Judo Bank founder reveals the biggest mistake a CEO can make

0:00The Australian Financial Review Sometimes in business, the biggest mistakes can provide the most important lessons. I was convinced it was cheaper and better to enter in third party arrangements. I made a big mistake there. I totally lost sight of what really counts here. Is the skill and development of the bankers. Welcome to 15 minutes with the boss. A podcast about success, failure, and all the lessons learnt along the way. I'm your host, Sally Patton. And my guest today is the Founder and CEO of Marlou Health Group, Joseph Healy. A former NAB boss who is best known for co-founding Australia's first Fintech Unicorn, Dudo Bank, which is now valued at about $2 billion.

1:05Joseph, before we start the clock, do you miss banking? No. Not at all. No, I had a wonderful career in banking, but I felt there was something else that I needed to do in life. I often thought about, I don't want my career tombstone to say here in Lies Joe the banker. I thought there was a lot more I could do. And so I left banking, you're looking to the future, feeling that I've achieved as much as I wanted to achieve. Wow, that's great. I'm sure we'll get to more of your new venture later, but we've only got 15 minutes. I'm going to start the clock right now. And my first question is actually about your morning routine. What time do you get up? What happens? Do you have breakfast? Well, I'm a 5am or there, thereabouts, riser. The first thing that I do is make myself a cup of coffee. And then I go online and read the international media. Then I would do some exercising. Depending on time of year and weather, I daily go for a long walk. Okay, I love that. Now Joseph, throughout your long career, is there a moment that stands out to you as being particularly pivotal?

2:09One that might have changed the trajectory of what you were doing? In the early part of my career, I spent about 10 years at Citibank in London. And this was in the late 80s and early 90s. I was very lucky both at Citibank and A&Z Bank who I worked for when I came to Australia to work for John McFarlane, who of course was the CEO of A&Z and the chairman of WestPak. But I worked for John at Citibank and he was someone who gave me a lot of big step changes in my career. One of them was when he appointed me head of risk management at the Division of City Crops and Visiting Bank in London. I hadn't had a lot of direct experience in risk management. But I always had a strong analytical mind and a natural sense for risk. And so I saw when risks were poorly managed and the consequences of poor risk management. And I understood from those days that good banking organisations are first and foremost good risk management organisations.

3:10So do you think you would have got to where you did subsequently if you had not done that role? Was it really fundamental to everything you did after? I think it was fundamental. Whenever I look at any business and as a banker I used to be responsible for a lot of lending that the banks did to businesses fall in large. And I would always say what are the risks in this business? Because I feel sometimes that senior management, not just in banking but across the business sector, don't spend enough time on risk. And it can derail the business and it can derail the individual's career. So for me in any business really having a good grasp of the nature of the risks, including things like you know, reputational risk. That's actually really good advice to all management. You know there are financial risks clearly but then there are non-financial risks such as reputational risk. What else would you put in that bucket? Well I think the loss of key people in your organisation, any leader, one of the primary responsibilities of a CEO of a company is to develop a strong bench.

4:17And to be able to look at at least certainly at one successor but ideally two or three. And so attracting and retaining and developing the talent that is going to take over from you is something again that I see a lot of businesses do a rather ordinary job at. Some do it accidentally but others not so. It's a big risk when you lose key talent in an organisation. And the board should be making sure that the talent that the organisation is going to need for the future is inside the company and has been developed. Yes, no it's very good advice. Now Joseph when it comes to your own career, what's one of the best pieces of advice you've ever been given? The best career advice was to think big. You're early in your career or even mid-career but think about what you could achieve. What is your appetite and your ambition? Set that vision of what you want to be in 5, 10, 15 years time and work towards it. So on the think big note, how old were you when you were given that piece of advice?

5:1725. So tell me, what did the 25 come in 26-year-old Joseph Healy do? How did you think big then? I was told that I was identified as someone who had a lot of potential and that being part of a senior management team in the future was a realistic aspiration. So immediately you change because you start thinking about what you need to do to fulfill that potential. To go into senior management. But not everyone is told that they are potential for senior management. So if you haven't been told that, can you even so afford to think big and dream big? Yes. It disappoints me sometimes when leaders are not giving feedback to younger people in the organization about how the organization sees them or what they need to do to change a perception that the organization might have of them. But the end of the day, it's the inner belief. It's your own self-belief and your own ambition about what you want to achieve in life.

