Multimedia - Succeeding as a Management Consultant Retail Banking

Succeeding aS a ManageMent conSultant Learn the skiLLs used by the Leading firms: the boston b oston ConsuLting group grou p, mCkinsey & Co. and bain & Co.

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ouR valueS We are run by former management management consulting

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coPYRigHt

teRMS oF uSe

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3

4


contentS exhibits

6

suppLementary materiaL

8

editor’s note

11

introduCing the engagement

14

Cast of CharaCters

18

proLogue

19

week 0 Week before the engagement engagement

24

week 1 Days 1 & 2 First Week at the Client

30

Day 2

Engagement Charter

36

Day 2

Work Plan

42

Day 3

Building a loan default value tree

46

Day 3

Developing the business case structure

51

Day 3

Sketching out a micronance operation

60

Day 4 Drafts of Week One Planning Documents

69

Days 4 & 5 Wrapping Up Week One

81

week 2 Day 1

A day in the lives of a borrower and loan ofcer

87

Day 2

First signicant team debrief and planning session

93

Day 2

Meeting the client: tea with the CEO

97

Day 4 Designing the hypotheses

103

Days 4 & 5 Designing the tests for the hypotheses

115

Day 5

Running the tests

121

Day 1

What does the data tell us, and storyboarding

128

Day 1

First major client update

128

Day 2

Building the model

142

Day 5

Output from the nancial analyses

153

week 3


week 4 Day 1

Finding additional data

163

Day 1

Pre-presenting to client executives

175

Day 2

Identifying quick wins

180

Days 4 & 5 Developing the strategy

184

week 5 Day 1

Mid-engagement Mid-engageme nt reviews

Day 4 Brieng the Minister of Finance

190 194

week 6 Day 1

Big picture thinking

203

Day 3

Client executive management workshop

212

Day 5

Implications of the strategy

216

Day 2

Finalizing the business case

229

Day 3

Finalizing the strategy

233

Day 4

Changing the organizational structure

250

Day 4

Planning for implementati implementation on

257

Day 5

What should the client do on Monday morning?

268

week 7

week 8

2 years Later:

assessing the strateg strategy y

280

books in this series

290

epiLogue

291

tooLs & teChniques used in this book

295

5

6


eXHiBitS Exhibit 0

Proposed Equity Research Note

24

Exhibit 1

Structure of the South African Finance Landscape

27

Exhibit 2

Structure of the South African Micronance Sector

28

Exhibit 3

UFBA’s Financials

31

Exhibit 4

Legislation & Governance of Micronance in South Africa

33

Exhibit 5

Competitor Proles

36

Exhibit 6

Customer Segments and Economics

40

Exhibit 7

ROE Tree Analyses

45

Exhibit 9

Issue Analyses

46

Exhibit 10 Charter Template

48

Exhibit 11 Draft Work Plan

55

Exhibit 12 Building Value Trees

56

Exhibit 13 Building the Hypotheses

66

Exhibit 14 Building the Market Analyses

71

Exhibit 15 Building the Business Case Analyses

72

Exhibit 16 Developing an Activity Model

74

Exhibit 17 Draft Work Plan

75

Exhibit 18 Revenue and Cost Drivers

76

Exhibit 19 High-level Storyboard

77

Exhibit 20 Designing a DILO

80

Exhibit 21 Developing a Focus Interview Questionnaire

85

Exhibit 22 Extracting the Key Themes

90

Exhibit 23 A Strategy to Manage Manage the Client

91

Exhibit 24 Analysing Best Practice

92

Exhibit 25 Selecting and Conducting Benchmarks

97

Exhibit 26 Pre-presentation Strategy

104

Exhibit 27 Using Prior Work

110

Exhibit 28 Finding Linkages between Work Streams

112

Exhibit 29 Testing Early Recommendation Recommendationss

115

Exhibit 30 Thinking Through Quick Wins

117

Exhibit 31 A Complete Value Value Tree

118

Exhibit 32 Value Chain

119

Exhibit 33 Opportunity Chart

126

Exhibit 34 Opportunity Chart Calculation

127


Exhibit 35 Overall Presentation

130

Exhibit 36 Headlines

131

Exhibit 37 Where are We in the Story?

132

Exhibit 38 Channel Economics

133

Exhibit 39 Understanding the Loan Book

135

Exhibit 40 Product Economics

137

Exhibit 41 Stakeholder Needs

139

Exhibit 42 Sector Performance

141

Exhibit 43 The Job Creation Versus Wealth Creation Trade-off

145

Exhibit 44 Writing Headlines Headlines

147

Exhibit 45 Strategy to Communicate the Key Findings

149

Exhibit 46 Organizational Implications

151

Exhibit 47 Managing & Quantifying Risk

152

Exhibit 48 Government Expectations

154

Exhibit 49 Bottom-up Versus Top-down Analyses

155

Exhibit 50 Business Case Storyboard

157

Exhibit 51 Model Structure

159

Exhibit 52 Worksheet Structure

160

Exhibit 53 UFBA Board Feedback

161

Exhibit 54 Draft Options for UFBA

166

Exhibit 55 Overall Focus Interview Feedback

167

Exhibit 56 Economic Analyses of Options

168

Exhibit 57 Organizational Analyses of Options

169

Exhibit 58 Implications on Loan Structuring

170

Exhibit 59 Changing Loan Ofcer Behaviour

175

Exhibit 60 Incentivizin Incentivizing g the Sales Force

177

Exhibit 61 Morale in the Division

179

Exhibit 62 Rating Senior Management

181

Exhibit 63 Employee Feedback

182

Exhibit 64 Employee Advice

188

Exhibit 65 Planning Final Executive Workshop

198

Exhibit 66 Final Executive Workshop

199

Exhibit 67 Decisions Made at Workshop

200

Exhibit 68 Implications of the Decisions

201

Exhibit 69 Timeline to Roll Out Changes

218

Exhibit 70 Measuring the Impact of the Engagement

219

Exhibit 71 Capturing Value from the Engagement

220

Exhibit 72 Is UFBA More Successful?

