An investigation into the aspirations,governance and management challenges of Māori farming trusts

Introduction

Farm business governance is concerned with strategic leadership (to achieve the purpose or mission of the business), whereas management controls tactical and operational decision-making. Governance is about effective collective decision-making to enhance business performance and is based on the process of getting advice to provide a better perspective (Tapsell and Woods, 2010). Business failure is often attributed to poor governance. Māori agribusiness is being criticized for underperformance. Is this a governance issue? Māori farming trusts provide a unique case study into the governance of large farming businesses. Today, Māori freehold dairy farms produce 8–10% of New Zealand (NZ) dairy production. Large management entities (greater than 1500 ha) make up 60% of Māori land; there are 50 incorporations and 92 trusts. The majority of Māori land quality is generally low, with lower than average natural fertility and more challenging terrain. A number of recent studies (Bird, 2012; Clough, 2011; Kingi, 2000; Ministry of Agriculture and Forestry (MAF), 2011; Te Puni Koriri, 2010, 2011; White, 1997) have sought to better understand how Māori freehold land is currently governed, managed and operated. These studies illustrate that the reasons for underperformance are complex.

Māori trust farms are in business to make money; however, the long-term and intergenerational ownership places considerable emphasis on both developing their people and protecting the environment in which they farm. Maintaining and strengthening one’s ‘cultural development and traditions’ as part of farm business mission statements are perhaps unique to indigenous peoples rather than European/Pākehā farmers. The performance of NZ Māori agribusiness is not solely related to financial decisions but includes the social construct of social, environmental, cultural and spiritual objectives which at times are in competition. The aspiration is that Māori businesses such as dairy farms can be seen as value creating, but to be effective requires leadership and communication. There is much to learn from better understanding the relational wisdom of indigenous Māori family/collective business (Nicholson et al., 2012).

This article foregrounds the importance of the quadruple bottom line identified by participants, as opposed to a dominant Anglo-NZ business of ‘profit/production-maximizing’. This preliminary scoping study investigates areas for possible improvement in the governance and management of large Māori dairy farm businesses. Semistructured interviews were conducted with 10 people directly associated with Māori farming trusts and incorporations. Those interviewed were Māori farmers (trustees, board members, beneficiary owners and managers) and rural professionals working with Māori dairy farm trusts and incorporations. There is considerable Māori farming activity in this area; 41 Māori incorporations and trusts farming 174,000 ha of land (mostly dairying and forestry). These are farm systems in transition. All selected interviewees were very familiar with Māori farming businesses and involved with governance and/or management of those businesses. It was considered that they would be information rich and provide illuminating insights. The key research question was how Māori trusts establish farm business goals/key performance indicators (KPIs) and how those goals are communicated to the farm management/consultancy teams and shareholders.

Indigenous governance and Māori entrepreneurship

The Māori economy has a long and flourishing history, and connections between people, and between land and people, have always been foundational to Māori well-being. The whānau, the primary social unit of Māori society, often consisted of three or four generations at any one time. Nicholson et al. (2012) describe the concept of ‘familiness’, which denotes the distinct set of resources held within the family firm that has the potential to create competitive advantage. Māori business governance shares some tenets with family business, whereby owners value the goals of good governance in both the business and in the family: peace, cohesiveness, effective conflict resolution and freedom to nurture the positive elements of heritage and pursue shared objectives and values (Aronoff and Ward, 2011). Families in business together have powerful motivation to govern themselves well.

In examining Māori entrepreneurial behaviour, Tapsell and Woods (2010) propose that where Māori innovation occurs – in farming and elsewhere – there is an interaction between the young opportunity seeking entrepreneur (Potiki) and the elder statesperson (Rangatira). The interplay between these two key members of the whānau is illustrated by the double spiral (Takarangi – see Figure 1), a spiral of creation leading to innovations that blend the traditional with the new ideas (Tapsell and Woods, 2010). The roles of the Rangatira/elder and Potiki/entrepreneur are complementary as they seek a balance between elements of chaos and stability, old and new thinking, all within the context of customary practice. Rangatira are responsible for maintaining kin identity through adversity. In this way, tribal heritage and the interests of ancestors and descendants are protected.

