Category Archives: Pro Experts

Hawke’s Bay’s leading professional service advisers & leaders

Don’t downplay the power of the Pen

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We talk about the pen being mightier than the sword. Of course these days it wouldn’t be a pen it would be a keyboard, but it’s the same notion of the power of the written word.

We in HR are sometimes accused of being bureaucratic pen-pushers, smothering people in layers of agreements, letters, forms and file notes. Naturally we have embraced technology and much of this red tape is now on-line; but it’s still there. We can just produce more, faster, with very attractive graphics and whizz-bang hyperlinks and whip it through cyber space to lots of people simultaneously, clogging up in boxes with gay abandon and polluting the clouds with cyber junk. Luckily New Zealand has the long white cloud to store all this stuff.

I accept that we can get overly pedantic about HR record keeping but there is method in this madness. If you are too far along the continuum towards no records, and many small employers are, you leave yourself very exposed to unpleasant consequences such as:

  • Fines for breaches of legislation
  • Wage arrears claims
  • Personal grievances

It is concerning to still hear of employers that don’t have written employment agreements at all, or don’t have them for certain groups of staff such as casual or seasonal workers. This is the most basic legal requirement and the foundation of the employment relationship. Not only does it provide legal compliance but protects both parties by confirming the terms you have agreed to work by. If you have agreements in place it is important to review these regularly to ensure you keep pace with legislative change and minimum entitlements.

The other important area of compliance is ensuring you keep thorough wage and time records which are sufficient to confirm that you are meeting minimum requirements, both in relation to wages and also holiday entitlements.

Government agencies do enforce these requirements and particularly regions like Hawke’s Bay with heavy reliance on seasonal workers can be subject to scrutiny from IRD, MBIE and NZ Immigration.

 If you have a dispute, a claim or an audit you will need to prove your version of the facts with hard evidence – usually documents. This is the moment when you really wish you had done the dreaded paperwork. For small employers this may seem daunting but it doesn’t have to be complicated. Get your basic essentials sorted which are written employment agreements for all employees and adequate payroll records. Then when stuff happens with staff, as it inevitably will, write it down:

  • Record any changes to terms of employment such as hours, pay, duties
  • Keep notes of discussions about performance
  • Document disciplinary action such as warnings
  • Recorddiscussionsaboutrestructuring and changes to roles
  • Plus keep your documentation up to date with changes in legislation

When an issue arises, if you are not able to confirm that things were discussed, or agreed, and that the correct process was followed you are vulnerable and it can be costly.

In small teams there is generally less formality as you would expect, and most issues are dealt with in person. This is ideal for reaching understanding and agreement but not helpful when down the track the details need to be confirmed. Recollections can be inaccurate and things can be re- interpreted through a different lens based on subsequent events. A representative or support person can put a very different spin on discussions and agreements that both parties were quite happy with at the time.

Depending on the situation, your records don’t necessarily have to be formal letters – an email, a diary note, a note in an app or on-line appraisal system for example, are equally valid. These don’t have to be lengthy and they can be written in plain language rather than legal technicalities. However, if you are unsure or there is an element of risk involved take advice about the records you need to have in place.

Under Attack from Cyber Crime

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WannaCry, the recent global cyber-attack highlighted the threat our businesses face from the online world. This attack wasn’t hugely successful when putting into context of the number of devices it infected worldwide, but it did generate a discussion on what the future holds for future threats.

The ease of which this threat was curtailed may not be the same going forward unless we invest time and resource into protecting the world from future attacks. In order to do this the manufacturers and businesses that operate in this space will need additional support, which may or may not be through government regulation.

We have an expectation that computers must be inexpensive and full of software, this though is at the expense of security and reliability. So it’s common for the machines we use to have vulnerabilities that attackers find easy to exploit and as we look at the number of connected devices growing exponentially the problem could be significant for some businesses unless a solution is found to address the issue.

Globally cyber security is a 1 Trillion dollar industry and growing. This year alone JP Morgan Chase will spend $500 million US on cyber security. Here at home the NZ government estimates cyber- crime cost New Zealand $257 million last year.

If we take a step back and define what cybercrime is then we can look at the issue from a holistic perspective. Cyber-crime is any crime that takes place using a connected device via a network of other connected devices. This then is a broad brush of crimes that include all that we generally think of when thinking cybercrime, DoS attacks, Phishing, Trojans, Spyware, brute force attack etc.

So who is doing this and why are they doing it?

It’s a complex question. Often it can be easy to do and some of the criminals do it purely for the thrill and kudos they receive. When it comes to the more organised criminals it isn’t so clear cut. Some is done for profit, but other attacks are done to cripple organisations and governments.

