Your behaviour and Money - Part 2

I said in my last blog that I would follow up on some financial concepts in this countdown to Christmas. Now some of you may not have finished your shopping (well that’s me too) or may not have even started. So what are some behavioural finance facts that you should take shopping with you?

When I talk about this area, I ask people who is using the first mobile phone they owned? This gets a laugh. We have all made many purchases that we can hardly remember. However, new work combining psychology and marketing principles by Elizabeth Cullen Dunn and Michael Norton lets us in on the secrets of how to spend money to make yourself happier. In their book, Happy Money: The New Science of Smarter Spending, they discuss five ways we should spend money to make ourselves happy. This list is definitely the one to reflect on as you head off Christmas shopping:

1. Make it a treat. Their research has found that occasional treats makes you happier than having them all the time. Too much of anything is not a good thing, so focus at Christmas on what is truly a treat. Perhaps quality over quantity is the right theme here.

2.  Buy time. We are all time poor, so spending money to give you back time makes a happier life. A gift that takes a busy person time to do might not be the most appreciated gift. 

3. Buy experiences not stuff. You may remember your first mobile phone, but do you even know what number mobile you’re up to? You will not remember your sixth mobile phone as much as you will remember a special concert or holiday. Spend money on an experience for someone – the massage or special dinner.

4. Spend on someone else. If you are more generous, you become a happier person. Research shows us that even buying someone a coffee in a day puts you in a better mood. Christmas is definitely a time when you can exercise that generosity muscle – and not always just for those you are close to, but the many others deserving our care at this time.
5.  Pay in advance. People are happier if they have all the fun of anticipating an event, a holiday or Christmas, without an ugly financial cloud over their head. Credit card debt is ugly because the pain lingers after the fun is gone. Pay in advance for Christmas and you’ll increase your pleasure of it.
Now what if you, or someone else you know, is in a hole with money? What if you or they are going to face some serious bills after Christmas because they didn’t manage number 5 above? Well firstly, deal with it quickly – bad news doesn’t age well! I’m a big one for learning from as many sources as I can and some of the best tips I have found come from Elizabeth Warren and Dave Ramsey. 

Dave Ramsey’s book The Total Money Makeover, encompasses seven financial steps (some are a little US centric). Of particular note though, he uses behavioural principles to pay off debt. He talks of starting a debt snowball by clearing the smallest debt first and then using those payments to clear the next smallest and so on. This gives people a feeling of progress and success. Dave Ramsey has a huge following online, and if inspiration is needed to clean up debt, many of his budgeting fans post detailed videos on Youtube. 

Elizabeth Warren, an ex-Harvard finance professor and now a US Senator, suggests getting your expenses into a ratio of 50% for essentials (e.g. rent, petrol, basic food), 20% for saving and 30% for wants. This formula leaves people with wiggle room if anything goes wrong in their lives. Google "50 30 20 budget" for more on this. 

Obviously, there’s also professional help for those who need assistance or guidance with belt tightening. Financial counsellors are professionals who work in this space and can be contacted through community organisations.  

Don’t forget to focus on the greatest resources you have - time, money and health and design your money to match the life you want. 

Until next time.


Your Behaviour and Money

Coming into the holiday season (which often involves lots of extra spending) I thought I’d do a couple of blogs on money. One particularly useful concept to reflect on at this 'high spend' time of year is behavioural finance. 

Once I started working in superannuation, I became fascinated with behavioural finance – the mix of psychology and finance. I’ve sat through hundreds of investment meetings and was surprised that seasoned professionals would get nervous about markets, even though they allegedly knew about expected volatility. 

In 2002, I was able to use an award I won to learn more in this field from some of the best in the USA. In fact in 2002, a psychologist Daniel Kahnemann, won the Nobel prize in Economics for his findings in this space! And only weeks ago, the 2017 Economics Nobel prize went to Richard Thaler who has furthered behavioural finance applications. So what are some important insights from this growing field?

