Analytical Processes and Credibility

Analytical Processes and Credibility

The dairy industry moans much about being misunderstood and maligned in the media. The industry would be well advised to get its own house in order before being critical of the public’s view of the industry. Yes, there are problems with the public’s perception of the industry, but those perceptions haven’t arisen in isolation. They have arisen partly from a lack of sound information and analysis by the dairy industry itself, and partly from taking on board a range of information regards environmental effects and sustainability from organisations such as the FAO, OECD or the Parliamentary Commissioner for the Environment.

The speculation and speculative analysis floating around in the media is due to a vacuum in industry provided analysis. Spin from Fonterra is news but doesn’t count as analysis. If the industry wants its strategies understood it needs to have done the analysis and shared it with the public. Until it has done so it not qualified, justified or credible in complaining. If the industry is arrogant enough to believe it doesn’t need to do such analysis, then you are getting no more than you deserve and worse is probably still to come. As far as can be determined the NZ dairy industry is vulnerable and not well prepared to withstand scrutiny on grounds of economic performance, environmental record or sustainability.

Possible strategies for bringing the public with the industry range from bluffing it is so important it is above needing to do so, to involving a wider groups and the public in coming to a consensus on industry direction. The strategies chosen will depend on the attitude towards sharing or controlling information and likely be consistent across the board including with attitudes towards shareholders.

Over the years dairy co-operatives in New Zealand have generated an almost mythical status and the industry has become very good at controlling information and exuding a perception of power. This has been aided by a lack of competition but it could be argued that Government and vested interests have been complicit in aiding this situation.

The movement of information and ideas should be a two way process. Otherwise entrainment of thinking, a lack of clearly stated vision and availing of ideas from a constrained pool equates to dysfunctional processes. A lack of leadership attention to addressing these issues continues to be of major concern.

An alternative process hopefully being started here is to follow some analysis of Fonterra through to possible conclusions but making the background information and the basis for analysis public so that others can draw their own conclusions. This all assists in identifying questions that still ought to be answered. If the conclusions drawn here differ from the alternatives proposed, they may be countered by providing the analysis supporting the Fonterra proposal. If they are not countered then the credibility of various proposals may be questioned, or shifted.

The process being followed here is one of increasing understanding of the dairy industry and Fonterra’s role in it through iterative assessment and analysis of:

  • Trends historical to current to future – cautiously as past performance may not indicate future performance. World, industry, sectors, farms. For markets, debt, profits, asset values, competitive advantage
  • Attempt an understanding as to why these occur,
  • Spot the turning points or discontinuities
  • Various forms of comparative analysis – over time, different co-ops locally and internationally, different sectors of the economy
  • Confidence in current structures and leadership, and leaders capacity to use those structures effectively. Understand why these occur.
  • Financial performance
  • Consistency of messages – over time, and between speakers
  • Delivery on promises

The first question that should come to mind in considering what structure is best for Fonterra is which one(s) match the strategies being followed. This relatively simple question holds irrespective of whether you are a supplier shareholder, Fonterra management, private individual or government.

Immediately following comes the question of identifying Fonterra’s strategy, and then whether it is appropriate? The latter depends much more on who is asking.

Potential confusion abounds. How well does Fonterra’s strategy fit with the dairy industry’s strategy - strategy that should have evolved out of an understanding of the industry’s strengths and weaknesses? The fundamental SWAT analysis demanded by industry leaders in forming their vision for the industry rather than simply assuming that what has worked in the past will continue to work in future.

It is difficult to find a current industry strategy or SWAT analysis. This raises questions over leadership - there may be something of a vacuum. Maybe our culture is not helping and needs to change. Looking around, dairying, and agriculture are not alone in NZ with these issues.

Not having a strategy what do you measure performance against? How can you evolve the strategy as market and world environments change? Do we by default create it?

These are issues that are not going to be addressed by restructuring Fonterra. Perhaps we just conclude that the classical approach to leadership is not working and others are needed. Maybe industry leadership was forgotten in the reforms of the 1980’s and again overlooked with the formation of Fontera in 2001. Or there is simply too much greed for anyone to be interested beyond short, narrow and selfish perspectives.