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Five-year review measures MLA’s value to industry, gets Sheepmeat Council nod

James Nason, April 20, 2016

Latest five-year independent review and economic impact assessment of Meat & Livestock Australia’s performance delivers a positive overall scorecard for the levy-funded industry service company, but recommends improvements in areas such as stakeholder engagement, on-farm R&D adoption and partnerships with its service providers.

 

 

MLA managing director Richard Norton

MLA managing director Richard Norton

FIVE years can be a long time in industry research and marketing.

Just ask Meat & Livestock Australia.

From 2010 to 2015, the industry-owned service company spent $997 million of grower levies and matching Government funds on R&D, extension and marketing activities aimed at improving red meat production and increasing red meat sales.

In the same five-year period it saw three different chairs, two managing directors and an interim MD, the intense glare of a senate inquiry, and a wide-ranging and heavy-hitting internal restructure process that saw dozens of jobs  shed, including some of MLA’s most highly experienced and longest-serving senior managers.

But after those days of upheaval and pain, MLA’s overall performance has received a relatively positive appraisal in its latest mandatory five-year independent review.

Every five years, MLA, along with all other RDCs (Research & Development Corporations) that receive at least partial funding from Government, must submit to a comprehensive external performance review.

New Economic Impact Assessment process

The latest review of MLA (click link at base of page to access full document)  has also included for the first time a full economic impact assessment of MLA’s entire portfolio of programs over the five-year period. It represents the most comprehensive-ever examination of MLA’s performance, according to managing director Richard Norton.

Similar independent reviews involving extensive economic impact assessments feeding into five-year performance reviews could become a blueprint for measuring the value of all RDCs in future, he predicts.

The economic impact assessment was led by the Centre for International Economics.

It found that MLA’s $997 million in expenditure on research, development and marketing programs from 2010-11 to 2014-15 provided a “current and future return” of $6.20 for very dollar invested, or an industry-wide return of $6.1 billion.

In the overall five-year performance review, which also took the CIE’s financial modelling into account, independent consultants ACIL Allen produced four key findings (detailed in full at bottom of article).

Over 200 red meat industry stakeholders from all levels of the value chain provided input into the review, including 76 who were directly consulted with interviews of an hour or more to capture data, insights and observations for analysis

Effectively the review found that there is merit for the red meat industry in having a single levy-funded research, development, extension and marketing organisation which spans the whole value chain like MLA, and recommends that the current company structures be maintained.

However, there were some things the organisation can improve upon.

“There are some operational issues around stakeholder engagement and procurement, and that is just part of the evolution of the business,” ACIL Allen principal JP van Moort told Beef Central.

“But there is a lot of power in MLA. In terms of its capability and potential, having an organisation like that is of benefit to the industry.”

Sheepmeat Council leader welcomes review findings

Sheepmeats Council of Australia president Jeff Murray

Sheepmeat Council of Australia president Jeff Murray

Sheepmeat Council of Australia president Jeff Murray welcomed the findings of the five-year independent review and economic impact assessment of MLA’s performance, stating that it demonstrated levy payers were receiving a good return on their investment.

“This report indicates that overall MLA does a very good job for our industry, most notably in the areas of market access, eating quality and integrity systems”.

“Considering we are a majority export industry and one that is underpinned by exceptional quality and integrity, these are vital programs for the future growth of our industry.

“The findings of the report are largely consistent with the feedback SCA provided to the process,” he said.

“We are aware that there have been numerous changes at MLA over recent years to address perceived shortfalls in their operations.

“While this report shows that there are still areas that will need to be worked on, it acknowledges that there are measures and processes in place to make sure this occurs,” Mr Murray said.

“The independent review also acts as a timely reminder that the work MLA does is undertaken on behalf of the red meat industry and its numerous stakeholders.”

Mr Murray said independent, regular reviews such as the MLA assessment are an important part of ensuring transparency and accountability for the sheep meat industry.

Review finds MLA and MLA Donor Corporation performed well

The review found that MLA and the MLA Donor Corporation had performed well against their Statutory Funding Agreement obligations. Its governance arrangements, practices and procedures met ASX requirements and its operational structure was constantly evolving to better meet the imperatives of the MLA Strategic Plan.

