An outstanding board and executive team is helping Walter and Eliza Hall Institute of Medical Research create the next chapter in its history, writes Tony Featherstone.
A cavernous hallway at the Walter and Eliza Hall Institute of Medical Research (WEHI) neatly captures the old and the new. On the left, a graphic shows WEHI’s remarkable 100-year history and milestones. On the right, a striking image of chromosomes reinforces the power of science and WEHI’s position at the vanguard of global medical research.
In the middle is WEHI president Chris Thomas FAICD, the former head of Egon Zehnder’s global board consulting and director search practice group. The 69-year-old has the great responsibility of helping WEHI become a bigger force in the future, while respecting its past.
In a distinguished career in board and executive search, Thomas played an important behind-the-scenes role in corporate Australia’s modern history. He placed hundreds of chief executive officers (CEOs) and directors and was the first phone call for many a chairman who needed to replace their CEO.
Thomas brings a different chemistry to WEHI. Over 35 years he met more than 20,000 executives and directors, studying most and remaining close to many. Thomas is a people watcher, a counsellor in corporate chemistry and as connected as one could be in Melbourne. It is hard to think of a chairman better qualified to find the right mix of directors, or one who has more useful advice for aspiring directors.
For all these skills, Thomas was a reluctant chairman. He was introduced to WEHI in the mid-80s when the famed immunologist, Sir Gustav Nossal, asked for his help in upgrading the institute’s admin and finance function, through Egon Zehnder’s pro bono work.
A decade later, Bruce Teele, the former WEHI chair and JB Were boss, asked Thomas to lead a fundraising push that would become the genesis of the institute’s financial sustainability committee. Thomas joined the WEHI board in 2001 and in 2013 was persuaded by then chairman, Leon Davis, the former CRA and Rio Tinto boss and past Westpac chairman, to lead the board.
Thomas says: “To be honest, I was reluctant at first to accept the chairmanship, probably because I was a bit overwhelmed by the calibre of my predecessors, all of whom were ex-CEOs and well known in business, but I have loved the role and found it a great fit for me.”
To outsiders, Thomas might seem an obvious choice as chairman. With a contact book bigger than most, he can help WEHI with fundraising from philanthropists. To seasoned governance observers, his appointment as chairman could have been a gamble. Unlike most chairmen, he did not have a background in corporate management or a history of board directorships.
Also, WEHI is among the more challenging governance roles in the not-for-profit (NFP) sector. It had research revenue of $102 million in 2014; capital funds of $395 million, principally through a large endowment fund that is managed internally; and employed 864 staff and students.
It is also Australia’s largest and most prestigious medical research centre, perhaps matched only by Sydney’s Garvan Institute of Medical Research. In just one area, the haematology work of the late Professor Don Metcalf, who spent 60 years at WEHI, and other researchers, is thought to have helped 20 million cancer patients worldwide.
WEHI has a strong focus on cancer, immune disorders and infectious diseases and is a vital part of Melbourne’s Parkville biomedical precinct, the largest in the southern hemisphere. It also resides in corporate Melbourne’s DNA, reflected in the calibre of its board and the philanthropy and generosity from individuals and businesses that started and helped maintain the organisation over a century.
“As chairman, I want WEHI to be bigger, better and have even more impact in the community,” Thomas says. “But I want it to do so in a way that builds on its history, maintains the culture, and recognises the enormous goodwill the community has bestowed on WEHI over the years.”
Thomas and the WEHI board break several myths about NFP governance. The first is that consultants have less to offer boards compared to those from other professions. Most chairmen of large organisations are ex-CEOs, not consultants who earned their living from the art of headhunting.
Under Thomas’ presidency, WEHI has just completed its next five-year strategic plan, refreshed the board, maintained its high ranking in National Health and Medical Research Council (NHMRC) funding and so far has made a great fist of its centenary celebrations in 2015.
When WEHI’s director and CEO, Professor Doug Hilton, unexpectedly enters his office, which was hijacked for this interview, he immediately thanks Thomas for a great board meeting the night before. Thomas, too, feels energised from a marathon meeting and a board that has serious momentum.
The second myth is that NFP boards are somehow inferior to for-profit boards and their directors are less committed. WEHI’s board features a who’s who of the Melbourne governance community. One director, the former Orica boss and current BHP Billiton director, Malcolm Broomhead FAICD, took part in the three-hour WEHI board meeting via phone from London at 4 am.
Other directors include Australian Football League (AFL) chairman Mike Fitzpatrick MAICD; Commonwealth Bank of Australia director Jane Hemstritch FAICD; Deutsche Bank vice-chairman, Australia and New Zealand, Steven Skala AO MAICD (also vice-president of WEHI); the former secretary of the Department of Prime Minister and Cabinet, Terry Moran AC; the prominent company director Catherine Walter AM; and the theologian and former McKinsey & Company partner, Associate Professor Rufus Black. Independent directors also include Rob Wylie FAICD, former national chairman of Deloitte Australia and Graham Mitchell who was research director of CSL.
