Believe and conquerTNA Australia

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INFORMING BUSINESS

perspective

Nine roles of a good strategic leaderCreating a winning cultureAccelerating your cash flowThe road to sustainability

ANZ winsCFO Award:

Business Bankof the year.

Continuing to deliver service with a difference.In recognition of ANZ’s success in delivering innovative

capital solutions to the corporate market, ANZ has been awarded the CFO Magazine – Business Bank of the Year 2005 Award.

When combined with our traditional banking services and our high calibre people who are decisive, reliable and accessible, it’s no wonder we continue to be rated No.1 against major banks for customer satisfaction* in the corporate market.

To fi nd out more talk to your dedicated ANZ Relationship Manager or contact one of our Corporate State Managers today.

NSW/ACT Roger Marcolin (02) 9227 1452QLD Graeme Riley (07) 3228 3456SA/NT Paul McCarthy (08) 8218 8283VIC/TAS Mark Lang (03) 9273 0131WA Garry Kurtz (08) 9323 8131

www.anz.comAll applications for credit are subject to ANZ’s normal credit approval criteria. Terms and conditions available on application. Fees and charges apply. Australia and New ZealandBanking Group Limited ABN 11 005 357 522.

*Source: Roberts Research Group 2005 amongst major Australian Banks. Businesses with annual turnover of $10m-$150m.

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Editors Shelley Williams and Kym Powell Ph (03) 9273 5569 ANZ Corporate and Business Banking 2/100 Queen Street Melbourne VIC 3000 email: inperspective@anz.com

response design 440 Clarendon Street South Melbourne VIC 3205 Ph (03) 9690 2188Businesswriters Rear 99-101 Grandview Street Pymble Sydney NSW 2073 Ph (02) 9144 4109 InPerspective is published by Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (ANZ) for its Corporate Banking customers. © February 2006.

In November Mark Patonjoined the Corporate Divisionas Group Managing Director,replacing Graham Hodgeswho has been appointed ChiefExecutive ANZ National BankLimited New Zealand. MarkPaton joined ANZ in 1990following ANZ’s acquisition

of National Mutual Royal Bank. Mark’s prior roleswithin ANZ include Managing Director Trade andTransaction Services, Head of the Food, Beveragesand Agribusiness segment within InstitutionalBank, and State Manager Business Banking forNew South Wales.

In a move that recognises the contribution offamily businesses to the Australian economy,ANZhas entered into a 3 year sponsorship with FamilyBusiness Australia. In addition to becomingnational sponsor of the Family Business Awardsprogramme,ANZ will host a range of seminarsand boardroom briefings, presenting on key issuesthat affect family businesses such as managinggrowth, governance, strategy and ownershipchange.We see this as a great opportunity tosupport this important business sector.

We are also thrilled at receiving the CFOMagazine - Business Bank of the Year Award.This award recognises the proven success of ourinnovative capital solutions, helping businessesmanage their growth aspirations and successionplanning.

I hope you enjoy the stories in this issue ofInPerspective, and if you have any commentsplease forward them to inperspective@anz.com

Welcome to the February 2006 issue of InPerspective. We have an exciting range of stories in this issue and we are especiallygrateful to our customers TNA Australia, AB Oxford Cold Storage,Satterley Group, Servcorp, and G&S Engineering who have generouslygiven their time to share their business experiences and insights.

16

Neil ShilburyManaging DirectorCorporate Banking

03 HOT TOPICS What makes a good strategic leader?

04 Caring for competitive advantageSatterley property model set to impact suburban lifestyles

05 FEATURE ARTICLE Believe and ConquerAlf and Nadia Taylor,TNA Australia

07 The road to sustainabilitySustainable responsible business

08 Serving clients rightServcorp

10 Listen, it’s simpleManaging employee behaviour

11 ECONOMIC UPDATE

12 Cold comfortAB Oxford Cold Storage

14 Riding the revolutionChanges in global marketing

15 Accelerating your cash flowInvoice finance

16 Empowering Staff – leads to a winning culture

17 WORK LIFE BALANCEToo much work can damage your success

18 IN THE COMMUNITYPartnering with the Community

08 12 0504

He’s certainly made his presence felt inWestern Australia.The founder and Managing Directorof the Satterley Group started his business as a realestate agency in 1980.Today he owns WA’s largestindependent property operation, with a land bank of36,000 lots that have a retail value of $6 billion.

Nigel Satterley is a developer with a differencewhich is reflected in his passion for the lowest-returning division in his company - public housingrenewal. He believes every Australian is entitled to a lifeworth living in communities with more open space,playgrounds, quality landscaping with safety in mindand good access to services.

His group (turnover: $550 million) has beeninvolved in developing more than 125 residentialestates.The scale of its current urban renewal programis remarkable: five joint ventures with the WAgovernment are underway with more than 5,000dwellings in public housing estates being refurbished orredeveloped and more than 8,000 lots being created forprivate sale.

The Satterley formula for mixed private/publichousing in attractive developments has delivered whatNigel calls “the heart and soul of good places to live”where quality is a competitive advantage. Designstandards are maintained by strict covenants onarchitectural style and smart “waterwise” gardens.

When Satterley was seeking ways to conduct goodmarket research, he decided to get involved himself. Hedirectly consults with local community groups and goeson doorknocking walks across his estates at weekends.“Some people know me and some don’t, but they tellyou what’s going on, which is terrific,” he says.

He tries to lead from the front “like a good captain”.The performance of 100 full-time staff is monitored inquarterly reviews, while Nigel himself works six days a

3

A simple, powerful job description,but getting everyone to follow is easier said than done. Corporate strategies are not alwayseffectively formulated (some executives don’tknow what their strategy is) and many leaders instrategic roles are ill-equipped to lead.

One reason for this is that managers who havebeen successful in operational or functional rolesdon’t necessarily make good strategic leaders.Most people spend their careers dealing withoperational issues, yet companies routinely relyon them as they move up the ladder ofadvancement into strategic jobs.

When the appointments don’t work out, thecosts of replacement and lost businessopportunities can be staggering. According to arecent report, the average price tag on such failedmanagement transitions in Australia is $780,000.

How can high-potential executives bridge thegap from operational to strategic leadership?

First, it’s useful for them to know the nineroles of an effective strategic leader, says RobinKramar, Professor of Management at theMacquarie Graduate School of Management.