•    Money decisions aren’t that rational. In fact, whilst we’re bombarded with fine print, it doesn’t always help. I once said to a group of regulators that they should hire some journalists as well as lawyers to communicate with ordinary consumers! 

•    Losses are feared far more than gains are desired (Daniel Kahnemann’s work). This is why people put another coin in a poker machine when they’re losing. It’s the phrase – “good money after bad”. Kahnemann found that losses are feared about twice as much as gains are desired. It’s not until markets are falling that you really know how you are going to react, especially when you’re retired and are living off the earnings on your money. 

•    Richard Thaler discovered that money is treated differently depending on its source and size, even though it all spends the same. People might worry about cents when it’s about the price of petrol, but don’t negotiate every cent when buying a larger item. Wouldn’t it drive everyone crazy to haggle like that on a house purchase? “I’ll offer $525,089.63 – no take it up to 70 cents!” 

•    People can be overconfident about their ability. You might think you’re the above average driver on those days when it seems like you encounter many idiots on the road. So too it is with money. Confirmation bias tells us that when we win (perhaps markets are going well), we’ve made a great decision. But when we lose, someone else is often to blame. 

Now you probably recognise yourself in some of the above. I know I still laugh at myself after tripping up on a bias. So with behavioural finance principles in mind, what practical advice do I give people about managing their money? 

•    Have a plan – yes that is, have a budget. Think about your money as if you were a business. Now some like to plan for every little item, whilst others like to put aside enough for big ticket expenses and then have flexibility with the remaining money. I always suggest converting spending and pay rises to annual amounts. Don’t fall into treating money differently depending on its relative size. For example, don’t think, 'well I’m already spending $200 on a present for my beloved, so another $20 is not much more.' Also, a pay rise of $10 a week might seem paltry, but that can be $520 for next year’s Christmas presents. 

•    Set up some sensible defaults to get you on the right track. Richard Thaler designed a system called “SMART” – Save More Tomorrow where people commit to save some of their future pay rises. It’s a neat idea that progressively adds to your savings. 

•    If you come into some money, the academics recommend that you should park it for a while – because then you treat it more carefully as it changes form in your brain from being “found” money to “saved” money. 

I’ll write a little more next time, but as I’ve said before, the greatest resources you have are time, money and health. Money gives you wonderful options in life so focus on it and use it to design the life you want. 

Until next time. 



Senior leadership requires skills for 3 fundamental tasks

I’ve just been involved in a selection panel for a very large senior role and this has caused me to reflect on the role of a leader. 

When I was asked many years ago by my then young son what I did as a CEO, I explained it as managing Strategy, People and Risk. Today, that’s still correct, other than perhaps I rename “risk” as “governance”. A leader needs skills to accomplish these three broad tasks. First to the tasks. 

Every organisation needs leaders who can lead Strategy – guide, cajole and push and pull towards the strategic goals of the organisation in their environmental context. 

Every organisation needs leaders who can lead People – every relationship from staff, to their bosses, to customers, to suppliers, and where relevant, to their board and even to politicians. 

And every organisation needs leaders who can get the grunt done – the Governance, budgets, KPIs, deliverables, regulatory requirements. 

A quick Google search brings up a multitude of skills or competencies for a senior leader. These include great communication skills, honesty, self-motivation, confidence, humour. When I think of the three main tasks to be delivered, what are some key competencies you can’t do without? 

1. To lead a strategic direction (whether for a team or a whole company) requires the ability to be facilitative. You may have great ideas, but you need to take other people’s views and the environmental context into account. You don’t have all the answers. In fact, sometimes the best you can be is the person encouraging the questions. Your role is often to facilitate openness. Consider implementing what I referred to as Good, Better, Best. First, encourage idealist, blue sky thinking to outline “Best”. Hopefully since you’re already at “Good”, start the thinking of “well what’s Better?”. Make it known that on the way to “Best”– to nirvana, to ideal, there might be many iterations of “Better”. Rome wasn’t built in a day. It’s about promoting that we’re okay with iterations, a practice of Gen 1, Gen 2, Gen 3. Don’t overlook small things to facilitate freer thinking. For instance, change the logistics of a strategic meeting compared to a business as usual meeting (e.g. consider holding the meeting in a different room). 

