Archive for January 2017

Building the crisis-ready board

Building the crisis-ready board

Building the crisis-ready board

Members of boards of directors take their responsibility to deal with crisis situations very seriously. But it’s unclear if they’re fully versed on whether the companies they’re directing are prepared to effectively manage those crises, a new survey suggests.

Deloitte surveyed more than 300 directors around the world. Seventy-nine per cent of survey respondents said relevant managers and staff at their companies were aware of crisis management procedures and how to execute them should an event strike tomorrow. The confidence was particularly high amongst directors of large companies.

But as the survey dug deeper, it became clear that at least half of the companies may not have taken key crisis preparedness steps.

Only half of the companies the directors oversaw had evaluated their strengths, weaknesses, opportunities, and threats or engaged in scenario planning for major risks. Fewer than half of the companies had identified relevant stakeholders (49%), had crisis playbooks ready to use (49%), or had involved relevant stakeholders in analysing specific risk scenarios (41%). Just 43% had evaluated worst-case scenarios.

The risks for which preparedness was most lagging at the companies included corporate reputation, product tampering, and man-made disasters such as terrorism.

Preparation differs

Crisis preparedness can vary substantially from company to company, said Olivia Kirtley, CPA, CGMA, a seasoned non-executive board member who served as board chair of the American Institute of CPAs (AICPA) and as president of the International Federation of Accountants. Some directors have done scenario planning, established a communication crisis team, and examined what their companies did well and didn’t do well after previous incidents.

“Those directors probably speak with a lot of confidence because they have knowledge from past events how they were actually prepared and what they have done since then to improve preparedness,” Kirtley said. “Others may not get that level of reporting at the board level. They may receive reports on cybersecurity, but it may all be more theoretical than using actual events or having an actual preparedness drill.”

How much a board gets involved in managing an actual event differs by company and crisis, said Leslie Murphy, CPA, CGMA, a director on three corporate boards and five not-for-profit boards, and a former board chair for the AICPA. “Our duty is to ask the right questions and get ourselves satisfied with the answers.”

That includes asking business-line managers specific questions to get crisis management details, for example, when outside counsel is sought or the board is notified. Also, board members should be part of a cross-functional team that keeps up with scenario planning and tabletop exercises a company performs to test crisis preparedness. And they should determine whether there are any gaps in the crisis preparedness plan, request an action plan and a timeline to close them, and follow up on steps taken.

Director education is critical, Murphy said. “Being a director this year is different than being a director last year.”

To that end:

  • Learn from case studies of how other companies managed crises.
  • Attend forums to talk with other directors.
  • Ask third parties with crisis management experience, such as consultants, attorneys, or communication professionals, to present an educational session to the board.
  • Arrange for training – in the US, for example, through the National Association for Corporate Directors or through continuing education required to maintain a CPA licence.

Key crisis preparedness areas

To make sure their companies are as capable as possible of managing a crisis, Deloitte suggested board members focus on these six key areas:

Experience. Consider making real-world experience with a past crisis a strong credential when searching for new directors. This builds crisis capabilities into the membership and structure of the board.

Preparation. Determine vulnerabilities and key risks the organisation faces, and establish a crisis plan for the board. Raise awareness amongst board members that each one should be ready to apply special skills such as public relations, risk management, or social media to manage a crisis. Long before the need emerges, board members should make time for joint planning committees, simulations, and other time investments that will pay off during a crisis.

Members of the board’s risk committee should take an integrated, enterprise-wide approach that drives better reporting and monitoring. A big-picture view can improve the board’s support of executives who are charged with risk management, and it can hone the board’s focus on crises. Have the organisation’s crisis management capabilities audited internally and validated externally.

Ensure that the executive management team is adequately trained and takes part in crisis simulation rehearsals. Work with executive management to create a short list of third-party service providers in legal, forensic accounting, and other key areas to assist in times of crisis.

Logistics. Up and down the line and across the many silos inherent in most organisations, the group of key people who will spring into action during a crisis have to be ready. Define that temporary committee of board members or directors and management and the roles each member plays, so other committees and management structures are not too heavily taxed during a stressful crisis.

Make sure at least one board member represents the group in planning and carrying out communications. Also, designate people upon whom the group can call for support during a crisis.

Details. Expect to see specific plans for handling each of the scenarios that might threaten the organisation. Also, board members should participate in testing those specifics against their best knowledge of what may happen and what the company is capable of.

Communication. Crisis communication starts before pre-drafted press releases or mea culpas are under the spotlight. Organisations first need to work inside their walls to promote shared understanding of risks and responsibilities. Establish a robust crisis communications plan that has been stress-tested.

A board that listens to and engages with key influencers, stakeholders, and customers can look at a situation from the outside in.

Commitment. Embrace the board’s role as a guardian of reputation. An organisation’s reputation is a priceless asset. It can take years to build, but a moment can imperil it. Everyone who has authority over preventing that damage derives that authority from the board – and only the board can engage the right decision-makers, establish the requisite communications strategy, and set the necessary tone.

To make sure lessons learned during and after a crisis aren’t lost, a board may want to ask for an independent review of the crisis management and post-crisis events. When the worst moments are past, the effort that goes into investigations and independent reviews can help head off future trouble.

Source : GCMA

How to incentivise executives to take a long-term view

How to incentivise executives to take a long-term view

Executive pay structures that rely on bonuses can encourage decisions that prioritise short-term gain over the sustainable performance and ethical conduct of the business. This, in part, is why executive pay has become a topic of increasing concern to regulators and shareholders alike.

But there are steps boards can take to encourage leaders to focus on the long term, according to Wim Van der Stede, CIMA Professor of Accounting and Financial Management at the London School of Economics.

Remuneration committees should take the following factors into consideration when putting together compensation packages, Van der Stede said. When it comes to bonuses, measurability and sustainability are key.

Annual bonuses can be quite effective in settings where performance can be adequately measured, especially where there is a direct link between the actions and decisions taken and their results, which can help to alleviate some potential short-term dysfunctional consequences of large bonuses.

