Research & Books

IPA Deakin Small Business: Big Vision conference highlights big SME problems

A LANDMARK international conference currently being conducted by the Institute of Public Accountants (IPA) in conjunction with the IPA Deakin SME Research Centre, will focus on the productivity crisis facing the Australian economy.

“In forming the Australian Small Business White Paper, we asked small businesses across Australia what was keeping those businesses awake at night,” IPA chief executive officer, Andrew Conway said. 

“The productivity growth rate in Australia has declined dramatically over the past 20 years, so we need to fix this if we are to protect Australia’s standard of living. If we don’t arrest the decline in productivity growth there will be a worsening of quality of life for our future generations. 

"We need to take some of the burden away; to support small business to achieve the best that they can. In short we need to make Australia the best country in the world to start and operate a small business," Prof. Conway said.

“We have had some successes along the way including establishing the SME Research Centre, purely focused on better policy outcomes to drive small business productivity; the first of its kind in the world.

“Our Small Business White Paper also gained support for a number of our recommendations including loan guarantee schemes and the establishment of the securitisation fund. But we still have much work to do to address Australia’s productivity crisis; we need government, regulators and policy setters to think ‘small’ first when it comes to forming policy," he said.

“Small businesses are doing it tough; they are staying awake at night as they often put their house, family and well-being on the line as they strive to survive. 

"As such, the IPA is seeking to build the evidence around mental health in small business continue to deliver practical training and support to boost the quality of life of small businesses,” Prof. Conway said.

www.publicaccountants.org.au

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Ageing small business leadership a new problem facing economy

THE AUSTRALIAN small business sector is facing a major shake-up over the coming decade, with the highest proportion of small business owners aged between 45 and 59 years and preparing for retirement.

That’s according to the Small Business Counts report released at the COSBOA National Small Business Summit this week by the Australian Small Business and Family Enterprise Ombudsman Kate Carnell. The report shows 61 percent of employing small business owners are approaching retirement age.

“The small business landscape will be transformed over the coming years with a significant number of older small business owners expected to retire, sell or move on,” Ms Carnell said. 

“This generational shift presents a number of challenges for the sector and the economy more broadly.

“We know access to funding continues to be a barrier to small business operators, so some of the business owners looking to sell may find it difficult to attract a buyer.

“These figures show that there is a need for meticulous succession planning by those small business operators who are planning to retire in the coming years," Ms Carnell said.

“The report reveals other challenges being faced in the sector, with more than half of small business owners reporting a taxable income of less than the minimum wage.

“Late payments continue to hamper small business viability, with half of all small businesses reporting late payments on 40 percent of their invoices.

“These are just some of the issues captured in the Small Business Counts report," Ms Carnell said.

“The statistics, collected from various Australian government agencies, helps us gain a greater understanding of the small business sector, which is vital to the work we do.

“We know that small business is the most dynamic and fastest growing sector and yet it is often overlooked by all levels of government when setting the policy agenda," she said.

“Overall, the Small Business Counts report shows the small business sector is surprisingly large and vibrant, which is vital to the health of the Australian economy.”

www.asbfeo.gov.au

www.cosboa.org.su

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Flinders Uni spearheads research into snapper stocks, underground mine water

FLINDERS University researchers will join forces with interstate and overseas experts to conduct in-depth studies into understanding underground water at mine sites – and in a second project to improve the management of Australian and New Zealand snapper fisheries.

The resources industry-driven $838,000 Australian Research Council (ARC) Linkage Project includes key partnerships between Flinders, Rio Tinto-Iron Ore, the Western Australian Government and researchers at Wageningen University in Europe.

The centre’s director, professor Craig Simmons said the new study would focus on creating reliable computerised modelling of faults and other common geological structures to determine groundwater flows at mine sites. 

“Understanding the effect of faults and barriers is critical in assessing the impacts of mining, unconventional gas and water resource developments,” Prof. Simmons said. Previous ARC Linkage projects he was involved with had extensively mapped other aspects of groundwater modelling in WA’s Pilbara and other mining regions.

