Mike Smith - Think strategically, act tactically

 Mike Smith - former CEO ANZ BANK

Mike Smith - former CEO ANZ BANK

"“…you can’t please all of the people all of the time” Abraham Lincoln


"Everyone has a strategy until they are punched in the face"Mike Tyson

yorkbutterfactory.com

Mike Smith

Think strategically, act tactically

Michael Smith was the CEO of Australia and New Zealand Banking Group Ltd. (ANZ) from 2007 to 2015 following his retirement he remained an Adviser to the Board until July 2017.  He is the Chair of York Butter Factory (YBF) established in 2011.  YBF is the “destination point for innovation in Australia”.  He also holds the position of Senior Adviser Asia Practice at PwC.

Prior to this he was President and Chief Executive Officer, The Hongkong and Shanghai Banking Corporation Limited; Chairman, Hang Seng Bank Limited; Global Head of Commercial Banking for the HSBC Group; and Chairman, HSBC Bank Malaysia Berhad.

He graduated with honours in Economic Sciences from City University London and in 2015 was awarded an Honorary Doctor of Science from City University London.  In 2013 he was awarded an Honorary Doctor of Laws from Monash University, Melbourne.

He is a Senior Fellow of the Financial Services Institute of Australasia and an immediate past Member of the Australian Bankers’ Association and Business Council of Australia.  He is a Member of the Chongqing Mayor’s International Economic Advisory Council, having previously served at its Executive Chairman, and a Fellow of The Hong Kong Management Association.  He was formerly a Director of the Institute of International Finance, the International Monetary Conference and Member of the Shanghai Mayor’s International Financial Advisory Council.  He is a Life Member of the Financial Markets Foundation for Children.

He was made an Officer of the Order of the British Empire in 2000 and a Chevalier de l’Ordre du Merite Agricole in 2007.

My Story - Mike Smith

When I think back on the sort of influences that shaped me and what happened to me in the early years I guess the most important was that I was sent to boarding school in the UK. I was raised in Kenya in East Africa and I guess that gave me a sense of independence from an early age. From there I went to university in London in the mid late 70s. At that time the UK economy was a terrible mess, I never thought about working in the UK because of that, the plan was to get out and find somewhere else to go. Originally, I was going to join the navy, and I think the Royal Navy sold most of their ships or scraped them. I really didn’t think that that was going to be a long-term career, but probably something I just wanted to do when I was younger.

I decided that the best way to get out in the world was going to be through international banking. So, I applied for roles at several international banks, primarily American banks and of course HSBC which was in Hong Kong at the time. They gave me a job offer before anyone else, so I took it. That was the start, I really didn’t know anything about banking, other than when I went to cocktail parties with my parents in East Africa I always thought the nicest houses we went to were owned by bankers. I thought banking certainly couldn’t be a bad thing to do. The first day I walked into the bank I just knew that it was for me and it was totally fortuitous, despite not really knowing a lot about it. I did have an economics degree meaning that I at least knew how it worked. The thing I found interesting though was despite my lack of familiarity, I felt totally comfortable. I just got it. I understood it, and that was very lucky.

From there I think I moved to about ten countries that I’ve lived across and lived in over a thirty-year career, almost thirty years with HSBC. I covered off on investment banking, retail banking, broking, general management, country management and operations strategy during my time there. I did most things in the discipline of banking, and of course in 2007 I was approached by ANZ Bank and I was at a stage in my life where I thought that unless I made the change, now I would be doing the same thing in another 10 years’ time. I really felt it was the right time for a change. I’d been to Australia before in the 80s, two of my kids were born in Melbourne, so I had an affinity with Australia and Melbourne in particular. I decided that we would do it, and ten years later I’m still here. I became an Australian citizen, and this is now home. Yeah, very much, it’s very much home. I’ve thoroughly enjoyed my time here, apart from the tax which is higher here than most places.

