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Redefiners
Winning in Volatility: How Trafigura Chairman Jeremy Weir Built a Global Powerhouse
00:26:57
There’s no shortage of uncertainty and change in the world these days, which is why it’s a frequent topic on Redefiners. This is especially true in the world of commodities, as perhaps no other industry has to deal with the level of uncertainty and...
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- [00:00]
A
Call them change makers.
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B
Call them rule breakers.
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A
We call them redefiners. Hi, everyone, and welcome back to another episode of Redefiners. I'm Marla Oates, a leadership advisor at Russell Reynolds Associates. Today I'm thrilled to be joined by my wonderful co host, Clark Murphy.
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B
Glad to be here with you once again. This is good.
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A
That's good to see you, Clark. Before we get started, just a quick reminder to our listeners that you can find all episodes of Redefiners and leadership lounge on YouTube. If you're watching Redefiners on YouTube, don't forget to hit that subscribe button so you don't miss an episode. And for our audio listeners, please don't forget to rate redefiners. Wherever you get your podcasts, we love to see your feedback.
- [00:49]
B
Marla. Today we're going to talk to somebody in the commodities business, a world you know incredibly well. He turned the business that he took over from a founder, always tricky. So just that leadership transition I'd be curious to ask him about, but he turned it into a global powerhouse in the trading oil, petroleum products, minerals, mining, et cetera. A world again, you know well. And this should be a pretty interesting discussion, to say the least, about volatility, risk, and how we manage the two.
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A
Yeah, I'm really excited for today's conversation, Clark. As you know, I grew up on a farm, so cattle prices, grain prices, hay prices, you know, all of that was central to my world. My, my dad worked just down the road at a refinery. So we talked a lot about oil prices, which is timely given we've seen oil prices spike. And then, you know, I started my career in investment banking in the Metals and Mining Group in London. So diamonds, gold. I'm really excited to talk to our guest today.
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B
A lot of the boards we're working with on CEO succession are asking about dealing with ambiguity, decisiveness, agility, because the plans we had three to six months ago are thrown out the window given the geopolitics and the volatility of the world, all over the world at this point. So I think someone in this business who takes risk every day and has to commit, whether it's a position or an asset or a purchase, that's the ultimate in decision making. That's the ultimate in, like, resilience and seeing how your volatility worked because you're making a bet.
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A
Yeah, I mean, I think you hit the nail on the head. Resiliency, adaptability, decisiveness. It's going to be a great discussion today, and I'm really curious to hear how he thinks about personally dealing with that pace of change.
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B
Well, this is the leadership crux as it is today. What we're seeing is ultimately getting consensus, being agile and making a decision and moving on.
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A
So, Clark, tell us, who is our guest today?
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B
Well, our guest today is Jeremy Weir, chairman of Trafigura, one of the world's leading commodity groups. They employ over 14,000 people in their global operations. Before being chair, he was group chief executive for 11 years. Served as CEO before that. This is a person who understands taking risk, placing bets, and showing how a company can perform and grow against difficulty. But as importantly, he races sailboats, which is very important to me. Jeremy, welcome to Redefiners. How are you?
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C
Very good, Clark. It's a great pleasure to be here. Nice to see you as well, Marlowe.
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B
I saw Killara. You've got a new boat.
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C
Well, basically my wife sort of said, if you're gonna start to retire and have more time at home, I can't have you with me all the time, so you'd better find something to do. So she touched base with a friend of mine, said, get him out of the house. And so all of a sudden, I. I now have a racing crew of 14 people and having a great time sailing in regattas around the Mediterranean. So it's not too bad.
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B
You know, they say for richer, for poorer, but you're not invited for lunch. So I think sailboat racing is a good place to go. Having done fastnet and Middle Sea and all those, we'll compare notes later on about where to meet up or where we're going to race against each other.
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C
With pleasure. With pleasure.
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A
Well, let me get this boat back on track. Jeremy, you were in the mining industry in Australia, and then you went on to spend the majority of your career in commodities. What drew you to the industry and what's kept you in it?
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C
Look, I studied geology as a university, enjoyed it immensely, and then worked in a mine for a period of time and then worked in banking, then worked in the. Obviously a traffic area of the trading company. And what it is, it's a fantastic business. You meet great people, you travel to great locations. It's always interesting, it's very diverse. Always problems, always challenges. But it's just been fascinating and I just don't regret one minute of it, really don't.
