Michael Jordaan is on Twitter. Not his PR guy, or the techie or some bright, but low-paid, widget in the basement of the sprawling Bank City complex in downtown Johannesburg with nothing better to do. No. The First National Bank CEO is on Twitter, @michaeljordaan.
For the uninitiated, Twitter is a social networking website that allows users to post comments no longer than 140 characters in length and to “follow” other users of the system who do the same thing. It’s an ego-system of epic proportions. The more followers you have, the more popular you are and the more likely you are to have your view on the world “re-tweeted” by your followers to their own followers in their own ego-systems.
It’s easy to dismiss simply as a globally interconnected narcissistic electronic mutual admiration society. “What a monumental waste of time!” you think to yourself. “Surely the CEO of FNB – one of South Africa’s biggest banks – has better things to do than muck about on social networking sites?”
Standard Bank’s Jacko Maree doesn’t have time for nonsense; nor does Mike Brown at Nedbank or Maria Ramos at Absa. Stephen Koseff may have an iPad but that’s for the Bloomberg app, not for the trivial pursuit of Twitter. Not during work hours, anyway.
Before you condemn Jordaan’s dalliance with social media as frivolous, consider the fact that the CEO’s adoption of a medium such as Twitter may just be symptomatic of something far bigger – both internally for FNB and a sea change in the way we all interact with companies, particularly those eager to position themselves as technologically innovative and responsive to their customers.
“We spend a disproportionate time on innovation in this business because we have a healthy dose of paranoia about the future and what banking will look like years from now,” says Jordaan.
FNB fancies itself as SA’s most innovative bank and has the marketing drive to sustain that image. It’s determined to be seen as being at the cutting edge of trends and technology while assuring its clients it does so without undermining core banking principles. While its competitors are gingerly considering their growth options while feverishly managing bloated cost bases in an uncertain revenue environment, FNB is being far brasher. It’s in a growth phase and wants everyone to know it.
But what gives Jordaan a confidence that appears out of sync with his peer group and more in line, frankly, with the likes of small players Capitec and Sasfin, which target the emerging market and entrepreneurs respectively?
“Just like a rugby player has to anticipate the bounce of the ball, strategy involves anticipating the changing environment,” says Jordaan. “For example, in 2007 we were the first to express our bearish sentiments and acted on the crisis long before our peers. Now we’re in the fortunate position to focus on customer growth.”
Although 2007 was pre-credit crunch, the FirstRand Group was at the start of a serious downturn: its mortgage and credit card businesses took strain and even WesBank hit the skids as growth in vehicle sales failed to meet its lofty forecasts, while its RMB franchise was badly burned on its proprietary trading book. It caused a serious rethink and a more conservative strategy is now in place with the founders still influential, but not directly involved, in its operations. Laurie Dippenaar remains chairman and former CEO Paul Harris is a non-executive director.
Back to Twitter and what its use by its CEO symbolises for FNB. Twitter’s website has more than 250m unique visitors/month – that’s 85% more than visited it this time last year and it’s attracting the interest of serious investors. United States investment bank JPMorgan is considering buying a 10% stake in the business for US$450m as the first investment in its new media fund. Venture capital group Kleiner Perkins, the most recent investor in Twitter, after it spent $200m on a stake in December 2010, valuing the website at $3,7bn. It’s becoming a serious business and the model is predicated on growing numbers of people exchanging ideas and communicating in a way few other platforms have allowed them to do on this scale.
Jordaan needs to be seen to be an eager participant in new platforms that will transform the way companies interact with their customers over time. If the CEO is at the cutting edge of technology the message is that the rest of his executive team also need to be keeping up. It’s a fundamental ethos within the group.
As part of its innovation strategy, FNB offers its clients everything from access to PayPal, cheaper phone calls through FNB Connect, trading distressed properties in possession (PIPS) through a dedicated website called quicksell.co.za and has its popular e.Bucks programme now connected to a potentially controversial fuel rewards scheme.
There’s been no final pronouncement from the Department of Energy on the legality of its cash back on fuel programme that’s been in place for almost six months. It implies that whether the State likes it or not FNB may have found a way to effectively discount the regulated price of petrol through creative thinking – something consumer champion Raymond Ackerman failed to achieve for Pick n Pay. Even now, if the department does rule the scheme to be in breach of the law, FNB will be regarded as having done its best to serve its client base: that buys considerable loyalty and consumer goodwill – these days a scarce and valuable commodity in banking.
“Bankers stuffed up the world by trying to be too smart. Regulators and the public have a right to insist on banking going back to basics,” says Jordaan candidly.