221

7

8


SuPPleMentaRY MateRial Subscribers to the book receive 24-hour access to

powerpoint

the following material, which can be downloaded

• Proposal to client

and edited. All documents are housed in a forum

• Project outline

allowing subscribers to interact with the editors

• Objectives and deliverables

directly. Updates to the models and other mate-

• Project management charter and timelines

rial are also posted into the forum, which sends

• Rationale for the project structure

automatic notications to subscribers.

• Structure for rst CEO meeting meeting

exCeL finanCiaL & market modeLs • Complete business case model

• Critical issues and hypotheses • Extended proposal issue pack for engagement team

• Market analyses model

• Flash reports per stream per week

• Value chain model

• Initial brieng pack pack for UFBA board

• Geographic analyses model

• Overview of global micronance micronance

• All models available in in four versions, each in

• Overview of micronance in in South Africa

different stages of development • There are 30 excel models

• Micronance case study: Mexico Mexico • Micronance case study: Russia • Micronance case study: Bangladesh Bangladesh • Micronance case study: Thailand • Micronance case study: Colombia • Micronance case study: Indonesia Indonesia • Micronance case study: India • Micronance case study: China • Micronance case study: Kenya • Micronance case study: Dominican Republic Republic • Client dashboard (assessing the client’s motivations) • Business analyses of banking channel • Workshop with banking banking channel • DILO visit to site 1 • DILO visit to site 2 • DILO visit to site 3 • DILO visit to site 4 • State of entrepreneurship in Sub-Saharan Africa


• Business case structure

editor’s podCasts

• Business case planning

• Engaging the client for the rst time

• Benchmarking

• Managing an engagement in an emerging market

• Model drivers and levers

• The unique challenges of public sector

• Business case analysis

engagements, particularly in Nigeria and

• Business case storyboard

South Africa

• Templates for each document above • Organizational structure recommendations • Overview of micronance micronance market • Technology in micronance

• Asse Assembl mbling ing the app appropr ropriate iate eng engage agemen mentt team team with wit h the the relev relevant ant skil skills ls • Designing a strategy engagement engagement in the nancial services sector, and micronance

• Market analysis planning

• Managing client and team expectations

• Market analysis by region

• Wee Week k 0 and Wee Week k 1 chal challen lenges ges on an enga engagem gement ent

• Value chain analysis

• Best practice for engaging client employees

• Sector analysis

• Owning, developing and managing a work stream

• Segment analysis

• Best practice in analyses design and conducting

• Strategy planning • Organizational analysis • Final recommendation

analyses • Best practice storyboarding and PowerPoint development

• Executive update 1 to client

• Developing a business case


• Structuring Excel models


• Communicating to ensure the team provides

• Executive update 4 to client • Executive update 5 to client

input to your work • How to manage workshops with clients • How to get clients to validate data • How to pre-present • Developing, managing and delivering milestone updates • How to develop insights after conducting analyses • Managing upwards (engageme (engagement nt manager), downwards (business analysts) and laterally (associates and client) • Typical mistakes consultants face

9

10


• Benchmarking your performance against best practice • Managing personal difculties difculties while staffed

• Testing a nancial nancial model • Using a model to support the rest of the engagement

• Managing performance issues

• Preparing and presenting an executive executive update

• Understanding the attributes of outstanding

• Testing the recommendation recommendationss

consultants and engagements

• Gaining client support • Wrapping up an engagement engagement

data sheets & tempLates

• Engagement best practices

• 40 data sheets for the Excel Excel model and reports

staged video interviews video guides

• Prof George Stinson, US micronance micronance expert

• Setting expectations expectations with the case leader/client

who disagrees with the the approach of the

• Designing an engagement structure

consulting team

• Developing the project timelines • Developing a work-stream charter • Developing an issue tree and hypothesis • Designing the analyses to test a hypothesis • Executing the analyses analyses to test a hypothesis • Developing a storyboard • Conducting a client workshop

• Sipho Mbandla, CEO of UFBA, and the architect of the micronance strategy • Precious Mbanza, Director General of the Department of Trade & Industry • Viktor Petkov, Associate Associate on the engagement engagement team leading the market analyses work stream • Doris Jacobs, 32-year-old mother of four,

• Conducting a client meeting

living on $100/month and a UFBA micro-loan

• Developing a focus interview

recipient

• Conducting a focus interview • Developing a ash report • Conducting a weekly project team meeting • Conducting a client update meeting • Pre-presenting do’s and don’ts • Structuring and executing qualitative qualitative analyses • Developing nancial nancial models • Developing a model description • Developing the nancial nancial activity model • Developing model drivers and levers • Developing the model architecture

• Edward Smit, 30-year-old manager, and member of the original UFBA start-up team


editoR’S note This is the “book” we had always hoped to produce. When we released the mining version of the book in in 2010, 2010, we we were were actually actually working working on two books and debating which should be released: one, set in the Brazilian mining sector, which we release released, d, and this book, book, set set in the South South AfAfrican retail banking sector. In July 2010, when we release released d the mini mining ng book, book, the the retail retail bankin banking g book was was more more develope developed d in its storylin storyline, e, data data and plot. Yet, the mining book was written in a more conventional manner as a “book” and we chose to release it to gain feedback on our style of writing. We believ believed ed we still had much much work work to do do in order order to bring our idea to life for the retail banking book.

plotline was introduced as an afterthought and the book lacked even the most basic supporting material. Moreover, to make the narrative easy to follow, Koch overly simplied the problem, which reduced the book’s usefulness due to its failure to mimic a real engagement. I vividly recall the questions that came up when we tried to replicate the concepts in the book: • Why do our numbers differ from the book? • How does one build a mincer? • How should my ROI model look? • What would happen if I changed changed the numbers? numbers? • How do I present this to a client? • What does he mean by segmentation? segmentation? • Just 40 pages dedicated to the analyses and 150 pages to theory! Really? • How do I contact Koch?

