‘‘Generational change is a natural process, and this has to happen’’

Upendra Poudyal is Chairman of Nabil Bank. An MBA from Tribhuvan University, Poudyal has over three decades of experience in the Nepali banking sector. He worked in Standard Chartered Bank Nepal (then Grindlays Bank) and NMB Bank. During Poudyal’s tenure as CEO, Nepal Merchant Banking and Finance was upgraded into an A class financial institution to become NMB Bank. As CEO of NMB Bank, he led the merger of four financial institutions to NMB in 2015. the HRM caught up with Poudyal to talk about generational changes in Nepali banking, succession plan and quality of human resources. Excerpts:

How do you view the current generational change in banking leadership?
Generational change is a natural process, and this has to happen. Nepali banking has changed and evolved compared to the time when my generation joined the industry. We have seen this generational change in the Nepali banking sector over the last few years. The good thing is banks are now preparing succession plans to groom new leadership. When I took retirement from NMB Bank, the mantle of the CEO was handed over by the board to the deputy CEO groomed as the next leader.

As the number of banking institutions increased, I felt a shortage of qualified human resources in the banking sector. The skills and capacity of banking professionals have not taken centre stage. The main focus of the banks and their top management has been on increasing business volume and maximizing profit. I feel the banking system has succumbed to the profitability pressure. The new generation banking manager has been groomed very well and looks promising, but many lack a deep understanding of banking.

How effective are the new generation banking leaders? How are they different from their predecessors?
If we talk out our generation, except for a few, the majority had limited exposure to working in international banks. The kind of competitive pressure we see at present-day banking was not there during our times. The central bank used to fix the interest rate. The newer generation has better exposure, works under competitive pressure and handles more unique products.

The first-generation bankers have played a significant role in the banking sector’s evolution. Armed with better exposure and training, the newer generation is now spearheading Nepali banking with a touch of newness and innovation. They (the new generation) received mentoring from us (the first generation of Nepali CEOs).

There was a lack of communication and information during our time, unlike now when bankers can get things around the world via internet. As Grindlays was an international bank, we received the Financial Times from our London office, which used to be shared from CEOs to staff. Now, information from new banking trends and new digital products to more modern technological solutions is available online. The free flow of information has better equipped the new generation of banking professionals.

How do you find the quality of human resources in the banks of Nepal? In what areas have they excelled over the years, and what areas have they yet to excel in?
Given their background and knowledge, the newer generation has a strong foundation. The challenge for newer generation bankers is to be ready for the evolving banking business and update themselves to address more contemporary trends. Otherwise, they will be left behind.

As the number of banking institutions grew, the competition became stiffer. Banks have to be prepared to deal with non-banking institutions who’re adopting new products and services related to banking. The financial sector has evolved in recent times; there will be massive changes every five years.

I see that they are bogged down in day-to-day work as their primary focus at the moment is on business. Nowadays, banking professionals are overworked and stretched and are ready to switch to another sector.

How have smooth leadership successions in the Nepali banking sector been in recent years?
When NMB was upgraded from a finance company to a commercial bank in 2008, I inducted a senior professional working in another commercial bank as my deputy. I brought another senior professional to the top leadership of the bank. The whole idea was to have a succession plan after my exit from NMB Bank. The three people we groomed as future leaders have become CEOs – two with other institutions, and one is the current NMB CEO. A smooth succession plan takes years of effort. The bank must give decision-making authority and empower those groomed as future leaders.

If a succession plan is made from within the organization, it would be effective. If a new CEO/leader is brought from outside, it may create insecurity. The new leader will take some time to experience the environment and win the board’s trust.

I find some financial institutions to have done leadership transition smoothly, but in many, including larger institutions, I still see succession plan has not been handled effectively.

What needs to be done to produce better HR professionals for the banking sector?
Managing institutions and leading them are two different things. We are preparing the managers but have not been able to produce leaders. To prepare the leaders, we need other thoughts and planning.

Managers are those who assign job responsibilities, put pressure on staffs to give results. But leaders work together with their subordinates, giving an impression that they are with them during a complex decision-making situation. When any problems arise, leaders provide a direction or way to resolve them. The most significant gap is visible in the thought process. The focus should be on whether the staff have delivered or not, not how many hours they stay in the office.

How receptive are banks when it comes to the HR development of their staff?
Nowadays, banks have increasingly realized that they need to train their team to scale up their skills. Banks have been providing focused training on various aspects–relationship management, trade and credit management–from external resource persons.

Nepal Rastra Bank (NRB) has also come up with a policy that banks have to spend a specific budget on training their staff. When NMB Bank started the merger process with other financial institutions, we set up a separate training and development department.

But, as they (banks) focus more on profitability and volume, the level of training that should have happened has not materialized. What should have happened is identifying the need for training during the performance appraisal. As of now, performance appraisal is focused on rating and grade increment. It should be linked with skill development also.

One thing that pains me is the tendency of senior level managers that they don’t have to learn now as they have reached a particular position. Another aspect that needs serious consideration is work quality. As banks are driven for business volume and profitability, we compromise on quality work culture.

Mergers and acquisitions (M&As) in Nepal’s banking and financial (BFI) sector have added to the challenges in people management by banks. What factors do bank HR professionals need to be mindful of when handling human resources post-M&As?
I was the CEO when NMB Bank signed a merger MoU with four other financial institutions in 2015. As the merger process moved ahead, I interacted extensively with the shareholders, directors, top management, and staff of those institutions merged with NMB Bank. I briefed the shareholders and directors on the plans and business prospects while told the teams about the work culture of the NMB. Once the merger was completed, we imparted orientation training on operational compliance and business analysis to the staff who came to the NMB Bank from merged institutions.

When two institutions merge, there will be differences in the work culture and capacity level. Therefore, the boards and CEO should give serious thoughts on how to scale up those staff skills. The HR department should identify the strengths and weaknesses of the staffs and come up with plans to address this gap. Hence, the leadership must have the patience to make the post-merger human resource management smooth.

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