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The Business Agenda in Australia
Discussion document
November 17th, 2013
OBJECTIVEUNDERSTAND THE THEMES OF CHANGE IN CORPORATE AUSTRALIA

Understand what is top of mind of Australian CEOs
Objective
Working Draft - Last Modified 26/04/2007 12:02:50 PM Printed
Identify key themes of change over the past 5 years
Reviewed 42 annual reports of top 50 Australian companies

Method for the years 2008/09 and 2012/13
Examined CEO and Chairman reports

Recorded mentions and top priorities for each issue within 5 broad
areas of focusgrowth, corporate responsibility, cost management, people/organisation and portfolio management
EXECUTIVE SUMMARY4 KEY THEMES EMERGING

Cost Management Is Now Top of Mind Percent of companies mentioning theme 1. Cost Management 2. Growth Step change in corporate responsibility Change in mentions Corporate governance Regulation
82
34
80 77 63 57
20 14 10 9 7
3. Portfolio Management 4. Corporate Responsibility

5. People/Organisation
Community
Risk management Environment Health and safety
Increasing focus on cost

Number of mentions 22% 82 60
Shift to human/behavioural organisational levers

Percent of total mentions 100% = Structural/ decision based Human/ behavioural 74 81
53
38
47
62
2008/09 2012/13
2008/09 2012/13
2

82
34
80 77 63 57
20 14 10 9 7

Community


53
38
47
2008/09
62
2012/13
3
2008/09 2012/13
COST MANAGEMENT IS THE MOST IMPORTANT THEME ON THE STATED CORPORATE AGENDA
Top priority
Theme 1. Cost Management
Importance in 2012/13 Percent of companies mentioning theme

70
82
2. Growth
44
80
3. Portfolio Management
38
77
4. Corporate Responsibility
27
63
5. People
16
57
Source: 42 annual reports of Australian top 50
ALL INDUSTRIES BUT CONSUMER HAVE INCREASED THEIR FOCUS ON ORGANIC GROWTH
Number of mentions 2008/09-2012/13
2008/09 2012/13
35
30 25 20
Inorganic
15
Financial
What are the drivers of this change? Consumer
10
Primary
5
Resources
0 0 5 10 15 20 25 30 35
Organic
Source: 42 annual reports of Australian top 50 5
ORGANIC GROWTH LEVERS DIFFER BY INDUSTRY

Number of mentions 2012/13: Percent
Key organic growth lever
16 26 25 14 25
Product service innovation
40
30
34
Geographic expansion
33
53 70 45 41
Investment for increased capacity
27
21
Consumer
Finance
Resources
Primary
Total
6

82
34
80 77 63 57
20 14 10 9 7

Community


53
38
47
2008/09
62
2008/09 2012/13
2012/13
7
THE CORPORATE RESPONSIBILITY AGENDA EXTENDS BEYOND GOVERNANCE ISSUES

Percentage point changes to mentions Sector Theme Initiative Health and safety Environment Community 3. Performance execution Regulation 4. People and organisation Corporate governance Risk management 5 26 50 31 33 22 25 -17 11 32 11 Consumer 0 5 5 -6 0 Financial 13
Key driver for sector
Resources 0 34 42
Primary
1. Growth
16 16 17 25
2. Corporate responsibility
5. Portfolio management

82
34
80 77 63 57
20 14 10 9 7

Community


53
38
47
2008
62
2008
2012
2012
9
FOCUS ON COSTS HAVE INCREASED SUBSTANTIALLY
Top priority
Mentions
Theme
Importance in 2012 Percent of companies mentioning theme
Change 2008 to 2012 Percentage points

1. Cost Management
70
12 82
22
2. Growth
21
59
80
14
38
39
77
-4
27
36
63
5. People
16
41
57
10
GREATER FOCUS ON COST MANAGEMENT IS BEING DRIVEN BY CAPEX BLOW OUTS

Theme 1. Cost Management Mentions
138
108
2. Growth
61
Cost/operational
50
Cost/Capex
77 58
5. People
2008
2012
11
RESOURCES ARE NOT THE ONLY INDUSTRY INCREASING FOCUS ON COST

Number of mentions 2008-2012
25
2008 2012
20
Financial
15
Revenue
Resources What are the drivers of this change? Consumer
10
Primary
0 0 5 10 15 20 25
Cost/operations
TRENDS IN OPERATING MARGINS viz-a-viz COSTS AND REVENUE

