Strategic concerns

Sunday, 01 May 2022

Denise Cullen

    With a background in tech, Prospa Group chair Gail Pemberton AO rates the big strategic risks for boards as accessing quality talent, coping with disrupted supply chains and expediting meaningful digital transformation.

    It’s been decades since Gail Pemberton AO started her first job as a trainee computer programmer, but she still likes to stay in touch with what she calls her “inner nerd”. “I try to be self-sufficient with technology — I just plug away and solve things myself,” says Pemberton, who has since built a diverse directorial career spanning technology, digital, financial services and infrastructure industries.

    Today, Pemberton is independent non-executive chair of listed SME lender Prospa. One of a growing number of new fintech platforms focusing on small business, it was co-founded by Greg Moshal and Beau Bertoli, and floated on the ASX in 2019.

    She’s also chair of listed fleet leasing company Eclipx Group, and also a director of HSBC Australia, the ARC Centre for Quantum Computation and Communication Technology and software communications firm Symbio. In addition, Pemberton has non-executive roles with Land Services WA and the Sydney Metro, a NSW government project delivering a $50 billion program to construct and operate a fast, regular metro rail network across Sydney.

    “You might look at my background and say, ‘Well, she’s never done it [transport and infrastructure] before, but boards need to have diversity of thought,’” says Pemberton. “When you get people around a board table who bring different insights and genuine diversity of experiences, it’s amazing how it raises the level of discussion.”

    Talent challenge

    The same tenacious bent that sees Pemberton continue to flex her technological muscle is also apparent in her approach to the challenges facing Australian businesses as they enter a third year of pandemic-related disruption.

    Having just spent four weeks in the UK and Europe, Pemberton notes that fear of COVID-19 doesn’t dominate the news there as much as it does in Australia. While mostly empty airports highlight that international travel remains relatively depressed, Europeans are maintaining sensible measures like donning masks, but are otherwise “getting about their business”. She would like to see such confidence grow locally, so Australian businesses and cities can regain their vibrancy and momentum as we adjust to dramatically different ways of working.

    “Pre-COVID-19, we used to talk about the war for talent. That seems such a long time ago now because today that war is on a scale we could not have foreseen — and it is impacting almost all sectors,” she says. “It’s so difficult to secure and retain talent. Employers have to offer very flexible working conditions and extend their sourcing of talent to different locations domestically and internationally.”

    Other retention tools being used include tenure- based cash or equity incentives, or both. “Incentives like these don’t necessarily need to be decided by the board, but they’re discussed with the board in the context of rising wage inflation and increasing staff turnover,” she says.

    The “Great Resignation” is also emerging as a strategic and financial risk, which means boards have had to spend much more time revisiting the whole framework for recruitment, reward and retention, and other ways to mitigate these risks. In certain businesses, supply chain issues have come to the fore — most notably in supermarkets, but also affecting many other businesses including transport and construction. As an example, in the fleet management sector the lack of supply for new motor vehicles has led to inflation in used car prices. “As supply chains revert, we’ll expect to see those prices going down as order backlogs are filled, but we just don’t know at the moment how neatly those two will interweave,” says Pemberton, noting that a broader consideration for boards is whether their organisations have too great a dependence on certain supply chains and whether that exposes them to too great a risk.

    SME funding opportunity

    However, as government policy shifts to “living with the virus” and local restrictions continue to ease, there are positive signs that the demand for capital and business investment are on the rise, particularly among SMEs seeking to rebuild inventory and drive recovery and growth.

    “We’re seeing a really strong and healthy resurgence in the small business economy — and demand for funds,” says Pemberton, referring to her role with Prospa, which provides more flexible funding for SMEs where traditionally, business owners have had to put their house on the line.

    “SMEs are a very important sector in our economy, accounting for around 40 per cent of GDP and 65 per cent of employment,” she says. “But our research tells us that around 80 per cent of those businesses have difficulty getting finance.”

