Winners of the grievance lottery!

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Exclusive EMA news, advice, learning and networking
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Issue 14 + April + 2005
Winners of the grievance lottery!
No break from Holidays Act
Auckland’s transport off the rails
10 skills for HR trouble-shooting
ERP sweetens
confectioner’s distribution
In this issue:
Leadership is the challenge
Holidays mystery mix up demystified
Getting skilled people offshore
Making people the priority
FINANCE FEATURE
- How to value your business
- 5 steps to cashflow wealth
- New ways to fund expansion
EMA Northern & Central are foundation members of and the major contributors to:
Also inside:
@ LARGE
your learning guide
Business NZ
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EMABUSINESS
EMABUSINESS
NEWS
is published for:
EMA NORTHERN
04
09
Local home market rattled
High dollars bites into growth
Ph: 09 367 0900 or 0800 800 362 Email:
[email protected] Website: www.ema.co.nz
04
Personal grievance awards are a lottery
David Lowe reports
159 Khyber Pass Rd, Grafton,
Private Bag 92066 Auckland
CONTENTS
24
Make people the priority
From struggler to star in three years
Chief Executive
Alasdair Thompson
Advocacy Manager
ADVOCACY
Bruce Goldsworthy
Manager, Employment Advice
02
Manager EMA Learning
03
06
Leadership! It’s the challenge
Paul Winter writes that success is defined by how we deal with
change.
George Gerard
Waikato
Alan Fursdon
Auckland’s transport planners drop the ball
Alasdair Thompson says ‘it beggars belief’.
David Lowe
06
No one likes the Holidays Act
Easter brings an avalanche of calls. Survey results.
07 839 0806
Bay of Plenty
Kim Stretton
07 577 9664
EMA CENTRAL
ADVICE
08
Its a mystery demystified. Magdalene Phythian explains.
PO Box 1087 Wellington Ph: 04 473 7224
Fax: 04 473 4501
11
13
Ten points for solving HR issues quicker
Damian Treanor fires parting shots
Email: [email protected]
Website: www.emacentral.org.nz
How to calculate parental leave mixed up with
annual holidays.
13
ERP fixes dated confectionery system
Chief Executive
Paul Winter
Finance Manager
25
Chris McLaughin
Super show!
Manager Training & OH&S
25
+ Courage
Tony Ward
Hawke’s Bay
06 843 3419
Taranaki
06 759 4006
Manawatu/Wanganui
06 350 1825
FINANCE
Nelson
22
15
Talk to your bank about new ways to expand
16
Tuesday’s horror: No cash for wages
Gilbert Peterson 09 367 0916
19
Accelerated cash flow = faster business growth
Published by
21
Warning over trading trusts
03 548 4528
EMABUSINESS
Editor
Kevin Jones outlines on IRD’s stance.
TPL Publishing Services
Project Manager
22
How to value your business
Sheila Marshall 09 529 3007
Advertising Sales
Colin Gestro 09 449 2500
ISSN No. 1176-4953
Our Vision. Your Success
PA G E 1
A D VAODCVAI C YE
EMABUSINESS
By Alasdair Thompson, CEO, EMA Northern
Auckland’s transport planning goes off rails
Dropping the Avondale link to the
North Western highway from the
region’s 10-year land transport plan
shows Auckland’s transport planning
has gone off the rails.
Not only does the decision by the
ARC’s Land Transport committee
beggar belief, it cuts across Auckland
Mayor Dick Hubbard’s avowed support
given only two months ago.
The ARC’s transport committee
voted for a transport package that gives
away the SH20 Avondale link and
replaces it with more rail and ferry
services.
The Council effectively swapped a
permanent network link, to be used by
buses and other vehicles alike and
which is urgently needed, for a plan by
which people in satellite centres like
Kumeu and Pukekohe, can enjoy
heavily subsidised rail fares into the city.
It appears the funding of capital
projects is to be spent on the
operational costs of subsidising the
travel of a small minority.
This is plain wrong.
The Avondale link should be top
priority for both the Regional Land
PA G E 2
Transport Committee and for Transit
New Zealand.
Its completion is critical for easing
pressure on the central motorway
junction and for providing a second
route north.The ARC has completely
lost the plot on these network
priorities.
Just two months ago, on February
17th,Auckland Mayor Dick Hubbard
told the Property Council:
“The benefits of transport expenditure are
very great. Just last August a report by the
Allen consulting group showed, for example,
that the economic multiplier effect of the
Auckland western ring route package of
projects was $2.30 for every dollar spent.
There are real and major gains to be had
from reducing travel times and congestion.”
He went on to say:
“Many people told me on the campaign
trail that one of the most frustrating and
progress-stalling facts of life about local
politics is that every new administration
stamps its mark on a city and often u-turns
on the most vital projects for the wrong
reasons.
“But I vow to you I will use every
vote I can cast - and so will the majority
on this new council - to make sure these
initiatives not only go ahead but gather
pace under my leadership.”
EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
Furthermore, the chief executive of
the Council for Infrastructural
Development, Stephen Selwood,
pointed out that Auckland’s complete
western ring route from Manukau to
the north western motorway could be
completed within seven years, despite
the Auckland Regional Transport
Committee deferral of its construction
beyond 10 years through lack of
funding.
Stephen said:“If we can’t fund
critical infrastructure through public
funds, the obvious alternative is to
follow the Australian model where
major capital works projects are jointly
funded and managed through private
/public partnerships.
“You only have to compare the lack
of progress in Auckland, where it takes
more than a decade to construct a small
motorway link, with what they’re
doing in Sydney.”
Sydney will complete its 40
kilometre M7 western orbital
motorway as a toll road within 5 years
from original environmental impact
assessment .
We’re lagging way behind Australia
and not only in their incomes, GDP
growth and cricket.
by Paul Winter, EMA Central CEO
EMABUSINESS
ADVICE
V OSC A C Y
NA EDW
Leadership: Our challenge
In the 21st Century successful leaders of
enterprise are defined by their ability to
deal with change.They need to
anticipate what lies ahead, recognise
discontinuities in their environment,
and what that means for their organisation and its vision.Then they need to
lead the change process for their people
to achieve success.
we can build a progressive modern
economy capable of continually
renewing and reinventing itself.”
…….and…….“Building a strong New
Zealand requires leadership,
commitment and good policies.”
EMA and Business NZ are
committed to a positive engagement
with Government to advocate, not just
for good policies, but for the best
policies.We can do this because of your
support as members.
However, EMA members whether
small or large, limited liability
companies, trusts or public agencies, are
realists; we can move most deftly in
handling the transition as the policy
debate evolves from the implementation of changes, into legal obligations.
When the Government introduces
new laws, it ensures its own organi-
When did you last run a health
check over the capacity of your organisation to handle change, particularly
amongst those of your team who are in
regular contact with all aspects of your
operating environment?
