The hunt is on to find accountability for the current controversy associated with KiwiRail’s plans to replace its ferries and upgrade port infrastructure.
I know enough about the complexity of the issue to be sure there is no simple answer. I also know that the people in target="_blank">KiwiRail from the front-line staff through to the board, all are passionate about getting the job done well and care deeply about the national asset they are entrusted with.
In fact, without them, we probably wouldn’t have the asset we have today because historically owners have not invested as they should in order to leave the assets in the state they should and need to be in.
The political environment makes it difficult to stick to a long-term plan as different agendas play through. The result is a game of periodic, multi-year catchup.
So what is the solution? An area that the debate has so far overlooked is governance and here I believe a comparison is helpful.
In New Zealand, we have a few large businesses in the freight industry. The one I want to look at and compare with KiwiRail – without making any judgments about private versus public sector ownership – is Mainfreight.
Mainfreight was formed in 1978. Its founder has been involved throughout, the company has gone through listing and achieved massive growth in both business and shareholder wealth.
In the years since 2009, it has had 11 directors on a board that ranged in number from six to eight. It has had one managing director, who has been in the role for several years. The board churn has been 57 per cent over those 15 years (using seven directors as the mid-point).
Jim Quinn. Photo / Natalie Slade
KiwiRail was formed in 2008 as a consequence of reuniting a business that had been through multiple owners, fragmentation and underinvestment since the early 1980s. At formation, it had a board of eight directors. It also had a new CEO (me).
In the years since, there have been 35 directors on a board that has ranged in size from seven to nine and four CEOs (one twice).
The board has had 337 per cent churn over those 15 years (using eight directors as the mid-point). Note that this does not include the New Zealand Railway Corporation board that oversees the property assets.
Let’s also consider the executive management. The difference is stark. Glancing at the photos of Mainfreight management over those years is like those montages that show people ageing – the same people just a year apart.
Of course, there has been change and growth but not wholesale change that comes from constant change at board and CEO level.
While Mainfreight is a listed entity, they have been able to drive their business with a constancy of purpose that you just cannot get when you are in KiwiRail’s position with changing agendas at the political level and the churn that is an inevitable consequence.
I am not making any comment on the individuals who have held these roles. My experience is that boards and CEOs strive to do the best for the business as they see it at the time but agendas change quickly as personnel change and this is disruptive to planning execution.
Let’s now return to the new ferry issue. Discussions on this started around 2013. It is a massive project that can be delivered in several ways – and, as has been observed, it is vital to New Zealand as the blue SH1.
If you consider the number of people who have been through the various iterations to get to the outcome currently being debated, you come to the inevitable conclusion that there have been too many cooks in the kitchen.
We have an experienced board and CEO at KiwiRail right now and things will only get worse if we allow the controversy to be an excuse for further churn at either board or staff level.
We have to start valuing longevity in governance over “fresh ideas and faces”, which in my mind is code for throwing all the balls in the air and praying. This is long-run vital infrastructure that needs to be loved and driven properly.
Churn is becoming a plague in many areas of governance. I am now seeing owners limiting directors’ terms to six years. How can you guide a long-run asset successfully if you have barely become knowledgeable by the time you leave and you rarely see out long-run projects in your tenure?
Politics is what it is, but its vagaries shouldn’t be accepted with a shrug when they impact adversely on the planning and execution of long-term projects.
Continuing to shorten the terms of directors, especially in infrastructure, will continue to deliver at best, average results and at worst, crises.
Jim Quinn is an experienced director, chief executive and executive manager. His executive career included being the inaugural CEO of KiwiRail, Chief of Strategy at Auckland Council, and CEO of Express Couriers joint venture between New Zealand Post and DHL. He is currently chair at Payments New Zealand, ComplyPro, Shape Group and SmartCo Ltd. He is a director and a shareholder in Tubman Heating and a director at Ngāti Whātua Ōrākei Whai Rawa Ltd, Brosnan Ltd and Eastland Group.
