Executive Interview – Leslie Martin – Executive General Manager, Working Capital Services, CBA
Leslie Martin joined the Commonwealth Bank as executive general manager in December 2004 after a couple of years consulting to major organisations on banking infrastructure. Leslie had a 15 year career with Chase Manhattan Bank in Australia, New York and Hong Kong, which was followed by eight years at Westpac.
East & Partners senior consultant Paul Bartholomew spoke to Leslie about her plans for CBA’s Working Capital Services division after an intense period of re-engineering during 2005, and her views on Australia’s hyper competitive business banking markets.
You’ve been in this role for over a year now, how’s it been?
It’s been great. I have always admired the Commonwealth Bank and viewed them as a serious influence on everything we do in the banking industry, so the chance to join the Bank has been great. Although, joining was a bit like the difference between piloting a Cessna 150 and hopping aboard a Jumbo jet…that is to say very different issues and challenges. On top of that there has been a lot of excitement in the industry and also, with our new CEO joining recently, it’s been a perfect time to be here. So I feel as though I made a really good choice.
We’ve had a lot of excitement in the industry; Australia now has four major trading banks that each have a representative in a similar role to mine. Each of these individuals is relatively new to his or her position. St George is standing up a brand new team in the transaction banking / working capital services segment, and since Mark Paton at ANZ took over from Graham Hodges, it’s meant everybody in this market now has something to prove.
The other interesting thing is the new market entrants. I came to Australia in 1985, just as the new banking licenses were being handed out as part of deregulation, so I was one of the "Magnificent 16". However, only a few of us are left and we certainly don’t look the same as we did in 1985. The market now has a similar kind of feel to it, with big competition for deposits and transaction banking. It is almost a kind of renaissance.
You had quite a break from the banking industry and spent time consulting before coming back to the Commonwealth Bank.
I actually had a big break and consulted with my family for a long time. As a result, I’m really happy to be back with a commercial bank because it’s where I’ve come from, it’s a happy return. The consulting scene was intellectually interesting but not emotionally satisfying in quite the same way as a good old commercial bank.
How did you find the environment of a commercial bank after your time consulting?
Well, remember I’d already had almost 15 years with Chase Manhattan Bank, which at that time was really a commercial bank, as distinct from the investment bank which I believe it has now reinvented itself to be, at least internationally. I also spent eight years with Westpac, so it’s really a return to normalcy and a return to my roots.
2005 saw an incredible amount of internal re-engineering taking place inside all banks and new entrants coming into the market. As a result, 2006 is going to be a huge year in the business banking markets in Australia. How do you see CBA positioned in light of this competitive environment?
We’ve got a really solid position of strength. We are expecting delivery of our internet banking product this year, which is going to dominate our landscape. We have now rolled out our CommSee service platform through much of the Bank. I believe that in the long term, this will give us quite a sustainable advantage in this market. So this, in addition to some fantastic new products we will be launching this year, will position us strongly in the next cycle.
As much as we‘re organised for transacting electronically, there is still an important role for physical networks, such as branches and other distribution channels. So if we’re not on our toes, we’re going to be the big defender. But for a whole host of reasons, a lot of the investment we’ve made in technology under the aegis of Which new Bank is going to start becoming discernible to customers. I would also say we’re thinking about it in terms of combinations and permutations of capabilities that will change the customers’ lives, which is different for us. We’ve had a really strong product centric proposition particularly in Working Capital Services but we’re shifting that to a customer solution approach. You can ask why that’s different, and if it was one of our competitors sitting here I’m sure they’d say they were also customer centric, solution oriented. But there’s something really exciting about big product positions turned to the customer’s benefit; you can do a lot of things that are surprising. And because what we do is so intimately tied to the everyday business of our customers, a lot of their inertia works in our favour, the trick is to make sure your customers know what you’re doing and how you’re thinking about it, and within a certain amount of acceptable parameters they will give you the benefit of the doubt, and thank goodness for that.
An interesting area for the bank is that according to our research, it is performing quite strongly in transaction banking across the market segments that we cover. But when it comes to measuring the Bank’s share of customer mind, CBA’s metrics aren’t as strong, which indicates that the Bank isn’t conveying its strengths to the market as effectively as it might. Trade Finance is a good example of that.
We’ve got a new Trade platform for engagement and a strong story to tell the market. 2005 has been the year of re-engineering and 2006 is going to be the year of the sales and marketing push. This will involve a certain amount of training and a certain amount of targeted advertising. Not above the line advertising but targeted so we start shifting the market’s perception of the Commonwealth Bank as a trade bank. We’ve been maintaining good grades for our quality of service and I’d like to think that the next time there’s a Trade Finance survey; we will receive a positive reaction from customers for innovation as well as service.
