This document summarizes a study on corruption challenges faced by Safaricom Ltd, the largest mobile provider in Kenya. It discusses Safaricom's anti-corruption actions and identifies areas for improvement, using the McKinsey 7S framework. The recruitment process lacks behavioral assessments to ensure value alignment. The discipline management process allows warnings, weakening the zero-tolerance policy for fraud and confusing employees. Strengthening shared values and staff competencies through improved hiring and discipline is recommended.

1. Bay Bridge – Team 7 | Organizational Behavior Course – HULT
MBA | March 12, 2016

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Executive Summary
This paper presents our research and study of the challenges faced by many companies, resulting from
globalization and the growing interest in developing countries’ economies. As the main part of our study,
we concentrated on corporate corruption, looking at the telecommunication industry in Kenya with a
specific case of Safaricom Ltd, the largest mobile provider in the country.
The team haschosenthis topic becausecorruptionis one of the mostsignificant global challenges faced by
many companies. Examining Safaricom’s organizational culture and its ecosystem will help us understand
how corporationsin developing nationscould address the threats of fraud and exploitation. In this paper,
we study the current and potential impact of integrity issues, and the need for a strong, well developed
organizational culture to control and overcome the effects of an internal breach of trust.
There are limitations in this study due to the complexity of the issue chosen, the timeframe of the course
andthe available informationthroughcampuslibrary and online resources. Even thoughpubliccompanies
present a significant amountof informationon their annual and sustainability reports, there is still hidden
information that is out of our reach.
Globalization and Telecommunication
As one of the fastest growing industries in developing countries, the telecommunication industry made a
significant contribution to the economic growth of Kenya. However, the industry and its players are also
facing major challenges including corporate corruption and fraud. Research has pointed out that the key
drivers of this concern could range from regulations (or lack of them), the culture of the local society, the
company’s culture, and management. Corruption as an organizational problem is becoming more
challenging as globalization progresses, especially for developing countries. Large companies are
concentrating their strategy towards penetrating these nations due to lower labor cost and high revenue
potential.
The telecommunication industry is highly sensitive to corruption due to its structure, services and
environment, creating a significant impact on the company’s image, its stakeholders, and the future.
An illustrationof this case was publishedglobally in 2014. AT&T, theworld’slargest network in themobility
business, as a part of their expansion strategy outsourced their business to different parts of the world.
When it was fined for $25 Million by FCC due to a data breach, in which 28,000 CPNI (CustomerPropriety
Network Information)gotstolen, allits customersfelt threatened. Later, theinvestigationrevealedthat the
breach happened in three outsourced nations – Mexico, Colombia, and the Philippines, where AT&T had
very little authority. It was difficult for AT&T to come up with a strategy for outsourcing, as it knew that it
might lose total control of the company’s culture: something that is shaped by regional culture as well.
Internally, the issue cost AT&T more than just the $25 Million. It had to improve, add and replace several
company’s assets – from process, technology to workforce (Teri Robinson, 2015).

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As globalizationevolves, what keeps any CEO awake at nightis data security. As technology becomes more
complex, corruptionbecomeslessvisible tothenakedeye. Technology isbothaprotectoranda threat. This
story is very similar to what happened to Safaricom in Kenya, where 10,000 costumers were involved in
fraud (Sustainability Report, 2015). Like AT&T, Safaricom has the biggest market share and also wanted to
create a culture separate from the one ingrained in Kenya. The business model may be different as
Safaricomisn’tanoutsourcingbusiness.But, theybothareservicinginthetelecomfield where onequestion
remains– how to create an anti-fragile company in a fragile environment?
Telecommunication Industry in Kenya
Kenya’sInformationCommunicationandTechnology(ICT)sectoris a maindriver of the country’s economic
growth, accounting for 8.4% of GDP. ICT experienced rapid expansion in the cellphone market of Kenya,
where Safaricom and other players continue to contribute substantialgains to the economy. This allowed
the sector to grow by 20% annually and add 1% to GDP annually for the past decade. It is expected to
contribute10% tothe country’sGDP by 2017 (KPMG, 2015). Thefuture is undeniably hugefor the Industry
but, what are the challenges?
Corruption as a global challenge
When addressing such major challenge, a clear definition of corruption needs to be made; however it is
easier said thandone. While different resources define corruptionas actions or transactions, either with a
financial aspect or not, that support a promise or acceptance of benefits and motivate unethical actions;
the perception of what actions are considered corrupt or unethical vary, depending on many factors
including exposure, education, locally accepted behaviors, culture andthe environment (Mckinsey, 2015).
In many cases, it is not clear whether an action or transaction can be seen as having a corrupted nature,
especially when behavioral codes differ between borders. Often, what may seem unethical or corrupt in
one country can be seen as a gesture or a gift, in others. While organizations have to face the different
perceptions of ethics and corruption among their employees, it is important to clearly communicate the
corporate perception of ethics at all levels of the organizations. This can be obtained by creating
transparency, documentingtheprocessand ensuringthateverybody within thecompany speaksthe same
language (Mckinsey, 2015).
One of the biggest corruption risks, many companies are facing is employee’ fraud. Having their own
employees making unethical actions can damage the company in many ways. This type of corruption is
difficult to combat without an internal competence and a suitable and robust organizational culture (Ravi
Venkatesan, 2015).
Corruption in Kenya
In2013, Kenyawasrankedasnumberfouramongcountriesthatexperiencedthehighestamount ofbribery
and fraud worldwide. 70% of interviewers in Kenya reported that they had given bribes in previous 12

