Business Edge Winter 2015

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© 2015 BDO. All rights reserved. Business Edge is a BDO New Zealand publication.
WINTER 2015
www.bdo.co.nz
Audit | Tax | Advisory
BUSINESS EDGE
INCENTIVISING
FOR SUCCESS
GOING
PUBLIC
BEYOND THE
BUZZ
A SENSE OF
PURPOSEKylee Potae, Head of Maori Business BDO Gisborne

3. Business Edge - Winter 2015 1
WINTER 2015
Business Edge will provide insights on
key issues impacting your business.
CONTENT
Incentivising for success 2
Going public 4
Social media - beyond the buzz 6
A sense of purpose 8
Welcome, to the latest edition of Business Edge. We are excited
to celebrate our one year anniversary of this publication and
hope you find the content both relevant and thought provoking!
In this edition we discuss employee share schemes. Increasingly,
businesses are wanting to compensate and incentivise key employees
with share options. We explore the most common types and some
of the things you need to be aware of to ensure they work well for
both the individual and the company. Our second article is on Initial
Public Offerings (IPOs). Should your company consider an IPO? We
also discuss what issues you need to consider to make it a success. In
our third article we look at social media and why it is relevant for ALL
businesses today. Who should own your social media strategy and
how do you measure success? Our final article is on governance and
we provide a planning framework which we have found effective for a
number of our clients.
We love to get your comments, so if you would like to let us know
your thoughts on these articles, ideas or suggestions for future
articles, please feel free to email them to editor@bdo.co.nz
Best regards,
Adam Davy
Head of Advisory
BDO New Zealand
BUSINESS EDGE

4. Business Edge - Winter 20152
INCENTIVISING
FOR SUCCESS
One set of levers that employers are pulling with increasing
sophistication in their efforts to attract and hang onto top people
is employee incentive schemes.Varying combinations of bonuses,
shares and other incentives are being created to align managers with
shareholders around company goals, performance and return objectives.
However, there are pitfalls to be avoided in the quest to get it right, so
we offer a few tips below in this highly competitive arena:
Plan your incentive scheme
You spend considerable time and effort in planning your business
strategy, and incentive scheme planning should be no different.
After all, we’re talking about how incentives can drive your human
and company performance. And ‘human’ is a crucial word: aligning
behaviours with company objectives and value.
Among the questions that need to be answered when structuring the
scheme is whether the design balance is right in regards to short and
longer-term goals.
As there are a number of different types of schemes - each with
different structures, advantages and disadvantages - it is important to
choose a structure that suits your needs.
Do it early
The opportunity to align the performance and behaviours of your
leaders to company objectives and shareholders is strongest early on.
If you do this later, as your company grows, you might limit the
incentive and return opportunity for your key people. It could also cost
you more to change an existing scheme, and the tax consequences
could be complex.
The week before you undertake an IPO is not the ideal time to ask
yourself how you might reward senior staff who have been there a long
time and will help the company to grow. Although investors and analysts
want to see management aligned well past an IPO date, you don’t want
to erode profitability through a hastily-conceived incentive scheme.
Make sure it is ‘by the book’
The Financial Markets Conduct Act 2013 (FMCA) reformed how
companies offer shares to the public.
It provides specific exemptions to employee share schemes from the
usual disclosure and reporting requirements. However, the exemptions
are not absolute, as you are still required to provide certain warning
statements and other information.
It is therefore important to ensure your scheme is in compliance with
the FMCA.
Box clever for a successful, incentivised future
Whatever you are aiming to achieve, consider the consequences of
the incentive structure, as they can be major. Implementing a scheme
without fully comprehending the wider tax, valuation, accounting and
regulatory issues can result in an ugly scenario for your business.
For more information, contact your local BDO Adviser.
New Zealand: a land of robust economic growth, low
unemployment levels and no capital gains tax on
shares.This mix ensures that attracting, retaining and
incentivising top talent around company performance
and shareholder returns has become a red-hot topic for
any ambitious organisation.

