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					BUSINESS > UNQUALIFIED TAX ADVICE




MIND THE ADVICE
The ICAA is deeply concerned about losses being suffered by consumers after
following unqualified tax advice and is urging the ATO to take action
STORY PAUL HAM

DAVID LONG IS A PARTNER IN                       The results of acting on unqualified               There is little that can be done against
Gorrell Long Roberston, a Canberra            advice can be disastrous for small investors     agents and intermediaries giving tax advice
accountancy firm. Recently, he faced a         or home buyers who are drawn into trans-         where they are unqualified to do so. This is
familiar problem: sorting out the financial    actions that can lead to lasting financial        partly because they are not regulated, and
damage done to a client who had accepted      problems, says Long.                             partly because mortgage brokers claim not
tax advice from an unqualified practition-        In a typical case, one of Long’s clients      to be profiting from the advice. It is a
er. “If it was a one-off, I wouldn’t mind,”   decided to borrow against the equity in his      classic case of caveat emptor.
Long says. “But it’s happening a lot.”        home in order to buy another house in                A home owner is able to borrow against
    “Endemic” may be too strong a word,       which to live while renting out his original     their existing home in order to purchase
but the problem is certainly widespread –     home. “So the client borrowed, say               and rent an investment property – and neg-
where finance and mortgage brokers, real       $400,000, to buy the new house against           atively gear the loan to claim a tax benefit.
estate agents and other intermediaries give   equity in his existing house,” Long says.        But that kind of arrangement only applies
tax advice without the necessary knowl-       “The mortgage broker in this case advised        if you’re not intending to live in the prop-
edge or qualifications. It is a problem that   the client that they could claim the mort-       erty. You can’t cash in the equity on your
has alarmed the Institute, which is now       gage interest.” But the sting in the tail was    own house to buy and inhabit another.
pressing for the Australian Taxation Office   that the client was unable to claim a deduc-         The danger of unqualified advice is not
(ATO) to act against the practice.            tion for the interest because the new house      limited to relatively small transactions by
    Indeed, of 430 accountants surveyed by    was a deduction for private purposes.            home buyers and private investors, howev-
the ICAA recently, 403 said they had wit-                                                      er. Jenny Smith, principal of Alliance
nessed cases of tax advice being given by     DOUBLE TROUBLE                                   Business Partners, has a number of corpo-
those without qualifications. In response to   In one of the worst examples, a man pur-         rate clients. One of her most important – a
the question, “Who provided that unqual-      chased a new home using a mortgage               Queensland property developer – lost a
ified tax advice?”, 46% of respondents say     raised against his old home, then tried to       large sum of money after acting on unqual-
“financial planners”; 41% say “real estate     claim the mortgage interest and avoid pay-       ified tax advice from an estate agent.
agents”; and 23% say “bookmakers”.            ing tax on the rental income – all based on          At the time of writing, Smith was in the
Even a number of car salesmen, who            advice received from his loan agent.             throes of sorting out the mess.
appear to double as tax advisers, are cited       Long advised that he could not claim         Consequently, her firm is deeply concerned
by 7% of respondents.                         the mortgage interest on the new home or         by the presumption of tax expertise among
                                              deductions against the rental income             those without the necessary qualifications
                                              received from his old home – in short, it        to give it. Her client had purchased land in
     AT A GLANCE                              was a double tax whammy. “We said, ‘no           a fairly well-to-do area between Brisbane
 ■ The ICAA is alarmed by the number          mate, you can’t do it’. And when we did          and Ipswich. The estate agent acting for
 of unqualified persons giving tax             the sums, he realised he couldn’t afford it.     the vendor had advised her client (itself an
 advice and is pressing for action            So he had to sell one of his properties          unorthodox arrangement) that a full GST
                                              based on bad advice.                             credit would apply to the transaction.
 ■ The results of acting on such advice
                                                  “The financier told the client he could           “The agent advised my client that this
 can be disastrous for consumers, who
 include small investors and home             claim a deduction on both properties, but        was a standard part of the contract,” said
 buyers, as well as larger investors          you can only claim a deduction on a prop-        Smith, who was not involved in the deal at
                                              erty that isn’t your principal residence. As     the time it was agreed. The contract – the
 ■ It is difficult to act against those
                                              a result, the client later suffered a cash flow   first of three – valued the land at $150,000.
 giving unqualified advice because
 they are not regulated and often claim       crisis at tax time because he was relying        According to the vendor’s agent, this
 not to profit from giving such advice         upon the tax refund, which he didn’t             would entitle Smith’s client to a $13,000
                                              receive. The client had to sell his home.”       GST credit. But the claim was disallowed

