Ranjay Gulati: Sim Tshabalala grew up in South Africa’s largest Black township in the waning days of racial apartheid. At age 45, he became the CEO of the largest bank in Africa in terms of assets. Sim Tshabalala’s journey is a story of purpose and courage. Of finding a set of core principles early in life that guided him to one of the most important and most powerful positions in the financial life of a continent. Hi everyone. This is Deep Purpose, a podcast about courage and commitment in turbulent times. I’m Ranjay Gulati, a professor of business administration at the Harvard Business School. Sim Tshabalala joined me from the Johannesburg suburb of Rosebank. Sim is the CEO and executive director of Standard Bank Group.

Standard Bank has been around for some 160 years and operates in 20 African nations. It has 171 billion dollars in assets. Sim told me that he grew up in what he calls the dusty streets of Soweto. It’s South Africa’s largest township. And during the era of apartheid, Black South Africans and many other non-whites were forced by their government to live in townships, largely poor communities set apart from whites. In spite of the exceedingly harsh conditions they endured under apartheid Sim’s parents worked hard to send him to a mostly white private Catholic school in the Johannesburg suburbs. It was called Marist College.

Sim Tshabalala: My parents were enterprising, so I have to doff my hat to my late father and my mother. They sacrificed, and they sent me to a school run by the Marist brothers, a great Catholic school. The headmaster at the school was a gentleman by the name of brother Neil McGurk. He’s a legend. And I think I have to acknowledge him because I learned a lot from him, including my love for St. Thomas Aquinas. He was a very philosophical guy this brother. Taught us a great deal and drove us. I then had the privilege of matriculating and going to Rhodes University in South Africa. I studied philosophy and law. I did a BA and then an LLB, which is a law degree in South Africa. I practiced as an attorney, hated my practice, decided to go and study. And then I went to the University of Notre Dame. It was probably the best year of my life. I mean, it’s one of the best years of my life. Took time to reflect, studied public international law, studied deeply around issues around human rights.

Ranjay Gulati: After practicing law for a bit, Sim Tshabalala moved into finance, eventually landing at Standard Bank. As he worked his way up the ranks there, he was guided by the things he learned from his Catholic schooling.

Sim Tshabalala: The Jesuits would speak about heroic leadership. They say, “you’ve got to have a vision for the future. You got to have something to strive for that is bigger than yourself.” So I think that’s sort of one important principle. In that context, you should always have an action plan that you reflect upon every day that is related to that bigger future and that greater purpose that you’re aiming at. Suppose the second one is Ignatius Loyola spoke about living with one foot raised. The sense of not being bound to a place, bound to institutions, but being bound to higher purposes and a higher principle. So if Standard Bank said, “Sim, you got to go to Nigeria and go and run our business there,” getting up and going to run that business. Thirdly, the notion of love, high reverence for the humanity in others, and always seeking to connect with them.

And then just having a sense of wanting to innovate and constantly innovate. So that’s one set of principles. Another one, of course, is just this notion of natural law, that the right things are ultimately going to happen. Those things that have got the best reason in their favor are going to happen. And that that is animated by a higher being, whether you believe in God or not, but there’s a higher principle that is driving things. And I think that principle applies in business as much as it does in law, in philosophy, and in other spheres of life. And then another important principle, and which is also related to this notion of having a higher purpose and a principle, which is the inscription at the Oracle of Delphi: know thyself. Important to know deeply who you are and what you stand for. And then of course, related to that, another principle there at the Oracle of Delphi, which is, “nothing in excess.” Always try and do the right thing, but remember not to do things excessively, including work, by the way.

Ranjay Gulati: It’s hard to overstate the uncertainty a Black boy like Sim Tshabalala would experience growing up in apartheid South Africa. The system was designed to keep kids like him in their place, to discourage ambition, to smother dreams of a better world. I asked him how he dealt with such obstacles growing up.

