Colin James on John Key for Management magazine for February 2010
John Key, Prime Minister, is work in progress. Can the man who made his pile in the heat of currency trading be a game-changer for a nation that has been sliding down the global rich list? If so, he has to start in 2010.
Key declared himself “ambitious for New Zealand” in the 2008 election. He makes speeches that enthuse audiences — but which in the cold light of next day in executive suites leave doubts he will turn ambition into strategy.
That is a puzzle. His extraordinary acceptability to the public would enable him to sell major initiatives — to change the game. But in his first year he seemed content to play in the pack (example: climate change). Even in rejecting the whacking referendum, where some colleagues saw courage, he was in fact in tune with the majority comfort with compromise.
That cruisey first year is also at odds with his origins. As a teen he was determined to be Prime Minister; in his early working life as a trader he would, according to a workmate, do his analysis thoroughly and then take big risky positions which almost always turned out right.
From the trading room to the cabinet room: Key sees parallels in the mix of the collective and individualism in trading and in politics.
In the trading room there are “layers of risks woven together”, he says. A collective house view is formed of the short and medium term, which must be supported by the economic fundamentals and take into account what clients are thinking but which also gives clients the “right” advice.
Then individual traders are expected to take a view. They are held more accountable for whether they are making money than whether they holding to the house line.
“I used to take a quite large short-term risks, whereas a lot of people took smaller, long-term risks,” Key says. “Mathematically you don’t have to be right 50% of the time and wrong 50% of the time. You can actually be right 20% of the time as long as you are very disciplined about the way that you handle your losses.” As in trading, so in politics: “If I am on the wrong side of something, I tend to cut it.”
Key extends the parallel: “Question time [in Parliament] is exactly like the trading floor. It’s about theatre, intimidating opponents and enthusing your supporters.” After a hesitant start learning the ropes (the unwritten rules of the House collective), Key exhibited enthusiasm and verve. By the end of last year he had Labour leader Phil Goff, a 25-year veteran, on the ropes.
That is Key: a fast learner; a man who backs himself once he has done the homework. Foreign affairs grandees have been impressed with how quickly he has come from scratch to skill in a complex and subtle field (with the odd lapse, for example, writing off Europe when in Japan).
Question time has another parallel with the trading floor: its rituals are a mystery to outsiders. A visitor to Parliament sees bullying, bluster and barracking. MPs see a take-no-prisoners battle. Reputations are made and lost there. Key’s is being made.
Key takes the parallel wider still: his National caucus is “58 individual franchises bound together by the master franchise” (the party). “You’ve got a whole lot of individuals but collectively you’ve got, hopefully, a view that binds you together.” He instances Sandra Goudie, whose Coromandel electorate requires a different approach from other electorates.
Key adds, warming to his theme: “Traders are born, not made. Politicians are, too. You can’t teach people instincts.” But both get better with experience and acquired institutional knowledge: Key cites Winston Peters, a man he does not otherwise admire.
As on the trading floor, so in the cabinet. Helen Clark kept a close eye on her herd. Heather Simpson was the enforcer. Key thinks this “slowed up activity because too much had to go to the ninth floor” (the prime ministerial suite).
Under Key good ministers (examples: Bill English, Simon Power, Steven Joyce) shine. Weak or wayward ones make mistakes, which would be politically costly in a second or third term. He says he deals with that by “buttressing support around them or letting them know I expect an improved performance”. In Key’s book it is important not to become too risk-averse.
The nexus is trust: do the job well and be straight with him. Lose Key’s trust, as Richard Worth did, and that is “irrevocable”. Beneath that agreeable, affable exterior is a steely interior. You don’t make $40 million by just being a nice guy.
But Key is a nice guy. People warm to him, even many opposed to his policies or in socioeconomic and ethnic corners normally aligned with Labour.
Key works his cabinet and his MPs and his support party leaders on person-to-person basis. Ministers and support party leaders are nice about how nice he is to them.
He and English work very well together. They crack put-down jokes about each other in public that would have been headlines between Clark and Michael Cullen (and occasionally were when Cullen’s wit got the better of his judgment).
Key: “There is nothing he [English] would say behind my back that he wouldn’t say to my face.” We can’t know. But that Key asserts it attests to his self-confidence.
