Address to Napier Women in Business

Thank you for the opportunity to meet with you this evening. Today I was at a Government-Business Forum as Minister for Small Business. Tonight's event combines that role with my role as Minister of Women's Affairs.

I have said on a number of occasions now that there were two portfolios I specifically asked the Prime Minister for and they were Commerce and Small Business. I had often felt that there were untapped synergies between the two. However, when the Prime Minister also appointed me to the Women's Affairs portfolio, I immediately saw the potential in the trifecta.

As I said to the New Zealand Chambers of Commerce last year, while women in the paid workforce remain seemingly unable to lift themselves across a gender pay gap that persists at around 80 per cent to 85 per cent of the male wage, and when we know that even women university graduates earn less than their male counterparts, self-employment starts to look increasingly attractive to women. This is not surprising given the potential for increased flexibility in working hours, which often is a motivating factor in setting up one's own business in the first place.

I am particularly pleased that some of the benefits of being employed are being extended to include those in self-employment, for example, the extension of Paid Parental Leave to self-employed parents.

Before I come back to Women in Enterprise, I want to talk a little about my role as Minister for Small Business.

I need first of all to declare a non-conflict of interest – I don't run a small business, I never have and probably never will. But if I do, I have already learned many lessons that unfortunately a lot of small business owners will never learn.

The essence of the entrepreneurial spirit is about risk taking. However, what I have learned is that successful entrepreneurs manage their risk-taking by being very clear about where they are going and how they are going to get there.

The government cannot do this for people, which is why our focus is on providing information, advice and training for developing and running a business from self-employment, through to developing a business plan or helping to introduce a business to an export market.

The difference in my role compared to other portfolios is that as Minister for Small Business I do not have a legislative toolbox to make changes myself. To be an effective Minister for Small Business, I need to accurately identify the policy settings that are acting as barriers to taking on staff, expanding operations, investing in new infrastructure, increasing productivity, moving into exports and so on. I then have to come up with practical solutions that are deliverable and finally I need to persuade the relevant portfolio Minister to pursue the necessary changes. This is why we have a Small Business Ministerial Group, which I chair, to ensure that there is a constant cross-fertilisation of ideas and to ensure that the impacts of small business are considered when policy is being developed.

It's also why this government felt that it was important to have an independent voice in terms of contestable advice to officials and to Ministers, which we have achieved with the Small Business Advisory Group. Although their annual reports have excited the most media interest, it is the behind the scenes influence that is making a real difference. Officials go to them before they sign off on policy and on implementation (e.g. design of forms) and their response means that the perspective of the busy small to medium sized business (SME) owner is taken into account.

Why is this important? SMEs continue to be a key driver of growth in the economy, making up over 95 per cent of all businesses in New Zealand, contributing around 40 per cent of total output and from 2000 to 2004 SMEs accounted for 60 per cent of all new jobs that were created.

The National Bank’s Small Business Monitor showed that small businesses outperformed the rest of the economy from 2002 to 2004 in terms of economic activity. So SMEs are important to the economy, and for them to be productive they must be the best that they can be.

So everything I do away from Parliament is about learning from those who are out there doing it. I visit SMEs in start-up mode; ones that have just left the incubator, equipped with an effective business structure to accompany the good idea they brought with them; I visit SMEs that have been around for a number of years, sometimes generations.

I am constantly inspired by the breadth and depth of ideas, innovation, talent and vision that I have encountered in my short time as Minister. I know we are supposed to feel the doom and gloom of a downturn that is inevitable in any business cycle – but I find it hard to feel anything other than optimism when I am confronted every week with extraordinary people doing extraordinary things. But at the same time I am learning from them – what works; what doesn't work.

Every day I ask myself what can government do better to identify and eliminate barriers to success, to open doors to opportunity and to facilitate the development of relationships that we know are the key to business success.
My priorities as Minister for Small Business are:

• Improving business and management capability;
• Making transactions between SMEs and government agencies easier;
• Enhancing communication between SMEs and government;
• Providing more enterprise education for school students and young entrepreneurs; and
• Maintaining a quality regulatory environment that eliminates unnecessary compliance costs and minimises necessary compliance costs.

The order of these priorities reflects the relative impact that these issues can have on growing successful businesses. Before you comment on compliance costs appearing at the bottom of the list, can I say that they have equal priority in my view; however, I did learn early on in the job that it is important to focus on business capability.

This was reinforced by one of the business trainers I met, who said that when SME owners come in for their first session, they are asked what the biggest barrier to their growth is and they invariably say things that are external to the business – exchange rate, compliance costs, tax rates, lack of skilled staff…the list goes on. At the end of their last session they are asked the question again and they all say – it’s me. Not me, the Minister for Small Business, but me the owner, who has to own the barriers and find and own the solutions.

Last year I attended a presentation by Arthur Grimes of the University of Waikato and Richard Fabling from the Ministry of Economic Development entitled: What sets successful firms apart from the pack?

The information was drawn from the Statistics New Zealand Business Practices Survey 2001, which provided a lot of information from which they could identify business practices that were linked to success.

They identified investing in people – through performance pay, innovation-related employee training and regularly measuring employee satisfaction – and investing in innovation – through up-to-date equipment, marketing new products and continuous in-house R&D – as the key drivers of success.

Investing in people, products and markets – again it's not rocket science, but how many people know how to implement the theory in a way that is realistic given the nature of their business? We know small business owners are very busy people – often because of their size they end up doing everything and they haven't got the time to do the strategic stuff that will grow their business.

