Web Based Companies

“The [web-based companies] that survived, that are making good profits, always had solid business principles underpinning them.” Sam Friend Ca Business > Web-based businesses revenge of the dotcoms There’s a lot less fuss about web-based businesses these days compared to the dotcom boom. But there’s also a lot more of these companies making a profit. Story Ian Rumney Photography Eric Williamson Remember all the hype surrounding webbased businesses before the share market crash of early 2000? Those businesses, whose massive market capitalisations were in inverse proportion to their meagre turnovers, were going to change the face of business. Overnight. And with the US technology-based share market index, the Nasdaq, hitting a record high of 5132 on 10 March 2000, who could argue? But the dotcom boom – like all booms – busted. In less than a year, the Nasdaq had lost half its value, and today it is still more than 50% off its March 2000 peak. But many web-based businesses, which took the time and spent the capital to get their business models right, are now flourishing. There is much less press comment surrounding them; investors are far more wary of investing in them; but the web is an integral part of how many companies do business. worth the wait Sam Friend CA, the chief financial officer of the accommodation website Wotif.com, puts it succinctly: “Businesses that were based on solid fundamentals survived (the dotcom crash). Many of the companies first time around weren’t proper businesses. They were based on the premise of companies spending lots of money on advertising but not having a realistic business proposition for the end customer. “At Wotif.com – it floated on the Australian Stock Exchange on 2 June 2006 at a healthy 66% premium to its $2 issue price – we always had a solid business model and the company has been profitable since 2001. It’s been interesting watching web-based companies come and go; the ones that survived, that are making good profits, always had solid business principles underpinning them.” Today, there are few companies not using the web in some capacity; to find information, provide customer service (including information about products and services), to do financial transactions and purchasing. Certainly the cost of going online does not inhibit companies, the benefits being so manifestly obvious. big buSineSS But the numbers of companies that are totally web-based are still a minority, albeit a fast-growing one. There is no better evidence of this growth – or the diversity of businesses they represent – than the big dollars that media companies worldwide are paying for new web-based businesses. In March this year, the Sydney-based John Fairfax paid $675m for the New Zealand auction cum portal site Trade Me – the single biggest such deal in Australasia. (Fairfax has also snapped up the 21 Charter | August 2006 Business > Web-based businesses “The risk of using your credit card on the Net is arguably, and perhaps demonstrably, less than giving your details to a restaurant or service station.” daVid CLarKe generating the exponential sales growth that many web-based businesses are enjoying. Webjet, for example, saw its pre-tax profit jump from $100,000 in the six months to 31 December 2004 to $1.5m for the corresponding period to 31 December 2005. Going hand in glove with that acceptance of the Internet by consumers is greater confidence that the system is secure. Friend says bluntly: “Security is simply not an issue. The level of Internet security is the same as an ATM. When you put your credit card details in over the Internet it’s all encrypted and stored away. Certainly it’s far more secure than those instances where you sign your credit card and you know anyone can take your details and use your card anywhere.” Clarke makes a similar point: “The risk of using your credit card on the Net is arguably, and perhaps demonstrably, less than giving your details to a restaurant or service station.” He adds that three years ago security was high on the list of Webjet’s customer surveys. Now it isn’t even on the list. “I can’t remember the last survey where security featured as a reason not to buy online. People are aware that sites such as ours have extensive security.” To consumer confidence about using the Net and belief in it being secure, can be added a third, and perhaps the most important, factor – consumers today use the Internet for value, not for a bargain. The concept that the Internet would generate mass sales on low margins is going the way of the T-Model Ford. Clarke could not be more emphatic about this. “Contrary to popular myth, the Internet is not about price; it’s about value. Webjet charges a service fee that, on pure like-forlike comparison with, say Jetstar, means we’re dearer [Webjet charges $14.95 a booking, as well as $3.45 per person flight guarantee]. But the value we offer is superior and the reason [helps explain] why the online travel industry is growing exponentially. Airlines have dissembled their complex return airfares and made them one-way fares. The value to the consumer, therefore, is not whether you are paying $59 for a flight to Sydney; it’s what you pay for the return flight, where it can often be a combination of different airlines taking advantage of each of the airlines’ cheap seats.” It is the same story in the hotel industry. In biggest demand on Wotif.com’s website are 4-star hotels [Wotif.com gets 10% commission on every booking]. Friend says: “The market is mixed. Half is leisure, the other half non-managed corporate travel. Certainly it’s not someone always looking for the cheapest room. A lot of the time it’s people looking for value. There are still great deals to be had, particularly in the last week before the stay date. But we’re now offering rooms 28 days out and we’ve found the leisure customer likes this option. They’d rather book a little further out where there are still good savings to be had.” relationships website RSVP for $39m and holiday bookings site Stayz for $12.7m.) The Packer family bought the recruitment dotcom Seek that is now estimated to be worth $1bn. American-based Rupert Murdoch, for so long sceptical of all things web-based, finally decided he could no longer sit on the sidelines and bought the social networking site myspace for $770m. ConSumer ConFidenCe It is not only solid business fundamentals that