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THE DIRECTOR: WORLD CLASS & WORRIED P48

management.co.nz

THE LEADERSHIP

THE LEADERSHIP ISSUE

ISSUE THE HILLARY INSTITUTE: GLOBAL LEADERSHIP FROM NZ P26

INCLUDING LEADERS

A PUBLICATION OF LEADERSHIP NZ

JULY 2013 $7.10 INCL GST

JULY 2013

ANZ & NATIONAL: MERGER LEADERSHIP LESSONS P32 Business leaders do battle on safety p40 Fingers in the till p54 Derek Handley: a young leader’s story p24

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Leadership – it’s everywhere

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iven the singular lack of visionary leadership from our elected political masters – at least at central government level – it’s fortunate that it’s busting out all over, everywhere else. Our three columnists on politics, economics and leadership; Colin James, Bob Edlin and Reg Birchfield – three of New Zealand’s finest journalists – all raise serious issues of policy or implementation deficiencies in areas that have huge impact. Many in business will espouse the view that government should just get out of the way; set the broad macro environment and then let business get on with it. Recent history shows just how well that works. And our little country down here at the bottom of the world will never be playing in a level global market. We’ve got some great things going for us but only if we get to scale in a few areas that we can do really well at. Departing Coca-Cola Amatil CEO George Adams has this advice (page 36): create a New Zealand safe-food brand. But it would require greater commitment and rigour and a coordinated industry export strategy – controls that need to be government-mandated and monitored. We have an impressive homegrown but globally-focused leadership organisation that is having an impact on the world stage by identifying standout mid-career leaders. The Hillary Institute for International Leadership was of course inspired by an iconic New Zealander perhaps revered more for his work in remote Nepalese communities

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than for the great endurance feat that first brought him fame. We thought it was about time that we at home got to hear more about the Institute’s fine work. Co-founder Mark Prain tells the story of the Institute in the cover feature of this issue starting on page 26. An initiative that sprang out of the private sector, from a growing awareness at CEO level of shameful New Zealand workplace health and safety statistics, is the Business Leaders’ Health and Safety Forum (page 24). There are many more leadership examples throughout this issue. A couple of other standouts are Judith Hanratty, who developed and promoted the concept of corporate social responsibility during her long career at BP, and is still waving the flag for governance excellence, on page 48. And finally, young entrepreneur Derek Handley, whose highly enjoyable book Heart to Start is reviewed on page 24, has found his greater purpose in putting his considerable energy into the recently launched The B Team (page 8) a collaboration of world-wide heavy hitters including the likes of his friend Richard Branson. Their ambition is to change the way the world economy works – to turn commerce into a worldwide force for good; for people and the planet. Happy reading and be inspired.

www.management.co.nz A MEDIAWEB MAGAZINE PUBLISHER & EDITORIAL DIRECTOR Toni Myers CONTRIBUTORS Reg Birchfield, Bob Edlin, Jacqueline Ireland, Colin James, Ruth Le Pla. Iain McCormick, Patricia Moore, Mark Prain, Amanda Schaake, Phil Veal ADVERTISING MANAGER Trish Day, 027-561 6556, trishd@mediaweb.co.nz BUSINESS DEVELOPMENT MANAGER Rod Myers, 027-484 8046, bdm@management.co.nz DESIGNER Melissa McGregor COPY & WEB EDITOR Gill Prentice PRODUCTION MANAGER Fran Marshall franm@mediaweb.co.nz NEW SUBSCRIPTIONS www.management.co.nz/subscribe SUBSCRIPTION ENQUIRIES subs@mediaweb.co.nz

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

NZ MANAGEMENT magazine is independently owned by Mediaweb Limited and is published 11 times a year. It is the officially recognised magazine of the New Zealand Institute of Management Incorporated. Editorial material does not necessarily reflect the views of NZIM. Copyright © 2013: Mediaweb Limited. All material appearing in NZ MANAGEMENT is copyright and cannot be reproduced without prior permission of the publisher. Editorial contributions are welcomed. Letters to the editor are also welcomed, but pen names are not acceptable. NZ MANAGEMENT is printed by PMP. Subscriptions: One-year NZ subscription (11 issues) $78.15 (GST incl). Overseas (airmail only): Australia NZ$130; rest of the world NZ$250. Enquiries: Mediaweb Limited, PO Box 5544, Wellesley Street, Auckland 1141, New Zealand. Phone: 09-529 3000, Fax 09-529 3001, enquiries@mediaweb.co.nz www.management.co.nz New Zealand Institute of Management enquiries to: NZIM Inc, Box 67, Wellington; Northern, Box 6600, Epsom; Central, Box 11781, Wellington; Southern, Box 13044, Christchurch.

Toni Myers, Publisher Vol 60 No 6 • ISSN 1174-5339 (Print), 1179-3910 (Online)


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contents 26 COVER STORY:

The Hillary Institute Global leadership from NZ Mark Prain explains the vision behind the organisation that nurtures exceptional mid-career leaders.

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PUBLISHER’S LETTER

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INBOX: News and views

15 FOCUS: World Class NZ Awards NZ Workplace Health & Safety Awards 18 NZIM: The race to compete Reg Birchfield 43 EXECS ON THE MOVE 44 EXECUTIVE DEVELOPMENT OPINION 20 POLITICS: Balancing the books not enough Colin James 21 ECONOMICS: Public vs private Bob Edlin 22 LEADERSHIP: Time ministers please! Reg Birchfield 36

23 THOUGHT LEADER: Building a nation of retailers Phil Veal 24 BOOKCASE: Heart to Start; The Future Toni Myers ADVICE 45 MARKET INSIGHT: Marketers at the board table Jacqueline Ireland


JULY 2013 • Vol 60 No 6

features 32 ANZ & National – leadership lessons from the merging of two banking icons Amanda Schaake speaks with ANZ CEO David Hisco.

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36 Face to face: George Adams – “No compromise” on safety.

The outgoing head of Coca-Cola Amatil for NZ and Fiji talks to NZ Management about what motivates him.

40 Top CEOs do battle on safety – attacking NZ’s poor workplace accident record.

The Business Leaders Health & Safety Forum takes action on New Zealand’s shameful workplace safety statistics.

The Director 48

Judith Hanratty:

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NZ-born global governance leader and pioneer of CSR is worried about the future of corporate commitment to social responsibility. She talks to Reg Birchfield. 52

The diversity debate: Patricia Moore talks with law firm Minter Ellison Rudd chair Cathy Quinn.

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Fingers in the till: Ruth Le Pla asks what ethical governance means in different cultures.

56 Does your board think ‘inside out’? Iain McCormick looks at boards’ internal obsessions.

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Including Leaders

A publication of Leadership NZ

Photo: thinkstockphotos.com

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INBOX

Photo: thinkstockphotos.com

Surprising trends in foreign investment Ask your average Kiwi which country is currently dominating foreign investment into New Zealand, and their answer would probably be China. But the reality shows quite a different picture, according to research released last month by KPMG NZ. KPMG has analysed trends in foreign direct investment through a review of the Overseas Investment Office (OIO) approvals over the period July 2010 to December 2012. This research showed that Asia accounted for only 16 percent of gross foreign direct investment over the last two years. Australia remains our main single source of capital at 46 percent. Combined, North America, Europe and Australia accounted for approximately 70 percent of investment. “There has been a lot of press about Chinese investment into the country, particularly around large agribusiness deals,” says Justin Ensor, KPMG partner, corporate finance. “However Asia and China are not as dominant as many people may think.” The KPMG research also showed there were significant levels of investment from 6 | management.co.nz | JULY 2013

unexpected quarters – with Germany, for instance, investing heavily in agribusiness in recent times. Of the $300m that German entities have invested here in the past two and half years, agribusiness accounted for 86 percent (predominantly in dairy). Another interesting finding was that Korea appears to have dropped off the radar as an investor in New Zealand. In the past two and half years, there were comparatively few Korean-based deals recorded by the OIO. “In previous years we’d seen a lot of transactions with Korea, particularly around forestry and wood processing, but they were completely absent from the latest stats,” says Justin Ensor. Overall, however, New Zealand remains an attractive environment for offshore investors. “At KPMG we’re regularly engaged with overseas buyers involved with acquisition and due diligence processes – and our experience tells us that inbound investors are maintaining their levels of interest in New Zealand.” “New Zealand offers lower regulatory hurdles than in other territories, coupled with our stable political and legal environment.

The recent uncertainty in Europe has no doubt made us an even more attractive proposition.” Other highlights from the KPMG research showed that: • The largest 11 transactions during the 2.5 year period accounted for approximately 40 percent of OIO-approved investment. • Among Asian countries, Japan (53 percent) was a bigger investor in New Zealand than China and Hong Kong (33 percent). Significant acquisitions made by Japan in the last two years included beverage companies Independent Liquor and Charlie’s. • While China’s level of foreign investment appears relatively low in recent times, this may be about to change. Recent examples include press announcements over proposed investments in the dairy sector by Yashilli and Yili. • China, Germany and Sweden have been the most active acquirers of dairy land, accounting for over 70 percent of dairy land acquired by overseas investors in the last three years;  • The UK and the USA remain the dominant acquirers of land by overseas investors. China is 14th on the list by area acquired over the last three years. M


INBOX

When talking about subsidised health insurance we often focus on the benefits to the employer of having employees that are fit, healthy and productive in their jobs. However the health of an employee’s loved one is equally important. Having a sick partner or child can cause worry and stress, and taking care of them often requires time off work. We’ve heard from a number of businesses that employees really appreciate the chance to look after their families’ health and wellbeing by adding them to their existing Southern Cross health insurance policy. One of these, Ravensdown, New Zealand’s largest supplier of fertiliser, has been providing subsidised health insurance to its employees and their loved ones and finds it a powerful retention tool. Tracey Paterson, Ravensdown General Manager of Human Resources, says it means their people don’t have to sit at work for months worrying while they wait for treatment

for themselves or their family on the public health system. “Our people are used to being looked after. For full-time employees, cover extends to partners and children – that’s a benefit you don’t give up lightly.” Although GP visits are free for children under six, sometimes common childhood illnesses can require specialist treatment. This may mean a lengthy wait on public waiting lists for appointments, diagnostics and treatments. Last year Southern Cross paid over 100,000 separate claims for those aged under 21. The most commonly claimed for procedure in 2012 was tonsillectomy. A lot of people add their children to their health insurance policies. The best time to get insurance is when you’re young and healthy – this means you’re less likely to have preexisting conditions. Those with Southern Cross health insurance

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Looking after the kids

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receive a child’s rate for their first two children – the third and following children receive free cover. For more information on the benefits available to your family through a Southern Cross work scheme call us on 0800 GET COVER (0800 438 268). M

Southern Cross Medical Care Society. Policy benefits vary – please refer to specific policy documents for terms and conditions and exclusions or call Southern Cross on 0800 GET COVER (438 268).

TRUCK DRIVER TURNED TEDX STAR Dr Mark Strom has two decades of experience advising senior leaders on strategy, innovation and engagement. He started his working life however as a brickie, a builder’s labourer and a truck driver.

He was recently in Auckland and spoke with a diverse group of leaders at an evening of dinner and conversation hosted by ManawaOra and Leadership NZ. Evidenced by his popular TEDx talk, he’s an engaging speaker with a particular skill for asking questions – ‘grounded questions’ he calls them – that provoke meaningful conversation and deep change. Leadership NZ CEO Sina Wendt-Moore and ManawaOra’s principals and founders Lisa Markwick & Morna Haist hosted and chaired the evening. Strom shared something of his journey from manual labour to working on strategy and culture change with leaders of large and complex organisations, including first hand experience of leading the turnaround of a public institution as its CEO. He discovered early in his leadership career that traditional training was not helping the people he worked with to think deeply about strategy and significant culture change. He also

found that business jargon and labels – particular language – was getting in the Dr Mark Strom. way of meaningful conversation and understanding. He developed his model of ‘grounded questions’ that lead away from abstract and theoretical discussion to personal stories that inspire and engage. Strom studied theology, philosophy and history in Australia and the USA culminating in a PhD in the history of ideas. His research constituted a major study of the roots of modern leadership complexities in the traditions that shaped western thought and society. He is well regarded as a speaker, teacher, adviser and historian of ideas. Proceeds from the evening went to support the Leadership New Zealand Sir Paul & Lady Reeves Scholarship Fund. M

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INBOX

Government rates poorly with Aucklanders A recent Horizon Poll showed the Government suffering poor performance ratings on Auckland issues. Nearly 47 out of 100 Aucklanders rated the Government’s performance on the Central Rail Link project as poor in the fortnight before it announced it would support a 2020 start date for the project. 46.9 percent rated performance on the issue as poor to very poor and 19.9 percent said it was good to very good. Others were neutral or not sure, according to a June 13 to 26 Horizon Research poll of 1026 Aucklanders aged 18+. Weighted to represent the Auckland adult population the poll has a maximum margin of error of +/- 3.1 percent. The issue is among a number on which the Government is perceived to be performing poorly. Top of the list is affordable housing (64.7 percent poor, 9.7 percent good), followed by traffic congestion (60.2 percent poor, 10.2 percent good). It is also rated as listening poorly to Aucklanders (55.9 percent poor, 14,5 percent good) and scores poorly on trustworthiness  (49 percent poor, 18.1 percent good) and inspiration (47,2 percent poor, 13.9 percent good) and leadership overall (45 percent poor, 19.7 percent good). Aucklanders also perceived the Government had managed relationships with Auckland Mayor Len Brown poorly (44.1 percent poor, 14.7 percent good), though it fared slightly better on managing relationships with Auckland Council (43.5 percent poor, 26.6 percent good). The Government got its best performance score for building new roads (28.9 percent good) though 35.7 percent rated this poor. Major investments in new motorways, electric passenger trains and electrifying rail do not appear to have been recognised by Aucklanders.

Issue (excludes Neutral or Not Sure)

Good

Affordable housing Traffic congestion Listening to Aucklanders Rates Trustworthiness Public transport (buses, ferries, rail, cycling) Inspiration Central Rail Link project Leadership overall Passenger rail development Managing relationships with Mayor Len Brown Managing relationships with Auckland Council Knowledge Planning for the future overall Economic development Developing new infrastructure Making Auckland a good place to live Services in your street Building new roads Maintaining existing infrastructure Understanding

9.7 64.7 10.2 60.2 14.5 55.9 7.3 52.3 18.1 49 22.5 48.9 13.9 47.2 19.9 46.9 19.7 45 21.9 44.4 14.7 44.1 26.6 43.5 20.7 41.6 24.5 40.2 25.9 38.3 18.7 36.8 23.2 36.5 19.9 36.3 28.9 35.7 20.2 32.3 16.1 27.6

Poor

The Central Rail Link (CRL) announcement may go some way to improving the Government’s performance ratings on the CRL and traffic congestion issues. Several polls, including one by Horizon, have consistently found about 63% of Aucklanders support building the CRL.

Source: Horizon Research 2108 New Zealanders 18+ between March 15 and 19, post-sample weighted on age, gender, ethnicity, personal income, education level and employment status. The survey has a maximum margin of error of ±2.1% overall at a 95% confidence level.

8 | management.co.nz | JULY 2013

NEW UK ONLINE RESOURCE FOR NZ MANAGERS Leading provider of professional development courses and qualifications, the NZ Institute of Management (NZIM), has formed a strategic partnership with the UK Chartered Management Institute (CMI) to deliver a significant new online resource for its members. Individual NZIM members will have full access to ManagementDirect, an extensive training and information resource. This service includes: interactive e-learning modules and short video clips, e-books and e-journals and leading edge research summaries. NZIM membership also includes access to events, networking, special rates for training courses, management tools plus this magazine, NZ Management, delivered to your door each month. To find out about joining NZIM, look up the membership options on the website, NZIM.co.nz. M


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Tony Nowell - export champion Tony Nowell’s inbuilt “internal frustration engine” drives his desire to see New Zealand reach its full capability in international markets. It’s one of the reasons he’s been selected as this year’s NewstalkNZ Exporters Champion. Nowell has wide experience in New Zealand and internationally as a CEO, board member and chair in the consumer products, food, technology and international trade sectors. He devotes much of his time to activities overseas that “seek advantage for the country’s exports and international business”. He was on his way to Turkey when his award was announced at the Air New Zealand Cargo ExportNZ Auckland Awards recently. He said in a pre-recorded message that time offshore has taught him “the weight that New Zealand’s voice can have in the region and the opportunities that abound for New Zealand business”. Nowell was acknowledged at the awards for the “huge amount of personal time and work under the radar” that he puts into the New Zealand export sector. Nowell is only the second Exporters Champion to be selected. He joins last year’s inaugural award winner, Glidepath founder and CEO Sir Ken Stevens. Export New Zealand, Auckland chair Graham Kearns says the Exporters Champion award entails a strong element of altruism. “It’s not just in recognition for what they do for their own business but also for what they do to help other people in the export sector.”

