12 September, 2013

Great debate 2013: to lift productivity and go international, Kiwi owners and managers need to upskill

On 10 September 2013, I was part of Fairfax Media's Great Debate. David Slack, Phil Veal and I put the affirmative case and argued (somewhat tongue in cheek) that New Zealand should face 3 uncomfortable truths - we're overcautious, inexperienced and mean.  Selwyn Pellett, Davey Hughes and Greg Cross put the negative case.  Here's my pitch (without the bad jokes about the opposition):

Ladies and gentlemen; ten years ago, the NZ government commissioned a series of industry task-force reports for ICT, design, food & beverage, etc,. They all said essentially the same thing: the biggest challenges facing New Zealand businesses aren’t exchange rates, investment capital, innovation, tariff barriers, infrastructure, or government regulation; no, the top issues are the skills and capabilities of our owners, managers and workers. Ten years on, nothing’s changed; last week’s Global Competitiveness Report said the same thing: many New Zealand businesses lack skills and they lack business sophistication. Why? The 3rd uncomfortable truth: we’re just plain mean. We think of skills as costs rather than investments.

Take training budgets - that is, if you have them at all. They’re small, begrudgingly doled out, and usually the first thing you cut when the margins get a little squeezed. Too many Kiwi companies don’t invest in training and development for their staff and leadership teams. And the excuses are feeble: we can’t afford it (despite the government subsidising 70% of industry training costs); we can’t afford the lost time, and the most feeble excuse of all, they’ll only leave for a better job! Yet all my experience says that better-trained managers and workers repay their training a hundred-fold, and by the way, they’re more loyal.

Then there’s pay. New Zealand companies pay peanuts for management and technical talent and wonder why they get monkeys. Again, listen to the excuses: “we can’t afford that kind of pay (yet somehow our international competitors can); our margins won't sustain it; it will upset our pay relativity”. And when it comes to hiring talent in overseas markets, we get even meaner, hoping to keep the cost down because it’s high compared to Kiwi pay. Hire 2nd or 3rd rate people and get 2nd or 3rd rate performance.

There’s a rough rule of thumb in IT that a good programmer is 20-30 times more valuable than an average one - they understand the problem better, they take less time and do a better job of design and build; the finished product is faster, cheaper and more reliable, with lower operating and maintenance costs. A highly-skilled capable person repays their wages many times.

What about having a board of directors? Many Kiwi owners won’t pay for an advisory board or a board of directors - it’s just more cost. Even if they do set up a board, again the tendency is to be cheap and mean, appointing a mate or high street accountant with narrow skills that won’t do much to help the business grow. But ask anyone who’s built a successful international business of any significant scale and the vast majority will have a board with real expertise, and they don’t begrudge the cost for the insights, guidance and advice they get.

I’ve been privileged to lead three companies. As A CEO, I only did 4 things:
  • Lead the development and execution of our strategy.
  • Sell, communicate and report on the strategy and its progress.
  • Invest in the processes and projects to execute the strategy.
  • Build and lead the team to implement the strategy.
Building the team meant hiring great people here and overseas, rewarding them well, and putting in place a comprehensive skills and career development programme across the organisation. I was usually lucky to have good directors guiding me, and they were invaluable in helping us to achieve success.

It’s not just me. The Danes and the Germans have many superb mid-size companies competing successfully on the global stage. Why? They hire the best people, they invest heavily in training and development, they pay top wages at home and abroad, and they have boards of scientists, engineers and marketers with wide international experience.

It’s simple. Investment in skills training, investment in hiring skilled people, and investment in a skilled board - all of these investments will repay themselves many times over - through better business processes, better design, better production costs, better marketing, better contract negotiations, better value for customers and better value for shareholders. If you want to build a more successful, more productive business at home and abroad, stop being mean. Stop thinking about skills as a cost, and start thinking about them as an investment. We’re firmly of the belief that to lift productivity and go international, Kiwi owners and managers need to upskill. We believe it; so should you.

Contrary to all logic and the tenor of the audience questions, we lost the moot!  The negative team had better jokes.  Great fun and great people.

1 comment:

Shaun Coffey said...

Jim

A great piece!

I would like to re-emphasise your following comments:

If you want to build a more successful, more productive business at home and abroad, stop being mean. Stop thinking about skills as a cost, and start thinking about them as an investment.

thanks

Shaun Coffey