differentiate these businesses compared with their dotcom boom predecessors. Today, many more consumers are willing to use the Internet, as David Clarke, managing director of the online travel service Webjet, explains. “It’s a reality that people are far more comfortable with the Internet today. Three years ago there was a definite skew to the younger end of the population – under 40 – on our site. Our latest data base demographics indicate no skew relative to the travelling population. “So we’ve seen in the past two years an increasing acceptance of the Net – a comfort factor with the Net – by older people. And that comfort factor has been driven, more than anything else, by banking online and buying shares online. We’ve seen a definite pattern where customers will buy a small ticket, say a Melbourne to Sydney trip. They get comfortable with the process and then buy a more complicated ticket. There’s a definite sequence thing in how people buy tickets.” Greater acceptance of the Net is one factor 22 Charter | August 2006 Image: David Clarke when, not iF Online hotel bookings represent slightly less than 10% of an $8bn a year industry. In the US, that figure is 25%. It is little wonder that Wotif.com, which enjoyed 38% sales growth in 2004-05 and is forecasting 44% growth this financial year, is optimistic. “I guess it’s a question where our market penetration ends up. There are different views on that. It’s hard to forecast … but we don’t see any impediments. For us, it’s more a question of how long it will take,” says Friend. At Webjet, it’s all blue sky. In the US, online has secured 50% of the market, and Clarke estimates Australia, at 33% online, is about 18 months behind the US. “Australia will get to 50% of the market, maybe higher. I think traditional travel agents will continue to provide specialist expertise in extensive round-the-world holidays, but their domestic role is reducing. Remember that half our business now is after 6pm. That tells its own story.” • Business > CFOs strategist or steward? The days of just being a talented number cruncher are long gone for today’s multi-skilled CFO; they are now an integral part of their company’s strategic and commercial objectives. Story Cameron Cooper Illustration Gregory Baldwin As former Enron chief financial officer Andrew Fastow wallows in a jail for his role in the US energy giant’s inglorious collapse, it is easy to view him as a symbol of the lost innocence of the modern CFO. They have power. They have the ear of the chief executive and board. And, like the CEO, they can and do take the rap for their decisions. There is little doubt that the role of CFOs – Fastow or otherwise – has changed. At their best, they require a complex combination of technical, commercial and strategic knowledge in tandem with mentoring skills. Bill Palmer, general manager of standards and public affairs at the Institute, says the historical reporting job of CFOs has been superseded by a requirement to be part of a strategic team that supports the chief executive. In listed companies, in particular, they now have a crucial communications role to inform the markets and stakeholders. “They’ve become much more involved in the external communication process, which used to be purely the area for the CEO and the public relations person,” Palmer says. “It’s a recognition that the finance function is not just an adjunct, but an integral part of the strategic direction of the business.” Simply handling the monthly management accounts for a divisional general manager will not cut it for many. Business strategy, cost cutting and product pricing are part of the everyday role. As a “confidant” to the CEO rather than just a number cruncher, Palmer says CFOs now have potentially more job satisfaction – and additional stress. And their chances of becoming a CEO have “exploded”. the next minute … or they might have to enforce a policy and they’ve got to be seen to be impartial,” Simister says. He agrees that superior communication skills are crucial. For many, the days of just being a talented number cruncher are long gone. “If they haven’t got the communication or people skills, they are just not going to get to be CFO of any sizeable organisation,” Simister says. “They just won’t cut the mustard even if they are technically brilliant.” StrategiSt or Steward? The CFO has become part strategist and part steward. Juggling the two is incredibly difficult. As Tom Honan, national president of the Group of 100 association of senior finance executives, told an audience at the CFO Awards Night late last year: “In looking at challenges, the most important one facing CFOs today, I believe, is one related to striking the right balance. That is, achieving a balance within the dynamics which impact on business performance and outcomes.” It is about growth versus control. Honan argues that new products, new markets and new customers must be sought in order for a company to grow and prosper. At the same time, the advent of CLERP 9, the Australian Stock Exchange (ASX) corporate governance recommendations and, for some, Sarbanes-Oxley, has upped the ante on CFOs’ stewardship function. Malcolm Simister, a principal at LNM Consulting, believes the integrity of CFOs has never been more important. He argues it will be tough for CFOs to work with CEOs under the new compliance rules. “They might have to work very closely with someone and then say no to them in who iS leading whom? As the role of the CFO expands, it raises the question about the pecking order of modern corporate life among CEOs, CFOs, chief operating officers and chief information officers. Consensus suggests that most CIOs still have to report to the CFO, but it is also true that the ever-rising importance of technology means an IT manager wanting to become a chief executive has a much better chance than five or 10 years ago. Many CIOs have experience managing the IT budget, which is often one of the largest in the business. There is certainly no lack of motivation among CIOs. According to a report from recruitment firm Talent 2, about threequarters of Australian technology leaders aspire to be CEO even though they still confront the techno-geek stereotype. A further 69% say the chief information 25 Charter | August 2006 Business > CFOs Split loyaltieS Consultant Malcolm Simister acknowledges his is a controversial argument, but remains unrepentant. A principal