Internationally, the acceptance is
now very broad that it is the totality of
an organisation’s ability to
respond and adapt
appropriately that is the
‘ ‘Business leaders in other
best indicator of the
quality of its leaders.
countries facing greater
I have just had the
compliance burdens than
privilege of attending the
INSEAD Advanced
ours, don’t use it as an
Management Programme
excuse. They get on with
with one other Kiwi and
23 other nationalities.
making their organisations
While there were clear
differences of culture
the best they can be, no
between us, what
matter what the external
impressed me most was
how universally accepted
environment.’ ‘
are the principles that
sations respond appropriately to the
apply to top performing organisations.
changes required of them.Their staff
Just as importantly, I noted that in
attend EMA briefing sessions and
New Zealand we are growing in our
seminars, and they consider how best
ability and confidence, and can aspire to
they should implement the
lead internationally competitive
requirements of the new laws.
enterprises with the capacity to
They seek too, to push beyond the
respond to the rapidly changing global
minimum compliance demands of the
environment.
changes to the law.They seek as well
In an article last month ‘Leadership
to use them as an opportunity, to turn
wanted from public agencies’, I quoted
what might at first be considered an
from the Prime Minister’s speech at the
imposition, into an advantage for the
opening of Parliament this year –
organisation.
“Together we can build a society in
This ability to be flexible and think
which every New Zealander has a
proactively about changes to the legal
stake.And by unlocking all the talents,
and social environment is one good
test of the quality of organisational
leadership.
It’s the ability to know how to
support advocacy for better policies
and the detail of our legal framework
while pragmatically going beyond
them and being a good corporate
citizen by seeking the best from the
change that the law demands.
This attitude and behaviour of our
public service organisations contrasts
sharply with many other enterprises,
particularly small businesses
struggling to survive. However, no
enterprise, big or small is guaranteed
a living.We all have to deliver the
value demanded from a discerning
marketplace.
Ensuring we have a vision and plan
to deliver our point of
difference is simply the starting
point for any successful
business. Ensuring the
enterprise is appropriately
resourced, with good
responsive people is just as
important, so that choosing to
ignore all or any aspects of a
new law is no longer a
temptation.
The leadership challenge
applies to every enterprise in
New Zealand.The more of us
who step up to the mark by
striving to develop more
responsive and flexible
enterprises, the better our economy
will perform.
What impressed me about the
attitude at the INSEAD programme
was how many of the international
business leaders, who face greater
compliance burdens than we in New
Zealand, don’t use it as an excuse.
Though they continue to advocate for
better policy options and laws, in the
meantime they get on with the
challenge of making their organisations
the best they can be, no matter what
the external environment.We should
do the same in New Zealand.
Our Vision. Your Success
PA G E 3
NEWS
EMABUSINESS
By David Lowe,
Employment Services Manager, EMA Northern.
The sums of money being handed out to
employees for personal grievance claims
vary significantly, depending on which
member of the Employment Relations
Authority hears a case, and apparently,
in which part of the country they live.
Employees in Wellington have a 65
per cent chance of winning their case,
which is 15 per cent higher than in
Auckland.
EMA has completed its annual
analysis of the Employment Relations
Authority’s decisions from 2004
finding as in previous years that the
variations from year to year and from
ERA member to member are
significant and ongoing.
The hurt and humiliation award is
the key area as the amounts awarded
are at the discretion of each Authority
member. The other award categories
tend to have a formulaic approach that
restricts individual discretion.
Christchurch employees who sued
their employer last year often got more
money compared to 2003. They were
seven percent more likely to win than
last year, with hurt and humiliation
awards increased by 25 percent to an
average of $6,169.
Auckland employees may well feel
hard done by compared to their South
Island counterparts; they stood less than
a 50% chance of winning.And awards
for hurt feelings grew by just three
times the inflation rate, 10 percent, to
average $4,421.
Nearly $5000 each was handed
out to 26 employees made
Average awards of each region
Redundancy
Region
Lost
Wages
$7,429
$2,458
$7,026
$6,193
Hurt &
Humiliation
$4,074
$4,875
$10,500
$4,938
Lost
Benefits
0
0
0
0
Penalties
Average
$500
0
0
$500
$4,491
$5,489
$13,144
$5,920
Dismissal for misconduct/poor performance
Region
In Favour
Lost
of Employee
Wages
Auckland
57 out of 103
$5,816
Wellington
19 out of 28
$6,028
Christchurch
26 out of 38
$3,450
National
102 out of 169
$5,1202
Hurt &
Humiliation
$4,735
$6,454
$5,782
$5,325
Lost
Benefits
$11,744
$1,768
$1,768
$8,419
Penalties
Average
$2,417
$875
$875
$1,861
$17,982
$9,789
$7,975
$8,827
Constructive dismissal
Region
In Favour
of Employee
Auckland
13 out of 46
Wellington
3 out of 6
Christchurch
9 out of 20
National
25 out of 72
Lost
Wages
$7,893
$6,833
$3,663
$6,659
Hurt &
Humiliation
$4,639
$11,166
$6,611
$6,022
Lost
Benefits
$2,125
0
0
$2,125
Penalties
Average
$600
0
$1,533
$986
$13,103
$13,444
$9,157
$11,744
Lost
Wages
$0
$1,189
$0
$1,189
Hurt &
Humiliation
$3,250
$1,833
$5,186
$3,718
Lost
Benefits
0
0
0
0
Penalties
Average
$0
0
$100
$10
$3,250
$2,229
$4,550
$3,771
Auckland
Wellington
Christchurch
National
Disadvantage
Region
Auckland
Wellington
Christchurch
National
PA G E 4
In Favour
of Employee
19 out of 37
4 out of 7
4 out of 7
27 out of 51
In Favour
of Employee
13 out of 22
3 out of 4
8 out of 22
24 out of 48
EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
▼
Personal grievance awards:
EMABUSINESS
ADVICE
NEWS
The winners are…
▼
redundant, even though the
redundancies were for genuine
reasons. Employers were simply
tripped over the technicalities of the
process though it was agreed there
was nothing wrong with what they
were trying to do.
New dismissal laws introduced late
last year have been predicted to turn
these cases in to a lottery, and we are
watching very closely those cases
involving employees dismissed since
December 1st. Our analysis shows
the predictions might already be
coming to pass.
The outcome of each hearing
depends on which Authority
member is to hear it.
Wellington’s Denis Asher awarded
an average of $9,278 for ‘hurt and
humiliation’ in 2004, almost twice
the national average of $5,609.
We are at a loss to understand
how, and in what ways,Wellington
employers, and in
particular those appearing
before Mr Asher, are
different to employers else
where in the country.
Employees taking
grievances before Mr
Asher also enjoyed a
remarkable 75 percent
success rate. But ERA
newcomer James
Crichton is overall the
largest benefactor to employees with
their employers money after two
decisions, with an average hurt and
humiliation award of $9,500.
In contrast,Auckland members
Janet Scott, Dzintra King and Ken
Anderson awarded successful
applicants on average less than
$3,000 for hurt and humiliation.
The inconsistencies would be
comical if it weren’t for the fact that
the livelihood of both employees and
employers are on the line.
But the Personal Grievance gravy
train isn’t a free ride all the way to
the bank for employees.
Unsuccessful claimants can end up
owing thousands of dollars as they
are usually required to contribute to
their employer’s legal and other costs,
as well as pay their own legal bills.
(Statistics compiled by Ben Thomas of EMA
Northern’s AdviceLine.)