36   Charter                                                                                                                      June 2004
                                                                                                 BUSINESS > UNQUALIFIED TAX ADVICE



because the estate agent’s tax invoice did      stands GST – is not in the loop. Property            ICAA CEO Stephen Harrison says the
not contain an ABN – a crucial element of       buyers tend not to involve their accoun-         increase in unqualified tax advice has a sig-
any such deal. The agent had simply failed      tants in actual transactions.                    nificant impact on consumers who appear
to notice this and had similarly failed to                                                       to be making decisions about expensive
provide an ABN for the other two con-           CALL FOR CRACKDOWN                               investments and their retirement, based on
tracts, worth $180,000 and $230,000.            The Institute has received many com-             advice from people not legally qualified to
    There are more problems with this deal      plaints from members about such prac-            give it and who don’t have the necessary
than just the ABN omission, says Smith:         tices. One accountant, Andrew Crawford,          skills and knowledge.
“What right did the agent have to issue the     cited the case of a client who had come to           “We often get calls from members
invoice on behalf of the vendor? At face        him with an unexpected $250,000 tax bill         despairing at having to sort out the tax
value, everything looked fine. But the agent     after acting on advice from a financial           problems of clients who have acted on
had no legal right to issue a tax invoice in    planner with a major bank, in relation to        questionable advice given by people not
his capacity as agent for the vendor.”          CGT exposure on selling investments.             qualified to give it,” says Harrison. “We
    Smith’s client was hoping to sell the           Another, John Yeomans, an accountant         hear of consumers losing tens of thousands
development on the basis that the land had      at KIS Australia, reports the case of a          of dollars because of tax advice provided
only cost him $150,000 less the GST cred-       financial planner who proposed “outright          by unqualified people without the neces-
it – about $137,000. Given that no GST          scams to my clients” relating to the tax         sary skills. Our tax law already contains
credit was allowable, Smith’s client had to     savings of negative gearing. “The overall        the necessary consumer protection mecha-
sell the block subject to the margin scheme     risk and tax risk were never explained. In       nisms, yet nothing is being done to enforce
for calculating GST. Now that the damage        most cases, my clients changed their minds       it and rectify this problem,” he says.
is done, Alliance Business Partners has lit-    when I pointed out the real risks. But, on           Late last year, Commissioner of
tle room to manoeuvre. This is because the      at least two occasions, my clients lost hun-     Taxation Michael Carmody and ASIC
estate agent claims that it was not paid for    dreds of thousands of dollars,” he says.         chair Jeff Lucy issued a joint press release
giving the [flawed] tax advice: “Therefore           The Institute has called for the ATO to      saying they were investigating whether
they’re not breaking the law,” Smith said.      crack down on the provision of unquali-          guidance on how the law operates is nec-
    The root of the problem, she says, is the   fied advice – an activity it says that is cost-   essary. The ICAA is calling for more
fact that the accountant – who under-           ing consumers millions of dollars a year.        action, however.
BUSINESS > ORGANISATIONAL CHANGE




CHANGE? KEEP
IT SIMPLE
A simple strategy of asking the simple questions, such as ‘why?,’ is emerging
as the best way for organisations to institute meaningful change
STORY MARK ABERNETHY PHOTOGRAPHY JOHN FRYZ


