Boardroom Conversations with Jacqueline Chow

Episode 8: Jacqueline Chow - CEO succession planning, chemistry in the boardroom, and tips on shifting from executive to board director

Jacqueline Chow GAICD is a director with Boral, Charter Hall, Coles, and nib. She’s also one of the speakers for this year’s AICD Essential Director Update (EDU). We discuss planning for CEO succession, the importance of chemistry in the boardroom, and tips on shifting from an executive career to becoming a board director. Plus, we speak about some of the topics Jacqueline will address at the 2023 EDU, including: AI, cyber security, and data protection.

Transcript

BENNETT MASON

Welcome to Boardroom Conversations, a podcast from the Australian Institute of Company Directors. My name is Bennett Mason. Thanks so much for joining us. And each episode will have candid conversations with some of Australia's leading directors, delving into their background journey to the boardroom and some of the challenges they face to with the way. Our guest on this episode is Jacqueline Chow. She's a director with listed companies Boral, Charter Hall, Coles, and nib. Before beginning her board career, Jacq was a chief operating officer at dairy giant Fonterra and a senior executive with Arnott's and Kellogg's. On top of that, Jacq is also one of the speakers delivering this year's Essential Directors Update for the AICD. And we’ll have links to that in the show notes.

BENNETT MASON

Jack, thanks so much for joining us. What was your first board position? How did it come about? And also, why did you want to be a director?

JACQUELINE CHOW

All great questions. After an executive career running consumer goods businesses, I just wanted to learn how business serve customers in completely different sectors. And for selfish reasons, I just wanted to satiate my own intellectual curiosity and my ongoing professional development. So of course, a way to broaden sector skill and experience is by building a portfolio of roles. And so hence why I pursued board governance as a career. I was thrilled when the private health insurer nib, invited me to join their board. It's the fastest growing publicly listed company in the sector and it's known for its progressive and innovative culture. It's been really fulfilling to contribute toward shifting that business from providing financial protection after customers are sick, to now providing personalised health care proactively while they're still well. What I'm very grateful for is that my first board role, my chairman and my board colleagues took a chance on me having not served as a board director in a publicly listed organisation and not knowing the sector either, which is quite a couple of pretty significant variables. But it was my customer experience that was most helpful, which is where the shift of the business model has been focussed on.

BENNETT MASON

I want to stay talking about your executive career. As we mentioned, you were a CIO at Fonterra, and you had a number of senior positions at Kellogg's and elsewhere. What advice would you have for people who are making that jump from an executive job to a board career?

JACQUELINE CHOW

My advice for people considering the career shift from executive to non-executive life is truly to first undertake, if they haven't already, the AICD’s Company Directors Course. I just think it's a “no regret” investment in your professional development, whether you change careers or not. But it is a great self-assessment on whether a non-executive career would excite you or actually make you run for the hills.

BENNETT MASON

Thank you for the plug, Jacq. We're always happy to hear someone champion any of the AICD courses. In your exec career, you would have reported to boards lots of times. Do you have any guidance or tips for execs listening on how they should present to boards and directors?

JACQUELINE CHOW

Actually, reporting to boards and having that experience in my executive life was one of the material factors in my consideration of shifting to board governance career. I just found my board directors always transcended the operating day-to-day activities of our business. And it provoked much richer, more strategic considerations than I probably would have turned my mind to. But they also sometimes went for a very deep line of inquiry on a matter that obviously was fairly material to the company's future or reputation, in a way that I didn't appreciate. So, the lesson learnt from that experience as an executive is to really pay attention to the rationale. The “why” behind the why questions from board directors and see if actively you can shift also your line of sight to maybe look around corners more than you would otherwise. Or look further afield at future horizons to anticipate better.

BENNETT MASON

And is that something you've now taken onto your own board career? Asking those sorts of questions?

JACQUELINE CHOW

I definitely wish, if I had the skill and experience I've started to accumulate now in this new non-executive career, I wish I had those skills when I was an executive. It's a very important lens, and so that's my advice for those who maybe are aspiring to make that shift.