Sim Tshabalala: Always feeling like you don’t belong, I think, is a sense that has always been with me and is an abiding sense. Because going to the school I went to, Marist Brothers, which then became Sacred Heart College, one always felt like an outsider. It was a Catholic school, it was in a white suburb, Black child. Yes, South Africa was changing, but one was always an outsider. And that’s, I think, an important lesson for me and an important experience because I’ve always felt like an outsider. When I was at university amongst the Black student movement and the political organizations, I always felt like an outsider. When at work at Bowman Gilfillan, which is a great law firm in South Africa, one of the first young Black attorneys felt like an outsider. At Standard Bank, same story amongst the higher echelons in the organization, always an outsider.

But I think there is always a sense in my view that as an outsider, you develop imagination, courage, resilience, and you and I are now talking. I’m sitting here with a privilege of running the largest financial institution on the African continent and being an outright insider, right? The outsider-insider dilemma: real privilege, but always having a sense of the humility of the outsider, if one could call it that. I think when my father passed away was another important inflection point. The sense that my generation is now it, right? We’re now the patriarchs.

Speaker 4: Standard Bank’s purpose. Africa is our home. We drive our growth.

Ranjay Gulati: Organizations that really live their purpose often learn how to tell the story of that purpose through a kind of master narrative. This is the way we are, this is who we are. This is what we believe in. I call it their big story. For a South African bank, that story can’t help, but be challenging to tell. I asked Sim Tshabalala how he tells the bank story.

Sim Tshabalala: So our purpose is, “Africa is our home, We drive her growth.” The Standard Bank is a company that has existed since early January, 1863. It was formed in Port Elizabeth to serve the needs of wool farmers who were selling wool between Port Elizabeth and London. And the job of Standard Bank was to facilitate the trade in that wool. And so from day dot Standard Bank existed to serve the purpose of people who were buying and selling goods. One thing that we are very proud of as Standard Bank as well, was that in the 19th century Standard Bank actually banked the leading Black intellectuals like John Tengo Jabavu, and Sol Plaatje. They also served an organization called the Lovedale Native Mission, which is today Fort Hare. The relevance of that is that Fort Hare is where Nelson Mandela and great Black intellectuals where they studied. And so Standard Bank was in the service of these organizations from day dot.

You accelerate to 2022. You see a great institution facilitating trade on the African continent. We represented in 20 countries on the continent, which make up roughly 70% of African GDP. We are represented in London, New York, Dubai, Beijing, the major money centers of the world, where we serve clients who have got real economy interest on the continent. Take GE out of Boston, they’ve got operations in several African countries. We are able to serve them because we’ve got people based in New York who can talk to them and we can serve them on the continent. In strategic terms, prof, what is it that we have that others don’t have? And what is it that we do that others can’t do is we’ve got this massive network on the continent with people on the ground who are able to facilitate the movement of goods, capital, and people on the continent.

Ranjay Gulati: How do you get them to believe the purpose? How do you get those people on the ground? Frontline workers? The challenge with purpose, we have found in the people who study it is that there’s an exponential decay as you go further down the chain of command. Where an ideal sitting, which the CEO, the leadership team might even understand, doesn’t always hit the emotion of that frontline worker, in some way.

Sim Tshabalala: I would say to you, you can walk into a normal branch in Luanda, in Angola and ask the branch teller. What is the Standard Bank purpose? I am prepared to bet you, my last dollar prof that they would say to you, “Africa is our home, we drive her growth.” And the way we’ve driven it is in various different ways. The first one is I talk about it at every opportunity, firstly. Secondly, it forms the basis of our code of ethics. So we start with our purpose. Then we define our vision, our strategy and our values. And everything that we do is driven by that rubric. Our culture is therefore defined by these values, that vision, that strategy and that purpose. We then also include those elements in the performance agreements of our people. So my direct reports, their contracts are structured around six strategic value drivers, which form the base on which we devise our strategy. And those six strategic value drivers are calculated to get us to that purpose. And our people are very passionate about it. I was in our London offices talking to our team. Now these are hard-nosed investment bankers based in London. And they too have an abiding sense of the importance of our purpose. They’re there to serve our clients Nestle as Nestle executes it strategy on the African continent.

Ranjay Gulati: Have you had to make hard trade-offs sometimes where, you know, there’s financial versus the social, because you say, “Africa is our home and it drives our growth.” Sometimes, you have to think about Africa more than financial returns. How do you reconcile? Maybe there’s an example where you’ve had to do that in the last couple of years where you might say, you know what, this plays to our purpose.