               THEY SAY THAT CHANGE IS THE ONLY CONSTANT                     THE FAILING GAME
               in our universe. Then why is it that we’re so bad at it?      This is hardly a cynic’s view of the world, says
               Or, at least, why is it that the people who work in organ-    organisational change expert Anne Riches. “You have to
               isations are so badly equipped to change those work-          approach this subject with the knowledge that 70% of
               places for the better?                                        organisational change projects are failures, as ranked by
                   There is a constant buzz of change across the broad       the organisations’ own measures. What that means is
               expanse of SMEs, corporations, government agencies            that the goals are not borne out: it could be market
               and non-government organisations. Indeed, the need to         share, revenues, profitability, unit margins – whatever
               change has even spawned its own consultant-speak              the measure, 70% of change projects are not making it.”
               imperative: “change or perish”.                                   Riches is the executive director of The Riches Group
                   Every year, Australian organisations of all types and     (TRG), a consulting firm that specialises in change
               sizes spend hundreds of millions of dollars in various        strategies and ‘buy-in’. She says that all change projects
               exercises that emphasise significant change in the             are basically aimed at empirical measures such as market
               workplace. The aim often is to pursue a new goal,             share or profitability. But change initiatives are also
               better execute an existing strategy or change the             ‘people issues’ in that change is reliant upon people for
               culture to a point where it can be successful                 its implementation. But many change projects miss this
               at the first two.                                              point and the ineffable logic of ‘the numbers’ takes over.
                   People lose jobs, or are negatively recruited; others     “We start with the buy-in phase when we’re talking
               are retrained, re-purposed or redeployed; entire IT           about change management strategies,” says Riches, a
               systems are replaced by new IT systems, which appear to       former barrister and academic. “The biggest reason for
               do much the same job as their replacement; mission            failure is the people: they’re resistant to change because
               statements appear on kitchenette walls; long lists of         they don’t see why they should, how it’s an improvement
               marketers’ buzzwords are circulated under the heading         and what’s in it for them. You have to work with people
               ‘Our Values’; senior types parrot neologisms to the           on these things – and you have to work with all levels.”
               troops about ‘empowerment’ and ‘the team’, and when               Riches says the problems inherent in organisational
               the worst of it is past, the ‘people-people’ are sent in to   change programs are often glossed over by the
               mop up by ensuring that there’s a sense of ‘buy-in’ to the    organisations themselves and the consultants who advise
               new regime among the rank and file.                            on them. When a project fails, the CEO moves on and
                   If the change project succeeds, the immediate goal        another CEO enters the scene, the expectation is that
               of greater profits/sales/margins/share will be realised        they will make further changes.
               and when the share price bounces, so does the new                 Underpinning this cyclical issue of change is the
               CEO’s package. If the change project fails, most of the       problem of fads meeting corporate culture. This sees
               key people and the developing talent leave and when           organisations take on the flavour of the day – total
               the share price slumps, the CEO “moves on to                  quality, teams, re-engineering, downsizing, rightsizing,
               explore exciting new opportunities” and the cycle             systems, mergers, and so on – without ensuring that the
               begins again with a new CEO.                                  strategy properly fits the company culture.

38   Charter                                                                                                                  June 2004
ORGANISATIONAL CHANGE
EXPERT ANNE RICHES:
CHANGE HAS A BETTER
CHANCE OF SUCCESS WHEN
IT IS CLEARLY ARTICULATED
TO THOSE IT WILL AFFECT
BUSINESS > ORGANISATIONAL CHANGE




 A
“ BADLY ARTICULATED MESSAGE OF WHY THE CHANGE IS NECESSARY
AND WHAT IT SHOULD ACHIEVE, IS NOT A GOOD WAY TO START”

   The fad may be all the rage in the           understanding it. And if the troops don’t       re-engineering, and so on) has been
consulting world and the business media,        get it, it won’t happen,” Riches says.          successful is where the organisation has
yet it’s the culture which is the fibre of the                                                   committed itself to communicating the
organisation. According to Riches, whole        CHASING SHORT-TERM GOALS                        strategy, the outcomes and the part that
industries can be wracked with a                The professor of organisational behaviour       employees play in the success of such a
revolution of one kind or another, and the      at the Australian Graduate School of            strategy. Top-down, ivory tower projects
deleterious effects are often not               Management, Sharon Parker, says that the        are famously doomed from the start.
acknowledged until it’s too late.               senior people behind a trendy change               “When you study successful change in
   “Not all change programs suit all            project often completely lose sight of the      organisations, you find it happens where
companies. You may be in an organisation        employees’ aspirations as they chase            there is trust between senior management
where the new buzzword is innovation.           short-term goals that bolster the               and employees, and where there is open
But that has come from a weekender with         company’s share price.                          communication between all levels of the
the senior people – the company has been           “Between 70% and 80% of                      organisation.”
built on quality and the culture won’t          organisational change initiatives will fail,”
support innovation,” Riches says.               says Parker. “The worst one has probably        CHANGE IS THE NEW REALITY
   “The same thing happens with                 been downsizing. It just about always           Parker says one of the problems with the
‘entrepreneurial’. If the organisation has      results in bad consequences for the             organisational change process is the 4.5-
traditionally beaten its people over the        company, the investors or the employees.”       year average tenure of CEOs which
head for making mistakes, then simply              Parker says it was a combination of          promotes ever-faster change projects.
adding the word entrepreneurial to the          same-thinking consultants with MBAs                 There is also a lack of management
mission statement is not going to change        and executives with an almost obsessive         training in organisational change. This
the culture of the company. You get the         watch on their peers that created the rash      means that executives become overly
classic mission statements where they say,      of retrenchments in the 1990s and into          reliant on consultants for setting the
‘we encourage a work-life balance’, but all     the 2000s. This retrenchment mania              agenda and measuring the outcomes –
the important meetings are either eight in      simply necessitated vast recruitment            these are the two things that the
the morning or six at night.                    drives or non-economic outsourcing              organisation itself must own, however.
   “Organisations are about people –            contracts a few years later.                        “We are bombarded with the concept
behaviour and mind-set. If you don’t work          What the executives and the                  of change yet we always think that
on this from Day One, you will not get          consultants didn’t factor with downsizing,      someone else knows all about it. We are
buy-in,” Riches says.                           she says, was the culture – the actual          saying that change management is a set
                                                human dynamic and personal aspirations          of skills that managers and executives
REFINING THE STRATEGY                           that existed in large companies.                should be learning.”
Riches says the strategy part of the change                                                         In the end, change is the new reality
project should also be constantly refined. A     KEY PERSON PHENOMENON                           for everyone who works. Yet, while the
badly articulated message of why the            Thus, the era of downsizing created the         old Coopers & Lybrand was one of the
change is necessary and what it should          ‘key person’ phenomenon, where the              first firms to articulate the concept of
achieve, is not a good way to start and it      talented employees chose to leave rather        change management, the actual users of
should be redrawn if it’s not working.          than risk being retrenched, then acted as       the idea have so often ignored the
   “We advise that the client spells out        scouts to bring their talented protégés into    ‘people’ component of it.
the project in the simplest terms: ‘in          the firms they joined.                               Parker says the simplest tip for making
three years’ time we will have this                Parker says this happened across all         change work in an organisation is the
market share and this profitability if we        industries and in all countries. The result:    word ‘why’.
make this change and this change over           demoralised, insecure and overworked                “If the employees know why this is
the next six months’.                           work forces in the downsized companies          happening, the chances of success
   “In my experience, if you can’t get the      with happier, better remunerated, more          increase. That involves a clear strategy
CEO to write this down in plain English,        fulfilled talented folks working elsewhere.      and an open style of communication.
in a couple of simple sentences, then there        According to Parker, where downsizing        It’s just that not all executives are up to
is little chance of the employees               (or rightsizing, relayering, restructuring,     the challenge.”

