It is all well and good to have leaders to follow; but it is at least as important to have confidence that where they are leading us is where we need to go. By David James
John Howard’s four leaders of the 20th century are:
- Don Bradman,
- former Australian Prime Minister Robert Menzies,
- former British Prime Minister Winston Churchill and
- English royal Lord Louis Mountbatten.
Australians come from poor stock.
The writings on (leadership) are fun, sexy even, with their pictures of heroes and stories that can be our private fantasies. To read (them) is to escape into a private world of might have beens. – Charles Handy, The Age of Unreason
How do Australian leaders rate?
Perhaps the most realistic response is to say that beauty pageants are always an impressionistic affair. Today’s executive super model can easily become tomorrow’s business pariah when fashions change.
In the 1980s, Australia’s commercial stars were considered to be the entrepreneurs who discovered in naked ambition what they lacked in financial probity. In the 1990s, the exemplars were bean-counting hawks who could hack into workforces and reduce companies to the few things they did best executives such as Don Argus, former chief executive of National Australia Bank, and Bob Joss, former chief executive of Westpac. In the first decade of the 21st century, however, the stars are likely to be seen as those who most effectively embrace e-commerce: people such as Evan Thornley, chief executive of the internet company LookSmart.
What might have been
Yet true leadership is finally not a matter of fashion; it is a matter of foresight and wisdom. Evaluating the quality of Australia’s leaders requires taking a longer perspective of national progress and assessing performance not just against what is achieved, but also against what might have been done. In the 1950s, for example, Australia’s economic performance was extremely sound, but many now see the Menzies era as one of lost opportunities because what could have been achieved might have been so much greater at a time when much of Europe and Asia was still rebuilding after World War II.
Viewed in this light, the performance of Australia’s leaders in the 1990s was desultory at best. Where the United States used the e-commerce boom to create the longest period of economic growth since World War II, Australia did little more than balance the books: reducing government debt and, for the most part, corporate debt. Where most countries have become part of international alliances such as the North American Free Trade Association (Nafta), the European Community, Mercosur in South America, the Association of South-East Asian Nations (Asean), or Asean+3 (China, South Korea, Japan), Australia has largely failed to solidify its position in Asia, and it has few options elsewhere.
Where the US stockmarket trebled from its 1987 high, Australia’s rose less than 50% in the same period and its corporate managers concentrated more on providing franked dividends than on aggressive expansion. Peter Farrell, chief executive of the global sleep-products manufacturer Resmed, says: “If you are a high-tech company in the United States, dividends are completely unexpected. Franking [the removal of double-taxation on dividends] kills you because you are forced to give back the money you should be spending on R&D.”
Out the global back door
At a time when many European and US corporations have begun the difficult task of globalising, Australian corporations with a few conspicuous exceptions such as News Corporation and Resmed are still thinking in terms of increasing exports, tentatively establishing a few foreign operations or withdrawing from unsuccessful ones. Commonwealth Bank’s recent sale of its Asian operations (which it acquired through the takeover of Colonial) is the latest in a long line of retractions. The fierce competition to establish global operations designed to exploit different time zones and create strategic flexibility in all potential markets has largely passed by Australian leaders. Public debate of globalisation typically concentrates on trade policy or the possible relocation of the corporate headquarters of large Australian public companies overseas issues mostly irrelevant to the real dynamic of globalisation.
The global race to acquire and exploit knowledge has also largely been missed, and the blame must lie with corporate and political leadership. Few Australian universities are solvent; all are declining in quality because of a lack of funding. Australia has done little to exploit its advantages in the e-commerce environment and runs the risk of missing out in the biological sciences the most seminal area of new products for half a century in which the country enjoys a substantial global advantage.
The reason is not hard to find. Most of Australia’s investment capital is in the hands of fund managers (even Kerry Packer’s wealth is small by comparison), and they have concentrated heavily on producing tax-advantaged returns rather than aggressively backing new forms of commerce. The Australian venture-capital market is just beginning to emerge, perhaps a decade too late, and corporate heads have routinely been rewarded for removing costs and squeezing more out of their domestic market shares rather than for finding new ways of expanding internationally or by developing new markets. The result was a sharemarket that achieved little capital growth.
Leadership in the scientific and academic community has also been lacking. Mark Matthews, director of the Canberra-based policy consultancy Policy International, says the science community is often doing work that would be valuable to business but lacks an understanding of how to convert it. “A whole raft of co-operative research centres are doing that [business-relevant] work. They might talk about risk reduction, but they never present the intended outcome of the R&D in business-compatible terms. Which, by the way, is the way to have it make sense to ministers, who usually are lawyers or come from a business background.