Analysis of 2004 Employment Relations Authority decisions
Average awards of each authority member
A Dumbleton (Auckland)
D Asher (Wellington)
D King (Auckland)
G Wood (Wellington)
H Doyle (Christchurch)
J Crichton (Christchurch)
J Scott (Auckland)
J Wilson (Auckland)
K Anderson (Auckland)
K Raureti (Auckland)
L Robinson (Auckland)
M Urlich (Auckland)
P Cheyne (Christchurch)
P Montgomery (Christchurch)
P Stapp (Wellington)
R Monaghan (Auckland)
V Campbell (Auckland)
Y Oldfield (Auckland)
In Favour
of Employee
Lost
Wages
Lost
Benefits
Hurt
& Humiliation
Penalties
Average
7 out of 19 (37%)
10 out of 13 (77%)
13 out of 24 (54%)
7 out of 15 (47%)
17 out of 26 (65%)
2 out of 2 (100%)
6 out of 19 (32%)
3 out of 8 (38%)
11 out of 30 (37%)
9 out of 14 (64%)
10 out of 29 (34%)
17 out of 23 (74%)
13 out of 23 (56%)
13 out of 20 (65%)
10 out of 15 (66%)
7 out of 20 (35%)
10 out of 26 (38%)
15 out of 20 (75%)
$11,437
$5,557
$15,076
$3,085
$2,747
$5,368
$1,419
$3,399
$5,583
$10,768
$7,352
$3,589
$4,707
$2,690
$7,147
$3,480
$1,869
$4,046
$26,250
$0
$2,348
$0
$225
$0
$750
$0
$0
$0
$3,211
$0
$0
$3,311
$0
$0
$0
$0
$5,040
$9,278
$3,700
$7,417
$5,647
$9,500
$2,500
$4,667
$2,964
$3,206
$4,000
$3,912
$6,625
$4,701
$4,867
$2,750
$4,600
$8,697
$0
$0
$1,000
$10,000
$750
$0
$0
$0
$750
$300
$500
$0
$100
$875
$2,000
$1,300
$500
$0
$22,480
$11,747
$6,611
$9,107
$7,041
$14,867
$3,571
$6,932
$5,633
$8,299
$8,944
$4,545
$7,933
$5,688
$9,803
$4,220
$5,304
$10,048
Our Vision. Your Success
PA G E 5
NEWS
EMABUSINESS
‘Get over embarrassment of holidays mistake and fix it’
The Easter holidays period brought
an avalanche of calls from employers
about the Holidays Act, EMA Northern
reports.
We fielded two-and-half times
more inquiries about public
holidays in the lead up to Easter this
year than in previous years, says
David Lowe, the association’s
manager of employment relations
services.
“In the two weeks before Easter
this year we had 106 calls about
public holidays compared to just 43
for Easter 2003, which was the
most recent comparable period.We also
responded to over 200 further calls
about holiday entitlements in general in
the same fortnight.
“The 2003 amendment to the
Holidays Act has plainly failed to
achieve the objective stated for it which
was to provide ‘entitlements that are easy
to understand and apply.’
“Adding to the confusion was that
people think Easter Sunday is a public
holiday because of trading restrictions,
but it isn’t.
“Employees themselves are those
most likely to miss out as a result of the
muddle.
“Employees are unlikely to get their
correct entitlements over Easter because
every second person we talk to –
employers and employees - has a
different version of what they are.
“Nobody agrees on what employers’
obligations are, or what employees are
entitled to.
“The recent Heinz Wattie decision
was a classic case of how badly the law is
failing. In that the Labour
Department’s own inspectors
showed they didn’t know what
the law meant.What hope is there
for smaller businesses making up
the majority of employers?
“Businesses and employees
most likely did what they’ve been
doing for the past year and
worked out their own
arrangements.
“Now would be a good time to get
over the embarrassment of admitting
to the Holiday Act mistake, and take
another look at it, so it really does
become easy to understand and
apply.”
7ELLDOWHATEVERWECAN
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9OU CAN RELY ON US TO BE THAT VITAL LINK IN THE CHAIN
BECAUSE OUR SPECIALISED BUSINESS TEAM ARE WITHOUT
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PA G E 6
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EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
EMABUSINESS
Phil O’Reilly, CEO, Business NZ
NEWS
Widespread dissatisfaction with Holidays Act: survey
The large-scale survey of business
has found widespread dissatisfaction
with the Holidays Act.
Business NZ through EMA
received replies to the survey from
more than 1,500 enterprises across
all industry types in New Zealand.
■ 74% said it had increased cost for
their business.
■ 38% of all respondents said the
Act added up to 2% extra payroll
cost.
■ 22% said it added 3-5% to payroll.
■ 12% said it added more than 5%.
■ 45% of the businesses surveyed
had difficulty explaining the
holidays changes to employees.
Business NZ Chief Executive Phil
O'Reilly said the questionnaire
indicated the depth of concern in
the business community about the
new law.
"The 'relevant daily pay' formula
used by the Act is definitely part of
the problem. It sweeps all sorts of
additional payments into holiday and
leave payment rates, significantly
inflating leave costs for many
employers.
"Other counterproductive
outcomes - the employer may not
pay the employee more for working
than for not working; employees
may earn more by not being at
work; and in several industries it
means employees have less incentive
to produce, so productivity
diminishes.
“Both employers and employees
are finding it difficult to understand
and apply.
"We have presented the findings
to Government and we intend to
present a number of solutions for the
Minister of Labour to consider.
"Among other things, the formula
for calculating holiday pay should be
changed back to something like the
'ordinary pay' formula that was in the
previous Act, and the Act needs to be
simplified," Mr O'Reilly said.
Survey participants commented
“...calculations to ensure employees are being paid according
to the new Holidays Act are very time consuming...”
“...our daily rate of pay for sickness used to be $108, it is
now as high as $285 ...staff now take more time off since this
was introduced...now all sick days are being taken...”
“...we are in the business of processing clients' payroll...across
the board there has been an estimated 20% increase in the
time taken to process payrolls following the introduction of the
new Act...”
“...this Act has cost our business in excess of $25,000 per
year...”
“...estimating holiday payments for those on commission is
complicated and unrealistic, particularly if the previous 4
weeks included a big promotion drive - payments under this
principle are proving ridiculously large...”
“...calculation of payments is very difficult for those
working variable hours...”
"...exorbitant cost when an employee takes a holiday
immediately after they have worked a public holiday resulting
in $11 an hour employee having the right to holidays paid at
$27 per hour..."
“...we are in a seasonal packing industry operating January
to April - within this period we have several public holidays,
but if we operate on these we face the punitive cost of 2.5
times normal labour costs - we have no option but to shut
down on these days....”
“...it has made it very difficult for us as a small business to do
our own wages each week...”
Increase your staff productivity
through professional staff support
services, including:
On-site support
Off-site counselling
Training & Development
Critical Incident Response
Phone Auckland (09) 522 2830
or Hamilton (07) 856 8638
Our Vision. Your Success
PA G E 7
TPL2570
ADVICE
EMABUSINESS
By Magdalene Phythian, from EMA Northern
Parental leave and annual holidays demystified
Calculating annual holiday entitlements
during and after a period of parental
leave can be challenging for payroll staff.
And yes, employees on parental leave do
continue to receive service related
benefits such as annual leave, while on
parental leave.
But how do you calculate leave
entitlements earned before an
employee went on parental leave and
who wants to take the leave after she
has returned to work? What happens if
the leave was earned during the
parental leave? So the questions start to
flow.
First, it is good practice for pregnant
employees to use up their leave
entitlement before they go on
maternity leave.This is because they
will be accumulating additional annual
holidays while on parental leave, and in
general, liability for leave becomes
greater when it’s taken at a later date.
The entitlement to leave earned
before the commencement of parental
leave is paid at a rate based on either
the average weekly pay, or the ordinary
pay at the beginning of the annual
holidays, whichever is greater, under
section 21 of the Holidays Act 2003.
