C1 - Guaranty Trust Bank PLC Nigeria (A)

Harvard Business School 9-399-110
Rev. April 19, 1999
Guaranty Trust Bank PLC Nigeria (A)

In October of 1996, Fola Adeola was both pleased and concerned. Since its founding in 1990,
Guaranty Trust Bank of Nigeria (GTB) had become something of a local success story. Nevertheless,
Adeola, GTB’s Managing Director and Chief Executive Officer, was worried that previous growth
and success would prove a mixed blessing in Nigeria’s increasingly competitive and economically
uncertain future. He knew that the bank needed to take further steps to implement a recent
reorganization, and wondered how new employees could be optimally included without losing the
vision that had worked so well so far. He wondered if GTB should adopt different strategies and
practices for growth in the next six years as it planned to expand into other parts of Nigeria and
Ghana. With over 250 employees and seven branches in a region where communications were often
difficult, was GTB getting too big to maintain the special atmosphere and vision created up to this
point? And what strategy should it take in assimilating its first acquisition in Nigeria, the Magnum
Trust Bank?
These questions, and others, took place within an economic and cultural context which the
September, 1996 Agusto Banking Industry Survey depicted as follows:
The economy is characterized by weak productivity, a low industrial

capacity utilization (1995: 28%, 1994: 27%), double digit inflation (projected to be
about 30% for the current year, but down from 73% the previous year), high
unemployment, and a heavy external debt burden—to name a few ills. A climate of
political uncertainty also prevails in the country, and investor/depositor confidence
remains low. Consequently, the ability of banks to generate and retain long-term
deposit liabilities remains limited. Many depositors prefer to keep their investments
liquid in the form of short-term deposits1
In addition, though Nigerian laws had changed in 1995 to encourage foreign investment, the
response had been less than encouraging so far. Both investors and tourists avoided Nigeria, partly
because of its poor economic performance and high inflation, partly because of its human rights
record, and partly because of a reputation gained from advice like the following from a U.S. State
Department bulletin.
1 Agusto & Co., Ltd., 1996 Banking Industry Survey: Lagos, Nigeria,1996, p. 48.
Research Associate Harold F. Hogan, Jr., prepared this updated version of case #897-118, originally written by Professor
Louis B. Barnes, under the supervision of Professor Lynn Sharp Paine as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation.
Copyright © 1999 by the President and Fellows of Harvard College. To order copies or request permission to
reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to
http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system,
used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying,
recording, or otherwise—without the permission of Harvard Business School.
1
This document is authorized for use only in Dr. Pranav Dharmani, Dr. Neeraj Singh and Dr. Abhishek Yadav's PGP14_SM at Indian Institute of Management - Rohtak from Dec 2023 to Jun
2024.
399-110 Guaranty Trust Bank PLC Nigeria (A)
Warning: The Department of State warns U.S. citizens of the dangers of

travel in Nigeria. Violent crime, practiced by persons in police and military
uniforms, as well as by ordinary criminals, is an acute problem. Harassment and
shake-downs of Nigerians and foreigners alike by uniformed personnel and others
occur frequently throughout the country.
State Dept. Bulletin No. 96-127
June 28, 1996
A former British colony that gained independence in 1960, Nigeria was saddled with
many of the social and political problems common to other emerging nations. The West African
country had one of the most diverse societies in the world. Its mid-1990s population of
approximately 100 million was divided among some 250 ethnic groups (though three main
tribal groupings were dominant) and further separated by religion into the Moslem north and
Christian south.
The political structure was defined by a federal government and 30 separate state
governments, but strongly embedded ethnic and tribal identities had long hindered attempts to
establish a sustainable democracy. Other than two periods of civilian administration—1960-
1965 and 1979-1983—which ended in coups, military juntas had ruled the population. In 1996,
the country was headed by General Sani Abacha, whose reputation for brutality had been
secured with the hanging of nine human rights and environmental activists in 1995. The
English language, deemed the official national language over myriad tribal dialects, supplied
Nigerian society with a rare element of unity.
Nigeria’s economy centered on traditional agriculture until the 1970s, when oil, which
had been discovered in 1958, became a major source of wealth. In the mid-1990s, oil accounted
for over 75% of federal government revenue and over 97% of export earnings.2 Much of it,
though, was squandered by government officials through, according to an outside observer,
“wildly extravagant development plans, …enormous wastage and, inevitably, a high level of
corruption.”3 While gradual industrialization followed the oil boom with mixed results, the
chief occupation for most Nigerians remained agriculture.
A foreign consultant who had worked in Nigeria for many years commented:
The fact that Nigeria became a major oil player created an insulation around
the country and kept it from having to really compete in world markets for a period
of time. The older generation grew up within this protected environment. In
addition, indigenisation laws in 1972-79 structured things so that certain industries
were reserved for Nigerian 60% ownership. Banks were in this category, so many of
the foreign banks started leaving after awhile.
By 1996, pessimism prevailed, even within the banking industry itself. The Agusto
Report went on to say:
The CBN/NDIC (Central Bank of Nigeria/Nigerian Deposit Insurance

