Perfect One Day. Then What? | BTalk Australia

(13min 14) The Queensland mining sector is being hit hard by the collapse of export demand, yet the state’s CEOs remain relatively optimistic about the year ahead. While they expect a downturn they don’t expect to bit hit as hard as the rest of the country.

Phil Dobbie talks to the CEO Institute’s Sue Forrester about a report on the business expectations of 70 Queensland CEOs. Are they blinded from reality by year upon year of high growth?

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• Today’s Transcript

Phil Dobbie: Hello, I’m Phil Dobbie and welcome to BTalk Australia. Today: what is the economic downturn going to do to those folks north of the border?

Queensland: perfect one day, economic downturn the next. But if Australia’s telling itself it’s going to escape the worst of the world global crisis, Queenslanders reckon they’re going to be better off than anyone else in Australia, not totally scot-free but they’re going to be somewhat cushioned from the full effect. That’s the view of 70 CEOs up there in Queensland who were quizzed as part of a survey by the CEO Institute. The institute’s CEO for Queensland is Sue Forrester. She’s a busy lady. She’s also on the board at ERGON Energy, she’s the chairman of the Department of Primary Industries and Fisheries and she’s a board member of the National Foundation for Australian Women but she still found time to talk to us. Now even though Queensland business says it’s not going to be as bad as everywhere else you’re still expecting some economic turmoil in the year ahead, aren’t you?

Sue Forrester: Of course. There’s no avoiding it, Phil. When we conducted our survey at our January conference we found that 88 percent said there just wasn’t going to be an improvement before 2010. So we’ve got a full calendar year of difficult, challenging financial times.

Dobbie: You’re still saying, though, 70 percent say Queensland business will cope better with the downturn than other states. What do you think the reasons are for that?

Forrester: That’s interesting, Philip, because when we looked back at the survey there wasn’t a lot of free form additional reasons for that. It could be a little bit to do with the fact that Queenslanders do tend to be a little more optimistic about things, perhaps, living in the Sunshine State. However, when we did speak to our members in detail at our monthly meetings we found that there’s a lot of supporting evidence in terms of the increased migration to Queensland. The agricultural sector they believe will lead us out of recession notwithstanding the mining industries having a severe turndown. And most of our Queensland budget is based in fact on coal royalties. So there’s reduction in the mining industry, however there’s recovery or health in the agricultural sector.

Dobbie: And is that going to be enough to counterbalance the expected downturn in mining do you think?

Forrester: Mining’s a very big part of our revenue, Phillip, so I don’t believe it will completely counterbalance it. However, I think if you look at the recovery based on primary production, aged care and then I suppose that the changeover of the workforce from perhaps the mining sector into the other sectors.

Dobbie: It has been a good run for Queensland, hasn’t it? It’s been growing faster than the other states’ economic growth. Still this year it’s expected to exceed national growth and that’s going to be the 13th consecutive year. So do you think, we touched on it a few seconds ago, do you think this Queensland optimism is part and parcel with that?

Forrester: I believe so. I mean you can’t knock them down really. [laughter] I was just noting that GOMA, the Gallery of Modern Art in Queensland’s major exhibition at the moment is called “Optimism” and it’s all about contemporary artists and how they view the world and how it needs hope and energy and passion and I thought it was excellent timing by the gallery. But in addition to that I think it reflects the Queensland psyche.

Dobbie: Yeah, I noticed also in the survey findings one of the concerns that people had for overcoming the economic crisis is all the doom and gloom talk — you just need to overcome that talk to maintain a more positive attitude.

Forrester: Absolutely, yes. Something we’ve been working with our members is they say look with this barrage by the media and all we hear all day is negativity. Our businesses are quite strong — we have strong balance sheets. We don’t want to mislead our staff but similarly we don’t want to just constantly be putting out messages that are negative. So we work quite closely with them to ensure that communications are open and honest. But really pep it with some positive, optimistic messages for staff who are highly anxious during these times.

