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Your complete guide to business success 2013






UNDER THE MICROSCOPE Welcome to the second edition of MPA’s Business Strategy Special Report. Following the fantastic feedback we received following the publication of last year’s report, we’re delighted to have once again brought together some of the best and brightest academics from around the globe to contribute to this year’s publication. This year’s Business Strategy Special Report features academics from Harvard Business School and the Brookings Institution in the US; Birmingham Business School in the UK; and the Curtin Graduate School of Business, the UQ Business School, and the Deakin Graduate School of Business and Macquarie Graduate School of Management here in Australia. But there’s more to running a successful business than academic theory, and MPA has also garnered the opinions of some of the Australian mortgage industry’s pre-eminent thought leaders to provide the practical guidance that goes hand in hand with theoretical knowledge.




CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Robin Christie tel: +61 2 8437 4787 Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 Account Manager Simon Kerslake tel: +61 2 8437 4786 Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599

At MPA we recognise that today’s mortgage broker is more than a mere salesperson

Key Media Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 Offices in Singapore, Auckland, Toronto, Denver Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Insurance Business magazine can accept no responsibility for loss

At MPA we recognise that today’s mortgage broker is more than a mere salesperson. Broking in the 21st century requires dedication, entrepreneurship, business acumen, a commitment to professional development, and the desire to act as a customer’s trusted adviser. To that end, the second edition of MPA’s Business Strategy Special Report is picking up where the first edition left off, providing Australia’s mortgage broking community with essential business intelligence that will help them take their businesses to the next level.

Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

Robin Christie, managing editor, MPA


Contact the editor: robin.christie@

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Organisational design Keeping your eyes firmly on the strategy, the whole strategy, and nothing but the strategy

CHAPTER ONE: STRATEGY AND PLANNING 4 | Business planning How to ensure strong foundations for sustained success within your brokerage 8 | Cash flow Your guide to staying on top of cash flow and avoiding mounting debts 12 | Accounting essentials The key terms every business owner should be familiar with



Leadership How to recognise the importance of emotions while guiding decision-making

14 | Sustainability and engagement How a business should respect the stakeholders that are essential to its long-term prosperity



50 | Productivity The secrets of goal-setting, and getting your priorities right

18 | Building referrals A marketing campaign to boost referrals can take your business to the next level 26 | Branding The two key branding issues that all brokers should be aware of

CHAPTER THREE: PEOPLE AND MANAGEMENT 40 | Professional development Why formal development programs can be vital to business success

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56 | Transitioning How to create satisfied customers who will help drive your business forward 60 | Making outsourcing work Which services to outsource and how to manage outsourced services 62 | Outsourcing 101 Outsourcing mortgage broking processing to the Philippines explained



A rundown of some of the top business minds who have assisted in putting together this year’s MPA Special Report: Business Strategy ROBERT C. POZEN


Robert C. Pozen has served on President Bush’s Commission to Strengthen Social Security, as Secretary of Economic Affairs for Massachusetts Governor Mitt Romney, and as chairman of the Securities and Exchange Commission’s Committee to Improve Financial Reporting. He frequently contributes to the Financial Times, the New York Times, the Wall Street Journal and the Harvard Business Review. He is the author of Too Big To Save? How to Fix the U.S. Financial System and The Fund Industry: How Your Money is Managed. Bob graduated summa cum laude from Harvard College and holds a law degree from Yale, where he also obtained a doctorate for a book on state enterprises in Africa.



Professor Simon Collinson is a world-recognised expert in complexity management. He has consulted for a wide range of globally renowned companies (eg ABB, British Aerospace, Corus, Diageo, HSBC, ICI, GSK, Jones Lang LaSalle, Kodak, Lloyd’s Register, Nippon Steel, Philips, Prudential and Sony). His work has been widely published in prestigious journals such as the Journal of International Business Studies, Organization Studies, and the European Management Journal.



Associate professor Jeremy Galbreath has over a hundred publications in both practitioner and internationally ranked academic journals. He holds a PhD from the Curtin Graduate School of Business, an MBA from Colorado State University, and BS and MS degrees from Ball State University. A native of the US, he worked for a number of

years with Fortune 50 companies, focusing mainly on corporate and business unit strategy development. He is a senior research fellow studying the intersection of corporate governance and sustainability in large Australian firms, and climate change strategies in the wine industry.



Neal M. Ashkanasy is a Fellow of the Academy for the Social Sciences in the UK and Australia, the Association for Psychological Science, and the Society for Industrial and Organizational Psychology, and a Life Fellow of the Australia and New Zealand Academy of Management.



Dr Anne Rouse teaches innovation management and business consulting on the Deakin Graduate School of Business MBA course. She has been researching outsourcing in Australia and Europe since the late 1990s and is author of the book Negotiating and Managing a Successful Outsourcing Arrangement. In 2003, Anne’s study of outsourcing in Australian firms won the Australian Council of Professors and Heads of Information Systems research medal (for best Australian doctoral thesis in information systems).



Dr Paul Kirkbride began his career with a PhD in organisational power from the Centre for Organisational Change and Development at the University of Bath. He has worked as an academic specialising in change, leadership and HR, as the chief learning officer for a Fortune 500 company, and for two of the world’s top executive leaders in Europe and North America. AUGUST 2013 | 3  




Investing in business planning can ensure strong foundations for sustained success within your brokerage, explains Fiona Mackenzie In the current market, small and medium enterprises (SMEs) in mortgage broking are having to become increasingly competitive and provide a unique offering in order to retain existing clients and attract new ones. Most mortgage broking companies are small: 49% are single operators and 30% have two to three people, while 21% have four or more people, according to Macquarie’s 2012 Mortgage Broking Benchmarking Report. So SMEs in the mortgage space must use their limited resources efficiently, and this applies to how they do business planning as well. We all know that regular planning is essential, but how can we achieve this efficiently? Generally, the responsibility for change lies squarely with the business owners as they are fundamental to the business, and some might even argue they ‘are the business’. Their vision and what they implement to reach these goals have a profound effect on the shape and health of the business. You can think of it in terms of your own health and fitness. Your body and health today generally reflect the choices you have made in the past, and the choices you make today will affect your health in the future. The same idea applies to the health of a business.

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It can seem daunting that the onus for success falls on one or more individuals, but it can also be an exciting opportunity to create the change you want.

WHAT DOES THIS MEAN ON A PRACTICAL LEVEL? Keep it simple. Ensure your planning is focused on what will make the real difference at every stage of the business life cycle. In the very early stages of business, the focus should be on attracting clients and generating revenue – and on raising awareness within a niche market. Delivering on promises and ensuring a great client experience are key drivers of success at this stage. Even though it can feel like a luxury at this point, having your own trusted adviser or coach can help you stay focused and grounded. Once the business is established it is time to prepare for the growth phase. But before rushing to recruit staff and upgrade premises, it is vital to check on the basics. When ready to expand, it’s important to examine the numbers. The Macquarie 2012 Mortgage Broking Benchmarking Report showed that increase in rent expenditure is offset by reduction in other costs as companies grow. It’s worth taking this into consideration.


PUTTING YOU IN THE DRIVER’S SEAT To help time-poor SMEs, Macquarie Practice Consulting has been facilitating business planning workshops called ‘Power of One’. Essentially, in one hour working of through a streamlined process, each participant gets to a point where they have identified what they want to achieve, unpacked their options, and decided what positive action they need to take towards their end goal. The power of one – what does the process look like? REFLECT: Ask yourself what you find fulfilling and what you find frustrating in your business currently. What one change to your business would ensure you enjoyed it significantly more, every day? BRAINSTORM: What are all the things you could do differently in order to get the outcome you seek? Give yourself permission to jot down a whole raft of ideas, thoughts, half-plans, one-day/someday thoughts, etc. CHOICE: Identify the one initiative that will make the most difference to your business. Be ruthless and just choose one initiative because you will have a greater chance of achieving it. For example, it might be to add insurance to your offering or recruit a new support person.









Source: Macquarie 2012 Mortgage Broking Benchmarking Report

REVIEW: Now ask yourself what internal barrier you might be putting up that is getting in the way of doing the one initiative and achieving the one difference in your business. The sorts of barriers that often come up are knowledge gaps - for example, not knowing the steps involved in adding a new service, or skills gaps such as not being competent at delegating complex deals. This is where the ‘rubber hits the road’, and if the barrier can be identified and worked through, it can have profound implications. DECISION: Think about what one simple action will get you started – to overcome your one barrier and start implementing your one initiative. Make sure this action is both simple and SMART (Specific, Measurable, Achievable, Relevance and Timebound). This will lay a good foundation for ongoing business planning and implementation. Once you have worked through these steps, the secret to ongoing success is to do the one action, see what occurs, then review and plan the next action. Put that new action in motion and continually repeat. If this is done, then very quickly real learnings occur, momentum is achieved, and results start to flow.


YES 37%

NO% 63 Source: Macquarie 2012 Mortgage Broking Benchmarking Report

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39% 40% 42%

Client communication/marketing




Premises and technology





36% 25% 21%

2-3 staff

4+ staff

Source: Macquarie 2012 Mortgage Broking Benchmarking Report

Fiona Mackenzie is head of Macquarie Practice Consulting. She has an extensive background in financial services in senior marketing, product development and business consulting roles. Visit

DISCLAIMER This material has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL & Australian Credit Licence 237502 (“Macquarie”) for general discussion purposes only, without taking into account your personal objectives, financial situation or needs. Before acting on this general information, you must consider its appropriateness having regard to your own objectives, financial situation and needs. The information provided is not intended to replace or serve as a substitute for any accounting, tax or other professional advice, consultation or service.

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What can also get forgotten at this stage is ensuring the business is crystal clear on its ideal target client and value proposition. The reason this is so important is that it serves as a compass for all important decisions, such as who to partner with for referrals, what skill set to recruit for, what marketing to undertake, and what the website should contain. As the client base grows, it becomes a more important source of revenue – through referrals and retention – and so ongoing client engagement comes to the forefront. A potential opportunity some brokers are currently exploring is working with accountants who offer self-managed super fund services and whose clients may be seeking limited recourse borrowing arrangement loans.


k you see What asre ? r o s volved succe t to be in n a w l il t s Do youbusiness? you put in the e would lu a v f o t r What suor company? ff to a sta on yo ur bookntant/ o y g in ll u se co Are youer/broker/ac membial planner? m financ want fro e buyer h t l il w t Wha rchase? the pu

As a firm matures, the focus may shift to expansion or the owners may start to consider their exit plans. If expansion is on the cards, the options can include geographical expansion or offering complementary products and services. Again, reflecting on your ideal client and value proposition is vital for setting the right course for the future. It is important to be clear on how you are currently positioned in the minds of your clients and referral relationships, and how readily they will accept the expanded offering from your business. Succession planning is also relevant to factor in, in terms of what timeframes you might be working towards, what are you seeking in your successor, whether you still want to be involved in the business, and what sort of value you would put on your company. Identify and assess your exit options, which may include running down or selling your book to another staff member/broker/type of business (such as accountant/financial planner). Equally, it’s worth taking into account what they may want from the purchase. The 2012 Mortgage Broking Benchmarking Report identified that only 37% of those surveyed had a succession plan in place. Of this group, the main proposed options were to continue to own book while paying another broker to manage the book (21% of succession plans), and sell to another mortgage broker (21% of succession plans). As the mortgage industry continues to face the challenges of softer property markets, lower investor confidence and tighter margins, it is vital that brokers have a business planning approach that works for them. In our experience, keeping it simple and action-orientated works best for most smaller, time-poor firms.


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FLOWING Cash flow management is a vital element of any business, and one that it’s vital for mortgage brokers to get right if they’re to avoid mounting debts. Michael Quinn explains how to get it right

A cash flow management plan is vital to understanding your business operations. Simply put, managing cash flow means delaying outlays of cash for as long as possible and speeding up payments to reduce the lag between outgoings and income. Cash flow can cause headaches for brokers and all types of small businesses when it dries up and debts begin to mount. Through careful management planning, you or your small business can help make certain there are sufficient funds to pay wages, taxes and expenses as they fall due. Compare your cash flow forecasts

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with actual reports and make sure you plan for the unexpected. A contingency plan will ensure you are able to respond to unexpected changes in the marketplace and put your business in a stronger position. It may seem obvious, but a better-managed cash flow budget starts with keeping accurate records. Accurate, up-to-date records will enable you to create a cash flow forecast that truly represents the financial position of your business. As a result, the reports you produce and analyse will allow business owners to identify any future problems and initiate


TIME TO SEEK HELP? Cash flow seems to be a common issue for many mortgage brokers, as income and commissions can fluctuate significantly from one period to the next. If your business has the following problems, then it may be time to seek the advice of a professional and take action to manage your cash flow situation: A heavy reliance on borrowed monies An inability to pay creditors A decline in profit margins

rescue procedures as well as plan for major expenditures, such as GST or creditor bills. Your cash flow forecast should include all fixed costs (rent and salaries), variable costs (supplies and marketing) and projected revenue. Depending on the nature of your small business, this may vary from a monthly to a quarterly or half-yearly forecast. More frequent cash flow reviews are important for mortgage brokers as income can vary from month to month.

GETTING BACK ON TRACK If you’re seeing plenty of sales on your profit and loss statement but no actual cash in your bank account, you will most likely have little to no cash flow. This is known as the timing difference, basically the difference between the date your client accepted the costs of your services and the date you actually collected the proceeds for providing your services. Timing difference will exist if you offer credit terms to your clients. To help take control of your cash flow, you need to take control of your accounts receivables. Selling your services on credit is an inevitable factor of running a business, so you need strong accounting systems to track and finalise your accounts. Collecting accounts receivables as quickly as possible is a critical aspect of cash management.

CASH FLOW FORECASTING WHAT TO INCLUDE: ● All fixed costs (rent and salaries) ● All variable costs (supplies and marketing) ● Projected revenue

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THE TIMING DIFFERENCE The difference between the date your client accepted the costs of your services and the date you actually collected the proceeds for providing your services.

