Today's CEOs don't know how to grow a business

Step by step the management of many Australian companies has lost its way. It is not as bad as what is happening in the defence department (Defence’s problems go right to the cultural core, November 15) but it is serious.

This week, as I listened to how Meriton’s Harry Triguboff built and manages his company, I realised just how much we have changed (Triguboff was speaking at a dinner to celebrate the 50th anniversary of Australia’s largest apartment developer and owner, Meriton). And most of the changes are not for the better if you want growth.

At the moment, finding real growth among listed public companies – as distinct from profit growth via cost cutting – is not easy. What staggered me was that, with one exception, the techniques Triguboff uses are the direct opposite of what the management schools teach today to achieve growth.

First the exception. Back in 1963, Triguboff chose a strategy that at the time was ‘disruptive’. Back 50 years ago the home-building industry in Sydney was dominated by cottages. Triguboff believed people would live in apartments.

Last week, five American institutions returned from Australia determined to invest in companies that are disrupting the majors (US hedge funds are lining up Australian banks, November 8).

When Triguboff built his first small apartment block he was funded by the ANZ Bank. For the next 50 years, the ANZ has remained his lead banker. Today it’s very fashionable to shop around bankers.

In the building industry, sub-contractors are a key to success but these days they are often treated badly by big builders. Triguboff realised that the only way he could keep the extreme unions at bay was to have a steady stream of work and look after the good sub-contractors. When a sub-contractor gets into financial bother (and from time to time that happens), he makes sure the employees of that sub-contractor are looked after. In modern Australia there is no feeling of obligation to look after the sub-contractors staff if there is a failure.

What Triguboff is doing is very similar to what Lend Lease’s Dick Dusseldorp did in the same era. Dusseldorp established the companies that went on to become Lend Lease a few years before Triguboff established Meriton. Bruno Grollo fostered a similar strategy.

In staff management, Triguboff believes in being ruthless in removing staff in the first few months. But once employees have got through that initial period they are on their way to being a long-term employee.

In today’s world, suppliers are to be driven down with more and more tendering competition. In the case of Meriton, Boral has been supplying the group’s concrete for almost all the 50 years. In the 1960s the late Elton Griffin had taken Boral into quarries and pre-mixed concrete and the thrust into building materials was accelerated by his successor Eric Neal. Similarly, BHP OneSteel (now called Arrium) has provided most of the Meriton steel over the past 50 years.

Triguboff believed that by sticking with one main supplier it would look after you in shortages and you would gain the best prices. That is the reverse of what many managers do today. But most are after short-term profits rather than building businesses.