What do Alan Carpenter, Mark Creasy and Rob de Crespigny have in common, apart from the fact that their surnames begin with C?
The correct answer is that all have a talent problem; not their own, Briefcase hastens to add, but a problem in managing a shortage of executive talent, which is a direct result of the economic boom that has propelled Western Australia to ridiculous levels of growth.
Looked at in general terms, the executive talent shortage is part of the overall skills shortage that has led to a deficit of boilermakers, electricians, and even pencil pushers in the Perth office of the Australian Stock Exchange.
Looked at specifically and it becomes clear how each member of the Briefcase “C-class” has chosen a common technique to handle the problem. Throw money at it.
Mr Carpenter’s solution, which, to be fair he inherited, is illustrated by the whopping salary paid to his chief of the health department, Neale Fong.
No matter which way the Fong case is analysed, it is extremely difficult to argue why a man in charge of the health services of a state of two million people is paid more than twice as much as the health boss in Queensland, which has twice WA’s population.
The Fong case has been well publicised, if not well explained by WA’s political masters. Briefcase understands their problem. Quite simply, they are embarrassed that their chief health bureaucrat commands such a high salary package when staff in hospitals are demonstrably overworked and underpaid.
Out in the real world, where it’s alright to make money from a shortage, the talent hunt has resulted in Messrs Creasy and de Crespigny adopting a new ‘back the man’ approach when it comes to investment decisions.
Both Mr Creasy and Mr de Crespigny, who have each made more than $100 million from playing the mining game, have identified the executive talent shortage and found a way to pay more to get the best people.
In Mr Creasy’s case, he has even allowed his shareholding in a mineral explorer to be significantly “watered down” just so he can stay in the game of “people backing”.
Mr de Crespigny has adopted a variation on the theme by assembling a talent pool in his new mining adventure, offering them a slice of the rewards, and unleashing them to execute deals.
The specifics of Mr Creasy’s people exercise involve a company called Apex Minerals, a business in which he had amassed a 44 per cent stake, but which was down to its last $1 million in the bank, and had a collection of high-risk (and high-cost) prospects in western China.
The revival of Apex involves the recruitment of three senior mining executives, all with time served at the successful Canadian-based nickel and gold company, LionOre.
Mark Ashley, Mark Bennett and Kim Robinson have been given the job of revitalising Apex. About $7 million in fresh cash is coming from the clients of Southern Cross Equities, and Mr Creasy is happy to see his stake drop to 16 per cent, because he is prepared to back the new talent team.
Mr de Crespigny’s play involves Scarborough Minerals, a new business emerging in London from a complex three-way merger of less-than-successful explorers. While there are a number of mineral assets in Scarborough, the real asset is the talent pool, including former senior staff with Deutsche Bank who are relishing the chance to do deals using the capital assembled by Mr de Crespigny.
In the case of Messrs Creasy and de Crespigny there are no questions asked about the game they’re playing because it’s a conventional business strategy of backing talent, and paying handsomely for it, with the price dictated by availability.
In Mr Carpenter’s case there is more of an issue, as we have seen because the laws of business (supply meets demand) do not tolerate a harsh political light. Even if Dr Fong is the most talented health management professional in the world there is no way his performance can be measured using a simple profit formula in the same way Mr Creasy and Mr de Crespigny will measure their chosen talent.
While on the question talent and the letter C, it is impossible to not use this opportunity re-visit a company long in one, and short in the other.
Clinical Cell Culture, which sometimes goes by the nickname of 3C, has been a favourite of Briefcase for some time. Not because it is particularly liked, more because it has attracted so much publicity, and delivered so little to its shareholders.
Last year, Briefcase had the temerity to question the business plan of 3C, which had decided to relocate from its Perth headquarters to a new office in Britain. Management at the time said it was a necessary move to better market the company’s spray on skin product to doctors in Europe, and then on to the US.
Briefcase questioned whether this was not a cart before the horse situation, because costs in the UK are exorbitant and small biotech companies have a habit of mistaking publicity for achievement.
Earlier this month, 3C recognised its problems, complained about a lack of sales, and announced the departure of a couple of senior executives and the return of its founder, Fiona Wood, to help orchestrate a revival plan.
Devoted followers of 3C will have their fingers crossed that, this time, the company gets it right. There has been an up-tick in the share price, but not before time. When Briefcase first raised its questions the stock had dropped from around 44 cents to 34 cents – a fall the 3C cheer squad claimed was too harsh because the stock was really worth $1.13.
Oops. After that share price tip, 3C plunged to a low of 10 cents, but has since raised its head back to around 17 cents.
Briefcase is in no position to pass judgment on whether 3C’s products are good or bad. It is merely noting that this is another company that has experienced problems because management misjudged the costs of the overseas move, and the time it would take to win market acceptance.
As a result, 3C is being forced to reorganise its management team at a time when the entire management pool is remarkably thin, and it will take a lot of money to attract the most talent people, as Messrs Carpenter, Creasy and de Crespigny are discovering.
“The art of medicine consists of amusing the patient while nature cures the disease.” Voltaire