While the mining mining book was very popular, it it was in many ways the prototype. We had signicantly more ambitious plans for the retail banking book. We wanted to x some some of the problems plaguing plaguing so many business books today; many of these Like most books, we tossed it aside after one books are written to the authors’ preferred style reading and moved on to, what we thought, and not written for the audience’s needs. We would be better books. Those Those were hard to nd. wanted the book to be truly interactive, engaging engaging A similar problem occurred occurred during internal conand as realistic as possible. Over the next year sulting training. We attended very elaborate and and a half, we worked through numerous revisions of this book and its supporting material. In costly training sessions lasting a week at a time in exotic locales around the world. Despite the reviewing the rst draft back in June 2010, we pomp and grandeur, no one was able, nor expect expect- vividly recalled the challenges we had as associassocied, to gain the skills to do the work. It was priates when reading books by Ohmae, Henderson, marily a networking event and a chance to “read” etc. One particular book stood out, “The Finanabout new areas. In fact, many training sessions cial Times Guide to Strategy,” by Strategy,” by Richard Koch. exercises in which which a edgling It was meant to be a narrative on a management- were marketing exercises practice could showcase some interesting engageconsulting problem. The idea of a personalized ments and encourage interest across the rm. narrative with a strong plotline was appropriate, Training should never be a marketing exercise. and popularised by “The by “The Goal.” Koch’s Goal.” Koch’s book, however, struggled to accomplish this. The In writing this book, we changed our focus and

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“In the world of management consulting, financial models are vital and ignoring them is like learning to play the piano by merely reading a book.” experiencing g the challenges of the local market. tried to avoid these two traps. Rather than think- experiencin ing about how to write a book on management In updating the book, we went to great lengths to ensure the characters, story and richness of the consulting, we changed the question to, “ How can we best train management consultants and data is correct. We wanted readers to appreciate aspiring consultants to understand and replicate South Africa’s unique challenges. We used South a consulting engagement from start to nish? ” African editors to help us build in data accuracy In answering this question, we built what became and descriptiveness. the “book” and materials you will now use. Maybe Extensive,, robust and editable fnancial Extensive fnancial the phrase “consulting ecosystem” would be a models. Corporate nance, strategy or operaopera better choice? You You can judge and let us know. tions books usually slot neatly into one of two Podcasts with editors’ notes. notes. We wanted the categories: text-heavy with no Excel models, or reader to unambiguously understand the author’s text-heavy with imsy Excel models. We disliked the imsy and unrealistic models used. We usuusuthinking and motivation behind the concepts in the book. In most books, these important supple- ally found they were unable to be used in a real mentary notes are usually excluded or added as engagement and lacked the detail and robustness ridiculously summarized footnotes, which lose required of a management consulting engagetheir impact through the process of being summent. In the world of management consulting, marized. Why a decision was made is, usually, far nancial models are vital and ignoring them is more important than the actual decision itself. like learning to play the piano by merely reading It is crucial to hear the rationale in the author’s a book. Moreover, many engagemen engagements ts require voice as he/she provides provides the behind-the-scenes behind-the-scenes several models of different sizes and complexicomplexinarrative. Therefore, each chapter is supported ties for the different work streams. This book is by a ~30 minute podcast in in which the authors supported by over 30 Excel models, which can explain the decisions made, thought-process apap- be completely edited edited to explain the decisions plied, consulting tools used, and crucially, how to and numbers used in the book. We also built apply these techniques to your own engagements the models to be user friendly. They are black or training needs. screened. The background is black and the num bers are all in light green. green. This is the only only way to Authentic regional regional information. In the prevent eye-strain when staring at Excel models Brazilian mining book, we felt the characters, for extended periods – a problem we have faced issues and settings were well developed, but all too often in our consulting careers. lacked authenticity. It is important for readers to visualize the context context as much as possible. ConCon Detailed PowerPoints. PowerPoints. The PowerPoint slides text, after all, plays an equal if not greater role created for this book are much more detailed and than the analyses in determining the strategy. are divided by the work streams on the engagement. Moreover, templates like interview guides The reader should feel as if they are physically


and even sample interview notes mock-ups for the book have been included. There are over 50 PowerPoint decks provided, covering all elements of the study, including the analyses, planning, data collection and client presentations. In addition, there are approximately 45 supporting documents to lend authenticity to the book. The reader can now understand how data is extracted from documents to create the complete Excel model. Each document is categorized and la belled so the reader may use them seamlessly. By following the book and PowerPoint slides, you can see how this engagement was built over time and the message crafted for the client. Training videos. Each signicant PowerPoint deck or Excel model is supported by a video guiding the user through the information and providing helpful hints to ease understanding and usage. While the podcasts explain the manmanagement consulting rationale and application to real engagements, the video guides focus on the technical elements of the engagement, like why and how to estimate the weighted-average-costof-capital. We feel this will make an important difference to the user. Client videos. To increase the authenticity of the book, we have included video-recorded discussions with the “CEO” and key characters in the book as they describe the issues and challenges they face. It is vital to understand the emotional considerations under which the case was developed, and the the videos play a crucial role in accomplishing this. Before an engagement begins, the initial discussions with the client usually play the primary the primary role in shaping the consultant’s

thinking. These videos outline exactly what the consultant experiences just as the engagement begins. This emotional emotional setting and and the client’s behaviour play a signicant signicant role in the evolution evolution of an engagement. Along with the numbers and strategic analyses, the client culture will dictate the success of the engagement. The actors, from South Africa, were fully briefed and trained to ensure the reader sees exactly what the consultants saw when they arrived onto the engagement. Updates available online 24/7 . The book and supporting material are housed on an online system to be accessed at your convenience convenience.. This gives us the opportunity to update the “book” with more material, videos and nancial models models as needed. In other words, we want to build on the base we have created. This ensures we keep the ecosystem “fresh” and relevant to everyone. Users can leave questions behind and the authors and editors will respond in real time. In total, the “book” consists of the 325 page book itself, 25 podcasts, 29 video guides, 50 PowerPoint decks, 45 supporting documents with data, 30 nancial models, and 6 client and consulting video intervie interviews. ws. With With the exceptio exception n of the videos, all the material can be downloaded and edited. We hope you enjoy the the book as much as we en joyed preparing it. Toronto, Ontario December 2011

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intRoducing tHe engageMent A team of four ex-management ex-management consultants from

some of the world’s largest companies, fastest-

BCG and McKinsey, led by the Firmsconsult-

growing consulting ofces and most signicant

ing team out of our Capability Center1, worked

consulting engagements. We select our stories

on this book to develop the PowerPoint slides and Excel models. We are grateful to those MBA

based on where where we think think signicant signicant work will will be

students who spent their summer internships

modern business books are set in the UK, US and

assisting us. In essence, we conducted a full

Europe. We wanted to produce a book that would

consulting engagement engagement over a 12-week period.

help ll the void in emerging markets strategy.