Michael Quinn is an experienced chartered accountant and lawyer, and co-founder and director of the Quinn Group. He has spent years advising industry leaders and business owners about their financial situations and decisions, assisting them in maximising their potential and their opportunities. Visit for more information.

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When sending out your invoices, be sure to follow the steps in the invoice checklist below. Many industries request a certain percentage of monies or deposit from their clients before undertaking any work. If you will be working with a client over a period of time, it may be worthwhile exploring this option. If you do find yourself needing finance to get back on track, there are a number of options available, depending on the nature of your business. Short-term finance, which includes overdrafts, business credit cards and import finance, is used to maintain cash flow by purchasing assets that will turn over quickly. This type of borrowing would be self-liquidating, meaning that as soon as the cash is received from the debtor the loan will be repaid in full. However, before applying for short-term finance, speak to a professional who can analyse your cash flow statement and explore other options available. Finally, be proactive about cash flow: make a plan and stick to it. You can’t control the external environment, but with good financial management you can keep your cash flow under control. Seeking the advice of a professional accountant, lawyer or financial planner will give you an outside opinion of how your business is doing financially. Professionals can help you analyse various options available and turn your negative cash flow around.

T ECKLIS H C E C I INVO s clearly nt term

payme Outline 60 days, etc.) s, y a (30 d the llowing voices fo in t u o ice Send our serv er sale of y custom t for the such n ie n e v , ns con Make it . Offer all optio heque, etc. c ou l, y a y P a y p a to posit, P e d t c e as dir their clients if g r u o y d remin p callin Call and is overdue. Kee ill w t paymen king when you as , ly t k n e e e w ym their pa receive

ANALYSIS: CASH FLOW SLOWS Figures from Dun & Bradstreet (D&B) suggest that cash flow has slowed this year, placing further strain on a range of industries already experiencing low confidence because of weak trading activity and high operating costs. Businesses are waiting nearly eight weeks to be paid by other companies, according to D&B’s Trade Payments Analysis, with the average invoice payment time rising to 55 days during the first quarter of 2013. This figure compares to a national average of 52 days in the previous quarter and 53 days a year earlier. After easing during the last half of 2012, payment times have increased this year as a combination of weak sales activity, a high Australian dollar, and concerns about operating costs affecting businesses’ ability to pay on time. Operational costs were identified as the biggest of businesses barrier to growth for businesses in the quarter expect cash ahead, according to the latest flow will be D&B Business Expectations an issue Survey. The slow payment cycle, as revealed by analysis of millions of accounts-receivables records, is being felt by the nation’s businesses, with D&B finding that 56% of businesses expect cash flow will be an issue for their operations in the quarter ahead. D&B’s analysis has also found that the nation’s biggest companies are the slowest to pay, with those companies employing more than 500 employees taking 58 days to settle their accounts in Q1. The majority of all invoice payments in Australia are being paid late, with 48% of accounts settled between one and 30 days beyond standard payment terms (30 days), while 38% are paid on time. Companies with fewer than 20 staff are taking, on average, 53 days to make payments, whereas those employing more than 500 people average more than 57 days to pay their bills. The fastestpaying companies are medium-sized operations employing between 50 and 199 people, which are settling their accounts in 50 days.



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La Trobe Financial presents its explanation of some of the key financial terms that it encounters on a daily basis Brokers, particularly in the commercial space, are commonly required to present ‘financials’ as part of loan applications. But accounting materials are not always completely intuitive, and understanding what numbers mean and what is important is not automatic. La Trobe Financial believes the following is a useful, concise summary of key accounting information for brokers wanting to ‘fill in some gaps’ in their knowledge:

THE IMPORTANT DOCUMENTS BALANCE SHEET The balance sheet (or statement of financial position) is a snapshot of what the business owns at a point in time. It compares the assets of a company with its liabilities; hopefully it identifies that the company owns more assets than it owes in debts – the balance being equity of the owners. The balance sheet also assists understanding of the liquidity profile by looking to the ‘term’ of the components. This, for example, identifies ability to pay debts in the short term by comparing the ‘current assets’ (convertible to cash within 12 months) with the ‘current liabilities’ (payable within 12 months). A three-month term deposit is a current asset; however, plant and equipment will typically be non-current. In the same way, a 30-year mortgage is a non-current liability, but an amount owed to a trade creditor is a current liability.

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INCOME STATEMENT The income statement (also called the profit and loss, or P&L) is a report showing how much a company has earned and spent, generally over a financial year. This is critical to understanding the capacity of a borrower to service a loan. However, the P&L is based on accounting measures that adjust timing of cash flows in the P&L. Accounting tries to allocate economic value to the time periods over which it notionally relates, to the extent this differs from the period of cash flow. The difference is taken to the balance sheet and brought back to the P&L in the appropriate period. This most commonly results in ‘accruals’ and ‘capitalisation/depreciation’.

STATEMENT OF CASH FLOWS The statement of cash flows is useful in assessing the short-term viability of a company and its true servicing capability. It is focused only on the business’s inflow and outflow of cash. Items such as depreciation or write-offs of bad debts are not taken into account. It does not necessarily give a full picture of the profitability of a business; however, as the ability to make loan repayments is directly related to cash flow, it is very important to a lender.

THE IMPORTANT MEASURES PROFITABILITY AND THE BOTTOM LINE Profitability of course reflects the general health of a business. There are a wide range of profitability


measures. These are commonly considered in absolute levels or relative to industry benchmarks/ peers. Net profit before tax is the first figure lenders look at. Alternatively, the gross profit margin is derived from the income statement and is the gross profit divided by the sales revenue. A business such as a supermarket will have a high turnover, so the gross profit margin may be as low as 2–5%; however, a property developer should typically have a gross profit margin above 15%. The ratio of cash flow to sales measures the relative amount of cash flow generated by each dollar of sales revenue. It is good to compare this with the profit margin.

LIQUIDITY There are a number of liquidity ratios, but the most common are the current ratio and the quick ratio, which both come from the balance sheet. The current ratio is simply current assets divided by current liabilities. It is important that this ratio should be higher than 1, otherwise the company may find it difficult to pay its short-term debts and bills. The quick ratio is the same but only looks to cash + marketable securities + accounts receivable for the assets.

FINANCIAL LEVERAGE Financial leverage comes from the balance sheet. A highly leveraged company has a large amount of debt when compared to its assets and/or equity. A lender will consider a highly leveraged company to be riskier because of the obligation to service the debt from an increasing proportion of cash flow earnings, sustained over time. Leverage is commonly considered in terms of ‘appropriate’ levels for the given business, particularly in the economic circumstances. Borrowings above this are considered risky.

INTEREST COVERAGE Coverage comes from the income statement and indicates a business’s capacity to meet its financial leverage. ‘Interest cover’ measures whether income is sufficient to cover interest payments. Typically, a company’s loans will not be due to be repaid in full in the short term; however, interest payments due on the debt certainly will be. Interest coverage compares available income (net income + interest income + interest paid) to the amount of interest to be paid. This ratio must be greater than 1:1, and many lenders prefer a ratio of greater than 3, or 4:1, depending on the business type and loan profile.

CASH FLOW Many companies have a cash flow statement that details cash flow movement over a year. However, a good indicator of cash movement is to add back the depreciation of depreciating assets to the income statement. Some businesses have little difference between accounting earnings and cash flow earnings, while for others this is substantial. Again, this is critical for a lender to understand the ability to service and repay debts is ultimately a cash flow issue.

ASSESSING FINANCIALS CONSISTENCY Brokers should look for consistency from one year’s figures to the next (typically flat or growth). Many lenders take the lower of the last two years. Any major changes or reductions could be a concern, and clients need to be able to explain the year-toyear differences. At La Trobe Financial we make our assessment on 120% of the lowest of the last two years’ results to allow for a reasonable level of improvement.

GROUP POSITION This will help a lender understand the client’s financial viability. A hierarchical business diagram helps lenders understand the group position; this will provide the analyst with an understanding of how the funds flow within the group and between each business entity. La Trobe Financial seeks such diagrams to guard against reviewing financials in isolation, which sometimes may not provide an accurate assessment of a borrower’s position.

INTERIM FINANCIALS Interim financials are never a lender’s preferred document because they can be distorted by seasonal variations in the client’s business and should only be relied upon when assessing multiple periods.

BUSINESS EQUITY Understanding the business equity is an important element of understanding the financial strength of an applicant. Equity provides the opposite of financial leverage: a low leverage ratio means high equity levels and the ability to withstand hard conditions. Lenders will usually consider how strong the equity position is of the borrower.

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A new paradigm is emerging surrounding how a business should respect the stakeholders that are essential to its long-term prosperity, argues Jeremy Galbreath

Most companies desire to stay in business over the long run. This requires a sound business strategy, including sharp focus on the right target customers, an unbeatable value proposition, and a product or service that can be delivered to the targeted customers at a consistent profit. This ‘wealth’creating strategy and function has been the generally accepted sole purpose of business for generations. Today, however, there are converging forces that recognise that while businesses are in the business of making money, their economic activities require greater scrutiny – and accountability. More specifically, stakeholder demands, the activity of non-governmental organisations, and regulatory reforms – an issue that mortgage brokers are all too familiar with – are increasingly placing pressure on firms to take into account the environmental and social implications of their economic activities. ‘Sustainability’ is an emerging business paradigm that recognises that businesses – and their economic activities – are inescapably reliant upon environment and social systems for long-term survival. For example, businesses rely on natural resources and ecosystem services for energy, operations, and production. They rely on governments and communities for infrastructure and support. They rely on employee skills and knowledge for competitiveness and growth. The sustainability paradigm clearly recognises that economic growth and wealth creation are only viable if access to this natural, human, physical, and social capital continues. Sustainability recognises the following three corporate objectives: • economic viability • environmental integrity • social responsiveness

WHERE DOES BUSINESS FIT IN? Private business acts as the engine of economic progress in society and represents the productive resources of the economy. In this economic role, competitive, market, and regulatory forces place considerable pressure on firms to sustain their wealth-creating contributions. To remain economically viable, firms can: • plan strategically • invest in research and development activities • lower costs and realise production efficiencies • innovate to meet customer needs

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NAB’s approach to community and stakeholder engagement can be broken down into five areas: customer, people, community, environment and supply chain. Within each of these areas, the bank has identified issues relevant to NAB and the way that it operates. ‘‘We group up various numbers of different stakeholders and then we think ‘How are we going to engage with them and what are we going to achieve through that engagement?’,” says O’Neill. As well as ‘day-to-day’ business interactions, NAB also holds annual meetings during which stakeholders are presented with an issues map and asked for their feedback. “We’re asking them not only what is important today but what are our future trends, so we start to think about what’s coming around the corner that we might not have thought about yet.” These kinds of open discussions are crucial for a business to identify any areas where strategy is not in line with stakeholder priorities, says O’Neill, but they can also create challenges around expectation management. “They might feel that they’ve voiced an opinion and that we’re going to act, whereas we might feel that, while it’s been useful to hear, it’s not part of our strategy.” Which discussions will lead to direct actions, and which are simply to be kept in mind and taken note of,

However, sustainable companies focus attention not only on their economic role but also on their environmental integrity and social responsiveness. The economic activity of firms can impact on: • natural resource depletion • environmental degradation • disruption of communities • worker displacement • worker health and safety While some of these ‘negative externalities’ are dealt with through the pricing/allocation mechanism of the market (eg carbon emission trading) and others through regulation (eg worker health and safety), many are unpriced or ‘exploitations of the commons’ (eg loss of natural habitat, disruption of communities, worker displacement).

TAKING ACTION Given the many potential unpriced externalities of firms’ economic activities, sustainable companies

needs to be clearly communicated and established from the outset, says O’Neill. She adds that finding the balance between engaging familiar stakeholders that have an understanding of your goals and achievements, and opening the floor to new voices, can also be a challenge. A system whereby stakeholder meetings are not “a new room of faces every year”, but instead groups are rotated every two to three years, is ideal for ensuring diversity as well as steady progress, she says. For NAB, these workshops also served to highlight a need for more constructive dialogue with stakeholders around broader goals for both businesses. “People were turning up to the workshops and only really understanding the tiny part that they touched. We realised we need to work on having relationships based not just on one transaction, but to actually use the relationship and talk about who NAB is holistically and what we’re trying to achieve.” These comprehensive relationships not only create advocates for the business in the community but also boost employee engagement and encourage innovation within the company, O’Neill explains. “Stakeholder engagement really is a critical part of creating value for the organisation because it gives you access to new information and new ideas and helps you to build more sustainable relationships. It’s an essential part of doing business.”

move beyond market mechanisms and regulatory compliance to address environmental integrity and social responsiveness voluntarily and proactively. These two dimensions are intrinsically tied to ongoing sustainable economic activity. In the sustainability paradigm, economic viability is achieved not by indiscriminately externalising costs onto legitimate stakeholders but rather by treating the maintenance of ‘natural’ or environmental capital and the delivery of social improvements as a necessary complement to economic activity. There is ample evidence to suggest that companies that proactively address environmental integrity and social responsiveness actually enjoy higher economic performance. However, maximising economic, environmental, and social performance is no easy task. Ideally, sustainable companies are those that seek to maximise the utility of all stakeholders

Janette O’Neill


SUSTAINABILITY An emerging business paradigm that recognises that businesses – and their economic activities – are inescapably reliant upon environment and social systems for long-term survival.

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Would you be more likely to choose an employer if they were invested in sustainable practices? Source: Greenfleet survey of 1,001 Australian workers











53% SA

NSW 39%

61% 46%



Jeremy Galbreath is an associate professor at the Curtin Graduate School of Business. He is an authority in corporate social responsibility and sustainability. He holds a PhD from Curtin, an MBA from Colorado State University, and BS and MS degrees from Ball State University.