Because this is a lot to ask from any incentive system, firms should not exclusively rely on short-term, annual bonuses, but rather complement them with other types of incentives, Van der Stede added. Doing so provides the opportunity to mitigate any measurement problems or address any areas where the goals are not aligned with the long-term objectives of the business.

Regulators and shareholder groups are increasingly interested in the link between performance and bonus pay, but transparency in this area is also important to internal stakeholders. When employees perceive executive bonuses to be unjustified or disproportionate, this can trigger resentment and undermine engagement, with knock-on effects for performance and culture.

Bonuses should be maximally motivating towards the achievement of long-term sustainable performance, but not excessive. However, excessive is a relative term, Van der Stede said. The magnitude of the bonus needs to be assessed within the sector to ensure that firms can offer a competitive pay package and attract, motivate, and retain the right type of talent. Excessive bonuses yield non-incremental benefits and, therefore, constitute an inefficient use of resources at best, and are likely to exacerbate short-termist behaviour at worst. Companies should tweak the design of compensation packages regularly to ensure that they remain competitive but not excessive.

Evaluating sustainable performance

To gauge whether performance is sustainable, some longer-term metrics must be taken into account.

“Some combination [of long- and short-term metrics] is probably best, where maybe only 70% of the incentive pay is based on the realisation of current performance and the remaining 30% is based on, say, three-year returns or market, equity-based performance for publicly traded companies, and/or some non-financial measures,” Van der Stede said.

The right split between short- and long-term measures depends on the length of the company’s business cycle and the nature of the business model. For example, when a pharmaceuticals company invests in research and development, it can be a number of years until the benefits of the investment are seen.

The horizon over which performance is measured also needs to be carefully calibrated. It needs to be long enough to establish whether the performance was sustainable, but the longer it is, the less motivating effect the bonus has, explained Van der Stede. So a balance needs to be struck between the various dimensions of inherently complex incentive plan designs.

“If you keep an eye on some of these non-financial measures related to customer satisfaction, employee development, share of sales from new products, and so on, you will have a gauge of your ability to continue to do well in the future, especially when the chosen measures are leading indicators of future financial performance.”

“Of course, non-financial measures can be manipulated, too, and thus even the best incentive systems stand no chance when not embedded in, or supported by, the right culture,” Van der Stede added.

Another option is to defer part of bonus payments, so, for example, only two-thirds of the bonus earned is paid out at the end of the period, and the other third is put into a bonus bank, Van der Stede explained.

The deferred amount that is eventually paid out will vary according to performance on that performance measure in future quarters or periods. So, if the employees, managers, or executives have done something to boost profits now, in a myopic rather than substantial fashion, it may never be paid out because the performance on which the bonus was earned did not prove sustainable.

Encouraging a long-term focus

Organisational culture, tone from the top, and career progression can also help create a focus on the sustainability of the business.

In an organisation whose leaders consistently and reliably maintain focus on the long term, employees will be less likely to choose the “earn while we can” option when faced with a choice between doing something that increases their bonus now and something deemed to have a beneficial long-term effect.

Similarly, an organisation that focuses on promoting employees who never miss their targets could be sending a message that hitting targets is the only way to progress.

A more holistic approach to performance evaluation which also considers all the key aspects of the job is likely not only to make for a more effective incentive plan, but also to help shape the culture, Van der Stede said. When people who place importance on factors such as collegiality, business development, talent development, and new delivery initiatives are promoted to leadership roles, they will also expect their staff to exhibit these characteristics, rather than simply prioritising targets to maximise their bonus.

Source : GCMA

Price rises are making a comeback at Australia’s major supermarkets ahead of Amazon’s arrival

Price rises are making a comeback at Australia’s major supermarkets ahead of Amazon’s arrival

Photo: Quinn Rooney/ Getty Images / File

You’re not imagining it: prices are ticking up at Australia’s major supermarkets, especially for fresh fruit and vegetables.

The sector, which has seen ferocious competition in recent years thanks to the arrival of German budget chain Aldi, saw a strong lift in prices for the first time in eighteen months, according to special research from Deutsche Bank.

The industry is waiting to see the full extent of US internet giant Amazon’s plans to enter the market, especially how aggressively it will compete in the fresh grocery category. The company is known to be building capability for its Amazon Fresh service, through which customers can order groceries online in the morning and have them delivered by dinner time.

Deutsche Bank, which checks prices around the country at supermarkets on fixed basket of goods each week, says fresh fruit and vegetable prices surged more than 7% in the December quarter, compared to a limp 0.7% in the three months to September.

The effect on across-the-board prices in the sector is seen in the chart below:

Courtesy of Deutsche Bank.

Between the major two supermarkets, the price rises were much more pronounced at Coles, compared to Woolworths which has been pursuing a turnaround strategy involving the closure of 30 stores and cutting 500 jobs. This shows the difference between the two:

The inflation in fresh goods is offset at the major chains by their continued investment in their private label products, which saw deflation during the quarter.

Deutsche highlights that Woolworths stands to gain more than Coles’ holding company Wesfarmers from food inflation, simply because the diversity of Wesfarmers portfolio of businesses makes its earnings less sensitive to the impact of stronger supermarket revenues.

Deutsche has a buy rating on Woolworths with a $27 price target, and a sell on Wesfarmers with a $38 price target.

Source : Business Insider

What a data breach means to your business

What a data breach means to your business

Consequences of a data breach could now be a lot more serious

Consequences of a data breach could now be a lot more serious

By Michelle Lindsay

In October 2016, the Australian Red Cross Blood Service announced it had been the victim of a significant data breach. More than half a million donor records, including personal information on sexual activity, drug use and health, were compromised when they were accessed from an unsecured server.

The scale of the breach, and the sensitive nature of the information disclosed, made it one of the most serious in Australia’s history, damaging the organisation’s reputation and opening it up to potential litigation.