These competencies, listed in, ‘Grow YourOwn Leaders,’ a book by William Byham, AudreySmith and Matthew Paese, are found in the rolesof navigator, strategist, entrepreneur, mobiliser,talent advocate, captivator, global thinker, changedriver and enterprise guardian.

Surely it’s impossible to find all of theseattributes in one person? Probably, agreesKramar, but that’s no excuse for senior leadersfailing to work on them.

For example someone who’s a naturallytalented “navigator” – a person who can workquickly through complex information, get to theheart of matters and identify priorities – may berelatively weak as a strategist.This involves anability to develop long-range plans and goals toalign with a company’s vision. If they can’t mastersuch skills, they should seek help from someonewho’s strong in the areas in which they’re not,Kramar says.

4

week, reserving the seventh for family andanother passion, the West Coast Eagles AFLteam. His private numbers are in the phonebook. “If consumers have hassles they’ll ringme, which is good.These people buy ourproducts and most of them part with their life savings to do so; they’re placing their hardwork in our trust.”

The brand is so highly regarded thatmany customers pay extra to get the parks,gardens and community facilities that comewith a Satterley estate and the propertiesappreciate strongly. Another key to success is long-term relationships with 22“cornerstone investors”.

“We’re relationship people,” Satterleysays. “We’re structured like an unlistedpublic company with all the controls andtransparency of a public company.”They also spend around $4 million a year on advertising and marketing in TV, print and signage.

Satterley’s ambition now is to expand intoeastern states. He has acquired a major asset in Trinity Beach, Cairns, and is looking for theright opportunity in Sydney.

“I aim to find projects which allow us to create something special that people wantto buy, so we can make a profit and run a respected business.”

What makes a good strategic leader?

h o t t o p i c s

Nigel Satterley is 56 but wouldlike to work until he’s 100. That should be more thanenough time for the Satterleyproperty model to make aconstructive impact on suburbanlifestyles across the nation.

Nigel Satterley has built a half-billion-dollar business through:• Developing well-designed,

liveable properties that appreciate in value

• Philanthropy and integrity • Personal interface with

customers• Long-term relationships

with investors• Advertising.

“Leaders need to know their weaknesses, whichtend to be most evident when they’re under stress.Typical failings among strategic leaders include beingrisk averse, impulsive and too much of a perfectionist.If you have good self-insight you’ll be aware of thosenegatives and learn to manage them.”

Another key competency, ‘change driver,’ relatesto being adaptable, making change happen and helpingothers to accept new ideas, while ‘talent advocate’ isabout developing and retaining good people.

Knowledge of employees in an organisation andthe skills they need to drive it is arguably the mostvital attribute, Kramar asserts, especially at a time oflabour shortages and ‘churn.’ Strategic leaders shouldbe able to inspire – to articulate a vision of somethingbig and win hearts and minds to build passion andcommitment (captivators).They must also obviouslyidentify and exploit opportunities for new products,services and markets (entrepreneurs).

If it all seems too much, it often is.That’s why anestimated 40% of senior managers fail within the first18 months of their appointment.

So what should a leader do if they suspect they’refalling down in some areas?

Gaining self-knowledge can be achieved viapsychological tests, coaching and training programs,suggests Kramar.There’s a trend for senior strategicleaders these days to have coaches, experts who candiscuss with them areas in which they can improve andsupply them with ideas to build competencies. Formany, it’s a realistic option and one that can genuinelymake a difference.

“If they’ve never thought of it, they should,”Kramar suggests. “Being a successfulstrategic leader involves truly innovativethinking. It’s about the unimaginable.”

“Leaders need to know theirweaknesses, which tend to be most evident when they’reunder stress.”

“My job,” American computer industry

executive Ken Olsen once said, “is to

make sure we have a strategy and that

everyone follows it.”

Caring,for competitiveadvantage

6

10 years.They related to one patent in multiple countries,commencing in the UK and followed by Germany and the US.

Despite the new machines’ performances, many potentialcustomers refused to believe their eyes. “They wanted to stickwith the status quo in case something went wrong,” says Alf. Heeventually installed machines in some smaller European factoriesthat were prepared to give them a go. It took several years tobuild reputation and credibility.As companies reaped the benefitsthe doubters disappeared.

Now his vision is to grow TNA into the biggest supplier ofend-to-end packaging solutions in the world. “Some competitorstried to send us broke during the legal wrangling over patentswhen we were small,” he says. “They regret that now. I like riskand I like to win.”

Taylor attributes his winning ways to his fiercedetermination, a never-quit attitude and a love of engineering.It’s relatively easy to be a successful manufacturer in Australia ifyou have the right competitive edge, he says. In his case it’sinnovative design and the right people.

“Most importantly we need to operate in a country with highlevels of education so we can efficiently source engineering,software, electronics, marketing and sales skills.We need suchprofessionals to run our company and we’ve been lucky enoughto have found many of them in Australia.”

In the past 20 years Australian education has improveddramatically,Taylor says. Criticism about falling standards ismisplaced because if it was true companies like TNA couldn’tsurvive. “We outperform our biggest competitors in Japan,Germany,America and the UK.Australia can do more with its20 million people than other nations can do with 100 million.We must stop talkingourselves down.”

TNA employs 175 people, split evenlybetween the offshoresales offices and theirSydney headquartersand manufacturing sitein Melbourne.

Why the two-citysplit? One of the start-up team responsible for establishing thefactory wouldn’t move to Sydney and Alf wouldn’t move toMelbourne. But with today’s communications it’s no

impediment. “Melbournetruly is Australia’smanufacturing centre so it’s amuch better place to set up afactory,” he says.

In travelling the world, thesuccessful businesses Taylorhas observed are those inwhich employees understandthat companies are there forthe benefit of all members ofthe enterprise and theirfamilies. He relies heavily onthe excellence of his sales staffoffshore who believe in theproduct.They’re trained to“underpromise and

5

and conquerBelieve

In the early 1980s, Scottish migrant Alf Taylor was workingfor a multinational snack foodcompany in Sydney when heasked himself why themechanical bag makingmachines he was handling were so complex, inefficient and wasted so much product.

He investigated further by talking tocontacts in manufacturing about it, butthey told him bags couldn’t be made anyother way. “It’s impossible for anymachine to fill more than 75 bags aminute,” one said.

Taylor wasn’t convinced.Manufacturers seemed to be peddling amyth. He suspected that by makingslower machines, they knew they couldpotentially sell more of them.