The analysis is based on issues faced by South

Our choice of storylines has also been prescient.

Africa’s actual retail banks and and uses extensive nancial information from their annual reports to construct models that mimic South Africa’s banking environment. environment. We held held numerous discussions with analysts covering the banks and the micronance sector, as well as employees at the banks and analysts at the South African Reserve Bank, to understand the sector. Estimations on

done in the near future near future.. Moreover, the majority of

About a year before before micronance micronance fell out of vogue and the business models began straining, we conceived the South African storyline. Well before anyone knew what was to come in Europe with the current austerity measures, we predicted and wrote the Swedish Swedish Post Ofce storyline. storyline. We think think the stories are relevant, authoritative and timely.

regional economic growth, employment creation,

Retail banking, and in particular micronance,

new businesses started per sector, etc., are all

was a theme we had wanted wanted to pursue for a long

factual. When the models and reports reference a data source, that source does exist and you could

time. Beyond the complexity of analysing the

reference it yourself. That said, the client and engagement is ctitious, and any references to this data are merely for completeness.

market, if the emerging markets are to succeed in the long term, they will have to nd ways to engage and support all classes of the economy. The bottom-of-the-pyramid remains one of the

Three of our four books are set in emerging

most attractive and risky playing elds. Given its

markets: Brazil, Mexico and now South Africa. Many have asked why we have avoided the typical

sheer size, even marginal success in this market

locations of the USA, England or Germany. As

these bottom-of-the-pyramid citizens become

the emerging markets continue growing, more

successful, buy furniture, clothing, x their

could lead to signicant prots. Moreover, Moreover, as

consulting work will be done in these increasingly homes and buy nancial services products, they importantt markets. Brazil, Mexico, South Africa, importan

will become a signicant signicant source of revenue for

Russia, Indonesia, Chile, China, India, Turkey

nancial institutions. This has not been lost on

and many similar countries are already home to

companies eyeing this market. In researching the

1

www.pbyr.m


book, we discovered that that at any given time, time, per per

sufciently compact economy to be researched by

a signicant emerging market, there are at least

our team and written about, yet containing all the

three management consulting studies, eight NGO

challenges present in the larger economies, like In-

studies, one World Bank study and three govern-

dia and Brazil, for the book to be widely relevant.

ment studies being conducted simultaneously on micronance. We believe this book could help many of the consultants currently engaged in these studies.

For consistency we will be using the same team of intrepid consultants we have used in all our books. This This allows us to to build character character proles proles and expand on them throughout each book. HenHen-

We picked picked South Afric Africa a because because it is an anomaly anomaly..

drik, Luther, Max and Klaus will continue to play

Apartheid Apart heid wreck wrecked ed the the economy economy and create created da

central roles in this book. You will not need to

dual class system: wealthy elite numbering less

read the previous book to follow the story or un-

than 4 million, whose tax receipts are driving the

derstand the character proles. We have simply

growth of a country with a population of 45 mil-

built on them them further further in this book. As well, well, we will will

lion. A member of the so-called BRICS, it has a

be introducing introducing new new characters characters in this book, book, whom

GDP about the size of Colombia. A gateway to Af-

we have develope developed d further in the Swedish Swedish version version

rica, it has been getting less attention, a ttention, and invest-

of the book, as well as the forthcoming books. To make the story realistic and useful we have

“The book’s ecosystem was created so the reader may follow,, understand, follow understand , interact with and replicate a strategic engagement.” ment, than Nigeria. A stock exchange smaller than

worked worke d with with one clien clientt engagem engagement ent through throughout out the book. Using different examples and different clients to explain concepts would have made it dif cult for readers to see the data linkages and dede velopmen velop mentt of the the nal nal recommen recommendation dations. s. This This has allowed us to build a very elaborate set of supporting material, les and documentation to mimic a real consulting engagement as much as possible.

Toronto’s, the Johannesburg McKinsey ofce is

That said, any similarities are purely coinciden-

larger than the Toronto McKinsey ofce. A ma ma--

tal and not intended. The book’s ecosystem was

ture consulting market with multi-million dollar

created so the reader may follow, follow, understa understand, nd, in-

strategy engagements, yet BCG and Bain are just

teract with and replicate a strategic engagement

entering the market. Africa’s largest economy, yet

using the same techniques used by the leading

about 35 million citizens remain in poverty while

rms like McKinsey, Bain and the BCG.

unemployment reaches 45% on a good year. It is a

15

16


the CLient

Business School personally ew down to the last

The client is the United Federated Bank of Af-

group board meeting to discuss the micronance

rica (UFBA), one of a triumvirate of megabanks

strategy and express his admiration for the “up“up-

sprawled across the South African investment,

ending of the pyramid.” It is notable to remember

retail, commercial, corporate, private and micro-

that the bank funds Porter’s institute at Harvard.

banking sectors. Among the the most stable stable in the world, the the three banks all have have triple-A triple-A credit credit ratings, and were untouched by the post-Lehman global lurches that affected the banking sector worldwide.. A booming worldwide booming South African economy has helped keep growth on track, while the country still struggles to tame ination, unemploy -