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months. Compared to the world’s average of 27% of interviewers, indicates that the integrity, corruption,
and bribery are still standing as major challenges to Kenya’s growth and development (TI survey, 2013).
In December 2015, the president of Kenya declared corruptionas a national threat. The acknowledgment
of the Kenyan government in the changes need to be made in order to align with the new opportunities
andglobal connections, issignificant for companieslike Safaricom. Having tocompromiseandadjustto the
local culture andbehavior pattern, impacted the internal culture of organizationsin Kenyaas well as their
performance and global connections.
Safaricom Ltd.
Background
Safaricom Ltd is a leading network operator in Kenyathat was initially foundedas a fully owned subsidiary
of Telkom Kenya (the Posts and Telecommunication Corporation of Kenya). The organization was
establishedin 1997 asa privatelimited liability company andbecame publicin the year 2002. InMay 2000,
VodafoneGroup fromtheUK acquired40% ofSafaricom’ssharesandmanagementresponsibilities. In2008,
the Kenyan government, which held 60% shares in the company, disbursed 25% of its shares and made
available to public; turning Vodafone UK to be the main shareholder in Safaricom Ltd (Safaricom Ltd Web
Site, 2015).
Safaricomenvisionsto“Transformlivesofthe people”, deliveringefficient services, with simplicity andgrow
trust of the people (Safaricom Ltd Web Site, 2015). In order to achieve their vision, Safaricom provides a
range of products and telephone services, broadband, Internet and financial services. Safaricom Ltd.
Providesservices to over25 million subscribersandcurrently commandsamarket shareof 67%, according
to the Communications Authority of Kenya (CA) June 2015 Sector Statistics reports. The Company's
integratedtelecommunicationservicesinclude mobile andfixed voice, shortmessagingservice (SMS), data,
internet and its money transfer service, M-PESA. After experiencing the success it achieved with the M-
PESA service in Kenya, Safaricom has now extended its services to the global markets. The MPESA service
has now emerged as a most favored personal cash transfer medium, making it a globally known money
transfer service operating in Afghanistan, India, SouthAfrica andEastern Europe (Karuri, 2012). Lookingat
the global opportunities, Safaricom has started to implement many changes within the organization; the
number of employees was almost doubled in the past few years (4,129 employees in 2015 compared to
2,400 in 2013), new policies and procedures along with a change of management.
Statement of the Problem
Safaricom Limited has faced many cases of corruptioninvolvingits employees, management, andbusiness
partners. The mostrecent case was in 2015 whenthe company fired 58 of its employees dueto fraudulent
activities (George Ngigi - BusinessDaily, 2015). WhileSafaricom showsgreat commitmenttoimplementing
a well-developed integrity system, many related issues are still emerging due to the company’s growth,
driving opportunities as well as risks. Safaricom has relations with many business partners, including local
and national governments, suppliers, dealers, and agents. These significant relationships lead to an