Tapsell and Woods’ (2010) and colleagues’ (Hēnare et al., 2014; Overall et al., 2010) emerging indigenous entrepreneurship theory builds on the work of entrepreneurship theorists such as Joseph Schumpter and Israel Kirzner. Tapsell and Woods’ (2008) linking of Kirzner’s work to personal construct theory (Bannister and Fransella, 1971; Kelly, 1970) is compelling as it puts the entrepreneur at the centre and in the control of the innovation activity. Personal construct theory provides a theoretical understanding of the nature of learning and illustrates the importance of the learning, trust and relationships in farmer decision-making, as reported by Phillips (1982, 1985).

The Māori entrepreneurial process is one of construction, exploration, experimentation, evaluation and exploitation of profitable opportunities to create something of value (as economic profit, and for people, environment and community), taking into account risk, alertness to opportunity and the need for innovation (Tapsell and Woods, 2010). Māori entrepreneurs operate from a world view that explicitly acknowledges the particular historical and cultural context (Tapsell and Woods, 2010) within a continuum of self-organisation. If both partners (Rangatira and Potiki) are not interacting, there is little progress and a potential for crisis. There is potential conflict between this entrepreneurship model and Māori trust governance structures, raising questions of the appropriateness of imposing a European style governance structure onto Māori businesses.

Traditional indigenous communities such as Māori hold collectivist principles. Māori entrepreneurial activity is underpinned by social objectives to improve the wealth and well-being for the community, not just the individual (Henry, 2007: 542). Pākehā (European New Zealanders) entrepreneurship differs from Māori entrepreneurship along the individualism–collectivism spectrum. The Māori ‘harmonious collectivists’ base their aspirations upon the community expectations of the group (Henry, 2007). This holistic view sees that spirituality, natural environments, society and culture are all interconnected processes that cannot be seen in isolation (Spiller et al., 2011). Barrett-Ohia (2009) used a proverb to illustrate these holistic relationships: ‘My house has four cornerstones. When one corner is weak, the whole house is jeopardized’. Such holistic and multi-dimensional approaches are based on an ethic of care (Spiller et al., 2011). Māori values demonstrate a relational view of the world and a commitment to develop reciprocal relationships of respect and care to engender belonging. Māori businesses draw upon Māori values such as Kotahitanga (unity), Wairuatanga (spirituality), Whakapapa (genealogy), Aroha (care, empathy, charity and respect) and Manaaki (respect and kindness) in practice to endow a sense of belonging to each other and the natural world. The concept of ‘relational wealth’ or ‘social capital’ is about creating value for the entire network of stakeholders through cooperation – a decentralized power and authority to build a consensus. For Māori, connectedness and relational wisdom are core values of the emerging Māori economy, for ‘People are the Land and the Land is the People’ (Durie, 2003).

OPEN IN VIEWER

Figure 1.

Takarangi (Overall et al., 2010: 156).

Historical background to Māori land tenure

In 1840, NZ Māori owned 66 million ha of land. By 1896, this had declined to 11 million ha, and by 1996, only 3 million ha remained in Māori ownership (Gillies et al., 2006). It is widely acknowledged that the European arrival in NZ generated what Lorenzo Veracini has coined ‘founding violence’, experienced by many colonized peoples and characterized as disregard for indigenous peoples, land, social structures, customs and safety (Boast, 2008; Panoho, 2006). The NZ government had a program of confiscating Māori land to reward militia troops and new settlers; in Waikato in 1864, 1.3 million ha of Māori land were taken for this purpose. European buyers wanted the best agricultural land available (King, 2003). As Māori land was confiscated and fragmented, Māori resettlement was often made on lower quality land. In the early 19th century, Māori settlements had been built around family or hapū membership. In some regions, Māori retained only a fraction of their original land area. Often, Māori were left owning the ‘unimproved value’ of the land while lessees farmed it in return for statutory rentals, which were infrequently reviewed (Sanderson, 2000).

Customary Māori land tenure

Māori belief and understanding is that land is permanent and human life is transient, as reflected in the Māori proverb ‘man disappears but the land remains’ that describes Māori holistic values and respect for the land. Māori considered their association with land in terms of ‘belonging to rather than owning [it]’ (Kingi, 2008). Land was regarded by Māori as a communally owned collective good and was treated with respect, owing to its possessing economic and spiritual qualities (Henry, 2007). Māori society is hierarchically organized, with clearly defined roles and practices (tikanga) observed by those positioned within the different layers. The core of these layers is the whānau (extended families), which combined under common ancestry forming the central social, economic and political units of Māori society called hapū (a collective of whānau that shares genealogical links) (Tapsell and Woods, 2010). The whānau (extended family) usually held the rights to land.

