Stata Bank of India - Transforming a public sector giant

7/29/2019 Stata Bank of India - Transforming a public sector giant

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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)

State Bank of India: Transforming a State owned Giant


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SBI: Transforming a State Owned Giant

11/10/12

Reasons which made transformation

necessary

Lack of Sale Focus

SBIs 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 bankwith no influential voice and just 15 per cent market share.

SBI was losing customers to its competitors and more

importantly, the banks 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 reformmeasures 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 queuesunnecessarily. 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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The transformation & the Result

Following steps were undertaken during the transformation

phase:

I) LeadershipThe 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 & Changeheaded by GM, David

Azariah. This was a revamp from the SBIs 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 communicationBhatt embarked on communicating his vision to the 200,000 employees and changing theirmind-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 managementconsisting 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 Vanceand illustration of Golfers swing to instill support

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 anddebated passionately 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 Initiatives2) Facilitating Business3) People initiativesb) Other conclaves: There were a series of conclaves held by the Chairman and MDs for theChief General Managers (CGMs) and General Managers (GMs) the agenda of which was to take

them through the State of the Nationpresentation 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 2006-072) the best public sector bank in growth parameters in 2007-083) the best Indian bank in 2008-094) the best global bankResults: 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


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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 wasspecifically targeted towards the trade

unions. Meetings were organized after thedays 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 Initiativesa) IT Platform: SBI finally overturned its product and services offerings by implementingefficient 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 tocentralized 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 SBIs ranking in customer service to thefirst position. SBI started a campaign of Triggering Posterseach 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 Unhappyservice 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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d) Other Initiatives: SBI strengthened andintegrated 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-bankingsubsidiaries were mobilized in the areas of capital

markets, credit cards, mutual funds and lifeinsurance by using the banks 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 administration.

IV) People InitiativesFocus 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 themessage of change to the rest of the banks 138,000 employees. SBI launched an in-house mass

internal communication program called Parivartanwhich was led by David Azariah and the

DMD of Corporate Strategy and New Business, Deepak Chawla.

Results: Parivartan received a whole hearted feedback 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 withthe 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 onbusiness and leadership skills in top business schools.

Results: SBIs 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 withresponsibilities 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. wereintroduced. 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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a) Burgeoning Indian Middle Class: Image of SBI wasreconfigured 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 villageswas 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 ofmoney 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 Indiancompanies. 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. Bhatts successor

Sustaining development

Mr. Bhatt ensured that the transformation journey got started for SBI. Mr. Bhatts 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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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

Indias middle income group every year. In order to

cater to such huge demand and convert the marketpotential 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 Bhatts aspirations

Mr. Bhatt took SBI to a position where it could be catapulted to become a very strong banking

system in terms of size, sophistication and reach. At that time India didnt 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, Bhatts successor had a huge task ahead.

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Stata Bank of India - Transforming a public sector giant