Average weekly pay is defined as gross
earnings divided by 52 weeks.
Ordinary weekly pay is the amount of
pay an employee receives for an
ordinary working week including such
as incentive payments, overtime, and
cash value of rent if these are a regular
part of the employee’s pay.This rate of
pay continues until all the leave is used
up.
For instance, an employee who we
will call Jane, goes on parental leave for
PA G E 8
a year commencing 1 October 2002.
On her work anniversary date of 1st
July 2003, she earned an additional 3
weeks minimum annual holidays.
The Holidays Act 2003 (Schedule 3,
Part 1, Parental Leave and Employment
Protection Act 1987) states that leave that
becomes entitled during a period of
parental leave, or for a period of 12
months after the employee returns to
work, is to be paid at the average
weekly pay.
Let’s assume Jane returns from
parental leave and applies for 15 days
annual holidays during the 2003
Christmas period. She takes 5 days
from the entitlement she earned before
going on parental leave, and is paid the
greater of the average weekly earnings,
or the ordinary weekly pay. She has
now exhausted all her annual leave
entitlements earned before going on
parental leave.The balance of 10 days
must come from the leave she became
entitled to on 1st July 2003 while she
was on parental leave. But this leave is
paid only at the average weekly pay
(gross earnings/52).
Since she has been away from work
for a while, the value of this leave can
be quite minimal as her gross earnings
would be quite low.The leave is paid at
her average weekly pay for the 12
months immediately before her last pay
period.That’s gross earnings over 3
months divided by 52.
Jane’s annual holidays
(Christmas 2003)
5 days taken from leave entitlement before
going on parental leave (calculated at greater
of average or ordinary weekly pay)
10 days from leave earned during parental
leave (calculated at average weekly pay and
earned 1st July 2003) Total 15 days.
Her leave balance looks like:
EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
Leave earned before maternity leave = 0
Leave earned during maternity leave
= 15-10 = 5 days (@average weekly pay,
earned 1st July 2003)
Father Time keeps on, and on her
1st July 2004 anniversary, Jane receives
another 3 weeks leave, again to be paid
at the average weekly pay in
accordance with Schedule 3, Part 1 of
the Holidays Act 2003.
When Christmas 2004 comes
around, Jane decides to take 22 days
annual leave for an overseas trip to
show off the new addition to the
family.
Jane’s annual holidays (2004)
5 days from previous balance (@average
weekly pay earned in 1st July 2003)
15 days taken from entitlement in 1st July
2004 (@average weekly pay)
2 days leave in advance.Total 22 days.
The leave in advance is paid at the
greater of average vs ordinary weekly
pay in accordance with section 22 of
the Holidays Act 2003.This leave
should be on condition that Jane allows
the employer to deduct it from her
annual holidays entitlement when it
falls due.Also, if Jane leaves before the
entitlement is due, it shall be deducted
from the final pay. (It is unwise to grant
too many days advance leave!)
Key points to remember are:
■ It is good practice to encourage
pregnant employees to take their
annual holidays before going on
parental leave.This leave is paid at
the greater of average vs ordinary
weekly pay.
■ Employees on parental leave
continue to accrue annual leave.
■ Leave entitlement during a period of
parental leave and 12 months after
returning from parental leave is paid
at the average weekly rate only.
EMABUSINESS
ADVICE
NEWS
De-stabilising factors rattle home market
Consequences from the ongoing skills
shortages and the sustained high level
of the New Zealand dollar are
destabilising the local market, EMA
Northern reported late last month.
Unease amongst New Zealand
manufacturers is rising, said Bruce
Goldsworthy, EMA’s Manager of
Manufacturing Services.
“Despite headline figures suggesting
that economic growth is continuing,
albeit at a slower rate than previously,
we are hearing frequent reports of:
■ ad hoc speculative import
shipments being sold solely on
price and destabilising New
Zealand-made production,
■ no one making money from
exports as margins are decimated
by the high dollar,
■ skilled staff pursued by
‘headhunters’
■ rising wage pressures overall.
“The ANZ/Business New Zealand
Performance of Manufacturing
(PMI) survey for February showed
manufacturing still in positive mode
but with a slowing rate of expansion.
“Local manufacturers (who employ
293,000 New Zealanders in total) are
finding the high dollar is encouraging
speculators to import one- off
shipments for sale on price alone,
thereby destabilising the local market.
“In response to the skills shortages,
the high kiwi dollar and the new low
pricing levels, we are now hearing of
small and medium manufacturers
exploring production options in Asia.
“Though exports of elaborately
transformed manufactured goods for
the year ended January were up 10
per cent to $9.244 billion, reports
from many exporters indicate they
are merely trying to hold onto
markets, not making any money.
“The labour market is working well
for some people hawking their skills
to the highest bidder.
“Some companies report
heightened wage pressures as their
staff are made wage and salary
offers.
“All these indicators are signalling a
change to the demographics of
New Zealand’s long established
manufacturing sector on a scale not
witnessed since the 1980’s.”
The ANZ-Business NZ PMI stood at 54.4
for the month of Feb, a higher rate of
expansion than in Jan. A lift in activity
after the holiday season is usual. The
Feb 2005 PMI was mid-way between
the results for Feb 2003 and Feb 2004.
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EMPLOYERS & MANUFACTURERS ASSOCIATION. Our Vision. Your Success.
By Damian Treanor, EMA Adviceline
EMABUSINESS
ADVICE
ADVICE
The exit interview: Damian Treanor
After two years in the Adviceline team of EMA Northern, HR
specialist Damian Treanor is heading abroad for his OE. In
this article he leaves with 10 important skills to HR troubleshooting.
Managing employee relations is not an orderly affair in
which issues can be dealt with in a timely and efficient
manner. More often than not is a continuous case of putting
out fires throughout the organisation.
Ideal solutions are hard to come by. The HR professional
is forced to resolve the problem not with the best option, but
with the best option available. Here are 10 ways to reach that
best option quicker.
1. Define the problem
It is very easy to act upon what you perceive the problem
to be, only to discover three steps later, that the question was
more complex, less complex, or interpreted differently by
others. Establishing what is, and is not the issue will make
achieving solutions much easier.
2. Determine the desired outcome beforehand
Know the end result you are looking for, whether it is a
reprimand, relocation, a warning, dismissal or redundancy.
Make sure this outcome is consistent with those of others
you are working with. Working to different, or unclear
agendas is likely to compromise your process.
5. Get a second opinion, if only to verify your own
A differing perspective can isolate gaps in logic or
information, or increase your confidence.
6. A little information is dangerous
Everyone is an expert, or knows someone who purports
to know ‘the law’. Employment relations is rife with
mythology and long repealed, but still quoted rules.
Attempting to establish the source of an opinion before
accepting it as fact is a good way to avoid being led astray.
7. Identify problems before they become problems
It can be difficult but may be possible to head off many
problems before they come to a head. Being proactive is
more efficient than reactive.
8. Employees may need boundaries
It would be preferable to trust people to act honestly and
responsibly, and with most you can. Often small businesses
can depend on goodwill and mutual understanding of staff,
but larger staff numbers, or poor employees can require
formal rules regarding conduct and behaviour.
9. See it from the other side
You do not have to agree with an employee’s position, but
understanding it will better allow you to correct it.
10. Don’t humiliate anyone
People never forget how you made them feel. Giving
employees an avenue by which they can retreat without
losing face allows for an ongoing relationship.