5. Business Edge - Winter 2015 3
10 KEY QUESTIONS:
Our job is to create the right blend that maximises the outcomes
for staff and shareholders while minimising associated issues. Our
starting point is therefore to ask these questions:
1. What are you trying to achieve?
2. How much do you want to share?
3. Do you want senior management as shareholders, or as incentivised
managers?
4. Are some senior management family members?
5. Can your senior management afford to pay for the shares?
6. Is there some form of liquidity event on the 3-5 year horizon – an IPO
or trade sale?
7. What form of incentives structure would drive the right behaviours?
8. Is the business going to generate dividends or churn out cash (or no
cash) for the next five years?
9. Do you want to remain a shareholder, gain a business partner, or sell
the business to senior leaders?
10. What happens if…?
What schemes are out there?
Share options schemes Employees are granted an option to exercise the right to convert options into shares at a particular future
time and at a particular exercise price. Options typically confer no voting or dividend rights until the option is
exercised.
Long-term incentive schemes Employees are granted an option to exercise the right to convert options into shares at a particular future
time and at a particular exercise price. Options typically confer no voting or dividend rights until the option is
exercised.
Share loan schemes The employee obtains a loan from the company to purchase shares in the company. The loan has certain
repayment requirements and the employee may have other restrictions on how the loan and their shares are
dealt with under the terms of the share scheme
Phantom share schemes Employees have the right to the increase in value of the shares after a certain period of time without buying
shares. If an employee is given 100 phantom shares at $1,500 per share, and the company increases earnings
by its 40% target when a second valuation takes place, the shares would be worth $2,100 per share -
resulting in the employee’s phantom shares increasing from $150,000 to $210,000: a gain of $60,000.
Employee Benefit Trusts
(EBT)
EBTs are established to benefit employees with equity-based incentive plans that include bonus plans, share
options plans, and phantom share options. Companies sell shares into the EBT, which then facilitates share
acquisition for employees through individual agreements and creates a market for private company shares.
Over time, senior management become beneficiaries of the EBT on individual arrangements. If they increase
the value of the company according to agreed markers, they receive a share in the increase in value.
* These examples provide a general overview of some of the types of schemes available. However, there are many variations and derivatives of these, particularly as they are
tailored to the particular needs of the company. Each scheme has various advantages and disadvantages which need to be evaluated according to the particular needs and
size of your organisation before choosing the most appropriate scheme for you.

6. Business Edge - Winter 20154
In BDO’s experience, successful IPOs are characterised by a range
of common factors.To help other businesses considering an IPO, we
recently brought together a range of senior people with experience in
the area, including experts from BDO’sCorporate Finance team, for
an IPO seminar. In this article, we’ll discuss the key themes from the
seminar including the potential benefits of IPOs, the key success factors,
and the issues to consider along the way.
Why go public?
The most obvious benefit of an IPO is that it provides access to capital
to grow your business.That’s a particular concern for the 90% of New
Zealand mid-market businesses ($10-$50 million turnover) that are
privately owned. For the CEOs of these businesses, balancing their growth
aspirations with the demands of servicing existing clients is a major issue –
particularly when they’re so busy working in the business that there’s little
time to work on it. Opening up capital for growth is key for this important
sector, and an IPO can be an effective way to do it.
But the benefits of an IPO can be much wider than accessing capital. Our
experience, and that of many speakers at the seminar, was that going
public can also result in a better, stronger business. According to NZX CEO
Tim Bennett, most business who list report that it’s been good for their
business. Here are some of the reasons why:
▶▶ Better governance and business processes - When you’re a private
company, it’s a little easier to let those things slide. But when
you’re in the glare of the public spotlight, you need to have rigorous
governance and business management processes in place – which is
good for the business.
▶▶ Profile – as a public company you have a much higher public and
media profile. While that can be uncomfortable, it can also be a big
competitive advantage.
▶▶ Credibility – as a public company customers, investors and suppliers
see you in a different light – especially in overseas markets where
listing is seen as the ultimate business aspiration.
▶▶ Transparency – your share price gives you an immediate and constant
measurement of your business performance. As a result, it drives
you to constantly think about your customers and their needs – and
ultimately make better business decisions.
▶▶ Clear succession – listing on the share market provides a clearer, easier
exit strategy for the founder, and helps the business focus on ensuring
a smooth transition.
It’s not always a good time to undertake an IPO. Currently, though, a low-
interest rate environment and the growth of KiwiSaver funds mean there
is a window of opportunity.The emergence of the NXT market, with less
complexity, simplified listing rules and a new approach to disclosures, has
also created an easier pathway for smaller businesses.
Key success factors
Planning – and more planning
IPOs take time – usually a lot more than you expect. A detailed timeline,
with key milestones and checkpoints, is essential to help you stay on track
and avoid chewing up even more time and resources. Start the planning
process by revisiting exactly why you’re undertaking an IPO in the first
place and how much money you need to raise, as that clarity will help you
with the important decisions you’ll need to make along the way.
GOING
PUBLIC
Going public can have many
benefits. It can be a pathway
not only to growth, but
also to a stronger, more
sustainable business. But
it’s also not something to
enter into lightly. While the
rewards can be huge, getting
to an IPO can be a lengthy
process requiring significant
resources.

