Review and Renew - Basics for Growth
Les Owen, Group Chief Executive, AXA Asia Pacific Holdings, speaks to Susan Heron about cultural change, management, leadership and the AXA experience.
Q: When you arrived from the UK in 2000 you set ambitious and aggressive goals for AXA, which were known as K5. It has been generally agreed that you achieved the objectives set by K5. What do you attribute that success to?
A: We had a company, National Mutual, that AXA had rescued from a pretty weak financial position in the mid-1990s. They demutualised it and listed it in 1996 with AXA holding 51 per cent. And I think, in retrospect, two things happened in the period from 1996 until I came on board. First, we demutualised the company but we did not demutualise the culture, and therefore, although we were a listed company, the management team was still a mutual management team. It is difficult to say these things without appearing to criticise, but I have competed against mutuals in our industry for 30 years and I will say that mutuality is a bit like communism, it's a good idea in theory but in practice it rarely delivers better results for customers.
Secondly, not long after AXA acquired National Mutual, AXA also acquired UAP, at that time the largest insurance company in Europe . All the attention in Paris went into making sure the UAP acquisition worked so that even though AXA acquired National Mutual nothing changed except that it had more capital.
The performance in the second half of the '90s was such that while we didn't have financial difficulties we were just slowly declining, this was the first thing I realised when I arrived.
We had to change that mutual culture, and K5 was the way to do it.
We went public on K5 because I needed to get our people to commit. I hadn't realised before I came to Australia how big and iconic National Mutual actually was in this country. I discovered that if I said something to all my staff it would be in the papers the next day; so I felt if I was going to do a proper job of communicating internally to staff it was going to get out, so it was better to go external - at least then I could control the message.
We did K5 because I felt we had to paint a picture internally as to what success looked like, because I don't think there had been, for many years, a clear picture painted to the staff of what success actually looked like. And our K5 was meant to be a balanced scorecard. Our first objective was to double the value of new business and profitability. It was very important to make that the first one because mutuals in our business go for market share and often misprice and misreserve, and the problems come years down the track; so we had to stress the value of new business.
It's no good having good profit margins if you are small, so the second one was to get into the top five in net retail funds inflow. It was all about volume and market share.
The third objective was about reducing costs by a third, and there was a lot of evidence that we were quite a bit more cost inefficient than our average competitor.
The fourth objective was about customers and achieving a place in the top five for customer service, and the fifth objective was about our own people and achieving recognition of our staff among the top quartile in AXA's own world survey of staff attitudes.
It was meant to be simple and easy to understand, and aspirational.
Q: You set the leadership goals for the transformational leadership program at AXA. Did the changing of culture at AXA require major changes to your management team?
A: I had worked for the same company in the UK in the same industry for 28 years, and anything I have learned was while working for other people. You learn from your experiences and your work environment.
If you work in a mutual company that has mutual values, then no matter how good you are as an individual you are bound to learn and behave from that experience. The challenge when I got here was that there was a lot of good people, but some of the people, both privately and in public, said to me, "we really want this company to be successful, it hasn't been going well for the last 10 years". So there was a real desire to be more successful.
The problem was that if we tried to change the culture internally, completely organically, it would take a long time.
The one way to change a culture quickly is to change the people who make up that culture. It may not be the only way, but I felt there was a need to change quite a lot of the people. It was not a commentary on the individuals themselves but a commentary on the environment that they worked in for 10-15 years. The way they had learnt to do things wasn't always the way I wanted to do those things.
So the first task was to decide which members of the senior management team needed to change quickly, and over the first year-and-a-half we changed 50 to 60 per cent of the top 50 people, and that helped change the culture. I wanted people who believed we had a chance of hitting K5 and I needed people who could also work with me. And I know I am not an easy person to work with, I wouldn't work for me!
Q: Regarding the need to turn around the company, and the journey you took to do it, did you reach a point where you just eyeballed staff and said, "are you with us?"
A: I think a lot of organisations going through change have this issue to face. The analogy I use is the good soldiers.