at LMN Consulting and author of the CFO of the Future reports published by KPMG and the Institute of Chartered Accountants in Australia in 1998, 2001 and 2004, Simister argues that the role of chief financial officers will be split into two. There will be those who handle the strategic and commercial side of their organisations, and others who take on the more mundane compliance and governance role. “I’m afraid my view is that Chartered Accountants will end up in the compliance-type governance roles unless they really get their skates on and get a Masters of Business Administration (MBA),” he says. The prediction has copped some flak. “[But] I haven’t changed my view,” says Simister, who will release the fourth in the CFO of the Future series later this year. Sure to get a mention in the report, he says, is the increasing importance of further education for Chartered Accountants, either through an MBA or relevant work experience, if they hope to challenge for prestigious CFO strategy roles. In the last report, Simister cited work/life balance as an issue of concern as “hairychested” executives risked their health in clocking up huge amounts of overtime. The problem has not gone away, although “more of them are willing to talk openly now about it rather than pretending it’s not an issue”. Another key issue Simister expects to feature in this year’s report is the recruitment and retention of staff. “That’s certainly an issue for everybody.” Despite fallout in Australia from the reverberations of Enron and the local collapse of HIH and others, it is apparent that corporate Australia has not been as severely affected. “We didn’t have anything like the systemic problems that they had over there,” says Palmer. Nevertheless, he notes that CLERP 9 amendments requiring a CFO to sign off on corporate reports “largely arose out of concerns that emanated from the postEnron era”. Palmer backs the claim that the CEO/CFO relationship is more complicated than ever. “You’ve got the CFO who has the custodian role associated with the company’s assets and the credibility of the company in the financial marketplace ... [There’s] tension between the two roles.” It will require steel-minded CFOs to help steer the right course. Palmer says: “What we’ve got to have are CFOs who have the courage and the conviction to stand up to their CEOs when they genuinely believe they might be moving astray at times.” “The most important [challenge] facing CFOs today, I believe, is one related to striking the right balance.” tom honan officer role has given them the leadership skills to take on the top job. And what of the COO, often maligned as the equivalent of the deputy prime minister or treasurer because they have a title and responsibility, but tend to live in the shadow of the boss. Just ask Peter Costello. A Harvard report recently deliberated over what a good COO should be doing. The conclusion: implement the CEO’s strategy; lead a particular initiative; mentor an inexperienced CEO; make up for the weaknesses of the CEO; provide a partner to the CEO; test out a possible successor; or stave off the defection of a highly valuable executive. As the report concludes: “This tremendous variation implies that there is no standard set of great COO attributes, which makes finding suitable candidates difficult for companies and recruiters alike.” 26 Charter | August 2006 Comply or die CFOs, clearly, are in the hot seat as they try to ensure their organisations are fully compliant with all relevant laws, regulations and guidelines. As a consequence, the compliance and commercial demands on CFOs are significant. While compliance work continues to dominate the time of many executives, Simister argues that some companies listed on the New York Stock Exchange, and which went through Sarbanes-Oxley reforms, are actually starting to see the benefits of that exhausting process. “It was horrific for them, but now they’ve got it up and running, and the CEO and CFO say they are quite pleased because they’ve now got much more confidence in their numbers,” he says. Complaints notwithstanding, the impositions of compliance reforms are here to stay and represent one of the many factors that will define the role of CFOs in the years to come. The cost of getting the compliance equation wrong – either unintentionally or deliberately – will be high. Just ask Andrew Fastow. • Keep aSKing queStionS With Fastow in jail and his Enron superiors Jeffrey Skilling and the late Kenneth Lay set to join him, one question keeps emerging: how did they get away with conspiracy and fraud so spectacularly and for so long? Only when the likes of Fortune magazine reporter Bethany McLean started asking some pointed questions did the facade crumble. Co-author of the book Enron: The Smartest Guys in the Room, McLean said in the film of the same name that “it was shocking to me every step of the way with Enron to look at the culpability of others in the Enron affair, because it’s just not a case of a few bad apples down in Houston, Texas, misbehaving; it’s a case of almost everyone associated with the company, inside and outside, failing to do the right thing”. McLean says that, ironically, Enron’s own motto, ‘Ask why’, acts as a guiding light for executives moving forward. the early birds Story James Dunn Image: Getty Images It’s almost expected that accountants will head overseas to further their career; and now that the younger generations are coming up through the ranks, they’re doing it even sooner. Business > Global mobility The rite of passage of working overseas is a major part of the chartered accountancy world; and it may be coming into play earlier, as members of generation Y – those born between 1978 and 1994 – start to move into the profession. The Institute’s national student survey recently revealed that generation Y is highly motivated by a desire for greater work/life balance, rather than personal wealth – and a major part of the experiential mix they seek is travel. The survey of 960 accounting students from universities across Australia shows that up to one in three accounting students would prefer to move overseas in the next three to five years in order to progress their careers. And with more than 75% of respondents indicating that career opportunities and diversification were the reason why they studied accounting, that the trend is expected to grow. According to 2004 figures from