2. To lead people, it’s about courage. Courage to bring your people along with the expectations of those who judge your organisation and you. For instance, every day your customers judge your organisation. Your boss or shareholders judge you. I have more than once struck people who wanted to shield their teams from reality. These managers had such amazing leadership skills with their own teams to the extent that their teams treated them like a Messiah protecting them from the nasty world. But these managers weren’t managing up. Courage for them only went one way. It was about leading a siloed team into battle. Ultimately in an organisation, courage requires that you understand your responsibility to love and grow that organisation. You need to speak up if you disagree, and speak up again. Courage is about dealing with reality. 

3. To lead governance, you need accountability. The buck, in whatever job you are performing, stops with you (at the very least) to the limits of your job description. Know what you are accountable for and get on with it. When feedback came that decision making was too slow or bottlenecked, I coined a phrase “Is it law or is it lore?” Often people got hung up on what was truly just folklore when they actually had more latitude than they were aware of to make decisions themselves. All of the grind that needs to happen like budgets, KPIs, regulatory requirements etc, make sure it gets done and it gets done well, whether by you or whoever is best placed. Understand every job has that mix of fun and grind. If you don’t do the grunt work well, things go pear shaped and suck away all the time for fun work! 

So as far as recently being part of a selection panel, I wanted someone who could facilitate strategy, lead people with courage and be truly accountable for a big role. Until next time.

Time, Health and Money

I wanted to reflect on making choices in your life. I once asked a person who lives their life very consciously about their decision-making framework. He said something quite simple. So long as it fits his ethics, he does what he wants unless he can’t. What he found that limited people was time, money and health. 

Time, money and health are the great resources you have. 

Time is your first great resource. I spoke a little about this in my second blog – managing yourself. I was a young CEO and was simultaneously chairing the national board of super funds. During this time, I had our second baby so had a laptop in my maternity room. I got good at prioritising time because I was running a business where the rules kept changing and we also wanted innovation. So I had to focus on making sure the 'important' was achieved, as well as the urgent. Over time, you’ll find your 'important' changes. For example, I made my recent career change because having more personal time rose in importance for me.
Money is your second great resource. I had great opportunities to learn from some of the best people in the world over the years, as we built the investments at QSuper. However while the total investments came to a huge number, I always translated our work into its effect on people. One of my financial planners showed me his box of tissues for those clients who would cry from relief when told they could retire with enough money. I was acutely aware of the joy of 'enough'. 

About 15 years ago, I became interested in behavioural finance, the crossover of finance and psychology. You see whilst money is numbers, it’s the humans who make the decisions. Often, we are not rational economic beings, we are human beings. For a couple of decades, I had the privilege of watching lay and finance people react to investment markets. I learned from the GFC that many thought they could handle investment risk until it came. The GFC caused me to think long and hard about 'enough' as well as complexity and risk. There is much to be gained from simplicity and resilience in your finances. All too often we shoot for more than 'enough', without thinking whether it makes us happy or considering the downside. 

Interestingly there’s now research into how to spend money to make yourself happy. For instance, experiences matter more than stuff. Experiences are what you’re going to treasure in your twilight years. Spending on others, even buying someone a coffee in a day, also adds to your happiness.
So when thinking about how your money can empower you, think about it making you happy. Understand what you’re invested in and take enough risk to live a good life, but consider the downside also. Have a bit of perspective around a good life. If you get to make a choice between a flat white and a latte, by global wealth standards, you are living an incredibly prosperous life!