More New Zealand businesses use Ace
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Visit our constantly updated website at www.acepay.co.nz
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3. Separate the issues
Different problems involving the same person are still
different problems, and need to be managed individually.
Performance problems for instance, tend to come bundled
with other issues that management may have with a
particular staff member, only to complicate matters unnecessarily.
4. Ask many questions
There are never too many. One small, seemingly irrelevant
piece of information may change the situation entirely, so it is
best never to overlook it, discount it or make assumptions.
TPL573
Our Vision. Your Success
PA G E 1 1
EMABUSINESS
ADVICE
Brandlines
Facing skills shortages?
By Bernard Walsh, Immigration consultant with Hesketh Henry
In making its assessment as to whether there are New Zealand
workers available for any particular job, the NZIS is required to be
satisfied there are no New Zealand workers who can do the work on
offer. The process can involve quite extensive enquiries.
Employers may have to satisfy the NZIS they have made genuine
Brandlines employs over 160 people,
with revenues exceeding $50
million, and operates from 15,000
sq metres of warehouse.The
company’s main challenges related
to lack of good business information
due to disparate and dated legacy
systems.
attempts to recruit a New Zealander into the job.
In areas of industry with acknowledged
transparent and easy to use than the
skills shortages, the NZIS recognises
previous system. The new process
them and the geographical regions
involves far greater consultation with
where they occur, in the Immediate
affected
Skill Shortage List.
groups.
If an occupation is included in that list,
Employers with skills in short supply
or in the Long Term Skill Shortage List,
should make sure they are included in
which identifies areas of absolute skill
the NZIS skill shortage lists as there
shortage for residence purposes, then
are definite advantages in doing so.
the NZIS will ‘automatically’ accept
Affected employers are therefore
there are no New Zealanders available
urged to participate in the occupational
to do the work involved, and won’t need
shortage
to inquire further.
coordinate their submissions for future
Under
these
circumstances
an
employers
review
and
industry
process,
and
reviews.
application for a work visa or permit is
fairly
straightforward.
centrally
maintains
The
NZIS
these
skill
shortages lists which they review twice
a year in consultation with Government
agencies, industry training organi-
Though submissions on the current
sations, employer groups and unions.
review have now closed, employer
Updated lists, which take effect in July
groups can (and should) register
2005, will be available from 4 April 2005
their interest for future reviews
on (www.immigration.govt.nz).
by e-mailing
In December last year, the NZIS piloted
[email protected]
a new review process more facilitative,
Immigration policy relating to the employment of foreign workers is governed
largely by General Work Policy, which is organised to allow employers to recruit
non-New Zealand workers only when the Immigration Service (NZIS) is satisfied
no New Zealand citizens or residents are available.
Just lately NZIS has acknowledged skill shortages can determine whether an
offshore worker can work here, so we urge employers faced with persistent skill
shortages to make their case known to the NZIS.
PA G E 1 2
EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
Improved stock rotation was also
required to ensure old stock was
dispatched first. Knowing where
stock was located was important.
Stock used to be rotated
manually, relying upon the team in
the warehouse to ensure efficient
flow of goods to the customer.
But the company estimated
losses up to $150,000 each year
were due to poor stock rotation.
“With our existing systems, we
would regularly write-off stock
because it was not easily located
and dispatched before it went out
of date, explained Joy Chapman,
Corporate Services Director.
It was also difficult to guarantee
the integrity of data used to
forecast sales, which resulted in
excess stock holdings.”
Brandlines had been doubling in
size each year recently, but had
multiple legacy systems not capable
of handling the growth and
diversity of the FMCG sector. The
systems didn’t interface with new
tools being put in place, like Tablet
PCs, and wireless and mobile
technologies.
Reporting, financial accounting
and warehousing systems all
operated separately. “We also
found support for our old legacy
system was shrinking fast, with less
and less system development taking
place and no investment in R&D
by the vendor. We were concerned
we’d end up with unsupported
technology,” Chapman said.
The driving factor was finding a
system which would be supported
EMABUSINESS
T E CHNOLOGY
tackles dated confectionery with ERP
human error,” McKinstry said.
in 10 year’s time and would be still
Having ‘real time’ information
being invested in. Brandlines met
available via Axapta means staff can
with Solution Partners, who
see how stock is moving, tackle the
proposed a strong ERP. “With
clearance of short dated stock,
considerable Axapta experience,
improve freight efficiencies and
Solution Partners quickly
reduce late or inaccurate deliveries.
understood our business issues and
By streamlining its approach,
offered us excellent advice and
Brandlines has been able to
support,” Chapman said.
redeploy three people from
Brandlines adopted Microsoft
administrative tasks to more
Business Solutions - Axapta as an
effective use analysing information
end-to-end solution to support its
entire business and drive its growth instead of processing data.
strategy.
Kelvin McKinstry,
Solution Partners business
applications consultant,
played a key role in
introducing Axapta into
Brandlines’ business.
“BizTalk was also
integrated to run parallel
with Axapta to assist with
file exchange and electronic
ordering and customer
invoicing. No paper is moved
around the warehouse now,
having been replaced by
Tablets with scanning
devices. The technology
minimises the number of
keystrokes needed, further
Brandlines distribution online
reducing the potential for
BACKGROUND BRIEF
Despite an ambitious growth target,
Brandlines Limited - an importer and
marketer of leading confectionery and
grocery brands (including Smint,
Chupa Chups, Werthers Original, Lindt
and Mentos) - was facing issues of lost
revenue as a result of disparate
warehousing
and
dated
legacy
systems.
Our Vision. Your Success
PA G E 1 3
Four years into his franchise, Rod Clarke’s Hardy’s Healthy
Living business was burgeoning. He knew it was the perfect
time to open a second. His old bank disagreed. That’s when
When Rod’s plans for a
second franchise looked like
they were going on hold,
he tried an alternative remedy.
he talked to us.
Because we lend based on the performance of franchise
systems as opposed to an individual’s assets, we can make
it that much easier for you to get into your first franchise.
In Rod’s case, his second, then his third.
While Rod has done very well, he’s the first to admit that he
couldn’t have expanded anywhere near as quickly if it
weren’t for our belief in him and Hardy’s Healthy Living.
Another aspect that Rod appreciated was the specialist
nature of our franchise managers. He discovered they know
almost as much about franchises as they do about banking.
Lynda Mann, his Business Manager also gave him
some handy advice on a block of land that he was looking
at buying. Rod reciprocated in kind by recommending
something for Lynda’s recurring running injury.
If there’s a franchise that you’re interested in, call
0800 39 40 41 to talk to one of our Franchise Specialists.
Like Rod, you might find out that an open-minded bank
can be the difference between Open and Closed.
anz.co.nz
ANZ lending criteria apply to all applications for credit.
AZB2281
TPL3920
ANZ, part of ANZ National Bank Limited.
By Shelley Thomas
EMABUSINESS
ADVICE
FINANCE
ADVICE
Talk to your banker about new ways to expand
Company tax figures tell the story:
Business is booming. Several years of
solid growth are generating ideas for
further expansion and wealth
generation.The obstacle is eternal:
money.
Every new project needs lots to
seed it, feed it and keep it growing
to the point where it can flourish.
But whose money?
The advertising campaigns
pitched by banks at businesses in
the last year may make them high
on the target list for those with
expansion in mind.
