Choose your leaders wisely – Part II (or replacement for Jackson Tai of DBS Bank )

Choose your leaders wisely Part II (or replacement for Jackson Tai of DBS Bank, and something also on Malaysia’s Nazir and Citi’s Chuck Prince et al)

Several people have written to ask me to pen down my thoughts on the changes that will be taking place in DBS Singapore as a result of Jack(son Tai) stepping down in the next couple of months. I thought I should take the opportunity also to update how my own thinking on leadership has evolved, which is what I will do in this blog entry.

On the day after the announcement, John Burton, the Singapore-based Financial Times journalist wrote a pretty cynical piece about the possible reasons for Jack’s departure. You will need to read what he wrote to learn the rules of crafting an innuendo, such as sticking in the possibility of Jack having resigned because of DBS exposure to sub-prime lending on him, which I know was not the case. Having said that, it is the job of a journalist to ask the question, so that nobody takes it for granted. Remember also that the notice period for resignations at DBS is only one month, even at Jack’s level, so he will become eligible to leave any time now, and not necessarily at the end of the year.

Last year, as part of building our inaugural leadership awards processing capability, I wrote what was the first of my thoughts on the nature of leadership in the financial services industry today. One of the assessments I made in that article called “Choose your leaders wisely” was that in my view, investment bankers generally make very bad franchise builders because they enter the business with very wrong assumptions about what it takes to build a franchise.

DBS learnt this at a very high price in the early years of the “John Olds-Jackson Tai show” hosted by the bank’s then chairman S. Dhanabalan, desperate to buy franchises in Thailand, the Philippines and Hong Kong without a clue about what they needed to pay attention to, overpaying and being saddled with more problems than they needed to. Even at that time, HSBC and StanChart had much better developed M&A assessment teams and an understanding of the region, and would not venture into some of the acquisitions that DBS is now trying to get out of. So, in a sense, there is no denying the cost of learning which was very unnecessary.

But without having to revisit the points I raised in that article, it is now time to take the positive things that were achieved from that episode, learn and move on. While Jack and Dhanabalan took the brunt of the severe criticisms that followed from that episode, I am just amazed how John Olds kept his nose clean, and quietly slipped away into oblivion with a few million dollars in his pocket and even a thank you note from the Singapore government.

In my opinion, in the few instances when I met him at press conferences, I came to the conclusion that hey, here is one guy who did not have the experience of making any of the heavy decisions when building a commercial bank, but who gave the impression that he did simply by keeping his mouth shut. I gathered this impression from the IT core banking vendors, the risk management consultants and people like that who visited with him and the conversations that they had with him. The impression I formed in my mind was that he just held a poker’s face to the world, while absorbing as much as he could, learning many things for the first time. Amazing.

I would not be surprised if he left the postion early because the mount of hard operational decisions became very clear to him through those conversations, and he probably never ha to make such decisions as an investment banker. I now realise that I should have kept asking the stupidest questions to unravel his posture if that would reveal that ignorance. We cannot allow leaders the luxury of hiding behind what we don’t know what they know.

For the Singapore government, hiring Olds was part of an expensive and interesting learning process in engaging “foreign (read “white”) talent.” Having said that, it will be wrong to criticise the Singapore government for the way in which it went about learning about leadership change. I think that after having brought the island and several of its key institutions to become major international players using local talent, it is natural to ask the question if there are talents out there who could bring them to the next level in a quest to become even more global.

Some of the choices made, although stupid to the layman, are part of the process by which leaders go through to understand what is involved, what is out there and the things they have to do out-of-the-box. The part that made it unpalatable to the layman was the way in which it was presented to the masses in what in Margaret Thatcher’s time would be called the TINA (“There Is No Alternative”) principle. In government, as in business as in life, there are ALWAYS alternatives, whether they are better or worse, and so what leaders make are Choices. The Singapore government just has not learnt to speak in that language with their own people, but hey, who’s perfect.

I think that the fact that the Singapore government asked these questions and set out to learn what is out there puts them way ahead of any other government almost anywhere in the world, who sit on the sidelines, don’t make the choice to push the envelope and learn nothing. But learning from mistakes does not make any sense if you don’t learn it together with the people on the ground, but as they say, there are some things that are “Uniquely Singapore”.

The first lesson with hiring “foreign talent” from any markets, industries or players that are perceived to be world class is that the best never leave their turf. This point came home to me when I was visiting Princeton University last weekend, to join my American friends whose daughter just started school there. I have now visited schools in the US like Harvard, Georgetown, UCLA, and I did two weeks in Columbia, and visited even something as heartlander as Madison-Wisconsin, but none are as insular or as the American version of “blue-blood” as Princeton is.

The club mentality permeates through Princeton. The parents who came to see their children that weekend themselves looked as if they belonged to a club already. Their children were motivated in similar ways. The school has clubs that students must apply to join as undergraduates. It is such a big deal to get into Princeton even for a parent who is an alumni that the message to their kids is “you better not screw up”, which in turn means, “get a job at an elite New York investment bank, work your way into government and be amongst the crème de la cream in US society.”

It occurred to me that it seems to be sheer folly for a small country on the other side of the world to draw from the energy in this pool. Yes, you can send your own children from your own country to study on scholarship at Princeton, and take them back. Yes, you can hire Princeton graduates who have proved themselves in business as consultants (which is what someone like Olds should have been in the first place). You may even be able to get the occasional renegade from this elite American culture who wants to prove himself or herself in an alternative island in the sun. Some who join investment banks and consulting firms are parachuted into Asia. Alas, I believe that Jackson Tai is fron Princeton himself, but one would argue that in his case, the government was not bringing in foreign talent as much as providing a promising foreigner with the opportunity to upgrade his skills from a CFO into a CEO, and then leave.

But I thought during that weekend that there is really no alternative for an aspiring Asian country or institution but to create its own what I would call “aspirational momentum”. The rule should be that instead of thinking that there is something better somewhere else, to keep your “eye on the ball” – build prestigious universities and institutions that your own best people will and others can aspire to. I have some thoughts on this idea but discussing it further here would distract from the purpose of this entry.