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B
You stepped in, I think unexpectedly, tragically, the chief executive and founder had passed away from a battle with cancer. You had this broad background of you talk about mining, banking, trading, but then you had to Be the boss. What was that transition like? What surprised you in the upside or the downside of quickly becoming the chief executive?
- [04:57]
C
My predecessor, Claude Dafoe, was a great mentor, incredible businessman, entrepreneur. And he was a tough boss too as well. And he was to some degree autocratic in the way he ran the business. And when I stepped into the role, it was tough. Our business is one whereby it's not a friendly business where people welcome you into the industry. It's highly competitive. So it was a very, quite frankly a lonely experience initially. But I had a lot of good colleagues working alongside me, helping me, supporting me. You know, at the end, once you get your feet, you're comfortable in your role, then you can start to sort of really, if you like, hit your straps.
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B
Was there any moment when the competitors kind of drew a line in the sand? Did you get literally tested early on or you just stepped in?
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C
Some businesses became more competitive, a little bit brutal, I can say. People were really trying to test the system. Test if Trafigura is an organization under new leadership would be resilient. And look, it ended up being. We were.
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A
Jeremy, I want to come back to something that you said. Look, it's a private business, Trafigura, but it's also an employee owned business, which is a little bit unusual for a business that size. You're effectively managing your peers. How did you adjust your leadership style to fit the culture of this employee shareholder model?
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C
Well, fortunately, I've been in the company for 25 years now, so very attuned to sort of what the model model's about. We're now in the next generation. This is the third generation of leaders which are enjoying the organization the way it's structured, I think it's a fantastic structure for a start because there's a certain DNA within the organization. People are very much aligned. They have a lot of personal wealth locked up in the organization. So they look beyond their own accountability if you like. So if they see opportunity sets or if they've got concerns. So it really is a fantastic model. But we have seen people come into the organization who struggle a little bit. You know, it's a different platform. What we find, which is another big benefit, is within reason, the structure is flat. Clark, you're talking about volatility and, you know, markets where they are. But the fact is you have to make decisions. If there's an issue, you have to get people around a table, make the decisions and if you make a mistake, just cut them quickly. It's okay to make mistakes. It's responsive, but being accountable and alignment. Three main sort of really great positives about the way our organization structure and particularly with respect to ownership.
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B
Interestingly, our firm is a private partnership. We're in 47 cities around the world. Same thing. Very, very, very flat, very entrepreneurial, shared sense of what's right and wrong. And I think we say we're longer on initiative than we are in guidance, like get on with it and if something goes wrong, there's a problem. Russ used to say, the only problem is the one you don't share with your partners, because we can solve the problem together. You've grown tremendously, we have found you really have to dig deeper to make sure there's a culture there that you've just described. Making decisions quickly, you make a mistake, then cut it quickly, et cetera. How do you evolve through growth, though? How do you keep that all going from when you took over to where it is now?
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C
I think what happens is because you're in the epicenter, you don't reflect back and say, well, that was tough, or what did we do during the growth period? You just adapt and that's what our organizations adapt. You need more lines of credit, you work with more banks. Is your risk platform good enough? Are you starting new business lines? Are you going to new countries? How do we do these things? It's not a big bang approach. It's not as though you're acquiring something, but it is organic. And therefore through that process, we won't do something which we can't control. When I reflect on sort of turnover numbers and staff numbers and business lines, yes, we increased enormously during my tenure, but it felt normal in any funny way. So it's a team effort. It is one whereby you've got a lot of people working together and it's not political from that perspective, which is very positive.
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B
How do you grow leaders in a risk environment? And equally, how. How do you know when someone probably has taken too much risk and they may not be part of the future of the organization? So how do you develop new people? And when do you realize perhaps they've taken too much risk and in fact they got to cut the risk?
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C
We have a number of sort of intake levels. We have a grad program which is very successful, which we have a junior trader program. So we have enormous organic growth and we build that talent and they build them in a style and they learn the organization, they go through different divisions and they start to get specialised in a certain area. We have very defined stop limits on how to manage Risk. There's a lot of training which goes on and there's a lot of support too. You know, people make mistakes and I think the most important thing is to provide a helping hand when people do make mistakes, learn from those mistakes. But sometimes you see repeats and people just don't get it. And so therefore we do rotate people out. It's not a job for life if people don't cut the grade. They're not part of the organization. And we make sure that some people might be traders all their life and other people move into a management function and it works well.
