Mark Powell and Sir Stephen Tindall on Q + A - TV One

Sunday 4 August, 2013

Susan Wood interviews Mark Powell and Sir Stephen Tindall

Warehouse founder backs Australian companies moving jobs to NZ – even though low wage jobs are part of the attraction to move here

Sir Stephen Tindall, founder and director of The Warehouse, has given his backing to Australian companies moving parts of their operations to New Zealand, despite the fact those companies are moving to NZ because our costs are lower, including wage costs.

When asked by Q+A host Susan Wood if he was concerned that Australia was chasing our low wage society, Sir Stephen says, he’s not worried.

“I’m not concerned at the moment, because I think what it’s going to do is give a lot of people in New Zealand jobs – those that are not getting them at the moment.

“We do need more people in work in New Zealand, and we’ve been losing lots of people to Australia, so initially I think it’s good. I think as we build our economy, which I think we will against Australia, then wages will rise. And if they keep having the dearth of a problem that they’ve got with mining, theirs will come down again,” Sir Stephen said.

Sir Stephen and Warehouse Group CEO Mark Powell were on Q+A talking about the Group’s decision to introduce a Career Retailer Wage (CRW), which was influenced by the Living Wage Campaign.

The CRW could see Warehouse staff receive an increase to their overall package to anywhere between $18.50 and $20 per hour, dependent on their role.

Mr Powell says the decision is both a moral and business decision.

“It’s part of an overall strategy that we’re implementing at The Warehouse to completely change the business going forward, and we’re investing in our stores hugely, we’re investing in our products, we’ve revamped our promotions. But ultimately retail’s a people business, and we sat back – started a few years ago, actually – saying, “How do we have the most engaged people of any retail business in New Zealand?” Wage is a part of that – it’s only part – but then we sat back and looked further and said, “Can we challenge ourselves?” And a career retailer wage, it comes from that. How do we make retail a great career that people want to stay in, they feel engaged? And if our team members in retail are engaged, they’ll serve the customers better, and that will help with growth,” Mr Powell says.

The move is costing The Warehouse Group 2-2.5 million dollars a year.  However, the CRW only applies to employees who have completed more than 5000 hours with the company and whose stores meet budget targets.

First Union, which represents 2000 Warehouse Group workers, says this means many staff will not qualify.

Q+A, 9-10am Sundays on TV ONE and one hour later on TV ONE plus 1. Repeated Sunday evening at 11:30pm. Streamed live at www.tvnz.co.nz.   

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Q + A – 4 August, 2013

MARK POWELL
CEO, The Warehouse Group

and

SIR STEPHEN TINDALL
Director, The Warehouse Group

Interviewed by Susan Wood

SUSAN                         I spoke to Sir Stephen Tindall and The Warehouse Group CEO Mark Powell earlier this week and asked them whether the decision was a moral one, a business one or a mix of both.

MARK                           Yeah, probably say it’s a bit of both, actually. It’s part of an overall strategy that we’re implementing at The Warehouse to completely change the business going forward, and we’re investing in our stores hugely, we’re investing in our products, we’ve revamped our promotions. But ultimately retail’s a people business, and we sat back – started a few years ago, actually – saying, “How do we have the most engaged people of any retail business in New Zealand?” Wage is a part of that – it’s only part – but then we sat back and looked further and said, “Can we challenge ourselves?” And a career retailer wage, it comes from that. How do we make retail a great career that people want to stay in, they feel engaged? And if our team members in retail are engaged, they’ll serve the customers better, and that will help with growth.

SUSAN                         Costing you a couple of million bucks – 2 million to 2.5 million bucks a year. Will you get that back in terms of retaining staff, in terms of more sales?

MARK                           In the short-term, that would be a question mark because this is a long-term decision and the strategy we started two years ago is a long-term strategy. It’s about doing the right thing for the long-term to be able to make this a sustainable business for the long-term. So whether we get full short-term return, time will tell. Hopefully people watching will go and shop with us more because of it, and that will help.

SUSAN                         Sir Stephen, you’re lucky that you have that long-term vision. You also have scale and size, being our largest retailer. Do you think the small guys will be able to follow you and pay their people more?

STEPHEN                    They’ll be able to do what they want to do, really. I mean, if you have a look at what happens in New Zealand – I just looked at some stats this morning; there's about 4000 companies start up every year, and in 2010, 5500 fell over. So everybody, like I was when I started with one employee, has the opportunity to do what they want to do to drive their own business. You know, we’re a free country. And some of them will elect to pay the minimum wage, because that’s the edge that they will have over us, and others will say, “Oh no, it’s probably better to invest more in our people.” So I think it’s pretty open, really.

SUSAN                         How much was this decision influenced by the living wage campaign, Mark?

MARK                           I’ve used the phrase that it was a benchmark. When we were sitting down saying, “How do we make retail a more attractive career?” what the living wage gave us was some good research that helped us take a benchmark and then helped inform the decision.

