Ziggy Switkowski: In my first CEO role at Kodak we were very focused on Total Quality Management (TQM), and the company was well recognized for its achievements in this area. Playing some small part in helping to create a stronger awareness and culture of quality in manufacturing, not only in the business that I ran but more broadly, was very satisfying, as was extending the life of the Australian Kodak operation by more than a decade by successfully negotiating with both the parent company, Eastman Kodak in the US, and the our Federal and State governments. This was, I believe, a good outcome for both the company and for Australia - and was made possible, in part, because of the recognition that the local business was in its own right a strong, capable and competitive organisation.
Leading Telstra through the dot-com boom and bust, with only minor dents to the corporate chassis, would be another one. Telstra now has a portfolio of assets and businesses in areas such as wireless, broadband, subscription TV, IP telephony, and online search and directory services, that leave it well-positioned for success.
ZS: A number of investments made at Telstra during the 1999-2000 period, both in Asia and in local internet companies, didn’t deliver the value we expected. If you overpay for an asset, and pretty much everyone did at that time for hi tech enterprises, subsequently extracting any shareholder value becomes almost impossible.
I think the error we made was underestimating the difficulty in getting the management balance right when, as an ‘old economy’ company, you invested in very different ‘new economy’ companies. You need to pay enormous attention to operational issues, while at the same time respecting the cultural and style differences between the two companies.
Joint ventures also can be problematic, especially when the goals and the cultures of the companies are so different. That was an issue with both Foxtel and Pacific Century Cyber Works (PCCW). Given the differences between Telstra and its JV partners, it was quite a challenge to get clarity of objectives and responsibilities. Of course, joint ventures often are created with built-in and recognised conflicts of partner agendas, so I’m not sure those difficulties could have been totally avoided!
ceoforum.com.au: That propensity during the dot-com boom for traditional telco companies to splurge on buying speculative assets was widespread. Do you think that behaviour by global peers creates an investment climate within which it is very hard not to buy something, no matter what fundamental analysis might tell you?
ZS: I don’t think peer pressure was so much of a factor, but it was very easy to get caught up in the exuberance of the moment. Much of the analysis at the time was very optimistic about the future demand for internet-related services, and the potential of 3G wireless services. Companies like Telstra, which had a very strong balance sheet, were in a position to be players in the market, and, given the technology basis to our business, the investment opportunities seemed a good fit.
I and my team did make some mistakes on these investments, but none of them threatened the company as such, and, with the passage of time, were only small perturbations in the trajectory of the company. Other companies, of course, were not so fortunate, and did not survive that period.
We also had some luck in investment timings. If you look at the auctions of the 3G wireless spectrum , they took place in Europe around a year before Asia, when the boom was at its peak. As a consequence, European telcos, such as France, British and Deutsche Telecom, paid out tens of billions of dollars, more than ten times the price per capita than companies did in Asia and Australia.
ZS: In the early years of all the roles I tended to focus on key management processes: defining a clear vision, determining key result areas, communicating effectively, planning the business and managing talent. As these processes became institutionalised within the company, I spent more time on scenario planning. This is about trying to understand the big shifts that were occurring, or would occur, in the industry – be they technological, regulatory or something else. Your attention then naturally shifts to how you should be structuring your organisation to respond most effectively – as your strategy evolves, so must your structure.
There was this natural shift from first putting in place effective management processes to, once they had been bedded down, looking at larger strategic issues. All of this was occurring at a time in which the industry we were operating in was itself going through enormous upheavals.
One thing you do learn as a CEO is that you need to be intervening all the time, and the timing of these interventions can be critical so is something that you are always working to get right. Because of the breadth and complexity of any CEO role, you are making decisions all the time – on business strategy, organisational structure, key appointments, regulatory positions, investments, and many others. Inevitably a certain percentage of those decisions fall short of initial expectations, , so you need to act quickly and, in some cases, reverse. At times you can often be too slow in responding – say, with an appointment that hasn’t worked out, you may leave the person in the role longer than you should. The challenge you have as a CEO is that you are continually getting all these very diverse signals about how the business is travelling, and you need to integrate those signals and then act upon them in the most effective and timely manner.
ceoforum.com.au: How can a CEO get that balance you are suggesting is required between getting involved in the operational detail of certain key management processes without losing sight of the strategic big picture?
ZS: I very much agree with the recent Ram Charan comments where he said that success requires an intense focus on operations. That in turn requires that you as a CEO be capable in that business area, and that you allocate sufficient time to drill down into the organisation. You also need to make sure that, when you appoint people to your team, they have been selected, in part, because they have the capability to be operationally excellent in the area they are overseeing.
If there has been one thing I have definitely learnt as a CEO over the last decades is that, while you need excellent strategic thinking skills and the ability to convincingly represent the organisation externally as a CEO, this is never sufficient. You also need to understand the operations in detail, and how the processes in individual businesses can affect company outcomes.