Nowell’s current pro bono work includes membership of the Export NZ national board and Leadership New Zealand where he is still inaugural deputy chairman after 10 years. He’s the immediate past president of the ASEAN New Zealand Combined Business Council, and a trustee of both the Anew New Zealand Trust and the Snowvision New Zealand Trust. Nowell is a firm believer in Kiwis’ learning by experience in international markets. He stresses the need to establish businesses offshore, put expats on the ground and “learn the local way” by trying to understand what drives local people. “Don’t just visit every six months,” he says. Nowell stresses the need for firms to collaborate to build scale. He favours “project work that pulls capabilities from different companies in distribution, marketing and foreign exchange” over clustering that “sees a few companies selling and buying together”. Nowell’s current directorships include Scion, Wellington Drive technologies and the FoodBowl. Agri-tech products company Tru-Test Group took out the supreme award in the ExportNZ Auckland Awards. It also won the Westpac Exporter of the Year – total sales over $25 million. Other category winners: QBE Insurance Exporter of the Year – total sales under $25 million

Tony Nowell (left) beside Stephen Jacobi of NZ International Business Forum with Philippines President Benigno “Noynoy” Aquino III (right) at an APEC gathering.

Best Bars – supplier of towing solutions and automotive accessories.   BDO Food & Beverage Exporter of the Year Greenshell New Zealand – farming, processing and marketing Greenshell mussels under the Ikana brand.    TNT Express Emerging Exporter of the Year Kagi Jewellery – New Zealand designer jewellery brand.   Baldwins Intellectual Property Commercialisation of Innovation for Export Southern Spars – designer and manufacturer of yacht masts, booms and rigging.   Endace Tech StartUp of the Year TranscribeMe – new generation voice-to-text transcription services. M

Rothbury and Steadfast connect to create a powerful new network Learn more at www.rothbury.co.nz and www.steadfast.com.au

JULY 2013

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THE B TEAM LAUNCHED JUNE 13

Photo: thinkstockphotos.com

If ‘B Team’ reads ‘also-rans’ to you; not good enough to make the A Team, then think again. On the other hand if ‘B Team’ means a viable alternative to mainstream thinking and practice then you may be on the money. A group of global high fliers launched the B Team last month with a mission to deliver: “a ‘Plan B’ that puts people and planet alongside profit. Plan A – where companies have been driven by the profit motive alone – is no longer acceptable.” The B Team is a not-for-profit initiative that has been formed by a group of global business leaders to create a future where the purpose of business is to be a driving force for social, environmental and economic benefit. The initial B Leaders include: Shari Arison, Sir Richard Branson, Kathy Calvin, Arianna Huffington, Mo Ibrahim, Guilherme Leal, Strive Masiyiwa, Dr. Ngozi Okonjo-Iweala, François-Henri Pinault, Paul Polman, Ratan Tata, Zhang Yue, Professor Muhammad

Yunus and Jochen Zeitz. Joining The B Team as Honorary B Leaders are Mary Robinson representing People and Dr. Gro Harlem Brundtland representing Planet. Working with a global community of advisers and partners, The B Team seeks to develop and implement a Plan B for business that puts people and planet alongside profit. The B Leaders will focus on execution and action, catalysing and amplifying others’ efforts by undertaking specific global challenges where their collective voice can make a difference. The B Team founders and co-chairs are Sir Richard Branson and Jochen Zeitz. They are joined by supporters who make up the Founders Circle including Derek Handley (founding CEO), Havas Media, Strive Masiyiwa, Joann McPike, Blake Mycoskie, Kering/ PUMAVision, The Rockefeller Foundation, The Tiffany & Co Foundation and Virgin Unite (initial incubator of The B Team). For more information, please follow us @thebteamhq. M

A new ruling class?

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Photo: thinkstockphotos.com

New Zealand and Australia pride themselves on their egalitarian history; being classless societies where everyone gets a fair go and where people are the masters of their own fate. Nick Cater, a senior editor with The Australian, believes this culture of egalitarianism is under threat. Cater’s new book The Lucky Culture – The Rise of a New Ruling Class observes how since the 1970s a new tertiary-educated class of people has emerged that not only thinks its education bestows better academic skills, but crucially also a sense of moral superiority over fellow citizens. Cater claims that this development has created ‘a new ruling class’ that genuinely believes it is better equipped, intellectually and morally, to tackle the problems facing society. It’s views are now shaping public debates from climate change to poverty alleviation, genetic engineering, aspiration and even the notion of progress itself.

The independent think tank, the New Zealand Initiative, is staging public forums with Cater in Wellington on July 15, Auckland July 16 and

Christchurch July 18. For more information go to nzinitiative.org.nz. Though his book is written in an Australian context, many of Cater’s observations have resonance in other countries, including New Zealand. And his questions are as relevant here as they are on the other side of the Tasman: Are we witnessing the emergence of an exclusive political class with little experience outside of university and politics? What does this mean for our social and political debates? And are we losing our egalitarian spirit? Nick Cater is one of Australia’s best-known journalists. He began his career in Britain as a studio manager at the BBC before joining News Limited in 1989. He worked in Adelaide, Canberra and as a foreign correspondent in Asia before joining The Daily Telegraph in Sydney in 1997. He has been a senior editorial executive at The Australian since 2004. Nick Cater graduated in sociology at the University of Exeter in 1980. M


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PUTTING A PRICE ON NATURE

Photo: thinkstockphotos.com

A conference taking place this month in Wellington is addressing the growing awareness of the role the natural world plays in our wellbeing in general and our economic prosperity in particular. ‘Valuing Nature: the economy and the environment’ at the Embassy Theatre, July 9 & 10, is organised jointly by the New Zealand Government Natural Resources Sector and Victoria University of Wellington, in association with the Sustainable Business Council. Human well-being – economic, social, and cultural – all rely critically on ecosystem services provided by nature. Examples include water and air quality regulation, nutrient cycling, plant pollination, flood and erosion control and food, fuel and fibre. Biodiversity underpins all of these services, but the invisibility of biodiversity’s value has often led to inefficient use and sometimes destruction of the ‘natural capital’ that supports our economies. New understandings of society’s dependence on nature and its fundamental role in New Zealand’s economic, social and cultural well-being can allow us to work together to address these issues. This conference explores the new vision for biodiversity that is emerging globally, one that calls for wider recognition of nature’s contribution to our livelihoods, health, security and prosperity. This vision reflects the value of natural capital and ecosystem services in the mainstream of both public and private decision-making. The New Zealand Government Natural Resources Sector comprises the Department of Conservation, Department of Internal Affairs, Land Information NZ, the Ministry of Business, Innovation and Employment, Ministry for the Environment, Ministry for Primary Industries, and Te Puni Kokiri. M

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JULY 2013

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Coaching plus – unlocking true potential New evidence-based personal development programmes are helping to reveal the true potential of many New Zealand executives, according to executive development and coaching company, ilume International. “We are no longer satisfied that coaching as a behavioural tool will provide all the answers in today’s complex world,” says director Raechel Ford. “ilume now considers it too one dimensional. “Executives and senior managers want coaching that provides clear results that are apparent to both them and their workforce.” Following a three year study with Professor Otto Laske, founder and director of the Interdevelopmental Institute in Boston, US, ilume has introduced its Constructive Development Framework (CDF) assessment programme to New Zealand. “With the results of the CDF, ilume is able to build a robust evidence-based coaching

programme for the individual that can deliver lasting change and recognition of their capacity.” The programme can reveal where their adult development is at, their capability to fulfill their role, and their potential. The key is in assessing an individual’s hidden dimensions. Ford says ilume has been debating the future of coaching for some time, and what changes needed to be made in order for the practice to keep at the forefront of the executive development industry, not just in New Zealand, but globally. “The CDF programme is unique to ilume. The methodology we use goes beyond behavioural coaching techniques. Although behavioural coaching is a very important component of a coaching programme, it is the developmental coaching that CDF gives us that sets us apart.” Since the recent introduction of its programme and the CDF to assess an individual’s hidden dimensions, ilume has undertaken

80 assessments with local executives and senior managers of several large international companies. ilume assessment programmes focus on helping the client understand where they are developmentally by distinguishing between the three hidden aspects of how adults progress through time. The dimensions include thinking, emotional stance and behaviour. Says Ford: “There is no short cut for achieving progression through the stages of development. Mental growth is a multi-dimensional issue as we don’t develop in one single dimension alone, but in several intertwined dimensions. “Our programme includes an in-depth report on a client’s developmental profile and its tie-in with the behavioural disposition they bring to their work and life.” Veronique Cremades-Mathis, Nestlé New Zealand country manager and CEO, is one of the senior executives ilume has been taking

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INBOX

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through the programme. Cremades-Mathis has been with Nestlé for 23 years in nine different countries and is responsible for 600 employees in her current role. She was interested in further leadership development and read about ilume and CDF in NZ Management magazine. “Understanding my current level of cognitive and social/emotional development using the CDF was key to moving beyond my existing leadership, operational and technical capability. That led to a personalised programme supporting development of the whole person, based on the ‘hidden’ part of the human dimension – beyond the ‘déjà vu’ way of thinking / working.” Cremades-Mathis said the process is challenging: “Self-reflection and acceptance of the current state is the first milestone. In our leadership role, we are barely ever exposed to this intense level of feedback. From that acknowledgement, the process starts. It is hard work; it is about self-knowledge and committing

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to learn and move into another thinking dimension. “I have learned to challenge my cognitive pattern through deep self-analysis and develop a new dimension for influencing change in myself and others. This is what I was looking for. I am still going through the process, but mid-way, I certainly have developed a more impactful way to interact and express my ideas. It has also made me more aware about team empowerment and be a better coach to the people I lead. It is not about seeking perfection; it is about

pushing the boundaries of the thinking process within a business context.” She said that right from day one of the programme you start to think, reflect and act slightly differently. “Then there might be an acceleration. It is about subtle optimisation of your better self, leveraging tools you never thought existed before – re-formulating the thinking process into a higher dimension that delivers better outcomes. It is also about mindfulness of your leadership impact and being aware of the variety of tools that exist to support success in your role.” M

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Kea World Class Awards: Brett Lees, Unique Visions Photography

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Kea World Class New Zealand Awards. 1 The 2013 World Class New Zealand Award winners. 2 Annabel Langbein and Rob Fyfe. 3 Geraldine McBride and AUT University Vice Chancellor, Derek McCormack. 4 Sir Don McKinnon. 5 Doug Cleverly. 6 Sir Stephen Tindal, Rt Hon John Key MP Prime Minister of New Zealand, Kea Chairman Phil Veal, Director of the Kiwi Landing Pad Catherine Ronbinson. 7 Judith Hanratty. 8 Bill Buckley and Sir Graeme Douglas of Douglas Pharmaceuticals. 9 The 2013 World Class New Zealand Award winners with their Weta Workshop tall poppy statuettes.

New Zealand Workplace Health & Safety Awards 2013. 1 (From L to R) Graham Wells, Keith Land, Hilary Bennett, Don Stock, Rob Jager, Toni Myers, Julian Hughes, Peter Kane, Jonathan Marshall. 2 Rob Jager - presenting award – Safety Leader of the Year. 3 Rob Jager and George Adams. 4 Peter Kane and Toni Myers. 5 George Adams - being congratulated by Cath King.

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NZIM

The race to compete In 16 years New Zealand has fallen 14 places in the IMD’s global competitiveness rankings. Or is the rest of the world simply catching up? Whichever way it’s looked at, our now mid-field ranking is not good news. By Reg Birchfield.

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he Swiss-based IMD World Competitiveness Yearbook turned 25 this year. And, unhappy he World Competitiveness coincidence that it is, New Zealand scoredT the th same number – 25 place out of 60 measured Scoreboard 2013 economies. It’s one place worse than last year and wistfully light years from our best-ever ranking of 11th, scored in 1997. 0 10 20 30 40 50 60 70 80 90 Should New Zealand managers worry about the nation’s receding global competitiveness? Of course they should, says 100.000 Kevin Gaunt, chief executive of IMD’s local survey partner, 93.357 the New Zealand Institute of Management. “It doesn’t mat92.783 ter how you look at it, this is not a good result. It is further 90.531 evidence of a trend that inhibits and threatens New Zealand’s 89.857 global economic standing. 89.585 “Our economic performance, business efficiency and in89.128 frastructure are struggling to remain static, let alone improve. 88.439 Even our government efficiency, which admittedly still ranks 86.197 10th in the world, is slipping,” says Gaunt. “The Asian econo85.505 mies with which New Zealand increasingly trades are making 85.193 great progress. We have to match them and there’s really no 83.514 reason why we can’t. It is obvious that we have a thoroughly 83.305 business-friendly environment. But, we’re not investing as 83.158 much as we need in our export efforts. Our international 83.145 management skills aren’t up to the job and business is not 80.513 developing leaders with the right competencies.” 79.591 The gap between trans-Tasman neighbours New Zealand 79.150 and Australia held firm this year. Both countries slipped 78.210 a place in their ranking; New Zealand from 24 to 25 and 78.187 Australia from 15 to 16. Australia ranked four places behind 77.040 New Zealand 16 years ago but, the tables have been turned. 75.169 Australia’s highest ranked position was fifth, recorded in 74.711 2010. But since the global financial crisis (GFC) Australia’s 74.529 fall has been both rapid and dramatic. Consequently, the 73.942 competitiveness performance gap between the two economies 73.133 has closed from 15 places in 2009 to nine places this year. The 72.966 two economies now seem similarly afflicted and are struggling 71.327 to compete internationally. 69.012 Shamubeel Eaqub, principle economist at the New Zealand 67.994 Institute of Economic Research, agrees with Gaunt that other world, particularly Asian, economies have caught up with (2012 rankings are in brackets)

The world competitiveness scoreboard 2013 (3) SWITZERLAND 2 (1) HONG KONG 3 (5) SWEDEN 4

(4) SINGAPORE 5 (8) NORWAY 6

(6) CANADA 7 (16) UAE 8

(9) GERMANY 9

(10) QATAR 10

(7) TAIWAN 11

(13) DENMARK 12

(12) LUXEMBOURG 13

(11) NETHERLANDS 14 (14) MALAYSIA 15

(15) AUSTRALIA 16 (20) IRELAND 17

(18) UNITED KINGDOM 18 (19) ISRAEL 19

(17) FINLAND 20

(23) CHINA MAINLAND 21 (22) KOREA 22

(21) AUSTRIA 23 (27) JAPAN 24

(24) NEW ZEALAND 25 (25) BELGIUM 26

(30) THAILAND 27 (29) FRANCE 28

(26) ICELAND 29 (28) CHILE 30

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IMD WORLD COMPETITIVENESS YEARBOOK 2013

100

(2) USA 1


New Zealand. “New Zealand’s economic settings are good, but others are catching up,” he says. “And our lack of scale and geographic distance (from markets) make it difficult to create the competitive environment that is essential to innovation, efficiency or productivity improvements.” And, says Eaqub, there’s a difference between economic resilience and growth opportunities. “The New Zealand economy is resilient and able to withstand shocks such as the global financial crisis. But that doesn’t mean we have the policies or expertise in place to participate in a rapidly changing global economy. “New Zealand is trying to participate in the new economy in a small way, but really we are still thinking about how to export dairy and logs. It is not surprising that our economic performance is not keeping pace with other more dynamic economies,” he adds. “When you are small and far away from the rest of the world it is not enough to have good economic policies. You have to have the best. You need to be at the forefront.” Ironically, New Zealand’s government efficiency score is consistently high. This suggests a benign business environment. But business seems unable to turn that ranking to competitive account. The other three factors on which IMD rates global performance, namely business efficiency, economic performance and infrastructure, are middle rankers and, in the case of economic performance, New Zealand is a tail-end-charlie, clocking in at 40th place. New Zealand’s competitiveness has fallen along with the nation’s inability to keep up with the economic reforms that took it closer to the top of the rankings around 20 years ago, says Eaqub. “We were at the frontier of economic reforms and policy settings. But we haven’t kept up and others have caught us. We’ve lost the advantage we once had.” And from an export perspective, New Zealand has, in Eaqub’s view, gone backwards while other economies have adjusted to new global market opportunities. “We are now even more dominated by agriculture (for export income) than

we were 10 years ago. Our manufacturing has declined and our services sector isn’t growing. We haven’t been able to replicate the niche market manufacturing activities of other small economies. We’re still heavily reliant on land-based exports. Admittedly we are good at it, but it’s not enough,” he argues. And despite its apparently businessfriendly regulatory environment, New Zealand ranks at the lowest possible level, 60th, on direct investment flows. “New Zealand is heavily reliant on foreign capital, because domestic saving is low,” says Eaqub. “This means we don’t have much to invest abroad. Therefore, we ship our goods overseas rather than try to establish a base offshore. Scale and distance matter here too. Our domestic market is too small to act as an incubator for local firms before they spread their wings worldwide.” So, does the survey suggest that Kiwi managers are too pessimistic and unwilling or unable to make the most of the environment that exists to lift our international competitiveness? “It’s unfair to blame business leaders,” says Eaqub. “Economic policies are doing their job and creating economic resilience. But we are small and remote. Auckland is trying to become a city of international scale, but it’s still small by world standards. We must keep working on trade agreements and other policies to bring the work closer to complement the global economy’s shift to the East.” Do international competitiveness rankings mean anything? Report cards are helpful, says Eaqub. And this one shows New Zealand’s strengths and weaknesses. And in his opinion, its findings generally mirror his organisation’s overarching economic analysis. “Business leaders need to be aware of our strengths and exploit them to gain an edge when dealing internationally,” he says. “Knowing your weaknesses helps managers prepare their businesses and put mitigating strategies in place to overcome them.” M Reg Birchfield Life FNZIM is a writer on leadership, governance and management. reg@rjmedia.co.nz

