ROBERT E. MARKLAND, Feature Editor, College of Business Administration, University of South Carolina
The following article, written by Jeff E. Heyl (Lincoln University, New Zealand), responds to the previous ``International Issues'' column (September/October 1995 Decision Line) entitled ``From Mutton to Mungo: Revitalizing the Management of New Zealand,'' by Andre M. Everett (University of Otago, New Zealand). We always welcome articles that reply to topics discussed in this column.
In the article below, Professor Heyl offers further insights on changes in the New Zealand economy and the resulting impact on the country, its people and the business environment. In the next issue, we will feature an interesting and lively article by Professor Art Hill (University of Minnesota) in which he describes some of his teaching experiences at IMD in Lausanne, Switzerland.
WELL, MATE, THERE'S A LITTLE MORE TO IT THAN THAT!
by Jeff E. Heyl, Department of Economics and Marketing, Lincoln University, Canterbury, New Zealand
I really enjoyed reading Andre Everett's article in the last issue of Decision Line. It certainly painted a glowing picture of New Zealand as we prepare to enter the next decade. One of our faculty commented that by the end of the article he was standing with hand over heart, humming God Defend NZ under his breath. But, like many attempts to explain what has and is still happening here, several very important aspects were either minimized or overlooked. It should come as no surprise that the picture is not as attractive as the one painted in the article. As a recent transplant, I have spent some time looking at the almost complete reconstruction of the New Zealand economy and social structure and would like to add some perspective.
First, to say the country was in trouble severely understates the reality of New Zealand in the early 1980s. Always a very British culture, they had adopted the worst of the British economy: state controls and strong labour unions. Imports were simply not allowed in many areas, ultimately causing exports to suffer as products became less competitive. Other barriers were put in place internally. As an example of the Monty Python-like conditions:
As necessary as the changes were, they did not (and do not) come easy. To list them does a disservice to the efforts of the Labor government of the period and the vision and courage of one man, Sir Roger Douglas. While many people played a role, he was clearly the true architect of the revolution. He led a wave of sweeping change that left the country, and more importantly, the opposition, shattered and shaken. Had the pace been any slower, the many powerful institutions that were being dismantled in front of their own eyes might have been able to mount a successful opposition. From a minority position (extensive opinion polls never showed more than 30% support) old controls were removed, new legislation was enacted, social entitlements were reduced or eliminated, the tax system was completely restructured, and monetary policy dramatically altered. In many instances, speed was clearly a priority over planning, and the sequence of the changes often ran counter to accepted economic thought. Changes were implemented as opportunities presented themselves, rather than in accordance with a master plan.
But the fear and pain was (and remains) considerable. There was suddenly no safe haven, no reliable firm ground. Union contracts, government support, protectionist legislation, medical and educational systems, the state retirement system, farm subsidies, and export support were all either privatized, scrapped, or substantively changed. The vast bulk of the population was scared and breathless as their once cozy lives were torn apart and the pillars of state assistance crashed around them. Even with the benefits, and there have been many, it has been a time of personal crisis that has not always been equally shared.
But even with the benefits, the pace could not be maintained and the rate of change has slowed dramatically in the past few years. There are tariff cuts planned for the next five years, but autos, auto parts, carpets, footwear, machinery, and textiles will still carry tariffs of between 5% and 15%. In the latest elections, a new system for determining the composition of parliament was approved partially as a result of concern over continued changes. It may essentially insure coalition governments, which should prevent the sort of blitzkrieg Sir Roger lead through the 1980s. There are already strong voices calling for a return to the old ways.
It took huge political nerve to make the changes Andre describes in his article, and the cost has been very high. Many businesses have failed and the country is experiencing unemployment and homelessness at higher levels than in the past (unemployment peaked at about 13% in 1991 but is now down to about 6%). But there is no question the future is brighter than a decade ago. The critical issue now is whether the changes will continue.
The first lesson from the New Zealand experience is that lack of competitiveness almost destroyed the economy. It could again if we're not careful. The protectionist attitude and big government approach to managing the economy was as big a failure here as anywhere.
The second lesson is that committees don't create change, strong visionary leaders do. While effort (and sometimes sacrifice) from the troops is clearly necessary, there will be no victories without leadership.
Third, change is not without some real cost. Many organizations believe they can avoid the cost (and pain) and must experience their own ``significant emotional event'' before they are willing to pay the price. Ultimately the Labor party was defeated, individual politicians left public office, and a new system of proportional representation along party lines was approved by the electorate.
Fourth, action may be far more important than planning. Opportunities were captured as they came along, no matter the plan. Plans are fine for keeping things moving in a basic direction, but there must be enough flexibility to respond to a dynamic environment. Of course, certain conditions made change in New Zealand a little easier than for other countries. The political system is quite thin with no written constitution and, at the time, no proportional representation. This is probably closer to conditions present in most businesses than other nations.
Finally, change is like a baby elephant. It is made with much bellowing, it requires a considerable period of nurturing before it can stand on its own, and it takes a long time to produce results (which may not always please you). New Zealand is now in the nurturing stage. If we plan our change well, we're going to have a great future. If we do it poorly, we're going to have a nasty, ill-behaved elephant around for many years. Wish us luck.
(Several examples and much of the background information in this article was provided by the faculty and staff of the Department of Economics and Marketing at Lincoln University, especially Jeff Kennedy and John Wood.)
Appleby, T. ``The land that rolled the dice: New Zealand's gamble that pain leads to gain,'' Toronto Globe and Mail, September 16, 1995, A6, 1.
Australia State Bank Planning Group, 23 February 1995.
Bollard, A. and Mayes, D. G. ``Lessons for Europe from New Zealand's Liberalisation Experience,'' National Institute Economics Review, No. 143 (February 1993), 81-97.
Campbell-Hunt, C. and Harper, D. A. Islands of Excellence? A Study of Management in New Zealand, New Zealand Institute of Economic Research, Wellington, 1993.
Everett, A. M. ``Mutton to Mungo: Revitalising the Management of New Zealand,'' Decision Line, (September/October 1995), 4-6.
JEFF E. HEYL is a Senior Lecturer in Operations Management at Lincoln University in Canterbury, New Zealand. He is heading up development of a new program in Manufacturing and Technology Management that will blend basic engineering with a sound management core curriculum. His current research interest is measuring quality at the organizational level. He has developed numerous innovative teaching materials and has been an active participant at DSI meetings for some time. The dramatic nature and magnitude of change in the New Zealand economy and culture over the past ten years has prompted Jeff to revisit an earlier research interest, managing change.
Dr. Robert E. Markland