 and July 1 2010. The approvals were for foreign investors to buy either financial shares or physical assets on agricultural land. More than 150,000 hectares of agricultural land has been approved for sale in the past five years. The commodity boom and a bright outlook for agricultural prices make this land increasingly attractive to overseas investors, as an Institute of Economic Research discussion paper pointed out. The paper looked at another data set to put matters in perspective. Foreigners had $293 billion invested in our $187 billion a year economy in March 2009. Statistics New Zealand data show the stock of land-based foreign holdings was $4.8 billion in 2009 (one percent of the 2009 total). Around $27 billion (nine percent) was invested in

No one knows how much New Zealand land is foreign-owned.

manufacturing and $192 billion (61 percent) in finance and insurance. Much of New Zealand’s inward foreign direct investment comes from Australia. Investment from China is too small to be reported separately. The institute believes there is broad support for further trade liberalisation through the World Trade Organisation or free trade agreements, because Kiwis know that when other countries remove subsidies or tariffs on the goods we export, we become more competitive and this lifts our income. We also want to be able to invest in overseas projects and travel freely for business purposes. But some elements of globalisation discomfort some sections of the public. The paper cited migration and foreign direct investment. In the case of foreign investment in land, public misgivings have been potent enough to prompt a revisiting of the Government’s review of foreign investment rules. Prime Minister John Key reflected the public mood: “My concern is about what I see potentially unfolding and that is quite large tracts of New Zealand land coming available for sale rapidly and the consolidation of those farms in foreign hands and whether that’s in New Zealand’s best interests, and my view is, it’s not.” The Government therefore was thinking about tightening the rules on farm sales to foreigners. When the review was launched last year, it aimed to

further liberalise the rules to encourage investment flows into a country unable to meet its own capital needs. Bill English seemed more relaxed than the PM: “Anecdotally a lot of them [foreigners] come here, they buy the land, they figure out you can’t make much money out of it and it’s a long way to come and look at it, so they sell out and go. We’re not even sure how much of our land is owned by foreign investors.” The public was unlikely to be mollified. At that time around threequarters of respondents to a TV3 poll said they wanted overseas investment rules tightened. But the institute discussion paper said restricting overseas investors’ access to the New Zealand economy would increase our country risk premium, causing borrowing costs to rise for households, firms and the Government. New Zealand didn’t have the capital market depth to afford to be picky. Given New Zealand’s debt levels, restrictions would reduce economic growth and income – “hardly a sensible way of trying to close the gap with Australia”. Obviously these economic arguments were not understood or were being rejected by a majority of people and, as English said of the land ownership statistics, “the public debate would benefit from more information”. M Bob Edlin is a leading economic commentator and NZ Management’s regular economics columnist.

SEPTEMBER 2010

| www.management.co.nz | 23

HOW COME YOUR

PHOTOCOPIER

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Best of all, because Southern Cross is a notfor-profit organisation, our duty is to look after the health of New Zealanders not the pockets of shareholders. And we pass this value on by paying out 96.6 cents of every dollar received in premiums back to our members4. No other health insurance company comes close to our 840,000 members or is as committed to the health of New Zealanders as Southern Cross. Talk to us today about the best way to look after what really makes your business tick. And no, we donâ&#x20AC;&#x2122;t mean the photocopier. To find out more, call Southern Cross Health Society on 0800 323 555 or visit our website www.healthybusinessco.nz

For elective surgical procedures. 2TNS research 2004 3Based on actual cost of Wellbeing One for a 41 year old as at 1 March 2010, calculated as a percentage of the average NZ salary of $45,000. 4For the year ended 30 June 2009, Southern Cross Annual Report, 2009

Healthy people healthy business Southern Cross Medical Care Society, 181 Grafton Road, Grafton, Auckland 1010 0323/AD/NZM/0810

NZâ&#x20AC;&#x2122;s Most Reputable Organisations

Reputation is everything In New Zealandâ&#x20AC;&#x2122;s first major peer review of reputation, NZ Management magazine and global business consultancy Hay Group reveal our Most Reputable Organisations. Reg Birchfield analyses the insights that emerged.

SEPTEMBER 2010

| www.management.co.nz | 25

COVER STORY

eputation can be a forgetful and unforgiving companion. Abuse it and chances are it will bite back. Leave it unattended and suddenly it has gone. Pay attention to it, and few marketplace strategies deliver so profoundly. Air New Zealand, NZ Management magazine’s first Most Reputable Organisation, is living proof of how a good reputation can create a Kiwi icon. And similarly honoured in the study are Kiwibank, named our Most Reputable State Owned Enterprise; New Zealand Police, voted as New Zealand Most Reputable Government Department; and The Salvation Army, declared our Most Reputable NotFor-Profit Organisation. The value of a good reputation has, in the past year or so, become more apparent and shot to the top of the strategy agenda of many organisations. Many that attempt to cultivate a reputation will fail, because at leadership level they don’t understand the commitment required to build an honest reputation. In today’s interconnected world, the most painstakingly designed and manufactured reputation can blow out in an instant. BP, for instance, invested billions of dollars telling everyone that, when it came to safety and environmental considerations, it would stake its reputation on being the “most trustworthy” energy company around. Its reputation now looks like an empty well. So, what, in New Zealand, identifies a

26 | www.management.co.nz | SEPTEMBER 2010

reputable organisation? What management and leadership insights does a peer review of this scale and scope reveal? NZ Management and Hay Group combined forces to find out. Every year in the United States, Hay Group helps Fortune magazine identify what it calls, The World’s Most Admired Companies. Last year, the consultancy started something similar with BRW magazine and generated Australia’s Most Respected Companies List. Given NZ Management’s wider readership and the idiosyncrasies of New Zealand’s small and public sectorimpacted economy, the researchers opted to seek opinions on more than just our companies. Directors and managers across the economy were asked to rate the reputational performance of our companies, state-owned enterprises, government departments and not-forprofit organisations. They were then asked to nominate one organisation, across all categories, that they considered New Zealand’s most reputable. Air New Zealand flew in. An overwhelmingly high percentage of respondents chose our national airline. Its high profile and sometimes inspirational management and leadership performance over the past two or three difficult years deserved to be acknowledged, said the respondents. And so it is, in this inaugural issue of New Zealand’s Most Reputable Organisations. The research provides fascinating

management, leadership and performance insights which are made all the more relevant, says Hay Group New Zealand’s chief executive, Ian MacRae, by the “outstanding” response to the survey. “The response rate was dramatically higher both in quantitative and qualitative terms than we have achieved in other countries, particularly in start-up year,” he says. “More than 70 percent of respondents were chairs, directors, CEOs, general managers or partners. The remaining 30 percent were senior managers, managers or similar level leaders. Given the response, we are confident that the findings are robust and reflect what leaders across the economy consider are reputational criteria relevant to today’s tricky market conditions,” he says. Given the enthusiastic response, the survey will be conducted every year, according to NZ Management’s publisher Toni Myers. “It will help us build a better understanding of what organisational reputation means and what it is built upon. We can then tell our readers what consistently resonates with directors and managers when they think about reputation,” she says. Despite the diversity of the organisations surveyed, our top level respondents were surprisingly consistent about what constitutes key reputation-defining characteristics. Strong and effective leadership is one in particular. These are difficult economic and social times, so

it is hardly surprising that the nation’s organisational leaders recognise the critical role strong leadership plays in delivering on survival, performance and success-focused strategies. It stood out as the highest-rated characteristic of Air New Zealand’s reputation, and featured as the secondhighest characteristic identified within Kiwibank and NZ Police, the country’s most reputable SOE and government department respectively. Air New Zealand has, said one respondent, “strong leadership from the top through to lower-level management”. And its “strong leadership is open and honest (providing) a high level of customer service, vision, communication and international recognition.” Its chief executive, Rob Fyfe, was frequently singled out by respondents for his unique and motivational leadership style. “He knows the business from the ground up, and has provided great internal and external leadership through what has been a difficult time to be in the airline business,” said another respondent.

ome-grown businesses dominated in the Most Reputable Company category. Air New Zealand, Fonterra, global engineering consultancy Beca, Fletcher Building and F&P Healthcare took out the top five places. Overseasowned multinationals did not rate. Air New Zealand also rated strongly

for being strategically innovative, having a clear and compelling vision and because respondents believe it contributes significantly to the wider community. “It is an organisation that puts New Zealand on the map and one which we can be proud of. Its CEO connects with wide stakeholder groups and represents New Zealand well in foreign markets,” said another respondent. Footing it globally earned reputational brownie points. Dairy industry giant Fonterra ranked second, mainly for its clear and compelling vision, its welldeveloped strategic plans and objectives and for its effective organisation structure which, perhaps, says something about how Kiwi leaders rate the global effectiveness of co-operatives. Fonterra was, said one respondent, New Zealand’s only true multinational “operating in a highly competitive and regulated environment, earning $1 in every $4 New Zealand earns from exports”. There was also a “sense of integrity in their approach to business”.

iwibank, the top rating SOE and New Zealand’s high-profile, homegrown bank earned the respect of at least one respondent for “taking the Australian-owned banks to task, challenging them” and thereby, “setting new industry rules”. It rated highly because it was “New Zealand-owned, innovative, trusted and fun”. Respondents felt Kiwibank was

Our Most Reputable... MOST REPUTABLE ORGANISATION Air New Zealand COMPANIES 1 Air New Zealand 2 Fonterra 3 Beca Group 4 Fletcher Building 5 Fisher & Paykel Healthcare SOEs 1 Kiwibank 2 NZ Post 3 Meridian Energy 4 Genesis Energy 5 Solid Energy GOVERNMENT DEPARTMENTS 1 NZ Police 2 Department of Conservation 3 Treasury 4 Inland Revenue Department 5 NZ Customs Service NOT-FOR-PROFIT 1 Salvation Army 2 Cancer Society of NZ 3 Plunket 4 Southern Cross Healthcare Group 5= Royal NZ Foundation for the Blind 5= National Heart Foundation of NZ 5= Royal NZ SPCA

SEPTEMBER 2010

| www.management.co.nz | 27

COVER STORY

customer-focused, engaged with the community and was equipped with a clear vision of what it was established to do: “compete with the major banks and provide affordable banking services”. Kiwibank’s birth mother, NZ Post, is the nation’s second most reputable SOE. Its perceived effective organisation structure and contribution to the community rated highest. Its effective implementation of strategic plans and objectives, coupled with “strong financial management and performance” also captured attention. Energy companies filled the SOE category’s next three reputational placings. The ranking of Meridian Energy, Genesis Energy and Solid Energy probably says something about the nature of the state’s involvement in the New Zealand economy.

hen it came to ranking the reputations of New Zealand’s government departments, NZ Police out-gunned the competition. Not surprisingly, it scored highest for its contribution to the community. That attribute was, however, closely followed by perceptions of the department’s strong and effective leadership and its effective and appropriate operating model. It is doubtful whether a policing organisation would score as strongly in many other countries. More likely they would have a reputation for being corrupt, uncaring, excessively coercive or just plain incompetent. 28 | www.management.co.nz | SEPTEMBER 2010