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Our Ouraim aimisisto tobuild buildmanagement managementcapability capabilitythrough membership, development and research. through membership, development and research. Our Ourfocus focusisisto: to: •• Research managementtrends trendsand and Research leading leading management practice constantlydeveloping developing practice and and promote promote aa constantly model capabilityfor forNew New model of of best best management management capability Zealand. Zealand. •• Enable and aspiring aspiringmanagers managers to Enable managers managers and participate in learning programmes, mentoring, to participate in learning programmes, and events that providethat theprovide information mentoring, and events the and experience need tothey develop information andthey experience need their to capability. develop their capability. •• To managementrole rolemodels models To identify identify leading leading management and that recognise recognisethe thecareer career and provide provide awards awards that and educational achievements of managers. and educational achievements of managers. NZIM Inc NZIM Inc CEO: Kevin Gaunt FNZIM, FAIM CEO: Kevin Gaunt FNZIM, FAIM Email kevin.gaunt@nzim.co.nz Email kevin.gaunt@nzim.co.nz Auckland Office Auckland Offices Contact: Tait Grindley Contact: Tait Grindley PO Box 6600, Wellesley St, Auckland 1141 PO Box 6600, Wellesley St, Auckland 1141 Ph 0-9-303 9100, 0800 800 NZIM Ph 0-9-303 9100, 0800 800 NZIM Email enquiries@nzim.co.nz Email enquiries@nzimnorthern.co.nz Website www.nzim.co.nz Website www.nzim.co.nz Wellington Office Wellington Offices Contact: Shaun Sheldrake Contact: Shaun Sheldrake PO Box 11781, Wellington 6142 PO Box 11781, Wellington 6142 Ph 0-4-495 8300, 0800 800 NZIM Ph 0-4-495 8300, 0800 800 NZIM Email enquiries@nzim.co.nz Email enquiries@nzimcentral.co.nz Website www.nzim.co.nz Website www.nzim.co.nz NZIM Southern NZIM Southern Regional Director: Michael Weusten FNZIM Regional Director: Michael Weusten FNZIM CEO: Joseph Thomas AFNZIM CEO: Joseph Thomas AFNZIM PO Box 13044, Christchurch 8141 PO Box 13044, Christchurch 8141 Ph 0-3-379 2302, Fax 0-3-357 8003 Ph 0-3-379 2302, Fax 0-3-357 8003 Email info@nzimsouthern.co.nz Email admin@nzimsouthern.co.nz Website www.nzimsouthern.co.nz Website www.nzimsouthern.co.nz

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JULY 2013

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POLITICS COLIN JAMES

Balancing the books not enough manage, and they will need pensions and because there will be more of them the bill will go up. In addition, new health technologies drive up demand and so too, costs. Rough figures on current policies suggest health will go from 6.9 percent in 2012 to 11 percent in 2060 and national superannuation from 4.4 to 8 percent. Options to manage pension costs: tax rises, a higher qualifying age, personal savings schemes like KiwiSaver and private schemes and lower pensions. Options to manage health costs: costreducing technologies, dignified dying in place of aggressive near-end-of-life

“Education could get much more expensive.” adjustment than a panic response from the mid-2020s or so. It would spread the load more equitably across generations. The third follows from the first two: changes will be more timely and spread better if a debt target is agreed and stuck to, with allowance for fluctuating economic circumstances. The target the Treasury is likely to propose is the one adopted in the 2013 budget of net debt of 20 percent of GDP. That would be low enough, the Treasury calculates, to allow a temporary rise to cope with a shock without requiring crisis policies to build fiscal surpluses to bring debt back down to 20 percent. Conversely, in buoyant times, the figure would logically fall, as it did in the mid-2000s when it reached zero. But to keep to a 20 percent average will require some complex spending and revenue decisions. Older people have more chronic health conditions, which cost money to 20 | management.co.nz | JULY 2013

interventions (likely as people die older), personal payments and insurance, tax rises, diverse delivery mechanisms and rationing. The Treasury assumes education costs will fall proportionately as the proportion of young people falls – by one percentage point from 2012 to 2060. To that might be added the likely cost-effective digital supply of much material right up to tertiary undergraduate level. But massive changes in the global economy are changing the nature and distribution of work. So if New Zealanders are to be well paid and therefore pay enough tax, the education system will have to change from a 120-year-old factory system inculcating “skills” to one in which “professional” – highly qualified, well paid – teachers develop children’s and students’ personal capabilities. Education could get much more expensive instead of cheaper.

Photo: thinkstockphotos.com

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his month the Treasury will publish its third long-range fiscal projections. They will be one reflection of the fact that we are in a period of great social, and therefore political – and fiscal – change. There will be three main elements to the projections, which go out to 2060. First, the change now under way in the age structure of the population – proportionately more older and fewer younger people – poses significant revenue and spending challenges, starting this decade. Second, starting to address those challenges now will allow a smoother

There might also need to be larger redistribution costs to maintain social cohesion than the Treasury projects. Next: the physical environment and ecosystem services, which underlie all economic activity. Sustaining ecosystems has been seen as a public cost. If climate change goes as the United Nations scientists project, there could be large additional costs by 2050-60. But if, as some multinationals are doing, businesses fully cost their use of ecosystem services, that cost will be moved from governments to markets – that is, privatised. How will the Treasury handle that in its projections? That points to another major shift under way, from seeing the private and public sectors as distinct and separate, as social democrats and neoliberals do, to seeing them as inseparably joined, with “public” services devised, delivered and consumed in much more diverse ways than now. That will change longerterm fiscal trajectories. Add this all up: managing the budget is far more complicated than balancing the books. Fiscal futures are complicated – and set to become much more so. M Colin James is New Zealand’s leading political commentator and NZ Management’s regular political columnist. ColinJames@synapsis.co.nz


BOB EDLIN ECONOMICS

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he fiscal fundamentals of the Government’s 2013/14 Budget are simple: tax revenue is forecast to increase slightly while expenses decline, as a share of GDP, over the next four years. The Budget Economic Fiscal Update forecasts show the Government is expected to achieve its fiscal objective of a return to surplus ($75 million) in 2014/15. Tax revenue increases in each year of the forecasts, reflecting the expected growth in the economy. Budget decisions have increased expenses by around $1 billion a year, but coupled with revenue initiatives, the net spending in the Budget reduces to $900 million a year.

Photo: thinkstockphotos.com

Public vs private

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well – look at China – and some countries with small public sectors do badly. Christopher Stone, research director of the Public Service Programme at Australia’s Centre for Policy Development, gives further cause to question spending cuts and privatisation in the first two of three discussion papers to be published this year. Some of the research funding (let the record show) comes from the Community and Public Sector Union, the rest from the Becher Foundation, which looks for projects that satisfy its social justice priorities, and Slater & Gordon, a law firm.

public sector can end up costing far more than they save, and leaving some jobs to the private sector will result in their being done badly or not at all. While some politicians talk about doing “more with less”, in reality this can mean doing less with less. Stone sets out six cases where the value provided by public services is greater than their costs, and where the job done by the public sector is, in some or all ways, better than the private sector. For example: Sydney trains save car commuters $923 million a year by reducing congestion. The congestion reduction also avoids 1 million tons The first paper looked at false of carbon emissions and reduces economies stemming from short term, community health costs from air narrow thinking on Australia’s public service. Its main message is that to know pollution by $109 million. Even without whether Aussies are getting public value taking into account less directly observable advantages, the benefits to for public money, they must consider rail commuters, car commuters, and the what government does as well as what wider community are of greater value it costs and to look at results as well as than rail subsidies. resources. This is true both of decisions As for privatisation, Productivity to cut back on spending or to privatise Commission analysis of public and or outsource public services, Stone says. private hospitals has shown the He looks at the various types of efficiency of each is very similar, efficiency: (1) Technical efficiency – with both having areas of strength such as building a road using the best compared to the other. In diagnostics mix of labour and capital; (2) allocative and prosthetics the public sector efficiency, or building roads where outperforms the private in terms of they are most needed; and (3) dynamic efficiency. efficiency, or attending to transport The simple lesson: cuts or nonneeds as opportunities change over government delivery can be time (such as introducing high-speed counterproductive. M rail or intelligent roads). Often the pursuit of one form of efficiency can hamper achieving the others, says Stone. Bob Edlin is a leading economic commentator and NZ Management’s regular economics columnist. His second paper says cuts to the

“Cuts to the public sector can cost more than they save.” Thus the Government is maintaining tight financial constraints on the delivery of public services. The reasoning is that the public sector makes up about a quarter of the country’s economy and so makes a large contribution to our economic performance. Increases in productivity and skills in the public sector are expected to benefit the whole economy. Partial privatisation by selling shares in state energy companies is aimed at improving economic efficiencies too. Shrinking the size of government in the name of economic efficiency appeals to libertarians, many economists, business people and anyone who bridles at paying taxes. The appeal is rooted in an aversion to amassing public debt and a belief that smaller government is better for economic growth, although some countries with big public sectors do

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LEADERSHIP REG BIRCHFIELD

Time ministers please!

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ffective leadership is often about timing. And time is running out for the Government’s overhaul of New Zealand’s public sector. National’s better public services (BPS) programme was announced with much fanfare by Prime Minister John Key, as is often his way, over a year ago. Now the wheels required to deliver real change management look dangerously close to falling off this particular policy bandwagon. A progress report published by global consultancy Ernst & Young (E&Y) is critical of the programmes

to change by showing the benefits it will bring. A lack of committed leadership, failure to develop an “explicit and agreed” model and strategy to deliver change and, insufficient resources to do the job are, according to E&Y, compromising the programme’s implementation. Ryan says the E&Y report hits “many nails on the head”. And even though the report was presented seven months ago, little has happened apart from the appointment of former Department of Conservation boss Al Morrison

“The leadership required for this change job isn’t happening.” implementation approach and strategy. Other interested observers are joining a steadily growing critics chorus. “The programme is at a critical juncture in its delivery,” says E&Y. Bill Ryan, an associate professor in Victoria University’s School of Government and a committed public sector reformist, also thinks “time is running out fast” to deliver the kind of “step change” sought by the original BPS report. Leadership will, as I said in this column a year ago next month, define the success or otherwise of this large and important culture and performance change exercise. And so it seems to be. E&Y’s report says the public sector’s senior leaders must lift their game and take ownership of the process. “They, and they alone, are the ones who can lead this change.” The report’s authors think public sector functional leaders and chief executives must personally invest in, and commit to better public services. They need to demonstrate different work ways and affirm the need 22 | management.co.nz | JULY 2013

to a newly created role of deputy commissioner at the State Services Commission to run the new ‘corporate centre’ designed to increase the pace and delivery of better public services. Leadership of the kind required for this change job, isn’t happening across much of the sector, according to Ryan. Change management on a scale this large is obviously problematic. Despite the easy political promises, changing New Zealand public services was never going to be easy. Even relatively small enterprises find change taxing. It takes seriously committed and thoughtful leadership to effect meaningful and lasting cultural change. Organisational change, whatever the scale, is personal. That’s why it must be competently and intelligently lead. Minds must be tuned to comprehend, accept and embrace the personal and enterprise-wide benefits that flow from change. When politicians, and particularly self aggrandising ministers, “insist” on change it’s hardly surprising

that those bent over the oars ask: “why should I do this for you, mate?” E&Y says the change process has so far been captured by the programme’s “mechanics” and transactions. It’s now time to deliver the objectives. Ryan uses similar semantics to explain his interpretation of the hiatus. “What we are getting at the moment seems to be a timid, introverted, tinker-withthe-mechanics approach to leadership change,” he says. “The approach is based on the idea that the central agencies can figure it out first then tell others how and when to do it.” The approach is, he says, about face. Strategy leaders should be telling middle managers to “get into it” and, if they find good stuff, back them. “Chief executives should free up and empower middle-level managers and professionals. Some have been trying to act in new ways for some time but have been held back by the system and old fashioned command and control, hard driving forms of management and organisation,” he adds. “In the public sector, which is complex and adaptive, middle-outwards change is the way to go.” Delivering a better public service is a leadership exercise. It doesn’t help that few ministers in the current cabinet seem to grasp the complexity of what they are saying or understand how to lead in complex settings. The results of this programme are “important”. Indeed, they are too important to be treated as electoral fodder. Politicians who talk about “bashing the public service into shape” won’t help and certainly won’t hasten the implementation of better public services. M Reg Birchfield Life FNZIM is a writer on leadership, governance and management. reg@rjmedia.co.nz


PHIL VEAL THOUGHT LEADER

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Building a nation of retailers

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reating enduring and endearing relationships is in our DNA. It’s one of the things that firsttime visitors to New Zealand always notice, and it’s the main reason visitors come back. We are warm, welcoming, friendly people, and folks around the world are drawn to us. This wonderful national characteristic – that translates into an ability to create relationships– is something we should celebrate more, because it’s the most important building block of any good business. And yet, as we do business across New Zealand and around the world, we’re often happy to outsource our customer relationships to someone else, to let the product do our talking for us. We don’t invest in spending time with and understanding our customers, and we don’t invest in developing compelling consumer brands. When they head offshore, some of our most promising companies license their products to multinationals for manufacture, or sell their products to one or two corporate distribution partners overseas rather than go eyeball to eyeball with their end customers. WE’VE BECOME A COUNTRY OF WHOLESALERS, AND WE NEED TO BECOME A NATION OF RETAILERS I don’t mean retail in the sense that we all have to open a shop, I mean retail as developing relationships with our real customers. We need to focus on customer experience. Here’s how: • Make the most of our vaunted ability to connect with people (read: ‘customers’). Remember, even in our hyperconnected world, everyone craves real connection. Let’s use that desire and

our natural relationship ability to our benefit, to establish retail relationships with our end customers, wherever they are, and however they’re using our products. I believe the only way to do that is to be in front of customers. So get on a plane, train or whatever, and really understand how your product is being (or will be) used. We succeed in business when we make a sale, when we close an opportunity, when we transact – not when we develop a product, or define a service. And transactions aren’t the result of a process, or a machine, or technology. Transactions come from relationships. Our ability to be warm, welcoming, friendly people should be our greatest export as business leaders. • Think about how we can transform our wholesale customer relationships into retail relationships. We have to bake our New Zealand-ness into our businesses, not as silver ferns on packaging or ‘Made in New Zealand’ labels, but as products and services infused with authentic New Zealand warmth. It’s not enough to produce the best red meat in the world. We need Chef’s Select prepared meals that allow us to cook chef-created meals at home in very little time – thank you NeatMeat and Josh Emett. It’s not enough to build the best washing machines in the world. In the United States, customers need washing machines that can play the StarSpangled Banner – thank you Fisher & Paykel. It’s not enough to grow the finest merino wool in the world. In Europe, customers are willing to pay a premium for finished garments that fit their lifestyles – thank you Icebreaker.

Phil Veal.

BY THE WAY, DEVELOPING RETAIL RELATIONSHIPS MEANS MOVING TO MARKET-DRIVEN BUSINESS MODELS It’s absolutely critical that we build as much value into our products as we can, because any margin that we can’t capture for our account will be captured by someone else closer to the end customer. If you’re retail (marketdriven), you’ll use marketing, packaging, logistics; whatever it takes to own the end customer and command the highest margin. Market-driven business models are less about what we can produce (commodities that our customers will pay a market rate for), and much more about what our customers will pay a premium for (branded products or experiences). If we are the small country at the end of the world’s longest supply chain, then we’re going to have to be the most productive, the most value-added, and most importantly, the most customerfocused small economy on the planet. So put that genuine New Zealand “world’s warmest welcome” at the core of your business, and better financials will follow. M Phil Veal is chair of global expat network Kea and has a New York-based capital and private equity business.

JULY 2013

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BOOKCASE

Change-agents HEART TO START by Derek Handley • Random House • RRP $39.99 Harvard Business Review Press

Impressive though his achievements to date have been, it did seem a little odd to be reading a ‘life story’ and sage advice from one so young. But Handley is a young man in a hurry, determined to make the most of his time on this planet and he’s packed a heap into his life so far. There’d be plenty happy to say they’d achieved what he’s done thus far, in an entire lifetime. Many will only know of Handley’s successes as a digital-age entrepreneur; the founding and multi-million dollar sale of The Hyperfactory and the subsequent launch of Snakk Media which listed on the NZX earlier this year. It’s easy to assume that all this was part of a carefully thought out plan of which he was certain from the get-go. What was less well-known before the book was all the uncertainties, failures and wrong turns he experienced along the way and shares with us so candidly and generously in this book – which really does embody the ‘heart’ of the title.

THE FUTURE by Al Gore • W H Allen • RRP $39.99

Impressive, well-researched, comprehensive and worthy all come to mind in reference to this latest offering from the former US Vice-President and Nobel Peace laureate. In The Future, Gore identifies the major forces shaping our world, giving his assessment of six critical drivers of global change in the coming decades: dramatic changes in the global 24 | management.co.nz | JULY 2013

He doesn’t pretend to be a great writer – a great master of prose – but the book is very approachable and readable and any entrepreneur anywhere in the world, who’s been through a start-up or two will identify with parts of Handley’s story. What’s so good about it for a Kiwi readership is that it’s so close to home – much of his experience is here in New Zealand – and it’s such a story of the new digital age where it matters not where you start from; your business can be instantly global. There’s no pretence, other than the front he puts on with potential investors – read ‘saviours’ – when all around him is turning to custard. He shares it all with us, with such candour that I’m sure will be inspiring to budding entrepreneurs who may hesitate to embark upon a bold ambition because they think there’s some secret key to how the business world operates. Handley shows clearly that there’s not, but that what you need in spades for his kind of journey is self-belief and the ability to project confidence – in addition to the bankable plan.