One of the interesting corollaries of that first article I wrote was that criticisms came not from the obvious people I was assessing. Of all people, Nazir Razak, the rising star of the Malaysian finance scene, got not one but a couple of his staff asking my staff “what was the empirical basis on which we were criticising him”. It was a strange question, because anyone who read my original article last year would have seen that I had not even started criticising him!

All I said was that given the record of investment bankers, his foray into making a hostile bid for a strong franchise such as Southern Bank put him in the “high risk” category and I was merely citing him as an example of someone whom I hoped would not make the same mistakes as the rest of his pedigree.

Nazir would not remember this, but one year before he made the hostile bid for Southern Bank, I encountered him seated next to me on a flight from Brunei to Singapore. I had attended a lunchtime briefing in Brunei that day incognito and low profile where he had just made a sales pitch to Bruneian companies to seek listing in Malaysia, through CIMB of course. The entire trip must have been a waste of his time, because Brunei is economically closer to Singapore and competes with Malaysia as an Islamic off-shore center. I was looking forward to a quiet flight back to Singapore, but lo and behold, he was given a seat next to me as he had to fly to Singapore and spend a night there to make it back to KL early in the morning.

As I made small talk with him, he probably was not aware that I was asking him questions to help me understand what he was made of. He answered some of the earlier ones, but then started to get irritated. I guess that Malaysia’s “corporate princes” are not used to be asked stupid questions or making small talk with nobodys. No harm, but I did manage to ask him if he saw himself in commercial banking, and his answer told me that he did not understand the question (I reckoned then that his thoughts on acquiring Southern Bank came after that encounter, after he was given Bumiputra Commerce Bank on a platter and only then did he really start thinking about what a financial services conglomerate would look like. It certainly was not on his mind at the time I met him during that Brunei flight.)

But he did ask me what my thoughts were on KLIA airport and why it was not as successful as Singapore. He must have been pitching for some work related to the airport at that time. When I suggested to him that KLIA was not as liberalised enough, he said “We have done everything”, to which my reply was “everything except liberalise access to Singapore, your single most important destination.” The KL-Singapore route remains the most protected and anti-competitive in the region today, relegating KLIA to a second tier after Singapore, Bangkok and Hong Kong, even if its facilities are better than some.

Having said that I think that to his credit, Nazir thinks and speaks in simple and clear conceptual terms, and that is one of the virtues of a better leader. I also think today that what he did AFTER he acquired Southern Bank was commendable – he went round and made sure that all the key managers stayed, in some cases, speaking to them personally and giving them more money. From everything I have been hearing about him, his penchant for communicating with all staff through morning meetings and newsletters, puts him as one of the more promising leaders in our region.

The most telling of all was that after that flight we were on – he dragged his own travel bag coming out of the flight. Malaysian and Thai and Indonesian and Chinese and Korean and Japanese corporate princes are so used to being waited on by a string of underlings, that it struck me that this one was a working leader (just to make the point, even Al Gore, the former vice president of the United States and latest Nobel Peace Prize winner, whom I had the privilege of hosting for a day and a half in 2005, drags his own bag when I met him at the gate as he came out of the plane at Singapore airport.)

I know that Nazir deferred to anchor the operational integration of his commercial banking business to the Southern Bank infrastructure instead of the parent Bumiputra Commerce Bank. He collapsed the group’s core banking, credit card operations, call centers etc to Southern Bank. Having said that, the jury is still out on the building CIMB into a successful Malaysian universal bank, because if you read the annual report, the real driver of the business is still the parent investment and securities business that forgives a multitude of sins, including integration costs and the dangers inherent in some of its risky investments in Indonesia, eg Lippo Bank.

Even as we now consider the replacement for Jack at DBS in SIngapore, I need to say that my assessment last year that investment bankers do not make very good franchise builders has now developed further. I made the assessment because at that time, the private equity players and the investment banks were making all these M&A deals in the region and putting in the people closest to them – investment bankers – into positions of responsibility. Wilfred Horie in Korea, Thierry Porte in Japan, John Olds in Singapore and the ilk.

When I met Thierry Porte, the beleaguered CEO of Shinsei Bank in Japan last year, he was trying to make his role look more pompous than it was, was very rude when I started the conversation with small talk (to size him up of course), and had some kind of identity crisis (French who wants so much to be seen as American) that I immediately said that this guy is trouble to the bank – and I was right. Shinsei is in trouble right now as this investment banker disrespects all the franchise building work that was put in place by Yashiro-san over five years. To be honest, I do not have an iota of sympathy for hubris and I have never been wrong when I called a spade a spade. So we need to be vigilant against the species because the worst of them destroy valuable franchises that gives jobs to thousands.

But even investment bankers learn and organisations learn. In fact, I was gratified when at the announcement of Jack leaving, DBS said that it was framing its choices between investment/corporate bankers, retail bankers or someone from outside the industry. Very nicely said and nice to know that I am being heard loud and clear in the board room.

But I want to push the thinking further. The modern commercial bank as the modern institution is the modern “village”. Just because you have not seen it described this way in the Harvard Business Review does not mean it is not so. Managing the modern commercial bank – with its retail, corporate, investment, advisory, trade and plumbing businesses, is really about managing a large and complex set of people all called “villagers”, albeit in a modern sense.

The single most important skill of a village leader in this regard is in “managing complexity”. Now, managing complexity IS a Harvard Business Review topic and there is a lot of literature out there on this, and I must say that in assessing leaders of financial institutions of the future, we now need to move on to figure out their ability to “manage complexity” as a village leader would.

By managing complexity, I do not mean managing a range of business lines and their respective sales and operational channels. The best way to describe managing complexity, is to say that a CEO who as an orchestra conductor, can make music from the different instruments in the den. He or she can’t control any one of the instruments, he may not be able to even play them, and so he has to give them an incredible sense of autonomy. But he knows how to draw them out, so that the institution is seen as clearly demonstrating clear messages to customers and investors alike.

You may think that I am talking about banks in Asia. I am not. I am talking even about banks as global as Citi, which has completely gone awry because the fibres of the “village” have been eroded and replaced with structures that look like steel frames in a construction project that does not quite look like the building it was meant to be.