the Department of Immigration and Multicultural and Indigenous Affairs, almost one million Australians – equal to 5% of the nation’s population – now live overseas. Managers, administrators and professionals make up almost 54% of this group. It is only to be expected that accountants figure very prominently among these expatriates. and performance at Deloitte, says mobility is “absolutely something that’s on the table” when the firm recruits. “It’s a far more global world these days. Years ago, the transfers used to be within Australia. These days, because of the Internet and a whole range of other things, all of the kids – not “It’s very much accepted by us that geographical mobility is a major driver in an accountancy career.” SharON Bell MOVING ON UP It was ever thus, say human resources professionals at the big accounting firms. “It’s very much accepted by us that geographical mobility is a major driver in an accountancy career,” says Sharon Bell, director of human capital at Pricewaterhouse Coopers. “It’s an integral part of a young accountant’s work pattern.” Alec Bashinsky, national partner for people just graduates – are far more aware of the global environment, whether it’s in terms of holidays or careers.” Melanie Machin, national graduate recruitment manager at Ernst & Young, says the opportunity to travel is “taken as a given” by graduates going to the chartered firms. “If we’re honest, that is the reason why they choose the big four: in a room of graduates, 70% will put their hands up and 29 Charter | August 2006 Business > Global mobility say they want to travel. Therefore, we have to ensure that a large proportion get that opportunity.” at least one secondment before achieving partnership level within the firm. We’re simply trying to bring that in earlier.” Career DeVelOPMeNT Traditionally, the means toward this end is secondment, either to international offices or to roles with clients. That is still the case, but in reaction to the arrival of generation Y, firms are bringing forward the secondment timetable. “Generally at the senior accountant level, overseas secondment opportunities would start to kick in once people have been with us four or five years,” says Bell. “We’ve brought that forward now, and we run a GreaT eXPeCTaTIONS And this is the rub. Generation Y wants to go earlier than others have done, but in the main, they still have to complete the Charted Accountants program. “They simply want to do it: a larger proportion than even a few years ago just want to do it,” says Machin. “Whether it’s now or two years’ time, it’s a case of managing their expectations and making sure that we retain them. We’re definitely looking at bringing forward some of that would commence the program at the end of 2007 or in early 2008. They would need 36 weeks experience before commencing the program and then they would typically look to work for two years, then look to work overseas. “The Institute is in the process of revamping the whole Charted Accountants program in terms of how long it lasts and the experience pre-requisite required. Graduates need to have about nine months’ work experience with a chartered firm before they start the program, and they would typically begin it at the end of that first year. At the moment it takes about two years if they pass every subject. That’s typically when they look for a secondment or a transfer. That’s part of their expectations, so we need to give them an idea of when it can happen.” In a sense, she says, the accounting firms have to pull the rein – softly – on some of their young staff. “We see, if they don’t, that not everybody will be able to do it when they want to. They’re probably in a better position if they have a couple of years’ experience under their belt before they go. There are visa requirements, for a start, and it’s a lot easier for them to transition through the firm than it would be straight from graduation. With patience, they can build up more bargaining power, but not all of them can see that.” “If we’re honest, that is the reason why they choose the big four: in a room of graduates, 70% will put their hands up and say they want to travel.” MelaNIe MaChIN dedicated program for graduates that come in, where they express an interest upon joining us that they are interested in going on a secondment program. We say that 20% of each year’s intake of graduates will have the opportunity to go on one of those secondments once they complete their post-graduate qualifications. “We look at it as filling both their thirst for travel and professional development. It makes perfect sense to us, because they’re being exposed to different clients and industry groups. We see it as a key career development piece because, if you look at our partners, most of them would have had 30 Charter | August 2006 The NeXT STeP Just as much care must go into handling the other end of the overseas experience phase, says Bashinsky. “It’s always been the case that the lifestyle pull of Australia makes itself felt when people are a bit older and have young children. Our task then is to make sure that we manage the transition so as to give them a role commensurate with the experience that they’ve picked up overseas – and also commensurate with their development within the firm. “We have a dedicated international assignments team that monitors this, and also the partners stay in close touch with the people that we have on assignment overseas. It may be a regular phone call, or a broader conference call every quarter. Staying in touch is critical, because their circumstances may change – they may say ‘I’ve had a good stint in London, I might be interested in doing something in Canada’. Or they may say they want to come back, and we can accommodate them with the cycles that we have,” he says. • mobility to travel: it’s a hot topic. There are opportunities for short-term secondments overseas, typically in Europe, prior to qualification, but typically, we prefer people to have completed their Charted Accountants program prior to obtaining a placement overseas.” The challenge, she says, is to match the expectations of the firm’s young people with the professional reality. “Typically, we would recruit someone a year prior to them starting the Charted Accountants program. If we were recruiting someone now, to start in early 2007, they Profile > David Vos FCA to tax, and to please Tax is one of