With the recent appointment of Moruf Oseni as its new CEO and Dr. (Mrs) Oluwayemisi Olorunshol as Board chairman, can this bank witness the much needed turnaround under this duo ?
On the face value ,one may be tempted to tag Wema Bank Plc a corporate champion ; this is particularly so when the supersonic increase in its performance indicators in the last few years becomes the yardstick to measure its progress without reference to its actual place in the industry .
Between 2020 and 2022 ,for instance ,its Profit Before Taxation inched up impressively from N6.9b to N11.2 and 14.8billion .From 2021 and 2022 , its gross earnings , profit before tax ,profit after tax ,total deposits , total assets ,total Loans took a double-digit upward flight by 42%,19%, 26% ,23% and 24% respectively .This was not accidental ,it has remained the trend in the bank in the recent time .
Excited by the feat at the end of 2022 financial year , the management in its analysis noted the bank had sustained revenue growth across income lines, improved asset utilization resulting to higher returns and improved efficiency despite headwinds .
The above is good . But those views from its management ,indeed, are raising questions .Though the above trend is a feat, paradoxically , however , it is as well a ruse .For a well informed and critical investor or stakeholder , the dream is beyond the above incremental progress; to its stakeholders whose investments had gone down the drain more than two decades ago , the dream is about its turnaround and outperforming .
The bank , in the real sense of it ,of course , is still far away from achieving the above stakeholders’ ambition.To clearly ascertain where a company belongs in its industry or its progress status , certain critical success factors must confirm this .Few of these include the recent high profile initiatives launched, issues preoccupying senior management, criteria and benchmarks by which progress is being measured ,track record of new business creation, dreams and fears on the faces of employees ,company’s ability to shape the future and regenerate success again, and again in the years and decades to come when you look into its future.
Looking at Wema Bank through the above prisms , there is no doubt that its new management led by its new CEO,,Moruf Oseni and Board Chairman, Dr. (Mrs) Oluwayemisi Olorunshola still have some critical battles to fight concerning the issues highlighted above ; in fact ,they need to face the reality and be less disingenuous if the bank must change its status from the treadmill and actualize its investors’ dream of an industry leader .
One of the above criteria that exposes where Wema Bank’s competitiveness in the banking industry is when the bank is bench marked with its rivals .Benchmarking assists in understanding performance standards or what constitutes good and poor performance ;it helps to understand the impact that the mechanics of comparison might have on behaviors and it can be usually regarded as a process for gaining momentum for improvement and change ..
Moreover , there are different bases for bench marking of performance standards of which are .improvements on historical performance ,industry (sector) norms /standards and best in class beyond the industry in which an organization currently operates
Historical performance data are often used by many corporate entities . As could be seen in the analysis of its 2022 results , Wema Bank appears to prefer the first which looks at the performance of an organization in relation to previous years in order to identify any significant changes. However , the danger in it is that it could lead to complacency since it is the rate of improvement compared with that of competitors that is important.
This danger is not unknown to the management of Wema Bank ,though this is not limited to this bank alone .But analysts believe the choice could be disingenuous – a deliberate effort by the management to cover up its weakness relative to its rivals and to make brand more attractive to its stakeholders .
However , not everybody could be deceived by this management’s criterion or benchmark by which its progress is being measured. This deception is exposed by other standards of bench-marking . In spite the progress highlighted above and the management boastful posture over it , Wema Bank remains one of the worst banks in the industry .
When an industry or sector comparative bench marking is adopted to measure its competitiveness , the only bank among the tier 2 banks that Wema Bank could claim to outperform is Unity Bank , a bank with negative shareholder funds .
A 2021 analysis tagged Tier 2 Banks in the Afrinvest Paradigm and published by Proshare , a financial firm, confirms this assertion. Despite its so called progress highlighted above using the historical data , Wema Bank ranked the least overtaking only Unity Bank in all performance indicators amongst tier 2 banks in gross earnings, profit before tax, profit after tax , total asset, shareholders fund, customers deposit and net loans and advances. And even its 2022 figures confirm its treadmill position .
Even when its progress is measured using historical bench-marking , the bank in 2022 and years before displayed the fact that it remains a laggard in the industry .Despite the fact that its profit before tax increased from N6.9b in 2020 to N11.2b in 2021 and N14.8 billion in 2022 , the fact that its Cost to income stayed within 84% ,80% and 81% respectively is a pointer to its pathetic position in the industry.
