Wired for Good

Western Union CEO Hikmet Ersek on educational access and clean money.

By Dirk Olin

Hikmet Ersek is the president and chief executive officer of The Western Union Company, a Fortune 500-ranked global leader in payment services. Ersek has executive management responsibility for a global financial services network spread across 200 countries and territories and an iconic,160-year-old brand. The company today counts employees from more than 100 countries working in 300 offices around the world.

During Ersek’s tenure as CEO, which began in 2010, Western Union has steadily diversified its business mix. Besides growing its retail money-transfer business to more than 520,000 worldwide “agent locations,” the company has expanded into electronic and mobile channels, added a global cross-border business that serves small- and medium- sized enterprises (SMEs), and broadened its financial services product line to include stored-value cards and e-wallets.

Prior to becoming CEO, Ersek served as the company’s chief operating officer. He joined Western Union in September 1999, and held several international senior roles of increasing responsibility within the company.
Ersek began his career in financial services in 1986 at Europay/MasterCard in Austria. In 1996, he joined General Electric (GE) Capital, where he was responsible for retailer sales, finance, and the card business. He also represented the GE Corporation as national executive in Austria and Slovenia.

In 2012, Ersek was recognized by Corporate Responsibility Magazine as a Responsible CEO of the Year and by the American Advertising Federation as a Diversity Achievement Career Achiever. Additionally, Ersek serves on the Board ofTeach For All, a network of independent social enterprises working to expand educational opportunity around the globe. He holds a master’s (magister) degree in economics and business administration from the Wirtschaftsuniversität (University of Economics) in Vienna, Austria and is fluent in English, German, and Turkish. He recently sat down with CR Magazine to share his thoughts on corporate citizenship, generally, and Western Union’s CR initiatives, particularly.

How is corporate citizenship practiced, broadly speaking, within the mission of Western Union?
This is an easy question you ask me because I’m a fortunate CEO. Our business itself starts with a huge global economic responsibility. You have to understand that we do 28 transactions a second, and those transactions change people’s lives. If you send money from the U.S. to the Philippines, the $200 can decide directly whether a mother’s child goes to school or not. If you can’t send that $200, it may be the case that the kid doesn’t get to go to school. And that’s a life decision. Or sending money to Colombia from Germany, might determine if somebody gets a medical treatment or not—and that can be a life and death situation. So the core business, every transaction, can change lives. So we build on that.

And your reach is quite wide, even in comparison with other multinational companies. How does that affect your agenda?
If you look at our customers worldwide, we are in 200 different countries, with 16,00 separate corridors—we’re
not in North Korea or Iran for obvious reasons. So we see the demographic differences, the diaspora behaviors, the different behaviors based on ethnic and cultural differences. It’s true even within the same country—Filipinos in Chicago are different from Filipinos in San Francisco. So about five years ago, I wasn’t CEO yet but I was the largest business leader in the company, and CSR was still a pretty new concept, and I said ‘this is a slam dunk for us,’ and let’s build on it. I don’t say make money and then give back. I say if we give back, then automatically we will make money. I said if you do these things first, then the customers will be loyal. And that has paid off. So we combined our activities globally by asking ourselves what can we do that the people really need? Over time, the programs have changed, but overall the one thing I really believe in is the value of education. I’m very focused on it. By which I don’t mean how to write and read, but how to promote the constant development of the people. We do that at Davos and with the World Bank and the U.N and actually also with Gordon Brown, the former prime minister of England. We helped [U.N. Secretary General] Ban Ki-moon develop the Education First initiative. Because through education you get less hunger, a better unemployment rate—because everything is so connected. I mean, there are 61 million children worldwide who don’t have access to education, and that’s for certain reasons. It could be political reasons, or it could be for economical reasons, because they just don’t have the money. I know that in our Western Union business, 33 percent of our transactions are going to support people’s educations, for children to go to school. It’s not easy being a mom, maybe a Filipina leaving her children and country to make money that she can send
home. In the states, we have parents worried when their child goes off for a week to camp. In our business, we have parents leaving for two or three years at a time to go to Saudi Arabia or the E.U. or the U.S. And our focus, which is unusual, is on secondary and vocational education.