Corporation) put the number of financially distressed and potentially distressed
banks at 60 which implies that there are 60 solvent banks left in the country. Our
opinion is that there are, in fact, no more than 33 healthy banks left in the industry
today. We also believe that the regulators were not pro-active enough in identifying
troubled banks and in taking decisive action. The situation was allowed to build up
2 The Economist Intelligence Unit Limited, Country Profile: Nigeria, 1997-1998, p.11.
3 The Economist Intelligence Unit Limited, Country Profile: Nigeria, 1997-1998, p.13.
2
2024.
Guaranty Trust Bank PLC Nigeria (A) 399-110
to a level where the incidence of financial distress in banks reached crisis

proportions. Thankfully, since 1995 the regulators have been given the mandate to
resolve the crisis in banking and are taking steps to clean up the industry.4
Guaranty Trust Bank was one of the exceptions. According to a September 1996 financial
column in a Lagos newspaper:
If NIB (Nigeria International Bank, Ltd.) a subsidiary of Citibank, N.A, leads

the pack of emerging BANKS OF THE FUTURE, Guaranty Trust Bank (GTB) is
definitely the fastest growing. The bank, which commenced business only six years
ago, is today running close to NIB Citibank in the Nigerian banking scene. With its
growth rate and current policies, the bank is regarded by many analysts as the best
indigenous bank in Nigeria.5
In 1996, ten banks in Nigeria had 70% of the assets and 64% of the profits of all banks. GTB
and NIB were the only two commercial banks (along with one merchant/investment bank) to receive
a “1” (Superior Risk) rating in the Agusto Banking Survey. GTB ranked #6 among all banks in terms
of total assets and contingents with 12,895,265,000 Naira (about $161million) and fourth in terms of
profits after taxes (7.5%).6
Background
In 1989, Fola Adeola asked his longtime friend, Tayo Aderinokun, if Tayo would join him in
establishing a new commercial bank, to be based upon outstanding customer service and
professional banking practices, in Lagos, Nigeria. The time seemed right, though neither man had
the financial resources for such a start-up. Both men had considerable banking experience,
however— most recently with Continental Merchant Bank, a Nigerian partner and subsidiary of
Chase Bank before regulations prohibited Chase’s majority ownership. Adeola and Aderinokun had
known each other since high school, and had continued the friendship at Continental. As Adeola
said:
Tayo wasn’t the only friend I had who was in banking, but it had always
been clear to me that he was a person I could work with. . . . We were going to
start off on Day 1 as professionals, and we were going to end up very proud of
ourselves as professionals . . . also felt that whatever difficulties we might have,
we could cope with. Tayo is somebody I trust absolutely. . . . We argue about
many things, but if somebody can express himself, I know where he stands. He’s
a much easier person to deal with that way.
By 1989, Chase, like most international banks had left Nigeria, because of the restrictive
government regulations. These same regulations, however, made it easier for local applicants to
acquire banking licenses from the Central Bank of Nigeria, which many enterprising Nigerians did.
While there were 36 commercial and merchant banks in 1986, by the time the Central Bank stopped
granting licenses in 1991, there were 120 banks along with over 400 finance companies.7 Many of
the “new” bankers and finance company owners were not bankers at all, but opportunistic
businessmen. These entrepreneurs hoped to make quick financial profits by capitalizing on the
4 Ibid.
5 Inside Business, vol. 2, no. 506, September 10, 1996, p. 3.
6 The official exchange rate until 1995 was 22.5 Nigerian Naira per $1.00, though the market rate was closer to 80
Naira per dollar. In 1995, in a major currency devaluation, the official rate became 80 Naira per dollar.
7 Agusto & Co., Ltd., op. cit., p. 16.
3
2024.
dual exchange rates and by borrowing money from their own new banks for their own investment
purposes. In noting which four banks had failed first in the aftermath of this onrush, the 1994
NDIC (National Deposit Insurance Corporation) noted that all had insider debts amounting to at
least 65% of their total debt. “It is obvious that insider debts killed the four banks,” wrote the
NDIC.8
Seeing the handwriting on the wall, Tayo Aderinokun joined one of the new banks in 1989.
He did so with reservations, but felt that Continental was going from bad to worse. Fola Adeola
stayed with Continental for several more months but expressed equal concern:
Continental was a bank that we saw collapsing around us. Tayo and I both
left it before it actually crashed. We saw what went on while we both were there and
later on while I held a more senior position. After Tayo had gone, the few of us left
running the corporation and reporting to the Managing Director saw real
management problems that we couldn’t do anything about. I came out of
Continental Merchant Bank knowing very clearly how not to run a bank. For
example, people there didn’t have any overriding interest in the organization as a
whole.
Adeola elaborated:
There was a policy that made Continental employees reckless: if you get a
deposit, you earn a commission. This started to tear the organization apart. In the
competition to find new depositors, no one wanted to share information anymore.
Everyone just started to go after the money. On the lending side, people started
making loans they knew wouldn't be re-paid, all for the commission.
After seven months in his new job, Tayo Aderinokun left. His worst fears were realized. The
bank’s owners saw banking as a peripheral extension of their own business interests with neither the
integrity nor professionalism that Tayo sought. Upon leaving, he told Fola that he would run a small
finance house and devote substantial time to the GTB start-up, even though Adeola had not yet left
Continental Bank.
The Beginning
In order to fund their new venture, Adeola and Aderinokun needed to raise 20 million Naira
($2,500,000—the exchange rate was then 8 Naira per dollar). Rather than going to one or two