Respondents considered NZ Police well led and managed under difficult circumstances. It shows “high integrity” and, despite being under-resourced in some areas, is generally “not corrupt” and “upholds the principles” of good policing. One respondent believes it “keeps us relatively safe and helps enhance all New Zealanders’ quality of life”. The Department of Conservation is New Zealand’s second most reputable government agency. It contributes to the community, has an effective and engaged workforce and, in the opinion of the survey respondents, has a welldeveloped strategic plan and objectives which it implements competently. It is, in summary, committed to preserving

and enhancing New Zealand’s natural environment which, obviously, now rates relatively highly with New Zealand’s organisational leaders. The next most highly rated agencies are Treasury and the Inland Revenue Department. Both are credited with being consistent in how they deliver customer promise and service. Treasury, said at least one respondent, gives “consistently high quality advice” while IRD is “innovative, efficient and well-respected globally”.

he Salvation Army leads the reputational charge as the country’s highest-ranking not-for-profit. It contributes positively to the New Zealand community. It does this through its

The Research... NZ Management magazine’s Most Reputable Organisations survey was conducted by Hay Group New Zealand. Hay Group is an international consulting organisation that conducts research worldwide to identify admired, respected and reputable enterprises in both the private and public sectors. The word reputation was chosen deliberately for this study. Because the survey covers more than just the corporate sector of the New Zealand economy, the researchers were keen to establish leaders in every sector based on perceived critical reputational indicators that were more broadly based than profit, return on investment or other strictly commercial criteria. The objective is to establish indicators on which peers value an organisation’s contribution to the New Zealand economy and community as a whole. Hay Group’s survey was sent to over 4000 senior executives and directors and received a highly credible seven percent response rate. Participants were asked to nominate organisations they believed were reputable and to rate them using 12 criteria ranging from having a clear and compelling vision to actively contributing to the wider New Zealand community.

effective organisation structure. And it consistently delivers on its customer promise and service. The Salvation Army is, as one respondent put it, “always there in times of need”. According to another it “works effectively and quietly, has widespread support, and does not get political”. The Cancer Society and Plunket are New Zealand’s next most reputable not-for-profits. The Cancer Society scored for its clear and compelling vision, strong stakeholder relationships and because, once again, it contributes to the wider community. Plunket scored similarly on its community involvement, clarity of vision and strong stakeholder relationships. It also got credit for the delivery of its customer promise and service. Southern Cross Healthcare ranked next and was, perhaps, a surprising inclusion in the most reputable not-for-profit category given that that it was up against stiff competition from the charitable sector. Respondents credited it equally highly for its clear and compelling vision, its effective organisation structure and for its strong stakeholder relationships. The work it does keeping its stakeholders well informed obviously pays dividends. It was credited with “providing a good service in a difficult sector. Sharp focus, competent management, consistent.” As another respondent put it, Southern Cross “actually invests money into making their product better”.

hile having a strong and effective leader featured most as an indicator of reputational ranking, organisations that contribute to the wider New Zealand community also ranked highly. This holds a message for businesses in particular that focus simply on satisfying shareholders first, second and always. The importance of organisational contribution to the wider community is uniquely New Zealand, according to Hay Group’s MacRae. “That characteristic does not rate as consistently in other countries,” he says. “This might, he adds, simply reflect New Zealand’s smallness. People can see the impact of an organisation on the community more clearly. Some organisations realise that their actions are more open to scrutiny and so they focus on community impacts.” There are, says MacRae, lessons to be learned from this finding. Organisations serious about enhancing their reputation in New Zealand need to think more carefully about their social responsibilities and community perceptions, he says.

he survey, according to MacRae, reinforces his consultancy’s increasing anecdotal evidence that more organisations are focusing on the strategies to address reputation building. “There is a heightened interest in the relevance of reputation and standing. Many more leaders are now talking about reputation. It is becoming a key element

in their organisational thinking.” This switch in focus is probably the result of recent global events. “People have seen reputations ruined almost overnight. They also see that organisations with strong and well-founded reputations have come through with their reputations intact,” says MacRae. “There is a realisation that perhaps a strong reputation helps organisations survive and succeed in difficult times.” The survey findings are generally consistent with similar reputational surveys Hay conducts around the world, says MacRae. A clear vision or view of an organisation’s future rates highly. But that view must be compelling and properly articulated by strong and effective leaders. A good reputation takes time and genuine commitment to build, he says. “Companies with established reputations understand that they must walk the talk. They understand the value of reputation, but also understand that it takes consistent effort to protect it. It is about building organisational trust and confidence.” But, he cautions, while many organisations are now focusing on reputation building, too few understand just what sort of commitment it takes to build and deliver on. “For those that do, like Air New Zealand’s Rob Fyfe, Kiwibank’s Sam Knowles, it can pay dividends and become a self-fulfilling prophecy,” says MacRae. M SEPTEMBER 2010

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NZ’S MOST REPUTABLE ORGANISATION: AIR NEW ZEALAND

Flying people

not planes Under Rob Fyfe's leadership, Air NZ's focus on its people has rapidly built a winning culture and earned it the accolade of New Zealand's inaugural Most Reputable Organisation. Reg Birchfield.

ven in a year when Air New Zealand received significant global recognition there is, says the airline’s chief executive Rob Fyfe, “no recognition more valuable than that from fellow New Zealanders”. Fyfe’s comment came in response to his company being named NZ Management’s Most Reputable Organisation, the first time the accolade has been awarded. “It’s humbling and immensely rewarding to be recognised by peer Kiwi businesses,” he added. Last year Fyfe picked up the Deloitte/ Management magazine Top 200 Executive of the Year Award. Now his company has been acknowledged as a leader in “an area that really matters to us”, he said. Air New Zealand was ranked as New Zealand Most Reputable Company with the added plaudit of being named the Most Reputable Organisation overall.

30 | www.management.co.nz | SEPTEMBER 2010

Fyfe is delighted because he thinks New Zealanders expect a lot of their national airline. “They are simultaneously our harshest critics and our most avid supporters,” he says. “To win this award means a lot to us.” Five years ago, when he took over as the airline’s CEO, he discarded words like “vision, mission and strategy” from the organisational lexicon. “We decided to centre our business around the authenticity of our people and their personalities,” he says. “Our business is about flying people, not planes. We have given our 11,500 people the opportunity and responsibility to be themselves and to engage with colleagues, customers and suppliers in a genuine and engaging Kiwi manner.” This philosophy now permeates everything the employees do and effectively shapes the company’s overall reputation in the marketplace. “It is a business advantage that can only be achieved

when you have a passionate and highly engaged workforce,” says Fyfe. “Trust is essential to the success of an airline,” he says. “More than 35,000 passengers get on our aircraft every day and put their safety in our hands. Our reputation, our integrity and our commitment to safety – these are the foundation stones of our business. The airline business is testament to how quickly businesses fail if they lose the trust of their customers.” Reputation is, says Fyfe, built at multiple levels. “Our passengers translate clean aircraft, our brand reputation and our customer service into signals of a business that pays attention to detail and cares about and listens to its customers. They also see it as a business that represents New Zealand on the world stage with pride, integrity and in an authentic Kiwi way.” At 42nd largest in the world, Air New Zealand is, Fyfe concedes, a tiny player in the global aviation market.

“Yet we win all sorts of awards including Airline of the Year and Best Passenger Service beating off far bigger rivals. This is because of our reputation for being innovative and nimble and having a team who go out of their way to help passengers.” Fyfe’s decision to focus on people and personality guides what is done at the airline and provides his most important success measure. “Rather than use policies and procedures to define the personality – we use stories and real-life experiences to bring this personality to life and to give our people guidelines and reference points,” he says. “Our stories bring to life simple concepts like: be yourself; welcome as a friend; can do; and share your New Zealand. These concepts guide our responses.” The result is, he says, that all Air New Zealand employees feel trusted, supported and empowered to be themselves. “Our industry is governed, for good reason, by the strictest rules and regulations. The sense of identity that sits alongside these rules sets us apart from many of our competitors. And it brings a genuine and relaxed Kiwi style to the way we do things they can’t even begin to match,” he adds. Fyfe also sees a direct link between reputation and shareholder value. “The airline industry has incredibly fine margins. Every passenger that chooses to fly with Air New Zealand rather than one of our competitors because of our reputation, is of great value to us.” A two to three percent increase in passenger demand as a result of reputational pull increases the company’s profit by 50 percent, he says. “And earlier this year our reputation brought us one of the biggest accolades in the industry – the Air Transport World magazine Airline of the Year Award. “These are the Oscars of the indus-

Rob Fyfe … The greatest intangible benefit of a winning reputation is the pull it has with people.

try and ATW Airline of the Year is probably the greatest compliment bestowed on Air New Zealand since its inception. The global publicity that emanates from an award like this further builds passenger preference, reputation and shareholder value.”

genuinely connected with the company, compared with 68.5 percent three years ago. Our reputation in the marketplace helps build staff culture and vice versa, and customer service levels correlate closely with the increased sense of engagement and connection.”

The airline business is testament to how quickly businesses fail if they lose the trust of their customers. The greatest intangible benefit of a winning reputation is the pull it has with people. “Our employees are connected with the company and what we stand for better than at any time since we started measuring employee engagement,” says Fyfe. “Today 88.9 percent of our staff feel

The other New Zealand organisations Fyfe rates highly are those that don’t feel intimidated by New Zealand’s small size and remoteness. “Those that believe in themselves, their ability to perform at world-class levels and which embrace their New Zealand identity as a source of advantage,” he adds. M SEPTEMBER 2010

| www.management.co.nz | 31

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MOST REPUTABLE COMPANY FINALISTS

Fletcher Building JONATHAN LING, CEO

“Fletcher Building has been around in some shape or form for 101 years, and you can only build a business that survives that long if it is able to deal openly and honestly with its customers, suppliers, and staff. “We are here for the long term – hopefully another century at least – and having a strongly positive reputation in the wider community is good business and will help to ensure we do survive even in tough times. “Having a great reputation is part of what needs to be done to build a sustainable organisation – one that continues to evolve to meet the market.”

Fisher & Paykel Healthcare MICHAEL DANIELL, CEO

“We’re in the medical devices business, so our reputation is important for our business. Reputation is important to us, because we have a lot of stakeholders – the shareholders first and foremost. Also it’s important for consumers and staff, to be seen as a good quality business, especially as we’re looking to recruit and attract the best people. “Our strategies come naturally right from the founders more than 75 years ago. We are a company that goes out of its way to behave ethically and honestly – it’s part of our DNA, as opposed to being a conscious strategy. “Having a good reputation serves us well with shareholders, customers and staff.”

Fonterra

Beca Group

ANDREW FERRIER, CEO

KEITH REYNOLDS, CEO

“Fonterra is really performing. We are growing export earnings, we are investing in New Zealand and about to deliver the second best ever payout to shareholders this year. We are delivering on our vision to take Kiwi farmers’ milk to the world, to maximise returns to them and New Zealand, and do it as sustainably as we can with scale and quality. “For us, reputation is vital. We are in the food business and our whole business is built on our reputation for quality, reliability and trustworthiness. “Over the past 18 months we have been through a thorough process with 300 of our employees to clarify and refresh our values. These values, ‘Co-operative Spirit’, and ‘Do What’s Right’, are at the core of everything we do, while ‘Challenging Boundaries’ and ‘Make It Happen’ promote innovative thinking and a basis for action.”