Prof. Simmons said the Rio Tinto partnership in WA built on significant ongoing research initiatives between the company and the National Centre for Groundwater Research and Training at Flinders.

He said development of new models to quantify groundwater and other solute flow through and along faults is vital for mine managers around the world.

“By combining geological, hydraulic and geochemical approaches with 3D numerical models, we will gain an improved understanding of the role of faults and barriers in subsurface hydrology, and an improved ability to model complex groundwater systems,” Prof. Simmons said.

FOCUS ON FISHERIES

A second Flinders University-led $321,113 ARC Linkage Project, announced by Education Minister Dan Tehan, is a collaboration between five major state fisheries agencies in Australia, NZ Crown Research Institute Plant and Food Research and the University of Queensland (UQ).

Chief investigator and Flinders University molecular ecologist, professor Luciano Beheregaray said the project would generate and integrate genomic, environmental and phenotypic datasets for snapper populations from across vast coastal regions of Australia and New Zealand.

“The large-scale fisheries genomics program should substantially enhance fisheries management and aquaculture initiatives for snapper, providing commercial, social and environmental benefits for many stakeholders across the two countries,” Prof. Beheregaray said. 

Flinders University deputy vice-chancellor for research, professor Robert Saint said the latest ARC Linkage Projects cement Flinders University’s leading status in groundwater management and conservation genomics research – key components of the university’s strengths in earth and environmental sciences.

“The research will provide robust scientific data and evidence-based best practice that will enhance the sustainability of Australia’s mining and fisheries industries,” Prof. Saint said.

“Flinders research in these areas is outstanding, and the latest ARC Linkage Projects illustrate some of the ways the university’s contribution to science will make a real difference to the future of the planet.”

www.flinders.edu.au

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New research by Vertiv looks at real-world 5G challenges

VERTIV and technology analyst firm 451 Research have released a landmark report on the state of 5G telecommunications in Australia and globally.

The report, Telco Study Reveals Industry Hopes and Fears: From Energy Costs to Edge Computing Transformation, captures the results of an in-depth survey of more than 100 global telecom decision makers with visibility into 5G and edge strategies and plans. The research covers 5G deployment plans, services supported by early deployments, and the most important technical enablers for 5G success.

Survey participants were overwhelmingly optimistic about the 5G business outlook and are moving forward aggressively with deployment plans, with 12 percent of operators expecting to roll out 5G services in 2019, and an additional 86 percent expecting to be delivering 5G services by 2021.

According to the survey, those initial services will be focused on supporting existing data services (96 percent) and new consumer services (36 percent). About one-third of respondents (32 percent) expect to support existing enterprise services with 18 percent saying they expect to deliver new enterprise services. 

As networks continue to evolve and coverage expands, 5G itself will become a key enabler of emerging edge use cases that require high-bandwidth, low-latency data transmission, such as virtual and augmented reality, digital healthcare, and smart homes, buildings, factories and cities.

MOST EXPECT DELAYS

However, illustrating the scale of the challenge, the majority of respondents (68 percent) do not expect to achieve total 5G coverage until 2028 or later. About 28 percent expect to have total coverage by 2027 while only 4 percent expect to have total coverage by 2025.

“In Asia, operators are optimistic that they are ready to deploy 5G in the next few years. But with the growing reality comes a new set of challenges including increasing energy consumption, existing infrastructure readiness and visibility as well as manageability of sites,” Danny Wong, senior director for telecoms at Vertiv Asia said.

“There is all the more a pressing need for telecom operators to identify and utilise energy-efficient and innovative power and thermal solutions to make 5G a reality.”

To support 5G services, telcos are ramping up the deployment of multi-access edge computing (MEC) sites, which bring the capabilities of the cloud directly to the radio access network. Thirty-seven percent of respondents said they were already deploying MEC infrastructure ahead of 5G deployments while an additional 47 percent intend to deploy MECs.

“We’re seeing even greater emphasis on edge computing across Australia and New Zealand’s 5G preparation and rollout compared to some of our global peers,” Robert Linsdell, Vertiv managing director Australia and New Zealand said.