- [10:06]
A
Let's talk about the management function. Identification and development of executive talent is something that you focused on during your own transition from CEO to chairman. Tell us a little bit more about that succession plan, how you identified the talent, how you signaled to the board. Was it a smooth process? Was it? What advice would you have for other listeners?
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C
First of all, I signaled early to the board what I thought was the right timeline for me to exit. So there wasn't any surprises. You know, in fact, it was a good two years ahead saying, look, this is what I think my timeline should be. This is the rationale. We then sort of discussed within the board, what talent do we need? What person do we need? I was very different to my predecessor. You've got to look forward and say, what are the right skills required to run this institution for the future. We talked about a few people and first of all, our view was as a partnership, it had to be an internal candidate. We ended up basically selecting Richard. And you know, he. Richard's young but you know, very experienced and very measured and we thought had all the right skill sets to run the company. And what I then did was, it's probably the world's worst kept secret, spend a lot of time with him, traveling with him for about a year because he had to learn different businesses, relationships, have to pass on the relationship. And ultimately it was announced and then a relatively quick handover period. And what I think was very important was to signal it's his job, I'm there to provide support, guidance as you see fit and let the organization function as it should function.
- [11:38]
B
So you were a hands on operator, you were a trader who became a manager who looked at global risk and global growth. And now you're the chair, you have to stop being the operator. How was that transition? Did you make any mistakes? Did you dig back in at all? What was it like to be a governor instead of the operator?
- [11:57]
C
This was a job where you were traveling 70% of your time, you watched 24 hours a day. It was very, very intense. I was tired. I thought it was right time to step aside. I actually personally had no issues. Cause I just. I have other interests and I wanted to recharge the batteries. But I think what is important as you make that transition is to plan. It is to plan what you want to try and do. Plan other interests, making sure you give the CEO space. From my point of view, I've enjoyed the process. I enjoy the new role. It's a perfect evolution, I think, in one's career. And it's very nice to sort of see the organization performing well under a new CEO. It's great.
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A
A lot of times, as you can appreciate, as an exec search firm, we're helping boards and organizations make that change in terms of CEO. It can be hard for a CEO, though, to move to the board, right? The nose in, fingers out. Tell us a little bit about how you've made that pivot and how you got comfortable with it, how you set the organization up for success and also got the board comfortable with that.
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C
The board's worked together for a long time. And one thing about trading companies, you go from crisis to crisis. So this is an easy one. It wasn't a big deal. CR Quite frankly, to me, it all gets down to proper planning, proper communication, and so everyone knows where they are. And I think if you move people in now very quickly and people don't understand the reasons, it can create uncertainty and concern. That wasn't the case here. So I think from my case is literally just to ensure that you can evaluate the person who you've selected properly, provide the right assistant, make sure he's feeling very comfortable in his shoes. He or she, I should say. And the board is very supportive as well. They had to be very supportive the entire process because the end game has to be the success of the organization, the success of transition management. And if you try and put any blocks there or egos get in the way, it's not going to be constructive. It really isn't.
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A
We'll be right back with Jeremy Weir. But first let's head to our London office and hear from Dee Simons, leadership advisor at Russell Reynolds. She'll share her perspective on how leaders can respond effectively in times of uncertainty.
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D
Right now, leaders are operating in an environment defined by rising political tensions, shifting energy markets and almost constant disruption. For many leaders, the challenge is not only understanding what's happening now, but also preparing for how quickly the situation could shift once more in moments of extreme volatility no one has all the answers. So what does effective leadership actually look like in times of uncertainty? In our latest report, we outlined 10 enduring lessons from how leaders communicate and make decisions to how they balance short term pressures with longer term priorities and build resilience across their organizations. To explore all 10 lessons, you can find the full article in our show notes or@russellreynolds.com
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A
now back to our conversation with Jeremy.
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B
As we talk about CEO succession. You had someone internal, you had a smooth process and it's working. We have an annual global CEO turnover index which is looking at changes in the CEO seat. Last year was another record year of turnover for chief executives. The world's a more volatile place. Consumer behavior is different. Investor expectation really different. For you, who looks at the commodity business which has just movements every minute, every second, every quarter. If you step back a little bit, what's your advice about this turnover and how do you navigate volatility to pick leaders?
