Thirty-Five Talking About Survival 1985

CHAPTER THIRTY-FIVE

Talking About Survival

Whilst issues relating to the Manawatu operation had preoccupied the board during the first few months of 1985, other significant challenges were also testing the directors. Most pressing was the appointment of a general manager to replace Tom Molesworth. Management Services in Wellington had failed to attract any suitable applicants. Two candidates had been interviewed and shown around the company’s provincial operations but both declined to be further considered. Further advertisements reaped six more replies and a shortlist of two, neither of whom had stock and station backgrounds but had ‘proven records of management in other areas’. Both were taken on a tour of the company’s operations and following a meeting with the executive committee on Thursday 13 June a decision was made on the most suitable applicant. On Tuesday 2 July 1985 Mr Derek C. Evennett, the new general manager, was welcomed to the board by chairman Reeve Williams. Although the board had intended that Tom Molesworth provide a period of assimilation for the new general manager before he departed, Derek Evennett preferred to take charge and confront the difficulties head on. Consequently Tom’s exit from the company was relatively sudden and without fanfare or formal farewell. He is fondly remembered by staff and directors as a stalwart of the Farmers’ co-operative movement and a great people person.

Derek Evennett had not in fact applied for the position of general manager of Farmers’ Co-op. He had been convalescing from an operation when he received a telephone call from Ron Borland, principal of Management Services Ltd, who said, ‘I have a job out of left field for you Derek’!

The men had met on a couple of occasions in the past. Following a meeting with Ron Borland in Wellington an interview was arranged with Reeve Williams and Peter Blyde in Taranaki, and the appointment was subsequently confirmed. The person prepared to undertake the difficult task of steering the company out of its present predicament within the current unsettled economical climate would require exceptional management skills and Derek Evennett was left in no doubt about the company’s precarious position after his first board meeting. The new general manager was no stranger to the commercial scene. A chartered accountant,

Derek C. Evennett, general manager The Farmers’ Co-operative Organisation Society of New Zealand Limited 1985–87.

Derek Evennett started with Kenneth Hayes & Co., Chartered Accountants, in the United Kingdom and went on to become chief accountant for D. T. Bullock & Co. Ltd, Civil Engineers, Builders and Developers, before immigrating to New Zealand where he joined Wilkinson Wilberfoss & Co. as an auditor in March 1973. Other positions he had held included company accountant for Grayburn Contracts Ltd, company secretary for Monier Tile (N.Z.) Ltd, and company secretary for Firth Industries Ltd where he rose to the position of corporate planning manager and finally northern regional manager. In this role he took on the responsibility of turning around a part of the company that had been performing poorly. Within one year the area of operation was back into a substantial profitable situation. He had also been an independent financial consultant. Although without experience in the rural sector or farmer-owned-and-operated co-operative organisations, his credentials in management and finance were exceedingly good. He was a Member of New Zealand Society of Accountants (A.C.A.) and a Fellow of the Institute of Chartered Accountants in England and Wales (F.C.A.). The directorate was pleased with the appointment.

Derek Evennett had perused the company’s financials and viewed a set of accounts before accepting the position, so the plight of the company was not a complete surprise to him. However, within a few days, as the true difficulties were revealed, he would describe the situation as ‘quite shocking’. He was soon aware the cost of funding was one of the main issues of the day. It was clear that company secretary Trevor Pope and financial controller Trevor Harrop were wrestling with a multitude of financial difficulties and constantly engaged in investigating alternative methods of funding ongoing projects the present board were committed to complete.

With a new captain on the bridge an immediate change in course was ordered, a raft of sterner measures instituted to reduce the level of debtors to the company, and a number of other radical steps taken to stem the evaporation of funds from the coffers. It was September 1985, and Derek Evennett had been at the helm for one month and received the board’s support to turn the ship into the wind. He was forthright in reporting to the directors at his first meeting as chief executive. In presenting the general manager’s report on the preliminary results for the year, he announced a group profit of $799,000, which represented, ‘a serious shortfall compared with the 11 months profit previously reported (excluding the Finance Company) of $1,170,000’. Furthermore, he said, ‘it represents an even greater reduction compared with the predictions made only 2–3 months ago of a year-end profit of $1,700,000.’

He expressed the view that the board had ‘been grossly misinformed about the true financial position of the group’ and reassured the directors that the situation would not be tolerated and that fundamental and simple procedures would in future be adhered to and an accurate monthly assessment of the group’s financials would forthwith be presented to directors. The discrepancies were summarised:

Profit as reported for the 11 months to 30 June 1985 $1,170,000 Add: Finance Company profits 160,000 Expected Profit July 130,000 Expected year-end profit, based on last month’s Board report $1,460,000 Latest estimated profit $799,000 Shortfall $661,000

Represented by: Under-estimation of interest charges Over-estimation of stock figures Additional losses in Speciality Machinery

427,000 59,320 183,796 $661,000

Revised figures indicated that the group was showing a loss for the year of $204,000. Of the three sections – the main company, wool and finance – the culprit was the main company, which lost $464,000. With market conditions unlikely to suddenly and dramatically improve performance, Mr Evennett decided to concentrate on three areas of the company. One was funds reduction (especially stocks and debtors), with a target reduction figure by 30 September of $4.8 million in stocks and debtors. A second focus was general efficiency, which would be improved by introducing an ‘owning your own business’ syndrome and paying more attention to stock shrinkages, stock mark-ups, the general appearance of stores and control of expenses. Also a ‘will to win’ and ‘to be the best operator’ philosophy was to be introduced and lastly, and regrettably, there would be a reduction in staff. On this matter his report stated: It is appropriate that in considering this action we acknowledge the special responsibility that our Company, as one of the largest employers in the Taranaki region, has to its people. However, we are talking about survival of a company and it is surely better to be able to be confident about the future of say 550–600 employees than doubtful about the future of 700 employees…. The figure of 101 employees is a horrifying one but, again, it is essential if we are to survive. The approach we have taken is recognising people as individuals and ensuring, as much as possible, that the principal home income earners have jobs is best described verbally. He asked for the support of the board in taking these measures and set out the method to be used to achieve the necessary reduction in staff. An embargo on appointing new staff was put into immediate effect and a variety of others measures, including detailed budgeting reports, shareholding and funding proposals were put into place to attain better overall results and control. Of particular significance was the resolution to dispose of the Specialty Machinery division in the Manawatu which had incurred a loss of $378,000 for the year ended July 1985. Apart from the fact that the operation was considered to have little strategic importance, it also had considerable stock that was not suited to New Zealand conditions, for example haybalers that made bales too large to transport on New Zealand roads. As a large user of capital, it was considered not viable on a return-oninvestment criteria. The Specialty Machinery division was to be disbanded and its assets sold. This sale, however, proved more difficult than expected, with protracted negotiations over many months and no satisfactory result. In August 1986 a decision was made to enter into discussions with staff members to see if there was sufficient interest amongst them to take over the business.