Sim Tshabalala: There are many examples, professor. So firstly, let me try and describe, I suppose our theory of the purpose of the organization and how we think about... We believe that the role of the organization is a social one and that it is an integral part of the social fabric. And that our job is to create value for all our stakeholders, shareholders, our staff, our clients, and society. Would you believe that we believe that we should maximize the taxes we pay within the four corners of the law. And we should simultaneous with that maximize the pay of our people and simultaneous with that maximize the value that we create for our clients. And we believe that we can do that by making the pie bigger. So in a way, very different to the theory of the firm driven by the likes of Milton Friedman. We don’t believe that the sole purpose of management is to maximize profits.

We believe that you can maximize the value for all of those stakeholders. So that’s the first principle. We do, however, believe like you say that they’re trade-offs. There are times when you have to say, well, if my job is to make sure that we generate acceptable returns for shareholders and ROE, that is acceptable to our shareholders, I run the risk that if I don’t generate that acceptable ROE, I will not have the capital to leverage because I’m a financial institution. I therefore have to maximize ROE, but in maximizing ROE, does that mean that I have to in 2010, for example, retrench 10% of our staff in order to generate that ROE. And at that point, the trade-off is between the staff then, and generating acceptable returns, but on the basis of the argument that it’s in the best interest of the company and all stakeholders, so that we can maximize for all of them. At that point, you would then maximize in favor of shareholders. We’ve done that before. It’s difficult. It causes conflict, begin conflict with your leading trade union is a very, very difficult process to get through. But if you believe in that high purpose, Andy, if you believe that you need to be maximizing for all your shareholders, you will do the right thing.

Ranjay Gulati: How do you connect short-term, long-term financial return on equity versus social impact? Employees, customers, communities, stakeholders, you really are wearing multiple hats. Businesses are being forced into geopolitical, political social issues in America. People are asking, what do you think about gun rights? What do you think about voting rights? What do you think about abortion rights? Right? And employees are vocal. Employees are rebelling even as an outsider who is trying hard and you’re trying to grow the pie. How do you reconcile this inherent tension in the job?

Sim Tshabalala: Firstly, by arguing that the business is an organ of society. So it’s got a role to play in society, principle one. Second principle is at bat. It has to play in its lane that as a financial institution, whereas a business, it should only comment on policies and issues around it that have a direct impact on what it does. And it should only do so within the context of the mandate that the organization has got. So as a bank, I think it’s well within our rights for us to have a lot to say about country risk because country risk is an important input in the calculation of the cost of equity. And to the extent that the cost of equity is high because of country risk. Of course, I should have something to say about policies that have got a material, negative impact on the cost of equity.

As a bank, we need to be able to have faith that when the client has failed to repay, we’ll be able to go and foreclose. We therefore have a lot to say about the rule of law. So any actions that get taken that have a diminution on the rule of law, we should have something to say about. And so I would say to you without getting involved in politics, without commenting on politics, we are well within our rights, playing in our lane to comment on those things that have an impact on our activities. And that is the rubric that I would use.

Ranjay Gulati: Standard Bank’s biggest shareholder is the massive Industrial and Commercial Bank of China. The ICBC is owned by the Chinese government and is China’s largest lender by assets ICBC projects, such as infrastructure projects on the African continent help fuel China’s economic growth. Certain of these projects have drawn criticism for providing little value to African people while greatly enriching Chinese industries and labor. China is Africa’s largest trading partner. I ask Sim Tshabalala how he balances the interest of an outside shareholder like ICBC with the interest of the African countries, where Standard Bank operates?

Sim Tshabalala: I have a book here, which was a gift given to me by one of my Chinese colleagues. And it is the history of China. And it tells an amazing story of this long lived civilization with a long written history and an incredible set of values and an incredible set of principles, which are demonstrated by our partners. So that’s the first big theme I would want to emphasize, that our partners at ICBC are incredibly principled men and women. We don’t always agree with them, but they’re incredibly principled with high values and a long lived intellectual tradition, which one has to work hard to understand and respect. Secondly, there’s a long history between the African continent and China of trade for example. The third principle is that that relationship of trade is one which ought to be done on the basis that we are equals.