On the faces of its employees and other stakeholders , it is more of fear than hope because of their past experiences . The balance between the hope and anxiety in the company, between confidence in its ability to find and exploit opportunities for growth and new business development and concern about its ability to maintain competitiveness in the company’s traditional businesses; between sense of opportunity and a sense of vulnerability, at both corporate and personal levels is more of fears than hope .
Until recently ,the bank had long been written off by investors as a clunker, characterized by low growth, low margins and an unmatched ability to destroy shareholder value. It became competitively enfeebled, experiencing downturn in every imaginable dimension .
On the bank’s ability to shape the future and regenerate success again and again in the years and decades to come when you look into its future, unlike the champions that spend less time worrying about how to position the firm in existing competitive space and more time creating fundamentally new competitive space, it appears it is otherwise for Wema Bank .
Consequently , the bank has remained more a rule taker than a rule maker within its industry, less intent on challenging the industry status quo than protecting it and less fully alert to the dangers posed by new ,unconventional rivals .
The reason for the ugly fate of Wema Bank may not be far to seek. Haunted by the deep-seated damage inflicted on it by its past leadership and helpless by the absence of any strategic leader with right and adequate capability to restore it to an industry leader, the bank has remained on the treadmill .The bank out rightly lost the industry structure to its competitors due to its managerial malfeasance and ineptitude,outdated managerial corporate lifestyle and genetic code that need urgent replacement .
Waking up a laggard like Wema Bank and turning it to an industry leader , like squeezing water out of a rock, no doubt , is a herculean task ; consequently , for it to regain its lost position in the Nigerian banking landscape is not for a dilettante .
Many reasons could be adduced for this . First , one very significant hallmark of a leader expected to live up to such an expectation is an understanding of appropriate strategic choices, including the bases for such choices as well as the options for developing them in terms of both the directions and methods of development .Since the expected strategic choices must relate back to its peculiar strategic position, such choices have to be made in the context of its strategic position to achieve the expected results.
In the past ,some leaders drafted to rescue Wema Bank from the doldrums after its collapse some years back , no doubt , did their best , but either by commission or omission ,they appeared to have failed the above litmus test . Consequently , the penalty for the failure of those corporate leaders to heed the above warning or live up to those expectations is glaringly the bank’s inability to get off the treadmill for long or shake off the stigma of a laggard.
HOW WEMA BANK ENTERED THE LAGGARD’S CAMP
Sequel to this ,the bank is still haunted by it ugly past . But how did Wema Bank enter the camp of the laggard and why are those drafted to wake it up from its slumber failed to live up to its stakeholders’ expectation s? Answers to this questions may shed a better light on its current travail . . In other words , for better understanding its current uninspiring strategic position in the industry , some analysis of the degree of the damage done to it or the degree of the decay in the bank inflicted on it that led to its change of fortune may be very appropriate and highly imperative. Before the travails of Wema Bank ,its heath status was among the best and it was an industry leader with the necessary capabilities to deliver competitive values to its stakeholders . .
However , its story suddenly changed with boardroom squabbles and bickering as well as allegations outright mismanagement that nearly grounded the bank particularly after exit of Mr Tunde Lemo ,one of its brightest leaders.
The story of Wema Bank change of fortune, indeed, is purely a case study of an alleged managerial malfeasance as well as leadership ineptitude; it lost its leadership to some unconventional players ; the bank saw its success destroyed ,or to say the least , eroded heavily by the tides of technological ,demographical and the regulatory change and the order of magnitude productivity and quality gains made by non traditional competitors..
Buffeted by the above forces with none of those leaders in the past to arrest them , the bank lost the control of its destiny . No doubt, the foundation of the bank’s past had shaken and fractured terribly as the industrial terrain changed shape faster than the top management could refashion its basic beliefs and assumptions on which markets to serve ,which technologies to master ,which customers to serve and how to get the best out of employees .
In a simple language , definitely , the upheavals that rocked Wema Bank ,indeed, reflected the failure of some of its past leaders to keep up with the accelerating pace of the industry change.