In the 1990s, John Reed built a global consumer and corporate bank almost from the ground up, with many of the initiatives coming out of his business in Asia. Many of the senior executives who eventually became global leaders in their own right had that incredible degree of autonomy that enabled them to build businesses in their respective constituents and develop their own core competencies. I came to know so many of them, and the thing that struck me was their sense of ownership of the businesses or operations they were running.

Reed’s skill was in “weaving” them together (a villagers idea) loosely and then facilitating the sharing of knowledge until it became a global business with a credible learning and knowledge sharing capability. This is something a leader does by virtue of personality as much as skills – and it is for this reason that there are incredible few of them.

Now, there is something organic in the way a village comes together that if you introduce a new element, it becomes very difficult to understand how to fit the parts together. This is the problem that Sandy Weill had when he tried to collapse Citi into Travellers, and then collapsed Travellers into Citi, created dual reporting lines and kicked the thing to see if he could get the synergies to work.

I think Weill would have still pulled it off IF ONLY the people who were part of the original village had stayed to see it to the next phase. To stretch the metaphor a bit, a village becomes successfully larger as it becomes more complex when you leave some of the indicators in place, such as the famous town square or pizza store or the “mamak tea” stall and the grandparents who keep reminding the kids what the place used to be like.

Unfortunately in Citi, almost the entire Reed generation left, not always because they were phased out. Many of those I knew personally at that time were nearing and even passed retirement age as well and so Citi had its continuity challenge built in (There is the story of Ajit Kanagasundram who built the world’s largest credit card processing facility in Singapore, who was found asleep in his car, exhaused with so much travelling to more than 60 countries and then forced to retire with no replacement of equal quality or commitment to the organisation. Yes, they merged the corporate and consumer operations after that under another astute manager, but that made it worse, not better).

By the time Chuck Prince (the current Citi people NEVER allowed me to meet him!) took over, the problem he was faced with was that all of the new replacements were trying to run in an institutionalised manner what was previously run like a village. The form was there, but nobody could figure out the substance of the organisation. For that reason alone, despite the best of intentions of many of the new people working in an old-wine skin environment, they just kept making mistakes after mistakes and getting into one integrity issue after another in one country after another.

Prince’s first and only real focus so far (yes just one, two years down the road) was to build an accountability infrastructure. The interesting thing about villages is that there are no policemen and no fences between neighbours. The accountability is in built into the collective culture, and if something goes wrong, you know exactly who it was and why and what to do. But when you ransack the village and fill it instead with the best of others who have not lived in it before, you can have all the forms of accountability structures, but you will never have the substance of it.

That is why, when I read the Financial Times article on the day after the 3Q results last month, the sentence that stared at me in the face was the remark from someone within Citi, “Nobody’s in charge here.” Whoa! Spot on.

The “construction site steel frames” that Prince had to create to keep the place together while he figured out why the hell there was this integrity problem was the matrixed multiple reporting lines that practically crippled everybody. I know that I live in Asia and I am not an insider in Citi’s New York office. But even an idiot can tell you that if the Asian consumer operations has THREE heads of business (retail, cards and subprime) and your poor country business manager has to report to all three, plus a couple of others for compliance, he can’t get any work done!

I thought it was instrutive that when I met with the vice chairman of Bank of New York-Mellon, Donald Monks and Bob Stasik a couple of weeks ago, they were explaining to me how the merger with Mellon was coing along. They said that they set up something called the “Revenue Council” to coordinate the overlaps in clients between BoNY and Mellon. I though that was an elegant name for oversight into how synergy was working without interfering in the sales teams from both sides of the merger. Very village-like.

Even as the US media asks for Chuck Prince’s head today, that would create new problems because you either allow someone to stay and figure out the problem to its logical conclusion or you let the business burn to the ground and simply let a new village come up from its ashes. Either way are hard decisions that require time to heal.

Just to go back to Nazir and Malaysia again, strangely enough, I honestly think that Malay culture in this region makes an incredible crucible for generating leaders of complex institutions like a bank, if only they keep up with the times. The Chinese and Indians have had more of their people exposed globally, but the global corporate is coming to a phase where the skills required are far more subtle and mature. You may laugh at me in making this point, but I am thinking out of the box of what is obviously in front of us here. It is very important to learn from everybody, and no one people have a monopoly on everything.

There were actually the makings of good ethnic Malay leaders during the time of the British in the civil service and in the plantations at that time (there were no real large corporates then except for plantations), but unfortunately that species was erased out of existence through gross insularity and through the peversion that the inexcusable affirmative action programme has become. Even then, you still have outstanding individuals like Amirsham Aziz of Maybank and when you think about how he has kept the bank solvent through so many politically motivated crisis, you have to concede him credit that is a few notches above that of his peers in the more visible countries in the region.

A Thai equivalent of Amirsham would be Khun Vichit, chairman of Siam Commercial Bank, although I would say that the problems related to a Thai village culture is fundamentally different from a Malaysian one.

You may think that a Chinese-run Singaporean or a Hong Kong bank is much larger with considerably more credible. But think about it, how international do you think that an institution that for all practical purposes, is dominated by a single ethnic group (overseas Chinese), with a single corporate culture, with very little differentiation in skill between the different business heads, and where loyalty to the patriach precedes skill, can be?

How does a UOB or an OCBC say that they want to become pan-Asian when they have not practiced the initial process of incorporating the ethnic and skills diversities of their own multi-cultural people? We politely pretend that they will be able to make the transition and applaud them when they make the occasional acquisition abroad. But the world is changing on them.

Again, it is a choice that they will have to make consciously, and if you don’t make that first choice to manage diversity within your own context, then do not even imagine that you will ready to deal with it when you deal across borders. The skills of a Wee Cho Yaw may have served their purpose when trade was tribal but we really must assign them to the past and look for new ones.

In today’s highly competitive institution, the head of retail is so very different from the head of investment banking in personality and orientation. Both as professional as the other, both as egoistical as the other, and rightfully so, because both business lines are so competitive that if you mess up either one of the business lines, it will be nearly impossible to put humty dumpty together again. So, it is the CEO’s job to manage both and all the rest well.

Now, against that update on my thinking on the subject matter, let me comment on the choice of possible leaders that have been for Singapore’s DBS.