40   Charter                                                                                                                      June 2004
BUSINESS > MY RESTAURANT RULES




PRESSURE COOKING
When national accounting firm BDO was offered the role of financial adviser
to the contestants of television series My Restaurant Rules, its accountants
took to the screen with enthusiasm. The result? A feast of tasty television
STORY PAUL HAM PHOTOGRAPHY ISAMU SAWA



                       WHEN AUSTRALIA’S NEW REALITY TV SHOW                       team, with a strong working relationship. Peter and
                       My Restaurant Rules needed an accountant to advise         Tayissa from Melbourne, perhaps the most ambitious
                       the contesting restaurateurs on their business plans,      couple: Peter has confessed he would like one day to
                       the first choice was KPMG – Channel 7’s in-house            be Prime Minister; his partner Tayissa is a criminal
                       accounting firm. KPMG said no: the Big Four firm             lawyer with a love of food.
                       declined on the basis of a possible conflict of interest,      The show, which began in mid-February, asked
                       since Channel 7 is also airing the show.                   the competing teams to design and fit out a
                           Channel 7 then selected the world’s fifth largest       restaurant from scratch. They were given the keys to
                       accountant, BDO, which was happy to accommodate            a vacant block, and told to create their dream dining
                       the last minute request. Its acceptance of the on-screen   experience. Designing the kitchens was a particular
                       role – as financial adviser to the five competing            nightmare for some of the teams and there were
                       restaurant teams in five states – is a credit to BDO’s      several heated arguments over menus and other vital
                       adaptability. It’s certainly not every day that            details. Then the couples had to open their doors,
                       accountants are asked to appear on television with         and serve their chosen menu to unexpected groups
                       only a few weeks to prepare. Geoff Sincock, partner in     of “difficult” customers: such as a buck’s night
                       BDO’s Melbourne office, says: “We came in late.            of young men, demanding and hypercritical
                       Those of us who had any restaurant experience were         connoisseurs – the usual restaurant clientele.
                       quickly co-opted to appear on the show.”                      “We were called in to give general business advice
                           By this he means those among BDO’s accountants         on the planning and monitoring of the business,”
                       who had handled clients in the catering business – not     says Sincock. “We helped them to control their costs,
                       those who doubled as chefs. Even so, none had much,        and whether or not what they’d planned for would
                       if any, television experience and there wasn’t time to     be a good business experience.” This involved
                       train BDO’s people in on-screen presentation.              advising the teams on the minutiae of good
                       They were dropped onto the set green.                      restaurant management: such as costing the menus
                                                                                  on a plate-by-plate basis to ensure they priced their
                                            SLOW STARTERS                         dishes to cover overheads and labour costs.
                                            The show began slowly, but               So how have they performed as businesses?
     AT A GLANCE                            picked up viewer interest, as the
 ■ Channel Seven selected BDO, the          Fawlty Towers-style conundrums        LEAN CUISINE
 world’s fifth largest accounting firm, to    and kitchen chaos of starting a       One early difficulty the contestants faced, according
 advise contestants on its new reality      restaurant from scratch proved to     to BDO, was the low start-up capital. “$140,000
 TV show, My Restaurant Rules               be great television viewing.          is not much. In the restaurant business, you’d usually
 ■ BDO’s accountants were called on
                                               Five couples, dedicated to         be spending at least $250,000 in initial capital,”
 to give general business advice on         starting their own restaurant,        says Sincock.
 planning and monitoring costs              located in Sydney, Melbourne,             The couples relied on donations from friends, and
                                            Brisbane, Perth and Adelaide,         extreme cost-cutting measures, to get their restaurant
 ■ The service BDO provides to the
 show demonstrates its commitment
                                            were given $140,000 in start-up       established within the limit. They also had to budget
 to growing smaller firms, a field in         capital and told to go for it. They   for opening costs, the party, publicity and marketing.
 which the firm specialises                  included Sam and Catherine                “In Melbourne they kept just about bang on the
                                            from Sydney, a brother and sister     cost limit,” says Sincock.