The book also offers something to those who’ve been in business for a while. It’s a reminder that great gains sometimes only come from taking a risk; that big rewards sometimes only follow those heart-stopping moments of ‘this can go only one of two ways – really, really badly or be a runaway success’. And there’s no pretence either that he started out with a grand plan, that he carried out step by step, nor that he started out wanting to save the world. He doesn’t suggest that he set out with any other ambition but to be successful and make money. But he shares his discovery of purpose as he grows up and out on the pages of the book. It’s a very satisfying thing to see a young high-flier’s progression from the buzz of commercial success to looking for meaning and discovering the ability to do stuff that can potentially change people’s lives for the better. Even if it’s just a quick Sunday afternoon read – and it is a quick read – I don’t think you’ll regret picking up this book. The young man’s refreshing frankness is disarming. – Toni Myers

economy; the shift in the balance of power and the role of nations; digital and biotechnology revolutions; climate crises and energy transition; demographic surprises and resource consumption; health and medicine. And over-riding all that, the emergence of a global conscience transcending borders. The big problem with books of this ilk is that I suspect they’re seldom read by those who need to; rather they adorn the library shelves of the converted – those who already have some awareness of the big issues Gore

addresses. And sure, they’re going to add to the knowledge of the worried middle and professional classes of the first world – but will they change hearts and minds? Nonetheless, if you can give the time to this book, it will add to your armoury of knowledge when next in discussion on the big issues of our time. – Toni Myers


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LEADERSHIP THAT MATTERS

It is not the mountain we conquer, but ourselves. Sir Edmund Hillary

GLOBAL

LEADERSHIP FROM OUR OWN

BACKYARD

26 | management.co.nz | JULY 2013


LEADERSHIP THAT MATTERS

New Zealand has spawned a global leadership organisation that bears the name of our most famous son – Sir Edmund Hillary. The Hillary Institute of International Leadership has impeccable credentials and links to some of the best-known and most influential people in leadership roles in the world today. It is another example of a ‘world class’ initiative springing from these small islands, that is better known and recognised outside the country than at home. Executive director of the Institute, Mark Prain, explains the vision and impetus behind the organisation he co-founded in 2006.

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ith Sir Ed as its inspiration and with his and June, Lady Hillary’s support, the Hillary Institute of International Leadership saw little point in aiming low when many leadership challenges are global in scale. And, for a very small country, we have managed to generate more than our fair share of movers and shakers. So, with a board of heavy hitters – the Hillary Summit – spanning five continents, Prain and Hillary Senior Fellow Matt Petersen (President of Global Green USA), scour the globe for exceptional mid-career leaders, ultimately selecting one Hillary Laureate annually from a global ‘watch-list’. (See box for details.) The Institute’s goal is to provide its laureates a platform – a community of peers and other leaders to engage with and additional resources to scale their efforts for greater impact. MARK PRAIN ON THE THINKING BEHIND THE HILLARY INSTITUTE Food security, energy security, poverty, inequality, the leap to the gun rather than the negotiating table….the list is lengthy

and salutary. It’s arguable that our institutions are failing us – whether they be partisan-paralysed federal governments, commercial organisations captured by market inertia and/or vested interests, or well-intentioned, weak international alliances. We live in an age of media ephemera, much of it ‘white noise’, void of depth. We work in a business landscape of quarterly financial dictates, of shareholder rather than stakeholder value and of (largely) blindly, awaiting the next, inevitable bubble, tomorrow’s GFC. We are all part of a hyper-connected world, but data volume doesn’t necessarily produce quality outcomes. Leadership is more vital than ever. Without focus it’s no panacea but it can be a universal resource. Crises bring it out in spades – but sustained momentum is more difficult. No individual can lead effectively alone, but we can all take notice and loosen the ties that bind and craft long-term change that matters and delivers. And in terms of triggers, as President Obama’s former chief of staff Rahm Emanuel famously put it, “Never waste a crisis!” Climate change induced by human activity is one such JULY 2013

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LEADERSHIP THAT MATTERS

Above: Xingu River, Brazil (June 15, 2012) – Three hundred indigenous people, small farmers, fisherfolk, and local residents demanding the cancellation of the $18 billion Belo Monte dam project. Right: Amazon Watch 1500 person human banner at Rio + 20, Flamengo Beach.

‘trigger’ – and as with issues of similar weight, we humans provide the greatest barrier to confronting it. We have the science, common sense and moral authority, but that doesn’t mean that Jo Smith – in Wellington, Warsaw, Wuhan or Washington – hears or even wants to listen. Or worse, is in fact perversely inspired to take a comforting, denialist position. And so we stumble blindly on, trumped by a sense of it all being too hard, with much hand-wringing guilt about the state of the planet we’re leaving our children. However, as a militant optimist, my privileged focus most days (thankfully), is ‘Leadership that matters’. And indeed last month’s issue of NZ Management celebrating our World Class Kiwis, reminds us of exceptional leadership here at home, and amongst the fabled one million (or fifth population share), of ‘gifted and gone’ who form one of the globe’s most interesting diaspora. How might we ensure, as KEA’s Sue Watson points out, that their influence and leverage offshore continues to enhance NZ Inc., while concurrently addressing the other elephant in the room: the health of New Zealand’s environment, economy and society? Is it attractive enough for those in New York, London, Dubai or Melbourne to choose to spend part of their productive years ‘back home’? The Hillary Institute seeks to honour the legacy of Sir Edmund’s extraordinary leadership on the world stage. It does so by selecting, leveraging and supporting one extraordinary leader in mid-career each year – the annual, global Hillary Laureate – and every four years with the NZ$100,000 Hillary Step prize. Leadership in what however? Our international board of governors, the Hillary Summit (see box), chaired by Hon David Caygill, was free to choose any major area of global impact at its inception – so long as it reflected the spirit both of Sir Ed’s extraordinary exploits as our best-known ‘global citizen’, and his enduring contribution to improving life quality and opportunity for the Sherpa people via the Himalayan Trust over 55 years. In turn their selection is ratified by the institute’s operating board 28 | management.co.nz | JULY 2013

here in New Zealand, based in battered Christchurch, within sight of the maunga (mountain) where Sir Ed did much of his early mountaineering, Mt Aoraki (Cook). ‘Climate Change Solutions’ was the governors’ choice in 2008, as perhaps the zeitgeist challenge of our age, where our modest charitable efforts might make a difference. Upon review in 2012, they resisted the temptation to leave the field and focus instead on poverty, or food security, or gender equity…. and remained with Climate, but nuanced more towards its social, economic and inter-generational impacts. 2012-15 is therefore focused on Leadership in ‘Climate Equity’. What the institute is not, is a research-led Brookings Institute, an advocacy Beltway lobby or a CEO school like Fontainebleau’s INSEAD (cofounded by institute governor Manfred Kets de Vries). There remains a profound, psychosocial challenge; how do we change hearts and minds, reach deep into the fear of losing our fossil stock-invested pension and sovereign funds and build a global coalition of the willing for action on critical global issues? CO2 measurements have just reached 400+ parts per billion, which our species has never experienced. This century’s already seen 11 of the warmest years on global record. Yet despite the camera-friendly New York super storm, Sandy; Hurricane Katrina; June’s inundation of Prague’s ancient city centre and the rapid emergence of a summer passage through the Arctic ice sheet; the temptation is to continue to bury our heads in the


LEADERSHIP THAT MATTERS

The Hillary Institute of International Leadership The Hillary Institute of International Leadership was launched on January 22, 2007 during his last trip to Antarctica, by Sir Edmund Hillary. He was accompanied by the institute’s patron, former Prime Minister Helen Clark (now Administrator of the United Nations Development Programme) and principal philanthropic investor Jan Cameron (founder of the Kathmandu brand). From a global search watch-list, the institute selects one Hillary Laureate annually, an exceptional leader in mid-career who also resonates with the humanitarian commitment of Sir Ed.  In addition, the inaugural Hillary Step prize (valued currently at NZ$100,000) was given in 2012. Named after the final, almost vertical 40-foot cliff-face that Hillary and Tenzing Norgay scaled in reaching the summit of Everest, the Hillary Step is a metaphor for the challenges innovative leaders face. The institute is a charitable foundation based in New Zealand and advised by an international board - the Hillary Summit - of renowned thinkers and strategists from five continents, chaired by Hon David Caygill. Summit governors include a number of players with links to New Zealand, including Saatchi & Saatchi worldwide CEO Kevin Roberts, Australian Collaboration chair Dr Helen Sykes, director general of the UK Institute of Directors, Simon Walker, Intergovernmental Panel on Climate Change chair Dr Rajendra Pachauri and Natural Capitalism author and US environmental poet-laureate Paul Hawken. Climate Change Solutions (2008-11), and the institute’s second (four year cycle), leadership topic, Climate (Change) Equity (2012-15) were determined by the Hillary Summit which also chooses the annual Hillary Laureates and ultimately the Hillary Step recipient from shortlists provided by key staff. Atossa Soltani (Amazon Watch) is the fifth annual global Hillary Laureate and the second for Leadership in Climate Equity. Her predecessors were: CEO of Europe’s largest solar energy business and renowned author Jeremy Leggett (UK) in 2009; ‘China-Dream’ creator Peggy Liu of JUCCCE (Joint US-China Collaboration on Clean Energy) in 2010; climate deal-broker and Beltway veteran, Aimee Christensen (US) in 2011; and closer to home, the indefatigable champion of frontline, small island nations, President Anote Tong of Kiribati (2012) – facing the harsh reality of losing his entire sovereign nation to sea-rise within his children’s life-time. The first recipient of the Hillary Step was 2010 Hillary Laureate Peggy Liu, who was awarded the prize to assist in her ‘China Dream’ programme. The institute also holds annual symposia both in New Zealand and internationally, usually in the communities of the laureates, bringing thought leaders together and forging connections around the chosen leadership topic.  The institute’s co-founders were executive director Mark Prain; Chairman David Caygill; the late Christopher Doig; former Ngai Tahu CEO, Anake Goodall and Dr Andy Pearce. www.hillaryinstitute.com

proverbial sand. That in turn puts minimal pressure on politicians and business to better direct their capital. Enter Atossa Soltani, founder and executive director of Amazon Watch, announced in June as our 2013 Hillary Laureate. A native of Iran, Soltani moved to the US at 13. Multilingual, she speaks Spanish, Portuguese, English and Farsi. Her influence over two decades supporting indigenous people’s rights to self-determination, natural resources, culture and way of life, brought her squarely on to the institute’s radar. Contributing 20 percent of the earth’s fresh water, the Amazon is the planet’s largest weather conveyer after the oceans. Amazonian rainforests function like a massive heart that pumps columns of heat and vapour into the atmosphere, thereby driving global weather systems. This remarkable oasis of biodiversity and carbon capture, ‘the lungs of the planet’ pours 300,000 cubic metres of wet-season, fresh water into the Atlantic every second. But the Amazon is under attack, exacerbated by the multiple sovereign claims of Peru, Ecuador and Brazil. De-forestation, mineral and oil exploitation and climate change impacts, particularly drought, are now leading to the threat of large scale forest fires with potentially devastating consequences on the Amazon basin’s ability to regulate weather, thereby further destabilising our global climate.

Exceptional leader: Atossa Soltani.

JULY 2013

| management.co.nz | 29


LEADERSHIP THAT MATTERS

Against this sobering backdrop Soltani and her savvy team of campaigners took on Chevron in support of 30,000 indigenous and rural plaintiffs recently winning a US$19 billion (NZ$23.6b) verdict for the environmental and social harms to forest communities caused by the company’s oil extraction in the Ecuadorean Amazon – earning Atossa the moniker of the Amazon’s ‘Erin Brockovich’. Typically, Chevron appealed but lost again in the US Appeal Court and a judgement of this size cannot be ignored by shareholders and industry peers. Soltani also contradicts Brazilian claims of hydro ‘clean energy’. Unlike New Zealand, large dams in the tropics cause methane emissions, decomposing vegetation and soil in reservoirs. Amazon Watch is promoting instead a wind and solar energy direction for the entire region. An outspoken critic of the massive Belo Monte Dam, Oscar-winning director James Cameron has travelled to the Brazilian Amazon three times since 2010 at Soltani’s instigation, expeditions embedded in the DVD edition of his epic Avatar. From Quito, Ecuador her immediate response to our call was: “I am honoured to join such a truly exceptional group of leaders and to be connected to the spirit of Sir Edmund Hillary, whose courage, determination, and passion for service has inspired so many of us”. We’re honoured to have her join an equally remarkable cast of former laureates (see box). Laureate search via the maintenance of a global watch-list, and then selecting, recognising and leveraging further their leadership, is our core business. The institute’s contribution to NZ Inc. six years on, as a reputational asset, is already significant (with MFAT event-hosting support on four continents), and long-term it could be a great deal more so. We welcome more dialogue with Kiwi influencers in that vein. Without getting too excited about our modest achievements to date, the positive impact of the Nobels on Scandinavian economies and reputation 110 years on, is vast. The stories of our small cast of laureates are all instructive, however I’ll reference two more only. Inaugural winner (2009) and renowned author Jeremy Leggett is a force majeure in the UK where his GBP60m turnover Solar Century is one of Europe’s largest renewables companies. Leggett’s work on Peak Oil and Carbon Tracking keeps him close to key influencers and the headlines of media from the Financial Times to the Huffington Post. Originally a geologist peer of disgraced BP (post Gulf of Mexico spill) CEO Tony Hayward, Leggett’s knowledge of the energy landscape and reach into its future ‘stocks’ is difficult to match. The Rockefeller Foundation funded, Carbon-Tracker Report’s (http://www.carbontracker.org) prediction of the collapse of fossil stocks is only far-fetched if we are self-destructive 30 | management.co.nz | JULY 2013

enough to go on burning current assets without constraint. The International Energy Agency agrees – market capitalisation of the top 200 listed oil and gas companies is around US$4 trillion and their debt US$1.5 trillion. That’s Mum and Dad’s retirement savings at stake, never mind banks and revenue authorities’ exposure. Interestingly this ‘100% Pure’ nation of ours with a proud history of innovation and punching above its weight is now on the front-line of deep-sea exploration for more such ‘assets’, with recent industry safety assurances stretching credulity. The bottom line is: one third only, of proven fossil fuel reserves can be consumed prior to 2050 if we’re to achieve the 2 degrees C goal the world’s governments, including New Zealand, signed up to in Cancun in 2010. Leggett’s contention is that a good part of the alternative solution has to be investing in the extraordinary growth of future-focussed renewables. 2010 Laureate Peggy Liu’s story features the rapid emergence of China. If China goes where we’ve been, again, it’s arguably, game over. Her answer; ‘The China Dream’. Winning the first Hillary Step prize (NZ$100,000) to assist this project in 2012, she and her JUCCCE colleagues in Shanghai have set about architecting a desirable and sustainable lifestyle for the 300 million (growing to 800 million) middle class Chinese consumers by 2025 – a metaphor also for those of India, Russia, Brazil and the emerging powerhouses on the African continent. Preposterously ambitious though this appears, one of Liu’s responses to her social engineering aspiration is to point to her own, double-educated (Fudan and Harvard) young staff, 90 percent of whom are products of China’s lone-child policy. And as Econet Wireless founder Strive Masiyiwa reminds us, 10 percent of a population holding an unshakeable belief can be a tipping point for the whole of society. And as I write this, he, Sir Richard Branson and Jochen Zeitz, former Puma CE and current director of French luxury goods giant Kering (formerly PPR), have launched a new global collaboration to drive transformational change in business. Founded on generating long-term value, The B Team brings together an initial 14 leaders from major global corporations including Unilever, Natura, Celtel and Tata. ‘Future bottom lines’, the ‘Future of Incentives’ and the ‘Future of Leadership’ are initial targets while seeking collaboration from around the globe. And as with all good stories, there’s a New Zealand connection. The founding CEO is young Kiwi serial entrepreneur, Derek Handley, now 35 and based in New York. Alongside similar efforts like those of lobby group Pure Advantage here at home, the game is serious and changing. Let’s raise the bar! M The views expressed herein are those of the author.


Business. Leaders.

L&F il001M

We help develop both.

Auckland. Wellington. Sydney. www.ilume.co.nz


LEADERSHIP LESSONS

ANZ & National

Leadership lessons from the merging of two banking icons Two million customers, 8500 employees, over 400 IT systems, two very different brands and a thousand ways that it could have gone very wrong. But, despite inevitable niggles, by any measure it was a smooth transition – the result of strong leadership. Amanda Schaake speaks with ANZ CEO David Hisco.