The first choice, Lee Hsien Yang, I think is the most credible and I whole heartedly support that possibility. For the uninitiated, Hsien Yang is the younger son of former prime minister and leader of Singapore, Lee Kuan Yew and younger brother of the current prime minister, Lee Hsien Loong. For those of us in the know, I think we are all way past the phase of wondering if this is a family business (please don’t sue me, because I want to say things as they exist in my head!!!!).

Hsien Yang and his sister-in-law, Ho Ching, are both highly competent people, and even if they are from the same family, have established their respective reputations as competent, if not more so, than many around them. So we deal with them individually as credible corporate personalities in their own right.

The question that follows that however is whether there is a grand plan, since DBS is owned by Temasek, the Singapore government sovereign fund run by Ho Ching, a desire to dominate the financial services industry by stringing the pieces of the different acquisitions together? From all my encounters wtih Temasek people, I KNOW there is a grand plan. Actually, there are two grand plans – one which the building of a regional financial institution, and the other is portfolio investments in global financial institutions, and we must not confuse the two by putting what Temasek is doing with China Construction Bank or Barclays into the same basket as what they are doing with their investmets in DBS or StanChart.

The question that follows that is – is that inherently wrong? I don’t think so. The question that many of the analysts and media have been asking since 1998 when DBS was a sleeping teenager who did not look like it was going anywhere, and then acquired the Post Office Savings Bank just because some stupid management consultant and investment bank (Goldman Sachs?) told them that was the right thing to do, has been “what will you acquire next”? The answer they have been looking for is coming back to them, but packaged in a very different but no less credible manner.

So what if the right answer was that direct acquisition is not necessarily the best route but there is another way, in which Temasek and DBS act in concert to make investments together, and then to think about a really large regional or even global financial institution originating from this modern Netherlands of the East.

My personal musing is to see one day the merger between DBS and StanChart and ICICI Bank. I think it is so logical. DBS has become a very skills oriented business with a strong balance sheet in a very competitive market place with not much upside left on revenue generation and profitability. It will benefit from the international franchise of a StanChart and the cost synergies of an incredibly well run ICICI Bank that is home to low cost skills plus a growing Indian market. At this moment, however, all three are pushing ahead full steam as far as they can go, and so any form of merger or alliances are out of the question, but if one must happen, it should happen with this lot.

Hsien Yang’s watermark as a leader was built through his work in establishing Singapore Telecoms into a truly international entity with a complexity of business and customer lines that in some ways matches that in the financial services industry.

My own encounter with Hsien Yang (again he would not remember this) was way back in 1999 or something like that, just before he appointed Lucas Chow to head his then troubled mobile phone business. I had problems with my Singtel issued mobile phone and went to the repair center in Pickering Street to have it repaired. To cut a long story short, there were so many problems associated with getting a simple phone repaired, that I wrote a three page letter to Hsien Yang directly, telling him what went wrong and what I thought was the problem.

I need to put on record that I am not in the habit of complaining to CEOs whenever I have a problem with my mobile phone. I only wrote to him because there was a more fundamental problem that I thought warranted his attention.

I did not expect to hear from him, but guess what, he replied me personally and had two people from his corporate communications office visit me personally to lend me a replacement phone to have mine repaired, and then the same two visited me again two weeks later to return the repaired phone. I was blown over.

I am not sure what impact my letter had on him, but it was clear that he had taken a personal interest to see what he needed to do with his mobile phone business, which had all sorts of problems, in the light of new competition at that time, and was reading his letters personally. I have a high regard for CEOs who drag their own bag, drive their own cars (as Hsien Yang does when he is with family – I have seen him) and read their own customer letters. It means that their feet are firmly on the ground.

If you ask me today the single most important reason that I think that Hsien Yang is the best candidate to lead DBS, I would say that it is because he is at the right phase in his own career to learn to “manage complexity”, as opposed o creating them. All CEOs, including the celebrated ones need to be at points in their careers where the next phase is considered a challenge to grow.

Despite all the good things that we read about Hsien Yang in the media, in my view, he spent most of the time building the international portfolio and scaling up the core businesses. There was still one unfinished bsiness at SingTel from what I can piece together from conversations with people on the ground there. He did not quite manage to put in place the matrixed reporting structure that could work and deliver the numbers from the more complex businesses. Maybe because he was doing so many big ticket acquisitions all at once, he probably did not spend enough time, that could only be done when the business is plateauing, to internalise how it all comes together.

The result is that there are pockets of areas in SingTel’s core businesses where it is still very vulnerable to foreign competition. There are domestic corporate businesses that just do not seem to get off the ground – like their outsourcing services, the corporate bandwidth connectivity business and so on – in my view because of the reporting structures of the sales teams in these areas are not designed specifically to motivate them to scale the business up.

Why this is so important is that the diversity of products in banking are much more involved than products of a telecommunications company. In a simplistic manner, a telco sells bandwidth, collects money on the toll. Banking products (unless it is cash management) is based on absorbing costs and risks as part of the value proposition to the client. The incentive structures for the sales process have to be calibrated more carefully, otherwise the CEO is going to have a crisis blow on his face, even if he was not responsible for it.

If he joins DBS, I hope that we will see a different part of Hsien Yang’s skills in action. I am hoping that M&A will not be number one on his agenda – anyway, there are not as many in banking as there are in telecommunications in a year. I hope that franchie building will be the skill he will focus to build on and as any career professional, it will be a worthwhile endeavour. If someone can bring DBS to the next level, to operate like a humming village, I genuinely think that Hsien Yang can.

You know, the strange thing about banking today is that to excel in it, you have to be good at a business line – whether retail or corporate or investment banking or whatever else a bank does. But to LEAD it, the skills do not necessarily come from any one or several of the business lines. As banks become more complex as institutions, managing complexity means being a good driver and yet knowing what is wrong if called on to go beneath the bonnet.

Why not Francis Rozario, the current CEO of Fullerton Investment, the banking investment arm of Temasek who reports directly to Ho Ching? I think that Francis is a consummate franchise builder, and given the chance, he would do a grand job of DBS, if all it required was franchise business skills. I told him as much when I ran into him in San Francisco last month, that I thought he did a grand job preparing for that potential acqusition of Chang Hwa Bank in Taiwan in 2005-6. I was there in the week the bid was lost to Taishin, and in all my meetings, I was amazed with the amount of preparation he had put into the bid. He had, just by working his incredible contact base, put together a potential team that could take and run with it if Temasek had won the bid.

