Productivity trumps growth as the leading issue for corporate AustraliaDOWNLOAD
12 April 2013: The 4th edition of Deloitte’s research on Australian boards, Board Effectiveness: The Directors’ Cut, shows that productivity, growth, strategy and execution are the top issues on the agenda for Chairs and CEOs of ASX200 companies in the next 12 to 24 months.
The Directors Cut provides practical insights into the challenges facing Australia’s largest companies, through qualitative and quantitative research with 100 Chairs and CEOs from the ASX 200.
For the first time since the research started, productivity is the top issue of concern for leaders of the ASX200. Chairs and CEOs are looking at productivity through two lenses: by company and for Australia as a country.
“Corporate productivity is the focus for most companies in a challenging growth environment,” said John Meacock, Managing Partner NSW, Deloitte and leader of the research. “Chairs and CEOs said they were reviewing IT efficiencies, alliances, supply chain arrangements and finance transformation initiatives, but realise that ultimately they cannot cut their way to growth.
“At the macro level, many Chairs and CEOs were concerned about Australia’s competitiveness, especially in the face of economic headwinds and factors such as the high Australian dollar. They believe there is an urgent need to enact reforms, especially in the area of industrial relations, to enhance productivity.”
Dual timelines on strategy
A significant change from previous editions of the research is that corporations are taking a dual approach to strategy. Chairs and CEOs are now increasingly operating in two timeframes. They are closely monitoring short-term performance and keeping a tight handle on costs and they are also setting the longer term strategic vision, by understanding the structural changes impacting their industries and trying to make the right investments for the future.
Whilst setting strategy remains fundamentally important for boards, there is a realisation that the execution of that strategy is now equally important and 98% of Chairs interviewed (and 87% of CEOs) say that their board actively monitors the execution of strategy.
A focus on core strengths and Asian growth
“The research showed a much clearer focus on core capabilities and less consideration of adjacent markets than in the past,” observed John Meacock. “This can limit the opportunities for growth in Australia and for many companies there is now a clear imperative to look to new markets and offshore for growth, particularly to Asia. We observed a clear trend amongst companies who are, or are planning to, appoint Asian directors and open offices in Asia. With that in mind we anticipate an increase in Asian investments in the next few years.”
Business models are changing
Reviewing the company’s business model is much higher on the agenda than in previous editions of The Directors Cut. Almost all of the CEOs and Chairs interviewed agreed that changes to their business model were a part of what they had to manage. Digitisation of business has been a major catalyst for this shift, with only 26% of CEOs and 9% of Chairs disagreeing with the statement that ‘digital has significantly impacted the way the organisation does business.’
“What is concerning is that while there is greater awareness of the impact of threats such as digital disruption and global competitors, companies are still reacting to change, rather than actively creating change in their business model to create competitive advantage.” observed John Meacock.
Is innovation un-Australian?
While 77% of Chairs and 72% of CEOs said their organisations were innovative, only 34% of Chairs and 46% of CEOs said that a significant proportion of their revenue was derived from recent innovation. Indeed, while companies saw themselves as innovative, the interviews highlighted several concerns that Australia has not been innovative as a nation.
“Both Chairs and CEOs raised concerns around innovation, such as a lack of scale, low levels of venture capital funding and changes to government tax rules,” said John Meacock. “But what surprised us was the view that lack of innovation may be cultural. There were several references to tall poppy syndrome and cultural cringe around innovation. Many Chairs and CEOs also felt that while Australian companies are good at adapting and maybe incremental innovators, they have not generally been breakthrough innovators.”
Chairs and CEOs working well together
The research also highlighted a healthy and balanced relationship between Chairs and CEOs in ASX200 companies.
“Our interviews highlighted high levels of trust, transparency and interaction,” said John Meacock. “The differentiation of roles is distinct and there is a more respectful and healthy balance of power than we have observed in the past.”
Issues on the board agenda in the next 12 – 24 months
Source: Board Effectiveness: The Directors’ Cut, 2013, Deloitte Australia
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