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Change Management-Project Assignment
Econometrics (Econ906)
Addis Ababa University
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A. Methodology
As a group, we raised and discussed the different ideal methodologies available to approach the organization. The team deliberates on each methodology in depth to select the appropriate methodologies to approach the organization. To this end, the group decided to approach the organization through face to face. Relevant data and information have been collected through interviews and from periodical reports produced by the Bank. The specific directorate contacted for the purpose of our assignment was Change Management, Planning and Communication Directorate. The Change Management, Planning and Communication Directorate are responsible process owner to monitor and evaluate the status of change initiatives undertaken by respective directorates within the National Bank of Ethiopia.
B. Brief Background of National Bank of Ethiopia
The National Bank of Ethiopia was established in 1963 by proclamation 206 of 1963 and began operation in January 1964. Prior to this proclamation, the Bank used to carry out dual activities, i. commercial banking and central banking. The proclamation raised the Bank's capital to Ethiopian dollars 10 million and granted broad administrative autonomy and juridical personality. Following the proclamation the National Bank of Ethiopia was entrusted with the following responsibilities.
To regulate the supply, availability and cost of money and credit.
To manage and administer the country's international reserves.
To license and supervise banks and hold commercial banks reserves and lend money to them.
To supervise loans of commercial banks and regulate interest rates.
To issue paper money and coins.
To act as an agent of the Government.
To fix and control the foreign exchange rates.
However, monetary and banking proclamation No. 99 of 1976 came into force on September 1976 to shape the Bank's role adoring to the socialist economic principle that the country adopted. Then the Bank was allowed to participate actively in national planning, specifically financial planning, in cooperation with the concerned state organs. The Bank's supervisory area was also increased to include other financial institutions such as insurance institutions, credit cooperatives and investment-oriented banks. Moreover the proclamation introduced the new Ethiopian currency called 'birr' in place of the former Ethiopia Dollar that eased to be legal tender thereafter.
The proclamation revised the Bank's relationship with Government. It initially raised the legal limits of outstanding government domestic borrowing to 25% of the actual ordinary revenue of the government during the preceding three budget years as against the proclamation 206/1963, which set it to be 15%.
This proclamation was in force till the new proclamation issued in 1994 to reorganize the Bank according to the market-based economic policy so that it could foster monetary stability, a sound financial system and such other credit and exchange conditions as are conducive to the balanced growth of the economy of the country. Accordingly the following are some of the powers and duties vested in the Bank by proclamation 83/1994.
Regulate the supply and availability of money & credit and applicable interest and other changes.
Set limits on gold and foreign exchange assets which banks and other financial institutions authorized to deal in foreign exchange a hold in deposits.
Set limits on the net foreign exchange position and on the terms and amount of external indebtedness of banks and other financial institutions.
Make short and long-term refinancing facilities available to banks and other financial institutions. Moreover, the proclamation has also raised the paid-up
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Organizational Strategic Values Pursuit of Excellence and Professionalism
Goals of the Bank
Goal 1: Carry out extensive and sound institutional transformation tasks. Goal 2: Maintain price and exchange rate stability. Goal 3: Maintain adequate international reserves. Goal 4: Improve the soundness of the financial system. Goal 5: Play a decisive role in economic research and policy advice to the Government. Goal 6: Create efficient Payment System. Goal 7: Improve the currency management of the Bank.
Objectives of the Bank
Objectives of Goal 1 1 and conduct Quick wins I activities on continuous basis. 2. Implement BPR studies conducted and ensure their sustainability. 3. Review and update the SPM document of the Bank every two years. 4. In 2005/06, devise a result based scheme that measures the performance evaluation of the work units and individual employees. 5. Identify and have adequate change agents. 6. Improve service delivery of the Bank. 7. Strength IT service and enhance computerization process of the Bank. 8. Enhance the capacity of the Bank.
Objectives of Goal 2 1 annual core inflation (non-food inflation) within a single digit. 2. Maintain the exchange rate of Birr close to the equilibrium exchange rate. 3. Contain the premium between the official and parallel market exchange rate to
the level below 1 percent. 4. Maintain the premium of respective buying and selling rates of the USD between the NBE and commercial banks below 2 percent.
Objectives of Goal 3
- Ensure that the international reserve of the country is not less than three and half months of imports of goods and non-factor services.
- Manage the country's Foreign Exchange Reserve efficiently and effectively.
