In an all too familiar tale, the departure of Absa CEO Daniel Mminele, just 16 months after joining the bank, brings into question the fragility of the relationship between CEO and board. It is undeniable that for the relationship to succeed for the betterment of the business there must be precise alignment on the task at hand. But in some cases communication and trust deteriorate so quickly and with such animosity that both parties choose to part ways, sometimes amicably and other times not.
Mminele’s recent resignation has shone a light on this at times tenuous relationship, and while it might be easy to attribute the resignation to a lack of transformation within the banking sector (and Absa’s executive committee specifically), this in our view does not genuinely reflect the complexity of issues at hand. To do so renders this highly impressive and accomplished CEO, as well as his counterparts at board level, as one-dimensional characters in a sad but predictable drama.
Rather, instead of writing another opinion piece on the virtues of transformation in corporate SA, we believe the more important conversation ought to take place around three key points when employing at executive management level. Firstly, how transparent are boards when setting expectations of the job, or is it more about prestige and positioning? Secondly, are boards ready to consider that diversity needs to extend beyond race and gender to the diversity of thought, perspectives, backgrounds and attitudes to add value in a meaningful way? And lastly, why are outside candidates consistently sought for organisations?
As stated earlier, the relationship between CEO and board is one of accountability and trust. As an appointee of the board and its shareholders, the underlying premise is that the individual has the trust and backing of the board to determine the strategic direction and make the necessary decisions for long term sustainability. This assumes sufficient time and energy has been applied to the recruitment process to find the right individual aligned with the board, business vision and culture.
This relationship is seamless and symbiotic in the best of cases, resulting in a stable and resilient business and profitable returns. However, it is undeniable that there appears to be a trend resulting in less successful appointments of late across corporate SA, putting at risk companies and the livelihoods of all who depend on them.
Mminele far exceeded the prerequisite skill set required to have succeeded in the role. His impressive resume included two five-year stints as deputy governor of the SA Reserve Bank, where he was responsible for financial markets, international economic relations & policy, and human capital & operations. He was also a member of the monetary policy and financial stability committee. Before joining the Reserve Bank in September 1999, he worked for African Merchant Bank and Commerzbank in SA and West LB in the UK and Germany for 12 years.
Despite the impressive resume, his tenure at Absa has been cut short, citing divergent professional views and approaches. A lot has been said about the institutional nature of Absa. The entrenched business culture, long-established systems and processes and the unspoken dos and don’ts. Some divisional heads have been with the business for over 20 years and for all intents and purposes each runs his or her business independently, in what is clearly an effective decentralised model for the Bank.
This raises our point around expectations. What was Mminele made to understand about the role he would be taking up? Could it be that he was given the impression that he would be able to institute the changes he deemed fit, only to find that the business strategy was set in stone and that his role was primarily ceremonial? If this is the case, expectations were clearly misaligned and should be no surprise to anyone that both parties chose to part ways.
The bigger question is why Absa went through the process of appointing someone from outside the business in the first place, when there appeared to be internal alignment around strategy and the future trajectory of the business. By doing so they inadvertently rendered Mminele a political appointee, a position no black executive worth his or her salt would accept, especially not one as decorated as Mminele.
An alternative view could be that there was a clash of cultures and personalities. Having spent the bulk of his career within an institution as regimented and protocol driven as the Reserve Bank, with a focus on the broader banking control and legislative environments, it is not implausible to think Mminele perhaps did not take to the business culture and style of doing things at Absa.
This is not a question about ability but to make the point that 20 years at the same institution would render any one of us highly institutionalised; with less familiarity around corporate processes and reporting outside regulatory reporting. Couple this with an Absa management team equally as entrenched, and you have a recipe for disaster. With little room for diversity of thought and opinion, it is not surprising that this well-intentioned union did not pan out.
Some have argued that perhaps Mminele was simply out of touch with the nitty-gritty of retail banking, a highly demanding and competitive landscape centred on high-volume, low margin credit. Wealth management, insurance and corporate & investment banking — other key Absa pillars — are equally niche areas requiring specialist skills, hence the seemingly appropriate decentralised operating model.
Others would respond to this by saying Mminele’s predecessor, Maria Ramos, was not a career banker yet managed to retain a semblance of unity during an extremely challenging decade to lead a bank (although during her tenure, Absa admittedly did not gain market share in its key segments.)
The lessons here for everyone, especially corporate SA, is what we in the reputation management business call managing expectations. Mminele was seemingly slated to be the successor to the Ramos legacy, and with it represented a step towards a more transformed and inclusive banking sector. Enamoured with the idea of a black CEO, both parties perhaps did not apply sufficient due diligence to the “softer” alignment factors around culture.
Unfortunately, there are no shortcuts to transformation, and this episode will serve as an important reminder. Instead, what is needed from corporate SA is a commitment to equal opportunity and the development of an internal talent pool reflective of SA society.
• Wedi is director and Silke associate director at Instinctif Partners.
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