THE LEADERSHIP CHALLENGE IN THE NIGERIAN BANKING INDUSTRY

IDRIS YAKUBU REGIONAL MANAGER - NORTH FIDELITY BANK PLC JOS NIGERIA

JUNE 3rd, 2010

PRESENTATION OUTLINE
Issues in the Macroeconomic Environment Economic Growth Vs Foreign Investments Leadership Vs Management The Nigerian Banking Industry - pre & post 2009 Key Challenges affecting Bank Leaders today The New Industry Leader IBMs CEO Search Criteria Famous Quotes on Leadership Closing

ISSUES IN THE MACRO ECONOMIC ENVIRONMENT

Tough/Stagnant Economy Unstable Political environment Frequent changes in Government Policies Public Sector Reforms Governments Anti - Corruption posture Social Unrest - Niger Delta, Religious Crisis, MOSOP, etc Political uncertainty - build up to 2010 Elections

ECONOMIC GROWTH VS FOREIGN INVESTMENTS

Transformation in the Nigerian political structure (Military to civil rule) has reshaped the fundamentals of the economy to create new opportunities and challenges. Successive governments (since 1999) aware of the investment benefits democracy represents have seized on the goodwill to create a platform for flow of foreign investment. Investment flows have been helped by core reform programs such as privatisation, liberalisation, banking sector consolidation program, anti-corruption crusade, debt relief program etc Economic Growth has been substantially spurred by rise in non-oil investments particularly in key areas like telecommunications, hospitality and financial services As investment flows improve, government (holding the highest stakes) in the economy has substantially reduced its presence in many sectors including financial services

LEADERSHIP
Influence, the art or process of influencing people so that they will strive willingly and enthusiastically toward the achievement of group goals. - Koontz & Weihrich People should be encouraged to work with zeal and confidence. Zeal is ardor, earnestness and intensity in the execution of work; confidence reflects experience and technical ability.

 LEADERSHIP
The capacity to create a compelling vision, translate it into action and sustain it. The art of influencing others to their maximum performance in order to achieve the desired goal.
A Leader is a Dealer in hope. - Allan Leighton

 LEADERSHIP
Leaders act to help a group attain objectives, through the maximum application of its capabilities. They do not stand behind a group to push and produce; they place themselves before the group to facilitate progress. They inspire organizational goals achievements e.g, the Leader of an Orchestra.

 LEADERSHIP
Effective Leaders guide & facilitate the work to accomplish tasks & objectives while at the same time maintaining cooperative relationships and teamwork. - Yukl, Gordon & Taber, 2002

4 INGREDIENTS OF LEADERSHIP
- Power - Fundamental understanding of people - Rare ability to inspire followers to apply self fully to a project/task - Style of the Leader and the climate (environment) he/she develops

LEADERSHIP STYLES
- Autocratic Leadership - Democratic/Participative Leadership - Free Reign Leadership

QUALITIES OF A GOOD LEADER

Leaders are Strategic thinkers: they plan ahead and anticipate difficulties. They quickly spot inefficiencies and re-organize people to make improvements.
To effectively perform these functions, a Leader must possess the following qualities:

QUALITIES OF A GOOD LEADER ........Continued

TECHNICAL COMPETENCE: Business literacy and mastery of ones field.
CONCEPTUAL SKILLS: a facility for abstract or strategic thinking. TRACK RECORD: a history of achieving results. PEOPLE SKILLS: an ability to Communicate, Motivate and Delegate. A Leader without Followers is just taking a walk.

QUALITIES OF A GOOD LEADER ........Continued

TASTE: An ability to identify & cultivate Talents within your Team JUDGEMENT: making difficult decisions in short timeframes with limited Data. Avoid buck passing; take responsibility CHARACTER: This is the Quality that defines who we are. It is framed by drive, competence and integrity (moral compass). Character is the mother/key to Leadership.

KEY LEADERSHIP TERMINOLOGIES

Power Visionary Motivation Influence Charisma Mentorship Expertise Entrepreneurship Empowerment Will Power Delegation Servant Leadership Going the Extra mile Humility Effective Communication Followership

MANAGEMENT
The process of designing and maintaining an environment in which individuals, working together in Groups, accomplish efficiently selected aims. Koontz & Weirich Getting things done through the instrumentality of others. Focuses on the bottom line; how can I best accomplish certain things?

