To describe the succession plan at Absa Group as ‘botched’ would be kind. In truth, there wasn’t one.
It is rather clear that the board seems to have been blindsided by CEO Maria Ramos’s decision to ‘retire’ at the end of February after she turns 60. They had ostensibly managed to convince her to stay on at least once before. She wanted to leave in 2016 and had previously communicated to the board her preference for a seven-year tenure. The decision by Barclays Plc (in 2016) to exit Africa meant she was practically forced to stay.
It is here where matters took an incomprehensible turn.
One needs to ask whether the board had a successor in mind in 2016? (I would suspect former chief financial officer David Hodnett’s name would’ve been on that shortlist.)
Regardless, after ‘persuading’ Ramos to negotiate the separation from Barclays plc and steer through its implementation, surely it would’ve been prudent of the board to commence a search for a new CEO almost immediately?
At that point, it knew the timeline for the separation process (which runs from 2017 to 2020). It was improbable that Ramos would’ve stayed to the very end, given the inherent momentum these sorts of things have. Plus, there was no obvious internal successor. Strong talent (and probable successors) – such as Hodnett and Phakamani Hadebe, now Eskom CEO – had been mismanaged and lost in recent years. Peter Matlare, the remaining deputy CEO (Hodnett had been the other until he was offered a demotion to run Corporate and Investment Banking and subsequently resigned), has limited banking experience.
The new Absa Group CEO will have to be an outsider. This makes it all the more perplexing. Why was a candidate not identified in 2016 and appointed in 2017?
What ought to have happened is clear. Her successor could’ve been appointed CEO designate for a period of 12 or 18 months. Yes, Ramos has the relationships, experience and skill to negotiate a successful separation from Barclays plc. But a CEO designate would’ve been able to work alongside her, developing the bank’s new strategy and assembling a leadership team of their choosing.
Why is this so painfully obvious in hindsight?
The main problem now is, rather predictably, that Ramos has moulded the new Absa Group in her image. The rebrand, the strategy, and the executive team are all her choices (she’ll tell you there was broad consultation, which there was, but this is Maria’s Absa)
The new CEO will ‘inherit’ all of these choices. What if, for argument’s sake, the new CEO wants someone else to run (read: turnaround) the retail bank?
Some reports have said that the bank’s search for a new CEO has been made more complicated as it needs to find someone who would be willing to implement Ramos’s strategy. This doesn’t make any sense!
Why on earth would an experienced executive take on the toughest job in South African banking, only to be judged on a plan developed by their predecessor!
In reality, this will be another wasted year for Absa. It will be sleep-walking for the rest of 2019 under the safe pair of (interim) hands, René van Wyk.
Van Wyk, a non-executive director of Absa since February 2017 and former Registrar of Banks at the South African Reserve Bank, is not likely to make any real decisions – certainly not any strategic ones. The new strategy has been set and the flywheel is in motion.
It is instructive to look at the succession plans of the various South African banks over the last decade or so. Standard Bank initially made a poor choice (co-CEOs) and then made the right choice. FirstRand (and FNB) made obvious choices. Nedbank made the safe choice and has an enviable pipeline of (especially black) talent. Investec made a complicated choice last year, thankfully made less complicated by the decision to unbundle the asset management unit. Capitec Bank, too, made the obvious choice.
Absa Group made no choice. And that’s why it is in this mess.
* Hilton Tarrant works at YFM. He can still be contacted at email@example.com.