“Our reputation is crucial to our business. Engineering projects are often unique, large-scale and enduring with an inherent degree of risk. “It is imperative that clients feel confident that Beca’s planning, project management and technical advice can deliver the appropriate solutions not only in terms of functionality, but also with regard to safety, value and sustainability. “Beca’s reputation as a trusted adviser facilitates recruitment and retention of the best people in our field, attracts premium projects, helps us build long-term relationships with our key clients and helped insure us against the latest recession.”

SEPTEMBER 2010

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NZ’S MOST REPUTABLE STATE-OWNED ENTERPRISE: KIWIBANK

Kiwibank steals a march

n reflection, Kiwibank’s arrival on the New Zealand financial ser vices scene could not have been more exquisitely timed. Its outstanding performance in NZ Management’s first Most Reputable Organisation survey is, given banking industry events since 2008, therefore hardly surprising. As the judges said at last year’s Deloitte/Management magazine Top 200 Awards in which the bank was an award finalist: “Kiwibank has stolen a march on the established trading banks that have for so long dominated the New Zealand financial sector.” But, as the bank’s successful and soon-to-leave chief executive Sam Knowles said in response to learning of Kiwibank’s ranking as New Zealand Most Reputable SOE: “Our strong reputation has been built on trust. “We have not over-promised and

we have delivered on what we have said,” he added. “We have challenged the established banks and made a difference. That is what we said we would do.” The survey respondents, it seems, agree. They rated the bank first for its “clear and compelling vision” and almost as strongly for its consistent delivery of customer promise and service and its strong and effective leadership. Reputation is, says Knowles, critical in a competitive market which the banking sector unquestionably is, the fiasco of the past couple of years notwithstanding. In his opinion, the bank has quickly established a “reputation for delivering on promises, being fair and being known for innovation which all helps differenti-

encourages customers to consider their options and make critical decisions on which bank is right for them. Consequently, Kiwibank continues to attract more than 1500 new customers a week,” he boasts. “Perception can be intangible, but public perception of the bank as honourable, honest and trustworthy is solid gold.”

Reputation and trust are inseparable. – CEO Sam Knowles ate Kiwibank from its competitors”. According to Knowles, innovation drives the bank’s strategic approach. “Innovation is critical,” he says “whether it be through new products, new developments in IT or new ways to deliver service. Equally, focusing on our customers by always doing what we say we will and doing what is right, is critical.” Knowles rates reputation-building strategies among the organisation’s key measures for success. “Reputation and trust are locked together,” he adds. According to Knowles, a great reputation delivers tangible outcomes. “It drives competitive advantage and 34 | www.management.co.nz | SEPTEMBER 2010

Again, as the Top 200 judges observed last year when they ranked the bank a finalist in the Marsh Most Improved Performance Award: “Kiwibank is a homegrown success story. Its huge customer uptake and popularity is the result of its professional approach to offering the right services and the right price.” Acting professionally and delivering on what is promised apparently goes a long way to building an organisation’s reputation. The perception that Kiwibank has been doing that is, it seems, obvious to other business leaders, particularly those who responded to the survey. M

FINALISTS

NZ Post Group

Solid Energy

BRIAN ROCHE, CEO

DON ELDER, CEO

“The New Zealand Post Group’s reputation delivers real benefits. We have some of New Zealand’s most-trusted brands including New Zealand Post itself, our PostShop retail network and Kiwibank. People readily relate to us and we are able to provide real value for our customers. A good reputation is also a key to attracting and retaining top-class people.”

“Solid Energy has come a long way in the last 10 years and part of that has been openly acknowledging that in the past we hadn’t always done the right thing in the way we carried out our mining activities. “We’ve spent a lot of time and effort addressing our environmental performance and our relationships with neighbours and other people in the communities.”

Genesis Energy

Meridian Energy

ALBERT BRANTLEY, CEO

TIM LUSK, CEO

“The company’s reputation impacts its relationship with communities affected by our power station assets, our relationship with our many customers across New Zealand, with our local and international suppliers and with the many governmental organisations that we deal with. Reputation and standing in the community at large is impacted by everything we do.”

“I’m exceptionally proud of the culture the company has built over the years which is underpinned by a set of values we call the Meridian Way. This is a roadmap for our staff, how we achieve our vision to be a global reference company for renewable energy. “It has served us well from the very start and is a touchstone inspiration for the innovative team work that has made us successful.”

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NZ’S MOST REPUTABLE GOVERNMENT DEPARTMENT: NZ POLICE

Police walk the talk

t’s probably unsurprising that the New Zealand Police is New Zealand’s most respected government department. Our cops sometimes take a hammering in the media, but time and again they score well in public opinion surveys. Now they are highly rated by Kiwi leaders too. Commissioner Howard Broad is “delighted” with the top-shelf vote of confidence and thinks his peers respect his organisation’s mission “to ensure the community’s safety and security”. “They probably also understand the difficulty of our operating environment,” he adds. “I suspect they look at it and say: that’s tough.” Fronting up to and dealing with difficulties while simultaneously keeping an eye on the ball and delivering a service dayin and day-out, is a tall order for any chief executive and management team. “But that is what we do,” says Broad.

“You can’t take time out to just think about things and try something else. You have to be doing it, as you do it.” But Broad also thinks having, what he calls “skin in the game” builds ‘brand’ respect. “We are not just talkers,” he says. “Our staff own the business. They can end up with police officers getting shot or badly injured. We occupy a ringside seat on the country’s difficulties and we are part of it.” And finally, Broad thinks NZ Police has a clear but simple operating strategy. “We turn up when people call for help. We have coercive powers that we must deliver on, and at the same time show the community why we can be trusted to exercise these powers. The whole community policing thing is the counter-weight to the other coercive powers part of the organisation.” The survey’s respondents undoubtedly picked up on the department’s effective

we competent when we turn up? And, can we be trusted because of the nature of the services we deliver?” It is difficult to imagine many countries where a police force would enjoy a similar survey rating. Broad agrees. “New Zealand does have a trusted police force,” he says. “People have opinions about us and want to tell us how to do our job, but that is a good thing. That’s democracy. But they trust us even when they disagree about things we do.” The New Zealand police force scored highest for its contribution to New Zealand community and that, says Broad, is entirely understandable. “We encourage our staff to engage in the community. We don’t have a fortress mentality, like many police agencies around the world. We have a different view and encourage our people to get involved in all sorts of community stuff. “We are widely distributed and very

Having ‘skin in the game’ builds brand respect. – Commissioner Howard Broad operating model. “When I talk about the strategy of policing (to outside groups) the simplicity and the compelling nature of that strategy is clear and they invariably get it,” he adds. So why is such a high ranking in NZ Management’s survey so important to him? “There is nothing more important to us than our reputation. We can’t do anything without a good reputation,” he says. “Being considered reputable is important to us. Reputation is built on the quality of our service: Do we turn up? Are 36 | www.management.co.nz | SEPTEMBER 2010

visible. And we use technology to get our people out into the community, not as a way to pull back from being out there.” And when it comes to strong and effective leadership he says simply: “We’ve done some work over the last few years to build our leadership brand. Not just command leadership, but teaching a wider set of skills associated with effective leadership. “To see that reflected in a survey like this is very encouraging. It is also personally satisfying for me after five years in the job. For someone to come along unannounced with this kind of finding is very pleasing.” M

FINALISTS

Treasury JOHN WHITEHEAD, SECRETARY

“I would like to think that we have a reputation for integrity, and for being free and frank with our advice. We are professional and committed to doing excellent work. Our lead role in improving public sector performance is taking on greater importance. The Government has high performance expectations of the Treasury, and we in turn are setting clear expectations for ourselves. ”

Inland Revenue Department ROBERT RUSSELL, COMMISSIONER

“Inland Revenue works in a very business-like way. We can and do measure productivity, and have lifted it each year for several years. “We have excellent relationships and high customer satisfaction level with the business community and a transparent, open tax policy process, as seen in the discussions leading to major tax changes.”

Department of Conservation

NZ Customs Service

AL MORRISON, DIRECTOR-GENERAL

“We hope this rating reflects the work we have done to build trust and confidence in the way we deliver our services. We work hard to tailor our services to the business interests of our stakeholders, whether they are in government, industry, or the public – and deliver to their needs while maintaining our protection and enforcement roles.”

“DOC works with over 4500 businesses every day – from small-time bee-keepers and kayak operators to the country’s biggest energy and tourism companies and I think the business community is starting to understand the wider value of the conservation work we do. We are looking after the very things that New Zealanders say they treasure most.”

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NZ’S MOST REPUTABLE NOT-FOR-PROFIT: THE NEW ZEALAND SALVATION ARMY

Sallies ﬁght the good ﬁght

eputation is not something the New Zealand Salvation Army sets out to engineer and market. “It is a by-product of our work,” says Commissioner Don Bell. Having said that, he accepts that having a good reputation is “critical” to the Army’s effectiveness, and he’s “humbled” by the recognition his peers have accorded his organisation. “Without the moral and financial support of the public, our corporate partners and various trusts and foundations the breadth and depth of our work would contract dramatically,” he adds. “Since the recession started in the first quarter of 2008, the number of families coming to us for emergency food alone has increased 55 percent to almost 29,000 families a year. Without that support a good many of these families would have faced hardships most of

us can’t fully comprehend. So we don’t take reputation for granted but its significance goes far beyond any dollar value that it might raise.” The Salvation Army’s mission statement – caring for people, transforming lives and reforming society – defines the organisation’s strategic objectives and the way in which it delivers on its promise and service to the community, particularly to society’s disadvantaged. “We work with New Zealanders in their darkest hours,” says Bell. “And everything we do is guided by the mission statement and our belief that we need to be there for people when they need us most.” The Army launched four mission goals in 2006, the success of which it is now evaluating. The goals called for

organisational management structure, with every section answering to a chief operating officer. That has been changed to a structure with a CEO (Bell), a chief operating officer and three ‘cabinet’ offices running the three divisions of business, programmes and personnel, who report to the COO,” Bell explains. “People relate better to this more structured format,” he adds. “We have also delegated the decision-making

We are highly structured and disciplined. – Commissioner Don Bell making “dynamic disciples”, increasing the Army’s membership, eradicating poverty and “becoming a streamlined and mission-focused” Army. “We have pretty well concluded that this is the core essence of the direction we are going and so we will re-launch these at the end of October,” says Bell. Survey respondents scored the Army highly for what they perceived as its effective organisation structure. And its structure is regularly reviewed to ensure that it continues to deliver on its service. “At one point we had a straight-line 38 | www.management.co.nz | SEPTEMBER 2010

down to the people who run each of our programmes.” Activity programmes, such as the Army’s addiction programme, have their own management board and governance structure, which in turn report back up to the cabinet. “Delivering on our mission is why we exist,” says Bell. “We are highly structured and disciplined and our goal is to serve suffering humanity. And we deliver on that.” NZ Management’s Most Reputable Organisation survey respondents seem to agree. M

FINALISTS

Cancer Society of NZ

Plunket

DALTON KELLY, CEO

JENNY PRINCE, CEO

“Reputation equals trust. We rely on raising our own funds through events such as Relay For Life and Daffodil Day, as well as bequests, donations and through sponsorship. Without a sound reputation, we would not be so well supported by the people and businesses of New Zealand.”