But he is currently where he is supposed to be – making the deals and putting the people in place on a regional basis. To take him out of that would be to stall the other part of the equation, to build a regional franchise. In some sense, Francis and whoever leads DBS will have to enjoy meeting other regularly, given the unstated symmetry in objectives between the two organisations. But then again, Francis is in the right phase in his own career to prove his mantle by actually leading a regional bank himself. So, we will see.

What about Jeanette Wong? I was having dinner with a former, very, very senior person at HSBC in Beijing last Friday, and even as I was saying to him that Jeanette Wong is probably the best kept secret in DBS’s investor relations strategy, he added to my remarks by interjecting that “she is a class act”, which of course made me suspect that HSBC must have thought about hiring her at one point.

All of us who know her, know that both Jeanette and her husband are among the most competent professionals in their areas of expertise – not necessarily in actually running a business, but at least in providing that management depth. She has both the sharp IQ and the EQ in good measure at the management layer, and if DBS share price holds its ground in a very volatile marketplace, all of us who are shareholders owe it to her skills. But I am quite clear that she would be not interested in the CEO position, or actually running a business. It’s too hard.

If whoever suggested her name was thinking of a DBS equivalent to Chua Sock Koong, who took over from Hsien Yang at SingTel, then they are comparing the two wrongly. Sock Koong groomed herself to be CEO, even if she may not admit it in that way. From my own observations in a government-sponsored committee I served in, Sock Koon has no problems wearing the pants in the boardroom, while Jeanette would rather contribute still, but as the feminine wonder, charming in an effective manner. Sock Koon is CEO material and Jeanette would not be interested.

In the meantime, I am VERY concerned about Koh Boon Hwee’s involvement. When I read that he was supposed to take on the role of an executive chairman while they look for a new CEO, I said “oh no!” I keep saying this, that it is my opinion that he is more trouble than he is worth in franchise building but nobody seems to be listening to me.

I know that several people in very high places think very highly of Mr Koh (I tend to be very formal with people I have trouble liking). For all his so-called intelligence, I think that this public figure has serious EQ problems. I think that his first problem is that he relishes in moving the goal posts, pushing the finishing line, putting hurdles in front of people. I think that whether you work for him or you are his customer, you will never be good enough for him.

We saw this during his time with Singapore Airlines – all that mumbo jumbo about satisfying economic capital … ohhhh that suited him well, because the unions and the employees would never be good enough to negotiate terms for themselves even if the company was registering incredible profits because in “economic capital terms” the airline industry is a waste of time (I have heard this argument so many times now that I want to say to them that if you actually believe that, then please sell Singapore Airlines and use the capital to build a capital-free kachang puteh (ground nuts) business. Of course they are not going to do that because even an idiot knows the value of creating employment and a highly visible and branded business that is a lead generator to other businesses. If you told him that the value of economic capital should not be on the capital but on the value add, he will in all likelihood change the rules on you right there!

The most loyal customers of Singapore Airlines – and I am Solitaire – are also never good enough for Mr Koh because, “the flights may go out full but do you know that they return empty”, according to someone I know who quoted him saying. I want to make it very clear that I have never met this man, except being at the same cocktail parties, but as I told someone from DBS in an SMS conversation recently, people with huge egos are easier to read than they realise. More so, when they love giving close up “how to run a successful business” interviews with the media.

His second problem is that I see him as desperately wants to run a large business. Being chairman is not good enough. So, when I read (I have not been in Singapore for a long time now) in the electronic newspapers that his excuse for taking charge was because there was a “planning period underway”, I muttered under my breath, “any excuse, Mr Koh.” Then if the retort to that is TINA (“there is no alternative”), my reply will be, “it’s interesting isn’t it that Frank Wong seems to have the privilege of the title of deputy CEO and still not step into the role of CEO when required.” The point being, it’s a choice.

Again, without knowing anything about what actually happens, I can imagine him barging into the CEOs office and the business managers offices at DBS to ask “how about this” and “how about that”. The person I most worry for in this regard is Edmund Koh, the head of retail, because the older Mr Koh actually thinks that he understands customers and the retail business is something that everybody thinks they understand. I can hear him at the board room saying “when I was a Singapore Airlines…” blah blah blah. Please someone, this man is so easy to read that I wish someone will tell me point blank that I am wrong.

His third problem is that he really wants to be seen as smart. We saw this in that rather lame speech he gave internally at DBS when he first became chairman last year. I read the speech and wanted to congratulate him for understanding banking as it was understood by the worst IBM technology salesman in 1985. But somehow the local media reported his speech as refreshing. Will he be made CEO instead? Well, on a point of protocol probably not. That would be a demotion for Singapore’s “super-chairman” as a local TV station anchor once called him.

The reason I am deeply concerned when it comes to people like Mr Koh is that the banking business is already so very difficult to create and run, that if he undoes what has been achieved at DBS over the past five years, all the kings horses and all the kings men will not be able to put humpty dumpty together again.

From what I hear, Mr Koh was already doing a bad job at Singapore Airlines, and I read the ensuing standoff with the pilots union as originating in part because of him (if I am wrong please correct me). The big difference between Singapore Airlines and DBS is that at the airlines, the core skills were well entrenched and he could not touch them. At DBS, because a number of senior managers are either new or are not well established in their positions even if they are highly competent, and worse, now that there is no CEO, a feather-buster chairman will have his day.

He is unlikely to touch the businesses he does not understand. He will leave Frank Wong alone and maybe the institutional banking business alone, but frankly, during this phase in thinking about who the best leaders should be, this chairman is a distraction to the cause.

As I make these assessments, my benchmarks at the back of my head are some of the leaders of similar types of institutions that I have had the privilege of interacting. Two that stand out very clearly in my mind are Sir Brian Pitman, who led Llyods TSB, first as CEO and then as chairman, and Sir George Matthewson, the former chairman of the Royal Bank of Scotland. I am actually looking forward to seeing Sir George again at The Asian Banker Summit in Hanoi in March next year.

