ANZ’s technology overhaul is accelerating at a time when the Australian banking industry is bracing for the impact of economic uncertainty, inflationary pressures and house price declines. While interest rate hikes and the post-COVID-19 economic recovery bolstered profitability for major Australian banks last year, some of that growth is expected to be challenged in 2023 placing renewed emphasis on building a strong digital capability among other long-term value drivers.
“To some extent, my job is to burn the boats a little bit, and to say, ‘There’s no going back.’ We’re committed to a strategic objective.”
In recent years, ANZ has undertaken several initiatives, including designing a new technology stack, hiring hundreds of engineers, and launching a new digital-retail bank. It launched ANZ Plus in 2022 to provide a fully digital end-to-end banking experience for everything from digital savings to transactions to automated home loans and mortgages.
The ambition to make ANZ a “contemporary, relevant, and customer-driven bank,” as Elliott told McKinsey’s Joydeep Sengupta in this interview, has required courage and commitment in the face of economic headwinds and hard-to-shift legacy mindsets. “To some extent, my job is to burn the boats a little bit, and to say, ‘There’s no going back.’ We’re committed to a strategic objective,” said Elliott.
This kind of leadership has also helped Elliott provide a sense of direction in today’s turbulent times. In this edited interview, he talks about ANZ’s radical rebuild, how culture and purpose support change, and the importance of pacing yourself.
Joydeep Sengupta: You are leading ANZ through a digital transformation with the launch of ANZ Plus. What was the genesis of this strategy?
Shayne Elliott: At one point, we sat down and talked about how the business we’re in is heavily commoditised, like a lot of industries. Our home loans and credit cards do the same as pretty much everybody else’s. We had two choices at the time: either get closer to the customer or further away. Being further away meant being the best low-cost provider of a commodity product. This wasn’t a reasonable choice for us, given our market position and culture. So we analysed the sort of things ANZ is good at. Relationship management is one of them. We have an amazing history of being a custodian for multigenerational customers, so we decided to make the first choice and get closer to the customer.
To achieve our ambition to be a contemporary, relevant and customer-driven bank, however, we wouldn’t want to be starting from where we were [back then]. To use a housing analogy, we couldn’t knock the whole house down because we have to live in it but we could knock down bits of it. We’ve now gone down a path of a radical rebuild and are fundamentally rethinking our business model.
We decided to build a bank built around nine financial principles designed to help people do better. When we came up with these principles, we wanted to make sure they could be understood. Our test was simple: What would you tell your children about being a better manager of money? It sounds like a very simple idea but it’s quite a radical thing when you go and test it with people. Someone would say they would tell their children to save for a rainy day; others said they should protect the things they love.
We want to give people all the tools that will make doing all these things easy and obvious. That is the customer-driven proposition that became what we’re now putting into market with ANZ Plus. It is probably most visible in the retail bank but the philosophy is the same in our small-business bank and our institutional business as well.
Time will tell whether we’ve made a good decision or not. Such changes cannot turn on a dime. We are a large, complex legacy organisation. We can’t just click our fingers and change. So the question is do you have the courage and the fortitude to stay the course? Because it does come at a significant cost.
The reality is the market doesn’t always reward transformations. It really takes courage at a board level and an executive level to truly believe in the transformation. And to some extent, my job is to burn the boats a little bit, and to say, “There’s no going back.” We’re committed to a strategic objective.
Joydeep Sengupta: What gives you the courage of conviction to change and make these decisions?
Shayne Elliott: That is probably one of the most difficult parts of the job because you experience self-doubt, like everyone else does. I am constantly questioning and constantly challenging myself—to not fall in love with a strategy just because it feels right, but constantly saying, “Maybe we’re wrong. Maybe we should test that assumption.” Having a good team with whom you can have mature, robust and challenging conversations is really, really important too.
It’s also good to have people from outside the bank come and challenge us. I enjoy my time with investors. I know a lot of my peers will bemoan whatever time they have to spend with investors. I’ve been CEO for seven years, and I was CFO for three before that, so I’ve been doing this for ten years, and I find that conversations with investors, especially international investors who have the benefit of distance and are not reading the local newspaper daily, actually provide a lot of that challenge. They are a good way for me to test my own thinking.
Joydeep Sengupta: Is the culture of the bank also changing, in light of the transformation?
Shayne Elliott: In terms of culture, ANZ has always been an outward-looking organisation. We started in Launceston in Tasmania in 1828. We’ve been in Fiji since 1880 and Papua New Guinea since 1910. We’ve also always been socially progressive. In the late 19th century, we became the first bank in the country to employ women. You have to be a courageous, outward-looking organisation to have done those things.
