KCB scraps 15 directors’ posts in purge on wage bill

At least 15 top executives have lost their jobs at KCB, Kenya’s largest bank by asset base, in a shake-up meant to contain staff costs that have more than doubled in the past five years.

The decision to trim the executive wing from 22 to seven desks underscores the bank’s determination to reduce its costs to income ratio from 70 per cent, the second highest in the sector, to less than 50 per cent, especially after most employees snubbed the bank’s offer of an early retirement option last year.

Chief executive Martin Oduor-Otieno announced the scrapping of the two deputy chief executive posts that were held by Samuel Kimani and Peter Munyiri.

The work of 13 divisional directors will now be handled by four officers.

Mr Oduor-Otieno said the re-organisation should enhance business performance in the competitive lending market.

“We intend to reduce our cost to income ratio to about 50 per cent in the next two years and this will be achieved by growth in income and reduction of costs,” he said.

Mr Samuel Kimani and Mr Peter Munyiri who have held the deputy chief executive positions since 2000 and 2007 respectively are among the top executives to lose their jobs in the ongoing re-organisation.

Mr Kimani, who joined the bank in 2000 and has been in charge of the bank’s internal controls, has previously worked with the Central Bank of Kenya (CBK) and consultancy firm PricewaterhouseCoopers (PwC).

Mr Munyiri joined the group in 2007 and looked after the group’s general business.

He boasts a wide experience in the banking sector, having held executive positions at Co-op, Barclays and Standard Chartered banks in Kenya.

Ms Catherine Njoroge, who previously headed KCB’s retail banking, has relinquished her position as divisional director of special projects while Mr Kepha Bosire, the divisional director of corporate communications will quit the office he has held since 2003.

The bank also created four new executive roles that will take up several functions that were headed by independent divisional directors, meaning that at least eight more of the bank’s 14 divisional directors will be sent packing.

KCB has created the position of a chief operating officer who will assume the roles previously held by Dr Tony Githuku (IT director), Paul Tikani (operations director), and Wilfred Sang (credit director).

The new office holder will also oversee the bank’s logistics, including transport and security.

A new executive will be hired to oversee the bank’s five local departments, signalling the retrenchment of Caroline Kariuki (mortgages director), Timothy Kabiru (retail banking director), John Wandolo (corporate banking director), Mary-Ann Mwangi (marketing director), and Mr Bosire (communications director).

Another executive will look after the group’s regional business, a role that has been headed by Mr James Agin (director, regional business).

In the next two weeks, KCB will start interviewing candidates for the new executive positions, for which its existing officials are free to vie. KCB is set to cascade its staff review to middle level management ranks over the coming months in the exercise led by global consultancy firm McKinsey & Company.

By unveiling a leaner executive team, KCB hopes to reign in its staff costs that rose from Sh4 billion in 2006 to Sh9.3 billion last year, stifling profit growth.

This pushed its cost to income ratio to 67.9 per cent, only rivalled by Co-op Bank’s 80.7 per cent.

KCB has pursued an aggressive local and regional expansion in the past few years that saw it nearly double its staff count from 2,921 in 2007 to 5,639 last year.

KCB’s pay roll trimming is in line with that of other top banks that are coming off an aggressive hiring phase started in 2007 that was aimed at capturing market share.

Early this year, Barclays Bank announced it was laying off 200 middle level managers to cut payroll costs that grew to Sh8.3 billion last year from Sh7.2 billion the year before.

The exercise is set to save Barclays –whose loan book shrunk last year-- hundreds of millions of shillings in fixed expenses.

Equity and Co-operative banks have slowed down new hiring, opting to spread out existing staff to meet their needs across the country. Corporate segment focused Standard Chartered Bank has the lowest staff count (1554) and wage bill (Sh23.4 billion) among the top five banks.

Executive jobs have lately emerged as a shaky perch in corporate Kenya with Safaricom, CMC Motors, Yu, Eveready, and East African Breweries among companies that have shaken up their executive suites since January.

Previous layoffs tended to affect low and middle cadre employees but their relatively low earnings and associated perks meant little impact on the payroll.

With companies moving to drive efficiency, new talent that can be employed across various roles is emerging as a cutting edge.

“Increased competition is wiping off the luxury of having a top-heavy organisational structure. When companies are highly profitable they tend to split and elevate similar roles to managerial levels but companies are now seeking to expand margins,” said Samson Osero, the executive director at the Institute of Human Resource Management.

Mr Osero added that large executive teams can also hamper the performance of a chief executive by reducing his focus to managing direct reports, instead of looking after the strategic direction of the business.