Small businesses often respond strongly to the idea of striking up a relationship with a "challenger" bank, such as a St George or BankWest, perhaps because they also consider themselves to be challengers in the business world. On the other hand, the Commonwealth Bank is viewed as a mainstream, stolid, not particularly "sexy" bank. How do you go about modifying this image?
Important work with our brand is currently underway at a Bank-wide level, and we’ve certainly captured the hearts and minds of the wider community since we dramatically changed our performance in the business banking space. I think a combination of these two factors will lead to new positioning in this market. We may be stodgy, but we’re safe. People trust us in quite an important way and we’d never want to abrogate that trust.
There’s been an incredible amount of hunting and recruiting of relationship managers over the past 18 months. Are you looking to boost your sales team?
We are certainly looking to boost it; we’ve had a lot of exits and entrances. My own view is that the Commonwealth Bank is a fantastic training ground for people, so at some level we’re always going to be vulnerable to poaching. However, at another level, it is very annoying. Although, we’ve stolen people from other places so it’s a bit of a market merry-go-round and that’s apparently about finding career growth in a field that’s recognised and specialised. There is an excellent system for career progression within the CBA so we always feel happy when people move somewhere else within the Bank. We’re at a point where the technology and the competition almost guarantees that we’re going to go through one of those staff cycles. The issue is navigating that as constructively as possible and using it to get some real perspective into the place.
Has it been hard keeping the business going with a lot of staff changes?
It has been inconvenient but it hasn’t stopped much because the businesses have a rhythm of their own. For the most part we’ve seen it as a growth opportunity for some people.
Since you’ve been in this role at the CBA, what kind of building blocks have you put in place?
I’ve put a new structure in place that is designed to get cross border engagement. We had a very strong product team and we had a very strong sales team and I’ve taken some of the bits out of each to engender teamwork and cooperation. I’ve tried to do that in the structure and then by staffing that structure. I’ve brought in a couple of people from outside the bank, promoted a couple of other people, and brought in others from elsewhere inside the bank. So we’ve got a very strong, diverse team, and with the exception of just one person, everyone has done time with more than one institution. A couple of key players have also done time overseas so it is a very broad and deep team. We’ve done some development work in a couple of different areas, which has been about getting a product and market bias into what we do and we’re piloting those projects now.
We’ve made a really explicit decision to anchor our online banking for business offering to the CommSee proposition, which is our major Which new Bank deliverable. That gets us really close to the Holy Grail in our space of having the customer and anybody working with the customer looking at the same data in the same way. So that’s going to help us recover from being late to market and we certainly want to have a good reason for being late.
Is the Bank starting to see the benefits of CommSee?
We’re certainly starting to understand just how powerful it is to have everybody across the bank able to see the same information. I think we’ve done a sensible job training our people just in time so that they can go back to work and actually start using the system straight after training, so there’s no gap between exposure to it and using it in their job.
It has been a huge undertaking and with any new technology there’s a bit of human adaptation that’s got to happen. Generally it has gone very well. From a product perspective, we’re leveraging it in really explicit ways, so there’s buckets of upside with what you can do with it.
What are some of the other tangible benefits of the Which new Bank program for the Premium Business Services division?
I guess from my perspective as part of rethinking the business model and what we needed to do to actually be efficient, we put the back office of the three product businesses in PBS into the one team. That surfaced all kinds of engineering and researching efficiencies that we were never going to get as long as the processing and service systems were all embedded in vertically integrated businesses. In my mind this has probably been the major Which new Bank benefit. It’s improved our cycle times and our ability to understand the rhythms of the customer base dramatically. We’ve still got work to do but if you combine that with the next generation of CommSee, it is easy to see a really powerful proposition.
Which market segments do you view as offering most growth over the next 12 months?
What I find interesting about our Premium Business Services group is that it gives us great potential. Over the last 20 years, most of our Working Capital Services themes have been invented for the top end, for the Top 500. We’re now in the position of being able to shrink-wrap a lot of the capability that we built for BHP and make it available to the corner milk bar. There is resilience and opportunity associated with doing that, that’s very exciting. So I guess I’m looking for growth down the turnover tree and while the commercial segment is a happy hunting ground, I really think it is in the SME and Micro Business segments that we are going to get a lot of vibrancy. The receivables finance market is growing at a great rate of knots and the combination and permutation of those kinds of things with the operating dimension is going to give us some good growth.