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he most important phone call of David Hisco’s career came just after lunchtime on October 27 last year. At the other end of the line was ANZ’s chief operating officer Craig Sims. After two years of planning and build work by a team of hundreds of specialists across three countries, New Zealand’s biggest Information Technology integration was as ready as it would ever be. “Permission to go, Mr Hisco?” Sims asked the ANZ CEO. The stakes were high. ANZ, New Zealand’s largest bank, was moving more

32 | management.co.nz | JULY 2013

than 2.6 million customer records, 80 million transactions and $46 billion in funds onto a new IT system. With about half of all Kiwis having a financial relationship with one of ANZ’s brands, the effect of getting it wrong would be felt across the economy. But as he gave the green light for the conversion to proceed, Hisco was confident. “In the lead up to the change we kept going back to the six Ps,” he says. “Proper prior planning prevents poor performance.” The IT integration was the successful conclusion to one of the biggest changes

in the New Zealand financial sector in at least a decade. A month earlier Hisco had announced that ANZ would be bringing the ANZ and National Banks together – in brand and in infrastructure. Banks are, by nature, big and conservative organisations. They don’t make change for the sake of it and don’t usually have a reputation for innovative leadership. But Hisco, 49, had arrived in New Zealand as ANZ’s new CEO in 2010 with a reputation for making the hard calls. On a previous stint in New Zealand in


LEADERSHIP LESSONS

the 1990s he sorted out UDC Finance and in Australia, he turned asset finance arm Esanda into a sustainably profitable unit. Strong strategy, backed up by clarity of message and ruthless execution. Merging ANZ and National Bank had been on the cards since ANZ bought the brand from Lloyds TSB in 2003. National Bank was a much-loved brand, well regarded for its strengths in customer service and internet banking. At the time it was thought that operating the two brands would enable better market segmentation, capturing a greater share of the market. But over time the combined market share dropped from about 40 percent to about 30 percent. “We had the ridiculous situation where we had branches across the road from each other with the brands competing against each other for customers and forgetting we had the same shareholder,” says Hisco. “The onset of the global financial crisis in 2008 showed that this strategy left us exposed. At a time when banks in Europe and the US were falling over, we realised that it was vital for us to be as strong as we could be – and we couldn’t do that with two brands and all the duplication and cost that brought with it.” “The natural advantage we had of size and scale wasn’t being used.” THE ROAD TO SIMPLIFICATION The strategy was to be New Zealand’s best bank by radically simplifying the business, stripping out duplication and focusing resources where they could be most effective in delivering better products and services for customers, achieving efficiencies, improving technologies, and making the bank lighter on its feet to respond to a rapidly changing banking environment. Such fundamental change required the buy-in of about 1.7 million customers, more than 8000 staff, government and regulatory officials, media, unions and

influencers. It also needed a leadership style that included a clear vision, an ability to engage across a wide range of groups and an understanding of the deep links people had with the brands. Moving such a large group through a change curve couldn’t be done singlehandedly so a decision was taken early to have a decentralised approach of engaging local leaders and managers. They – and not head office – were going to be the agents, the ambassadors, of change.

They – and not head office – had to be the heroes of our change.” SHARING THE VISION The de-centralised engagement approach is one that builds on research by Towers Watson (Towers Watson and Tom Lee, Arceil Leadership Communications). According to the management consulting firm, employees receive 61 percent of their information from leadership, 32 percent from systems and processes and

If you want to deliver something big you need to trust your leaders. “If you want to deliver something big you have to trust your leaders,” Hisco says. “Having spent much of my career outside of head office, I’m well aware of what can happen when head office rolls out initiatives without proper engagement with the front line. You might get a result but you’ll never really ignite a workforce from behind your desk. “In all honesty, some days I did feel a bit out of control, but the sheer scale of the change meant we needed to decentralise our engagement approach.” Hisco understood that the strong relationships the brands had with their customers were forged and maintained in the branches. “The relationships customers had with the people behind the counter, the people they saw every week at kids’ sports, and who they turned to for advice, was stronger than the colour blue or green. These relationships transcended brands because they were personal, and they are at the heart of an organisation such as ours. “Having customer-facing staff engaged and believing in the change was vital.

only seven percent from formal corporate media. The role Hisco and his executive team took was laying the groundwork. They covered the length of the country stopping at branches to meet the teams. They hosted road shows across the country’s main centres (open to all staff, not just management) to share their vision for the change and to take time to listen to front-line staff ’s concerns and questions. These sessions provided the first opportunity for many ANZ and National Bank employees, who had previously been deliberately kept apart, to meet. “Some of our people had been living two doors down from each other for years and working across the road with a different coloured sign above the door, and they didn’t know each other,” Hisco says. “Once they started talking to each other they could see the benefit of working together. Sure, some people were really loyal to their own brand but when the majority are in favour of getting on with the change they help the others to get on board with it.” JULY 2013 management.co.nz | 33


LEADERSHIP LESSONS

ANZ CEO David Hisco on leadership I’m an optimist. I have to be an optimist to take on a project like this and believe it’s going to work. Some of my early managers in banking were quite inspirational. One or two that let me loose to meet customers and make decisions. They coached me and improved me. Those were the times I excelled, when I was given the reins to do the job. There’s no room for bureaucracy in leadership. I believe key leadership traits would have to be strong customer focus, great relationship skills, decisive and clear about what you will and won’t do, being approachable and optimistic. Communicate well. You need to be straight up with people and tell it like it is, even with difficult messages. Sometimes people won’t like it but most will respect it and understand where you’re coming from. Far too much time is wasted in organisations trying to interpret what the boss is saying. Finding balance and tolerance is important as a leader. Supporting people when they get things wrong once or twice. Three or four times though and they’re sacked. I’ve been back and forth from New Zealand since 1998 and I’ve always thought I wanted to get my hands on this business and have a crack at it. I enjoy a lot of aspects of my job, from the day-to-day variation to the satisfaction of helping develop people within the business. You get to the point in your career where 34 | management.co.nz | JULY 2013

it’s no longer about where you’re going but about where the people you think are talented are going. Leadership isn’t a good career choice for a control freak. You’re responsible for a lot of things that are out of your control. The trick is to manage the risk and lead the person, not the other way around. Thankfully there’s not much that keeps me awake at night. If there was I would question my ability to be a CEO. Balance in life is important and you need friends, family and time away from your job. Although when the US Masters and British Open golf is on, I do stay awake at night… We still have a lot to do: working on our strategic plan for New Zealand; growing the bank even further. I love a challenge, I like working with good people and I get that here at ANZ. Any job after this is going to need to tick a lot of boxes. I see a lot of miserable people around managing businesses which is a shame. Just because we’re running a business doesn’t mean we need to be robots. Fun and laughter is an important ingredient in any day. If I could step back in time and have a word with myself 30 years ago I’d tell myself: “you can’t do it all on your own and you shouldn’t try”. You need to work out who you are going to trust and get your team right early. Nurture your team and have fun along the way. 

David Hisco.

With the National Bank brand on license from Lloyds, and that license about to expire, employees had lived with the prospect of a brand change for some time. For many, the realisation that change was coming was a relief. “I was pleasantly surprised. A lot of our teams just wanted us to make things happen. When we met the staff the overriding message they gave us was they were up for the change and just wanted us to get on with it. “People smell indecision in leaders – it undermines you and the organisation.” TALKING CHANGE, BELIEVING IN SUCCESS That early engagement led to a catch 22 of sorts. While the brand change had been rumoured for some time, preparation work for the ANZ board’s decision had to be kept within a tight circle to prevent competitors taking advantage. Early engagement with leaders across the organisation meant non-disclosure agreements for 100 staff, but in the final week before the change that grew to a few thousand staff as branch managers were briefed. Hisco believes the fact so many people kept schtum so long was a testament to the fact they had bought into the vision and wanted the brand change to be a success.


LEADERSHIP LESSONS

What happened next was an accomplishment in logistics. Briefing packs were provided to all key leaders and relationship managers to guide them through potentially difficult customer conversations. The leadership team conducted phone conferences and online chat sessions with all staff. In the 24 hours after the brand announcement, relationship managers made more than 100,000 phone calls to their key customers to talk through the change. Over 8000 hours were spent holding direct conversations with customers. Hisco credits his optimistic leadership team with turning those potentially difficult telephone conversations into relationship-building opportunities. In addition, the outcome of the calls was not just customer awareness of the brand change, but an increase in product sales. The brand announcement was swiftly followed by ad campaigns and relentless internal communications sharing the success stories. “We developed the plan and made our decisions based on 30 years of banking intuition,” Hisco says. “I changed the leadership team early on so we have the right team in place and then we put in the ground work to get closer to the front-line to understand what the change meant for them. Staff can see straight through the crap. They just wanted us to make decisions, be as open as we could be with them and get on with it.” TEETHING PROBLEMS A month later, the ANZ and National Bank IT systems were merged. Such an epic change didn’t occur without a few issues. Most core system changes take around two years, but the original plan was to merge the systems in late 2011 meaning the project would complete in under a year. The tight deadline galvanised many in the organisation into action, but it became clear as the deadline approached that much more testing needed to be done.

The drive to act as quickly as possible meant conflicts in priorities between New Zealand and Australian IT teams were overlooked, corners were being cut, planning wasn’t as thorough as it should be and there was a lack of leadership in key parts of the programme. Hisco and the team made the tough call to halt the merger. The business regrouped and entered a stage of re-planning - strengthening resources in key areas, enhancing risk management and making changes to the project team. The changes, although adding intense pressure, paid off when the migration took place with almost no loss in system availability. COMBINING THE BEST OF BOTH BANKS As expected, competitors tried to take advantage of the brand change to poach National Bank customers. ANZ was ready for this to the point where its marketing team had prepared a series of fake competitor ads to show teams what they might be up against. And counter-attack plans were developed by the bank. Despite fierce targeting by competitors, ANZ has minimised customer losses and avoided a dive in staff morale seen in many corporate mergers. In fact deposits and lending market share increased in the first quarter of this year, there has been no significant increase in staff turnover and staff engagement remains at all time highs. “We run a group engagement survey annually and measured employee sentiment regularly before, during and after the migration. It was by far the largest period of uncertainty and change and yet our people were supportive of the change. They told us that it felt like things were on the move and the bank was making progress. And we could see this in their behaviour. “Communication and feedback from the front line was more open and frequent and new product sales were up.”

Integration by numbers One management structure • 8500 employees and 17,000 shareholders in New Zealand. • More than 130,000 training hours for staff members. • No dip in employee engagement levels. One customer approval process • 2.4 million customer letters to advise of change. One product set • Over 320 products simplified to under 100 core items. One brand • 2.6 million customer records. • 500,000 security records. • 80 million transactions. • $46bn funds under management. • No loss in market share and customer numbers. One technology system • 290 pre-integration system updates released. • 37,000 test scripts • 4 dress rehearsals and 1 back-out rehearsal to get migration right. • Over 400 core systems simplified down to 270. • The bank was balanced to the cent.

So if getting leadership out from behind their desks was a key success factor for ANZ, how does Hisco feel it went? “It was brilliant,” he says. “I’m actually really proud of my executive team who took real accountability for their individual work streams; they got out there and got the job done without fuss. And I’m even more proud of our front-line people. They stood up to the fight, stood up to all the negative media and they held onto our customer base. They didn’t do it because of the sign above the door but because they wanted to defend their turf and they’re loyal to the customer. “You can’t ask for better than that really.” M JULY 2013 management.co.nz | 35


FACE TO FACE

George Adams

“No compromise” on safety The Coca-Cola high flier with the soft Irish lilt reflects on his nine years at the helm of the New Zealand operation, and on the challenges faced by NZ business in general. He shares with NZ Management the satisfaction he found in making a difference to employees' lives by introducing new health and safety measures as a result of his involvement in the Business Leaders Health & Safety Forum.

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he very affable departing boss of Coca-Cola Amatil (CCA), New Zealand & Fiji, doesn’t come across as someone who courts controversy. George Adams was in the news however, earlier this year, stating his view that New Zealanders’ attitudes to big business were stifling growth and damaging for the country. Too few Kiwi business owners were willing to take the risks to grow their 36 | management.co.nz | JULY 2013

businesses into bigger, export-driven organisations, he opined. Genial and mildly-spoken, you get the feeling he doesn’t come out with a controversial statement without a great deal of forethought. But there is no doubting his business smarts, honed through 24 years immersed in the commercial world. He’s had senior financial management roles mainly in FMCG with various Coca-Cola entities around the world, but had a three year term with British Telecom from 2000


FACE TO FACE

to 2003 prior to coming to New Zealand for his nine years with CCA. The business acumen is tempered with an awareness of social and ethical issues that have seen his active involvement in the Business Leaders Health & Safety Forum and as a mentor on the Auckland Chamber of Commerce Diversity Trust Programme. CCA has an active, multi-faceted programme to identify and fast-track female talent and aims for its top stream to be around 50 percent female. The multi-national also wants the number of women in its 40-strong senior leadership team to rise from 35 percent to 45 percent. His concern for New Zealanders’ attitude to big business stifling our potential stems from his passion for commerce. “What gets me excited? It’s generally people and succeeding. I find the commercial world genuinely exciting.” And he likes to give back. Although generally “not a joiner” and selective about what he signs up for, Adams has been on the NZ Food and Grocery Council since 2006 and chairman since March 2009, driving membership growth by one third and income by 75 percent since he took office. It’s a voluntary role but one that takes a lot of time. And for the past three years he’s been heavily involved in the Business Leaders Health & Safety Forum. He’s part of the steering group established to ‘stepchange’ the leadership capabilities of New Zealand’s top companies and executives in order to address our poor occupational health and safety record. “The health and safety arena seems mundane, but I’ve seen the benefit of getting very hands-on. I’ve enjoyed the engagement with people and learning something I didn’t know much about. “People have been very open in sharing their time and knowledge,” and he found the experience of implementing changes that can have an enormous impact very uplifting. Adams got involved with the forum after attending its launch and being genuinely surprised at New Zealand’s

bad record for workplace safety – “and recognising that I’m part of it”. He committed to getting involved and discovered that you didn’t need to know a lot to make a difference. (See article on the Business Leaders Health & Safety Forum, page 40.) “The forum is good for peer learning and the opportunities it presents to meet with like-minded people and get feedback. It’s been truly transforming for the workplace.” Very quickly he figured “how big a

deal for people” this [health & safety] was and the opportunity to show that “you give a damn”. “In business terms the ‘burning platform’ for change is really ugly in safety. You can’t use that natural springboard for change without a death,” said Adams. “We had a worker [paralysed in an accident on an Auckland building site in 2007] come and talk to us, together with his son. He told the story of what happened to him for the first time. It was

Leaders: how good is your safety performance? The Business Leaders Health & Safety Forum recently launched a '360 assessment tool' that enables leaders (for the first time) to benchmark their performance as safety leaders against world-class standards. "The tool essentially shines a light on blind spots leaders might have about their performance, and gives practical suggestions on how to improve. We've had really good feedback from members about the tool," says forum executive director Julian Hughes. The expanded tool enables the 360 assessment of a CEO’s safety leadership performance to include input from peers, direct reports, and managers/boards, as well as the CEO themselves. The original version released in 2010 – itself a ground-breaking worldclass CEO Safety Leadership Assessment – was solely a self-assessment. "Having completed the assessment myself I found it provided me with a very clear view of my performance on safety leadership," says George Adams, managing director of CocaCola Amatil NZ and chair of the forum's Leadership Development Working Group. Every good CEO understands the importance of self-awareness, and that we all have blind spots, Adams says. "We all have areas where we think things are going better or worse than they really are. For me, this 360 assessment was an effective way to shine a light on those blind spots – to identify the gaps between how I saw things and what others perceived." Identifying those gaps is the first step towards closing them, he says. The assessment measures CEOs against key characteristics of world-class CEO safety leadership, and rates their maturity as a safety leader. Members who complete the online assessment get a confidential report outlining their strengths and weaknesses, and suggesting practices to lift their performance. They also have a face-to-face follow-up session with the workplace safety psychologists who developed the assessment for the Forum, Dr Hillary Bennett and Dr Philip Voss. "I found this session really useful," Adams says. ‘Like most CEOs, time is something I’m short of. But the face-to-face format meant I had someone there who could efficiently decode the feedback and help me home in on what I needed to do to improve my safety leadership." Prior to the forum developing the assessment there was no resource that articulated what it means to lead on health and safety – or that enabled CEOs to benchmark their performance. The assessment is available to forum members at a cost of $1000. Contact Julian Hughes, hughes@zeroharm.org.nz.