“Plunket is, and has been for over a century, trusted to go into homes across New Zealand. We value very highly the trust that the families across New Zealand, of all cultures and walks of life, place in us, often when their lives are undergoing a huge shift.”

The National Heart Foundation of NZ

Southern Cross Healthcare Group

TONY DUNCAN, EXECUTIVE DIRECTOR

IAN MCPHERSON, CEO

“Reputation is very dependent on internal culture – the way that we do things. We try to measure this through staff satisfaction surveys and exit interviews, to ensure that staff feel that their personal values and the way we do things is aligned.”

Royal NZ SPCA BOB KERRIDGE, NATIONAL PRESIDENT

“As a charitable organisation, it is expected that we undertake our charitable activities in a professional and effective manner, and in this regard the SPCA excels. Our sincere and honest appeal to the public to support us, is received in the spirit in which it is asked.”

“Is [being] reputable important? It’s vital – we are talking about people’s health. Our members and customers have placed their trust in us – usually during a difficult time. We seek to repay this commitment by providing excellent value and service.”

NZ Foundation of the Blind SANDRA BUDD, CEO

“Reputation is an important part of building a solid and sustainable foundation; it keeps you front of mind for your target audience, and gives your stakeholders the confidence to trust you. A great reputation is invaluable to attracting and retaining great people.”

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This year’s Deloitte/ Management Top 200 Companies campaign, ‘Understanding the New World’, examines six major contemporary issues and opportunities for business. This month, an analysis of brands.

42 | www.management.co.nz | SEPTEMBER 2010

hat does your brand stand for? What do you stand for? These questions are two of the most important that you will ask in your business career, says Michael Crampin, of branding experience company Designworks. “Brand has always been understood as a way of powerfully communicating what a company or product stands for – its difference, its attitude and its way of doing business,” says Crampin. Crampin is director of Designworks, one of a new breed of companies that has sprung up to help businesses set up, manage or reinvent their brands and reputation using corporate identity and design. He believes brands can help you to define not just your business identity, but also who you are as a person. “You

can define how you want to be perceived: as a rebel, athlete, greenie, or a cutting-edge creative.” Or as a hot-shot senior manager. “Ultimately brand is a space in its audience’s mind, offering them something to fulfil a desire or answer a need, be it functional or emotional.” And there can be serious repercussions if you get it wrong. Just look at BP’s woeful response to the Gulf oil leak, or how Apple recovered from controversy over the functionality of its new iPhone. In personal branding, look at Tiger Woods and at how David Beckham survived both sporting and sexual controversy to build a brand as strong as ever. “Today brand has more clout than ever before, but this power has to be used far more wisely than ever before too,” says Crampin. “If it stands for something, it has to deliver on that promise,

not just through its communications – but its deeds.” Today’s consumers are far more savvy about and less accepting of brand experiences that don’t live up to their promises. “The consequence is that the next advertising campaign will not wash away the issues of accountability,” says Crampin. The most important thing to remember today is “a brand is what a brand does”, he says, not what it promotes. “In times of recession it is important to see action over words. When an experience moves from product parity to product innovation there is an understood advantage – the consumer is being given more and as a result will give more back. “A brand in the current environment must do good things and have a function that is useful. Provide both and you are being genuinely useful.” MANAGING BRAND REPUTATION In this issue of NZ Management, senior managers have rated other organisations on reputation, something that Crampin says can be managed as a brand exercise. “Brands have to deliver on what they say on the tin, no surprises there – but they actually have to perform, not just as a product or a service, but culturally, socially and ethically.” Dishonesty can be fatal. With the lightning-fast messages of social media and the power of the internet and the press today, a brand will be exposed (and quickly) if it promises more than it can deliver, or says it stands for something that is later proven false by its behaviour or performance. So, what happens when a brand gets mired in a very public embarrassment? Recent events show the issue needs to be tackled head-on with transparency and honesty. What seems to work best is when the leader or icon behind that brand fronts up and responds with grace, by being

B_E_E “chatted you up with pick-up lines”, says Crampin.

straight-up and by taking responsibility. Explaining why it happened and what will be done to fix things most often works. A crisis doesn’t have to be the deathknell of brand, Crampin says. Look at how Dell reinvented itself after a barrage of bad press. “Brands that were previously seen as arrogant, out of touch and inhuman can use crisis as a catalyst to reinvent themselves. The best examples go beyond image, and choose to change their own culture, their focus and ultimately their business.” The best brands have an innate understanding of their purpose and reason for being, Crampin says. “The great brands, such as Disney, Apple, the

Olympics, Google and locally Trade Me are clear on why they were put on this earth in the first place – more often than not, it is all about the role they play in enhancing life and humanity. This drives their actions, creates the ‘plot’ and becomes the rallying cry.” Crampin says today’s consumers also want a say in their brand, rather than just a transaction. “They expect to get involved, influence the product and have some fun with it. The best brands (like the best websites) create two-way conversations that are involving and immersive. However, a brand totally designed by its consumer will lack star quality that consumers ultimately want.”

The ‘You’ brand Social networking environments provide a means for ‘you’ to broadcast your life and share it with others. This is ‘you’ branding in its purest form. This phenomenon has altered brand behaviour in a number of ways, says Mike Crampin. You branding is the ability for the consumer to ‘be in the brand picture’, where the brand allows the consumer to become part of the brand by being or defining the content. YouTube is the classic example where the brand exists as a means to channel you – or as they say ‘broadcast yourself’. Other incarnations are when the consumers can influence the experience – most recently here with the Yellow campaign that built the treehouse restaurant and created the yellow chocolate bar.

SEPTEMBER 2010

| www.management.co.nz | 43

UNDERSTANDING THE NEW WORLD

The best brands (like the best websites) create two-way conversations that are involving and immersive. – Michael Crampin The rise of companies specialising in ‘design’ thinking, such as that done by Designworks, is no accident, says Crampin. “It’s about the ability not only to define what a brand’s position and story is, but to design that experience – products and touch-points. Every interaction has to be designed and stack up. One weak link and the credibility is out the window.” THE GENERATIONAL CHALLENGE As a new generation becomes a target for marketers, branding will have to change, says Crampin. “Today’s uber-connected, totally networked, brand-savvy kids see through the fakes and the try-hards and show no mercy towards brands that are not up-front about their intentions. It is not so much anti-brand – it is more pro-honesty. “They will endure obvious ‘marketing’ if it’s cool and its intentions are clear. This new brand-savvy consumer is driving significant change.” Managers have to be aware of the

shifts that are occurring between the different generations, he says. “The tension between Baby Boomers, Generation X and Generation Y is what creates our current society and you have to analyse what this means for making organisations and customers tick.” There will be rewards for those who crack the code – in fresh business models that will translate into hard cash. The only constant in the new business world is change and consumers become impatient and bored with brands lacking in empathy or freshness, says Crampin. “Increasingly brands are like fashion, needing to change with the season to keep up with changing tastes and trends. The age of a corporate standards manual and a locked-down brand story are on the way out.” Pioneering brands like Diesel think nothing of continual reinvention, multiple logos and a changing face, he says. He sees it is happening across all industries, not just in fashion, which

has always been seasonal. “The smart ones are continually shape-shifting in the spirit of their brand to create new conversations and fresh interest – from airlines and energy drinks, to retail and breakfast cereals.” He cites Designwork’s concepts for B_E_E when it launched a new breed of ‘eco luxury’ cleaning brand. “It was an early incarnation of a brand that literally chatted you up with different pick-up lines.” In essence, brands need to stand for something bigger than their product, says Crampin. “They need to stand by – and up for – their beliefs and be genuinely useful in what they offer. They need to deliver tangible advantage (it works better, it does it differently, it is cheaper or easier) and be imaginative and ever-changing in their pursuit of their ideal. “Brands are living things that need now more than ever to adapt to the changing attitude and preferences of their consumers – whoever they are.” M

Medi ediaWeb aW MG aWeb M

SPECIALFEATURES UÊ <Ê> `Ê Û>Ì ÊUÊ*À viÃÃ > Ê iÛi « i ÌÊ Õ `i For further information contact UÊ <É ÕÃÌÀ> >Ê/À>`iÊqÊ Ã }ÊÌ iÊ}>«Ê«À }ÀiÃÃÊÀi« ÀÌ Clara Iqbal on 021 930 887 or UÊ/ iÊ ÀiVÌ À email admanager@management.co.nz

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Trends to watch Brands that are understanding the new world are adapting to the change in consumer markets, working with and through new channels and breaking established rules of branding and identity. The key here is to change fast and keep changing, moving ahead of the play with a direct conversation with the consumer mind at all times. It is interesting, says Michael Crampin, that both locally and internationally we are seeing not just small startups, but established players taking a new tack to stay ahead of the brand curve. Some of the key trends are: COUNTER-TRENDING For every trend there is a counter-trend. Playing in the counter space is where the gold is – “zigging” while others zag! NOT BEING TOO PERFECT People are suspicious of perfection, so there is beauty in the imperfect, which shows that humanity is a good thing. You need to show you’re human and that you’re trying hard. SHAPESHIFTING BRANDS This is a move to use the brand as the billboard and also to continually change to keep up a dialogue and interaction. Here are some good examples: • www.1day.co.nz A Kiwi consumer champion, a local example of a brand creating a gap and owning it. This follows in a kind of buddy brand format, where you get a heads-up to online

its user experience into one that is fresh and livelier than its historical look and feel, an approach that engages the user differently to its competitors, google, msn and yahoo. • www.diesel.com/be-stupid/ Diesel is not afraid of referring to the brand in a range of ways. Being a fashion brand, it recreates its image with every new season. Look at its recent ‘be stupid campaign’ which gives interesting advice “for successful living” (its tagline). specials. The pared-down platform gives you a simple range of specials at discount prices without the overwhelming bargain chaos that you would expect from other shopping experiences or in-store sales. As the name would suggest, these specials are only up for 24 hours, which makes the next day’s deal as fresh as it can be; if today’s specials don’t suit, you just try again tomorrow. • www.aol.com Aol (America on line) found a new way to deliver what it is all about. It turned around • www.youtube.com/watch t b / t h As an example of new conversations, adidas has taken vintage footage of Star Wars: A New Hope and turned it into a mash-up rife with product placement and pop culture references. It took the idea of reviving its old original looks (which it has been mining for the past two decades) and attaching them to icons of up-to-the-minute pop culture.

