Here is the transcript of our webinar reviewing the results from the Voice of the Ops Leader Survey.
We are joined by Cameron Bagrie who discusses current hot topics around disruption, the economic vs the social ledger, inflation risks and execution on opportunity and how theses might provide challenges and opportunities available for Operational Leaders in the next 12 months.

Ryan:

Hey, Cameron, how you doing?

Cameron:

Hey, not too bad. Yourself?

Ryan:

Yeah, very well, thank you. Yeah, I think we're all set up to go at this end, are you good to roll?

Cameron:

Yeah, good as gold. See this trend here, the bias of policy and the expectations that are being placed on Biden and the United States is along similar sort of lines. We're looking at a very strong redistribution based policy agenda coming out of governments both locally and around the globe, and there's nothing wrong with having a redistribution based policy agenda, as long as you are matching it with a growth agenda on the other side.

Cameron:

And one of the big issues that we're mindful of at the moment is of course, the policy agenda looks pretty redistributive, it doesn't look that growth focused on the other side. And if you see pressure, and we're seeing this coming through at the moment for wages to move up, which is a good thing. But if you're not seeing wages met by productivity growth on the other side, then that puts pressure on margins, that potentially unlocks a bit of inflation pressure and then you've got pressure for interest rates to move up.

Cameron:

But redistribution based policy initiatives is the name of the game and of course, what we're also seeing out there is that the top issues across New Zealand at the moment, they're not economic focused, they are social focused. Housing is the prime, the tension spot for 60% of New Zealanders, yeah, housing's a big issue in Australia as well, but nowhere near as significant or as relevant as what is going on here in New Zealand. And this is where we're now, where we're seeing a real stretching of what's called the economic versus the social ledger. Yeah, the gap between the circle, haves and the havenots, and that is ramping up the expectations for the government to do more to rebalance that ledger, and that rebalancing on some level is long overdue and required.

Cameron:

Yeah, the million dollar question is that, how do you achieve it without cooking the golden goose so to speak, in regard to the business sector flourishing, making sufficient coin so they still want to get out there and employ people. Yeah, but if I were to look at the housing announcement that came to the table a couple of weeks ago, yeah, that really smacked of panic, and of course we're awaiting now what Adrian Orr is going to announce in the next sort of two to three months, because housing or housing unaffordability is not just a social issue, it's become a financial stability issue.

Cameron:

Interesting stat, New Zealand is now spending more on the accommodations statement and income related rents than what we spend on primary school education. Now I look at that statistic and I find that quite mind blowing in regard to not just the social consequences of where we are at the moment but where we are now being forced to spend money as opposed to where we'd like to be investing money. Now the relativities between New Zealand and Australia's I think pretty critical. If New Zealand does not get on top of the housing market, the fact that 60% of New Zealanders are worried about the property market and 22% of Australians are worried about housing, tells me that's got net migration exodus written all over it the next 2-3 years.

Cameron:

And I know there's a big theme here, people think people going to come running home and we will see a bit of that. I think there's going to be very strong pressure for a lot of people to say, "You know, it might just be a little bit easier to get ahead across the Tasman" And looking at the survey results I saw, of course what's the big issue out there for firms at the moment across New Zealand? It's finding skilled staff, it's finding labor and the last thing we want is more people to be departing.

Cameron:

Supply is the main problem. It's not demand. Now if I look across New Zealand at the moment, there are some pockets of the economy, obviously tourism that is absolutely under the pump because your demand is not there because the international tourists, yes, we've opened the gate to Australia but there's still massive voids to fill. But if you look at the general theme across New Zealand at the moment, we have firms now got the biggest the problems, it is not demand, it is meeting that demand.

Cameron:

Two thirds of New Zealand's imported product are capital and intermediate goods. That means they go into the production process to make other stuff, build houses, equipment used for factories, et cetera, et cetera, et cetera. But it's not just about goods, items, timber, these sort of things, a big input into the production process for firms, it's the availability of labor. And we've still got an economy that's slightly below where we were pre-COVID, but we've got job ads. If I look at Seek data, they're now above 2019 and COVID levels. And of course, now when you can't bring those workers in from overseas, RSE workers or the horticulturists or even people with skilled staff, we're seeing heightened pressure coming through the labor market or what's essentially a firm's most critical component, it's getting quality people.

Cameron:

And the reserve bank came out within the February monetary policy statement and they New Zealand is getting close to full employment. Now we're not at full employment, but we're getting close. Now that is quite horrifying when you look at the stats, because New Zealand has still got an unemployment rate of 4.9%, that's 200,000 in the job seeker benefit and there's 370,000 people on all benefits. Yeah, that's one in nine of the working age population and what that basically tells you is that we've got very deep rooted structural problems across the labor market in New Zealand.

Cameron:

And because New Zealand has been very reliant upon migration for a long time, what we've done is unfortunately we've gotten lax and we haven't been investing in New Zealand's critical staff infrastructure for a long time. And what COVID is now exposing is that under investment and skill deficiencies we've got across key parts of the economy. And if I overlay the likes of population aging, unfortunately that story is going to get worse. We're going to see heightened pressure for quality people not just internally within New Zealand but we're now competing in an international marketplace.

Cameron:

We're competing with Australia and one of the concerns I've got over the next two to three years is that Australia just is a little bit sharper in regard to identifying their talent. Yeah, we might look to the Pacific Islands, but Australia's going to be looking to New Zealand to fill their own problems in regard to finding staff.

Cameron:

Statistic, bit of a wake up call, if you think about the future workforce of New Zealand, that's the kids of today. In 2015, 70% of kids were regularly attending school. They're regularly attending school is being there nine days in ten, 90% of the time. In 2019, regular attendance has gone from 70% to 57.7%. 45% of Maori Pacifica kids regularly attend school. The biggest drop we've seen in school attendance has come within primary schools.

Cameron:

Now this is the feeder system into the workforce for employers. Now some of the reasons we are seeing that declined attendance, I think's connected to problems we've got within the housing market but that will not be the only reason. But, yeah, I think firms need to be rattling the cage a lot more regarding what these statistics actually mean for a critical element of your businesses going forward, which is people, and we've got to get the schooling system right. If I think about where New Zealand is going to be in 20 to 30 years, probably the most critical barometer is the quality of kids' education today. And at the moment, school attendance and what we're seeing with maths, science, these sort of things, they're not telling a pretty picture.