BENNETT MASON

I've got one final question, and it's an important one, about your career. You were the GM of both Arnott's and Campbell's, two well-known consumer brands. I have to ask: did you have a favourite Arnott’s biscuit or a favourite Campbell's Soup?

JACQUELINE CHOW

Very important question. Thank you, Bennett. I always went to the classics. My favourites for both brands are those with the simplest ingredient list and have been around for decades. So, for Arnott's it's the Arrowroot Biscuit and the Campbell's, it's the humble tomato condensed soup. Great questions.

BENNETT MASON

I'll go for the Monte Carlo, and I like Campbell's pumpkin soup.

JACQUELINE CHOW

Oh, nice.

BENNETT MASON

All right, that's enough on soup. Now, let's talk a little bit more about your board career. Now, early on, you went through the AICD mentoring program. What did you learn from that?

JACQUELINE CHOW

Look, I was incredibly lucky to be able to be part of that program. It just gave me great practical tips and unexpectedly decision frameworks of how to actually think about building my first broad portfolio. That was a bonus. For sure, the basic skills of how to build a résumé for a very different career. So, I did have to quite significantly shift my résumé from an executive résumé. How to connect with the director community, which I wasn't a part of, how to seek and prepare for interviews. I had expected that for the program, but definitely what was a pleasant surprise were those decision frameworks for how to actually think about curating my first broad portfolio.

BENNETT MASON

You mentioned a second ago you learned about connecting to the director community. What did you learn about that?

JACQUELINE CHOW

Actually, what I learnt about connecting the director community is that it's an incredibly generous community of their time. And they have abundance of advice and there are more people willing to, if even if you're a stranger or not acquainted, they're more generous with their time and the advice than I had ever imagined. So, it was actually a very warm community to join and broke all my assumptions about being an opaque network of only brokering and supporting a small group of mates. It's very open and supportive group.

BENNETT MASON

Speaking of people who are kind and generous with their time, your mentor in the program was David Gonski, who will be known to many of our listeners. David's obviously a very well-known director, but what did you learn from him about governance and about being on board?

JACQUELINE CHOW

David has been the fantastic mentor and generously continues to share his advice with me and his time. I think what he's helped me most with is how to go back to first principles. So, he's taught me to really think deeply about what truly interests me. What really drives my motivation? How and where can I be most effective in my contributions? And they seem like pretty basic questions. But it's very easy, I think, to get lost in the swarm of advice and different metrics or other people's success factors. And just coming back to what will make you individually our most fulfilled and most effective, I think is great for governance and most important. And so that David has been very good in bringing me back to first principles.

BENNETT MASON

Sticking with your board career, you've got quite a diverse portfolio of companies now. We mentioned them at the top. They're all ASX listed, but from a broad range of sectors. There are supermarkets, insurance, construction materials. On the outset it might seem like a company such as Coles doesn't have a lot to do with someone like Boral. So how do you pick which boards to join? Is there something you look for?

JACQUELINE CHOW

Yeah, it's a great question. I thought carefully about how to curate my first portfolio and the connection between all of the firms I serve is their focus on the customer, which is where I can be helpful. Where I feel like I can most effectively contribute is discerning customer needs for today, their pain points for today, and anticipating where they might be needing support tomorrow.

So, number one is the customer. The second criteria that matters to me is if the organisation is eager to shift their business model to be match fit for the future. And even better if they want to adopt digital technologies, to do that, to be more productive and more effective, ideally competitively advantaged. That's the second important criteria for me. And the third is very much mutual. It is all about fit and it is subjective, and it's fit with my board colleagues. It's assessing the fit of the board team with management. Really judiciously assessing the fit between the chair and the CEO, a crucial relationship that does affect the broader board team and management relationship. So that chemistry is the toughest one to assess. But the most important of my three criteria.