7. Business Edge - Winter 2015 5
never set down in a coherent way or exists largely in the head of the owner.
But to convince investors, the investment statement needs to articulate
your strategy in an accessible and compelling way. Having that clarity is
a significant benefit to your business going forward, whether you proceed
with an IPO or not.
The new Financial Markets Conduct Act should make it easier to tell your
story.The focus of the new act is on providing ‘clear, concise and effective’
information for investors, rather than a plethora of technical details. In
preparing your investment statement, focus on what typical investors
really need to know about your business, such as identifying risks that are
particularly significant and how likely they are to occur.
Establishing a rigorous verification process is also critical. Every fact or
number in the Investment Statement needs to be verified and documented,
so a methodical process for cross-referencing data will save a lot of time
and avoid potential issues later on.
Staying on message
Consistency is key. It’s vital that everyone involved in the IPO, especially in
the sale process, is reading from the same script. Conflicting messages will
not only confuse the market, but may lead to issues further down
the line.
How BDO can help
BDO has extensive experience in helping clients prepare for and execute
successful IPOs, including assisting with IPO planning, preparing a
prospectus and independent accountant’s report, liaising with the
Companies Office and NZX assisting Directors to understand their
obligations, assessing your readiness for an IPO, and more.To find out
more, contact your local BDO Adviser.
If you want to find out more about NZX visit www.nzx.co.nz or the new
NXT market for small high growth businesses visit www.nxt.co.nz.
Assembling the right team
A successful IPO requires input from a lot of different people skills and
expertise – so it’s important to get the right people around the table. Apart
from the owner and company management, specific roles you’ll need to
think about include:
▶▶ Lead Managers – as their role is to sell your business to the market, it’s
essential to ensure they have a good understanding of your industry.
▶▶ Independent Directors – they play an important role in balancing the
natural enthusiasm of the owner and management with an objective
assessment of the business and in particular, it’s growth potential.
▶▶ Investigative Accountants – getting your numbers and assumptions
right is key. The Investigative Accountant’s role is to review and
provide assurance on the historics and future forecasts.
▶▶ Legal Advisers – there is a significant amount of documentation that
needs to be produced including offer documents, banking agreements,
employment contracts and more, all of which require legal review.
▶▶ Tax Advisers – IPOs can create complex tax issues, from the tax
treatment of employee share plans to dividend payments to
shareholders in other tax regimes. Getting a tax adviser involved at an
early stage will avoid nasty surprises down the track.
▶▶ Advertising / PR professionals – don’t underestimate the importance
of profile and media presence in the success of your IPO. To sell the
company to investors, you need a compelling story.
▶▶ FMA / NZX – staying in touch with the FMA and NZX throughout the
process will make it easier to ensure you meet their requirements.
They are also an invaluable source of knowledge, information and
resources.
The investment statement
The investment statement is at the heart of the IPO process – and it’s also
one of the major benefits for your business. Often, your business strategy is
Other issues to consider
Business as usual
during the IPO
process
IPOs inevitably consume a significant amount of management focus. You may want to consider ‘backfilling’ some key
positions to ensure you’re able to continue to meet your customers’ expectations during the process.
The importance
of good record-
keeping
Going public by definition exposes your business to a whole new level of scrutiny.That’s why it’s important to take good
records during the IPO process and in particular, to document all key decisions. Business is uncertain – but if things don’t
turn out as expected after the IPO, being able to demonstrate a considered, well thought through decision-making process
will go a long way to avoiding potential issues.
Have a Plan B In business, things can change quickly – often for reasons outside your control. It’s important to have regular checkpoints in
your IPO process so you can assess whether it’s still the best option for your business – and to have a Plan B if it isn’t.
“Balancing your business growth aspirations
with the demands of servicing your existing
clients is a major issue for all CEOs”

