The Commonwealth Bank says its latest revamp is on track, ahead, making
good gains and winning- but what about managment stability?
There’s nothing like an update of a difficult business concept to get
the powerpoints flowing, the laser pointers flashing and the executives
a’ tap dancing. And so it was with the Commonwealth Bank yesterday
when it not only updated the market on the $900 million revamp of its
mostly retail banking processes, but showed off a new branch in the
Sydney suburb of Five Dock.
And nice it is. But Crikey has news for David Murray, the CBA’s CEO,
it’s still a bank branch. However the market liked the patter, pushing up
CBA shares as Dave told investors the revamp was ahead of schedule, the
gains were bigger so far and would end up being larger. So far more
than $350 million has been spent, with a lot more to go.
A year or so ago when the revamp was announced, news of the size of the
spend and the impact on earnings in 2004 sent the CBA shares skidding,
now investors like the tune.
But while the song and dance show was wowing the market, it took
attention away from yet another departure from the top management ranks
of the CBA. Michael Ullmer left suddenly on Tuesday after apparently
losing out in a revamp and reshuffle of responsibilities with Michael
Katz, who is proving to be the ‘survivor’ in the top level of line
managers reporting to David Murray.
Ullmer was another in a now long line of talented senior managers to up
and leave the CBA. All were at one stage a possible successor to David
Murray. Some have gone to CEO jobs, but the loss of executive talent
from the top rungs of the CBA is now openly discussed in Australian
Chanticleer in yesterday’s AFR put the pro-Murray and CBA spin on the
departure, saying that Katz was now favoured to replace Murray with the
decision to combine premium financial services and institutional
banking into a new division.
That meant Michael Ullmer, who headed up Institutional Banking was out
after taking up the role to get line experience in banking following a
stint as CFO of the bank. Some other commentators speculated that Ullmer
might be heading for the talent-poor NAB as an executive, but being a
director might be a smarter move.
But the departure of Ullmer has again emphasised what an uncertain
place the CBA’s top executive ranks have become. With David Murray the
‘founding’ CEO of the bank back when it was
privatised in the early 90’s, he dominates the bank like no other CEO
has dominated a bank for quite some time. What David wants, David gets,
and if you delivery, you’re fine, but falter and who knows. The top
ranks of the CBA appear to be a pretty bleak and unforgiving place.
A smart person promoted to report to David Murrray would go for the
modular office approach with a few discrete packing boxes, because many
don’t get time to put down roots. That is unless you are Michael Katz,
who has followed Murray up the ranks of the CBA for years.
A look at the 1997 annual report shows Michael Katz as head of
Institutional Banking, along with Michael Ulmer as head of Financial
and Risk Management, as two of the three executives to have lasted as
direct reports to Murray. The other is Human Resources head, Les
Cupper. HR is not a line-management so Mr Cupper is not a contender in
the succession stakes. Katz and Ullmer were still there in 2000 along
with another promising lad from 1997 in John Mulcahy, who was head of
Australian Financial Services.
But he’s gone, along with another promising executive of the 2000 annual report, Gail Kelly, who was head of customer services.
Both have now gone on to bigger and better things running their own
shows. Mulcahy is at Suncorp, taking over from the mysterious American,
Steve Jones who gave no value at all. Mr Mulcahy has a reputation in
banking circles as being a strong leader of the ‘command and control’
Gail Kelly was head hunted by the Dragonbank to fill the gap caused by
the death of then CEO, Ed O’Neal. She has proved to doubters that she
is a very talented manager. Relatively stiff in public and continually
on message, she has got St George Bank firing and the smarter analysts
say that its St George’s gain and the CBA’s loss.
Insiders told Crikey about her abilities and rise in the CBA three
years ago but weren’t surprised when she went to St George because of
the fate of many possible successors to David Murray who have faded
after reaching the top ranks of the CBA.
It appears to be a pretty unforgiving place at the top with the current
head of retail banking, Hugh Harley, yet another manager from the
school of Key Performance Indicators, deadlines and holding
people utterly accountable. It’s apparently the way the management game
is played inside the top ranks of the CBA next to Martin Place in
But some analysts wonder about the longevity of the revamp that saw
Ullmer depart. The spin from the CBA is that premium financial services
and institutional banking fit better together so as to service the
growing of wealthy people in small and medium businesses and around the
top rungs of big business who need coddling and personal banking.
No Australian bank, except Macquarie has been able to work out a way of
handling their high net work individual customers to the satisfaction
of the customers. It’s a problem that has bedevilled the NAB, the ANZ
and Westpac, but the latter seems more content not to fiddle with its
structure at the moment, while the ANZ is now going through another
revamp with all Australian customer-based financial services being put
under the one executive.
In the ANZ’s case, the driver for this revamp was the underperformance
in the ANZ’s distribution side of the funds management joint venture
with ING; With the NAB, the business has been overcome by process,
paperwork and poor skills; With the CBA, its yet another attempt to try
and get some ‘synergy’
between its wealthier customers, who are quite often business banking
customers as well.
Then that has to be linked in some way with the Colonial First State
Funds management arm which is still not really paying its way.
That business is overseen by Stuart Grimshaw, who fled the
processs-driven embrace of the NAB and former CEO, Frank Cicutto. Much
younger than Katz and Murray, the longer the latter continues at the
top, the better Mr Grinshaw’s chances become. To be a contender, he has
to move to a line banking role soon. If that happens, that will tell
you that another succession play is in progress at the CBA and to
standby for yet another departure or two down the track.