Australian companies are focusing too much on efficiency and too little on growth: departing REA Group CEO Greg Ellis

Australian companies are focusing too much on efficiency and too little on growth: departing REA Group CEO Greg Ellis

Published 14 March 2014 12:17

Jake Mitchell

Outgoing REA Group chief executive Greg Ellis says Australian businesses are hurting the economy by spending too much of their capital on improving existing operations rather than investing in new growth opportunities.

Ellis will depart from online real estate classified business REA this week to run Scout24, ­Germany’s largest real estate and dating portal. Under his leadership, REA’s market valuation has grown from about $500 million to $6.6 billion. The operator of the country’s number one residential property website realestate.com.au is 61.6 per cent owned by News Corp Australia.

Ellis says many business leaders were not correctly incentivised or insufficiently skilled to take the risks necessary to support long term growth.

“If you only invest in existing operations, all you’re doing is using the digital world to make yourself more efficient, which means less jobs or lower paying jobs,” he says. “If you have lower paying jobs, you can’t have adequate economic growth, given Australian gross ­domestic product is dominated by ­consumer spending.”

He says Australian companies, institutions and the Federal Government needed to dramatically change their thinking to support longer term growth opportunities.

“Australia, like all Organisation for Economic Co-operation and Development countries, needs new growth,” he says. “Conversations need to be happening at things like the Business­ ­Council of Australia, at the federal ­government level and frankly at the senior levels of boards to understand successful businesses like [online jobs classified enterprise] SEEK and [digital automotive classified company] ­Carsales and understand what they’ve gone through.”

Australia underskilled

Ellis says more tax incentives should be offered to those companies willing to invest in new technologies and industries, while remuneration structures for management could also be altered to motivate long-term ­investments.

“REA is a growth company that could probably pay better wages than traditional media because it’s a growing business. We don’t have enough new growth jobs in this country.”

The Australian population was severely underskilled for the digital era, which is one area where the government could invest to promote long-term growth, Ellis says.

“We’ve stopped trying to recruit from outside the company now at senior levels, expect for my position of course,” he says. “We’re trying to educate people on how we run the company from the inside because we physically can’t find enough people that are capable of working in a digital world.”

As foreshadowed by the The ­Australian Financial Review, Ellis will leave the country on Sunday to take the helm of Scout24, which will make him one of Australia’s best paid media executives. He says he plans to learn German. “English is well spoken within the company I’m told,” he says. “But I think if you’re in someone else’s country it’s always good to try.”

Ellis denied rumours of a rift with News Corp, after the company’s chief executive Robert Thomson said ­relations had improved with REA since Peter Tonagh was announced as interim chief executive. Tonagh is News Corp Australia’s chief operating officer.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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