8. Business Edge - Winter 20156
Social media is strengthening its place as a major part of the day-to-
day lives of people across the globe. In little more than a decade, social
media has been adopted at an unprecedented speed and on a truly
staggering scale.Worldwide it’s estimated there are:
▶▶ 1.8 billion social network users
▶▶ 4.5 billion ‘likes’ a day on Facebook
▶▶ 500 million tweets sent a day on Twitter
▶▶ 5 million images uploaded a day on Instagram
In terms of devices where social media is accessed, mobile growth is
clearly leading the way. This is evidenced in New Zealand which has a
strong existing base of smartphone and tablet users (2.2 million and
1.0 million, respectively). According to the most recent report from
the Interactive Advertising Bureau of New Zealand (IAB NZ), mobile
advertising spend in Q4 of 2014 grew by a whopping 119% year-on-year.
Though they don’t break this down further into sub categories, there’s
a strong sense that a big part of the increase correlates with the growth
in accessing social media from mobile, possibly making it one of the
hottest digital trends in the country. Another recent report from the IAB
in Singapore found that 48% of New Zealand’s population with active
accounts on top social networks, access them via mobile.
Your customers, your competitors, your business partners, your kids, your
neighbours and your friends – they’re all on social media. So you need to
be there too – don’t you?
For most businesses, the answer is undoubtedly yes. But many make the
mistake of jumping into the social media frenzy without really asking why
they’re there, and what they hope to achieve.
Investing in social media is no different to any other business investment.
You need to think about how it will contribute to your business strategy,
and how you will measure that contribution. You also need to understand
the costs and risks involved.
To be effective, you need to provide a continual stream of engaging,
relevant content and invest resource in creating an ongoing conversation
with customers and other stakeholders.
As many businesses have found out to their peril, social media is a two-
way conversation that cannot be ‘managed’ in the traditional sense.
Negative feedback from disgruntled customers used to be confined to
a small circle of friends and family. With social media it can reach an
audience of millions - in seconds.
Take for example, the “United Breaks Guitars” case, where a Canadian
musician’s guitar was allegedly severely damaged by United Airlines
baggage handlers. When United informed him that his miniscule claim
was ineligible for compensation, he immediately created a song on
YouTube where he sang that he “alerted three employees who showed
complete indifference towards me”. The YouTube clip amassed 150,000
views within one day, prompting United to contact Carroll saying it
hoped to right the wrong. Within four days of the video being posted,
United Airlines stock price fell 10%.
So it’s important to have a clear strategy for social media – and a
clear link back to your overall business strategy and reputational risk
management framework.
Who owns your social media strategy?
Social media is often led by the marketing department, as it’s seen as
simply another channel for connecting to your market. But as the list of
potential applications above shows, it can have a significant impact right
across the business – so the whole business should have an input into
your social media strategy. For example, consider establishing a social
media steering committee with representatives from throughout the
business. That way you can avoid:
▶▶ Taking too narrow a view and missing out on the opportunities social
media presents to transform your business, and:
Social media can contribute to a wide
range of business goals. The most
appropriate social media approach for
you depends on your business strategies
and what you’re trying to achieve.