JULY 2013 management.co.nz | 37


FACE TO FACE

NZ should focus on having a ‘safe food source’ brand. raw for him and his son. He spoke to 45 people for three quarters of an hour and you could have heard a pin drop. It was excruciatingly painful – but helped us to figure out that people change if they have the motivation. “Mine was personal. I was personally committed that we (CCA) wouldn’t compromise [on safety] for profit or anything else. The journey has been great; we’ve made mistakes but we’re moving forward. The team is engaged, with a great relationship with the All Blacks (promoting fitness training). The manual handlers have set up strength training and we haven’t had a workplace injury since.” Adams said he would wake up at night thinking about CCA having 500 vehicles on the road at any one time, and with New Zealand’s statistics he thought he was bound to be attending a funeral. “Thankfully it didn’t happen.” The company introduced a driver safety initiative. As a “lively driver” with an interest in motor sports, Adams did the programme first. It was made available to staff and their families who wanted to offer it to their teenagers. Although concerned about New Zealanders’ willingness to drive business growth, he concedes that the environment 38 | management.co.nz | JULY 2013

for doing business here is good. “You can pick up the phone; people are more accessible. They’re generally honest, trustworthy and pretty straight. It’s easier to cold call here; to contact the CEOs of sister organisations. You shortcut the nonsense.” There are lots of challenges in New Zealand’s future if we want to maintain or build the standard of living we expect as a first world nation. We need a capital base that is hard to attain with such a small population. With such a small domestic market companies have to export to gain any scale. The ‘tall poppy’ syndrome creates barriers to success and you get big by being good. “Manufacturing is always going to be tough. CCA invested in superior equipment – the best that money can buy. But we’re never going to be as efficient as elsewhere because we don’t have the population to justify running it 24/7. We just have to be more intelligent about how we do it.” He is adamant that New Zealand must act in its own best interests. “The government has done a good job of creating a level playing field [in terms of trade] but other countries you’re competing with aren’t bothered about that. The US will

do what is in the best interests of the US, for example. “You’ve got to back agriculture, technology, design – find ways to protect your brand and advantage New Zealand. “New Zealand should be focusing on creating a safe food source. Look at the impact of the milk powder scares. You would be well-placed if you took a national approach to a ‘safe food source’ brand. There needs to be rigour around that; the global market is challenging – but it’s something you could trade on.” And what’s next on the Adams agenda? NZ Management spoke with him at his Remuera home which he and his wife were preparing to sell, although with “no immediate plans” to return to his native Ireland. His children, Rebekah 15 and Lucy 11, have “enjoyed being Kiwi kids, enjoyed school and thrived here” but have 21 cousins back home to welcome them should the family go back to Europe. Although he plans a break and to do some travelling he’s already considering his next career move and you can’t imagine him taking it easy for long. His home is comfortable, but not showy. What stands out is how tidy, controlled and organised it is – one suspects that is the same in every aspect of Adams’ work and home life. Although the week had been stormy, not a leaf dared to stray on to the patio and the grass and edges were neatly maintained. “The gardener?” we queried and he looked genuinely surprised. “It takes no time,” he responded. This master organiser’s considerable skills are transferable but he still has passion for the FMCG sector and mentions Information Technology. With accounting training and background he has managed some major business information system implementations and integrations and had a period as CIO of one of the Coca-Cola entities. It would be great to harness that expertise and enthusiasm for commerce in another New Zealand enterprise – perhaps an SME with the courage to go global that needs the right CEO to take it there. M


Safety leadership comes down to what you think about the people who work for you – how important is their safety to you, and how does that rank against your other priorities?

Are you a world-class safety leader?

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he Business Leaders’ Health and Safety Forum supports senior executives to become better leaders on health and safety. Our 360 Safety Leadership Assessment enables senior leaders to benchmark themselves against world-class safety leadership practices. It was designed by leaders for leaders. Every good leader understands the importance of self-awareness, and that we all have blind spots. This 360 assessment shines a light on those blind spots. It shows up gaps between what the leader thinks and what others perceive. The assessment also gives practical tips on how leaders can close those gaps – and help keep their people safe.

I helped ‘road test’ this tool to ensure it resonates with CEOs and managing directors. It provided me with a very clear view of my performance on safety leadership. Even better, it provided me with some practical guidance on what I can do to become a better leader in future. George Adams

Managing Director, Coca-Cola Amatil NZ

This is an excellent tool for those motivated to improve their leadership and effectiveness in the field of workplace safety. It provides a very useful report card on your leadership competencies in a range of domains as well as good advice on how to continue to lift your game. Well worth the time and investment.

I was able to identify practical ideas and next steps. Chris Caldwell

Managing Director, People, Culture and Services, Fonterra

Roger McRae

Managing Director, McConnell Dowell Constructors Ltd

Find out more at

www.zeroharm.org.nz S A F E T Y L E A D E R S H I P I S A B O U T W H AT L E A D E R S T H I N K , D O, S AY A N D M E A S U R E


HEALTH & SAFETY FORUM

TOP CEOS DO BATTLE ON SAFETY – attacking NZ’s poor workplace accident record

A group of business leaders have said “enough is enough” and the buck stops here – with them. The Business Leaders’ Health & Safety Forum is an initiative from some of the big industry players most impacted by our poor safety record relative to other developed nations. With government support they’re addressing one of NZ ‘s most intractable, and shameful, industry statistics.

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et a group of high-level CEOs working together on a very big problem, like New Zealand’s appalling workplace death and serious injury record, and you will get action. The Business Leaders’ Health & Safety Forum was set up to motivate and support business leaders to get more involved in health and safety in their own organisations, and across New Zealand via their industries and supply chains. Their vision is for all business leaders to be passionately committed to achieving ‘zero harm workplaces’. Their focus is to make workplaces safer by growing world-class safety leadership in New Zealand, and by leveraging the combined skill, influence and resources of members. The forum was launched just three

40 | management.co.nz | JULY 2013

years ago by Prime Minister John Key and now has about 140 members who are all CEOs or senior executives in significant New Zealand enterprises. The list is a ‘who’s who’ of the largest retailers, building, energy, engineering, forestry, manufacturing and logistics companies. Together they comprise a significant chunk of New Zealand’s commercial activity and cut across many of the businesses that have the biggest safety issues. T h e i r v i s i o n f o r ‘ ze ro h a r m workplaces’ is a big ask given New Zealand’s poor workplace statistics. Forum chair Rob Jager, also chair of the Shell Companies in NZ and GM of Shell Todd Oil Services, was appointed by the government as chair of the Independent Taskforce on Workplace Health & Safety. “Our national statistics are sobering, unacceptable, and ultimately unsustain-

able,” said Jager in the taskforce’s report. Over 100 people die in New Zealand each year from workplace accidents. Between 700 and 1000 people die as a result of gradual work-related diseases, and 6000 plus people notify the Ministry of Business, Innovation & Employment of serious harm incidents in their workplace. New Zealand’s workplace injury rates are about twice that of Australia and about six times that of the UK. Jager said the emotional toll on the individuals and their families was huge, but also the economic and social cost of workrelated injuries to NZ was about $3.5 billion a year. The forum is a significant game changer for CEOs: making safety leadership a core competency for business leaders and first priority in their businesses.


HEALTH & SAFETY FORUM

Several critical drivers of change have combined to create what the forum believes is “a once in 20 year chance to make substantive impacts”. The government has provided additional health and safety funding – $37 million over four years – to strengthen and transform the regulatory approach, increase the capability and number of frontline health and safety inspectors, and support targeted health and safety initiatives. And the government set a target of a 25 percent minimum reduction in workplace serious harm and fatalities by 2020, with an interim target of 10 percent by 2016. The taskforce headed by forum chair Rob Jager reported in April, and offered ways to fix New Zealand’s “broken” workplace safety system, says Julian Hughes, forum executive director. “The forum strongly supports the taskforce call for an urgent, sustainable step-change on harm prevention activities and agrees that our current performance is not acceptable.” Both the Pike River Royal Commission and the internal inquiry into the former Department of Labour found that problems with workplace safety ran much deeper than actions or mistakes by individuals. “They found that New Zealand’s health and safety system is suffering from systemic failure. The taskforce report supports these findings and offers ways to start fixing these systemic failures.” There is no single failure so a sustained approach is needed across the system. That’s the step-change needed. “Tinkering around the edges is not going to prevent another Pike River,” Hughes affirmed. “Business leaders are the key to the success of the proposed changes… If we want safety to be a priority in our workplaces then it must be a priority for our directors, CEOs and senior managers.” The forum makes the point that

Lessons from the London Olympic build Lawrence Waterman oversaw an event that was unique in the history of the Olympics. Waterman was head of health and safety during construction of the massive London 2012 Olympic complex. Throughout construction a huge emphasis was placed on keeping people and the environment safe. As a result, London became the first Olympic build in history where no workers were killed. The project had an accident frequency rate of 0.16 per 100,000 hours worked – well below the UK building industry’s average rate of 0.55. What the London Olympics showed us is that deaths and crippling injuries aren’t an unavoidable consequence of work, Waterman says. “It is possible to do it safely.” During a recent visit to New Zealand Waterman talked at a Business Leaders’ Health and Safety Forum event about the pivotal role leaders play in improving safety among contractors. He recounted an event that occurred early on in the construction, when contractors discovered potentially dangerous contamination during a tunnelling operation to take power lines below the ground. As you’d expect, the Olympic Delivery Authority (ODA) – which oversaw the construction – was under a fair amount of pressure to get the complex completed on time. Moving the power lines was essential to get to the next stage of the work. Despite that, the ODA decided that tunnelling would stop until an occupational hygienist confirmed the work arrangements

health and safety leadership, knowledge and practice are variable among our senior leaders and there are limited opportunities for development. Many leaders want to improve health and safety but they don’t know how to influence outcomes and build a safety culture. They struggle to find the time for personal development and only a few

had been changed so work could be done without making anyone sick. That took several weeks, Lawrence Waterman. but then the work recommenced safely. “By stopping work like that the directors of the ODA sent a very clear message that the safety of people was their number one priority. They didn’t have to make any more speeches about health and safety being important after that. Everyone already knew it.” This story illustrates one of the key factors in the success of the London Olympic build – visible leadership, Waterman says. He’d advise any leader wanting to impress on their employees and contractors the importance of health and safety to come up with a reason to briefly stop work on the site. “Go into the workplace and congratulate people on some good things you see. Then find something you don’t like and call work to a halt. Bring everyone together – even if just for a few minutes – and tell them you’re worried about their safety and what the problem is. Keep it positive and don’t make it personal.” Your actions will have a far greater impact on people’s behaviour than anything you might say or write. For more information on health and safety and the London Olympic build visit: http://learninglegacy.independent.gov.uk/ themes/health-and-safety/

see Zero Harm as an achievable target. And worse, safety leadership is generally not seen as a desirable competency or part of the CEO’s role. Safety is generally led by middle management and CEOs don’t appreciate or acknowledge the important role they can play. And that is where the forum comes in. M JULY 2013 management.co.nz | 41


HEALTH & SAFETY FORUM

Fletcher Building commits to ‘zero harm’ By John Beveridge – CEO Fletcher Distribution/PlaceMakers 2002 was a watershed year for health and safety in the Fletcher Building group of companies and as a general manager with John Beveridge. the company at the time it had a big impact on me. Fletcher Building is one of New Zealand’s biggest listed companies, with 20,000 employees in 100 sites over 40 countries. In 2002 there were two separate fatal incidents at a Fletcher business, Pacific Steel. Two contractors were crushed when steel dropped from a magnet crane and four months later an employee died after falling from a mezzanine floor. At the time I was working for another Fletcher company, Fletcher Easy Steel, and those three tragedies had a profound impact on my attitude towards safety leadership. When I became the general manager of Pacific Steel in 2007 I was determined to bring a clearer focus on health and safety to the company. Some of what we did was pretty straightforward. We cleaned up the site and removed hazards. We made sure people used protective clothing and equipment. We also worked hard to get better engagement from staff on health and safety. This led to initiatives like a Weight Watcher’s programme, where our staff lost 1000kgs as they got fit for work. We dramatically improved our business performance to produce record earnings

42 | management.co.nz | JULY 2013

which were far in excess of previous performance levels. Engagement lifted and we became “the little mill that could”. Staff morale reached an all-time high and safety leadership was embraced. I maintained this focus on safety and engagement when I became chief executive of another Fletcher company, PlaceMakers, in 2009. I did this because in my experience, if you can’t get employees engaged on health and safety you won’t get them engaged in any other initiatives aimed at improving your business. Fletcher Building is committed to working towards a goal of zero harm workplace. The company has invested millions of dollars across its businesses over the last nine years to drive progress towards this goal. Last year it began rolling out a “human factors” training programme to managers that aims to help them understand the way employees make decisions, and the impact this can have on safety. ‘Human factors’ refers to all the things that can affect an employee’s behaviour – like their workload and work environment, their skills and attitudes, and the culture and work patterns in their workplace. It recognises that people make mistakes, and that understanding the ‘human factors’ involved in these mistakes can help prevent them recurring. When an accident happens blaming the individual involved might be emotionally satisfying and legally convenient. But it gets you nowhere. Accidents happen because the defences we put in place to stop them didn’t work. So a far more useful response is to ask ourselves how and why these defences failed – and what can be done to prevent this happening again.

A second significant initiative uses the information gathered from investigations of incidents and near misses to improve our safety defences. The Incident Cause Analysis Method (ICAM) is an investigative method that aims to identify all the things that led to the incident. This includes problems relating to people, the environment, equipment, procedures and the organisation itself. The beauty of ICAM investigations is that you can use the findings to build multi-layered defences against accidents. That way if your defences fail at one level – say your equipment fails – any accident will still be prevented by defences built in at another level – ie safety checks or back-up systems built into your procedures. Fletcher Building has made enormous progress on health and safety in recent years. Our total recordable injury frequency rate (TRIFR) has gone from 60 per million hours worked in 2005 to less than 8.5 in 2012. While it’s too early to say how the Human Factors and the ICAM programmes will affect our safety performance, they’re already helping us design better defences. For example, the human factors approach led to a change in the way we work with saws at PlaceMakers that has reduced hand injuries by 80 percent. This change cost us about $10,000 per site, but across 60-plus sites and 2000 employees it led to a big shift in safety performance. I’m determined to keep working on our safety performance because the last 10 years have strengthened my belief that there’s a direct link between excellent safety performance and the success of your business. It’s clear to me that safe businesses are great businesses.


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EXECS ON THE MOVE

Richard Cuthbert has recently been appointed executive general manager of engineering and surveying consultancy Spiire New Zealand. For nearly 10 years he was chief executive of the Mouchel Group in the UK and prior to that he was a managing director with the WS Atkins Group. Spiire is a fully owned subsidiary of Downer, a top 200 listed company on the Australian Stock Exchange. The directors of Blue Star Group (New Zealand) have announced the appointment of Greg Howell as CEO of both Blue Star Print NZ & Blue Star Labels. Howell was with Blue Star between 2002 and 2010, the largest part of that time as general manager of Rapid Labels. PwC has confirmed the admission of Kevin Brown and Andrew Holmes as assurance partners, and Callum Dixon as an advisory partner (operating in both financial risk consulting and financial assurance). Brown is based in Wellington, while both Holmes and Dixon are in Auckland.

Duncan Cotterill Lawyers have announced two senior appointments in its New Zealand network. Karen Overend has moved from Auckland to Christchurch, taking up an associate role. She specialises in property development, including acquisition, leasing, construction and infrastructure. Adam Gallagher is an associate in the Christchurch employment team, focusing on health and safety in the workplace.

The Ministry of Business, Innovation and Employment has appointed Reece Moors as Te Tumu Whakarae, head, of its Māori Economic Performance Unit. Moors, Ngāti Mahuta - Tainui & Ngāti Pikiao, Ngāti Whakaue - Te Arawa, is currently sector manager, Māori industry development, Callaghan Innovation. He was formerly the chief advisor Māori development at the Ministry of Science and Innovation and has managed the Ministry of Education’s iwi partnerships.

Australasian engineering consultancy, Harrison Grierson, has recruited heavily over 12 months for the Christchurch rebuild. Key international recruits are David McInnes - planning manager for the South Island. Nik George is structural manager and a civil engineer from the UK. Ioannis Prionas is team leader, structural engineering. He has significant experience in seismic isolation of bridges and structures, seismic retrofitting and structural dynamics.

Deloitte has announced the appointment of 10 new equity partners, which brings the firm’s total number of equity partners across its six offices in New Zealand to 89. They are consulting partners Darren Wood (Wellington) and Hamish Wilson (Auckland); corporate finance partners Linda Meade (Wellington) and Richard Dorset (Auckland); tax and Māori services group partner Mark Lash (Wellington); Deloitte Private partner Hilton Joll (Hamilton); and Enterprise Risk Services partner Catherine Waugh (Wellington). An additional three partners were appointed earlier this fiscal year – Deloitte Private and Māori services group partners Murray Patchell and John McRae (Rotorua) and consulting partner Steve Law (Christchurch).

Simpson Grierson welcomes Tim Orsman as business devel and marketing director. Before joining the firm, he was director of strategy and communications at DAC Beachcroft LLP in London.

Super Liquor Holdings has announced the promotion of Martin Bremner to the newly created role of chief executive officer. Bremner has been chief operating officer since 2010.

