Archive for the ‘Governance’ Category

We Need To Talk About CFOs

Wednesday, December 12, 2018

Apparently few others really understand what the Chief Financial Officer (CFO) thinks is important. The most recent survey by McKinsey and Company on CFO’s reveals a range of issues relating to CFOs (read it here). While the whole article deals with a number of observations from the survey relating to the CFO and their roles, one in particular highlights how important it is for the key leaders of the organisation and the CFO to have a conversation to be on the same page.

The following table lists the top 10 activities the CFO believes they have engaged in which adds financial value to the organisation. Next to that is the ranking given to the same activity by other leaders in organisations:

Activity

CFO Ranking

Other Leaders Ranking

Performance management (e.g., metrics, value management, incentives/targets)

1

8

Strategic leadership

1

4

Traditional finance roles (e.g., accounting, controlling, planning and analysis)

3

1

Organisational transformation (enterprise-wide or within finance organisation)

3

7

Finance capabilities (e.g., finance-organisation talent pipeline)

5

9

Speciality finance roles (e.g., treasury, audit, investor relations)

5

3

Cost and productivity management across organisation

7

2

Support for digital capabilities and advanced analytics

8

10

M&A (including post-merger integration)

9

5

Capital allocation (e.g., capital-expenditure allocation)

10

6

Pricing of products and/or services

10

11

 

It is interesting that so much of what the CFOs think is important other leaders place less importance on. The risk with this is that the CFOs will be spending time on activities important to them, but not necessarily important to the rest of the business, potentially causing tension and issues between the leadership team and business units. It is important that leaders within an organisation have the conversation to ensure everyone agrees with what is important, and remain focused on those.

And Avondale Business School (ABS) can help you achieve this, and indeed with any aspect of your business. Simply contact us a ABS@avondale.edu.au or call on 02 49802168.

Have you updated your Director’s qualification?

Tuesday, October 23, 2018

Associate Professor Lisa Barnes attended a 2 day update workshop in Brisbane last week run by the Australian Institute of Company Directors. The course was attended by members who had previously completed the Australian Institute of Company Directors course, but had not been updated in the last few years. The course attendees were made up of actively serving board members from listed companies, the not-for-profit sector as well as the government and private sectors. The link to the AICD website is https://aicd.companydirectors.com.au/

The updated course covered recent topics such as the Royal Commission into the Banking Sector, the legal environment that company directors operate in, as well as fiduciary duties and responsibilities of company directors in both the civil and criminal legal environments.

Other topics included definitions of conflict of interest, board composition, board remuneration, board risk, the importance of strategy as well as understanding financial papers in light of the Centro case. All topics covered were discussed and case studies presented and discussed by participants.

The 2 days ended with 3 groups being allocated different roles (Board, Remuneration Committee, Risk Committee) and a case study given where participants had to role play different scenarios and present to a board for discussion in light of a crisis, being either a legal issues, a risk issue or a strategy issue.

Lisa Barnes attended the course in her role as Vice Chair of a not-for-profit organisation called “Coastlink” who provide disability respite care to youth on the Central Coast. She has recently been appointed to the Risk & Audit sub-committee of ACARA, the Australian Curriculum, Assessment & Reporting Authority which is an independent statutory authority that hopes to improve the learning of young Australians. They currently administer the NAPLAN program. ACARA was established under Section 5 of the Australian Curriculum, Assessment and Reporting Authority Act (Cth) on 8 December 2008. Lisa will take up the new position in November 2018.

 

Do More But Do It Quicker

Wednesday, September 26, 2018

If you have been working for any length of time, you will agree with me that we are being required to do more in less time. And leaders and managers are particularly susceptible to this due to the huge amount of additional information they have access to and the more compressed time frames to make decisions. Consequently leaders are looking for ways to do more with less.

A recent article by Scott Stein for the Governance Institute of Australia entitled ‘How Leaders Can Learn to do More with Less’  (read it here) tackles this issue head on and provides some excellent strategies to achieve this. I am not going to go into the details, but the 5 strategies are:

  1. Limit distractions that steal your attention
  2. Leverage time by hacking your approach to email
  3. Identify the activities you shouldn’t be doing
  4. Boost impact by delegating to your people
  5. Use the right type of team meeting to enable people to do more.

I would encourage you to read the full article to see how these 5 strategies can actually help you achieve more. And the Avondale Business School is here to help you also. Just contact Warrick Long on 02 4980 2168 or Warrick.long@avondale.edu.au to find out how we can add value to your business.

Leaders Should Take The Blame?

