Jillian Broadbent: Success ‘dulls the appetite to challenge’

Jillian Broadbent believes success can be its own worst enemy, dulling the appetite of those at the top to challenge the status quo.

Jillian Broadbent says directors can become consumed with financial performance and compliance.

After two decades sitting on major company boards, Jillian Broadbent believes success can be its own worst enemy, dulling the appetite of those at the top to challenge the status quo.

Broadbent, who was a member of banking regulator APRA’s ­inquiry last year into the failings of the Commonwealth Bank’s corporate culture, says the abiding lesson was the danger of complacency. “When the executives and the board have collectively ­determined the key performance indicators (KPIs) they’re looking at and they’re going well, you don’t look at what other KPIs are that are not going so well. Success does breed complacency,” she says.

“We’ve got much better at measuring things, but have got more comfortable with the things we’re looking at. To be constantly challenging yourself and each other is hard to keep alive if everything is going smoothly.”

Broadbent, who sits on the boards of Woolworths and Macquarie, is chair of Swiss Re and has been a member of the ­Reserve Bank board. She says directors can become consumed with financial performance and compliance.

Financial measurement has improved with sophisticated tools to drive the return on capital, making individual business units accountable for the capital they’ve used and the returns they have generated. “But the real value is the people, the brand and the culture. That’s the engine that is producing that result and there have to be measures and temperature readings to make sure you’re fit for the competitive environment you’re operating in.”

Broadbent says one of the findings from the Commonwealth Bank inquiry was that operational risk was not given as much attention as financial risk, because it is harder to measure. She says everyone observes the culture in an ­organisation. “You have to have people who doubt and challenge and they haven’t been well rewarded in big organisations.”

Broadbent says directors are ­increasingly preoccupied with compliance, as regulators become increasingly specific about what is required. She believes there is too much emphasis on black-letter regulation and insufficient attention to “gut feel” and the “smell”.

“This applies internally as well with behavioural rule books that get so cumbersome that people forget what they are there for.”

She believes there has been progress in the participation of women on boards and in executive teams but says it is a “long game”.

“Most organisations that have opened themselves up to merit and abandoned their gender filter have benefited from it,” she says.

“No women want anything other than a meritocracy, but unfortunately some people don’t recognise merit if it is not in the same form as themselves.” Businesses should be asking why, when more than half their graduate entrants are women, the percentage has dropped after three years.