Health is your third great resource. QSuper is one of the biggest life and disability insurers in the country as well as a large employer. I lived through many sad stories of accidents and illnesses and peoples long retirement not arriving. Many health outcomes are just a fluke and not fair. I keep a touchstone list of people who passed away too early to remind myself that life is precious. I have always been profoundly grateful for being healthy and intelligent. Of being given opportunities. I think this is why I try to use my time and gifts well. I know on average, I should expect to live a long life in Australia, but averages are just that. Half go either side. 

Whilst I spent nearly all my working life encouraging people to save for retirement, my own mother died age 61 when I was 27. 

So know that time, money and health are your greatest resources in living the life you want. If life has chosen you to be here, why not choose your life?

Managing your superiors

In this final in this series on who you should manage, managing up is a reason I survived so long as a CEO. If you think about it, for 18 years, in sitting through over 500 board and committee meetings, I not only learnt from seeing other people managing up, but also heard the multitude of very senior business peoples’ comments about how these internal and external guests managed up. 

I saw clangers of course – like those who hadn’t done their homework on the technical matter or personalities, those who talked too much or attempted to present 50+ PowerPoint slides! Guests in these meetings who didn’t impress usually had an “I” attitude: I have this to tell you. Or I have this presentation to give you. Or I want to win this contract. Too much I! With staff, especially those who were very valuable technically, we could coach them, but some just couldn't let go of the "I". 

Guests who succeeded over the years and ended up being promoted or winning contracts came into a Board room with an attitude of service, I am here to serve you. What can I do or say or hear that will make you comfortable with this direction? Success in this world comes from service out. To be successful, there are four key ways to serve your superiors. 

1. They want to trust you. If you have their trust, you’ll be given more responsibility. Trust is simple. Know your brief, respect them in your behaviour and deliver what they ask for. If you think their path isn’t the right one, deliver what they ask for, and then deliver a bit extra as an alternative. Because you can’t know all the reasons for their points of view, their path might be right. But a decision might not be approved because of timidity, politics or something left field. If your path is important, work behind the scenes. But sometimes a good idea just needs the right time, so protect your reputation and firepower. If you press it without support, they may think you don’t respect their decision and you could lose trust.

2. Make their job as easy as possible. Help them. I had various directors who were time poor and those who loved every detail. Communicate top down by presenting the most impactful first and do not underestimate how something is physically presented. Hard copy as well as soft copy can be important sometimes. And don’t just share technical material – let them know so they can acknowledge key staff members’ lives and achievements. 

3. Make it safe for them. By this I mean present in a way that “no” or “more information” is legitimate. I would spend committee meetings observing the members. If I thought something wasn’t understood, I would ask a safe question. “Has everybody heard enough, or can I explain this point a little more or bring back some clarification?” It is natural for people not to want to ask a “dumb” question or admit they don’t know something. Read them and speak in a way that lets them safely say “Help me”. 

4. They want to be proud of you, because this helps their reputation. Demonstrate you are succeeding not just in your core KPIs. Take accountability for making change. In your industry or business, earn wider respect by not just complaining, but pitching in. Think through what each of them is facing in their world. Do they have a new boss, so might be feeling pressured themselves? Do they have a key staff member out? Can you offer to help in some way? Demonstrate you are always ready to step up. 

So think about how you manage up – especially if these people do your performance review! Make it easy for them to trust and work with you and be proud of you. Really these elements come down to having an attitude of service. Until next time.


Why you must manage your team

In this second of my series on “who to manage”, I will share my thoughts about managing your team. 

As I headed towards the end of my term as CEO of QSuper, I deliberately had small group meetings with managers a few levels down from me. In a large company, these weren’t people with whom I had been able to spend much time. I wanted them to know the difference between “what” and “how”. 

I began CEO life heavily into the detail – of “what” I had to deliver and master. By the end, I understood far more about the need to lead people. I learnt some key differences between “what” and “how”. 