Strategies can only be made real if you connect back to the question of how a given strategy can be made operational in your organisation: that is, an organisation with particular commitments, resources, assets, processes and legacies. While capable executives can move between industries, there is more risk associated with importing an executive who doesn’t have either the industry knowledge and/or the knowledge of the market that the company is operating in.
ZS: In my experience, it’s very difficult to get any work-life balance as a CEO – the role expands into the time available! This has been enabled by the various technologies – email, mobile phones, personal digital assistants – that everyone is familiar with.
There is something of a paradox in this, of course: while most leaders would encourage their own staff to be aware of the work-life balance issue, the demands on most CEOs make achieving such a balance very difficult indeed. The shorter average tenure of most CEO appointments also exacerbates this: a CEO position is now seen as a fixed term campaign requiring complete dedication to the cause for the duration, rather than, as it perhaps once was, a more extended journey where you could stop to smell the roses on the way. The pressures from competitors, investors, analysts and so on are only intensifying, so it’s very hard to see this changing any time soon.
Another thing that has changed over the years is the amount of attention you need to give to the regulatory environment. The burden and intrusiveness of business regulation seems to have increased in recent years in many industries, so dealing with the associated issues around this does take up more time than it did.
Even as a CEO, you can still be hostage to circumstances, so, when an issue emerges, you often need to respond to it very quickly. Expected reaction times to issues are now much faster – you need the ability that good politicians have, which is to work to the cycle of the daily demands of the media. This is something that I had to develop in the role at Telstra at particular. In the early period at Telstra, our major shareholder - the government - believed our public relations and media processes were too lethargic, in that we were taking a considered approach to issues that the government felt needed a response the same day. We did change our approach and made sure we had allocated sufficient resources to manage and respond to issues as they arose, rather than waiting a few days as we had once done.
ZS: There’s no doubt that as institutional investors are being held accountable for performance on a quarterly, or even a monthly, basis, that demand for accountability and superior short term performance will be urged upon corporations. , Of course as a CEO, as you need to reconcile that imperative with your larger business goals, but ignore it at your peril !
There also is an increasing intolerance for unconventional strategies of any kind. The markets get very nervous, for instance, when (resource companies aside), an Australian company considers expanding off-shore. Yet, strategically, it’s the most obvious thing for most Australian companies to do. These reservations, of course, may be well-founded – after all, the track record in this area is not great. Yet a carefully planned international expansion should be a strategic option for many substantive Australian corporations.
ZS: You were often pleasantly surprised by the ability of people to step up to deal with what at the time can seem enormous challenges or crises. In the case of the Sydney Olympics, for instance, there was a hugely effective, near flawless effort by the technology providers, who were Telstra and IBM. When natural disasters occur, like the Thredbo landslide or the Canberra bushfires, we saw a fantastic response from Telstra people on the ground, all on their own initiative. Those qualities of people often surprise and inspire you.
There is another paradox that you may experience as a CEO, and Telstra was probably a special case of this. On one hand you are sitting on top of an enormously powerful organisation, and you are its senior decision-maker. At the same time you and the company are suspended in a kind of three-dimensional grid, made up of a whole lot of other forces and players: investors, customers, suppliers, media, regulators, government, competitors, consultants, rating agencies, directors and so on. In often mysterious ways, all these forces interact and influence what you can and can’t do, and how effectively you can execute your strategies.
This is not just being accountable to different stakeholders, it’s more subtle and elusive than that: just how these forces constrain you or shape your options is sometimes far from obvious! It’s really about understanding the practical limits on the notional power of your role.
ZS: When I judge top CEOs I look for i) an ability to consistently deliver superior returns to shareholders over a long period, ii) a clarity and correctness of strategy, and iii) a leader whose company ‘makes a positive statement’ in its approach and style . When you apply those criteria, you identify people like QBE’s Frank O’Halloran, Woolworth’s Roger Corbett, Wesfarmer’s former CEO Michael Chaney, Allan Moss and David Clarke at Macquarie Bank and Australia Post’s Graeme John.
All these CEOs have achieved great success for their enterprises and stakeholders, and have been enormously effective in the CEO role.
ZS: I've come to believe that, perhaps because of the comparative shortness of CEO tenures now, it can be difficult to leave lasting corporate legacies. It is your effect on relationships, and on the people you nurture and befriend, that may prove to be the one true legacy that you have.
Success in your role, after all, is based on the decisions you make and which are implemented by your team, and these are people you have attracted, promoted and empowered. Those people may survive you in the organisation, or they may move on to other companies and industries, but they make up the network that will endure as you leave your role. A year after leaving Telstra, I feel this may be my most enduring and important legacy.
Can I add that being a CEO is an enormously satisfying and rewarding experience. I know it is a job that attracts a fair share of critics, but there is no more worthy or important role in the community or national economy - you deal with fascinating people, you are presented with interesting challenges every day, and, through the decisions you make, you have can bring benefits to all the different stakeholders in a business: shareholders, customers, employees and the broader community. I feel privileged to have been given the opportunity to serve in the CEO role for three outstanding companies.