Prior to living in Australia, I had also lived in Argentina, in 1997 when I was working for HSBC. HSBC had purchased a bank and financial services group called the Group O’Roberts in Argentina. It was basically a bank, a general insurance company, a life insurance company, a superannuation business and a medical insurer. They were country wide and the fourth largest bank in the country. At the time it was a family owned business, so it was run in a very different way than HSBC would run something. It was my job to go into the business and bring it into the HSBC family. I remember, I reported to the group CEO of HSBC of the time who was in London and like all large companies we had KPIs which were on a form about 15 pages thick. Containing all the things you had to do and what you needed to achieve. Instead of the normal 15 pages he handed a KPI form to me with two words on it: fix it. I’ve always thought of this as a brilliant lesson, because he knew what he wanted me to do and I knew exactly what he wanted me to do. It didn’t need a massive industry to explain it. It was a good lesson in keeping it simple and understandable.

I think the first two or three years in Argentina were great and then the financial crisis that hit Argentina in 2000-2001, really hit the business hard, to the extent that it caused some significant changes. The banking system effectively had its capital stolen by the government, expropriated.  At the time the Argentine Peso was fixed to the US dollar, as a peg. They unpegged it but at a different rate for assets and liabilities. I woke up one morning to find I had no capital.

Finding ways to get cash to people and to sort out what the government had done became very difficult. Finding liquidity generally was very difficult. The government then imposed a law preventing people from taking out their own money, to a limit of something like $200 a day. You can only imagine people’s reaction to that. They began to blame the banks and would literally storm them. We had to have steel plates welded to the outsides of the branches as they were regularly attacked. We even had a gun battle inside our main office where a crowd of protesters were trying to burn down the building. We had to evacuate a thousand people whilst there was tear gas going off and bullets ricocheting around. It was something crazy and two people were killed in the attack on the bank. Thankfully, we got all our staff out safely and I was very pleased to do that.

Prior to that of course I’d had my own little run in with some corrupt members of the older organisation who’d hired a bunch of policemen to get rid of me. There was as assassination attempt in which my car was shot up. Fortunately, I was driving at the time, so I managed to escape, but I did get shot through my thigh. But that’s quite a long story and that needs a couple of beers. I had a Jag and it got shot up pretty badly although somehow it kept going without tires and with the engine full of bullet holes. That car kept going and it really saved my life. I was able to get away from those people and I’ve owned a Jag ever since.

The attack was in response to the fact that I had been talking about a superannuation business that had a very large marketing budget. We managed to get a little deal going but it was obvious that money was being skimmed off. I couldn’t really prove how much was being taken but I knew something was happening. I also wasn’t too sure as to who was involved. In the end I fired everybody including all the marketing department and the advertising agency. In the good South American style, they thought if they got rid of me then things would simply go back to the way they were. It was an instinctive move, but I just knew something wasn’t right.  Throughout my career I’ve become much more instinctive, I think when I first started I was incredibly analytical and I’ve learnt that actually instinct plays a very, very critical part. Funnily enough we spend most of our lives surpassing our instincts. Through social norms and for various other reasons. I think you should rely on your instinct and on your intuition far more than we do. This was one of the things I learned from being attacked, I remember my security personnel told me that if I ever instinctually felt I was in danger to act on it, not to worry about the social norms and being polite. This piece of advice did save my life later in India when I was in the Taj Hotel when it was attacked. I had a feeling something wasn’t right and left the hotel with my country manager, just four minutes before the attack. When we were in the car on the way to the airport we received a call from the Australian Ambassador asking us where we were and telling us to go to the airport as central Bombay was under attack.

