Moffatt: The initial attraction was that, for my family and myself, the centre of the world was and is Australia. Telstra's success really matters for the future of Australia. So you not only had the excitement of an industry that is changing rapidly, but you also had the attraction of helping make a contribution to the productivity of the nation. That made the role a terrific opportunity.
Moffatt: Not really. Having been both a CFO and a CEO, I think the two roles have a lot of common elements: they are all about people, processes and money, in a word execution. However, there is probably a difference in emphasis. The CEO is more the driver, the challenger, and the visionary, while the CFO role is more the enabler, the problem-solver, and the analyser. Of course, CEOs need analytical skills and CFOs need vision, but the weighting of those elements is different in each role.
Moffatt: I think the application of your skill sets is similar. In the country manager role, your primary responsibilities are growth and business development. In that sense, it's a true CEO role, it's about building your business, but what you don't need to do a lot of as a country manager is communicating with investors.
In a large, domestically oriented, listed company like Telstra, all those business building skills are directly applicable, but you have the added responsibility of both communicating with the market and, particularly as the CFO, being responsible for the quality and transparency of financial reporting. I guess you feel the 'buck stops here' more than would be the case as a country manager in a large MNC. But I do think the skill sets are very similar.
Moffatt: This is something I have thought about a lot. I'd see the CEO as growth driver, cultural leader, customer champion, focussed on people and values, and very much the public face of the organisation. The CFO role is about execution, strategy support, growth enabling, productivity and process transformation, as well as compliance and risk management. Again I'd emphasise that many skills are common, but the weightings are different.
Moffatt: It is a very exciting part of the role, as the industry, Telstra and our customers are all undergoing rapid change. It's great working with all our staff on process improvement and productivity initiatives, and in turn being able to drive shareholder value, so that aspect of the role has been very rewarding.
ceoforum.com.au: What were the most valuable things you learnt at GE that you have been able to bring to this role?
Moffatt: I think everything you do adds to your experience, not just your most recent position. I've been very fortunate to work for a range of organisations in a diversity of businesses, each of which contributed to my overall business perspectives.
I think the day-to-day issues you face in any business are very similar. Can you place the right people in the right jobs, with the right skill sets and values? Can you successfully address the customer issues of any particular marketplace? Do you have a set of processes that can capitalise on market opportunities, and consistently deliver to customers? And can you allocate capital effectively across your businesses? GE in particular have brought together these questions into an integrated business system that works very, very effectively to drive growth, develop people and create shareholder value. In that sense, my time at GE was both a culmination and systematisation of a lot of earlier experience.
Moffatt: Not much difference, really. In this role, there is also an enormous people challenge, as I am directly responsible for around 4,000 people, across the finance functions, risk functions, process improvement, shared services, M&A and IT. All of those people require leadership, so effectively you still need strong people leadership skills.
One difference between the two roles is that, in the CEO role, you spend more time thinking strategically about moving people across a broader organisational landscape than you would in the CFO role. But the people you are managing tend to want the same things. They want to know where the organisation is going, what their personal opportunity is, and how you can help them to develop personally and professionally. So you still need to provide that leadership.
I think the leadership challenge around people is different depending on the type of business you are in. In an organisation that is growing rapidly, a lot of the people issues almost resolve themselves, due to the inherent excitement of growth in the organisation. In an established organisation where the emphasis is on getting more productive, the issue is more difficult. You have to spend a lot more time working with people, being transparent, on getting more done with less, and linking back all the time to customer imperatives.
Moffatt: It's a very different business model. Telstra is an integrated telecommunications company, so every element of it is linked to every other element. We have one brand, one leadership team, one set of values. You can't apply the pure portfolio-based approach to this type of business.
The integrated business model has all kinds of implications. Take the capital allocation process, for example. In a traditional portfolio-based business, that process is relatively simple. You simply say, here is my leverage, here is my required return on equity, show me how I can get that over time. In an integrated business, capital allocation is far more complex, with a lot more variables, such as reinvestment levels and future growth, understanding commercial risk, factoring in technological change, and tracking interrelationships between different elements in the overall business.