- Ensure and manage the effective use of the country's Foreign Exchange.
Objectives of Goal 4
- Ensure the average level of NPLs of commercial banks is reduced to below 15 percent.
- Conduct effective on-site inspection of banks.
- Conduct effective on-site inspection of insurance companies.
- Conduct effective on-site inspection of micro finance institutions.
- Issue seven new directives within the SPM period.
- Amend the existing directives/policies.
- Ensure systematic risk management framework for each bank.
- Introduce CAMEL rating of banks.
Objectives of Goal 5 1 the Ethiopian macro econometric model and start its application 2 the Bank's research and policy advisory capabilities and the dissemination of its findings in terms of published research papers and policy discussion forums by 100% each from 4 and 2 to 8 and 4 respectively.
Objectives of Goal 6 1 a National Payment System framework. 2. Conduct structural reforms on the existing payment systems.
directorates identifying the execution time in view of their contribution to strategic objectives of the Directorates as well as the Bank.
In order to ensure the effective implementation of initiatives, Change Management, Planning and Communication Directorate, based on the responsibility given, repeatedly reminded Directorates to give the required attention for the execution of the initiatives as per the plan documents in the strategic plan and has tried to follow up their implementation and conduct study that helps to make appropriate and strategic decision by top management.
II. Assessment of NBE’s Strategic Initiatives Aims of Strategic Initiatives
National Bank of Ethiopia has developed and implemented strategic initiatives with the aim of: Closing the gap that is beyond the reach of incremental or continuous improvement efforts;
Linking an initiative to strategic objectives and drive performances; and Solving significant organization problems.
NBE Strategic Initiatives Selection and Monitoring Process
The Bank developed five years strategic plan document in line with the Second Growth and Transformational Plan (GTP II). In addition to the GTP II document, by referring the Bank’s vision, mission, strategic goals and objectives each directorate takes initiatives to implement a change initiative in aligning with the directorate’s duties and responsibilities. Before each directorate takes initiatives and starting to implement, the respective change initiatives goes through the approval process and incorporated into the plan of the directorate for implementation. The Change Management, Planning and Communication Directorate is in charge of monitoring the implementation status of the change initiatives. The same directorate assesses the implementation levels of the directorates on quarterly
basis and proposed recommendations for each directorate to take appropriate actions on the lagged and ineffective implemented change initiatives.
Previous Change Management Initiatives
National Bank of Ethiopia has been initiated different change initiatives aiming to transform the Institutions for the previous years. To mention them a study made by KPMG and also to implement a BPR study to transform the Bank to a new level. It is well understood by the Bank that those change initiatives failed to achieve to transform the Bank to a new changed Institution. On the process of implementing these initiatives, the bank didn’t take appropriate notes why the change initiatives failed to transform the Bank to a new level. Furthermore, the most worrying thing is that the Bank does not know clearly why the previous change initiatives failed to transform the Bank to the new level, the factors of failures for the change initiatives not documented and formalized by the Institution.
Business Case and Its Background
What is BSA?
BSA (Bank Supervision application) is web based solution responsible for secure submission of financial information, validation, and analysis and report generation. Designed by the SADC (Southern Africa Development Community) countries including Kenya and Uganda with the purpose of supporting and harmonizing the bank supervision functions of the Central Banks and Financial Authorities.
Why BSA?
Regional collaborative product for harmonization of banking supervision functions
Full customizable solutions to cope the bank supervision requirements
Adoption of Supervision International Standards
The essential change management dimensions for this BSA change initiatives were identifying business requirements or needs of the supervision process of the Bank was the most critical step in the process of deploying this BSA application. Identification of business requirements of the supervision directorate was properly identified and documented for reference and guidance for proper implementation of the BSA application.
One very important dimension missed out in the process of recruiting BSA application was the issue of IT infrastructures. Ensuring availability of IT infrastructure was critical in the process of implementing and integrating BSA application system with Financial Institutions at country level. Upon integrating BSA applications with financial Institutions the detail IT infrastructures requirements not purchased and ready in advance to function the application in time. Due to delay of management decisions on the purchase of IT infrastructures the BSA application system not functioned yet. The project was planned to implement fully up to December 2017, but not executed as planned on reasons of delaines of purchasing IT equipment’s and facilities. Overall, this change initiative delayed by a year and of course on process to fully implement the BSA applications to make functional.