In 1982, with his wife Nadia,Taylorestablished his own company,TNAAustralia. By 1984 they and their teamhad designed and built an electronicbagmaker, the Robag, a machine thatnow quietly and smoothly loads 200 bagsa minute.

Its success was built on basic conceptsthat included a rotary continuous motionand a now-famous ‘stripping’ action using rotary jaws.

In 1986 the first machine wasinstalled at Smith’s Snack Foods plant inRydalmere, Sydney. Shortly afterwards,TNA received an order from Smith’s foranother 42 machines.

TNA today designs and manufacturesthe best-selling vertical form fill and sealbagmaker in the world. It also supplies arange of other products includingweighing and inspection equipment. Itrecorded compound growth of 30 per cent a year since 1990 withturnover increasing from $2 million to around $100 million.

The Robag’s creation revolutionisedthe speed with which factories couldpackage goods, but challenges soonarose, particularly in the internationalarena. By 1989 Taylor found himselflocked in patent wars with internationalcompetitors that dragged on for

overdeliver,” a process that’s helpedby the machines’performances routinely exceedingexpectations.

Managers shouldcreate cultures inwhich everyonerecognises theirsuccess is helped by the contributions ofcolleagues, he says.“If the group benefitsthen all individualswho are part of theenterprise benefit.”

Travelling theworld on business tomeet customers takesits toll, to the extentthat Taylor jokinglyrefers to his lifestyle asslightly unbalanced.

Still, he’s proud of being able to demonstratehonesty and openness in his personal style. Othersfollow his example. “No manager at TNA willridicule or diminish someone who’s made an honestmistake,” he says.

“I’ll be the first to put up my hand and admit amistake and talk to the team about how to dealwith it.These are opportunities to learn.Youhave to sustain that belief system so your peoplecan believe in you. In an environment wherethey feel comfortable, enjoyment and financialsuccess will follow.”

Taylor attributes hiswinning ways to his fiercedetermination, a never-quit attitude and a love of engineering. TNA has become a leader in global

manufacturing by:

• Refusing to believe “it’s impossible”

• Dominating a niche market

• Fighting for what it believes to be right

• Maintaining sales offices around the world

• Employing well-educated,professional people to run the company

• Building a culture based onhonesty, openness and learningfrom mistakes.

7 8

best pract ice

The road toSeveral corporate social responsibility

“cycles” have occurred in the history

of industrialised nations. One of the

first was the labour movement at the

turn of the twentieth century that

spawned awareness and new laws

about working conditions, employee

safety and child labour.

sustainability

Today’s executives can’t fail to notice that the concept is more widely accepted than ever.A clearlyarticulated Corporate Social Responsibility (CSR) policyand program is becoming an integral part of the wayAustralian companies do business.

That’s because there’s been a general value shift sinceWorld War II, accompanying the rise of sustainability and protection of the environment as key concerns for tens of millions of people, says Dr Leeora Black,Founding Director of the Australian Centre for Corporate Social Responsibility.

Clear evidence of this change is the number ofcompanies appointing full-time professionals to track and manage performance in the area. Investors these daysevaluate companies’ CSR practices before buying stocks.More and more firms are examining their greenhouseemissions and setting up employee volunteer andcommunity partnership programs.

Corporate social responsibility is especially evident in the rise of sustainability reporting.A survey of 509 top Australian companies last year conducted for theCommonwealth Department of the Environment andHeritage revealed that 116 produced a sustainability reportcompared with 57 in the previous year. Some 45 per centof the Global Fortune Top 250 companies now publish suchreports (guidelines for global sustainability reporting canbe found at www.globalreporting.org, a UN website).

Those numbers may not seem significant, says Black,but they are. “Social reporting is the tip of the iceberg,”she says. “It’s usually the last in a series of steps taken by acompany to consider its social and environmental impacts.”

Awareness of the concept may be widespread,but not all leaders fully understand it. CSR is not solelyabout protecting the environment, as some assume.Genuine CSR accepts that companies must take account of all impacts - social and environmental - of their activitieson stakeholders while ensuring the long-term viability oftheir businesses.

That’s commendable, Black says, but there’s a caveat:corporate responsibility or sustainability programs must

be based on substantive behaviour, not spin.“You can’t add up your charitable donationsand claim you’re socially responsible,” saysBlack. “Stakeholders won’t be fooled.”

A big potential pitfall for companiesembracing CSR, in fact, is stakeholder cynicism, which can occur when promises get ahead of delivery.

A company’s first step on the road to atruly sustainable and responsible business is to understand its connection with thecommunity around it, she says.That entailsknowing who stakeholders are andunderstanding the impacts of the business onthe community and environment.The nextstep is to initiate dialogue with stakeholdersabout their needs and expectations, aboutwhat’s deliverable and to keep the dialogueopen and ongoing. “It’s essential to approachthis with a spirit of empathy.”

Another ingredient in the mix is ethicalbehaviour. It requires a system that goesbeyond mere compliance, which identifies the behaviour that’s expected of everyone in a company.And senior managers need tolead by example.

ANZ, IAG,Westpac, BHP Billiton and Shell are among Australian leaders in corporatesocial responsibility, Black contends.They’vetaken time and made big efforts to embed CSR into their strategies and to link it to key performance indicators - and they’regetting it right.

Meanwhile CSR will continue to evolveuntil it’s business as usual for everyone, shepredicts, in the same way contemporary ideasabout marketing, HR and communicationsmanagement have become accepted.

“It’s a journey, and one step at a time is just fine,” she says.

“A company’s first step on the road to a truly sustainable andresponsible business is tounderstand its connection with the community around it.”

But soon after 8 o’clock that morning,he learned that Servcorp's client company which hadinvited the tenders in fact needed the document tobe delivered by 9am - in less than an hour’s time.

His anxiety was allayed by a Servcorp secretaryin Brisbane. She logged him into HottDesk®, a toolthat allows clients to print anywhere in the worldfrom their desktops.The 28MB document wasprinted in colour, bound and hand-delivered inBrisbane with time to spare.

“What can I say other than thank you,” theclient wrote to Servcorp later. “One cannot helpbeing impressed.”

Australia’s largest and most successful supplierof serviced office space, Servcorp has beenimpressing customers for the best part of threedecades. Servcorp’s HottDesk®, which providesbusiness services anywhere in the world andincludes accessing files and email remotely, is justone way in which the company keeps its 7,000loyal clients happy.