With almost almost no signican signicantt growth expecte expected d in the rest of the business, and with a successful, yet tiny, insurance and internet banking business, Sipho Mbandla, the CEO, knew that micronance could be the most meaningful opportunity to shift the market shares in UFBA’s favour.

ment and surging crime. Established fault-lines of competition created over many years, which others may simply call this laziness, have led to the banks maintaining roughly the same market shares in all their core markets. UFBA is a gritty bank, run by the investment

“The company is expected to make a spectacular push into microfinance across the South African rural regions.”

banking side of the the business, business, and known for being extraordinarily creative and willing to take risks to capture prots and market share. Since 2005, a brilliant (some would say ruthless) and young CEO CEO has positioned positioned the bank for success in key growth areas like insurance, infrastructure nance, internet banking, and now, micronance. On the back of huge successes in insurance and internet banking, the company is expected to make a spectacular push into micronance across the South African rural regions. Initial pilots in Kwa-Zulu Natal, Polokwane Province and the North West Province have generated tremendous praise for the micronance team. No less than strategy guru Michael Porter of the Harvard

With ination ination roaring roaring at 11% and the the Reserve Reserve Bank Governor threatening to raise rates again, Mbandla believed the time was right to make the push. A new integrated IT system rolled out by Accenture Accenture and IBM IBM over the the last three three years years was expected expected to place place the bank in the unusual unusual position of reporting and closing out its micromicronance books on a daily rolling basis. Moreover, a stunningly unexpected alliance with Banco Azteca of of Mexico led to an infusion of micromicronance best-practice, which UFBA was hoping would give give them an edge in a notoriously notoriously difcult difcult market. Despite Mbandla’s optimism, many had tried and failed to capture the prots from South


Africa’s emergin emerging g market. market. Lacking Lacking access to to bank

prots and revenue boomed, the next phase called

accounts and even mobile phones, the market

for a signicant amount of capital to fund the new

intricacies have resulted in many well-meaning

branch rollout. rollout. In a critical move, UFBA, UFBA, sensing sensing

NGO’s pitching inspired but ludicrous ideas. In

a massively protable sector, had decided to go it

the last such scheme, Portlandia, a Washington,

alone and end its partnership with the state banks

US-based NGO pitched the idea of providing

that had provided ofce space in the rural regions.

lenders with mobile phones thereby allowing

On the eve of this monumental change in strat-

them to make their payments via mobile banking.

egy, which Financial Week of South Africa was

Of the 50,000 phones earmarked for the AlexanAlexan -

calling “Titanic Sinks an Iceberg,” the board had

dra Township next to the wealthy city of Sandton,

appointed a rm of international management

20,000 were distributed, although 70% of the

consultants to conduct a business review, and give

recipients simply disappeared with their new toys, what was expecte expected d to be an approval of of the plan. plan. while 30,000 30,000 phones phones were were stolen while in in transit to their distribution points.

The consultants have been retained to understand if the micronance sector was attractive and asassess UFBA’s market entry strategy. The book is

“The consultants have been retained to understand if the microfinance sector was attractive and assess UFBA’s market entry strategy.” strategy.” Hoping for a better outcome, UFBA took a different tack and pursued niche segments of the market. They targeted rural entrepreneurs seeking loans between R2,000 (R8 = US$1) and R50,000. Backed by the blessing of the national government, UFBA quickly produced a portfolio of tailored loans catering to all types of business ventures. venture s. If you needed needed a loan to build build a shop, they could provide it. What about a loan to set up a clothing business? They could do that as well. As

written from the engagement engagement manager’s manager’s viewpoint. This is the engagement team’s experience.

17

18


caSt oF cHaRacteRS ufba exeCutives

investment bank & equity anaLysts

The engagement team will primarily interact with

• CEO: Aldus Steenkamp

the following executives at UFBA:

• MD Research: Mark Fibert

• CEO: Sipho Mbandla • COO: Wickus De Jager • CFO: Annemarie Schoonmaker • Board Chairman: Dr Percy Cyrus • MD - Micronance: Ralph Ralph Niewoudt • Finance Manager: Dawie van Heerden • Branch Manager: Portia Pieterse • Field Agent: Sasha Philips

engagement team The engagement team consists of ve business analysts and associates, along with the engagement manager, engagement partner and director:

• Lead Analyst: Paul Fine • Analyst: Indresan Naidoo Naidoo

south afriCan government offiCiaLs • Director General of the Department of Trade and Industry: Precious Mbaza • Director General of Treasury: Stella Mzibande • Minister of Finance: Dorothy Lekota • Minister of Trade and Industry: Raymond Lekaukau

miCro finanCe Customers of the bank

• Director & Senior Partner: Hendrik Lotke

• Loan Recipient: Victor Marogoyo

• Engagement Partner: Jacob Goldberg

• Eldest son: Jacob Marogoyo

• Engagement Manager: Luther Matthau

• Wife: Ruth Marogoyo

• Associate (Business (Business Case): Viktor Petrov • Associate (Operations): (Operations): Klaus van Hertzog Hertzog • Associate (Services): (Services): Alfred Mtunzi • Business Analyst (Business Case): Shay Naidoo • Business Analyst (Operations): Deshi Padyachee


PRologue 6am: poLokwane provinCe,

fewer workers looking to stock up on items. In

south afriCa

their latest attempt to survive in a region with

Jacob Marogoyo looked ahead with a worried expression cresting his dirty brows. Waiting on a dusty street as commuters made their way to the taxi rank three kilometres away, the line outside

56% unemployment, Victor wanted to expand the shop by preparing lunch parcels and delivering them to workers. Thankfully, he had qualied for a R10,000 micronance loan.

the wholesaler snaked back as far as he could see.