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by maximising economic outcomes while simultaneously maximising environmental and social outcomes. But optimising across all three dimensions is virtually impossible because the pursuit of sustainability requires trade-offs, and cost. In trade-off situations it is difficult to achieve two or more desirable objectives simultaneously. For example, a company might accept a lower rate of return on a major strategic initiative in order to protect the natural environment. Or, when economic interests take precedence, certain environmental investments may not proceed, or a program promoting social progress might have to be postponed. On the other hand, sustainability-focused companies might experience a higher cost structure by, for example: • paying their employees above-market wages • engaging in mitigation effects regarding environmental externalities over and above what is required by regulation • not reducing headcount rapidly in times of economic austerity • passing up valuable investment opportunities that are not consistent with their values • earning lower margins on products or services due to more expensive sourcing decisions to appease NGOs









• losing customers to competitors by charging a higher price for sustainability-focused features that some customers are not willing to pay for

CHASING SUSTAINABILITY Pursuing the sustainability paradigm largely comes down to a few key aspects, ie the degree to which – more or less – a company takes the following actions: • emphasises the long term versus the short term • cares more or less about the impact of their operations on other stakeholders and the environment • focuses more or less on the ethical grounds of their decisions • places relatively more or less importance on shareholders compared to other stakeholders Each of these aspects ultimately places considerable tension on decision-making and begs the question that every company must ask: “What is our strategy?”


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Hanging up a shingle and waiting for clients to come to you may keep you afloat, but Rebecca Wilson argues that creating a marketing campaign to boost referrals can take your business to the next level. And it doesn’t have to cost the earth We are taught early in our business degrees that we can build a business by being a technical expert, hanging a shingle and waiting for clients to walk through the door. Many professional service providers all throughout Australia diligently fulfil their qualifications, maintain their professional development, and serve the customers who trip over their businesses. They do OK. But with well-targeted marketing, you can do better. You can, in fact, build your business around the market that you want to work for, and have them drive your customers to you by referral. Good referral-based marketing will compel your ideal target audiences to voluntarily pursue your firm’s services. And, if done right, not only will you achieve a growth in revenue from your ideal types of clients but you will also drive them to refer your business to their friends, colleagues and community, creating a self-perpetuating buzz.



Take the time to get to know someone and build their trust over time. This requires you to meet or exceed their expectation that they can rely on you.


Be honest in your relationships, owning your mistakes and managing clients for the best outcome of all involved. Honesty is critical to building resilient, referable trust.


Be referred to someone by somebody they already trust. This is by far the fastest, most satisfying form of trust to achieve.

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Angus Algie

Angus Algie admits there were some hesitations when his company decided to get involved with social media, but he says the risk has more than paid off. “You’re putting yourself out there in a very public forum. Anyone can access your site and can put their comments or opinions on there, rightly or wrongly. “You need to be monitoring it on a regular basis to make sure that whatever is out there isn’t going to damage your brand.” Addisons currently integrates its website content with Facebook and Twitter, interspersing industry news, client case studies and advice with occasional light-hearted content designed to engage with potential clients. “We’re just trying to keep in contact with our community. People that are considering our services can follow the journeys of our current clients, monitor what we’re doing, and hopefully that will build loyalty in the brand and build trust, and then get them to send an email or pick the phone up. “You’re trying to build trust with what potentially is a lot of strangers, people that are just finding out about your business.”

Up until recently, the majority of Addisons’ social media work was done by Algie himself, but they now employ a marketing coordinator part-time to help with content integration. Algie says social media has been a fantastic lead-generation tool for Addisons, but stresses that it’s not a quick-fix strategy. “People seem to think that you can open a Facebook page and you’ve got to get more staff on to handle enquiries. It’s a little bit more of a slow burn that that. You are generating enquiries from Facebook, but you’re certainly not going to retire on it.” Algie advises businesses that do not yet have a social media presence to “have a bit of fun” with the medium, take a holistic approach, and outsource if lacking in time or expertise. “When we first started we were a bit doubtful, but we thought we needed a presence so we got one. I think the further you go without having one, the harder it’s going to be to get that presence up and running.”

HOW DO CLIENTS BUY PROFESSIONAL SERVICES? Acknowledge that they have a need or issue This is a client-centric part of the process over which you have little influence

Screen potential suppliers based on qualifications and experience Buyers initally screen on technical expertise, experience and qualifications

Overlay with professional trust-based experiences The knowledge of the professional and their firm in action now comes into play

Select service provider The best sales technique for a service provider is great service delivery, as trust is best built through client interactions. Real people work on real issues and build real connections







Source: Stretch Marketing

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BUILDING REFERRALS IN PRACTICE: HOMELOANS LTD SELLING TRUST To grow a mortgage broker business you have to consider the fact that your business is selling a tangible, yet human, service. You are selling trust. You can’t advertise trust on a billboard, or print it in a magazine. Trust has to be earned in order to grow your clients and expand your revenue. See ‘Three ways to build trust’ on page 19 for trust-building tips. Picture this. The phone rings on Thursday afternoon with an excited person wanting to meet with you. They have to get a new broker as soon as possible. They got your name from their long-time friend Rob, who says you helped him sort out all his mortgage issues and find a great home loan far more suited to his situation. I hope you have received a call or two like this in your career. The exciting part of a call like this is that it’s pretty easy to convert the sale. When someone passes on a referral, the prospect is often ready to buy immediately, with a much shorter time-to-sale than average. The prospect has identified that they have a problem. They have then sought information from a range of potential service providers on the expertise they need. And now they have asked around to see if anyone they respect can refer someone.

UNDERSTANDING YOUR PRIORITY TARGETS Most small and mid-sized brokerages serve one or several easily identifiable local communities or even regional socio-economic categories. Understanding who your top-priority target markets are is crucial to being able to target them specifically, and walk them through a structured and logical process that – if delivered with honesty, integrity and energy over its entire life cycle – will be sure to generate word-of-mouth referrals. And when you know who your ideal targets are, it’s easier for you communicate to your existing satisfied clients who they should refer you to, making them your evangelists.

BUILDING EVANGELISTS There are five stages to building a customer: from no awareness to full-blown evangelist. Get it right and you’ll only have to go through the initial campaigns once or twice to build yourself a base of satisfied customers extolling your virtues by referral. This process takes the client on a journey from their first point of contact with your business,


“If it’s not working, you need to be honest and upfront enough to say that it’s a waste of time to have that referral arrangement in play,” says Greg Mitchell. “Don’t sell your soul. I try and be very specific about who we get into a relationship with, and that does take a process of understanding what each other is about. If that doesn’t gel, it’s best to walk away, because neither of you is going to get any advantage from that at all.” If a referral partner is right for your business, says Mitchell, it’s crucial to be constantly invested in the relationship, not just when it is convenient for your business. “Both partners have to be 100% committed to it at all times. If that wanes, you need to ascertain why it’s fallen off and try and work hard to build it back to where it should be. “It’s like training for a sporting event. You have to keep on tweaking, assessing, refining on an ongoing basis to make sure everything is working the way you want it to work.” The particular arrangement you have with each partner can vary, but each side needs to be clear on what they expect to get out of and also to give to the relationship, and assess this constantly. But the real value referrals are always those passed on by your customers, and that means exceeding customer expectations in every single transaction, says Mitchell. He gives the example of one broker who delivers a bouquet of flowers and champagne to the workplace of every client who has had their loan settled as a highly visible ‘congratulations’. This not only makes the customer feel valued, Mitchell says, but drives colleagues to ask questions about their broker and hopefully garners referrals. And if something doesn’t go according to plan, he adds, exceeding customer expectations is even more important. “If a loan is processed poorly, I’ll call both the customer and the broker right away. Just to talk through what went wrong; to keep the client happy and to make sure that it doesn’t happen again.” Homeloans also runs incentive programs for customer referrals, and counsels all of its brokers to ensure they’re having appropriate conversations with their clients around referrals. “As competitive as the world is, brokers need to get into it and explore every opportunity out there to source referrals, find the areas where you can get true traction, and work at it always – it’s never been more important.”

Greg Mitchell

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inspiring them to reach out and refer your business time and time again.


Raising awareness

When you know exactly who you want to target as your primary clients, it’s easy to broadcast your message to them. You can get involved in industry associations or local community groups, do guest speaking, write articles, advertise, do good PR, attend tradeshows, or run an integrated campaign of activities. But let’s face it, this step is a hard, often cold part of the sales process, so we only want to do it once or twice. We eventually look to skip the awareness phase by using active referrers to bring ideal clients directly to us.


Courting interest

As an ideal target is developing their interest in your business, it is important to ‘court them’ diligently to build their interest into hungry desire. Successful courting requires that you get to know your targets as human beings and be personal, engaging and interested in their success, building trust. There are a whole host of clever ways to do this. You could use content marketing, hold topical briefings and personal breakfasts, and write regular

It is the simple way to grow your business without fandangled marketing budgets and expensive resources newsletters or even blogs. Or you could invite people to accompany you to events or fit in some good old personal interaction, remembering that people always buy professional services from people.


Escalating their desire

This is the hottest and most volatile point of the marketing and sales process. If you can take a customer on the journey and identify when they have clearly hit the desire phase of the sales process, then all you have to do is close the deal and deliver a great service. Sounds easy, doesn’t it? But

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REFERRALS: THE IMPORTANCE OF SOCIAL MEDIA Connective marketing manager Jess de Araugo explains why all brokers should be jumping on board the social media train. WHY IS IT IMPORTANT FOR BROKERS TO ENGAGE IN SOCIAL MEDIA? Our industry is continuing to evolve and we are seeing more and more borrowers going online to research their lending needs. A broker needs a reputation trail, and they need to be visible online. Social media allows for another means of engagement to foster stronger relationships with clients, and provides a launching point for brokers to generate exposure of their business name, services and brand in a social online setting, plus it’s a great way for brokers to drive traffic back to their websites. WHICH SOCIAL NETWORKS ARE MOST IMPORTANT (EG FACEBOOK, TWITTER)? I would say it makes sense for brokers to be visible and active on Twitter, Facebook and LinkedIn. That being said, the online space is evolving at a rate of knots, and if you were to ask me this question in one year’s time I am sure there will be another platform out there!  In addition, it will really depend on the broker’s clients. If you know who your ideal client market is, it will educate which social media tools you should choose to engage. HOW MUCH TIME EACH DAY SHOULD A BROKER SPEND UPDATING THEIR SOCIAL MEDIA PROFILES? A broker should update their social media profile daily but, in relation to how much time, it’s a question of what time they have to spare. Social media can become a time vacuum, so it is about having the discipline to update and engage without it eating into your day. While 10 minutes is sufficient, I would say a maximum of 30 minutes. SHOULD BROKERS SET TARGETS FOR THE NUMBER OF LEADS THEY HOPE TO GENERATE THROUGH SOCIAL MEDIA? Of course. As with any type of marketing, you should at least start with a rough plan for what you want to get out of it. That being said, your presence on social media is as much for those who already know you well as it is for new clients. Gauge how you go in month one, and then use that as a yardstick for where you need to surpass in months two and three.


WHAT KIND OF INFORMATION SHOULD BROKERS SHARE ON SOCIAL MEDIA IN ORDER TO BUILD A GOOD REPUTATION, ENGAGE CLIENTS AND BRING IN LEADS? Quality, unbiased content that your clients will value. This is about knowing your ideal consumer and choosing content that will add value to them. If you only deal with residential loans, don’t post an article about commercial lending. It’s common sense, and at the end of the day it’s about positioning yourself as a thought leader and expert in this area. It’s important to also look at how the broker chooses to position themselves as a brand. Content posted will reflect the broker’s brand personality, which will allow the brokerage to differentiate themself from the competition. Displaying unique content and in a consistent voice is vital to engage an audience, network and initiate a conversation with a prospective client. WHAT RISKS ARE INVOLVED WITH ENGAGING IN SOCIAL MEDIA, AND HOW CAN THESE BE MANAGED? In any kind of marketing you undertake there are risks. But there are more risks, and more risks that are out of your control, when your clients and prospective clients have the opportunity to rate your service for all to see. My advice is to be open and honest and refrain from posting anything even slightly unsavoury or biased. When in doubt, leave it out. This way you will avoid unnecessary backlash that could potentially damage your brand. In the rare case you have offended any party, be quick to remedy! This will show that you respect the views and opinions of your fans and followers. You will also build trust by acknowledging your contact and addressing their concern. It’s always important to be transparent.

create a straight ‘link to win’ campaign on Facebook, but Twitter is more lenient. Always make sure you are adhering to the terms of use of that particular platform, or risk being banned/locked out. In terms of target marketing, obviously first home buyers would be ideal on social media. But we are now seeing more and more baby boomers embracing the online space. ‘Housewives’ (I hate this term but I can’t think of a better one) are also a key target group. It’s all about getting to know your target demographic and putting yourself in their shoes.

Jess de Araugo

HOW SHOULD A BROKER PLAN A SOCIAL MEDIA CAMPAIGN TO MAKE SURE THAT IT’S EFFECTIVE IN GENERATING LEADS? First things first: define what a lead is. Is it someone wanting a home loan right now? Is it the contact details of someone who at some stage might want to use your services? By setting this definition first, you can then set yourself more realistic goals around what social media campaigns can do for you. The next thing to think about is ‘what’s in it for me?’. Why would a client bother completing your form? Clicking your link? Following you? Make sure you have the incentive correct (don’t overpromise and underdeliver), and they rest will follow.

IF YOU HAVE SEVERAL BROKERS IN YOUR BUSINESS, HOW CAN YOU MONITOR THEIR SOCIAL MEDIA USAGE AND MAKE SURE THEIR PROFILES ARE PUTTING OUT THE RIGHT MESSAGE? There are loads of applications out there these days that allow a sole log-in, and then the company ‘personality’ is pushing out from a central place. We also recommend implementing workplace social media policy that covers what can and cannot be said from the company. WHO SHOULD BROKERS BE TARGETING IN THEIR SOCIAL MEDIA CAMPAIGNS (EG ARE THERE CERTAIN DEMOGRAPHICS THAT ENGAGE IN SOCIAL MEDIA MORE THAN OTHERS FOR FINANCIAL INFORMATION)? The term ‘social media campaign’ is a tricky one as for every platform it is different. For example, you can’t

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GIVE VALUE FIRST There is one more thing that will help you position yourself within your market and guide referrals to you with greater velocity. We like to call this the ‘give value first’ approach. For many service professionals, giving something without the guarantee of financial reward is an uncomfortable thought. “What if I don’t get paid?” they think. Worry about ‘getting back’ some other time, because if you give – unconditionally and without expectation – you add value to the community around you. It is this mentality that draws people to you as an individual and a person. Instead of asking your client, “What do you want to buy?” or thinking to yourself, “What can I sell?” you start to think, “What can I give?” You can give referrals to your peers and networks, share your ideas and information, or even offer introductions for people to join your communities. And after a while you might find that you enjoy connecting other people and making them successful, and start to develop a different mentality to many service providers. If you ‘give value first’ and give it to the right people, you may then get the opportunity to look for and develop strategic partnerships and relationships with influencers who work with your target market at an important part of your sales cycle. These influencers are the people who can ultimately offer more referrals to your business than any one client, and make the difference between mediocre success and enormous success. So consider giving value first, giving it often, and giving it to the people who can say yes to you and your services.