I am going to risk being a bit controversial and suggest that this applies more to male as opposed to female small business owners. Why? Because many of the reasons that many women are in business are often quite different from what motivates many men. I am not saying this is always the case, but the differences are pronounced. My opinion, fortunately, has the advantage of being evidence-based. Allow me to explain.

The Women in Enterprise Project arose out of the development of the Action Plan for New Zealand Women, where it was identified that women in enterprise are a growing feature of the SME landscape.

Women are becoming self-employed at twice the rate of men, and are becoming employers at a faster rate than men. This trend is shared with many similar countries across the world. On average, however, women’s businesses start small, remain small, and generate lower incomes than men’s businesses.

As a consequence, the Ministry of Women’s Affairs (MWA), in conjunction with the Ministry of Economic Development, initiated the Women in Enterprise project. The objective of the project is to gain a better understanding of women’s experiences in business and to explore opportunities for the government to support women to achieve greater business success.

Research undertaken as part of the Women in Enterprise project included a review of international and New Zealand literature, as well as interviews and focus groups with 50 women business owners and women involved in business assistance services e.g. New Zealand Trade and Enterprise, the Pacific Business Trust and the Maori Women’s Development Incorporation.

Overall, the research suggests that women business owners share many characteristics and face similar issues as men business owners e.g. developing business expertise, accessing finance and managing compliance costs.

However, as I indicated, differences in men’s and women’s enterprises reflect underlying differences in their motivations and goals, as well as a range of other factors that are likely to have a more profound affect on the success of women’s businesses.

These include:

• Lower levels of business experience;
• A lack of accumulated wealth and borrowing potential;
• Caring responsibilities.

Although women face some additional barriers as a result of these factors, the success of many women’s businesses highlights that not only are women able to overcome these obstacles but that they also bring other strengths to the business environment.

The government, though, must focus its attention on these barriers as they do affect the potential to grow. Extending paid parental leave to self-employed parents is a step in the right direction. And it matches what we are seeing in the numbers of women entering self-employment, which show an increase of approximately 31 per cent between 1991 and 2001.

The different strengths that women bring to business include aspects of management style. The literature cautions that ‘efficient management’ is often seen to require masculine qualities, which many women do not identify with.

Other research, however, suggests that women's emphasis on co-operation rather than competition, collectivity as opposed to individuality, and web-like networks over vertical hierarchies actually fit very well within what are currently admired forms of management and leadership.

The participative and transformative management style of many women managers, as well as the importance placed on interpersonal skills, confirms that women can do very well in a business environment.

Networks are another area where women can bring strengths, particularly given their participatory nature and emphasis on creating co-operative relationships. International research suggests, however, that women experience difficulty in accessing networks particularly those dominated by men. This has seen the number of women’s networks increase over the last decade, for example HER Business network and Women’s Business groups attached to Chambers of Commerce.

Women have much to contribute to this country, and to business in particular, but our talents are not always used to the extent that they should be. The 2006 Census of Women’s Participation, published last month by the Human Rights Commission, shows that just 7 per cent of the directors on the boards of the major companies in New Zealand are women. While this is up from 5 per cent in the first census in 2004, it is still lower than most countries with which we tend to compare ourselves, and it is far worse than the state sector where we have achieved 35 per cent participation rates on Crown Company boards and 41 per cent of government appointed boards.

That 7 per cent represents only 46 directorships held by women. As some women hold more than one directorship the actual number of women is even smaller. I don't believe there are fewer than 50 women in New Zealand that have the skills and experience to serve on these boards.

No one is advocating that women should be appointed to boards just because they are women. But global research I monitor as Minister of Women's Affairs is increasingly backing up the common sense view that successful companies have boards that tap a broad range of perspectives.

The Ministry of Women’s Affairs has a Nominations Service that maintains a database of women with suitable skills for serving on boards and committees. It works closely in the public sector with boards of governance and professional organisations to understand their requirements and then nominates women with skills and experience that are well matched to those organisations’ needs. Because they nominate only people with the right skills, many of them are appointed and over time the number of women on boards has steadily increased.
Of course, to be successful, the Nominations Service also needs to have a huge range of talented women on its database. I know that most of you are probably consumed by managing your own businesses, but you may also be interested in serving on a state sector board, or know of other talented women who would be interested. If so, I urge you to check out the Women on Boards section of the Ministry of Women’s Affairs website - on www.mwa.govt.nz - to see whether you have what is required.
The private sector could learn a thing or two from the success of the state sector in finding women to contribute at a governance level and I would like to see a greater commitment within the private sector to working towards greater gender equality in the company offices and boardrooms.

I see this as a sensible business decision rather than an act of tokenism. The publication The Economist last year reported on research from America, the UK and Scandinavia that showed a strong correlation between shareholder returns and the proportion of women in the higher echelons. Findings reported in the publication suggested that a corporate culture that fosters women’s careers also fosters profitability. Diversity is good for business.

I am pleased that the Women in Enterprise project is producing the data, which I will be able to utilise as Minister for Small Business and Minister of Women's Affairs to advocate for the policies that will help lighten the load. As I often say just because girls can do anything, doesn't mean they have to do everything.

Which is the point that I keep coming back to. When I asked the Prime Minister to take a punt on a synergy that I could see in Commerce and Small Business, she answered my request with a combination that has an even greater potential into the future.

What can I do in my role as Minister of Commerce, Small Business and Women's Affairs to make life easier for you who are doing everything?

I am very excited by the challenge she has given me, because of the potential it represents in terms of what can be achieved and I look forward to working with women in business to explore what that could mean.