“Our dispersed geography makes it more challenging to create the high-bandwidth, low-latency experiences across the board that will be emblematic of 5G. But our technology leadership puts us in prime position to be a global leader for the critical infrastructure needed to support 5G, and the fact that we’re deploying and optimising the right technical enablers for that position now is very promising.”

DENSE NETWORKS CHALLENGE

As these new computing locations supporting 5G come online, the ability to remotely monitor and manage increasingly dense networks becomes more critical to maintaining profitability.

In the area of remote management, data centre infrastructure management (DCIM) was identified as the most important enabler (55 percent), followed by energy management (49 percent). Remote management will be critical, as the report suggests the network densification required for 5G could require operators to double the number of radio access locations around the globe in the next 10-15 years.

The survey also asked respondents to identify their plans for dealing with energy issues today and five years in the future when large portions of the network will be supporting 5G, which 94 percent of participants expect to increase network energy consumption.

Among the key findings were:

  • Reducing AC to DC conversions will continue to be an area of emphasis, with 79 percent of respondents saying this is a focus today and 85 percent saying it will be a focus five years from now.
  • New cooling techniques will see the biggest jump in adoption over the next five years. Currently being used by 43 percent of telcos worldwide, this number is expected to increase to 73 percent in five years.
  • Upgrades from VRLA to lithium-ion batteries also show significant growth. Currently, 66 percent of telcos are upgrading their batteries. Five years from now, that number is projected to jump to 81 percent.

“5G represents the most impactful and difficult network upgrade ever faced by the telecom industry,” said Brian Partridge, research vice president for 451 Research.

“In general, the industry recognises the scale of this challenge and the need for enabling technologies and services to help it maintain profitability by more efficiently managing increasingly distributed networks and mitigating the impact of higher energy costs.”

Vertiv released the report in conjunction with its participation in Dell Technologies World, a global exposition focused on digital transformation. During the expo, Vertiv also showcased a virtual reality (VR) experience that lets users build a sample 3D model data centre and interact with their creations through a VR system.

https://Vertiv.com/5Greport

www.Vertiv.com

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Aboriginal Dreamtime is for everyone, explains author Aunty Munya Andrews

IF SHE HAD A DOLLAR for every time someone asked what Dreamtime was, Aunty Munya Andrews says she’d be a very rich woman.

Ms Andrews, who is an Aboriginal elder and barrister, runs Indigenous cultural awareness training with her partner Carla Rogers at Evolve Communities. She has also written a book, Journey into Dreamtime to help people better understand Aboriginal culture.  

“Of all the questions I get asked the most common are about the meaning of Aboriginal Dreamtime,” Ms Andrews said. “Aboriginal Dreamtime is for everyone, not just Aboriginal people.

“It is a spiritual philosophy that has as much to offer humanity as any other – such as Christianity, Buddhism or Hinduism. It can help everyone you cope with and master life, like any other belief system.”

An Indigenous barrister originally from the Kimberley region of Western Australia, Aunty Munya was raised in a remote Aboriginal community steeped in traditional law and culture. She is a specialist in intercultural interactions and has run Indigenous cultural awareness programs for over 30 years.

“Joseph Campbell, who wrote prolifically on world mythology, says religions are like computer software – if you don’t understand a religion, it’s only because you are not familiar with its programming language,” Ms Andrews said.

“My book Journey into Dreamtime is about helping people to understand that language by introducing them to Dreamtime concepts, such as sacred sites and song-lines.

“I teach people what Dreaming means and what it means to have a particular Dreaming like Kangaroo or Possum Dreaming on both a practical and spiritual level.”

Ms Andrews believes that most Australians want to know more about Aboriginal Dreamtime so they can forge a deeper connection with Indigenous people and have a deeper insight into the spiritual and psychic makeup of this land.

To that end, the book looks at a range of important questions about the Dreamtime, including: Why the Rainbow Snake known by that name and why it is deeply revered; What special role it plays in traditional healing; What are sacred sites and how they empower you; What it means to have kangaroo or possum Dreaming; How you discover your ‘Dreaming’ and what it can teach you. 