Starting out with half a floor of serviced officesin Sydney’s MLC Centre in 1978, the Moufarrigefamily has, through careful stewardship, created aninternational company operating 55 floors in 13countries, turning over $120 million a year andemploying 500 people.

Publicly listed in 2000, the company is carvingits reputation in service-oriented markets, takingout the award for Best Services Company inSingapore for 2005.

At first, like many businesses, it was groundedin necessity. Born of Lebanese parents in Mudgee,CEO Alf Moufarrige had been seeking office spacefor himself in Sydney of suitable quality, butcouldn’t find any.

When a Melbourne client of servicedoffice-space supplier Servcorp had to submit a bulky tender document to a Brisbane address recently, hethought he had until close of business on submission day to lodge it.

clients rightServing

Marcus Moufarrige,Servcorp.

Eventually he decided that sharing the costsof setting up offices in a good quality buildingwould be cheaper than buying equipment andpaying other overheads.At a time whenfacilities for shared office space were poor heand his early partners opted for quality, likemarble floors and smart boardrooms - a policy that continues.

The concept took off, moving to Melbourne,then Singapore in 1987. Servcorp offices arenow located in Australian mainland capitals,Auckland, Paris, Brussels, Kuala Lumpur,Hong Kong, Shanghai, Beijing,Tokyo, Osaka,Nagoya and Dubai.

Its offering includes business-to-businesscommunications in addition to physical spacein salubrious locales.A fundamental tenet isthat if a company employs fewer than tenpeople, it’s cheaper to share the infrastructure,capital and technology with others.And that’strue in virtually every case, asserts Alf’s sonMarcus, who runs the business with his fatherand brother,Taine.

“You can work in a fantastic location andit’ll still be cheaper than doing it yourself,”says Marcus. “We provide clients with thecompetitive advantage of first-class supportstaff, a service culture and IT infrastructurethat’s entirely managed in-house.”

IT is a particular strength. BecauseServcorp serves an array of differentbusinesses, off-the-shelf solutions don’t always fit the bill.

“We provide clients with thecompetitive advantage offirst-class support staff...”

10

When company leaders are asked which behaviours

they’d most like to encourage in their organisations,

they invariably agree. They all want a high-performance

culture in which employees set challenging goals, are

creative and innovative, support and encourage each

other and build strong relationships.

The Moufarriges tackle this problemthrough word of mouth.They offer asensible financial proposition during thefirst point of contact with enquirers andeducate front-line personnel to packagethe information skilfully, so potentialclients can understand the advantagesstraight up.They advertise in thebusiness press too.

Training and staff selection areparamount concerns. Servcorp bringssenior personnel to Australia annuallyfor management meetings and newmanagers are trained in an intensivecourse at head office in Sydney.Whenhiring, the Moufarriges seek peoplewho are, above all, enthusiastic. “Weoften get people from the hospitalityindustry or straight out of secretarialschool,” says Marcus.

Having expanded rapidly in recentyears, the company is eyeing China as amarket, seeking to establish premises inGuangzhou and Shenzhen. “We learnedlessons in China,” says Marcus. “Wewere the first of our kind into thecountry and had to educate the marketsthere and bring service standards to asuitable international level.”

A key lesson was that theinternational language of businessapplies everywhere and transcendscultural and language barriers. “If youconduct yourself with honesty andprofessionalism and back that up withdiscipline and good systems, local teams adapt to cultural differences,”Marcus explains.

So the company builds its own phone and othersystems and sends Australian engineers abroad to setup and run offices elsewhere. “Competitors try tomake off-the-shelf applications work, but the realityis you’ve got to design them from the ground up,”says Marcus.

Innovations don’t stop there. Recognising thesweeping changes IT has brought to the way peoplework in a wireless, globalised world, Servcorp hasmoved beyond the confines of physical premises andprovides a “Virtual Office”.This includes services like areceptionist who answers in the name of the client’sbusiness, a physical address and stationery for aprestige location, voicemail and SMS services andaccess to boardrooms and meeting spaces.

The company’s biggest and ongoing challenge isperception and it’s related to Servcorp’s sophisticatedimage. “Our premises are first-rate so everyone thinkswe’re expensive,” says Marcus. “Yet people forget howmuch it costs to run a business. Our rent includes areceptionist, electricity, water, newspapers, flowersand other services.”

9

Servcorp stays ahead of competitors by:• Offering a value-for-money service based on sharing ofinfrastructure, capital and technology costs

• Flexible IT solutions• Innovating to provide new concepts like a “Virtual Office”• Word-of-mouth marketing• Training and careful staff selection• Transcending cultural barriers.

Unfortunately the reality is disturbinglydifferent, according to research by global consultancyHuman Synergistics.Australasian managers simply don’tpractice what they preach.

Analysis of 1,215 organisations and more than 50,000leaders in Australia and New Zealand shows that 76 percent of executives who want employees to behave in aconstructive manner are giving the wrong messages.Their“do as I say, not as I do” approach leads to a “do as I do”mentality, which reinforces defensive andcounterproductive behaviour.

The research reveals that the real common culturalattributes in companies include: take few risks so you’renever blamed for mistakes, follow rules, compete formanagement’s attention to gain influence, be critical ofothers and pass on decision-making.

“Our research shows most executives who wantemployees to work constructively are unwittinglyencouraging them to behave in ways that holdtheir companies back,” says HumanSynergistics Chairman, Shaun McCarthy.

Consider a standard scenario: at the startof a project the CEO gives his managers andemployees encouragement about how thework will be exciting and goals will bereached through effort, focus and teamwork.Typically when they don’t reach targets ontime, the executive gets anxious, thenbecomes negative. “Rather than talking inpositive motivational terms, they end upsaying ‘if you don’t pull your finger out,we’re going to have serious performanceissues’,” says McCarthy.

While it’s easier to focus on what’s wrongthan be positive, McCarthy concedes, what many leadersdon’t understand is that managing through anxiety merelyraises anxiety levels in others.

Nine out of ten Australian managers conductingperformance reviews forget that their feedback should be amotivating tool to improve performance, McCarthy says.

The more negative feedback they give,the more demotivated their staff become.

The belief that you can motivatepeople through competition is equallydamaging.Almost all managers believethat encouraging competition can raiseperformance levels, says McCarthy, yetthere’s no research anywhere in theworld to support this.