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EXECUTIVE DEVELOPMENT

For comprehensive listings please go to: http://www.management.co.nz/events.asp

July 16 Governance Essentials. Auckland. Institute of Directors. www.iod.org.nz

5 Mental Toughness. University of Auckland Executive Education. www.exec.auckland.ac.nz

17 Innovation and Collaboration. University of Auckland Executive Education. www.exec.auckland.ac.nz

5 Project Management Masterclass. University of Auckland Executive Education. www.exec.auckland.ac.nz

17-19 Organisations and Management. Wellington. NZIM. www.nzim.co.nz

6-7 Leadership. Auckland. NZIM. www.nzim.co.nz

18-19 Strategic Management (Dip in Management Advanced). Wellington. NZIM. www.nzim.co.nz

6-7 Essential Skills for Managing Projects. Project Plus. http://projectplusgroup.co.nz/ essential-skills-for-managing-projects

22 Managing People and Performance. Wellington. NZIM. www.nzim.co.nz

7 LEAN Thinking. University of Auckland Executive Education. www.exec.auckland.ac.nz

25 Which Top Team (Board or Executive) is the Real Top Team? Christchurch. Organisation Development Institute. www.development.org.nz 25-26 Strategic Thinking. Auckland. NZIM. www.nzim.co.nz 29 Managing People. University of Auckland Executive Education. www.exec.auckland.ac.nz 29-31 Four Quadrant Leadership. Invercargill. NZIM Southern. www.nzimsouthern.co.nz 31 Finance for Non-Financial Managers. University of Auckland Executive Education. www.exec.auckland.ac.nz

August 1-2 Quality Management. Wellington. NZIM. www.nzim.co.nz 4-9 Company Directors Course. Auckland. Institute of Directors. www.iod.org.nz 5 Start NZIM Diploma in Management (Advanced). Auckland. NZIM. www.nzim.co.nz

7 Business Forecasting, Budgeting and Strategic Planning. University of Auckland Executive Education. www.exec.auckland.ac.nz 8-9 Coaching & Mentoring Skills (for Managers). Auckland. NZIM. www.nzim.co.nz

14 Strategy Essentials. Dunedin. Institute of Directors. www.iod.org.nz 14 B2B Social Media Marketing. University of Auckland Executive Education. www.exec.auckland.ac.nz 14 Organisational Thought Leadership. University of Auckland Executive Education. www.exec.auckland.ac.nz 15 Reflective Practice for Leaders. Christchurch. Organisation Development Institute. www.development.org.nz 15 Start NZIM Diploma in Project Management. Auckland. NZIM. www.nzim.co.nz 19 Effective Communication Skills. University of Auckland Executive Education. www.exec.auckland.ac.nz 19-21 & 22-23 PRINCE2 Foundation & Practitioner. Project Plus. www.projectplusgroup.co.nz/prince2certification-programme

8-9 Business Communication. Auckland. NZIM. www.nzim.co.nz

21 Activating and Sustaining Positive Change. University of Auckland Executive Education. www.exec.auckland.ac.nz

12 Business Model Design. University of Auckland Executive Education. www.exec.auckland.ac.nz

21 Strategic Planning. University of Auckland Executive Education. www.exec.auckland.ac.nz

12 Implementing Human Resource Strategies. Wellington. NZIM. www.nzim.co.nz

21 Facilitate and Capitalise on Change and Innovation (DFM). Auckland. NZIM. www.nzim.co.nz

12-13 Accounting for Non Accountants 1. Dunedin. NZIM Southern. www.nzimsouthern.co.nz

25-30 Company Directors Course. Wellington. Institute of Directors. www.iod.org.nz

12-14 Four Quadrant Leadership Stage 2 with Wilf Jarvis. Christchurch. NZIM Southern. www.nzimsouthern.co.nz

27 Finance Essentials. Wellington. Institute of Directors. www.iod.org.nz

13 Governance Essentials. Dunedin. Institute of Directors. www.iod.org.nz

28 Finance for Non-Financial Managers. For furth University of Auckland Executive Education. Rod Myers: 0-9-37 www.exec.auckland.ac.nz bd

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JACQUELINE IRELAND MARKET INSIGHT

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Marketers at the board table

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hat do CEOs really think? It’s a question for the ages. One thing that we do know is that The Marketing Society in the UK studied these big business brains, and found that they overwhelmingly believed bringing the customer into the boardroom was a top priority. But saying it and doing it are two different things. Many other studies have found marketers struggle to influence the top leadership stratum of companies. A study by executive head hunter Norman Broadbent, for example, found that only 50 non-executive directors on the boards of FTSE 350 firms in the UK had any substantive marketing in his or her background. This has a direct impact on the budget allocated to marketers and experience designers, who hear lots of lip service paid to the importance of the customer at the higher echelons of a company, but struggle to get the funds required to connect and engage fully with their customers. Building brands and relationships requires a longterm commitment and investment, and all too often this is sacrificed for short-term shareholder gain. There is a lot more to be done before ‘brand’ becomes truly integral to every business operation; before it completely shifts from the ‘cost centre’ category and into the ‘value builder’ category. This, despite the fact many more CEOs are now familiar with the importance and meaning of brand than they were 10 years ago. Brand valuations are certainly helping the cause by creating a common measure for both marketers and financiers, and ensuring that marketing is better understood and accounted for by the business as one of the key drivers of financial and business success – alongside more direct sales activities and business partnerships. Over the past 30 years, in fact, brand has

become one of the most valuable financial assets of modern organisations. Overall, brand contributes more to shareholder value creation than most other tangible and intangible assets. Recent analysis by Millward Brown Optimor shows that for an average S&P 500 company, the additional value realised by brands amounts to 50 percent of intangible capital and over 30 percent of total company capitalisation. The analysis further concludes that solid investment in strong brands leads to consistently higher share prices. Further, companies with strong brands lose less value precipitously in a recession, emerging with a sustainable competitive advantage. They do this because strong brands provide a cushion against crisis and are a springboard in periods of economic growth. Brand valuation quantifies the financial value that brand and marketing add to the business – crucial for merger and acquisition situations, compliance with accounting standards, and for tax purposes. Furthermore, putting a dollar number on the brand sends a signal to CEOs, CFOs and boards that brand matters – and is, in fact, one of the major financial assets any business has. Yet, as marketers know, brand valuation is about more than a number. It sets up a model of how brand creates value in the business through its impact on the critically-important customer purchase decision. Brand valuation can be used to measure the effectiveness of brand strategy and marketing initiatives by tracking their success in growing a company’s financial value and quantifying the return on investment (ROI) from investment in marketing. In addition, it can help identify opportunities to grow shareholder value by providing useful insights into brand strengths and weaknesses, enabling

management to calculate the financial impact of alternate brand and marketing investment strategies and prioritise the right course of action. MORE PROOF (AS IF YOU NEED IT) The BrandZ Top 100 Most Valuable Global Brands ranking is the only brand valuation in the world to combine analysis of financial performance with the results of detailed research amongst the people who really matter – category consumers of each of the brands being measured and valued. BrandZ uses real consumer perceptions, generated by quantitative research that is updated annually, to determine the role of brand in driving purchase decisions. Despite difficult economic conditions, the Top 100 Most Valuable Global Brands rose seven percent in value in 2013, with that rise spread across most categories. In and of itself, this proves the power of strong brands. But the story becomes even more impressive when you consider brand value growth over that time. The total brand value of the BrandZ Top 100 has improved a whopping 77 percent since the ranking’s introduction in 2006. During the intervening eight years, the stock market value of the BrandZ Top 100 portfolio grew 58 percent, substantially outperforming the S&P 500, which gained only 23 percent. This growth occurred as brands faced unprecedented challenges in a marketplace disrupted by the digital revolution and global recession. In these circumstances, the steady growth in brand value illustrates a fundamental finding of the annual BrandZ Top 100 reports: When the economic tide comes in, strong brands ride the crest of the wave, and when the tide turns, as it always does, strong brands resist the undertow and recover substantially faster.. M Jacqueline Ireland is CEO of Colmar Brunton.

JULY 2013

| management.co.nz | 45


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JULY 2013

Vol 11 No 3

52 The diversity debate 54 Fingers in the till

Judith Hanratty World-class & worried p48

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COVERSTORY

Judith Hanratty

World-class & worried Global governance leader, UK-based Judith Hanratty, worries that corporates are just ‘ticking boxes’ on CSR. She talks to Reg Birchfield.

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udith Hanratty, Wellington’s former constitutional law graduate turned global corporate director, is emphatic that companies and their boards have deeply embedded social responsibilities. Hanratty, in New Zealand recently to add a World Class New Zealand award to her impressive portfolio of gongs, including a CVO and an OBE, is credited with pioneering the concept of corporate social responsible (CSR). She did so when she was British Petroleum’s company secretary at its London-based head office But she now has some reservations about what’s happening to the ideal and practise of CSR. “It’s slipped to become something of a tick box exercise. It should be a much deeper and more meaningful process,” she told The Director when she was in Auckland to collect her Kea global expat network award. Companies, no matter their size, are responsible for their actions in the communities in which they operate, says Hanratty.

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But senior managers and directors seem to be detaching themselves from the meaning and commitment that social responsibility implies. She thinks information technology might be partly to blame for the de-personalisation process. Corporate commitment to communities is, in Hanratty’s view, nothing new. “It goes back to the 19th century. Companies like chocolate manufacturer Cadbury, understood that businesses needed to engage with their communities in a real way. They may have been feudal and patronising, but they understood the principle of community commitment,” she says. However, the anonymity of capital now makes it easy for an enterprise to be detached from the community and its social responsibilities. “There is growing pressure to bring that relationship back together,” she adds. But boards and directors need to do more than simply tick a box. For much of her 28 year stint at BP, Hanrat-

ty pushed the company to record and explain its community involvement programmes. “You are, after all, using shareholder money to do things, so they needed to be explained, reported and accounted for. Directors must explain why funds are used in a wider social context,” she says. “Companies must both act and be seen to act, responsibly. Besides, acting responsibly is nothing more or less than good business.” Allowing CSR to descend into “just another box ticking compliance formality” is, in Hanratty’s opinion indefensibly bad governance practice. “Equating this approach with real governance is wrong. Governance is more than compliance with various rules. It is a holistic leadership activity,” she says. “It’s about monitoring and holding to account. Boards must fully engage and interact with the executive. It’s all about monitoring, coaching and engaging in the process of enterprise.” Governance, says Hanratty, is a difficult and complex task. “It is not simply a high form


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of management. It is often confused with that because so many chief executives move on to boards and forget to take their CEO hat off.” Hanratty was a constitutional lawyer who gravitated to administrative law because the opportunities to practice constitutional law in New Zealand were limited. “Besides, constitutional and administrative law go hand in hand,” she adds. “It means you focus on how things work and making them work better.” So, in the 1970s when the young lawyer who was acting for BP, was offered permanent work she forgot about writing constitutions for emerging states and opted for the corporate world and became a company lawyer. “It was a natural progression,” she says. Hanratty’s rise through the ranks at BP to become company secretary and Counsel to its board in 1994 brought other important governance appointments with it. She was, for example, a director of BP Pension Trustees, chairman of BP-owned multi-line insurer, the Tanker Insurance Company

JULY 2013 | THE DIRECTOR | 49


COVERSTORY

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understand these two critically important functions the board can’t do its job.” The seeds of many organisational problems germinate in the architecture of the enterprise, according to Hanratty. The way in which an organisation is constructed impacts on performance. Directors need to know the detail of an organisation’s architecture, particularly as it grows. “Large businesses invariably create operational silos which prevent boards from getting a clear picture across divisions,” she adds. Some serious local and global issues are regularly attributed to poor governance – such as environmental degradation, corporate corruption and the world’s growing wealth disparity. Does Hanratty feel governance has some house fixing to do on these issues and others like excessive executive and director remuneration? Executive remuneration got out of hand, she says. And she wonders if New Zealand

‘‘

and its other multi-line insurance company, Jupiter Insurance. An upshot of those appointments and of her transformational work on BP Group’s approach to financing cover for rare, severe events was that she won international insurance industry awards and was appointed a member of the Council of Lloyd’s of London and the UK’s Competition Commission and Gas and Electricity Markets Authority. She is currently a non-executive director of reinsurance company PartnerRe (NYSE) and chairman of the Commonwealth Education Trust. Strategy and monitoring its implementation are Hanratty’s board priorities. Boards can’t detach themselves from strategy and, if directors leave it to management they shouldn’t be surprised when things go wrong. “Human nature requires boards to constantly monitor and coach management,” she says. “Left to their own devices managers are invariably captivated by principal-agent rela-

Different rewards come with working in a country like this.

tionships that effectively undermine directors’ authority. Boards that don’t work the coaching role effectively should not be surprised when things go off piste. It’s human nature. Interacting with the CEO and executive team is a skill directors must learn and work on.” Hanratty isn’t unhappy with the governance model. It’s in the practice that things often go awry. To work well, the model needs to do fundamental things like consciously delegate authority to and from the board from the owners and to management. “The model’s still relevant to today’s world but, boards must operate properly,” says Hanratty. “Organisations need strong executive leaders but, boards must clearly define the boundaries within which those executives operate. And boards need to provide the managers with good quality feedback, particularly when there are performance concerns.” Directors who misunderstand their role give Hanratty serious cause for concern. “Boards must be deeply and fully engaged in an organisation’s strategy and understand the risks facing the enterprise. If directors don’t

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needs to link its pay levels to the world scene. “There are different rewards that come with working in a country like this,” she says. “The better and simpler lifestyle has a value of its own. Some of the (remuneration) models used in larger countries simply aren’t appropriate here.” She concedes excessive pay is a governance issue but, she adds, the agents in the process also need to be controlled. “Consultants often contribute to the problem.” She acknowledges however that boards have a responsibility to control recruitment agencies and to be more transparent about the decisions made and the reasons why. “It is not enough to say they had to pay a high salary because someone in Australia was being paid something similar. A follow-the-leader approach is not good governance. Most other countries have access to larger pools of capital from which to pay high salaries.” Hanratty is equally clear on board composition and diversity. “Boards must know what skills they require,” she says. “I’m agnostic about the dress or ethnicity those skills come

in. A proportion of board members should understand the specific business. Boards need strong, independently-minded directors who aren’t conflicted and who ask good questions. Boards need people who have a macro view of society and the detail of say, organisational finance.” She also suggests the pool from which New Zealand might draw directors could reach up to southern Asia. Skills, rather than a perspective by dint of gender or ethnic difference ranks higher in Hanratty’s mind. “It’s more about finding candidates who appreciate what the business is about,” she adds. Does she think many boards and directors spend much time thinking about the ways in which their decisions and actions contribute to some of the world’s troubling social, environmental, political and financial activities? “Well they should do,” she says. “Boards, at least in the northern hemisphere, are spending more time considering the impact of corporate activities. There’s a strong movement toward social responsibility in that sense. Somewhere between the 1980s and now there’s been a strong evolution of understanding of the corporate world’s wider responsibilities. I believe positive changes in board behaviour and organisational governance are happening.” In the context of global perceptions about best practice governance, Hanratty suggests New Zealand try building on its trusted internal reputation. She thinks the relative lack of corruption, respect for the rule of law, democratic processes and system of public administration and deeply rooted respect for the land and natural resources have global currency. But she was distinctly unimpressed with corporate New Zealand’s lack of reporting transparency and officially available commercial detail when she was here. “We tried to look up a company that asked to do business with us and there was nothing there,” she said, genuinely surprised . “If New Zealand wants to deal internationally it will have to address this issue. Boards and directors must be prepared to provide greater disclosure if they want to attract capital or build long term business relationships.” Reg Birchfield is a writer on leadership, governance and management. reg@rjmedia.co.nz


Executive Reward

Why the mighty jump in directors’ fees? by Jarrod Moyle

T

he recent increase in fees for directors of Mighty River Power (MRP) was always certain to capture headlines. A 73 percent increase in fees will grab anyone’s attention, especially when compared with salary increases and CPI movements. Union leaders labelled the increase “obscene”, while the Labour Party claimed it would set a precedent for other State Owned Enterprises. Seen in isolation it is certainly worth asking – is that level of increase warranted? We would argue that this level of increase was only necessary due to the previously very low level of fees paid to the directors of MRP. If director fees at MRP were more in line with the market for similar sized energy/infrastructure companies (regardless of ownership), such a large increase would not have been required. Tony Ryall, Minister for State Owned Enterprises, quite correctly claimed, the increase in fees was “to bring them more into line with comparable listed companies’’. As with executive remuneration, there is a strong positive correlation between organisation size (revenues, assets, market capitalisation) and directors’ fees. Generally speaking, the larger the organisation, the larger the directors’ fees. As the individual is ultimately responsible, and legally liable, for the success or failure of an organisation, the scale of the potential impact on directors increases with organisation size. The failure of a small company will have minor impact, both economically and in terms of the number of people affected, but the failure of a large organisation will have wide and far reaching consequences. Good governance is essential to minimise this risk so it is only fair that directors of large organisations should receive greater fees to recognise the greater risk and responsibility. Organisation size is not the only factor we consider when advising on appropriate directors’ fees. In our research we also see that listed

companies typically pay higher fees than privately owned companies, even being similar sized in similar industries. Ask any director who sits on the boards of both listed and non-listed companies about the relative complexity of each and you will quickly understand why there is this gap. The directors of a listed company face much higher levels of scrutiny from analysts, investors, media and the general public, all of whom are eager to track the success or otherwise of the company. The regulatory and disclosure requirements for a listed company place significant additional workload on both executives and directors, compared with a non-listed company. Special skills and experience are also required for directors to be successful in a listed company. The increased workload and specific skills required of directors provides further justification for an increase in directors’ fees for a company listed on the stock exchange. Finally, when you are starting from such a low base, an increase in fees, which may not be significant in terms of actual dollars, will often translate into a very large percentage increase. Unlike executive remuneration, directors’ fees are often only reviewed every two, three or four years, and we have seen boards that have gone even longer between increases. The result of such gaps between reviews is that there is often considerable and justified catch up required, resulting in large year on year percentage increases, which is why we encourage boards to review fees regularly and ensure they don’t make headlines for the wrong reasons. In our minds, the combination of starting with fees below the market based on company size, and the increased complexity for directors of a listed company, has resulted in a very large, but justifiable increase in fees for MRP. Jarrod Moyle is manager, executive reward, of remuneration and performance development consultancy Strategic Pay.

