The Business Agenda in Australia

Discussion document

November 17
th
, 2013
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1
OBJECTIVEUNDERSTAND THE THEMES OF CHANGE IN
CORPORATE AUSTRALIA
Objective
Method
Understand what is top of mind of Australian CEOs
Identify key themes of change over the past 5 years
Reviewed 42 annual reports of top 50 Australian companies
for the years 2008/09 and 2012/13
Examined CEO and Chairman reports
Recorded mentions and top priorities for each issue within 5 broad
areas of focusgrowth, corporate responsibility, cost management,
people/organisation and portfolio management
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EXECUTIVE SUMMARY4 KEY THEMES EMERGING
Cost Management Is Now Top of Mind Step change in corporate responsibility
Increasing focus on cost Shift to human/behavioural organisational levers
82
80
77
63
57
5. People/Organisation
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
Percent of companies
mentioning theme
7
9
10
14
20
34 Corporate governance
Regulation
Community
Risk management
Environment
Health and safety
Change in mentions
82
60
2008/09 2012/13
22%
Number of mentions
47
62
53
38
74 81 100% =
Percent of total mentions
Human/
behavioural
Structural/
decision based
2008/09 2012/13
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3
EXECUTIVE SUMMARY4 KEY THEMES EMERGING
Cost Management Is Now Top of Mind Step change in corporate responsibility
Increasing focus on cost Shift to human/behavioural organisational levers
82
80
77
63
57
5. People/Organisation
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
Percent of companies
mentioning theme
7
9
10
14
20
34 Corporate governance
Regulation
Community
Risk management
Environment
Health and safety
Change in mentions
82
60
22%
Number of mentions
47
62
53
38
74 81 100% =
Percent of total mentions
Human/
behavioural
Structural/
decision based
2008/09 2012/13
2008/09 2012/13
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4
COST MANAGEMENT IS THE MOST IMPORTANT THEME ON THE
STATED CORPORATE AGENDA
Importance in 2012/13
Percent of companies mentioning theme Theme
5. People
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
16
27
38
44
70
82
80
77
63
57
Top priority
Source: 42 annual reports of Australian top 50
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0
5
10
15
20
25
30
35
0 5 10 15 20 25 30 35
ALL INDUSTRIES BUT CONSUMER HAVE INCREASED THEIR FOCUS ON
ORGANIC GROWTH
Resources
Consumer
Financial
Primary
Inorganic
Organic
Number of mentions 2008/09-2012/13
2008/09
2012/13
What are the
drivers of
this change?
Source: 42 annual reports of Australian top 50
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6
ORGANIC GROWTH LEVERS DIFFER BY INDUSTRY
Number of mentions 2012/13: Percent
27
21
70
45
41
33
53
14
30
34
40
26
16
25 25
Consumer Finance Resources Primary Total
Product service
innovation
Geographic
expansion
Investment
for increased
capacity
Key organic
growth lever
Source: 42 annual reports of Australian top 50
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7
EXECUTIVE SUMMARY4 KEY THEMES EMERGING
Cost Management Is Now Top of Mind Step change in corporate responsibility
Increasing focus on cost Shift to human/behavioural organisational levers
82
80
77
63
57
5. People/Organisation
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
Percent of companies
mentioning theme
7
9
10
14
20
34 Corporate governance
Regulation
Community
Risk management
Environment
Health and safety
Change in mentions
82
60
2008/09 2012/13
22%
Number of mentions
47
62
53
38
2012/13 2008/09
74 81 100% =
Percent of total mentions
Human/
behavioural
Structural/
decision based
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0
5
5
11
26
5
13
0
-6
32
50
31
0
34
42
11
33
22
16
16
17
25
25
-17
THE CORPORATE RESPONSIBILITY AGENDA EXTENDS BEYOND
GOVERNANCE ISSUES
Sector
Percentage point changes to mentions
Initiative Consumer Financial Resources Primary
1. Growth
2. Corporate responsibility
3. Performance execution
4. People and organisation
5. Portfolio management
Theme
Key driver for sector
Health
and safety
Environment
Community
Regulation
Corporate
governance
Risk
management
Source: 42 annual reports of Australian top 50
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9
EXECUTIVE SUMMARY4 KEY THEMES EMERGING
Cost Management Is Now Top of Mind Step change in corporate responsibility
Increasing focus on cost Shift to human/behavioural organisational levers
82
80
77
63
57
5. People/Organisation
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
Percent of companies
mentioning theme
7
9
10
14
20
34 Corporate governance
Regulation
Community
Risk management
Environment
Health and safety
Change in mentions
82
60
2008 2012
22%
Number of mentions
47
62
53
38
2012 2008
74 81 100% =
Percent of total mentions
Human/
behavioural
Structural/
decision based
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10
FOCUS ON COSTS HAVE INCREASED SUBSTANTIALLY
Importance in 2012
Percent of companies mentioning theme Theme
5. People
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
16
27
38
21
70
41
36
39
59
12
82
80
77
63
57
Source: 42 annual reports of Australian top 50
Top priority
Mentions
0
-4
14
22
Change 2008 to 2012
Percentage points
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11
GREATER FOCUS ON COST MANAGEMENT IS BEING DRIVEN BY CAPEX
BLOW OUTS
Mentions
77
58
61
50
108
2008
138
2012
Cost/operational
Cost/Capex
Theme
5. People
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
Source: 42 annual reports of Australian top 50
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12
RESOURCES ARE NOT THE ONLY INDUSTRY INCREASING FOCUS ON
COST
0
5
10
15
20
25
0 5 10 15 20 25
Financial
Primary
Revenue
Cost/operations
Number of mentions 2008-2012
Resources
2008
2012
What are the
drivers of
this change?
Consumer
Source: 42 annual reports of Australian top 50
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13
Revenue of all analysed companies
$ Billions
Operating expense of all analysed companies
$ Billions
Operating margin
Percent
125
2007/08
113
08/09
124
09/10
147
10/11
194
11/12
237
2012/13
13.6%
22.7
2007/08
23.1
08/09
21.1
09/10
20.5
10/11
20.7
11/12
24.4
2012/13
+1.5%
102
2007/08
90
08/09
102
09/10
121
10/11
160
11/12
188
201/132
13.0%
Employees
Thousands