9. Business Edge - Winter 2015 7
▶▶ Taking a piecemeal, uncoordinated approach to social media that is
not aligned with your overall business strategy.
The steering committee should also establish guidelines for the use
of social media in your business – e.g. what channels you will ‘play’ in,
who can take part and in what capacity, what resources are required to
achieve your social media goals, your social media ‘tone’ and ‘voice’, and
so on.
Measuring success
In the same way, you should take an organisational wide view of how
you will measure the impact and success (or otherwise) of your social
media initiatives. There are plenty of tools you can use to measure
various aspects such as likes, click-throughs, sentiment, followers etc.
These are attractive because social media is hard to measure and they
provide some hard data. But the key is to focus on your intended business
outcomes rather than just on activity.
Social media measurement is not easy and it’s an emerging and hotly
debated topic. Likes, click-throughs etc. have their place, but they should be
used as part of a multi-disciplinary dashboard approach. It should include
both hard and soft measures, and should focus on the contribution of social
media to overall business goals. Social media should always be aligned with
your business strategy – not an end in itself.
How can BDO help?
BDO has extensive experience in working with organisations to help
them develop effective ways to measure their marketing including
social media spend.
This article was authored by our Brand Marketing effectiveness specialist,
Tim Gacsal, Associate at BDO Auckland.
LINKING SOCIAL MEDIA TO
YOUR BUSINESS STRATEGY.
SOCIAL & BUSINESS GOALS
Some different ways social media can support key business objectives:
▶▶ Increasing reach and awareness – this is the starting point for most
businesses and the most obvious reason to get involved in social media.
Customers increasingly use social media networks as a source of
information and opinion about products, services and brands. A social
media presence can connect your business and your brand to a huge
audience across different market segments and geographies.
▶▶ Thought leadership – social media platforms such as Twitter and
LinkedIn are increasingly where people go to stay up to date with
latest thinking on key issues in their field. This has particular relevance
for professional services firms, who have traditionally used ‘content
marketing’ (e.g. the creation of white papers, opinion pieces and journal
articles) to sell their firm’s expertise.
▶▶ Building profile – for professional services firms, the profile and
reputation of their partners and senior people is a key driver of
new business. Increasingly, clients seeking professional services are
reviewing the LinkedIn profiles of key staff as well as their social media
posts when they are considering engaging a firm.
▶▶ Build relationships with key influencers – Many important
influencers have a large number of followers on social media (LinkedIn
has even established a global influencers programme which includes
luminaries like Sir Richard Branson and Bill Gates). Thoughtful
contributions to their posts and conversations can help to enhance your
own profile.
▶▶ Increase marketing effectiveness - Social media can be an effective
way of leveraging existing marketing and corporate responsibility
activities. Paid search, banner ads and posts can link to campaign pages
on your website, while Facebook and Twitter are effective forums for
stories about your sponsorship or community activities.
▶▶ Improve customer service – Customers increasingly expect that
businesses will be on social media. They also expect to be able to
interact with you there, 24/7.
▶▶ Increase website traffic – Social media is an important factor in
search engine algorithms. Building your social media presence can help
improve your site’s ranking for organic search.
▶▶ Reputation and issues management – One of the major advantages
of social media is the ability to listen in to what people are saying
about your brand and your business.
▶▶ Market and customer research – Social media networks offer huge
opportunities to gain deep insights on what both your customers and
competitors are doing and saying.
▶▶ Improve recruitment – Networks like LinkedIn offer access to, and
with, a huge pool of potential employees.
▶▶ Internal collaboration – Social tools like intranets, executive blogs and
other knowledge sharing tools can encourage your staff to collaborate
more effectively – especially over multiple locations.
1.8 BILLION
SOCIAL NETWORK USERS
4.5 BILLION‘LIKES’ A DAY ON FACEBOOK
500 MILLIONTWEETS A DAY ON TWITTER
5 MILLIONIMAGES A DAY ON INSTAGRAM
LINDA COLES SEMINAR
Interested in finding out more about how you can use
Social Media to your advantage? We have an exclusive
Social Media breakfast seminar hosted by Linda Coles, one
of LinkedIn’s top 500 influencers, inAugust. For more info
go here: www.bdo.co.nz/social-media