The tribal Marae (the ceremonial courtyard) remains the focus of Māori society. Among other things, the Marae holds customary authority over surrounding land. So long as the Marae has survived, the kin group’s identity to its ancestral estates is said to have endured (Tapsell, 2002). The Rangatira (elder statesman/kin group leader) controls the Marae-based forums, which centre on the core cultural values of whakapapa (genealogy) and tikanga (customs, traditions and protocols of behaviour), and the performative delivery, reception, exchange and use of ‘treasures and learning passed down from the ancestors’. Through these lenses, tribal identity is continually refocused. Where agriculture is concerned, ‘the Māori way’ describes the collective will of Māori and modes of work and productivity of kinship groups (Hēnare, 2011). Traditional and oral history reports prepared by Hēnare et al. (2009, 2010, 2013) observe that philosophically speaking, Māoritanga refers to Māori culture–society and its four well-being: spiritual, ecological, kinship and economic. These map well onto the quadruple bottom line identified in this study, namely profit, people, environment and community and suggest that the wisdom of tūpuna or ancestors pervades contemporary practice.

The treaty of Waitangi

The NZ Treaty of Waitangi (1840) is the agreement, in Māori and English, that was made between the British Crown and about 540 Māori Rangatira (chiefs). In the early stages of colonization, most of the Crown’s policies had negative impacts on Māori society, including loss of land (Bassett et al., 1994). Māori have for nearly 200 years attempted to gain recognition of their rights under the Treaty of Waitangi. However, before the 1970s, it was not an operative document (Panoho and Stablein, 2005). In 1975, the Waitangi Tribunal was established to consider claims by Māori against the Crown regarding breaches of principles of the Treaty. Since 1985, the tribunal has been able to consider Crown acts and omissions dating back to 1840. The Treaty, therefore, informs the intergeneration discourse of Māori and the Crown and its governments on matters to do with economic development and politics (Hēnare et al., 2014). Any discussion of Māori entrepreneurial activity (or lack thereof) must acknowledge the impact of colonization and the Treaty of Waitangi (Overall et al., 2010; Tapsell and Woods, 2010).

Farm business governance

Good governance, management and operational efficiency are critical to all dairy farm businesses. Large Māori family farms have corporate structures with large numbers of shareholders. The different roles of governance, management and operations need to be separate. This is how mature governance differs from ‘founder-led businesses where there is no distinction between roles’ (Lockhart, 2011b). These roles often get confused; Lockhart (2011a) argues that immediate improvements could be achieved if the board and management roles were conducted independently of each other. A good board process allows differences to be addressed and bridges built both horizontally and vertically (Irving et al., 2009). Lockhart (2011a) adds that independent thought is a requisite for effective collective decision-making and argues that good governance is achieved where governance is defined as effective collective decision-making resulting in exemplary company (business) performance (Lockhart, 2011a). The selection of directors needs to be based on how their competencies and behavioural characteristics complement each other. Governance boards exist for purposes other than compliance (Lockhart, 2011a); effective governance requires accountability between the shareholders and the business (Aronoff and Ward, 2011), and reporting business direction and performance would be of value to debt providers (Lockhart, 2011a). Irving et al. (2009) offer a model that demystifies governance by identifying its three key roles and the activities of each: the key components of governance are strategy, infrastructure and monitoring. The board or trustees decide the business strategy, and the key policies ensure that there is adequate resourcing to achieve the strategic goals. To monitor the business, the board/trustees must ensure that they are properly informed on the performance and state of the business. At the ‘top end’ (MAF, 2011; tier 1 farms), the Māori farming trusts are both professionally governed, managed and very profitable. A good example is ‘Wairarapa Moana’ (www.wairarapamoana.org.nz ) where the vision, strategic plan and business values are clearly stated on their website for all 3000 stakeholders. Kapenga M Trust (www.kapengamtrust.Māori.nz) also has a clear vision statement and their strategic plan includes five points that drive the direction of the farming business: (i) the retention of the land, (ii) maintaining the unity within Kapenga M Trust, (iii) maintaining the authority and leadership of the trust, (iv) encourage young people to participate in the trust and (v) promote farming among our young people.

