Migration of Key Personnel in the Financial Sector

The financial sector in Ethiopia has been undergoing considerable changes in recent years. The dramatic rise in the number of new market players in the sector has vividly altered the competitive environment and increased the demand for skilled labour. Although there are 18 banks, 16 insurance companies, and 33 micro-finance institutions in the country which are fast expanding, figures indicate that a large proportion of the population still belong to the so-called “unbanked” or “under banked” class.
With the unprecedented growth momentum in the sector now, the demand for skilled personnel is also escalating to a new height and this in turn has created opportunities for employees—especially key personnel—to jump ship easily. On the other hand, because financial institutions have better benefit packages than other sectors; and the rise in the number of new entrants in the industry has substantially changed the labour market in general and the retention of key personnel in particular.
A company’s future success depends primarily on the performance of its executive officers and key employees. At a company level, the loss of the services of any executive officer or other key employees means the loss of asset that could negatively affect business continuity, resulting in the loss of significant customer relationships and institutional knowledge. Similarly, at industry level, fighting over acquiring key personnel and planning to snatch the technology as well as business strategies through them could adversely affect the overall industrial competitiveness.
Competitiveness in the sector is principally based on the ability to utilize technology. In response to this, companies have ongoing commitment to reform programmes supported by research and development. In this regard, loss of key personnel who might have essential role in the process could mean forfeiting the entire work for competitors.
Under the present scenarios in the financial sector, this seems to be inevitable. If a firm is unable to manage such crisis in a timely manner, a portion of market share could be lost; planned innovative products could be easily pirated; new distribution and branch network strategies, marketing core competencies, even organizational structures and management philosophies could be pirated. Additionally, competitors may independently develop technologies that are substantially the same or superior to the one at hand and that could infringe on the original company’s rights. This has become a common practice in the Ethiopian financial sector and companies are having difficulty preventing competitors from utilizing these similar or superior technologies, research out puts or strategic orientations that could determine the firm’s future direction.
Human resource officials or recruiting professionals working in the financial sector definitely mention the forfeiture of talented employees to competitors as one of the recent human resource challenges. However, key employee turnover is still a more misunderstood and mismanaged human resource area. Even suffering with high employee migration rate, companies in the financial sector are grousing that they can’t find skilled workers, and filling a job can take months of hunting.
Financial institutions are quick to lay blame. Graduates are not coming with the required skill and service mindset, there is hardly any academic institution specializing in banking and insurance and the list goes on and on. But partly, the real culprits are the firms themselves since most do not set clear strategies to manage the issue either independently or collectively. Instead of developing their own, financial institutions are merely focusing on embezzling experienced workers of other firms as a competitive advantage.
Nowadays, most argue that competitiveness in the Ethiopian financial sector is tacitly characterized by “copy pasting” and sometimes “cut pasting” subject to movement of some employees, working in more than one strategic area, in two or more financial institutions. This scenario paves the way for these relatively qualified and experienced individuals to easily adopt business strategies and breed services across industry players. However, when one looks deep in to the matter, this in turn hampers innovation and enables competitors to unzip business secrecy, if any.
To take the issue from the frying pan to the fire, prospecting as well as client retention in the financial sector is predominantly based on referrals and personal relationships. As a result, when an employee leaves a certain organization, the client could also be lost. Presently, players in the industry are suffering from client exodus whenever a “well versed” practitioner departs.
Habitually, companies operating in the financial sector choose the “buy strategy” approach to fill key posts. However, this can also prove to be very disruptive since it creates frustration on the in-house talent, which in turn erodes loyalty and forces others to look for outside sources for promotion. Still another drawback associated with this approach is that, compared to the “make strategy”, it typically requires organizations to accept a higher level of risk for their leadership staffing decisions. The reason for this is that rather than promoting leaders who have been repeatedly tested against tough business challenges, under this strategy, companies are hiring managers who are relatively unknown to the organization. The issue here is whether these outsiders will be able to successfully “graft on” to the strategic intent of the organization or stay until they spot another vacancy elsewhere.
Surprisingly, in some cases, the industry is competing over and offering unjustified benefit package for unmerited employees and the issue becomes more problematic when the position to be filled is managerial requiring strategic orientation.
In some cases, employee turnover is actually a positive thing. Imagine a poor-performing worker. If he walked in late one day as usual and announced that he was leaving, would you consider that a bad thing, or would you secretly celebrate his departure? The purpose of seeing the other side is to open your mind about the silliness of measuring only aggregate turnover. The idea of keeping everyone is just plain silly. There are many factors to consider. As a result, firms need to classify their turnover as either “regrettable” or desirable turnover.
As a way out, through succession planning, proactive recruitment and retention strategies, the negative effects of loss of key personnel can be mitigated. Hiring the right people from the start, most experts agree, is the best way to reduce key employee turnover. Interview and vet candidates carefully, not just to ensure they have the right skills but also that they fit well with the company culture, managers and co-workers. “Hire for attitude” is the new HR mantra. Their enthusiasm can be infectious.
In addition, companies should also revise their benefit packages regularly and let key employees know how much they are valued, the opportunities available and make sure the link between their performance and rewards is clear. In doing so, companies can slice turnover rates markedly and emerge as the “most preferred employer”. Otherwise, hunting the “ready made” can no longer serve as a sustainable competitive advantage single handedly.
At industry level there has to be a strong financial academy specializing on training human resource that can meet current and future needs. Moreover, there should be ethical code of practice and/or regulation that could protect proprietary rights. There should be mechanisms to prevent trouble-free adoption of strategies and technologies by competitors. Professional societies would also play a key role in shaping the ethical code of practice by members.

5th Year • June 2017 • No. 51

Fikru Tsegaye

Author of the award winning book TAKAFUL Insurance in Ethiopia (AOI 2023), is a senior insurance expert. He is also a regular contributor at EBR. He can be reached at fikru.tsegayee@gmail.com

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