42   Charter                                                                                                                   June 2004
   BDO’S GEOFF SINCOCK
   GOES OVER THE BOOKS
WITH MELBOURNE’S PETER
     AND TAYISSA IN THEIR
    ST KILDA RESTAURANT,
       THE SEVEN STONES
BUSINESS > MY RESTAURANT RULES



                                                                             BDO is enjoying its own in-house competition, with
                                                                          state offices vying for the honour of making ‘their’
                                                                          restaurant the most successful, as a business and a dining
                                                                          experience. As Michael Batchelor, national chairman of
                                                                          BDO, says: “Some of our people have had some
                                                                          involvement with the media in the past. They’ve filmed
                                                                          us on our premises and in the restaurants. It’s largely
                                                                          about expertise, not on-screen experience – so those
                                                                          who’ve worked in the hospitality industry in the past
                                                                          were put forward to appear on the show.”
                                                                             The service provided by BDO to My Restaurant
                                                                          Rules demonstrates one of the firm’s distinguishing
                                                                          features: its commitment to growing smaller firms, a skill
                                                                          which has marked BDO as one of the more innovative
                                                                          and forward-thinking of Australia’s accountants. It is a
                                                                          field in which the largest ‘second-tier’ firm specialises,
                                                                          and to hammer home the point, BDO sponsors the BRW
                                                                          Fast 100, Australia’s fastest growing enterprises.

“COMMITMENT TO A CULTURE OF                                               PACKAGE FORMULA
                                                                          Six months ago, BDO launched in Australia its Growth
LEARNING AND OPEN-MINDEDNESS IS                                           Service package, which is a step-by-step approach to
ITS KEY COMPETITIVE ADVANTAGE”                                            formulating and executing a strategy for high growth in
                                                                          successful smaller companies. Not all are smaller
                  If the contestants needed more money they had to        firms – some are very large, privately owned companies.
               make a financial case to the ‘bank’, a judging panel        But all are family or privately owned, because the
               that considered each claim. “Ultimately, everyone got      service seeks to match the owner-director’s aspirations
               the same amount of money,” says Sincock.                   with those of his or her staff.
                  Then came the litmus test – the first week of trading,      Peter Jordan, partner and Growth Service chairman,
               in early April. After weeks of prime-time TV publicity,    explains: “It’s about communicating and aligning
               the five restaurants were expecting large crowds. The       aspirations for the business between owners and
               financial results, however, suggested a very mixed          managers, and making sure you have the organisational
               response among the dining public in each capital city.     capacity to deliver on your growth aspirations. There’s
                                                                          a change in dynamic from moving from a small firm,
               TASTY TURNOVERS                                            where the owner is the manager, to something much
               The total turnover figures for each restaurant during the   larger.” Growth Service has outperformed BDO’s
               first week of trading revealed a surprising range:          expectations: already 20 Australian companies have
               Melbourne earned $75,000; Perth, $72,000; Adelaide,        submitted themselves to the thorough BDO makeover.
               $60,000; Sydney, $55,000; Brisbane, $41,000.
                   Of Melbourne’s success, Sincock says: “We              ROLL-OUT STAGES
               helped them to budget for less than the budget             The firm rolls the service out in several stages, priced at
               they’re achieving. Their turnover is more than             a fixed project fee, so there can be no cost overruns.
               double what we expected – staff costs are out of              The first stage is the full assessment of the company’s
               kilter because they needed more staff.” Melbourne’s        financial position, aspirations, and potential to meet
               restaurant was profitable, and was set for an equally      those aspirations. This costs between $5000 and $15,000,
               successful second week.                                    depending on the size and complexity of the client.
                   The food was a winner as well, according to Sincock.      During the second stage, BDO works with the
               “When I was there,” he says of Melbourne’s dining          owners and managers and identifies critical growth
               experience, “the food was terrific: scallops, prawns,       targets. This phase can take several weeks, and costs in
               beautiful steaks, and the duck was delicious, too.”        the range of $10,000 to $30,000.
                   Sydney and Brisbane have both been eliminated and         The third stage executes the strategies worked out in
               all three remaining restaurants will face the TV voting    earlier analyses – and sets the firm on the right path to
               poll to see who’s next to close.                           achieve its next growth spurt. Growth Service differs