While 2016 saw a number of high-profile data breaches, experts warn that this is not just an issue for the big end of town. With new mandatory reporting legislation also set to take effect in 2017, the consequences of a breach could now be a lot more serious.

According to new report, the IBM Cost of Data Breach Study: Australia, a malicious or criminal attack caused 46 per cent of data breaches in 2016, while 27 per cent were caused by a negligent employee or contractor, and a system glitch was the source of the remaining 27 per cent.

Organisations may be required to report data breaches

Under the proposed Privacy Amendment (Notifiable Data Breaches) Bill 2016, organisations will be required to go public on any unauthorised access, disclosure or loss of personal information which is likely to result in serious harm to the affected individuals.

If a business suspects a data breach, it will be required to carry out an assessment within 30 days. Then, if there are reasonable grounds to believe a data breach has occurred, it will need to notify the Privacy Commissioner, as well as all the affected individuals.

According to Ian Cunliffe, chief privacy officer at CPA Australia, the legislation will be a game-changer, making lapses more public and potentially more costly to address.

“Up until now we’ve had legislation that has the potential to impose serious penalties to people who breach privacy, but the obligation to self-declare, as the legislation proposes, raises the stakes enormously,” he says.

“Currently businesses are not required to self-declare, so we don’t know how many breaches there have been. If this legislation is passed, there will be the obligation to shout any data breaches from the rooftops, and a failure to do that will double the embarrassment if the company is found out and greatly increase the risk of criminal sanctions.”

Failing to disclose could also prove expensive, with businesses facing a range of potential penalties, including fines up to A$1.8 million.

Accountants are at high risk of a data breach

Cunliffe says that some small businesses may be underestimating their exposure to data security incidents.

“Every business has information that is confidential in relation to the privacy obligations that apply, for example, employment records. This might be information about people’s sick leave and the reasons for it and other personal information, so maintaining its confidentiality is a serious matter.”

He says that accounting practices are at particular risk, given the sensitivity of the data they hold.

Professional Development: Technology, accounting and finance forum on demand: stay ahead of the latest trends and issues into technological developments for accountants and finance professionals

“Accountants’ stock-in-trade is providing confidential advice based on personal information – so it would potentially be very embarrassing if that information made it into the public arena.”

Cyber insurance expert Drew Fenton, from insurance and professional indemnity protection firm Fenton Green, agrees that accountants cannot afford to be complacent.

“If I were to rate clients from zero to 10, where 10 is the highest risk, accountants would be seven or eight. Even though they don’t have a large database, they have all of our personal information including our financial details. From that perspective they are high on the target list for hacking.”

He says that being aware of the potential for a cyber attack can go a long way to protecting a business from the reputational damage and financial costs that accompany a data breach.

“The number one risk is opening an infected attachment – that’s where viruses get into your system. On average a virus is in your system 140 days before it is detected – watching, waiting and collecting information.”

Maintaining trust

The IBM report on the cost of data breaches in Australia shows that the average cost of managing and rectifying a breach is around A$142 per compromised record.

Although the financial cost is high, IBM says the biggest consequence of poor data security is a loss of business following a breach.

Fenton agrees that reputational damage and reduced client trust are probably the biggest concerns for small businesses.

“If it happens, once, we’ll probably forgive it. Twice we’ll be very cautious, but if it happens three or four times, the company will have a very severe PR problem.”

Protect your business from data breaches

Here are three strategies to help keep your data safe.

1. Put robust data security protocols in place

The first line of defence against cybercrime is having a strong culture of data security and reporting, and up-to-date security software. Your systems, and those of your partners and suppliers, should be regularly tested for vulnerabilities, and a risk assessment and management process put in place.

Be aware of your industry compliance obligations such as the Payment Card Industry Data Security Standard (PCIDSS) for organisations handling credit card information or the Information Security Registered Assessors Program (IRAP) for businesses or other groups wishing to store or process Australian Government information.

Educate your employees about the importance of protecting client information, and create clear management reporting processes.

Only collect the data you need – the less you have on file, the lower the risk if a breach occurs.

2. Consider taking out cyber insurance

Cyber insurance is a relatively new type of insurance cover, which can help cover costs related to a data breach. Cyber insurance can cover first-party costs, such as having an IT expert come in and wipe the virus, or the cost of reporting the breach. It can also cover your liability costs if an affected client takes legal action.

3. Seek help if you suspect a data breach

As the proposed legislation hasn’t yet passed, it’s not clear exactly what the notification process will require. So if you think there may have been a breach of your data, speak to a solicitor to confirm whether you need to report it, and how to go about making the required notifications.

You may also want to consult a public relations firm to help limit the reputational damage, and help shape the message to affected clients.

Source :CPA

Three economies helped by a commodities rebound

Three economies helped by a commodities rebound

Rebounding prices are lifting the incomes of three Asia-Pacific economies

By Jason Murphy

Being a commodity-exporting nation requires great stoicism. Just when you think you know what prices are doing, they swing dramatically.

Between 2011 and mid-2016 the world grew accustomed to the prolonged slide in the prices of coal and iron ore. Then, in the second half of 2016, the extended erosion of commodity prices was replaced quite suddenly by startling spikes.

The impact is being felt in commodity exporting nations such as Australia, Indonesia and Malaysia, where it is lifting forecasts of economic growth in 2017.

Coal and iron ore boost Australia’s bottom line

The prices of Australia’s major resource exports have jumped during 2016. Coking coal, used to make steel, rose in price from below US$80 a tonne in the middle of the year to more than US$300 by early November.The price of thermal coal, used mostly to produce electricity, rose more modestly over that same period but nearly doubled. The iron ore price has risen by more than 90 per cent in 12 months, trading at US$79 a tonne in early December.

Reserve Bank of Australia assistant governor (economic) Christopher Kent argues the price surge will lift growth and help cut unemployment. Commonwealth Bank economist Kristina Clifton describes the effect as “a solid boost”.

