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Macquarie Boss Happy To Be Part Of AGSM Team

AUTHOR: Lachlan Colquhoun   DATE: 01.09.05   ISSUE 2, 2005

“It’s been very much a team thing, and most of the elements of that culture were in place when I joined Hill Samuel (Macquarie’s predecessor) in 1977,” says Moss, who recently joined AGSM’s Advisory Council.

Alan Moss received an AO this year for service to the investment banking industry.

“Organisationally we are, in many respects, a federation of different businesses so I give relatively few black and white directions – its much more of a collaborative process.”

Despite his modesty, Moss is by any measure one of Australia’s most successful Chief Executives and the business has expanded under his tenure from a domestically-focussed investment bank to a global player.

Moreover, the innovative 'Macquarie Model' of taking real estate and infrastructure assets and packaging them into funds has been successful around the world in assets from Korean toll roads to Tanzanian airports and US golf developments, and is now being widely emulated.

Moss has been a constant throughout Macquarie’s history.

“We have a philosophy of indifference to the business cycle,” says Moss.

“A traditional concept of business strategy is to ask what business you are in, and then develop our strategy around that, but we’ve felt that is a sterile approach because you tend to define your own strategy in terms of your competitors’ business models, and that leads to conventional answers.”

While the parent bank itself is worth around A$14 billion, the specialist listed and unlisted funds that it has created now comprise assets worth A$46 billion, a figure UBS Warburg expects to grow to A$69 billion by 2007. There has even been talk of a Macquarie bid for the London Stock Exchange.

Throughout Macquarie’s history, Moss has been a constant. He joined Hill Samuel in 1977, when it was a Sydney operation with a 50 person headcount with a core business of corporate advice.

Now 56, Moss has been Macquarie’s Chief Executive since 1993, but rather than expounding at length on his leadership style, he is happier to point to the factors which have driven Macquarie’s growth, a strategy he says is based around two concepts – “adjacency and competency.”

“The adjacency is best illustrated by how we got involved in the infrastructure funds management business a decade ago,” says Moss.

“We decided to compete for the private financing of a toll road in north-west Sydney and came up with a novel idea of financing it through an IPO, and to our knowledge no-one had done that before with a new road.

“From there, it was a relatively modest step to establish a fund that might own more than one road, or to do the same in other industries, and to broaden the mandate to international roads.

“So its been innovation by increments.”

The concept of competency comes in when Macquarie enters new industries in which to apply its model. As it prepares to enter a new field, it hires experts to advise and form teams with the Macquarie staff who apply the financial expertise to create the new specialist fund.

In selecting the assets, Moss says Macquarie is driven by a criteria he calls “privilege,” which delivers safe cash flows and minimises risk.

“Normally there is only one major tollroad from point A to B,” he says.

“Airports also fit into that category because there’s normally only one major airport in each substantial geographic location, and there are probably only one or two broadcast towers in any region

Another key part of Macquarie’s success, says Moss, has been its ability to preserve and extend the original Macquarie culture.

“We think of our culture as a small business culture within a larger organisation and those of us who are in the leadership all remember what it was like to be a part of a smaller business and so we’ve organised the Macquarie group to maintain that entrepreneurial culture,” he says.

“And the way we foster that is largely through a business philosophy we call freedom within boundaries, and what that means is that we seek to centrally control a small number of key risks – credit risks, market risks, operational standards such as ethics and brand – but we leave as much as we possibly can to the people who are involved in the relevant businesses, and that even extends to looking to the businesses to recommend their own strategies.

“This has been a very effective way of fostering an entrepreneurial culture.”

Although Macquarie has recently been on an expansion phase in Asia, acquiring Dutch bank ING’s cash equities business in the region and also hiring locals in countries where it operates, Moss says he believes the bank’s culture is easily communicated to new employees.

“We think of our culture as a small business culture within a larger organisation."

“I don't think hiring locals changes the bank,” he says.

“When I visit our international offices, even though they are often speaking a non-English language in every other cultural respect it feels to me just like the organisation I joined 28 years ago.

“People understand how we do things, they understand the concept of freedom within boundaries they enjoy operating entrepreneurially within a sound risk management framework.

“So it's still Macquarie and it's Macquarie because the philosophy that we have to our business is a compelling one and a manifestly successful one so people feel happy to embrace it.”

"In a globalised world education is going to be a key determinant of who succeeds and who fails."

Moss says that another achievement of the Macquarie culture has been to engender a strong sense of teamwork which has resulted in very low staff turnover.

“I think we’ve been very successful in maintaining high standards and in retaining key people,” he says.

“For the top 20 p.c. of staff, voluntary turnover is down to around 6 p.c. per annum which is very low, almost down to retirement levels.

“We almost never lose business heads to a competitor, and I think as part of the management team that I’ve been able to contribute to that.”

Although Moss admits he “doesn’t get involved” in many activities outside of the bank, he says his AGSM role is a good fit with his philosophy.

“I try and be selective but I feel that in a globalised world education is going to be really a key determinant of who succeeds and who fails,” he says.

“So I think that its especially important to support good education.”

Characteristically, however, he is reluctant to talk up his likely individual contribution to the Advisory Council.

“There’s a large number of qualified, experienced and talented people on the council,” he says.

“So I just see myself as being one of the team really.”