10. Business Edge - Winter 20158
When people are united behind a clear vision and strategy, amazing
things can happen.The BlackCaps’ incredible run in theCricketWorld
Cup is one example.The global success ofXero, driven by its vision of
‘beautiful accounting software’, is another. But often, there’s a gap
between the vision and strategy set by the directors or trustees, and
what the organisation actually does.
When the vision isn’t reflected in what happens ‘on the ground’, it’s
enormously frustrating for directors and trustees. They don’t understand
why people in the organisation just don’t seem to ‘get’ the vision they
laboured so long and hard to create.
It’s frustrating for people in the organisation too. They’re working hard,
doing what they think is right for the organisation – but somehow it
doesn’t seem to meet the expectations of the board. So what’s behind
that gap between the vision and strategy - and the way they are
interpreted and executed?
Communication breakdown
In our experience, one of the fundamental issues is around the clarity of
the vision, and the way it’s expressed.
To achieve out the board’s vision, staff first need to understand what it
means for the organisation, and how success will be measured. More
importantly, they need to know exactly what it means for them - and
how they will be measured.
It sounds simple, but it’s not - and that’s the cause of much of the
frustration.
Often, Directors, Governors and Trustees have broad conceptual goals,
based on a desire to leave the organisation in a better position after they
leave. For example, they may want to be ‘the leader in their market’ or
‘the pre-eminent provider of widgets to New Zealanders.’ While those are
admirable goals, they’re also relatively ‘loose’ and open to interpretation.
The more stakeholders you have, the more interpretations there are likely
to be. In collectively owned Maori businesses there are by definition a
wider range of ownership interests than most other businesses. It’s not
surprising, therefore, that the outcomes are often different from what
board members had in mind.
In our experience of working with Maori Trusts, the owners and Governors
also have much longer horizons than most commercial businesses. They
are concerned not just with the next 3-5 years but with the next 30 – 50
years or longer. Because their asset base – predominantly their land – will
never be sold, they take a long-term intergenerational view. That means
that they may be less concerned with maximising opportunities today,
and more concerned with ensuring sustainability for future generations.
However, the farm managers they employ may have short-term financial
targets to meet in terms of getting the best prices for their sheep, beef
or crops – so they are very much concerned with maximising current
opportunities. The result is often that while those financial targets are
achieved, that may come at the cost of some of the key principles that
are important to owners and Governors, such as long-term sustainability.
We often see business plans being driven by budgets rather than strategy.
And when that happens, unintended consequences can result.
Business Planning should always start with a clear understanding of the
purpose of the organisation, how that purpose will be achieved, and how
it will be measured. A budget is then developed based on the resources
needed to carry out the agreed strategy – not the other way around.
Business planning is not a simple process. In our experience having a
structured planning framework is key to success. There are many models,
A SENSE OF
PURPOSE
Kylee Potae,
Head of Maori Business
at BDO Gisborne

11. Business Edge - Winter 2015 9
but below is one that we’ve found effective in helping many Maori Trusts
get greater clarity on their vision – but the process can be applied to any
business.
A Business Planning Framework
We view the business planning process as having four distinct steps:
Step 1: The strategic plan
In this step Directors and Governors agree on the vision and mission of the
organisation, and a high-level view of its goals and objectives. For clarity,
this should cover no more than 4-6 key areas (otherwise it becomes
difficult for stakeholders to understand), and should describe the things
that are fundamentally important to the owners and board.Typically the
focus areas will be something like:
▶▶ Production
▶▶ Financial
▶▶ People
▶▶ Social & cultural
▶▶ Environmental
Having a focus on each of these areas gives managers and staff a wholistic
view of the business, rather than focusing for example on narrow financial
goals. It helps them understand not only what you want to achieve, but
also what that would actually look like in the real world, to mitigate the risk
of different interpretations. It also enables conversations about how you
prioritise and trade off between sometimes conflicting objectives.
In each focus area, directors should the define critical success factors
and key performance indicators, so there is a clear understanding of the
outcomes they are seeking in each area.That’s crucial, because unless you
know with crystal clarity what it is you want, you are unlikely to get it.
Getting to agreement can make your head hurt – but in our experience it is
often the difference between success and failure.
The extract below illustrates the type and level of information in a typical
strategic plan. While it’s a farming example, the same principles apply
across all sectors.
Key focus area Objective Critical success factors Key performance indicators
Production Maximising livestock
productivity
• Ability to finish 70% own grown lambs
• Ability to finish all own grown cattle
• Ability to market 80% finished lambs
• Ability to market 80% finished cattle
• Development of individual productivity
performance programme
Environment Utilising resources in a
sustainable and scientifically
based manner
• Forage and nutrition plans
• Improving our environmental footprint
• Completed nutrient budget and long term plan
• Land Environment Plan to be completed
“Bridging the governance
gap from a Maori business
and farming perspective”
At its heart, good governance is about making sure
organisations ‘do the right thing, in the right way.’
Of course, ‘the right thing’ for one organisation
may not be ‘the right thing’ for another. It depends
on the organisation’s vision, and their strategy to
achieve it. Setting that vision, of course, is another
crucial role of governance.