Despite this, Australia’s economy still contracted 0.5 per cent in the third quarter, compared with the second quarter.

Related: A fall in oil price becomes opportunity for Malaysia’s Petronas

If current prices of coal and iron ore are maintained through to April 2017, estimates Clifton, Australia could see a lift in gross domestic product (GDP) of between 0.5 and 1.5 per cent. If higher prices hold to the end of 2017, that bump could be 2 to 3 per cent.

Higher oil prices timely for Malaysia

The oil price, as measured by the futures price of West Texas intermediate crude oil, has risen from US$26 a barrel in February 2016 to more than US$48 in late November and jumped to over US$50 in the first week of December.This has been timely for oil-exporting Malaysia, where economic growth slid from more than 6 per cent in 2014 to 4 per cent in the second quarter of 2016. The mid-2016 oil price rise appears to have supported a recovery in growth, which improved in the third quarter, to 4.3 per cent.

The Asian Development Bank says the Malaysian economy had slowed due to weaker prices for oil, gas and manufactured goods but it now forecasts GDP growth of 4.4 per cent in 2017, attributing some of this to the speedier recovery in global economies and higher prices for oil and gas.

The bank notes, however, there are risks to its forecast, such as from any renewed price weakness or from interest rate increases in the US.

Meanwhile, another, unrelated, oil price spike is also proving useful to Malaysia. Palm oil prices have risen 23 per cent over 2016. Malaysia exported more than 6.3 billion ringgit of palm oil products in October, the most recent period for which the Malaysian Palm Oil Board provides data, up from 5.7 billion ringgit in the same month of 2015.

LNG supports Indonesia

A recent increase in the spot price of liquefied natural gas (LNG) is particularly welcome for Indonesia. Although most LNG is sold globally under contract,  the country’s director of oil and gas, I Gusti Nyoman Wiratmaja, expects a large share of its annual production – almost a third – to be sold on the spot market in 2017.The World Bank, in its June 2016 Indonesia Economic Quarterly, notes that while exports and imports are both falling in Indonesia, exports are falling more slowly, as commodity prices rise or stay steady. The bank expects GDP to grow by 5.1 per cent in 2016 and 5.3 per cent in 2017, above the 4.8 per cent annual growth achieved in 2015.

Japanese buyers are, however, threatening to spoil the party. As the oil price fell during the past two years, the contracted price of LNG began to look high compared to spot prices.
In mid-2016, Japan’s Fair Trade Commission began an investigation that could lead to renegotiation of Japan’s LNG contracts, with the potential to spread through the Asia-Pacific region as buyers sought to renegotiate lower prices for LNG.

“The consequences of this action, if successful, are truly seismic,” argues Geoffrey Cann, Deloitte Australia’s national director of oil and gas. South Korea, China and Taiwan could follow suit, he says.

In this context, the recent bump in Asian LNG spot prices is welcome for LNG exporters such as Indonesia and Australia. LNG spot prices, as reported by market monitoring firm Platts, have risen from less than US$5 per million British thermal units (MMBtu) in April to more than US$7 in November 2016.

How sustainable are commodity price rises?

Coal and oil prices are notoriously hard to predict. That is especially true now, because recent rises depend partly on government decisions as well as market factors.

The coal price spike follows a Chinese government decision in April 2016 to limit production at certain coal mines to 276 days a year. This could explain some of the price rise. China will unwind the restrictions in March 2017 and this could cause some of the recent price increases to weaken.

Commonwealth Bank analysts believe current coal prices cannot be sustained indefinitely but argue prices will remain higher than expected in early 2017.

OPEC’s decision on November 30 to cut oil production by about 1 per cent of global output saw the price of West Texas intermediate crude jump to $US51.79. But it remains to be seen whether OPEC members will stick to their agreement and how much impact the cartel still has on global production and prices.

For commodity exporting nations such as Australia, Indonesia and Malaysia the consequences of these far-off actions will be felt very close to home.

Source : CPA

9 essentials of executive coaching

9 essentials of executive coaching

The rise and rise of executive coaching

In 2002, executive coach and clinical psychologist Dr Steven Berglas wrote an article for Harvard Business Review titled, “The very real dangers of executive coaching”. In it, he describes the botched jobs he’s had to fix after someone has been in the hands of an underqualified executive coach.

“To this day, not a month goes by when I don’t have a call about that article,” says Berglas from his Los Angeles home. “If anything, the situation has become worse in the last 14 years. The field is being flooded due to the lucrative nature of the work. There are so many degree-less professionals out there. It’s a horrific landscape for people to navigate.”

Berglas is not alone in his concern. The UK’s Professor David Clutterbuck, who some refer to as the “grandfather” of mentoring and coaching, was a keynote speaker at the International Coach Federation (ICF) Australasia Conference in October 2016 in Queensland. He has assessed hundreds of accredited coaches in centres designed for this purpose and says: “Seventy per cent of these coaches fail to meet even the basic standards of competence. That’s worrying.”

With low barriers to entry, no regulation and market confusion about what coaching actually is – definitions vary considerably – the ground is fertile for rogue players. Some of these may be hard to spot, as they include the well-dressed, former senior executive with many years of corporate experience, who deems specific training in coaching unnecessary.

In Australia, the coaching landscape is less likely to be “horrific”, as it has some of the most sophisticated buyers of workplace coaching in the world, according to Tony Mathers, CEO of the Institute of Executive Coaching and Leadership (IECL), which operates in the Asia-Pacific region. The coaching market in the UK is similar to in Australia in its level of maturity, says Mathers, with locations such as Singapore and Hong Kong a few years behind.

“Government and corporate purchasers [in Australia] know what they are doing in terms of the criteria they set, the qualifications they demand and evaluation required of the coaches they engage,” says Mathers.

However, not all purchasers are so experienced. So how can they know if the thousands of dollars they are spending on coaching senior staff is money well spent? And is price, which can range from about A$400 to A$1200 or more per hour, a reasonable indicator of quality?