“They [scientists] don’t think about why they are asking for subsidies from the taxpayer. We do research that squeezes down the margin of error in investment appraisal where big companies lose a lot of money. That is a way to get funding for R&D. It is not a matter of waving your arms and saying: We need to spend more on R&D. The other thing you need to do is get around the world and have a look at what is going on; yet, in Australia, that kind of knowledge generation is seen as a junket. In Europe and America and Japan, they see it as vital.”
Political window dressing
Farrell says there are also leadership problems with politicians. “They look as though they are interested [in innovation]. But they don’t expect anything to come from it; it is just going through the motions. There is no serious follow-up. They put out a publication that government-orchestrated nonsense. Unless you focus on more than strategy where we are heading and why we are heading there by planning for things to happen, and executing, then you will get nowhere. Frank Blount (former chief executive of Telstra) said the three most important things he had learnt from business were execution, execution, execution.”
Australia could be well placed in the three developments that most count: globalisation, business-to-business (B2B) e-commerce, and the biotechnology revolution. It is against these trends that an evaluation of Australia’s leaders should be made. If the darlings of the Australian corporate world in the 1990s were those leaders who balanced the books and got more out of the domestic market, the favored leaders of the 21st century are likely to be those who embrace successfully the impending huge technological, financial and commercial changes.
Michael Enright, professor of business at the University of Hong Kong and co-author of The Competitive Advantage of Nations with Michael Porter and Sun Hung Kai, says Australia is considered to be a distinctive part of the Asian region, that is, not linked into Asia. “Australia is an outlier, it is just different.”
He says most Australian companies export rather than placing production capacity in the region: they are using a national model rather than globalising. “I do see Australia as an interesting base for creating new technology and as an entry point into Asia. Australia has always been seen as a friendly base; you can set up here before moving on. Multinationals now are getting 6% to 7% of their sales in Asia; they are looking to get 25% to 30% of their sales in the region within 10 years.”
Enright says the old-style “country manager” a manager of the local division of a foreign multinational company is an endangered species. As this type of executive constitutes much of the Australian management culture (a high proportion of Australia’s industrial base is in foreign hands), further management upheaval is likely.
His comments also have implications for business leaders who focus only on the domestic market. “Which [global] activity can Australia capture? Increasingly, Australia is looked to as a source of management and professional talent. Some companies are now running 24 hours a day: eight hours a day in the US, Australia and Europe. Australia should be thinking about maintaining a lead in specific activities rather than developing industries around the region.”
The second area is B2B commerce. The new “gee whiz” products and the internet have stolen most of the attention in the e-commerce environment, but the real results of B2B commerce are more likely to come from a far less sensational source: the normalisation of management practices.
David Karpin, principal author of the 1995 Karpin report into Australian management, says that in the 1990s there was a broad acceptance that the manufacturing techniques perfected by the Japanese (total quality management and offshoots such as the Sigma 6 methods exploited by General Electric) and the re-engineering methods used by Americans (the removal of corporate hierarchies and the aligning of organisations with their customers) had a profound positive effect on productivity.
Karpin says: “Where it had its biggest impact and why in my judgment America has been able to maintain low inflation is in this move towards the dominance of the service industries at the same time that the people in those economies were learning better ways of doing things. So, if you go into financial service industries, transport or other service industries, the application of the same principles started to wash right through the heart of developed economies”
Such adoption of common management methods in primary, secondary and tertiary industry has meant that it is becoming possible to automate industry transactions to a far greater extent than before. Because companies are increasingly managing their businesses in the same way, it is possible to be aggressive about how they are structured, how they undertake purchasing and what business relationships they pursue. The alliance between General Motors and Ford to purchase together, for example, is possible only because the two companies are not as operationally distinct as they were in the mid-20th century. There are similar arrangements in the global mining industry and, in the Australian context, with corProcure, a procurement network for many of Australia’s large corporations. The leaders of the future will be able to use management in an entirely different way.
Grady Means, the US author of Meta-Capitalism, says the homogenisation of management methods has made it possible to develop enterprise-wide technology that can be used in many industries and achieve large-scale productivity improvements. “It is a consistent global play. It allows you to put together large-scale trade exchanges, internet-based exchanges. Companies don’t have to own their supply chains, they can now more or less pay an option price. That means they can get high-quality products without tying up capital.”
Means says these B2B exchanges and new business arrangements will quickly become global because they are based on communications networks that are not geographically confined. “In the B2B era it is recognised that the internet allows a lot of leverage; and now that is going into large organisations. Rather than focusing on managing within the four walls of the company, they are focusing on innovation and expanding into new markets.”
The implication of this trend is that leaders will depend on good management rather than the other way around. Good management practices are also a condition of entry into the B2B game, and Australia, though not excelling, has performed adequately. Karpin says: “What was going on was understanding that manufacturing processes were integrated processes and that the way we were organising our activities was not effective to handle that. So, for example, the person on the production line and the person ordering the inputs needed to know what the customer thought of it as much as the marketing people did.