Jacob knew they were far away from paying off

He tried squinting to block out the rising sun.

the loan. He had heard his parents whispering

He could now see much further and the line was

at night about the difculties they had had with

even longer. “This would never work,” he thought

the payments. More than once, his parents had

to himself. He knew it would take him about

decided to “visit” friends at the same time a loan

one hour to walk back to school. Today, the last

ofcer was scheduled to visit. It probably would

Friday of every month, the wholesaler opened

not get any better. If anything, they needed an-

earlier, at 7am; when employees were paid their

other R10,000 just to buy a delivery cart for the

salaries. Even if he had been the rst customer in

sandwiches. With their livelihoods on the line,

the line, it would still take him about 20 minutes

Jacob resigned himself to another day of missed

to pick up the supplies of bread, milk, canned

schooling. He was not doing well anyway, and

meat, sweets, chocolates and other items his fa-

at least he was now helping his family. Learning

ther needed for the little shop they ran out of his

about the Anglo-Boer War and a man who wrote

younger brother’s room.

plays in 16th century England was not a path to

It had been a tragic few years for the Marogoyo family and the shop was supposed to turn it all around. It was called Hope called Hope Shop. Shop. Four years

success. Of that he was sure.

9am: morningside, south afriCa

ago, Victor Marogoyo, his father, lost his janitor

“Curse the Gautrain!” thought Indresan Naidoo

position at the platinum mines due to an acci-

as he sat in Sandton’s horrendous early-morning

dent that blinded him in one eye and cleanly cut

trafc. A glittering array of luxury German sedans

off one leg at the ankle. Compensation was still

clogged up Rivonia Road where it merged into a

winding its way through through the creaky, corrupt and

single lane alongside the Codfather restaurant.

overburdened South African legal system when

The road was backed up all the way to the edge of

the recession hit and the price of commodities

Morningside while a huge bosom stared down at

collapsed. At this time, Victor started the shop,

him from a Teazer’s billboard. He dgeted with

but fell on hard times as limited limited overtime meant meant

the controls on his new BMW 3-series hoping to nd a trafc update. 5FM was discussing the

19

20


latest Lady Gaga antics while High Veld Stereo

Should he go ahead and recommend that South

seemed to be playing a dial-in prank on another

Africa’s largest bank receive receive a credit downgrade

unsuspecting victim. 702 would be dead boring at

due to its aggressive push into unstable micromicro-

this time so he decided it was not worth the effort.

nance loans? That indeed was the question that

He decided to call his wife, Kalinda, who had recently quit her marketing career since the birth

would make or break his career. career. He could play it safe. Should he?

of their rstborn, Neelesh. He did not want to

12pm: department of trade &

disrupt her yoga sessions, but thought he could

industry Campus, south afriCa

get some better trafc information from her and possibly her thoughts about his 9:30 am meeting scheduled for that very same morning.

Precious Mbaza called her parents every day at 7am sharp. She never missed a day. She even moved back meetings and ights to keep to her

“Hey Babe, am I disturbing you?” asked Indre-

schedule. It was her way of thanking her parents

san, as he searched for his hands-free controls.

for the enormous sacrices they made to pay for her economics degree at the prestigious Universi-

“Nope,” replied Kalinda, “I am at Woolies getting

ty of Cape Town. She was, furthermore, the only

some stuff for dinner. I hope you don’t mind eat-

person in the university’s history to be admitted

ing pasta again tonight?”

directly into the MBA program, the country’s

“Not at all, Babe. I suppose asking you for trafc

most elite, straight from her undergraduate

advice is out... Did you have any further sugges-

program. She recalled her father, a proud man,

tions for my presentation today?” asked Indresan,

getting up every day at 5am to boil water for the

knowing full well that his wife hated discussing

family, put on his doorman’s uniform and take a

condential information in such a public place.

taxi to the Mount Nelson Hotel where he worked: a routine that lasted 20 years. She never forgot.

“Well, I cannot talk much here, but I would say that if you have the evidence to support what

As the rst person in her family to receive a

you are doing and you are sure of this, this, then you

university degree, Precious was determined

should go ahead,” replied Kalinda, “If you have

to make the most of her career. She joined the

time, maybe ask someone else for their advice as

South African Reserve Bank as an analyst and

well. Just do not present present more than you really...” really...”

quickly made her mark by analysing the impact of the infrastructure program on employment

“Damn Vodacom network,” exclaimed Indresan

creation. Her views, though controversial at the

as the call cut. He tried calling back but the net-

time, proved correct and she quickly caught the

work seemed overloaded overloaded – again.

eye of the bank’s leadership. She rapidly vaulted


“Should he go ahead and recommend that South Africa’s largest bank receive a credit downgrade due to its aggressive push into unstable microfinance loans?” through the ranks before serving as senior advi-

6pm: 23rd fLoor of bank City City,,

sor to the Governor. At the age of just 38, she was

Johannesburg, south afriCa

asked to step in and serve as Director General of

Dawie Van Heerden did not usually stay in so

the Department of Trade & Industry (DTI), re-

late. A Blue Bulls fan and a family man, he al-

sponsible directly under the Minister for running

ways left the ofce ofce at 4pm. This This gave him him a full

the government department.

two hours on the road as he navigated the trafc

Precious’s signature move was the creation of

to Pretoria North, getting him home in time for

a new state-owned bank, which provided mi-

dinner at 6:30pm and giving him enough time to

cronance funding to struggling low-income

spend with his newborn daughter. He used the

entrepreneurs in rural areas. The South African

driving time to call each of his analysts or sched-

President had heralded her work in his state of

ule meetings where he could dial-in. It was a

the union address, and used its expansion as a

great arrangement – except for having to navigate

campaign platform that captured the rural vote.

the trafc in every morning just to get in at 8am.