The 15-member WEHI board, more diverse than most, also has senior representation from the University of Melbourne and Melbourne Health. “I haven’t been knocked back yet by a candidate for a WEHI board position,” Thomas says. “The staff and what this place stands for is a great attraction. There is an atmosphere here that excites people.”
The WEHI board, arguably, is governance at its best: leaders from business, health and education who are passionate about the cause, and willing to contribute weeks of their time each year through their stewardship, for no financial reward.
Over the years, WEHI directors, touched personally or through family members by cancer and other diseases, have eagerly given back to the organisation, through their time or financial donations.
Thomas says: “The whole institute is a great monument to the philanthropy and generosity of people, first from Eliza Hall, who established the Walter and Eliza Hall Trust in 1911 with a gift that would be worth $110 million in today’s dollars.
“One of the first acts of the trust was to make a donation to establish the Walter and Eliza Hall Institute in 1915.” Several executives from Melbourne investment firms also donate their time to manage WEHI’s well-performed endowment fund.
Another myth is that NFP boards, especially in health and the arts, focus mostly on fundraising. Sustainable funding and fundraising are important issues for WEHI’s board: it wants the organisation to raise $50 million over five years to fund 100 research fellowships.
But fundraising is only part of its focus. The WEHI board was closely involved in shaping the new strategy, which aims to translate more drug discoveries into products; and it spends considerable time on corporate social responsibility issues, such as the ethical treatment of humans and animals in research, and more recently the ethical sourcing of compounds and other materials made overseas.
The final myth is that NFP boards often maintain the status quo rather than drive organisations forward and ensure they adapt to changing conditions and prosper. Thomas is acutely aware of the funding challenge for medical research as federal and state governments cut spending.
Uncertainty surrounds the proposed $20-billion Medical Research Future Fund and the Victorian Government has not increased funding for medical research institutes. “New South Wales and Queensland have lifted medical research funding and are doing more to attract scientists,” Thomas says. “Victoria risks losing an important competitive advantage.”
Moreover, the board and executive focus on WEHI commercialising more drug discoveries is an easy request in theory, but would be much harder in reality if its scientists and the organisation’s culture were not aligned with this evolving strategy.
Thomas is clearly excited by the challenge of governing WEHI and is in no hurry to take on other board roles. “You can’t help but get a buzz out of being involved,” he says. “We have some of the brightest young scientific minds in the country, and some bright old ones too, looking to make the next big discovery and help the community.”
Thomas has a personal interest in WEHI’s work: two of his grandchildren have coeliac disease, a focus for WEHI, and he is an unaffected carrier. One of his daughters, Dr Rachel Mudge, is a PhD-trained scientist who works in grants and fundraising at St Vincent’s Institute in Melbourne, and another, Dr Claire Thomas, is an accomplished novelist.
With four grandchildren and a beach house that recently burned down, courtesy of a rat that built a nest over a downlight, Thomas has plenty on his plate. A holiday house in Burgundy, France, helps Thomas and his wife Cheryl relax for two months each year, and partly offsets the stress of supporting his beloved Collingwood in the AFL.
Here is an edited extract of Thomas’ Company Director interview:
Company Director (CD): What are the biggest challenges of governing a medical research institute?
Chris Thomas (CT): The key challenge is perennial uncertainty about future funding. For every dollar received from government for research, WEHI has to find around another 60¢ to cover indirect costs. That means more pressure to raise funds from philanthropy. Unusually for a research institute, WEHI does not have a foundation and manages its endowment fund internally. Investment revenue from the endowment gives our scientists more control over their work.
CD: How important is fundraising on the WEHI board?
CT: The board needs to be very conscious of current and potential donors and support WEHI’s fundraising team. Some of our directors have personally been very generous over the years. As chairman, I am very involved in the board’s contribution in fundraising. But fundraising is not the major item on the board’s agenda, principally because we have a financial sustainability committee. Our centenary campaign goal, to seek $50 million to help attract and retain young scientists from Australia, and increasingly overseas, forms part of the broader strategy.
CD: How involved was the board in shaping WEHI’s latest five-year strategic plan?
CT: Management led the formation of the strategy and the board was involved all the way through. We had three deep looks at the strategy, and the document tabled as the final version was quickly approved because directors were so familiar with it. It’s a terrific plan.
CD: Where will WEHI be in five years?
CT: The new strategic plan has two big features. The first is about being more effective in the commercialisation process of our drug discovery, while still doing excellent science. We have a great commercialisation team and scope for further gains in this area.
The second feature is ensuring we attract enough great young scientists to WEHI though our centenary fellowships plan. As grants become harder to get, younger scientists are inevitably the first to suffer. Attracting outstanding scientists from overseas, for example from China, is another priority.
CD: How can government best help the scientific community?
CT: Governments are frustrating. The Prime Minister is a great supporter of medical research from his days as health minister, but governments these days are increasingly risk averse in research funding. Those with a wild science idea struggle to get funding and it limits the creativity of medical research.