“I started to see, from my own experience in running businesses in CRA and also from what was being done across businesses, that there was a lot more ground to make from the application of these techniques that were developed and perfected in the manufacturing industry. It was nuts and bolts stuff. Even though we in Australia were competitive in most of our mining industries, with the exception of coal, why was it that we still had a long way to go in dropping our cost structure compared with other industries?”
High-tech cottage industries
The third area in which Australia will need to show leadership, biotechnology, is also positive for the country. Craig Venter, chief executive of Celera Genomics, and one of the scientists who helped decode the human genome, says Australia has scientific strength in this most dynamic area of industry. He says universities in Australia were among the first to have a direct link through the internet to Celera’s database. “It would be a big deal for the Australian Government to maintain a $100-million computer for researchers to do this work, but they are getting the equivalent of that for a couple of million dollars a year. It is a cottage industry in most parts of the world, including Australia and the US. Australia, now that it has these tools, has just as big a chance of making a breakthrough. If that breakthrough were made in Australia, it would lead to millions of dollars for the economy. You have the calibre to be competitive with anyone. There is a long history of that.”
So, how do Australia’s leaders rate in these three areas: globalisation, e-commerce and new forms of knowledge? A survey by the accountancy firm PricewaterhouseCoopers says the most admired leaders are Don Argus, former head of National Australia Bank, James Strong, chief executive of Qantas, Paul Anderson, chief executive of BHP, Kerry Packer, chairman of Consolidated Press Holdings, and Dick Smith.
Among the most admired companies are Telstra, Wesfarmers, News Corporation, Coles Myer, Lend Lease and General Electric. This is a revealing list. The companies do not have a convincing global strategy with the exception of BHP, a long-standing mining company; News Corporation; and possibly Lend Lease. What is being indicated is a strong preference for domestic strength, not the ability to adopt a global position. The implication is that leaders are a long way from knowing how to place Australia in the emerging global economy.
Compare, for example, Australia’s dominant media magnates: Kerry Packer and Rupert Murdoch. Packer has, until his recent large software investments in India, operated almost exclusively in Australia, establishing a media presence that spans television, print and the internet. In financial terms this has been a highly successful strategy: low risk and extremely lucrative (he is comfortably Australia’s richest man with net wealth of more than $6 billion). But is it leadership?
Murdoch runs a company that operates worldwide, has a strategy based on arbitraging between geographical markets, and is a world leader in its field. In terms of establishing Australia in the global economy, Murdoch ranks as one of the most forward-looking business leaders ever. The next most global Australian companies would be BHP, Farrell’s Resmed (which operates in 50 countries and derives only 4% of its sales in Australia) and the US-South Australian spectacles company Sola.
Many of the other companies in the list operate in Australian-based oligopolies and are admired for the extent to which they can do this profitably. Coles Myer has a dominant local presence, but no global ambitions. Telstra’s international positioning is at best hesitant, and it will continue to rely on its dominant domestic position. Qantas likewise has not attempted to acquire a global position although it is questionable whether this is a viable strategy in the airline industry preferring to form alliances.
An exception in the corporate sphere is Lend Lease, which is transforming itself from a construction company into a finance company and is seriously attempting an Asian strategy.
The picture in the banking sector is not encouraging for those looking for signs of globalising among Australian companies. Commonwealth Bank has just sold its acquired operations in Asia, clearly concluding that the market is not attractive. National Australia Bank has talked of relocating to Europe, but it has yet to convince the markets that it has a legitimate global strategy. Westpac and ANZ have both recovered from a period of profligacy, but their focus is domestic.
It is significant that a regulator, Allan Fels, chairman of the Australian Competition & Consumer Commission, is considered one of Australia’s most prominent leaders. The reason? Because Australia’s corporate oligopolies are so powerful that anybody able to oppose them is seen as more powerful than politicians.
A similar pattern of domestic control emerges when looking at Australia’s richest people. Shopping-centre magnate Frank Lowy has almost exclusively created his wealth from the Australian economy, as have Gerry Harvey, chief executive of Harvey Norman, and property tycoons Harry Triguboff and John Gandel.
An exception is Richard Pratt and his Visy Industries paper and packaging empire, which derives as much from its US operations as its Australian. Few could legitimately criticise Pratt’s attempts to use his wealth to show leadership in the arts and philanthropy. He is a revealing exception: in the US, the wealthy routinely give money back; Australia’s business leaders tend to be miserly with their riches. Janet Holmes a Court has also gone against the Australian trend by being prepared to put some of her wealth back into the community. Philanthropy, however, is lacking in Australia; if quality leadership is an art measured by generosity, then Australia is poorly served.