Richard and Joanne have built
their EZy Fix hardware store in
Petone into a chain of four across
the Wellington region.With the
format humming after 10 years in
the business, Richard and Joanne
are now looking to add three more
sites but need a significant cash
injection to fund the expansion.
Having relied on bank finance to
get them where they are now, the
EZy Fix owners are familiar with
the need to produce a detailed a
business plan incorporating market
research on the new locations, a
marketing plan and detailed budget
forecasts for the next three years.
Armed with a bulging file they
feel confident their bank will again
be a willing partner.
They are more than
surprised when their business
manager suggests the bank is
not enthusiastic about the
proposal in its present form.
Do they have the skills to actively
manage a chain spread from
Palmerston North to Kilbirnie? If
the accounting and stock control
systems are already in place to
manage the existing four stores,
perhaps franchising would be a
more appropriate method of
expansion.
The bank would be willing to
look at financing potential
franchisees, taking as security the
cashflows based on EZy Fix’s
established performance.
Further, franchising the new
stores would provide Richard and
Joanne the means to expand the
brand to other centres at a faster
rate than previously contemplated.
There is also the potential benefit
of taking capital out of the business
– a step towards a long term exit
strategy - by franchising the
existing four stores.
For Richard and Joanne
franchising differs markedly from
the loans they obtained to expand
from one shop to two and from
three to four. As security for those,
the bank had taken a charge over
their home as well as the assets of
the business.
They agreed to their home being
part of the security for the last loan
only as a trade-off for a lower
interest rate.
If Richard and Joanne were
manufacturers of hardware looking
to double their revenue, and were
not retailers, their ANZ business
manager might have suggested
talking to ANZ Development
Capital.
This is a new opportunity for the
bank to support its commercial and
smaller corporate customers by
providing equity capital.
Specifically, the bank will consider
smaller management buy-outs and
buy-ins with an enterprise value up
to $8m, and for companies needing
a round of expansion capital when
further debt funding is inappropriate.
To qualify for expansion capital, a
business needs some trading history
and an improving cashflow.
Equity is provided typically for a
two to five year term in the
expectation that it will deliver
significant benefits for the bank and
the company.
Shelley Thomas is the Central Region
Manager of ANZ Business Banking
covering the North Island from South
Auckland to Turangi.
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TPL3927
Our Vision. Your Success
PA G E 1 5
FINANCE
ADVICE
EMABUSINESS
By Selwyn Hodder, Manager of
ANZ Business banking, Northern & Auckland CBD
Tuesday’s horror: Not enough in the bank
to pay wages on Thursday
the short-term hump of rapid growth
or a special order.
A term loan is generally a lower
cost option to meet longer terms
needs such as a permanent increase in
working capital or to fund capital
expenditure.
When assessing loans, lenders
invariably want some form of security
just in case there’s an unpleasant gap
between intentions and reality.
Where there’s a proven cashflow,
After the hurried calls to your largest
some banks are prepared to accept
outstanding debtors, the relief on
that as security. More usual are the
Thursday is palpable –if the payments
assets of the business, particularly if
arrive in time.
they are real estate and/or a charge
And so is your resolution not to let
the principal shareholder’s
the situation re-occur.
Five steps to cash flow wealth overown
home.
So, how do you avoid the
Businesses
with a strong
Mother Hubbard syndrome?
1: Have clear policies on who gets credit and tell
cashflow employ other ways of
First, put aside the fallacy that
your customers
making their money work
profit equals success. Cashflow is
harder. Renting or leasing
the key to survival for most
2. Don't let debts grow old and bad
office space, computers and
businesses, then: Establish clear
3:
Monitor
cashflow
and
investigate
anomalies
vehicles may be an effective
credit policies. Draw these terms to
option to release the cash
the attention of your customers
4: Release cash for growth by leasing
required for expansion.Your
and the penalties, if any, that they
business banker should be able
will incur if they fail to meet them.
5: Talk to your banker about reducing costs
to help with a range of options
If you want added security,
best suited to your needs.
check with a credit rating agency
before extending terms to potential
months ahead. If there is trouble
customers.
So how much cash does a
looming a few months out you have
Make sure you stick to the credit
business need?
time to prepare an alternative strategy.
terms.
Bankers, ideally like to see, current
Fast-growing companies burn cash.
Have a procedure to deal with slow
assets – that’s cash plus stock and
There are extra wages to pay and
payers.Telephone customers who are
accounts receivable - at twice the
materials or equipment bought - all
late with their payments and inquire if
value of the accounts payable,
before the revenue from growth starts
there are any reasons why they’ve
otherwise known as current liabilities.
flowing.
overlooked the due date.The squeaky
That provides a built in margin just
If the cashflow can’t cope, then
wheel syndrome usually works.
in case all stock can not be resold for
more cash needs to be raised from
Become more persistent as accounts
full value, or all debts fully recovered.
shareholders or by way of a loan or an
edge beyond 60 days overdue.The
However, if the working capital
overdraft from a bank.
chances of full recovery drop sharply
balance/ratio is consistently above
Your banker will be more
after 90 days.
two, there may be too much cash
impressed if your request for funds is
Consider offering incentives for
being kept in the business.
accompanied by a business plan, plus
payments received early or on time.
While there may be a case for
detailed budget forecasts – and is
If you’ve been in business a while
holding a safety margin to cover
made before the situation is dire.
and need to change your credit terms,
unforeseen disruptions, excess cash
As a rule of thumb, overdrafts are
notify customers in writing what the
may be better used for further
new terms will be for future orders.
for short-term needs arising perhaps
expansion, purchase of fixed assets, or
Do a cashflow forecast for the next
from seasonal demand, or to get over
distributed to the owners.
For many, managing cash flow and all it
entails, is one of the least attractive
aspects of being in business.There’s no
point in being in business if you don’t
get paid.There is little joy in ringing
customers to cajole payment for overdue
bills.
PA G E 1 6
12 months. Depending on the business
you operate, this should be worked out
on a monthly basis showing the
maximum and minimum cash balances
expected.
Be realistic: some months are better
than others, fixed costs also vary from
month to month, so be careful not to
just divide an annual cost by 12. Base
forecasts on past results and allow for
the seasonal fluctuations.
Use the cashflow forecast as a
management tool by comparing actual
outcomes against the forecast and make
adjustments to the projections for the
EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
NIGHT AFTER NIGHT
AFTER OVERNIGHT SUCCESS.
NIGHT AFTER NIGHT
AFTER OVERNIGHT SUCCESS.
From trucking to tourism. Farming to forestry. For over 65 years we’ve built our business
by supporting New Zealanders who have been quietly getting on with building theirs.
If you need a finance company that’s in it for the long haul, talk with your local account
manager and find out how we can assist you. Call 0800 500 832 or visit www.udc.co.nz
EMABUSINESS
FINANCE
ADVICE
Accelerate cashflow, accelerate business growth
The benefits to you and your business
would be obvious.You could:
■ Purchase replacement stock earlier,
for earlier re-sale;
■ Invest earlier in new plant and
equipment;
■ Bank the proceeds to wait for the
optimum time for purchasing
■ Forget the ‘re-work’ of chasing bad
debts, and consequently cut your
administration time.
Or, if you outsourced your businesses’
credit management altogether, you
could focus on your core business,
thereby improving the chances of
growing it.
Cashflow finance advances money
against your outstanding invoices, which
means that access to finance for growth
becomes no longer limited to your
tangible real estate assets but becomes
leveraged off your sales record.To be
more precise, cash for growth is secured
from your debtor’s ledger.
