Challenging The Tried And True

Challenging The Tried And True

Dear Colleague

In politics and business it's tempting to stay with the tried and true - do business with the companies you've always done business with, put the work the way of old school mates, whose values and psychology you understand.

But in these tough times is it the right thing to do? Do these "old boys" networks actually do more harm than good and stifle competition?

Recently we have seen John Key throw some of the most important work in the country the way of people from his "old boys" network - Mark Weldon headed up the Jobs Summit (and is now lecturing SOEs to "think privatisation") - John Allen also took a prominent role at the Jobs Summit and is now CEO of MFAT.

The question which needs to be asked is whether dealing through the "old boys" network is getting the country in this case, or your business, the best deal. The respected "Economist" doesn't think so -

"Old-fashioned networks do no good either to companies or to society. When jobs and deals go to the good old boys, networks tend to undermine meritocracy. They encourage bosses to recruit people like them.

Being mostly male and white, cliques tend to encourage discrimination against women and ethnic minorities."

Here's The Main Report's take on the issue www.themainrepoprt.co.nz

"Jobs Summit Well Meaning - Did Institutional Leaders Lose Their Way?

John Key has defended the Govt's record in protecting and creating jobs. He says ideas are still flowing through from the Job Summit (which has saved a mere 345 jobs so far) and other areas, and these will make a difference.

He cited the purchase of Queens Wharf and tourism marketing as examples. He believes the state of the economy vindicates the decision to have a "rolling maul" and not a "big bang" approach to stimulating the economy.

The PM says the credit crunch is now easing, with the "chasm" facing the banking sector late last year closing. But he notes there were still issues in the financial sector and the pain of the economic recession to go through.

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He points out one concern is if the exchange rate rises too rapidly it will hurt exporters and fuel consumer spending due to cheaper imports. In fact "it would run the risk of derailing the recovery process."

Key and his Govt have given NZ's top end of town businesses the chance to come up with solutions. The institutional leaders have failed to take the initiative. Perhaps the Govt should now look at the innovative entrepreneurial engine room of NZ Business - the SMEs - to provide some of the answers.

They could certainly do no worse than those involved in the Jobs Summit talk fest. There are answers to the problems which are holding NZ's economy back - the Govt just needs to look elsewhere."

For some the "old boys" network is a boon. For most of the economy, it is not such a great thing. It means people rather than ideas are being promoted. It's a business version of playing the man not the ball.

The Economist quotes Nicolas Veron of Bruegel, a European think-tank, who says "networks make it hard for new firms to emerge in France, since established ones are conservative about whom they do business with.

As a result...you often see successful young firms are business-to-consumer rather than business-to-business."

In The New York Times Thomas L. Friedman says "the country that uses this crisis to make its population smarter and more innovative - and endows its people with more tools and basic research to invent new goods and services - is the one that will not just survive but thrive down the road."

Our "old boys" network has so far failed to realise this. 9-day fortnights and cycle ways will not bring prosperity.

Plenty of food for thought.

To see the full Economist article go to http://www.economist.com/businessfinance/displaystory.cfm?story_ id=13914661

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