CEOs in dissimilar organisations share a preoccupation with meeting the demands of stakeholders and budgets. By Christina Mowle
A decade or so ago small shareholders would have been hard pressed to recall the names of any senior management personnel in the businesses in which they held shares.
Nowadays, popular demand for transparency in management has made the names of chief executive officers more familiar. Because of the publicity surrounding big stockmarket floats such as Qantas, Commonwealth Bank and Teltra, and the proliferation of “mum and dad” shareholders, the spotlight has been put on senior people in organisations large or small that make, supply, process or manage the goods and services we depend on.
Even small investors in public or private companies have an opinion, in general terms at least, on executive salaries, accountability, and a perception of how they expect a company to perform. When we become aware that things have taken a turn for the worse, or when our dividend was not worth waiting for, we look to the chief executive for an explanation. We mutter when jobs are shed, but if the next dividend is good, well
The desk where the buck stops
Spare a thought for chief executives, whose work performance is monitored publicly and extensively, who accept responsibility, to varying degrees, for the performance of the whole organisation, and whose workloads would cripple a mere mortal.
Business in private
Privately owned companies come in all shapes and sizes, and although Robert Clifford of InCat Tasmania, builders and designers of large catamarans for the local and international market, says he is theoretically accountable to the family trust, in fact he does what he likes. He started the company 20 years ago, and his only regret is that with 1000 employees and 300 subcontractors every aspect of the company has changed.
But when it comes to accountability, things have to be very different for Robin Ferris of the K. R. Darling Downs Bacon co-operative in South East Queensland.
Pork farmers, contracted annually to K. R. Darling Downs Bacon, an Australian icon brand in Queensland and beyond, sell pigs to the co-operative, which processes the meat. Perhaps the farmers buy some ham to have in their sandwiches. Then they share the profit from the sales. In other words, they sell their product to themselves, buy it back from themselves, then pay themselves a dividend from the profit. Chief executive Robin Ferris is the pivotal person in a double transaction, acting as a buyer one moment and a seller the next.
It sounds perfect, and perhaps would be a model environment, were it not for the fact that pork prices are the lowest they have been for 30 years. Ferris leaves political lobbying to the industry groups, but is relieved that in recent months pork producers have become more vocal about their plight.
One hundred and seventy-seven pig farmers have signed with the co-op this year. Times are very tough, but there is no shortage of farmers waiting for an opportunity to sign the annual contract, despite the slump brought about by cheap imported pork. Eighty percent of it is from Canada, where it is grown with subsidised feed, then passed off on Australian markets as locally produced. The Pork Council estimates that farmers are losing up to $35 for every pig, with average losses running at up to $1000 a week and many producers facing ruin.
Ferris’s response to this is to proceed with plans for a $25-million expansion of plant, and with diversification of product styles to reinvigorate the market. Changes to labelling laws would help that reinvigoration, not only by reminding consumers that the product is wholly Australian, but by also reminding them that other products are imported. Ferris says: “If the consumer does not give a stuff whether or not what she buys is made in Australia, we might as well close up our factories and become shopkeepers.”
Ferris describes himself as a leader, as distinct from a manager. An enthusiastic delegator, he says he has total confidence in his management team, all of whom know the industry inside out better than he does and many of whom are also producers. The inclusion on the board of directors of several pork producers, plus members from other industry areas, is in keeping with the co-operative’s ethic. At present Ferris is concentrating on making contact with as many producers as possible to discuss their current difficulties, an effort that takes him all over southern Queensland.
A different complexion
It is some distance from pig farming to manufacturing cosmetics and herbal medicines, but there are similarities. Ferris and Marcus Blackmore, chief executive of Blackmores Ltd, have staff who pay themselves dividends, and both men are hot under the collar about labelling laws. Blackmore claims some recent success in his fight for changes to the Therapeutic Goods Advertising Code which would give his company the right to include the words “Drug Free” on product labels.
Blackmore was awarded an AM in the recent Queen’s Birthday honors for services to the community. His attitude to his company and its employees is one more generally attributed to chief executives in the public sector, where there is an assumption that the manager will adopt a particular ethical stance as an agent of public purposes or a trustee of values. Blackmore has chosen to blend ethics and commerce and seems to be having some success here too. A recent report by the St James Ethics Centre, an association of legal professionals dedicated to the preservation of ethical standards in commerce and service, recently indicated its approval of Blackmores.
