Nigerians woke up to a rude awakening in the month of August 2009 right after the announcement by the Governor of the CBN of the potential insolvency of several banks. This news led to a major shakeup in the banking industry with a series of negative side effects on the workforce in this industry. Even staff in banks which were not directly affected by this announcement also felt its effect as we all witnessed an avalanche of retrenchments. As someone who has been privileged to work in this industry, it was quite challenging to see people who I had developed a relationship with in the course of business being asked to go as part of a major restructuring exercise within some of these banks. It’s very possible that as you read this article, you probably know some people who were also affected by these exercises and are even yet to recover from it.
Well, what has happened is in the past, but very recently, something quite frightening became very apparent to me as I thought over these series of events. The spate of bank retrenchments is something that we have witnessed at different times over the years. A number of them were driven by a desire for some of these banks to ease out ‘non- performing’ staff while others were driven as a reaction to major changes in the industry. Whatever the cause of these retrenchments, the lives that have been negatively impacted by the decisions of these organizations are countless. Of course, the option to rationalize staff in a number of these organizations is quite justified as the presence of non- performing staff or an urgent need to reduce manpower costs in the face of insolvency are measures that can actually help them stay in business.
As an HR professional and someone who has had time to observe the trends in the banking industry, I foresee that the spate of staff rationalization in banks is not yet over and the most concerning thing for me is that most bankers are unaware of this possibility and are obviously unprepared. The average banker is afraid and from my observation is doing little or nothing to prepare for a possible re-occurrence of staff rationization. Now, let me share my thoughts with you on this;
(1) Banks are still looking to reduce the largest item on their budgets… their Wage Bill: Due to the external factors that have significantly affected banks, cost reduction has become a major highlight in most of their business continuity strategy meetings. In some banks, the wage bill accounts for up to 30% of their total expenditure. General cost reduction will therefore not be possible if the staff cost is not considered. Right now, staff who are perceived as non performing immediately come under scrutiny and are being viewed as cost saving items.
(2) Branch Optimization is sure to happen: Banks have been forced in recent times to begin to reconsider the issue of size versus effectiveness. With the reduced focus on universal banking today, strategy sessions and performance review sessions in banks often times are focused on measuring the profitability of their channels to their customers. Non-performing (non profitable) branches mean erosion of profit and this is obviously not desirable for sustainability. The question they ask is; why keep several branches open in a location when just a few are actually adding value to the bottom-line? Reduced branch size will automatically translate to excess staffing and will necessitate a reduction in workforce size
(3) Reduced customer confidence in certain banks means reduced business and consequently low tolerance for non-performing staff: I believe this point is clear enough. Some banks are now crowed while others are practically empty. The game of banking is based on trust and when trust is absent, it becomes evident in patronage. While some banks are working at rebuilding customer confidence, they have to consider how to do this in a sustainable manner and cost reduction (including staff cost) immediately gets attention.
Okay, what exactly are you concerned about, Jimi. First a rumor, then a news headline, then one or two people that you know who have been affected… that’s exactly how staff rationalization occurs on the people end. For those affected, the beginning of a nightmare they did not plan for. I am quite certain this is coming… do you know any banker who has been struggling with performance because of unattainable targets or lack of interest in what they are doing? My question is this…are they prepared should in case they are let go? Remember, to be forewarned is to be fore-armed! Watch this space for my proposed solution on how to be prepared…