Case study: Acleda Bank, Cambodia "We ask the village chief what he thinks of our new hires"

24 October 2016

Author: Philip Heijmans

Case study: Acleda Bank, Cambodia

The remarkable story of a Cambodian bank that rose from the ashes of war to compete with the best in the world

In 1993, Cambodia was emerging from a period of terrible human atrocity in which at least 1.7 million people lost their lives - about a fifth of the population. After the country had been torn apart by the Khmer Rouge regime, Cambodia had gradually moved towards democratic elections overseen by a United Nations peacekeeping force.
From the ashes of a society decimated by decades of fighting came the first wave of new businesses - among them a small, homegrown non-governmental microfinance organisation called Acleda. When Acleda was established in 1993, it had just 28 staffers, many of whom were inexperienced. But the group also included a tenacious 30-year-old university graduate named So Phonnary, who led the hiring and training of the business.
In the years to come, the Cambodian economy picked up steadily. By 2010, it was one of the fastest-growing in southeast Asia. And fast forward to 2016 and Acleda is now a fully fledged bank - with the largest loan portfolio and highest deposit ratio of any of the dozens of financial institutions, including heavy-hitting international players. It is also the country's largest single employer of local people.
At the top of this mammoth staff of more than 12,000 now sits one Dr So Phonnary as executive vice president and group chief operations officer.
The rags-to-riches story of how a small NGO turned into the largest financial institution and most important employer in the Cambodian economy is a remarkable journey. Phonnary credits Acleda's success to a unique people-driven philosophy and a notable ability to retain staff in a competitive and often divisive industry.
Acleda was awarded a specialised banking licence in 2000, which heralded a rapid expansion and recruitment drive. But the change - essentially moving from the ethos of local NGO to high-end financial institution with a large and skilled workforce - required diligent and careful planning of the right corporate culture, Phonnary says.
"The original employees were more NGO staff, trainers and so on," Phonnary says. "During the period of becoming a bank, we had to transition the staff," she adds, noting that retention of the right personalities was more important than replacing them with arguably more skilled external candidates.
To manage this process, the bank launched an intensive and extensive capacity building programme for existing staff to obtain tertiary education in Cambodia. Phonnary's team also developed policies and support mechanisms to enable staff to partake in short overseas courses. "This [education] was our first priority mechanism," she says.
In 2011, the bank formalised its immensely successful internal training programmes and created the international standard Acleda Institute of Business (AIB) - a tertiary institution offering associate and bachelor degrees in a range of fields specific to the finance and banking industry.
"[The] AIB receives many microfinance and government VIPs every year to observe and learn from us, including from Myanmar, Laos and Malaysia," says Phonnary.
The Acleda academy is open not only to the bank's staff, but also external Cambodian candidates. All courses are taught in English as the language of international commerce, she says, and programmes are bolstered by international guest lecturers. "We want our graduates to be able to accept work at any [international bank]," she says.
"We have to have a proper plan to provide training to our staff," Phonnary says, adding that the AIB initiative is also now an integral part of Acleda;s recruitment efforts. "We identify students who are at the top of their class [for recruitment]"
Creating an entire tertiary institution to assist with recruitment may seem like an extreme HR initiative, but for Acleda Bank, which has an attrition rate below 1.5 per cent most years - largely down to the forced retirement of those over 60 - securing the right people is everything. And the screening and selection of new staff is critical.
For Phonnary, the solution is to treat prospective employees with the same rigour the bank would apply to potential customers. "We arrange field visits to the families of applicants who are from the countryside," she says. "The process is similar to that of the procedure for the loan customers."
In Cambodia, a country with poor infrastructure, connectivity and credit records, banks and microfinance institutions will often physically visit their loan applicants to verify the facts of a loan application and the financial health of the applicant. Phonnary's team applies this same diligence to employment applicants.
"We ask neighbours and the village chief about the applicant as well," she explains, adding that the bank asks questions such as: "Is the family a good family? Have they been here for a long time? What is the village like?"
Successful candidates are then placed in a three-week, classroom-style induction course, followed by on-the-job training. "This training is very important for Acleda, and can take up to three months," says Phonnary.
This detailed education and recruitment programme means the bank almost always hires fresh graduates for professional positions, which in turn unfolds another unique HR policy. "We don't appoint people outside the organisation to high positions. We only promote from within," Phonnary says, explaining that the strong recruitment focus is on graduates - or even students - to grow and stay within the business. "This also means we don't have a problem finding people to fill senior, technical positions. And these people will have integrity and commitment.
One member of staff who rose through the ranks started as a lowly custodian before becoming an AIB graduate and eventually a high-ranking divisional leader. Commitment and loyalty to the organisation are key factors in the company's hiring, Phonnary says. "Acleda never takes employees from other banks. We only promote from within or from graduate programmes, though we see that other banks take employees from us. But this is not an issue because our philosophy for the new generation is for them to have freedom," she says.
"All our employees are very loyal and we see that when they move to other institutions, it is always for senior positions with triple or double money. We are happy for employees who do this. We keep good relations and they stay in touch with us," Phonnary says, adding that the bank encourages staff to accept high-ranking positions with international organisations, ultimately expanding Acled's alumni network and reputation.
"We are very proud when employees leave to take on good positions. Sometimes, we see people being recruited for roles that are three levels higher than their position at Acleda," she says.
The loyalty of employees is bred by a teamwork ethos, she adds: "We tell all the division leaders to create a team, not just one person who can do the job."
For Phonnary, Acleda's junior employees are its foundation and their growth and retention will, ultimately, make or break the bank. Its willingness to commit the resources to recruit and train them is essential, not least as it faces stiffer regional and international competition.
"We have had a strong corporate culture from the beginning, and build the organisation on a strong foundation," she says.