National Bank of Zambia (NBZ)
In the end, National Bank of Zambia (NBZ) could not keep up the pretence any longer. The bank’s Chief Executive Officer, Robert Tusheni, who came from Barclays Bank in 2015, and its Chairman of the Board, Mr Patrick Kunda, an old hand, were at each other’s throats and one of them had to go. It was Mr. Tusheni, the young, well-regarded Zambian MBA graduate, who was ousted last week, rather than Mr. Kunda, who is 75 years old and due to retire in 2019.
As soon as Mr. Tusheni arrived at the bank in 2015, he made the bank’s top managers face some uncomfortable truths. When the bank was established in early 1995, he reminded them, NBZ and the other commercial banks in Zambia, had roughly similar geographical reach, balance sheets, market capitalizations, profits and staff numbers. Why was it, he asked, that NBZ had so dismally underperformed its rival banks ever since? If it was not to lose even more ground, Mr. Tusheni told them, its strategy would have to change.
Under his leadership, NBZ increased the number of branches countrywide. In the urban area, the bank still faced competition from the private banks, notably, Barclays Bank, Stanbic, Standard Chartered, and Indo-Zambia Bank. NBZ nevertheless had an edge on the private banks because it was jointly owned by the governments of India and Zambia and, through a bilateral agreement between the two countries, the two governments channelled all their business through NBZ and urged their nationals to do the same.
In the case of rural areas, the leading private banks had recently decided to scale down their operations and eventually withdraw altogether because of what they perceived as poor business. NBZ had taken advantage of the vacuum created by the withdrawal of private commercial banks by embarking on a liberal credit policy to those who sought loans and lowering the minimum balance requirement to an affordable level considering that the clients in rural areas largely comprised government civil servants, subsistence farmers and an assortment of retirees who had opted to settle away from the hustle and bustle of urban life. The significance of cross-border trading in provinces sharing borders with neighbouring countries was not lost to Tusheni and his management team. The bank offered special loans and services to business men and women at their branches in border towns. So important were the rural initiatives that by 2017, the revenue from the rural sector accounted for fifteen percent of the company’s revenue.
Although the bank’s capital base gave the bank an edge over other banks, it was Tusheni’s wish that the bank did not become complacent; rather it had to fight its way with other banks to win customers over. Tushen initiated a number of measures intended to rebrand the bank and improve its corporate image. In particular, the service was to be improved through a number of policies: employees were sternly warned that they stood to lose their jobs if they failed to please and be courteous to customers. Staff who interacted with customers and their immediate supervisors would be censored and disciplined if a customer was in a queue for more than twenty-five minutes. The bank would recognize and reward any employee who enticed anyone to become a customer of the bank.
The turn in fortunes of the bank under Mr. Tusheni’s stewardship was also enhanced by the bank’s decision to enter into an alliance with COMESA which was headquartered in Lusaka. Through an agreement with COMESA, member states were encouraged to use NBZ whenever their officials were on business linked with COMESA. This gesture was also extended to traders in the COMESA region who were encouraged to open accounts with the bank in order to access special facilities the bank introduced to assist and promote business within COMESA.
Last year Mr. Tusheni started to back away from the unspoken tradition of granting soft loans and advances to old political hands, whose default rate on repayments was becoming a matter of concern to the bank. This did not however please Mr. Kunda who drew his support from the political establishment of the ruling party. Moreover, so Mr. Kunda argued, NBZ was a “national and people’s bank.” On his part, Mr. Tusheni made no secret of his disdain for what he considered Mr. Kunda’s “archaic and destructive banking practices.” Mr. Tusheni also riled the expatriate staff who felt insecure by Mr Tusheni’s slant toward indigenization of the bank. A firm believer in the “African way of doing things,” Mr. Tusheni had, in the last two years, began promoting local fellow Zambians and Africans from COMESA member states to managerial positions, a role traditionally reserved for Indian expatriates.
Forcing the pace of change at NBZ, half of which dates from the 1990s, was a hard task, and Mr. Tusheni made enemies along the way. Critically, he failed to keep in with the bank’s non-executive board members, viewed in the City of Lusaka as a conservative lot, and hopelessly steeped in Indian tradition. It was these folk who turned on Mr. Tusheni last week, despite his support from the executive managers and the Minister of Finance in the Zambian government who was known to be a close friend and business associate. Most recently, differences between Mr. Tusheni and his Chairman had been aggravated by Mr. Tusheni’s open enthusiasm for privatization of the bank. Mr. Kunda is known to be passionately opposed to any “watering down” of government ownership.
How the bank charts its course in the post-Tusheni era will now be the job of Mukela Mundia, NBZ’s former Operations Manager, who was promoted to Managing Director last week. Mr. Mundia is known to be a close confidant of Mr. Tusheni and reliable sources believe there will be no major shift from Mr Tusheni’s stance. So Mr. Tusheni’s ideas, if not his management style, will continue.
Source: Adapted from The Economist, December 8-14, 2001, p.72
(a) When Mr. Tusheni arrived at the bank in 2015, he advocated for a new strategy. What was the significance of calling for a new strategy?
(b) Identify and describe the strategies that the bank pursued from the time Mr. Tusheni arrived at the bank to the time Mr. Tusheni left the bank. [Do not rehash the case].
(c) Describe the strategy Mr. Mukela Mundia is likely to pursue. Justify your position.
Following poor performance over the last three years, Lukas Engineering Company has engaged Kamuti Sepiso, a civil engineer, as a Chief Executive Officer to turn things around. Six months into the job, the company is still experiencing poor performance. Sepiso now believes that to achieve better results from the turnaround strategy, he has to change the company’s organizational culture.
a) What is meant by an organizational culture?
b) Explain how Sepiso use organizational culture to improve the performance of Lukas Engineering Company.
In the light of the corona virus pandemic, the Zambia Oil Company is considering making a donation of K100,000 to the Ministry of Health. The Board of Directors is, however, divided: some members of the board are against making the donation and others are in support of making the donation.
The firm has hired you as a management consultant to present to the board two (2) arguments for and two (2) arguments against making the donation and to make a persuasive recommendation on what the company should do.