The facility to do this can be
Normal Cashflow Cycle
undisclosed – none of your clients need
know you are backed by a organization
such as Scottish Pacific – or all your
credit management may be managed by
them on your behalf.A variety of
options are open for negotiation.
Of particular value to small and medium
businesses exporting to Australia is that
the cashflow services treat the wider
trans Tasman marketplace as a whole you need not be concerned about
getting paid by customers though they
operate in a different jurisdiction.
For a summary of the process at a glance,
take in the graphic.
Factored Cashflow Cycle
TPL2572
What if your customers paid their
invoices within 24 hours of getting them?
Our Vision. Your Success
PA G E 1 9
EMABUSINESS
By Kevin Jones
ADVICE
FINANCE
ADVICE
IRD sounds warning against trading trusts
The IRD’s “rekindled” interest and
media focus are primarily fuelled by the
Taxation Review Authority decision of
W33 (originally V20) which, though
handed down in December 2003, has
haunted business owners and their tax
advisors ever since.
The dentist in case W33 restructured
his affairs in 1994, after seeking
professional advice. He settled a
discretionary family trust, the trustee of
which was a corporate entity, with
himself as a director and shareholder.
He, his wife and four children were
beneficiaries of the trust.
Before this restructure the dentist
earned in excess of $200,000 a year.
After it (once the trading trust
arrangement was set up) the corporate
trustee employing the dentist paid him
a more modest salary of only $80,000 a
year.Therein lay the hapless dentist’s
downfall.
The balance of income generated by
the dentistry practice was distributed to
his wife and children, at their lower
marginal tax rates (there was no minor
beneficiary rule in those days, making
income streaming more attractive).
Distributions were by book entry
only, and were immediately loaned back
to the trust, again by book entry. As a
result, no ‘real money’ passed to the
dentist’s wife and children; the full
amount of the revenue generated was
still available to the dentistry practice,
yet the overall tax rate was reduced.
Hence the IRD’s displeasure.
For the hearing the IRD focused on
tax years ’95 and ’96; it was adamant the
entire trading trust restructure
amounted to tax avoidance, and sought
to annihilate it. It requested the Court
to write back all the income to the
dentist personally, and tax him on it
accordingly.
Fortunately for the dentist, the
Taxation Review Authority (TRA)
refused to annihilate the restructure.
While it found for the 1995 year there
was indeed an arrangement, the tax
benefits were held to be merely
incidental, primarily with the rather
odd logic that the tax savings were
nominal.
For the 1996 year, when the tax
savings were relatively higher, the TRA
found them to be not merely
incidental, and that the restructure for
that year amounted to tax avoidance.
The TRA was unimpressed with the
artificially low salary ($80,000). It
effectively “reset” the dentist’s salary at
what it considered a more realistic
salary; $120,000 a year.
However the attention drawn to the
decision is disproportionate to the real
content of the judgment. A few points
bear mention, namely that the TRA
also found:
■ Restructuring one’s affairs into a
trading trust arrangement is not per
se tax avoidance;
■ Book entry distribution of income to
beneficiaries, while found to have an
‘element of artificiality’, is also not
necessarily tax avoidance;
■ Even a restructure “mid-stream” of
one’s business affairs is not necessarily
tax avoidance.
Most notably, the TRA held that had
the dentist’s salary of $80,000 been set
at $120,000, then “all pretence and
artifice would have been removed from
the arrangement”.
Conclusion
BACKGROUND BRIEF
Many readers would have recently
seen
somewhat
negative
rumblings from the IRD, directed at
“professionals and others who are
reducing their taxable income by
operating through trading trusts”
(Otago Daily Times – 5/3/2005). The
article quoted goes on to state
rather ominously that:
“Following
a
ruling
by
the
Taxation Review Authority (TRA),
the
Department
has
warned
people to consider taking advice
as the arrangements may be
subject to review by IRD.”
The same article reports that the
IRD has had its interest “rekindled
following a TRA case in which the
Authority held that a dentistry
practice was transferred to, and
carried on, by a “trading trust for
tax avoidance purposes.”
The National Business Review
reported (11/3/2005) that the IRD
“admitted it had (such) a project
targeting people it believes are
improperly using trading trusts”
Anyone already operating in a
trading trust structure should not run
for the hills, but should discuss the
importance of W33 with their advisors.
Some attention should also be
dedicated to the manner in which
salaries have been set, to ensure they are
market related.
Next month I will examine some of
the shortcomings in the conventional
trading trust structure insofar as asset
protection is concerned, and discuss a
modification to the structure.
Kevin Jones is leader of Hesketh Henry's
Private Client Services Team
Our Vision. Your Success
PA G E 2 1
FINANCEA DADVICE
VICE
EMABUSINESS
By Garth Hurrell
Valuing your business
The business was broke when
they salvaged the wreckage from the
receiver and started making
components for
the dairy
industry.
The first few
years were
rugged, but the
firm now feeds
10 families
directly and is
knocking out a
decent profit for
its owners, so
much so that
Eric wants to
cash-in to while
a few years away
living in a
southern French
idyll.
Mike, who is
more of mind to
stay with the
business for a
few more years,
has first option
on Eric’s shares
but will need finance to do the deal.
Before making a final decision,
Mike asked the firm’s bank manager
for guidance on valuing the
business.
Buyers usually look at the cash a
business is earning before interest,
tax, depreciation and amortisation
(ebitda).The purchase price then
becomes a multiple of that number.
How big a multiple depends on
many factors. Small, unlisted firms
with a track record of sound cash
flows are likely to attract a higher
multiple than those two or three
years old. But both would be less
the rate of return of the super profit
on the purchase price. If the result
is close to 30 per cent the second
test is applied.
This doubles the earnings before
interest, the proprietors’ earnings
and depreciation to give the cash
the business should earn in two
years. If that’s close to the chosen
price, then go to the final step and
apply the rule of thumb that the
goodwill of the
business is worth
three times the
super profit.To
that might be
added the cost of
fixed assets such as
plant, equipment,
fixtures and
fittings.
The three
calculations are
most likely to give
a range of answers.
$1,200,0
00 Adjust them for
the economic
climate, particularly if interest
rates are rising
signalling an
economic
downturn ahead.
Those are the
“hard” numbers
that bankers will
crunch to provide
generate a higher free cash flow can a valuation to guide the degree of
funding a prospective purchaser can
be an attractive proposition.
expect.
And the reverse applies. A lean,
But they are not the only
well-run company with a high
margin provides fewer opportunities elements driving the final price.
for a potential buyer unless synergies Buying a business is as much art as
science. And Eric’s expectations, as
can be obtained in other ways.
well as Mike’s ability to fund the
Mike’s bank manager uses three
purchase, will both be an element in
different calculations to assess the
reaching the final transaction price.
price based on the free cash the
business generates.
To assess the free cash he takes
Garth Hurrell is ANZ Business Banking
ebitda and deducts the owners’
Central District Manager based in
salaries to determine the “super
profit” the business is generating.
Paraparaumu
The first takes method looks at
than the multiple commanded by a
stock exchange listed company.
There is also an element of
fashion.When dot.coms were hot,
they attracted high multiples based
on potential earnings.