Join us at this year’s Top 200 awards where we meet those who are already rewriting the rules for a new world. 6.30pm, Thursday 2nd December, SkyCity Auckland Convention Centre

BOOK NOW FOR THIS YEAR’S EVENT Online: www.management.co.nz/top 200 Or contact Tania Vela, E: taniav@mediaweb.co.nz, T: 09 845 5114

SEPTEMBER 2010

| www.management.co.nz | 45

VOICE: BRANDS

The world’s

smartest logos International design judge, Kiwi Fraser Gardyne, says New Zealand’s logos rate among the best in the world.

hat is it about a logo that makes it work? Marketers the world over would love to know the answers. For international design expert, Fraser Gardyne, the key is a few simple rules. “The first thing is The Big Idea,” he says. “What can you see? What does that company do? What does it stand for? What is the logo’s personality? That’s what you’re looking for. If that’s obvious when you’re looking at a logo, that’s great. “Following that, you really need to see what they’re trying to achieve with the brand and the logo.” Gardyne should know – locally, for the past eight years he’s been a design judge,

first at a local level, then as one of 10 design judges globally for the prestigious WOLDA Worldwide Logo competition (www.wolda.org). Locally, Fraser is the current convenor of graphics judges for the Best Design Awards, a position he has held since 2003. In addition, he has just completed a twoyear term as convenor of judges for the Pride In Print Awards. In his judging role for WOLDA, each year he casts his critical eye over 2000 of the world’s top logos. “Each entry had a descriptor, but the quality of the entries was down to the entrants, so sometimes there was very little information.” Gardyne says the finalists for the

are producing is right up there. “Having convened the Best Design Awards, I know that the local design industry is capable of producing work that’s as good or better than what’s being done overseas. “I think it’s probably due to the fact that New Zealand is a travelling nation. We head overseas and, in a lot of cases, bring back experience. In a lot of the skills we have in the advertising industry we do lead the world.” Many companies fail to realise the power design has to build their company’s profile and profitability, says Gardyne. He points to research done in Britain that tracked the stock market performance of

Having convened the Best Design Awards, I know that the local design industry is capable of producing work that’s as good or better than what’s being done overseas. – Fraser Gardyne WOLDA awards were an interesting group of logos from across many different sectors. This year’s winning entry was American and last year’s was Australian, but he believes the work Kiwis 46 | www.management.co.nz | SEPTEMBER 2010

166 companies that invested in design over 10 years, finding they outperformed companies that didn’t by 200 percent against the FTSE 100. The British Design Council, which

Apple has now become an entertainment brand.

PHOTO: COURTESY OF APPLE

ran the survey, concluded: â&#x20AC;&#x153;This adds to the growing evidence that design measurably improves company performance. For the financial community, it offers a new way of looking at investment.â&#x20AC;? For proof of the power of a logo, you only have to look at Appleâ&#x20AC;&#x2122;s, says Gardyne. â&#x20AC;&#x153;We know what we perceive when we see the Apple logo â&#x20AC;&#x201C; exciting new products, its leadership and innovation, and the way it markets itself, the popular culture that surrounds it. â&#x20AC;&#x153;Really, that brand has just moved out of selling computers, now itâ&#x20AC;&#x2122;s into entertainment. It has become the number three mobile phone company on the globe, and itâ&#x20AC;&#x2122;s only been selling phones for three years.â&#x20AC;? Tiger Woodsâ&#x20AC;&#x2122; personal brand got knocked last year, notes Gardyne. â&#x20AC;&#x153;It doesnâ&#x20AC;&#x2122;t mean that heâ&#x20AC;&#x2122;s not still a great golfer, itâ&#x20AC;&#x2122;s just that the concept of a good, clean-living gentleman went out the door.â&#x20AC;? Locally we saw Telecom handling the XT

controversy with dignity, he says. â&#x20AC;&#x153;Paul Reynolds, the head of Telecom, is pretty convincing. You need to have someone whoâ&#x20AC;&#x2122;s got that strength of personality for that approach to succeed, and not many CEOs would be comfortable doing that. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s interesting to see that in New Zealand our largest employer is Fonterra. I donâ&#x20AC;&#x2122;t think many New Zealanders would strongly know their brand as a logo. In fact, the average Kiwiâ&#x20AC;&#x2122;s most trusted brand now is Wattieâ&#x20AC;&#x2122;s, which is around New Zealandâ&#x20AC;&#x2122;s

100th largest company.â&#x20AC;? What about the future of logo design? â&#x20AC;&#x153;The way that we talk to our public and our clients changes, and increasingly younger people arenâ&#x20AC;&#x2122;t relying on traditional media in the way that we did.â&#x20AC;? Gardyne is adamant design remains one of the best investments you can make in a brand. â&#x20AC;&#x153;Common sense says if your company can tell a clear and consistent story, your staff will believe it and your customers will believe it.â&#x20AC;? M

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Nominations now open 2011 World Class New Zealand Awards Weâ&#x20AC;&#x2122;re looking for â&#x20AC;&#x2DC;world classâ&#x20AC;&#x2122; individuals who: p p p p p

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*G ZPV LOPX TPNFPOF XIP JT FYDFMMJOH PO UIF XPSME TUBHF PS MFBEJOH CZ FYBNQMF JO IFMQJOH UP TVQQPSU ,JXJ FOUFSQSJTF JOUFSOBUJPOBMMZ QMFBTF QVU UIFJS OBNF GPSXBSE

Nominations Close 24 September 2010 'PS GVMM EFUBJMT BOE B OPNJOBUJPO GPSN HP UP www.keanewzealand.com/global/make-nomination 1MFBTF FNBJM FORVJSJFT UP worldclass@keanewzealand.com The World Class New Zealand Awards are presented by Kea, with support from New Zealand Trade and Enterprise.

SEPTEMBER 2010

| www.management.co.nz | 47

CRISIS MANAGEMENT

The smartest

turnaround A dysfunctional business unit has to be dealt with straight away. Consultant Gordon Davidson explains how to deal with a troubled business unit.

here comes a time when everyone in an organisation accepts that one of its departments or business units has become dysfunctional and is in deep trouble. The problems have been common knowledge for some time but have been getting steadily worse. Other departments have looked on, speculating what the final outcome of all this will be but feel powerless to do anything about the situation. Rival factions will have developed in the business unit, each suspicious and mistrusting of the other, but united in blaming management for the problems.

Gordon Davidson... Turnaround managers need to have thick skins.

48 | www.management.co.nz | SEPTEMBER 2010

A number of interventions to “fix” the problems will have been tried. External mediators will have been used and a restructuring may have been tried. Several key staff will possibly have left. Things have now become so bad that the board or the CEO has no choice: something has to be done – but what? This is not an unusual situation. For a variety of reasons, a particular business unit in an organisation may get into serious difficulty. Its problems may not be serious enough to threaten the whole organisation yet, but the longer a deteriorating situation goes on, the more debilitating it becomes for the whole organisation. If the organisation is prominent in the community or is a publicly funded one, it is likely that the local media will sooner or later sniff out the story and the organisation’s reputation will begin to suffer damage. Its revenue sources will start to dry up and customer spending will begin to taper off. As the problems continue, inevitably the rest of the organisation too will begin to take sides and will slowly get drawn into the department’s issues. Internal problems such as these don’t get better over time – they just get worse. But if there have been several attempts to resolve the problems without success; what more can be done?

The first step is clear. The business unit’s leader has to go, whether he or she is responsible for the mess or not. No progress can be made until they are replaced. The next decision is whether to parachute in someone temporarily from within the organisation (another manager) or to start afresh with a turnaround manager from outside the organisation. In most cases the best decision is to go with the external turnaround specialist. An internal appointee is inevitably compromised from the start – the business unit’s staff will discount someone they already know and the internal appointee will find it difficult to discard their own judgements about the department’s problems. What is needed is a completely fresh pair of eyes from someone outside the organisation. The turnaround manager will need to have a thick skin. It will be a tough job. They know this is not a long-term career role. They know once they have done the job, it is time to go, with few fond farewells. To succeed, the turnaround manager needs three things going for them: 1. Turnaround leadership experience. 2. Full backing and support from the CEO and board. 3. Time to do the job.

The first thing to do is complete a thorough scoping assessment of the business unit’s position. Can it be saved? Turning around the business unit is just one option open to the CEO and board. There are a others – merging it with another business unit, reducing its size, or perhaps selling it off. If you decide on a full turnaround, then the challenge ahead is that of a successful change management exercise. The main task of the turnaround manager is to get the business unit back on its feet with sound management underpinning it. The skills needed to do this include communication skills, knowledge of change-management principles and employment law, and an ability to see clearly the end-point of recovery. Turning around a dysfunctional and conflict-ridden business unit can be an up and down business. The turnaround manager needs personal resilience and the courage to make some tough deci-

sions. Some staff will want to hold on to grievances and fight endless battles – they will have to go. There will also be some business unit staff who will seek support for their cause elsewhere. This is not a time for the CEO or board to wobble. A turnaround manager can’t do the job on their own; they need solid support – especially when it counts. A dysfunctional business unit is not going to turn around overnight. As good management systems are put in place, the momentum will build up speed. Then you should look at appointing a long-term manager for the department. Not all turnarounds succeed and other backup options for the business unit should be kept alive. But once the business unit turns the corner, the organisation can learn some useful lessons from the business unit’s troubles. How did things at the business unit get so bad? Should the problems have been addressed earlier?

A turnaround manager needs... • To know their stuff on change management. • Personal resilience. • Clarity on what the recovery endgame will look like. • The full backing of the CEO and board – no wobbles. • Enough time to do the job – it always takes longer than you think.

Without addressing these questions similar problems could happen again. M Gordon Davidson is a Christchurch-based independent management consultant who specialises in restructuring and turnaround management.

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SEPTEMBER 2010

| www.management.co.nz | 49

EXEC TECH

Inspector

Gadget Pauline Herbst turns detective to find the latest in manager-friendly technology.

s winter draws to a close, the gadgets come out of hibernation – or so it seems. August and September are always big months for the launch of new products and this year is no different. Amongst the frenzy whipped up by Apple’s iPhone4 and iPad availability, a number of other companies got a look in. But is our reliance on new technology making us lax when it comes to security? IN THE CLOUD To celebrate “25 years of IT excellence”, Toshiba recently released a range of 19 new consumer notebooks, including the Satellite A660 3D gaming machine.

Toshiba AC100.

50 | www.management.co.nz | SEPTEMBER 2010

Toshiba W100.

Of more interest to business users is the Libretto W100, a concept notebook aimed to show “what’s possible in the next generation of ultra-mobile PCs”. Mark Whittard, managing director of Toshiba (Australia), says: “Since the launch of the world’s first mass-market notebook computer, the Toshiba T1100 in April 1985, Toshiba has remained a pioneer in the development of mobile computing [and is] on target to reach 100 million shipments of notebooks worldwide later this year – a significant achievement for the past 25 years.” The limited edition 25th Anniversary Libretto W100 goes beyond slates and netbooks to deliver something more: a full Windows 7 experience that

covers two multi-touch touch screens. It lets users easily share, stream and synchronise files and multimedia through their home network or cloud. It also comes with a USB port and built-in memory reader to transfer data to and from external hard drives and other popular gear. Busy execs continually having to synch their data will appreciate Toshiba’s AC100 Cloud Companion – an Android-based mobile internet device for all your cloud computing needs. The AC100 combines the functionality of a smartphone and a netbook. It is thin and light, making it the ultimate web companion. According to Whittard, market success for Toshiba has been ongoing. “Toshiba (Australia) has for the past 25 years been ranked as the first or second most recognisable brand in the notebook market.” CALL FACE TO FACE, TO ANYONE, ANYWHERE “HD video calling is a critical step toward our vision of a world in which video communication is as mainstream and seamless as a telephone call – for anyone, anywhere.” That’s Bryan Simpson’s view. He’s the general manager of Logitech New Zealand and as luck would have it, the company has just released its flagship Logitech HD Pro Webcam C910. This webcam offers HD 720p video

Logitech HD Pro Webcam C910.

calling, full HD 1080p video recording, as well as Logitech Fluid Crystal technology to ensure clear images, smooth motion and rich, true-to-life colours. Included is Vid HD software that can transmit two-way live video in HD. Stereo audio is also catered for with two microphones on either side of the webcam lens. Whether you’re skyping into remote office workers or catching up with family while away on business, you’ll find most of the major video clients are supported, including Skype, Yahoo! Messenger, Windows Live Messenger, and Gmail Voice and Video Chat. The C910 has one-click video upload to Facebook and YouTube as well as the ability to take a 10-megapixel photo. Quick and dirty editing can be done with the included Magix photo and video editing software. Despite the aggressive profile seen here, the C910 is only 25 millimetres deep and as such, is a relatively minimalist addition to your computer. It’s available now and retails at around $169.90.