Rebecca Wilson is the founder of Stretch Marketing, a marketing and business development consultancy that specialises in supporting professional services businesses with logical, practical, rewarding marketing strategies and integrated marketing programs. Visit

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be warned: at this point you have done all of the hard work to build a client’s awareness and court their interest; however, if your service is not desirable enough or your competition is more convincing, then you will lose the sale to someone else, and all your effort, marketing spend and time will be wasted as they establish themselves in the hearts and minds of your target client. It is critically important to prepare succinct, high-quality proposals and manage relationships personally and effectively throughout this stage of the sales process.


Calling them to action

This is the point of the sales process where a customer parts with their money. If you have built awareness of your top-notch product or service and managed to hold on throughout the process, constantly nurturing your lead with care, I would hope that you would be closing your sale

To grow a mortgage broker business you have to consider the fact that your business is selling a tangible, yet human, service

and booking your invoice here, and moving firmly into the process of super-pleasing your new client with great service delivery. Your job now is to take action, establishing them in your client-nurturing program that allows your firm to leverage the relationship into word-of-mouth referrals, and drive future work for your team.


Creating satisfaction

This is the linchpin. The reason businesses strive for satisfied customers and not just paying customers is that a satisfied customer tells people how satisfied they are. This reduces the amount of work you have to do in raising awareness of your business. A satisfied customer sits around with their connections and makes a recommendation to their peers at the time when their peer is interested and has a need for your services, thereby cutting the hard, cold marketing out of your cycle. Imagine Rob standing around the barbecue with his mates on a Saturday night. Nathan next to him starts ranting about how tired and frustrated he is with his bank. He asks the group if they know anyone he should speak to… Bingo! It’s the perfect time for Rob to talk about his terrific experience, compelling his friend to contact his mortgage broker because “Rob trusts him”. The referral lands on carefully listening ears. Each of these five steps, when combined, create a rich experience for a client, one that they can’t help but talk about, generating buzz about your business and ensuring a healthy referral cycle. It is the simple way to grow your business without fandangled marketing budgets and expensive resources.


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? K C A B

Many businesses wait until they are in crisis before they work on realigning their brands with their clients. Neil Shewan explains how to avoid this scenario – and the two key branding issues that all brokers should be aware of 26 | AUGUST 2013


BRANDING IN PRACTICE: HOMELOANS LTD Crisis tends to drive change. It is built into the human psyche that we need to be shaken out of our routine before we start looking for another way. A crisis focuses us on understanding the problem, rallying together, coming up with creative solutions, making a decision, and then taking action. Crisis leads to clarity. Think back to when you started your business. You hopefully had a ‘moment of clarity’ when it was very clear to you who your clients would be, how you would be different, and why you were a broker. At this point all elements of your brand were in alignment. There was focus, hope, optimism and an amazing energy. Then change kicked in. New competitors entered the market, you added a new product or service, one of your partners left, you changed aggregators. What was clear became foggy. Time passed and your team could no longer clearly communicate the value you provide to a prospective client. New business dropped, clients left, and you were in crisis. This approach can be inefficient, confusing, costly and very stressful for business owners.

What holds us back from change? Once you get your business running, it is often a big ship to change direction


“It’s important that people understand who we are as a business in terms of where the brand is positioned in the market and what the perceptions are of our business across the board,” says Will Keall. “We’re not different things to brokers, to consumers or to anyone else in the market. We just make sure that everyone sees us as the same professional organisation.” A key challenge for brokerages in maintaining this consistency, he says, is communicating that brand clearly to your staff. “The people representing your business can be very diverse; they have different personalities and ways of dealing with clients and it can be difficult to ensure compliance with your brand. “We definitely take every opportunity to ensure people are aware of what the brand is, what it stands for and how they’re expected to behave.” Homeloans has created six corporate values, which he says Homeloans staff “live by” and which were developed based on market research. “It’s about understanding what’s important to your market. In the financial services industry, for example, professionalism is everything, so that has become the number one value in our brand strategy.” One of the biggest mistakes people make in branding, says Keall, is failing to realise that a brand touches everything you do – not just your logos and letterheads. “Your brand is who you are. Every interaction you have with a client, every piece of stationery that carries our brand, the way you present yourself – all of these things impact your brand. “I think a lot of people don’t realise just quite how powerful the brand can be as an ally or an enemy.”

Will Keall

CHANGING DIRECTION What holds us back from change? Once you get your business running, it is often a big ship to change direction. Processes and logistics are all pushing in one direction and people’s behaviours are set. There is also a big anchor pulling you back to what you know. Many broker businesses don’t have clear visibility of the factors that impact on them. They have no tool to keep an eye on areas of brand misalignment so they can then manage through the organisation and drive focus.

KEEPING YOUR BRAND IN SHAPE I want to share a simple tool – a dashboard of sorts – to help you manage your brand and identify where there is misalignment. There are three key parts of your business you need to keep aligned:

1. THE BRAND COMMUNITY These are the people who interact with your brand. For a broker these include your potential

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Political Economic




Brand community






Products/ services

Legal Environment

Leadership People

clients, existing clients, your referrers, prospective referrers, and the media. It may also include key influencers in your market.

2. STRATEGY Strategy is an integrated set of choices that uniquely position your firm in the industry. The goal of strategy is creating sustainable advantage and superior value relative to the competition. There are a number of external elements that will impact on your strategy, and these fall into political, economic, social, technological, environmental and legal groupings.

Financial brands that make data fun and social, or even encourage positive behaviour, will benefit in today’s market

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This includes your leadership team, team culture, and the products and services you offer. Your goal is to have all of these three segments aligned. Put simply, your strategy needs to align with the needs of the people who interact with your brand, which needs to align with what your business is delivering. Make the dashboard your own, but the key is to use some form of tool to make your brand visible and a topic of conversation when you review your monthly performance. We recommend you review the dashboard each month, flagging parts of the brand that are out of alignment. Then make many small steps to maintain clarity and focus. There are two changes I’d like to focus on that are currently impacting on the broker market.

CHANGE 1: RELATIONSHIP SHIFT The big banks are getting better at creating and maintaining relationships with their clients. The closer a bank gets to your client, the higher the risk that the relationship moves from you to the bank. For a broker this is a challenge. How do you keep relevant and useful between the transactional stages in your relationship? After all, a client may only refinance a few times in their life, yet they are transacting with a bank every week. The key word is useful. You need to look at how you can be useful to clients when they are in between using your services. Start with what knowledge or insights you have that may genuinely help your clients. This trend also highlights the need to ensure that the time you have with a client is exceptional. This includes every ‘touchpoint’ you have with your client – from first contact, through to followups after the loan settles. Consider how your brand is signalled to the world in four ways: 1. Visual signals: your visual identity. 2. Communication signals: the way you communicate and the channels you use. 3. Physical signals: the way your people look, and your workspace. 4. Behavioural signals: the way you behave; your attitude and approach.



Australia rank


Brand value

Brand rating








Commonwealth Bank of Australia




















St. George










Colonial First State










BT Financial Group










Bendigo Bank





Bank of Queensland








Source: The Banker/BrandFinance Banking 500 Report 2013

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Keiran Evans

“A brand isn’t optional; everybody has a brand, and what business owners and mortgage brokers have to decide is how they manage that brand,” says Keiran Evans, and managing it well is crucial in an increasingly competitive broking market. “Brand and awareness in the marketplace is what will determine future customer flows, so it is paramount to a business’s success,” he explains, adding that there are three steps to shaping a broking brand. Know your audience: “Never forget the reason why you are in business: to provide great service to customers. Brokers need to gain some insight into their target market and understand what it is their customers are looking for,” Evans advises. Know your business: “The second thing to ask is, ‘What is it my business delivers to those customers?’ What attributes does your business have in relation to your target market?” The most important aspect of this step, Evans says, is ensuring that you’re realistic about your capabilities and strengths: “A brand that says one thing but delivers something different will always lead to disappointing outcomes.” Link it up: “The third part about branding is putting a plan in place to align what those brand values are, what is important to your business, and what you deliver, with what it is your customers are looking for,” he says. Know your competitors: Finally, Evans says it’s important to ensure that your brand is unique, that it shows your customers why they should work with you and not your competition. “Once you get those in alignment you’ll find that you have a brand and a point of difference where you can say, ‘This is what we stand for and this is what we promise to deliver’,” Evans says, adding that the key to sticking to this is to keep your brand very simple. “For example, ANZ brokers are renowned for


Neil Shewan is managing director at TANK Branding, a Melbourne-based agency specialising in developing brand strategy and brand identities for some of Australia’s leading organisations. Visit www.tankbranding. for more information.

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Forget information overload. Despite the deluge of data, consumers show no signs of ‘info-fatigue’, taking every opportunity to check, track, set up alerts, play with and scrutinise information. Personal finances are a key area of interest for people. Financial brands that make data fun and social, or even encourage positive behaviour, will benefit in today’s market. How about encouraging customers to save by awarding them thrift badges, or helping them flaunt their financial savvy when beating spending targets? After all, while individual data might not be meaningful, allowing users to compare their position to that of others

providing consistent delivery of service. That’s it in a nutshell: consistent turnaround times. That’s the brand that we live by and we’re known for that in the marketplace, so that people know what to expect when they deal with ANZ.” The next step is getting that message across to your customers, he says. And that doesn’t just mean changing your email signatures and letterheads, or sending out tweets. “The big awakening with branding comes when you realise it’s at the forefront of every business decision you make; it’s not merely your communication to the external market. It includes everything you say and everything you don’t say, everything you do and everything you don’t do. It’s all-encompassing.” Constant communication with your customers in a way that is relevant to them, Evans says, is the way to ensure your message gets across: “The important thing is not what you say, but about what they hear, so you need to be communicating on a level that people choose.” For many clients this will mean social media; for others it might be local sponsorship or advertising, he says. “But the important thing is that you’re keeping your clients updated in a way that is valuable to them, even after they’ve settled their home loans.” Failing to constantly refer to your brand and shape it, Evans points out, leaves your brand open to be shaped by others. “Branding is a lot more than a lifeguard. Branding fits the direction for everything in the business, from marketing applications to customer service standards to operation models to after-sale service. Branding is paramount, and I would encourage everybody to take up the choice and manage their brand because everybody, every business, and every brokerage, has a brand.”

can add value. Look at ways to visualise financial information in a simple way, or benchmark their life against others.

HOW CAN YOUR BRAND CHANGE IN THE NEXT 90 DAYS? A great quote from Winston Churchill sums it up nicely: “To improve is to change; to be perfect is to change often”. It is a matter of embracing change and managing it, and using it to your advantage. Your brand will go in and out of moments of clarity over time. A clear and simple dashboard on your brand alignment is a good starting point to managing change, and looking for opportunities.


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KEEPING YOUR EYE ON THE BALL When designing your organisation, your eyes must be kept firmly on the strategy, the whole strategy, and nothing but the strategy, or you could end up with a ‘disorganisation’ full of ‘busy fools’, argue Melvin Jay and Simon Collinson

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WHAT IS ORGANISATIONAL DESIGN? Highly effective organisations follow a design. All activities, projects and processes are purposefully designed to deliver their strategy, and thus to create value for stakeholders. Each function, department and individual understands the company’s strategy and how their daily work contributes to its delivery. People are diligent and focused; everything they do adds value to the business. This is because all decisions about the way teams are assembled and activities assigned have been made with the company’s stated goals in mind. Unfortunately, these companies are in the minority. In overly complex organisation designs, the opposite is true. Despite having equally intelligent and hardworking people, a high percentage of their activities will create no value and play no significant part in helping the company achieve its strategic purpose. We call these companies ‘disorganisations’. They are often populated by large numbers of ‘busy fools’: people running fast but in the wrong direction! There is plenty of activity, but very little of it creates value. ‘Lean Six Sigma’ studies of office workers suggest that in many organisations 97% of activity is wasted because so much of what people do will create no measurable value for the company. Just imagine: staying at home in bed would have almost the same impact on the success of your company as turning up. For the purpose of this discussion, let’s assume that you have a good strategy in place. Companies have become very effective in the creation of strategy, yet we often find the strategy in significant dissonance with their organisation design. This raises the obvious question: why this frequent misalignment between strategy and organisation design? See the ‘Warning signs’ box on page 37 for the symptoms to be aware of.

Your organisation design covers the key elements of how you have organised your people to deliver a stated business strategy. These are:


In other words, your organisation design is not just a structure chart but also the conscious and measured combination of all the elements above. A simple organisation design has the fewest number of these elements, joined together in the simplest and most logical way – or, to put it another way, only what is essential for your success.

H Here are some common reasons for misalignment of organisation design and strategy:


One of the most common reasons is also the easiest to correct: communication. In many companies, the majority of people don’t fully understand the strategy. In our workshops, we often ask the more senior participants to write or draw their company’s strategy. At first, we were surprised by how few


The division of activities into logical groupings representing the responsibilities of different teams, lines of reporting and individual roles. (This is usually captured in an organisation chart or a structure chart.)


Who will need to collaborate effectively and how they will do this (both formally and informally).


The skills and capabilities required by your people.


This covers your culture, values and behaviours needed to succeed.


Structures you have chosen to underpin your organisation.