Sunday, September 9, 2018

Corporate culture is very topical at the moment, as we see unprecedented numbers of organisations under scrutiny for inappropriate corporate behaviours. It was hoped that the introduction of corporate reforms (Sarbanes-Oxley, CLERP 9, Etc.) would see a significant reduction in such issues, but has that really been the case?

More importantly, who is responsible for these events. Craig Smith, in a recent article entitled The Critical Consequences of Culture (read it here) provides three case studies of recent failures of corporate culture, being Wells Fargo, Volkswagen, and Uber. In the case of the first two entities, the failures resulted from pressures in either sales targets (Wells Fargo) or product to market deadlines (Volkswagen). In both cases the organisations were fined very heavily, and the people who “did the wrong things” were punished, usually by being fired. The difference with Uber, is that it was the senior corporate executives who paid the price, unlike the first two. Yet when things go well, it is the senior executive team who take the credit (and often the multi-million dollar bonuses).

And that is the nub of Smiths article – too frequently it is the workers struggling to meet unrealistic targets set by the senior leadership that pay the ultimate price. Yet who sets the culture of the organisation? Senior leadership. Smith makes the point that “while individuals must bear responsibility for their actions, the body corporate can also have some measure of responsibility, not least as a result of the goals set by senior management and the culture in which employees operate’.

The challenge for leaders is to think bigger picture to see what the real culture of the organisation is as a consequence of their actions, and whether they are prepared to personally take responsibility for the resultant culture of their decisions. As you consider your organisation and culture, Avondale Business School (ABS) may be able to help to be the ethical company to want to be. Call or email Warrick Long on 02 4980 2168 or Warrick.long@avondale.edu.au to find out how we can help.

Kicking Your Strategy Into High Gear

Thursday, August 9, 2018

There is so much to absorb when you start looking at strategy. Everyone has a view as to how to formulate and implement it, stakeholders all have different views as to what it should be, and if you do a google search for it – well let’s just say there is an avalanche of sites all purporting to have the answers for you.

Having studied and taught strategy, we know how difficult it can be to sift through all the available information to plot a course for your organisation. One article that came across our desk recently seemed to offer some new perspectives on how to really shift your strategy process into high gear. It comes from McKinsey&Company, based on an article and book by some of their team, Chris Bradley, Martin Hirt and Sven Smit, and is entitled ‘Eight shifts that will take your strategy into high gear’ (read it here).

Rather than parrot the eight shifts, let me just outline a few of them for you, and suggest that you take the time to read the article to find the remaining ones, and to work out whether they will provide the boost to your strategy that is probably needed. Note that the authors are not trying to provide the magic pill to solve your strategy issues, but rather they aim to “…improve your strategic dialogue. The choices you make, and te business outcomes you experience.”

  1. From annual planning to strategy as a journey
    Do away with the annual planning meeting and process that looks at 3- to 5-year plans (which become outdated within weeks of them being written), and instead look at a ‘rolling plan’ that can be regularly updat3ed as your context changes. This will involve regular strategy conversations with amoung your senior leadership team on a monthly basis. You should be regularly checking the assumptions of your strategy, and adjusting strategy as needed.
  2. From getting to ‘yes’ to debating real alternatives
    Too often strategy discussion revolve around the leadership team bringing a single proposal that is to be approved. Anyone suggesting different options or questioning the plan is unwelcome. Instead, change the conversation so that the underlying assumptions are debated, that choices are discussed and strategy becomes a shared vision.
  3. From ‘you are your numbers’ to a holistic performance view
    Organisations are too frequently guilty of giving managers ‘stretch target’ that are overly optimistic, then penalizing that manager for not reaching that goal. Perhaps it is better to assign probabilities to managers targets, so that when the performance is being discussed, a more realistic assessment of whether goal attainment can be made. If people are punished simply because they failed to meet a high risk plan, then employees will lose confidence and ultimately the entire organisation suffers.
  4. From long-range planning to forcing the first step
    We have all seen the grand ‘strategic plan’ in all its glory – paraded in front of staff via glitzy PowerPoint presentations, or emailed out in an impressive document replete with interesting fonts, appropriate bolding, and the daring use of color. And while this may hype some of us for a short period of time, usually that is the last we see of it and it gets lost until the next review in 3 or 5 years’ time, when the performance is repeated. To give the plan the best chance of survival, also present the first steps that now need to be taken. Employees will appreciate the light being shone on the pathway and the opportunity to actually begin the journey rather than waiting for direction.

So there are just four of the eight steps for improving your strategy processes. The article is well worth a read, and highly recommended. And remember, the Avondale Business School (ABS) is just a phone call (02 4980 21468) or email (abs@avondale.edu.au) away from helping you with your strategy.

