IIC Partners

By IIC Partners
Jan. 8, 2013

One of a handful of CIOs who have reached top corporate roles, Sir Ralph Norris is a former chair of the Australian Bankers' Association, director of the Business Council of Australia, chair of the Commonwealth Bank Foundation, chair of the New Zealand Bankers' Association and Business Roundtable. He was appointed managing director and CEO of the Commonwealth Bank in 2005. During his six year tenure he oversaw Australia's largest retail bank's purchase of BankWest for just over $A2 billion. Prior to this he was managing director and CEO of ASB Bank, the Commonwealth Bank's NZ subsidiary. During his time as ASB CEO, the bank grew its profitability six-fold, increased its market share by 60% and was rated the best financial services provider in NZ. Sir Ralph is a former CEO of Air New Zealand and is credited with returning the once-troubled airline to profitability.

Sir Ralph Norris has mentioned the word 'honesty' approximately 30 times in 58 minutes. Irony from a former top banker? No. Honesty is the reason Sir Ralph managed to successfully steer two retail banks through the two biggest financial crises of the past two decades, where most others failed.

Honesty is the fundamental cornerstone of organizational culture and culture is 'critical' to the success of any organization, believes Sir Ralph.

"To get an organization from mediocre to best-in-class and outstanding, it's important to set the tone from the top of the organization. That means as a CEO how you act is not just a case of what you say; there needs to be complete alignment between what you say and your actions.

"Honesty in companies is very important. Chief executives go wrong when they don't confront issues they should have confronted a lot earlier. If you think of some of the excesses that happened in banking, if someone had been honest and said, 'Look you are pushing the envelope here,' instead of thinking, 'This person makes a lot of money for us and confronting them could have a negative impact on revenue,' when all the time they were spoilt brats who needed a firm parental hand. The problems seen in banking stemmed in many cases from people not confronting issues or telling the truth at the most critical times."

1. How can leadership shape sustainable organizational culture?
"As a leader, you have to ensure the management team you surround yourself with is consistent in applying the same values you are setting for the organization and that they are not going off in different directions.

"However all employees in a company should be empowered to display leadership appropriate to their role and therefore have an influence on organizational culture. This manifests itself in better client service with even the most junior levels taking responsibility for the client and making decisions. And if they get it wrong, it is highly unlikely that these decisions are going to bankrupt the company, if the company has robust processes and culture."

2. How can an organization ensure its board and senior staff are effectively driving organizational culture?
"An important tool from my experience has been the use of 360 degree reviews of the senior team, surveying peers and subordinates. The results give the reviewee the insight into how they are perceived by their peers, by their subordinates and what they might need to do improve their leadership performance. Over the years I have always participated in those processes myself - leaders shouldn't be seen as being above them. Organizations I have worked for have used the Gallup process to identify issues which lead to dysfunctional outcomes - invariably it comes back to the leader. Generally, I've found these processes end up creating an environment of greater trust and collaboration."

3. Given the problems of the recent financial crisis, is defining a 'board's' culture a new organizational priority?
"Having different rules for different people based on the perception of their value to the organization is a mistake. My view is there are some enduring attributes that permeate all levels of an organization. We all want to work for an organization we respect and which respects us and gives us the opportunity to use our talents and achieve our aspirations. Honesty, respect for the individual, respect for the customers of the organization - these do not change."

4. What about when things go wrong?
"None of us are perfect and I am not trying to present myself as being a saint. We all, from time to time, have situations where we get angry, but it's the way you respond. You can be angry about the situation, not angry with the person. Being able to separate the person from the issue is very important. If you attack the person it doesn't result in a very successful resolution of the problem. People subject to such attacks will become much more reticent in admitting to problems if they feel threatened, resulting in the problem becoming a bigger issue and probably more difficult to fix. An open and supportive environment at these times means that problems are addressed earlier before they escalate out of control."

5. What are the signs of a healthy organizational culture?
"Very good customer service ratings, very good staff engagement levels. I guarantee you when these factors are in alignment they have not happened by accident, they have happened by design and are the basis of a strong and healthy culture."

6. How can a healthy culture be sustained?
"A lot of constructive debate - based on honesty. Honesty about performance, honesty about behaviours, being prepared to have the tough conversations in confronting issues."

7. Signs of an unhealthy culture?
"Everyone knows when an organization has an unhealthy culture, it is characterised by poor staff morale, poor customer ratings resulting in a poor reputation. I am not aware of any company with poor staff engagement and culture becoming an outstanding performer."

8. Everyone has 20:20 vision in hindsight, have you ever made any mistakes?
"I've made plenty of mistakes. But it's about making sure you learn from them. Mistakes create experience, but they only create experience if you ensure you learn from them. Generally, my mistakes have been where I haven't moved fast enough when I've had doubts, about something or someone, generally taking more time to act than I should have."

9. Have you ever experienced any surprises when shaping or reviewing organizational culture?
"You are always in for surprises - you are not an oracle. When you create a safe environment and culture it's always quite surprising to see people achieving a lot more, than they ever would have previously, when they are unleashed from a negative environment.They can become very strong contributors and leaders and really surprise people around them."

10. What one piece of advice do you have for business leaders and founders on how to get sustainable organizational culture right from the start?
"Be honest about failings. Make sure people understand what the company stands for and what the non-negotiables are."

11. Finally, what are your tips on staying a top leader?
"It has to come to from honesty, real action, authenticity and applying common sense consistently. Leaders need to realise that they are there to be respected, and not necessarily popular. Popularity is not a gauge of success as a leader.

"Many people in leadership roles have a propensity to lecture. We have two ears and one mouth and that's not bad proportion to use them in.

"In 2002 when I started at Air NZ there were two documents on my desk the first morning I walked into the office: the latest financial forecast (forecasting increasing losses) and a staff culture survey 29% of our staff had bothered to fill out. This either meant the remaining 71% were blissfully happy or that they couldn't care less. When I looked at the results from the 29% I found 90% had no confidence in the management or the strategy going forward. I needed to communicate the issues and problems to our staff to create a step change. Over a three week period I invited seven groups of 800 people from different parts of the organization to an event where they sat eight to a table and we discussed our future options and opportunities, issues and problems and why going down a particular path was the right way to go. It was amazingly successful in gaining staff understanding and commitment to what the strategic imperatives were, why we had to introduce wage reductions, wage freezes and also why we had to change, quite substantially, the way the company undertook its business to focus on flying people, not flying aircraft."

"Today, Air New Zealand is financially successful and rated as one of the most innovative airlines internationally and has been named the 'Best Airline in the World' twice in the last three years by the U.S. magazine Airline Travel World. It is also rated New Zealand's most respected company and best employment brand."

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