C. ANALYSIS All change initiatives and change management activities are passing through all administrative phases. Meaning all change initiatives passed through formal approval process before implementation. Any change initiative would be validated whether the change initiative linked to the strategic goals and mission of the Bank. The initiatives are mainly assigned to respective directorates for implementations and monitored by Change Management, Planning and Communication Directorate. The status of implementations of each initiative evaluated and reported to management for actions and decisions. Specific to BSA application, the project is delayed and ineffective yet. Its ineffectiveness is as a result of poor planning and absence of proactive monitoring and evaluation system. Furthermore, absence of proactive decision making related to BSA implementation process exposed to project ineffectiveness. Overall, our assessments of
the practice of implementing change initiatives in the National Bank of Ethiopia lack obviously effectiveness and efficiency.
D. Recommendations to National Bank of Ethiopia
A separate work unit for project/initiatives management should be
established
As we have seen above, National Bank of Ethiopia does not have a strong and effective system that follows up and monitor its projects or initiatives. As a result, in the period from 2016-2018, the bank planned to execute 44 strategic initiatives of which the implementation status of 28 strategic objectives are below the expected level. They are in the state of either ‘not started’ or ‘lagging behind the set schedule’. In addition, most of the fully completed initiatives in the mentioned periods are existing initiatives transferred from the previous strategic plan and the bank does not have a means to ensure whether these completed initiatives are effective and efficient in bringing the intended result as well. Therefore, lack of a strong project or initiative management system in the bank has played a significant role for the ineffectiveness of strategic initiatives.
Hence, to manage the initiatives, the bank needs to have a new work unit that contains professionals in project management and responsible for designing appropriate strategic initiatives in collaboration with directorates/stakeholders, installing strong and effective system and identifying barriers to effective initiative implementation.
Consequently, strategic initiatives must be managed separately to allow them to be effectively evaluated, funded, and prioritized.
As we have assessed the BSC plan of directorates, most of the targets set are unclear, ambiguous, unrealistic and not related to the intended results of strategic objectives and this might lead to wrong selection of strategic initiatives.
Hence, in order to set appropriate targets, the bank should follow the following steps;
Review stakeholder expectations : This will determine the critical areas the bank needs to address in order to be perceived as successful.
Strategic objectives clarification/ selection: Once the stakeholders’ expectations are identified, these need to be expressed as strategic objectives. Strategic objectives are clear statements of what the organization needs to achieve. They must be few in number and should address the different stakeholders’ requirements.
Objectives prioritization: Most companies try to achieve too much. It is much better to prioritize and deliver fewer projects than fail to deliver on too wide a range of goals. The focus will help employees too as they will be very clear about what is important in the coming period.
Set performance measures. Key performance indicators must reflect the organization’s goals. Data collection: This step is often overlooked. The bank needs to collect timely and relatively accurate information as a basis for setting targets. Data is never perfect, but it does have to be consistent and reliable enough to be fit for purpose.
Set targets : Based on the previous steps, the bank should give the necessary attention in setting targets. Judgment is required and the bank needs to assess the risk of getting the target wrong. This is also where most organizations stop, but this is not the end of the process.
Action plan design: An action plan is required covering all the projects and changes to the bank that are needed to ensure the target is reached.
Action plan discussion and agreement : The plan must be communicated to staffs.
Develop Effective Initiative Monitoring and Reporting Strategy
Strategic initiatives monitoring and reporting strategy facilitates the identification and resolution of problems, enhances performances and ensures alignment of major activities with intended results, builds capacity to implement and manage initiatives successfully and promote the identification and dissemination of lessons learned. Therefore, it is better for the bank to develop effective initiative monitoring and reporting strategy.
Each directorate that owns and manage initiatives should be required to submit quarterly/monthly progress report to ensure all initiatives are on the right track. The directorate assigned to follow up the bank’s initiatives must identify any assistance needed by initiative owner’s /directorates/ in the form of technical, financial or other inputs. It has to produce summery reports and submit to top management for decision and subsequent actions.
Accountability is important
Accountability is about being responsible for actions taken, about being able to explain, clarify and justify actions. Hence, there must be a system that makes accountable for the failure and success of strategic initiatives in the bank. If accountability exists, attention will be paid to strategic initiative implementation at all levels and consequently, bank wide performance will be enhanced.
Change Management-Project Assignment
Course: Econometrics (Econ906)
University: Addis Ababa University
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