 “What’s more, it’s indigenous to this land and can foster a deep sense of belonging to people who come from other shores,” Ms Andrews said.

“After all, we’re all Australians and we have much to learn from each other.”

 www.evolves.com.au/dreamtime-book/

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New UQBS research reveals best financial practice for CEO succession planning

By Eric Tan >>

THE POSITION of a chief executive officer (CEO) – unlike any other in an organisation – plays a pivotal role in shaping the future of the organisation and consequently the welfare of its stakeholders.

Consequently, given the power vested in CEOs of modern corporations, the importance of the succession process can hardly be overstated.

It is, therefore, not surprising that CEO succession – a topic of considerable interest to academics and practitioners alike – has been the subject of intense academic research and debate in finance and management literature.

In a world that is increasingly seeking equal representation, parity in opportunities and inclusion of people across different backgrounds become the guiding principle for businesses in their hiring practices. 

While, on the one hand, the succession process is fraught with risks of hiring a person who could potentially do more harm than good, on the other hand, however, succession serves as an error-correcting process. The shake-up may be necessary to move the firm forward to keep up with competitors.

Good succession planning contributes to a smooth transition at the top. It also serves as a proxy for effective boards and good corporate governance – which strengthens investors’ confidence.

Observable past experiences and personal traits of incoming CEOs, therefore, provide important clues in identifying the ideal successor.

The cost of poorly defined and managed succession planning is extremely high, and could lead to elevated managerial and operational risk.

As such, a careful consideration of current and future firm developments is crucial in determining the qualities necessary in the incoming CEO.

 

PAST SUCCESS A GUIDE?

While corporate boards often tend to emphasise past success as the defining quality in the incoming CEO, one should not underestimate the importance of personality traits such as gender, age, ethnicity, career path, educational background, and social status as potential determinants of future success.

In other words, boards should try to align a firm’s strategic direction with a much broader set of candidate profiles, rather than solely relying on past performance to build a talent pipeline.

In addition, boards should also consider the performance consequences of succession events such as:

(1) the potential loss in firm-specific knowledge and human capital;

(2) the departures of upper-level managers following the succession event;

(3) a likely decrease in firm integration; and

(4) the potential for a drop in morale within the organisation.

 

WHAT RESEARCH SHOWS

In recent research, conducted jointly with academics at the University of Otago, we examine the value and performance implications of differences in personality traits between the predecessor and successor CEO, termed as ‘succession gap’.

This research is in the form of a co-authored research paper with Renzhu Zhang, Gurmeet S. Bhabra, and Hsin-I Chou – who are from the University of Otago – and is based on our recent paper entitled CEO Succession Gap and Firm Performance (see link below).

We address this research question by examining a sample of S&P 500 companies spanning the period 1996 to 2016. We construct a gap index by comparing differences in predecessor and the successor CEO characteristics along several dimensions such as gender, age, career variety, cultural background, highest education level, and social capital.

We find that when the succession involves a forced removal of the CEO, or when pre-succession firm performance has been poor (such as disruptive environments), an attempt to further shake up the status quo through a radical shift in the personal traits/experiences of the CEO leads to worse subsequent firm performance.

However, under non-disruptive conditions, we find succession gap to contribute positively to subsequent firm performance.

In our further tests, to examine the channels of underperformance, we find that successor CEOs who differ considerably from their predecessors tend to co-opt a greater proportion of the board, enjoy greater discretion in making far-reaching changes regarding downsizing and disinvestments, and generally lead firms that are characterised by higher levels of post-succession strategic instability.

Overall, we find evidence that appointing a successor with a gap in characteristics does not always increase firm value.

In fact, it can be harmful when the succession event is disruptive.

 

CEO SUCCESSION BEST PRACTICES

Our empirical findings have strong implications for how firms manage CEO successions.

These findings suggest the following good CEO succession planning best practices:

1. Identification of a successor who possesses strong leadership skills that reflect future aspirations of the firm.

More importantly, the successor should have in-depth industry knowledge and a good understanding of the corporate culture. Such successors will be less likely to demand drastic changes and will experience less resistance within the organisation, enhancing, rather than disrupting, existing relationships.

