2014 Research Magazine

// 2014

BUSINESS.ECONOMICS.MELBOURNE

ECONOMICS

Footy clubs can’t buy success (yet), study finds

04

MANAGEMENT

Why aren’t we better at managing people?

14

FINANCE

The majority of Australians not saving enough for retirement

08

ACCOUNTING

Helping our cities breathe – accountants and botanists in world leading research

10

MARKETING

7 Secrets of the Ad Industry revealed

16

12%

GRADUATES OF CATHOLIC SCHOOLS

OVER THE LIFETIME OF THEIR CAREER COMPARED TO PUBLIC SCHOOL GRADUATES

EARN 12% MORE

15YRS

THE GAP IN WAGE GROWTH BETWEEN PRIVATE AND PUBLIC SCHOOLS DOES NOT EVENTUATE UNTIL

OF EMPLOYMENT EXPERIENCE

AFTER 15 YEARS

STUDIES SHOW THAT

IN AUSTRALIA ARE ENROLLED IN PRIVATE SCHOOLS

34% OF ALL SCHOOL STUDENTS

20% CATHOLICSCHOOLS

14% INDEPENDENT SCHOOLS

34%

CATHOLIC SCHOOLING PAYS 12% MORE

TO BE PRECISE

FBE.UNIMELB.EDU.AU02 BUSINESS.ECONOMICS.MELBOURNE

Authorised by: Dean, Faculty of Business and Economics. CRICOS Provider code: 00116. Intellectual Property: For further information refer to Statutes and Regulations. Copyright: The University of Melbourne 2013. Copyright in this publication is owned by the University and no part of it may be reproduced without the permission of the University. Disclaimer: The information in this publication was correct at the time of printing. The University of Melbourne reserves the right to make changes as appropriate. As details may change, you are encouraged to visit the University’s website or contact The University of Melbourne Information Centre to obtain the latest information.

FACULTY OF BUSINESS AND ECONOMICS

HOW CAN AN INDUSTRY IMPROVE ITS SUPPLY CHAIN TO REDUCE ITS COSTS?

HOW CAN ECONOMICS BE BEST APPLIED TO ASSIST IN DEVELOPING ENVIRONMENTAL POLICY?

CAN WE DEVELOP A MORE ACCURATE PICTURE OF HOMELESSNESS IN AUSTRALIA?

IS IT POSSIBLE TO CREATE LEADERS THAT INSPIRE US IN THE WORKPLACE?

HOW CAN WE ENHANCE REGULATIONS IN OUR FINANCIAL MARKETS?

These are just some of the questions

that academics across the Faculty of

Business and Economics (FBE) seek

to address in their research. Research

that spans the disciplines of

GEQPQOKEU��ƓPCPEG��CEEQWPVKPI��OCPCIGOGPV�CPF�OCTMGVKPI�CPF� is consistently published in the

world’s premier academic journals.

From its foundation in 1924 the Faculty of Business and Economics has grown to be one of the world’s leading business and economics schools. The Bachelor of Commerce is the most highly sought after program of its kind in Australia, while The University of Melbourne’s graduate school in business and economics, the Melbourne Business School (MBS) is a leading provider of management education in the Asia Pacific region.

The Melbourne Institute which has been powering economic and social insight for Australia for over fifty years also resides within the Faculty of Business and Economics, as does the recently established Centre for Workplace Leadership which is seeking to improve management in Australia’s workplace.

Creating a community of world class researchers in business and economics at The University of Melbourne has been a strategic focus and this magazine provides a snapshot of their research from across these disciplines.

FBE.UNIMELB.EDU.AU 03BUSINESS.ECONOMICS.MELBOURNE

FOOTY CLUBS CAN’T BUY SUCCESS (YET), STUDY FINDS 04

CATHOLIC SCHOOLING PAYS 12% MORE TO BE PRECISE 06

THE MAJORITY OF AUSTRALIANS NOT SAVING ENOUGH FOR RETIREMENT 08

HELPING OUR CITIES BREATHE ACCOUNTANTS AND BOTANISTS IN WORLD LEADING RESEARCH 10

THE FUTURE OF FINANCE ONE OF THE WORLD’S LEADING FINANCE ACADEMICS TALKS ABOUT THE DIRECTION OF THIS DISCIPLINE 12

WHY AREN’T WE BETTER AT MANAGING PEOPLE? 14

MAJORITY OF AUSTRALIAN WORKERS LACK FAITH IN THEIR BOSS 15

7 SECRETS OF THE AD INDUSTRY REVEALED 16

AUSTRALIAN SUPPORT FOR R&D AMONG THE LOWEST IN THE WORLD 18

HOW TO WIN BUSINESS IN ASIA TOP 5 DO’S AND DON’TS 20

WHY DO WOMEN LEAVE THE WORKFORCE? STUDY DISPELS COMMON MYTHS 22

BUSINESS.ECONOMICS.MELBOURNE

EDITOR: EOIN HAHESSY

[email protected]

FBE.UNIMELB.EDU.AU

The study – AFL team performance and football expenditure – looked at the football department spending and on-field success of AFL clubs between 1994 and 2011.

It found that, over recent years, clubs that spent 10 percent above average on their football departments enjoyed a 9.5 percent increase in their winning ratio during the home-and-away season. The chance of winning a premiership jumped by 7 percent.

“Spending currently explains only a relatively small proportion of the variation in AFL teams’ performances,” according to lead researcher Professor of Economics Jeff Borland.

But the research did find that the impact of money on success is growing stronger.

“In the mid-1990s and early 2000s the relation between clubs’ spending and their performances was too small to be accurately measured,” Professor Borland said.

“But by the late 2000s the relation was stronger and had become statistically significant.”

The research team – which also includes Professor Ross Booth from Monash University – believes the AFL is correct to be seeking to address differences in spending between clubs. “We don’t want this trend to continue,” Professor Borland said. “So the AFL needs to strengthen its equalisation policies”.