In my conversations with them over breakfast, over dinner, I developed a mental picture of how they respectively built two of the most outstanding financial institutions in the course of the 1990s. I talk to them about the news behind the news, how some of their M&A opportunties came about, their people problems, their own personal orientations at that time, what about the criticisms levelled against them. The impression that is formed in my mind is that the essense of leadership has not changed in all this time.

If the board at DBS is looking for the next milestone that the bankmust aspire to, let me suggest one: to become the Llyods or the RBS of the next decade. It is achieveable, but not because the board says it so, but because there will arise a leader who can make it so. Big difference.

DBS can become a global icon even if it operates within its own market place, even as Llyods and RBS were essentially domestic institutions. We are riding a period of unprecedented growth in Asia that even the weakest player will ride on. It is possible to stand out only if there is talent arising from within the system that can steer the course. You simply can’t have pretenders on the throne.

There are other people who were not mentioned in that list. Edmund Koh, who as head of consumer banking, generates almost 50% of the bank’s profits gets no thanks from the board – in another bank, he would be a board member (his equivalent in ICICI Bank in India, Vadyianathan was made the youngest board member this year and that bank does not waste time taking the most difficult business it runs for granted). Edmund is arguably one of Singapore’s most seasoned locally bred retail talents and I hope someone else will poach him so that DBS does not take him for granted. I know that he has rubbed people the wrong way before, but if Jack can be forgiven for learning so can Edmund.

At the same time, I must clarify that I am not suggesting Edmund as potential CEO. Board member yes, which leads me to say that while DBS has a good complement of non-executives as board members, it really should include some of the anchor senior management at the business level as well.

Another name that popped up was Rajan Raju. Rajan Raju is the name of someone who is highly competent but who did not invest enough in cultivating his own corporate brand name. We must remember that he is the man who identified and created the tremendous opportunity that DBS has in India through that Cholamandalam acquisition. We also need to remember that he is holding fort for operations and technology, clearing up the mess left behind by the irrepressible Steve Ingram.

But from what I understand, internally, he operates more like the management’s goffer. I don’t mean to be wicked in making this description, but any aspiring leader has to realise that basic competency is not enough in today’s talent race.

There is a big difference between leaders and highly competent people in the corporate world. Leaders may be highly competent, but they have the added skill of cultivating their own brand names in order to survive any fallout and to make themselves available to be players themselves. After a certain level, if all you do is good work, the bosses will by-pass you and hire from outside. It is not their fault, because they too need to be seen making the right visible choices of people the industry and not just insiders know about.

Having said all these cruel things, I think that Rajan will make an excellent COO, and one could argue that the role actually complements a strong CEO. The stronger a CEO, the more low key the COO should be, and if not having a brand name is not important, then I think that Rajan is an excellent candidate for this role.

Should DBS hire “foreign talent” from outside the institution or outside the country? In all earnestness, I think that it is not even the right question to ask. The right question to ask is, “how do we make sense of the sum of the parts we have created.” It is still a fragile sum. Ideally, it should come from within the organisation, but neither Jack nor Frank (who by the way I reckon will leave as well, probably next year) cultivated sufficiently from within. The question is also not where they come from. It should be where they are in their respective careers to ride the curve.

As equally important as searching for the right leaders is the task of flushing the organisation of the kind of people who were cultivated through the many years when Singapore’s financial services industry was a closed and insular business, and it gathered up the moss of hanger-ons who really did not need to excel but ride an economy that was growing at a clip 6-8% per annum for over thirty years.

Just to illustrate this point, I was at SIBOS in Boston, now two weeks ago. It’s a huge global event with more than 6000 bankers from all over the world and about 1000 exhibition booths of all shapes and sizes. As I was walking around the huge exhibitions, I saw a very Singaporean looking man at the booth of an IT company called DST, where they were giving away Ben & Jerry ice creams if you drop your name card into a glass jar. His hand was still in the jar when I approached him and read from his conference badge hanging around his neck that he was “Daniel Tan” of “The Singapore Exchange”. So, I said to him, “hi Daniel, my name is Emmanuel and I am from The Asian Banker, would you have your name card with you,” as I reached out for my own name card to exchange with him.

His reply was “oh, let me see” and he started fiddling into his jacket pocket when very clearly he was holding his stack of name cards in the other hand and had just exchanged it for a Ben & Jerry ice cream. At the same time he was sizing me up to see if I was important enough to give a name card to. Now, to me that is hubris behaviour and as I say again and again, I have no patience with that kind of behaviour. I became visibly sterner towards him, and pointed out “you are holding your card in your (left) hand.”

His reply was even more hilarious as he handed me his card reluctantly, he said “ah yes, I was trying not to find it,” to which my reply was, “yes, I can see that (you twit)!” His reply probably came out of a warped sense of moralilty of being honest after being found out, something that I have seen in religious zealots. In a world where they say that they are incredibly international, this is your quinessential Singaporean salaryman, still this carcature of a cloistered adolescent playing hide and seek. You would imagine that a 50 year old would have developed all the confidence of an adult a long time ago, but not the Singaporean salaryman. No wonder I recognised him from a far.

I read the card and it said, “Daniel Tan Bak Hiang, Executive Vice President, Head, Retail Business & Development.” As I walked away, leaving him with his Ben & Jerry ice cream, he looked at my card and said, “ah, I did not know it was you,” to which I thought, what in the world did that mean when you were sent here to meet people?

I thought to myself, the Singapore Exchange, which seriously wants to become a leading exchange in the Asia Pacific region, spent about S$20,000 to send this man to SIBOS in Boston (S$11,000 for a business class fare Sin-NY-Sin, another S$1,000 for connections, S$4,000 for SIBOS registration fee, S$2,000 for accommodation and miscellaneous – I know because I run a business as well!) to meet as many people as possible, get ideas for growing the business and come back charged with taking it to the next level.