BENNETT MASON

Jacq, how do you get a sense of the chemistry and the fit before you actually join the board?

JACQUELINE CHOW

Yeah, it's a great question, Bennett. Chemistry and fit seems so elusive and it feels rather subjective. And I have to confess I used to underestimate the importance of it, but it drives the effectiveness. There are ways to actually do that due diligence. For sure, the line of inquiry, not being fearful to ask those questions during an interview. What matters most? What's the purpose of the organisation, and the team? Values? They're crucial questions and often not the content of the answer, but the manner in which it's answered. Is it textbook response or is there a really effusive, passionate tone to the explanation and how personalised it feels for the individuals on the board team? I think that's a great way to assess and no doubt, meeting colleagues who know people who've worked in the organisation, professional services or customers or team members alike. You can start to triangulate and get a good feel for whether it is a culture, and the organisation has a dynamism that best suits getting the best of you, and you getting the best of the organisation.

BENNETT MASON

One final thing on your portfolio of boards. It must give you a great insight into how the economy is going. At one end you've got Coles, obviously Coles is very much focussed on the consumer. And then you've got someone like Boral, which is a different part of the economy. Do you think that helps you in your board career? You can look at different parts of the economy and how it fits together?

JACQUELINE CHOW

It was definitely part of my decision criteria to have a breadth of sectors that are often seen as bellwether signals for what's going on in the broader environment, both economically and socially. And so having that ability to tap and connect the dots on how different sectors are interacting upstream and downstream is certainly helpful. And I feel allows me to be a better businessperson to have that breadth of perspective.

BENNETT MASON

I want to talk now about some topics and governance issues. I've seen you speak before about digital transformation and innovation. Now, we saw an extraordinary amount of change during the pandemic, and we know that more change will be on the way. How can boards ensure that they really embrace a culture of innovation?

JACQUELINE CHOW

Innovation, the source of innovation and its importance, it's got to be embedded in this strategy. So, I think innovation or technology always has to serve a purpose for the customers, for the employees, for productivity. Chasing an approach just because it's a novel gimmick is definitely a sure-fire way for destroying economic value and creating risk. So, I think it's always going to be integral to the strategy. Therefore, it's always going to be led by management, who’s accountable for the business strategy, for implementing that strategy and leading the team.

BENNETT MASON

Do you review that on who's leading on innovation? Should it be the board or is the board leaving it to management, to the IT department? Sometimes even outside consultants?

JACQUELINE CHOW

I always have a point of view when it comes to innovation or technology, that management should lead it. And it should be led by the business unit who is authoring and defining that strategy, who actually are accountable for PNL of that strategy, therefore, the implementation. And the team who are going to lead it and make it happen. I worry and I fear and there are certain circumstances in the business cycle or economic pre-preconditions that might require having a central group lead innovation or external advisors. But they're very few and far between, in terms of when they might be relevant. I think it should always be the people who lead the strategy and the business and the people, the team members that are most important to lead the innovation in the technology.

BENNETT MASON

We mentioned before that you're in a diverse range of sectors. Have you seen differing approaches to digital transformation and innovation across different industries?

JACQUELINE CHOW

I have. I've definitely experienced where innovation and technology has been led by the IT team, by professional services. If that capability is immature and lacking in the organisation. And I've even seen on rare occasion it's been board, CEO triggered and led. I think all of those approaches have benefits for a very short period of time for very specific reasons, but most of the time I think it should be led by the business units who are running the PNL.

BENNETT MASON

This ties into people, of course. The workforce is dynamic, it's changing. But we know that all companies are engaged in this fierce competition for workers with the right digital skills. How can directors ensure that their organisations are attracting the right staff with the right skills?

JACQUELINE CHOW

Comes back to basics. I mean, this conversation is in the public discourse at the moment with respect to even working from home, ways of working. So, it's all adjacent topics that I think culminate to the same point that if an organisation is more developed on having a performance mindset when it comes to accountability for outcomes and a good growth mindset in terms of continuous improvement, it tends to be correlated with those having a more progressive, innovative technology, adoption, and maturity. And that is often a lead indicator for strong talent recruitment and also retention.