The other hugely growing segment is this online high yield deposit account area. We’re in the market now with a quiet offering in this space and we’ve been mindful that at least in the relationship-managed end of business banking we’ve always been able to hold onto those funds by popping them into the money market. The online capability’s going to change that dramatically and make us more relevant for other people who had been sweeping money to other institutions. In terms of the growth in the deposits market, that online high yield space is the single biggest growing part of the APRA data that you can find so not having an offering there is a big mistake.
So in the end it’s about putting the kind of energy and focus on that day to day relationship, about doing the best you can to get rid of split banking arrangements that are prevalent at the top end and prevalent in consumer land, and increasingly prevalent in those middle tier segments. I would argue that across all the majors there’s still a lending bias to the main relationship army so we’re all faced with the challenge of getting as much share of mind and heart and interest in the relationship area, for a liability capability as much as assets.
How important is the cash flow financing and receivables area for the Bank?
We’re a big network bank so you can manage receivables through us and through our affiliates pretty well. But the game is increasingly about understanding what those receivables ought to be in advance and reconciling the receipts to the receivables and delivering a reconciled credit to the ledger, and then understanding those flows and the forecasts so well that you can actually fund shortfalls and if you don’t want to fund shortfalls you might want to securitise them. So that whole area is the next big thing. And the flipside of the coin is in payables where I believe we’ve got a strong proposition; it’s in use and abuse of the card to control the payables function so we’ve been doing a lot of work in that space. So in the supply chain for any given customer, we’re all pushing out from the business of paying and receiving to supporting the enterprise level activity, whether it’s an SAP installation or a MYOB installation. For a whole host of reasons we’re all scrambling in that direction.
There seems to be a plethora of small providers whose main game is cash flow financing to SMEs. It’s a very hot space.
A lot of these smaller providers have spotted the opportunity, had a good go at it and then exited it because you need some infrastructure and some balance sheet and you need the trust factor and assembling that for any entity other than a bank is tough. You take a group like Accelerate who were working in that space using other people’s trust, other people’s balance sheet, and other people’s infrastructure, and there’s a lot of cloth to cut to make that play. So banks should have natural homogeneity in this space but courtesy of a bit of silo logic in the product set, knitting all those factors together coherently hasn’t been that easy and obvious.
Anything else we can expect from this year?
I think we can see the shape of 2006 pretty clearly. The question is who’s going to put what kind of resource into which piece of it to make their mark. Most of us have a natural strength from which to deal the cards so there’s room for everybody.
You’ve been in this role for over a year now, how’s it been?
It’s been great. I have always admired the Commonwealth Bank and viewed them as a serious influence on everything we do in the banking industry, so the chance to join the Bank has been great. Although, joining was a bit like the difference between piloting a Cessna 150 and hopping aboard a Jumbo jet…that is to say very different issues and challenges. On top of that there has been a lot of excitement in the industry and also, with our new CEO joining recently, it’s been a perfect time to be here. So I feel as though I made a really good choice.
We’ve had a lot of excitement in the industry; Australia now has four major trading banks that each have a representative in a similar role to mine. Each of these individuals is relatively new to his or her position. St George is standing up a brand new team in the transaction banking / working capital services segment, and since Mark Paton at ANZ took over from Graham Hodges, it’s meant everybody in this market now has something to prove.
The other interesting thing is the new market entrants. I came to Australia in 1985, just as the new banking licenses were being handed out as part of deregulation, so I was one of the "Magnificent 16". However, only a few of us are left and we certainly don’t look the same as we did in 1985. The market now has a similar kind of feel to it, with big competition for deposits and transaction banking. It is almost a kind of renaissance.
You had quite a break from the banking industry and spent time consulting before coming back to the Commonwealth Bank.
I actually had a big break and consulted with my family for a long time. As a result, I’m really happy to be back with a commercial bank because it’s where I’ve come from, it’s a happy return. The consulting scene was intellectually interesting but not emotionally satisfying in quite the same way as a good old commercial bank.
How did you find the environment of a commercial bank after your time consulting?
Well, remember I’d already had almost 15 years with Chase Manhattan Bank, which at that time was really a commercial bank, as distinct from the investment bank which I believe it has now reinvented itself to be, at least internationally. I also spent eight years with Westpac, so it’s really a return to normalcy and a return to my roots.
2005 saw an incredible amount of internal re-engineering taking place inside all banks and new entrants coming into the market. As a result, 2006 is going to be a huge year in the business banking markets in Australia. How do you see CBA positioned in light of this competitive environment?