People will need these to perform effectively in their roles.

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Tony MacRae


STRATEGY Your strategy describes where you’ve decided to focus and how you are going to win in your chosen field of business.

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What Tony MacRae hears more and more from mortgage brokers is about the ongoing challenge they face in balancing both their regulatory and compliance obligations with the need to sell. “The reality is that as business owners they do not need to do everything themselves right away; there are many partners and external advisers that can help them navigate and prioritise the most important requirements so they can be out in the field selling more with their clients,” he says. “Determining what a business is strong at and delivering this in an exceptional manner, then building strong partnerships to deliver other components, is critical.” Diversification and improving service quality are fundamental to getting ahead in an environment of low credit growth, says MacRae, and a strong organisational design is the key to making this work. “Sharpening your customer service proposition beyond selling the home loan and extending the range of cross-sell services for your clients, whether through direct or in partnership with suppliers and lenders, will reinforce your point of differentiation with your customers,” he points out. But trying to do this on your own, without a strong structure built on partnerships, is a recipe for failure, he warns.

“You need to have a clear focus by staying close to all your stakeholders, customers, partners and service providers. “Moreover, being clear about what you and they are good at delivering, and trusting each other to deliver – ‘sticking to your knitting’ and having transparent discussions – are important aspects of building strong long-term growth.” Keeping a strong focus on these relationships will aid brokers to keep their business strategy in line with their organisational design, even as their business grows and changes, MacRae says. “Knowing where you want to stand out from the crowd, being different, and then getting the best people to undertake the execution of these activities is critical. “Ensuring your model aligns with your strategy boils down to having a very clear plan that is built around the strengths of your operation or your point of differentiation, and then having a single-minded determination in executing this.” And part of being single-minded, says MacRae, is knowing when to say no. “The biggest challenge for many brokers is the pressure to do everything, and therefore they take it all on. Many times it is often more important what you decide not to do, than what you choose to do.”

could clearly articulate it. But it no longer amazes us since this problem has proven to be so common. Similarly, we have seen management teams unable to agree on the best metrics for success, simply because they don’t fully grasp their strategy. Companies happily spend millions of dollars creating a great strategy but fail to communicate it in a simple and inspiring manner. If people don’t entirely comprehend your strategy, then it will be no surprise to see your senior managers designing organisations that fail to deliver it.

People are busy collecting information, following processes or pursuing projects, but these activities have not been carefully designed with the strategy in mind, so their efforts are not creating value. In fast-growing companies, people and departments are often added in haste to keep up with the growth, without carefully aligning with the company strategy. When the cycle slows or reverses, the company then finds it has a lot of people or whole departments not adding value.


The misalignment of organisation design to strategy can also happen because people lose sight of your strategy over time. The organisation starts off carefully designed to deliver your strategy, but over time things drift.

The second most common reason is that the work of individual functions or departments has not been purposefully planned to deliver the strategy. This is particularly common in the support functions, which are less close to customer needs. But even in front-line functions like sales we find that a high percentage of work has little or no impact on achievement of the strategy.


NEW WAYS OF WORKING In organisations everything evolves. Unfortunately, things rarely become simpler. New projects and activities get created and processes reworked, but


because the strategy is not at the forefront of your mind during these changes, the organisation design gradually shifts away from its strategic purpose, rather than towards it. This drift can also happen because people are still doing what they have always done, even though the strategy has changed and the organisation has been reconfigured accordingly. Humans can be very resistant to and scared of change. Old habits and ways of working are hard to kill. So we often find that the organisation was, on paper, carefully redesigned to align with a new strategy, but people have simply drifted back to their original activities and ways of working. Of course, it is easier to carry on doing what we know well, and companies rarely invest enough time and money in embedding new processes or new ways of working.

GAUGING ALIGNMENT There are ways you can test whether your organisation design is in harmony with your chosen

You should ruthlessly rip out any elements of your organisation design and any activities that don’t have a proven role in delivering your strategy strategy. We call it the ‘organisational impact tool’. It offers you a simple yet methodical way to assess if all the elements of your organisation design are fully aligned with your intended strategy. You can do this at a company level, but it works equally well when looking at the organisation of specific divisions, functions, departments or teams. When looking at the organisational alignment tool (see next page), ask yourself the following questions:

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The logical grouping of activities into functions, lines of reporting and individual


How teams collaborate on key activities and make effective decisions


Needed by your people to do their jobs efficiently

Do we provide people with the information and resources they need to deliver our strategy and check that we are on track? If not, how can we improve in this regard?


Needed by your people to do their jobs well



The values, behaviours and culture that must be fostered

Structures that are in place to measure and reward success

STRUCTURE Looking at our organisation’s structure chart, does the way we divide up activities and responsibilities into different functions and departments give us the best possible chance of delivering our stated strategy? Do the reporting lines make sense? Does our current structure hinder strategy delivery in any way?

COLLABORATION MODEL Do different teams and functions collaborate effectively to ensure we make good decisions that help deliver our strategy? Which connections work well and support our strategy? Which ones hinder us from delivering our strategy?

SKILLS & CAPABILITIES What are the skills, know-how and capabilities that our people need to deliver our strategy? Do we already have these skills? Is our organisation designed to ensure we develop these skills?

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MEASUREMENT & REWARD Does the way we measure and reward teams and individual performance help us deliver our strategy well? If not, how can it be improved?




What are the key values and behaviours we need? Does our culture support our strategy or hinder it? Is our organisation designed to ensure that the right values, behaviours and ways of working are encouraged?

TWO CLEAR OPTIONS As you assess your organisation design against each of these six questions, ask yourself: is this particular aspect of my design helping me deliver my strategy, the whole strategy and nothing but the strategy? Limit yourself strictly to two options: YES: My organisation design does seem to support this element of my overall strategy. (Outline how exactly, then consider if it could be done even better.) NO: My current organisation design does not support this element of my strategy. (How could you change it to improve the alignment?) You can take this assessment even further with what we call the ‘stop/start/continue’ tool. Apply it as a final checkpoint to help you decide which existing elements should be stopped, which continued, and which new ones you need to kick off to improve things. This is a good way to summarise your learnings. At the end of this exercise you should be able to see clearly which elements of your organisation are well aligned with your strategy and which elements are not.

MAKING IMPROVEMENTS To improve the alignment between strategy and organisational design, follow these steps:

STEP 1: MAKE SURE YOUR STRATEGY IS WELL UNDERSTOOD Regularly test understanding of your strategy among your people by asking them to tell you what the company strategy is in their own words. If this test reveals that the awareness is poor, invest

WARNING SIGNS more time, energy and creativity in communicating your strategy. There are three unbreakable rules when it comes to communicating your strategy well: Simple: Anyone in your company should be able to understand your strategy without having it explained to them at great length. As a great copywriter once said, “To explain is to fail!” Inspiring: Your strategy should capture hearts and minds and inspire people to do great things that create value every day. You need to think carefully about imaginative and impactful ways to create a feeling of inspiration. Repetitive: While we all hate duplication, communicating your strategy is the one occasion when it’s virtually impossible to repeat your message too many times.

STEP 2: ENSURE ALL ACTIVITIES AND PROJECTS CONTRIBUTE TO THE STRATEGY Review the role that each function or department plays in delivering your strategy, and agree how that particular team creates value. Also ask each function or department to create an ‘organisational purpose statement’ that clearly explains the overall role they play in helping the company deliver its strategy. Review and sign off these statements at CEO or board level. Using finance as an example, the organisational purpose statement could be the following: “We provide only the essential financial information needed to track progress versus our strategy and to identify how we can improve our overall financial performance”. Now ask each departmental head to review their current organisation design and all key activities against this purpose statement and prove that each element of their organisation is designed to deliver the strategy. They should review each activity (eg a project, process, task, report produced, etc.) and ask themselves these questions:

! ! !



l People are very busy, but you are not delivering against your goals. l Departmental in-fighting: different functions are at war, pulling in opposite directions to deliver your strategy. l Duplication: similar activities take place in different parts of the organisation. l External vs internal focus: high amounts of work are focused on internal discussions about the company itself; not enough is focused on external matters (like customer needs, competitors, and improving your products and services). l People can’t describe the role their department – or their own job – plays in delivering your strategy. l When you ask people how an activity/project/ process contributes to your strategy, they are unable to give a clear and simple answer. lLots of information is produced, but little of it helps deliver your strategy.

• How does this activity help our department meet its purpose and deliver our strategy? • Do we really need to do this activity at all? What if we stopped it all together? • Is there a smarter simple way to do this activity? Next, ask them to make sure every job description has a dedicated (yet concise!) section that describes how that person’s specific role contributes to the company strategy. For the head of legal, for example, this could be the following: “I ensure we stay on the right side of the law and regulations, while actively supporting our ability to achieve our strategic goals”.

In many organisations, 97% of activity is wasted because so much of what people do will create no measurable value for the company

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Even in front-line functions like sales, we find that a high percentage of work has little or no impact on achievement of the strategy STEP 3: FIX THE ISSUE OF ORGANISATIONAL DRIFT As part of your annual planning process, each department should review all the activities and projects they will take on in the coming year – this is to make sure that all planned work will add value and contribute directly to the company strategy. This way the organisation design can only drift or carry on with outmoded structures for a year before being reset again. The ‘keep/improve/kill’ framework is particularly handy for this. Review everything your team is doing, ask how this activity helps deliver the strategy, then decide to carry on or stop doing it. The other useful questions to ask are: • Are we doing the right things? (Then stop all projects/processes/activities that don’t help deliver your strategy.)

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• Are we doing things in the right way? (Then find simpler ways to deliver the remaining activities/projects.) Encourage people to challenge the value in process changes, new tasks or information requests. They should feel empowered to question the worth of anything that doesn’t appear to help with strategy delivery.

STEP 4: KEEP THE LONE WOLVES IN CHECK Give leaders who are out of line with the overall strategy the opportunity to contribute to the development of the next strategic plan, making sure their ideas and views are carefully considered – they might have a point. Once the strategy is signed off, give them six months to get their house in order. If their department is not 100% aligned with the company strategy by then, you may need to look for a new management team to lead that part of the organisation. In the long run, you will drive more success from a fully aligned management team than a federation of lone wolves!

Professor Simon Collinson is the dean of Birmingham Business School. He is a world-recognised expert in complexity management, has consulted for a wide range of globally renowned companies, and has been widely published in prestigious academic journals.

IN SUMMARY In order to keep your company simple, your organisation design needs to be totally focused on delivering your strategy, the whole strategy and nothing else. You should ruthlessly rip out any elements of your organisation design and any activities that don’t have a proven role in delivering your strategy. If you succeed in this, your business will be simpler, your results will improve, and your people will enjoy their work, since every day they come to work they do so to achieve great things.

Melvin Jay is the founder of Simplicity and the author of ‘From Complexity to Simplicity’. He has over 25 years of commercial and consulting experience with some of the world’s biggest companies. Visit simplicity-consulting. com.


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Preparing for success

Professional development often takes a back seat to the day-to-day activities of mortgage broking. However, Paul Kirkbride and Jenny Rickard argue that development programs can be vital to success – and they’re not just for senior managers Business pressures often prevent leaders and key contributors from undertaking development activities. Leadership programs, for example, create more opportunity for businesses to begin to look at challenges differently and tackle problem solving using a wide range of tools and frameworks. There is often a misconception that executive development programs are only suitable for senior executives, or at least those that are in managerial or leadership roles. While this may be true in some cases, we have found that in order to develop business and leadership capability in individuals and organisations, there are a number of programs that do not require the participants to be managing people. These programs focus on relevant business skills such as finance, negotiation, strategic thinking, social media risks and opportunities, marketing, innovation, design thinking, change management, business analytics, business transformation and project management (Six Sigma), communication and conflict resolution. Often the people in the business who are critical to its success are key contributors, experts in their respective fields, but not necessarily responsible for people leadership. Like their managerial colleagues, key contributors also require development and to stay up to date with various business capabilities. For up-and-coming and emerging leaders the

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choice of development programs is generally more focused on establishing the capabilities needed to transform them from managing a small functional team to taking on multiple teams and tackling organisational issues. Mid-level and senior leaders have a wealth of experience and generally require programs that acknowledge and build on this experience. The topic areas are focused on broader organisational leadership issues or may be structured in such a way that the learning is heavily facilitated by the whole participant group through case studies, experiential activities or forums.

LEADERSHIP Leadership is a complex and multifaceted capability and, as such, leadership development does not come in a one-size-fits-all package. It is essential for organisations to select a leadership program that suits the individual’s job function, current experience and future aspirations. Someone in the early stages of their leadership career, or about to take the leap into a leadership role, would be best suited to programs that help establish good managerial and leadership practice. See the checklist on page 41 for elements that such a program should include. Similarly, these types of development activities are also suitable for someone who has


been in a people leader role but perhaps needs additional tools and frameworks to help them deal with the increasing complexity of their role. In addition, they would need to consider those that offer deeper insights into leadership behaviour. (See the checklist on page 42.) For more senior leaders who are responsible for larger teams or leading the organisation, there are specific development programs that help them consider leadership and business issues through different lenses, focus on a more holistic approach to self and organisational leadership and resilience, or deal with leading innovation, strategy, change and business transformation. These programs focus on critical business issues from multiple perspectives and create clear actions and strategies for leaders to implement in their workplaces. Others teach leaders to think about how to create the space for innovation in their organisations, rather than teaching them the process of innovation.

MANAGEMENT We know it is important for managers and leaders to develop and continue to build capability in terms of commercial acumen. While this generally refers to areas such as strategic thinking and finance skills, it can also encompass a broader range of skills required to effectively manage a business unit or portfolio. The emphasis of professional development in this case should be on the operational capabilities managers require as they transition from a functional role to a more general management or senior business role. Strategic thinking is a critical capability as managers and leaders move up to seniorlevel roles, or for those managers working with senior executives to determine their business unit

and/or organisational strategy. The understanding of key tools and frameworks is the foundation for developing strategic plans and ensuring the organisation is resourced appropriately to execute these strategies. Managers also at times require specific management skills, dependent on whether their functional role and experience includes areas such as strategic account management, negotiation skills, and managing social media opportunities and risks within the organisation.