The Kapenga M Trust was established in 1981. The trust’s 915 shareholders are of Tūhourangi descent and own a total of 1858 ha. The ‘core drivers’ of the business are all about farm business management. At the top end ( MAF, 2011; tier 1 farms) of Māori farming trusts, there is no doubt that the business vision and values are clearly communicated to owners, beneficiaries, consultancy team/farm managers and farm staff. In contrast, many of the ‘underperforming’ farms have low profitability and poor cash flow (Bird, 2012; Clough, 2011), and although generally conservative regarding debt, struggle to gain access to additional capital (ANZ Bank, 2014). However, it is unclear what proportion of the Māori farming trusts has good effective governance and management systems, nor whether it was good governance, excellent management or leadership that allowed the ‘top trusts’ to perform at this high level. The modern European corporate structures and processes, which the Māori farming trusts must comply, are not part of Māori culture or decision-making. NZ farmers and advisors tend to judge farm business success on very narrow production and profitability criteria. Capital gain is very important to most farmers but as Māori land is not sold, capital gain is not a business driver for Māori. In terms of priorities, profit is often seen as the fourth priority. Just having secured land ownership and control (post-colonialism) is in itself very important. These values and drivers of business are different from mainstream NZ farming businesses, but they are neither unique nor untenable.

Findings

Interviewing 10 well-informed respondents has provided valuable insight into the current state of Māori farming trusts’ governance and management. Wairarapa Moana and Kapenga M Trusts are exemplars of excellent farm business governance and management. Wairarapa Moana’s vision statement reflects the long-term needs and aspirations for their people and families, such as community, health and well-being, educational achievements, cultural development and capability. This is a good example of ‘developing social capital’ to create competitive advantage (Nicholson et al., 2012). The strategic plan (farms, hydro and forestry) clearly sets out tasks, performance indicators and expected outcomes. The farm staff were all included in developing the “farm business values statement” and the final document is included in their individual employment contracts. On-farm manager meetings are weekly, and these are supported by group emails and the ‘AgHub’ intranet system where managers report weekly and the farms are benchmarked within the farm business (http://www.onefarm.ac.nz/research/maori-farming-trusts). The business values focus on relationships, responsibilities, reciprocity and respect. This is an exemplar of a Māori world view, which explicitly acknowledges the particular historic and cultural context (Tapsell and Woods, 2010). The strategic plan is to act as a guide to how the trust can protect the environment, and sustain, grow and preserve its history and future. It also illustrates the spiral or matrix of values ‘He Korunga o Ngā Tikanga’ as envisaged by Nicholson et al. (2012).

The Kapenga M Trust’s goals meet the dual imperative of retaining the land and strengthening the cultural connections. This exemplifies the principle of Kaitiaki – being good caretakers of the land and passing it on in a better state for future generations while honouring past ancestors. Aspirations are directly linked to core values of the trust. Aspirations seem also to be linked to the current way in which the land is used. The ideal was a balance between a viable business and the maintenance of the owners’ cultural connections. The top performing trusts have good financial returns, which are enabling them to take advantage of investment opportunities and invest in education. Such farms have high equity and are rapidly growing.

There was consensus among the interviewees that effective governance was critical to delivering the owners’ aspirations. This group of well-informed rural professionals also expressed confidence in the Māori governance that they had contact with, and in the rate of improvement of that governance. It is also true that in this study, ‘poor governance’ was given as the main reason for ‘poor Māori Farm Trustee’ performance, especially the lack of farm business management skills of the trustees. There is, however, a community optimism that: ‘Māori farming business in general has massive potential – they’ve got plans, they have ambition, they want to grow and they’ve got governance that’s improving all the time across the board –some are already excellent.’ The strategic management plans of the Māori farming trusts prioritise the development of social capital to create competitive advantage. There is clear evidence of culture/language (ancestral/elders) being blended with new ideas/technology (entrepreneurship) to create innovative decision-making and strong business performance. Strong business performance ensures better education and welfare of descendants as well as environmental protection.