It’s All Just A Matter Of Trust

Wednesday, July 25, 2018

If public trust is the not-for-profit (NFP) sectors most valuable asset, then why are directors and leaders of NFPs not doing more to safeguard it? The Australian Charities and Not-for-profits Commission’s 2017 Australian Charities Report (find it here) reports that trust in charities amoungst Australians has declined from 37% in 2013 to just 24% in 2017. Such a decline in the value of any other form of asset would have seen the directors of organisations demanding answers and taking urgent action to correct it.

A recent article by Lucas Ryan for the Australian Institute of Company Directors (AICD) entitled ‘Trust in not-for-profits’ (read it here) looks at this issue of trust and raises a number of very important points for leaders of charities and within the NFP sector to consider. Some of the highlights in this article include:

  • The AICD indicates there is little evidence of NFP directors addressing trust
  • While directors recognise the primacy of culture as the most significant issue relevant to trust, very few directors receive reports on culture, and most don’t have it as an item on their agenda.
  • The ACNC Report identifies belief in an organisations mission and transparency about the use of resources as key influencers of individual trust.
  • 45% of people in the ACNC study did not trust charities that paid salespeople to raise funds on their behalf.
  • Fewer Australians are trusting charities to apply their donations to a charitable purpose and to be ethical and honest in their fundraising.

These are really worrying trends for NFPs and charities, and the AICD identify the top 3 factors most critical to building trust:

  • Communicating and engaging openly with stakeholders;
  • Transparency of business practices and decision-making; and
  • Understanding the issues that matter to stakeholders.

This means directors and leaders of NFPs really do need to ensure they are actively engaging in discussion trust, and ensuring there are strong governance practices in place to guard this valuable organisational asset.

What are you doing to guard and enhance the public trust in your organisation? The Avondale Business School team can assist you in ensuring your governance program is maximizing the success of your organisation. You can contact us at abs@avondale.edu.au

Book Review: ‘The Tyranny of Metrics’

Thursday, July 5, 2018

“There are things that can be measured. There are things that are worth measuring. But what can be measured is not always what is worth measuring; what gets measured may have no relationship to what we really want to know.”

This statement, and the subsequent arguments presented by Jerry Muller in his book ‘The Tyranny of Metrics’ (2018, Princeton University Press), were initially a challenge for me, with my background as an accountant. But I warmed to his argument and grew to appreciate what he was presenting.

Muller is a professor of History at Catholic University of America and the author of numerous books on markets and capitalism. He draws on publically available information, numerous research and reports to substantiate his position, and provides a number of supporting examples that are easy to relate to.

A central theme of the book is that ‘many matters of importance are too subject to judgement and interpretation to be solved by standardized metrics. Ultimately, the issue is not one of metrics versus judgement, but metrics informing judgement…” (p. 183).

I felt it was a very convincing argument which has caused me to consider the metrics I use and am exposed to. Being very well organized, with logical arguments and ample evidences, the book is easy to read over a relatively short space of time. It would appeal to anyone involved in developing or using performance metrics.

Overall, this book is a balanced and worthwhile read, and as noted, is not about the evils of measuring. Muller’s summary would be captured by this statement from page 4 of the book: “The problem is not measurement, but excessive measurement and inappropriate measurement – not metrics, but metric fixation”.

Reviewed by Warrick long, Lecturer, Avondale Business School

What’s Keeping You Awake at Night?

Thursday, June 14, 2018

Sustainability and long term growth prospects are what’s keeping Australian company directors awake at night, according to the Australian Institute of Company Directors (AICD) Director Sentiment Index 2018 (Click here to access the report).

Other issues troubling the sleep of Australian directors include:

  • Structural change/changing business models
  • Corporate culture
  • Business reputation in the community
  • Data security

Do these issues resonate with you? What about the following trends identified in the report as having the biggest potential impacts:

  • Positive Impact:
    • Big data
    • Increased transparency
    • Automation
  • Negative Impact:
    • Mass retirement of older workers

Australian directors have a generally optimistic outlook for both the Australian and international economies, with NSW directors most optimistic for their state, and WA directors most pessimistic for theirs. While directors expect lower unemployment in the next 12 months, they also anticipate increases in inflation, wages and the ash interest rate over the same period. Growth is still expected, including an increase in profits. However, there is growing pessimism regarding the level of government red-tape and corporate reporting requirements.