MANAGEMENT VS LEADERSHIP
Management 1. Plans 2. Organizes 3. Delegates 4. Controls 5. Procedural Leadership Visionary Empowers Involvement Passion Commitment Inspirational

MANAGEMENT VS LEADERSHIP (Contd)

MANAGEMENT LEADERSHIP

Transactional Keeping the system going in the same direction. The Manager does things right.

Transformational Doing things that change the system. The Leader does the right things.

THE BOSS VS THE LEADER

The Boss The Leader 1. Drives his men Coaches his men 2. Depends on Authority Depends on goodwill 3. Inspires Fear Inspires Enthusiasm 4. Says I Says We 5. Fixes the blame for Fixes the breakdown breakdown 6. Knows how to do it Shows how to do it 7. Says Go Says Lets Go

EXPECTATIONS OF THE FOLLOWERS

Team members look up to the Leader to provide the following: FOCUS/PURPOSE: effective leaders bring passion, significance to the process of defining organizational purpose. GENERATING & SUSTAINING TRUST; trust is the emotional glue that can bond people to an organization. In building trust, the Leader must deliver competence, consistency, caring, candor and congruity at the work place. FOSTERING HOPE: a Leader anticipates positive outcomes he believes that things will work out well.
GETTING RESULTS: Leaders will provide meaning, build trust and foster hope; but all of that counts for little unless Results are produced.

THE LEADERS MOOD

The Leaders Mood drives performance!!! The Leaders Mood & behaviours drive the Moods & behaviour of everyone else. A cranky and ruthless Boss creates a toxic organisation filled with negative under achievers who ignore opportunities - Goleman, Boyatis & Mckee Primal Leadership

THE BANKING INDUSTRY PRIOR TO SOLUDO

The period 2004/2005 was a watershed era with the appointment of Chukwuma Soludo as CBN Governor.
Soludo introduced an industry-wide consolidation programme which required banks to raise their capital base (shareholders funds) from a minimum of N2billion to N25billion The exercise recorded mass corporate actions of unprecedented scale involving strings of capital raising exercises, mergers, acquisitions and take-overs

Consequently, the Nos of Players sector shrank from 89 to 25 in separate merger/acquisition processes while 13 banks were liquidated.

..and the Bubble Burst

The new capital threshold created an industry of players of equal sizes as opposed to the era of the super powers (the then Big 4) and the Floor members (the rest) This heralded a new regime of Competition with banks struggling for every available space on the performance table even in areas that are not in line with their founding vision and then the bandwagon began (Capital raising, product offering, branch network, E-business, international expansion, subsidiary developments) Between 2004 and 2007, banks raised over N2.5 trillion in capital with over 35 appearances Naturally, these developments created pressure points along the Income lines as banks became desperate to service the new legion of stakeholders and investors

This provided the anchor for the Liquidity bubble and urgent search for investment outlets as income expansion became an imperative
..and the Stock and Property markets became the unfortunate victims.

CRITICAL ISSUES AFFECTING THE LEADERSHIP OF BANKS

As the sector expanded, structural weaknesses began to emerge in such areas as:
Blindfolded competition premised on ego and personality contests Quest for short-term profitability even at the expense of long-term results
Asset/Liability Mismatch Rise in speculation, rent taking and arbitrage business Absence of clear-cut and functional management plan

Failure of Corporate Governance

Insider Abuse and unhealthy use of privileges Regulatory Circumvention and application of street-wise practice models Defiance of sound risk management principles in asset creation

CRITICAL ISSUES AFFECTING THE LEADERSHIP OF BANKS(Contd)

Skill gap and human capacity challenge motivated by poor understanding of the peculiar nature of the Nigerian business environment and the needs of the customer
Absence of enabling allied institutional support to accommodate the growing profile of the sector. Lack of effective technological support to detect effective deployment of banking solutions across different product and market spectra. Resource Management: Availability Vs Allocation Strategic Management Vs Change Management Performance Management: Motivation & Rewards

ISSUES THAT AFFECTED THE BANKING INDUSTRY PRE 2009

Absence of Effective regulatory framework & structure to detect infractions Corporate Governance/Insider Abuses Poor Risk management practices Short term focus & approach in Business development Skill gaps in Project/Development Financing Recent Changes Global Financial Crisis, Niger Delta issues, Declining Government Revenues, etc.