6:19You can never totally control everything. But you can set yourself a plan or a vision for what you want to achieve. So for me, I always say that people think big. I'm not everybody has a self-confidence to do that. But then I think that's a coaching opportunity where you should sit down with people. Because you'd be amazed at the talents inside an organization that might be shy or introvert in nature and not self-promotor. I mean, the one thing that I did notice in my career is that there were people who were very good self-promotors and there were those that were not so. But you found the depth of talent in that lateral pool, like people that didn't self-promote, was everybody's rich as those who blow in the trumpet telling everybody how good they are. You just need to look harder for them. How did you know how to map out your career to achieve what you wanted to achieve? I was advised early on in my career, and I would say in my mid-20s, about the importance of getting off the busy dance floor of life and getting onto the balcony and to doing that on a regular basis.

7:27And what does that mean? We're all living on the hustle and bustle of the busy dance floor of life, and you don't get a chance to think about things that you're doing, take stock of where you are at, what you need to do for the future. And so getting into the habit of, and I would say every six months, at least, maybe every three or four months, taking some time off that busy dance floor and taking stock on the balcony of just where you're at, how you're progressing, how you're feeling about things. And doing that as part of a routine. So in practical terms, does that mean going for a four hour walk on a Saturday afternoon? Does it mean taking half a day off work? For me, it was always about taking at least three or four days, sometimes a week away. The biggest mistake that CEOs can make is not taking the time out and getting onto the balcony. Now, Joseph, don't go anywhere. We are going to take a short break, and when we come back, you pick the questions.

8:29I'll see you soon. Welcome back to 15 minutes with the boss. I'm here with former high profile banker, Joseph Healy, who is now the chief executive and founder of Marlou Health Group. Now, Joseph, in front of you is a cardboard box with about 20 random questions inside. For this next section, I'm going to get you to choose the questions one at a time. Let's get started. What's the best or worst business idea you've ever had? The worst business idea struck decision was around technology. You know, we're in a world where technology is central to so many things that we do. And in the business world, it can be quite defining. But the risk of making a bad decision on technology, I feel is very high.

9:30And so I was convinced that, and I don't want to make a reference to the company here, but I was convinced that outsourcing a lot of technology is the way to go, because you don't need to build a big technology department. And by outsourcing, you get access to best practice. But in reality, when you outsource things, you lose control. And so your organization's needs can evolve, but you're hostage to a third party. Yes. So I was convinced, it was cheaper and better to enter into third party arrangements. I made a big mistake there and the organization did. The other big mistake that I made actually was back in 2012. When I was convinced and I agreed to outsource a lot of the financial analysis that bankers do day in and day out to India. To our third party organization, because getting the financial spreading done in India was approximately

10:34a third of the cost of doing it domestically. The problem, though, is that over time, you are descaling your workforce. Man, you're not conscious of that at the time. But from a core competency of a good banker, is that he or she can look at a set of financial reports and connect and join dots about how the balance sheet, the P&L and the cash flow statements work and where they might not look like they're in good shape. When you outsource all of that and you start saying to the bank, is your job is to sell rather than think about the risks in the company that we're going to lend money to, that is a classic example of focusing on what is counted and losing sight of what counts. And what I mean by that is that I got convinced by the 30% cost saving. Yes. But I totally lost sight of what really counts here is the skill and development of the bankers.

11:35So if I put those two things together, it sounds like the advice is to be very careful about what you outsource. Yes. Now too often, too much weight is placed on its cheaper by outsourcing. My experience is that in the long run, it can be so much more expensive. Not just in a direct financial sense, but in what economists call an opportunity cost sense, that you can spend so much time trying to fix the problems that you didn't anticipate because you were outsourcing them. And you miss growth opportunities somewhere else? You miss growth opportunities somewhere else. You lose flexibility and you find that your organization is potentially vulnerable to a third party that you have no control over. Yes, no. I love that. I have another fish in the box. What is a piece of advice that you would give your younger self? The advice I would give myself is to find something that I'm really aligned to, that I believe in. And think hard about what you want to achieve in life.