“We cannot find any significant correlation between fee levels and competence or between fees and hours of coaching experience,” says Clutterbuck. “The difference appears to be mostly one of marketing expertise.”

As co-founder of the European Mentoring and Coaching Council, Clutterbuck was instrumental in putting organisational coaching on the map in the UK in the 1990s. He says an obvious trap that many workplaces fall into these days is automatically believing that all executive coaches are of high quality. “Few [providers] apply rigorous vetting to the coaches they offer,” says Clutterbuck.

Untrained coaches are a major concern of coaching practitioners worldwide, according to the 2016 ICF Global Coaching Study, conducted by PwC. The survey was completed by 15,380 respondents, 62 per cent of whom identified as business coaches, from 137 countries.

“[Coaching] fills a cultural gap for those in senior roles … where else can they have a safe and trusted conversation?” Dr Julie-Anne Tooth

Australia is leading the way in trying to tackle the problem, with Standards Australia publishing Guidelines for Coaching in Organisations in 2011. For all countries, part of the challenge has been trying to keep up with the rapid growth of the coaching industry.

Over the past couple of decades, executive coaching has grown from a relatively novel concept to a mainstream learning and development intervention in many organisations throughout the world. It is often used in combination with mentoring and training or to help embed the learnings from leadership development programs.

Dr Hilary Armstrong is an executive coach and coach supervisor with Sydney coaching practice WhyteCo. She wrote the curriculum for, and led the delivery of, IECL’s accredited coaching program for 10 years and has witnessed the industry’s escalation.

“In the late 1990s, when coaching was just starting, it tended to be used for remedial purposes,” she says. “Then around 2010, when uptake by organisations really increased, it was commonly used to increase performance and productivity. Today, there is more of a focus on developing potential.”

Why is executive coaching so popular?

This is one of the questions that puzzled Dr Julie-Anne Tooth when she was working in a senior HR role 10 years ago. “I looked at this unregulated activity that wasn’t a profession yet was proving so popular in organisations, and I really wanted to discover what all the hype was about,” she says.

So, Tooth trained as a coach, and then practised as one. Still not satisfied, she devoted an entire PhD to the topic.

Tooth concluded in her thesis that at the heart of coaching lies a self-reflective practice that takes place within a trusted, confidential relationship.

“The opportunity to step away, reflect on your experience and learn from it is very absent from MBAs and the business world today, so it [coaching] is filling an important learning gap,” she says. “It also fills a cultural gap for those in senior roles who are ‘lonely at the top’ – where else can senior managers and CEOs have a safe and trusted conversation?”

When conducted well, does coaching actually work?

The University of Sydney is one of the few centres conducting academic research into the coaching industry. Its research and literature reviews suggest that coaching improves goal attainment, performance, mental health and resilience, as well as the ability to cope with organisational change. Through her PhD, Tooth also discovered that the coaching process leaves people more able to coach themselves.

Does it deliver a measurable ROI?

Clutterbuck says a number of studies on the efficacy of coaching show high returns of around 600 per cent. “Most of these studies don’t have control groups; however, it’s probably a reasonably accurate estimate,” he adds.

Some of the biggest benefits of coaching, he says, tend to emerge well after the coaching assignment and are more difficult to measure. “How do you put a value on someone growing in maturity, or moving from a mindset applicable to one level of leadership to a mindset suited to a higher level?” he asks.

The future of executive coaching

All indicators are that executive coaching is well positioned for continued growth.

 First, it satisfies self-interest. Who wouldn’t love having a conversation with someone for an hour or more, where the focus is completely on you, your goals and your potential?

Second, it meets a broader need. “The speed of change is so great today that loss of reflection in organisations has increased to critical levels,” explains Armstrong. “Reflection is an important part of our ability to learn and make wise, ethical decisions. It’s hard to put words to the value that many people derive from having that space … to stop, reflect and think about what has been happening and to learn about it.”

Meanwhile, the broader coaching community is divided on whether they think coaching should be regulated. According to the 2016 ICF Global Coaching Study, 52 per cent of coaches agree that it should.

Berglas will be frustrated to know that coaches in North America were the least likely to agree – just 37 per cent there said yes to regulation.

What is coaching?

Standards Australia defines coaching as “a collaborative endeavour between a coach and a client (an individual or group) for the purpose of enhancing the life experience, skills, performance, capacities or wellbeing of the client”. Executive coaching is defined as “a service provided to executives and line managers for the purpose of improving skills, performance or work-related professional and personal development”.

The checklist

When screening a coach, here are some of the key points to check:

  • Coaching-specific qualifications.
  • Supervision and ongoing development.
  • Theoretical framework and evidence base underpinning their approach.
  • Methods and assessment tools used.
  • General coaching experience – years in practice and depth of experience.
  • Industry-specific coaching experience: does the coach understand your context?
  • Business experience.
  • Commercial acumen, including reporting practices and stakeholder management.
  • Professional membership and ethics.

Trends in coaching

Professor David Clutterbuck predicts a shift towards using internal coaches, where someone with a normal organisational role is trained to be an accredited coach. The Institute of Executive Coaching and Leadership confirms this trend with its clients in Australia, Singapore, Hong Kong and South-East Asia.

“The results of line manager coaching have been disappointing,” says Clutterbuck, explaining that it’s difficult to be totally honest with someone who will also be doing your performance review. “New approaches, such as creating coaching cultures within intact work teams, are producing much better results.”
This is an approach that has been embraced by EY, where coaching comes in two forms:
“Big C” coaching, which represents formal coaching engagements, and “Little C” coaching, which cultivates a coaching culture through the informal, day-to-day conversations that help professionals to develop.

Data analysis skills lacking among finance teams

Data analysis skills lacking among finance teams

Keeping pace with rapid changes in technology is a cause of concern amongst CFOs. So, too, is talent management – finding good talent, keeping it, and nurturing it.