However the study argues that the AFL may need to go even further.

“Other factors such as the quality of club management and coaching are likely to be just as important to a team’s performance, as how much they spend,” Professor Borland said.

“So equalisation policies also need to make sure that clubs are managed well and are spending their money wisely.”

POURING MONEY INTO AFL CLUBS ONLY HAS A MODEST EFFECT ON TEAM SUCCESS, DEPARTMENT OF ECONOMICS RESEARCH HAS FOUND.

FOOTY CLUBSCAN’T BUY

SUCCESS (YET)

STUDY FINDS

04 FOOTY CLUBS CAN’T BUY SUCCESS (YET), STUDY FINDS

FBE.UNIMELB.EDU.AU

CLUBS THAT SPENT

ON THEIR FOOTBALL DEPARTMENTS

10% ABOVE AVERAGE

THE CHANCE OF WINNING A PREMIERSHIP JUMPED BY 7%

ENJOYED A IN THEIR WINNING RATIO DURING THE HOME-AND-AWAY SEASON.9.5%

INCREASE

05FOOTY CLUBS CAN’T BUY SUCCESS (YET), STUDY FINDS

Catholic

12% more to be precise

Schooling

Pays

The research compared the long-term wage outcomes of public and Catholic school graduates.

It found wage growth tracked equally at first, but a $3-an-hour wage gap opened up for those educated in the Catholic system after 20 years in the workforce, equating to about $120 in extra earnings a week, or more than $6200 a year.

During the prime-time of career (15 to 25 years of employment experience) wage rate growth for Catholic school graduates is, on average, 12% higher than growth for public school graduates, the research concluded. Previous studies in this area took a short term view, however this is the first study to take a longer term view.

‘We examine wage outcomes over a working life, including effects for those with more than 30 years of labour market experience. Taking a long-term view is important because, arguably, many of the potential benefits from Catholic schooling, such as non-cognitive skills, may take time to be realized in the labour market’ explained Dr Nikhil Jha, one of the reports co-authors.

The results of the study offer important policy implications, particularly around the current methods of measuring school performance. Presently schools focus intently on academic outcomes, potentially at the expense of other forms of education. This study suggests additional factors maybe at play that lead to labour market success.

“Given that we find that the gap in wage growth between private and public schools does not eventuate until after 15 years of employment experience and is more pronounced among those with at least a bachelor’s degree, a possible explanation is that the benefits are associated with differences in non-cognitive abilities that are important for promotion into management roles. Other explanations, such as better networks, may be realized early-on in a career and may not depend to the same extent on higher education qualifications” highlighted Dr Jha.

The study also outlines that as 34% of all school students in Australia are enrolled in private schools (20% in Catholic and 14% in independent schools) compared to around 10% enrolled in private schools in the United States, it facilitates comparison across school types. The relatively large private schooling sector in Australia is due, in part, to government subsidies to private schools that account for around 80% of Catholic school and 45% of independent private school net recurrent income per student.

Additionally highlighted in the research is that total expenditure per student in Catholic schools is on par with per student expenditure in government schools (A$10,000 per student per year), but is less than in independent private schools (A$12,000). The study used panel data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, a nationally representative household panel study.

Wage growth for Catholic school graduates is, on average,

12% higher than for public school graduates

12%

Studies show 34% of all school students in Australia

are enrolled in private school (20% in Catholic and 14% in independent schools)

34%

The gap in wage growth between private and public schools does

not eventuate until after 15 years of employment experience

15YRS

Graduates of Catholic schools earn 12% more over the lifetime of their career compared to public school graduates,

research from the Melbourne Institute has found.

06 CATHOLIC SCHOOLING PAYS 12% MORE TO BE PRECISE FBE.UNIMELB.EDU.AU

PUBLIC SCHOOLS GRADUATES

$

CATHOLIC SCHOOLS GRADUATES

12% 12%

$

CATHOLIC SCHOOLS

PUBLIC SCHOOLS

YEARS OF EMPLOYMENT

MORE EARNED OVER A LIFETIME OF THEIR CAREER

0 2010 15 25 355 30 40

THE GAP IN WAGE GROWTH BETWEEN PRIVATE AND PUBLIC SCHOOLS GROWS AFTER

15 YEARS OF EMPLOYMENT EXPERIENCE

12%

45%

80%

INDEPENDENT SCHOOLS

CATHOLIC SCHOOLS

PUBLIC FUNDING AS A % OF INCOME FOR INDEPENDENT SCHOOLS

07CATHOLIC SCHOOLING PAYS 12% MORE TO BE PRECISEFBE.UNIMELB.EDU.AU

Research by academics in the Department of Finance, the Melbourne Institute and the leading global consultant Towers Watson has found a significant number of Australians are not likely to achieve adequate retirement incomes, even when all sources of savings are considered.

Based on data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey and targeting Australians aged 40 to 64 in this first tranche of the research, only 53% of couples and 22% of singles surveyed are on track to have a comfortable level of retirement income, as based on the ASFA Retirement Standard.

The research demonstrates how Australians in this age group are heavily reliant on retirement savings outside superannuation and the age pension. If non-super retirement savings are excluded, the levels drop to just 32% of couples and 11% of singles on track to achieve a comfortable level of retirement income. If the age pension is also excluded, only 15% of couples and 5% of singles are expected to meet the standard.

John Burnett, senior consultant for Towers Watson in Australia said: “This highlights how important it is for superannuation fund members to be aware of their projected retirement income but this information is currently not being provided by most funds. Super savings are only part of the equation; income from all sources needs to be taken into account. Online calculators and financial planners are unlikely to solve this gap alone, unless more members become aware of the shortfall they may be facing.