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increased risk of unethical behaviors by employees or partners. Due to the government privatization
process, Safaricom was no longer a state corporation and thus has the obligation to act according to the
Ethics and Anti-corruption Commission Act (Mckinsey&Company, 2015).
While Safaricom performance seems promising with a high growth rate and an increasing number of
subscribersand services, it’s still clear that the lack of integrity andcorruption cases created an impact on
the company’simage, loss of trustfrom customers, partnersandemployees, and a loss of market share to
its competitors (Appendix, Exhibit 1). The KPMG True Value report for 2015 determined that the external
andinternalcorruptionelementsin Safaricomare damagingtheeconomicvalueofthecompany, estimating
a loss of 30 Billion KES (KPMG, 2015). Safaricomacknowledgesthat further steps need to be taken to face
the ongoing unethical behavior by its employees and change the culture both internally and externally.
Actions Taken
To fight against corruption, Safaricom has implemented the AB&C program (The Anti-bribery and
Corruptionprogram) which adheres to bothlocal and international requirements. As part of this program,
Safaricominvestedin developingastronggovernanceinorder toimplement integrity standards. Oneofthe
key elements under this goal is the ethics committee, which is led by the CEO and involves many senior
managers, includingtheDirector Risk Management, CFO, andotherseniorManagement withtheEthicsand
Compliance Head of Department as the Secretary (Safaricom Ltd, 2015). In addition to the program,
Safaricom CEO BobCollymore statedthatSafaricom’s businessreports(showingbothassets and liabilities)
are shown publicly to ensure transparency in this matter. Shown in the company’s sustainability report,
Safaricom re-echoes its pledge to advocate a culture that promotes personal and corporate integrity,
committing oneself to a high form of ethical standards (KPMG, 2015).
Future Steps
The company has been well-recognized for the implementation of the anti-corruption framework (KPMG,
2015)butwhat they overlooked was how these action plans affect their bottomline, their employees and
otherelementsof thebusiness. Asanexample, intherecent peoplesurvey, (AppendixExhibit2)Safaricom’s
employee net promoter and engagement metrics show a diminishing trend.
In addressingthese issues, our team decided to use Mckinsey 7S Modelto identify Safaricom’snext steps.
The 7Smodelserves asa tool for analyzingthecompany’sorganizationaldesignwiththeattentionon7 key
internal elements: strategy, structure, systems, shared values, style, staff and skills, and helps to identify
how to effectively align these elements and allow the organization to achieve its goals. One key aspect of
this model is the interconnection between all 7 elements andhow a change in one area requires a change
in the rest for the firm to function effectively (Exhibit 5).
The model divides these elements into hard and soft areas and emphasize that strategy, structure and
systemsare hard elements which are easier to identify and manage, and the soft areas which are counted
as the foundation of the organization, and are harder to manage.

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For Safaricom’s future steps we chose to focus on two main soft elements of the model: Staff and Shared
Values. Staff refers to the people, their backgrounds and competencies aided by recruiting process,
selection, trainings, career development, etc. WhereasSharedValues refer tothe fundamentalsetofvalues
sharedthroughouttheorganizationandserveas guiding principlesof whatis important. Underthismodel,
organizationsare successful when they achieve an integrated harmony amongall the elements (Mckinsey
7S's Model).
Using this model, our team analyzed the current situation in Safaricom and its goals for the company’s
integrity systemdevelopmentas well as its global expansionplans. It is clear thatthere are inconsistencies
between thecompany’scurrentsituationanditsaspirations. Whilesomeelementsof the7Smodel are well
developed, we acknowledgethe interconnectionof these elementsand the need to make adjustmentsand
tuning of its shared values and staff to ensure that it works effectively to reach its desired goals.
Recruitment Process
The most pivotal role of a human resource team is to hire the right person, for the right role at the right
time. An effective recruitment process is crucial because it plays a huge part in ensuring that a company is
sustainable in the long run.
Studying the hiring process of Safaricom, it isn’t clear which assessment it uses to ensure that applicants’
core valuesarealignedwith thatofthecompany’s. Itfocuses only onhardskills, andfromthedatagathered,
it is easy to draw an assumption that character/behavior filtering during the hiring process is not
implemented at all. According to Towers Perrin Report, two of the attractiondrivers in recruiting the right
people are Reputation of the Organization as a good employer and the Caliber of coworkers hired. Ruling
out ethics as a pre-qualifier in the recruitment process may potentially diminish the chance in getting the
right people. Safaricom is continuously facing corruption issues, coupled with demotivated employees,
because it failed tothoroughly identify the right candidatesand missedsetting integrity expectations from
the beginning. This decreases employees’ morale dueto misalignmentit sets from the startwhich resulted
in a poor employee satisfaction and engagement trend.
HumanCapital bringsa uniquesource of competitive advantagetoany organizationandchoosingthe right
workforce will help the company from the desired culture. As a further step, our team highly recommends
Safaricom to use behavioral assessment during the interview process. It not only adds reliability to the
quality of their new hires, butalsosets aproper expectationfor the candidatesonthelevel of strictnessthe
company givestoitsmoralcodes. Asareference point, pleaseseethedetailed andsuccessfulAT&T Mobility
Hiring Process (Exhibit 3) in the Philippinesin which they put a huge value in filtering behaviors first before
skills.
Discipline Management Process
Safaricom’s Risk Management 2015 report details different statistics that show the effectiveness of their
action plans against fraud. Their anti-corruption corrective measures include a number of fraud cases

