Analysis: The former chief financial officer of one of NZ’s biggest and most volatile listed companies, Fletcher Building, has resurfaced in the same role at the country’s biggest ever government agency.
Bevan McKenzie quit Fletcher after the company announced a “horror half-year result” last February, which it blamed (in part) on ongoing costs associated with the burnt-out Auckland convention centre.
Now he’s jumped out of the fire and into the frying pan that is Health NZ. Newsroom has learned that McKenzie has been named chief financial officer of Health NZ Te Whatu Ora, as Government-appointed commissioner Dr Lester Levy proceeds with wholesale change to the troubled agency’s leadership.
Levy, who’s been described as a friend of Prime Minister Christopher Luxon, was parachuted in by the Government to fix a $130 million a month cost blowout. He warned the big super-agency was facing a $1.7b deficit in 2024-25.
In a perceived snub to chief executive Fepulea’i Margie Apa (who might have expected another term in the role) Levy has begun an international search for a new chief executive. She’s been told she can apply – but internally, planning and funding director Dr Dale Bramley is tipped to replace her.
Seven other members of the executive team have now resigned or been laid off. The award-winning former chief financial officer Rosalie Hughes quit with a mediated payout last year, after blowing the whistle on how Levy and his deputies planned to report the agency’s finances.
Hughes was vindicated when the Auditor-General forced Levy to back down on his attempt to include hundreds of millions of dollars extra in redundancies and holiday pay remediation in the Health NZ deficit.
Margie Apa announced McKenzie’s appointment to senior staff on Thursday, in an email obtained by Newsroom.
She cites his global experience across finance, strategy, operations, business development and mergers and acquisitions. “His experience in turning around financial performance in large and complex organisations will be critical to the Health NZ reset to focus on delivering for patients.”
Apa’s email doesn’t mention the circumstances of McKenzie’s departure from Fletcher’s, which followed the early departures of chair Bruce Hassall and chief executive Ross Taylor.
McKenzie is to start at Health NZ on April 28, more than a year after he announced his resignation from Fletcher’s. There had been shareholder pressure for heads to roll on the construction giant’s board and in management.
This came after the company announced a “horror half-year result” last February, which it blamed (in part) on ongoing costs associated with the burnt-out Auckland convention centre.
Even before the company reported its big half-year loss, The Australian newspaper and some analysts had questioned whether McKenzie could or should remain in the role.
Health sector commentator Ian Powell, who for many years headed the Association of Salaried Medical Specialists, predicts McKenzie will struggle to adapt, after his headline-grabbing departure from Fletcher Building.
“Like other former senior Fletcher Construction employees Bevan McKenzie would have preferred that this might somehow be magically expunged from people’s memory,” Powell says. “It is not career-enhancing.”
He warns that McKenzie’s lack of experience in the high complexity and relationship-dependent health system, combined with the continued internal restructuring, will make his shortcomings glaringly obvious. “In addition to the financial skills, he will need to know what he doesn’t presently know and have an abundance of empathy for both the health workforce and patients.
“It would have been logical to appoint someone with the experience of a former DHB chief finance officer. It is also logical to assume that no former chief finance officer would want to touch the role with a barge pole given the dysfunction and scapegoating culture of its leadership.”
It seems McKenzie was brought back from the wilderness by another former Fletcher chief financial officer, Roger Jarrold – who’s now deputy commissioner of Health NZ. Jarrold was chief finance officer at Fletcher’s construction subsidiary for three years, then continued four more years as a financial consultant. According to his LinkedIn profile, he continued consulting for Fletcher Construction until November, just two months ago.
The chief executive of the Shareholders’ Association, Oliver Mander, says Health NZ will no doubt have done its homework before appointing McKenzie.
“I’ll say at the outset that individuals do learn from their past experience – positive and negative,” he observes. “At Fletcher Building, investors perceived McKenzie as a proponent of the long-term strategy, since he worked there in 2017. From an investor perspective, that strategy has been de-bunked and resulted in significant loss of value.
“From an NZ Shareholders’ Association perspective, we held significant concerns about the company’s risk management and performance culture, where issues occurring at the ‘front line’ of the business did not appear to be surfacing at the board.”
But what does this mean for his performance in his new role at Te Whatu Ora? “From a Health NZ perspective, this comes down to the guardrails or structures they have placed around the role,” Mander says. “One would hope they have structured the chief finance officer role to play to McKenzie’s strengths and mitigate any potential weaknesses.”
McKenzie was at Fletcher for nearly 11 years, in which time he is said to have played a driving role in Fletcher’s $315 million acquisition of Higgins. But in recent years, the company has described Higgins’ performance as “disappointing”.
His acquisitions experience could be useful at Health NZ where there are calls to buy back the struggling medical labs services – but there’s unlikely to be government appetite to nationalise businesses like Awanui Labs.
More likely, it’s his business turn-around experience that Levy and his deputies will call upon, as they continue a rolling maul of cuts and redundancies at hospitals and clinics the length of New Zealand.
This morning, Jarden analyst Grant Swanepoel comes to McKenzie’s defence, saying he should not be the scapegoat for Fletcher’s problems. “He is a very smart CFO with many Fletcher Building internal supporters for his acumen.
“Fletcher Building is a monstrously difficult organisation for one person to make a difference without getting tied up in politics,” Swanepoel adds. “Sometimes I thought he could have done a better job at disclosure and I certainly thought the company’s executive team could have done a far better job, but as an outsider I think we underestimate the difficulty of the culture at the top.”
Craigs analyst Mo Singh says there was a lot of criticism aimed at Fletcher’s management and board. “The business was a wild ride from the initial post-Covid highs to the lows when the construction market started to slow dramatically.
“To be fair, Fletcher Building is a highly cyclical business so it’s never going to be easy as a CFO to manage. Demand (and costs) can move fairly dramatically, even within the space of six months or so – that can make planning very difficult.
“I suspect Bevan will have a much better time at Health NZ from the perspective of fairly stable revenue (funding) which allows for much more reliable long-term planning and forecasting. There will obviously be other complexities – it’s the health system after all!”