Cameron:

When you see supply sort of constraints, you are naturally going to see a bit of pressure on inflation, and we're starting to see a bow when you come through the labor market as people put up wages. It's not coming through the official data yet, but anecdotally on the ground, that's coming through thick and fast. And if I have a look at the ANC business outlook survey, which looks at cost of goods, services... It's a recent indicator that I've included for pricing intentions... We're not seeing these sort of measures since 1993. So what we're seeing across New Zealand at the moment is there is an awful lot of pressure on costs moving up, which means, what do you do if you're a firm?

Cameron:

Do you take the hit in margins? You've got to look at productivity growth, do you pare back your investment? Do you pare back your employment or do you pass that price increase on? What is your ability to pass those price increases on? But what it's also going to do is I think it's going to force firms to get back a lot more to the basic 101 and that's we've got to have a ruthless obsession with driving better productivity growth across this economy.

Cameron:

Now this is not just about firms. It's not just about private enterprise, we've got big infrastructural problems across New Zealand so our central, local government need to be joined at the hip here in regard to taking New Zealand along for the ride. What we know is two things. Look, one, we headed into COVID with not great productivity performance. Now New Zealand is actually poor on that front. Some of that reflects geographic disadvantage, the shape of New Zealand, various other components.

Cameron:

COVID is a productivity detractor. It makes us less efficient in some areas, and that just means you've got to work ruthlessly harder in other areas to pick it up. Glass half full is... and that COVID, well, we see some great stories of firms that have realized they just need to change their business models, stuff that have being talked about time and time again. It's almost like COVID was the wake up call. Yeah, the call to arms, look, we've got no choice now, we've got to do these sort of things.

Cameron:

And you see these great little stories, fish and chip shops suddenly they could get an online experience and literally in a space of a couple of days. And so there's an old adage, "Never waste a crisis if you want to get anything done." And at the moment, I think New Zealand's at a pretty delicate inflection point, we're at crossroads in regard to where we could go for the next sort of two to three years. But at the epicenter of those crossroads and what we need to take control of is better productivity growth. We cannot just be out there having a redistribution based policy agenda, without a very strong focus on economics 101, which is productivity.

Cameron:

Things such as... over the past 30 years, yeah, we've resided through an economic environment where interest rates have just gone and hit lower and lower lows. It's been an era of the dominance of monetary policy. Now if interest rates keep going down and hitting lower and lower lows, while asset prices generally speaking have been on a one way trip north. A lot of wealth creation has just come through asset price inflation and that come through lower and lower interest rates. Yeah, the government's been able to get away with being somewhat average.

Cameron:

Now, yeah, I think we've milked the last of that low interest rate cow, and we're seeing interest rates have now started to pick back up off their lows. There's going to start to be pressure on asset prices going forward. Real wealth creation across New Zealand and around the globe is now going to come from investment and the real economy. That's going to come through doing things smarter, because the easy game, yeah, that story's now over. What we also now are going to see is the government will need to step up big time.

Cameron:

Yeah, we are entering an era of a bigger more interventionist, involved government. Now there's some good reasons for that, in regard for restoring some balance, but that's also concerning if they do not have the ability to execute. If you look at central government, central government is a $400 billion balance sheet. Local government is $150 billion balance sheet that is $550 billion worth of balance sheet capability. They need to learn to be able to manage and take risk, invest in the right places. And unfortunately, governments are not good at managing or even taking risks.

Cameron:

Theme seven, the final one, your survey results has got a little bit on disruption. People tend to think about disruption through a technology lens. Disruption is not just about technology, in New Zealand it's about Mother Nature. Now, we're not what you would call a seismically stable place around the globe either. It's about pretty aggressive and rapid government changes. I just saw the government just announced today live cattle exports, it's got two more years to run. Yeah, these are the sort of things we are dealing with literally, overnight, that your business model could get turned on its head.

Cameron:

There's a great survey out by Suncorp a couple of years ago. They asked firms, "Have you been disrupted?" 43% of firms, looking in the rear view mirror said, "Yes." They also asked firms, "Looking forward, do you expect to be disrupted?" And it went from 43 to 36. Now those numbers smack of Kiwiana 101 which is complacency, and what we need to do is rattle the cage on complacency and the new phrase to think about is, "We now need to learn to take risks, because not taking risks is no longer the risk free strategy." And it sounds like an oxymoron and it's very confusing but the status quo ups your probability of getting turned upside down at some stage over the coming few years.

Cameron:

And finally, I'll just present just something to illustrate it, way back in 1995, these were the top eight companies on the New Zealand Stock Exchange. Now there's only one of them around and they're not in their former form. They're a fundamentally a big different business from where they were in 1995. Now we can have different illustrations of this, yeah, but to me, there's just the... In the space of 26 years, the top eight companies that used to be listed on the Stock Exchange are no longer there.

Cameron:

Back to you gents.

Ryan:

All righty. Hey, Cameron, thanks so much for those insights. Some, I guess with everything in the economic environment, you get one factor changing on one side, it always has a influential outcome on the other. And the things you've talked about are absolutely reflected in the thoughts and insights that came back from people that completed the survey for us. So thanks for tying some of those together.

Ryan:

I think one of the themes that we talked about or you've talked about in the findings there was the impact on costs going up, price pressure but particularly around that supply side and productivity and that's a theme that we're going to be talking a lot about in the survey as we review. So thanks for the insights there, Cameron, appreciate you sticking around for Q&A.

Ryan:

Let us jump across into the survey results. Firstly, just want to give you a quick bit of insight into who filled out the survey. So you see that the larger organizations are a constant trader here and it was intentional, those are the organizations we love to hear from. And the industry sectors that you came from in completing the survey, also, and as Mike said in the intro, in the productive sector, we're not about financial services. We're about the people that wear a high vis or get dirty work boots at some point in their process, so that was the focus of the survey as well.

Ryan:

In terms of where are you located, New Zealand only or New Zealand and international? 70% of you were New Zealand only.