I think at the end of the day, and this is why it's not a polarised argument, should it be either/or? Should you adopt these technologies, should you not? Should you work from home? Should you not? Should you have more agile? Should you have more traditional business unit models? It's not binary. It's really down to do you have this growth environment that's driven by performance outcomes? And I think that is what retains the best talent and engages them the most to get the most out of them.

BENNETT MASON

Engagement and mindset and culture, those things will matter. But so does money. This competition for talent has led to spiking pay in some sectors. You're on some REM committees. Do you think directors should be concerned about this fight for talent and what, in some areas, can be a surge in wages?

JACQUELINE CHOW

Yes, especially given we have got an inflation, you know, this persistent inflation issue. Yes, it is a problem. However, I think we all know that only monetary benefits are not going to actually drive performance. We know that it's not only remuneration that's going to either retain or to attract the best talent. It's got to be all of those factors you just described: the culture, the growth opportunities, the ability to build new capabilities, the purpose of the organisation, the values, all of these matter. So that's why I am a remuneration chair and support other remuneration committees. And most of those organisations and teams now broaden the remit to be about people and culture and skills and reskilling because all of those matter.

BENNETT MASON

I wanted to ask you a few more questions on technology. I know you've got a strong interest in Israel and the tech sector there. Are there lessons that Australia and Australian boards can learn from Israel and how that country and those organisations there embrace technology?

JACQUELINE CHOW

Israel's a great role model when it comes to technology and it's actually not the technology per se. That's their distinction. It's actually how effective they are at garnering a holistic full system approach. So, they can pull public, private, civic, government system solutions in one direction against one purpose when they adopt their new technologies. That's what's very interesting. And we, I think, sometimes struggle with that in Australia. We often say that the most wicked problems can only be solved if we have an “all of system” approach, but we struggle to be able to pull it off. And I think the Israelis are very good at finding that mutuality between all those constituencies that benefit all. And that's how they apply the technology and can supercharge it.

BENNETT MASON

Sticking with tech. We hear and read a lot about data now. The companies you're involved with would have huge amounts of data on not just their customers, but also staff, suppliers. How do you as a director, approach the governance of data?

JACQUELINE CHOW

It's a great question because we used to cite just three forms of capital: economic, financial capital, social capital, human capital. But for sure, data is now cited as the fourth. Maybe nature is the fifth. That's a topic for another podcast, but data is sometimes labelled as the intellectual capital and is crucial.

It's a source of competitive advantage. It's traded and now it's stolen, and it's even ransomed. So that's how important and vital it is. As a director, we need to have a data strategy on privacy, on protection and on risk controls and really understanding what data has the highest economic value and social value, how it's managed and protected. And the backup plan, if it's ever compromised, is a core duty of directors.

BENNETT MASON

That use of data links in with artificial intelligence. This is a topic that many boards are starting to grapple with. What do you think directors need to know about AI? And what are some of the key challenges and opportunities that come from it?

JACQUELINE CHOW

With regards to AI, and this has already been a risk measure and a governance matter for some time since data and advanced analytics became more pervasive. So really understanding how the organisation is adopting it, who's using it, what's happening to the data as it's generated and formed into insights, is really important. But now, I think, also applying ethics and transparency and monitoring as well are crucial as part of the risk controls.

BENNETT MASON

I mentioned that a lot of directors would just be coming to grips with AI. There needs to be some upskilling on AI, on data and maybe even cybersecurity. Do you think it's worthwhile sometimes having specialists on the boards to look at these topics? or is that something that that everyone needs to get to grips with?

