All sorts of authorities bang on about our collective productivity underperformance.
But the OECD’s 2022 Economic Survey of New Zealand was explicit, noting that “managerial practices in New Zealand lag behind other advanced OECD economies, holding back the adoption and effective uses of digital technologies”.
“Management boards in New Zealand’s firms are often more focused on preserving existing value and regulatory compliance than on growth strategies that involve productivity-enhancing investments and international expansion,” it said.
“In particular, there is a shortage of board members with rich managerial experience, as opposed to a preponderance of those from accounting and legal backgrounds.”
The Fletcher Building board debacle obviously springs to mind, where, irrespective of the perceived quality of the professional directors, there was not sufficient industry depth.
Two board shakeouts in seven years tell you a lot about a company.
So, too, does the appointment of a new chair from inside the existing tent instead of bringing in a well-qualified outsider with industrial experience to shake the tree.
Again, a boat that should have been rocked wasn’t.
At the recent Institute of Directors conference, Bowen Pan (a recent appointee to the NZME board) identified that New Zealand companies generally lack the ambition to want to win large. They needed to be global and embrace risk.
The OECD had earlier opined something similar: “The deficit in management skills results in low dynamic capabilities, which is holding back New Zealand firms from grasping changes in business environments and investing in strategic intangible capital to capture new business opportunities or respond to threats.”
Some Kiwi companies have flown high on the wings of big ambition: Sir Peter Beck’s Rocket Lab, Craig Piggott’s Halter, and Rod Drury’s Xero, which upset the local broking community when it moved its sole listing to the ASX.
We need to grow many more.
What distinguishes these companies is single-mindedness.
It’s a contestable point that too much time is spent within New Zealand companies these days on things that don’t make the boat go faster.
Former Spark chief executive Simon Moutter recognised this when he slimmed the HR function after coming in as boss of what was then Telecom.
The Wall St Journal reported this week that many US companies were rethinking the “performance review” culture.
They are also rethinking the focus on diversity, equity and inclusion (DEI). This is not simply a Trumpian response, but a recognition that making a profit comes first.
It makes more business sense to post sufficient revenue to keep the team employed in the first place and grow the customer base.
BlackRock’s Larry Fink, who preached to the choir each year in his annual newsletter, has climbed off his DEI throne and is now focused on “stakeholder capitalism”.
Microsoft founder Bill Gates is questioning “net zero” climate emission objectives.
Fundamentally, there is a shift in the US away from “the company as parent” culture, along with the nostrum of “bringing your full selves to work”.
New Zealand has not made this paradigm shift.
But there is no harm in examining what holds our companies back.
This week, the Herald reported that the Government has now begun approving significant pay hikes for members of Crown boards – in several cases, roughly doubling their compensation – after introducing a new set of fees.
Cue outrage, even when the overall fees remain microscopic for the reputational risks involved.
Of course, directors should be paid rates comparable with the private sector to ensure better performance.
The Government boost was well overdue.
Other risks also come from the Crown as shareholder, particularly when Cabinet ministers ream out directors for perceived under-performance.
Hence the debacle over the Health NZ board, when politicians told the former head of IRD she couldn’t read a cashflow analysis (seriously) and when the chair of KiwiRail was framed as having had to resign over a ferry running aground, when he had already tendered his resignation letter to Cabinet Minister Nicola Willis.
This is barking.
The Reserve Bank governance debacle has been a disgrace and a blemish on New Zealand’s reputation.
It is blatantly obvious the former chair – and other directors – oversaw an environment in which head office costs blew out during Covid and beyond.
Willis was right to stamp that out.
But directors need to perform and show mettle.
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