You might rightly wonder how the addition of products, platforms and rewards schemes makes banking simpler. Surely it adds another level of administration and complexity? Not so, argues Jordaan, who says the business of banking needs in essence to be boring – but that doesn’t mean clients’ experience of banking needs to be unfulfilling.
Cynics often scoff at the principle of pay-off lines and internal values systems. Standard Bank was ragged for its “Simpler, Better, Faster” tag line, Absa has stuck to “Today, Tomorrow, Together” and Nedbank ever since “If you’re serious about money” has finally settled on “Make things happen”.
In FNB’s case it has deliberately crafted its client offerings to feed back to its pay-off line: “How can we help you?” It doesn’t mean for a moment it won’t repossess your house if you exhaust the credit committee’s patience or won’t send the sheriff to attach assets if you fail to pay off your overdraft. This is banking, after all.
“Banking must work. Banking has to be ruthlessly efficient and that can become boring if the activity is repetitive. But there’s nothing more irritating than a credit card that doesn’t get accepted, an ATM that has no cash or online banking that’s slow. If the price to be paid for getting the basics right is to be boring then we choose boring any day,” says Jordaan. But how does the concept of innovation fit into the dull world of banking?
“The rate of change in the world is increasing at an increasing rate. Being a big bank isn’t going to secure our survival. Being an innovative bank helps us keep up with the twin challenges of technology advances and client demands.”
All of that might help you understand that in Michael Jordaan’s world nothing deliberate happens by accident.
If anything, Jordaan may be too early an adopter of social media from a South African business perspective. Very few South African executives are actually using it. An informal poll on Twitter reveals just a handful of names: there’s Vodacom CEO Pieter Uys, Global Trader CEO Charles Savage, former acting SA Airways CEO Chris Smythe and Alexander Forbes CEO Edward Kieswetter, previously a deputy SA Revenue Service Commissioner, who all dabble. Moneyweb CEO Alec Hogg is also active and Comair CEO Gidon Novick is a recent convert – according to his Twitter page – after being cajoled by Jordaan.
South Africans are bit players on the periphery of social networks but a growing number are migrating to electronic banking channels, increasingly using their cellphones to transact after being slow adopters of the new technology years after their parents struggled to come to terms with the now ubiquitous Internet banking channels. Cellphone banking volumes at both Absa and FNB doubled last year, indicating a growing acceptance of mobile devices as tools in banking.
As bank clients move in growing numbers to electronic banking channels, the more they’re likely to use online platforms to communicate with those institutions. It’s also true that the more familiar bank clients of the future become with interacting on their mobile devices and the Internet, the more likely they are to trust those as ways of transacting. It’s a virtuous circle.
However, the power of social networks is often illustrated by the failure of companies to adequately think through strategic initiatives: dabbling in social networking without a carefully thought out strategy in place can be career limiting. The use of networks such as Facebook and Twitter as a communication mechanism in Egypt and other recent social uprisings has led to the yet unanswered question: Could the board of a company be unseated as a result of the use of social media?
Though that might be some way off, the use of social networks has dramatically accelerated consumer interactions with companies. For example, Pieter Uys at Vodacom is known to be quick to respond to consumer problems, and Dawn Nathan Jones (CEO of Europcar) recently warned her executives they needed to be cognisant of the power of social media when it comes to protecting the company’s brand.
One of the more startling examples of the dangers of misreading social media was the resignation last year of the CEO of Gap North America. Marka Hansen quit her job in December, months after a campaign on social networking sites forced the company to revert to its much-loved old logo and brand identity.
The Twitterverse (yes, it has a name) is an increasingly powerful agent for change. Companies ignore it at their peril.
“I don’t run this business,” says Jordaan. “The FirstRand philosophy allows for individuals to take accountability for the work they do: there are rewards and there are consequences,” he says.
Part of that philosophy goes to the regular switching of divisional CEOs. Yes, FNB does seem to have an unhealthy obsession with the title. But that, argues the “CEO in Chief”, goes to the culture of accountability. Jordaan is also not averse to turning things on their head from time to time.
For example, while Absa and Nedbank have seen some fairly radical leadership changes over recent years relative to the long-standing and now questionable stability in the upper echelons of Standard Bank, FNB recently saw a rotation of CEOs. Recent big changes saw the head of the group’s “wealth cluster” swap jobs with the head of its commercial banking. Now Willie Miller runs commercial and Iris Dempsey does his old job. Both have hit the ground running and have made changes to the way their predecessors ran their operations.
Says Miller: “Iris has changed things that probably needed to be changed. If you’re in a job for too long you either don’t see problems or are unable to change them. I’ve also made changes to the way she ran commercial banking.”