When Blackmores was listed on the Stock Exchange in 1985 the company’s employee share plan allowed staff to buy shares with a 10% deposit at the time, then paying off the balance with dividends.
Current permanent full and part-time staff were issued a further 100 shares on July 1 this year, in gratitude for an exceptionally good year for the company.
Staff are involved in the decision-making process and have a sense of ownership of issues. There is a stable employee base with a balance between opportunities for internal promotion and access to the company through new appointments from outside.
Blackmore used to be chairman of the board and managing director. What he refers to as “the Solly factor” (a reference to Solomon Lew, former chairman and managing director of Coles Myer) motivated him to leave the board. He was happy to change his role in a way that allowed him to take advantage of a strong team of young, keen and competent senior managers. There is a clear note of relief in his voice when he says that accountability is a lot further down the line than it used to be.
A man of many enthusiasms and opinions, Blackmore is happy to put his money where his mouth is and to encourage others to do the same. “Business has a responsibility to the community. Leaders need to see that business is not just about commercial activities and returning money to the shareholders.” He was delighted recently to find the front page of the The Manly Daily, announcing a donation of $65,000 from Blackmores employees to the charity of their choice, in voluntary pledges representing 0.5% of their pay, matched dollar-for-dollar by the company through its Match Donation scheme.
Common goals fundamental
Rev Dr Gordon Moyes, Superintendent of the Wesley Mission Sydney, says the not-for-profit sector suffers from over-regulation and over-democratisation: “It is democracy run riot.”
The mission owns all its properties and depends solely on funds raised and earned, and Moyes says it has to be transparent, accountable, and squeaky clean. It is the largest parish in Australia, operating 306 hospitals, nursing homes, children’s homes, and employment training, and it conducts an active “ministry of word and deed”, including relief of various kinds.
Moyes works a 105-hour week and has done so for the past 40 years, 20 of them at the mission. Reporting occupies enormous amounts of time, and although he would like to prepare reports that are more focused for each of the boards, councils and committees to which he is accountable, it is not feasible; there are scores of them. As well as state and federal government regulatory boards, there are local boards for most of the community organisations that occasionally hinder rather than help by wanting to make decisions outside their authority. All have the power to hire and fire.
The mission is moving into the future with enthusiasm, adopting new technology and using it to communicate with the rest of the world. Moyes has just returned from China, where he appeared in a video co-produced with The Bible League about China’s house-churches, which are attended by about 40 million worshippers, and he helped to set up Web sites to spread the Christian word.
Interested parties in the mission include the Uniting Church, donors, the recipients of services and facilities, and its 3500 volunteer workers and 2100 paid employees, all committed Christians. Moyes believes that shared values promote teamwork. He places an emphasis on women in leadership, and almost a thousand employees, male and female, are undertaking advanced management courses or acquiring specialist skills.
Moyes works at building relationships with companies (including Lend Lease Group, Mercantile and General Reinsurance, Sydney Kings Basketball) by offering to speak on management issues in return for paid time off for employees so that they can work as volunteers in mission enterprises.
The mission’s facilities and delivery of services recently achieved ISO9000 international quality assurance registration after satisfying 20 requirements.
Excellence and the achievement of it in education was the substance of a book by Dr Ross Millikan (with Professor Emeritus Hedley Beare and Professor Brian Caldwell, both of the University of Melbourne). Millikan is principal of Carey Baptist Grammar School, a co-educational school in Melbourne for 2200 students, from kindergarten to year 12, from the more affluent end of the socio-economic scale. Carey is a very different kind of not-for-profit organisation from WMS, but it also has a client base with strong expectations of accountability and transparency, particularly in regard to receiving the service for which people have paid: a high-quality education that will ensure a bright future for their children.
Millikan reports to a board, of which he is a non-voting member, and is a member of numerous subcommittees that advise the board. Half of the board membership is nominated by the Baptist Union of Victoria, which must approve all expenditure above a certain amount. The school was incorporated in 1991.
