Fonterra’s latest move, appointing Miles Hurrell as interim CEO “with immediate effect”, has sent fresh rumbles through the dairy industry.
The co-op’s chairman John Monaghan, announcing the move, spoke of the need to “breathe some fresh air into the business”.
He is not alone with this observation: several politicians have been calling for just that – but many of the co-op’s 10,500 farmer-suppliers may be wondering what exactly a blast of “fresh air” may do.
Whatever Fonterra does is important not only for the farmers, but also for the country, because the co-operative is the only NZ business which can be truly labelled a multinational. It is the country’s biggest exporter and has 20,000 employees worldwide.
Fonterra was already undertaking a global search for a successor to Theo Spierings as CEO, who was due to leave the post in November. He will now leave on September 1.
Hurrell, who has been with the company since 2000, is currently chief operating officer of Fonterra’s Farm Source unit, which is responsible for working directly with its roughly 10,500 farmer-owners.
Monaghan, who himself took over as chairman only last month, said it was not best practice to have the chairman and CEO stand down at the same time, but events have overtaken that decision.
“I have agreed with the Board that we will stop the global CEO search while we review the co-operative’s current portfolio and direction. It’s important that we give ourselves the time to take stock of where we are as a co-operative, breathe some fresh air into the business, then determine any changes that are needed. Appointing a new CEO is the most critical decision a board will make. We will take all the time we need to find the right person.”
Monaghan said in the meantime, Fonterra needed a new leader who could hit the ground running and Hurrell had the experience, intellect and commitment to do that.
Fonterra has faced criticism about not disclosing the illness of former chairman John Wilson, who stepped down last month, as well as – more fundamentally – on its financial performance. On Monday, the dairy processor and exporter dropped its forecast payout to its suppliers and said it was unlikely to pay a final dividend.
Federated Farmers’ spokesman Andrew Hoggard says the timing of the announcement is “rather strange” because Fonterra must be close to choosing a permanent head.
He said he lacks an in-depth understanding of Hurrell’s skills.
“All I know is he’s very approachable, I’ve never heard him say anything stupid. He’s a safe pair of hands.”
Hurrell, who is 44, has been with the co-op since 2000. As Chief Operating Officer at Farm Source, he has been responsible for Fonterra’s global farming strategy that includes farmer services and engagement, milk sourcing and the chain of 70 Farm Source™ rural retail stores throughout NZ.
Monaghan insists appointing a new CEO is the most critical decision a board will make.
“We will take all the time we need to find the right person.In the meantime, we need a new leader that can hit the ground running.
“Miles has great mana. He has a deep understanding of our business and has demonstrated his ability to manage large, complex business units in most of our global markets.
“Miles is well-respected both within our co-op and by our key global customers and wider stakeholders”
But critics may find it odd that Monaghan further says:
“Our CEO role requires intellect, energy and commitment. Miles brings that in spades.”
Those who toil in the sheds could think this goes without saying —- especially as the departing CEO received $8.3m in remuneration.
Hurrell is quoted as saying Spierings
“ … leaves behind a talented leadership team that includes some of the best minds in global dairy. I’ve been privileged to be part of that group for the last four years and I’m totally confident that, by working as a team, we can deliver on the expectations New Zealand has of us”.
But, significantly, he added: “As a group, we haven’t always got everything right”.
Would that be the dud investment in Beingmate? Or the slow progress in adding value? And what else?
Certainly some analysts contrast the plodding performance of Fonterra with the spectacular results achieved by relative newcomers in the industry, such as Synlait and A2 Milk. Others see the culture in Fonterra’s HQ as “dour”.
If Fonterra needs more oxygen at the top, as Monaghan seems to suggest, it is not the only corporate in NZ with this problem. Fletcher Building has been through the same treatment.
With the government reviewing the legislation governing the dairy industry, it is a critical year for the giant co-op.
Monaghan says Spierings has led the co-op through a period of great change and “some real challenges”.
But the latest move suggests not all of those challenges have been met.
The fiercely loyal farmer-suppliers will be looking to the board to suck in that “fresh air” and crack the whip a bit more vigorously. They — and NZ — need Fonterra to be the global leader it aspires to be.
UPDATE: Investors have reacted positively to news of fresh air being pumped into Fonterra. The share price on the NZX started the day at $4.81. At noon it was $4.85.