Stata Bank Of India - Transforming A Public Sector Giant 341w60

State Bank of India: Transforming a State owned Giant

Abhinav Prakash (0006/49) Amit Das (0032/49) Amol P Kothawade (0037/49) Ankita Zutshi (0054/49) Ajit Singh Verma (0035/49) Abhishek Johri (0008/49) Abhishek Minz (0010/49)

SBI: Transforming a State Owned Giant

Reasons which made transformation necessary Lack of Sale Focus SBI’s decline started in 1970s and continued for more than two decades. From being an opinion leader and a market leader with 35 per cent share it became just another bank with no influential voice and just 15 per cent market share. SBI was losing customers to its competitors and more importantly, the bank’s employees were not aware of the problems that the bank was facing. The senior management seemed to have lost hope and the employees started to lack in energy. SBI was losing business mainly because of weak technology backbone. Growing competition and aversion to technological advancement In the beginning of the 1990s, there were financial reform measures taken by the Indian government and the license raj was abolished. As a result, new private banks entered India and existing foreign banks expanded their business. There was a tremendous change in the way banking happened in India. The new entrants introduced concepts like remote banking, relationship banking etc. The nationalized bank seemed averse to the new technologies like ATM network, networked branches and centralized internet banking. Degrading customer satisfaction In the early 1990s in spite of rapid expansion, profitability was not high. Three-fourth of the area in the branches was reserved for employees. The way of handling transactions was not organized properly – roles were narrowly defined and multiple employees were involved in processing a transaction, customers’ time was wasted as they had to stand in multiple queues unnecessarily. The employees could not focus on customer sales and service as they wasted their time doing manual, paper intensive work. Customer awareness was low even at the higher authority level. Though the transition from manual to a computerized system had happened in the 1990s, it was only in 2003 that a centralized computer system was set up. Until then, the branches operated on their own independent servers. Technology transformation along with business process reorganization was the need of the hour. Thus, inferior technology, degrading customer satisfaction level and the plight of the employees necessitated a transformation effort for the State Bank of India.

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SBI: Transforming a State Owned Giant

The transformation & the Result Following steps were undertaken during the transformation phase: I) Leadership The entire top management was shuffled and four new SBUs headed by Deputy Managing Directors (DMDs) were created. Bhatt incorporated a mid-corporate group and bank within the bank to recapture large and midsized corporations. He also created a new department – ‘Corporate Communication & Change’ headed by GM, David Azariah. This was a revamp from the SBI’s hierarchical reporting structure as David directly reported to him. Results: The strategy was a significant shift from the old hierarchical structure. II) Top-down and Bottom-up communication Bhatt embarked on communicating his vision to the 200,000 employees and changing their mind-set from that of resignation to one of confidence and dedication. The series of conclaves conducted were: a) Aamby Valley: Conducted in September 2006, it was designed for the top management consisting of two MDs and 22 Deputy Managing Directors (DMDs). It was characterized by the metamorphosing of the transformation as a caterpillar changing into a butterfly and screening of the movie ‘The Legend of the Bagger Vance’ and illustration of Golfer’s swing to instill and motivation to his ideas. Results: The conclave put forth a platform where people could voice their ideas, criticize and accept criticism and finally build up a consensus. The concerns of the bank were expressed and debated ionately in a participative environment. For the first time SBI was benchmarked against the outside world at Aamby. The brainstorming sessions on the last two days resulted in a 14-point transformation agenda along three broad parameters: 1) Business Initiatives 2) Facilitating Business 3) People initiatives b) Other conclaves: There were a series of conclaves held by the Chairman and MDs for the Chief General Managers (CGMs) and General Managers (GMs) the agenda of which was to take them through the ‘State of the Nation’ presentation and make them do some structured group exercises. There would be debates on some topics and they would arrive at a 4-5 point action plan for fixing the issue. Four benchmarks were created to become: 1) the best bank in customer service in 2006-07 2) the best public sector bank in growth parameters in 2007-08 3) the best Indian bank in 2008-09 4) the best global bank Results: DMDs recognized the importance of individuals in the transformation process and were motivated for the whole process. Consequently, the conclaves were cascaded down to DGMs 11/10/12

SBI: Transforming a State Owned Giant and AGMs. The purpose shifted from the performance-oriented assessment to analyze where they stood and what was the current state of the bank. c) The Union Conclave: This conclave was specifically targeted towards the trade unions. Meetings were organized after the day’s work and would not end until the both parties agree. There was a major shift in how the management viewed the unions as a part of the organization. Results: The union leaders also made presentations and came up with constructive suggestions. These enclaves moved them in and brought them at the same level of understanding as the top management. III) Business Initiatives a) IT Platform: SBI finally overturned its product and services offerings by implementing efficient technology platform. It resumed CBS rollout and all branches were on CBS platform by July 2008. It moved from branch banking to anytime, anywhere banking. Results: But volumes expanded at a pace which technology could not handle. The competition was getting tougher and SBI still depended on vendors for technology. b) Business Process re-engineering: SBI shifted all non-customer facing branch activities to centralized back office processing cells so that the branches could focus exclusively on sales and service. It also redesigned its branches. The modular structure was dismantled and the positions of Deputy General Managers were removed. Results: The processing cells ensured faster turnaround time and better processing quality. The physical and mental barriers separating the customers and the staff were removed by the introduction of glass and fiber modular workstations. The loan orientation of the branches was also changed to cater all kinds of borrowers. c) Customer Service: The next agenda was to elevate SBI’s ranking in customer service to the first position. SBI started a campaign of ‘Triggering Posters’ each one posing a simple question for gathering ideas on the new vision statement. It also leveraged technology to improve customer service. The customer service website ‘Service Desk’ and ‘SMS Unhappy’ service were introduced for providing product details and smses to SBI in case of any grievance to be resolved within 24 hours. Results: SBI received over 141,000 responses from the employees for the vision statement and it finally adopted ‘My customer, my SBI, My SBI first in customer satisfaction’ as its new vision statement. The ‘Service Desk’ internal website introduced to facilitate the customers for all product and service offerings removed the burden from the staff to know and explain details about all 196 products. The relationships between the staff and the customers improved to a great extent.