politically powerful investors, they drew up a list of 150 prominent Nigerians whom they considered
as possible backers. To avoid being dominated by a few powerful investors, they decided to accept
only smaller investments of between 100,000 and one million Naira. The original list was reduced to
43 in number, chosen on the basis of each person’s quality of character. In effect, Adeola and
Aderinokun chose their prospective investors based upon a judgment of integrity. This procedure
was uncommon in Nigeria where political and financial influence tended to count most heavily. Like
many commercial enterprises in Nigeria, banks typically relied upon political favoritism, privileged
position, and varying degrees of corruption to help them survive. Adeola and Aderinokun decided
that GTB would be different.
From his experience at Continental, Adeola had come to regard bribery as a “cancer”:
“Giving bribes is like telling lies: once you start you can’t stop, and you have to tell more lies to cover
up the lies you told at the beginning.” He had also seen the impact on employees: “It breeds distrust
8 Ibid., p. 22.
4
2024.
of your own staff. You have to use an intermediary, so you give him cash for a payoff, and you never
know if he paid it all or kept some for himself.”
As it turned out, 42 of the 43 prospects agreed to invest in the new venture. When asked
why, Adeola replied:
We were hometown boys and had had interesting careers. Before my own
stay at Continental, I used to work with NAL, which was an American Express
Company here. Tayo had worked for Chase in New York as well as here. We’d met
so many people in the course of our prior work that we didn’t just go to our sponsors
without a prior reputation and a track record. As part of our proposal, we came to
them as professionals, and it was refreshing for them to know that real bankers were
coming to them to invest in a bank.
Adeola’s ideas for GTB reflected not only his prior banking experience, but also the values
he’d grown up with as a child in Lagos, the capital city of Nigeria. From his parents and brothers, he
recalled, he learned the value of communal sharing and a fierce sense of honesty. He related: “If you
brought something home that wasn’t yours, everyone would ask where you got it and you’d have to
return it. It was a check on morality. My mother always said that, ‘Even if you don’t have money,
you can still have your name.’” Adeola saw his Boy Scout experience—he attained the top rank of
Eagle Scout—as another formative influence. The Scout mottoes provided him with strong guidance.
“Know yourself. Do your duty. Be prepared. Promise to do your best,” he explained. “Those
leadership ideas were very important to me.” Besides learning the importance of sticking to a set of
basic principles, he said:
I learned service, teamwork, how to make things happen for the group and
not just for myself alone, and honor. . . . As a junior scout, I saw one of the
scoutmasters washing his clothes himself. This was unusual, because you would
expect in our culture for someone lower down to do it for him. So I volunteered, and
he refused to let me do it. I felt disappointed. Later he explained to me that he
wanted me to see that he could do it himself, so that when he asked me to do it I
wouldn’t think it was such a big deal. Another time, I was expecting the scoutmaster
to pay for a summer camp that I couldn’t afford, but he didn’t do it. He explained to
me that I had expected it, and that I had to learn that I could only get things on my
own, and not through privilege.
This was, said Adeola, the “leadership by example” that he wanted to use at the bank. Having seen
many companies fail in Nigeria, GTB’s founders set themselves the task of building a lasting
institution.
Once the financial backing for GTB was assured, Adeola and Aderinokun chose to finance
the license application procedures themselves. Adeola reported:
We did not call on our subscribers for money at that point. We paid the
license fee, the application fee, administrative costs, all of the photocopying details,
everything. In other words, if we didn’t get the license, Tayo and I would have faced
the entire risk of the bank startup. Once we did get the license, then the sponsors
could bring their money. Because we didn’t see them running the bank with us, we
had to take the initial risks ourselves. We were the ones who believed that we could
get a banking license. . . . They were just going to be investors in an established bank.
And Aderinokun added:
5
2024.
We pursued things in a very professional manner, which also impressed the

regulators substantially. During that time, we had to keep our subscribers on board,
because that was the only way we were going to eventually get 20 million Naira to
get us going. So every month, we sent out a kind of news letter which went to all of
these 42 people informing them what was happening and where we were, and where
we were going to go during the next month.
The Bank Opens
th
GTB’s license application was submitted to the Central Bank on May 29 , 1989 and was
st
approved on August 1 , 1990. By October Adeola and Aderinokun had hired, and had started
training, most of the 82 other people needed to initially run the bank. Using outside programs and
speakers with previous expertise in banking, they met with employees both formally and informally
in a variety of seminars and learning experiences. They introduced “typical” consumer and
corporate bank customers. They designed courses and used faculty from the Lagos Business School
for specific topics of importance to banking as well as training programs on Total Quality
Management (TQM). They drew upon their own resources to go over the technicalities of accounting
and basic operations in commercial banking. They also did customer surveys to see what customers
wanted. Finally, they spent considerable time reviewing the cultural components they wanted to
introduce—“how we wanted to live our lives here,” as Adeola put it, along with “this dream and this
vision that would make us different,” according to Aderinokun. Out of these discussions came what
they called the bank’s “vision.”
Our Vision
We are a team driven to deliver the utmost in customer services.