life’s two certainties. David Vos FCA has been instrumental in shaping the system that, among other reforms, introduced Australia to the goods and services tax. Story Peter Switzer Photographer Helen White He carries the imposing title of the Inspector-General of Taxation and among other things, his job is to sort out one of the most feared organisations in Australia – the Australian Taxation Office (ATO). But David Vos FCA is a mild mannered family man, whose success has come from his belief that life is a great teacher. interstate for two to three days and would sometimes fly home to complete a tutorial for the Chartered Accountants program, then fly out again. It was a monster of a year.” A stint at Deloitte was followed by a venture that culminated in the arrival of a new business called Firmstone & Vos. “It was a powerful indirect tax practice and after two years, around 1985, we were looking to expand,” he says. “But I was clamouring for a big firm and approached Coopers, which accepted me back as a merged practice.” This set Vos’ course for the next 17 years. then a majority of years advising taxpayers,” he concludes. “It has given me significant insights to be the monitor of the tax system.” decisive moves On how he sees the ‘repair’ of the tax system, he warns there is no magic wand. “The tax system is complex with checks and balances,” he says. “What has made it messy are attempts by some to be aggressive and it has led the ATO to be aggressive back.” Vos does not shoot from the hip on important matters, but he is concerned about the ATO sitting on a decision for, say, three years and then acting retrospectively. “This has created anxiety and concern, which is not fair,” he insists. “If they change their mind, it should only be on prospective basis.” Vos says when he started in the accounting game the Taxation Act was “a half to threequarters of an inch thick” and for modern types that’s almost two centimetres! He says those days are gone for good. the lessons of life An old boy of Homebush Boys’ High School, Vos came from a Salvation Army family and was a devoted brass player. He left school in the days when university was for the rich or the scholarship winners. “I just missed out on a scholarship,” he recalls. “I left school at 16 years and six months to work for the ATO and did accounting part-time.” Vos completed his night school work in double-quick time and was admitted to being a Certified Practising Accountant by 1968. “Not studying at university is a regret of sorts, but it has never held me back,” he admits. “I have lectured at university, but I’ve never read there. Life is a process of learning and it can be as good as sitting in a tutorial. At 58, I am still learning.” Promotion within the ATO led to a hectic life and along the way he progressed to start the Chartered Accountants program in 1977. But life was about to get more hectic. “I left the tax office on the day my first child was born and I told my wife that I had joined Coopers & Lybrand,” Vos says. “I was laying the foundations Recognised as ‘Mr Indirect Tax’, he advised John Hewson in the ‘Fightback’ days of the early 1990s and was one of the six members on the Cole Inquiry which provided the groundwork for the Howard government’s eventual tax reform package that brought us the goods and services tax, Australian Business Numbers, Business Activity Statements and input taxes. “Our report was adopted unilaterally, but because of political reasons the government expanded it beyond that,” Vos proudly reflects. “It virtually had 100% acceptance which was very rewarding.” On his new role as Inspector-General of Taxation, he likes the circularity. “It’s a fitting end-play as it brings to bear many years of working for the tax man – 13 years – and the ‘r’ word On the future, Vos has no plans set in concrete, but he is not thinking about retirement just yet. “I have three children and three grandchildren and two on the way,” he says. “It’s an exciting time of my life where I am enjoying my family and my work.” One suspects the name David Vos will be around for some time yet. • 41 Charter | August 2006 Profile > Brett Hills CA securing the farmers’ future A meeting on the future of his own family’s farm led to Brett Hills CA working on rural succession plans throughout the country. Story Jess Blanch Photographer Frank Monger On his first day of primary school, Brett Hills CA worriedly asked his father how he was going to run the family farm without him. Ironically, years later Hills, now 32, runs Rural Succession Services, a company based in both Mount Gambier and Melbourne, which helps other people answer that same question. A graduate of Deakin University, Hills became a Chartered Accountant because his parents had warned him there was no longer any money in farming. He took a job with Geelong firm, WHK Day Neilson, before venturing overseas where he held numerous financial positions, including financial director of English and Swiss company Brookshaw Stuart International at the tender age of 26. “I wanted a career that one day would help me run the farm business more effectively but also let me go out to see the world and travel,” he says. “Accounting was an easy choice as it gave me great understanding as to how the mechanics of a business operate.” After three years abroad, Hills returned home to face a challenge that would shape his future in more ways than one. “We were having disagreements and communication problems within our own family farm business,” Hills admits. “No one knew what the future of the farm was, who was going to take over and when.” The family opted for a facilitated meeting to work out some goals for the future, goals that would ultimately form a financial plan. “We achieved more in that eight hours than we had in the previous eight years,” says Hills. “But more importantly, when I visited the farm the following weekend it was the happiest I had seen my parents in years. They now had a plan for retirement, the farm had a secure future and would stay in the family.” Hills had his eyes opened to a career that would combine his accounting and communication skills with his rural background. Beginning family meeting facilitation training in 2004, he launched his business at the start of 2006. “Succession planning for rural properties is unique as there are so many issues that face farm businesses: retirement and leaving the only life