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SBI: Transforming a State Owned Giant d) Other Initiatives: SBI strengthened and integrated its risk management systems and introduced a position of Managing Director who functioned as the Chief Credit and Risk Officer. A new system for measuring business performance was designed and implemented. Non-banking subsidiaries were mobilized in the areas of capital markets, credit cards, mutual funds and life insurance by using the bank’s distribution channel. Results: The performance in non-core banking instruments improved. Merging of State Bank of Saurashtra and State Bank of Indore in itself eliminated the duplication of front-end branches, back end operations and istration. IV) People Initiatives Focus was to bring about a more open, friendly and caring culture in the bank more conducive to bonding, team work and business. a) Broad Based Communication: The next target on the agenda was to communicate the message of change to the rest of the bank’s 138,000 employees. SBI launched an in-house mass internal communication program called ‘Parivartan’ which was led by David Azariah and the DMD of Corporate Strategy and New Business, Deepak Chawla. Results: Parivartan received a whole hearted but some treated it as an attack on the capabilities of the staff by pointing out their inefficiency in serving customers b) Training and Expansion: An expansion plan of adding 1000 odd branches per year met with the challenge of adequately staffing them. Recruitment was taken up resulting in 2.4 million applications which was further reduced to 60,000 interviews for the required 20,000 clerical officers and 3500 officers. Efficiency was greatly improved due to the use of a streamlined online process. To focus on leadership for the future, AGMs and above were regularly trained on business and leadership skills in top business schools. Results: SBI’s employee strength grew by 15%. Through the lateral recruitment, new employees were offered market based salaries on a contract basis. c) Performance Management System: Incentives for employees were not aligned with responsibilities or in some cases were too late for the incentives to kick in which resulted in lower morale or demotivating employees to not work harder. The reasons were traced out to lengthy reports filling resulting in a promotion backlog. A system of using MCQ based reports for promotions and the increase in the number of committees led by senior people was implemented. Employee recognition measures like ‘Best employee of the month’, etc. were introduced. An online employee suggestion scheme was also launched. Results: Bottlenecks in performance management were sorted out and across the organization and people were given incentives to inculcate the value of being the part of SBI. V) Business Initiatives

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SBI: Transforming a State Owned Giant a) Burgeoning Indian Middle Class: Image of SBI was reconfigured to attract the middle class and the youth. To reduce the average age of the employees in SBI, a conscious effort was taken to recruit directly from the campus. Efforts were taken in the direction of trying to improvise the products to suit the needs of an average professional. Expansion into strategic locations with multi-functional ATMs was implemented. Results: Reduced average age of employees to attract a younger mindset and opening a new branch in a new suburb got easier with the use of core banking b) Rural India: A target of 100,000 unbanked villages was set. The bank was positioned as the ‘Banker to every Indian’. This idea of inclusive growth required a different focus led by technology at the lowest costs possible. Rural Banking and Agricultural Group (RBAG) was set up to guide the branches in semi-urban and rural areas. SBI adopted an outsourcing model by partnering with FMCG companies. Results: By 2011, SBI reached 125,000 villages and planned to cover 200,000 more by 2012. c) Wholesale Bank: Providing ancillary services in addition to providing a large chunk of money required SBI to invest in certain technologies to coordinate activities of all different businesses that serviced large customers. A holistic way to manage customer relationships was introduced. Results: Increased wholesale banking from 0.15 billion dollars to 0.99 billion dollars in just four years. Recently SBI funded 1 billion dollars in five minutes for the Tata-Corus merger. SBI has the unique distinction of being able to work out this kind of funding in less than 10 minutes. d) Global Expansion: SBI built the foreign currency assets by taking larger exposures on Indian companies. To fund these assets, foreign currency bonds were issued. Results: Due to these measures, SBI can take a single group exposure up to 1 billion dollars.

Challenges before Mr. Bhatt’s successor Sustaining development Mr. Bhatt ensured that the transformation journey got started for SBI. Mr. Bhatt’s successor had to make sure that efficiency of the bank is given priority. By 2008, Mr. Bhatt made sure that for SBI things were working out fine in the fields of technology, product differentiation, branding, marketing and distribution. The new Chairman would have to take measures to keep the progress happening in the same way so that SBI remained the market leader. He must be ready for challenges ahead and to face them successfully by taking calculated risks and firm decisions. Meeting customer expectations and catering to high need

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SBI: Transforming a State Owned Giant The citizens of the country had high expectations from SBI. It would be a challenge for the new Chairman to meet such expectations and keep customers satisfaction high. There was huge market potential on the part of SBI in the retail sector as 30 million people were being added to India’s middle income group every year. In order to cater to such huge demand and convert the market potential to market size, there was requirement for adapting new products and services. Increase capital The Indian companies were growing at a tremendous rate. The number of Indian companies in top 500 global companies was rising rapidly. So, in the area of corporate banking SBI needed to meet the capital and other requirements of these companies. Meeting Bhatt’s aspirations Mr. Bhatt took SBI to a position where it could be catapulted to become a very strong banking system in of size, sophistication and reach. At that time India didn’t have such a system. Bhatt believed such a strong banking system was required to sustain the existing growth rate over the next decade. Also, Bhatt aspired that SBI became the best customer oriented and the most tech-savvy bank in the country and then the best global bank. Thus, Bhatt’s successor had a huge task ahead.

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