12:37And then also ask yourself, why do you want to achieve that? What's the motivation? And then think about what you need to do. Not just in the short term, but over the course of your career to make sure you fulfill that ambition. So careful planning, doing something you really do believe in. Banks, for example, I believe strongly in the critical role that banks play in the economy. Yes. I'm not necessarily proud of the way that banks have conducted themselves in the... Always, yes. But they are central to how the economy works and both in a household sense and in a business sense. You talked before about alignment. And I know that you've just set up a mental health business. Have you always sort of been aligned in some way with mental health and mental health problems? I would say really only over the last decade or so when I became a lot more aware of mental health problems. They're invisible problems. It's not like a physical health problem, like a broken arm, which can be very obvious.

13:37I always felt the businesses were poorly equipped to dealing with that problem. I still believe that today, actually. We live in a country, a rich country. But one in seven Australians are on antidepressants today. So this, for me, this is a big issue that has big costs to the economy. But more importantly than just the economic costs, I worry that mental health is deteriorating. In our society. I also had a direct experience in the sense that my young son, George, who was suffering from anxieties and depressions for quite a few years, he finds himself in a situation where he took a drug, a party drug, but it was laced with fentanyl when he was in the United States. And it killed him. I directly linked that to the mental health challenges that he had to face.

14:39And that was another factor because I still feel strongly today. Youth mental health is a serious problem. So when your son died, did you manage to find solace somewhere? Well, that's a very difficult question. When a young person dies, one of your children, you never prepared the life for that. You find solace in the fact that you've just got to keep going. You know, it's hard. It's a deeply, deeply personal thing. But you have to keep going. No, that's, again, very good advice and a certain circumstances. But it does happen. It does happen, but you can't, from a personal perspective, you can't allow it to shape your future or define who you are. That sounds like a callous statement to make, but you've got to dig deep. You've got to live through it, manage it, understand grief and understand that the sadness associated with that actually never goes away.

15:48Three fades over time, but the morning never does. No. And actually, I've turned that into a positive thing in the sense that, you know, a part of you is dead. But you have to go on with things. And you have to go on with life. You talk about it as we are, but you know, it is something that you mustn't allow to be defining your future. That's how it is, yes. That's how it is. Thank you so much for sharing that, Joseph. Now, before our time ends today, I do have one final question for you. If you weren't the chief executive of Marlou Health, what would you be doing? I would probably be an academic, a teacher. You know, one of the wonderful things about our long successful career is that you've learnt a lot and you've got a degree of wisdom that you can impart onto others. And in a sense that it's quite an exciting thing to do to teach and help develop other people. So you'd be in the university system?

16:49In the university system. And what do you think you'd like to teach? I would like to teach economics, but not economics in the way that it's taught today. I would teach economics in a much more holistic way. I would link economics to societal well-being, that there's no point having a roaring economy when you've got a sick society. Or a society where so many indicators of well-being are heading in the wrong direction. And just like that, Joseph, our time is up. I wish you all the best on your new teaching career, post Marlou Health Group. And thank you so much for allowing us to spend 15 minutes with the boss. It's my pleasure, thank you. And thank you to everyone for listening. If you like the podcast and you want to hear more, consider sharing the podcast or writing a review as it helps us to reach more people. And follow us wherever you get your podcasts.

17:49At the financial review, we investigate the big stories about markets, business and power. For more, go to afr.com. And you can subscribe to the financial review, the Daily Habit of Successful People, at afr.com slash subscribe. This podcast was hosted by me, Sally Patton, reduced and edited by Iona Rennie. Head of audio is Alex Gal, and our executive producer is Fiona Bafini. See you next week. If this episode has raised any concerns for you, you can contact Beyond Blue on 1300 W24636. The Australian Financial Review.