ALL RETIREMENT SAVINGS

53% 22% $

MINUS NON-SUPER RETIREMENT SAVINGS

32% 11% $MINUS NON-SUPER RETIREMENT SAVINGS & AGE PENSION

15%

50.2% 20.6%

5% $

NUMBER OF AUSTRALIANS THAT ARE LIKELY TO ACHIEVE ADEQUATE RETIREMENT INCOMES AUS AGED 40-64 YRS

COUPLES SINGLES

THE MAJORITY OF AUSTRALIANS NOT SAVING ENOUGH FOR RETIREMENT

$57,655 $42,158

FIXED DOLLAR AMOUNT AS A TARGET RETIREMENT INCOME

OF COUPLES WILL REACH THIS TARGET, BUT ONLY IF ALL RETIRED SAVINGS ARE CONSIDERED

OF SINGLES WILL REACH THIS TARGET, EVEN IF ALL RETIRED SAVINGS ARE CONSIDERED

$

FBE.UNIMELB.EDU.AU08 THE MAJORITY OF AUSTRALIANS NOT SAVING ENOUGH FOR RETIREMENT

The research hinges on determining a fixed dollar amount as a target retirement income, based on the ASFA Retirement Standard ‘Comfortable’ level. This is currently $57,655 for couples and $42,158 for singles.

John Burnett said: “We found the projected retirement income of couples in this demographic was in a much stronger position than for single people. The research shows the median projected retirement income for couples is expected to reach 100% of the target retirement income but only if superannuation, the age pension and other retirement savings are all considered. This is undoubtedly a good outcome, but we are talking about the median result – 50% of those surveyed are below this level of projected retirement income.”

In contrast, the median projected retirement income for singles is only expected to reach 68% of the

target. Even when superannuation, the age pension and other retirement savings are all considered, the median projected retirement income for singles is still $12,393 per year below the target income level.

Dr Carsten Murawski from the Department of Finance said single people are also going to be more heavily reliant on the age pension than couples. “The research indicates that between ages 65 to 90, the age pension will provide 61% of the retirement income of single people and 39% of the retirement income of couples. Moreover, 96% of single people and 89% of couples aged 40 to 64 today are expected to receive at least a partial age pension at some stage during retirement.”

The retirement projections allow for compulsory superannuation, voluntary superannuation, the age pension and other retirement savings not held in superannuation.

39%

89%

61%

96%

EXPECTED CONTRIBUTION OF AGE PENSION TO RETIREMENT INCOME AGED 40-64 YEARS

0

0

10

10

20

20

30

30

40

40

50

50

60

60

70

70

80

80

90

90

100

100

“We found the projected retirement income of couples in this demographic was in a much stronger position than for single people.”

JOHN BURNETT

AUSTRALIANS AGED 40-64 YEARS EXPECTED TO RECEIVE AT LEAST A PARTIAL AGE PENSION

09THE MAJORITY OF AUSTRALIANS NOT SAVING ENOUGH FOR RETIREMENTFBE.UNIMELB.EDU.AU

10 HELPING OUR CITIES BREATHE ACCOUNTANTS AND BOTANISTS IN WORLD LEADING RESEARCH

Helping our cities breathe

ACCOUNTANTS AND BOTANISTS IN WORLD LEADING RESEARCH

FBE.UNIMELB.EDU.AU

Background image: Royal Botanic Gardens Melbourne, by Janusz Molinski

11HELPING OUR CITIES BREATHE ACCOUNTANTS & BOTANISTS IN WORLD LEADING RESEARCH

Cities are the leading producers of the greenhouse gas carbon dioxide (CO2) and the main drive to reduce these emissions has focused on energy efficiency. An unlikely pairing of accountants and botanists from The University of Melbourne, the Royal Botanic Gardens Melbourne and the Institute of Chartered Accountants is expanding our knowledge on how our plants and trees can be fully harnessed in the battle against global warming.

From an early age we are taught that our plants and trees take in that bad CO2 gas and give us back our life giving Oxygen. Yet despite this generational knowledge we as society do not know how much CO2 specific plants take in. We have limited knowledge it is best to plant a sequoia or a blue gum to capture the smog and pollution from our cities. We simply know that green belts and the lungs of cities take in pollution but we cannot accurately state or account for how much that is.

In the fight to reduce CO2 emissions most attention has been placed on energy efficiency measures such as using bicycles or the insulation of homes and offices. Yet little attention has been focused on the lungs of city, namely green spaces, lakes and waterways, which both capture carbon naturally and act as a natural buffer, reducing the need for heating and cooling of a city.

Recognising this knowledge gap, a team of accountants from the University’s Faculty of Business and Economics and the botanists from the University’s School of Botany formed a research team with the Royal Botanic Gardens. ‘It is an

unlikely team of number crunchers and plant lovers, but by pooling our respective knowledge the benefits we can bring to the field of carbon accounting can be significant’ underlined Associate Professor in Accounting at The University of Melbourne, Brad Potter.

With funding by the Australian Research Council, the research team will spend the next three years using the fastidiously manicured beauty of the Royal Botanic Gardens in both Melbourne and Sydney as their laboratory to create their primary objective, a model of a carbon cycle of a managed ecosystem. They will test and experiment to ascertain how much CO2 a green belt in an urban environment traps, thereby expanding our knowledge on how such areas can be beneficial to the environment.

For urban planners, local councils, property developers to global corporations this research project offers significant benefits. ‘A council might be interested in how much carbon their football oval holds or emits, and this project creates a way to find out where carbon is flowing through the land we are responsible for. The potential to roll out this carbon

WE HAVE LIMITED KNOWLEDGE IF IT

IS BEST TO PLANT A SEQUOIA OR A BLUE GUM TO CAPTURE THE SMOG AND POLLUTION FROM

OUR CITIES.

SEQUOIA

EUCALYPTUS

model not just nationally but internationally is huge’ underscores Professor David Cantrill, the Chief Botanist and Director of the Plant Science and Biodiversity Division within the Royal Botanic Gardens Melbourne.

