Cover Story : Super sizing Auckland NZ’s biggest corporate transformation

It was never going to be an easy ask. Create streamlined super city out of eight reluctant fiefdoms, give it vision and direction, ensure operational stability, save money while you’re at it – and don’t forget this RWC thing which just happens to fall in the middle of the process… Important to get that bit right.
So one year in – and with Murray McCully galloping in on his Central Government charger to apparently rescue RWC fortunes from the inadequacies of Auckland’s administration – does Doug McKay regret his decision to be the new Super City’s first CEO?
“No, not at all. It’s been tough as you can imagine. Any change on this scale would be – it is the largest corporate organisational transformation in New Zealand’s history.”
There is no business equivalent – though one commentator suggested the task would be as complex as trying to merge Fonterra with Telecom. For sheer size, it’s daunting: 10,500 people (at the start), eight organisations, no less than 3500 different IT systems, 4000 parks, 72 locations, $30 billion plus on the balance sheet…
Then there are the tasks that had to be accomplished in tenure less than two years long. McKay ticks them off. Moving to single rating system based on common valuation; establishing new democratic structure; setting up seven new companies – six of which could earn place in New Zealand’s top 30 in terms of size; putting in place 50+ directors, seven new chairs, seven chief executives.
“Plus we’ve had to maintain relatively seamless delivery of Council services and functions, deliver the first annual plan with combined budget and rate decisions; deliver the Auckland Plan, our 30-year strategy document; and now we’re in the process of delivering our 10-year financial plan. And on top of that we’ve had whole lot of operational stuff to do…”
The statistical enormity of it all rolls easily off McKay’s tongue. This is man who evidently relishes challenge. It is, he owns, central to his management style.
“I do have huge capacity for work. I’ve always been very fit and energised by exciting new challenges – things we don’t know the answers to. That’s what gets me out of bed in the morning and excited about coming to work.
“I try to imbue sense of energy, optimism and confidence in the organisation through my example and think people are responding to that.”
It’s not job he had envisaged doing. His background is in business including senior executive roles with Lion Nathan, Carter Holt Harvey and Goodman Fielder, five-year stint heading Sealord and two at the helm of Independent Liquor. He was working in private equity when approached about his current role and took it on not only because he saw it as “a great privilege” but also he felt he had the requisite skills.
“A background of running large organisations with focus on change and helping business through very challenging situations was appropriate for this job. So I did feel I had the experience and skills to do it.”
Moving from private to public sector work was less of leap than people might think, he says.
“Business has lot of stakeholders to deal with as well and lot of politics. It comes in slightly different package but many of the principles are the same. Also I’m not here to become an expert at Local Government politics – I’m here to do very specific job and I’m here because of what I can bring to that task so I’m very focused on that.”
A first priority was to attract top executive team. One of the benefits of large organisation is that it is of more interest career wise to top performers and that’s paid off in the quality of his senior executives, says McKay.
Once he’s got the team he wants, his style is to let them run.
“I’m not very hands on. I put lot of faith and trust in my team. And we’ve got good mix here – from Local Government, Central Government and from private enterprise. The calibre of people we’ve been able to bring in is big part of the reason why we’ve enjoyed the progress we have so far.”
Organisational culture has also been priority with research commissioned early on to establish which values staff felt best represented the new organisation. These were identified as: pride, accountability, respect, service, teamwork and innovation.
“The catchphrase is ‘can-do’ rather than ‘can’t do’ culture,” says McKay. “The process we went through was about building on the things they really valued in past cultures but also bringing in some of the attributes of high performance cultures I was aware of through business experience. We ended up with very well-defined set of values to which we aspire and that is something we will start to focus on more deliberately from 2012 on.”
The time required to bed in organisational change is something McKay has talked over with people like Fonterra’s former head Andrew Ferrier and he is understandably wary that community expectations not be set too high.
“There’s huge sense of opportunity and that’s appropriate. But in the short term it is so important not to get ahead of yourself and lose control of the organisation. All this changing and merging has to be carefully managed because if one thing goes horribly wrong then it can flow through to all the rest of the services that Council offers.”
He says one of the job’s major challenges has been maintaining operational stability through all the changes.
“We were never going to have credibility talking about the future unless we could deliver the present. So ensuring basic services and functions were maintained was our number one goal in the first period – and generally we have achieved that. I know we are not falling behind legacy council measures – and in many cases we are starting to exceed what they were doing in terms of performance.”
Being able to identify best practice from the eight legacy councils and rolling that out across the whole organisation has contributed to improved performance, says McKay. He can also notch up win on the saving money front – knocking $81 million off costs and consequently delivering rate increase that at 3.9 percent came in well under the expected legacy council rate rise of 9.3 percent.
The savings, he says, come from head count 2000 lower, reduced procurement costs due to greater purchasing clout, “significant” efficiency and productivity savings, and better prioritised and scheduled capex projects.
McKay rates his second biggest challenge as delivering the new democratic structure.
“We’re talking 170 politicians – Parliament has only 122 – and 21 Local Boards, the Mayor with his own budget and resources. This is all new and figuring out who does what in the new system, where the boundaries for decision making are, where budgets will lie – all that is very complex task that we are still working on and will be for some years yet.”
Delivering the new planning regime is another biggie – and it’s happening at pace. The draft Auckland Plan – 30-year strategic document to “make Auckland the world’s most liveable city by 2040” – was released in September with submissions closing late October. Alongside this 500-page tome were the Draft Economic Development Strategy, Draft Waterfront Plan and Draft City Centre Masterplan.
If that’s not enough to get collective planning heads spinning, then there’s the “Unitary Plan” which will replace all existing district and regional plans providing the structural bones for implementing the City’s strategic vision.
There’s little doubt that the council’s already shrunken human resources are being stretched to their limits to get this work done on time and within budget. Whether the outcomes will withstand legal scrutiny is open to question – whether the timeframe is even realistic is another.
The financial and unitary plans do have to be consistent with and support the over-arching strategic vision contained in the Auckland Plan – but take years to evolve through actual use, practice and testing in the Courts, says McKay.
“However, we do have clear idea of what