Revenue of all analysed companies $ Billions
13.6% 194
125 113 124 147
237
Operating margin Percent +1.5%
2007/08
08/09
09/10
10/11
11/12
2012/13
22.7
23.1
24.4 21.1
20.5
20.7
Operating expense of all analysed companies $ Billions 13.0% 160 188 2007/08 08/09 09/10 10/11 11/12 2012/13
102
90
102
121
2007/08 08/09
09/10
10/11
11/12 201/132
Employees Thousands
793
804
864
923
987
1,130
Source: Bloomberg, ASX and Company Reports
13

82
34
80 77 63 57
20 14 10 9 7

Community


Percent of total mentions *
Indicates multiple mentions by each company
100% = Structural/ decision based Human/ behavioural
74
81
53
38
47
2008/09
62
2008/09 2012/13
2012/13
14
SHIFT FROM STRUCTURAL TO HUMAN/BEHAVIOURAL PEOPLE LEVERS

Theme 1. Cost Management Total mentions*
100% =
74
81
2. Growth
Structural/ decision-making
38 53
3. Portfolio Management Human/ behavioural

62 47
2008/09
2012/13
* Includes multiple mentions by each company

ORGANISATIONAL INITIATIVES DIFFER BY INDUSTRY SECTOR

Percentage point change in mentions
Sector Initiative Culture/ engagement Human/ behavioural People development Capability building Recruitment Succession Structural/ decision making Performance management/ accountability Incentives -6 -11 -6 6 6 -18 -9 0 7 Consumer 0 0 Financial 6 6 0 Resources 27 Primary 8
Main changes on initiatives by industry
Values
33 38 11 51 0 17 -17 -25 53 -17

16
-16
0 -6 6
19
19
22
Organisational structure

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The Business Agenda in Australia

OBJECTIVEUNDERSTAND THE THEMES OF CHANGE IN CORPORATE AUSTRALIA

Identify key themes of change over the past 5 years

Reviewed 42 annual reports of top 50 Australian companies

Examined CEO and Chairman reports

EXECUTIVE SUMMARY4 KEY THEMES EMERGING

3. Portfolio Management 4. Corporate Responsibility

Increasing focus on cost

Shift to human/behavioural organisational levers

EXECUTIVE SUMMARY4 KEY THEMES EMERGING

3. Portfolio Management 4. Corporate Responsibility

Increasing focus on cost

Shift to human/behavioural organisational levers

Theme 1. Cost Management

Importance in 2012/13 Percent of companies mentioning theme

Source: 42 annual reports of Australian top 50

What are the drivers of this change? Consumer

ORGANIC GROWTH LEVERS DIFFER BY INDUSTRY

Working Draft - Last Modified 26/04/2007 12:02:50 PM Printed

Product service innovation

Investment for increased capacity

EXECUTIVE SUMMARY4 KEY THEMES EMERGING

3. Portfolio Management 4. Corporate Responsibility

Increasing focus on cost

Shift to human/behavioural organisational levers

THE CORPORATE RESPONSIBILITY AGENDA EXTENDS BEYOND GOVERNANCE ISSUES

Source: 42 annual reports of Australian top 50

EXECUTIVE SUMMARY4 KEY THEMES EMERGING

3. Portfolio Management 4. Corporate Responsibility

Increasing focus on cost

Shift to human/behavioural organisational levers

FOCUS ON COSTS HAVE INCREASED SUBSTANTIALLY

Importance in 2012 Percent of companies mentioning theme

Change 2008 to 2012 Percentage points

Source: 42 annual reports of Australian top 50

GREATER FOCUS ON COST MANAGEMENT IS BEING DRIVEN BY CAPEX BLOW OUTS

RESOURCES ARE NOT THE ONLY INDUSTRY INCREASING FOCUS ON COST

Resources What are the drivers of this change? Consumer

TRENDS IN OPERATING MARGINS viz-a-viz COSTS AND REVENUE

Operating margin Percent +1.5%

Source: Bloomberg, ASX and Company Reports

EXECUTIVE SUMMARY4 KEY THEMES EMERGING

3. Portfolio Management 4. Corporate Responsibility

Increasing focus on cost

Shift to human/behavioural organisational levers

100% = Structural/ decision based Human/ behavioural

SHIFT FROM STRUCTURAL TO HUMAN/BEHAVIOURAL PEOPLE LEVERS

3. Portfolio Management Human/ behavioural

* Includes multiple mentions by each company

ORGANISATIONAL INITIATIVES DIFFER BY INDUSTRY SECTOR

33 38 11 51 0 17 -17 -25 53 -17

Working Draft - Last Modified 26/04/2007 12:02:50 PM Printed

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