While he thought nothing about dumping his name card into a cookie jar in exchange for an ice cream, he did not think it was even more interesting to press his name card to strangers at the same conference in exchange for even more valuable ideas and opportunities? If his excuse was that he was frightened to meet a journalist, then he should have been even more frightened if one writes to report on his stupidity as I am doing now. But that can’t be the excuse, because otherwise, what does a business development head do if not promote the business everywhere. At the second tier level, Singaporean institutions are still manned by the likes of Daniel Tan Bak Hiang, hiding behind job titles instead of getting the bloody job done.

I had four other staff with me at SIBOS, and honestly, if Daniel Tan Bak Hiang was one of my staff, I would have chewed him up for this incident. So, when you wonder about how a Singapore Exchange can become a serious international player, think about the people whom its CEO Hsieh Fu Hua is sending out to the field.

Am I being way too critical? Are there redeeming features of this man that I should take note of? In the internationl scene, all of us deal with what we see, and I am relating what I saw.

This cadre of Singaporean salarymen, borne of an era when all you needed to do was keep your nose clean and ride the growing economy, have to be phased out and replaced with a new generation of international managers who know how to seize the day (not the ice cream). You can have the best CEO in the world, and honestly, Fu Hua is a good man for all intent and purposes. But he will always be only as good as the men and women he sends out there.

In contrast, I had a much better time with the DBS head for its Financial Insitutions business, Neil Parek who was also there at SIBOS. We exchanged notes, I introduced him to the chairman of Asia Universal Bank in Kyrgyzstan, Mikhail Nadel, whom I know from my recent trip there, as he walked past, and I did a quick interview with Neil to help him promote his business, while we were kicking around the carpet at the Bank of America booth (hosted, I must report, by my buddies Shankar and the indomitable Subin Subaiah). So much exchanged in a day’s work. The work is simple, productive and fun, if you get the hubris out of the way.

So, in conclusion, I would say much of the initial ingredients to build a dynamic international institution are already there at DBS. For all the mistakes he made in the initial phases of his leadership, Jack more than made up for them by becoming a supporter of his best managers. He has laid the foundations for the future. But the cement that holds the institution together is still wet. Now is not the time to experiment with foreign talent (remember Tom Kloet at SGX?), not because it is foreign, but because it is unknown.

Someone like Lee Hsien Yang – whether or not it turns out to be him – may not yet understand many of the instincts that he will need to develop about the business of banking. But I don’t see this person writing speeches to show that he does. I see him or her spending time understanding the business from ground up. The less the person knows as a leader, the more he or she will defer to his council of village chiefs. The less he knows about exotic instruments, the more likely he will be to assess them with common sense. Therein lies the secret of the success of the next phase of this very interesting transformation of an institution that mirrors that of the country it represents.

ED


Comments

  1. Eduardo D. Jose, Jr.

    A rather long but interesting analysis of leadership in a difficult industry. Entertaining, informative, opinionated – great piece and its interesting how many names are familiar including the guys from BOFA. Never though of it but its probably true that the really good ones would not have left their native country & should only come as consultants & there are many of those nowadays – would you have a piece on choosing consultants? –

  2. Interesting and thank you very much for the insight information.

  3. Great article, well written.

  4. Armstrong Chen-CBRC

    It is the first time I read such a long English article but it is indeed very attractive.

    ?????????,??????????????!

  5. Thanks all for the feedback – almost all non-Singaporean, very interesting. Criticisms are also welcome, by the way! A quick one about choosing consultants. Fortune magazine had this great piece in April this year, about a US based guru called Ram Charan, I think called “The Homeless Consultant”. Basically, they were wondering how in corporate America could this almost sage-type guy with no family, living out of a suit case, could be an independent adviser to the very top of American corporate leaders, including Jack Welch and others. It has insights into what leaders want to see in their consultants. If I were to write about choosing consultants, I would write about the ones I know – the freelancers, the small groupies who get together around a proposition, the institutionalised ones and others. My initial thoughts would be: 1. choose the person, not the firm 2. read the CV over and over until you can distill what exactly you are getting 3. know exactly what you want to get out of the consultant, using consultants is not for adolescent managers. More when appropriate….

  6. Great article. I would add to your comments on organisational accountability that I think that CEO accountability – and the right type of accountability, at that – is an important ingredient for success.

    In Asia corporate governance standards and ownership structure of banks (family stakes, government stakes) combined with under-developed market discipline (good sell-side research and financial journalism) create a complex set of management incentives which is very different to that faced by US and European banking leaders.

    I therefore have no small amount of sympathy for the foreign talent that seeks to play in this part of the world, but at the same time am not convinced that activist hedge funds and stalking private equity funds are necessarily is the way forward to improve CEO performance in less developed banking markets…

  7. hi Daniel, great article from you to decipher the true meaning of leadership..just wondering wud you have any more pertinent and detailed information on the merger of CIMB and Southern bank as i'm currently doing a case study project on this topic,thanks for your great assistance

  8. Brian, Yes, I do have “pertinent and detailed” information about a lot of banks in the region. It's my job. But I am a bit concerned if you thought that by writing freely in my blog that I like telling on banks. I run an organisation that has to keep the trust of a lot of banks, including DBS and CIMB. If the banks gave us permission to publish professionally through a formal interview, we would do and if we can't we don't. When I stick my neck out and give the leadership issue the treatment I did, it would be for a very good reason – so that it could be heard in the boardroom – which I am happy to say, it was. But I would not dare betray the trust of a lot of operational information given to us by people in the bank. You must understand that I am part of this industry, I make my living from it. We still have to talk to banks like DBS and CIMB everyday. In fact, Jackson Tai gave us a very indepth interview after my blogs (link https://www.theasianbanker.com/A556C5/Journals.nsf/$ALL/01A001F227418D55482573A7002481A6?OpenDocument), and so life goes on. The best people in the industry, like the people we know in DBS, trust us and even use us! The bad ones can't figure it out, but no problem. As for CIMB, why don't you ask them directly.