Dobbie: Absolutely. And what are the CEOs saying their other concerns are?

Forrester: It’s certainly in the construction and property sector. Access to capital is very, very difficult. The CEO of Suncorp has just resigned. One of our major banks has had difficulty capturing capital. So if it’s experiencing difficulty you can imagine the small to medium-sized developers and banks being unable to access capital as well. However, the state budget includes $17 billion for infrastructure and that has been quarantined. So that may well assist and enhance us through these tough times.

Dobbie: Now there’s been a continual flood of migrants of course from south of the border. Are they changing the way business is done in Queensland? I mean a lot of them are retirees, but there are people, a lot of people, who are moving up there as well to set up businesses. Is that helping or is it diluting that Queensland’s enthusiasm perhaps?

Forrester: I think it would be a personal comment to respond to that as opposed as to one representing the CEO Institute, but certainly as I said earlier the age care sector is world provisioned through the recession. There’s good government funding in place there. This is why I don’t think that there’s too much different impact I suppose on migration, on the way Queenslanders do business. It is a more casual, relaxed environment. However a lot of the offices that we have in Queensland are in fact branches of nationals and multinationals, so those still reflect the culture and the way things are done down south.

Dobbie: Now at this stage do you think the Bligh government, you might not want to answer this in your official capacity, but do you think the Bligh government is helping business in Queensland or is business doing reasonably well despite the best efforts of the state government? I think in every single state at the moment everyone’s having a bit of gripe about their state governments so you’re allowed to for Queensland as well.

Forrester: [laughter] No in fact I won’t. I think I’ll go the other way. It’s not a political comment. Its comment reflected by many of the survey responses. With our premier, Anna Bligh, has actually instituted a job squad where she’s put, I can’t tell you the exact number but I think it was 16 business leaders including the head of Qantas and the head of some of the banks and some local business leaders so that she could really understand the issues in business and how they were going to come through, especially in terms of employment. And then they’ve also put together a package I suppose of 350 jobs within government-owned corporations which might take up some of the slack. So she’s been quite proactive in that respect. And I think also a positive treasurer who has predicted we weren’t going through recession this year. We will have 3 percent growth and by quarantining that 17 billion dollars worth of infrastructure projects it does just continue to keep the economy buoyant and reasonably optimistic in these times.

Dobbie: So what’s your forecast? I do believe that the optimism shown by the 70 CEOs you spoke to is founded and Queensland will continue to grow faster than the rest of the country? Or to feel if we do go into decline to be cushioned to an extent from that, or do you think the effect of the downturn in mining is going to hit the state hard?

Forrester: I think we’re still really learning about how severe that impact of the mining sector is going to be. Certainly their survey responses where that they don’t think we’ll be hit as hard as the other states and that they think our agricultural and other industry sectors will in fact pull us out at a faster rate, but more than that I can’t read into the data.

Dobbie: So getting back to the results of the survey, the cynic in me says, because we’ve seen a few surveys where CEOs have said things are going to be bad and the cynic in me would say, well, they’re bound to say that because they’re sort of getting themselves out of future trouble because they can say, hey, look it’s not my fault. It was the economy, stupid. Do you think that’s a fair comment?

Forrester: I think it’s fair. I think we’ve got to acknowledge that CEOs are under huge pressure due to the economic global downturn and they have to perform and they have to lead confidently. So while they’re leading in these tough external circumstances and they’ve also got internal conditions with highly anxious staff who are often fearful for their jobs. They’ve got to recognise that the role that they play often can be very isolating and they can feel very vulnerable. So I suppose as an institute we like to work with our CEOs so that we can provide them with the support and environment that they need that they can obtain information and business data from other peers that can be an environment where they can show their vulnerability and admit they’re not doing things well and try and find out from peers how they might do things better. So that after some reflection they can actually lead with confidence and show that expertise they have to when they get back out into the marketplace.