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investigated, disciplinary warnings, dismissals and cases reported to local law enforcement agencies.
Lookingclosely at the progress, it is clear that their overall numberof disciplinary warnings since 2014 had
decreased tremendously in 2015. To an untrained set of eyes, this achievement may call for a celebration,
butdoes the trend truthfully show how seriousthe company is in addressingtheir corruptionissues?Note
that though there was a decrease, the very presence of disciplinary warnings only shows that
Fraud/Corruption is not part of their zero tolerance policy which should have been clearly defined in the
company’sCodeofConduct. Thisisahugeredflag thatthemanagementdisregardedandhighly contradicts
Safaricom’s public claim on the level of severity they place on the issue; this causes a huge misalignment
within the organization. Understanding the principle of employees’ behaviors formation – cognitive,
affective and behavioral, it is easy to predict that when they see a misalignment, they start showing their
resentment in their daily routine.
The right discipline management process would have been, when one proven guilty after careful
administrative investigation, any acts related to fraud or willful breach committed by the employee,
regardless of his job grade, must be punishable with automatic dismissal. Allowing a range of Disciplinary
WarningstoDismissalasapenalty clausesendsawrongmessagetotheemployees, statingthatfirstoffense
is always acceptable which misleads them from the true core values of the company and doesn’tdrive the
right behavior in any organization. It increases an opportunity for them to commit fraudulent activities
which isagainstthe causeof whatSafaricom hasbeenfighting forandconfusesthemfurther onwhere they
stand in this battle.
Conclusion
Globalization is one key source that drives changes in an organization’s culture, structure, design and
strategies. Corruption and fraudulent activities are one of the greatest threats faced by organizations
operatingin emerging economies. When addressingthesenew challenges, it is importantfor organizations
tohavean endtoend solution, and driveits valuesand policies inits people, internally andexternally. Every
employee of the company starting at the hiring point and throughouttheirtime at the organization, must
be well aware andcontinually exposedto thevaluesand changesin theorganization. TheLeadership of the
organizationmustcommunicateits values and perception of ethics in every action it takes. As Safaricom is
startingto establisha global importance, the organizationpresentsa strongcommitmenttowards a robust
integrity system. The company’s non-tolerance policy for corruption needs to be aligned with its actions
andcommunicatedproperly at all levels of the organization. Thiswould in turn lead to a better connection
within the 7 elements of the Mckinsey Model. A strong recruitment and Discipline Management process
along with continual efforts implementing Safaricom’s anti-Bribery and Corruption policies, would help
Safaricom achieve its goals, developingan ethical ecosystem along with becoming a relevant global player
in the telecommunication industry.

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References
(2015). Retrieved from Safaricom Ltd Web Site: http://www.safaricom.co.ke/
George Ngigi - Business Daily. (2015). Corporate News. Business Daily.
KPMG. (2015). True Value Report.
Mckinsey. (2015). AB&C.
Mckinsey 7S's Model. (n.d.). 7S's Model.
Mckinsey&Company. (2015). AB&C Program.
Safaricom Ltd. (2015). Sustainability Report.
(2015). SustainabilityReport. Safaricom.
Teri Robinson. (2015). Associate Editor. SC Magazine for IT Security Professionals.

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Appendix
Exhibit 1
Exhibit 2

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Exhibit 3
Exhibit 4

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Exhibit 5