Now, some might say that the contracts and the agreements that have been entered into between Chinese firms and Africans are lopsided. I would submit to you that the one between Standard Bank and the ICBC is a very good one and is in the best interest of all shoulders of the Standard Bank group. And our Chinese partners often point out to us how surprised they are at how little Africans negotiate. And my argument to my colleagues is often to say, and to our clients is to say, you must negotiate the hardest and best bargain you can in favor of your stakeholders, because that’s what your counterparts expect you to do. And they actually surprised that you don’t negotiate. The next point to make here would be that partnership has been fantastic for the development of the Standard Bank Group. They’ve provided us with capital when we’ve needed it. They’ve partnered with us on major projects. We are able as a consequence to say that we facilitate trade and investment between the middle kingdom and the African continent in a way that is in the best interest of Africans. We abide by the highest standards at Standard Bank, the highest standards of ethical conduct and compliance because we operate in the United Kingdom, the US, the EU, and therefore any arrangements we have with our partners or with our clients are driven by those principles of compliance. And so we are proud of our track record.

Ranjay Gulati: I want to turn back to the idea of “Africa’s our home, and it drives growth.” Access to banking, historically, an everyday thing for most white South Africans, I would imagine, but not necessarily for people of color, a bank account can mean a lot to somebody who is unbanked. I would imagine that Standard Bank has done a lot to kind of move and help people, bring financial inclusion, bringing people into this space. How would you describe that a little bit?

Sim Tshabalala: If one goes back to the 1970s and the 1980s, you would find that the level of financial deepening in South Africa was not what it should be. But as we speak, the vast majority of South Africans have got bank accounts, the only issue is, and the debate in South Africa at the moment is whether or not people are underbanked or not. And so you will find that access to financial services is an important element of what we’ve done in South Africa. And it’s been driven by the Black Economic Empowerment act of South Africa, as well as the charters that were set up under the broad based Black Economic Empowerment Act. And in financial services, the financial sector charter essentially obliged us to work with government, with a trade union movement and with our clients to increase banking penetration. And so we’ve used digitization partnering with telcos and so forth to broaden financial inclusion. So at Standard Bank, at the moment, we have roughly 10.2 million customers, which is a large proportion of the South African bankable population. And my competitors, the competitors of the Standard Bank group have got large numbers of customers as well, which bespeaks the point that I’m making that South Africans are actually quite penetrated. And the thing to do now is to increase the number of products and the quality of banking products that they hold.

Ranjay Gulati: In 2016, Standard Bank established the Tutuwa Community Foundation. Its mission is to uplift communities in South Africa through economic development and the alleviation of poverty. Its main focus is young people.

Sim Tshabalala: A number of years ago, we set up a contractual arrangement between the Standard Bank Group and Black economic entities, namely Safika, as well as our staff, to broaden ownership in the Standard Bank Group. So roughly 10% of the Standard Bank shareholding was set aside for these Black economic empowerment shareholders. And as I say, they included BEE partners, our staff and the Community Trust.

One of those community trusts was the Tutuwa Foundation. And that Tutuwa Foundation continues to exist. And it is geared towards providing funding for mainly education. And it used the original allocation of shareholding that was given to that broad base of shareholders that I’m referring to, which at the time were called to Tutuwa. But as I say, some were Black economic empowerment partners, some were staff, and some were community organizations. So when you look at our website and you see the Tutuwa Foundation today, it is partly the outcome of that allocation of shares that was done to Black partners.

Ranjay Gulati: You know, the Standard Bank, when you came in, had a kind of a mixed past. You mentioned some positive things in the past of Standard Bank, but it was part of the apartheid era. Now there was a beautiful reconciliation effort going on in South Africa to let go of the past, to purge ourselves and not get lost in the cycle of hatred. You coming into that role, how did you allow yourself to embrace the past while looking into the future? I was thinking about your legacy, but also about how you’ve moved beyond the past.

Sim Tshabalala: Standard Bank has got a rich history, which is, as you say, rooted in a colonial past. So in fact, prof, Standard Bank has always been progressive. So it has got a colonial but progressive tradition. And I’ve had the privilege of being able to contribute then to the development of that tradition while I’ve been a steward at the bank. It’s not reflective of the country’s demographics yet, but it’s gone a long way to changing and transforming itself. Modernizing itself and making itself part of the fabric of South African society. It’s a dialectical process. You take one step forward, one step back they’re negatives and they’re positives, but overwhelmingly that is an institution that is headed in the right direction. And I’m very proud to be part of it.