Globally there has never been a project like this, involving a complex urban eco system and the creation of this model will ‘enhance measurement of carbon and improve the approaches for reporting of this information’ highlighted Professor Ian Woodrow, Head of the School of Botany at The University of Melbourne.

Across the world shareholders, employees, communities and other stakeholders clamour for organisations to reduce the impact they place on the environment. Despite such market pressure and public scrutiny, in accountancy, the field that underpins all economies, no universally accepted standard exists for reporting of CO2 emissions by entities. “This project allows Australia to take a lead role in the international debate and will explore how the way CO2 emissions are reported impacts on decision making by stakeholders” underlined

one of the partners in the project Karen McWilliams of the Institute of Chartered Accountants Australia.

In a few years as you stroll through your garden you hopefully will be able to tell thanks to an unlikely bunch of researchers if that eucalyptus tree was worth all that digging.

GLOBALLY THERE HAS NEVER BEEN A PROJECT LIKE THIS, INVOLVING A COMPLEX URBAN ECO SYSTEM AND THE CREATION OF THIS MODEL WILL ‘ENHANCE MEASUREMENT OF CARBON AND IMPROVE THE APPROACHES FOR REPORTING OF THIS INFORMATION’

‘IT IS AN UNLIKELY TEAM OF NUMBER CRUNCHERS AND PLANT LOVERS, BUT BY POOLING OUR RESPECTIVE KNOWLEDGE THE BENEFITS WE CAN BRING TO THE FIELD OF CARBON ACCOUNTING CAN BE SIGNIFICANT’

FBE.UNIMELB.EDU.AU

12 THE FUTURE OF FINANCE FBE.UNIMELB.EDU.AU

ONE OF THE WORLD’S LEADING FINANCE ACADEMICS TALKS ABOUT THE DIRECTION OF THIS DISCIPLINE

THE FUTURE OF

FINANCE

Carsten Murawski: What brings you to Melbourne?

Peter Bossaerts: A unique opportunity to realise a dream, and that is to study human decision making under uncertainty, all the way from the brain to markets. We want to build an inter-disciplinary group where economists work together with neuroscientists, engineers, and computer scientists. To give a little background, this is an initiative that is very hard to implement even in the best of universities, because we try to go across disciplines and work in larger teams. In economics or finance researchers are not used to teamwork and a lot of work is still done in small teams of two or three people, mostly professors working with each other or involving a PhD student. So it is a unique initiative that I want to accomplish here and Melbourne has given me the opportunity to do so.

Murawski: Most of your research is based on experiments. In economics and finance, the use of experiments is still very rare. Why do you use experiments and what can we learn from experiments that we can’t learn from more traditional research?

Bossaerts: I think we’ve come to the conclusion that financial markets in particular, or any financial interaction, are extremely complicated. We cannot understand the principles of financial markets – or any

phenomenon if it is too complicated – by just observing it. You really want to take out bits and pieces and see what happens in a controlled setting where you control some of the confounding factors. I’ll give you an analogy. There is this very well-known principle in physics according

Peter Bossaerts, one of the world’s leaders in experimental decision making research in finance and economics, and one of the founders of the new discipline of neuroeconomics, recently joined the Faculty of Business and Economics as Professor of Experimental Finance and Decision Neuroscience. He also holds an honorary position at the Florey Institute for Neuroscience and Mental Health.

Peter Bossaerts has transformed our understanding of how humans perceive and take risk. In this interview with Carsten Murawski he outlines his reasons for joining The University of Melbourne and his ongoing research.

We cannot understand the principles of financial markets – or any phenomenon if it is too complicated – by just observing it.

13THE FUTURE OF FINANCE

The really big problems out there – including how to deal with financial markets – cannot be solved by one discipline alone and have to involve people from other fields.

to which objects fall at a speed that is not dependent on the weight. If you were to go with that principle into the real world, you would think that it is complete nonsense, and yet everybody knows it’s true. How do we know it’s true? Well, because of controlled experimentation. The fact that the principle doesn’t have much predictive power in the real world does not mean that it isn’t extremely useful because it gives you some fundamental insights that you then use to build a more complicated theory.

Murawski: You were the first financial economist who linked research on financial decision-making – on risk-taking to be more precise – with neuroscience. Why is it important to link finance and economics on the one hand and neuroscience and biology on the other?

Bossaerts: The obvious answer is of course that we are biological organisms. When you see people make choices you would suspect that the brain has something to do with it. But there’s more to it. Economics and finance are very much rooted in rational choice theory which is about how we should make decisions. At some stage psychology entered to point out systematic deviations of behaviour from rational choice theory and helped us to categorise those deviations.

Where biology comes in is answering the question ‘Why?’ The human brain is shaped and, I should even emphasise, optimised, for behaviour under uncertainty. But it is a particular type of uncertainty that we see in nature and that people have been exposed to in the past. There was a lot of uncertainty in our environment as we evolved. It is obvious from the tasks that we give people and how the brain reacts, that the brain is optimised and it does an incredibly good job in dealing with uncertainty, even in incredibly complicated tasks. But there is a suspicion that the tasks that humans are good at, do not include financial tasks or dealing with financial markets. The jury’s out on that though. This is what we’re actually trying to research. Studying the brain will be crucial in this endeavour.

But we also want to help people, give them tools to improve behaviour. After all the human brain is not made to fly in the sky and yet we are now flying airplanes because we have developed the right tools to make sure we can stay in the clouds without crashing. We want to develop similar tools that help us to better navigate financial markets.

Murawski: There are more than 700 neuroscientists clustered within a radius of 200 metres or so here in Parkville at the University and with some affiliated research institutes it makes this one of the largest clusters of neuroscientists in the world. What are the benefits of such a large number of researchers in the same field working together in a small space?