12. Business Edge - Winter 201510
Key focus area Objective Critical success factors Key performance indicators Completion
Production Ability to finish 70%
own grown lambs
• Development of more high
quality forages
• 300 ha to be planted this year May 2016
• Selection of ram genetics in
line with finishing policies
• Board approval of any genetic changes August each year
Step 2: The business plan
In this step, management are responsible for taking the strategic plan
and turning it into a detailed operational business plan. For each critical
success factor (CSF), they set out how they will achieve it, by when, and
how success will be measured. The extract below shows how one of the
CSFs from the above example might be broken down in the business plan:
This process is key to bridging the communication gap that often exists
between different levels of the organisation:
▶▶ It ensures that the board and management are aligned, with
an agreed view of what needs to be achieved and how. (Giving
managers the responsibility for creating the business plan also
helps ensure they are committed to achieving it).
▶▶ Management can also use this with staff to ensure they understand
how their day to day role contributes to the overall goals of
the business.
Step 3: The Budget
Only when the strategic and business plans have been agreed does the
budget process begin. The goal is to ensure there is enough money and
resources to achieve all the parts of the plan. If there isn’t, management
must negotiate with the Board to obtain more funding, reprioritise, or
delay some aspects of the plan until more funds are available. The key
point is that the budget is an outcome of the business strategy, rather
than driving it.
Step 4: Reporting
A common issue with strategic and business plans is that they are created
once, amidst much fanfare, and subsequently left to languish in a drawer
while the business carries on as normal. The key to keeping the plan alive
is a regular, simple reporting process.
Managers should report directly to the Board on the key metrics identified
in the business plan. This reporting should be a feature of every board
meeting (we have found that a simple red-orange –green traffic light
report on progress towards the 4-6 Key Focus Areas works well, as it’s
easy to create and interpret).
The process of regularly reporting and discussing issues keeps the
strategic plan alive in people’s minds, and enables changes to be made
in response to changes in the business and the external environment.
It also helps keep everyone in the organisation focused on what’s really
important, rather than getting lost in the minutiae of business as usual.
As many boards in many industries will attest, delivering on their vision
isn’t easy. It takes discipline, accountability, and focus. But by following a
structured approach Maori businesses can greatly increase their chances
of bridging the gap between vision and reality – and achieving the true
potential of the Maori economy.
For more information, contact Kylee Potae, Head of Maori Business at BDO
Gisborne: kylee.potae@bdo.co.nz
STEP 1:
The strategic plan
In this step Directors and Governors
agree on the vision and mission of
the organisation, and a high-level
view of its goals and objectives.
STEP 2:
The business plan
In this step, management are
responsible for taking the strategic
plan and turning it into a detailed
operational business plan.
STEP 3:
The budget
Only when the strategic and
business plans have been agreed
does the budget process begin.
The goal is to ensure there is
enough money and resources to
achieve all the parts of the plan.
STEP 4:
Reporting
A common issue with strategic and business
plans is that they are created once, amidst
much fanfare, and subsequently left to languish
in a drawer while the business carries on as
normal. The key to keeping the plan alive is a
regular, simple reporting process.
1
Source: BERL: The Asset Base, Income, Expenditure and GDP of the 2010 Maori Economy
2
Source: Ministry for Primary Industries: Growing the productive base of Maori Freehold Land, February 2013

13. Business Edge - Winter 2015 11

14. This publication has been carefully prepared, but it has been written in general terms and
should be seen as broad guidance only. The publication cannot be relied upon to cover
specific situations and you should not act, or refrain from acting, upon the information
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