New Zealand’s chief executives
The critical challenges facing New Zealand’s chief executives: implications for management skills
Ann Hutchison The University of Auckland, New Zealand Peter Boxall The University of Auckland, New Zealand
This paper reports a 2012 survey of 265 New Zealand chief executives, representing 27% of the
nation’s largest organisations. It examines their most critical challenges in the current environment,
discusses the implications for New Zealand’s management skills, and considers how human resource
practitioners can support such skill development. The results reveal a complex environment of
changing markets and technologies in which the support of stakeholders, including key funders, is
more guarded and conditional; in which there is an ongoing war for talent; and in which business
models need to be reframed to respond to fast-paced and ambiguous change. The data suggest three
fundamental management skill needs: managing uncertainty and renewal, managing stakeholders
and business partners, and managing people and limited resources. Now, more than ever, human
resource specialists need to focus on the development of managers, and take part themselves in
development processes that bridge internal and external boundaries.
Keywords: chief-executive opinion, management development, management skills, New Zealand
Correspondence: Dr Ann Hutchison, Lecturer, Department of Management and International Business, The University of Auckland, Private Bag 92019, Auckland 1142, New Zealand; e-mail: [email protected]
Accepted for publication 18 August 2013.
Key points 1 New Zealand’s chief executives report a fast-changing, ambiguous environment
characterised by constrained funding.
2 In this environment, managers need capabilities in managing uncertainty and
organisational renewal.
3 Managers need political and interpersonal skills to handle a complex web of rela-
tionships with stakeholders.
4 Managers need skills in, and a systemic approach to, managing people and limited
resources.
5 HR specialists should design, foster and model the developmental processes that
support these skills.
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Asia Pacific Journal of Human Resources (2014) 52, 23–41 doi:10.1111/1744-7941.12020
© 2014 Australian Human Resources Institute
In large organisations, chief executives sit atop a pyramid of managers and employees. Reporting to the board of directors, they are charged with leading the organisation into the future, co-ordinating its response to the opportunities and threats in its environment. Their role is inherently interdisciplinary and integrative: they must bring the parts of the organisation together to perceive and pursue a common agenda – or fail. But what chal- lenges and risks do they see, and which are the most severe? This paper’s goal is to report a survey of chief-executive opinion in New Zealand, examining what chief executives in the private, public and not-for-profit sectors perceive as the most significant issues in their current environment, and to examine their implications for management skills.
This is a timely moment for such an assessment. Since the global financial crisis (GFC) of 2008–09, New Zealand, like other nations, has experienced lower rates of economic growth. Its government has used increased borrowing to make up the deficit in the national accounts and has carefully reviewed public expenditure across the board (The Treasury 2012). The situation has been complicated by the need to rebuild Christchurch’s economic and social infrastructure following the sequence of earthquakes that began on 4 September 2010. New Zealand does have opportunities for growth, including in its world- class primary industries, in its attractive tourism sector, and in high-value manufacturing and services, but New Zealanders have continued to emigrate in search of better career possibilities, putting at risk the country’s skill base. This is a trend that has concerned gov- ernments, of all political stripes, but which they have struggled to arrest.
In this light, our aim is to present what New Zealand chief executives currently report to be their greatest challenges, and to discuss the implications for management skills. Given what is known about the business environment, what managerial capabilities are important, and how can human resource (HR) specialists support their development? We base our discussion on a recent survey of 265 chief executives from New Zealand’s largest organisations. We begin with an outline of key features of New Zealand’s organisational landscape and a review of existing research on its management capabilities. This leads into an analysis of the survey’s quantitative and qualitative data and to an examination of the implications for management development and the HR function.
New Zealand organisations and management capabilities
New Zealand is a small economy of 4.5 million people remote from international markets. Apart from the dairy industry, in which New Zealand is a world-class player, it has few organisations of global reach. In 2011, New Zealand had no companies in the Fortune Global 500 while Australia, with a population of 23 million, had eight, and Singapore, with a population of 5.2 million, had two (CNN 2011). The average New Zealand organisation is a small or medium-sized enterprise. Although many multinational firms have branches in New Zealand, a smaller percentage of New Zealand employees (44.8%) work in firms with at least 100 employees compared with employees in the USA (64.4%) and in the UK (60.2%) (Mills and Timmins 2004). As might be expected, the average size of New Zea- land’s large firms is smaller than in the biggest Anglophone countries: ‘the average number
Asia Pacific Journal of Human Resources 52
© 2014 Australian Human Resources Institute24
of employees per firm in firms with 500 + employees is 2532.2 in the UK and 3321.1 in the USA, but only 1593.9 in New Zealand’ (Mills and Timmins 2004, 15).
While there are niche players in various spheres, there are many types of manufactur- ing, including automobiles, aerospace and semiconductors, that have little or no presence in New Zealand, restricting opportunities for individuals who wish to specialise in these fields. New Zealand has the kind of business and consumer services one expects in an advanced economy, but much of it is in foreign ownership, including almost the entire banking sector and large parts of retail and distribution (Boxall and Frenkel 2012).