Consider a typical example.“An Area Manager may call branchmanagers together and put up salesgraphs to embarrass the lowestperformers to do something about it.That’s not motivating; what the AreaManager should do is deal with peopleindividually on ways to reach targets andhelp them understand what they’recapable of achieving.”

Solutions to these problems are sosimple they’re almost trite and changesonly need to be small to influence staffpositively, McCarthy observes.

By simply listening, showing theybelieve they want their people to achieve (people overwhelmingly do) and be happy, they can deliver strong results.Yet few managers are good listeners.

Similarly, too few managers jointlyset goals with employees “the mostmotivating goals are those you set foryourself,” says McCarthy. “It’s afundamental form of respect to asksomebody’s opinion, but Australianmanagers seem to believe they mustmake all the decisions.”

The more managers involve people inimproving an organisation, thegreater themotivational value.Good examples of thisare companies likeLion Nathan,Vodafoneand Mastercard,McCarthy says. Eachhas put substantialeffort into building and developing aconstructive culture.In each case theirefforts have beenreflected in strong

recent performances.“Working people in teams is always

sensible, as is sharing knowledge. But the most important motivator is to take a genuine interest in them,” he says.“It’s that simple.”

“... most executiveswho want employees to workconstructively are unwittinglyencouraging themto behave in ways that hold theircompanies back.”

Listen,it’s simple

Servcorp offices are nowlocated in Australian mainlandcapitals, Auckland, Paris,Brussels, Kuala Lumpur, HongKong, Shanghai, Beijing, Tokyo,Osaka, Nagoya and Dubai.

1211

90

100

110

120

130

140

150

160

Dec-03 Jun-04 Dec-04 Jun-05 Dec-05

Index

Source: Bloomberg

Equity market prices growth

US S&P 500

Australian ASX 200

UK FTSE 100

Japan Nikkei 225

-3-2-1012345678

00 01 02 03 04 05 06 07-3-2-1012345678

% pa

Sources: Australian Bureau of Statistics, Economics@ANZ

Measures of Growth

Net exports contribution (RHS)

GDP (LHS)

Domestic final demand (LHS)

over the yearpps to growth

The economy has struggled to gaintraction in 2005. Growth has been quitevolatile, with a scant 0.2% increase inGDP in the September quarter following a 1.3% rise in the June quarter. Theannual rate of growth has been morestable at around 21/2%, well down on the31/2% average through 2004 and the33/4% achieved on average since the early 1990’s recession.

This more sombre economic performance isthe outturn of two offsetting influences. On one side is the cooling in housing construction and more mutedhousehold consumption stemming from the ending ofthe house price boom. On the other is the higherbusiness investment and higher business incomesflowing from the global resources boom. Over the past year the cooling forces have predominated,leading to an overall easing in economic activity.

The good news is that this balance will tilt in thedirection of stronger growth in 2006.The forces of“cooling” will weaken as investment in dwellings beginsto reaccelerate in response to a growing shortage insupply.And the forces of “heating” will intensify, withcontinued solid business investment, a strengthening inresources exports in response to the expansion incapacity and infrastructure in recent years, and arebound in rural exports on the back of a return tomore normal production conditions. GDP growth willaccelerate from 21/2% in 2005 to 3% in 2006 and 31/2%in 2007.The potential rate of growth of Australia isnow probably no more than 3 to 31/4% (it is difficult tobe precise but our estimate is calculated as the sum oflabour force growth of 11/2% and labour productivity of11/2%). So the projected rebound in growth over thenext two years will return Australia to the good times– or at least as good as they are likely to get!

The Australian equity market is already enjoying thegood times. Buoyed by record profits in the miningindustry, the Australian ASX 200 has risen by 40% sincethe start of 2004.This has made it one of the bestperforming stock markets in the developed world.

Employment growth will resume in early 2006 in response to strengthening economic activity,particularly as housing construction rebuilds inresponse to emerging shortages of housing stock.In the interim the unemployment rate is likely to edge a little higher.

The sting in the tail of our thinking is that ourprojected acceleration in growth will inevitably beaccompanied by further policy tightening by the RBA.With the economy already operating close to capacity,and with headline inflation already at the top of the

Growth to rebound in 2006 and 2007.

target zone, the inflationary dangers from an acceleration ingrowth are more intense. Going forward, the RBA will beseeking to cap growth at around potential.As a result webelieve the RBA will lift interest rates by a further 25bpsaround mid year, taking the cash rate to 5.75%.This can be expected to flow quickly through to mortgage andbusiness interest rates.

Tony PearsonHead of Australian Economics, ANZ

February 2006

economic update

Return to the good times

Australian share market is strong.

The early days weren’t easy for Laszlo Fleiszig whoarrived in Melbourne in 1950 with a young family and fullof hope. Destitute, having been stripped of his assets by thecommunist regime in Hungary, Fleiszig worked tirelessly tobuild a new life and a successful business from scratch.

Now 87, he remains active in AB Oxford along withten other family members, generating revenue of $40million a year and managing 20 per cent of the outsourcedcold storage space in Australia.

“My father’s a person of the highest integrity,” saysGabor (Gabby) Fleiszig, Laszlo’s son and Joint ManagingDirector. “He’s always worked hard, paid his debts on timeand when he gives his word he sees it through, even if itmeans sustaining a loss.”

The Fleiszigs own the largest single site cold storageoperation in Australia with capacity for 100,000 pallets for clients like Nestlé, McCains, George Weston Foods and Fonterra.They are also a Therapeutic GoodsAdministration-approved cold store in Australia and provide cold chain logistics services forpharmaceutical company CSL, handling products like vaccines and other pharmaceuticals.

The company moved into cold storage in the late 50s to cater for the poultry business Laszlo started soon after arriving in Melbourne.A natural entrepreneur, he began to let spare capacity toother food companies.As demand increased he reinvestedin more space.Though each investment involved substantialrisk, each paid off and his operation soon became anintegral link in the state’s supply chain.

“Our competitors often wouldn’t have spare capacitybecause they build only after securing firm agreements,”explains Gabby. “Every time we filled our existing space we tended to build more.”

This advancement wouldn’t have been possible withoutflexibility. “We’re not a public company so we can make bigdecisions quickly when we’re on the move, even in thecorridors on occasions,” says Gabby.