Clark and Cullen divided the responsibilities for running the government. Cullen did much of the detail and fixed some of the toughest issues or worst messes — notably the foreshore and seabed. Clark helicoptered in on selected issues which were likely to present the government in a good light. Until her frayed and fraught final year, she was the good cop and Cullen the attack man.
If anything, Key and English might have the good/bad cop routine the other way round — something to ponder going into their second year. Key’s niceness won’t always trump him brawling in the House.
As to their cabinet business management, insiders talk of an 80-20 government, reflecting English’s responsibility for a mass of detail and Key’s higher-level positioning. Of the six economic workstreams”, for example, English runs five and Key one — on science and innovation. Key doesn’t (yet) have Clark’s mastery of portfolio detail.
So is the Key-English combination akin to that of Jim Bolger and Bill Birch in 1993-96 or to that of Sir Roger Douglas and David Lange in 1984-87. Lange was a brilliant salesman for Douglas’s reforms. Douglas was the driver. Bolger was pre-eminent and Birch was in his shadow.
Key personifies the government as Lange did. But his 20 per cent is much more than the mathematics suggest. English ticks off his thinking before it gets to the stage of a cabinet paper. And ministers insist it is Key’s cabinet, as Bolger’s was Bolger’s.
Like Clark, Key hoovers up information travelling across wide social terrains. Like Clark, he feeds that back to ministers — though he and they draw the line at texts at 1 in the morning, a Clark habit. And, like Clark, Key is very accessible to the media. A text and he usually calls back.
Still, he has yet to demonstrate to outsiders — including many of his supporters in business — that he is in command of strategy.
That is his challenge for 2010 — and one he says he will take on.
A test will be the response to the tax working group and the capital markets development taskforce.
As the tax group issued papers Key expressed outright opposition to or discomfort with some taxes they examined. By December, when it presented some tax re-mixes for discussion, he had become much less judgmental.
That illustrated a Key characteristic: that he often thinks aloud without getting all the evidence and thinking it through — which can be confusing, since what a Prime Minister says is usually taken as government policy gospel and he can appear to have up to three positions on a topic as it unfolds and/or can appear more conservative or radical than he is.
When ACT leader Rodney Hide pushed for full competition on ACC during negotiations for support for Nick Smith’s legislation, Key, standing alongside Hide, said he generally favoured competition, setting off speculation of impending root-and-branch reorganisation. In fact, Key soon returned to the official National policy of competition only in the worker account and maybe in some service delivery.
Can someone who thinks aloud be strategic? Does Key have a long-range programme for taking the country somewhere? Is there a vision, as distinct from some aspirational phrases? Or is Key a project manager, in the Clark mould, with only moderately different leanings?
And what should we make of Key’s reverence for polls? He told the Tourism Industry Association conference in October he considered polls scientific and, while Parliament wasn’t a hotbed of poll-driven fruitcakes, it pretty nearly was. He often drops a recent poll or focus group finding into a conversation. His shift from opposition to the anti-whacking bill in 2007 to initiating a compromise was prompted by poll signs of softer women’s support for National.
Actually (to use a favourite Key word), Key doesn’t need polls. He has accurate antennae. He dragnets opinion across a wide spectrum of society. He marries that to accurate instincts which reflect a middle-class upbringing that included a spell in a poor area and is not weighed heavily with ideology. He insists: “I don’t use polls to make decisions. I just use them to confirm what we’ve done.” They are a check marking the dividing line (necessary on the trading floor) between being confident and being cocky.
Attention to polls also rules out “blind ideology”. Nevertheless, Key insists, leadership requires action because “people elect you to make decisions, even if they don’t like them and agree with all of them”. Leadership is “having a sense of what is important to people, having the confidence to implement it and having the determination to make good on it.”
That sounds almost like a transformational leader who could bank his acceptability to make and sell bold and far-reaching changes — in keeping with, and necessary to realising, Key’s ambition to catch New Zealanders’ wages up with Australians’ by 2025. He could as Prime Minister revisit his risk-taking, getting-rich days.
But in 2009 he looked far more the transactional leader, the sort who manages the show. While he talked “step-change”, the step didn’t look very big. Is he a game-changer or does he just want to up the game a bit?
