Australian Financial Review
January 6, 2017

Woolworths’ Brad Banducci is a new-age CEO. He meditates, practises yoga and often swims in the ocean.

But Banducci’s sensitive approach belies a steely determination to deliver results. Since taking over the helm of Woolworths from Grant O’Brien in early 2016, the group’s supermarkets appear to have turned the corner after more than a year of poor sales and are starting to claw back market share from arch-rival Coles.

While Banducci, a former consultant who grew up in South Africa, did not have as much retail experience as other candidates for the CEO job, he has a “terrific style” with people, says one executive search specialist. “He’s very transparent, really open and brings people along.”

Medibank Private’s Craig Drummond, who replaced George Savvides in July, is seen as another quiet achiever, described by headhunters as “smart and sharp” while remaining “a humble individual who is down to earth and engaging with people”.

In an increasingly volatile world, where longstanding economic and political structures are being shaken by events such as the election of Donald Trump and Brexit, some CEOs may be scared of deviating from tried and tested management techniques as they try to stay in control.

Shorter strategy life

However, it is collaborative skills that will help CEOs succeed in 2017, says Guy Farrow, a partner at Heidrick & Struggles. Instead of trying to be “heroes”, CEOs need to remember what it means to be human, he says.

“The half-life of a strategy is getting shorter and shorter, so two things happen: execution becomes more important, and execution requires greater leadership encompassing culture, diversity – all the soft skills – and the ability to adapt …There’s definitely a greater emphasis on the people skills when we’re interviewing for jobs.”

Shareholders have been sceptical of boards linking CEOs’ pay packets to meeting goals on culture and diversity. The Commonwealth Bank’s remuneration report received a strike at its annual meeting in November after the bank tried to introduce a new “people and community” performance target into CEO Ian Narev’s long-term incentive package.

Commonwealth Bank’s outgoing chairman David Turner, who will be replaced by Catherine Livingstone in January, argued the bank’s success is linked not only to profits, but also to the culture of the organisation and its ability to remain an attractive place to work.

Culture is key

Farrow says the fact that culture and diversity is now part of the remuneration discussion reflects changes in business and society – as does miner BHP Billiton’s revelation in October that it wants women to compose half its global workforce by 2025.

​Headhunters cite Virgin Australia CEO John Borghetti as an example of someone who has used employee diversity and created a customer-centric culture to turn around the airline, making it competitive with Qantas.

Scott Charlton, CEO of tollroad group Transurban, is another CEO known for his good communication skills, which have enabled him to convince state governments to agree to new road projects.

Charlton says Transurban actively encourages “diversity of thinking” as well as gender and cultural diversity.

“One of my key roles as CEO is to find opportunities that others have yet to identify and develop a team capable of realising those opportunities – even if at first they don’t see the potential,” Charlton says.

Finding flexibility

Katie Lahey, executive chairman of Korn Ferry, says flexibility is another essential skill for CEOs.

“Life at the top is moving faster than ever … if the environment changes, can you change yourself and your company quickly enough? Sitting around and doing five-year plans just doesn’t happen, except in areas like resources … most companies are doing one or two-year plans.”

Industry experience has traditionally been prized by boards considering new CEOs, but an ability to cope with disruption is now considered equally important.

“The new norm is a volatile, unpredictable world,” says Peter O’Brien, managing director at Russell Reynolds. “Looking at the behavioural aspects of leaders is as important as their experience and background … can they continue to inspire people when markets and the environment around them from the outside look like they are falling apart?”

Autocratic CEOs are out of favour, O’Brien adds. “Boards want leaders who are humble, they want leaders who are able to coach and develop their people and are willing to listen and learn … that takes a lot of self confidence.”

Learning to listen

Brambles’ incoming CEO, Graham Chipchase – who will replace Tom Gorman in early 2017 – is considered a good example of an executive who listens to shareholders and customers rather than simply protecting his own turf. At British packaging group Rexam, which makes beer and soft drink cans, Chipchase slashed costs and sold assets so he could reduce debt and return cash to shareholders.

CEOs that don’t move swiftly to adapt to changing markets don’t last. Former Aurizon CEO Lance Hockridge did an excellent job shepherding the rail haulage group through its float in 2010, and initiating cultural changes at the former government-owned entity.

But his grand expansion plans in Queensland and Western Australia turned out to be the wrong move when commodity prices tumbled. Hockridge retired in August and was replaced in December by former Rio Tinto executive Andrew Harding. Harding is a fast mover, changing Aurizon’s chief financial officer just two weeks after taking over as CEO.

Reshuffles have also been quietly under way at transport group Toll, which is owned by Japan Post. The Japanese are understood to be unhappy with Toll’s performance since acquiring the group in mid-2015, and have brought in former Asciano CEO and Telstra chairman John Mullen (who previously ran DHL Express’s global business) as executive chairman, and former Linfox CEO Michael Byrne (who oversaw the trucking group’s Asian operation) as CEO.

Japan Post, which wants to expand its parcel delivery business in Asia, wants Toll to be run by people who understand its global business and know how to operate in international markets, according to people familiar with the company.

Be prepared

Gregory Robinson, managing partner at Blenheim Partners, says the CEOs who will survive are those who can make “pragmatic” decisions rather than “fancy strategies that struggle to be executed”.

They also need to be able to sell their company’s story to analysts, investors and proxy firms, Robinson says. “Without these groups onside, CEOs will have limited ability to be ‘allowed’ to execute on their strategy”.

Boral CEO Mike Kane, who is spending $3.5 billion buying US building materials group Headwaters, flagged plans to expand in the US before announcing the deal – although shareholders were still shocked at the size of the acquisition, forcing Kane to defend the move, which he argued was “low risk” in terms of execution.

As 2016 drew to a close, perhaps the most important advice headhunters had for CEOs is the most simple: remember the Scouts’ motto and Be Prepared.

“If you look at the things we thought never would have happened in 2016, we would have put Trump and Brexit at the top of the list,” says Heidrick & Struggles’ Farrow. “There will be things that happen in 2017 that we never could have imagined.”

Article by Jenny Wiggins Infrastructure reporter


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