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C
If you are driven for certain financial performance on a quarterly basis, if you have to try and meet targets in a very short term in market conditions which are highly volatile, that's tough. Okay. And you may start to do things which are probably unproductive for the business long term, but deliver the results in the short term. I'm not saying people have been dishonest, but it's maybe not the right direction an organization should go. That's why I think when you asked the question before about ownership structure, DNA, these sorts of things are really, really critical for organizations. And that's where I think CEOs need to focus. You need to have very good people around you with the right skill set to be able to manage the environments in potentially highly volatile environments for the future. We talk about market volatility as a trading company, quite frankly, profitability often has a positive correlation, most likely has a positive correlation to volatility. That's what we manage. That's our business. That's what we do. Manage supply chains through highly volatile and dysfunctional markets is when we tend to excel more than under normalized conditions because we've got a global footprint, we understand. But things like AI, big fundamental changes in business structures which will result of that. How do you comply with that and what skill sets are needed to do that?
- [17:08]
A
You read my mind, Jeremy. That's exactly where we were headed next. AI and technology are clearly on the minds of many boards today. In fact, we just toasted a dinner with Jefferies in Dallas and that was all the talk of the table. When you are placing These big bets and managing global commodities supply chains. Where's Traffi placing those bets and how do you manage the risks?
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C
It's very important to our industry. I think there's going to be massive changes as a result of AI where we're positioning ourselves. Obviously we're making sure, first of all utilizing models. Okay. And also making sure our data can effectively utilized well by AI. So put putting the foundation blocks and structures in place, for example, analysis has been always very key market analysis for commodity trading companies. AI is rapidly changing that in terms of the timeliness and the accuracy. Also just in business processing because we're obviously very heavy in terms of documentation those things. So I can see the whole industry changing rapidly as a result of AI. We need to be at the sharp end. The large companies which are data rich, which have global footprints, if they can adapt well to utilizing AI, they're going to do extremely well out of it.
- [18:22]
B
As we talk about change in markets and you look back on your career, we ask every CEO, was there a moment that in your career defined who you are or had to redefine who you needed to be?
- [18:38]
C
I'd say one or two events. First of all, when I worked in a mine underground as a geologist, junior geologist, you know, understanding information flows, working with people, making sure people who are at different levels of organization, blue collar workers, white collar workers are respected and you can talk to them properly and they feel part of an organization. Working with a bank, I remember somebody always walking the floors, making sure, looking over people's shoulders how you're doing on trading side of things. Again, that's a communication type of thing to me, extremely critical. I think the other thing is I saw CEO really been able to sit in rooms regardless of topics and ask pertinent questions to ensure that he got the best out of his meetings and he got the best out of his team. So therefore don't often talk too much, listen, but ask very pointed questions. And that to me was sort of fundamental in trying to how I wanted to manage the business and operate as a CEO.
- [19:33]
B
Fantastic.
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A
Trafigura has been central to the global fossil fuel trademark, yet it's also investing heavily in the green energy transition. What misconceptions do leaders have about the pace and complexity of the energy transition?
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C
How long have we got,
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A
dare I ask?
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C
The problem is the green energy pendulum is swinging all the time. And obviously if you wind the clock back two years, everyone was looking as a green energy hydrogen. But you're looking at the cost of these things. It's Just not economic at the moment. Okay, yeah, but we've got a problem to solve. We need to decarbonize. But this is going to take a period of time. And what we need to do is give the companies the time and the motivation to change. We will move more and more towards the electron gas and the electron and renewable energy, solar, wind, et cetera. It will happen more and more. But also the systems and the infrastructure has to be ready for that. So therefore policies, et cetera, will be put in place to address this. But it's tough, it's complex, it's going to take time. And I just don't think we should demonize certain industries. We should try and encourage them to sort of utilize their competencies to change, become more efficient and deliver the energy that the world needs.
- [20:50]
B
How do you think about innovation and kind of evolution of a company where it puts capital to work, where it shouldn't put capital to work over time? How did you think about innovating and evolving as a company, as a leader?
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C
The problem with investments is that you invest for a certain rationale and certain sort of, if you like, returns and it mightn't happen and then you've got to try and pivot. You can't get out of these things quickly. What you've got to do is have a very disciplined approach around investing. We've made mistakes, I've made mistakes around that. And what we've done, sorry, is put in structures where people with the right, if you like, competency and right business processes to evaluate asset acquisitions or divestments or by performance alongside the strategy of the organization. The good thing in a company like Trafigura is that you tend to have pretty good ideas of where markets are going in the short term and I think generally in the long term. And so therefore we can start to pivot more in terms of where we think those opportunity sets are going to be on a long term basis. But you've got to do that within very defined parameters. How many fixed assets or industrial assets do you want as part of your overall equity base? And they're the things that actually we've become much better at.
