The West Australian Leadership Matters Events Program
Oct. 14, 2014
Andrew Smith speech 14 October 2014 Leadership challenges – ‘effective leadership’
Good morning Ladies and Gentlemen. I would like to begin by acknowledging the traditional owners and custodians of the land on which we meet today, the Noongar people, and pay my respects to their Elders both past and present.
Also I would also like to thank the West Australian for putting on today’s event and providing me with the opportunity.
Preparing to speak on a topic like leadership is not the easiest of tasks. It is a topic that is so often the centrepiece of mythology, it is the trait we admire most in our sporting heroes, it is the quality we seek in our political leaders, and it is what we expect from our CEOs and general managers.
Books on leadership fill the best sellers lists, and there are no shortage of
motivational speakers who will tell you how to be an effective leader. But in reality leadership is very personal.
Rather than stand here and quote Churchill or Menzies, I would like start today with a personal observation.
In reflecting on today’s speech with a member of my staff, we were discussing leadership that impacted my personal and professional development. My mind settled on my experience working at Shell’s refinery in Geelong in the mid-1980s, and to a supervisor called Cliff, who amongst other things had to supervise graduate engineers like me.
The lessons I learned observing Cliff have stayed with me and had a deep impact on my career.
The refinery was Shell’s, but Cliff owned the kit we worked on. He helped build it. Selected the staff who worked on it. He treated the processing unit as if it was his. If you worked there, you were in his house, and with that he assumed responsibility.
I recall how he cared deeply for those worked on the unit, and he held all of us to such a high standard.
This is not a story you will find on the shelves at Dymocks, but it offers an insight into how profound leadership on the factory floor, or in the office, or on the building site, can be. It is a story about leadership’s most fundamental aspect - leadership is about getting the best out of people.
My industry - the oil and gas industry - is dominated with stories about innovation, technology and amazing kit. From the revolutionary development of remote oil fields, through to the sheer size and scale of floating LNG facilities, the stories of technology dominate the narrative.
But at the core of the industry is the same basic building block as all areas of human pursuit - its people. And under that the fundamental truth that to get the best out of people you need effective leadership.
As a collection of individuals, corporations have a role to play in showing leadership. The story of my own company shows how corporations can show national leadership, and their actions can have a profound impact on nations.
Shell’s story in Australia started 113 years ago, in the same year that our nation was born. The journey to becoming one of Australia’s largest investors began 30 days and nine kilometres from the first meeting of the Australian Parliament – when a vessel called the ‘Turbo’ moored in Melbourne’s Hobsons Bay.
The ‘Turbo’ was the first ship to import bulk kerosene into the Australian market. Up until that point kerosene, which was the fuel of its day, was imported in ‘kero tins’.
This is an example of how Shell leaders had the courage to adopt an innovation to change the status quo - by improving efficiency and reducing costs.
Similarly in the mid 1980s Shell leaders had the courage to introduce radical
thinking into the design of the North West Shelf project. At the time the venture was struggling to find an economic development model. Initially the plant design included water cooling and steam turbine driven LNG plants. But this option was prohibitively expensive.
Through its international network of LNG engineers, Shell introduced to the venture the world’s first air cooled, gas turbine driven LNG plant design. This innovation allowed the JV to reduce the capex required for construction by around 20 per cent. A final investment decision was taken two years later, and the long term contribution of this project to the Western Australian and Australian economy is still being felt.
While I don’t want to focus solely of Shell’s activities, I would like to share the story of one of my predecessors and the leadership example he set for a company in transition.
Roland Williams led the company in a period of great transition between 1995 and 1999. The business that Roland assumed control of had seen its total capital employed in Australia fall over the previous decade.
Like all great leaders, Roland brought a great sense of reality to his position. He understood that company’s that don’t grow, don’t survive. On the organisational level he honestly challenged his people, once saying “if we don’t perform we lose our licence to exist”.
But Roland went further than simply using direct language to describe the situation - he was a man with vision, and he was prepared to set an example of how that vision was implemented. Roland spent much of his time as chairman preoccupied with developing business opportunities and expanding markets for Australian LNG. He promoted further development on the North West Shelf by expanding Shell’s customer base in Asia.
At the same time he pioneered the establishment of a Shell corporate presence in Perth, realising that if the company was to seize opportunities that offshore Western Australia offered the company needed local leadership. Under Roland’s direction and leadership in the late 90s Shell pursued opportunities of the CTES joint venture - which was looking to develop the Gorgon resources.
It was period where Shell was coming to grips with a new and competitive
landscape, and it was through effective leadership that it was able to transform itself.
For me effective leadership involves a high degree of intellectual honesty. That is, effective leadership must be driven by a clear and unbiased view of reality. To be a good business leader one must first understand reality - and actions must be driven and grounded in that reality.
