Westpac ex-CEO wants to help you be 'better' after $1.3b blunder
Brian Hartzer stood at the pinnacle of capitalism. Then he got fired.
As chief executive of Westpac, Hartzer led more than 33,000
Westpac staff and helped create billions of dollars in profit.
But he left in acrimony, forced out by investor pressure
after the financial crime regulator AUSTRAC revealed 23 million breaches of
anti-money laundering laws.
A small number of them related to customers sending money to
pay for child exploitation.
"There is an element of personalising things in large
companies that – I would have that view, I suppose but I'm not entirely sure it's, it's the
healthiest obsession with this idea of scapegoating," he said.
"Being a major bank and being in the political and
media environment that we were in, there was this enormous pressure for
individual accountability – and so my position is untenable.
"I understood that and the board understood that,"
he said, almost 18 months since he departed the company.
"Now, whether that in the end was the best thing for
the company? I think that's something that other people should judge."
Billion-dollar scandal
Westpac largely sailed through the grilling of the banking
royal commission, as institutions like AMP and NAB lost their top executives
and were hit with court action and billion-dollar compensation bills.
But behaviour that AUSTRAC chief executive officer Nicole
Rose called "serious and systemic non-compliance" brought Westpac
undone.
The overwhelming majority of the breaches related to regular
overseas pensions payments.
However, the regulator alleged the bank failed to
"carry out appropriate due diligence on customers sending money to the
Philippines and south-east Asia for known child exploitation risks".
Westpac did not heed guidance about how to prevent its
money-transfer systems being gamed by paedophiles and staff didn't do enough to
stop it.
One employee identified a customer as a convicted paedophile
but did not freeze their account for a month and a half — allowing more
overseas transactions that fit what is called the "typology" of
payments for child exploitation in another country.
"There's no excuse for what went wrong in the inner
aspects of that, and how it worked," he said.
"I couldn't say, I wasn't there long enough to get to
the bottom of why individuals did or didn't do what they should have done. But
there's clearly no excuse for it."
Hartzer was a former chair of charity Save The Children,
which works in areas like The Philippines with the victims of child
exploitation.
When the allegations exploded into view, he visited the
financial crime prevention unit of the bank in Western Sydney, to talk to
staff.
"They were devastated because they thought they were
doing what they needed to do.
"And obviously, they'd missed something and had fallen
between the cracks. You know, that's to the company's, and certainly my,
eternal regret."
Moving on
We spoke to Hartzer on the release of his first book, The
Leadership Star: A Practical Guide to Building Engagement.
Largely eschewing the scandals (there are four pages about
it, starting on page 213), it focusses on how to build a culture to engage the
emotions of staff and teams.
The book summarises his decades of experience in financial
services and lays out how to boost staff engagement in the age of COVID, which
has forced rapid change in workforces.
"There's some companies who have seen their engagement
actually improve, because people aren't spending as many times many hours
sitting in big meetings.
"They're able to focus, get more work done," he
said, explaining the impact of the work from home revolution.
"[But] it has a permanent impact on company's ability
to build teams, for people to build relationships with each other.
"I think it's very hard to build a relationship with
people over Zoom."
Large employers like Westpac sent employees home, shattering
the central business districts that have been the engine room of economic
growth in recent decades.
But with the positives of remote working now entrenched, Mr
Hartzer does not expect a "snap back" for the centre of our biggest
cities.
"When you're doing project work, or creative work,
there's something about being in a team environment, where ideas are bouncing
off each other," he said.
"The old thing about hallway conversations… people
bumping into people in the queue for coffee.
"Those informal discussions, I think are really
important to creative work. But I don't think it'll go back entirely to the
same level as it was before."
Culture from the top
Interaction like that might help banking fix some of its
systemic problems.
During the 2018 hearings of the banking royal commission,
another regulator lobbed in an explosive report.
The Australian Prudential Regulation Authority (APRA)
examined culture at the Commonwealth
Bank in the wake of allegations of breaching anti-money laundering and
counter-terrorism financing laws.
This scandal cost CBA $700 million (the former record for a
money-laundering fine).
Looking at governance, accountability and culture at our
largest financial institution, APRA said the bank's "continued financial
success dulled the senses of the institution".
Westpac was then our second-biggest bank with a similar
problem. In a large, complex organisation people thought keeping on the right
side of the law was someone else's responsibility.
"Where government and regulators are looking to drive
particular outcomes – in terms of compliance and the like – there's a desire to
centralise that responsibility, so that the regulators or the politicians know
who to point to," Mr Hartzer explained.
"However, the outcome of that is, in some ways,
sometimes to pull away the responsibility from the people dispersed to the
organisation who actually have to do the work, and they start thinking somebody
else is doing it."
Leadership misstep
When the AUSTRAC scandal broke, Hartzer and chair Lindsay
Maxstead initially dug in.
In a meeting with 300 senior staff, leaked to The
Australian, Hartzer tried to focus his leaders, telling them "we don't
need to overcook" the allegations, and that it wasn't a scandal like (in
US corporations) Enron or Lehman Brothers.
He also said, at the time, the issues didn't resonate with
mainstream Australia and "was not playing out as a high street
issue".
Mr Hartzer regrets the statements and insist they were taken
out of their context: of trying to lift the spirits of a shattered staff.
"Everyone was devastated. We knew this was
serious," he said.
"I was trying to get people to refocus on looking after
customers, and not becoming obsessed with resolving the issue internally,
because they had a job to do."
"I needed them, as the leaders of the company, to be
positive and focus on helping customers and focusing on their people doing
their jobs well.
"You know, I could have chosen better words, obviously.
"But the intent was absolutely about: 'Come on, guys.
You know, we need to focus on helping our helping our customers not spend all
our time obsessing about this thing, which obviously is devastating to all of
us'."
Self awareness
Hartzer is involved in some financial technology companies
(fintechs) and on the board of the Australian Museum, where this interview took
place.
The Leadership Star discusses the need for people to
encourage self-awareness, something he thinks others can benefit from.
"I do think it's a critical element of success as a
leader," he said, noting he'd used a "coach' throughout his global
financial services career.
He even has a tip for people to improve their skills.
"One thing I've always found helpful is to try to
predict the way people are going to react to you when you go into a situation.
"And if you don't get the reaction or the outcome that
you thought, well, maybe that's a hint that your self-awareness isn't where it
needs to be."
Self-awareness has been forced on the former Westpac boss.
He explained that his book avoids dissecting the scandal in
detail because its purpose is to — long after the headlines have faded — help
people get the most of out of themselves and their colleagues.
"I got way more satisfaction in my career out of
helping other people be successful.
"I found that really rewarding. and as a consequence, I
started to pay attention to what worked and what didn't," he said.
"Pay attention to people who care about people.
"Be disciplined in the way you organise yourself, and
the time that you spend helping your people be successful.
"And if you're genuine about your intent, and you work
really hard, then people will see that and you'll be rewarded with good
performance."
Opportunity roars
After managing the initial COVID pandemic well, by global
standards, the former CEO sees huge opportunities for Australia.
Originally from North America, Hartzer sees the times
suiting us.
"We're in a time of dramatic change as a consequence of
technology, shifts in demographics, shifts in geopolitics. No one knows where
all this is going to play out.
"To me the important thing is to create an environment
where innovation can happen, and people can try things and fail and move on to
new things.
"Certainly, in my career, I've had lots of things go
very well, and I've had a few things go not well.
"In my experience, you learn as much from the things
that don't go well as the things that do."
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