I started work in 1969 and have been lucky to spend almost 50 years in areas I’ve loved. When you love what you do, you can exceed your expectations. Some people struggle in difficult situations, but you can drive through adversity and create strength from it. A difficult market is easier to create success in. A strong market helps everyone and you face more of a challenge, money-wasting competitors and competition for people in the employment market. Anybody can succeed in easy times. This is the same for boards, which can become fractured in difficult times. Having worked across the public, mutual, not-for-profit and for-profit sectors, I think we focus too much on differences instead of similarities. These include:
- Customer expectations are the same in terms of the service outcomes
- Staff want to have a strong sense of purpose in what they do and be well engaged and led in their work
- The proprietary stakeholders are looking for good-quality, sustainable outcomes that meet their expectations
- All require strong standards of behaviour and conduct
- The wider community and government want to place trust in these organisations to deliver their purpose in the right way and not disadvantage some to the benefit of others.
Management and boards need to relearn achieving a reasonable balance when assessing stakeholder interests. We fail to use tools and techniques effectively to assess whether the balance is right. Any organisation needs to be sustainable over the longer term and balance good decision-making with stakeholder confidence.
Bias in for-profit financial services over the past decade has become about strong profit results. In some cases, those results were never sustainable. Unrealistic from the outset, they looked to benefit shareholders at other’s expense. Such companies churn through CEOs and directors with increasingly short life cycles, burning the confidence and trust of the community.
How many boards have explicitly agreed on the way they treat each of their stakeholder groups?
What are we doing wrong as boards? How many boards have explicitly agreed on the way they treat each of their stakeholder groups? Managers pass challenging targets down the line and create focused incentives to drive results — meaning the visibility of how targets are achieved is lost to senior executives and boards. Such incentives drive behaviour and results drive share price. Everyone wants good results, but in some cases we lose the equilibrium and sustainability — and stakeholders are affected.
This messaging needs to come from boards. Expected standards of behaviour need to be clearly understood throughout the business and staff should be encouraged to hold management to account for them.
As a leader, I keenly valued hearing whether people felt our actions were in balance. Staff in customer-facing roles know more about stakeholder problems and pressures than most leaders. We don’t listen to them enough.
When I was at TAL, 49 per cent of our 1700 staff were born outside Australia, a third of those spoke a language other than English at home, and half were women. Our society and customer bases will be reasonably close to this profile. Managers and boards need to reflect these patterns sooner rather than later.
Decades ago in New Zealand, we had affirmative action in the public service for women in management, and targeted policies to help advance people from Maori backgrounds. It worked.
One achievement I’m proud of was gender pay equity in all like-for-like roles in 2013. We closed salary gaps and benchmarked all performance assessments, bonus payments and pay rises on a gender basis until we got parity. We sent recommendations back to leaders to revise until they got it right. As expected, it was unconscious bias and, when challenged, leaders willingly revised the recommendations. This is a simple step to take. Yes, the salary bill was higher, but growth and profits became higher still.
Purpose and trust
We must put the customer at the centre of what we do, keep reminding ourselves of our purpose, behave like good corporate citizens and do the right thing, no matter how hard or financially difficult. Sustainable profits come from businesses that do these things well.
At TAL, we found big problems in old products and gave away tens of millions of dollars of value to fix these. Our reputation improved, customers were happier and growth accelerated. TAL grew market share over 500 per cent in my time.
A “shareholder first” focus might not have approved this strategy, but it was right and in balance. All the stakeholders won in the end.