POLO LETEKA: Managing transitions and transformation in banking

Two of SA’s most important companies — the banking giants FirstRand and Nedbank — occupy pride of place in the heart of the country’s prime business precinct in Sandton. As prominent members of the country’s banking oligopoly the fortunes of the two mirror the trends of the sector at large, and in some instances the fortunes of the nation itself.

Their footprint across the SA economy is transcendental and intersectional. As an employer, FirstRand has more than 39,000 staff servicing over 9-million clients. Nedbank, on the other hand, employs 26,000 people servicing a client base of 7-million. 

As signatories to the Financial Sector Charter both banks are committed to the key elements of the national agenda, such as financial inclusion, improved access and transformation. While the sector at large has made great progress in fostering financial inclusion and access across the board, significant fracture points remain in the dimension of transformation. Across the sector substantive transformation remains an elusive mission.

In its 2022 “Transformation Report” the Banking Association SA noted that while the banking sector had met its targets in key elements such as preferential procurement and enterprise development, significant gaps persisted in the areas of management control on operational levels and director level.

As one goes up the management ladder the gaps tend to widen and are amplified. At junior level management the banking sector had 87% of black managers against the target of 88%. In middle management the 67% recorded in the transformation report fell short of the 75% target. For senior management, the gap was wider as only 45% of senior management was black, against the target of 60%. For top senior management, the picture was similar with the sector scoring 43% against a 60% target.

Given the importance of leadership development within institutions such as banks that tend to favour internal timber with deep institutional insights for leadership positions, the trends of gaps widening up the ladder remains a point of deliberation for the sector at large. It may just be that efforts at promoting transformation within the ranks of the big banks have been focused on grassroots development, which accounts for the smaller demographic gap at lower levels of management.

The problem is that when the picture of the sector is so mixed it is difficult to know if this is a manifestation of an actual programme of action or simply a consequence of the professional demographic at the entry levels converging with the national demographic. 

Internal selection

The trend observed in SA over the past two decades is that financial institutions gravitate towards a process of grooming and selecting from within their own stable. The benefits of internal preparation are multifaceted. Familiarity with institutional culture and strategic orientation cuts down the learning time for a new leader. A secondary benefit of pipeline development is that it fosters a culture of long-term career planning for emerging professionals within the institution.

On the other hand, the introduction of new leadership can lead to new ideas and a shift towards embracing new frontiers in an ever-evolving world. Boards of directors therefore have the obligation to identify a most appropriate succession-planning model that addresses both the institutional commitment to the national agenda and the responsibility to stakeholders.

In recent weeks both Nedbank and FirstRand have announced important leadership transitions that will be implemented in 2024, which happens to mark 30 years since the dawn of democracy. In 2018, FirstRand took the proactive approach of diversifying its leadership pool by recruiting Mary Vilakazi from MMI Holdings and appointing her COO of the banking group.

Over the years she has formed part of the leadership cohort within the group that collectively worked through the challenging times of the pandemic and managed to steer the banking group through those unchartered waters. Rather than being subject to a coronation, Vilakazi was provided with an opportunity to master the trade and be in a position to put up her hand during the leadership transition. By becoming the first black woman to lead one of the big four banks she broke what had been the last remaining ceiling in the upper echelons of banking in SA. 

Nedbank’s transition has taken a rather different pathway. When long-term CEO Mike Brown indicated his plan to step down the obvious question was whether the bank would mirror the established trend and recruit within or widen its search beyond its own corridors. The CEO job was deemed lucrative enough for more than 300 individuals to express an interest in the early stages of the recruitment process.

The final shortlist, which included internal and external candidates, resulted in the appointment of Jason Quinn of Absa as the next Nedbank CEO. Quinn’s appointment has naturally revived old questions about how succession planning is managed across critical institutions. A critical element of succession planning in the SA context, is the need to incorporate transformation into the process itself.

As a country whose history of racial exclusion is well documented, South Africans understand that the poor history of black people leading large, listed institutions is intimately linked to the question of long-term patterns of exclusion. That historical anomaly makes the need to incorporate transformation an imperative for society at large and for institutions such as banks that play an amplified role in SA society.

Nedbank’s unique rules around executive retirement created an additional layer of complexity. Within its current executive team some senior members are close to the retirement age of 60. The gathering tides of time towards that age means such internal candidates may have been living through the Ruth Bader Ginsburg conundrum.

Ginsburg — an associate justice of the Supreme Court of the US who passed away aged 87 — was continuously lobbied to retire while a Democratic government was in power, to minimise the risk of a Republican president appointing her replacement.

Her conviction ahead of the 2016 election was that Democrat Hillary Clinton would win the US presidential election so she stayed on, only to die in office during the Donald Trump presidency. Trump duly appointed a new conservative justice who decisively swung the court in a new direction.

In Nedbank’s case the candidates close to retirement age may have had to consider how their looming retirement and the need for leadership stability would be balanced. The board could naturally have waived the retirement age clause, but that would have raised new questions about whether the rules were being bent to accommodate someone whose time in the sun had passed.

The obvious question for the bank is whether during the latter days of Brown’s tenure it considered the need to proactively manage succession planning and give internal candidates a fair chance to put up their hands without the added dimension of the looming retirement date to consider. 

A common misunderstanding of organisations that lobby for transformation, such as the Association of Black Securities & Investment Professionals (Absip), is the assumption that it means only CEO positions matter and until they are filled by people of colour transformation does not exist. However, our position is that institutions with a clear roadmap and commitment to transformation are best placed to find leaders within their institutions and the market at large who are able to deliver on the mandate to run the institutions properly and also boost its transformation efforts.

In the case of FirstRand, the clear commitment to widen its reach early gave it a best chance of finding a leader whose capacity to run the institution is widely acknowledged and whose appointment reflects the commitment to substantive transformation. In Nedbank’s case it is not immediately clear what the big idea was around succession and how transformation factored into this process. The indictment in this case isn’t just that the bank has not been able to find a candidate who would break its last remaining ceiling but also that its internal pipeline development seems to have fallen short in feeding into the succession planning process.

As Quinn takes on the role aged 49, he has some runway to invest in the development of a pipeline of executives that will not only support the bank’s strategy, but also form part of a proactive commitment to diversifying the talent pool. It is this plan of action that Absip will be keen to engage on and monitor at Nedbank on a continuous basis. It is our hope that the bank will be able to commit itself to a tangible and practical plan of action towards implementing its transformation goals. 

We will be curious to see if the bank can learn from its peers across the road about how the delicate balance between leadership succession and transformation can be addressed proactively. Getting this right will be an important task for the board as it oversees the next phase of the bank’s story. 

• Leteka is president of the Association of Black Securities & Investment Professionals.