Ryan:

So Mike, if we start diving into some of the results from the report... Do you want to take us through this part?

Mike:

Yeah, yeah, sure. So 50% reported that in 2020, compared to 2019, they actually grew. 28% stayed the same. 22% went backwards a bit. There is a detailed report that goes into some of the background data and it's pretty interesting. The COVID-19 had a neutral impact overall, was about 37% who said it had a positive impact, 34% said negative, and 29% said neutral. But in 2021, the expected negative impact drops back to 22% and neutral climbs to 41%.

Mike:

So to Cameron's point, there's a bit of a sense from that and some of the other data that we've kind of "Job done, move on, sorted, let's keep going." So most people grew... I think the report's available from... We're finishing it off just at the moment and incorporating Cameron's really... Quite disturbing actually, we should all be a little bit disturbed by this. And this is kind of, I think we're at a kind of T-bone cross section, intersection here, because we've felt pretty good about this stuff. We've had the opportunity through pretty good leadership at a government level but primarily because of the physical isolation and our quick movement that we've been relatively insulated, but the reality is, that complacency is going to work against us.

Mike:

In a way, it looks like the train smash that didn't happen. You know, it's interesting to sit here now, because we weren't sitting here 12 months ago. We were at home, we were right in the middle of lockdown, talking about it the other day.

Ryan:

Right.

Mike:

We were absolutely smack bang in the middle of lockdown. We had no idea what was going to happen, not even Cameron would have had any idea what was going to happen. Nobody had a clue, right? It was unheard of and unparalleled. What happened was that most of experience that hit in the first couple of months, through the lockdown and then around the middle of the year, we observed for ourselves and for others that there was a real kind of an intense catch up, like a snap back, effectively, and that's continued pretty much throughout.

Mike:

So yeah, we were lucky to miss the train smash...

Ryan:

It's probably worth just highlighting, and as per Cameron's point, is in the productive sector, we feel like we missed the train smash.

Mike:

Yeah.

Ryan:

Of course, there's some of those other sectors: tourism, hospitality which are, absolutely were nailed. But in the context of the people we're talking to in this survey, by and large, they missed the train smash.

Mike:

Yes. And there were those who experienced quite substantial decline as well, a smaller number and it appears to be... The pattern appears to be that it's specific to that sector or those companies.

Ryan:

Yes.

Mike:

Rather than a kind of a general trend you'd say... and exposure to hospitality would be one of those things, yeah.

Mike:

So in 2021, looking forward, 68% of the respondents are expecting modest or strong growth. A third of that number expected to grow by over 10% and it's worth thinking about this for a moment.

Mike:

Cameron, just back to you for a second, what's your expectation around growth in the economy in the 2021 year? What's the kind of the consensus around the forecast?

Cameron:

Well, if you look at the numbers at the moment, technically, we've just emerged from recession.

Mike:

Yeah.

Cameron:

Yeah, so December quarter was negative, but looks like March quarter is testing with whether it was negative and some of that, it's more technical than real, because we just had that cooling, settling down period after that pent up demand surge we saw in the third quarter of 2020. What's also going on at the moment is that the hit to tourism was never going to be a winter 2020 story. It was a summer story.

Mike:

Yeah.

Cameron:

So we're now starting to get into that rubber hit the road sort of period. Yeah, if I have a look at the economy at the moment, your activity's down about 1%, compared to pre-COVID levels. Internationally, that's actually world class, it's a great story. Yeah, do I think the New Zealand economy is going to be strong over 2021? Well, I don't think the answer is no. Yeah, I think we're going to... Yeah, we're heading into a bit of a low growth rut.

Mike:

Right.

Cameron:

And part of it is because the lingering after effects are still coming through. There's a lot of good stuff that's still going on, but you've got an economy at the moment that is capacity constrained.

Mike:

Yeah, yeah.

Cameron:

And there's actually more stuff we could do, if we had the resources to do it. We can't meet the demand.

Mike:

Yeah, yeah, that's absolutely the story, isn't it? I suppose if you took out the companies we work with and the companies that responded to this survey, 68% expecting modest or strong growth, a third of that number expect the growth to exceed 10%. That's huge in this context, isn't it?

Cameron:

Yeah, well, it's a great sign and reason for optimism. Though, you've got the aspiration there.

Mike:

Yeah.

Cameron:

The question is how do you deliver it on the ground and this is where-

Mike:

And that's what we want to talk about.

Cameron:

And this is where we need the different strategic thinking because it's a... The problems we've got, if you step aside from a couple of sectors are not insufficient demand. It's meeting that demand.

Mike:

Yeah.

Ryan:

Yeah.

Cameron:

Now that's a far better problem to have than insufficient demand, but it's still a problem.

Mike:

It's still a problem and it's quite intractable. We'll go into that and I was really pleased to hear you talk about the key challenge of productivity because in our view there's a sort of a warning in that growth. We've got activity that people are reporting as being higher than COVID. The main report challenge is they're reporting are keeping up with demand.

Mike:

Exactly as you say, supply chain problems, insufficient labor. The biggest strategic issue that you've highlighted is how do we leverage what's happened with COVID to actually get ahead. So in our view, keeping up isn't good enough, we've got to get ahead, and that is totally about increasing productivity, that is totally about making sure that the growth we experience is actually profitable and for that to happen, we need smarter, more skilled people. Exactly as you said, "We need to invest in our people infrastructure." We need to develop their skills at both a technical level, but also a management level, because that's the great enabler, and then thirdly the technology piece.

Mike:

Now we're not going to look so much at the technology piece, other than to say, having been the victim of... and I mean victim of... kind of package enabled re-engineering and technology enabled re-engineering, refer to points one and two, if you really want to know how to make technology, productivity improvements actually work, because it is about people.

Ryan:

Team, I'm just going to launch a quick poll here. When we did the survey, we asked you what the number one challenge you thought you were facing in the coming year. So let me just launch this to screen. If you could go, what do you think the number one challenge is that... We're just finding out of the survey. So that poll is on screen now, if you can just click a selection and submit for us.