“MLA has provided ACIL with ample evidence to demonstrate high levels of compliance with its formal obligations to Government, levy payers and other stakeholders in the red meat value chain,” the report commented.

“This review identified that MLA met a large percentage of its Key Performance Indicators (KPIs) in almost all areas, with the exception of some investments associated with beef and lamb domestic market promotion where external market factors impacted outcomes.”

Despite operating in a difficult and often fractious external environment, MLA had effectively responded to the recommendations of the previous Arche Consulting Review and implemented (or demonstrated progress towards) all of the recommendations to the 2013-14 Senate Inquiry to the Grass Fed Levy.

The report said MLA had delivered benefits to the entire value chain over the review period to the value of $4.03 billion. It found there was evidence to suggest that benefits delivered by MLA are concentrated more heavily in some parts of the value chain (i.e. grass fed cattle) than in others (i.e. processing).

It also found that some MLA programs were delivering exceptional results, including Meat Standards Australia, which was generating $679m in industry returns for a $54m dollar investment, and programs aimed at improving market access for red meat capturing a return of $24 for every dollar invested. Animal health and welfare programs, market information and the MLA Donor Company (MDC) were also high performers (more on these assessments in seperate story).

Areas for improvement

Some of the more specific areas for improvement highlighted by the review included the lack of performance of MLA’s domestic marketing beef program, the slow rate of adoption of on-farm R&D, stakeholder engagement and its approach to how it procures service work, which the report said must be streamlined to accelerate the realisation of greater benefits for the red meat industry.

Mr Norton told Beef Central that the report reflected the results of MLA’s own ongoing feedback with stakeholders and there was nothing in its findings that came as a surprise.

He said the board and management were already acting on the report’s recommendations.

Mr Norton said that in response to concerns about the domestic beef strategy, MLA embarked in 2015 on a completely new strategy by moving to a marketing team with a fast moving consumable goods background. The”Better on Beef” campaign was launched in mid-2015 as a result, and, against a 40 percent rise in retail beef prices, it had arrested a declining trend in domestic per capita beef consumption.

“So that obviously was addressed and addressed early,” Mr Norton said.

“Another is on-farm adoption of R&D which is an issue for all RDCs and any research organisation

“When we did the restructure we identified that MLA really needed to formalise that process.

“Not only did we have the grassfed senate inquiry tell us that it needed attention, we had the LPI (Livestock Productivity and Innovation) review.

“In the north we supported the NABRC structure and in the South and West we implemented grassroots model for R&D, with the direct intent that if grassroots producers are involved then it should be R&D that will be adopted at grassroots level

“We are 12 months into that cycle. NABRC was already formed, South and West have ben formed, the whole of Australia has put up projects which will go through the life cycle in this consultation process and we are now starting to allocate budgets to it.”

Stakeholder engagement

The report said many of MLA’s important stakeholders “want to be engaged meaningfully by the organisation”, and during most of the Review period, stakeholders perceived they were being “communicated to”, rather than engaged.

“The organisation’s existing stakeholder engagement can be characterised more as stakeholder communications, and is not meeting the expectations of important stakeholders. MLA’s past approach to stakeholder engagement was not meeting good, contemporary business practice.

“In line with good practice, MLA’s engagement with stakeholders should be meaningful, be focused on building trust, oriented to evolve from transactional communication to seeking stakeholder involvement, and be calibrated to generate mutual benefits for stakeholders and MLA.

“There is considerable opportunity for MLA to develop a specialist corporate public affairs capability to develop and guide implementation of its stakeholder engagement strategy; and provide high-level socio-political counsel to MLA Senior Management as to how it can effectively involve stakeholders in how the organisation operates.”

The report noted that MLA has endured considerable internal reform over the Review period.

This process had received “mixed praise” from external stakeholders depending on the nature of the stakeholders’ relationship with MLA.