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B
So the portfolio design, the balance sheet of looking where you want to have concentration, is that what you mean?
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C
Correct. Evolving all the time. Challenging, evolving. Have a five year strategy, but don't sit there and wait five years to say, how have we gone? You've got to look every three months and how are we doing here, guys? Are we going around the right way? Should we redefine it? Differently. The world is changing so rapidly. Reflect on an industry. Nickel. Nickel basically was an industry which was for stainless steel. Then batteries came along and then so nickel was being utilized for battery technology and everyone was starting to build out capacity. And then all of a sudden the battery technology changed. And so you go from nickel sort of based batteries to lithium phosphate batteries. So that happened in a period of two years. Yet a mine life is 20 years. So you're investing for 20 years. It's tough.
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A
So, Jeremy, we are through all the difficult questions and we've come to the part of our conversation we like to call rapid fire questions, which really is designed to help our listeners get to know you a little bit better. We're going to ask you a series of questions and we'd like you to respond as quickly as in one sentence or less. Are you ready?
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C
I'll give it a go.
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A
What's a piece of advice you received early in your career that still guides you today?
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C
Treat people as you'd expect to be treated.
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B
What trait do you most value in a chief executive?
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C
Honesty.
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A
If you hadn't chosen a career path in commodities, what might you have chosen instead?
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C
I'd like to be a sports pro, but I was never good enough.
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B
What's one word your colleagues would use to describe you?
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C
Fair.
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A
What's a small daily ritual or activity that you refuse to give up no
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C
matter how busy you are having a barocca every morning?
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B
I wonder if you're going to say that. What do you wish you learned sooner or earlier in your career?
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C
I didn't formally do accounting, so I think I would have liked to sort of done some sort of formalized accounting earlier on mixed with geology.
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A
Last question. What is one important skill every person should have?
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C
Humility.
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B
Honesty. Fairness. Humility. There you go. So totally loaded. Personal question. You think about racing around the buoys on Killara, your sailboat, which is a Wally Rocket 51. It's a very fast. It's a Formula One version for sailboats. For our listeners, how do you think about the risk taking at the windward mark? This is when all the boats come close together and make a turn and how the team works in preparing that team. As you reflect on also being a leader in business.
- [24:46]
C
Oh, that's a really good question. I've obviously got a tactician around me. I'm on the helm. You've got to be prepared and you listen to people around you. You might have an accident, stuff like that. I don't. I'm happy to take the edge because otherwise you're not going to be competitive.
- [25:00]
B
I agree. I think you've gotta, A, you've gotta have people better than yourself. B, you make really quick decisions in short races and if you want to win, you're gonna have to take risk. Maybe that's a metaphor for your career as well. I don't know.
- [25:14]
C
Possibly.
- [25:15]
B
Thank you for being here. I think super interesting for us and Marla lives in this world more than I do. But hearing you say you jumped straight in as a chief executive into a pretty brutal business where the competitors came for you to test you quite quickly. But as an employee owned business, that's very inclusive. You had the structure before you and you kept it moving to say, listen, we all have our personal equity in this business, so we're going to make decisions for the long term. But be inclusive, not dictatorial to make sure that the firm evolves with you. For you talking about volatility, it's the DNA of the leadership of the team because you make money with positive correlation to volatility. Volatility is your bloodline as opposed to some of us fear volatility. I find that super, super interesting. And as we think about the future of the company and green and decarbonization, we don't have to demonize those that have to do it. They need time, they need motivation and we also need the structure, the grid, the critical minerals to do it all. That's going to take time. And finally, you challenge in markets and you evolve over time. Take a five year strategic view, but you better re look at it every 90 days or less to pivot for the future. Like a sailboat. You gotta go where the wind shifts. That's how you win. So thank you for taking us through wind shifts and strategy shifts and pivots in such a fast moving industry. A lot to learn. Marla, you're in a hot business. More power to you.
- [26:44]
A
Jeremy, thank you for joining us today. Truly a delightful conversation. We you appreciate, appreciate all your advice and honesty.
- [26:50]
C
Clark Marlowe, it's been a pleasure. Thank you so much.