Bossaerts: There are several advantages to that. There are obvious ones such as infrastructure, expertise and potential for collaboration. What’s extremely important to realise is that you cannot do the types of research that we are doing if you don’t have the right intellectual environment, if you don’t have experts in many other sub-fields that you can go talk to and bounce ideas off. Most of the research – all of the big successes I’ve been involved in – I cannot claim as mine. They are based on an interaction with others.

The interaction with other disciplines is absolutely crucial. I collaborate with colleagues in signal processing and computer science for example. Part of computer science is a natural ingredient to computational neuroscience which tries to understand the computations in the brain. Why is computer science important? It allows us to get at a problem from a different perspective. And you need to look at a problem from many different points of view in order to really understand it.

I’m going to make a bold statement here. All the easy problems that could be solved within disciplines have been solved. The really big problems out there – including how to deal with financial markets – cannot be solved by one discipline alone and have to involve people from other fields.

And yes, it is very well-known that Melbourne has the intellectual environment that allows such kind of work. One of my senior colleagues in neurology two weeks ago told me ‘Oh, so you’re going to Melbourne?’ He urged me: ‘Go. It’s going to be wonderful.’

Carsten Murawski is a Senior Lecturer in the Department of Finance and co-head of the Decision Neuroscience Laboratory. To learn more about the Brian, Mind and Markets Laboratory click fbe.unimelb.edu.au/finance/bmmlab

Watch the full interview with Professor Bossaerts at vimeo.com/fbe

FBE.UNIMELB.EDU.AU

FBE.UNIMELB.EDU.AU

As US scholars looked to the East for inspiration about how to fix productivity problems in US manufacturing, they saw Japanese companies investing in their employees and treating them as valued resources, while seeking to foster employee commitment and build strong cultures.

While they may well have misread what was really happening in Japanese firms at the time, the idea that good HR practices were the key to productivity rapidly spread across the US and then the rest of the world.

Since that time there have been a lot of extravagant claims made about the importance of HRM for organisational success.

If you look at the mission statements of many Australian organisations you could be forgiven for thinking that people management is the single most important factor in their continued success.

In fact, many organisations don’t manage their people nearly as effectively as they might. The result: Australian organisations which are not as effective and productive as they could be.

Why is this? Is it that we don’t know how best to manage people for results?

Clearly not! From the early 1990s, research which sought to test the link between HRM

and performance – productivity, reduced turnover, financial performance – burgeoned. Indeed, it wouldn’t be an exaggeration to say that the ‘holy grail’ for management researchers was to demonstrate the link between HR and performance.

But 20 years down the track, what do we really know about the role of HRM in organisational performance?

In fact, we know a lot.

First, we know that organisations that put in place systems of mutually-reinforcing HR practices – work organisation, training and performance-reward systems – outperform those that don’t, on a number of measures of performance.

Second, we know what features each of these three elements needs to have to drive performance gains.

» Jobs that allow employees some control over decisions, as well as allowing different tasks to be done and different skills to be used, lead to superior performance;

» The more training employees are given, the better they perform; and

» The more resources that organisations devote to performance management

and the more that they link rewards to performance, the more motivated and effective employees are.

Not only do these things contribute to performance, at the same time they make employees more committed and satisfied. Good people management can make things better for organisations and their employees.

If we know what works, why are some organisations still not implementing effective HR practices and reaping the productivity gains?

First, in spite of the volume of academic research, it seems that many practicing managers are not aware of the evidence. Second, even if managers are aware of the evidence, they do not know how to take the research and use it to inform their day to day practice.

The challenge for management researchers and educators is to take the research and translate it into practical tools which managers can apply. We must also ensure that managers are equipped with the skills to use these tools effectively in their workplaces.

Bill Harley

This article was first published in the Australian Institute of Management.

The term ‘human resource management’ (HRM) can be traced back at least to the 1960s, but HRM as we think of it now really emerged in the 1980s.

14 WHY AREN’T WE BETTER AT MANAGING PEOPLE?

better AT MANAGING

people?

WHY AREN’T WE

BILL HARLEY IS PROFESSOR OF MANAGEMENT IN THE DEPARTMENT OF MANAGEMENT AND MARKETING AT THE UNIVERSITY OF MELBOURNE.

BILL HARLEY

FBE.UNIMELB.EDU.AU 15MAJORITY OF AUSTRALIAN WORKERS LACK FAITH IN THEIR BOSS

The survey found that 75% of Australian workers believe that their workplaces need both better management and leadership.

The representative survey of over 2,000 workers found a quarter of the Australian workforce do not have someone in their workplace they look up to as a good leader, while 35% of senior and middle managers also lacked a workplace role model.

“Australian workers lack faith in their leaders,” said Professor Peter Gahan, the Director of the Centre for Workplace Leadership.

“Leadership is the often neglected ingredient in productivity with studies showing that employees who have greater job satisfaction and motivation create workplaces that have productivity gains of 30%”

The survey findings were released to mark the official launch of the Centre for Workplace Leadership by the Federal Employment Minister, The Hon. Senator Eric Abetz.

University of Melbourne Vice-Chancellor Glyn Davis said the Centre for Workplace Leadership is an exciting venture.

“Created as a co-investment between the Commonwealth Government, The University of Melbourne and industry, the Centre for Workplace Leadership represents an exciting innovation in how we generate and harness new insights and thinking around leadership,” he said.

“We want to provide an opportunity for all Australian workplaces, irrespective of their size or location, to access cutting edge ideas through robust research, and mobilise them in practical ways in the workplace” said Professor Gahan.

“We have already developed pioneering partnerships with Cisco and Bendigo & Adelaide Bank, among others, but the Centre is strongly aiming to help small and medium enterprises in particular to fulfil their productivity potential through smarter management training and leadership” continued Professor Gahan.

