Geoffrey Pitt is chief executive of the South Australian TAB, a position he took up in 1996. He was formerly a managing director with retailers John Martin and David Jones. He began his career with Coles Myer. He is a board member of the Art Gallery of South Australia and a councillor and fellow of the Australian Institute of Management.
AIM: You have a background in retailing, how have you found the shift to the gambling industry?
Pitt: Both retailing and gambling work on a distribution network. At the TAB we have few products and a big distribution network, but the underlying principles are the same. To be a good business manager you have to be capable of moving across different disciplines. One can pick up the skills you require very quickly. As a chief executive the most important thing is to have vision and a leadership style.
AIM: What does that mean?
Pitt: You need to encourage the skills of the people you are working with. And what I am developing here is a customer focus. If you apply good principles of customer service, the customers will respond and the business will grow.
AIM: Who are your competitors?
Pitt: We have a monopoly in the wagering business. Customers can spend on poker machines or lotteries or other products. But if customers want to bet on a horse they have to use the TAB.
AIM: Where does the money go?
Pitt: 55% goes to the racing industry and 45% goes to the government. In the racing industry we have various authorities in the three racing codes: thoroughbred racing, harness racing and greyhounds.
AIM: If you are a monopoly, how do you measure performance? There is no possibility of comparing market share as a retailer could, for example.
Pitt: There is a monopoly in each state, so we benchmark against interstate and international operations. We tend to benchmark on the ratios used in retail business, such as wages-to-sales ratios.
AIM: How big are you compared with other states?
Pitt: New South Wales generates $3.1 billion, we turn over about $640 million. The profit rate is more important. You can achieve high levels of turnover and still get low profit margins. We also benchmark marketing costs, operating costs and wage costs.
AIM: Are wage costs the most important expense?
Pitt: Wage costs are the most significant variable. We open seven days a week, and at every outlet we need a person to operate it.
AIM: What is your cost breakdown?
Pitt: 25% is wage costs, the cost of rental is 10% and there are two parts of marketing: information, such as form guides and our own newspaper; and more conventional marketing. That is one place we are different from retail stores where you can just go in and buy: if we don’t list the race, people can’t bet.
AIM: If wages are your biggest expense, are industrial relations a high priority?
Pitt: In a lot of organisations, when staff had a problem, their first thought was the unions. Now they can solve problems by talking directly with management. It is important when negotiating an agreement to deal directly with staff rather than unions. David Jones had the philosophy that the line managers were the HR managers. That meant that relationships between staff and management were closer. We are in the process of privatising at the moment, so the unions are more dominant than before.
AIM: Should the TAB be private?
Pitt: I believe the role of government is to regulate, not to run businesses. Government is not structured to manage a business, especially in the decision-making processes. The government is much more political in decision-making and so is much slower.
AIM: How do you approach the political issues surrounding gambling?
Pitt: The proliferation of pokies has created a degree of problem gambling that was not there before. With the TAB you do not get into such dramatic addictions. The actual mechanics of a poker machine allow people to lose money faster. I accept that you can lose a lot of money if you place thousands of dollars in bets on the horses, but the number who do that is very small. The average bet on a horse is $8.
AIM: What is your management philosophy?
Pitt: My philosophy is keep it as simple and direct as possible. The role of senior management is to work with your people to get their full potential. The greatest challenge is the technical changes which are altering whole distribution patterns. It’s happening quickly and everyone is getting on the train, but no one knows what the destination is.