Clarity and consistency are the antidote to crisis and complexity, argues CEO turned non-executive director Ross McEwan CBE, who also wants to ease the reporting burden and get boards pushing back more assertively.
Stepping into the boardroom as a director after more than 30 years as an executive and CEO, Ross McEwan CBE jokes that as a newbie non-executive director, he has plenty to learn. Notwithstanding his self deprecation, he’s had a solid grounding from NAB’s own board dynamics as it reset after a scarring 2019 Royal Commission.
“I was blessed to have a really good board at NAB, both for what they did and what they did not do,” he says. “One was to challenge, in a way that was challenging without being confrontational — and the chair dictates that. The support they gave to the CEO and the executive was outstanding with that challenge. They’d ask the tough questions, but they’d also be there when there were tough things going on, in real support.”
McEwan handed over to successor Andrew Irvine in April 2024, with ambitions to spend quality time with wife Stephanie and a growing tribe of grandchildren, and to pursue business interests away from a sector that’s absorbed most of his life. Conversations in the lead-up to his retirement saw him join the board of UK defence tech company QinetiQ and miner BHP. In October, he joined plumbing group Reece as an independent director.
As a farmer-owner, solving ruminant methane emissions problems is also on his radar as an investor and director of NZ agtech Ruminant Biotech Corp Ltd and its Australian offshoot, which recently won a federal government grant to fund beef cattle trials. He’s also on the board of Massey University Foundation, his university alma mater, helping raise funds for its 2027 centenary.
Announcing news of McEwan’s appointment to the BHP board in March, the miner’s chair, Ken MacKenzie FAICD, noted that he brought deep experience in capital allocation, value creation and with stakeholders.
“Ross also brings a strong focus on people and culture, technology and innovation,” adds MacKenzie. “He has a deep understanding of organisational transformation and brings a very strong focus on the customer and technology as a driver of change.”
McEwan’s methodology and leadership philosophy has been tested and honed during five years resetting NAB after the Royal Commission claimed its CEO and chair. Before that, he spent six years righting the floundering Royal Bank of Scotland (RBS).
Who do you serve?
Born and raised in Hastings, in New Zealand’s Hawkes Bay, with experience including National Mutual Life (later AXA New Zealand) and the Commonwealth Bank before RBS, McEwan has strong views on where organisations go very wrong and how to put things right. It starts with losing sight of who you serve.
“In my experience, where it goes wrong is that the senior team forget why they were there and it becomes about them growing, being big, important and paid well,” he says. “For example, Royal Bank of Scotland became the biggest bank on the planet, had a balance sheet of £2.4 trillion, but they’d forgotten why they were there. That’s where financial services got caught. It started looking after itself rather than its customers and colleagues.”
Clarity and consistency
McEwan’s methodology is to lean into radical simplicity and consistency in strategy and execution, breaking things down to what is essential.
“Start with the basics,” he says. “What is the business that we are actually in? Let’s be clear about that. Where do we make our money? Ask some basic questions. Where does the revenue come from? What’s our cost base? Where does it come from? What drops to the bottom line so I can understand that business? What do we do for that money and how can we do it better? And if I don’t know, I keep asking... If you ask and they don’t know, that’s a problem in itself.
“How much capital is allocated, what’s our return? That’s usually an interesting starting point, because businesses add and add over time.”
McEwan says that’s what happened at the RBS. “They were the biggest bank in the world, in 54 countries. When you boiled it down, we made most of our money out of the United Kingdom, [so] why be anywhere else?”
He says the bank had effectively gone broke and was supported by the UK government with £45b put into capital to recapitalise it. “It was huge — we had the regulators in pretty much every country in the world chasing after us because we’d done something wrong — or they thought we had. We had to see the European Commissioner [to work out] how to get ourselves out of the commitments we’d made.”
Ahead of one meeting, McEwan recalls sitting with the RBS chair, who had quipped as they were going in, “A nil-all draw would be great, Ross.”
“Within half an hour, he gives me a nudge and says, ‘We’re five nil down — we’re not doing so well,’” says McEwan “You look back and you have to laugh, because it was so serious.”
But no matter what was happening, he says you had to keep your game face on.
“Keep turning up every morning, putting one foot in front of the other, heading in a direction that is better for the organisation — and never lose your nerve,” he says. “Because every day, there would be something coming at you. Every day, you were taking a pounding.”
War stories
McEwan recalls having to take the bonuses from a dozen senior RBS leaders in the UK ahead of an announcement to markets of a huge loss. “I pulled them into the room and said ‘I cannot pay you a bonus this year, and here’s why’.
Three had guaranteed bonuses. “I said, ‘I will pay you, because I’ll never be able to recruit again if I don’t pay what I’m committed to’. Every one of those three either spoke to me individually that day or rang me and said, ‘I’m with the rest of them. Take my bonus, I’m staying’. That was the sign of a team that said, ‘I’m here for the good of the organisation — it’s not about me’. At the end of the day, we had a team of people committed to fixing it and doing the right thing.”