SPECIALIST DEVELOPMENT Specialist development programs exist to create opportunities for managers and leaders to experience specific topical areas or specific approaches to leadership. For example, the study of neuroscience has become a significant focus for organisations, and we now have more insight into how the brain impacts on leadership behaviour, consumer behaviour and decision-making. Harnessing this insight can be invaluable for leaders to understand better how the performance of their brain is crucial to their performance and success. Leaders of all disciplines can benefit by building knowledge about their own brains and how they can perform at higher levels. Those in marketing, branding or corporate communication can broaden their skills by learning how neuroscience informs marketing and sales, and what organisations need to do to maximise their influence on the part of the brain that makes decisions. Leaders need to be comfortable with developing a culture that embraces and supports innovation, and can benefit from learning

E RIA L G A N A GOOD M ERSHIPLIST D A E L AND TICE CHECK yles ower st and foll PRAC ip h s r e lead ness

ective tanding sonal eff Unders r e p ir e th teams tanding Unders manage to s k r o framew ent ing skills Building anagem gic think ange m te h c ra s t d s n d a busines ing an Project e whole m-solv h t le f skills b o ro g p ing solution standin re r t e ic d fl n Develop n u co roader kills and hing a b tiation s o g Establis e n , skills nication Commu AUGUST 2013 | 41  



Stephen Moore

Professor Paul Kirkbride is the executive director, and Jenny Rickard is the director of open programs, executive education, at Macquarie Graduate School of Management.

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“We’ve moved from how professional development has traditionally been treated, and that is ‘What are the minimum number of hours I need to do to meet my obligations?’,” says Stephen Moore. “Business development really has a far broader definition. It’s about what I need to learn to ensure my business is successful now and into the future.” On top of structured development programs, Choice has placed peer-to-peer learning at the core of its professional development philosophy. This step is crucial to turning abstract concepts into tangible actions, says Moore. “It’s not just the expert on stage giving you the theory; it’s how that learning is then instilled. “That’s where the power of peer-to-peer learning really comes in: there’s theory at one level, but then its applicability is at a peer-to-peer level.” Learning from current experts, people who are “living and breathing it today”, is the most effective way to learn real and practical methods to better yourself as a broker and business owner, says Moore. Choice connects like-minded individuals to collaborate and discuss topics, and also runs more

practical ways to embed innovation through case study examples from leading global organisations. For contributors and up-and-coming leaders, the opportunity to experience innovation via a short business simulation can be an effective way to begin the journey to becoming ‘innovation architects’. Having the capability to navigate complexity and ambiguity and solve ‘wicked problems’ is also fast becoming a core capability for leaders at all levels. Programs that help develop ‘design thinking’ skills – how to diagnose problems and consider creative solutions to solving these – will build these practical and immediately applicable skills. As a partner to innovation, change management is a requisite skill for individuals, managers and leaders. The ability to lead change effectively is a competitive differentiator. Organisations that can execute change better, faster and smarter will ensure their future success. At an organisational level, senior leaders require insights into the principles for achieving performance excellence and implementing major innovation and change initiatives. Studying the successes and failures of organisational transformation in a variety of industries helps develop key principles of sound operational and change management. Organisations that have

in-depth educational sessions that tee up those who are actively working in an area, such as self-managed super funds, and those who are looking to move into it. The aggregator also combines opt-in webinars with invite-only sessions such as the Partner Plus program, and breakfast or ‘lunch and learn’ development presentations. And professional development is not just something to be put in place for your brokers, says Moore, but something that business owners need to actively engage in themselves. “Professional development, or continuing to learn, is arguably the most important investment anyone can make. And that’s whether you’re an employee or a business owner – it’s equally important.” Many brokers concentrate on developing technical skills as brokers, and spend insufficient time working on their businesses, says Moore. “Learning right across all roles within a business is fundamental on the path to best practice, and is critical to long-term business success.”

adopted ‘Lean Six Sigma’ principles also need to ensure their project managers are equipped with the skills and knowledge to apply these principles to their change and improvement projects. Other specialist programs that focus on helping leaders source, develop and evolve business analytics will help them ensure their organisations’ success.


nd lead mo ancial a How to trong fin ility s p lo e v b a de How to ial acumen cap rc acting comme ing and k in h t r s fo Solution lly ing a ic g te lem solv ra st lex prob p m o c tand tion Unders f innova ulture o c a p lo gies and Deve technolo hip w e n d n r ta es Unders aches to lead ro p p n and new a egotiatio n d e c n va More ad g skills in c n e u fl in


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Emotions are vital to decision-making, but giving insufficient thought to decisions can lead to disastrous results. Neal M. Ashkanasy explains how to recognise the importance of emotions while guiding decision-making towards achieving your goals and creating a healthy workplace culture

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5 LEVELS OF LEADERSHIP ORGANISATIONAL LEVEL How leaders can contribute to healthy and productive organisations GROUP LEVEL How leaders manage emotions in groups and teams INTERPERSONAL LEVEL How leaders communicate emotional states to their subordinates INDIVIDUAL LEVEL Some leaders are better at experiencing, using, and managing emotions than others MOMENTARY LEVEL How leaders can contribute to their employees’ feelings and performance, moment by moment throughout the day

Human beings are emotional. There is no getting around it. While we try desperately to appear cool and rational, and often pretend that we achieve this state, the sad fact is that we will inevitably fail. As Nobel Laureate Daniel Kahneman explains in his book, Thinking, Fast and Slow, even decisions ostensibly taken at the highest levels of government and finance are inevitably coloured by the emotional states of leaders. Moreover, many of these decisions are based on spur-of-the-moment so-called intuitions and more often than not lead us into trouble. It is little wonder that we live in such a chaotic world. On top of this, people cannot live full and effective lives without their emotions. Neuropsychologist Antonio Damasio has studied how people with brain damage think and behave. In one of his studies, Damasio discusses a patient named Elliot who had suffered damage to the ventromedial frontal lobe of his brain caused by a tumour and subsequent surgery. Elliot had been living a successful life before the tumour, and his IQ was in the 97th percentile. Following the surgery, however, two things changed in Elliot’s life. The first is that he became incapable of experiencing any emotions. He became a Spock-like pure rational man. The second is that Elliot’s life began to fall apart; he lost his job and his family.

5 4 3 2 1 Despite his high intelligence, Elliot would take more than 30 minutes to make an appointment; all afternoon to decide where to go for lunch. In other words, without being able to experience emotions, Elliot became incapable of making decisions. In subsequent research, Damasio and his colleagues showed convincingly that, far from inhibiting and distorting our decision-making capacity, emotions are an essential ingredient of our ability to make decisions affecting every aspect of our life. For leaders, whose role it is to facilitate organisations and their members in achieving their important goals, this poses a problem. People’s emotions play an integral role in facilitating their decision-making, but such decisions are often taken with insufficient thought, leading to disastrous results.

ACHIEVING YOUR GOALS It would seem, therefore, that a core responsibility of leaders is to manage this process; in other words, to recognise the innate importance of emotions, but to guide decision-making so that important goals are achieved. How then do they do this? My solution is based on work I am doing with Professor Ronald H. Humphrey, in which we have set out a theory of leadership based on five ‘levels.’ The five levels are:

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• Momentary level: How leaders can contribute to their employees’ feelings and performance, moment by moment throughout the day • Individual level: Some leaders are better at experiencing, using, and managing emotions than others • Interpersonal level: How leaders communicate emotional states to their subordinates • Group level: How leaders manage emotions in groups and teams • Organisational level: How leaders can contribute to healthy and productive organisations Sitting at the bottom level of our model of leadership is the idea that employees, like people everywhere, are innately emotional, in every second of their being. Everything we experience in the workplace, especially the hassles and uplifts of daily work life, results in some kind of emotional reaction. This is sometimes positive, for example joy at being rewarded for good performance, and sometimes negative, for example experiencing anger when a colleague fails to deliver. Research has shown that these emotional reactions determine how we think and behave at work. Moreover, it’s not just the big things; it’s the little things that recur over and over again that really make a difference. For instance, an employee who is constantly hassled by her or his boss may become disenchanted and lose the motivation to work productively. The implication is that leaders need to understand that everything they do and say is likely to have an emotional effect that will affect their organisation’s productivity, not to mention the wellbeing of their employees. In this case, while recognising that positive emotions are not always appropriate, a leader’s generally more positive emotional demeanour is likely to have beneficial effects.

EMOTIONAL INTELLIGENCE At the next level is the idea of ‘emotional intelligence’. Introduced to the world at large in 1995 by New York Times columnist Daniel Goleman in his best-selling book Emotional Intelligence: Why It Can Matter More Than IQ, emotional intelligence quickly became very popular among business leaders. However, it has also been described as ‘just another management fad’. There is some truth to this insofar as Goleman and other popular authors have tended to make extravagant claims that emotional intelligence is some sort of magical ingredient for a successful life.

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People’s emotions play an integral role in facilitating their decision-making, but such decisions are often taken with insufficient thought

In fact, emotional intelligence was defined by psychologists Jack Mayer and Peter Salovey as simply a set of personal abilities relating to how people perceive, use, understand, and manage their emotions. Some people are good at it, while others are not so good. Thus, emotionally intelligent leaders have the ability to sense the emotions of their employees. They understand this information and can use it to manage both their own emotions and the emotions of their employees. Relating this to the first level of the model, emotionally intelligent leaders have the ability to help their employees towards positive emotional responses that lead to productivity and individual wellbeing. The good news here is that, like intellectual abilities, while there is a genetic component to emotional intelligence there is also strong evidence that it can be improved through training.

EMOTIONAL LABOUR The third level of the model concerns the way emotions are communicated. The core concept here is ‘emotional labour’. First proposed by sociologist Arlie Hochschild in 1980, emotional labour involves the notion that employees can be remunerated for displaying appropriate emotions in their interactions with clients and customers. For example, a flight attendant is expected to maintain


a positive demeanour irrespective of how they are feeling. Hochschild pointed out that this can be done in one of two ways: an employee can employ ‘surface acting’, when they will try to feign the emotion; or they can use ‘deep acting’, when they will try to imagine being in the emotion, rather like ‘method acting’ used by movie actors. Research has demonstrated that deep acting is not only more effective than surface acting but involves less effort. In fact, employees who engage in too much surface acting tend to become emotionally drained and are prone to suffer from burnout. More recently, together with Ronald Humphrey, I proposed that good leaders can manage the emotional states of their employees using emotional labour, and especially deep acting. An effective leader will use his or her emotional intelligence ability to know the appropriate emotional expression to display to subordinates and then use deep acting to do so. Such a leader will thus be

able to display the right emotions needed to facilitate employee productivity and wellbeing.

EMOTIONAL CONTAGION The next level of the model involves the role of leaders as facilitators of group or team performance. Here the underlying mechanism is ‘emotional contagion’, a process whereby employees ‘catch’ the emotional state of their leader. This idea was first proposed by psychologist Elaine Hatfield and her colleagues and involves unconscious mimicking of the emotional expressions of others. More recently, emotional contagion has found support in the discovery of ‘mirror neurons’, whereby the brain detects other people’s emotional states and automatically responds with a matching emotional state. In fact, researchers have demonstrated that emotional contagion has a powerful effect on group and team members’ emotional states. Thus, emotionally intelligent leaders who are aware of their

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Mark Woolnough

Woolnough is the first to admit he can make mistakes. He knows what it takes to lead a successful broking team, and the challenges that come with it. “We all know the theory of what it takes to be a good leader, but the hard part is taking that theory and making sure you don’t just talk about it but you use it and you are true to it,” he says. “There are times as a leader that you can contradict yourself and be hypocritical in terms of what you suggest leaders should aspire to and what you actually execute. I’ve done it.” But there are some practical steps you can take to walk the talk as a leader.


Planning and strategy feature prominently in theory, but the key to making it work, says Woolnough, is simplicity. He often uses a ‘plan on a page’ principle to help his team, and himself, ensure that their actions line up with their business goals. Understand the goals of the business, the steps needed to achieve them, and how each team member will contribute – with enough precision that it can be presented on a single page, says Woolnough. “Have that visual in front of your team and around the office, and make sure your communication and presentations to the team going forward all align back to that plan.” Being approachable is crucial, he adds, but if smaller issues threaten to suck you into “a vortex of detail”, it’s time to delegate and focus on that bigger plan.


Neal M. Ashkanasy, PhD, is professor of management in the UQ Business School at the University of Queensland. He is a Fellow of the Academy for the Social Sciences in the UK and Australia; the Association for Psychological Science; and the Society for Industrial and Organizational Psychology; and a Life Fellow of the Australia and New Zealand Academy of Management.

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A common leadership pitfall, says Woolnough, is trying to “call all the shots, pull all the strings and determine how your team do things” from day one. Strong leadership is important, he says, but unless you know your team, you won’t know how to lead them.

subordinates’ emotional states and display the appropriate emotional expression using deep acting are able to affect the emotional state of their team members in a positive way.

EMOTIONAL CLIMATE At the top level of the model is the idea of an organisation’s ‘emotional climate’. Sociologist Joseph de Rivera describes this as something that “can be palpably sensed – as when one enters a party or a city and feels an attitude of gaiety or depression, openness or fear”. Clearly, however, this can go either way. Some organisations are characterised by a climate of

“Ease into the role and ask a lot of questions. Ask them what works and what their challenges are, so that when you come up with your plan you can present it in such a way that actually shows the team that you’ve taken on board their thoughts and concerns.”


If you don’t improve your skills as a leader to keep pace with your team, you can risk losing your authority, says Woolnough. “If the lower part of the hierarchy moves forward and the rest is not moving at the same pace, you end up with this enormous, highly concentrated bubble of people all trying to do similar things,” he says. To stay on track, he suggests having a mentor outside of your business area who you have common ground with but who is not so involved in the day-to-day running of your business that they get caught up in the details.


