Just Shout it: You want to bring Entrepreneurship back!
Standard Chartered Bank CEO, Bill Winters took up the position in June 2015 and a month later unveiled a plan to axe 1,000 of the 4,000 top management jobs. Cost cutting at StanChart is not a new initiative as Winters predecessor, Peter Sands in January 2015 announced 4,000 job cuts and an exit from unprofitable business sectors. Analysts rightly considered the measures as “too little too late” a sentiment which must have been shared by the board as they announced Winter’s appointment in February.
Relative to Citibank and HSBC Group, StanChart stock has performed dismally (see Bloomberg chart).
Sands, once the darling of the banking industry committed StanChart to an aggressive growth plan, expanding loans in emerging markets like India, Indonesia and South Korea. The economic slowdown, falling commodity prices and poor loan quality has left StanChart with a damaged balance sheet and an expensive cost structure, which according to some reports might even lead to a sale of the bank.
Banks chasing for productivity and accountability
Winters is trying to make StanChart more efficient and link responsibility to performance, something which entrepreneurs do quite naturally. Entrepreneurs typically have the bulk of their wealth in common stock and are therefore committed and aligned with the long term profitability and success of the company. No taking on risky loans in order to pick up short term bonus payments for themselves!
In their statement of July 19, 2015, StanChart said, “Group will simplify its geographic and client segment structure to reduce costs and bureaucracy and speed up decision making“. Winters said; “The Group needs to kick-start performance, reduce its cost base and bureaucracy, improve accountability, and speed up decision making”. In a memo to the staff, announcing the 1,000 layoffs, Winters wrote of the need for; “streamlining…eliminating management layers and duplication of roles”.
Old world industry threatened
Banking, like other “old world” industries have expanded their services well behind the initial core offering. Customers who once came knocking at their door, have started shopping around. Many bank offerings are not suited for their operating structure and now some banks are struggling as they now find the bundle they offer is not competitive. Newer players focused on discreet pieces of the offering and are able to offer better value - in cost and ease of use. Anthony Jenkins, Barclays Bank CEO (2012-2015) speaking at a Chatham House “Approaching the Uber moment in financial services” warned of the potential loss of 50% of banking jobs in 10 years and the struggle that smaller banks will face in adopting technology at the same pace of the larger banks.
An Entrepreneurial Environment
It is in these turbulent times that entrepreneurs thrive, seeing opportunity with the shifting tides and pushing ahead whilst larger companies contemplate and study outcomes. Malaysia’s own rock star entrepreneur, Tony Fernandes has often spoken of his journey in buying AirAsia from DRB-Hicom for RM1 in 2001 (with RM 40 million of debt) in the midst of a financial crisis. Fernandes had the insight to recognize that pricing of air-fares could be unbundled, so that costs could be better attributed to the consumer; meals, seat selection, near travel dates, etc. Tony famously made “everyone can fly” come true and sparked a revolution in air travel, setting a record for having the lowest cost for “Available Seat Kilometres” (ASK). For the year ended December 31, 2014, cost per ASK was 13.2 sen, or 6.7 sen, excluding fuel, lower than the 6.9 sen recorded in 2010. This reflects a remarkable cost management discipline at AirAsia and the ability to drive costs down.
Corporatisms and Entrepreneurisms
In our research for Beyond Corporate Entrepreneurship: Entrepreneurship as a Management Practice, due out early 2016, we found that companies start off being entrepreneurial but over time develop what we call “corporatisms” – debilitating behaviours that include knowledge held in silos, low trust, bureaucracy, reluctance to adopt technology, poor understanding of customer needs, etc. Most of these problems are the result of growth, the consequent control issues and the creation of a large head-office function. Winters referenced this issue in his letter to the staff! It is not by the evil design of scheming bosses that once entrepreneurial companies slowly degenerate into bureaucracies. There are plenty of natural and logical reasons for the loss of entrepreneurship, but organizations that are not on their guard do become fossilized!
Entrepreneurship and entrepreneurisms?
It’s interesting to know that “ism” was picked by Merriam-Webster as the word of 2015. We recently coined “entrepreneurisms” being a key trait of successful entrepreneurs and identified the nine entrepreneurisms (9Es) as; Self-efficacy, Risk-taking, Passion, Learning, Realism, Persuasiveness, Opportunism, Innovation and Energy-Action-bias.
Perhaps coincidentally, as it was pointed out to us, just as cats have nine lives, it seems that entrepreneurs with their will to thrive, also have nine entrepreneurisms (9Es). Adoption of entrepreneurship as a management practice should not be confused with corporate entrepreneurship, or intrapreneurship which are narrowly focussed initiatives. What we are advocating is a complete reworking of the organizational structure, which includes the way the company hires and operates.
Do be warned that the ride of adopting entrepreneurship will get uncomfortable for management (and the Board), but it’s better to be uncomfortable and get ahead, rather than being comfortably dead!
The full article, appeared in DNA under the title "Uberisation And What Banks Need To Do" https://www.digitalnewsasia.com/uberisation-and-what-banks-need-do