We’ve got a really solid position of strength. We are expecting delivery of our internet banking product this year, which is going to dominate our landscape. We have now rolled out our CommSee service platform through much of the Bank. I believe that in the long term, this will give us quite a sustainable advantage in this market. So this, in addition to some fantastic new products we will be launching this year, will position us strongly in the next cycle.
As much as we‘re organised for transacting electronically, there is still an important role for physical networks, such as branches and other distribution channels. So if we’re not on our toes, we’re going to be the big defender. But for a whole host of reasons, a lot of the investment we’ve made in technology under the aegis of Which new Bank is going to start becoming discernible to customers. I would also say we’re thinking about it in terms of combinations and permutations of capabilities that will change the customers’ lives, which is different for us. We’ve had a really strong product centric proposition particularly in Working Capital Services but we’re shifting that to a customer solution approach. You can ask why that’s different, and if it was one of our competitors sitting here I’m sure they’d say they were also customer centric, solution oriented. But there’s something really exciting about big product positions turned to the customer’s benefit; you can do a lot of things that are surprising. And because what we do is so intimately tied to the everyday business of our customers, a lot of their inertia works in our favour, the trick is to make sure your customers know what you’re doing and how you’re thinking about it, and within a certain amount of acceptable parameters they will give you the benefit of the doubt, and thank goodness for that.
An interesting area for the bank is that according to our research, it is performing quite strongly in transaction banking across the market segments that we cover. But when it comes to measuring the Bank’s share of customer mind, CBA’s metrics aren’t as strong, which indicates that the Bank isn’t conveying its strengths to the market as effectively as it might. Trade Finance is a good example of that.
We’ve got a new Trade platform for engagement and a strong story to tell the market. 2005 has been the year of re-engineering and 2006 is going to be the year of the sales and marketing push. This will involve a certain amount of training and a certain amount of targeted advertising. Not above the line advertising but targeted so we start shifting the market’s perception of the Commonwealth Bank as a trade bank. We’ve been maintaining good grades for our quality of service and I’d like to think that the next time there’s a Trade Finance survey; we will receive a positive reaction from customers for innovation as well as service.
Small businesses often respond strongly to the idea of striking up a relationship with a "challenger" bank, such as a St George or BankWest, perhaps because they also consider themselves to be challengers in the business world. On the other hand, the Commonwealth Bank is viewed as a mainstream, stolid, not particularly "sexy" bank. How do you go about modifying this image?
Important work with our brand is currently underway at a Bank-wide level, and we’ve certainly captured the hearts and minds of the wider community since we dramatically changed our performance in the business banking space. I think a combination of these two factors will lead to new positioning in this market. We may be stodgy, but we’re safe. People trust us in quite an important way and we’d never want to abrogate that trust.
There’s been an incredible amount of hunting and recruiting of relationship managers over the past 18 months. Are you looking to boost your sales team?
We are certainly looking to boost it; we’ve had a lot of exits and entrances. My own view is that the Commonwealth Bank is a fantastic training ground for people, so at some level we’re always going to be vulnerable to poaching. However, at another level, it is very annoying. Although, we’ve stolen people from other places so it’s a bit of a market merry-go-round and that’s apparently about finding career growth in a field that’s recognised and specialised. There is an excellent system for career progression within the CBA so we always feel happy when people move somewhere else within the Bank. We’re at a point where the technology and the competition almost guarantees that we’re going to go through one of those staff cycles. The issue is navigating that as constructively as possible and using it to get some real perspective into the place.
Has it been hard keeping the business going with a lot of staff changes?
It has been inconvenient but it hasn’t stopped much because the businesses have a rhythm of their own. For the most part we’ve seen it as a growth opportunity for some people.
Since you’ve been in this role at the CBA, what kind of building blocks have you put in place?
I’ve put a new structure in place that is designed to get cross border engagement. We had a very strong product team and we had a very strong sales team and I’ve taken some of the bits out of each to engender teamwork and cooperation. I’ve tried to do that in the structure and then by staffing that structure. I’ve brought in a couple of people from outside the bank, promoted a couple of other people, and brought in others from elsewhere inside the bank. So we’ve got a very strong, diverse team, and with the exception of just one person, everyone has done time with more than one institution. A couple of key players have also done time overseas so it is a very broad and deep team. We’ve done some development work in a couple of different areas, which has been about getting a product and market bias into what we do and we’re piloting those projects now.