The Centre for Workplace Leadership is located in the Faculty of Business and Economics at The University of Melbourne and is supported by the Australian Government through the Department of Employment.

workplaceleadership.com.au

Australian workers believe their workplaces suffer from poor leadership and need better management, according to a survey into workplace

management by the Centre for Workplace Leadership.

Australian workersMAJORITY OF

MAJORITYOF

Australian workers

LACK FAITH IN THEIRlack faithbossIN

THEIRboss

Australian workers

MAJORITY OF

LACK FAITH

bossIN THEIR

“WE WANT TO PROVIDE AN OPPORTUNITY FOR ALL AUSTRALIAN WORKPLACES, IRRESPECTIVE OF THEIR SIZE OR LOCATION, TO ACCESS CUTTING EDGE IDEAS THROUGH ROBUST RESEARCH, AND MOBILISE THEM IN PRACTICAL WAYS IN THE WORKPLACE.”

PROFESSOR GAHAN

75%

OF AUSTRALIAN WORKERS BELIEVE THAT THEIR WORKPLACES NEED BOTH BETTER MANAGEMENT

AND LEADERSHIP

35%

OF SENIOR AND MIDDLE MANAGERS ALSO LACKED

A WORKPLACE ROLE MODEL

30%

STUDIES SHOW THAT EMPLOYEES WHO HAVE GREATER JOB

SATISFACTION AND MOTIVATION CREATE WORKPLACES THAT HAVE

PRODUCTIVITY GAINS OF 30%

FBE.UNIMELB.EDU.AU16 7 SECRETS OF THE AD INDUSTRY REVEALED

In the early 20th century the early advertising pioneers began to pursue professional stature. In 1924 Stanley B. Resor, President of J. Walter Thompson, then the largest advertising agency in the world, noted that advertising is “too often seen as something based on inspiration, immature ideas and snappy slogans.” Resor set about establishing a series of mechanisms in the agency to facilitate a ‘scientific approach’ to advertising. More than a hundred years later the question of whether or not advertising has attained professional stature remains unresolved.

Research at the Faculty of Business and Economics has explored this tension as the ad industry seeks to be recognised as a profession, despite lacking an academically validated theoretical knowledge base.

Interviewing senior ad executives across the US, Dr Greg Nyilasy was able to both explore this professionalisation tension within the advertising industry and was able to identify the “pseudo-professionalisation” tactics the industry adopts to ensure it gains legitimacy and wins business.

“The need for agency practitioners to prove they ‘know what they are talking about’ permeates the industry. Clients want to know their advertising dollars are well spent and are helping them achieve their business objectives. This is a constant tension in the industry and drives this strive towards professionalisation” outlined Dr Nyilasy.

The solution, the study found, was that agency practitioners use “pseudo-professionalisation tactics.”

“Pseudo-professionalisation tactics are knowledge-related actions that do not use an esoteric and theoretical knowledge base to substantiate work, but do offer ad hoc solutions in response to professionally based demands from clients. The tactics are ‘pseudo’ because they are quick fixes, local and fuzzy resolutions to avert immediate legitimation crises” explained Dr Nyilasy.

Specifically the research identified seven tactics the advertising industry uses to legitimise their work, which Dr Nyilasy outlines.

The advertising and marketing industry uses seven tactics to garner legitimacy for its industry and its creative work, research

in the Department of Management and Marketing reveals.

7

SECRETSOF THE

AD INDUSTRYREVEALED

FBE.UNIMELB.EDU.AU 177 SECRETS OF THE AD INDUSTRY REVEALED

“One of the ways in which agencies justify their creative product is claiming that it is consistent with ‘strategy.’ Strategy, which these practitioners define as the core message based on consumer insight and the identification of the target audience, lays the groundwork for the creation of advertising messages, but it does not dictate the creative concept or the resulting advertising executions.”

“While it is possible to justify strategy, there is no theory and therefore no professional legitimation for creative. The tactic of ‘selling creative with strategy’ tries to resolve this dilemma by pretending that the link between strategy and creative is a sufficient explanation for why a particular creative route was taken. In reality, there are an infinite number of ways in which the strategy can be expressed in diverse creative concepts, all of them being ‘on brief.’ Yet it seems that ‘selling creative with strategy’ effectively masks this problem.”

“According to our informants, agencies often use ‘case studies’ to show that past advertising programs similar to the proposed project have ‘worked’ for others – agency clients or even brands outside the agency client list. If put to closer scrutiny, it becomes obvious that the argument that past successes – even under ‘similar’ circumstances – predict future success is a false one, given the infinite number of variables that differ between the compared cases. Nevertheless, it seems this tactic is yet another less-than-perfect professionalisation tool that ‘works’ for agencies.”

“In the absence of what they perceive as a reliable and valid theoretical knowledge base, agency practitioners often use other knowledge sources for legitimation. They frequently turn to the writings of other practitioners who are perceived to have significant experience, advertising trade publications and business books, or conference presentations. These sources, like agency philosophies, are part of the ‘second knowledge base’ for the advertising occupation. Because they come from ‘real life’, from the actual practice of advertising work, they are perceived to be more valid than academic research, which agency practitioners view with epistemological scepticism.”

“’Second knowledge’, in fact, is the very culture that surrounds practitioners every day, everywhere – in the routines of their work, through their interactions with peers, in informal conversations, and through special sites of negotiation such as advertising awards and recognitions bestowed. For example, several informants noted that the observation of trends and counter trends constitutes a large portion of creative thinking about what good advertising is.”

Dr Nyilasy is hopeful the findings can be of assistance in the advancement of the advertising profession, “advertising remains something short of a profession as measured by the criterion of an agreed upon and validated base of theoretical knowledge. Efforts should be undertaken that promote and enhance dialogue between academic and practitioner constituencies for the sake of mutual knowledge gain to advance the profession.”