Mike:

I think that context about the COVID being a wake up call, we will see that theme come through as we talk about some of these challenges and opportunities and I just didn't have the sense that we'd necessarily... in the productive sector, if you like... if we'd really grasped the kind of existential challenge that we've got in front of us right now. It's still very, very significant. Just because we've got through the pandemic and we're not dealing with its direct impact of lockdowns, et cetera, even acknowledging Cameron's point about we're still at risk, there are some very deep issues that need to be confronted and dealt with.

Ryan:

Yeah, and the quick poll here consistent with the findings out of the survey. That people was number one... And then there were go, the biggest challenge, we asked what your top three were. In the survey, 67% of the respondents said it was in the people, 45% in supply chain, 35% economic environment, and 26% was around budget. So reasonably reflective of the poll results as well.

Ryan:

So in the what were the people challenges, we asked you what were the skill areas you'd most like to see your people improve in? And these were the top five that came back, so dealing with difficult conversations. Over half the people said that was a skill they needed to see their people improve, keeping their teams engaged and we're going to talk about culture and the importance of contribution in your culture a bit later and then probably some of those other really just core fundamentals of management, time management, leading meetings, and then being mindful in how they act. And that's a key part of how we work with organizations and leaders, is making smart choices about what you do with your personal resource, your team resource, and the company resource.

Ryan:

So we talked, Cameron, you alluded to it at a government level, we need to start investing in infrastructure. If we take that into a company context, and think about how do we invest in our people infrastructure, that's partly about attracting good capability and then it's also about training it.

Ryan:

So what did people, their survey results tell us about the training? First thing is there was some good-ish news. The good-ish news, about 50% are doing some kind of training of their ops team. That I guess says that half of you are not, why it's the good-ish news. The bad news is that when we asked you the types of training you were doing, most of you are still using pretty old school approach to training and development, particular centered around workshops and personal coaching, and it's our belief that those alone don't actually create the behavior change you're looking for.

Ryan:

Mike, do you want to talk technology?

Mike:

Yeah, just at a very high level. It was interesting that 36% were exploring and considering investments. 12%, just 12% have already made significant investments. But I guess the somewhat remarkable thing in the context of what Cameron was talking about, the future going forward, is that just over 8% have decided not to invest and 18% have spent no time in either. And I guess our response would be, well, good luck with that. Not sure how that's going to work in 2021 and beyond.

Mike:

So then we kind of got into some of the opinion. This was where we were looking for the real gold from the free text space, the kind of where people could just express for themselves rather than using drop down boxes, et cetera. So here's our take on what people talked about.

Mike:

So we started with what's the one thing that your ops team could be better at, and the first answer was around quality, and this was the biggest single theme. It was around getting things right, as a good friend of mine says, "Stop doing dumb shit." So getting the basics right consistently and that consistency story, which is so fundamental to a well run organization, and I'll talk about that in a moment. That was the major theme.

Mike:

Managing people, the whole business of just being able to work together, which is those management fundamentals, how to resource, how to plan, how to run meetings, how to have conversations and that was just about working together to find solutions, not just about the problem. Self-management, just the desire that people spent more time thinking rather than reacting. There was a lot of concern about people's resilience in the face of COVID and fast change.

Mike:

So this, for us, the insight out of this, this title comes from a Gallup book which the largest global study, the most important determinant of the quality of your workforce and your organization's performance is your manager. And that's about creating a culture of consistency of delivery. "The What really works" is a reference to another really superb study and it talked about the companies that last longer than 25 years on the top are the ones that understand it's about delivering a 100% of the customer's expectation, 100% of the time.

Mike:

That's a real challenge, that's about consistency. That's not about 105% of expectations or 95%, 100%, exactly what the customer wanted, 100% of the time.

Ryan:

So, Mike, why not a 105? Because, I guess, we've been schooled often about, "Oh, you've always got to exceed customer expectation?"

Mike:

You're wasting money. Actually what your customer wants is what they ask for and to delight them and not get any value in terms of price, you're wasting margin. It's inefficient. It's actually a classic case of inefficiency, inefficient allocation of resources. That's what they want. Now you can change those expectations and part of the dynamic piece is to evolve those expectations and deliver new and different, but fundamentally, they just want what you said you were going to give. That's why they're buying, and to do that not 99% of the time, 100% of the time. It's a massive challenge and the best organizations work really hard at it.

Mike:

The second piece is about moving from the reactive manager, the firefighter, the technical person who solves the problems as they emerge but doesn't sort out the causes, who solves the problems themselves, rather than getting others to solve them, rather than building skill and capability in the organization. So that's what we see as being really fundamental there.

Mike:

The single biggest risk or threat people are facing in the next 12 months and Cameron's alluded to some of these. There is the general economic environment, as an economy it's slow, even though the people we're talking to are frantically busy, actually the economy as a whole is sluggish, of course. Threat of another lockdown, the ability to deliver supply chain, massive, changes in government policy, things like three waters. Skill gaps around process stability and integrity and that's really important as companies are... So many people looking at more than 10% growth, putting a lot of stress on the organization's processes and skills, and the loss of good staff and having too many untrained staff.

Mike:

Of course, you can't do anything about the first four, but you can do something about process stability, the infrastructure of the business, the skill infrastructure of the business and how you deal with the staff.

Mike:

So out of that, we thought, that actually that underplayed it. We think that it's actually worse than you think. The outflow to Australia, Cameron's mentioned it, and I think he's done us a great service by reminding us of what the historical brain drain that's been going on for generations. I was thinking about this in the context of Muldoon's comment that the brain drain race, the average IQ of both countries and I was thinking the Section 501, the Australian version and that's probably actually increased the average morality of both countries. I think our criminals are probably of a slightly high quality.

Mike:

Now look, it's not in our favor, all right. None of that stuff's in our favor.

Ryan:

And when we talk about those price pressures, like house pressure that Cameron mentioned, just the massive delta between New Zealand affordability of housing and Australian affordability of housing, how they just seem to be a bit smarter about being able to attract resource into their organization, yeah.

Mike:

That's the really, the really kind of stark issue is that people can make more money in Australia and to that point about our global decrease, the global decrease in compensation, I was not aware of that kind of global figure, but I know we've been slipping behind for decades, absolutely decades. And we've got this problem of full employment and a tight border, there are no more resources, so now what we're going to have is the skill gap. We're going to have a skill gap on two levels. One is falling behind, because only half of us are training and I accept that, the pressures, et cetera, but it's still the case that we don't invest enough in enough people or enough investment to catch up.