It can be profitable, while WannaCry netted only $100k it’s all profit. When looking at the opportunity for these hackers the internet has given them access to billions of people so that even a scatter gun approach can net return. Cryptocurrencies have also made it a little easier to hide the identity of the hacker, although not completely.

The future looks quite bleak in relation to being able to stop this so the current investment is likely to continue to rise until we address some of the questions the future will pose. The internet is no longer a web that we connect to. Instead it’s a computerised, networked and interconnected world that we live in. A world where we will have billions of devices connected and networked to make life easier.

And here lays the greatest risk.

I can’t help thinking back to the Y2K problem at the turn of the century. We didn’t know what could happen because we didn’t know what was connected to what and whether this had the capacity to error and crash some system.

What we do know for sure is the attacks will not stop while we continue to produce software that has vulnerabilities and still use weak passwords (the most common password is still 123456).

The biggest concern is identifying where these risks are, what the impact might be and how far reaching. If we take the growth of connected devices, it seems clear the ability for a massive global attack is going to occur unless there is some action by governments and manufacturers to address vulnerabilities quicker than we do today. In 99% of known attacks, security and IT professionals would have been aware of the vulnerability for at least a year.

What we can do in our own businesses is to address what we have control over. Making sure you are updating your system is obvious and has been talked about a lot. Another thing we can do is tighten up on passwords, we are just to blasé.

Iris scanners are already imbedded in the higher end smartphones and this will continue to become better with each new release. Many companies are now employing a dual authentication process, like Gmail and Yahoo has started to push notifications out so you don’t need a password to access email.

But I don’t think manufacturers are the ones who can fix the problem. In the end the solution is a multilevel approach from manufacturers, governments and consumers. If we continue with low cost devices and low cost deployment we will continue to experience attacks that easy to do but become increasingly harder to isolate for the billions of connected device.

The question I would leave you with is if you can address the one thing in your business what would that be?

How Efficient is Too Efficient

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Obviously resource management involves the consideration and management of competing interests, or if not ’competing’ certainly ‘different’ interests. That’s the democratic society we live in, and one person’s frustration can be another person’s preferred outcome.

It’s the fact we’re different and come from different perspectives that it seems so hard to agree on an approach, and people often question whether others actually understand the perspective they’re coming from. Of course they don’t – but do you understand theirs?

This isn’t a new point to raise, and there are all sorts of methods and best practice approaches that can be adopted to raise awareness and balance competing views to arrive upon an outcome, but I’ve been quite taken by the irony that can be seen within our sector and it’s through this lens that a few more other observations can be made.

I’m loving the recent ‘feel good’ craze with electric cars. Don’t get me wrong, gradually moving away from fossil fuels isn’t a bad idea, but one could say that we’re only in the position to make electric cars relatively easy because of our supply of electricity, and I recall a lot of opposition to wind turbines and hydro-schemes.

I also find it ironic how New Zealand is so keen to tackle climate change even though our efforts may only be a drop in the ocean compared the impact of other countries. With our global citizen hat on – are we focusing our resources in the areas in which we can make the biggest difference? Are we being a good global citizen if we’re not?

Even locally I wonder what we’re doing. Hawkes Bay has great potential as a food growing hub. Talking about being a global citizen – we could help feed the world as well as enjoy some great growth, and what I mean by this is more jobs and more people enjoying a greater meaning in life – great for society yes? All we need to do is manage our water to resolve availability issues. Ironically, we may have done the complete opposite. Do we really appreciate the social implications on the communities most affected?

I think one of the biggest ironies is this obsession for efficiency. Take efficiency to its logical conclusion and this is unemployment. Perhaps the smartest thing we can do is resist ‘too much’ efficiency. I recall a time when I was in Bali and found it interesting how the resort had a man stopping traffic for you to cross the road. I learnt to cross the road some time ago and thought this was a bit over the top, but then I realized that this person had a job and they had meaning. I would be prepared to have a little more inefficiency in my life if it meant preserving someone’s meaning.

You could take this further and suggest the best public policy we could have is to resist ‘too much’ technology. Obviously we don’t want to resist it all, and this is probably the challenge, but if we’re developing technologies that are replacing jobs or slowly leading us away from healthy lifestyles, is that a future we want? Is it actually good for us? What would the world look like with less jobs but more people – and potentially unhealthy people – a world full of massive social challenges that’s what.

