GOVERNANCE & MANAGEMENT : Volatility & Vision – Partnering on The Edge

It’s been five years since David Wolfenden was appointed chair of The Edge – the city-owned performing arts, convention, civic and entertainment facility that could be described as Auckland City’s cultural heart.
With strong banking and commercial credentials, he was new to the entertainment world and hadn’t previously known or worked with its CEO Greg Innes – but they now speak as one when it comes to discussing the “revolution” that’s since happened in the way shareholder, board and management relations are being handled. Seems it’s never been better.
There has, says Wolfenden, been “paradigm shift”.
“It’s been very positive. We now have very good working relationship with both the political and administrative levels of council. It’s better than it’s ever been. And once you’ve got the framework right and the relationship right between shareholder and operation, directors and management, then you have very stable framework for debating strategic objectives.”
But freeing the organisation’s commercial agenda from its owner/shareholder’s three-year political cycle is not something that’s happened by itself. Both men agree lot of hard work has gone into establishing processes that have helped create what they now describe as constructive, open and transparent environment.
Innes, appointed 12 years ago to nurse the organisation through difficult patch, remembers the bad old days of board/management relations when the board was stuffed with political appointees and the Aotea Centre was still bone of contention to be gnawed on at will.
It was hard to have constructive debate when, as Innes neatly puts it “Aotea Centre was touchstone around which various political positions were able to be manifested and progressed”. It didn’t help that local government restructuring had brought bunch of smaller councils under the Auckland City umbrella.
“It’s fair to say the only thing these amalgamated councils could agree on when it came to sitting around the table together was that the CBD had had it far too good for far too long,” says Innes. “So it was really complex interplay of issues that had to be worked through.
“That said, the levels of sophistication in terms of understanding the business we’re involved in and of where we fit in the programme of public offering being undertaken by the Council have improved with every new council. Though I suspect it’s only in the lifetime of the last [council term] that the intuitive inclination to adopt political posture in respect of our organisation was finally dissipated.”
Just as contrast, he recalls the time former chair turned up at council meeting to discuss the annual budget and had $1 million slashed from it with no prior warning.
“Back then there was no coherent understanding of the implications of doing that. Now the way everyone conceptualises the business and analyses it at governance level has moved on so far as to constitute virtual revolution in the way things happen.”
Wolfenden agrees that “the understanding of the business and the willingness to allow it to operate correctly as business is as good as it has ever been”.
He was appointed because the then Council wanted to give the board stronger commercial focus and there is now whole lot more commercial rigour around board appointments. There is, says Innes, clearly shared view around the importance of getting that bit right because so much else flows from it.
Wolfenden says The Edge is both more commercially driven, more strategically oriented and more future focused than it was five years ago.
“You have to be very clear about why you want to get to point where you have this open transparent environment and we’ve consistently done that.
“We now have relationship with Auckland City whereby they purchase their arts agenda from us and everything else we do here is commercial objective and commercial risk to get commercial return. Having said that – in my limited knowledge of the industry – these objectives are seriously hard to achieve.”
That’s because of the complexity of the business.

Coping with complexity
The entertainment business has dynamic all of its own and The Edge operates in fairly volatile market.
“It doesn’t fit the classic mould of traditional trading organisation,” says Wolfenden. “It has whole different risk profile and we agonise over that.”
About half its business – and half its revenue – is in the competitive conventions sector. That is, at least, sector that responds to traditional sales and marketing stimuli and to that extent lends itself to traditional ‘widgit production’ comparisons, says Innes.
“The theatre/entertainment market is quite different in that you have the subsidised entities – opera, ballet, orchestras – that also live in very volatile world but we know they’re actually going to be there even if revenues move up and down lot. Then there’s the commercial entertainment side which is hugely volatile – that’s where money can drop out of the sky or disappear into thin air.”
The best way to describe this mix, says Innes, is that there’s core of similarity in that they’re all events which require venue and services but the market dynamics of each is quite different. That complexity drives an analytical approach to the business which in turn has led to the creation of whole range of systems which provide leading edge analytical ability, says Innes.
“Just by way of example we have something like 60 different event types, each of which has its own pro-forma profit and loss so we can use that intelligence for future planning in terms of event mix – all of this builds into the business plan and strategy framework within which we’re operating.”
On top of those challenges is the major redevelopment work planned for Aotea Square that will affect access to venues and have potential negative impact on revenues. The organisation, agrees Wolfenden, does face some real challenges that it will have to manage through effectively.
He’s confident that the organisation’s “strategic future orientation” will help. Various scenarios for smoothing revenue bumps are already built into three-year strategy cycle that was initiated in 2003. Board and senior management work through that process together at an annual two-day retreat.
“We keep that three-year strategy rolling out one year ahead every year and that sets framework so board and management have clear understanding of where we’re going. Then we negotiate statement of intent with our shareholder and reach agreement with them. It’s process that works well,” says Wolfenden.

A constructive partnership
While Innes and Wolfenden have come from very different industry backgrounds, there’s strong sense of mutual respect about what each brings to the partnership.
“We’ve had five years to understand each other’s strengths. I think we’re clear about expectations and responsibilities and we have very open relationship,” says Innes. “If there is something I think could be problem, I’ll ring David and have chat and if I think there is some value to chatting with another board member then it’s entirely up to me to suggest it. I think there is genuine respect both upwards and downwards from executive and organisation up and board down.”
Neither can recall any occasion where disagreement between the two of them has amounted to any more than what Wolfenden describes as “constructive tension”. The process of drawing clear lines between management and governance is something that has evolved over time.
A few years back, they instituted an annual review that involves an external agency looking at individual and collective contributions at board level around governance issues. This has led to some changes in board structure, says Wolfenden.
“It’s all about learning. If you think it’s perfect, then you’ve missed the point.”
He believes there is clear understanding and clear delineation between board and management.
“We work very hard on ensuring management understands what

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