The free online resource www.malwarecity.com is aimed at those interested in their online safety.

KEEPING DATA SAFE More individuals and businesses are starting to appear on Facebook, Twitter and LinkedIn, lured by ease of accessibility and the ability to multitask all-important relationship building. However it appears paranoia has given way to a lack of security. Recent research from BitDefender showed more than 250,000 email addresses, user names and passwords were found circulating freely online. Of those social media accounts, 75 percent shared identical login credentials as the corresponding email account. “Using simple freeware scripts, it’s possible for almost anyone to extract and collect personal login details online,” says Sabina Datcu, threat analyst, BitDefender. A cross-check conducted over a random sample revealed that 87 percent of the email addresses and passwords were still current and could be accessed with the leaked credentials. The security implications are numerous: ranging from data theft, email and social networking account hijacking for spamming and malware dissemination purposes, to financial losses through fake credit card accounts opened by using stolen identities. Datcu advises: “Change your passwords regularly and do not keep any record of them online. If you find it difficult to keep track of all your login details, invest in a secured USB key with hardware and software encryption to safely store your details in one place. Free, secured services such as KeePass are also another suitable alternative.” DISASTER RECOVERY There is no point in upping your security without having a plan for disaster recovery. Symantec has reported an alarming trend for New Zealand businesses to neglect this, with 49 percent of New Zealand SME respondents lacking a documented IT process of how to recover from an IT outage. This is despite the fact that more than 60 percent of respondents experienced an IT outage in the past 12

Safe techs Symantec recommends the following tips to help businesses protect their information: 1. Develop an information protection plan that defines the procedures, guidelines and practices for securing and managing your information. This plan should include a detailed backup and recovery plan. 2. Implement a comprehensive and integrated security solution that is more than just antivirus technology. 3. Educate staff to avoid clicking on suspicious links in email, IM messages or on social networking sites. Part of the training should also focus on how to protect mobile devices and company information when on social networking sites. 4. Use strong passwords that have at least eight characters and combine alphanumeric and special characters. 5. Combine security and backup and recovery software technologies to deliver complete information protection and keep desktops, servers and applications running smoothly in case of disruption.

months and 32 percent expect they will experience a computer systems failure in the next 12 months. According to the survey, the greatest disruption to business information security is from accidental human error or natural disasters, which include incidents such as unintentionally deleting information; losing information stored on laptops, USB keys and smart-phones; emailing confidential information to an incorrect recipient; computer systems and power failures as well as flooding. M

3D TVs, iPads – what’s next? October’s Exec Tech will be coming to you live from IFA in Berlin, currently the world’s biggest consumer electronics and appliances show.

SEPTEMBER 2010

| www.management.co.nz | 51

EXECUTIVE HEALTH

Beat the business

travel blues Passport, phone, credit card… It’s time to add healthy habits to your list of business travel essentials, says Craig Morrison.

ew Zealand has a well-deserved reputation as a land of intrepid travellers. In 2008, Kiwis made 46 trips abroad per 100 head of population, compared to an international average of just 14 trips. While some cite romantic factors such as curiosity and wanderlust as the cause of our collective travel bug, being tucked away on an island quite far from anywhere is undoubtedly a major factor. The latest Ministry of Tourism statistics show that 281,000 New Zealanders travelled abroad for business in 2008. While the median length of absence for business travellers was six days, 30,000

business travellers reported an absence of more than 30 days. The recession in 2008/09 meant a dip in New Zealanders’ outbound travel. But with the economy improving, it seems businesses are moving to renew international acquaintances. In May, business travel by New Zealanders was up 19 percent on the same month last year. Travel – whether a regular occurrence or a one-off – can easily place a strain on your health and wellbeing if not managed properly. In this new age of austerity, a business trip must represent excellent value for money. Jam-packed schedules and

Healthy travel tips • Take a doctor’s certificate for prescriptions to show Customs should they query its provenance. Ensure you take an ample supply for the time you are away. • For those travelling to destinations where communicable diseases are likely to be an issue, visit www.safetravel.govt.nz for the latest travel advisories. Check at least two months ahead for any health precautions you may need to take, as some vaccinations require a period of time to take effect. • Check your travel insurance policy wording to ensure it has the cover you need – many do not cover pre-existing conditions. • In the event you need to seek medical help, retain all receipts and copies of medical reports. If the medical treatment is going to be serious or lengthy, call your travel insurance emergency assistance number immediately to report your problem and obtain advice.

52 | www.management.co.nz | SEPTEMBER 2010

early rises – and late bedtimes – are often required to make the most of the time away. The resulting tiredness, combined with an unfamiliar environment and long periods spent in enclosed public spaces, can leave business travellers especially susceptible to illness and infection. The simplest way to prevent illness is to pay close attention to hand hygiene. Regular hand-washing and the use of antibacterial wash or wipes are effective measures to help stop the spread of infection. If you are particularly concerned about catching a bug in-flight, paper surgical masks can be purchased in chemists or at the airport. For those travelling long distances, applying everyday health rules to your in-flight routine can pay dividends upon arrival. The usual advice applies: get as much rest as possible, avoid alcohol and heavy meals, and drink plenty of water. It’s not exciting, but it really does work! Several years ago there was a large amount of publicity surrounding individual cases of deep vein thrombosis (the formation of a blood clot in a deep vein, usually in the leg). For travellers in good health, the risk is small. Current preventive advice for all air passengers is to get up at least once an hour to take a short walk, stretch the legs and keep hydrated.

On the road again?

Tight schedules and tiredness on a business trip put you at risk.

If you think you might be at heightened risk of clots, seek advice from your doctor before travelling. In less developed countries, water quality is one of the main causes of travellers’ illness. In these circumstances, the best way to prevent the dreaded ‘travellers’ diarrhoea’ is to drink bottled water only (including when you’re brushing your teeth). The Lonely Planet travel health guide recommends sticking to major brands and ensuring the bottle seal is unbroken. The bottle rule should apply to most drinks – even in good hotels, juices may have been watered down straight from the tap. Ice is another source of potential contamination to be avoided. For your peace of mind, travel insurance – even for a short hop – should be

considered an absolute must. Online insurance sales make travel insurance easy to organise. Frequent travellers might also wish to consider multi-trip policies, which cover travel within a certain time period. Research by TNS Conversa in April 2009 revealed that 45 percent of New Zealand travellers have experienced some form of misfortune – such as lost luggage, theft or falling ill – while overseas. Six percent said they or someone they were travelling with had become seriously ill. Medical treatment costs can be stratospheric in some countries – and when your health is at risk, price should be no barrier to seeking immediate, quality care. M Craig Morrison is chief executive officer of Southern Cross Travel Insurance.

Sticking to hard-won healthy habits can prove problematic while travelling. Unfamiliar environs and tightly packed schedules can mean regular exercise is placed in the ‘too hard’ box, while diversions such as airport lounge buffets, petrol station pit-stops and canapés with clients offer ample temptation to take a holiday from healthy eating. Here are a few strategies to help keep up a healthy lifestyle on the road: • Try as much as possible to stick to your regular food choices and exercise routine – or a down-sized version of it. Even snatching 20 minutes for a brisk walk can make a difference. • Websites such as www.mapmyrun. com provide detailed maps for jogging/ walking routes in cities all over the world. Your accommodation should also be able to help out with local recommendations. • So your hotel doesn’t have a gym? If you’ve got a floor, you’ve got a workout space – ask your gym instructor to show you exercises that can be performed without equipment. Or download an exercise programme or podcast to your iPhone or laptop. • Be mindful that restaurant meals often contain more fat and salt than we would add to a similar dish at home. Choose barbecued or grilled meats where possible.

The best way to keep staff happy since wages. The activa card is a simple, fun way to attract, retain, and inspire your staff. You set the annual amount, then your staff use their activa card to enhance their health and wellbeing. It’s what you’d call a healthy incentive. To ﬁnd out more about the beneﬁts of activa for your staff talk to Southern Cross on 0800 323 555 now or visit www.healthybusiness.co.nz. activa is brought to you by Activa Health Limited. The activa Account and related banking services are provided by ASB Bank Limited. Activa Health Limited receives services fees from ASB Bank Limited and Southern Cross Medical Care Society. Neither Activa Health Limited nor the Southern Cross Medical Care Society is a registered bank. A copy of ASB’s disclosure statement is available free of charge at www.asb.co.nz.

SEPTEMBER 2010

| www.management.co.nz | 53

M BOOKCASE

Green? Just do it THE THREE SECRETS OF GREEN BUSINESS – Unlocking Competitive Advantage in a Low Carbon Economy By Gareth Kane • Earthscan • RRP: £17

Amongst the swag of new books pushing their respective green barrows towards a more sustainable business future, this effort avoids worthy advocacy in favour of just getting down to doin’ it. Written by a British consultant described as a rising star/future leader in the world of sustainability, it’s based on plenty of practical application. Gareth Kane has been helping hundreds of organisations clean up their respective acts for more than a decade. And his website (www.terrainfirma.co.uk) hints at the humorous touch he uses to lighten up the process. Kane’s three secrets are not rocket science. First: understand the business case and be proactive in grasping the opportunities but don’t forget you’re running a business. Those making the fatal assumption that green cred can overcome mediocre performance, poor design or soppy branding are, he says, destined for the ‘green graveyard’. Second is what to do – preferably follow the “eco-system model” which means adopting a non-toxic, closed-loop cycle of production (solar, cyclic and safe); or if that’s not realistic, improve your ecoefficiency (save energy/water/resource use etc) by a factor of 10. Three is how to do it – through lots of small steps (the Kaizen system of continuous improvement or doing things right) combined with huge leaps (Kaikaku or doing the right thing). The latter includes cleaner production, renewable energy, eco-building, eco54 | www.management.co.nz | SEPTEMBER 2010

design and product service systems. Chapters 3, 4 and 5 then proceed with the nitty-gritty bits. It’s all good practical, accessible stuff and Kane’s tips on creating a culture for change could usefully be applied to any organisation attempting a shift in values or direction. There are also some hints on how best to communicate green messages externally – like avoiding eco-clichés. His comment about never needing to see another picture of hands cupping a sapling resonates for me. – Vicki Jayne

