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When Wesfarmers made its $22 billion scrip bid for Coles in mid-2007, more than 99 per cent of the target's shareholders voted in favour of the offer. The overwhelming support was based largely on faith that a company with Wesfarmers' reputation for focusing on shareholder wealth would not steer them wrong.
This faith was particularly notable, given that Wesfarmers is a conglomerate with businesses ranging from retail to energy to financial services. Certainly, it had received a lot of credibility for its ability to grow and make prosperous its Bunnings chain of hardware stores. But in taking on the task of turning around the Coles supermarket chain, Wesfarmers showed it was not afraid of taking risks.
It was Richard Goyder's first big acquisition since taking on the chief executive role from his predecessor Michael Chaney in mid-2005. It is Chaney who can take much of the credit for Wesfarmers' high standing in the business community but the respect the organisation commands has not waned under Goyder.
Although the chief executive has a key role in determining the level of respect a company has in the business community, it has to be part of the company's culture and it has to come from the board down. A company with submissive directors and senior management is unlikely to gain respect.
"You don't want a whole lot of like-minded people, whether it's around the board table or the leadership team table," Goyder says. "You need people prepared to argue a point or put a different point of view. Within an organisation, diversity of views is extremely important but once you come to agreement on a position you want that position - and not the diversity of views - promulgated."
Whether it be a new senior manager or a new board member, it is important that the incoming individual is prepared to live by the company's values, Goyder says. His own role is vital in setting the example.
"The chief executive ultimately is the leader, and as the leader there are a few things they do. One is to set the direction of where an organisation is going; the second is to ensure the right people are in place; the third is to set and live the corporate standards. So the chief executive is critical. In fact, the company with the wrong chief executive - it doesn't matter how good the quality of the board is - they have problems."
Goyder is aware of the legacy of respect he inherited from Chaney and it made his job easier when he became chief executive: "Because we had a good reputation, to my great benefit people pretty much assumed Wesfarmers would get it right when I took over the job - that was helpful."
Nonetheless, Goyder was riding on the coat-tails of two decades of success and it raised a concern. "Complacency is a huge risk in any business. It's one thing I was concerned about when I became CEO, as Wesfarmers had been so successful for nearly 20 years, and that can bring complacency and risk aversion - people start to fear taking a risk in case it ruins success. So you have to keep innovating and challenging people."
Goyder certainly challenged his people with the Coles takeover but the big concern for the Wesfarmers team was not the financial ramifications of the agreement - a lot of the concern had to do with culture.
"Wesfarmers is very financially focused and when we were looking at the Coles acquisition the board had a lot of confidence that we had done the work on the financial valuation," he says. "So having done that work and worked out what we could pay for the business, the board's key issue was culture; would we be able to change the culture at Coles quickly enough to effect the changes we needed to make in the business?
"To change behaviour, how do you do that? It's management, so the question was, could we bring in a capable management team able to change the business? We came to the view we could and one of the things that the new team is driving is cultural change. Because the business had been criticised so much, I think the people in Coles were ready for a change."
It is two years since the Coles acquisition but from the outset Goyder said it would be a five-year program to turn the ailing stores onto a sustainable growth path. Nevertheless, the signs of change have started to appear in the retail chain's improving performance results.