    In February, Prospa released record half-year results, with new loans up 75 per cent to $315.1m. Revenue also increased by 40 per cent to $78.5m, while earnings increased 134 per cent to $9.6m.

    Although the company has seen $2.1b in loans originated since its inception, it‘s estimated that only two per cent of SMEs currently seek financing through Prospa. “We definitely plan to grow our market share,” says Pemberton.

    This growth will be achieved by leveraging Prospa’s technology platform to expand existing products and create new ones — including payments, overdrafts, invoicing and expense management — to serve a broader range of small businesses.

    Lessons learned

    Prior to her non-executive career, Pemberton spent 20 years at Macquarie Bank, where she held the roles of chief information officer and chief operating officer. She was also managing director and CEO at BNP Paribas Securities Services in the UK.

    “By way of example, Macquarie has always had a very strong execution focused culture,” she says. “It’s not just about having a grand plan, it’s about translating that plan — breaking it down in a granular way into initiatives over a particular timeframe, ensuring the whole team is in alignment and everyone understands what they’re accountable for. “That focus on execution and delivery of results is something that probably got ingrained in me. In a lot of underperforming organisations I’ve been exposed to, there is often a real lack of clarity about the boundaries of accountability and responsibility of individuals and teams, and how what they do contributes to the greater organisational goals and strategy. But if you can get that right, it’s incredibly powerful.”

    Pemberton also believes another lesson for boards is that strategy should be revisited and reviewed from time to time and not cast in stone for three to five years. “You don’t want to be chopping and changing all the time, but boards should regularly ask management the questions: ‘Is this strategy still right for us? Do we need to adjust and adapt? Should we slow down one of our strategic initiatives and put more resources into another?’”

    Customer satisfaction

    One of Pemberton’s earlier roles was as a director of PayPal Australia — and its focus on the customer is something she’s brought to subsequent roles. Prior to the 2017–18 banking Royal Commission, she says financial institutions didn’t give sufficient consideration to the customer experience. “That’s definitely right up on the agenda of those boards today — they’ll spend much more time on it — and it’s a trend across corporate boardrooms more broadly. There’s a lot more focus on customers — how your customers feel about you versus how they feel about your competitors, and how you can deliver a much better customer experience.”

    The migration of the customer interface away from face-to-face to online is one pandemic-related shift that has changed customer interactions. “Most companies are at different stages of their digital transformation journeys and some also have a big legacy they’ve got to overcome,” says Pemberton.

    Directors trying to stay up to speed may benefit from hearing directly from the transformation teams about progress and challenges. “Directors can ask how they propose to involve and engage customers along the transformation journey, how will they acquire or partner to bring in the contemporary skills that are required to deliver successfully and whether they have strong business sponsorship,” she says.

    “It’s also helpful to ask management to present regularly on what competitors are doing in this space and how we rate ourselves against them. Boards can invite industry thought leaders to address them on lessons learned by other companies. Another question that might be more appropriate for the risk committee is, what proportion of the organisation’s technology investment is being allocated to genuine digital transformation? Have a conversation about whether it’s enough.”

    Staying relevant

    To keep up to date, Pemberton subscribes to tech newsletters from the Financial Times, The New York Times and The Wall Street Journal and listens to podcasts including Pivot (with tech journalist Kara Swisher and New York University professor Scott Galloway), Techmeme Ride Home and the Lex Fridman Podcast.

    She also has regular “deep dives” with the chief technology officers (CTOs) on a number of the companies she’s involved with. ”It’s about keeping up to date, but because I speak their language, I can also be a sounding board for them,” says Pemberton. “If they’re working up something to present to the board, I can give them advice on putting a commercial lens on how they present their story.”

    It’s also a sign that the early career computer programmer is still very much in charge. “It’s pretty nerdy to have regular catchups with the CTO. I don’t know too many directors who do that.”

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