So with technology altering job roles, and jobs harder to fill, a skills gap has developed in finance roles related to data analysis.

Companies face a steep learning curve in harnessing their data for commercial benefit, and finance is well-positioned to be part of that movement, according to CGMA research. Finance professionals crave data analysis skills: In a 2013 survey, 85% of finance professionals said increasing their ability to work with Big Data would enhance career prospects – but they’re not always finding time to focus on strategic analysis.

Finance business partners in nearly half of companies spend the majority of their time creating and updating reports instead of analysing and interpreting information, or interacting with the business, according to a global report by Deloitte, which shows that finance leaders want staff to focus more on analysis and interaction. In companies where analytical skills are available, finance staff spend far more time on such analysis and interaction.

In another survey, three-fourths of managers listed “identifying key data trends” as a skill important to success. Yet, just 46% said their teams possess that skill, according to a new survey report by global staffing firm Robert Half and the Institute of Management Accountants (IMA), which used responses from 479 CFOs, controllers, and other executives and managers, mainly in the US and Canada.

The leaders face significant shortages of accounting and finance staffers who have the skills required for data analytics initiatives.

They are combating this skills gap in several ways, including these top three: developing skills from within (68%), hiring from outside the company (44%), and using consultants or project professionals (39%).

However, the skills development is at times off the mark. It’s one thing to offer skills training, but the training must focus on the right skills: 14% of respondents say their companies are offering training related to business analysis.

Need for training

Companies know what they need to do, but they haven’t done it yet, said Paul McDonald, senior executive director at Robert Half. They have growing volumes of data, but 86% are struggling with how to turn them into valuable insight, according to the CGMA report.

Offering skills training is valuable not only to current staff but to potential hires. A different Robert Half survey showed that 64% of job-seekers viewed the chance to gain new skills as very important when evaluating an opportunity. Companies that don’t have a reputation for training workers might not get the chance to hire a talented worker if that person believes better development opportunities are available elsewhere.

“Companies that are effective at staffing now are offering attractive compensation and perks,” McDonald said. “They’re offering training, and they’re presenting their culture because these individuals are not only looking at the current employer they’re auditioning with, but they’re also looking at what the job will do for their knowledge base and career. They’re getting a good feel for the culture, which is so important to employees today when they have choices.”

Money is the most-cited obstacle as it relates to hiring for a business analytics role, according to the Robert Half/IMA report. The top four challenges were lack of competitive compensation (31%), inadequate workforce planning (23%), not enough available professionals with the right skills (22%), and poor job description (16%).

In addition to better training programmes and hiring practices, companies must continue to update their technology platforms to give staff the best chance to apply those data-related skills.

The gaps that remain in risk initiatives

The gaps that remain in risk initiatives

Public companies and large private organisations are making the biggest strides in installing holistic risk management. But their risk management practices still have gaps.

Fifty-one per cent of public companies and 51% of large private companies have complete formal enterprise risk management (ERM) programmes in place, according to the American Institute of CPAs and North Carolina State University, which on Wednesday released data culled from 441 finance executives in business and industry.

The 2016 percentages represent a large increase when compared with previous results in the survey, which began in 2009. In 2011, 32% of large organisations, defined as those with annual revenues greater than $1 billion, had a complete ERM process in place, and just 24% of public companies did.

Mark Beasley, CPA, a professor of enterprise risk management and director of North Carolina State University’s ERM Initiative, said the percentages for public companies began to tick upward about 2010 in response to the US Securities and Exchange Commission issuing new rules regarding disclosures of a board’s role in risk oversight.

In the current survey, 25% of organisations have a complete, formal ERM function, the same percentage as each of the previous two surveys but up from 9% in 2009 and 15% in 2011. Not-for-profits lag behind other categories, with 17% in this year’s survey having complete ERM processes, compared with 10% in 2011.

Plenty of companies say risk management is important, and a rising number have taken steps to make it a priority, through naming a chief risk officer, creating board committees that focus specifically on risk, or other strategies. But a high percentage of organisations stop short of saying they’re finished with ERM initiatives.

“The entities are still working to see what’s best for them,” Beasley said. “They’re thinking more about risk management, but they’re reluctant to describe it as complete or enterprise-wide. They’re hesitant to put a stake in the ground and say, ‘We’ve got this thing figured out.’ ”

Risk, whether in the form of economic uncertainty, cyber-threats, or ever-changing technology, is not going away. In fact, 57% of respondents believe risks tied to doing business have changed extensively or mostly in the past five years.

But some view risk as an issue that doesn’t deserve an enterprise-wide response, and others aren’t seeing value in formal ERM.

Forty-six per cent cite insufficient resources as a barrier to ERM progress, 44% list competing priorities, and 34% cite a lack of perceived value.

Some companies have not yet implemented ERM programmes. Among respondents from those organisations:

  • 47% said risk is managed in other ways besides ERM.
  • 31% said there were no requests to change the organisation’s risk management approach.
  • An additional 31% said there were more pressing needs.
  • 23% said they had no one to lead an ERM programme.
  • 17% said they did not see benefits exceeding costs.

Those attitudes show why risk is not often linked with strategy: 56% said risk management was either “not at all” or “minimally” a proprietary strategic tool in their organisation.

How cost-competitive are mature markets?

How cost-competitive are mature markets?

The increasing value of the US dollar in the past year has hampered the cost-competitiveness of the US, according to KPMG’s 2016 guide to international business location costs. Within the North American Free Trade Agreement region and compared with developed economies in Europe and Asia-Pacific, the US is now by far the most expensive market.

Among the ten countries in the KPMG guide, ninth-ranked Japan has a 7.3% cost advantage over the US. Second-ranked Canada’s cost advantage is 14.6%, and Mexico, the only developing economy in the study, has a cost advantage of 22.5%.

In the two decades KPMG has studied business location costs in the ten countries, “this .. represents the first time that the US has ever placed this low in the … cost rankings,” the 2016 guide reported.