We are synonymous with building excellence and superior financial
performance in Nigeria; and creating role models for society.
Adeola added:
Quite early in the game, vision, vision, vision was a word that came up so
many times in discussions with people—even in marketing to customers, we went
from what might sound “soft” to the “hard” by constantly talking about ‘This is our
vision, this is how we share it, this is where we’re going, and so on and so forth.”
Probably at times we almost overdid it, but I think that it is now something that we
can never take out of our lives.
We always kept coming back to the dream, the dream—what we wanted to

be. It was during this time that we also resolved that people would call each other by
their first names—from entry level staff to the managing director. People don’t
ordinarily do that in Nigeria.
We also started non-traditional advertising before we opened, changing the

ads every other week. The first one that we had was an ad saying “May we share
our plans with you” and we showed the architectural plan of this unusual building,
and readers began to look forward to the next one, because once we used an ad, we
discarded it. . . . During this time, we saw some people here go from extreme
skepticism to full subscription. They are the interesting ones.
Aderinokun went on to say:
I have the feeling that this was responsible for the initial push. It was more
than total commitment from everybody. It went beyond a job, and it was like
6
2024.
everybody was trying to prove that it was possible that we could do something
different before we’d even done it. There were also other symbols that helped people
get charged up. First, we had this new Plaza building (the previous head office, now
a branch office) that was remarkable for its time 6 years ago. There was an earlier
building there, but we practically tore it down and added a lot to it for our purposes.
It had these imposing columns, and the banking hall by Nigerian standards was
totally revolutionary. Even the concept of a customer-banker interface was
redefined—no more cages. Everything was in the open with no more barriers
between the customer and the banker. We shared our vision with everybody
including the architect.
During these early discussions, the question of work assignments came up. When new
employees, all of whom were college graduates, were initially assigned as tellers, they didn’t like it.
The decision was made then that everyone from the newest employee to the managing director
would serve as a teller at least one day a month in different branches, partly to assure direct contact
with customers, and partly to maintain better contact with each other. A basic tenet was that
everyone followed the same rules. Adeola elaborated: “You don’t just ask others to do things at
Guaranty. No one carries my briefcase for me. Everyone eats in the same place, together—we have
no separate dining rooms for top managers. We park our cars like everyone else.” One early
employee recalled in 1996:
When I came to Guaranty Trust Bank, I had come from another bank and
knew the way things worked there and in the majority of banks in Nigeria. Guaranty
Trust Bank—for all of us, no exceptions—was totally different. What was good
about it was that we all consciously decided to go this route, because we felt and
believed that there was going to be real gain at the end of the day rather than going
the old route of not caring about customers or each other. We were all close then.
We would attend all kinds of meetings and my managing director and my deputy
managing director would be there, and they would share their knowledge, and we
all gained during those first 3 or 4 years.
th
The bank, in its new Plaza Building, opened for business on February 11 , 1991. A major
decision was then whether to report a first six-month loss of 2.4 million Naira when the fiscal year
th
ended on February 28 . Alternatively, management could bury the loss in the following year’s
profits. Although encouraged to take the second alternative by some members of the board, Fola and
Tayo felt strongly about the issue. Fola said:
We were able to convince the board that we should publish the loss and let
our next 12 months be 12 months and not 17 or 18 months. The board decided to rely
upon us, so we published our 2.4 million Naira losses. We were the first bank to ever
publish a loss like that in this environment, and nothing happened to us. It was our
signal to the market that we would not give it falsified figures . . . . For me, that was a
major sign saying doing the right thing doesn’t mean that you’ll necessarily get
punished. As a matter of fact, we weren’t punished for this, because the following
year, our profit was 52 million Naira, which at that time was the third most profitable
result of any bank.9
Those second year results suggested that GTB’s vision and philosophy were paying off. The
first of several informal annual retreats was held at a local hotel resort, bringing together all of the
bank’s employees for celebration, reports, and discussions. Adeola and Aderinokun seemed pleased
and a bit surprised at their success thus far. Aderinokun commented:
9 About $650,000.
7
2024.
It wasn’t like we’d planned it for ten years and had it clearly laid out. You
have some ideas about how to run a good organization. You want to be outstanding
among your peers, but in reality you never know how things are going to turn out.
You start small by testing the waters. Will this work? And you learn that it works
better than if you had done it the other way, even though in this environment you
have only seen it done in the ways you want to reject—but after some time you see
that it’s working and you actually have better results than the old way. And that
builds on itself. The success keeps reinforcing what you’re doing.
Adeola agreed:
The results we got really made it easier for us. If we hadn’t gotten good
results, it would have been possible for our board to say to us, this is not how to do
business here, and we might have come to the conclusion that, in the third world, the
old way was the only way of doing business. But since we made progress quite early
in the game, it made it easier for us to do it our way. I don’t know what would have
happened if we hadn’t met with success when we did.
Difficult Issues
Despite the bank’s growing success, being a role model for society was far from easy. Some
senior managers resisted Adeola’s strong stance against bribery, arguing that a blanket prohibition
was simply not feasible. Adeola relented—sort of. He acknowledged that bribes might be necessary
in some cases, but that he would be willing to pay only after senior managers proved that they had
tried every way to get the business legitimately. This approach forced managers to be resourceful in
finding better ways to do business.
Adeola was also troubled by widespread tax avoidance among GTB employees, and by the
bank’s complicity in the matter. Consistent with his aim of “running an ethical organization,” Adeola
had always made sure that the bank paid its full share of corporate taxes. He also took care to pay his
full share of personal income taxes. Most GTB employees, however, had chosen to follow the
Nigerian custom of grossly underpaying their personal taxes. Under the country’s tax structure,
average mid-level managers in GTB should have paid about 15% in income tax on their annual
earnings of $12,000. However, most were paying something closer to 5%. Among bank managers in
the top bracket of 20%, the underpayment tended to run about half the amount due.
Compensation at GTB was roughly comparable to other leading banks in Nigeria, with the
exception that a significant portion of pay—as much as 50% to 100% of base salary — came as a
bonus based on the bank’s performance against earnings targets. If targets were met, a bonus pool
was established according to the formula approved by GTB’s board at the beginning of each year.
The pool was then distributed based on top management’s assessment of the contributions made by
various groups and individuals. Of the $12,000 earned by the average mid-level employee, about
$4,500 would be bonus. In addition to salary and bonus, GTB employees also received a housing
allowance and various other benefits. Compensation in Nigeria’s banking sector was second only to