In a company undergoing change management you have perhaps 15 per cent of people really committed. They are saying, "this is fantastic, how can I help".
About another 75 per cent are the good soldiers. They won't be leading the charge but they are prepared to support change, and then there are the five or maybe 10 per cent who are the saboteurs. They just say, "this is rubbish, who is this bloke, it was better before". You have to identify the saboteurs and they have got to go.
Q: So the change of culture really does require some new blood?
A: Unfortunately yes. I also think it is very difficult for an insider to create significant change in their organisation, no matter what their qualities. It is difficult to stand up to an organisation that a person has been part of. That's why you sometimes have to get people in from outside.
I am also a great believer that big changes need to be cross functional. It is difficult for management to create cross functional change through a functional organisation. Certainly, you have to have a head of sales, a head of marketing, IT etc in a business like ours, but we had a K5 steering committee that was cross functional. Keeping the managers involved in cross functional projects was an important part of keeping them believing that we could do it.
Q: How did you manage to recruit and hold good people?
A: What helps us recruit and retain in Australia and New Zealand is that we are part of a successful global company like AXA. This is a major benefit and not just at the senior level. By the end of the second year of K5 we had probably changed two-thirds of the top 50. We had hired good people, but if it had still been National Mutual we wouldn't have been able to do it, even with the same message.
I think some people were also attracted by the ideas that we were brave enough to set these objectives and set that clarity.
Q: What are some of the key strategies that you believe work for you in managing a team?
A: I try and develop my senior team to believe in the same things I believe. I believe that you also have to be honest with your people, not just at the start, but all of the time. You also have to be consistent in what you say and do. If you are constantly changing policies and directions it won't work.
We faced a tough challenge with K5 because during the time of 9/11 and the global tech and stock market crashes we were trying to treble our business. There was a period of 18 months when it looked like I was going to be made a fool of and we wouldn't meet any of our objectives.
But if I had turned around and said to the staff, "actually circumstances have changed and we need to change these targets because it is not our fault", and we could have, then we would have failed. There is always the temptation to revise objectives but the management team needs to stick to its goals.
Q: People are always talking about change. How do you believe the process of change should be managed?
A: Change is actually a process like a lot of other processes. It needs to be planned and measured and reviewed and reported on and challenged and that's what we did with K5.
I think we probably have the strongest program office of any major company in Australia.
Before we do anything we get a plan and put together a project team. A lot of research shows that in successful change projects 20 per cent of the effort goes into the planning. It sounds boring, but we are quite a process organised organisation. Some people say it is better to be inspirational leader driven, or delegate and trust people to deliver. Yes, you need to do those things as well, but if you do that without plan and process it is likely to fail.
Q: How do you describe your leadership style? I've heard aspiration, I have heard process, I have heard communication...
A: Yes it is those things, but I am also a very, very competitive person. I hate losing and I hate second best and that's one reason why I am not an easy person to work for. But there are good things about that because I do stretch people. The bad thing is I tend to take things done well for granted and move on to the next thing, and I tend to focus on things that could have been done better. I have to work hard at saying "thankyou" often enough. I need people around me who can remind me of that.
I also believe that mastery of a business is an important attribute for success for managers and leaders. I have worked 35 years in the same industry, so I think I know a reasonable amount about it.
A part of my management style is that I know the business, I can usually pick when people aren't sure of their facts or proposals. And because I understand the business I ask a lot of aggressive questions, and that can make people nervous if they don't have the answers.
Q: It is often said that in Australian business a fear of failure leads to conservative management. Do you allow failure?
A: I think I do. But what I do not tolerate is failure through laziness or failure because people don't care enough. And I often use this phrase to people when I am talking about other people: "Are their hearts in the right place?".
If I know that someone is behind what we are trying to do and doing their best, then yes, absolutely, I tolerate failure.
Q: Are there any issues that keep you up at night?
A: I am usually so knackered sleep isn't a problem! But there are some challenges specific to our industry. We have not had the pricing and competitive pressures that many industries have had over the past 20 years. Consider manufacturing companies that have to reduce their costs of production by five per cent a year just to survive. We, and the banks, have never had that pressure. However, it is tougher now and I think that as our industry slowly globalises those pressures will continue to evolve.