Was this an easy lift within Western Union?
Change is hard. And this is particularly true for a public company. So I went to my team five years ago to start the conversation about how to fund these things. One of the mind changes that I personally had to go through was that I was trying to do too many things. After all, we’re in 200 countries, and I travel a lot, in fact, I’ve been in 89 countries myself in my own life. So you see a lot of different needs with our customer segment—I mean, I’m not selling Louis Vuitton or Ferraris or expensive laptops. This money is going to customers with financial needs. So I wanted to go everywhere, whether in Haiti or Morocco or in Chile or the U.S. or Russia or Uzbekistan. So the big learning for me was that it’s not about geographies, it’s about people. It’s not about which country is richer than the other country, it’s about which people have needs and where. So we built a global program based on actions, which meant building a business plan to use our agents globally, because we have 500,000 locations globally, with 70,000 agents deploying those. Something like 57 percent of our employees give to our foundation [see sidebar], and we match it two-to-one, and that’s even more remarkable when you realize that international employees can’t deduct that donation from their taxes, so they’re really reaching into their pockets.


So no resistance on fiduciary duty from your shareholders? No employees fearing volunteer time would cut into their bonuses?

This is combining CSR with our business model, and I very much believe in that. It’s not capitalism versus giving. We
are a shareholder-driven company, my margins are high, and I’m very focused on that. But again it’s a matter of giving back first, then the customers will never forget. Here’s another example. After the Haiti earthquake, we were the first company there. Our people were there within days with satellite phones so people could transfer money from worldwide to Haiti to support their relatives. And the same after the recent floods in Bangladesh killed thousands of people, so we did zero-fees for a month so they could get the money in there. And our businesses there are now great.

My board? I have a great board. They have been very supportive. And they get it, that we have an economic and social responsibility worldwide. It’s about long-term customer relationships and long-term shareholder value. If you get the customer, it pays back to the shareholder. I’m transforming a 162-year-old company. And I’ve had sleepless nights. But I believe in the plan, and it’s very transparent to the shareholders. We have a kind of a tailwind—our Q1 results are right on plan—and beyond our core retail business, cash to cash business, our online business is our fastest growing part, up 50 percent. So you get on your PC here, and the money is in, oh, Argentina has the money in minutes. We’re also moving into smaller business support—SMEs, they have unique needs. So for that guy in Uganda or Angola, it’s not so hard to ship the goods, but it can be hard to get the money. And that’s another part of the long-term story for our shareholders. This was an acquisition that was part of a move from our pure c-to-c—consumer-to-consumer—business to a b-to-b—business-to-business—operation.

Also, there are many NGOs worldwide with similar challenges. They need to get their money to many places around the world, some not so accessible. And they’ll give us that money, and we’ll get it distributed, and that cuts out a lot of corruption that used to occur, because it’s one-stop shopping. Again, this was doing business and doing good, because that teacher in Ghana can get the money and spend on their classroom right away.

So what are the hot-button CR issues for Western Union? I’m guessing climate change is less of an issue for a company like yours than, say, worrying about the Foreign Corrupt Practices Act, yes?
Right. Our business is quite green to begin with now, because every transaction is electronic, which means our carbon footprint is very small. Where we have to spend a lot of time is in the area of defending against money laundering. It’s one of our highest competencies. We are investing $100 million in this. It’s tracking every dollar, working closely with regulators to protect our customers, because we don’t want bad money in our system. We have lists of the bad actors, we have scorecards, we check ID’s, we have agent intelligence, we have customer intelligence. We just hired from JP Morgan one of the world’s best compliance officers.

Do privacy issues come into play?

Certainly. And it’s a very fine line between earning the customer’s trust and making the transaction too difficult, because then you can lose ‘good’ money. Of course, there’s also anti-terrorism and anti-drug aspects to this. But I mostly want to focus on the ‘good’ money, because our customers are sending back 40- or 50- or 60-percent of their paychecks to their families, and they need to be able to trust the brand called Western Union. And that’s why I put a lot of investment into consumer protection and fighting fraud.


What about internal relations? How do you lead your workforce?

We have about 9,000 to 10,000 direct employees and 1,000,000 through our agents. So, first, compensation is very closely tied to performance, both short-term and strategic, where the company is going. Second, I’m very hands-on with my direct reports, and we have monthly reviews, sometimes only five minutes, but I don’t want to surprise my people. And our metrics are clear. In today’s world, things are changing too fast. Waiting till the end of the year is old- school. Last, on employee relations, I’ve learned that it’s very important to be authentic—don’t ‘play’ the CEO! People are smarter than you think. I made that mistake when I started, but I stopped after two months, because I said to myself, ‘That’s not me. I can’t do this.’ I stopped hiding things. If I feel bad about something now, I say so.

Posted October 4, 2013 in 25115