JACQUELINE CHOW

I think both. I think it's important to have people who are more adept, especially on the contemporary issues, as it's evolving. But I also do think how it is adopted and how effective the risk controls are, as part of the entire risk management system for an organisation, is just as important. So, as you say, I think a lot of these skills are something that we all have to step up at, even the most basic level. And that's why I do find, as a as a career and as a trade, board governance is really important to continue professional development and learning.

BENNETT MASON

Data and AI bring us neatly to cyber security. We've seen lots of high-profile incidents over the last 12 months. And sadly, we know there will be more in the future. It's obviously a major issue for top ASX-listed firms, like the companies whose boards you sit on. But it's also an issue for SMEs. And if NFPs too. How can boards ensure they have the right governance measures in place around cyber security?

JACQUELINE CHOW

I do think it's really tough because you do need quite a bit of resource to be able to risk manage data, cyber security, and governance, all of these. So, it is tough and it's ever changing. But I do think even if an organisation feels like they don't have the resources, nothing stops asking the most basic questions. I have to give a plug to the Cyber Security Governance Principles that the AICD have published because they have the fundamental questions that at a minimum each director should be asking and know the answers to. Whether it's who has the primary responsibility for these risks?

Where and what are the most crucial digital assets that's important to the company? And how are they managed? How effective are the risk controls? They are the most basic questions that at least can be just asked by each director.

BENNETT MASON

Thank you for giving a plug for the Cyber Principles and we will have a link to that in the show notes. I want to jump from cyber to another issue that's important for boards and that's CEO succession. Boral appointed a new chief executive in 2022 and Coles welcomed a fresh chief executive this year. We don't need to go into specifics, but do you think there is a right way to succeed in CEO succession? And do you have any guidance for directors who are engaged in their own succession process?

JACQUELINE CHOW

CEO's succession is probably the one of the most important duties of a board. And so, yes, I do think the right way is to have a continual and constant effort on the succession plan. You know, we've been talking a lot today about how volatile the macroeconomic environment is and how much uncertainty there is. And so, making sure that the organisation’s strategy is going to be adaptable and resilient is key. And therefore, having the leader and the leadership team to lead through that strategy is key. And that's why it needs a constant effort to continue to reassess, to continue to develop internal candidates and to continue to have surveillance of potential external candidates for the role.

BENNETT MASON

What are some of the benefits of having an internal candidate versus an external one?

JACQUELINE CHOW

I think it's always ideal that an internal candidate is the ultimate successor. There are so many additional benefits of how it grows an organisation. They become role models. They clearly have been living and breathing the culture of the organisation and clearly there's a values fit and match. So, it's always ideal. But because of this ever-changing environment that's uncertain and volatile that we're operating in, I think it's healthy to have external benchmarking and just be sure that we haven't missed some external talent who've been in very different environments that may be more match fit to where our organisation wants to go, should be in consideration as well.

BENNETT MASON

We mentioned that some of your companies have just appointed new CEOs and I'm sure they'll be there for a long time and I'm sure they'll be very successful. But are your boards there already thinking about the next person in that job?

JACQUELINE CHOW

Absolutely. So that is the ideal that even on day one of the new CEO, we're now turning our minds to then, what is the succession? We always have contingency, but every board should do that in emergency situations. But really thinking about the next generation of talent and how we develop them. Time moves quickly as circumstances change, also in sometimes confronting ways. So working on succession constantly is crucial.

BENNETT MASON

Jacq, you'll be one of the speakers delivering the AICD’s Essential Director Update later this year. What are some of the issues and topics that you'll get to talk about at the events?

JACQUELINE CHOW

I'm really looking forward to the conversation with our director community on emergent topics: generative AI. There are plenty of cultural and social topics du jour, that's in the public discourse. But how do we bring those to our attention, towards our duties and obligations as directors for our customers, for our communities, our own employees on these emergent topics? I'm really looking forward to having that conversation.

BENNETT MASON

Great! And we'll have links to this year's EDU events in the show notes as well. Jack, thanks so much for joining us on the podcast. Terrific to speak with you.

JACQUELINE CHOW

Thanks very much, Bennett.