793 804 864 923 987 1,130
Source: Bloomberg, ASX and Company Reports
TRENDS IN OPERATING MARGINS viz-a-viz COSTS AND REVENUE
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14
EXECUTIVE SUMMARY4 KEY THEMES EMERGING
Cost Management Is Now Top of Mind Step change in corporate responsibility
Increasing focus on cost Shift to human/behavioural organisational levers
82
80
77
63
57
5. People/Organisation
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
Percent of companies
mentioning theme
7
9
10
14
20
34 Corporate governance
Regulation
Community
Risk management
Environment
Health and safety
Change in mentions
82
60
2008/09 2012/13
22%
Number of mentions
47
62
53
38
2012/13 2008/09
74 81 100% =
Percent of total mentions *
Indicates multiple mentions by each company
Human/
behavioural
Structural/
decision based
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15
SHIFT FROM STRUCTURAL TO HUMAN/BEHAVIOURAL PEOPLE
LEVERS
2008/09 2012/13
Theme
5. People/Organisation
3. Portfolio Management
1. Cost Management
4. Corporate Responsibility
2. Growth
Source: 42 annual reports of Australian top 50
Total mentions*
62
47
38
53
74 81 100% =
Structural/
decision-making
Human/
behavioural
* Includes multiple mentions by each company
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16
ORGANISATIONAL INITIATIVES DIFFER BY INDUSTRY SECTOR
Percentage point change in mentions
Sector
Initiative Consumer Financial Resources Primary
-16
0
0
-11
6
0
6
-6
-6
19
6
6
-9
7
6
19
-18
-6
38
0
27
0
0
11
22
53
51
8
33
8
-17
-25
0
-17
3
17
Culture/
engagement
Values
People
development
Capability
building
Recruitment
Succession
Performance
management/
accountability
Incentives
Organisational
structure
Human/
behavioural
Structural/
decision
making
Main changes on initiatives
by industry