Blueprint for Success
When Richard Goyder took over the helm of Wesfarmers there was no doubt that his performance was going to be scrutinised. Scott Morgan talks to the former CFO after 12 months in the job.
From his 12th floor office overlooking the glistening waters of Perth's magnificent Swan River, Richard Goyder has a great view. And yet he rarely takes a moment to admire it.
As Managing Director and CEO of Wesfarmers, Australia's largest conglomerate with more than 33,000 employees, Goyder's schedule does not allow him time to stand and stare. Formerly Chief Financial Officer at the company, Goyder was awarded the top job in July 2005, succeeding his good friend and mentor Michael Chaney. Though he expected the demands of the job to be high, he admits the sheer scale of his new role caught him a little off guard. "The difference between being CEO and CFO is the absolute constancy of work - you are never away from what's going on," Goyder says.
"The CEO's role is very demanding and I think it's a lonelier role. There are less people you can confide in. So there are some downsides to the job, but the upsides far outweigh them."
That Goyder has now come to terms with the demands of his new role is evidenced by his demeanour. Relaxed and affable, he exudes the unassuming confidence of a man comfortable in his position, and one who is relishing the challenges that come with it. Perhaps the biggest of those challenges has been to fill the boots of his dazzling predecessor, Chaney.
How has he gone about this? "One of the things that I have been very conscious of is being myself and not trying to be someone else or something that I'm not. My style of leadership is different to Michael Chaney's, and is different to a lot of other people, but it's been effective for me before and I trust it will be as we go forward. Part of my leadership style is being frank and open with people and being clear about what we are trying to achieve. I think that as a leader, telling people what's really going on, keeping them informed of decisions, is probably the most powerful tool you have."
Goyder does not run any of Wesfarmers's businesses on a day-to-day basis. Even if he wanted to he wouldn't have time. His focus instead is on medium- to long-term planning, and defining a clear direction for his leadership and management teams to follow. Goyder calls this "getting the settings right". With the exception of their insurance arm (Wesfarmers Federation Insurance and Lumley), he chairs each of the company's five divisional boards and is heavily involved in strategy development and approval of both capital and budgets across the group.
"Our divisional managers communicate well with me, so I'm able to assess what's going on and keep an eye on things without having to run the businesses myself," he explains. "This frees me up to concentrate on looking forward, and to consider things such as areas for growth in our existing businesses and potential mergers and acquisitions."
As an employee of Wesfarmers since 1993, Goyder, now 46, has not simply witnessed the company's extraordinary rise (during Chaney's 13-year tenure Wesfarmers grew from a $1 billion rural-dominated business into a $10 billion corporate giant), he has been integral to it. Before his appointment as CEO he served in several roles, including spells as General Manager of Business Development, Managing Director of Wesfarmers Dalgety Limited, Finance Director and Deputy Managing Director.
No one, with the exception of Chaney, could claim to know the business better. But with the company operating in areas as diverse as energy (coal mining and LPG) and home improvement (Bunnings), he acknowledges it's impossible to understand every element of every business in the group. Because of this, he argues, it's more important than ever that Wesfarmers attract, retain and develop people who are capable of taking on leadership and management responsibilities in each of the company's five divisions (home improvement, energy, insurance, industrial and safety, and chemicals and fertilisers).
One of Goyder's first moves as CEO was to initiate a twice-yearly schedule of succession and planning discussions with his leadership team. During these meetings Goyder and senior executives evaluate the merits of up to 120 employees who have demonstrated leadership potential: "We assess their readiness for new roles, discuss what development requirements they might have and what opportunities might be opening up for them across the group."
In addition Wesfarmers also runs an established Executive Development Programme, during which "high-potential individuals" (usually around 10-20 per year) are put through a series of leadership and management courses designed to assist them in realising their potential and ambitions. Goyder himself is heavily involved in this program. A week before our interview he spent a morning with this year's group, outlining his vision for the company and taking questions from the floor.
Though Goyder believes that some people are naturally inclined to lead, he is not of the view that good leadership is exclusively down to DNA. "You can look at some people and see in-built leadership qualities, but I have no doubt these qualities can also be taught and developed through experience," he says. "There is no question in my mind that someone like John Howard is a better leader today than he was when he was elected 10 years ago. I think that was also the case with Michael Chaney and I hope it will be the case with me. Life's a learning process."
One of Goyder's earliest lessons in leadership came during his spell as Managing Director of P. J. O'Connor, an industrial rubber business in Sydney's western suburbs. The business was losing money and Goyder, at the time employed by its parent company Tubemakers of Australia Limited, was tasked with reversing its fortunes. Conditions were not favourable. Workers were highly unionised and prospects of a quick fix looked remote.