At the end of the day, it’s OK to be you, says Woolnough. “You should hold your frustrations and hold your stress, but people also need to see you for who you are, and people need to know who their leader really is. “I think it’s important for the team to see the various emotions and passions of their leaders. Emotion can be strong or negative. Don’t try and dissipate those strong emotions of pride and achievement; celebrate those successes, but also don’t cotton wool those negative emotions.” You won’t always act the way the textbooks say you should, says Woolnough, but with a little reflection, simplification and self-awareness you can act in a way that always gets the best out of your team.

fear and are unhealthy places to work. Other organisations whose leaders are emotionally intelligent and appropriately transmit positive emotional cues to their employees become ‘healthy organisations’. This is the real power of positive emotional leadership: to manage emotions across the five levels, culminating in a positive workplace climate. Together with my colleagues Catherine Daus and Charmine Härtel, this is something I have been advocating for some time: that it is possible to develop healthy organisations, where members can broaden and build ideas, and are able to thrive and to prosper.


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PRODUCTIVITY HOW TO SET AND PRIORITISE YOUR GOALS In an extract from his latest book, Extreme Productivity: Boost Your Results, Reduce Your Hours, Robert C. Pozen explains the secrets of goal-setting, and getting your priorities right

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Many executives are whirlwinds of activity, racing from meeting to meeting or crisis to crisis without giving much thought to the rationale for their hectic schedules. Many of those professionals like the feeling of doing something; they are not comfortable reflecting on their priorities. Their typical approach can be described as ‘Ready, fire, aim!’ Others get bogged down in schedules dictated by their companies, or spend most of their time responding to ‘urgent’ requests from others. As a result, those energetic, ambitious people end up spending too little time on activities that support their highest goals. Despite their talent, they often report a serious mismatch between their work priorities and time allocations. No matter what your career aspirations are, you should begin by thinking carefully about why you are engaging in any activity and what you expect to get out of it. In this article, I will walk you through an exercise to establish your

Energetic, ambitious people end up spending too little time on activities that support their highest goals


In an environment of slow credit growth and flat revenue, productivity can be the key to maintaining momentum, says Kathy Cummings. “By addressing productivity a broker can improve efficiencies which will deliver a better customer experience, resulting in increased customer satisfaction and possibly allowing for reinvestment of resources through time saved.” Ever-increasing regulation in the industry, says Cummings, is another reason why brokers need to take a serious look at productivity. “Regulation and compliance is raising the cost of doing business. This can be offset by harvesting waste and cost from existing rework and poor process,” she suggests. One of the simplest ways to do this, says Cummings, is to remove the need for rework from your business day. “Do things right the first time. Avoid errors in the application and ensure all documentation is collected and delivered with the application at time of submission. “Having all required documentation will reduce the wait time for decisioning and helps to take the customer off the market.” A high workload can also lead to brokers failing

to thoroughly check applications. This can result in excess processing, Cummings says, taking even more time out of a broker’s work day. “If they are printing documents at point of sale, they must check for errors and ensure the customer has signed before submitting the application.” A detailed business plan, with well-documented objectives and goals, also helps to identify which tasks and processes are helping the business reach its targets, and which are simply superfluous, says Cummings. Tools such as visual management boards are great for helping brokers track their business. And finally, a clean, organised workplace and well-documented processes are an easy and practical way to lift productivity. “This will help to reduce the amount of time spent looking for things, and prevent staff from doing the same thing twice.” Keeping these simple things in mind during the work day, Cummings says, can help brokers see more results in less time and, ultimately, boost their bottom line: “Happy customers mean more referrals, which leads to more business and increased income.”

Kathy Cummings

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Brendan O’Donnell

“We realised we needed to have a clear differentiation around what we can offer brokers and customers, new ways that we can meet their core needs.” This, says Brendan O’Donnell, was the driving force behind the launch of its iPad application Spark. The introduction of the mobile, end-to-end loan application platform has boosted productivity by at least 30%, he says. “We thought if we can provide a technology platform, with the right process behind it, that saves brokers time, money and improves their productivity, they’re obviously going to put their hands up and say they’re interested.” Liberty’s internal research showed that most loan applications required a minimum of two to three meetings. Spark, says O’Donnell, allows advisers to “wrap up” a client with one interview, inclusive of doing the right thing by NCCP. The platform allows advisers to have all documents, client details and records of discussions located in one place, while allowing easy transfer of documents to both lenders and clients and improving the mobility of advisers, says O’Donnell. “There are a lot of apps out there, but this is the only app that really drives total end-to-end loan submissions. Everything from leads to post-loan relationship management is all sitting in one environment.” The user-friendly application has been welcomed by advisers, he says, with many positive responses around ease of use and improved processing times. “With an aging broker population, a lot of our advisers are older and they, too, have embraced the new technology and really enjoyed it. We’ve had great feedback from our advisers and we’re very pleased with the results.”

If you spend all your time responding to crises and tasks assigned by others, you can only tread water 52 | AUGUST 2013


ales Hire more s  fits by 15% ry day’ Increase pro  unity histo m m o ‘c in Participate  ve at chain top executi a e m o c e B  tech expo erience  Attend a tomer exp s u c t n a s a s Create a ple  ort for bos ly sales rep k e e w te ri W  ner terior desig  Hire an in dustry le in retail in Meet peop  anagers rea store m a h it w t e e M  ier offices  Get fanc strategy l marketing a c lo a p lo Deve  ndards for rmance sta o rf e p e n fi Re  sales staff

highest-ranking goals and to determine whether your actual schedule is consistent with this ranking. This process has six steps:



On one or two sheets of paper, write down everything you are required to do in your professional life. This includes all those routine tasks in your job description that you have to do on a daily or weekly basis, such as filing reports or reviewing documents. It also includes any longer-term projects assigned to you. But don’t stop there; if you spend all your time responding to crises and tasks assigned by others, you can only tread water. To get ahead, you also need to think about what you want to do. These may be long-term goals, such as advancing your career, or they could be short-term goals, such as developing a new skill or meeting more people in your industry. On the same sheet of paper as your assigned tasks, add these aspirations for your work. Don’t worry about separating tasks and goals; just jot them all down. We’ll organise them in step two.



“Staff morale has increased, staff ownership and the roles that they’re undertaking have increased, teams are feeling more empowered to make decisions,” says Justin Doobov, describing how things have changed at Intelligent Finance. “Instead of me coming up with plans for training, they’re feeling empowered to come up with their own. Volumes have increased, the amount of rework has dropped, and there’s just a better flow through the office.” In 2012 Intelligent Finance was already one of the country’s top brokerages, winning a slew of awards from broking publications across Australia, but there’s always room for improvement, he says. “We thought we had very good systems in place, and we did, but [CBA] saw ways that we could make them even better, and that’s something we’re always happy to look at.” Representatives from CBA conducted staff interviews and reviewed Intelligent Finance’s processes and documentation. Staff then spent five days out of the office in specialised training. “It was a real eye-opener, how much the bank wanted to support our business. I was really impressed. It was about finding those gaps that

To illustrate, I’ve completed this exercise from the perspective of the manager of one retail outlet of a consumer electronics chain. I’ll call him Joshua. ‘Joshua’s list’ (see opposite page) contains 13 tasks that Joshua must do – or wants to do – at work. I use this example to illustrate the concept of setting your priorities. Please be as broad as possible with your list. The point is for you to capture all your tasks and goals here; you’ll evaluate whether they are significant later on.



The next step is to divide your list into three time categories: career aims (five-plus years), objectives (three to 24 months), and targets (one week or less). See ‘Time categories explained’ overleaf. Some goals won’t fall neatly into one category; consider each on a case-by-case basis. If it’s a relatively quick and simple goal, assign it to the shorter time period. If it’s long and requires many cumbersome steps, make it part of the longer time period.

maybe you wouldn’t see yourself but someone from the outside can.” CBA then worked with Intelligent Finance to rebuild and re-document all existing procedures with an aim of enhanced efficiency and consistency. “We had certain processes in place, but everyone was doing it slightly differently so that every customer might have a slightly different experience, depending on who was working on their file. “We’ve now got a consistent way that we do it, so that if someone is away anyone else can pick up that file they’ve been working on and run with it. “We’ve also created more structure, visually. Now you can see where everything is and where we’re up to, whereas prior to this brokers filed their things away the way they thought was best.” Many brokers may decide to follow the old adage ‘If it’s not broken, don’t fix it’, says Doobov, but a few simple changes can turn a good system into a great one. “If you keep your eyes wide open and trust the process, it really does work. A lot of people might try to fight it, but in the end the benefits are absolutely worth it.”

Justin Doobov



Write down everything you are doing, or are planning to do, in order to achieve your professional goals




Organise the items by time horizon: career aims, yearly objectives, and weekly targets


Rank your objectives by their relative importance, taking into account what the world needs as well as what you want

Rank your targets by their relative importance – both those serving your objectives and those assigned to you Estimate how you actually spend your time, and compare that with your prioritised set of objectives and targets


Understand and address the reasons for mismatches between your goals and your time allocations

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TIME CATEGORIES EXPLAINED Career aims: These are long-term goals over at least five years. For example, a young law school graduate might have a career aim of becoming the general counsel of a company or a partner in a large firm. Or perhaps even both. Objectives: These are the goals for your professional life over the next three months to two years. They typically require many intermediate steps. Objectives could include completing a systems project, doubling the sales of a product, or developing a new organisational structure. Targets: These are ‘action steps’ that should guide your work on a weekly or daily basis. For example, your targets could involve writing a short report, resolving a client’s problem, or finishing one part of a larger project.

Next, make sure each of your objectives has one or two associated targets. If any of them lacks a target, think hard about the next actionable step you can take to advance that objective, then add it to your list of targets. For example, if one objective is to double the sales of a product, a target for the next week might be meeting with a large vendor to make a sales pitch. If it is to publish a research paper by the end of next year, a target may be to start writing a grant request to get your experiment funded. Here is Joshua’s list of career aims, objectives, and targets:

Robert C. Pozen is a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution. He graduated summa cum laude from Harvard College and holds a law degree from Yale, where he also obtained a doctorate for a book on state enterprises in Africa. He has served on President Bush’s Commission to Strengthen Social Security, and as Secretary of Economic Affairs for Massachusetts Governor Mitt Romney.

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Make sure each of your objectives has one or two associated targets



• Become a top executive at chain

• Hire more sales staff • Meet with area store managers • Participate in ‘community history day’


• Attend a tech expo

• Increase profits by 15%

• Write weekly sales report for boss

• Create a pleasant customer experience

• Hire an interior designer

• Meet people in retail industry

• Develop a local marketing strategy

• Get fancier offices

• Refine performance standards for sales staff

Once you have sorted your goals into these three categories, put your career aims aside. Planning your career as a whole is a complicated process, which I explore at length in my book. For now, focus on the medium-term and short-term goals – your objectives and targets. These will determine how you should be spending your time on a daily basis.

From the book EXTREME PRODUCTIVITY: Boost Your Results, Reduce Your Hours, by Robert C. Pozen. Copyright © 2012 by Robert C. Pozen. Reprinted courtesy of HarperBusiness, an imprint of HarperCollins Publishers.


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TRANSITIONING: The Third Space The key to success in business is the ability to leave behind the baggage from your previous interaction and show up at the next one with a mindset that will help you gain the maximum amount of value from it, and create satisfied customers who will help drive your business forward. In an article based on his book, The Third Space, Dr Adam Fraser explains all

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Working in the financial services industry you are faced with many challenges. Keeping clients happy, managing the expectations of stakeholders, and keeping up with constant regulatory changes are all in a day’s work. Of all the challenges you face the greatest one is the huge number of hats you have to wear on any given day. One moment you are playing counsellor to a client; the next you are wrestling with a frustrating bank system; then selling your expertise to a prospective client. Finally you are expected to go home and turn off from work and engage with the people in your personal life. The challenge is how do you perform at your best in each space you inhabit and not carry a bad experience into the next one? I first came across the concept of transitioning when Jim Loehr’s research showed that there was


very little difference between the top 100 male tennis players in terms of speed, accuracy and power during the point. Where the elite players differed was what they did in between the points. First of all the elite players were able to reflect on the previous point and not carry what happened into the next point. Secondly, they were able to relax their bodies, which calmed their minds and conserved their energy. Finally, they moved into the next point with a focused, optimistic mind. It was not what the elite players did during the point; it was what they did in between the points that made them the best. We are just like the tennis players moving from point to point: our lives are made up of moving between different spaces. The first space is the role/environment/task you are in now; the second space is the role/environment/task you are about to transition into. For example, you may go from checking emails at your desk to sorting out a personal issue, or you may go from an internal meeting about the strategy of your business to an external meeting where it is about your client’s world. Each space requires us to be different things to different people. The key to success in business is the ability to use the ‘Third Space’ (the transitional gap between the first and second) to leave behind the baggage from the previous interaction and show up at the next one with a mindset that will help you gain the maximum amount of value from it.

DON’T TAKE WORK HOME One of the transitions we struggle with the most is the transition from work to home. In our research we found that people often carried the work mindset into the home; that is they tried to run their homes like their offices. This mindset is obviously not conducive to the home. Our research found that only 26% of people came home with a positive mindset and only 43% came home in a good mood. We set out to determine if the transition between

work and home could improve mood and mindset. After three years of research we found the magic formula. The perfect transition between work and home consists of three elements: Reflect: This is where you reflect on the day. The key is to reflect on the positive things that happened. Specifically, what went well, what did you achieve and how did you get better? This activity gives you a burst of happiness and optimism. Rest: This is where you take time to be calm and focus on the present moment. This step relaxes the mind and sets you up for constructive behaviours. Reset: The final step is where you become clear about your intention for the home space and articulate the specific behaviours you want to exhibit. This final step has a dramatic impact on people’s behaviour as it elevates their self-awareness.

Dr Adam Fraser is a leading researcher and expert in human performance. He has worked with elite athletes, the armed forces, and business professionals at all levels. He is at the forefront of how neuroscience and positive psychology can be used to improve workplace performance.

In one experiment we asked a group of smallbusiness owners to practise these three steps between work and home. After a month of practising we saw a 41% improvement in their behaviour in the home.