“Our interviews suggested that advertising agencies seek to be perceived as partners and not as service providers. Many interviewees argued that the best way to achieve a partner status was working directly with the CEO of the advertiser.”

“It has become commonplace for agencies to brand certain aspects of their activities, suggesting ‘proprietary’ knowledge ‘owned’ by a single organisation. According to respondents, these claims that an agency has a unique way to approach advertising, ‘agency philosophies’, seem to give credibility and substantiation to the agency’s work, irrespective of the validity of that knowledge.”

“Despite the fact that agency practitioners do not believe that advertising creativity is rational, logical, or possible to be modelled, pretending that it is takes away some of the anxiety clients have about the unpredictable nature of creativity.”

SELLING CREATIVE WITH STRATEGY

SUGGESTING “THIS WORKED FOR OTHERS”

REFERENCING PRACTICAL AUTHORITY SOURCES

WORKING IN A “SECOND KNOWLEDGE” CULTURE

POSITIONING PRACTITIONERS AS PARTNERS, NOT VENDORS

ARTICULATING AGENCY PHILOSOPHIES

PRESENTING CREATIVE AS IF IT WERE LOGICAL

CASESTUDY

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FBE.UNIMELB.EDU.AU

The study highlights that the US government has committed over 0.22% GDP to business R&D and the UK Government 0.14%, while the Australian government has committed 0.09%.

‘Public debate often erroneously suggests that Australian governments are generous in this area. The alarm bells should be ringing about the rate at which our secondary and service sector industries are slipping behind not just other high-income countries but increasingly middle-income countries such as Malaysia, South Korea and the Czech Republic’ stated the report’s author Professor Beth Webster from the Melbourne Institute.

The report also states that business must take the lead and build industry specific R&D corporations if Australia is to compete in the global economy.

‘The loss of car manufacturers Holden, Ford and Toyota in Australia underlines the pertinence for industry to map out their future without waiting for federal or state Government to take a lead. Industry led R&D corporations can give Australia the decisive edge in the global economy’ highlighted Professor Webster.

Industry owned corporations would resource R&D for the benefit of the members with funding coming from a mix of industry levies, membership

18 AUSTRALIAN SUPPORT FOR R&D AMONG THE LOWEST IN THE WORLD

among the

Australian support

LOWEST IN THE WORLD

for R&D

“The loss of car manufacturers Holden, Ford and Toyota in Australia underlines the pertinence for industry to map out their future without waiting for federal or state Government to take a lead.”

0.22%

GDP

COMMITTED TO BUSINESS R&D

0.14%

GDP

COMMITTED TO BUSINESS R&D

0.09%

GDP

COMMITTED TO BUSINESS R&D

Australia has one of the lowest levels of government support for R&D and innovation development in the world and business must build industry specific R&D corporations if Australia is to compete in the global economy,

a Policy Brief from the Melbourne Institute highlights.

fees and government funds. Strategic priorities are identified by the industry through a range of consultative activities and the research is targeted at specific industry needs.

‘The advantage of the R&D corporation model is its comparative permanence. A program that is established with an act of parliament is less prone to annual budget cuts. Confidence in the longevity of a program gives the industry, and the research community that services it, the reassurance it needs to establish the architecture to support it’ underlined Professor Webster.

The Melbourne Institute Policy Brief Series is a collection of research publications that examines current policy issues and provides and independent platform to examine pertinent issues in public debate.

19AUSTRALIAN SUPPORT FOR R&D AMONG THE LOWEST IN THE WORLDFBE.UNIMELB.EDU.AU

FBE.UNIMELB.EDU.AU20 HOW TO WIN BUSINESS IN ASIA TOP 5 DO’S AND DON’TS

fbe.unimelb.edu.au/execed

Dr Peter Verhezen delivers the Doing Business in Asia Executive Education course at the Faculty,

here he shares his insights on doing business in Asia.

BUSINESS ASIAHOW TO WIN

IN

21HOW TO WIN BUSINESS IN ASIA TOP 5 DO’S AND DON’TSFBE.UNIMELB.EDU.AU

Do... be culturally sensitive. Do not bring your Western values along to ‘impose’ on those in the emerging markets. One needs to be able to see opportunity in complexity and transcend apparent opposites of agility and patience. Remember to build contingency time into your projects of at least 30%, precise time frameworks are not universally adhered to in Asia.

Do... develop long term relationships with key decision makers in emerging markets. One needs to be at ease at combining an unhurried sociocultural sensitivity with the urgency demanded by business pragmatism. It is important to focus on guanxi instead

of mere transactional contracts. Remember that in the emerging markets, one needs to spend time with government officials to build relationships and always recognise the role of SOEs (State Owned Enterprises).

Do... apply a set of best practices that a company can deploy to minimise the risk of intellectual theft and corruption. But accept that in Asia the good corporate governance principles are not as well implemented as in Australia.

Do... keep globalising your corporate mind-set and seek to globalise your strategy. Remember that it’s not just a product-driven strategy but rather a market-driven strategy that will work in Asia. Transactions are always embedded within a certain context and community. They need to be properly acknowledged and or managed within certain boundaries.

Do... prepare a contingency plan to exit when necessary. Despite the enormous possibilities and opportunities in the emerging markets in Asia, one still needs to be aware of the enormous threats and pitfalls. In the case of a possible misalignment between the firm’s values and objectives, one should envisage a possible strategic exit from Asia.

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Do not... let your client lose face in public and do not refuse hospitality. For instance, do not refuse a drink or an appropriate gift. The importance of “face” in Asia – i.e. symbolic capital – implicitly refers to the respect to people with experience and “old age” as in corporate or government leaders.

Do not... focus on the individual self-interest but on the group or community. Always respect hierarchy and ensure your body language reflects some form of respect when giving a name card. Be “we-oriented”

instead of “I-oriented”. Foster a sense of community instead of individuality. Focus more on group performance than mere individualistic goal-setting.

