Dialogue: Courage and integrity the keys to our future

ANDREW GRANT says business is ideally placed to foster an attitude of nation building but, first, it must adopt four core values.

New Zealand lacks a true sense of nation building, and if we want to maintain our developed-world status, the nation-building challenge before us is enormous.

In economic terms, the challenge New Zealand faces is of a magnitude comparable with that faced by Britain after the Second World War. Thankfully, we don't have to deal with the horrific aftermath of war, but there are similarities.

We have lost many of our most talented people, and we face a huge infrastructure challenge, significant financial constraints and a new global economy.

Addressing this challenge is not about incrementing at the margin or tinkering with traditional policy instruments. It is about rebuilding a nation. We must act accordingly.

To succeed in this challenge, New Zealand needs business to be a role model for the rest of society - to set the standard and lead by example. Business is well positioned to play this role because most of the challenges in the new global economy have been faced first by our business leaders.

However, if it is to succeed in this role, there are four values for which it must stand.

First, it must set global aspirations and strategies. Second, it must instil a true performance culture. Third, it must approach its business with a passion and sense of noble purpose; and finally, it must be underpinned by moral courage and integrity.

New Zealand needs businesses which seek to forge a path to global success. When Ireland was undergoing its transformation, business leaders were motivated by this saying: "To be big in Ireland is nothing." Business leaders knew that domestic success yielded little respect. Learning to win and win well on foreign soil was the benchmark.

I recently gave a presentation to business leaders that showed how we have been outperformed by every other small developed-world nation over the past decade.

As I went down the list of countries, the room was full of excuses. We can't be compared with Singapore because they are in the middle of Asia and have an efficiency of infrastructure that we can't match. Nor Ireland, because of European Union subsidies and proximity to Europe. Nor Israel, because of the influx of a million highly educated Russian Jews and a highly successful diaspora.

The excuses continued until we got to Puerto Rica ... when there was silence. Then, from the back of the room, someone suggested that was because of sales of Ricky Martin CDs.

If we have reached the point when we blame Ricky Martin for our inability to keep pace with Puerto Rica, we have a serious problem.

We must not make the excuse that our small size, our history and our location mean we cannot set global standards. We can and we must.

Global aspirations are pointless without the performance ethic necessary to ensure they are delivered.

A healthy performance ethic rewards outstanding performance generously. It does not tolerate excuses for underperformance and is quick to close any performance gaps. New Zealand can no longer afford to have parts of the economy that chronically underperform.

To achieve this, we need to create incentive structures that more generously reward those who perform and do not reward those who do poorly.

This should apply to everyone - company directors, chief executives, teachers, politicians and service staff. It is instructive to see that countries like Sweden, traditionally seen as our "socialist soulmates," have sharpened incentive structures in recent years.

Such a performance ethic provides clear guidance, for example, to the debate about directors' fees. A true performance ethic would gravitate toward the norms required by the large United States pension funds. Directors should be paid a modest stipend to cover their expenses, with the rest of their compensation being linked entirely to performance.

If they deliver exceptional company performance to shareholders, they are very well paid. If they do not, they get nothing or very little.

The world's most impressive businesses are not satisfied simply with profits. They want to leave the world a better place.

Companies like Merck declare: "We are in the business of preserving and improving human life." Sony seeks to experience "the sheer joy that comes from the advancement of technology that benefits the public;" and Disney aims "to bring joy to millions of children and to celebrate, nurture and promulgate wholesome values."

Craig Norgate, from Kiwi Dairies, provides a great New Zealand example. "We are determined to be the world's most impressive dairy company ... We will sweat blood for the health and well-being of our customers ... Even the cows are committed at Kiwi."

If we are to rebuild a nation, we need business leaders who are passionate about building new businesses that excite and engage us all. While New Zealand does have business leaders who are role models on this front, they are the exception. We need to make them the rule.

Gandhi suggested societal decay exists when there is "politics without principle, commerce without morality, education without character and science without humanity."

If New Zealand business is to lead politics, education and science by example, it must lift its game in this area. If you asked international investors about our business reputation, moral courage and integrity would not be the first words on their lips.

Several leading economists, such as Amartya Sen and Gary Becker, argue that in successful economies, moral courage and integrity are hard-wired into the way business is conducted. As a result, the cost of every business activity falls.

If New Zealand is to be the extraordinary nation that it can be, our businesses must focus on nation building. It will require each of us to commit, to contribute and to get involved.

New Zealand business has a great opportunity to set the pace and lead by example. Adopting the four values suggested and hard-wiring them into the way we do business is a great place to start.

*Andrew Grant is a principal of the Auckland management consultancy McKinsey and Co.