compensation in the country’s oil industry.
Underpayment of taxes was widely practiced throughout the country. At the beginning of
each year, all Nigerians were required to file with the state Internal Revenue Bureau a self-assessment
form estimating their expected income for the year and claiming dependents and other deductibles.
The tax authorities then notified employers of the amounts to be withheld from each employee’s
monthly salary. While the payment of income taxes was the legal responsibility of individuals,
employers were required by law to verify the estimates prepared by empoyees and to withhold the
correct amount for income taxes. Failure to do so was in theory a criminal offense. As Adeola noted,
officials in the bank were well-aware that employees were submitting false estimates and claiming
8
2024.
dependents to which they were not entitled. The bank nevertheless withheld taxes on the basis of the
amounts declared.
The prevailing attitude among employees was “Why pay?” For many, non-payment was a
point of pride—a sort of triumph, explained Adeola. Even those who could readily pay would rather
practice avoidance than hand over even $.25 in taxes. If pressed, employees would point to the
government, arguing that corrupt officials would only embezzle the money. “If we don’t pay the tax,
they don’t have anything to embezzle,” many reasoned. Adeola countered, “If you pay the tax and
they embezzle it, don’t you have a stronger basis for challenging them?” Adeola’s argument that
those who paid had a stake in the system and therefore a more legitimate basis for complaining, fell
on deaf ears.
Adeola cautioned employees that Nigeria’s lax administration of tax collection could change:
“One day something is going to happen and somebody is going to call for back taxes. I hope you
have enough money to pay at that time because I’m not going to support you.” Employees dismissed
his warnings, insisting they would deal with the issue if and when it arose. Given the good relations
between the bank’s tax consultants and the state’s tax authorities, the likelihood of an audit or tax
review seemed very remote. Senior managers scoffed when Adeola reminded them that they could
all end up in jail. “Who have you seen in Nigeria going to jail for not paying taxes?” they asked
rhetorically. “You’re stretching things too far.”
The real issue for Adeola, though, was not the risk of jail. The military regime that ruled the
country would readily trump up charges as an excuse to throw someone in jail. However, said
Adeola, “If they got me for not paying taxes, I would be the only Nigerian they used that on.” For
Adeola, the issue was building the country and developing a sense of citizenship—the role model
function of the bank. He believed that every citizen had a duty to pay taxes whether or not the
money was being properly used. Somebody had to take responsibility for initiating change. Without
positive examples, the country would not develop.
Adeola considered insisting that the bank’s employees all pay, but he was concerned about
the impact on the organization. Such a policy could backfire and end up demotivating people. It was
a difficult situation. As he explained, “People within the organization are drawing a line between the
organization being ethical and the individual being ethical. Employees think it is good to work for an
ethical organization, but when the responsibility for ethics falls on them as individuals, they say ‘no,
no, no.’”
The Bank Evolves
th
When the 1995 fiscal year ended on February 29 , 1996, Guaranty Trust had generated 2.117
billion Naira ($26,462,500) in revenues compared with revenues the previous year of 1.140 billion
Naira ($14,250,000). (See Exhibit 1 for financial summary.) Profits before taxes for 1995 were 1.01
billion Naira ($13,762,500), the first time a bank wholly owned by Nigerians had exceeded the 1
th
billion Naira mark in profits. On September 9 1996, GTB became listed on the Nigerian Stock
Exchange with an initial offer of 400 million shares at the price of 10 Naira per share. The offering
was made, as a local newspaper reported, “to remove the tag that the bank was the exclusive estate of
a few Nigerians.”10 By mid November, the stock price had risen to 14 Naira and was the highest
performing bank stock in the country. In addition, GTB had acquired another commercial bank,
Magnum Trust Bank, Ltd. with intentions of strengthening its performance in the low end retail
market, a segment not yet covered by GTB.
10 William Anacbonum, “Business Watch,” The Daily Champion, September 10, 1996, p. 18.
9
2024.
The bank’s financial success gave an added boost to its community service activites. Annual
donations to charity were 2% of profit before tax as approved by the board. Among its charitable
activities, the bank had adopted a government pediatrics hospital for children of the very poor.
Explained Adeola, “We believe that when you make money in an environment, you should give
some of it back—especially to benefit very, very poor people.”
Early that summer, GTB also restructured itself to decentralize its banking operations. There
would now be three major banking divisions—Institutional, Commercial, and Investment, and two
support divisions—Business Support and Management Services. Division Managers would now be
placed above the Group-Heads who had previously reported to Fola and Tayo. Tayo headed the
Investment Banking Division which included the new Magnum Trust Bank, and Fola was in charge
of Management Sevices. (See Exhibit 2 for the new 1996 organization chart.) As one manager
described the restructuring:
Breaking the bank down into divisions was done partly because we’ve
grown to a size where we now have people in different branches in and outside of
Lagos. I believe that it is superior to what we had before, given the bank’s size. Yet,
in the past, we all got together maybe once or twice in a year, and we knew each
other on a first name basis. There was a bond, and we were losing it, even in Lagos.
In terms of numbers, we were outgrowing those bonds and it was getting outside of
people’s control. So the decision was made that rather than have one bank, let’s see
if we can break the bank down into maybe a few banks and then appoint MD
(managing director) type people for each division, and hopefully, they would now
have strong managers to assist them in managing people within the individual
groups. In the first year, as in the past when we used to go as one bank on retreats,
possibly you would now find each division going on two retreats a year. If all
groups were doing that, and the bonding was there within all these groups, you
would then have one strong bank. However, there is also the risk that, instead of
having one strong bank, you could have a few strong banks not working together as
well as you would want. That is a clear danger.
No all-bank retreat had been held the previous year, partly because no facility in Lagos could
hold all of the bank’s employees anymore. Fola and Tayo worried about this and wanted to have
some kind of similar function in 1996. They were considering having two retreats—one for managers
and the other for lower level employees. They knew that there were people who felt like one of the
original employees who said:
One of the things I’ve seen erode is the sense of belonging. Everyone used to
be together in one bank. Now there are many branches and divisions. If somebody
now calls from another area, I may not even know who I’m speaking to. We aren’t as
close as we used to be in the past, but I think we need to try to maintain it. As far as
growth goes, it doesn’t mean that it should destroy that sense of belonging.
A Clouded Vision?
A major concern for Adeola and Aderinokun was the question of whether GTB’s people
could keep the growth pace going without losing the vision within the restructured organization.
They worried about both customer and employee dissatisfaction as a consequence of growth. At
the customer level, complaints had begun to arise about creeping bureaucracy. For example,there
were complaints that turnaround time for credit requests was too slow compared with other banks.
As one manager reported:
Even before the reorganization, we needed 3 to 5 people to sign off on credit