DOING WELL & DOING GOOD By S.R.H. Jones • Otago University Press • RRP: $49.95

The lessons of history are always there for the learning. So it is with the story of the rise and fall of Dunedin-based woollen goods retailer and manufacturer Ross & Glendining. It’s an intriguing tale of two very different but determined Scottish immigrants who hightailed it to New Zealand in the early 1860s in time to catch the pickings of the deep south’s gold rush days. John Ross and Robert Glendining were drapers by training who, despite their personality differences, worked well enough together to build one of the country’s largest manufacturing enterprises on the coattails of their original drapery importing business. Business historian SRH Jones has painstakingly pieced together the

managerial and personal stories of two men and their families which serves, as much as anything, to prove that people and their personalities are what make an enterprise tick. Sober-minded and conservative Ross and his rather more rambunctious partner Glendining envisioned and established a thriving enterprise. The other lessons contained in this 100-year account of commercial enterprise and endeavour, companies of today need to learn. You see, some things never really change. Ross and Glendining died because its second generation of managers and directors failed to adapt and change to a marketplace in which it first thrived but, finally slid into irrelevance. Before the founders disappeared however, and despite their manifestly contrasting philosophies of life, they contributed more than just a business employing at its zenith over 2000 people. They were wealthy and hard working and contributed generously to the Dunedin community and beyond. The religious Ross, for example, funded the construction of the city’s Knox College. Glendining, on the other hand, gifted the Dunedin Botanic Gardens’ winter garden. This is a tidy tale of the fortunes of a home-grown company that paralleled the changing nature of New Zealand’s 19th and 20th century economies and the emergence of the country’s once vibrant manufacturing sector. Doing Well & Doing Good is, above all, an object lesson on management’s need to comprehend and adapt to change or, fall victim to its relentless progress. – Reg Birchfield

FOCUS M

Canon’s North Shore contact centre was officially opened by Prime Minister John Key on July 23: 1 Mike Johnston, John Key and Greg Magness. 2 John Key, Kenji Kobayashi and Julie Ward. New Zealand the Lucky Country was the theme of Leadership NZ’s annual black tie dinner, at the Auckland War Memorial Museum on July 2: 3 Carol Hirschfeld. 4 Sir Stephen Tindall. 5 Peter Garnett & Helen Gillespie. 6 Jan Dawson & Dr Jan White. 7 Lady Beverley Reeves & Sir Paul Reeves. 8 Paul Argar & Malcolm Paul. 9 Sarah Trotman, Jo Brosnahan, Vicky Pond Dunlop & Megan Barclay. Westpac Manukau Business Excellence Awards at Villa Maria Estate Winery on July 28: 10 Len Brown with, from left, Karen Houston and Claire Huxley (International Travel College of New Zealand). 11 Gaelle Deighton (CEO, Enterprising Manukau). 12 Brookfield Lawyers Employer of Choice finalist Anne Singe (HMSC – AIAL) and Brett Abraham (Brookfields Lawyers). 13 Colin Mitten (Convenor of Judges, Enterprising Manukau).

SEPTEMBER 2010

| www.management.co.nz | 55

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

September 7 PROJECT PROCUREMENT MANAGEMENT. Wellington. Project Plus. www.projectplusgroup.com 8-9 LEADERSHIP FOR WOMEN. Auckland. Bright*Star Conferences & Training. www.brightstar.co.nz 8-9 HOW TO INTEGRATE INFORMATION SYSTEMS AND BUSINESS STRATEGIES. Auckland. University of Auckland Short Courses. www.shortcourses.ac.nz 12-17 COMPANY DIRECTORS’ COURSE. Queenstown. Institute of Directors. www.iod.org.nz 13-14 COMPLEXITY MANAGEMENT. Auckland. University of Auckland Short Courses. www.shortcourses.ac.nz 13-14 BUSINESS SKILLS FOR NEW MANAGERS. Auckland. University of Auckland Short Courses. www.shortcourses.ac.nz 14-15 BUSINESS PROCESS MANAGEMENT. NZIM Northern. www.nzimnorthern.co.nz 15 THE 7 MANAGEMENT & PLANNING TOOLS. Wellington. Project Plus. www.projectplusgroup.

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October 2-9 MANAGEMENT DEVELOPMENT PROGRAMME. NZIM Northern. www.nzimnorthern.co.nz 4-5 CREATING AND MANAGING BUSINESS GROWTH. Auckland. University of Auckland Short Courses. www.shortcourses.ac.nz 6 GOVERNANCE IN PRACTICE. Invercargill. NZIM Southern. www.managementsouth.co.nz

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56 | www.management.co.nz | SEPTEMBER 2010

EXECS ON THE MOVE M

He has worked in leadership positions for over 15 years including roles at British Airways, American Express and The Open Polytechnic of New Zealand.

New chief for Trade and Enterprise High-profile international businessman Peter Chrisp has been appointed as chief executive of New Zealand Trade and Enterprise (NZTE). The 48-year-old has been based in Sydney where he was regional president Australia for major multinational Norske Skog. Minister of Economic Development Gerry Brownlee said Chrisp was appointed for his combination of export and international business experience, strategic leadership capability, commercial acumen and political insight. “He is an experienced exporter and

Robyn Deacon Simpson Grierson welcomes Deacon as human resources director. A solicitor and experienced HR practitioner, she has previously held roles at the Meat Industry Association of New Zealand, Transpower NZ, Deloitte and a large national law firm.

Murray Barclay Goodman (NZ) has appointed Barclay to a senior executive role in its New Zealand operations. He has worked across Goodman Group’s major European logistics markets for the past three years and prior to that was general manager developments,

Joseph Thomas

his work globally has exposed him to major projects across the public and private sector.” overseeing the New Zealand development business.

Peter Mensah Fidelity Life has promoted Mensah, most recently risk product manager at its Auckland office, to corporate marketing manager. His focus will be developing and implementing the company’s marketing strategy in the life insurance and investment market.

Geoff Duncan CPA Australia in New Zealand has a new general manager. Duncan will be responsible for the development and expansion of CPA’s membership base.

NZIM Southern has appointed a new chief executive officer. Thomas is a chartered accountant, an Associate Fellow of the New Zealand Institute of Management Inc, and a certified management consultant and member of council with the Institute of Management Consultants of New Zealand.

Paul Robinson Recruitment and HR services company Randstad has appointed Robinson as New Zealand general manager of accounting, banking and financial services. He has over 12 years’ experience working with Randstad across a range of sectors in New Zealand and the UK.

Damian Swafﬁeld, Datta Supomo Specialist SAP provider Oxygen Business Solutions has made two senior appointments to its New Zealand management team: Swaffield has been appointed general manager, consulting, and Supomo has been promoted to business development manager. M

More Projects, Greater Complexity, Bigger Budgets, Higher Risk? We specialise in portfolio, programme and project management across most sectors. Get in touch to discuss your mission critical initiatives and how we can assist towards your success.

www.projectplusgroup.co.nz SEPTEMBER 2010

| www.management.co.nz | 57

M EXEC 10 TIPS

Workforce safety starts at home You can reduce lost work hours substantially by promoting home safety, says Keith McLea of the Accident Compensation Corporation.

n some workplaces, non-work injuries make up more than 90 percent of lost hours caused by injury, and the majority of these occur at home. These absences have a significant impact on productivity and profitability in the workplace. Try these ideas to keep your staff injury-free at home and save your business time and money.

Promote good health and safety practices in your workplaces

If health and safety is a priority in your workplace, this will influence your staff ’s awareness of the importance of home safety and lead to good habits at home.

Get a Safety WorkOut

Every year thousands of working days are lost due to staff being injured at home. Safety WorkOut is a programme for organisations to use to address non-work injuries and lost work hours which can be tailored to meet your specific needs. For more information call your ACC account manager or local injury prevention consultant on 0800 844 657.

Analyse your workplace data on lost work days

Audit the causes of lost work days at your organisation to spot common trends and enable you to tailor your programme. By knowing the extent of the problem, you can better manage 58 | www.management.co.nz | SEPTEMBER 2010

the impact of home injuries. It will also give you a reason to talk with your staff about helping reduce the number of home accidents and lowering the impact on workplace productivity.

Use team meetings to reinforce safety messages

Here are some talking points you may want to include: around one in seven Kiwis will be injured in the home this year; more injuries happen at home than anywhere else – including the road or sports field; 40 percent of home injuries are caused by slips, trips and falls.

Use internal communications

Run a competition

Display posters with safety tips

Include simple home safety statistics or tips in your staff newsletters, on payslips or on your intranet.

Encourage staff to send in photos or stories of them doing something in their home to make it safer or to send in ideas of how to make the home safer.

Put up posters in busy areas promoting simple home safety tips to help keep your staff injury free. Refresh posters

every couple of weeks to keep the interest of your staff. You can download posters at www.homesafety.co.nz.

Organise a home safety presentation

Play an online game

Give a presentation on the shocking number of home injuries and simple ways your staff can prevent accidents from happening at home. You can download a selection of different ‘Did you know?’ presentations to show your staff from www.homesafety.co.nz.

Circulate the following link to ‘Fame or Shame’, an interactive videobased tool designed to get people talking about home safety: www. fameorshame.co.nz.

Get involved in Safety NZ Week

To help prevent injuries in the home, ACC is running Safety NZ Week, its annual campaign, from Monday August 30 until Sunday September 5. If you would like to be updated and involved with this year’s campaign, email safetynzweek@acc.co.nz. M Keith McLea is the ACC’s general manager, injury prevention.

VOL 8 NO 4

SEPTEMBER 2010

Iwi wealth explosion Iwi trusts and community trusts manage and deliver substantial resources for the benefit of their communities. But a recent research report reveals they take very different governance approaches to managing their investment assets. Reg Birchfield analyses the findings. SEPTEMBER 2010 | THE DIRECTOR | PHOTO: Tuku Morgan, chairman of Waikato-Tainui Te Arataura, receiving a dividend cheque from Tainui Group Holdings chairman John Spencer.

wi trusts are becoming big business. They are growing their investment assets at a 50 percent faster rate than community trusts according to a study by Nicolas Maier, for his University of Auckland MBA. And it’s all down to asset allocation – not market timing, “better share picking” or luck, he concludes. The study of a total of 20 trusts – seven iwi and 13 community – highlights significant differences in the types and ratios of assets held by iwi trusts compared to community trusts. Asset allocation – the percentage of a trust’s portfolio invested in each asset type – encompass a broad range of investment categories such as cash, bonds, real estate, public shares, private companies and hedge funds. Numerous studies have proved that, over time, asset allocation is the single most

important determinant of long-term returns. According to Maier’s research, the iwi trusts are investing far higher percentages of their assets in equities and other growth investments. By comparison, community trusts hold proportionately more in cash and bonds to earn income to distribute today. “The reason for this difference is that iwis intrinsically tend to adopt very long-term intergenerational outlooks to support the future of their families and descendants,” Maier says. The benefits of equity-like investing are, says Maier, illustrated by some very long-term investment data – 196 years of it in fact – according to Yale University’s chief investment officer David Swensen. He showed that if a perpetual investment fund, not unlike New Zealand’s community and iwi trusts, held US bonds for 196 years

50 YEAR GROWTH EXPECTATIONS 22 20

BILLIONS OF DOLLARS

18 16 14 12 10 8 6 4 2 0 0 2010

5 2015

10 2020

15 2025

20 2030

25 30 2035 2040 YEAR

Community Trusts

35 2045

40 2050

45 2055

Iwi Trusts

Source: Nick Maier. Based on a sample of 13 community trusts and seven iwi trusts.