Job creation never failed as an effective platform

Today Dawie had a gnawing feeling in his stom-

when unemployment unemployment was estimated at 50%. 50%. Us-

ach as he looked at the rst business planning

ing pressure from her department, and her allies

documents for the newly created micronance

in the Ministry of Finance, Precious had corralled

division. It reminded him of the rst time he ate

the local banks, amongst the most stable in the

spicy Indian food. His analysts chose the venue

world, to offer micronance loans and products.

and the unsettling feeling started in the pit of

Before long, Harvard business school profes-

his stomach before working its way through his

sors were beating a path to South Africa to case

body. It was not a pleasant feeling. feeling. If that was

study her progress. Rumour had it that she was a

any indication of what was to come, the heart-

potential Vice-Presidential candidate in the next

burn and sweats would soon follow. follow. He suspected

general election.

this would be much worse. For two years, the

Sadly, none of this was on Precious’s mind as she

bank had treated the micronance micronance team as the

read the latest reports on micronance defaults.

resident stars – they had even been trotted out

The numbers were sobering. She had been told

at shareholder meetings. At the annual company

the night before to y down to Cape Town and

meetings at Gallagher Estates, they regularly

brief the Minister Minister of Finance in person. person.

headlined the bank’s performance discussions. Incubated in the bank’s innovation centre in the

For the rst time ever, she would miss her 7am

suburb of Randburg, the unit had been treated

call with her parents.

with kid gloves until until it was supposedly posting posting eye-popping revenue and prot numbers. As a

21

22


pet “project” of the CEO, they had no real prot

needed to lean forward to listen to the conver-

and loss center. Yet they seemed to have a fairly

sation over the loud din. Alfred Mtunzi looked

loose expense account. They continued to grow

around. Turtle Creek was denitely the place

aggressively. Their activities were “carried” all

where all the gorgeous gorgeous people of Sandton Sandton congre-

over the bank and no one had been able to get a

gated. It had to be be place he visited. visited. He looked looked at

consolidated view. Until now, that is.

his Tag Heur watch; still about two hours to go

The CEO had recently divisionalised the micronance business and the analysts had spent the last three months creating a consolidated business plan. It was not not pretty. Despite all the hoopla, the unit had a 55% default rate and only

while he could savour savour his freedom. The The chatty blond next to him him did not seem seem affected by the alcohol. He probably needed to wait her out another hour. It was worth it. He would not get many more nights out in the coming weeks.

made a prot, huge prots, since the governgovern-

On Sunday evening he was having dinner with

ment agreed to guarantee 90% of the value of the

the German/Bulgarian team arriving in South

loans. With new legislation potentially coming

Africa to work on a banking ba nking strategy review

into effect in 12 months, that guarantee could

engagement for a “crown jewel” client. The

disappear just as the bank was planning an ambi-

South African ofce did not have the skills or

tious push into the rural markets: an expansion

experience for this kind of work, and the team

which had already started.

would be largely European, with the exception

Dawie wondered how he would break the news. An “Afrikaner” risk ofcer telling the the bank’s “African” CEO that they should not be lending to predominantly poverty-stricken Africans would not come across well. Did messengers literally get shot? Dawie made a mental note to update his resume and invite a former head-hunting colleague to lunch.

9pm: turtLe Creek, sandton,

of a few South Africans and a mix of specialists from other ofces. Alfred was one of the lucky ones chosen. Or so his mentor said. s aid. He was not sure if he should consider himself lucky just yet. The hours were brutal and workload demanding. The German partners were not known for their work-life balance philosophy so s o this would likely get worse. The blond seemed to be a social buttery. She kept talking about her new law associate position at Werksman’s. Chatter, chatter, chatter.

south afriCa

Feigning interest, Alfred thought about the

The horrible cast-iron garden furniture chairs

upcoming engagement. engagement. He had a stack of docu-

were starting to hurt him. It did not not help that he

ments to read, including a 180-page annual


report, along with plenty of analyst reports, news

hour diversion turned into a 13-hour marathon

clippings and some prior engageme engagement nt briefs.

as his shoddy recordkeeping on the engagement engagement

He caught the eye of a gorgeous Indian lady and decided to hedge his bet. The blond did not notice him slipping away. She seemed occupied with the Maude Street bankers in their pinstripe suits.

came back to haunt him. That led to his having to get up earlier on Sunday morning, rush through his packing and arrive at a congested Heathrow Terminal 5, which was experienci experiencing ng lots of delays. So here he was experiencing his best sleep for the week on a Virgin Business Class atbed.

“The German partners were not known for their work-life balance philosophy so this would likely get worse.”

Certainly a bad omen for the engagement. As per rm rules, he was was not allowed to read condential material on the plane, so he resigned himself to reading all the news items he could nd on UFBA and micronance in general. There was a lot. He spent all four hours hours at the airport

12pm: or tambo internationaL airport, Johannesburg, south afriCa

while waiting for his ight, and three three hours on the ight, reading through the extensive media pieces. As a second year Associate, this was the engagementt that could usher in his transition to engagemen

“Wake up, Sir,” said the air hostess as she gently

engagementt manager. Not that he had much time engagemen

nudged Viktor Petkov awake. She ashed him a

to think about that.

trademark smile and explained they were about to begin the descent in Johannesburg and he

Petkov looked at his watch and did a quick

should take some time to freshen up or order any

mental calculation. Thirty minutes to land and

beverages if he would would like to.

disembark, about 30-50 minutes to go through immigration and collect his rental, followed by

Dishevelled Dishevelle d and marginally awake. Petkov’s mind

possibly another 30 minutes to his hotel. He

was not on beverages, beverages, or food for that matter. matter. He

would likely arrive sometime sometime around 2am and

was dead tired. He He had spent the entire previous previous

had his rst meeting at 8am that morning in SanSan-

week holed up in in the ofce nalising nalising the recom recom--

down, Sandton. He rubbed his eyes and willed

mendations for a report to the City of London on

himself to push back the need for proper sleep by

maintaining maintainin g its status as a (some would say “the”)

another week.

preeminent nancial services center. He had come into the ofce to nish cleaning, capturing and archiving all his material. The expected four-

23

24


WeeK 0 – WeeK BeFoRe tHe engageMent “This is a joke. Right?” asked Mark Fibert, the

“I need to see these backup documents for my-

managing director of equity research, as he

self,” retorted Fibert. “Even so, did you have to be

peered up at the proposed research note (ex(ex-

so dramatic in your note? This is not the US!”

hibit one) projected onto the whiteboard of Rembrandt’s main boardroom in their sprawling ofce complex on Maude Avenue. Through the large panel windows he could easily see the Deutsche Bank ofces. The rst day back from a gruelling series of meetings across Asia and Europe, he was not expecting anything tough for his Monday morning meeting. He wondered how to nd headache pills.