I mean when you have a near death experience in whatever way, it does make you reconsider your priorities and the way in which you live. I would say that I’m a better person for that experience. I think that before it happened I was far too ruthless, I was far too blindly ambitious. I was like a blunt instrument and I think because of that I left collateral damage everywhere. After that experience I began thinking that there are different ways of achieving things and you can bring people along and that’s much more effective than taking them on. It gives you a much less stressful life. People have always asked how I would like to be seen as a manager and what advice I would give on how to manage. I’ve always said, “manage other people as you would like to be managed yourself”. It is a very simple message and I think it’s a valid one. Wisdom comes with experience and I think that as you experience more your decision making becomes better. It becomes defined by what you know. I’ve never actually had any regrets because when you make the wrong decision you learn form that too. Then the next decision you come to, you take that bit of experience and learn from it as well. I think it’s very important that when you look back at your life, you recognize that of course you could have done things better, but it is more important that you can learn from what you’ve done. The good and bad, that is what makes you a better person going forward, and a better leader.

You also have to be honest with yourself as well, I’ve seen so many CEOs with egos that are out of control. You really do have to try and keep your feet planted on the ground and good people around you. I was very lucky with my wife, as she is someone who is very grounded, and she is very quick to bring me back to earth if there are any signs of straying. It’s a partnership and it’s a valuable one, you do need those people to bounce things off and to help you. Certainly, in the early part of my career I didn’t feel I needed anybody, I guess I was arrogant and a few people would have described me as arrogant. I didn’t mean to be, but I probably came across as being so. I think it’s important that you have ambition. Ambition is sometimes seen as a bad word. I don’t think it is, I think it’s a good word. It’s good to be ambitious and to have a plan, to have a vision. That vision may change but you’ve got to set yourself some sort of opportunity, some sort of goal to achieve.

Like anything you’ve got to compromise somewhere along the line. But in terms of your career, if you think about it, most careers are going to last many, many years. In that time, the balance between personal and business things will adjust. One of the problems is that at a time when you’re really trying to make your mark in your career, it’s also generally a pretty critical time in your personal life in having a young family etc. It is the hardest time to be in balance and I have no magic answer for that. I was very much weighed down by the career piece to the detriment of my family, yet I think I swung back and I was lucky that my wife was able to compensate for that. Let’s face it, if you’re going to be a CEO of a major corporation, a company with market cap of a hundred-billion or whatever, then life balance is quite difficult 24/7.

What you do is work out when you can get what I call down time and thinking time, I used to actually like flights as they allowed me to just think and do, not just about day to day things, but really think about what’s happening in the world, about the new issues out there and what is changing. When I was on holiday I would go to Europe as we bought a place in France many years ago as a lifestyle thing, because we moved around so much the kids thought of that as home. The reason why it worked for me so well there was because the time difference was so good, because I’d have all my emails when I woke up in the morning and would spend a couple of hours doing them all, making a call and whatever. The family weren’t awake yet, they’d get up and that’s the whole day and everyone here’s gone to bed. You’ve got to sort of plan that thing, that you can get proper down time and quality rest time because frankly you need it. You do need to recharge. Anyone who thinks you can keep on going is not right.

People don’t appreciate the sheer amount of work a CEO needs to do and the fact that you wake up in the morning and the first thing you do is look at positions and where currencies have gone and how it’s moved. When you think about it, if you’ve got a, close to trillion-dollar balance sheet, that’s an awful lot of money to be managing, and its other people’s money. A good part of that is shareholders as well so you’ve got massive responsibilities to those who quite rightly expect you to look after their interests, as half a million shareholders, etc. Again, if you can try and make sure all those interests are considered in the same way, you’re going to be more successful. Because if you run a business purely for shareholders, or you run a business purely for staff or purely for customers, somebody’s going to get upset.

Mentors - Mike Smith

For me there have been two types of role models in my career, good role models and bad role models. Bad role models are very useful as well as you can see what is not effective, what doesn’t work, what pisses people off or whatever. So that’s important to learn from that aspect as well. But I have also had good role models, I was lucky at HSBC to have some seriously capable managers and bankers, some really good people.  It was quite an aggressive style at HSBC, it was sort of no prisoners type of approach, but it was always done for the good of the company. It wasn’t about yourself, it was always what is the right decision for the company? As a result, the value system of that company was extremely strong and that was something that was always very important to me. I think you’ve got to do the right thing. You can say values are very different in many cultures and many types of businesses, but fundamental decency is very important.