.And what have been the Effects?

Confidence crisis which was last noticeable in the early 2000 has returned. Many depositors, particularly offshore institutions, are presently cautious of placing their funds in Nigerian banks and accepting their Guarantees in view of the present crisis The Credit market has virtually become Comatose while the Economy groans under the yoke of debilitating capital High incidence of Non-performing loans and massive diminution in Asset base Falling return on investment as demonstrated by declining share price, dissipating dividends and bonus issues Industry-wide capital stress Increased Job Losses

The Present state of the Banking Industry..the Sanusi Era

Following the expiration of the tenure of Professor Charles Soludo, the Federal Government appointed Sanusi Lamido Sanusi, the then Managing Director of First Bank of Nigeria Plc, as CBN Governor The new CBN leadership in an industry wide audit exercise, in two separate reports, pronounced 10 banks as being in grave conditions and urgently in need of capital injection Consequently the CEOs of eight of the banks were removed by the apex bank while a total of N620 billion was injected into the banks to relieve them of their precarious liquidity conditions

The dire liquidity status of the banks, according to the CBN report, was essentially motivated by huge exposure to of the banks to the capital market and petroleum marketing sectors

The Present state of the Banking Industry..the Sanusi Era (Contd)

The liquidity challenge has begun to show up in the balance sheets of the banks as recent published results reflect huge provisionings arising from Non-performing loans (NPLs) The development has compelled a Fresh round of Capital raising exercises as banks attempt to bridge the shortfall in their asset positions through new offerings for tier 2 capital. As at the time of this report, banks have announced plans to raise N2.7 trillion. The Regulator in its response has also announced its plans to rework the entire gamut of supervisory framework in the industry. Under the new arrangement, the CBN will focus on Corporate Governance, Enterprise Risk Management as well as Liquidity/capital adequacy. The Apex bank has also indicated plans to dump the Universal Banking model for a New system that will allow banks operate either as a Holding company or a Single purpose Commercial bank.

Defining Features of the Present Era

Regulations have become tighter
Disclosure requirements have become stringent Profits have become smaller

Capital has become scarcer

International alliances have become fewer

The NEW LEADER.

will be defined by the Ability

To manage Cost To operate outside the Bandwagon & Think outside the box

To see beyond the Immediate & Execute Strategies

To match the Facts with the Figures & Demonstrate Success To build Sustainable alliances To Take advantage of Opportunities & Mitigate the Risks To take the Hard decisions

IBMS CEO SEARCH SELECTION CRITERIA Creative Visionary Inspire and Motivates the Executive Teams A Strategic thinker Customer Orientation Immediate Credibility Record of Success as a Chief Executive International Experience (Exposure) High technological experience

Selection Criteria
Analytical Ability Makes it happen Infallible

FAMOUS QUOTES ON LEADERSHIP

Management is doing things right; Leadership is doing the right things. Peter F. Drucker
Dont tell people how to do things; tell them what to do and let them surprise you with their results. George S. Patton Leadership is the art of getting someone else to do something you want done because he wants to do it. Dwight Eisenhower

FAMOUS QUOTES ON LEADERSHIP ............Continued

A Leader should have the ability to inspire, get into the Trenches and show How it is done. Jonathan Feuer, CVC The very essence of Leadership is that you have a vision. You can blow an uncertain trumpet. Theodore M. Hesburgh
Delegating work works, provided the one delegating works too. Robert Half

FAMOUS QUOTES ON LEADERSHIP ............Continued Only One man in a Thousand is a Leader of men the other 999 follow women. Groucho Marx
The Best Executive is the one who has sense enough to pick Good men to do what he wants done and self restraint to keep from meddling with them while they do it. Theodore Roosevelt

OTHER QUOTES
The Person who gets ahead is the one who does more than is necessary and keeps on doing it. - Richard Denny The Winners in life think constantly in terms of I can, I will and I am. Losers on the other hand concentrate their waking thoughts on what they should have done or what they dont do. - Dennis Waitley There is No Substitute for Hard Work. Do not talk about it, Do it. - Gerald Ronson

THANK YOU