“What” is the deliverable – did someone meet a KPI? 

“How” is attitude and behaviour. It accumulates to be organisational culture. 

Your first key task in managing your team is to have everyone understand that “How” trumps “What”. 

I am not saying that KPIs don’t matter or that people shouldn’t need to deliver. 

But what I did learn is that hiring and praising and promoting for technical competency isn’t enough. 

As Jim Collins said, get the right people on the bus and the wrong people off the bus. Take someone with slightly less technical competency, but who exhibits smarts and a wonderful attitude. Smart people learn new things. Yes, they do. And for growth and innovation and the very future of your organisation, you need people who can learn new things! 


Because of this, especially at senior levels, I value people who can operate in an uncertain world and focus on the future state of the company and products. Those big rocks. 

So that’s my first tip for managing your team – be clear about who needs to be on it! 

Secondly, in managing people, as I mentioned last blog, are they doing the right work? Have you set the right expectations? At QSuper we had KPIs for both “what” and “how”. And the “How” came from our organisational values. For instance, “courageous” is one of the 4 organisational values. So not only did we consider “what” people had to deliver, but the behaviours to be considered “courageous” were scaled by level. Now I understand this can seem highly qualitative, but it was relatively obvious at moderation time when all people considered exemplary in behaviour were grouped. 

Thirdly, understand you and your team are being paid each day to love and grow your organisation. This makes the decisions and behaviours everyone needs to exhibit crystal clear. For instance, I was talking to a respected person in a workplace who often spoke about the toxic culture there. I coached them on what steps they could take as a respected team member to improve the culture. You don’t just sit by and comment about it – you are being paid each day to love and grow your organisation. 

Finally today, in managing your team, make communication simple and tangible. Share the strategy and good news through stories. Parables have been around for centuries and that’s because they work. I still have people say they remember a talk I gave about 2 decades ago, because I discussed how super affected me and my four sisters. What were some of the stories that formed the background of the company? What were some of the successes? What will a client experience when we’ve built our new product? Make it real! 

So my key learnings on how to manage people are to select them carefully, measure them correctly, and bring them along with you in loving and growing your organisation. Next blog, I’ll cover managing up. Until then.

Why it's important to manage yourself

I introduced my blog a couple of weeks ago by talking about the three key relationsh­ips I found you need to manage in a workplace to achieve success – the ones with yourself, with your team and with your superiors. Today, I’ll expand on the first relationsh­ip, the one with yourself. 

In regard to managing myself, I believe some of the key reasons I achieved in my career as a CEO were: 

· I worked in a field that interested me
· I focussed on the important
· I committed myself to managing my time

Firstly, I loved working in superannua­tion and often explained it as a mixture of economic policy and social policy. My heart loved working in an area that honoured older people – I had many elderly relatives growing up and adored them and their soft wrinkly faces. I strongly believe a person should not be old and poor, because it removes their ability to affect their own destiny. 

I also was intellectu­ally stimulated by the economic policy component – my head loved superannua­tion’s great mix of personal finance and institutio­nal finance. Not only did we at QSuper focus on each member’s superannua­tion outcomes, but we also owned a large financial planning practice. And of course, QSuper itself is an investor on a global scale, including ownership of very recognisab­le real estate, such as One Times Square, New York (where the ball drops on New Year’s Eve). 

Over the years I was part of the creation of the investment team and portfolio and had the privilege of listening to and conversing with some of the investing world greats – Jack Bogle (Vanguard founder), Ray Dalio (Bridgewat­er founder), Keith Ambachtshe­er (global expert on pension fund excellence­), Bill Sharpe (Sharpe ratio) and a few other Nobel prize winners! 

We all have parts of our work that are more of a drudge than others but some of your work should be time that brings you happiness – where you are deeply interested in what you’re doing and time just flies. In his work on happiness, psychologi­st Mihaly Csikszentm­ihalyi termed this concept ‘flow’. I found ‘flow’ for decades because my heart loved older people and my head was always stimulated­. 

