Is the new CBN deputy governor qualified for the job?
The importance of technical expertise in public service leadership
The appointment of Aishah Ahmad has been fraught with controversy, with many Nigerian’s saying that she is unqualified for the position.
Aishah graduated with a Bachelor of Science degree in Accounting from the University of Abuja. Her Master of Business Administration, majoring in finance was obtained from the University of Lagos. She also holds a Master of Science degree, in Finance and Management, awarded by the Cranfield School of Management, in the United Kingdom. She is a Chartered Alternative Investment Analyst (CAIA) and a Chartered Financial Analyst(CFA).
The major arguments are the fact that a)She is not an economist b)She doesn’t have the appropriate experience or career achievements
But I think the real question is firstly, how much a deep subject expertise/knowledge in government leadership matters. Secondly, we need to ask, who is better at governing central banks; bankers or economists?
How much does deep expertise matter for public sector leaders?
David Wirick in his 2009 research highlights that the main challenges faced by public sector leaders are team management challenges such as: the inability to clearly link performance and reward, compensation systems that are biased towards longevity, the inability to select project team members based on their expertise.
Similarly, research by Mckinsey & Company suggests that public-sector leaders should favor the rational and the analytical over the purely ideological, and to be willing to abandon tools and techniques that no longer work.
The research highlights four key principles:
- Use of better evidence for decision making
- Greater engagement and empowerment of citizens
- Thoughtful investments in expertise and skill building
- Closer collaboration with the private and social sectors
This work seems to suggest that these leaders need to be rational and analytical, but not necessarily deep subject matter experts. They need to be good at using quality data to make decisions, they need to be able to engage/empower citizens through excellent communications/use of social media, they must invest in hiring the correct experts and work closely with other sectors.
The study goes on to say that governments have a ‘mandate’ in certain troubled sectors — to play the part of a “systems integrator” that takes a high-level view on an issue and figures out how all stakeholders should work together. This speaks to a need for public sector leaders to develop the ability to understand the issues at a high level and communicate them to stakeholders using information provided by experts to take decisions rather than having all the expertise his/herself.
The Mandarin; a knowledge center for public sector innovation and learning goes further stating that:
The public sector needs to stop expecting leaders to be technical experts and start expecting them to be leadership experts. The bias is particularly damaging for women and stifles organisations’ ability to think creatively
But , there are people who disagree.
Zenger Folkman’s assessment of 57,000 leaders shows that those with the highest scores in technical and financial acumen were also in the 84th percentile for leadership effectiveness.
However, he goes onto imply that the skills that one begins the job with are not nearly as important as those continually learned as a leader progresses on the job.
One important aspect of achieving and retaining a high acumen is continuous learning. Because knowledge is increasing at an exponential pace and the rate of technological change is extremely fast, continuous learning is required-
Zenger Folkman
Who is better at governing central banks; bankers or economists?
What are we to make of this economist dominance? The Fed makes economic policy, so it stands to reason that there should be economists involved. But graduate education in economics, especially in macroeconomics, comes under pretty regular criticism for being narrow and unrealistic. Could there be value in diversity of opinion and background as well as opposed to just economic expertise?
- Harvard Business Review
Who is better at governing central banks; bankers or economists? The answer is that we don’t know. And perhaps different skills sets are needed at different times. Researcher Roger Lowenstein points out that during the financial crisis in America, career economist , Ben Bernanke clearly suffered for not having any experience as a banker he states that ‘Bernanke had never issued loans, had never evaluated balance sheets, and probably did not believe it was a macro useful thing to do. He, like Greenspan, believed that the market set a rational price on mortgage securities, so why waste a lot of time parsing balance sheets? This was a mistake’.
Even this point of view is debatable and almost every appointment of central bank leadership from India, to Japan, to Brazil to South Africa has turned into an debate between the economists and the bankers.
A look at the American Federal Reserves history suggests an economics background is no guarantee of success. The first senior academic economist to hold the post of chair was Arthur Burns, whose stint was a tainted as he grappled with political pressure. The longest serving Fed chair, William McChesney Martin and arguably most successful was a banker. He presided over a golden age economically, encompassing five administrations from Harry S. Truman to Richard M. Nixon.
Zhou Xiaochuan, Governor of the Chinese central bank studied engineering/science at Masters & Phd level respectively, prior to his career in banking!
I think I agree with the conclusion of this video from the financial times that states that ‘it’s neither necessary nor sufficient to be either an economist nor a non-economist’.
Apart from a knowledge of economics and exposure the banking financial services industry, the ability to listen,lead, help others grow, synthesize data, communicate, keep up to date, engage citizens and persuade are fast becoming important skills that the central bank leaders around the world must master. In a world where data, advice and expertise from all over the world abounds, we need strategic pragmatists that can make sense of it all.
I am excited by Aishah Ahmad’s appointment and look forward to seeing how she will perform over the next few years.