Selling space and chilled air has been at the heart of the Fleiszig family’s livelihood for more than half a century. Their company,AB Oxford Cold Storage, employs threegenerations of the same clan whose bonds of loyalty and, funny as it may seem,judicious handing out of lollies have helpedto make it the largest privately ownedcompany of its kind in Victoria.

When Fonterra recently needed airfreightedproducts to be accommodated and handled withspecial equipment at short notice, for example,AB Oxford agreed and made the necessaryresources available immediately.

The company does not rely on conventionaladvertising to sell its services, preferring referralsfrom satisfied customers, networking and anability to respond quickly when tenders open oropportunities present. It has invested heavily inspecialised handling technology but also has astrong IT capability, with customised software for every customer.

So successful have the IT offerings been, thatthe Fleiszigs have made them commerciallyavailable to the wider business community.“We don’t force customers into existing programsthat may be an uncomfortable fit,” says Gabby.

“We tailor solutions provided it makes commercialsense and there’s continuity of business.”

Like many companies with a long history,ABOxford has seen profound change. For much ofits early existence it provided storage for the meatindustry with significant effort devoted to MiddleEast exports. Difficulties associated with thatmarket saw the company becoming a morebroadly based chilled and frozen food operationabout ten years ago.

“We used to have bulk stores only, but sincethe mid 90s we’ve constructed racked stores,”says Gabby. “We now stack pallets seven high

“We’re not a public company so we can makebig decisions quickly when we’re on the move,even in the corridors on occasions.”

ColdComfort

0

2

4

6

8

97 98 99 00 01 02 03 04 05 06

%

Australia

USA

UK

Europe

NZ

Source: Bloomberg

Global cash rates

Australian interest rates to rise again.

The Fleiszig family haveachieved success by:

• Displaying integrity in their operations

• Taking risks and being flexible

• Using market intelligenceto win new business

• Tailoring services forindividual customers

• Developing an inclusivework culture.

13 14

using highly specialised equipment, and meat accountsfor only 10 per cent of our business.”

The Fleiszig’s corporate culture is inclusive,with some of the best recruits coming from small businesses because they’re more likely to be multiskilled.

The company works hard to foster a familyatmosphere which is why many of the 300-oddworkers are related, having joined on therecommendation of relatives already employed.The Fleiszigs enjoy great staff loyalty and theattendant benefits that brings. Some employees have been with them for more than 20 years.Two non-family members of the management team have 23 and 29 years experience, havingstarted as labourers.Training programs are ongoing and older workers are actively encouraged to stay on.

This philosophy is embodied by elder statesmanLaszlo, who greets staff every day on his rounds,shaking hands, asking about their families anddistributing lollies, a much-appreciated quirk.

“We like them to feel happy and part of theenterprise,” says Gabby. “We know everyone by name and we’re always available to listen,because we care.When they need help withdifficulties unrelated to work we give it to them.People who feel wanted tend to do their best on behalf of the business.”

Succession planning includes cousins andnephews and the third generation of Fleiszigs,some of whom have been with the business sincetheir early teens. All have a strong work ethic,Gabby notes.While family ties bind, there’s broad recognition that these must be supplementedwith education. Among the Fleiszigs working in management are a CA, three lawyers and several IT experts.

Riding the

Professor Gabbott has this advice forCEOs seeking a competitive edge:

Provide leadership on company/customertouch points. When an organisation andcustomer come into contact, what actuallyhappens? Provide leadership on what thosetouch points should look like and it willpercolate through your organisation.

Treat customers as partners, not revenuestreams. Nokia, for example, uses customersto help it design new products. As forservices, Gabbott points to recent researchfrom Europe. “If you take satisfaction with abank at 100 and a customer called the bankbecause there was a problem, theirsatisfaction dropped to 98. If the bank calledthem because there was a problem, theirsatisfaction went up to 110. That can makequite an impact.”

Whatever you’re promising, deliver.“Think about your brand . . . can you trulydeliver what you’re promising? If it’s greatservice or fantastic products, you’ve got todeliver those.”

Set clear, measurable outcomes formarketing. Sponsoring a sports team may go down well with your mates, but it’s onlydelivering real value if it impacts upon thebottom line and you can measure it.

Seek new ways of communicating.Gabbott points to Yellow Tail wines, whichhave had massive success in the US. “Their success was built around, firstly, their brand, but also public relations and in-store marketing. There was no bigadvertising campaign. It’s a different way of approaching the market.

“Customers are communicating throughBlogs (Web logs), chat rooms and forumsand you need to know them too.”

“In the past marketing was focusedon selling things,” says Gabbott. It used to involve changing products and prices to enhance customer appeal, designingpromotional campaigns or altering places of distribution to increase sales.Not any more.

“Now it’s more comprehensive.Many products have no price or physicalpresence and marketing objectives aremore varied than just sales. It could beabout improving community health,gaining votes for a political party, creatingawareness or more responsive employees.”

Ironically, as marketing’s focus becomes wider, it’s killing off MarketingDepartments. Marketing is now embeddedthroughout organisations - in logistics,retail distribution, customer service.And it’s internal as well as external:a large warehousing operation may well have a marketing person focused on how to improve service for the rest of the organisation.

In Australia, Gabbott admires whatVirgin, Coles and banks like ANZ are doing.

Are there common elements that helpsuch companies ride the marketingrevolution? “They’ve invested in developingthe brand and in what the company standsfor,” says Gabbott. “The Virgin brand waswell known in Europe for a long time.The question was, what would it stand for in Australia? They invested in factorsthat were true to their message. Like fun, flexibility, youthfulness, innovation,breaking the mould and being slightlyirreverent.All of those served the brand well.”

The revolution won’t stop, he predicts.Marketing is moving from products andservices to experiences. Starbucks is anexample.The margin on coffee beans percup is about one cent, but if you create thekind of experience Starbucks offers youcan get a margin of $2 to $5 a cup.

Does marketing still play a big role inselling? “Absolutely!” says Gabbott.“There’s an old business saying about‘feeding the dog.’ Bottom line is, alongwith relationship marketing,communication, customer training and all that stuff you’ve still got to feedthe dog.” That means making sales.

A global revolution is changing how marketinghappens, who does it and even what getsmarketed, says Professor Mark Gabbott, Head of the Department of Marketing in the Faculty of Business and Economics at Monash University. CEOs who understand this can profit from it.

revolution

“Contractors often askwhy workers arealways smiling in ABOxford’s warehouses, Gabby says.

It’s easy to see why.”