“Mark, it is dramatic,” responded Indresan. “The numbers certainly do not make sense. No one is making money from micronance in South Africa on the scale UFBA is claiming. Only one small bank is protable, and that is the operative word - small. The recently released Micronance Bank of South Africa2 (MBSA) lings clearly show that UFBA is the beneciary of guarantees amounting to 90% of their loan book. Why get funding from

Mervin shot Indresan a nervous glance as his

the MBSA if they are making money?”

colleague prepared to defend the controversial

“Let’s look at the facts,” interjected Paul Fine, the

report and sell recommendation. “Are you tell-

head of banking research, slightly annoyed that

ing me, that in your rst research note, just two

Indresan had ignored his advice and focused on

months after joining the rm, you are going to

the drama of the results. “Are we really r eally being that

recommend we downgrade one of the largest

controversial? This is not the US and sub-prime

banks in South Africa?” Africa?” continued Fibert. Fibert. “Can

mortgages. All we are saying is that one of the

you back this up? Has your research been been veri-

largest and most stable South African banks is

ed? Who veried it?”

on the verge of making a stupid bet. The micro-

“Nothing quite like starting the day in the ring range,” responded Indresan with a nervous laugh

nance business is just 4% of their prots, and maybe 3% of their asset base.”

as he tried to inject some humour into the situ-

A veteran banker banker of South Africa’s congealed congealed

ation. Fibert, either jet-lagged or genuinely not

banking sector who who once ran the equity research research

amused, just stared back. “Mark, we did not have

team at UFBA, Paul had an axe to grind. He

time to brief you on this since you were travel-

continued as everyone looked on. “This will never

ling. I went through all the standard protocols

cause a collapse of the South African banking

for checking the research, and even went one

system, but it will cause shockwaves and hammer

step further by handing the models and research

the share price of UFBA, since the market has

material to other analysts who literally tore into

already baked in the upside of the micronance

the numbers,” explained Indresan.

expansion.”

2

S-w bk rspsb fr mr f s.


Paul decided to state the obvious as the blank

“Let’s look at the numbers,” said Mark as Indre-

stares continued, “Banking in South Africa has

san projected his proposed research note. “As

not changed in about 15 years: same players,

you can see, as reported by both both the MBSA and

same market share and same ideas. This infor-

by UFBA, ninety ninety per cent of UFBA’s UFBA’s micronance

mation could cause enough pain for UFBA that

loans are guaranteed by the bank,” said Indre-

they either retreat, giving others room to grow, or

san. “The MBSA outlined two months ago that

they attack in other areas, creating some move-

approximately fty-ve per cent of its guarantee

ment in the sector. Either way, extra movement

scheme goes to UFBA. We know from UFBA’s

means mandates for our team: the only remain-

own lings that it generated revenue of R2.3

ing independent investment bank. The numbers

billion from this business. business. Which means about about

make sense and we need this.”

R1.81 billion is backed by the MBSA. Moreover,

“Are you sure the numbers make sense?” asked Mark again. “Mark, this is the moment we have been waiting for. An opening has been created and we just happen to be out front ready to ride this wave into Camps Bay,” responded Paul. Mark turned to his assistant, “Louise, see if you can get me Aldus on the line immediately. Tell him it is important and patch him through on the video conference with access to our projector.” Aldus Steenkamp, the the patriarchal head of the rm, was also a refugee of UFBA. He joined the rm straight out of his actuarial studies and raprapidly rose through the ranks. His career came to a swift end, when as head of the investment banking group, he was passed over as CEO. He spent the next 12 years building Rembrandt into South Africa’s largest independent independent investment investment bank with ofces in South Africa, Africa, the UK, the USA, Australia and Hong Kong. Kong.

UFBA has no program in place to manage defaults. They are simply shovelling the loans out and really don’t care about the defaults,” he continued. He looked around as he planned to deliver his coup de grace. “The share price increases for UFBA are...

25

26


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“Partnership” is the descriptive memoir of an

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revenue Agribusiness conglomerate that farms,

rst book, it is 260 pages with supporting Power

processes and sells its produce through its own

Point slides.

retail network. This book is particularly focused on developing a marketing and sales strategy for the retail outlets. The 296-page book is supported by Excel, Word, Power Point, video, audio les, and access to the discussion forum. + 80 supporting documents.


WHo We aRe Firmsconsulting works with leading students,

ronto, Canada, the center is tied to no political,

consultants and executives to prepare the former

consulting, commercial or national interests.

for consulting case interviews, and teach the latter the skills of a management consultant. We are retained by McKinsey, Bain and Boston Consulting Group employees, not the rms themselves, for private mentoring. Our strong values, scale, scope, and knowledge, having spent our entire careers in management consulting, allow us to prepare clients in a manner no one else can. We have gained extensive functional knowledge and industry expertise while serving clients across all major cities. We are guided by a sincere and deep value system of always placing placing our clients’ interests rst. We work with our clients clients to build their will, capacity and capability to succeed at their chosen career goals. We provide exhaustive books, videos and reports to support our mentoring mentoring to ensure clients can excel after having worked with us. We bring out those attributes of clients to fully succeed in their future endeavours. Firmsconsulting, founded in 2008 by an exmanagement consulting partner and associate, and privately funded, maintains the Capability Center, a curated forum of management consultants, industry executives and aspiring conconsultants committed to improving the state and values of the profession through through the sharing of ideas, concepts and information to shape global, regional and industry agendas. Managed as a not-for-prot foundation since 2011, from ToTo-

As at 07 January 2012, the Capability Center Center concontained approximately 250,000 toolkits, templates and methodologies, 150 videos on management consulting concepts, 77 podcasts on lifestyle and career management, sector-specic training material, a dedicated research studio staffed by ex-consulting associates and a moderated Q&A forum with over 2,000 researched responses.

27

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Exhibit 1

Multimedia - Succeeding as a Management Consultant Retail Banking

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