McEwan is a firm believer you have to pay people well, but it shouldn’t be the only reason they do the job. “They’ve got to love the business they’re leading and enjoy turning up to work and looking after people throughout,” he says.
Joining NAB when it was still reeling from the reputational fallout of the Hayne Royal Commission, McEwan found the RBS experience put a single banking Royal Commission into a broader perspective. At a London NAB staff town hall, discussing lagging engagement scores, he recalls a staff member blaming the impact of the Royal Commission. McEwan replied, “Where I’ve come from, we would’ve had a Royal Commission pretty much every month. We can deal with this together and get through it quickly if we focus on the right things... My perspective is the Royal Commission isn’t the reason our engagement scores are so bad, it’s because we’re not leading well enough. Our leadership must lead us through this.”
From a cultural perspective, McEwan emphasises leadership is about making sure people are delivering for the right reasons. “At NAB, by the end, we had a great team of people that really did see their purpose as looking after colleagues and customers. That was the driver, but it comes from senior leadership — the CEO and the board.”
Board skills
In that vein, McEwan feels that the relationship with the executive and the board — and within the board — is fundamental. “Having seen [BHP chair] Ken MacKenzie over the past few months and [NAB chair] Phil Chronican GAICD over nearly five years, they are two exceptional examples of having your board involved and giving everybody a voice in a disciplined way,” he says. “That’s a great skill of a chair to bring everybody into it. Also QinetiQ chair, Neil Johnson in the UK. They’re masterful in the way they bring people together and deal with issues.”
As boards grapple with an expanding list of ESG expectations and regulatory requirements, McEwan is concerned about the impact of the increasing complexity of governance and reporting obligations. With sustainability, modern slavery and mandatory climate reporting, he says a broader conversation is needed about the cumulative impact on board effectiveness, governance and assurance.
For example, he notes challenges emerging for companies and climate targets, citing Air New Zealand’s July announcement that it would step back from its climate targets due to delays in fleet renewal, sustainable fuels and factors outside its control. “That’s where we’re running into some difficulties — lots of promises made, good intent, but some companies are finding they just can’t get over the line,” says McEwan.
He questions whether the level of reporting detail truly serves shareholders and other stakeholders. “Can we actually see the wood for the trees? Every one of these pieces of legislation has great intent. But at the end of the day, when you line them up, put them together in a document, has anyone asked if this is what we really intended? At some point, we’ve got to ask if we’re overdoing what we’re asking of boards and executives. What can we peel back from these areas rather than just adding on?”
McEwan encourages boards to be more assertive in making decisions they believe to be right for their companies, even if they face potential backlash from proxy advisers or certain shareholder groups. “It’s not just boards, it’s audits. You talk to chairs, and chairs of committees, every board is going through this at the moment. We need to step back and have a good look at what’s required and what could be let go.”
McEwan thinks this is a factor in why fewer companies are coming to public markets. “We’re seeing this in the UK and Australia, where companies are considering whether they list anymore. This is a danger for Australia — that at the end of the day, if you don’t have to list, why on Earth would you? There’s plenty of capital around, which 20 years ago, wasn’t the case.”
Leadership lessons
In a business world overburdened with leadership models, books and fads, McEwan holds the following basics dear.
“If you’re in a bind, tell people,” he says. “It’s honesty and openness that people look for. Every morning, you’ve got to get out of bed and keep pushing towards the same cause. You have to be rock solid on the response, because everybody’s watching the CEO and how they respond to it. If you start flinching, everybody starts flinching.
“People get too caught up. I come back from holiday, I’ve read a new book and I’m going to change something? Forget it. There’s one leadership program — consistency. People want to know where you’re going, how you’re going to get there, where you’re going to put the capital and [that you’ll] stay firm to it. It goes back to simplicity. There’s nothing that complex in the world as I run it. If it was that complicated, you’d be a physicist or a rocket scientist.”
Strategy on a page
Senior colleagues have described Ross McEwan’s secret as his ability to execute on a clear strategy, to ask the obvious, simple question and not get distracted by complexity — an invaluable skill.
“You’ve got to have a clear vision about what you want to achieve, stay with it and have all the structure, the organisation, working towards it,” says McEwan. “I work off a one-page strategy. I’ve done it at the Royal Bank of Scotland and I did it at NAB and National Mutual. That one page outlines why we’re here, who we’re here for, what we’ll be known for, where we’ll grow, how we work and our measures of success.”
It was published in quarterly investor reports to show the leadership was staying firm to what it had agreed to.
“We did the same at Royal Bank of Scotland,” says McEwan. “The only thing we changed every year against the five targets was, what will we achieve this year? Because it was such a big program, we gave them a new foundational layer every year.”
This article first appeared under the headline 'Keep it straight, keep it simple’ in the November 2024 issue of Company Director magazine.
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