Mike:

And I will talk about why this is going to be so important and it's not just about keeping up, it's actually about how we can get ahead, how we can address this competitiveness issue. And people say a lot, "What if we train them and they go overseas? What if they do go to Australia?" And our response is usually, "Well, what if you don't train them and they stay?" Work out which is worse.

Mike:

So we think that you've got out of the data, at least, let's talk about some of the opportunities and advantages. People talked about, there were no strong themes, external opportunities, the economy coming right, some changes in customers perhaps. Floating on that rising tide, a lot of people talked about their advantage being their incumbency, their size, their stability, those kinds of things.

Ryan:

I wonder on that incumbency, when we look at Cameron's last slide of the top 10 companies on the share market.

Mike:

Yeah.

Ryan:

Maybe they were a bit satisfied with their incumbency as well.

Mike:

Yeah, yeah, and pretty kind of, "And I've worked in large corporates, I know what that inertia looks like. It holds you up for so long and then at some point, there's a tipping point and you fall off and those giants as they were then, unimaginable they wouldn't be around today and they're gone.

Ryan:

Certainly someone's calling you the next Kodak story.

Mike:

That's right, that's right. Yeah, you've just declined and slipped off the stock market. So that incumbency piece, yeah, there's certainly, it does have some advantages but it's not... May be enough to keep up. Some people reference the internal opportunities and that was helpful in terms of people were investing in new product development, a couple of people doing lean, which is always good.

Ryan:

And lean's a productivity, fundamentally, it's a productivity...

Mike:

Yeah, yeah. We see the biggest challenge is exactly in the same terms as Cameron's talking about. All roads lead to productivity, because if we can become more productive, it means we can improve our price competitiveness, without sacrificing margin. If we can reduce re-work, for example, we can get higher output for the same inputs. If we can innovate around our processes, not only become more efficient, we can also create a more consistent customer experience, and that enables us to have a longer lifetime value in the relationship and at higher prices.

Mike:

So whenever we think about this, the grand strategy stuff and all of that, that's actually about going to be about productivity. They are the things that we can influence and I think the challenge is that when it comes to trying to increase that productivity, we are constrained by the skills of our people and our capability to develop those skills. That, kind of, that side of the fulcrum is just too light. It's not pushing down and allowing the productivity to rise. We should be naturally, improving... I can remember seeing this... We should be improving our productivity at least 6% year on, year on, year on year, and I doubt very much that that's the case.

Ryan:

Well, Cameron talked about how productivity figures comparison globally and how we continue to decline.

Mike:

Yeah, yeah, yeah. So to ask the question...

Cameron:

Can I put a different spin on that?

Mike:

Yeah.

Cameron:

Just quickly, if you look at the past, particularly the past 10 to 20 years, we've had a pretty ruthless capitalist based model.

Ryan:

Yeah.

Cameron:

And shareholder capitalism. There's a big structural shift going on, locally and globally, where shareholder capitalism is being replaced by stakeholder capitalism, which is community connected, delivering on your social license, yada, yada, yada. But if you're certain then you break it down, the difference between stakeholder capitalism versus shareholder capitalism is basically the long game versus the short game.

Mike:

Yeah, I think that's right.

Cameron:

And what's the most critical investment you can make in the long game? It's your people.

Ryan:

Yeah, yeah.

Mike:

And when you think about stakeholders who are your primary stakeholders, yes, there's your customers, but you talk to anybody whose built great businesses, that endure over the longer term, they've always put their staff first, because great staff take care of customers.

Cameron:

Yeah, and a big part of the rebalancing that's going on at the moment is that we forgot about that, that people are at the epicenter.

Mike:

Yeah, yeah, look, as somebody who's seen all those changes, from the time of Muldoon, I was involved in the public sector reform. A lot of economists that you would know, and it needed to happen in a sense, but it's also gone on too long and that gap and the inequality are now really marked and of course, like you would predict from an economic point of view it's actually starting to impact on the efficiency of the economy and the ability to continue to deliver those returns, can't endure it.

Mike:

So we got that challenge, we got that challenge of increasing our productivity to be competitive. I think the other challenge and the even bigger one is that exactly as Cameron said, we're in the middle and have been for a long time of a war for talent. We have to increase our competitiveness in the war for talent. In the first place, that means, we've got to combat Australia's natural advantages. I call 30% income differential, I might have that wrong, by the way, I might be out of date on that, but it's a significant income differential, not to mention, it doesn't shake as much. It burns more, but you know...

Ryan:

It does have snakes and spiders though.

Mike:

It does have snakes and spiders. On the other hand, Noosa, so there are some real challenges that we'll always face. And the risk is that actually we just become more... what somebody once called... In terms of an economy, New Zealand is a lifestyle blog. So we lose our best people over there and we're left with people who are good, and capable, us, but we chose to be here because we don't want to be in Australia, right? So...

Ryan:

But that said, we may be in a fortunate position that we can make that choice because we are fortunate to own a property...

Mike:

I know.

Ryan:

And those kind of things, there is this huge of part of our economy where that social injustice is happening where they're going, "I'll never ever be able to own property in this market, so where else do I go that something like that is a possibility?"

Mike:

I know, look, it's only-

Cameron:

Can I just...

Mike:

Yeah.

Cameron:

Can I just jump in, again, just make an observation. If you're mentioning natural advantages between New Zealand and Australia, Australia gets more sun. They've got a few more beaches. But if you look at the hard data on natural resources, New Zealand's one of the wealthiest countries around the globe and on a per capita basis and renewable resources. This is a big economic exclusive side. We're long renewables. Yeah, we've got water coming out our ears. Yeah, you talked about getting water policy, right? You're absolutely critical. Yeah, we're a leveraged play off the spending side of the Chinese economy, which we know is going to be a big trend over the next sort of 20 to 30 years.

Cameron:

And so the great story here is that New Zealand, I think's got better potential upside than Australia. If we can get the execution story right.

Mike:

Yeah.