Successful habits - Mike Smith

The habit that I have insisted on every single day is that I always meet a customer, a staff member who didn’t report to me and what I would call mover, somebody of influence. That could be a major shareholder, it could be a politician, a media commentator or whatever. Now sometimes I would meet dozens, depending on what I was attending or doing, but I feel it is incredibly important to keep touch with your organisation and what it is that you are doing. So, for a customer of course it’s as important to speak to mum and dad and the corner store as it is to the CEO of Telstra or whatever. It’s also important to understand in your own business, and I used to have round tables once a week with junior staff, just to understand how they thought the business was going and they could ask me questions about what I thought. Because as a CEO the big problem was you are often told what people think you want to hear. You have to find a different way of getting different feedback. It’s amazing what you do learn and what you can pick up on and change. I think touching the organisation in any way you can is critical to success. That requires huge personal involvement and time and you have to be prepared to do that. There’s a thousand other things going on, but it is critically important.

Inspirational Quote - Mike Smith

I think Abraham Lincoln’s quote “you can’t please all the people all of the time”, is a fantastic one, you can please some of the people some of the time. You can’t boil the ocean. I think as you become more senior it’s very hard to please everybody and you have to accept that not everybody is going to be happy. When you’re young, idealistic and starting out, you do want to please all the people all the time and you suddenly realise, that there comes a stage where you can’t. You just can’t. It takes a lot of self-confidence and belief in yourself to be able to do that. It’s like spinning plates, you’ve got to allow a few to possibly fall off at times, and you’ve got to really work on the ones that need to be spinning.

The other quote I love is a bit unusual which is one from Mike Tyson, when he was asked whether he had a strategy for his fight he’d say, “everybody has a strategy until they’re punched in the face”. I think that’s a great one because no matter what your strategy is, something will happen that will knock it off and it becomes a question of what do you do about that? How do you adjust? What’s your plan B, plan C, plan D? That concept of contingency is so important. The more senior you are in an organisation, the more you have to look at the big picture, but you have to understand that the big picture doesn’t have a frame. You are managing ambiguity all the time. Now a lot of people hate managing ambiguity. They love to be in a box, know what they’re doing whatever. But the more senior you get, the less you can do that. What I always look for in senior manager is the ability to be visionary or to think strategically, but still act tactically. It’s quite rare. It’s not an easy thing to find people who have got that ability. You get plenty of people who do the execution well, and plenty of people who are great at the vision and strategy, but finding people who do both, is quite hard.

For example I myself have experienced seven financial crises during my career. One of which was the Argentine crises which was the worst because it was so dramatic, and the impact on everyday life was huge. In terms of the global downturn, the GFC of course was probably the most major we’ve seen in recent history in terms of its broad reach which we are still going through the effects.

These financial crises are a reality of economics and particularly in banking where you never learn from your mistakes, it’s the same in all industries, it’s the same story throughout history, we don’t learn enough from history. One of the things I’m always amazed at, I mean you look at the politics now in Europe and you think ‘does nobody remember what happened seventy years ago?’  It is frightening how quickly people do forget, we don’t learn from history and make the same mistakes. Well it’s good if you’re an accountant or a lawyer I suppose, because there’s always work.

We’re in the next revolution, there’s no doubt about it, the technical revolution, which is as significant as the industrial revolution. We are looking at an old economy, and a new economy, and the models and process that drove the old economy are just not going to work in the new one. Now we’re still probably going to make cars, but we’ll make cars differently, and it won’t be here. It’s really about understanding “Ok, what is important for the future, what’s going to make jobs for our kids?” I wish the politicians would grasp this, because they don’t seem to, they’re involved in the populist short terms of the day which means vision is something next Thursday, you know which is just hopeless. We have to adjust because Australia can’t put its head in the sand and say well we don’t need to change as the rest of the world will pass us by. You can compare it to the industrial revolution. If you had approached the farmer in the industrial revolution and said ‘I’ve just invented the steam machine that does the job of twenty horses’, the guy would say well I’ve got one horse and that does perfectly well for me, that just does the same thing. It’s just the same sort of thing. You think eight years ago there wasn’t an iPhone in Australia. Think that just six years before that and that was the introduction of the Blackberry, now that’s gone.