Unfortunately , those drafted to wake up the sleeping giant were less fully in control of its future and deficient of the iron teeth necessary to break the metaphorical hard nut indicated above .An industry observer and analyst in an interview with this medium noted :though the past damage was deep seated , those drafted to rescue it must admit that what they knew –the knowledge and experience that justified their position in the bank’s pecking order , was either irrelevant or wrongly headed for the future
This should not spring any surprise .It takes substantial and sustained intellectual energy to create the future ,to develop new competencies needed to re build a bank , pioneer new product and service concepts, form new alliances , produce nascent development programmes and long term regulatory initiatives to pursue
THE STRATEGIC ERROR: MORE RESTRUCTURING AND RE-ENGINEERING ,LESS REGENERATING OF CORE STRATEGIES
To fill the gap created by the above laxity ,the past leaders of Wema Bank , more than anything , were busy devoting too much energy to preserving the past and not enough to create g the future; instead of creating the future or regenerating its core strategies , occupying the attention of these leaders, in two words, were restructuring and re engineering .These decisions or options , though legitimate , no doubt , were believed to be the bank’s key strategic errors that have kept too long on the treadmill.
To be fair with those who came later to reposition it or restore its past glory,it might be difficult to blame a leadership in such a circumstance for taking the above initiatives as the bank was confronted by the problem of either no growth or slow growth. With this problem, some analysts explained , they might not be able to support the burgeoning employment rosters and significant investment programmes. The problem of low growth is often compounded by ballooning overheads , diversification into unrelated businesses and the paralysis imposed by unfailingly conservative corporate staff.
In the process of this and faced with competitive problems of stagnant growth, declining margins and falling market share, the past leadership just embarked upon restructuring .
Every successive CEO of the bank in order to save the bank consequently picked up a knife and started the work of brutal restructuring . The goal of this was usually to carve away the layers of corporate fat ,jettison under performing businesses and raise the asset productivity. And the fear ,usually, is that those executives who don’t find room for emergency surgery in this type of situation might lose their jobs .
The pressing motive is to improve the return on investment ,ROI . In the process of this , a leader usually targets one of the two components of ROI which include ,firstly, the numerator or net income and secondly , the denominator or investment, net assets or capital employed. To deliver and execute this agenda , its CEOs just made use of the corporate resources, launched some tough programmes. In a service industry like banking ,headcount may be appropriate denominator.
For Wema Bank leadership, denominators cutting was its better option .Grappling with the challenge of competing in a harsh environment., the bank was at work, sleeves rolled-up, digging a trench for bad and delinquent loans .To its management , it was the sinecure for a stronger balance sheet in the future. But the fact is that raising net income is usually a harder slog than cutting assets and headcount. and the bank preferred and opted for cutting the assets .
The reason for the management’s denominator cutting option is simple: to grow the numerator , top management must have a point of view about where the new opportunities lie ,must be able to anticipate changing customer needs ,must have invested in building new competencies and so on
Without any controversy , the above option is usually difficult , particularly when such a top management is under a quick pressure to improve ROI like Wema Bank . To cut the denominator, however , top management doesn’t need more than a pencil . This is reason why managers are usually obsessed with the denominator , an accountant short cut to assets productivity. This is usually to gain efficiency and higher productivity or to be able to get to the future first and get there for less .
Indeed , the past leaders of Wema Bank were glaringly under a severe pressure to improve the bank’s returns on investments or turn the bank around for better value delivery . Sequel to this , its management from one leader to another, from all indications , usually reached out for the lever that brings the quickest ,surest improvement in ROI and began to cut the bank’s to generate better returns to justify its leadership . This exactly was what those leaders did and the reason it lost its weight to its rivals to the extent that its capital base became almost completely depleted .
But this option is usually less preferable or desirable to analysts as a route to productivity or return improvement. What some analysts prefer to the above strategy is reaping productivity and efficiency gains by growing the revenue stream atop slower growing or constant capital and employment base .They believed ,an aggressive denominator reduction, under a flat revenue stream ,is simply a way to sell market share profitability cheaply , what marketing strategists term a ‘harvest strategy ‘and consider a no brainer. But that was the option preferred by some past leaders of Wema Bank .