Cameron:

The execution is about people delivering on the ground, but we've actually got the right stuff.

Mike:

Interesting, that's a really interesting perspective. I always had that impression that image of Australia, I know it comes from that Bill Bryson book, where basically if you wander out of the city for half an hour, stick a spade into the ground you'll probably dig up copper or nickel...

Ryan:

Bauxite or something, yeah?

Mike:

Yeah, yeah, something valuable, so... But yeah, you're quite right and...

Cameron:

Yeah, coals a big one for them, how do you think that's going to go for the next 30 years?

Ryan:

Oh, not so good.

Mike:

No, I don't think that's going to go very well. Yeah, which does make that regulatory reform, it's got a sharper edge to it, hasn't it.

Mike:

So look, when it comes back to increasing this competitiveness for talent, we talk about investing and development and I think that as much about not only up skilling them, but providing possibilities for progress. We know what motivates people. We know that from that kind of stakeholder point of view, that stakeholder capital point of view, they don't... Your best people don't just want to go to work. They want to go to work and improve. They want to go to work and somebody's improve and improved selves and that's your job as an operational leader to make sure that they've got that.

Mike:

And for us, it comes back to the team managers and that just speaks from our experience about how operations team managers they make it all work. We talked about market competitiveness and productivity that the only want to become more competitive in the market is to be more productive. That flows out of in the first place, yes, technology and continuing to invest in that. I think that is one of our challenges at a certain level, Cameron, the affordability of technology, given the smaller scale of a lot of our enterprises, the business case gets a bit tougher. But then again, we also have an incredibly resourceful innovation sector that is working with us and for us and I guess it's also where that, which sectors that technology is going to apply in.

Mike:

The second and more sustaining source of productivity gains is just process improvement. And that's not just kind of, "Stop doing dumb shit," it's actually about how you continually refine and re-engineer and simplify and automate processes over and over again. I mean this is not news. This is kind of Toyota. This is total quality management, all that stuff, but we still talk about it and it's almost as if it's kind of too obvious to be working on. I know lots of companies that have started down the lean, path, which I'm a great fan of, and so many of have not taken it to the end, so many of them have let it drift.

Mike:

And in part, it's because there's a piece that sits behind it which is making sure that you've got what we call a contribution culture. And that means you've got a culture where people at all levels of the organization can make a contribution to improving process. We've seen this time and time again. Particularly, mid market organizations, tend to spend a lot training their senior people, their C-suite tend to go off to the nice residential courses at Millwater and the like. We've worked to train tier three managers, that's a bit part of what we've done.

Mike:

What we've noticed is that things get better when those people have got training, especially the tier three type people. When you take your technical managers, your ground level managers, your team leaders, and your supervisors, they are the people who transform the culture. We have seen that over and over again, and that's because they're involved, they're getting, they're opening up the floor to the ideas. It's the old story, if only IBM knew what IBM knows, so there's a lot of knowledge and a lot of wisdom inside there, but how you get it out is a really challenging kind of thing.

Mike:

We've seen productivity gains of 10% plus, when the supervisors and the team leaders finally get the chance to say, "Look, you're finally listening to what we're saying about how to do this better, instead of just kind of, making all the noises, you're finally engaging in the conversation about what we can do." That's the kind of investment that needs to happen, and you need to have managers who can make that happen. If you can do that, then you can start to get some really significant productivity gains. More importantly, you then become more competitive in the war for talent, and by the way, that's also how you make the technology improvements really stick and really work.

Mike:

But it's a virtuous circle, if you've got better skilled ops team managers, they're the ones who build this culture of contribution. They are the ones who make it a place where people want to... Again, we're seeing that, too, you don't have to do a lot, once you've kind of transformed these people, because word gets around that this is a good place to work. You don't lose your best people to Australia or competitors or offshore. Your dollar per labor hour will go up, but you've first got to...

Ryan:

And so then what's the number one reason that people leave an organization?

Mike:

It's the manager.

Ryan:

It's their manager and I'm sure everyone on the call has had that experience probably in a both a positive and a negative light of how much a change to your daily environment a capable and successful manager can make and on a reverse, how much of a negative and toxic environment they can create if they're not there. And by and large, we're finding that in the operational manager space, it's not a lack of desire to be a good manager, it's just the lack of capability. They've often come to a very technical and very functional roles into those leadership elements and they're just fundamentally missing the capability to do a good job of leading those around them.

Mike:

And they're not being very well led. In the end, this is the responsibility of the people that we're talking to right here, because their performance is your responsibility. This is where they don't know what they don't know. They think they're doing quite well. I think it's called the Dunning Effect, we always think we're doing better than we actually do. They don't know what they're capable of. They're not well coached. We don't have a good tradition of management and building bench depth and building capability.

Mike:

If you look at our most successful organization, which would be what, Ryan?

Ryan:

Wears black? Or is it written on my chest?

Mike:

No, it's not us.

Ryan:

Oh, it's not us. Oh, the All Blacks.

Mike:

It would be the All Blacks.

Ryan:

Oh, okay.

Mike:

There's, we have had the best shooters and people in management development that you could hope to see anywhere in any book in any instructional residential program anywhere in the world, Hansen, Henry, Smith, and actually the rest of our coaches, Leon Macdonald people like that, are outstanding in their understanding of how management works and yet we don't take all of that stuff that we see on the news and in the press conferences that we just consume so avidly and say, "How do we make this work here?"

Mike:

It is about investing in those, the great teams are the ones that have a whole bunch of captains in them. The All Blacks of my childhood, right, childhood, the original greatest All Blacks, Meads, McCaw, all those guys, seven of the eight guys in that pack captained their province. That's what leadership looks like, that's what it can give us.

Mike:

So really we're talking here about how you can create people-powered productivity, because the return on investment from training your managers will give you a better workforce, it'll give you higher productivity, it'll make you more competitive and address those big issues that Cameron has so helpfully raised about our stakeholder capital. It'll fix you balance sheet, no problem. It'll take care of that. More importantly, what will it do for your stakeholder balance sheet? So I guess that's kind of brings us to the last thought about this.

Mike:

Because all this has to come down to actually what are you going to do to make sure that your best people aren't buying a one way ticket to Australia at some point in the next 12 months?