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THE DIRECTOR | SEPTEMBER 2010

50 2060

it would have turned $1 invested into $9950 over those years. But holding a mix of the US large-capitalisation stocks (similar to the Dow Jones Index) would have turned the dollar into $9.8 million. In the short term there are, unquestionably, greater risks in holding equity-like investments because they can be volatile, hard to value and difficult to sell in a hurry. Often, such investments require considerable due diligence, and ongoing time, energy and management. As a result, Maier’s study noted that appropriate skills, experience and governance frameworks are essential for trusts investing in equity-like assets. According to Maier, the community trusts he surveyed are investing nearly 50 percent in bonds and cash – regarded as lower growth, but less risky investments. Their equity investments are predominantly via sharemarkets. On average there are some small holdings, 15 to 18 percent, in private equity but these are usually specific assets such as local power generation companies or airports that have been gifted to the trust. “There are very few direct investments by the community trusts where they actually buy and manage a portfolio of private companies as part of an equity strategy,” he says. Consequently, community trusts are likely to get only the average market return over time. Iwi trusts are looking to actively manage their investments and work toward higher (eventual) returns. The iwis Maier surveyed have around 60 percent of their net assets in private companies and around 35 percent in real assets such as farms, forests and livestock. “The iwi trusts are backing their own management ability or investing in companies which they feel have good management which they can leverage,” says Maier. “This is a significantly different approach from the community trusts. Iwi are saying ‘let’s get involved and try to improve the outcome’. Community trusts are saying ‘I’ll take what I can get’.”

Based on their different investment strategies, Maier estimates that the seven iwi trusts will accelerate their value growth, surpassing the 13 community trusts before 2035 and creating an increasing size gap thereafter. In 50 years, by 2060, he forecasts the iwi trusts will have grown from $1.4 billion to $21 billion in assets (15 times larger) compared to the community trusts growth from $2.9 billion to $8 billion (2.7 times larger). If the community trusts grew at the same pace as their iwi counterparts, they would reach $43 billion instead of $8 billion. The implications of this differential growth scenario are enormous given that trusts generally distribute a proportion of their annual income or value to their beneficiaries. As a result of the different core asset allocations, Maier’s study forecasts that greater fund values will also lead to higher distributions to beneficiaries over the next 50 years. In 2009, total grants from the 20 trusts Maier surveyed were approximately $175 million. The community trusts distributed and paid out almost twice the amount of the iwi trusts – about $115 million compared to $60 million. However, as with total asset values, the relative distribution levels will completely reverse in 50 years, Maier reckons. In the year 2060, the iwi trusts are expected to make grants of approximately $865 million compared to $320 million by the community trusts, according to Maier. The cumulative

distribution results are equally impressive. During the next 50 years, the iwi trusts are forecast to distribute $15.4 billion compared to the $10.4 billion by community trusts. GOVERNANCE ISSUES Nick Maier’s father Sandy Maier, a highprofile professional director who serves on the boards of a number of perpetual trusts, believes that “one of the issues for trusts pursuing more equity-like asset allocations is making sure they have their governance set up correctly to ensure sound, long-term strategies are followed”. According to Maier senior, iwi trusts are actively building their governance capability. They are, he says, committed to providing formal training for their directors, adopting international best practice models for their existing organisations and, “changing their structures accordingly”. “They are also using more formal written

Nick Maier.

from boards that have elected or appointed representatives to boards with a better or richer mix of external, professional and skills-based members.” Community trusts, according to Nick

Iwi trusts are actively building their governance capability. board charters and strategic plans, learning from and correcting their mistakes and, sourcing independent directors through independent search committees and search firms,” says Sandy Maier. “Some of this means simply moving away

Maier, tend to hire financial advisers and use a benchmarking process to guide their investment selection. Iwi trusts, on the other hand, have often been ‘gifted’, or settled historic claims for, a large portion of their assets. In several cases they have,

Contact Carrie Hobson or Stephen Leavy Auckland Office T +64 (9) 379 2224 PO Box 362, Auckland 1140 Level 3, Shortland Chambers, 70 Shortland Street, Auckland 1140

Wellington Office

www.hobsonleavy.com

T +64 (4) 460 5244 Level 16, Vodafone on the Quay, 157 Lambton Quay, Wellington

SEPTEMBER 2010 | THE DIRECTOR |

he says, hired in sector-specific experts to help them manage their assets – such as company directors, property managers and forestry managers. Maier’s conclusion, therefore, is that the iwi trusts are pursuing the opportunity

to manage the performance of their assets themselves using the best in-house management that they can obtain. “The interviews and discussions I had during the study confirmed this was a cornerstone of several iwi trusts’ investment

A TAIL OF SUCCESS The trust-run company Whale Watch is a multiple award-winning nature tourism company owned and operated by the indigenous Kati Kuri people of Kaikoura, a Maori sub-tribe of the South Island’s larger Ngai Tahu tribe. Whale Watch was formed in 1987, when Kaikoura’s declining economy had hit the local Maori population hard. Leaders like Bill Solomon believed the local sperm whales held the answer to the unemployment problems of the Maori community, so the Kati Kuri founders of Whale Watch mortgaged their houses to secure a loan to start the business. The venture has grown from a single small inflatable vessel to today’s fleet of four modern catamarans specially designed for whale watching. The expansion of the Whale Watch fleet sparked the building of an entire marina in South Bay, from where the whale watching tours now depart. The company has also seen investment in new accommodation, restaurants, cafes and galleries, which have transformed the tiny seaside settlement. BNZ Bank’s series of TV advertisements about its investment in the venture have turned Whale Watch into a household name.

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THE DIRECTOR | SEPTEMBER 2010

management approaches,” he says. Maier’s study found that perpetual trusts need rules for decision-making and to be disciplined about sticking to those rules in times of uncertainty or turmoil. “Some of the best organised trusts have worked very hard to get the best minds around their table and borrow ideas from best practice and international examples,” says Maier. “These trusts are building on decades of other people’s experience and recruiting external experts to assist in these endeavours.” Maier also believes iwi trusts have approached their advisers and investments conservatively. “Having spent many decades fighting to get ownership of their assets back, there is an understandable desire not to lose them again. The process of building up management expertise has been gradual and somewhat emergent. The trend now, particularly in the larger iwi, is towards formalising their governance systems and structures and building up their internal management abilities. “As one iwi member I spoke to said: ‘We try to get the best minds around the table and then test models and outcomes. We get independent directors onto our board and [get] the strongest and most competent group of managers and board members that we can. We draw on these people to put policies, strategic frameworks, and asset allocations in place’,” reports Maier. His report concludes that: “We will see iwis become significant forces in the New Zealand economy and generate very strong benefits for their communities.” Maier says both groups of trusts have a perpetual mandate. “They intend to last forever and preserve equity between generations. They are supposed to give the same benefit to their community today as tomorrow, and 20 years from now. And yet they arrive at very different investment approaches. Their approach is miles apart. Will they both succeed? Or will one group significantly outperform? Time will tell.”

The Feltex decision A CASE OF THREADBARE GOVERNANCE Directors can take no comfort from the recent decision to dismiss all charges against five Feltex directors. The case shows the sad state of governance in too many New Zealand companies, writes expert Doug Matheson. he Feltex decision, as it may become known, is a distraction from what is really wrong with governance in New Zealand and many other parts of the world. It is, in effect, a real example of a board not performing its fundamental governance role and responsibilities. Unfortunately, the wider Feltex governance shortcomings have been sidetracked by the Auckland District Court decision to dismiss all Ministry of Economic Development-inspired charges taken under the Financial Reporting Act 1993 against five Feltex directors. And, of course, there are other similar cases pending against Lombard and Nuplex directors. These cases are primarily about compli-

ance with legal and regulatory obligations. But it is the fundamental responsibility of directors to act in the interests of a company and provide effective stewardship. Compliance is a given in director responsibilities. It is not the fundamental measure of governance performance. In reviewing the messages from this case it is critical to remember that the fundamental purpose of governance is to deliver organisational performance, always ensuring that relevant laws and regulations are complied with. In addition to complying with the laws of the land, directors must ensure the company also complies with accepted accounting standards. But the director’s role

Doug Matheson

and responsibilities are more than that. That’s why they are paid so much. In her 59-page decision, Judge Jan Doougue said: “There is not one skerrick of evidence to suggest any intention by them (the directors) to mislead the regulatory authorities, market, shareholders, creditors, potential investors or any other person.” It’s not a question of misleading – it is, in my opinion, a question of them not performing their full governance role and responsibilities.

SEPTEMBER 2010 | THE DIRECTOR |

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THE DIRECTOR | SEPTEMBER 2010

The Feltex case begs consideration of three obligations in particular: 1. The duty to act in good faith – with honesty, integrity and sincerity of intention – in the best interests of the company; 4. The duty to exercise reasonable care and skill – apply experience and expertise to the role of director, in the best interests of the company; 8. The directors are fiduciaries, and owe fiduciary duties to the company. Above all they are, in all their duties,

‘‘

That the directors knew they had breached their banking covenants was not a question of interpreting the standard, it was a matter of interpreting the contract they had with ANZ and disclosing the fact. They chose not to. Again, this was not a breach of the law – it was bad governance. The shareholders and investors were not informed. The Feltex directors later conceded the details were not reported in the company’s interim accounts, but claimed at the time they signed the documents they believed

‘‘

Above all, directors have a stewardship role and a responsibility to the company’s shareholders. To deliver that, directors must, from time to time, obtain advice from specialists. Lawyers, for example, evaluate against the law and advise directors accordingly. Accountants do the same against accounting standards. Directors review the advice and use it to make governance judgments from their perspectives as board members. Good boards comprise individuals of relevant competencies, backgrounds and perspectives. Directors must work together, considering all inputs and perspectives, and ensure that legal and accounting requirements are satisfied. To prove effective stewardship, directors may have to go beyond ensuring that minimum legal and accounting requirements are met and consider everything possible that is relevant to the management of the shareholders’ interests – property, finances, or other affairs. That is the directors’ responsibility and what they are paid for. The accountants might be correct. The judge might be correct. But governance is more than that. Directors add value and earn money by adding a total perspective, embracing the legal and accounting advice and all the other dimensions. Directors must add value in terms of their stewardship of shareholder interests. This was not apparent in the governance of Feltex. Directors’ obligations are spelt out in The Companies Act. Company directors must act in accordance with these duties.

The directors might have complied with the standards, but they failed in their duties to the company and its shareholders.

required to act “in the best interests of the company”. The five directors were charged with breaches of the Financial Reporting Act 1993. The charges related to failing to publish a breach of Feltex’s banking covenants and not properly classifying its $157 million debt facility with the ANZ Bank in the company’s December 2005 half-year accounts. The directors knew Feltex would need to repay the $157 million to ANZ within the next year. The question of not properly classifying this in the company’s accounts was not a question of interpreting the standard; it was a question of the directors deciding not to disclose the fact. While this was not a breach of the law – it was bad governance.

the statements met all the required accounting standards for a listed company. That’s simply not good enough. The shareholders and investors were not informed. My concern is about directors performing their duties, meeting their obligations to shareholders and stakeholders, and delivering standards of good governance. These go far beyond complying with accounting standards and legal requirements. In the Feltex case, the directors might have complied with the standards, but they failed in their duties to the company and its shareholders. They failed as directors. Doug Matheson is the author of The Complete Guide to Good Governance and Great Governance and a professional director and governance consultant.

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