44   Charter                                                                                                               June 2004
                         BUSINESS > MY RESTAURANT RULES



from the more mechanical business advice that has traditionally
marked an accountant’s terrain. It seeks to identify the aspirations
of the business owner: for example, it asks owner-managers where
they would like to be personally several years hence, and how their
company can help them achieve that lifestyle goal.

SELF-ASSESSMENT
A fascinating aspect of the rollout of Growth Service is that BDO
subjected itself to the treatment. “It was very interesting,” says
Jordan. “As a partnership we do have a group of owners, so we
did this to see how well our own aspirations were aligned with the
firm’s goals. There was a strong sense of alignment, which was
pleasantly surprising – a good outcome. It did highlight some areas
we will need to focus on to ensure the growth targets are achieved
– they are organisational, and to some extent financial.”
   Many of Australia’s fastest growing companies have made the
same self-realisation, says BDO. The firm commissioned RMIT to
conduct an in-depth analysis of what attributes helped make
smaller companies grow. “As business growth advisers, BDO
wanted to find out what special qualities, or strategies, give the
Fast 100 their formidable grid position,” says Jordan. Eighty two
of the BRW Fast 100 firms completed the hour-long survey.
   The RMIT/BDO research revealed that fast-growth owners are
ambitious and independent. They thrive on competition and the
challenges associated with running a business. Successful
entrepreneurs, for instance, see “opportunities” in situations
where others might see only “risk”, he says.
   “They are less likely to experience regret over missed
opportunities, and less susceptible to ‘stalling,’ or inaction
inertia,” Jordan says.

CLASSIC SNAPSHOT
A snapshot of the classic, faster growing company also reveals that
87.5% of owners are male, 75% are aged between 31 and 50
years while more than 60% are tertiary educated. The majority are
married, and have been involved in a previous business, which was
either sold or no longer operates.
    A similar picture emerges for CEOs. A quarter of these firms
were involved in information technology, with 19% in the
property and business services sector. Almost 70% were private
companies, with 21% of entrepreneurs viewing their enterprises as
family firms. Virtually all had sound strategic plans in place, and
were relentless in their drive for efficiencies through the use of IT.
    Like BDO itself, the study revealed that overwhelmingly a
company’s commitment to a culture of learning and open-
mindedness is its key competitive advantage. Investment in the
personal and professional development of employees was seen as
critical to the responsiveness demanded by changing markets,
customer expectations, and business environments.
    And, these are just the business traits that BDO hopes to
inculcate at a basic level in the competitors in My Restaurant
Rules, and in a deeper, ongoing level to the clients of its
Growth Service package.

June 2004                                                                www.icaa.org.au   45
BUSINESS > HOW TO..




HIRE STAFF WHO
ARE A PERFECT FIT
Interviewing the candidates and selecting the perfect fit for the job is only the first
step. Then, it’s critical to keep valuable staff members committed to your business
STORY ROSEMARY ANN OGILVIE   ILLUSTRATION CHRISTOPHER NIELSEN

                                                                QUESTIONS, QUESTIONS, AND
                                                                more questions: asking them is the only
                                                                way to hire the right person for the job.
                                                                But how do you ensure the questions
                                                                you’re asking determine that the candi-
                                                                date’s skills set and personality are suitable
                                                                for the position, while not breaching dis-
                                                                crimination or privacy legislation?
                                                                   The answer, says E. Leigh Olson,
                                                                Recruitment and Consulting Services
                                                                Association (RCSA) board member and
                                                                director of the Brisbane recruitment
                                                                agency Leigh Olson and Associates, is to
                                                                ask primarily behavioural questions,
                                                                which use past performance to predict
                                                                future performance. “I’ve done a lot of
                                                                research in this area,” says Olson, who’s
                                                                currently working towards her PhD,
                                                                “and it certainly suggests that this is the
                                                                most valid way to conduct an interview.”