We’ve made a really explicit decision to anchor our online banking for business offering to the CommSee proposition, which is our major Which new Bank deliverable. That gets us really close to the Holy Grail in our space of having the customer and anybody working with the customer looking at the same data in the same way. So that’s going to help us recover from being late to market and we certainly want to have a good reason for being late.
Is the Bank starting to see the benefits of CommSee?
We’re certainly starting to understand just how powerful it is to have everybody across the bank able to see the same information. I think we’ve done a sensible job training our people just in time so that they can go back to work and actually start using the system straight after training, so there’s no gap between exposure to it and using it in their job.
It has been a huge undertaking and with any new technology there’s a bit of human adaptation that’s got to happen. Generally it has gone very well. From a product perspective, we’re leveraging it in really explicit ways, so there’s buckets of upside with what you can do with it.
What are some of the other tangible benefits of the Which new Bank program for the Premium Business Services division?
I guess from my perspective as part of rethinking the business model and what we needed to do to actually be efficient, we put the back office of the three product businesses in PBS into the one team. That surfaced all kinds of engineering and researching efficiencies that we were never going to get as long as the processing and service systems were all embedded in vertically integrated businesses. In my mind this has probably been the major Which new Bank benefit. It’s improved our cycle times and our ability to understand the rhythms of the customer base dramatically. We’ve still got work to do but if you combine that with the next generation of CommSee, it is easy to see a really powerful proposition.
Which market segments do you view as offering most growth over the next 12 months?
What I find interesting about our Premium Business Services group is that it gives us great potential. Over the last 20 years, most of our Working Capital Services themes have been invented for the top end, for the Top 500. We’re now in the position of being able to shrink-wrap a lot of the capability that we built for BHP and make it available to the corner milk bar. There is resilience and opportunity associated with doing that, that’s very exciting. So I guess I’m looking for growth down the turnover tree and while the commercial segment is a happy hunting ground, I really think it is in the SME and Micro Business segments that we are going to get a lot of vibrancy. The receivables finance market is growing at a great rate of knots and the combination and permutation of those kinds of things with the operating dimension is going to give us some good growth.
The other hugely growing segment is this online high yield deposit account area. We’re in the market now with a quiet offering in this space and we’ve been mindful that at least in the relationship-managed end of business banking we’ve always been able to hold onto those funds by popping them into the money market. The online capability’s going to change that dramatically and make us more relevant for other people who had been sweeping money to other institutions. In terms of the growth in the deposits market, that online high yield space is the single biggest growing part of the APRA data that you can find so not having an offering there is a big mistake.
So in the end it’s about putting the kind of energy and focus on that day to day relationship, about doing the best you can to get rid of split banking arrangements that are prevalent at the top end and prevalent in consumer land, and increasingly prevalent in those middle tier segments. I would argue that across all the majors there’s still a lending bias to the main relationship army so we’re all faced with the challenge of getting as much share of mind and heart and interest in the relationship area, for a liability capability as much as assets.
How important is the cash flow financing and receivables area for the Bank?
We’re a big network bank so you can manage receivables through us and through our affiliates pretty well. But the game is increasingly about understanding what those receivables ought to be in advance and reconciling the receipts to the receivables and delivering a reconciled credit to the ledger, and then understanding those flows and the forecasts so well that you can actually fund shortfalls and if you don’t want to fund shortfalls you might want to securitise them. So that whole area is the next big thing. And the flipside of the coin is in payables where I believe we’ve got a strong proposition; it’s in use and abuse of the card to control the payables function so we’ve been doing a lot of work in that space. So in the supply chain for any given customer, we’re all pushing out from the business of paying and receiving to supporting the enterprise level activity, whether it’s an SAP installation or a MYOB installation. For a whole host of reasons we’re all scrambling in that direction.
There seems to be a plethora of small providers whose main game is cash flow financing to SMEs. It’s a very hot space.
A lot of these smaller providers have spotted the opportunity, had a good go at it and then exited it because you need some infrastructure and some balance sheet and you need the trust factor and assembling that for any entity other than a bank is tough. You take a group like Accelerate who were working in that space using other people’s trust, other people’s balance sheet, and other people’s infrastructure, and there’s a lot of cloth to cut to make that play. So banks should have natural homogeneity in this space but courtesy of a bit of silo logic in the product set, knitting all those factors together coherently hasn’t been that easy and obvious.
Anything else we can expect from this year?
I think we can see the shape of 2006 pretty clearly. The question is who’s going to put what kind of resource into which piece of it to make their mark. Most of us have a natural strength from which to deal the cards so there’s room for everybody.
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