New Zealand Venture Investment Fund

Using a new mapping process for decision-making ensures that investment of public funds is consistent, transparent, and streamlined.

Conscious decision-making pays dividends

New Zealand Venture Investment Fund logo

Mapping the decision-making process at New Zealand Venture Investment Fund (NZVIF) has helped make its investment of public funds more consistent, transparent, and streamlined.

“We are a government entity investing Crown capital into private companies, so we need to make sure our investment decisions are efficient, unbiased, and consistent,” says Chief Executive, Franceska Banga. “We need to balance management of Crown funds on the one hand, with the investment risks associated with backing entrepreneurs and their ideas – and choosing those opportunities that can deliver results.”

The team of seven, based in Auckland, are required to review numerous applications for investment each year. “While we rely on our private investment partners to lead in selecting investments, there are several aspects of the investment decision we also need to review and endorse,” says Ms Banga. “Some investments are straightforward, but most are not. There are several factors to consider, from pricing, to market validation, and investment terms.”

Effectiveness is making sure that what you’re doing is actually working. Efficiency is about what you’re doing, and doing it in as cost-effective way as possible.

The organisation also aims to reduce the subjectivity attached to its decisions. “We have a mandate to adhere to, regarding the types of investments we make. New Zealand is a very small market and we’re dealing with equity investment in private companies. Our investment processes need to be consistent and unbiased.”
The benefits of mapping became apparent when the organisation was looking for suitable portfolio management software six years ago and hired IT and business analysis consultancy Equinox to help. “They forced us to think about every step of our due diligence and investment process. A spin-off of the IT review was that the results were converted into process and decision ‘maps’, which were then accessible for all staff – it also helped us to get really clear about the critical parts of the decision process and where efficiencies could be made. We’re a small team, having to make lots of decisions quickly, so it’s really important everyone knows their part in the decision.”

In 2011, NZVIF asked Equinox back to review all the major processes within the organisation. Investment activity had grown to the point where new investments were being made every week, and some processes were overly bureaucratic, and did not enable decision-making across the variety of investment types the organisation was required to consider. “When investment decisions are taking too long and staff are not clear about their role in the process, then it’s time to re-examine your approach,” says Ms Banga.

Ms Banga acknowledges that NZVIF’s processes also need to be flexible. “When something fits our investment goals but doesn’t fit into a neat box”, practice notes are kept to document the basis on which funding is allocated and used for future investment decisions. “And this becomes the catalyst for further refining the processes.”

Not only does the mapping process improve the efficiency with which the small team operates but Ms Banga also considers it invaluable in staff training. The processes and practice notes are all on their intranet, and staff are expected to be familiar with them. “It may seem a bit harsh, but if investments are presented to the weekly investment committee meeting without all the information needed to make an informed investment decision, we send them back,” she says. “Sometimes it is tempting to say ‘look we know the background to this one so it’s okay’ but it’s not okay. We are investing in the highest risk areas of equity exposure and we can’t afford to fudge decisions as money could get inappropriately invested.”

Bringing in an external advisor was invaluable, says Ms Banga. “While we had standardised a lot of the decisions processes, and reviewed them internally for efficiency, it helped having a specialist look over everything with a fresh pair of eyes.” This also ensured the review was done properly. With a small team it can be hard to make the time to carry out this type of review.

As a result, although the number of investment decisions has increased, the time spent on making investment decisions has decreased. “I’ve noticed that our investment decision meetings have shortened to an average of one hour a week, and we don’t have to send back as many requests for additional information,” Ms Banga says. She also regards the organisation’s investment credibility in the market is a reflection of the rigour and fairness of the approach that is taken in making investment decisions. The NZVIF Board, comprising private sector members, also supports the approach that has been taken.

Ms Banga believes that the approach to investment decisions adopted by NZVIF could be widely applied across business and investment decision-making in the public sector. While particularly useful in decision-making for any applications for public sector funding, whether it be for infrastructure projects, grants, or community funds, the approach could also be adapted and applied across a number of other major policy decision processes – for example, policy reports and advice leading up to Cabinet decisions. “About 80% of the decision-making making and policy process is pretty standard,” she says. “There’s no magic in this. I believe there are many opportunities to increase the efficiency and reduce the time around the policy-making process. Good policy decision-making is a process and a discipline.”

NZVIF is happy to share its experience and has already worked with several organisations to help set up their own funding frameworks. “We don’t need to reinvent the wheel,” Ms Banga says.

Based on interview with Franceska Banga, Chief Executive, on 21 June 2012.

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