Directors optimistic about economy, but face growth barriers

19 November 2014

Directors optimistic about economy, but face barriers to growth

Directors are very optimistic about economic performance in the next 12 months, but believe that reducing the amount of red tape and building staff capability will further improve performance.

The Institute of Directors (IoD), in partnership with the New Zealand Institute of Economic Research (NZIER) carried out a survey of New Zealand directors. The results show 71% of directors expect the performance of their companies to improve and 47% expect the New Zealand economy to improve in the next 12 months.

Simon Arcus, Manager of the IoD’s Governance Leadership Centre (GLC) says there are several factors behind directors’ positive sentiment.

“Better business conditions, the election result, as well as types of business surveyed all have an impact. However, directors are strategists with an eye to long-term performance, so positive sentiment about the economy is encouraging.”

The findings also send a strong message about what directors think will aid business performance. 23% of directors say that reducing regulatory red tape is the number one thing government should do to help improve performance, while 75% of directors said compliance activities had increased significantly compared to two years ago.

Labour capability and quality was the most prevalent risk directors identified for their organisation with 17% of directors identifying this as their major concern.

“What that means for business is a need to focus on training and development of their staff. For government it signals the need to ensure the education and training people are receiving is relevant to today’s business needs.”

Concerns about personal liability was also seen as an issue, with 57% saying it had made them more risk-averse in their personal decision making.

“Directors are accountable for the decisions they make and balancing accountability with business risk is an ongoing tension boards need to manage. If a business is to grow then it’s inevitable they are going to have to engage with risk. At the end of the day it’s a matter of striking a careful balance between holding businesses to account and taking risks to drive better performance.”

Diversity features strongly in the survey. 64% of directors agreed diversity is a key consideration in making board appointments.

Arcus says the finding is positive as it adds to the body of evidence showing that boards understand how diversity can help improve decision making as well as improve financial performance.

The survey was conducted in October 2014 and involved 859 members of the Institute of Directors.

Summary of key findings
• 75% said compliance related activities had increased significantly compared to two years ago
• 71% of directors expect organisation performance to improve in the next 12 months
• 64% identified diversity as a key consideration in making board appointments
• 57% said increased personal liability had made them more risk averse in business decision making
• 47% of directors expect the economy to improve in the next 12 months
• 23% of directors said reducing red tape was the one thing government can do to improve economic and business performance
• 17% said labour quality and capability was the single biggest risk facing their organisation.

Click here for further information on the report.

A copy of the Summary Report and a video interview between Simon Arcus, Manager of the IoD’s Governance Leadership Centre and Shamubeel Eaqub, Principal Economist at NZIER, is available at: www.iod.org.nz/Governance-Resources/Publications/IoD-NZIER-survey

ENDS

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