Ryan:

Nice. Team we are going to head into some Q&A quickly with Mike and Cameron. I did just want to quickly ask, thank you again to those of you that completed our survey. We do have the ability to do a benchmark styled outcome report for you where we can compare your organization's results with the industry at large. If you'd like that returned to you, please just answer that for me in the poll now.

Ryan:

For some of you that maybe haven't completed the survey yet, we can get in contact with you, have you complete that and then again off that benchmarked approach so I'll just leave that open for a moment and then we will jump to Q&A. And while that's coming up, Cameron, a question for you from Tracy.

Ryan:

Thanks, Tracy, for joining in. Always lovely to see you virtually. Tracy would like to know, what do you think, Cameron, we could do at a policy level to change leading indicators like the attendance at primary school? So I think really a question is how could you fix government?

Mike:

How can you fix education policy?

Cameron:

The first thing you do in regard to education is that you'd be ruthlessly analyzing the data that you got. The good news is the statistics are available. They're aggregated up across regions so we know generally speaking that the further south you go, the higher school attendance is. Yeah, but we should be able to get... There'll be information sitting there by school.

Mike:

Yeah.

Cameron:

Yeah, we should be able to rip into that and see, well, what's going on at some schools versus other schools. Is there some models that are working better than others. Let's overlay it with the socioeconomic side of things as well in regard to decile area's, regions, is it connected to housing policy? These affect... but everything starts with ruthlessly tearing apart the best information that you got at your fingertips, because once you get that information at your fingertips, you've got a far better chance of being more accurate in regard to designing, effective policy advice. Without it you're throwing a dart.

Mike:

Yeah, so, Cameron, do you think that there's another piece in there? Again I remember going back to Clark's government, when the previous national government, they tend to prefer the targeting regimes versus the... Yeah, they prefer the targeting regime, and they social welfare at the time was or CPS or whatever it was called, they knew the 2000 families that caused 80% of the issues and when Mahari came and he said, "We're going to float the... We're going to raise the tide. Whole communities are going to float on a rising tide... Has this government got a different attitude? Because historically labor governments have tended to oppose that kind of targeting and tried to do across the board kind of solutions? What's your sense?

Cameron:

Well, if you go back and have a look at, there's been a bit of a furor over the past four or five days, over some information that was not in that mental to health report, some key statistics.

Mike:

All right.

Cameron:

And you start to ask yourself, why is that information no longer being made readily available, and you start to question just how transparent things are. But the government's got a very big checkbook. Yeah, they spend in excess of a $100 billion a year. Now I don't have a problem with them spending $130, $110, $90, right? The key thing that I want to see is it executing and delivering results? Or designing policies that at least have got a reasonable chance of result. And if they're not delivering results, can the policy redirect and let's try something again? It's sort of what we do in the private sector, if it doesn't work, well we stop it pretty quick and we redirect. But we manage the risk before that, but we're not going to stand still. And this is one of the big issues we've got for the government sector... They've actually got to learn to actually start to take some risks. You know, Kiwibuild was bad policy, the money should just get redirected into something else.

Mike:

Yeah.

Cameron:

That's politics, that you continue with it.

Mike:

I think also, our private sector, I think of the companies, we've worked with over nearly 20 years, and actually taking good risks is a skill and an art that few really understand and it's not just the kind of risk taker, entrepreneur kind of start up stuff. Actually, we should be taking risks all the time, and for example, we talked about investing in managers and staff and stuff. There's a risk. But how we understand that risk and manage it and also to understand that not investing is an investment decision, it is taking risk, even that...

Cameron:

Exactly. Yeah, I get back to that adage. Not taking risk is no longer the risk free strategy.

Mike:

Yes, yes.

Cameron:

Yeah, and it seems like an oxymoron, but it's not. When you think about the world we live in today, yeah, we're being used to an environment where it's been linear one, plus one, equals, two.

Mike:

Yeah.

Cameron:

But the world is now an exponential pace of change, and it's quickening and it's not just the Fourth Industrial Revolution, which is unlike the first three, because you've got the connection across all the sphere. You think about the fast pace of change we're now seeing out of government, the shifts in the environment for international tax. The conversations that are starting to take place internationally. Now this is the new normal as we try to both, satisfy economic normal requirements but try to get a bit of resource back into their economic and the social ledger and it's not going to be easy.

Mike:

Yeah.

Cameron:

Because we let that ledger get too unbalanced. But at the epicenter I think everybody, if we can get rid of short termism, I think that's a real big positive step in the right direction. Because short termism, like airports not investing in runways, landlords not looking after their tenants, the government infrastructure program which tends to be set for three years, as opposed to 30 years. There's all these sort of things, that have been going on. We talk a big game in regard to the long game, in practice we don't tend to back it up with a lot of substance.

Mike:

Yeah, yeah. I think that's true, and you're right. The asset drive or investor driven or cattle driven is very much awarded the short term, especially in the US particularly. We see that pace of change in training as well. 80% of people, just looking at a report out of the US, a training industry report, 80% of businesses will be doing their training in the future in some form of online. Only 12% are planning to go back to that traditional workshop, classroom basis and look, the reality is we've seen all the research. It just doesn't work that well.

Mike:

We've hung onto it and hung onto it simply because that's been the provided structure and that's been the way you always do things. And what we've learned is that the blended learning, using technology and face to face, that combination, that's what changes behaviors. So yeah, it's... Seth Godin talks about a learning revolution is underway and old models like workshops, they don't feature them.

Cameron:

Are our tertiary university institutions up for this.

Mike:

Oh, no, no, and look their idea of taking your stuff online is to record the lecture. It's not a... It's not a good...

Ryan:

Although, I'll give Auckland University a little bit of credit here.

Mike:

Okay.

Ryan:

With some inside word, they had a five year plan to move their, big share of content online. The gift of crisis from COVID, they did have it set up in two weeks.

Mike:

Yeah. That's true, that's true.

Ryan:

Not necessarily a fantastic learning experience but they did make something they thought was going to take five years, happen in a couple of weeks, so there you go.

