GOVERNANCE & MANAGEMENT : Bank on It – Kiwibank’s Jim Bolger & Sam Knowles

Kiwibank’s CEO Sam Knowles and chairman Jim Bolger first met over coffee in late 2001 when both men were still contemplating taking up their respective roles at what was, back then, an ambitious, controversial and yet-to-be-launched government venture.
Banker Knowles had been involved in the ground work to get Kiwibank set up while former Prime Minister Bolger was back from his stint as ambassador to Washington.
That coffee meeting was chance to eye-ball each other and decide whether they felt they could work effectively together.
“I was aware then of all the work that had been done [to set up Kiwibank]”, Bolger recalls. “I agreed with the proposition that bank could be established, seeking its sector and share of the market. Having strong parent like New Zealand Post meant it was viable proposition from day one despite all the criticism that was floating around at that stage – including from many of my own former [political] colleagues. But the important thing for me was whether or not I felt Sam Knowles was the person that I would work easily with bringing together what clearly was going to be controversial and complex issue.”
As Bolger remembers it, Sam Knowles’ credentials were already proven plus. “Sam had been chosen by New Zealand Post because of his technical expertise and knowledge and the respect people had for him as banker to head up the project and take it through to fruition. [The issue for me] was whether or not he and I could work together. I formed an opinion then that we could and so it’s proved to be. That was really crucial meeting; enabling us to chew over some of the issues and get sense of what the chemistry might be like.”
At the same time Knowles was making similar assessment of Bolger. “At that stage I still hadn’t made the full call [about the job] but I [knew I] wanted to be chief executive of the bank,” he recalls.
Knowles had already done some research of his own. “I had never worked with Jim but had worked with plenty of people who had. It was matter of talking to few people and finding out what his style was and how he operated. In small country like New Zealand it’s not hard to do due diligence and find out what people say. So when I went into that discussion I was comfortable that what I’d heard about the way he operates would fit in well with the challenges that we’d face.”
Five years on the pair believe their initial impressions of each other have turned out to be accurate, and that their ability to work well together has been reflected in the bank’s strong growth.
In early October this year Knowles announced Kiwibank had 450,000 customers and was continuing to grow strongly, adding 2000 new customers week.
“Setting up bank is complex business,” says Bolger. “It’s constant. It’s not that you make few decisions, open few branches and say ‘here we are’. It’s never-ending stream of decisions, particularly with bank still in the early phases of its existence and that’s where the skill set that Sam brought was so important.
“Sam brought all the banking skills and knowledge that were required to run bank. I brought some public skills, some public profile and some ability to reach the public, which Sam now does superbly well by himself. But in the initial stages I was the known figure, Sam was the expert on banking.”
Knowles says Bolger’s dual role as chair of the bank and its parent entity, NZ Post, has been vital element in Kiwibank’s success.
“Because Post is also key supplier to Kiwibank we are required by the Reserve Bank to have an independent board. There’s plenty of scope for all sorts of conflicts to emerge through that process. Jim’s ability to guide both organisations has meant that when those challenges have come up they’ve always been resolved very quickly.”
Bolger says the issues around board and management interaction at Kiwibank are similar to the dynamics at other organisations.
“One of the important things in any board/CEO or chairman/CEO relationship is clear, although not rigid, demarcation. clear understanding of where responsibilities rest.”
This, he says, was particularly important as the bank got off the ground.
“As we worked through the very fast decision making necessary – and lot of decisions were made – an understanding of where our respective areas of responsibilities were was quite important in making sure everything went smoothly. [As chair] I always try to keep the responsibilities quite clear in my own mind even though from time to time I let board members wander little further here or there.”
Knowles adds: “The key from the chief executive’s perspective is having respect for the role of the board as distinct from just overlapping responsibilities. [Boards] do have that role of challenging, and individuals on boards always have different styles in the way they choose to play out that role.
“So the hardest thing is stepping back … At times it may be quite challenging when you’re totally certain you’re doing the right thing and you’ve got all the evidence behind you but people still want to go ahead and challenge it, and not just take your word for it. So you are forced to step back and say ‘this isn’t actually me against them, this is respect on both sides for the role’.”
Bolger agrees that respect is vital component. “That is hugely important in terms of dynamic but supportive relationship.”
He says his workday dealings with Knowles have evolved in “very sensible”, non-pressured way. “We deal with any issues that need to be dealt with and move on. We don’t spend our lifetimes second guessing what we decided yesterday or last week or last month.”
Knowles: “Probably as much as anything because Jim has come from working in complex environments where that leadership and chairmanship has been required, nothing has really changed since we started.”
Asked how they handle conflicts between them, Bolger acknowledges that both men will sometimes approach issues from slightly different angle or perspective. “It would be terribly surprising if we didn’t, but I wouldn’t describe any of our dialogue as driven by conflict around what we should or shouldn’t be doing.”
Knowles says the most challenging time for CEO is when an organisation is undergoing some form of external review.
“That’s the hardest part – when external reviewers are coming. Board members have got different perspectives on what they’re trying to get out of that review, and likewise management often gets into situation where it feels perhaps it’s been pushed bit further than it should be or the conclusions are quite appropriate conclusions but perhaps ones they’d rather not be sharing with the board.
“The real test is to come out of [such review] with better outcome than when we went into it.”
Bolger describes Kiwibank’s legacy to date as huge turn-around in public sentiment.
“[At start-up] there were huge question marks. More people thought we’d fail than succeed. There were more critics than supporters in terms of public comment by large margin and now that’s turned around completely. The mood of the New Zealand public is overwhelmingly supportive and there are only handful left who think it’s bad idea. lot of that goes to the bank that Sam and his team have developed. That it’s met and exceeded expectations when the doubting Thomases at the beginning thought we couldn’t even meet the expectations we’d set ourselves, much less exceed them. We’ve clearly dramatically exceeded them in many, many ways in terms of the client base we’ve got and the cost structure. So the environment we work in now is tremendous.
“[In the early days] Sam was an expert in banking and I knew little bit about the mood and mind of New Zealand and how to manage that but in the last few years Sam has demonstrated capacity to develop pubic persona which in banking terms is second to none. So it’s different environment that we operate in. It’s still challenging. There are lot of big banks out there that we compete against so it’s nev