A POSITIVE CUSTOMER EXPERIENCE NEEDS THE RIGHT MINDSET This strategy also applies to our business day. Business owners in the financial services space have had to alter the way they interact with clients dramatically. They are expected to take a holistic view of their clients, talk to them about their hopes and dreams, manage their emotions, and spend more time justifying the fees they charge. We all struggle with change. In fact, 75% of change efforts in the workplace fail. One of the reasons we fail to change is that we get busy. We might go to a seminar about improving our business and write down some great strategies. However, we get back to the office and are greeted by 150 emails and a panicked phone


FIRST SPACE Role/environment we are now in



Role/environment we are transitioning into

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“Giving great service to the customer and really thinking about each client as an individual is paramount to ensuring they receive the best service, which keeps them coming back and also referring the business,” says Glenn Gibson. No matter how many other demands there are on a broker’s time, clients need to feel that their broker holds their needs as top priority, he says. Taking a proactive approach to customer files by keeping in mind each deadline and then sticking to it is one of the simplest ways of achieving this. “Telling a client when they will be next contacted and by whom makes the client feel that the broker is in total control and completely focused on them,” Gibson says. “Mind you, keeping to your contact timeframes is crucial, even if something hasn’t happened in the expected timeframes. Ringing a client to tell them that something hasn’t happened is just as important as contacting them when it has.” Taking this pre-emptive approach can also help brokers’ productivity and task management by reducing unscheduled interruptions by clients looking for updates. Realising the importance of a strategy aligned to customer focus, AMP recently created a new customer solutions division and appointed a chief customer officer. “By aligning our customer focus approach both to brokers and customer we believe we will be in a better position to support the customer-first approach of our brokers,” says Gibson, who adds that being able to focus on each customer as an individual, regardless of a demanding workload, is crucial to building referrals and lifting your bottom line. “People are more likely to believe what they hear from friends and relatives than they are from advertisements. Repeat customers and customer referrals are two of the highest converting lead sources,” he says. “Delivering the optimum customer experience is not just about the first transaction but also the next one and the ones after that.  “When you consider the cost of acquisition of each new customer, including advertising, marketing, then the first repeat business halves that cost, and the benefit continues with each new interaction.”

call from a client. The change gets put on the backburner and we go into survival mode. We have run a number of very successful cultural change programs. Our strategy is simple: STEP 1: Map out what new behaviours need to be incorporated. STEP 2: Each time people move from one interaction to another they remind themselves of those key behaviours. The likelihood of incorporating these behaviours is far greater since they are front of mind. The customer experience drives your business. Services firms, more than any other sector, are built on referrals. People refer when they have had a great experience. It drives consumer behaviour. A challenge we face in Australia is that in-store retail spend has dropped. What is the average retail experience like in this country? It sucks! Staff seem more interested in updating their Facebook statuses than serving you; things are hard to find and you have line up to be served. People are increasingly shopping online because the store experience is terrible. Yet Apple makes 50% of its profit from in-store shopping and is the most profitable store per square metre of space on the planet. When people were asked why they shopped at the Apple store rather than going online, they said it was because of the experience. They loved going to the store: it was fun; it was cool; it felt good to be in there. When I recently asked my Facebook community to refer me to a financial planner and a mortgage broker, the reasons they gave for recommending people all revolved around the experience of dealing with them. It was things like: “They really listened to us and understood what we wanted from our financial plan”; “She was really nice to deal with, listened to us and took her time”; “They didn’t just push products on us, they understood our risk profile and tailored the plan to meet that”; and “Their level of service and care went above and beyond; they spent time understanding our needs and determined what was the best loan for us”. How we interact with our clients determines if we are successful or not. As you transition into every client interaction, ensure you use the ‘Third Space’ to get yourself into the right mindset to give your clients a positive customer experience. Ask yourself: “How am I showing up?” The better you show up, the more you will create satisfied customers who will help drive your business forward.


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Done well, outsourcing can streamline your business significantly. Dr Anne Rouse explains the pros and cons Some of the most important choices facing businesses today are which services to outsource and how to manage outsourced services. Note that I didn’t say “whether to outsource”. Sourcing decisions are becoming core to all firms, even small ones. Industries in which outsourcing has had the greatest impact are those dealing in informational products – IT, finance, business services and design. In these industries there are increasingly rich marketplaces of service providers, accessible, in some cases, only over the internet. Stories about outsourcing told in the press, and even in MBA textbooks, can be misleading. Many

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oversell the benefits of outsourcing, and while those that discuss risks are usually accurate, they are often vague about how to manage these. Outsourcing is different from using contract staff; it is when a firm contracts with another business to provide specified services to an agreed standard, for an agreed price. While most successful managers know how to direct and manage staff, fewer know how to manage an outsourcing arrangement successfully. That calls on new skills in specifying requirements; negotiating trade-offs and often-complex price schedules; and working cooperatively with another firm.


It is more difficult now because firms usually deal with several outsourcing vendors, supplying a range of services that often interact in surprising ways. So what can you do when approaching an outsourcing challenge?

TRADE-OFFS Outsourcing is all about trade-offs. As with projects, you can get fast access to services, reduced costs, and customised services from outsourcing, but not all three at once. Many firms turn to outsourcing because they have an immediate need. Amazon, for example, took advantage of many outsourced services in its early start-up. But over time Amazon realised that outsourcing all its warehousing (and other services) had downsides, and the firm brought in-house several of the services initially outsourced. Some firms certainly do save money by outsourcing, but normally only when the vendor provides a range of standard services to a large customer base, thus reaping economies of scale. Much successful outsourcing also occurs when firms have no capacity to deliver the services in-house in the short term – there is no choice but to outsource. In this situation, keeping requirements ‘vanilla’ ensures the lowest costs. With all outsourcing, costs saved have to be offset against the additional costs of negotiating with and choosing the vendor, specifying service requirements, and managing the arrangement. These costs are usually substantially underestimated. Many firms find they unexpectedly need to call upon outside consultants (more costs!) to help them in specifying, negotiating and contracting with their vendors, particularly when things go wrong.

FIXED TERM An outsourcing arrangement is not for life but for a fixed term, at the end of which many additional costs will be incurred. A truism is that you should plan for the divorce when you ‘marry’ your vendor, but a better analogy is that your vendor is your ‘date’ – likely to be replaced eventually. It is best to choose services with a ready market of alternative vendors, and those that are modularised, so that it is easy to move from one vendor to

While most successful managers know how to direct and manage staff, fewer know how to manage an outsourcing arrangement successfully another. And plan for the ‘dating’ (transaction) costs. Many firms hope their vendor will be responsive. Most vendors are customer focused, but there are limits. Highly responsive, customised reactions are expensive to provide. Your firm is likely to have most success when your response expectations are typical of other customers; the force of numbers will encourage vendors to provide increasing levels of typical service to their customer base. Purchasers of outsourced services need a clear understanding of the services and standards required, plus the capacity to articulate these well to the vendor. This results in an unambiguous contract, with fewer misunderstandings down the track. This is a tough challenge, even when you currently have a deep understanding within your firm about these services. Even then, the meaning of terms will vary in organisations with different cultures and histories, leading to misunderstandings.

CONTINGENCY PLANS Outsourcing of even well-understood services lasts for some time, and few firms seem able to forecast their future requirements in detail adequately. The best strategy is to recognise that even the most well-thought-through business case will have very high levels of uncertainty. So firms need to plan for substantial contingency costs, and for the costs of changing vendors if things don’t work out. The most successful outsourcing arrangements I have seen have recognised, and factored in, these inherent costs. Finally, outsourcing means sending data outside your firm, making it more vulnerable, particularly if sent offshore. Your firm still holds responsibility for protecting all outsourced data; neither customers nor governments forgive if sensitive data is breached in a vendor’s hands. You must ensure that data cannot be stolen or damaged – don’t just rely on contractual terms.

Dr Anne Rouse is an associate professor at the Deakin Graduate School of Business, where she teaches innovation management and business consulting. She has been researching outsourcing since the late 1990s, and is author of the book ‘Negotiating and Managing a Successful Outsourcing Arrangement’.

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1 0 OUTSOURCING 1 Loanworks Technologies general manager, sales, Wayne Macartney answers the key questions about outsourcing mortgage broking processing to the Philippines How much of a mortgage broker’s processes can they realistically outsource to a country like the Philippines? Generally you start with the most routine tasks such as straight data entry, then once you’re comfortable you can build on that, for example chasing up supporting documentation and following up the loan with the lender. Appointment setting is another example; with IP telephony, location is irrelevant, so phone calls and emails can also be managed, whether as a personal assistant up to a fully fledged call centre. We can train people to Cert IV Finance and Mortgage Broking, so there’s theoretically nothing they cannot do, subject to the broker’s comfort levels. The advantage is that you get a skilled, motivated

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workforce at a lower cost base. The broker can then focus on growing his or her business, meeting and genuinely helping clients and closing deals, rather than getting tied up in administrative matters. How can brokers monitor their overseas staff? Our staff report directly to the broker and use his or her software. We can also provide our Loanworks software platform which is cloud-based in an Australian data centre so that a broker can track activities across a team of processing staff. We work with the broker to further automate workflow so that email and SMS notifications and follow-ups can be sent both to the client and back to the broker, either as confirmation of progress or if something needs escalation. This approach also helps ensure consistency of service. Our local operations team can assist in tracking performance against SLAs [service level agreements] or KPIs. We also supply regular attendance reporting and support monthly performance reviews. What is the pool of talent like in the Philippines? The range of skill sets is no different to Australia; and we use our local in-house HR to ensure that we attract the best talent. Most of the large US banks are in the Philippines, as are a range of Australian banks, non-bank lenders, mortgage



Many BPO [business process outsourcing]-style offerings provide cookie-cutter, least-cost service, or are only interested in large accounts. By contrast, we align dedicated staff to the broker’s policies and procedures. The remote location also raises the issue of accountability; our clients find this is not an issue as we have a management presence in both Australia and the Philippines and we can therefore engage with customers across both countries – ‘they know where we live’. How much should a broker expect to pay to a staff member in the Philippines? We can provide a full-time, dedicated, experienced resource for a little over $20,000pa.

managers and broker companies, so there’s a pool of experienced staff there already. There are approximately 12 million people in metro Manila. English is an official language, and they’re the same time zone as Perth. Our staff actually prefer working to an Australian eastern seaboard time zone as they can beat the Manila peak-hour traffic, which has to be experienced to be believed. What are the main risks involved with outsourcing to support staff overseas? The main risk is in selecting the right outsource partner. For example, an ‘ex-pat’ management model will give you ongoing headaches. We have a local general manager, HR manager and operations manager, which effectively bypasses most of the cultural issues.

What are the common mistakes that companies make when outsourcing to overseas territories? I think the industry has already learned that if you subscribe to a full BPO model where you hand over a loan to be ‘processed’ and then walk away from it, you’re likely to get a poor outcome as there’s no buy-in. Another common mistake is if you go somewhere with what I call a ‘colonial attitude’, then this will have a hugely negative impact. People are people, no better or worse, and no one likes being condescended to. Finally, if you want take the ‘do it yourself’ path, then don’t underestimate the cost and the time involved, both in terms of start-up and then bedding down the model – there’s a steep learning curve and a lot of government departments to liaise with.

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FILIPINO HR PRACTICES What is the ideal structure to put in place in a Filipino office? The organisational culture in the Philippines is more hierarchical than in Australia, so team leaders are important even in a small team – it should be clear who is in charge. Be prepared to add additional layers as the organisation grows. A local office manager or operations manager is essential; we now have a full organisational structure, for example general manager, HR manager, office manager and operations manager, albeit we’ve been in Manila for some time now. You will also need to source reliable external local advice on HR and other legal matters. Give some thought to how the offshore structure aligns to the Australian organisational structure as this will influence lines of reporting and day-to-day interactions. There’s no one ‘ideal’ structure – the ‘ideal’ structure is the one that best fits your organisation, and this may change over time. Why are brokers going down the outsourcing route? I have had many conversations with mortgage providers in Perth, Melbourne, Sydney, the Gold Coast and Brisbane, all complaining how difficult it is to recruit and retain reliable staff. I also talk to companies who are delighted with the business outcomes of their decision to outsource. As the model becomes more prevalent, many financial services companies are becoming aware that if their competitors are doing it, then they’re effectively competing against a company with a much lower cost base.

“The advantage is that you get a skilled, motivated workforce at a lower cost base” How can brokers train overseas staff in essential systems and processes? We use a combination of onsite training, webinars and regular trips to Australia. Flying staff to Australia is particularly effective for induction, as it helps cement the new staff member into the organisation and provides context and an opportunity for social interaction. It can also be seen as a motivational ‘perk’. We also encourage

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Standard work day is eight hours with overtime for extra time worked Minimum five days ‘annual’ leave; up to 10 days is common. At least 15 public holidays through the year Five days sick leave per year; private medical insurance is a common benefit Unfair dismissal laws broadly similar to Australia All laws are strictly enforced by the Department of Labor and Employment, with an active legal body working on behalf of employees Source: Loanworks

our customers to spend time with us in Manila; they come away with absolute faith in our outsourcing model and our staff. How can brokers make sure their compliance practices are up to scratch when outsourcing? We monitor that for them, but it does raise the point that if the broker’s processes are deficient then this will potentially reflect in the success or otherwise of the outsource experience. We can provide software so that the broker can fully track and audit activity. We can provide staff with Cert IV in Finance and Mortgage Broking. There is also the option for staff to operate under the broker’s ACL. How much should a broker expect to pay in start-up costs? Nothing. We charge a small onboarding fee per staff member, which covers our recruitment effort etc. Allow two to three weeks for the recruitment process, plus another 28 days if the new recruit is currently employed as they will need to give notice to their current employee. Other options are available, including dedicated, secure office space if our customer wants a self-contained team. As a comparison, if you wanted to start from scratch establishing a presence, be prepared to spend anywhere from $250,000 to $500,000, some of which you’ll only discover as you go. Factor in around two years to get over the learning curve and be fully up and running.

Mortgage Professional Australia: Business Strategy 2013  

The magazine for mortgage professionals in Australia.