SUSAN                         $18.40 an hour – pretty tough to live on that, Sir Stephen, isn’t it?

STEPHEN                    Yep.

SUSAN                         How do people do it?

STEPHEN                    Well, they normally get top-ups, you know, if you look at the interview that you did with Bill English a couple of weeks ago, you know, people that have a big family and, you know, they’re not earning enough, they get top-ups.

SUSAN                         We’re talking Working for Families and a whole lot of tax that comes back. I mean, essentially is the taxpayer subsidising the employer, in that case?

STEPHEN                    Well, I think the situation from New Zealand’s point of view is businesses have to be able to survive. I said before, you know, 5500 go out of business every year, and when you’ve got a very competitive market, if you're not competing, then you are going to fall over. So, you know, one could say it’s being subsidised, but at the same time, we’re up against— in our case, in retail, we’re up against the internet. It’s a really big force coming at us so fast at the moment. And, you know, people will actually buy from the cheapest possible source, and so if we’re not competitive with the rest of the world, it’s a global market; we’re going to not be in business and, you know, 11,000 people at the peak of the year won't have jobs at The Warehouse Group.

SUSAN                         Your shareholders happy with this, Mark?

MARK                           I think they are. I think the share prices reflected that actually markets are long-term, and if you invest in the sharemarket, generally it is long-term. There are speculators who go in and out, but I’ve always taken the view that the sharemarket is long-term, and therefore it’s beholden of boards and CEOs to think long-term, and that’s what we’re doing here. Requires some courage at times, and doing the right thing for the long-term, you have to hold your nerve, and that’s exactly what we’re doing.

SUSAN                         Business New Zealand Phil O’Reilly essentially says that the living wage ignores the realities of the market. You’ve got to be— You’re pushing up prices. You will in fact reduce jobs because there’ll be fewer employed. What's your response to that?

MARK                           I think you’ve got to look at individual organisations and the competitive set and the business. How much you pay people is only one part of your total costs. You have to be productive. We don’t shy away from that. And so productivity is not just about how much you pay people. So what we’ve done here really is we’ve taken on board a challenge to say, “How are we going to do this and be productive?” and I think that’s where this fits in. I think leaders of businesses have to sit back and say, “What's our total costs? What is real productivity? And then what do we invest in our people to get long-term growth?”

SUSAN                         The government, Sir Stephen, does not support the living wage. Should they?

STEPHEN                    I’m not sure whether they should or not. I mean, I can't speak for the government. But what I do with the dividends that I get from The Warehouse is I invest them in small start-up companies that are high-tech, and I think that encouraging science and new innovative businesses that actually bring a lot more value to our country is a very important thing.

SUSAN                         A lot of those, as you pointed out earlier, fail, don’t they? So it’s a high-risk strategy.

STEPHEN                    It is.

SUSAN                         Any politics in this decision, Mark, to actually bring on an essential living wage for your people?

MARK                           I don’t think you can ever separate the individual from decisions at all, and looking after our people, being part of a wider community, recognising businesses’ place in wider society is part of the DNA of The Warehouse. It goes right back to the beginning, and I personally subscribe to that. So inevitably, what we’ve taken on board as the leadership team is linked to the values of our business, the objectives of our business. It’s different for different companies, and I’m not going to preach and stand there and take a moral high ground.

SUSAN                         But it would be good if others were able to follow, do you think?

MARK                           They’ve got to look at the individual. The challenge was to look in the mirror and say, “How much are we holding back? Are we really looking at the long-term? And what can we really afford as a business?” Now, I think this is quite a distinct question from minimum wage, and I think legislation on things like this wouldn’t be the way. I think there's a balance of freedom, competition and the wider community issues. We’ve weighed them up in our situation in our company, and this fits with our values and what we’re trying to deliver in retail and what we’re trying to deliver for our customers.

SUSAN                         Sir Stephen, more evidence this week of Australian companies coming to New Zealand – I think we’re talking about a thousand jobs in total – because it’s 30% cheaper. A large part of that is that our wages are so much lower than Australia. How concerned are you about our low-wage society?

MARK                           Well, I’m not concerned at the moment, because I think what it’s going to do is give a lot of people in New Zealand jobs – those that are not getting them at the moment. We placed an advertisement for someone to work at our Manukau store a few months back, and we had 500 people apply for it. I mean, we do need more people in work in New Zealand, and we’ve been losing lots of people to Australia, so initially I think it’s good. I think as we build our economy, which I think we will against Australia, then wages will rise. And if they keep having the dearth of a problem that they’ve got with mining, theirs will come down again.

SUSAN                         So we’ll do that through getting some of these jobs, but also you’re talking about those sort of smart companies that can afford to pay people more?

STEPHEN                    Correct.

SUSAN                         Very good to talk to you both. Sir Stephen Tindall, Mark Powell, thank you for your time this morning.

STEPHEN                    Thank you.

ENDS

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