Wema Bank over the years did not only embark on restructuring as strategy of its survival, it also added re engineering its processes .The reason for this clear: re engineering is a necessity child of restructuring.Recognizing that restructuring is ultimately a dead end , smart companies have moved on to re engineer their processes.
The management of Wema is not left out . First , this is to root out needless work and get every process in the bank for customer satisfaction, reduced cycle time and increased total satisfaction.However , one good observation that should be noted is that though the ostensible goal of re engineering is to focus each and every process on customer satisfaction, its main purpose is the promise of reduced costs.
Despite the above frantic efforts , Wema Bank has remained on the treadmill for so long and less competitive as it is still held hostage by the worst cost of doing business in the industry. Wema Bank had the highest cost of funds at 4% and cost to income ratio is above 80%, going by its 2022 results . The most damaging is that the bank is neither better nor bigger relative to its competitors .
The failure of those strategic choices to remove the bank from the treadmill , however , should not spring any surprise .Whereas downsizing, or restructuring and core process redesign , or reengineering are legitimate and important tasks , analysts believed they have more to do with shoring today’s businesses than creating tomorrow’s industries .Also , neither is a substitute for imaging the future nor will ensure continued success if a firm fails to regenerate its core strategies .
Analysts explained that any company that succeeds at restructuring and re engineering, but fails to to create the markets of the future will find itself on a treadmill , trying to keep one step ahead of the steadily declining margins and profits of yesterday’s businesses .
In a situation where a bank or other corporate entity is run by managers not leaders ,by maintenance engineer not architect , the urgent usually drives out the important , the future goes largely unexplored and the capacity to act rather than the capacity to think and imagine becomes the sole measure of leadership.
Moreover , a company that succeeds at restructuring and re-engineering but fails to create the markets of the future could not gain the position of leadership.This is because the process re-engineering and advantage building efforts are more about catching up than getting out in front .
Furthermore , any company that is more successful at restructuring than re-engineering will become more smaller faster than getting better as Wema Bank is currently .This is because re-engineering offers at least the hope , if not the reality, the hope of getting better as well as getting smaller. But the issue is that a company with those strategic choices surrenders today’s businesses when it gets smaller faster than it is getting better, surrenders tomorrow businesses, when it gets better without getting different .
In addition to the above , one of the inevitable results of downsizing is the plummeting employee morale just as it seldom results in fundamental improvements in the business. At best , some analysts believed , it buys time . That is why a savvy investor is usually encouraged to look at restructuring announcement as a signal to sell rather than to buy .
The simple fact is that getting smaller is not enough since downsizing is believed to be an equivalent of corporate anorexia and could make a company thinner not necessarily healthier
The Need To Regenerating its Core Strategies
The current status of Wema Bank is not only unfortunate but highly worrying as none of those appointed to lead the battle for its resurgence has succeeded . For several years, Wema Bank was a banking’s front player ; it was not merely a household name; it was a verb. But for more than two decades now , the bank had been swiftly dethroned by some unconventional competitors that have dominated the industry since then .
But the hope is not lost yet . To lift Wema Bank of the treadmill analysts believed it needs a leader who must be capable of fundamentally re-conceiving itself, of regenerating its core strategies and of reinventing its industry;it must be capable of getting different .
Thisc may not be farfetched . To create new businesses, the bank must or will have to regenerate its core strategies and reinvent its very concept of self — its channels, processes, customers , criteria for promoting managers metrics for measuring success and so on .
It needs a leadership that could create new value and competitive advantages for the future. Beyond building competitive advantages in relation to current competitors, it also needs to identify growth opportunities for the future and create new products and services, technologies, resources and capabilities.
In other words, the bank needs a strategic entrepreneur as a leader to embark on advantage -seeking strategy activities and opportunity-seeking entrepreneurial activities to create value. While the leadership strategy aspect supports this by forming competitive advantages, its entrepren- eurship contributes the identification of new opportunities in the market or environment. The latter involves entrepreneurs that innovate by identifying and exploiting new ideas and inventions that result in innovations.
Strategic entrepreneurship and its outcome, innovation , are essential for the long-term survival and success of all organizations; entrepreneurship and one of its most central ingredients and outcomes, innovation, are fundamental not only for creating value for customers, organizational growth and prosperity, but also generally for today’s economy. The management of this has failed to do the above at least competitively .