It’s that CEO rotation that provides for some interesting succession opportunities. Jordaan doesn’t intend sticking around forever and needs to know his successor will have a firm grasp of an increasingly complex operation. Putting tested senior managers into new environments quickly shows how adaptable they are and whether one day they’ll have what it takes to run the entire division.
The biggest single challenge facing South African banks is growing their client bases profitably. The bad debt overhang caused by credit boom of most of the first decade of this century remains embedded in the financials of all SA’s banks.
While all SA’s banks are eager to sign up as many wealthy clients as possible – and a visible presence on social media can contribute to that – the new battleground for market share is in the emerging market and will be fought out at branch level and on dusty streets through the use of mobile banks going to areas not adequately serviced by bricks and mortar infrastructure.
Banks, desperate for new revenue sources, are falling over themselves to compete in a sector previously regarded as unbankable. That was until Capitec showed it was possible to not only make money but to grow even through the worst financial crisis in living memory when mainstream banks were battening down the hatches.
The success of Capitec in signing up more than 2,5m clients – most of them over the past three or four years – has caused a strategic rethink within FNB about how it thinks about servicing the emerging market. Jordaan has signed off on a plan to deliver six new mobile banking branches/month to develop the group’s EasyPlan business, which is aimed at low-income earners to provide greater numbers of unsecured loans.
It’s a high-risk strategy in a market where dominant players Capitec and African Bank have credit-scoring systems tried and tested over most of the past decade without the concomitant issues of legacy technology and antiquated IT systems. Despite the ancillary risks, Jordaan wants to grow from 67 to 100 EasyPlan branches by June.
“Perceptions of risk have changed dramatically. The global financial crisis proved that many developed countries that were thought – and priced – in the low-risk basket were actually basket cases. We’re actively growing our franchise in high-growth African countries and believe that as a portfolio it will outperform the developed world by some margin – despite the risks.”
FNB isn’t the biggest South African bank in other parts of Africa: Absa and Standard Bank are dominant. But that’s changing. FNB has subsidiaries in Botswana, Namibia, Mozambique, Lesotho, Swaziland and Zambia, with representative offices in Angola and Nigeria as it seeks opportunities in those markets. Tanzania, Ghana and Uganda are also firmly in its sights. More interesting perhaps is the fact that it has an office in India, seeking to capitalise on trade between that country and the African continent.
FNB’s technological activities don’t detract from the fact that banking is a serious activity that’s predicated on our confidence in the ability of the financial institution with which we deposit our money to give it back to us on demand. Recent results from Absa and Nedbank reveal the SA’s banking sector’s ongoing struggle with achieving revenue growth and a mounting dependence – as revealed in Finweek
’s annual bank charges review – on fee and commission income to drive profitability.
The reality is SA’s banks need to grow their client bases.
Part of the benefit of the FirstRand structure is that Jordaan doesn’t have to worry about many of the issues that affect the heads of Nedbank, Absa and Standard Bank. For example, he doesn’t need to consider vehicle finance. Brian Reilly at WesBank does that and reports to group CEO Sizwe Nxasana, as does Alan Pullinger at investment banking division RMB.
Jordaan has the comparative luxury of a much simpler job: running retail banking, the client-facing branch network and within that, commercial banking to the business community. Plus it’s Nxasana who is summoned to meetings with the regulator and other time-consuming shareholder and administrative duties.
Jordaan doesn’t intend continuing as CEO at FNB in perpetuity. At 36 he was probably one of the youngest CEOs of a bank appointed in recent generations: at 43 he’s been in the job for seven years and sees no value in remaining beyond 10.
The walls at the FNB head office aren’t adorned with the portraits of his predecessors – there’s no sense of legacy in that way. (It does help deal with the whole Sandra van der Merwe/Bob Aldworth decorating fiasco that cost a previous “bright young thing” at FNB his job. Also one supposes it also means you don’t have to have portraits of directors of other banks on your walls. (Both Chris Ball and Wendy Lucas Bull now serve Nedbank.)
Jordaan prefers the explanation that the bank isn’t about a single person but rather about the difference 30 000 individually empowered employees can make in their daily interactions with clients.
He says his work isn’t yet done.
“If they’ll have me for a few more years I’ll be grateful, because I love what I do. Over time an organisation can also acquire the bad habits of any leader, so there should be a term limit for CEOs – mine is 10 years,” says Jordaan.
What then? Early retirement? Many former bankers say they’re headed to private equity – often a euphemism once they’ve been chivvied on by their boards to quit earlier than they might have wished.
“I’ll never retire. One’s self-worth is dependent not on anything achieved in the past but tied to what one does every single day. Ideally, I’d like to start a small asset management business for the intellectual stimulation and get involved in social entrepreneurship to create sustainable jobs.”
Ah! He wants to be a hedge fund manager. But one, it would seem, with a conscience.