Motoring organisation NRMA has faced a significant number of board challenges in the past. Christopher Niesche explains how the company turned itself around to become a leader in governance and diversity.
When Coral Taylor GAICD joined the NRMA board in 2008 it was the largest organisation she’d been involved in so she enrolled in an Australian Institute of Company Directors (AICD) course to improve her directorship skills. “As I sat through that course, the NRMA was the case study of how not to do things,” she recalls. “It was quite funny.” Certainly the NRMA has been through some tough times. During 2001, in the wake of demutualisation, it was losing $1 million a week, and the board was dysfunctional and driven by factionalism. Taylor says that by the time she joined, the turnaround under then president Alan Evans GAICD was well underway.
Today, some 15 years after the demutualisation of its insurance arm, the member-owned motoring body has staged a remarkable turnaround. It is a billion-dollar organisation with 2.4 million members. Its strategy, developed by management and adopted by the board, has seen it diversify into commercial enterprises such as hotels, rental cars and several innovative start-ups, posting a net profit of $67 million in the year to June 2014. It is also setting the standard in gender diversity – five of its eight directors are women. NRMA president Kyle Loades FAICD said the board didn’t deliberately set out to recruit women, but was certainly looking for a more diverse board. “I had a view as chair – as did the board – that gender diversity is important but we didn’t want it just for the sake of it,” he says. “If you want a more professional and diverse outcome, you have to open your mind to all the issues with diversity, which is gender and skill set and experiences, and we’ve got that in abundance.”
In fact, the NRMA is a trailblazer in gender diversity. The AICD is pushing for boards to adopt a 30 per cent target for female directors, but current numbers fall well short of that. Just 20 per cent of directors of S&P/ASX 200 companies are women and 30 of those companies do not have any women on their boards at all. The numbers are improving – but only incrementally – just 26 per cent of new appointments to ASX 200 boards in the year to June 2015 were women.
“It’s diversity of thoughts and skills that enables you to set yourself up for the future to deliver for the members of today and tomorrow,” says Loades.
The NRMA’s business model faces significant challenges in the future: the sharing economy where people rent cars for only a few hours at a time or use car service Uber instead of owning a car; the looming arrival of the driverless car; and the consumer’s increasing expectation of immediate service all mean the NRMA is in a fast changing world.
It’s not just gender diversity that is helping the NRMA board chart a new course for the organisation – there’s also diversity of experience. Marisa Mastroianni GAICD, for instance, is chief executive officer (CEO) of UOW Enterprises, a global education company that is a subsidiary of the University of Wollongong. She has expertise in strategic and operational planning, mergers, financial and risk management, corporate governance and change management.
Fiona Simson GAICD is a farmer and past president of the NSW Farmers’ Association and is a passionate advocate around the boardtable for rural and regional communities and issues. Loades also highlights the expertise in big data brought to the board by Tim Trumper MAICD, who has experience as a CEO and director in internet, e-commerce, financial services and media.
“If you look at all the trends going on around the world in terms of peer-to-peer businesses changing industries, challenging traditional industries, big data is a trend that we didn’t know enough about. So Tim has fed that experience in at the strategic level and at every board meeting,” says Loades, who has a background in motor vehicle retail and fleet sales and in the transport sector.
The NRMA hired “corporate start-up accelerator” Slingshot to consider businesses that NRMA could build from the ground up. There are several start-ups under active consideration, which remain confidential, but one that is already up and running is Camplify. This is a peer-to-peer caravan sharing service that lets caravan and motorhome owners rent out their RVs to holidaymakers when they’re not being used.
It has also invested in Sendle, a start-up delivery service that picks up parcels from the user’s home for delivery, at a cheaper rate than Australia Post. The NRMA argues that by having a financially strong organisation it can pay for its advocacy on behalf of road users and support other important but less profitable initiatives, such as its driving schools.
That the NRMA is addressing these challenges from a sound footing is testament to the governance reforms undertaken by management and the board, including Graham Blight MAICD, who was on the board for 12 years from 2003.
He and the other directors who’d been brought in to work with CEO Tony Stuart FAICD and his management team to clean up the mess found an organisation in chaos and with low morale. For instance, the previous board had been so busy with infighting that it had failed to sign off on the last three sets of board minutes. So the new board went back to basics. “Because the board had such a terrible reputation, the first thing we had to do was to set ourselves up as a board that people can respect, a board that would develop a plan and show some leadership. We had to show some consistency. We had to work with management to put together a business plan. We had to build a competent staff that the employees were happy to work with. And to just get on, show some good sensible governance and not to try any great magic tricks,” says Blight.
Stuart brought in consultants O’Connell Street Associates to advise the NRMA on matters like board charter, board tenure, board committees and the role of the president. He had also completed the AICD’s Company Directors Course and recommended that every director be required to do the course or its equivalent within a year of joining. “We are the only company in Australia to have done that,” he says.