But we did not generally have a culture of agility, nimbleness. Our sense of purpose has really helped us drive this change. Our people tell us that they have this great sense of belonging at the organisation. We have industry-leading employee engagement, not just here in Australia but pretty much globally. We used to be in the high 60 to low 70 per cent in engagement; now we’re in the mid-80 per cent. These are some really good indicators. There will be the cynics out there who will say, “Well, that’s nice, but show me the money.” Part of my job, and I haven’t always succeeded at this, is to be able to better articulate to our shareholders why they should care about these things.
It’s hokey to say, but culture is your only truly competitive point of difference at the end of the day, particularly in an industry like ours, which is so heavily commoditised. You want to see that there are measurable ways to show that our culture is materially better, that we attract better people, that customers want to be with us because we’re known for doing the right thing.
Joydeep Sengupta: Why is the bank’s purpose so important, and how does it influence ANZ’s priorities?
Shayne Elliott: We are the custodian of about $60 billion of our shareholders’ capital, and we leverage that many, many times. We have a balance sheet approaching a trillion dollars. Our job is to allocate that capital in a purpose-driven way where we can have the most impact. That is how we can shape the future.
When I came to the job, one of my philosophies was really about wanting ANZ to be famous for doing the right thing. My job as the CEO is to make sure people are being thoughtful in their decisions. I can’t tell them what to decide. We’re in 30-odd countries; there are people making decisions every day. But we want to give them the sense of purpose, value, structure.
When we think of where we should double down and where we can have the biggest impact, we have chosen three areas. The first is housing—thinking about sustainable and affordable housing—and providing finance for homeownership. That is a big function of banks in Australia and New Zealand. The second is the environment and being thoughtful about who we bank with. Are we banking with people who understand the need for [sustainable] transition? The third area we focus on is financial inclusion and financial well-being, so that every member of the community, no matter where they start, gets an opportunity. Obviously, these three things overlap. At the moment, where they are overlapping the most is with sustainability. We are very thoughtful about that and conscious that when we lend or provide services to people, we are—through a series of derivative actions—having an impact on the environment.
Now you can either do this by accident and say, “That’s not for us to decide, and our customers will do it themselves,” or you can do it deliberately with a sense of purpose. We have chosen the latter path. It’s not always easy. It’s controversial. It’s political. You get dragged into things you’d prefer not to. But I think it gives our people a greater sense of contribution and well-being. It has become fundamental to our strategy and our financial success.
Joydeep Sengupta: The world is going through a turbulent period. What is your leadership philosophy for such uncertain times?
Shayne Elliott: I understand why we constantly think we’re in this unusual period of change but in my experience there’s always change happening. It might feel like we go through extreme periods of change - what we call a crisis - but in my career, it doesn’t feel like there’s even been a single year of no change. I have learned along the way directive leadership is what works during such periods of extreme change, like we’re in right now. People are overwhelmed with information. They need to filter that through, and they really want to be told what to do. That’s when a three-point or five-point plan resonates with people. It provides people with something simple to remember. It de-stresses them and gives them a sense of direction. I think the failing is to think this approach is always appropriate. It’s not. It’s only really appropriate in extremely stressful periods. I have learned along the way that directive leadership is what works during such periods of extreme change, like we’re in right now.
Joydeep Sengupta: How do you personally maintain the energy and vitality required to be a successful leader over time, as well as through various business and economic cycles?
Shayne Elliott: I don’t always, if I’m being very honest. These jobs are hard and, like everything else, they have probably gotten a little bit harder [with time]. There is a high degree of public intrusion in these jobs that I wasn’t prepared for. I am quite shy as a person and I enjoy my own company. I’m very happy with my family and being at home. So I double down on that. I am quite strict in the way I allocate my time. I try to keep my weekends for me and my family. And I am absolutely religious about taking my holidays, when I switch off and do other things I want to do. I also like to go to the gym. I have a trainer. I have found that this helps in preparing mentally and physically for the role.
Joydeep Sengupta: What advice would you give to leaders who are leading similar transformations in their organisations amid a constantly evolving and challenging external environment?
Shayne Elliott: Whenever I have asked people who are at the end of their career to reflect on their journey, they have often told me a story. In most of these stories, no one has ever told me they felt they were too fast and too bold in their career. They always say they should have been even bolder and gone faster on decisions.
I always have this [thought] at the back of my mind. You always have to back yourself up to make massive, courageous decisions. You cannot underestimate the value of pace. You do end up losing a bit of time because of the pace of change and suddenly you are so far behind that it is almost impossible to catch up. You have to be prepared to be bold. And not reckless.
The other advice is related to making decisions about people, which is always difficult. I think I’m a very loyal person. I’m very thoughtful about the team I’ve built. But the reality is you need to be bold in your choices about people. At the same time, you also need to be able to make changes at pace when it is needed for the good of the individual as much as the good of the organisation.
Jooydeep Sengupta is a senior partner at McKinsey & Company and leads McKinsey’s Center for CEO Excellence in Asia.
This piece originally appeared in McKinsey & Company's Future of Asia website published on 31 March 2023