                                                                START WITH A HIRING PROCEDURE
                                                                The starting point for any business – no
                                                                matter how small – is to implement a
                                                                hiring procedure. Such a procedure helps
                                                                guard against discriminatory questions
                                                                being asked – and against discriminatory
                                                                information being recorded. It also
                                                                ensures that:
                                                                ■  All candidates for a specific position
                                                                   are asked the same questions
                                                                ■  These candidates are rated in a consis-
                                                                   tent manner
                                                                ■  Objective data, based on each appli-
                                                                   cant’s qualifications, knowledge, skills
                                                                   and attributes pertaining to the job is
                                                                   used to assess their suitability.
                                                                   Remember, ‘gut feeling’ no longer cuts

48   Charter                                                                                        June 2004
                                                                                                                     BUSINESS > HOW TO..



it! Since the introduction in late 2001 of
the new privacy standards, called the           BEHAVIOURAL INTERVIEW TECHNIQUES
National Privacy Principles, applicants
                                                Behavioural interviews are based on the premise that the most accurate predictor
have the right to see all information
                                                of future performance is past behaviour in similar situations: we’re very much
collected and recorded about them, and
                                                creatures of habit, preferring to do things out of habit because it’s comfortable, and
the processes used to assess their
                                                we don’t have to think about them too much.
suitability to fill a vacancy. This includes
                                                    The questions, which must relate directly to the skills identified for the position,
interview notes – both telephone and
                                                require the candidate to narrate a story about how they handled specific real-life
face-to-face; test results; behavioural
                                                situations. You, as interviewer, will need to guide them into their narrative, which
assessments; short-listing notes; and
                                                you do using the STAR system: explain to your candidate that you want them first
referees’ comments.
                                                to describe the SITUATION or TASK, then detail the ACTIONS they took and finally
    If these records breach existing
                                                tell you about the RESULTS.
discrimination laws, job applicants can
                                                    Give your candidates time to think about each response. If they cannot come up
use the information to support claims of
                                                with an example, tell them you’ll revisit it later. You’ll find that most candidates
discrimination, and compensation claims
                                                improve at recalling past events as the interview progresses, so take advantage of
for ‘injury to feelings’ or ‘humiliation’. In
                                                this ‘practice effect’ by grading your questions, starting with relatively simple
other words, you now face the terrifying
                                                scenarios and building up to the more important and complex ones.
prospect that every unsuccessful
                                                    Here are some typical behaviour-based questions. Ideally, limit the number to
applicant is also a potential litigant!
                                                eight. Tell me about a time when you:

SCRIPT YOUR QUESTIONS                           ■   Were placed in a situation where you had to take on new tasks or roles
To ensure equal treatment of every              ■   Handled a difficult situation with a colleague
candidate, you need to script your
                                                ■   Anticipated potential problems and developed preventative measures
questions in advance – before you even
place the recruitment advertisement.            ■   Surmounted a major obstacle
Here’s how to go about it:                      ■   Used an innovative course of action to deal with a situation
■  Write a position description
■  Identify the tasks associated with it
                                                ■   Were forced to adjust quickly to changes over which you had no control
■  List the qualifications, attributes and       ■   Won a major customer
   skills needed to perform those tasks         ■   Dealt with an angry client
■  Prepare behavioural questions (see
   box at right) that determine whether         ■   Established and built a relationship with a difficult customer
   the applicant has those mandatory            ■   Prioritised the elements of a complicated project
   qualifications, skills and attributes.
                                                ■   Achieved a particularly demanding goal
TAKING NOTES                                    ■   Dealt with a stressful situation that demonstrated your coping skills
Throughout the interview, ask questions         ■   Were able to successfully work or communicate with someone you did not like, or
strictly relevant to the recruitment                who did not like you
decision. Focus your interview notes on
facts given by the applicant in response        ■   Used your presentation skills to influence someone’s opinion
to those questions. “Aim to capture all         ■   Went above and beyond the call of duty to complete an assignment
the main comments and responses the
                                                ■   Worked on a project with others who disagreed with your ideas. How did you han-
candidate is giving you. If they can’t give
                                                    dle this?
a complete response, write something
like this: the candidate answered the           ■   Made a split-second decision
question, but could not come up with a          ■   Used your fact-finding skills to solve a problem
specific example,” advises Olson.
                                                ■   Made an important decision with limited facts
   Don’t record any discriminatory
information the candidate – or referees –       ■   Delegated a project effectively
may volunteer, such as age, religion,           ■   Successfully managed a situation that demanded you express your ideas or opin-
marital or parental status. Also, avoid             ions in a very tactful or careful way.
making any biased notes (for example,
‘big girl, blonde hair).