“I was fortunate in that I had directors in Alan Evans, Graham Blight and Michael Tynan who wanted to see reform,” says Stuart. “It was very difficult asking 16 directors to become nine directors in the early days – asking people to reduce the board size and reduce their terms – but we got there.”
Management and the board have also put through some changes to its constitution to make the board more effective and less political. It has abolished preferential voting and stopped candidates forming “tickets” with other candidates – a process that often saw the board divided into factions, which were more concerned with battling each other than with good governance. Instead, individual directors represent different regions around New South Wales and the Australian Capital Territory, much like electorates.
The right mix
Another governance challenge presented by the election of directors is getting the right skill mix on the board. While a corporate board can effectively seek out and recruit directors to fill specific skills gaps, NRMA’s directors are elected, so the board doesn’t necessarily always have the complete skill mix that is needed.
In 2010, to mitigate this problem, members voted to change the NRMA’s constitution so that only eight of its nine directors are elected. The ninth director is then recruited by the board after each election once it has assessed where it needs additional skills. In fact, the board is currently seeking the ninth director.
When Stuart joined the NRMA the board didn’t have the diversity it has today. “When I arrived, 90 per cent of the board members were men and at my first board meeting two of them wanted to have fisticuffs outside when they had a disagreement,” says Stuart, whose tenure as CEO ends in September. “It was very much a blokey board meeting and a big ‘lunch culture’.”
He says the board’s current diversity better reflects the NRMA’s members and has helped the quality of board-think. “It’s very important that we’re cognisant of our own members and our own customers,” he says.
When Wendy Machin GAICD joined the NRMA board in 2005, there was only one other woman. When she became president three years later several casual board vacancies (directors have to retire after 12 years) created the opportunity to appoint more women to the board.
“We’ve got people with good diversity of skills so it was the case that the best candidates turned out to be women and that’s fantastic,” says Machin.
She notes that half of the NRMA’s members are women, and they’re often responsible for major buying decisions and teaching the children to drive. “I guess we wanted to send a message. People think it’s a bit of a male-dominated organisation and it’s all about fixing cars and stuff – that’s the perception,” she says.
Having such a large number of women around the boardtable introduces a different dynamic to discussions. Women tend to be less pushy but can be quite assertive and have a different way of looking at issues and presenting their argument, says Machin. Women are also more inclined to ask the “hard question” that all of the other directors were silently puzzling over.
The board operates along the same governance principles that apply to ASX-listed companies, but members are first and foremost in its consideration. A lot of board discussions are about how the NRMA can provide value and benefits to its members, and differentiate members from customers and make them feel “really special”.
The core reason most of NRMA’s members joined the organisation remains for roadside assistance, but cars are much more reliable these days. While that’s great news for motorists, it raises a question of how many members will see the benefit of remaining in the organisation in the future.
The NRMA is in the process of recasting itself, not just as a motoring organisation, but also as an organisation that can help its members in other ways.
For instance, Emergency Home Assist is like the household equivalent of its Road Assist service – members can call for help in the middle of the night if their pipes burst or their gas stove springs a leak.
“Our focus and our strategy at the moment is helping people more often,” says Taylor, who has 25 years experience in the motor sports industry. “It’s trying to become relevant to the members in ways other than, and in addition to, the breakdown service.”
The organisation has also moved to address the needs of younger members, who often don’t own cars and who perceive the NRMA as something for their parents’ generation.
Now it has 100,000 Free2Go members aged 16 – 20 years old who along with all the usual benefits receive roadside personal assistance for any vehicle they’re travelling in, regardless of whether they own it or drive it. And recognising that many of its younger members are heavy users of public transport, it has started advocacy work in that area also.
With the NRMA’s governance problems behind it, the board can now focus on the core business. “There’s not a board meeting where there’s a subject that doesn’t come back to ‘what’s the relevance or the benefit to a member if we do that?’,” says Taylor.
NRMA: THE HISTORY
1920 The New South Wales branch of the National Roads Association was born and in 1923 became the National Roads and Motorists’ Association (NRMA).
1924 The NRMA Patrol service began.
1925 Reached 7,637 members.
1970 NRMA hit the 1 million-member mark.
1982 Worked with the New South Wales Government to improve road safety by introducing random breath testing.
2000 The NRMA demutualised, its insurance arm became IAG and the motoring organisation remained a mutual society.
2001 Fought to have the fuel excise capped – saving motorists about 10 cents per litre at the time.
2005 Acquired Travelodge Hotel Group.
2006 Acquired car rental company Thrifty Australia.
2010 Voting reforms to stop the board becoming overly political.
2012 Opened free public charging stations for electric vehicles in Sydney and Canberra.
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