Let me make a key point here. Leadership is an institutional capacity, it's not about the effectiveness, capabilities or skill sets of any one individual. The success of the organisation depends on how collectively individual skill sets come together, to bring out the best qualities of the organisation. That is particularly true in an integrated organisation like Telstra. All the different elements of the business model, from the network through to customer service, have to come together and work well for the organisation to succeed. With a portfolio approach, you can tolerate more variation.
Moffatt: I think the quality of your leadership comes down to the quality of the questions you ask. In all leadership roles, you are assessing risks, returns and probabilities. You need the analytical skills to understand industry structures - the regulatory environment, the nature of competitors, the customer imperatives, and so on. You also need to make sure you have the disciplined processes that can deliver to customers while providing your shareholders with an adequate return on capital.
In any leadership role, you do need to understand an industry, and that can take some time, but the imperatives are the same. It's about risks and returns, understanding the general industry drivers, and also the particular barriers and opportunities that your company faces.
In fact, I would argue that diversity of perspective and background is essential in any management team. This is really another aspect of the point about leadership being an institutional capacity, rather than the prerogative of a particular individual. If you can engage people from a range of backgrounds and experience, and harness that diversity, you can create real value. The challenge with diversity is to stay very focussed on outcomes and manage the risk of getting lost in debates on every issue.
ceoforum.com.au: It's interesting that you caution about getting lost in debate, as that can be the downside of bringing people together who don't share too many common assumptions - everything can take longer!
Moffatt: There's an action imperative to everything we do. Capital markets and customers are all impatient. Speed, and cycle time are issues you have to have at the back of your mind in every big decision you make. The more you can systematise the processes of analysing business problems, the faster you can get to the data, and thus bring the team to a collective decision. In today's environment, gut feel just doesn't work. Business is complex. You may have good business instincts, but you fundamentally need data to scope the opportunity or the problem.
Moffatt: Absolutely. And that requires sound instincts that are in turn a product of your accumulated business experience. You sense when the answer doesn't feel right, and/or you need to pursue the issue with more questions until you get to the heart of the issue. That's where diversity is so powerful. As you pick up on a particular thread, others will bring different perspectives and questions to really drive deeper into the problem. This will help you better understand and analyse the problems and opportunities that you face.
Moffatt: There often is this expectation in any organisation that the leader will have the answer. In reality, the leader needs to have the self-confidence to say, 'I don't have the answer, but, with our collective experience, we can explore this problem and find the answer together'. And that answer will always be a balance between the customer imperative, the shareholder imperative, and the staff imperative. As the leader, you need to make the call on what that right balance is. That is the fundamental responsibility of leadership, and that is always the case.
Moffatt: I actually found almost all elements of my role had a greater complexity than I had encountered before, by virtue of the operating nature of the role and the integrated, interrelated nature of the organisation. Risk management, finance, shared services and IT are good examples - they are not areas that you can jump to conclusions about too quickly, you need to understand the interrelationships first. At the same time, you are conscious that you don't actually have a lot of time, so you need to draw in the people around you. You need to trust the people around you in key leadership roles, ask them questions, and form judgements about their abilities and skills when they answer. It's basically the quality of the answers you get that tell you whether you need to make leadership changes. I am very fortunate to have exceptional people around me in the key leadership roles within my portfolio at Telstra, so I can trust the people, create an environment that will support them, while still challenging them to always do better.
Moffatt: If you are a CEO of a smaller organisation contemplating a shift to be CFO of a larger one, I would say it's a tremendous developmental step, and to go for it. While the roles have some differences, there are far more commonalities between them. After all, every large company needs an effective team to succeed - the view that individuals can drive large organisations on their own is, I think, flawed. Both roles have the fundamental responsibility to create an environment within which teams can succeed.