February 23rd 2018

Top Stories / National

Under pressure from directors, Family Bank management opts to 'sacrifice' employees

"The bank is moving in the wrong direction. Sacking employees who have stuck with the institution, when it was among the lowest paying banks in Kenya, is not the answer to the problems," the source said.

By Oscar NdundaMonday, 03 Oct 2016 19:32 EAT

Family Bank headquarters.

Family Bank has announced that it will be laying off some of its workers in the next two weeks to reduce operating expenses. In a memo that was circulated to workers on Friday, the bank said it was offering voluntary early retirement to employees for a grace period of two weeks.

What might follow is the retrenchment of up to 200 workers before the end of the year, according to an insider who spoke to the Kenya Free Press. More workers would be retrenched in 2017, according to the insider. Incidentally, the company is presently hiring new workers, including some with the same skills set as the ones earmarked for retrenchment.

According to the memo, the move is a strategy on efficient deployment to improve the bank’s performance. The memo also held that permanent and pensionable staff members will be able to access their pension dues and loans settled at the applicable rates in the bank’s HR Policy.

The layoff will be the bank’s second within a span of one year after it sacked nine management staff who were said to be part of the Sh791 million National Youth Service scam. The nine were fired in December. “It is a stance that is tough but necessary to ensure strict compliance with our fiduciary duties to all our stakeholders,” the bank said in the statement announcing the sackings.

The sackings came after the Director of Public Prosecutions ordered investigations into whether the nine had facilitated, aided or abetted the theft of the NYS money. The bank is still under investigation in connection with the scandal to establish whether it failed to comply with banking and anti-money laundering regulations. The investigation is being undertaken by the police, the Financial Reporting Centre and the Central Bank of Kenya.

“The voluntary early retirement is one aspect of the wider transformation programme which was put in place in June this year. The programme entails assessment of our business model, with focus on deploying capital efficiently to improve the overall performance and growth of the bank,” read the memo. The bank's operating expenses of staff has risen from Sh2.91 billion in June 2015 to Sh3.81 billion June 2016.

A manager at the bank, who spoke to the Kenya Free Press on condition of anonymity said the staff rationalisation announced today was part of the management's efforts to assure shareholders that weaknesses identified in a recent internal audit were being addressed.

These weaknesses, which were identified ahead of the bank's acquisition of new banking technologies, include the hiring of senior staff through an old boy network at the bank that places loyalty ahead of performance, the opening of branches without concrete assessment about their potential, and procurement of services at inflated costs.

The manager said that since the retirement of the bank's former CEO following the NYS scandal, the bank's non executive directors, some of who have brought experience from other banks where they served before, have put increasing pressure on the managers.

It had been recently identified, for instance, that the bank has made several wrong investment decisions, including the hasty establishment of four branches in Nairobi and Central Kenya without operational plans. The branches, which include one in downtown Nairobi and another near Kenyatta University, were ready to be commissioned when the top management beat a quick retreat.

But the decision came after the branches had been fitted with all banking facilities, office equipment and even ATM machines. Some of the branches have been on hold for four months. Another branch was opened before going through all reviews. "The management is moving in the wrong direction. Sacrificing employees who have stuck with the institution, when it was among the lowest paying banks in Kenya, is not the answer to the problems," the source said.

The source also informed the Kenya Free Press that branch managers had been instructed to employ a more stringent criterion on the awarding of loans. While the recent change in interest rates law was used as the reason for the change, the source said, the new requirements were meant to check the ease with which some managers at the bank had directed loans to businesses where they had an interest.

The source also spoke of tensions between long serving workers of the bank and recent recruits. "Some of these managers who were promoted overnight from other banks don't recognise the work the employees they look down upon did to make the bank what it is today," he said, explaining that most of the employees on permanent employment, who have been identified for axing, have served longer with the bank.

The manager also alleged that some recent changes at the institution were informed by the management's efforts to catch up with Equity Bank. "We have some senior managers who usually look at Equity's financials and tell us, 'that is where we should be' but they forget that these are two different institutions that should follow their own different models."

The writer is the news editor of the Kenya Free Press

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