Dobbie: We are seeing a lot of CEOs losing their jobs, aren’t we? And boards seem to be reacting very quickly to say, hey, look, the business is in trouble, let’s get rid of the CEO. Then we’ll work through the rest of the management team. It seems to be the knee-jerk reaction very often at board level, doesn’t it?

Forrester: Quite right — first in the firing lines. I mean modern management theories says that the management team needs the CEO and the people around him and a good CEO should always be surrounding themselves with highly experienced people with very high levels of expertise so that they aren’t the only person who you know takes the bullet, so to speak. I think recognising that there’s no guidebook for CEOs — recognising that the only way they’re going to learn is experientially, is important.

Dobbie: Yeah, and I guess also getting into a situation where there’s less conflict between the board and CEO which is the way a lot of businesses are run, isn’t it?

Forrester: Yes, but this is very new times, Phil. You know, the last 15 to 20 years we’ve really had very positive financial times so it’s really been about increasing profitability and returns to shareholders. Now CEOs are actually operating in an environment where they’re having to predict a loss of profits or even losses so much more demanding boards, much more demanding shareholders and as you said they’re usually first in the firing line so they have to build resilience and build optimism, as we were speaking about earlier.

Dobbie: But it might also be a different skill set, mightn’t it? I mean it might be justified to sometimes for the board to say, hey, look, you’re not the right guy for this business now. You’ve driven us through a period of growth but you’re really not the right person to drive us through the times that we’ve got now. We need somebody who’s more able to optimise resources rather than optimise sales.

Forrester: Oh, absolutely, and I think as you said earlier it shouldn’t be a knee-jerk reaction of he’s the person at the helm let’s get rid of him and everything will turn around. I think it’s very important to review the cycle that business goes through. You may well have a leader who could drive growth and did excellently there but in down times has no idea how to implement the change management policies or communicate to staff in difficult environments. So there would be nothing wrong from a corporate government’s perspective of ensuring that you’ve got the right leader at the right time.

Dobbie: Now if someone is listening to this and thinks, gee, this all sounds good. I’m going to move my business up to Queensland [laughter] it’s probably a bit late if their business is in trouble. Moving to Queensland is not going to solve all their problems. But for a longer-term view what are the advantages of running your business and basing it in Queensland?

Forrester: I personally don’t think there’s too much difference apart from the climate. I don’t think that we operate any differently than any of the other states in terms of corporate governance or business processes instructed although in some you get a feel of suits being worn. But I don’t think there’s any huge difference to be honest in the way businesses are run so I can’t offer any great insights there.

Dobbie: Just a better climate. Well, I’ll tell you the states come a long way, hasn’t it, since the days of Sir John Bjelke-Peterson, thank goodness.

Forrester: Yes, I think you can certainly say the sophistication is there more than 20 years ago [laughter] and you can certainly move your business from Melbourne or Sydney and not feel that you’re living in the back blocks anymore. I mean culturally and commercially and from a community perspective I think we participate on equal footing, yes.

Dobbie: Are you a Queenslander yourself or are you a blow-in?

Forrester: No, no I’m not a “Mexican”. I’m born and bred. I have lived in the other states and married to somebody from Melbourne, so I do get to travel quite extensively and follow the AFL.

Dobbie: Wow, so there we are. There’s a confession [laughter]. So Queenslanders are taking over the country? We’ve got a Queensland Prime Minister. We’ve got a Queensland governor general. We’ve got Greg Norman.

Forrester: I don’t know [but maybe] the treasurer is from there too. Yes.

Dobbie: [laughter] We’ll see how he does, shall we, before you claim him. And then Greg Norman, Pat Rafter, Keith Urban. Have I missed anybody out?

Forrester: [laughter] I’m sure there are thousands that have shined their light from under the bushel.

Dobbie: It’s been a pleasure talking with you. Thanks for your time today.

Forrester: And you, thanks, Philip.

Dobbie: Thanks, Sue. Oh, Philip. I only get called Philip when I’m in trouble.