  9. hi Daniel,
    many thanks for your prompt reply, i did try to get in touch with CIMB, but there is no reply from them, as a banker myself, i pretty much understand the confidentiality of the information of banks which should not be shared in public. I guess what i really need is a critical analysis of big events such as CIMB and SBB merger) ie. the logical reason of their merger, what are the two banks' strengths and weaknesses and how the merger would create a good fit or synergy for them to compete with their rivals,anyway, thanks again and i shall be visiting your blog from time to time to keep myself updated on what is happening in the banking industry..cheers

  10. Cheers Brian. I was just reacting to something that I am very sensitive about – the balance between speaking boldly and keeping faith of the industry. I guess I was using your question to deal with this issue. Many things are told to me in confidence at a personal level and I will die before I betray that trust.But at a professional level your question is valid. We are in the business of providing benchmarking services to banks to understand what is best practice, GAP analysis with peers in the market and so on. We deal with ALL banks, so the data we publish and services we provide have a high degree of integriy built in. If you write to me off line, I can put you in touch with someone who can help your bank. As a case study, the CIMB story is a good one, and I will ask our manging editor, Matthew Kovac, to explore it for the publication.

    Thanks also James… I'd say that activitist investors is the only way left. Another conversation when the time is right. best, ED

  11. Dear Ed, doesn't it make you wonder that why all of a sudden MAS has a say in who the CEO will be? Doesn't it make you wonder why a regulatory body is now involved? Doesn't it make you wonder why the CEO is still sitting there over Christmas and New Year when he said he wanted to spend more time with his family? To understand who should be the CEO's replacement, you must first understand why he is being replaced. The truth is what you should seek first and you don't know it yet.

  12. Dear Reader, greetings from faraway Valencia in Spain, where I am hiding rest of the year. YES, it has become VERY clear to me Jack Tai is leaving because of reasons other than family and all indications point at personalities. From what I saw in late Nov, Jack was switched off in ways a CEO in transition wouldn�t be. The MAS approval appears normal for a regulator as should be Temasek�s nod as main shareholder. I did notice tt several senior staff are really cosying up to the chairman. Not that I care, except to ask what is a non-exec chairman doing at mgt level? As long as the search for CEO was a rational exercise to do what is right, my analysis would have been useful. Once it gets into all these personality stuff, all I want to say is I hv been wasting my time. Corp governance exists sothat large public companies can make rationale and transparent decisions for the good of business. That�s all. Let�s see who even wants the job now. Happy new year!

  13. Reader – I agree that your question is very pertinent for DBS and its future.

    Conspiracy theories abound, but if a single 'incident' lies behind Jack's decision to leave my hunch is that it was merely a straw that broke the camel's back…Whether serious personal/personality issues were at play or whether his 'supporters' simply ran out of patience with DBS' unspectacular track record is difficult to work out from the sidelines.

    However, I feel strongly that change is needed, and regardless of the handling of the departure, new blood is essential for DBS is to move on. But of course the big question is the direction in which to move, and maybe this can only be tackled properly if one also understands the aspirations and limitations of the owners of the stock.

    Let me know if you can shed any light…

    ED – look forward to your thoughts on activist investors in banking stocks at some point in 2008!

  14. Dear ED, In any bank, once the CEO gives notice of resignation, due to the sensitivity of the job, they will be either told to stay at home or leave immediately. The reasson he has to leave is much more serious and if you really want to know, ask MAS. They know.

  15. James, Reader, points taken. I have no religion in this matter. I keep an open eye about the MAS or any other party in this matter. At some point, something is bound to happen to bring the pieces together. Incidentally, I am a DBS shareholder as I am of several other US/HK ones. All long term. Every day that they do not have a credible CEO, the damage builds. I keep saying that Koh Boon Hwee is not the solution. The reputation of their independent directors has already really taken a beating. Even if they announce a CEO, he or she will have to work against all these negative issues that have mushroomed. The biggest joke is Frank Wong. What in the world is he doing there if he is not heir apparent – he should have some self respect and just resign! Why in the world does he get to keep the huge salary of a deputy CEO? Shareholders have a right to know these things.

  16. I came across this article yesterday and find a misjudgment on the part of your illustration on Daniel Tan. I was an ex-staff who had worked under him before, not directly but a few levels under. Using your own words in the first article on DBS leadership, you were just making wild guesses based on whatever little you knew about the man. I guess you must have felt really bad at being snubbed when u tried to introduced yourself to him.

    If you found it absurb for the company to spend $20K to send someone like him to SIBOS, so do most of the staff in the company when he was transferred from technology/operation to head a business function. If someone has to be accountable for this, it is the very person who you sing praises on. If a leader cannot even place his men in their rightful positions, how do u expect the organisation he is leading to win against other competitors? It is an irony here that you were penning your thoughts on how DBS should be choosing their leaders wisely.

  17. Old blog — probably outdated now — you got Porte and Shinsei entirely wrong. Yashiro caused all the problems at Shinsei — hired weak people he could bully around and had no idea of risk management or compliance — look what happened after he left Citi Japan and the private banking mess that resulted in them losing their business license. The problems he left at Shinsei after he took his cash were insurmountable.

    The good thing is that he came back and inherited all that he had created and it all fell on him.

    Lesson — if you are the architect of a mess and you know it, stay away from a hero's return. If you are too stupid to know the mess you have created, you will end up stepping in it.

    Now try to clean that crap off your shoe.

    Leader? I've seen better used car sales leaders aplenty.

  18. By the time more and more people added to the tiny isalnd, the standard living kept dropping further and further due to overcrowding?The optimal population for Singapore, which lack of resources should be around 4.8m, which is more conducive for bring a child? Why people will want to bring up a child when the place getting more and more crowded and more and more difficult to access facilities and cost is getting higher and higher when more people is coming in that will drive up the price?When people worry about new citizen taking their jobs, how they go to bring up more babies? More people come how to increase their pay?We should learn from more develop countries, which had low Gini coefficient, how they harness the local populations to deal with this type of problems, with high birth rate?The reason for people not borning babies is more and more people come in and their job possibly losing to the new comers? Why some countries, they have the confident to bring up the child, even they are not married and don’t abort it, because the are confident the child future?It is highly unlikely, a couple will bear more babies generally, if they worry about their children educations and future which is not very secure and their job is not very secure due to competition from cheaper third world country?A limited import of people is reasonable but a large import is unsustainable? A limited import is possible to solve the birthrate because this type of people their skills is limited and highly skilled and can bring up the low wage workers?So the problem getting worst, going round and round and kept importing people, and don’t know the root causes of the problems, putting the cart before the horse?

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