The study uses a set of business operating specifications that are held constant for all locations. The model applies 26 location-sensitive cost factors, including labour and transportation costs, cost of capital, taxes, and incentives, for 19 industries and business operations. Rankings are then based on the business costs in 111 major cities in the ten countries.

Mexico, Canada, and the Netherlands retained the top three rankings as most cost-competitive markets in the past two years. Italy came in fourth, up two spots from 2014, followed by Australia, which moved up three places. France was in sixth place, down one spot from two years ago, and the UK, in seventh place, was down three spots. Germany moved up two places to eighth, ahead of Japan and the US.

NAFTA. Mexico had the lowest labour and facility costs of the ten countries in the study, a ranking that was greatly helped by the rise in value of the US dollar compared with the peso in 2015. Business costs in the Mexican corporate services sector were less than half compared to the US. Less-skilled clerical and administrative staff contribute to the cost savings.

Canada ranked among the three most competitive markets in labour, facility, and transportation costs, and in corporate income taxes. Significant federal and provincial support for research and development activities provides Canada a 27.7% cost advantage in research and development services compared with the US.

Europe. The rise in the value of the US dollar compared with the euro bolstered the cost-competitiveness of the Netherlands, Italy, France, and Germany. R&D tax credits and incentive support further aided the Netherlands, France, and Italy.

Italy’s labour costs were third lowest overall. Germany ranked second and third lowest in facility and transportation costs, respectively. The Netherlands ranked among the three countries with the lowest corporate income taxes.

The British pound held some ground against the US dollar, which hampered the cost-competitiveness of the UK as a whole, compared with countries in the euro zone. But results varied significantly within the UK. Manchester, for example, had the lowest business costs among the ten European cities included in the study, and London had the highest. Also, UK corporate income taxes ranked among the lowest in the study.

Asia-Pacific. The rise in the value of the US dollar helped improve the cost-competitiveness of Australia and Japan. Australia consistently ranks fifth among the ten countries in all sectors, except manufacturing, which is affected by relatively high costs to lease industrial facilities and transport freight. Japan had the lowest transportation costs among the ten countries.

Source : GCMA

The enormous cost of IT project failure

The enormous cost of IT project failure

Are we doomed to keep repeating IT failures?

Are we doomed to keep repeating IT failures?

In the late 1980s, Australian banking giant Westpac launched a project to build its own core banking system, CS90. A core banking system is the software machinery that runs modern banks, and so the CS90 project was both huge and mission-critical. Westpac brought in IBM to help, but their joint efforts could not make CS90 work. In 1992, the bank closed the project down, axed 500 jobs and took a A$150 million loss.

That same year, a young US software engineer named Steve McConnell was pondering why some software projects succeeded and others failed. These failures seemed startlingly common, especially in big programs for large organisations (“enterprise IT”), and he wanted to know why.

By the late 1990s, he had compiled a long list of project failures, with CS90 as one of the prize exhibits. “Even Vegas prize fights don’t get this bloody,” he wrote in 1998.

When failure is an industry standard

McConnell has spent many years analysing success and failure in IT projects and is now one of the world’s acknowledged experts on the subject. He estimates that a typical business systems project overruns its planned budget by about 100 per cent.

What’s more, he calculates only a quarter of such projects are delivered within 25 per cent of their original target.

Enterprise IT brings special challenges – elaborate work flows, unique needs and complex interdependencies. Completing such programs is a very different activity from building an app for a smartphone.

“We know why projects fail; we know how to prevent their failure – so why do they still fail?” Martin Cobb

What’s most remarkable about the past few decades is that despite enterprise IT’s long and storied history of project failure, the problem persists. Its persistence even has a name, “Cobb’s Paradox”, after Martin Cobb, a Canadian Government IT specialist who in 1995 ruminated, “We know why projects fail; we know how to prevent their failure – so why do they still fail?”

In 2005, the Institute of Electrical and Electronics Engineers (IEEE) – the closest thing the technology world has to a peak body – published a study, Why Software Fails, which argued that the project failure problem was actually getting worse as IT systems became more common.

Ten years later, in 2015, the IEEE went back to re-examine the issue and concluded that “while it’s impossible to say whether IT failures are more frequent now than in the past, it does seem that the aggregate consequences are worse”.

Dr Cecily Macdougall CPA, founder and CEO of Building4Business, explored software project failure in her PhD thesis. She estimated a project success rate of around 64 per cent and calculated that in Australia alone, A$5.4 billion was being wasted each year on projects that don’t deliver a benefit or are abandoned.

The dismal IT failure record

Their sheer scale means public sector IT project failures have hogged the limelight. The gold medal for recent enterprise IT project failure goes to the UK government’s attempt to create a national electronic health record system, cancelled in 2012 after an investment of more than UK£11 billion. Further examples include:

Queensland Health’s payroll replacement project failed in 2010, leading to a long legal stoush with IBM. IBM bid A$98 million to win the project; by the time it was finished the government had thrown A$1.2 billion at it.

The official inquiry into the project described underestimation of its complexity, poor governance and bad decision-making. Inquiry head Richard Chesterman QC said it could be the worst failure of public administration in Australian history.

Victoria’s Myki public transport project blew out by A$550 million.

The Australian Bureau of Statistics’ August 2016 Census, conducted predominantly via the web, was disrupted by site failures that meant the majority of Australians could not complete the census online on the designated day.

The US Air Force’s Defense Enterprise Accounting and Management System (DEAMS) has seen its projected life cycle costs double to US$2.2 billion – and its expected completion date slip from 2014 to 2017.

The private sector is less likely to be the subject of public post-mortems, but it has also had spectacular problems. Among the examples:

Australia’s Woolworths took six years and A$200 million to replace a 30-year-old legacy IT system with a SAP (systems, applications and products) solution. When it was first introduced, Big W operations couldn’t even place orders with suppliers, and it continued causing trouble until it finally began to stabilise earlier this year.