people have ever known, inheritance and divorce,” says Hills. “A facilitator should work in tandem with the businesses’ accountant because they have knowledge of the figures, business structures and viability of any plan; plus they need to be involved to understand any emotional or intrinsic reasons that have influenced the decision making process.” “Times have changed and these days it’s all about equity and fairness. You can’t sort out the future of the family farm over a cup of tea anymore.” • 46 Charter | August 2006 tell me about yourself Successful retention of staff begins with the recruitment process; early identification of personality traits is vital for finding, and keeping, good staff. Story Lucinda Schmidt When Owen Firth was working as a financial controller for a fast-growing IT company, he kept making the same recruitment mistake: not allowing enough time. Now, as the managing director of finance industry recruitment specialists FinanceMark, he sees his clients doing exactly the same thing. “Everyone recognises that it’s a high priority to find the right person, but they don’t block out any time in their diary for it,” says Firth, a former Chartered Accountant. “It’s such a candidate-poor market now. Candidates have multiple choices, so a delay means you can lose the right person. You have to plan it in advance and commit the time.” The next step is to develop a target profile. Firth says the approach has to be about the type of person you are targeting and what sort of job they are probably in today, rather than ‘I’m looking for a financial accountant’. For example, the target may be an assistant accountant in a big company who wants to step up to a higher role in a smaller company. “Too many clients say ‘I want someone who has done it all before’,” says Firth. “Why would that person come to you? Work out the skill/ competency gaps you’re comfortable with, and present it as an opportunity for them.” Image: Getty Images How to > Recruit and retain staff PRE-SCREENING Bob Olivier, a director of finance industry recruitment firm Olivier, says the initial job ad is crucial. “This market is less about screening people out and more about bringing people in,” says Olivier, also a former Chartered Accountant. “You don’t just write a shopping list of what you want, you have to make the role sound unique and interesting.” He also suggests that once the job ad responses have been culled, an initial telephone ‘pre-screening’ might reduce the face-to-face interviewee list, by weeding out those who are obviously not suitable within five minutes of talking to them. Once you’ve sorted out a short-list of candidates to interview, preparation is the key. Nicole Gorton, a director of Robert Half Finance & Accounting, says this includes: reading the curriculum vitae (CV); knowing in advance what questions to ask; and following a logical sequence. Also, make sure you have a professional environment in which to conduct the SAMPLE QUESTIONS TO IDENTIFY SPECIFIC TRAITS > > > > > > Can you provide an example of an unproductive team you have worked with, and your role in changing or shaping its direction? (Gordon Whyte, Michael Page International) Can you tell me of a time when you had to deal with conflicting deadlines and how you coped? (Dominic Moore, Hamilton James & Bruce) Tell me about a specific situation when you had to deliver some unwelcome news. (Nicole Gorton, Robert Half Finance & Accounting) Give me an example of when you’ve been faced with a moral dilemma in the workplace, and how you resolved it. (Owen Firth, FinanceMark) Tell me about when you have had to display the highest level of honesty in your role. (Mike Ewart, Lloyd Morgan/Parker Bridge) For a reference check: if you had the opportunity to rehire this person would you do so, and why? (Bob Olivier, Olivier) “Break the ice by asking for information on a more personal subject, such as sporting interests or hobbies,” he suggests. “Then set an agenda as soon as the formal interview starts – this will help you both to get as much out of the hour you spend together as possible.” As for what to ask, all the experts interview. (Olivier advised one rather drab insolvency office to put a vase of flowers in reception and paint the walls). FACE-TO-FACE When the interview begins, Dominic Moore, the principal, executive finance, for Hamilton James & Bruce, says the most important thing is to try and relax the candidate. 49 Charter | August 2006 How to > Recruit and retain staff emphasise the importance of asking open-ended questions to try and get to know more about a candidate’s personality, rather than concentrating on technical competence. “Use a mix of hard and easy questions to relax and stretch the candidate,” says Gorton. “What are your key areas of responsibility? What areas have you enjoyed? What have you achieved? How did you add value? What was your biggest challenge? What have you gained from the company? What are your main strengths? How has the role changed and what in this were you responsible for? What was the most difficult issue you recently had to address? Remember to let the candidate do the talking and be a good listener.” Gorton says warning signs to watch for include indecisiveness, criticising previous employers, jobs, colleagues and courses, negativity to everything and unrealistic claims to accomplishments. You also need to spend some time working out the candidate’s motivation, preferred working environment and cultural fit with your firm. “Often candidates are hired for their skills, but leave due to the culture or TIPS ON INTERVIEWING > Before recruiting, spend time developing an ‘employment value proposition’ An interview is not just about screening candidates, it is also an opportunity to brand and position your firm as an attractive employer. > Ensure that everyone who will interview candidates has adequate training Hiring managers need professional interview training, so candidates will bond emotionally with them and the firm. They also need an interview framework to work from, so they have the best opportunity to showcase all that is best about the firm. > Get candidates to answer questions using the ‘SAO’ technique (situation, action, outcome) Ask candidates to provide concrete examples of when they have demonstrated behaviour in the past, such as teamwork. Ask them to describe the situation, their actions and the outcome. Keep the questions