Monday, June 01, 2009

Staffing NBN Co

Thus far I have seen press reports identifying Paul Twomey, Peter Shore, Chris Anderson and Doug Campbell as front runners for the CEO or Chair's job at the new NBNCo. I even had one journalist ring me and tell me that the rumours were that Conroy had my CV and was considering me for an NBN gig.

We thankfully now have a bit more detail on that, but overall it is not that promising.

In Senate estimates last week in some opening comments on the NBN Senator Conroy said;

With respect to the National Broadband Network company and implementation study, the company has been established with an interim board made up of senior public servants with appropriate skills and experience to manage the company in its infancy. Establishing a company is a major exercise and it does not all happen instantly. The first task, and the one that the company is currently working on, is getting in place the systems and structures to allow it to operate. In terms of a permanent board management an executive search firm is being engaged to recommend names to the government for appointments in coming months. (Page ECA 51)

Senator Minchin then questioned departmental officers in more detail;

Senator MINCHIN—Could you advise the committee on the process by which this company will acquire a board and a chief executive?
Mr Lyons—The government is moving to engage an executive search agency to assist in the appointment of the ongoing board.
Senator MINCHIN—Is it clear that the board, once appointed, will choose a CEO for this company in accordance with normal practice?
Senator Conroy—Yes, the board will have that responsibility.
Senator MINCHIN—Do you have a time line for the (a) appointment of a board and (b)—
Senator Conroy—Free trade agreement requirements, as I am sure you are conscious of, always require a rigorous process and an open and transparent process, so we are bound by the guidelines of the trade agreements we have entered into. Perhaps Ms King or Mr Lyons may be able to update that.
Senator MINCHIN—When should we anticipate the announcement of a—
Senator Conroy—We will engage the firm first.
Mr Lyons—Once we have engaged the firm it will then be a matter for government to make that decision and make an announcement.
Senator MINCHIN—This is probably some months down the track?
Ms Scott—As to the selection of the executive firm, we hope that we can move reasonably quickly to that. Then it will just be a matter of time after that for government deliberations.
Senator BIRMINGHAM—Have those firms been shortlisted?
Ms Scott—We are going to go to select tender and we have identified a number of suitable firms that we
will approach.

That seems to be a pretty clear statement that all the Government is appointing is the Board, and that the Board will appoint the CEO. For those keen to see rapid appointments the facts are that the search firm hasn't even been appointed yet. The FTAs provisions that the Minister referred to are of course the provisions that require transparent processes of contracting an executive search firm, though as one person commented when I discussed this with them, "Why do they need a search firm anyway – surely there are people within the Department who know who is out there and who is good? Perhaps we should never trust anyone in the Department to choose the successful tenderer for a big job, or to decide what they want for lunch today…".

Given in fact the usual process by which Boards refresh themselves in which the Board itself contracts the search firm, maybe the Minister and department could have moved more quickly to make three relatively "safe" Board appointments and given them the task of finding the remainder. I also hope that the Government doesn't choose a Board and the chair but instead chooses a Board and lets the Board select a chair.

The process to one side, what kind of people do we want on the Board. The first thing is we want a oard that will act as a Board - not as de facto management. That means a Borad who can reliably select the CEO, can work with the CEO in the process of establishing the strategy and then be confidant in letting the CEO execute the strategy while providing oversight on "performance and conformance".

To the extent the Board needs people who can help coach the CEO and his executive team, what are the core skill sets required? Is a Board full of telco expertise required?

The first thing to note about the NBN is that it is primarily a giant civil engineering job, with a bit of electronics. It is a huge project to be delivered across the entire land mass with multiple stakeholders. Sandy Hollway of SOCOG fame (and non-gold IOC award infamy) springs to mind as the kind of skills required there.

The second element is the ability to work with large corporate customers in a close and integrated manner. Somebody from a banking background, especially institutional banking would be ideal. David Murray doesn't fit that description but could be relied upon to suggest somebody.

The relationship with state governments will also be important. Somebody who has worked in the senior reaches of the public sector ithin states could be useful. Bill Scales is a possiblity there. After that the Board would benefit from a senior engineer or two. Actually reaching back to the last Telecom Australia CEO in Mel Ward is not illogical.

Finally there is a need to ensure some diversity on the Board. Im acutely aware that thus far I've only named men. The temptation to find women from the law or accounting professions should be avoided, quite frankly most boards are better off without lawyers and accountants because other Board members inappropriately defer to and rely on their expertise. The diversity should include seeking Board members with expertise in the social sciences and in cultural and media issues. Professor Elizabeth More from the MGSM offers the kinds of skills that could be useful.

Finally, the Board needs to be kept small. Seven people in total including the CEO should be sufficient.

Then we confront two other issues - what kind of CEO and how do we deal with the problem of minority shareholders.

The Board will get to appoint the CEO, but I note a number of people who have emphasised the need for an engineering type or at least a skilled telco practitioner as the CEO. I'm not so sure. While there is a need to ensure a strong engineering capability this dos not need to come from the CEO. After all there is also a huge money management and relationship management task. What is really needed is a good old fashioned "leader" - someone who can bring a diverse set of management skills together and get the most out of them. Most importantly it needs someone whose track record is about managing the executive team they have rather than one of the modern era CEOs who brings a team with them.

To deal with the problem that the Board will be responsible to minority shareholders as well as the Government is our next task. The Board will also be running a business with natural monopoly elements, which means there are prospectively monopoly rents available. How do we ensure the Board does not feel the need to set monopolistic prices, other than direct regulation and the conflict with the regulator that would entail. The short answer is that this needs to be very explicitly stated in the documents of incorporation - that the purpose of the firm is the delivery of NBN services at cost reflective prices and returning to shareholders a return commensurate with that objective. More simply the non-government equity could be through some version of secondary shares that have no voting rights but have first claim on dividends up to a certain percentage return on the face value of the investment.

The role of the implementation study and the lead adviser to that study in relation to NBNCo hasn't been touched on. Gioven the sequential process of Board then CEO appointment we could be close to the end of the year before NBNCo is ready to take responsibility for the delivery of the NBN. But as a firm governed by a Board can they be expected to just fully adopt whatever the implementation study generates, or will they really need to undertake their own study? Is the purpose of the lead adviser to create a "project" that can be transferred to NBN Co mid-stream?

Every time I look I find more questions.

1 comment:

Anonymous said...

this may be an obvious comment to make but shouldn't the implementation plan be lead and developed by the NBN Co. This will ensure the new appointed leadership owns what it creates and set the directions. I see a real risk here to the delivery timeline for the NBN and alot of costly rework. And I think that the communnication and stakeholder management plan is another risk that requires a carefully thought out mitigation strategy.