Directors are also focusing more on corporate culture, with the three most significant ways of changing corporate culture being:

  • Regularly featuring culture on board and audit committee agendas
  • Capturing data on key cultural indicators
  • Communicating the ethical position of the board and business

As you reflect on your own business, are these issues similar or different to your own circumstance, and how these issues may impact your business. Most importantly, how prepared are you to face what is looming on the horizon. Avondale Business School is well-placed to help you position your organisation to ensure you enjoy success.

ABS Challenges Directors

Friday, June 1, 2018

The Board of Directors of Adventist Senior Living NNSW recently completed several modules of professional development, delivered by the Avondale Business School team. The sessions were held over three days, in February and May, and topics included the roles and responsibilities of directors, as well as finance, marketing, human resources and information management for directors.

Warrick Long and Associate Professor Lisa Barnes shared cutting edge practices and the latest research in these areas, also drawing on their extensive experiences as directors and leaders in the not-for-profit sector, including with aged care and disability services. The directors appreciated the interactive nature of the sessions, with up to date and practical information. Their feedback reflected that while they had been challenged, they were presented with easy to understand relevant concepts.

ABS presenter, Warrick Long, noted that “this is a great example of a board of directors taking their responsibilities very seriously, and endeavoring to improve their knowledge and sharpen their governance skills – it was a pleasure to work with them”.

The Avondale Business School has a suite of programs that can help your directors and leaders develop the winning edge for your business. For more information, contact Warrick Long to discuss customizing something unique for your organisation. Warrick.long@avondale.edu.au

Avondale Business School collaborates with Business

Monday, May 15, 2017

Business and College collaboration is a wonderful way to enhance student learning. A recent excursion organised by the Avondale Business School to Sydney saw students visit 3 business to get insights into risk management, marketing, human resources and accounting.

The first business to open its doors was the Mascot Air Base facility. Manager of Airline safety lead them into the emergency procedures training facility which demonstrated the approach to risk management, in particular in relation to the evacuation of passengers in the event of an emergency. Students were privileged to be shown the various different aeroplane doors used to deploy passengers, rafts and survival kits. They were also shown the pool used for ocean training, in both the dark and in the rain.

Students were then put into the emergency procedure training simulator, where they experienced a crash landing in which the cabin lights turned off and the cabin filled with smoke. Students followed the orders of the cabin staff in relation to “evacuate, evacuate” and were led safely out of the simulator. Some students also were given life vests to deploy, and shown the various safety features such as the water activated light. Students had a better appreciation for flight crew and risk management procedures, after this confronting experience.

Students then headed out to Allianz stadium, for a tour of the facility. Students were taken down the ramp into the stadium, and the logistics of running the stadium that is shared by three different codes of sport (NRL, Rugby Union and Football) was explained. The marketing of the stadium signs, the sponsorship of the different codes and general keeping of the grounds were explained. Students asked questions such as who are the sponsors and what are the benefits of sponsorship from a marketing perspective.

Student then headed into the Sydney Roosters facility where they were led into the boardroom for an “Apprentice” style session (yes Mark Bouris is on the Board of the Sydney Roosters), by the Chief Financial Controller Mr Manuel Vlandis. Students were presented with financial information about the club and the challenges of running a rugby leagues club from a financial perspective. Questions were asked of the salary cap, costs of injured players, and how the model works in relation to revenue streams such as memberships, gate takings and sponsorship. The CFO was happy to answer the questions, and speak of his relationship with the Board and the new strategic plan they are currently developing.

Students then headed next door to the NSW Waratahs headquarters. There the player development manager Lachie McBain explained the complexities of running a rugby club, including issues such as preparing players for life after sport. He talked about the initiatives the club has in place for players such as further education and financial planning. He discussed the available careers in a rugby association, and his role in relation to his employer being RUPA (Rugby Union Players Association), formed to prepare players for life after sport. The club facilities were shown to the students, including the training areas, technology viewing areas and player lounge. Students asked questions in relation to membership numbers, revenue from Foxtel, sponsorship and player wages.

Feedback from the day included the following:

“It gave us insights into jobs where we do not see what happens behind the scenes”

“It was awesome to see business applied in a sporting context”

Avondale Business School will continue working with these businesses in the future, turning textbook learning into the reality of business. As the late Wallaby and Lawyer Ross Turnbull stated “There is nothing that I learnt in SPORT that doesn’t apply to BUSINESS, or LIFE” (2014). This excursion came from research done previously into the education of current sports people for their career after sport, a paper to be presented at the Global Conference on Education and Research (GLOCER 2017), which will be held during May 22-25, 2017 at the University of South Florida Sarasota-Manatee campus in Sarasota, Florida.