15 16

Empoweringstaff leads to awinning culture

“Businesses are now waiting an average of 56 days to be paid by trade debtors, compared to an average of 48 days in 2004”, says Trevor Morris,Head of ANZ’s Invoice Finance.This additional delayin payment is limiting cash flow and significantlyrestricting working capital available for reinvestmentinto the business”.

Businesses who find themselves most affected by overdue trade payments include the manufacturing,wholesaling & distribution, transport and personnelplacement industries. Seasonal peaks can also placepressure on cash flows and with the increase in timecustomers are taking to pay their invoices, businessesare often fraught by working capital limitations.Despite businesses having effective management ability or sales opportunities, many are not reachingtheir full potential due to difficulties accessing theworking capital funding needed to fund their business cycle.With pressures on cash flow and less capital to invest back into the business,maximising success during times of acceleratedgrowth remains challenging.

Invoice Finance is increasingly becoming apopular choice with many medium and larger sizedCorporates. In 2005 this working capital financesolution experienced a significant 31 per cent growthrate throughout Australia. Invoice Finance enables abusiness to access a higher level of funding against thedebtors of a business.

ANZ recognises that running a business ischallenging at the best of times (even more testingduring a period of rapid growth) and that not allbusiness requirements can be satisfied by traditionalbanking finance (such as overdrafts and commercialbills).Working capital cycles, fast growth and/or thehigher gearing levels inherent in many successful

Accelerating your

cash flowbusinesses can limit their access to traditional funding.ANZ Invoice Finance offers businesses a structuredworking capital solution that accelerates cash flow bylinking funding to the current level of sales rather than pastperformance, and can offer immediate cash on up to 85%of outstanding invoices (subject to meeting ANZ’s creditassessment criteria).

Can ANZ Invoice Finance assist your business?

Do you...

• Need more working capital funding?• Have acquisition opportunities?• Need to free up equity/security?

What are the benefits for your business?

Greater level of fundingBy providing a greater level of funding than is availableusing traditional finance options, ANZ Invoice Financecan offer immediate funding on up to 85% ofoutstanding invoices

Accelerated cash flowBy providing your business with greater flexibility toaccess working capital when you need it, your cashflow cycle is accelerated with immediate access tofunds rather than having to wait for debtors to pay(usually 30 to 90 days)

Focus on running your businessBy introducing a customised funding solution thatreduces cash flow concerns you can focus on more important issues - optimising the opportunitiesfor your business especially during times ofaccelerated growth.

Invoice Finance - an alternate workingcapital finance solution that allows yourbusiness to convert trade debtors into casheither during times of accelerated growth or when you need more funding against your existing Balance Sheet assets.

G&S Engineering fuelsgrowth by:

• Operating in a “bust -proof” industry

• Careful planning

• A strongapprenticeshipprogram

• Ensuring employees are happy

• “Going the extra yard”.

During recessionaryperiods there’s noalternative to long hours,but in good timesGraham Smith delegatesand devotes himself tostrategic planning.His idea of a perfect dayat the office? “I’ve got atleast six senior peoplewho shine instead of me- they enjoy it, they’regrowing - and I like tomake that possible.”

Managing Director of Queensland-based G&S Engineering,Graham Smith, is an old hand at riding the waves of boom and bust inAustralian mining and industry.This time round he has the biggestboom he’s ever seen on his hands, along with a skills crisis that’s leftAustralia with a shortage of tradespeople that he estimates at up to20,000.

It’s a challenge Graham Smith has met with eyes wide open.More than 18 months ago Smith started expanding his skilledworkforce at G&S Engineering to prepare for the best of times.He is attempting to boost his cohort of 38 apprentices to more than 50 before the end of this financial year.Ten years ago he set up shopwith just six.

G&S provides asset management services to clients in heavyengineering, manufacturing, construction and maintenance.Working out of Mackay, Queensland, it employs some 600boilermakers, fitters, riggers and electricians to build, repair andmaintain plant and equipment.

“For years, particularly in mining, the training and development of apprentices was an obligation that industry felt it couldn’t support,”says Smith. “But I’ve always believed continuity and good conditions for people are essential.”

G&S has been lucky, he admits, because in some ways its business is bust-proof.When times are tight, industry boosts outsourcing formaintenance and repair services, so the company does well in thoseperiods too.

G&S Engineering has recorded an average annual growth of 29 per cent since 1995.Turnover then was $350,000; this year it’sapproaching $120 million.

Smith owns 50 per cent of the company and has previousexperience as managing director of another engineering firm.In good times and bad his best advice to managers in a tough,demanding industry is to retain the best people to deliver the bestwork. “We have many initiatives to attract them, including our ownrecruitment group,” he says.

They’re needed now more than ever.The engineering servicesbusiness has never seen demand at current levels.The coal sector is exceptionally strong and there’s an expanding number ofinfrastructure projects in power, oil and gas along with much work in ports, property and the defence industries.

Ensuring employees are happy helps to attract and develop a winning culture, because good people do good work. “The biggestchallenge for any manager to achieve this is to remove impediments to the freedom of staff to do their job better.We ask our people doing the job to look for a better way.”

In a 24-hour industry marked by driving deadlines and high levels of stress, this concept of staff empowerment is a critical component in G&S Engineering’s mission to build a workforce willing to go the extra yard on behalf of clients.

For further information please contact yourRelationship Manager or an ANZ InvoiceFinance Specialist on 1800 241 552(available 8am to 5pm EST) or visitwww.anz.com

Does this mean companies get more bang fortheir salary buck? Far from it, warns Gayle Brereton,Head of People Capital, Corporate Division at ANZ.Accumulated leave is something CEOs should take,and take seriously. It can bring extensive financial andlegal liabilities, even expose a company to a higherrisk of fraud.That’s aside from the personal cost to the health and family life of employees and CEOs themselves.

“You want people who are energised, who can come up with ideas and solve problems,”says Brereton. “If they’re tired and stale they won’t do that consistently and creativity in yourorganisation will suffer.”

The financial cost to companies can be high.Accrued leave effectively provides a retrospective payincrease. “Every time someone gets a pay rise youraccrual cost for annual leave goes up,” says Brereton.“If your company pays a loading on top of that thenobviously the cost gets even higher.”

Untaken leave can also inhibit succession planning.Ideally when people go on leave there’s anopportunity for another person to step up anddemonstrate their capabilities and provide the addedbenefit of career planning and motivation for staff.