Cameron:

Another interesting one was that COVID, actually forced the government to roll out tablets, the chromebooks in low decile schools. That should have happened anyway, these low decile school kids, they're at a disadvantage. We should be subsidizing broadband into these lower decile houses. There's actually been some really... COVID's been good on a lot of levels in regard to helping us force through some stuff that needed to take place anyway. But on then on some levels, there's some stuff we don't want to go near them.

Mike:

Yeah. It's exposed some things, too. My wife, just today, at this moment, chairing her first Cure Kids board session and so that's about child health, a lot of research over the last 50 years to help with child health.

Mike:

Number one issue with child health today is poverty, and we as Kiwis go, "Oh, that can't be right, that can't be right." It's a serious issue and of course, it's located primarily in the South Auckland and it's to do with housing, quality of housing is a key determinant of some of the appalling child health, and it's our responsibility.

Cameron:

You're disrupting you're housing, yeah, you're bouncing kids around schools, little wonder they're not turning up. Yeah, so we can't divorce the housing issues from what goes on regarding education sector and of course, education, is building blocks into the economy, the workforce of tomorrow.

Mike:

And look, we spend our professional lives thinking about how people learn and what goes on in schools is one thing, but breaking our kind of paradigms of thought about how we learn at the workplace, that's where the real opportunities. That's where we see the biggest opportunities, we see that if we can, once we've worked with organizations across the whole organizations and given them relevant pieces of the puzzle that help them to develop their own capabilities, they just fly.

Cameron:

It's got to be different. I'll give you... I stt on the National Board of Life Education, New Zealand. Now when we launched into high schools last year, so we obviously got disrupted, we had a program that looked at alcohol use. It something on what's called Money Mojo, financial literacy.

Mike:

Yup.

Cameron:

We're deciding if we were going to do something on financial literacy or Money Mojo, there's no point in just creating another website. We engaged some actors and the teaching mechanism with theater sports. Why did we choose that? It's different for kids. It gets them out of the classroom and they're getting hit from a completely different angle so it doesn't feel like a teaching environment for them. It's a little bit more fun.

Mike:

Yeah, yeah.

Cameron:

It's simple example of innovation.

Mike:

There's lots of opportunities for that and we understand more about learning and education, how we educate and stimulate and engage kids is a series of issues. Only some of those transfer or translate into the workforce and we've got enormous opportunities to teach... No, not to teach, to help our people learn, and that's very different from teaching. We've got enormous opportunities to do that at scale and with some real impact, but we've still got to make the investments and we've got to take some risks and we've got to think differently about what our job is. It's not just get shit out the door, it's actually about creating that kind of people-powered productive workforce.

Ryan:

Guys, let's close this out. We've just got one more question from Doug and it's a question really to you, Cameron. Again, I think it's about fixing the government with your magic wand. That is question is for primary industries and their requirement for relatively low skilled labor and highly intensive jobs in that zone, do you expect to see the government maybe opening the borders and providing better access now that vaccine roll outs are starting to happen?

Cameron:

So if I have a look at the agriculture sector across New Zealand, there's different components. Are we going to get strong growth over the next 10 years in regard to export receipts out of what's traditionally been the main state dairy or red meat? The answer is no. Yeah, we're going to have to increasingly turn to aquaculture, seafood, and a big one is horticulture. Now the horticulture sector at the moment, particularly the apple orchards are absolutely suffering because they don't have... Despite having 200,000 people on job seeker benefit, they do not have enough people to actually pick the fruit.

Cameron:

Now the issue is not accessing low skilled labor or paying people money, because they paid piece rates, they're paid contract. The typical RSE worker, because I did work with an orchard, I started end of last year, we put a submission under the product of commission. The RSE workers were picking 40% more fruit. 23% of the New Zealanders that picking the fruit were not picking enough to make the minimum wage. So they were effectively getting topped up. Yeah, there was an effectively a subsidy that was going on.

Cameron:

Now if horticulture is going to be a part of the replacement strategy, for New Zealand here in regard to diary. We can't milk too many more cows, we've got to be a lot more productive about it, then availability of labor is something that we're going to need to get on top of and the sector at the moment is suffering this year. But their primary concern is now next season, because they're getting into that stage where, what do they do with the trees? Do they rip them out? Do they order new trees? Do they stick to those established leases they've got and the longer we get that uncertainty at the moment, yeah, the more we're going to see negative investment connotations coming out of that sector.

Cameron:

And that sector that's got huge opportunities, but unfortunately, we just get... People forget it's not a wage issue, it is a productivity issue.

Mike:

And it's the same with kiwi fruit. I've had some involvement, I was on the board with a kiwi fruit company. Technology can take you so far but actually it's really... We spent millions on technology in the pack house but actually it still came down to being able to pick the fruit and being able to pack it and it's still very people intensive. I think this is a real area for...

Cameron:

Yeah, the RSE workers come back year after year.

Mike:

Yeah.

Cameron:

So the skills that they learn in year one get replicated in year two, three and four.

Mike:

But I also know that actually, it's the temporary management that comes in where there's real scope for investment and you can do even better with that RSE labor, any labor if you are prepared to train your temporary, your seasonal management, that infrastructure that comes in, they're absolutely ripe for it. The challenge they've got on orchards is they pick a whole lot one day and they make a decent amount and then there's no turn out for next day. So how do you manage those kinds of people? It's not enough to just say, "Oh, it's sort of, it's the lifestyle on the coast or whatever." You've got to work out how to manage them.

Cameron:

But you hear about seasonal workers coming in and if we can increase the volume across some of that, the horticulture sector, then ultimately Kiwis benefit from the creation of the full time jobs.

Mike:

Yes, yeah, that's very true.

Ryan:

Guys, let's wrap it up. Wrap it there. Firstly, Cameron, a big thank you to you for joining us and providing that insight and the additional commentary you added on the way through. Really appreciate that. Thank you to our attendees today, every single one of you, we will be sending out the results and include some of Cameron's commentary on that and we'll get that out to you in the next couple of days. And if you have any questions around how we can help develop that people capability for you and driving that productivity, to remain market competitive, then we'd love to have a chat with you.

Ryan:

So thanks again for joining us. We wish you all a great day. Thanks, guys.

Mike:

Thanks.

Ryan:

Bye.