It had also clearly impacted on staff satisfaction levels, which dropped dramatically during the middle years of this Review period. However, the report noted that staff satisfaction levels are now starting to improve as the reforms bed down across the organisation.

Strategic Plan next

Mr Norton said evaluation was a part of normal business for MLA and the company would use this review to guide its operation and the work it does for industry over the next five years.

The review informs MLA’s next five-year funding agreement with the Australian Government and MLA’s Strategic Plan.

Due for release in the coming weeks, the Plan is focused on commercial outcomes and is fully aligned with the Meat Industry Strategic Plan.

“I’m excited about the future of the red meat industry, and the contribution MLA will make to enhance producer profitability and sustainability in the coming years,” Mr Norton said.

Four findings of the Performance Review

1. There is considerable benefit of having one service company which can span the entire value chain. Recommendation: Maintain current company structures – to ensure MLA has the ‘breathing space’ necessary to operationalise the internal reforms that have been implemented over the past 2-3 years. This recommendation supports the continuation of the MDC (but with enhancements) as a fully-owned subsidiary of MLA.

2. Meat Industry Strategic Plan (MISP) is an underutilised planning, investment, engagement and communication tool. Recommendation: Use MISP 2020 as the access and exit point to MLA – to reinforce the role of MISP 2020 as a strategic planning and operational tool which drives internal and external company interactions.

3. Listening is not enough, genuine partnerships are needed to drive future performance. Recommendation: Improve MLA’s strategic partnership model – to ensure stakeholder engagement is meaningful, focused on building trust, oriented to evolve from transactional communication to seeking stakeholder involvement, and be calibrated to generate mutual benefits for stakeholders and MLA.

4. Sourcing and procurement generates performance issues for MLA and MDC Recommendation: Identify and then implement a leaner and more flexible procurement process – to achieve more from its investments and to accelerate realisation of MISP 2020 for the industry’s benefit.

Highlights of the Economic Impact Assessment

· Each of MLA’s four main strategic areas of activity (Maintaining and improving market access; Growing demand; Increasing productivity; Industry integrity and sustainability) generated a positive return on investment ranging from $14.80 for every dollar invested to a low of $3.80 for every dollar.

· The majority of MLA programs generated healthy industry returns and all programs generated a positive return on investment.

· Four program areas within the strategic framework contributed 46 per cent of total industry returns from 20 per cent of expenditure.

· The best performing program areas were “Market access” (24.0:1); “Livestock exports” (14.5:1); “Eating quality” (12.5:1); “Product integrity” (8.3:1).

· Five programs returned below $3 for every dollar invested

· Two programs returned 7 per cent of total industry returns whilst using 23 per cent of expenditure; “Domestic beef marketing” (1.1:1) and “On-farm productivity” (2.7:1).

Cattle Council of Australia response

The Cattle Council of Australia told Beef Central it is supportive of the recommendations of the review and believes that the independent analysis will improve MLA’s operations and deliver enhanced benefits to producers.

CCA president Howard Smith said the review highlighted the positive outcomes that MLA has generated for producers.

“The review notes the important role of industry strategic plans and Cattle Council believes it is essential that MLA’s future performance be measured against BISP2020,” Mr Smith said.

“The review’s recommendations will enable greater assessment of MLA’s performance and this will deliver greater accountability and transparency to producers.”

 

  • To view the summary of the MLA economic impact analysis click here
  • To view the full ACIL Allen report, click here.

 

 

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Comments

  1. Am I missing something here…? $997 million spent trying to improve the industry…….think about that, its not $997,000.00….it’s $997 million dollars, funded by levies. And how is the industry travelling. Lamb is either up or down, there is no happy medium, nor does it retain a average. How did the Australia Day advertising end up, all that money spent on advertising promotion? The lamb price was low, then medium, then dropped as Australia day weekend drew closer. Lamb after Australia Day was the same average price, before dropping dramatically………..$977 million, mostly spent paying wages to wallies who do bugger all…but that’s only my opinion. Full names required in future for reader comments please Brian, as per our long-standing comments policy: https://www.sheepcentral.com/about-us/sheep-central-comment-policy/ Editor.

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