Brereton points to several reasons peopledon’t take leave, among them:

Social life: Traditionally workers had a nine-to-fivementality and would go home and interact withfriends and family. Today much social interactionhappens at work so many people don’t feel theneed to be away too long.

Leaner organisations: Companies often don’t havehead count to spare, so staff feel indispensable, saysBrereton. “They believe nobody can service theircustomer as well as they can. Reality says that’s notthe case but it’s a perception individuals may have.”

Concealed problems: “If someone hasn’t taken leavefor a long period, it can expose the company to risk-not necessarily that they’re fraudulent but that youshould perhaps examine the role a bit closer,” saysBrereton. “It opens up the job to a second pair ofeyes from a compliance and regulatory point of view.”

Here’s what CEOs should do to achieve a sensibleleave policy, she suggests:

• Give line managers guidelines that allow them to manage leave effectively. There will always becases where people want to hold over leave to get married or go overseas, so you need flexibility. But clear policies on minimum leave should be inplace. Check the legal requirements for your State.

• Be a role model. Research shows executives arethe worst for not taking leave. What’s that saying to their people? Leaders need to break down the myth that you must always be at work.

• Presence doesn’t mean performance. You can’tassume everyone is doing a good job becausethey’re at work all the time. Measuring performanceon output as opposed to presence is a culturalchange senior managers need to effect.

Brereton concludes: “If you ask people whether theywant more time for their families they say yes.But when you ask why they don’t initiate work/lifebalance, they can’t answer.“What’s holding them back is a perception that you have to be seen to be at work because everyone else is.Leaders have to take accountability for that, and breakthe nexus.”

1817

We are working longer hours and work is

invading our private lives as never before.

Yet only 35% of Australians take all the

leave they’ve earned, according to a

recent poll. Five percent of people - one in

20 - take none of it.

ANZ is continually working to develop a culture that values making asustainable contribution to society. In 2004/2005 ANZ invested $8.67million in community initiatives, including almost $2.37 million in financialliteracy and inclusion programs that have already directly benefitedthousands of Australians.

work life balance

Too much workcan damage your success

The measurement of ANZ’s communityinvolvement follows guidelines established by the LondonBenchmarking Group (LBG) whose model is the emergingstandard for measuring corporate community investmentprograms and is used by almost 100 leading internationalcompanies. Some of the key community programs include:

Community Giving - 28% of Australian staff donatedmoney to 18 community partners through CommunityGiving programs where ANZ matched staff contributionsdollar-for-dollar (up to $1,000 per person). Overwhelmingdonations from ANZ and staff included a $1 million donationto the Tsunami relief effort via World Vision.

Saver Plus - ANZ has provided $1.1 million in matchedsavings for more than 700 low-income families, a joint effortby ANZ and the Brotherhood of St Laurence. Under thescheme, participants receive financial education and $1 fromANZ for every dollar saved.ANZ has committed a further $3 million over the next three years to deliver Saver Plus to3,000 more families.

MoneyMinded - Australia’s first comprehensive adultfinancial education program enables financial counsellorswithin community organisations to help those facing financialhardship to make better judgements and more informeddecisions about their money. In 2004/2005 MoneyMindedwas able to reach close to 5,000 participants and in 2005/06the program aims to reach a further 15,000 participants.

MoneyBusiness - ANZ and the Australian Governmenthave partnered to help build money management skills and a stronger savings culture among Indigenous people.ANZ will adapt its matched savings program, Saver Plus,to 300 families in remote communities in the NorthernTerritory and WA.

ANZ’s volunteer leave policy reflects ANZ’s supportfor employees who choose to become involved in providingvolunteer services to community organisations. During2004/2005, 3,336 or 18% of Australian staff contributedmore than 24,000 hours as part of ANZ’s Volunteer program,which provides employees with eight hours leave each year tocomplete volunteering activities of their choice. Some of themost recent local community activities include:

Comic Relief - over 500 ANZ staffvolunteered their time on a Sunday nightto take donations over the phone atANZ’s Australian Contact Centre duringAustralia’s first Comic Relief televisionfundraiser for Oxfam. Comic Relief usescomedy and laughter to get seriousmessages across with the aim to endpoverty and social injustice.

UNICEF - ANZ and UNICEF haverecently joined forces to raise hundredsof thousands of dollars for the world’sneediest children. Recent fundraisingactivities include the ANZ NSW & ACTCorporate Golf Day, and fundraising atthe Grease Arena Spectacular concertsand V8 Super Car events. ANZ alsocontinues to support UNICEF’s COINSFOR KIDS program whereby people candonate spare foreign coins and notes atany of ANZ’s three Bureau De Changebranches - 96 Pitt Street Sydney, 100Queen Street Melbourne and MelbourneAirport. All funds raised through theseprograms will help UNICEF’s lifesavingwork in the Asia Pacific region.

ANZ is continually providing its peoplewith opportunities to support theorganisations that are undertakingimportant, innovative work throughoutthe community.ANZ’s vision is to extendcurrent involvement in communityprograms and volunteering activities,to make a difference to those who needit most.

in the community

Partnering with theCommunity

Unlock your dreams with ANZ Capital.At ANZ we’re helping people like Frank Palazzo, owner

of Michaelis Bayley, wholesaler of Homy Ped shoes, and Gordon Stewart, his new business partner, to unlocktheir dreams by providing innovative capital solutionsto mid sized businesses.

Our team of leading fi nancial strategists have expertise that you don’t traditionally expect from bankers and can help with succession planning, exit strategies, fi nancial strategies and governance.

It’s because of our innovative approach to the age-old problems of how to fund capital and who’s going to fi ll

your shoes that we’ve been named Best Business Bank 2005 in the CFO Magazine Awards.

If you’d like to see how ANZ Capital can help your business unleash its potential, speak to your ANZ Relationship Manager or call an ANZ Capital Specialist:

NSW/ACT Bevan Elliott Ph (02) 9227 1616QLD Jeff Whiteman Ph (07) 3228 5438SA/NT Jeremy Steele Ph (08) 8218 8152VIC/TAS Timothy Buckley Ph (03) 9273 0247WA Marshall Allen Ph (08) 9323 8101

www.anz.comAustralia and New Zealand Banking Group Limited ABN 11 005 357 522.Pictured: Frank Palazzo and Gordon Stewart from Michaelis Bayley. D

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