How well are you paying your Directors? + Strategic Pay provides independent specialist

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Auckland 09 303 4045 Wellington 04 473 2313 Dunedin 03 479 0637 info@strategicpay.co.nz www.strategicpay.co.nz

JULY 2013 | THE DIRECTOR | 51


BOARDROOMDIVERSITY

The diversity

debate

Law firm Minter Ellison Rudd Watts is the sponsor of this year’s Excellence in Governance Award at the Deloitte/Management magazine Top 200 Awards announced late November. Patricia Moore spoke with the firm’s chair, Cathy Quinn, about the relationship between board diversity and governance excellence.

G

ood governance relies on a number of things; diversity is one of them says Cathy Quinn, chair at Minter Ellison Rudd Watts. But, she suggests, that doesn’t necessarily mean more women on the boards of New Zealand’s major companies. Rather than focus on gender or ethnicity, the key is diversity of thought, says Quinn. “One of the things boards need to avoid is, ‘group think’; they’re all from the same background, went to the same school, do the same things. “Diversity of thought is important and when you have people from different backgrounds, then that assists in providing that diversity. You want people who can stand back and think about things individually. But those people need to be able to demonstrate they can add value to a board in a range of ways.” Appointing board members today is about a lot more than ticking the boxes, she says. “The responsibility of directors is significant; the standards expected of them continue to increase and you just can’t afford to have a token anyone.” However, given that the first point of reference is frequently the people they know, the choice becomes limited – although as

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Quinn points out, many boards are now setting criteria and using head-hunters to manage the selection process. “T hey need to fi nd people wit h appropriate qualities that also bring in diversity of thought and experience. That doesn’t mean it has to be a woman or someone of a different ethnicity, although without a doubt, people from other cultures bring a different and valuable perspective.” Quinn would like to see less focus on a requirement for previous director experience as a pre-requisite for appointment. “The mere fact that someone hasn’t been on a board before doesn’t mean they won’t be a good director.” She says partners in major professional firms, particularly accountants, are frequently prevented from taking on directorships but retire with an enormous amount of experience that can make a huge contribution. Experience definitely counts, and Quinn is concerned by the number of younger women she hears stating they want a place at the board table. “It’s not a trophy. It’s a huge responsibility; the liabilities are significant, particularly for listed company boards. You shouldn’t be stepping into these positions until you’ve got enough experience to make

the sort of judgements and contributions required in the role.” They need to look at women like Joan Withers and Sue Sheldon, she says, “great role models who take the job very seriously, read their board papers; they’re intelligent people – but they’re not 30. They’re people who’ve had a lot of experience.” Excellence in governance is essential, s ay s Q u i n n. “ Yo u’r e lo ok i n g a f ter shareholders’ money. Investors are relying on good governance to ensure their hard earned capital is protected. You need good governance to support good management and make a company successful. In order for an organisation to be truly successful you can’t have one without the other.” The quality of governance has come under close scrutiny over the past few years – something Quinn regards as a really positive thing. “It’s actually made it really clear what the responsibilities are; you can’t be asleep behind the wheel, you need to do the hard work, and if you don’t understand the business or the financials you shouldn’t be there.” The case law is “almost liberating” for both professional advisers and directors, she says. “They actually understand their role is


to challenge, not just sit there and take on what the management team or the chairman says and go along for the ride. You have to apply independent thought.” Most good quality boards today carry out individual director and whole-of-board evaluations, often conducted by an external party, says Quinn. These are robust and confidential processes and her observation is that the people who are not putting in the required level of commitment, or don’t have the necessary capability, are weeded out. It’s also up to board members to recognise if someone’s not pulling their weight, she says. “Everyone has to be at their game and if someone’s not you need to agitate for change; you’re exposing one another to too much liability.” Minter Ellison Rudd Watts has made a number of significant contributions in the area of corporate governance – something of which Quinn is “pretty proud”. Their 2003 White Paper on Corporate Governance – updated in 2009 and again last year – preceded a similar Securities Commission handbook and was endorsed by the Commission and the Minister of Commerce at the time. “The Paper sets out best practice principles, based on many years experience working with major companies, and includes interviews with leading New Zealand directors and recent case law.” In 2011, corporate partner Silvana

Schenone wrote the book Duties and Responsibilities of Directors and Company Secretaries in New Zealand, a publication that has received excellent feedback from the directors’ community as it looks at the recent case law and its impact on boards’ dynamics. The firm holds governance symposiums where leading directors and company executives are able to debate governance issues. “Chatham House Rules apply and it gives people the opportunity to ask difficult questions of good senior directors.” Interestingly, embracing diversity was one of the themes to arise from last year’s Wellington symposium where it was noted research shows diversity influences business success. Currently 13 percent of all New Zealand directors are female, and it was agreed that the number must increase if business success is to continue to improve. However, Quinn says, it was agreed diversity is not just about gender. “It is diversity of experience and thinking.” Excellence in governance at top corporate level is essential, says Quinn and Minter Ellison Rudd Watts is delighted to have the opportunity to join the sponsorship team of this year’s Deloitte/Management magazine Top 200 Awards. “Recognising excellence in governance is something we believe makes a real contribution to the business community.”

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JULY 2013 | THE DIRECTOR | 53


BOARDROOMETHICS

Fingers in the till What’s the difference between paying backhanders and smoothing the path of commerce in poverty-stricken parts of the world? In the first of two articles, Ruth Le Pla asks what ethical governance means in different countries.

J

ust over a year ago, Prime Minister John Key signalled his belief that New Zealand’s longer-term economic future will lie increasingly with China, India and Indonesia. Yet these countries rank 80th, 94th and 118th respectively in Transparency International’s most recent Corruption Perceptions Index. The independent study measures the perceived levels of public sector corruption in 176 countries and territories around the world. Here’s some perspective: last year, New Zealand ranked first equal alongside Denmark and Finland. Many of our long-standing trading partners sit comfortably in the top quartile of Transparency International’s list. Australia was seventh, for example, while the UK was 17th and the United States 19th. New Zealand is slowly but surely switching its trading and economic focus from countries at the top of Transparency International’s list to those languishing much lower down. So what does that mean for directors of New Zealand organisations? Most importantly, what if anything must directors change? Is it possible that ethical governance can mean different things in different contexts? And should it? Suzanne Snively, executive chair of the New Zealand chapter of Transparency International, says it’s not just a matter of ranking countries. Her organisation also gathers scores on the perceived level of public sector corruption in each of the 176 countries on a scale of 0-100. China’s 80th place ranking puts it above the mid-point of all the countries measured,

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THE DIRECTOR | JULY 2013

for example, but it scores just 39 on a scale in which a zero signals a country is perceived as highly corrupt and a 100 means it’s very clean. “New Zealand scored 90 out of 100,” she says. “So we’re talking about a huge cultural gap between the ethics of the two countries.” India scored 36 and Indonesia just 32. All of which shows there’s a long tail and a world of difference in behaviours and ethical standards within the country rankings. Snively has just returned from a meeting in Phnom Penh, Cambodia, where the leaders of Transparency International’s 24 Asia-Pacific chapters expressed their “serious concern” about persistent corruption in the region. They urged governments to strengthen their commitment to transparency and accountability, and to step up anti-corruption measures. They also called for urgent action to protect whistleblowers and anti-corruption campaigners in the region. It’s worth noting that Transparency International’s list focuses on perceptions of corruption in each country’s public, not private, sector. Still, the linkages between the two are vital and unbreakable. Jakarta-based reputation management consultant Noke Kiroyan is an advisory board member for NZTE’s Southeast Asia Beachheads programme. He’s also on the board of Indonesia’s National Committee on Governance (NCG), which he describes as the Indonesian equivalent of New Zealand’s Institute of Directors. He notes the NCG realised back in 2004 it needed to establish a strong focus on public governance alongside its existing work on corporate governance.

Corporate without public governance would have minimal impact, he says. “You can’t have one without the other.” Kiroyan sees an increased understanding in Indonesia of the need for good corporate governance. It is fuelled in part by the growing number of corruption cases currently reported in the Indonesian media and under investigation by the country’s high-profile Corruption Eradication Committee, the KPK. Yet cynicism remains widespread, he says, and some people “sneer” when he tells them he runs his own consultancy business on ethical principles: a practice which he says is “perfectly possible although not always easy” to do. Snively pulls no punches in her criticism of New Zealand directors. She believes many of them need to tread far more carefully in their dealings in countries where pressure may be applied to smooth the path of commerce through less than legal means. She says New Zealand directors need to be much more familiar with relevant international law, such as the Foreign Corrupt Practices Act and the UK Bribery Act, and ensure their staff are fully briefed as well. There’s growing awareness of the implications of stepping outside defined legal parameters, she says. “But I’m told by people who are working with companies going into these new markets [in Asia] that, unfortunately, the stopping point is at the governance level. “It’s the directors who are inclined to say, ‘We won’t waste time on soft things like integrity, we’ve got too much to do. We’ll just go straight into the market and if the market [requires] facilitations and backhanders we’ll just pay them.’


“Governance is the problem,” she says. “Directors are being just a bit too short-term in their thinking and not thinking strategically or about the big picture.” Stuart Walbridge, chair of the ASEAN NZ Combined Business Council, says many Kiwis are “quite innocent about how things are sometimes done in Asia”. He’s not applying a right/wrong yardstick. Much of it is far easier to understand, he says, when put into a local context in which public servants are often very poorly paid. “If you’re only paid the equivalent of around $500 a month as some sort of a manager, temptation will always be there.” Certainly, David Taylor, New Zealand’s Ambassador to Indonesia and ASEAN, sees ingrained systemic practices as core to Indonesia’s problems with corruption. “Some people who are ambitious are obliged to pay large sums of money for access to certain fields or positions,” he says. “So they end up perpetuating corruption in order to pay for, and preserve, what they’ve gained.” He also sees poverty as one of the root causes of corruption in a country where around 100 million people earn less than US$2 a day. Some 40 million Indonesians survive on no more than US85 cents a day. “When more Indonesians are earning fair salaries and they don’t have to worry so much about making ends meet, some of the impetus that drives corruption will go,” says Taylor. He believes Indonesia’s structural problems require structural solutions but acknowledges they can be the most difficult to implement. “There needs to be a range of instruments to prevent corruption, ranging from efforts at the top end to prevent people from being tempted to reducing poverty levels at the bottom,” he says. “In between, there needs to be clear education for all, policies that are just and transparent, and enforcement to dissuade people from thinking they can get away with corruption.” To EMA chief executive Kim Campbell,

the issue of corruption in some parts of the Asian region is a huge concern. “I’m so worried that people are going to get so badly burnt,” he says. “Kiwis get so enthusiastic and I love their naive enthusiasm – we can’t kill that – but we’ve got to go into this with our eyes open.” Campbell has considerable experience at both operational and governance levels in Asia dating back to 1978. He has worked in Singapore, Malaysia, Taiwan, Hong Kong, Indonesia and the Philippines in private and public sector organisations. In some jurisdictions corruption is ‘ingrained’, he says. “It’s the way they do things… It’s in everything from traffic, to goods moving around the place… they just run on it… “In New Zealand we have a cultural bias towards fairness whereas in many countries they have a bias towards survival.... You need to take your cultural bias out of these things. If you start getting judgemental and self-righteous then you’re simply in the wrong place.” Ambassador Taylor pins some hope on a generational shift in the region, saying that larger numbers of people, “especially young people,” are becoming unwilling to let corruption be part of their lives. “This is partly an ethical choice and it’s also a product of economic development,” he says. “People want to earn a good living honestly. The wealthier a society becomes and the more good jobs become available, the easier this is.” Snively is a firm believer in New Zealand’s ability to trade ethically with countries lower down Transparency International’s Corruption Perceptions Index. For starters, our public sector is working effectively to maintain its reputation for low corruption, she says. “And by realising the benefits of trading ethically into a corrupt country, New Zea-

land businesses become exemplars, helping eliminate corruption worldwide.” She lists a series of potential benefits to New Zealand organisations of following non-corrupt business practices in overseas markets where others may play to different rules. They’re pragmatically aimed at the business bottom line. Research shows corrupt practices add an average of 35 percent to the cost of doing business in Malaysia, she says. “And surveys also show that ethical companies achieve greater customer satisfaction leading to higher levels of brand loyalty and more sustainable trading revenues over time… “We can talk until the cows come home about bribery and corruption, but for New Zealand the real loss is that our freedom from corruption is our biggest asset; we have such high integrity and we’re not capitalising on it. We’re talking about billions of dollars of lost profitability and lost market access.” Signalling, and adhering to, New Zealand’s stance against corruption is vitally important, she says. “Our GDP per capita keeps falling. This is the way we can grow it again. With the growth in markets in Asia there’s real opportunity for us to do just that.”

Ruth Le Pla accompanied a recent New Zealand trade mission to Indonesia with funding from the Asia New Zealand Foundation. The mission was organised by Export NZ, the EMA and the ASEAN NZ Combined Business Council.

JULY 2013 | THE DIRECTOR | 55


Does your board think

‘Inside-Out’? By Iain McCormick

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THE DIRECTOR | JULY 2013

if directors do not consider the interests of customers. It also suggests that in the strategic planning process the board should work with management in assessing current operations and new opportunities from the perspective of customers. The well-respected London Stock Exchange Good Governance Guide states that boards need the right functional expertise in marketing, finance and people issues. They state that boards must understand customer needs if they are to function effectively. The Guide also suggests that in developing a distinctive strategy the board should ask three key questions: Who should we target as customers? What products or services should we offer them? How should we do this? Despite this advice few boards regularly receive well-researched customer feedback. Lewis suggests that boards should understand the values and drivers of key customer groups and ensure that the brand strategy is effective. Most importantly they need to make sure that the people and culture of the company can deliver a sustained branded service. There are some great examples of companies that have taken the customer to heart and created a culture around this. A classic is the Ritz-Carlton Hotel Company that has the motto ‘We are ladies and gentlemen serving ladies and gentlemen.’ This motto exemplifies both the critical importance of customer service and the dignity of both staff and customers. As a result of its customer focus the Ritz-Carlton gained 121 quality awards from the travel industry in 2010 alone. These include: Best Hotel Chain in the United States, by Zagat Travel Survey; Index Award of Excellence, by Hotel and Travel Index; Alred Award for Best Hotel Chain, by Corporate Travel; and Top Hotel Chain in Ability to Service Meetings, by Successful Meetings.

It is the only company in the hotel industry to receive the prestigious Malcolm Baldrige National Quality Award by the US Department of Commerce and it did this in both 1992 and 1999. The awards result from a very clear customer focus and it is reported that executives in the company devote approximately one-quarter of their time to customer and quality related matters. The customer-centric culture is reinforced by clear detailed performance standards, targeted recruitment based on a match of potential employees to the company culture, a two-day induction programme followed by extensive on-the-job training and a range of recognition and appraisal systems to reinforce the company values. Tellingly, employees are encouraged to act immediately to resolve guests’ problems regardless of the type of problem or complaint. No matter what their normal duties are, other employees must assist if a fellow worker needs assistance when responding to a guest’s complaint or wish. Closer to home Air New Zealand has been transformed from the brink of bankruptcy to one of the most successful, creative and innovative airlines by developing a customerfocused culture. In 2012 it won the Air Transport World – Airline of the Year, the Energy Efficiency and Conservation Authority Supreme Award and the Randstad Award – for being the Most Attractive Employer. There are a raft of reasons why boards of directors need to develop a more passionate interest in customers and in setting a company culture to match. Outside-In is clearly superior to Inside-Out! Dr Iain McCormick PhD is a governance and leadership advisor who heads directorevaluation.com and executivecoachingcentre.com.

Photo: thinkstockphotos.com

M

ost boards are internally obsessed. This can easily be seen in the board meeting agenda. A typical pattern is: apologies, interest disclosures, previous minutes, CEO’s report including key performance measures, risk and compliance issues, CFO’s report, committee minutes, review of actions to be taken and confirming the next meeting date. How much of this typical agenda is internally focused? Does your board think ‘Inside-Out’? It is very common for boards to see the customer as the means to the company’s end – the means to improving shareholder value. These businesses focus on getting customers to do what the company wants! Companies are so often structured around functions or geography and not around customer segments or customer teams. Business processes are driven by products or services not by finding customer solutions. Performance measures focus on revenue and market share but rarely around customer retention and lifetime customer value. Recruitment is so often about technical and managerial experience and not around a passion for customers. Culture is about innovation and improvement but rarely about searching for more customer needs to satisfy. The alternative, says Dave Lewis, managing director of VantagePoint, a marketing and growth consultancy, is to think ‘Outside-In’. This means to shape the company to deliver what the customer wants. Lewis is not alone in thinking about the importance of customers, as many corporate governance guides clearly state the need of the board to focus on the customer. For example the New Zealand Institute of Directors’ Four Pillars of Governance Best Practice makes it clear that long-term shareholder value will not be maximised



NZ Management July 2013