including the managing director and the deputy managing director before approval.
10
2024.
Sometimes it stopped with the deputy managing director. Sometimes it would go

beyond the managing director to the Management Credit Committee. Now, because
we’ve created these new levels, a lot of people have to sign before a credit goes
through. . . . Consequently, turning around a credit request can take a week or two
weeks. The customers tell us that the other banks they bank with, when asked for
credit, will tell them to come and get it within two or three days time. We justify our
delay by saying that we are not going to compromise proper processes, but it’s
something we’re going to have to address in the near future.
There were also some complaints among newer employees. Was GTB really the bank that
they had heard about before coming? For example, a two-month orientation session for new
employees was postponed in August. The bank’s work load was given as the reason, though some
employees blamed poor management planning as the cause. One new manager argued that the
postponement sent a poor message to employees. After all, he said, customer relationships are
largely a reflection of how employees feel about the bank itself, and GTB had gotten off to a poor start
with this group. That group now wondered if the postponement was indicative of a new indifference
caused by growth and overburdened new managers. He went on to say:
Maybe because of growth, it seems like the bank is taking a few things for
granted and beginning to think that certain things are not possible. . . . When a
person comes in Day 1, if they get any training at all, it is training on HOW to do the
job. So from Day 1, I started to work. I never had any discussion with anybody
about what this organization was . . . nobody really concerned themselves with
explaining to me, “Look. This is our bank and this is what it’s all about.” Instead, it
was, ‘We’ve appointed you to this job, and we know you can do it. Start doing it . . .”
Now it has become an impersonal thing to us. Come to work and go home.
Among the original employees, there was concern as well. One middle manager voiced his
disappointment with what he saw happening at GTB.
When we started on Day 1, there was no meeting that we did not all attend.
There was free speech, a free flow of ideas, and the minute you got into those
meetings, we were all on course. As the work load got a bit much and the
organization grew, Fola and Tayo probably wanted to deal with fewer and fewer
people. So cohorts started forming. When we started this bank, we didn’t have
anything called Group or Division Heads. All of a sudden, you had a Group-Head
layer put in. More of the meetings were now for Group-Heads and above, and it was
up to the Group-Heads now to lead the meetings and decide how far the information
went. What I started seeing happen was that an inner circle had been created where
information was not readily available anymore.
Now, I’m not even sure that there’s anything wrong with them working that
kind of system if the people who were made Group-Heads were very similar to the
first two people who started the organization. I know that it’s almost impossible to
create clones, but I think that there could have been more of a common denominator
running through all of them . . . Fola and Tayo couldn’t continue to be solely
responsible for the culture and its dissemination, but there should have been people
at the next level who could do it.
It’s still a good organization. It’s still making decent revenues. It’s still got
very bright, hard working people. But it’s lost some of the spark., the passion, and
some of the stuff that differentiated it from everywhere else. From being here on
Day 1, I am very disappointed that we couldn’t continue the dream, because I think
that what we had then is what escalated our progress ahead of all the people who got
11
2024.
licenses at the same time as we did and before us. The way I explain it to people who
work for me is that sometimes in a race there may be five people, and on paper
there’s one person who has the most talent. On paper that person should win. But
someone else wins the race, because they have that little extra, and that’s what we
had, and I really think that over the last two years, people are working for a pay
check which is better than most pay checks in this environment. So they’ll work hard
and make decent money, but I don’t think that there’s that love and that passion for
the organization that there used to be. I’m not sure that people are working selflessly
for the organization anymore.
I really think we need to examine our manager-and-above levels. Probably

what has happened is that we’ve brought people in, probably very bright people, but
I think that more effort should have been placed on looking at the personality fit of
those people with the organization. In some cases, we brought people in from an
organization where he was used to being called “Sir” and not his first name, and his
door was normally locked.
I think that there was an arrogance on the part of this organization in that we
believed that whoever we brought in we would influence more than they influenced
us. But it’s not that easy when the people being brought in are pretty high up,
especially in a culture where naturally people are taught to have a reverence for
people who are higher up or older than they are. What I think happened is that the
people we brought in at the top—rather than us influencing them, they’ve started to
influence the whole culture and the way things are done. And it’s easy for them to
be a dominant force for the people who report to them. But while we give bank