Carey encourages its community to “own” the school and its operations, and to take pride in its achievements. When those operations include the awesome responsibility of being in loco parentis to that which is most precious to its clients, accountability takes on an extra dimension.
Society demands value for money and, over the nine years Millikan has been principal, it has demanded it with increasing stridency. Every parent expects the school to make a silk purse out of what occasionally turns out to be a beloved sow’s ear. It is not unusual for parents to give themselves licence to bypass established channels and go directly to the board with complaints about the school’s efforts, simply on the grounds that they want an immediate resolution. There has also been a noticeable rise in litigation that now has Millikan consulting the school’s solicitor monthly instead of annually.
“The challenge is not to lose the human touch as schools become increasingly complex,” he says. “Much of the complexity is driven by a rapid expansion in the knowledge that it is our duty to deliver to our students. If we cannot accommodate changes as they occur, then we will fail in that duty. This is where our most important area of accountability lies.”
The quest for economy and efficiency in resources usage has always exercised governments and raised the ire of their critics. Studies of budgetary control have shown that arbitrary funding cuts leading to reduced programs prove to be cost-inefficient and contrary to the public interest. Nevertheless, as long as current thinking puts more emphasis on effectiveness and outcomes, budgeting continues to be a seesaw for Jennifer Williams, chief executive of the Austin and Repatriation Medical Centre in Melbourne.
At one end of the seesaw is the ever-present threat of government cuts to hospital funding, requiring a reduction in services; at the other, a funding formula based on delivery of services. The less you get, the less you get. Williams has little, if any, influence on funding policy at government level because it is all systematised. Yet the government holds her responsible for the quality of the vast array of essential services at the centre.
Williams came to the Austin last November from the Department of Human Services, where she was director with a budget of $1 billion. She says that despite a much smaller budget her job at the Austin is more complex. The centre is made up of four public hospitals under one umbrella: the original Austin Hospital, renowned in particular for its spinal and organ transplant units; the Royal Talbot Rehabilitation Hospital; the Heidelberg Repatriation Hospital; and the Larundel psychiatric hospital. It also manages medical and nursing-training and research departments.
Planning and tendering processes for a big redevelopment on the site of the old Heidelberg Repatriation Hospital, and liaison with veterans and other special interest groups contributing to planning for the new hospital, have occupied much of the relatively short time she has been chief executive. The Austin will be the first major public hospital to undergo redevelopment on such a scale, and important decisions about its future management are still to be made.
Survive and deliver
The survival of the company itself is the only thing that matters, according to Brian Blinco, chief executive of the Queensland Government’s Energex electricity company. He may be right. Recent studies of “managerialism”, a term used to describe organisational changes in the public sector, suggest that changes since the late 1970s in the relationship between the state and its citizens has made the latter simply clients waiting for attention. Most of them are more concerned with the quality and reliability of an essential service than with who owns it.
Blinco says: “Energex is just like any public company, except the Queensland Government holds all the shares and appoints the board members from private industry.” Although some would argue that those differences are already significant, Blinco makes no distinction between the allegiances and accountabilities he has in the fulfilment of his duties: an allegiance to the company is an allegiance to all the stakeholders. He considers that being available to consumers and government representatives is an important part of his role, and he is in contact with both areas on a daily basis.
Duty of care, and vice versa
Although they are accountable to a range of interests, the expectations behind the performance of chief executives as they carry out their duties seem, on the surface, to have several similarities. Chief executives in the not-for-profit sector must juggle the interests of several groups just as they do in the other sectors; supporters of not-for-profit organisations care just as deeply about how their charity dollar is allocated as taxpayers observing the distribution of money from the public purse; and even Government-funded agencies and departments have to prepare budgets and have them approved.
Chief executives quote common visions and sets of key values. They are all determined to be “learning organisations”, to expand and diversify, to develop a shared vision for the future of the company and for the employees, and to balance the needs of clients and stakeholders.
The success of any organisation can be measured using a range of criteria, and corporate culture has great significance for the chief executive in relation to the bottom line: how best to meet the company’s commitments to clients and customers, shareholders and partners, employees and managers.