And if it is the latter, how does that mesh with the fact that under the combined impact of information technology, globalisation and geopolitical and geosocial change and a financial crash the world’s economic game has changed?
His speeches and interviews do not reflect that changed world. That may be because he is on the cusp between the baby-boomer generation and the next one and not actually a new-generation leader. Key has shown no interest in exploring potentially game-changing “green growth” (whatever that is): the economy is No 1, and “green” and “growth” are a zero-sum game in Key’s book.
As Key tells it, that tentativeness may be about to change.
Key considers 2010 pivotal and the budget in May to be the “focal point”. With recession-hit 2009 behind him, a lot of working parties, taskforces and other groups are starting to deliver policy options in areas as diverse as tax, science and innovation, the “drivers of crime” and reducing disadvantage in the very earliest months and years of life. This year Key aims to demonstrate “step-change”, though he expects the changes will not fully flow through until the second term. Tax reform will be a major test. English and he began meeting on that in December. Ministers and officials have been talking up an “economic growth agenda” to be featured in his annual Parliament opening speech on February 9.
Besides, the economy, the two other “objectives” Key says the government was elected on are “tightening up law and order” and “improving education standards”.
But Key has another, personal, ambition. He wants his prime ministership above all to be remembered for reducing the disadvantage that flows from a poor or bad early start in life. Paula Bennett, who shares that ambition, has a mandate. He bothers a lot about the fifth of teenagers who leave school inadequately literate and numerate.
It is large ambition — and an economic one (a capable workforce) as much as a personal and social one. It is an ambition for which there is unlikely to be much evidence of success, if any, until into a third term.
Key does not grandstand about a third term but he wants one. And he hopes that on the way he will “step-change” the electoral geography through his relationship with the Maori party. He wants to “redefine the National party”, so that it stops being a party of white middle class males. “The party needs to reflect the growing multi-ethnic diversity”.
Those are big ambitions. By the end of 2010 we should be getting a fix on whether he will realise them and on whether “step-change” is upping the game or game-changing — whether he is a visitor to politics or a serious operator under the affability.
The high-risk trader might marginally punt on the latter — but there is some homework to do yet.
Key: “Ultimately, leadership is about having a sense of what is important to people, having the confidence to implement it and having the determination to make good on it.”
“We [Bill English and he] have a very genuine relationship. There is nothing he would say behind my back that he wouldn’t say to my face.”
“If you are going to base a relationship on someone’s word and trust, if that is broken, then it is irrevocable. That’s the basis of the relationship. If I can’t rely on someone’s word, I can’t work on the basis where I give them room to operate.”
“There is a very fine balance in politics between doing things for what looks like, even if it is not, for the wrong reason — in other words, following a blind ideology because you believe you should — and not doing enough because you are scared of consequences.”
“So 2010, I think, is going to be the year when we need to put in place the economic policies that demonstrate what sort of government we are. We were elected on making a step-change for New Zealand. There is an acceptance that things take some time. What we do in 2010 will have some impact on our electability in 2011 but a much greater impact on our electability in 2014. [Voters] will have had a good opportunity to reflect on whether we are delivering on our promises.”
KEY ON THE QUALITY OF BUSINESS MANAGEMENT
John Key thinks management of New Zealand corporations as improving but with a way to go. He has been talking to business groups about it but there are no detailed plans.
Key: As the government we are playing our part in trying to strengthen the governance of the entities that we control. There has been significant improvement in the quality of the boards in the last 12 months. There is always room for growth in the capability of our management. Although by and large I think it is improving, there is still room for improvement and places like the Auckland Business School can play a role in that.
Q: Do you have any plans to buttress that?
A: We have had some discussions with business groups about that. At the moment we can identify the problem without necessarily identifying all the solutions.
Q: Do you exhort business leaders to lift their game when you talk to them, to think more strategically long-term?
A: Some of them are and are being rewarded for that. And there is no getting away from the fact that, like in any organisation, the leadership comes from the top and the more that the leaders embrace the change that is required, the more successful they will be.
Q: You don’t worry that too many are heading off to Australia to run top Australians?
A: We’ve had a bit of that but we’ve also seen quite a few coming back.