How does all this relate to resource management, well the RMA speaks of our environmental, economic, cultural and social wellbeing, but it seems that while people have pretty strong views on other people’s practices or ideas, and whether there’s any elements of irony or not, the social part of the equation seems to have dropped out, and it seems that we’re at risk of beginning to mess with the very basics of our social structures.

Take the primary sector, this is a delicate market, and while society could load up the responsibility on this sector to enhance our environment, could one of the implications be robots to pick our fruit rather than paying salaries due to increased operational costs? Forget thinking the implication maybe asking society to pay a few more cents per apple, technology like this probably isn’t that far away and the more likely implication is massive jobs cuts in the sector. What impact would this have on society?

The point here is that we need to be very careful, and very aware of the trajectories on which we’re setting our society when developing approaches around resource management or deciding on ideas, particularly when our technological advances have the potential to manifest as a foe rather than a friend.

When your conservative portfolio is not so ‘conservative’

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The word ‘conservative’, particularly when it comes to conservative investment portfolios, usually suggests stable, slow-to-change and steady-as- she-goes, but in these changing times, there are early warning signs that a ‘conservative investment portfolio’ may no longer be the haven that it once was.

Most people who don’t have a huge appetite for risk, often because their earnings potential is declining due to age or because they need the income from their investments, will traditionally opt for a conservative investment portfolio. A conservative portfolio may be 75% bonds and cash, and just 25% of so-called riskier growth assets or shares – but the world is a different place from what it was five or ten years ago.

We are living in times of unprecedented and historic low-interest rates, not just here in New Zealand – where the Reserve Bank of New Zealand just recently left its official cash rate unchanged at 1.75% – but also in many of the world’s major economies. For example, the Bank of England last year cut interest rates to .25% for the first time in its 322-year history (it has since gone up to .50%).

Interest rates likely to rise

Essentially this means that cash investments are currently returning next to nothing, which puts pressure on people who rely on their investments for income. Meanwhile, inflationary pressures are increasing here in New Zealand and abroad – recent moderations in inflationary growth, due to a fall in energy prices, are unlikely to be long-term as low unemployment continues to exert upward pressure on wages and, as a consequence, prices.

The New Zealand Reserve Bank also needs to keep money flowing through our economy which, as it strengthens, may lead to rising interest rates to balance inflation.
On top of this, economists are also warning that we can expect to see higher interest rates due to positive growth outlooks, possibly early or mid-2018 here in New Zealand, while the Federal Reserve in the United States has already increased interest rates twice this year. At the moment, New Zealand’s banks are struggling to find cash to lend because the low-interest rate environment is deterring local investors from cash investments. As a result, local banks are having to source funds overseas, where rising interest rates are in turn making those funds more expensive. Ultimately, this will likely cause our banks to increase interest rates locally to attract ‘cheaper’ money. The upshot is that interest rates are likely to rise and, while this is good for cash investment returns, it’s not so good for the other half of your income portfolio, bonds.

Secondary market risks loom for bonds

Traditionally part of a portfolio to offer liquidity and flexibility, bonds can be defined as a ‘debt investment’, because when you buy bonds, you are essentially loaning money to an entity like a corporate or government e.g. government bonds.

Bonds can comprise around 40% to 75% of some conservative portfolios. When cash starts to outperform bonds, however, the latter ends up getting stuck on third base, resulting in a secondary market risk for investors with a large bond presence in their portfolios.

A good analogy for this is to think of your investment portfolio like a rental property. Think of your cash investment returns as the rental returns you would earn from a property. Bonds, on the other hand, are like the capital value of the property, which may decline as interest rates go up.

If your bonds are returning 4.5% interest and interest rates rise beyond 4.5%, you can no longer sell those bonds at their full value, (although you can sell at a marked down discount) because cash is worth more.

What’s more, you may be stuck with those low performing bonds until they mature years later, for example in 2020. We call this secondary market risk, and it is just such an eventuality that is making your traditionally conservative investment portfolio a riskier proposition than in the past – even for moderately conservative portfolios which consist of 60% income assets and 40% growth assets.

In summary, conservative investment portfolios may not be that conservative in a rising interest rate environment.

Time to challenge thinking about what’s conservative

Naturally, everybody’s needs are different, and each investment portfolio should be structured according to your individual goals and needs – based on professional investment advice – but perhaps it is time to challenge yourself with some ‘outside the square’ thinking when it comes to structuring your conservative investment portfolio. It is possible to achieve income and liquidity (traditionally viewed as the domain of bonds) from growth assets without being locked into low-yield returning deposits. Managed funds, for example, offer ways to achieve liquidity as well as solid returns, so long as you are prepared to take a portfolio-wide view of your investments.