Retailer Target US decided to have its Canadian business implement a SAP solution. The project came so badly unstuck that it contributed to Target’s decision to close all 133 Canadian stores, with 17,600 employees losing their jobs. (Seeking to learn from that experience, Woolworths has appointed to its board former Target merchandising chief Kathee Tesija.)

“Even Vegas prize fights don’t get this bloody.” Steve McConnell

In 2014, Australian superannuation fund administrator Superpartners cancelled the building of an administration platform that was four years overdue and A$180 million over budget. Later that year, Superpartners’ disillusioned owners, some of Australia’s largest industry superannuation funds, sold the whole business to the Link Group.

The IT meltdown at the Royal Bank of Scotland took nearly two months to resolve and locked 6.5 million customers out of their accounts for several days. It has cost the bank UK£56 million in fines and much more since in efforts to shore up its systems.

Steering to IT success

Steve McConnell says organisations have to overcome three persistent challenges before things can improve: they have to lift the technical management of a project; enhance staff capability; and boost organisational understanding of, and commitment to, a project of work.

McConnell and other specialists list a series of concrete steps those organisations can take to meet these challenges, according to specialists in the field.

Get sponsorship

Business IT projects need champions at the top. It’s one of the most common themes of reports into IT project failure. Says Richard Marrison, partner in charge of KPMG Technology Advisory, “When it works well, someone very senior with a lot of authority to make change is in charge. You need a broad business mandate and a clear view of the technology solution.”

That may require a business to change its practices in order to use packaged or cloud-based solutions, rather than requiring whole new software systems to be written to map the way an enterprise operates, says Marrison.

Liaise with the business

CPA Australia’s chief information officer (CIO) Cathy Bibby says IT leaders who want project success must engage in “honest conversations” with the business that clearly explain the challenges, costs and risks of major software projects. She says it’s also beholden on the CIO, project delivery manager and project manager to put up the flag early if a project can’t be done within the budget or timeframe that the company is pushing.

That, she says, relies on the project team having a deep understanding of the program of work required to achieve a desired outcome.

For Bibby, several situations flag that a project is facing issues:

  • when requirements and objectives are not clearly spelt out but development starts;
  • when there are inadequate and potentially wrong resources to tackle either the development or the change management that must come with it;
  • when a vendor serially fails to deliver and is not appropriately managed; and
  • when project governance doesn’t provide for honest conversations.

Get excellent technical leadership

Industry analysts say there has been a tendency in some organisations to draw CIOs from the business ranks rather than from computer engineering, and for generalists instead of specialists to be left in charge of complex programs of work.Building4Business’s Macdougall is concerned also that in large, sophisticated programs of work, competencies are often focused too low, and there is a lack of overarching control that such a program requires.

Require certification of software professionals

McConnell laments the lack of rigorous certification among software engineers. While the IEEE and other bodies have advocated certification of software professionals, he says that their efforts have thus far failed to establish a critical mass of certified software engineers.

Investigate failure

Given the amount of waste in the public service, Australian Computer Society vice-president Professor Paul Bailes is keen for government to step up, with more forensic analysis of its project failures. Mandated reflection, he says, could prompt much greater transparency between purchasers and suppliers and also help lift competencies across the industry.

“We just can’t keep repeating this,” he maintains.

Solving Cobb’s Paradox

History seems to argue that IT project failure could keep repeating itself. The problem was already old when Westpac’s CS90 hit the rocks in 1992. Almost a quarter century later, Westpac is in the nervous early stages of renewing its core banking system. It is using someone else’s software, not its own. Even so, the banking industry is holding its collective breath.

If many billions of dollars are not to be wasted, jobs lost and hopes dashed each and every year on IT projects, then boards, senior executives and government all need to take note of Cobb’s Paradox.

We know how and why projects fail. Now we need to enforce the practices that will minimise the risk of yet more failure.

Can Agile help?

An Agile approach to software development is fundamentally different from the classic Waterfall approach, where everything is mapped out in advance. In Agile, software development goes through repeated cycles, and projects are split into more manageable chunks, which are often quite small.

Agile practices such as Scrum allow programmers to alter the program as customers think through what they really want and need.

Steve McConnell notes, however, that not every organisation is rigorous in the way they leverage Scrum. That can leave unsolved problems hanging around.

Yet he believes that overall, the use of Agile techniques has improved software creation in the past decade.

“You need a broad business mandate and a clear view of the technology solution.” Richard Marrison, KPMG Technology Advisory

Cecily Macdougall generally agrees, although she warns that teams shouldn’t cherrypick which bits of Agile they use – they have to embrace the entire approach, including quality assurance and ongoing testing. While Agile is getting runs on the board, it still needs careful management.

12 success factors for IT projects

The Institute of Electrical and Electronics Engineers and software project experts have identified the key factors for IT project success:

  • Have the business clearly articulate the required outcome.
  • Secure senior executive sponsorship and commitment.
  • Assign high-quality project and program management.
  • Put in place good IT governance to ensure the business knows what’s happening.
  • Get excellent technical leadership.
  • Properly resource the project, with sensible budgets and timeframes.
  • Get high-calibre software engineering skills.
  • Have IT staff liaise closely with the business.
  • Remain clear eyed about the difficulties ahead.
  • Invest in change management as the business adopts new systems.
  • Use Agile techniques, including Scrum, rigorously.
  • Test, test, test your software before releasing it.

9 things that cause IT projects to fail

The experts consulted by INTHEBLACK identified several issues that can cause projects to fail:

  • Incomplete articulation of desired outcomes.
  • Lack of vision regarding the program of work and complex interdependencies.
  • Poor risk/return assessment.
  • Underestimation of complexity, time, cost and effort.
  • Over-willingness to believe vendor hype.
  • Imperfect procurement (choosing the wrong vendor or wrong product).
  • Insufficient accountability.
  • Dearth of proper change management effort.
  • Lack of transparency into project and program progress.

Source : CPA