What’s more, that reality may be one that is not easily apparent or pleasant. An effective leader must be able to clearly separate the apparent from the reality - while being able to recognise opportunity, or the vision of what is possible.
As a Victorian living in Western Australia, our nation’s obsession with Aussie Rules football is something that is not lost on me. The sport’s thriving national competition provides one of the most powerful examples of vision and corporate transformation - facilitated and led by effective and brave leadership.
In the mid 1980s the Victorian Football League was the dominant competition of its code. Its powerful clubs had the means to cherry pick the finest players from across the nation, and suburban grounds across Melbourne played host to capacity crowds every weekend.
But the VFL’s newly appointed CEO Ross Oakley realised this veneer of ongoing success masked a harsh reality. Powerful clubs were dominating the competition, and smaller clubs were struggling financially. He also realised that despite the financial difficulties of the Sydney Swans - expansion was the only avenue to growth.
Like Roland Williams at Shell, Oakley realised that growth underpinned his business’ ‘licence to exist’. Oakley set about a radical reform agenda that would transform the VFL into the nation’s dominant sporting code and a thriving business.
The obvious examples of Oakley’s reform agenda was expansion of the competition into Western Australia and Queensland - followed by the establishment of a team in Adelaide. This broadening of the competition’s appeal was a central plank of his reforms - but the true leadership came from three less obvious moves.
The first, and perhaps most meaningful, was that he fought to hand control of the competition to an independent commission - wresting power from the self-interest of the competition’s participating clubs. This move is credited with the competition taking long term decisions, that often came at a cost to the significant block of clubs in Melbourne. This move showed not only vision, but more importantly foresight.
The second was the willingness to challenge the status quo by taking unpopular public positions in relation to the struggling areas of his business. Oakley publically championed the relocation or merger of struggling Melbourne based clubs that had been part of the VFL since its inception. This courageous move was always going to unpopular. In fact it led to widespread public condemnation, with ‘Up yours Oakley’ bumper stickers in various club colours adorning cars across the state.
The final area of outstanding leadership came in the willingness to reject proposals from powerful suitors. Under Oakley’s leadership the VFL rejected well-funded and publically popular proposals led by the Tasmanian State Government to establish a team in Hobart.
The resistance, and personal costs, Oakley faced would have been difficult to endure. But the lessons from his leadership are a great example for anyone in business. He understood the reality, despite it being uncomfortable. He needed growth to underpin the viability of his business, and he stood up to vested interests in order to grow.
Now I would like to cast an eye to the future, and consider the leadership challenges faced by those responsible for investing in the job creating, income generating ventures of tomorrow.
More than ever brave and visionary leadership decisions will face broad scrutiny - this is an inevitable outcome of the information age. Challenging decisions will face more effective campaigns of public outrage, some of it based on confected outrage whipped up by university graduates armed with degrees in activism. But we cannot allow these dynamics to halt Australian progress.
As company’s look to establish the greenfield projects of the future, authenticity in leadership will be a pre-requisite to overcoming inevitable waves of protest. Activism, boosted by digital communication, is fast becoming one of the greatest challenges facing Australian growth.
As a nation we built the Snowy Mountain Scheme in the post war environment where development was synonymous with growth and opportunity. But the landscape has changed.
Throughout the 1950s and 60s Australians in every state expanded vital
infrastructure to make our cities liveable and our industry prosperous. But today major infrastructure projects face significant challenges from activists who prefer alternative paths to development - or sadly no development at all.
Court challenges to developments such as Queensland’s Abbot Point port
expansion or Melbourne’s East West Link freeway construction - concern both business leaders and investors alike. Rather than express an alternative point of view by peaceful protest - they look to undermine the legitimacy of decisions taken by democratically elected governments.
Too often the blame for these circumstances is placed at the feet of well organised NGOs and fringe activist groups. Groups that the business community likes to marginalise. But this is far too simplistic, and ignores the fact that effective leadership is about building coalitions of support.
Often protest action manifests itself in communities that feel they have lost control of a process. Fears within these groups are too often manipulated by interests that fill a void in knowledge, sometimes with misinformation.
The debate around water in Queensland’s coal seam gas industry is a good
example. Some farmers were used by anti CSG activists, who fuelled fears about water contamination. All this despite overwhelming scientific evidence, and a strict regulatory regime. Years later, the industry is thriving, and these actions did little more than slow projects, add cost and divide communities. In the long term extra costs mean less jobs, less tax revenue and higher gas prices.
These examples show that in the information age it is more important than ever for leaders to engage with communities and cast ego aside.
Allow me to leave you with a quote from Jack Welch, the former head of American industrial giant General Electric. According to Jack “Good leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion”.
Jack may have never run a processing unit in a 40 degree northerly like my first boss Cliff or faced angry Footscray supporters like Ross Oakley - but his insight remains valuable.
As we leave the room allow his thoughts to percolate. Create the vision, articulate it, own it and drive it to the end.
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