orientations for the newcomer employees down below, this is the group that really
needs to better understand the bank and its culture.
The Future
By the mid-nineties, GTB had become known as one of the New Generation Banks in contrast
to the larger, more traditional banks which were described as “just waking up” to new market,
product, and managemnent demands. A number of Nigerian and foreign executives maintained that
GTB’s dilemma was common to all new Nigerian companies, caught between new and old generation
forces. A few criticized GTB, and specifically Adeola, for not crusading more widely with his visions
of trust and integrity. Others criticized him for focusing too much on GTB’s continuing expansion
rather than consolidating its gains. With the news that the bank might even get involved with
government credit requests, they worried that the bank was growing too fast and possibly too
recklessly. Bode Agusto of the Agusto Survey Reports was one of these. He observed that:
GTB’s growth has got to be controlled from now on. That’s my feeling. They
have to cut out growth simply for the sake of growing, because they’re beginning to
plateau. Growth must not impair the quality of their earnings. If opportunities are
not consistent with long term goals, they should forget them at this point of time.
They should look more long term. They have separated themselves from the pack
successfully so far, but going forward, the bank needs to ensure that they have
controlled growth in terms of risk assets, in terms of its people, in terms of liability
generation, and in terms of its branching strategy as well.
But Fola Adeola saw this as the time to continue rapid expansion, before the new competitive
waves moved in:
The investment climate today is not very conducive. There are not many
investors who see a bright future in coming here just now. Instead, they say don’t
12
2024.
come, don’t come. The current government says that it is leaving in 1998. So from
now until they leave in October of 1998, we have 24 months. And then people will
wait to see how the new government turns out. For the time being, I must water this
plant of Guaranty Trust. Then when I find that it’s a tree and we need a bulldozer to
get it out, then I can say I’ll move on to other things.
Finally, Fola and Tayo were concerned about how to best relate GTB, its people, and its
philosophy to the Magnum Trust Bank acquisition. Magnum operated at a lower end of the socio
economic scale and had very different trditions and practices. Should GTB try to export its vision to
Magnum? Two GTB managers had been sent to Magnum as short term overseers, but how should
the acquisition be dealt with in the longer term?
Fola saw some hope in the comments of another middle manager who saw the future
in these terms:
What the Managing Director and the Deputy Managing Director really need
to do now is focus on developing the people that they’ve created directly beneath
them as the Division Heads. One thing we believe here is that our structure and
culture are good. Empowerment is good. But you also have to develop people to
embrace what you are giving to them. A lot of people thrive better when you’re
telling them what to do or when you guide what they do. But once you give them
the power and say go ahead, you can’t just let go. They have the discretion to go
ahead and do it, at that time, but there can be problems. Those people need
developing, so that they then can develop themselves into a Fola or a Tayo for their
subordinates. Then those beneath them can begin to get a feel of what Fola and Tayo
felt on Day 1, or how their own bosses felt in the early days, when they were working
directly for Fola and Tayo.
At some point, Fola and Tayo consciously started pulling back. And a lot of
us who had gotten knowledge from them didn’t catch on early enough that they
were pulling out and what we now needed to do was to now push down this
knowledge to those who were coming behind us. Recently, a bunch of us managers
were talking and we found it interesting on this point. A lot of our problems now—
we see them, because we had what we called the initial training which came from the
senior people then. But what we’re not doing right now is we’re not pushing that
training down to those who are coming in who do not now have access to these same
teachers.
Fola wondered how to deal with these various issues.
13
2024.
Exhibit 1 Guaranty Trust Bank, Selected Financial Data, 1991-1996 (in millions Naira)
For Years Ended 28 February: 1996 1995 1994 1993 1992 1991a
Gross income 2,117.2 1,140.1 1,279.4 541.9 153.0 6.9
Operating expenses 515.3 341.6 269.4 139.4 39.1 5.6
Profit before tax 1,010.0 552.6 601.3 214.7 52.3 (2.4)
Net income 776.3 350.3 389.0 139.2 41.8 (2.4)
Assets 11,790.4 10,942.6 4,863.5 2,323.0 1,125.4 172.8
Liabilities 10,772.4 10,400.9 4,572.1 2,170.6 1,059.6 147.7
Shareholders’ funds (net worth) 1,018.0 541.7 291.4 152.4 65.8 25.1
Earnings per share (in kobob) 414 350 389 278 167 (9.7)
Source: Based on company documents.
aGTB began operation in October 1990.
b100 kobo = ₦.
14
2024.
Exhibit 2 Guaranty Trust Bank Restructured Organization-1996
Managing
ManagingDirector
Directorand
and
Deputy Managing
Assistant Director
Managing Director
Fola
Fola Adeola
Adeola
Tayo
Tayo Aderinokun
Aderinokun
Investment
Investment Institutional
Institutional Commercial
Commercial Business
Business
Management
Management
Banking
Banking Banking
Banking Banking
Banking Support
Support
Services
Services
Division
Division Division
Division Division
Division Division
Division
Fola
FolaAdeola
Adeola
Tayo
TayoAderinokun
Aderinokun (Vacant)
(Vacant) Algboje
Aig Baje Femi
Femi Vaughan
Vaughan
Corporate Financ. Inst.