Key factors identified with underperforming Māori farm trusts

It is important to quantify what is meant by the term underperforming. In part, it is not being as profitable as the potential for that land class, in other words not having a sufficiently high return on assets (Clough, 2011). The studies by MAF (2011), Clough (2011) and Bird (2012) did not judge Māori nor non-Māori farm businesses on the basis of ‘quadruple bottom line objectives’ but on Anglo-NZ profit/productivity criteria. Tier 2 Māori land-owners (less profitable farm businesses as defined by MAF (2011)) have weaker links to the land either because of living some distance from the land, because the land was previously leased to Pākehā farmers or for forestry, or because the owners have less agricultural and business skills and knowledge. Their aspirations are being shaped by the current or recent past use and output of the land. Culture remains of equal importance to these farmers as making money, but being viable is different from seeking good financial returns, and there is a greater possibility of conflict and trade-offs between culture, people and profitability. The following 10 opportunities for growth emerged from this scoping study:

1. The challenge of a clear vision. The better performing trusts were deemed to have governance totally separate from the management and to have a very clear business vision. Within these trusts, the governance team is prepared to make full use of their accountants and advisors to develop the vision and really critique those decisions they’re making. The struggling trusts don’t have that clear vision or clear goals outlined. Some trustees confuse the roles of governance (strategic management) with farm management (tactical and operational decision-making).

It seems like being between a rock and a hard place – if you don’t have the expertise, you need to get advice. If you invest too much in it then you divest the responsibility, you’re never actually building the capital there yourself. Māori need to invest more time in building knowledge capability in the younger Māori people.

Māori farm infrastructure is usually very good as it is seen as a long-term investment. However management decisions are a challenge. What they need is appropriate KPI’s that they can benchmark their operations against and then they can ask their adviser the questions.

The problem for Māori is no longer ‘do they have the resources?’ It is about how to develop those resources to get the best value for owners from the particular resources in a sustainable way. The knowledge gap has been identified as farm business management. A very poignant comment about current Māori capacity was that:

We need more whānau (extended family) working in the business but the reality is that the available pool of suitable people is very small. I believe more than 50% of Māori leave school with no qualification then that has flow on effects into all industries not just agriculture.

Conclusions

There has been little research into rural business governance and the relationship between good governance and subsequent business performance has not yet been established (Lockhart, 2011b). There is also very little data available on the productivity of the Māori economy. However, when comparisons have been made between Māori and other dairy farms, they have focused on profitability and production, neither of which feature prominently in the Māori strategic priorities. Has the comparison really been with ‘similar’ businesses? Māori business values focus on relationships, responsibilities, reciprocity and respect. Their strategic management plans illustrate a matrix of values (Nicholson et al., 2012) and emphasize the development of social capital to create competitive advantage. Such strategic plans reflect the Māori vision and aspirations to sustain and grow the land base, to provide leadership and guidance for the whānau, to develop capacity and resources within the trusts and to perform better as businesses.

According to the Māori way of doing business, they have ‘quadruple bottom line of profit, people, environment and community’ business objectives. It is very important to understand that Māori have a very long-term view of business and land ownership, ensuring that the land (whenua) will never be sold. These impact on both strategic and tactical decisions. It changes the vision from short to medium and then to long-term. Māori in general have a conservative view toward borrowings and debt, but these attitudes are driven by a feeling of responsibility on behalf of the whānau to protect ownership of the land. Most Māori trust farms are located on lower land use categories and have only been established as dairy farms in recent times. Māori trust farms have different strategic objectives that reflect their values and world view.

A separate question is: can the Māori trust dairy farms be more productive and more profitable? The answer is a definite yes, and it needs to be acknowledged that the top performing Māori trust dairy farms already outperform similar farms. Yet Māori leaders acknowledge that: ‘Generally speaking, Māori farming or Māori resources are underperforming” MPI (Māori Agribusiness Forum (MPI), 2013). The reality is that it is very difficult – and accentuates management challenges – for a Māori trust to deliver on the people, community and environmental outcomes if profit is poor or insufficient. What the Māori trusts need is appropriate KPI’s, industry-wide, that they can benchmark their operations against so they can challenge their advisers with well-informed questions. Much of this study has been related to the farm business management skills of Māori trust governance and management. There are talented young Māori getting tertiary educations and receiving trust scholarships to support their higher level education. There should be more encouragement of young Māori to seek degree training in agricultural science, agribusiness and especially farm business management.