Over the past decades, the financial industry has been affected by sustained liberalization and synchronization of the financial markets as well as new developments in information technology. This caused the banking industry in emerging markets to become more competitive due to increased bank sizes caused by acquisitions and mergers while they did not necessarily become more profitable. In this article (by Béata Habyarimana and André de Waal) the organizational restructuring process of a bank in Rwanda is investigated on its effectiveness. The high performance organization – HPO diagnosis was applied, consisting of a questionnaire (containing questions on the quality of the organization) and interviews with the top management of the bank. This diagnosis established the HPO status of the bank. The questionnaire was also applied at three other banks in Rwanda for comparison purposes. The HPO Diagnosis clearly indicated the reasons why the restructuring efforts of the case company had not resulted in better organizational results and in fact had led to under-par performance compared to the other three banks. The diagnosis also yielded multiple improvement possibilities for the bank to make its restructuring efforts still successful. The research findings will make it possible for Rwanda Bank to improve its performance to the benefit both of its clients and stakeholders. The findings will also benefit other Rwandan banks in their efforts to achieve higher organizational performance.
Over the past few decades, the finance industry has become increasingly more competitive due to financial liberalization, globalization, technological advances, new market entrants, acquisitions and mergers. In addition, the global financial crisis in 2008 negatively affected economic growth in emerging economies, especially in countries still undergoing financial reform (Akinsola et al., 2017). In response, many
organizations and financial institutions adopted strategies to sustain organizational performance and to preserve their competitive advantage against rivals (De Wit and Meyer, 2010). In this competitive environment, Rwanda Bank (a pseudonym, on request the bank has been made anonymous) decided to review it strategies in order to improve its performance.
Rwanda Bank originally was an umbrella institution holding several saving and credit cooperatives with limited banking authorization. In the beginning of the past decade the bank merged all its cooperatives into one single bank to create a full-fledged retail and commercial bank with a full banking license and accompanying supervision of Rwanda’s Central Bank. The bank at that time also increased its equity and, under influence of the government’s economic liberalization and privatization program (Ulrich and Thomas, 2014), accepted a new foreign investor as strategic partner which helped the bank through the transformation to a commercial bank. The new strategic investment as well as the new commercial bank license — and requirements — imposed several changes to the bank and created a new organizational culture, based on crosscultural diversity and a customer oriented strategy. Usually an increase in capital, if well applied, should lead to positive financial results, maximizing the wealth of the owners and giving satisfaction to all stakeholders. However, although the bank recorded positive returns the first year after the investment, the following years it experienced considerable financial losses and high staff turnover. And in the second year, the bank faced corporate governance issues whereby the Board of Governance was removed and totally renewed and new key management team members were brought in. Thus, despite the financial injection, the organizational change seemed not to have led to better organizational performance.
In this article, we describe research aimed at investigating and assessing the major structural and behavioral performance issues at Rwanda Bank which might have affected the organizational change to be less successful. As our research tool we used the HPO Framework (de Waal, 2007, 2012), a scientifically validated technique to evaluate the performance of an organization and identify possible performance
problems and improvement possibilities. The study also includes a comparison with the organizational results and high performance organization (HPO) status of several other commercial banks in Rwanda. The research findings have both theoretical and practical implications. There has been limited research into high performance in Rwanda and therefore our research contributes to the literature on performance improvement especially in the HPO field. Practically, the research findings will make it possible for Rwanda Bank to improve its performance to the benefit both of its clients and stakeholders. Possibly, our findings will also benefit other Rwandan banks in their efforts to achieve higher organizational performance.