"The business was losing money but it seemed to me that nobody wanted to face it," says Goyder, whose first move was to take to the shop floor and give the workforce an unsweetened dose of reality. "Basically I said to them, 'Look, this is what's happening with the business and unless we can fix this we won't have a future'."
Goyder then set out his blueprint for recovery, a process that involved outlining both his and their roles in achieving it. That same day, to make doubly sure everyone understood their part of the plan, he met with key members of the workforce one by one. The very next day the business turned its first profit in over a year. "That was a great lesson for me," he says. "It showed me that if you're open and honest with people, and they trust you, then they will respond." At the time Goyder was just 28.
But no one gets it right all the time. Goyder admits he has made his share of mistakes. During his career he feels he has occasionally been guilty of deferring decisions about underperforming employees, hoping that things would improve even when, deep down, he suspected they wouldn't. "I've done that a few times but not so much anymore," he says. Through experience he has also learned to be more detached in his decision making, especially on projects in which he has a personal stake: "If you're an advocate for something, and you're closely involved, then you become very keen to make it a success because you feel that your credibility rests on it. But sometimes you just have to step back and say, 'Enough, we gave this a good shot but it isn't going to work'."
As a company, the stated aim of Wesfarmers is to provide a satisfactory return to its 125,000 shareholders. But Goyder is also aware of his responsibility to uphold its reputation (built up since its inception as a farmers' cooperative in 1914) for ethical business practices and good corporate citizenship. "Of course we want to make a dollar," says Goyder. "But we want to do that in a way that is ethical and responsible. That means making sure that our employees have a safe place to work and opportunities to develop. It means treating the environment with respect. It means dealing appropriately with our customers and suppliers. And it means supporting and benefiting the communities in which we operate."
In 2004/05, through sponsorships and donations, Wesfarmers's operating businesses made community contributions totalling $2.7 million. A further $2.3 million was donated at Group level. Corporate sponsorship is directed through its Wesfarmers Arts Programme, which provides funding to numerous arts organisations in Western Australia including the West Australian Ballet, Opera and Symphony Orchestra.
As a farmer's son from Broomehill, a small, rural town roughly 300km south east of Perth, Goyder is fiercely proud of his Western roots and is committed to extending Wesfarmers's association with good causes in the region.
Goyder believes that, as leader of the company, he has an obligation not simply to advocate ethical values but to set the right example by living them. Integrity, he says, is everything: "Without integrity it would be impossible to remain competitive over the medium to long term. Customers and suppliers won't deal with you if you don't have the values they think you should have. Our view is that if you compromise on your ethics then you've got nothing. Once you've lost trust the game's over."
In support of his argument Goyder points to the fact that several of Wesfarmers's acquisitions, including the high-profile takeover of hardware business Bunnings finalised in 1994, have been instigated by direct approaches from the existing owners or management. "The ultimate acquisition of Bunnings came about because the Bunning family came and knocked on our door," he reveals.
"They said, 'We think you're a good company and we'd like to talk to you about an opportunity.' People don't do that if your reputation is poor."
In a company with 33,000 employees and five distinct areas of business he's realistic enough to know - and honest enough to admit that, occasionally, things will go wrong, and that not every customer's experience will be a happy one. But he doesn't lay awake stressing about it: "If I spent my time worrying about everything that goes on across the company I would very quickly go nuts". That said, he is committed to delivering the best service possible, and believes his most effective resource in achieving this is the people working for him.
"At the end of the day," he says, "the quality of our people will be the only enduring competitive advantage that we have."
In the war for talent Goyder is prepared to lead from the front by ensuring Wesfarmers continues to be a rewarding place to work. And not just in financial terms. "Remuneration is important, ensuring that we are competitive in the packages we offer is important, but it's equally important that we create an atmosphere that makes Wesfarmers an enjoyable place to be."
There is no doubt Goyder enjoys being where he is. Being ultimately responsible for every element of every single Wesfarmers business gives him a sense of pride, achievement and quiet satisfaction. But he feels the influence of the CEO tends to be exaggerated: "As a CEO you have some awfully powerful levers... but you only have a few of them. For people to think that one person can define the success or otherwise of a company is a gross overstatement. It's a role in which you can certainly achieve a lot, but only if you have an outstanding group of people working with you."
Goyder is clear about the direction in which he would like Wesfarmers to move during his tenure. He wants to see growth, both within existing businesses and through acquisitions in Australia and possibly internationally. He wants Wesfarmers to enhance its reputation as an employer of choice, and as an academy of creativity, innovation and ethical practice. He wants to deliver increased value to shareholders. And he wants to achieve all these things by the most sustainable methods possible.
"If we can do all this," he says, "then the future will take care of itself." And if that happens, Goyder, probably to his private dismay, will be acclaimed as a corporate icon - for pulling those powerful levers and getting the settings absolutely right.