Recommended Reading - Mike Smith

I have a favourite book of the moment. In fact a colleague of mine gave me a book called Meditations by Marcus Aurelius. He wrote it more as a diary of observations as a Roman Emperor, I mean it’s interesting that he wrote it in Greek. Maybe that was to keep it private or something. It’s fascinating and what he writes are extraordinary comments on common sense. When you think about some of the great authors in history, when you look back to someone like William Shakespeare or whatever, some of his observations on life are as absolutely as relevant now as they were then, which is so extraordinary really. And for somebody so young to have been able to get those gems of wisdom is quite remarkable.

 

 I also just read a book written by Winston Churchill, and I hadn’t read any of his stuff for a long time, and again his word, the way he uses words, absolutely amazing, extraordinary talent. Every time he ran out of money he would write a book and publish it, he made a lot of money from his writing. He did a history of the second world war, so it was the first volume of that. I think there were six volumes, so I’ve got to get through the others at some stage. I think with books, the same with magazines, you’ve got to have something that interests you at the time. I might read a novel at the same time I read a historical book. I’m not big on management books, I find them a bit boring as I think there’s nothing quite like doing it and learning as you go along. But I know some people really enjoy learning through books, and that’s good. To have an open mind is incredibly important. I think a key attribute that any executive needs today is curiosity. It is so important that people are interested in thinking about what they do day to day. It’s why I love the other cultures. When you look at the way other cultures do things and their values systems, and you think what makes us right and them wrong? Or what makes them right and why don’t we do a bit more from that? The same thing applies in relation to running a business, there are no right or wrong ways, just different ways. If you’re in a job that you don’t enjoy, try something else. Otherwise you end up frustrated, you become cynical, you can become bitter and then you become less effective.

My Life Now - Mike Smith

Look I’m very fortunate that I can now do what I want to do. I have not joined any public company boards, very deliberately. The reason being that the corporate governance system in this country has now got out of hand I think. To the extent that board meetings can be 95% process compliance procedure and 5% business. What entrepreneur or business person is going to join a board? It’s now people with a legal background or an accounting background who are used to being very risk adverse. Those who don’t have that entrepreneurial flair or that need to take risk. That’s a problem for public companies, so it’s one of the things I have avoided.

What I have got involved in is the start-up industry. I’m the chairman of the York Butter Factory, and that’s great fun. Not only is it joint space provider, but also an incubator and the great thing about it is that it has a model that has been developed with corporates in partnership. If a company like ANZ wants to do some innovative type of business, they need a problem-solving partner, they can give it to York Butter Factory to find the right company out there, the right way of dealing with it, with ANZ’s innovation people and come up with something quite different. Because if you try to innovate within a corporate culture it won’t really work very easily. Corporate cultures tend to protect themselves. It’s like any maverick in any corporate, within the executive body, they will have their edges clipped off as the corporate culture is very strong at self-preservation. Now we are in a world where that isn’t going to be enough. That’s one thing that I’m doing, and I’m still working as an advisor for PwC which I enjoy, and I’m involved with a couple of other smaller companies, I actually really enjoy it. I’m doing what I want to do, which is a lovely place to be and it’s the first time in my life that I’m in that place. I am also now growing wine.

I still find I’m working quite hard, but if I suddenly want to and if the sun comes out and I want to spend a couple of days down at the farm I can. And the great thing about what I am doing now is that you’re always connected and with broadband or any decent wireless service, it doesn’t really matter where you are. It’s the relationships that are most important. Things don’t happen overnight. You can’t have lunch with somebody and say, well I’ve got a good relationship with someone, you’ve got to work it. That’s still so important.

Contact Mike Smith

I’d say the best way to get in contact is through LinkedIn, that’s probably the easiest approach.