Ranjay Gulati: I want to go back a little bit to the bank and talk about… this goes to my case on DBS. And what I’ve learned is that transforming a bank to a digital organization is very hard work because people in banks are bankers. They’re not technologists. And you have an institution, the grandfather bank of Africa with lots of history and tradition, which also means the other side of it is that it doesn’t change easily. How have you mobilized and really pushed this organization to transform itself in the face of what some would call major digital disruption that is coming?

Sim Tshabalala: We came to the conclusion a number of years ago that we were a bank and that, as a bank, we could either watch the fintechs and the big techs and the telephone companies, the telcos, eat our lunch, eat into payments, provide our clients with products and services that were simpler better, faster and cheaper than we provide them, and as a consequence, provide them with experiences that were superior to what we could do, and then, as a consequence, stand between us and our clients. We could allow that to happen. And we would then become irrelevant, we’d become utilities and become irrelevant. And we said to ourselves, we cannot afford to allow that to happen. The consequence of that acceptance was that we would need to accelerate our digitization of our institution so that we could provide our clients – retail and wholesale clients – with the same experience as they’ve come to expect from Uber, Google, Microsoft, Tencent, and so forth.

And so we had to formulate a strategy, which we did to respond, which entailed an investment in the digitization of our organization, partnerships, where it was appropriate. The training of our people so that they become adept at working with these machines so as to improve the customer experience. It entailed the retraining of some of our executives. We would send some of them to an institution where they went through board training so that they could become technology savvy. We did the same for the top executives of our organization, and then cascaded that to our general management. We changed performance agreements. We set people targets, and then we put in place incentives that would accelerate the digitization of the organization. We’re not anywhere near done yet prof, but we are seeing some good signs, signs that include an increase in the number of digitally active clients, an increase in disbursement of loans, done electronically and increasing the number of people using smartphones to make payments. We’ve got an app for example, which I’m very, very proud of that is in effect a bank for our clients, a bank in a person’s pocket. And we seeing the increased uptake by people of these digital channels.

Ranjay Gulati: I want to ask. You had a busy long day, and I’m sure every day is like that for you with lots of people wanting a piece of you, time, every minute is accounted for. What do you do in your personal practice that is something that allows you to recharge and regroup every day?

Sim Tshabalala: I don’t manage to do this all the time, but what I try and do is firstly, I do spend a few minutes figuring out, “what am I supposed to do today?” So what’s my action plan in the context of that long term plan? I don’t manage to do it all the time. So I try to do that. Secondly, I try and read as broadly as I can. So at the moment, I’m reading about the Enlightenment, what’s it got to do with banking? I don’t know, but it’s got a lot to do with the Industrial Revolution. So I’m reading that. Thirdly, I have got a loving family. I’ve got a lovely wife and two lovely daughters, and I try and carve out time to connect with them. And it’s an important way of free charging. And then I pray. I’m a proud Anglican. I try and live within the principles of that tradition without derogating from others. I respect that other people come from a different place of faith, but it’s a way for me to cope with this complicated environment that I live in.

Ranjay Gulati: Sim Tshabalala is CEO and executive director of the Standard Bank Group, based in Johannesburg, South Africa. Standard Bank is the largest bank in Africa based on assets and has offices in 20 African nations. Instilled with a passionate dedication to hard work by his parents and spiritual teachings from his school years, Sim was able to rise from what he calls the dusty streets of Soweto to the helm of an institution, positioned to drive the growth of his home continent Africa. Thanks for listening to this episode of Deep Purpose, a podcast about courage and commitment in turbulent times. You can go to my website for more of my conversations with leaders in the business world, navigating the 21st century business environment. You can also find out about my book, titled Deep Purpose. That’s deeppurpose.net. This podcast is produced by Steven Smith with help from Lauren Modelski, Melissa Duncan, Craig McDonald, and John Barth. The theme music is by Gary Meister. I’m Ranjay Gulati.