The second challenge in our business, and we share it with the politicians and government, is how do we persuade people that they have to save more for their old age and retirement. It concerns me greatly that the politicians and regulators do not understand enough about the law of unintended consequences. In responding to various situations they usually overreact and do the wrong thing and you get unintended consequences.
I see a real danger in regulators slowing our industry down so much that the things we can do to help people protect themselves and their families will be more and more difficult and more costly to do. In a business sense these are our two biggest challenges.
Q: How does a company like AXA assure people that it is providing something sound and secure?
A: Whatever industry you are in, you shouldn't judge the conduct of yesterday by the standards of today. Our industry is very much sales advice driven. People don't just walk into our shops and buy our products, we are the quintessential push industry. Politicians and regulators talk as though sales is a dirty word, but the only way to persuade people to defer current consumption, for instance, not to go on that holiday or not to buy a bigger boat or car is to sell them on the benefit of that decision to defer expenditure.
We don't apologise that we are a sales driven industry. But in the past the structure with higher commissions and a lack of disclosure led to a lot of problems.
We overcome the problems, not by disagreeing with the principles behind the regulations. We support transparency, disclosure, higher standards of professionalism for advisers and fee for service etc.
The way we gain consumer confidence in us is to practise these principles. What we don't support is the bureaucratic and detailed nonsense in the way it gets implemented.
Q: There is a lot of concern about workforce shortages and skills shortages. What is your view on the talent shortage?
A: There isn't really a talent problem in Australia or New Zealand , but it is an issue for us in Asia and half of our business is in Asia. I think we will only be successful in the long term by having our Asian operations run in the main by locals, but in some countries such as China we are finding it extremely difficult, at this point in time, to get enough experienced professional managers.
We are forced to move more expats in and we are going to have to make some quite big investments in HR in Asia, including partnering with business schools and universities and perhaps recruiting more people than we actually need and then training them in the way we want to do business and moving them into local operations.
We are talking about advance hiring, which is shorthand for "if we are going to be in 10 Chinese cities in three years' time let's not wait three years and work out how we are going to find the general managers. Let's hire them now and put them in Hong Kong and Singapore and then move them in when we need them".
This takes quite a lot of investment upfront, and training these days is often the first thing on the list to be slashed - although later down the track you pay the price. However, training has to be aligned with other parts of the process. The worst thing is to train people and then find they leave and go to your competitors. Training has to be aligned with remuneration and the objectives and culture of the organisation, so that when you train people they actually want to stay, rather than just seeing training as a short cut to the next job. The demand in Asia and China is so great this is a major problem. People can move every six months and increase their salary 50 per cent each time if they have an insurance or accountant or actuarial background or success as a sales manager.
The Owen record
Les Owen has held the position of Group Chief Executive of AXA Asia Pacific Holdings Limited (AXA APH) since 1 January 2000.
AXA Asia Pacific is a top 50 ASX-listed company with operations in Australia, New Zealand, Hong Kong, China, Singapore, Philippines, Thailand, Indonesia, India and Malaysia. AXA APH has a market capitalisation of $A10 billion and total funds under management, administration and advice in excess of $A80 billion.
Les Owen has more than 30 years' experience in retail financial services, and prior to coming to Australia he was Chief Executive of AXA Sun Life, one of the UK 's largest and most successful life assurance companies.
Les is a member of the global AXA Group Executive Board and is responsible for AXA's property and casualty operations in Asia Pacific (excluding Japan ), and for representative offices in China , in addition to his responsibilities as Group CEO of AXA APH.
His directorships include AXA Asia Pacific Holdings, AXA China Region in Hong Kong, AXA Minmetals in China, AllianceBernstein (Australia & New Zealand) and ipac. He is a member of the Treasurer's Financial Sector Advisory Council.
Les is a Fellow of the Institute of Actuaries and the AIM. He is married with three daughters and has a keen interest in sport, particularly cricket, soccer (Liverpool), football (Collingwood) and golf.