In this context, it is commonplace for New Zealand managers to feel they have out- grown the country, and to seek advancement by emigrating to a larger economy or by transferring from the New Zealand branch of an international firm to one of its much larger international offices (Gilbert and Boxall 2009). Lack of progression to the ‘really big jobs’, and the absence of the kind of highly specialised roles available in the world’s largest economies, make recruiting and retaining management talent a fundamental problem. On the other hand, New Zealand organisations do have some advantages. They are less bureaucratic, tend to provide individuals with greater job autonomy, and can argue that New Zealanders have an enviable quality of life (Gilbert and Boxall 2009). An empowering kind of management style seems to be commonplace in New Zealand’s smaller, more informal organisations (Macky and Boxall 2008). None of this, however, is stemming the ‘brain drain’. In the year to 31 August 2012, 53 900 people migrated from New Zealand to Australia while only 13 900 moved in the other direction (Statistics New Zealand 2012). There are now some 650 000 New Zealanders living in Australia (Department of Immigration 2013), where they have a high level of success in the labour market. Based on census data collected in 2006, ‘83% of New Zealand-born men and 70% of New Zealand- born women’ resident in Australia were employed, ‘compared with 72% and 62% for the comparable Australian groups’ (Department of Labour 2010, 5).
Given the small scale of New Zealand industry, and the challenges the country faces in retaining its educated workforce, what is the calibre of New Zealand management? Does the country have the management talent it needs? This is increasingly the question raised in relation to New Zealand’s productivity performance. As the New Zealand Productivity Commission notes, New Zealand ‘slipped from one of the wealthiest countries in the 1950s to now around 26th in the OECD’ (New Zealand Productivity Commission 2013). New Zealand has one of the lowest rates of productivity growth in the developed world (NZIER 2011). With the US economy providing the reference point (US = 100), the OECD currently rates Australia’s labour productivity (in terms of GDP per hour worked) at 81.4 while New Zealand is rated at 56.5, some 69% of the Australian level and below the OECD average of 74 (OECD Statistics 2013). This productivity gap, in turn, has resulted in substantially lower wages in New Zealand. In fact, based on 2006 figures, the income gap with Australia has been estimated at $14 000 per person (NZIER 2011).
Clearly, the productivity and income gap with Australia is a key concern for New Zealand. In the early 2000s, analysis of the productivity problem placed emphasis on the difference in capital intensity (Black, Guy and McLellan 2003). Australia has a higher
Ann Hutchison and Peter Boxall
© 2014 Australian Human Resources Institute 25
capital-to-labour ratio, reflecting the fact that ‘the Australian economy has a larger mining and quarrying industry’ (Black, Guy and McLellan 2003, 23). There is no doubt that Aus- tralia benefited strongly from the resources boom prior to the GFC, but a recent study by the New Zealand Institute of Economic Research of the period from 1989 to 2006 argues that 70% of the productivity gap between the two countries ‘is due to underperformance of New Zealand’s industries rather than a difference in the industrial structure of the two countries’ (NZIER 2011, ii). While capital intensity plays a role, the report attributes most of the difference to ‘the quality of management, organisational innovation, the production process, and the quality of labour and capital’ (NZIER 2011, ii). This assessment, it should be noted, masks important sectoral differences. New Zealand’s agricultural and utility sectors have strongly outperformed their Australian counterparts, as, remarkably, has New Zealand’s much smaller mining sector (NZIER 2011, 5). It is in services – including wholesale, retail, hospitality, finance and construction – that New Zealand’s relative per- formance has been much weaker. Given that services employ around 70% of the work- force in both countries, this is a serious issue for New Zealand (NZIER 2011, 6).
As the NZIER’s (2011) analysis implies, part of the productivity problem must relate to management capabilities, and surveys often point to shortages of managerial resources in New Zealand (e.g. Statistics New Zealand 2007). An analysis of management skills in New Zealand manufacturing firms has been conducted by Green et al. (2011), using a methodology developed by academics at the London School of Economics and consul- tants at McKinsey & Co. The approach relates management-reported practices in opera- tions, performance and people management to productivity indicators. They rank New Zealand at 10th place in the 17 countries studied so far, arguing that:
while some of New Zealand’s firms are as good as any in the world, there is a substantial ‘tail’
of firms that are mediocre . . . This is a key differentiating factor between New Zealand and
better performing, more innovative countries. (Green et al. 2011, i)
Green et al. (2011, iii) conclude that ‘New Zealand manufacturers would benefit by focusing much more on the development of management capabilities within their firms’. Scale and ownership seem to make a difference: the study suggests that larger and foreign- owned firms have better management practices. The study’s authors indicate, however, that we should be cautious with the results (Green et al. 2011, 13–14), as limitations in the availability of financial data meant that Green et al. were able to base their analysis on a sample of only 50 New Zealand firms.