General Electric is giving more positive signs. David Moffatt, chief executive of General Electric in Australia and New Zealand, is regarded as one of Australia’s most talented managers and is proving effective in placing Australia in the global General Electric value-chain. Given that almost half Australia’s industry base is owned by foreign global companies, the country’s ability to develop world-class managers within foreign organisations will determine much of its economic future. Karen McLeod, the London-based head of human resources for Rio Tinto, follows the maxim “act locally, think globally”. She believes the global headquarters of an organisation have a role distinct from that of local operations. It is common to flatten organisational structures on a local level, she says, but one size does not fit all. Flat structures have problems of their own.
Who’s at fault?
If the quality of Australia’s leaders in the global environment is at best mixed, how do our leaders rate on e-commerce? To provide a sound answer, it is necessary to identify who is in charge of this part of the national destiny: Australian fund managers and managers of Australian corporations (who are in turn largely responsible to local fund managers). It is they who have the money and, during the e-commerce boom, they, for the most part, did not invest in local talent. Contrary to popular perception, the fault does not lie with politicians or a tax system that does not sufficiently reward research and development. Government does not have the capital to invest capital can only come from an aggressive financial community.
Australia is only just beginning to develop a venture-capital market, and many of our most talented people have migrated to Silicon Valley in search of support. Australia’s capital markets have mostly focused on providing tax-advantaged returns for superannuation funds. There has been a distinct lack of aggression. If this habit is repeated in the burgeoning life-sciences market in which Australia enjoys substantial advantages in expertise there would be grounds for strongly rethinking how the financial community is assessed.
In the third area, leading-edge knowledge, Australian leadership has unambiguously failed. A succession of federal governments have allowed the universities to deteriorate alarmingly. One of the lessons of the US experience is that developing a “knowledge economy” is related to the quality of tertiary education. US secondary education is often poor, but the better US universities are the best in the world.
By being unwilling or unable to attend to the complex management problems afflicting Australian universities (a 19th-century system of tenure being applied in a 21st-century economy), Australia’s political leaders have virtually destroyed the academic career at a time when good academics are economically vital. The real wages of Australian academics have plummeted (only pastoralists have fared worse), and academic positions are becoming much less secure. If there is a profound leadership failure in Australia, it is in the university sector.
Perhaps the most troubling sign is the failure among leaders to identify the uniqueness of Australia. This is in part a measure of isolation: we have no strong sense of identity because identity relies on being noticed, and Australia is rarely noticed by the rest of the world.
It is the sense of distinctiveness that is crucial to developing a strong position in the global economy. As Andrew Liveris, vice-president of specialty chemicals at Dow Chemicals, says: “You need to see the world, but come back to the local culture and fit in to the local culture.” To impress others, it is first necessary to understand yourself.
Whose standard? is the standard question
How do Australia’s religious leaders rate? The question poses more questions than possible answers. To assess the quality of Australian religious leadership according to religious criteria, it would be necessary to have some indication from a Supreme Being. (Management Today has put in a call to God, but He is not returning our calls.)
There are a number of high-profile public religious figures in Australia: Archbishop Peter Hollingworth (Anglican), Archbishop George Pell (Catholic), Reverend Tim Costello (Baptist), Reverend Fred Nile (Festival of Light), Archbishop Stylianos (Orthodox), Rabbi John Levi (Jewish). But, in general, there has been a long-term decline of religious feeling in Australia. Looked at this way, Australia’s religious leadership has failed.
Half a century ago, Australia was an explicitly religious, Anglo-Protestant society (to the point where job advertisements routinely said: “Jews and Catholics need not apply”). But there has been a long-term secularisation and pluralisation of Australian society, perhaps no better demonstrated in changes to the abortion laws (a serious problem for all Christian and Muslim religions) and changes to the divorce laws. For many, religion has become little more than a caricature.
In large part this has occurred because of the adoption of multiculturalism. By accepting that there is an implicit equality in all cultures, there is a parallel implication that all religions are equal. This puts multiculturalism directly at odds with religion, because if there is one assumption on which religions consistently operate, it is that each is the best (and sometimes the only) way to live a godly life.
Cultural commentator Rod Beecham says it is hard to rate Australia’s religious leaders. “Unless there is a coalescence between religious and political agendas, as occurred with Hinduism and the push for Indian independence, or Islam and the push for an independent Iran, there is always going to be an implicit contradiction between the lip service paid by the state to religious tolerance and the state of society desired by the religious leaders themselves.”
In Australia, as in Britain, religious leaders tend to exist as a soft-left pressure group whose job is to ameliorate the harshest effects of free-market economics. The best service a religious leader can do for his or her faith is to use the institutional position of authority to promote the religious spirit in the country, as opposed to the religion business. By this measure, it is impossible to judge Australia’s religious leaders because the standards of debate and reportage tend to be puerile and adversarial. I suppose you could look at their work ethic: someone like Tim Costello does well on that score.”