Risk
Finance Correspondence Enterprise 1 Technology
Management
Treasury Banking
Magnum
Internal Pay and Receive
Trust Multinationals Enterprise 2
Control Lagos/Local
Bank
Ghana Financial Pay and Receive

Oil and Gas Enterprise 3
Project Control International
Pay and Receive

Local UpCountry/
Enterprise 4 Personnel
Corporates Local and
Domestic Ops.
Legal
Administration
and Corporate
Affairs
Source: Company document.
15
2024.

C1 - Guaranty Trust Bank PLC Nigeria (A)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

C1 - Guaranty Trust Bank PLC Nigeria (A)

Uploaded by

Copyright:

Available Formats

Harvard Business School 9-399-110

Rev. April 19, 1999

Guaranty Trust Bank PLC Nigeria (A)

The economy is characterized by weak productivity, a low industrial

Warning: The Department of State warns U.S. citizens of the dangers of

The CBN/NDIC (Central Bank of Nigeria/Nigerian Deposit Insurance

to a level where the incidence of financial distress in banks reached crisis

If NIB (Nigeria International Bank, Ltd.) a subsidiary of Citibank, N.A, leads

And Aderinokun added:

We pursued things in a very professional manner, which also impressed the

The Bank Opens

We are a team driven to deliver the utmost in customer services.

We always kept coming back to the dream, the dream—what we wanted to

We also started non-traditional advertising before we opened, changing the

Aderinokun went on to say:

The Bank Evolves

Even before the reorganization, we needed 3 to 5 people to sign off on credit

Sometimes it stopped with the deputy managing director. Sometimes it would go

I really think we need to examine our manager-and-above levels. Probably

Fola wondered how to deal with these various issues.

Gross income 2,117.2 1,140.1 1,279.4 541.9 153.0 6.9

Operating expenses 515.3 341.6 269.4 139.4 39.1 5.6

Profit before tax 1,010.0 552.6 601.3 214.7 52.3 (2.4)

Net income 776.3 350.3 389.0 139.2 41.8 (2.4)

Assets 11,790.4 10,942.6 4,863.5 2,323.0 1,125.4 172.8

Liabilities 10,772.4 10,400.9 4,572.1 2,170.6 1,059.6 147.7

Source: Based on company documents.

aGTB began operation in October 1990.

Exhibit 2 Guaranty Trust Bank Restructured Organization-1996

Corporate Financ. Inst.

Ghana Financial Pay and Receive

Pay and Receive

Source: Company document.

You might also like