Do not... ignore hierarchy and status in Asia. Titles on your name card may not have any significance in Australia, but they do in Asia, especially when dealing with government officials. Have some deference for hierarchy and age, do not focus on skills and knowledge only. Be aware of the importance of symbols, status and rituals in Asia.

Do not... focus on the transactional value of the deal only. Consider the threats and opportunities of such relationship-building and thus the risks of bribery in relationships. Remember that legal enforcement is not always optimal or even possible in emerging markets. Understand that contracts are the beginning of a ‘relationship’ and may change in the process when the context would change (something which is not done in a Western context).

Do not... ignore the role of Stated Owned Enterprises and government officials and those potential risks associated with it. Be aware of the dangers and perils of such relationships, as well as the opportunities of these relationships.

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Dr Peter Verhezen has over 25 years’ experience of doing business in Asia. During the Asian crisis (1998-2002) he became a Senior Financial Advisor to the Indonesian Bank Restructuring Agency (IBRA) and has been invited as a speaker on Business Ethics and International Governance at a number of institutions including the World Bank (Washington DC-US), the Hanoi Banking Institute (Vietnam), and the Singapore Monetary Authority.

DO’S

DON’TS

FBE.UNIMELB.EDU.AU

leave the workforce?

WHY DO

STUDY DISPELS COMMON MYTHS

women

The survey found that unfriendly, even

discriminatory work-practices and internal

restructures were the main reasons behind

women leaving the workforce, with only

11% of those interviewed citing family

responsibilities as the chief reason for

leaving their organisation.

84% said they left due to organisational changes such as mergers, restructures, management changes or downsizing, and almost 63% were offered financial incentives to leave in the form of redundancy or retrenchment packages.

Almost half (45%) of the interviewees abandoned plans to continue working for their organisation because of unfriendly work-family practices that didn’t give them a fair opportunity to return or continue to work, such as a lack of part-time positions or expectations of very long work hours on an ongoing basis.

More than one quarter (27%) mentioned broken employment promises and legal obligations upon their return from maternity leave as a primary reason for their departure.

‘A regular message in the media for years has been that professional, highly educated women ‘chose’ to forgo careers to care for their families. Such stereotypes fuel perceptions of women’s low commitment to work because of family commitments and it assist in divesting organisations of some, if not most of the responsibility for the persistent scarcity of women in senior management’ underscored the report’s author Associate Professor Isabel Metz.

‘Shattering the common assumption that women leave the work force to be a home maker is very important and this survey certainly dispelled that common belief’ highlighted Associate Professor Metz.

The study also revealed that while Australia is regarded as an egalitarian society, it has a relatively low gender-egalitarian culture. Australia lags behind many western countries in terms of gender-egalitarian values, and while women’s participation in the workforce has increased in the last 30 years, female representation in leadership has decreased or plateaued.

The common assumption that women leave the workforce due to the desire to assume the role of homemaker is dispelled in a survey of female bank workers

by the Melbourne Business School at The University of Melbourne.

11% DUE TO FAMILY RESPONSIBILITIES

84% DUE TO ORGANISATIONAL CHANGES

63%DUE TO BEING OFFERED FINANCIAL INCENTIVES

PERCENTAGES OF THE MAIN REASONS BEHIND WOMEN LEAVING THE

WORKFORCE

22 WHY DO WOMEN LEAVE THE WORKFORCE? STUDY DISPELS COMMON MYTHS

FBE.UNIMELB.EDU.AU WHY DO WOMEN LEAVE THE WORKFORCE? STUDY DISPELS COMMON MYTHS 23

The surveys with the 44 female banking professionals unravelled a complex web of factors that leave women feeling hopeless or unwelcome in their organisations. ‘Throughout the interviews a common theme emerged of women feeling they were hitting their heads against a brick wall and were being squeezed out of their organisation. Interviewees spoke of ‘chauvinism, chauvinistic environments and reluctance by some senior men to recognise senior women as equals’ underlined Associate Professor Metz.

The survey also illustrated how HR practices can be improved. ‘It was evident from the interviews that some HR employees were of little or no help to the women being terminated, hence failing to fulfil their role of ‘employee champions.’

The findings of the study raise important implications for policy and practice, underlines Associate Professor Metz, ‘companies undergoing organisational changes, such as restructures and mergers, should be required to analyse the effect of the changes on the gender composition of jobs and be required to ensure protection for part-time workers, who are disproportionately mothers.’

A more proactive and supportive HR in times of organisational and personal change is also called for in the study. With for example, HR personnel devising comprehensive communication and training plans regarding available women friendly (WF) policies and their effective implementation.

‘High-quality HR practices have been found to be significantly and positively related to the promotion of women in organisations, and the promotion of women into managerial ranks has been associated with higher organisational effectiveness’ summarised Associate Professor Metz.

Providing alternative explanations for women’s departure might arrest persistent beliefs about women’s supposed low commitment to their careers and positively influence how organisations implement strategies to manage transitions due to organisational or personal change. This study indicates that it might be both possible and within the control of organisations and their managers to increase the retention of women managers by reassessing change management practices, work cultures, equal employment opportunity and family-friendly rhetoric and commitment.

45%DUE TO UNFRIENDLY WORK-FAMILY PRACTICES

84%

DUE TO BROKEN EMPLOYMENT PROMISES AND LEGAL OBLIGATIONS UPON THEIR RETURN FROM MATERNITY LEAVE

“A common theme emerged of women feeling they were hitting their heads against a brick wall and were being squeezed out of their organisation.”

“I would talk to the HR guy and he would say, Ņý�ƋĘå�ųåÏŅųÚØ�ůF�ĩĹŅƵ�he’s a bully, no one

likes him but we can’t do anything

about him’.”

“I gave them notice that I was resuming

[returning] from maternity leave and they decided to tell

me that I couldn’t have my job back”

B

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