After all, it comes down to linking the kind of culture the firm needs and the next leader’s attributes and qualifications.

2. Cultivating good internal corporate governance practices in identifying candidates – either internal or external – that best suit firm needs in a rapidly evolving business environment.

While most firms prefer internal candidates because of lower search costs and they are often less disruptive, the assessment of external candidate is vital to ensure proper due diligence of the decision.

3. It is imperative to ensure ongoing accessibility to the outgoing CEO post-succession to ensure a seamless handover, thereby minimising disruption regardless of whether the successor is an internal or external candidate.

4. In most succession events, planning is largely ignored as a CEO’s departure is generally viewed as a distant event and, thus, often neglected.

Given that forced succession is costly to the firm in the form of reputation risk and potential loss of shareholder credibility, it is important for the incumbent CEO to be open about their own succession by identifying a potential successor early on to cater for a sudden or unexpected departure.

5. When enjoying stability and prosperity, CEOs are known to cling to policies and actions that led to past success but may not work under current or future situations.

Such ‘competency traps’ will lead to the incumbent CEO’s technical and political obsolescence that is unable to provide suitable solutions to new issues and to maintain a stable political environment within the firm. Such succession-related risk can be avoided by considering incoming CEOs with succession gaps who are more driven to acquire human capital than their counterparts.

 

CEO Succession Gap and Firm Performance is available to view at:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3220794.

 

The author, Dr Eric Tan, is a senior lecturer in finance at the UQ Business School (UQBS), Queensland.

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Can visual communication in business unlock billions in productivity?

NEW RESEARCH by software group TechSmith shows how increasing visual communication could unlock $6.527 billion in productivity and boost Australia’s Gross Domestic Product (GDP) substantially..

According to the TechSmith report, Australian businesses could experience significant financial and productivity gains by including more visual content — such as screenshots, screencasts, images, and video — in communication with employees.

TechSmith commissioned the Centre for Economics and Business Research to examine TechSmith’s own scientific research and productivity data, along with research into how people spend their time at work, to assess the impact of better use of visual communication in the workplace. 

The Centre for Economics and Business Research report for TechSmith found that, in Australia, businesses stood to gain up to $6.527 billion in productivity. It is an astonishing figure that is verified by breaking down the impacts of better visual communication on an individual basis.

The research found that using visual content in workplace communications could unlock about seven extra minutes a day for every affected employee.

The average boost in GDP, if businesses were to use more visual communication, was estimated at 0.52 percent — or more than $167 billion annually across the six geographic regions studied, including Australia.

TechSmith CEO Wendy Hamilton said she was not surprised that visual content helped people perform.

“We’ve always known that visuals are essential to the effectiveness of communication, and therefore are essential to instruct and inspire,” Ms Hamilton said.

“The essential findings of this study are, first, that visuals matter even more than most assume and, second, there is an urgency for leaders to adapt as employee demographics change.”

Ms Hamilton said Australia had a lot to gain if businesses were to increase their use of effective visuals. Australia could see a 0.55 percent boost to its economy – the second highest hike of any geographic region studied –  due to Australia’s combination of long working hours and a high proportion of communicating workers. 

The TechSmith research also revealed the value of using more visual content in workplace communications to individual businesses.

For example, Australian businesses could save $1,384.70 per worker per year, based on average annual hours and GDP per hour.

In an eight-hour day, communicating with employees using effective visuals, such as videos and screenshots over plain-text email, the research found this could save each affected employee six minutes and 43 seconds.  Over a 40-hour week, that equates to 33 minutes and 36 seconds.

TechSmith is a company uniquely placed to provide such insights. Founded in 1987, TechSmith Corporation provides practical business and academic software products that change and improve how people communicate and collaborate.

TechSmith’s economic modelling was conducted by the Centre for Economics and Business Research in March 2018 and combines TechSmith scientific data and publicly-available data across Australia, Canada, France, the UK, the US and the DACH region, combining Germany, Austria and Switzerland, to quantify the impact of visual communication on business productivity.

Download the full report

www.cebr.com

www.techsmith.com

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