I achieved from a young age and looking back, the second key to this was that I endeavoure­d to focus on the important. I often talk of ‘big rocks’– you must first fill your jar with the big rocks, because if you instead put sand and pebbles in first, those big important rocks won’t fit. Way too often I dealt with people, including executives­, who were focussing so intently on today’s pebbles and sand that they neglected the purpose of their job. You see, the more senior you are, or aspire to be, the more time you should spend on further out thinking, rather than only defining success as a clear inbox or ticked to-do list. 

Now I started my career as a policy person, heavy into the detail of the Tax Act. I even typed the first rules to QSuper and got it through the Parliament­, and I loved being the superannua­tion nerd. But I also found the big picture and what would have impact in terms of honouring normal older people, I thought about what mattered. And over the years, I relinquish­ed (to some extent anyway) the nerdy stuff. 

Finally, once I was aware of what mattered, there was still the task of getting it done. Not easy when you consider the scale of the operation. It would be entirely possible to just respond – to be reactive to the urgent. As anybody tells you, the rules to super kept changing (and I might write another blog on that one too), so keeping an organisati­on on top of it all was a big job. However, if you’re always driven by someone else’s agenda (the urgent), you’re just a mouse on an ever-spinning wheel. So, if I knew there was important – like a good idea floating around, mine or another’s – I would deliberate­ly and vocally commit myself. I would, for instance, tell my Board about it and offer to bring a paper back in a couple of months’ time, or make an appointmen­t with the right people to explore it more. Prioritise the important, and delegate the work you can to great people. Eight words I heard on prioritisi­ng time have remained with me for years – ‘I only do what only I can do’. To spend some time on the important, allow yourself to let go of the sand and pebbles sometimes.­ 

So to lift yourself up to your career potential, does your work engage your heart and your head, are there some big rocks in your jar, and are you spending some time so those big rocks one day have impact? 

Until next time.

Who should I manage?

A question I’ve often been asked is “How did you survive so long as a CEO?” I had an 18-year CEO career leading a tremendous organisation with great people, and was fortunate – and earned – the ability to finish in the role on a day of my choosing.  Yes luck, and politics, and respect and hard work played into this. 

I’ve thought much about it and how some people with all the seeming talent in the world don’t reach the stars. The simplest way I have worked this out is they didn’t learn “who to manage”.  To me it comes down to basically three key relationships you have at work and learning to manage each.  

You must manage yourself
You must manage your team
You must manage your superiors

Now before anyone comes along and tells me my errors over the years, I know at times my management of these relationships varied somewhere between good – and, well the opposite of good!  But I know I learnt as I went and had someone brave enough at times to pull me up – you’ve got to love that 360-degree feedback!  

So, regarding the first relationship, the one with yourself, do you even know what your skills are? What work you like doing?  Are you in the right career?  I do believe your life – where you live, who you work for and what you get up and do each day – is your choice. But it takes some thinking and more importantly, doing. 

When you reflect on the second relationship, managing teams, we teach, set KPIs and try to inspire and lift people up to their potential.  Fortunately, there’s been a fair bit of emphasis in the workplace on equipping people to manage teams. As for me, I’m a big picture thinker so when selecting and coaching staff, I tended to focus on their ability to add value in the future. That’s about people who can learn new things and who fit the culture that we’d nurtured.  

It’s often the management of the last relationship on my list that I’m astounded that mentees have hardly thought about. Managing up. I’m sure it’s one of the areas which enabled me to survive so long. I innately respected my superiors and wanted to achieve for them. And I guess if you’re faced with not respecting your superiors, you’ve got a bunch of decisions to make. 

Over the next few blog topics, I’ll try and expand on how I think about each of these relationships. Looking forward to hearing from you.