It is the buyer’s estimation of
future earnings, which ultimately
drives the offer price. A down at
heel business with opportunities to
lift sales, quickly cut costs and
$100,000
00
,0
00
$5
PA G E 2 2
EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
$1,300,000
Looking back over the last 15 years,
Mike & Eric take pride in having
created a $20 million-a-year business
from the shell of a small town
engineering company.
A GOOD BUSINESS RIDES
THE UPS AND DOWNS.
NIGHT AFTER NIGHT
AFTER OVERNIGHT SUCCESS.
From helicopters to hydraulics. Farming to forestry. You need a finance company
that understands the constant changes in your industry. For over 65 years
we’ve built our business by supporting New Zealanders who have been quietly
getting on with building theirs. Talk with your local account manager about
how we can structure finance to help take your business to the next level.
Phone 0800 500 832 or visit www.udc.co.nz
NEWS
EMABUSINESS
By Francheska Segedin, EMA Northern
Making people the priority
Unlimited People Seminar. Review from 20 Best Places to Work
Three years ago Fletcher Easysteel
was struggling. Within the Fletcher
Building Group they were an
unreliable financial performer, had
high staff turnover, a stagnant pool
talent and lacked clear vision and
strategy. Confidence was low.
Since then John Beveridge and his
team drawn from all areas of the
company, have turned things
around.The company was
rated 15= (with Toyota) up
from 36 last year, by its own
staff in this year’s Best Places
To Work survey; Beveridge
recounted what they had
done to change things at the
recent BPTW seminars.
Some of these changes were:
2. Creating a strong vision and
the strategies to achieve it
Setting the vision and supporting
strategies were core components and
key drivers for change.The whole
workforce got involved, resulting in a
set of values with meaning for the staff
to be practiced at work.A point of
understanding that they were all in it
together is summarised with:“We all
have to contribute to ensure success –
it’s ‘The Easysteel way’”
PAYROLL PERSPECTIVES 2005!
1. Determining their
current situation and
John Beveridge and team
establishing a sense of
urgency
3. Communicating the vision
Easysteel felt it was important to
and strategies. Getting buy in.
get real about the state of their
Initially a considerable amount of
company. This allowed them to
scepticism stood in the way of the
identify the areas needing most urgent
change process and how it would affect
attention and create something to be
staff. By leading by example the team
proud of and celebrate once
found they could break down those
improvements were in place.
barriers.
PA G E 2 4
They demonstrated and
encouraged the behaviours needed
to contribute to success, and kept
alive the sense of urgency by
keeping new change initiatives
coming. Gradually staff started to
buy in. It wasn’t a quick process
but its positives are visible now.
4. Communicating the links
between positive behaviours
and corporate success
Rewarding and celebrating
success is very important. A wide
range of rewards and benefits have
been established to recognise and
encourage the staff helping
improve the company. These
benefits include:
■ On-site BBQ’s for staff who
reach a certain production target
■ Medial assessments i.e. Diabetes
checks
■ Gym subsidies
■ Xmas vouchers
■ University scholarships which
can be taken up by family
members
■ Service awards
The scheme caters to the
various groups of employees. Staff
who work hard and contribute to
the company’s success get back
something valuable to them.
Getting it right for Payroll staff
Stamford Plaza, Auckland
19 & 20 May 2005
EMA’s Payroll Perspective 2005! will
bring you up to date with the latest
developments and trends in payroll
procedures, and give you the right
tools!
Payroll is an essential function, and its
important you get it right first time. It is
also a minefield of legal, tax, and
security issues.
Multiple Booking Discount: Register
one and get the second from your
place of work at half price!
PROGRAMME INCLUDES ANSWERS TO:
■ Why does Payroll have to be so
complicated?
■ Legal Workshop
■ CASE STUDIES
■ Employing skills from overseas
■ Dealing with Difficult People
EMA Business Plus Magazine - Exclusive EMA news, advice, learning and networking
■ IRD Update
■ Preventing Fraud in the workplace.
■ Payroll Technology Update
Tel 0800 800 362 for full programme
and to register now.
Thrive: Super show!
The PM, All Black captain, Saatchi whiz,
manager supremo, Telecom boss, bungy
jumper will share centre stage
The highly anticipated 2005 Thrive
Auckland is set to rock Aotea Centre on
April 14.
“The speakers we are presenting in 2005
have set world-class standards for
achievement around the world, and we
are very excited to welcome them to
Thrive,” said Alasdair Thompson, EMA’s
CEO.
■ All Black captain Tana Umaga will tell
his personal story; his perspectives on
winning, losing and living in the public
glare.
■ Kevin Roberts, New York-based CEO of
Saatchi & Saatchi is one of the world’s
most successful ideas men. He leads 7000
people in 84 countries. His book
Lovemarks: The Future Beyond Brands is
the manifesto for ‘creating loyalty beyond
reason’.
■ Air New Zealand CEO Ralph Norris
■ Telecom CEO Teresa Gattung, thrice
named in Fortune magazine’s Top 50 Most
Powerful Women in International
Business.
■ Peter Gordon is synonymous with
innovation in food. Peter is the co-owner
and joint head chef at London restaurants
Providore and Tapa Room. The Providore
team is currently consulting for New York
restaurant Public, featuring the classic
Kiwi pavlova. Peter has just opened Dine
by Peter Gordon in Auckland’s Skytower.
■ AJ Hackett’s bungy empire grew from a
single attraction in Queenstown to a
global organisation: Australia, France,
Mexico, Bali, Macau, Germany and the
US.
■ Infratil CEO Lloyd Morrison heads up a
business with a sharemarket capitalisation over $800 million. One of his recent
ideas includes change to the New Zealand
flag
Book Now! Tel 0800 800 362
Thrive audiences to get dose of courage
Not for profit organisation, StarJam, will be
at Thrive Auckland this month to entertain
and provide a lesson in courage.
StarJam’s young performers – ‘jammers’ all have a disability. They take centrestage at public spectaculars to perform
with stars and celebrities. They also
appear at corporate functions looking to
incorporate something inspirational in a
conference programme.
At Thrive, a jammer will interview Air New
Zealand’s Ralph Norris. Mr Norris was put
through his paces earlier this year by
StarJam at the Air New Zealand international managers’ conference. StarJam
singers also performed several hits.
“The bravery and talent of the young
performers was inspirational – like
nothing else we’ve seen. It left every staff
member feeling empowered to take on
their own business challenges,” Mr Norris
said.
StarJam has also been chosen to open
the new TelstraClear Pacific events
centre on 13 May. The “StarJam Stage
Show’ will feature over 130 young people
with disabilities performing with 30
celebrities
and
the
Auckland
Philharmonia to tell a story about facing
and overcoming hurdles, and featuring
dance and musical items from pop to
opera.
“These kids have real talent and will
blow the socks off those attending,” says
Richard Jeffrey, CEO of TelstraClear
Pacific.
StarJam founder Julie Bartlett said:
“Anyone who has ever had to overcome
an obstacle in their life is inspired by the
raw courage and talent of the StarJam
performers. Simply by getting up on
stage they achieve what most of us
strive for our whole lives: they accept
themselves and appreciate their own
unique talents and gifts. The audience
goes away determined to confront their
own challenges head-on.”
To find out more about StarJam
performances at business events, or
how to get tickets to the StarJam Stage
Show,
ring
09)
624
4555.
www.starjam.org.
MAXIMA.
AWARDED
NBR CAR OF
THE YEAR.
Awarded National Business Review Car Of The Year 2004.
w w w. n i s s a n . c o . n z
NIS1851\TBWA