By all accounts there were some very smart people involved in the Hayne Financial Services Royal Commission. Now that it’s over and the final report has been in the public domain for some time, I can take a more reflective look at the Commission’s work and some of the fallout. It strikes me Royal Commission’s are strange beasts. They are overwhelmingly led by lawyers and are conducted in a manner that has a very legalistic and adversarial framework. Most often they are looking into matters that reflect systemic organizational or cultural issues that are failures of management and leadership. It would follow, I would have thought, therefore that while a solid legal foundation might be needed by the commissioner/s, the most essential skill set is management and leadership (and here I’m speaking of leadership of a company). This is seldom the case and proved true of the Royal Commission chaired by Justice Hayne.
So that had me thinking – what were the qualifications of the main belligerents? What made them uniquely qualified to sit in judgement of others? Let’s start at the top with Justice Kenneth Hayne. He’s an ex-University of Melbourne double major Arts and Law and did a Bachelor of Civil Law at Oxford. Topping that off he is a Rhodes Scholar. Then there was the stellar performance by his counsel assisting, the inimitable Rowena Orr QC. She’s endowed with a Bachelor of Economics and Hons Law Degree and a MPhil in Criminology.
Then let’s take a quick peek at some of the ‘defendants’. First off Dr Ken Henry, then Chair of NAB, with an economics degree from UNSW and a PhD in economics from University of Canterbury. He was Treasury Secretary for 10 years most importantly steering Australia through the GFC. Another is David Gonski, Chair of ANZ, who began life as a lawyer at Freehills becoming the youngest ever partner at the age of 25. He is equipped with a Bachelor of Commerce and a Bachelor of Law (winning the University Medal no less) both from UNSW.
What’s striking for me in this is that both sides – the Commission and those being grilled – both appear to have a yawning gap in the very skill area in which they are defending their position, or proffering their criticism. How can this be? I’d never knowingly fly in an aircraft where the person at the controls was not a qualified and experienced pilot. I’d be willing to guess it has to do with hubris. To become a lawyer you need a great academic result in school that will set you above the less gifted, academically speaking, in what still is (despite increased use of A-i) a highly sought after and hotly competitive area of study. Very few lawyers seem to go on to study management through an MBA or other lifelong learning. Believe me economics and commerce are not a straight proxy for management. They are, off the bat, ill-equipped to speak on matters of management and leadership without bootstrapping some academic qualifications in the field of management.
The fact that the banks and other financial institutions got into trouble, I would argue, is because of lack of management expertise in the first place. Creating highly perverse outcomes from incentive schemes aimed at playing on greed and individualistic reward, was always likely to end badly. The schizophrenia between the advertising of the banks and their actual behavior must have had many of their non-bonus earning staff shaking their heads in disbelief. The skill of management is about creating growth AND compliance and getting everyone ACTUALLY delivering against agreed values, not just nodding towards them at successive Board meetings. Skills as a Director, which really should be re-phrased as ‘experience’ as a Director, are no proxy for management, nor is it any indication as to how a company might be run.
I noted during the Royal Commission that the professional organization that represents managers and leaders, the peak body as it were, made the case for all senior execs in the finance sector to become Chartered Managers. This is the latest offering from the Institute of Managers and Leaders ANZ and to my mind should be a prerequisite for anyone looking to lead a company as part of the executive. How many take up the offer remains to be seen. You wouldn’t have your Chief Financial Officer without a professional accountancy qualification CA or CPA etc. so why would we expect companies to be run by someone without professional management qualifications?
So, what were the implications for us as consumers from this lack of managerial skills, experience and qualifications? Well, as already noted, consumers have been ‘dudded’ for some time by financial institutions. But at the Commission itself this lack of depth in management means the recommendations are unlikely to create a coherent plan for a re-structure that can create order out of the apparent paradox of serving the customer and the shareholder. Hayne hasn’t sorted this out. There was also a lost opportunity in addressing a long-existing flaw where the executive and Board lines get blurred. I have been of the belief for a long time that you can be on a Board, or in the executive, but you cannot simultaneously do both. If I was Hayne I would have banished the Managing Director position once and for all. How can the management be held to account if the chief officer of management, the CEO, also sits as one among equals on the Board of Directors in the role of Managing Director?
Hayne did collect some ‘scalps’ though, so you might think that the consumer at least had some sense of justice. But let’s look at who went. Ken Henry, saviour of the country from the GFC had a mere 3 years as Chair of NAB and much less time as Chair than his counterpart, Gonski, at ANZ. Henry’s gone and Gonski remains in place. This is as a direct result of Hayne and critical comments in his report based on the tone of the ‘cross examination’ during the Commission’s hearings. Had Hayne had more management expertise to draw upon, I suspect he might have understood the emotional intelligence (EI) issues at play and realized that his assessment of Henry was coloured partly by his performance style.
You could be forgiven for thinking that Hayne might have even had the fleeting thought of ‘how dare he’ a mere economist speaking like that to a lawyer! We will never know. What we do know is that those who are familiar with Henry say that when involved in such circumstances he gets very defensive. This, it can be argued, was also a fault of Henry’s own lack of EI. Henry, though, was only responsible for his performance, while Hayne was sitting in judgement where the bar is set higher (excusing the pun). I hypothesize that a Chartered Manager sitting in Hayne’s Chair would have had a better handle on EI and things might have worked differently for Henry and not at the detriment to the findings either. Gonski, a wily performer with more time in the corporate world, made a small target and came through the Commission pretty much unscathed. Was NAB that much worse than the ANZ…I’m not so convinced?
So I’m advocating for the corporate world to embrace the Institute of Managers and Leaders Chartered Management qualification. I’m suggesting that there be no dual roles as executive and Director for the same person on the same Board. I’m calling for a genuine focus on the customer and concern for the well-being of the workforce. All these things genuine managers do as part of their day jobs. I’m also calling for a more reasoned approach next time the Government decides to call a Royal Commission. By all means have a commissioner with some knowledge of the law so things can go well procedurally, but let’s have some people with genuine credentialed management qualifications and experience. After all if management is the core of the issue, managers need to sort the issues out. If both your pilots fall prey to food poisoning on your next flight, you are unlikely to hear a call out over the PA system asking for someone with experience in Torts!