open ended and generic, and judge how the candidate approaches the answer. > Use role-plays Role-plays are another strong way of tapping in to personality traits. For example, ‘Tell me about the process you would put in place in order to solve the following problem … ’ You can then judge their approach to teamwork, delegation, decision making etc. > Have a standardised scoring method It is important to have a pre-prepared ‘scoring’ technique or you will find yourself relying primarily on ‘gut feel’. You should be making notes and comparing things such as confidence, detail of answers, strength of decision making process and so on – a simple score out of 10 could be an example of this. Source: Mike Ewart, director of Lloyd Morgan/Parker Bridge. All the experts emphasise the importance of asking open-ended questions to try and get to know more about a candidate’s personality, rather than concentrating on technical competence. management style,” Gorton says. “You want to discover what it is about a culture that brings about the best in the candidate. Under what circumstances will they thrive and fail?” Sample questions include: what is it about this opportunity that interests you? What is it you enjoy most about your current role? Why are you looking to leave? How does the role compare to other opportunities you are considering at present? What is it about the opportunity that attracts you the most? What is your ideal role/company? What motivates you to exceed expectations? What unmotivates you in the workplace? The theory is that past behaviour is a predictor of future behaviour, when the candidate may be working for you. “The benefit is that you are matching the candidate to the role based on factual evidence, rather than hypothetical scenarios,” Gorton says. “How did you do that, versus what would you do if ... These questions are highly specific and require the candidate to search their memories for examples and validate their outcomes.” Gordon Whyte, associate director of Michael Page International, says the key with this type of questioning is to leave no stone unturned. “Keep probing and asking for examples.” He also notes that the set of questions must be designed to test the qualities and skills you are seeking, and every candidate should be asked for the same examples. Don’t forget that the interview is also an opportunity to sell your firm to the candidate and differentiate it from competitors. “Clients often forget they have to sell their company and excite the candidate,” Firth says. But over-selling the opportunity can be a disaster. “The hardest thing of all is to balance selling your opportunity without over-promising,” Olivier warns. “You might tell them they’ll be promoted by Christmas and they’ll never have to work late on Friday, but they’ll be gone within six months [if that’s not true].” Bringing successful potential role models into the interview can also help, says Mike Ewart, a director of Lloyd Morgan/Parker Bridge (part of Candle Australia).“The key to success in recruiting professional staff is to have ‘case studies’ for people in similar situations who have gone on to great success within your firm. Even better, get the ‘case study’ to become involved in the recruitment process at some stage. This then becomes less of a generic statement but more a tangible and very real benefit of working with your firm.” • LEARN FROM THE PAST Many human resource professionals are now using behavioural interviewing techniques to extract information about particular traits, such as teamwork or meeting deadlines. They will ask candidates to describe a real-life situation in the past where they had to display a particular trait, what the candidate did and the outcome. 50 Charter | August 2006 Business > Training & Development beyond the bottom line The inaugural Trans Tasman Business Leaders Conference will provide an outstanding opportunity to learn from a diverse range of high-profile presenters and network with your business peers. Story Geoff Kingswood THE FOCUS While senior finance professionals are very comfortable with balance sheets, measurement and reporting, being a leader involves a much broader insight and heightened capability. Excelling in business leadership demands strategic thinking and knowledge of diverse topics such as: organisational culture, risk management, brand and sustainability. Kurt Resienberg, managing director of CFO Executive Board advises: “Chief financial officers must gain greater intimacy with operations, and not risk becoming a de facto chief administrative officer.” The conference will highlight that building sustainable growth in today’s rapidly evolving business world requires more than knowledge of numbers and reporting. Successful business leaders exhibit skills such as strategy, communication, vision, team management, facilitation and inspiration. “It’s not that CFOs won’t be effective at improving functional and administrative performance, but that the opportunity cost of managing these areas is high.” While many senior finance professionals aspire to occupy the role of chief executive officer, analysis of career paths in the US has revealed an infrequent incidence of their ascendance directly to the CEO or chair roles. In fact, research conducted by the CFO Executive Board indicated that 90% of current CFOs either retire, are reassigned or become CFO of another company. In order to increase their personal effectiveness, CFOs must re-focus on their core responsibility – driving company performance. The conference will guide finance professionals through the practicalities surrounding the return to this key objective. 