June 2004                                                                                                                 www.icaa.org.au   49
BUSINESS > HOW TO HIRE THE RIGHT PEOPLE                                                                BEHAVIOURALLY
                                                                                                       ANCHORED RATING
                                                                                                       SCALE (BARS)
                                                                                                       The University of South Florida defines
   “Many recruiters use such comments                 their elderly parents to the doctor,
                                                                                                       the BARS this way: A method of
to jog their memory, but it’s not on,”                or have a long weekend with their
                                                                                                       assessing performance by assigning a
stresses Olson.                                       partner. Understand also that it’s               numerical value to one’s judgments.
   “Instead, I suggest using the                      sometimes unrealistic to expect                  Each number on the scale represents a
behaviourally anchored rating scale,                  employees to leave their personal                specific set of observable behaviours,
known as BARS (see box at right), based               problems at the front door                       such as steps, tasks, or skills involved in
on the behaviour required for the job.            ■   Provide a comfortable work space,                a complex task.
This is evidence that you are basing your             up-to-date equipment and technolo-                   There’s an excellent example on the
hiring decision on demonstrated data.”                gies, and regular training – not just            website       www.hrtoolkit.gov.bc.ca/
                                                      in skills directly related to the job, but       staffing/staffing_steps/assess_meth-
KEEPING GOOD PEOPLE                                   related aspects such as dealing with             ods/Rating/RatingScalesIndex.htm.
                                                                                                           Click onto one of the rating scales,
Getting the perfect fit for the job is                 difficult customers and handling client
                                                                                                       either the three point or five point, to
critical for retaining staff, but it’s only the       complaints
                                                                                                       see how they are constructed.
starting point: you have to work hard to          ■   Make a point of praising and reward-
keep members of today’s highly mobile                 ing individual and group perfor-
workforce.                                            mance. Catch staff doing something               each item, and keep the meeting on
   Here are some suggestions that will                right as often as possible                       track. Avoid scheduling meetings
help boost your staff retention rate.             ■   Recognise that each person has differ-           when people are under pressure to
■  Pay competitive salaries. While good               ent strengths, and therefore brings dif-         meet deadlines
   money is fundamental for attracting                ferent qualities to the workplace.           ■   Talk to your staff: find out what they
   the best candidates, it won’t compen-              Where possible try to capitalise on              like about the job/company, what they
   sate for unfulfilling work, or an                  employee’s strengths, placing them in            hate, their level of job satisfaction,
   unpleasant or restrictive environment              positions to help them to achieve their          what motivates them, how they would
■  Recognise that people have lives out-              full potential; focus less on their              like to be rewarded
   side the office, and that employees                weaknesses                                   ■   Encourage creativity and innovation,
   who achieve some sort of work/life             ■   Don’t micro-manage: give staff                   cultivating an environment where
   balance are generally much happier                 responsibility and allow them to own             employees are comfortable sharing
   and more productive. Aim to create a               their own clients, projects and work             ideas and suggestions about how to
   family-friendly work environment,              ■   Keep everyone informed about what is             make the company a better place to
   allowing people a degree of flexibility             happening in the business                        work, how to improve aspects such as
   in their working week so that they can         ■   Hold meetings only when necessary.               customer service, efficiency, profitabil-
   attend their kids’ sports days, take               Set an agenda with a time limit on               ity and growth.




 CA Small & Sole Practices Conference 2004
                           Tailored to meet the needs of                                With over 18 sessions to choose from, and up to
                           Small & Sole Practitioners                                   14.5 CPE hours available, there is the widest
                                                                                        possible choice for delegates.
                           The CA Small & Sole Practices Conference is the
                           premier event on the CA program specifically                 The CA Small & Sole Practices Conference is the
                           designed and tailored to meet the needs of small             ideal forum to discuss the latest challenges and
                           and sole practitioners in NSW.                               issues facing small & sole practitioners. It also
                                                                                        provides the perfect opportunity to network with
                           A comprehensive three-stream program has been                fellow practitioners at the official conference
                           designed to include the hottest issues pertinent to          dinner in the spectacular surroundings of Star City
                           small and sole practitioners. The latest technical           on Darling Harbour.
                           updates will be presented by industry experts and
 8–10 June 2004                                                                         With so much on offer can your practice
                           will include sessions on taxation, auditing and
 Star City,                                                                             afford not to be there?
                           trusts. There are ample opportunities to improve
 Darling Harbour,          practice management through staff recruitment,
 Sydney                    growth & profitability and business & succession             For more information:
                           planning. There is also the added dimension of               ww.icaa.org.au/cpe/smallandsole
                           professional development covering a diverse range            Or email: katier@icaa.org.au or call
                           of topics from communication to advisory skills.             the Hotline on 1300 137322

				
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