The proposed Medical Research Future Fund would make a big difference by providing more funding and giving Australia a fund comparable to those in the United Kingdom and United States. Simon McKeon AO FAICD [AMP chairman] led a report on developing medical research in Australia. Both sides of politics agreed on its findings but little has been done. Governments must recognise that medical research is very interdependent, as different bodies collaborate with each other. I would like to see government fund equipment, which is becoming more expensive, that could be shared across biomedical precincts.
CD: How do we get the private sector more involved in medical research funding?
CT: It is very difficult. Closing the gap between innovation and commercialisation, the so-called “valley of death”, requires people from the private sector who are prepared to invest large amounts of money in high-risk ventures. Governments can certainly invest more in commercialisation programs, although not at the expense of research funding.
CD: What makes a great life sciences board?
CT: Like any board, it starts with diversity. At our last board meeting we talked about industrial relations, information technology, budget, ethics and a range of other issues. The diversity meant our directors could make a good contribution in different areas. This mixture and richness of experience comes through in our board meetings.
You also need directors who are genuinely passionate about the organisation and its cause. As a search consultant, my advice to potential non-executive directors was always to find an organisation they were seriously interested in.
At the end of the day, you cannot achieve much on your own as a director and board roles can provide low satisfaction if you are not into the cause. Fortunately, our directors deeply care about WEHI, its staff and its work.
CD: How would you describe WEHI’s culture?
CT: You tend to get two types of cultures in medical research institutes. The first is a “research hotel” where you get the best and brightest scientists, give them a laboratory and let them do their own thing. The second is about wanting the organisation to work together to do great science and have real impact for the community. That is our culture.
We have a highly collaborative culture and great sense of integrity, equality and respect for each other. The board is very mindful of this culture. You see the CEO and staff in the morning tea room, which is part of our culture and an important tradition. We encourage researchers to get away from their laboratory and mix with others.
CD: How does the board measure WEHI’s performance?
CT: Financial sustainability is fundamental to our performance and we are comfortable with where WEHI stands on that front. The board also considers information tracking WEHI’s scientific achievements: its publication in peer-reviewed journals, the number of citations of its research, its share of NHMRC funding and so on. WEHI ranked third nationally in the latest round of NHMRC funding, and we received the most funding of any medical research institute, so we are pleased with our scientists’ good work in this area.
CD: Is it hard governing a medical research institute without a life sciences background?
CT: The WEHI board always has a few members with a scientific or medical background. But it’s rare that the board gets locked in deep discussion about the science. If our CEO suddenly came to the board and said WEHI should do a lot more work on brain research, for example, we would consider it in the context of the long-term strategy, without getting bogged in the detail. WEHI’s science is very important, but its governance is much broader than that.
CD: How do you put your stamp on the board, while respecting the organisation’s history?
CT: First of all, it’s about helping our CEO, Doug Hilton, and his team, when asked. Doug’s a very entrepreneurial CEO who wants to achieve things and is like a sponge with advice from the board. A strong board and CEO relationship is vital to take the organisation forward.
I want to ensure WEHI has the best possible mix of people around the table to help management and to govern the organisation well, on behalf of its stakeholders. I headed Egon Zehnder’s global board practice for a decade, so I know how boards work. And chairing Egon Zehnder’s international partners’ meetings for a decade was a great insight into leading teams and working on complex issues. In some ways, chairing a board is easier than chairing a group of partners at a large professional services firm.
CD: Why don’t we see more senior consultants make the transition to governance?
CT: There’s this misguided mindset that the chairman should be an ex-CEO. I’ve seen some former CEOs make terrific directors; Malcolm Broomhead is an example. And others who have been disasters.
Being on a board is about making the best decision through a productive group discussion, and supporting that decision. It requires directors who are smart, willing to contribute, have opinions and are not afraid to express them, and are very collegiate. You need directors who can manage their egos for the good of the board and organisation.
Good consultants tend to know a little about a lot of things. It forces you to develop broad skills, work with lots of different people and on varied issues. These are useful governance skills.
CD: As a search consultant, you met many directors over the years. What advice could you give aspiring directors?
CT: First, be hard-nosed about what interests you. Don’t take a board role for the sake of it; being a director can be a thankless task if you don’t like the role.
Second, take great care in your first board position in listed companies. I’ve never quite understood why, but if your first role is on the board of a small company that is a bit edgy, the big end of town will not think about you for board roles. I’ve seen directors desperate to get their first board role accept the wrong
position and limit their governance career.
Third, have a good look at who else is on the board and the CEO. That will tell you more about the calibre of the organisation and the board than anything else. Finally, make contact with all the big search firms and let other directors know you are interested in a board career.
CD: You conducted or sat in on thousands of interviews. How can aspiring directors make a good impression?
CT: Be yourself. I always worried when people over-emphasised certain skills to get a tick, mostly because it might lead to them getting the role and being forever miserable. Be as genuine as you can, show your passion and integrity and if you don’t agree with something, say so. Pretending to be someone else never works in the long run.
CD: What makes a good interview?
CT: The best ones are where directors have a real opportunity to demonstrate their experience. The worst ones are where the client asks the interviewee to explain their career, despite having all that information. A good interview focuses on specific career challenges and allows both sides to probe for information.
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