52 Charter | August 2006 INTERNATIONAL SPEAKERS > Ed Franowicz Corporate Executive Board Corporate Executive Board is a best practice strategic research company, headquartered in Washington DC. Franowicz is excited to be addressing the inaugural Trans Tasman Business Leaders conferment. Specifically, Franowicz will look at CFOs who take a strategic approach to research. Dr Fahy is a recognised leader in the areas of share service/business process outsourcing and finance transformation. He has been involved with many world-leading organisations, including Michelin, Unilever, HSBC, Oracle and the Bank of Ireland. Dr Fahy will focus his session on how finance can become a true business partner in delivering value added insights Excelling in business leadership demands strategic thinking and knowledge of diverse topics. Over the past few years, the finance function of many companies has been feeling unprecedented pressure from the CEO and the board to take actions that will help drive the business performance forward. Typically, this has meant that finance must go beyond its traditional role of reporting and compliance to take a more proactive role in the area of business partnering. Franowicz will present an examination on how some companies are rising to meet this challenge, and profile a selection of companies that have been successful at increasing finance’s impact on the overall bottom line. > Dr Martin Fahy Chartered Institute of Management Accountants Dr Fahy is director of development for the Chartered Institute of Management Accountants in Asia Pacific. He holds a PhD in information systems from University College Cork and is a fellow of the Institute of Chartered Accountants. to senior executives and decision makers. He will explore the challenges facing finance professionals as they work to support strategy execution, and implement finance systems and processes that deliver long-term value to shareholders. Dr Fahy will highlight why firms need to move beyond the rhetoric of strategy and focus on the execution of robust financial delivery models. • THE DETAILS > When: 20-22 September 2006 > Where: Millennium Hotel Queenstown, New Zealand > Qualifying hours: the conference offers delegates up to 13 continuing professional development hours. For further information, visit www.icaa.org.au/training/transtasman or call (02) 9290 5709. Business > Number one in numbers the road less travelled In light of the current skills shortage, it makes good sense to look beyond traditional sources of candidates for the Chartered Accountants program. Story Sonja Kukec As the competition for accounting talent heats up, firms are increasingly turning to candidates who have travelled a nontraditional career path. Firms have been hiring high-quality candidates from nonaccounting disciplines not only to fulfil their recruitment targets, but also because they bring diverse experiences and skills to the organisation. It makes sense then that the Institute follows suit and allows graduates with non-accounting degrees to enrol in the Chartered Accountants program. could be losing out on the flair and new angle that these people bring to their work. “For someone to re-train and change careers signifies a high level of commitment, and from an employer’s perspective that’s quite an attractive option,” says Jarvis. head in, and the fact that he started from scratch to get there showed real drive and commitment. That’s why I decided to hire him,” explains Campbell. no eAsy tAsK Responding to criticism that broadening the entry requirements to allow people from non-accounting backgrounds to enrol will affect the quality of the program, Frenkel points out that people will have to pass an entrance exam first before they can enrol. “The quality and rigour of the Chartered Accountants program will in no way diminish. Non-accounting graduates will need to pass an entrance examination before they can enrol, ensuring that they have an adequate knowledge of core accounting areas. This way neither they nor other students are disadvantaged,” Frenkel says. The examination, the first of which will be offered in April 2007, will cover the required knowledge areas of financial and management accounting, finance, auditing, taxation, and commercial and corporations law. One of the benefits of the examination is that it identifies any gaps in core knowledge. If graduates don’t pass the exam, they can, together with their employer, work on developing their areas of weakness through additional training or by completing suggested conversion courses. In this current shortage, it not only makes good sense to look beyond traditional sources of talent, it can also pay dividends. The experience, skills and attitude that people from non-accounting backgrounds bring to an organisation are rewarding for their clients, employer and the profession. • CooKinG UP A storm The recruitment of non-accountant graduates is not limited to Big 4 firms or larger organisations. Sydney firm RP Campbell Associates Chartered Accountants hired former chef and helicopter pilot, John Ziller, in an accounting role. Ziller worked as a chef for 12 years before opting for a career change. Returning to university, he completed a Bachelor of Business degree and shortly after joined the chartered accounting firm. Now, about to undertake the Chartered Accountants program, Ziller hasn’t looked back. “I loved cooking, but I always knew I wanted something more challenging. My work now is so much more stimulating and rewarding. I enjoy working on projects, seeing them come to fruition and building long-term relationships with my clients,” Ziller says. The firm’s principal and the man who recruited Ziller, Peter Campbell, said that smaller firms often experience difficulty finding suitable graduates. They need people who have multiple skills and as a result, they are forced to think outside the square. “I was impressed by Ziller’s maturity and communication skills. You don’t necessarily get that in a graduate fresh out of university. He knew what he wanted and the direction he wanted to benefit from diversity Sheena Frenkel, Chartered Accountants program and admissions general manager, says that by broadening the entry requirements into the program, the Institute is keeping pace with business needs. “With the number of domestic accounting students not likely to increase, the pool of potential employees is getting smaller. Employers are focusing on finding quality talent, including people from nonaccounting disciplines. The Institute is supporting employers’ needs by giving more people an opportunity to develop as Chartered Accountants,” says Frenkel. Kevin Jarvis, division manager at Robert Half Management Resources, finance and accounting recruiters, believes that while looking at non-accounting graduates is imperative to counteract the shortage in the profession, an organisation can also benefit greatly from their diversity and expertise. “Those employers who ‘pigeonhole’ their staff and are reluctant to move away from the expectation that staff follow a traditional, linear path could actually be doing themselves a great disservice – they 54 Charter | August 2006