Organizational Behavior: Transforming a State-owned Giant

What were the reasons behind the implementation of the transformation effort in State Bank of India?

The key drivers for implementing transformation effort in State Bank of India are as follows:

Declining Market Share: SBI became “an inward-looking bank” with no focus on market share or customer segmentation. It never focused on the young customer. The main reason behind losing the market share was that SBI was losing its customers to its competitors as the customers were neither respected nor treated well in the bank. The bank was losing market share steadily for more than two decades. In the early 1970s, they had about 35% of market share, but that declined to 15%. During the early years of the century, the decline was getting worse. It resulted in losing its voice significantly in the economic sphere, in the industry, in the government circles.

Lack of Customer Focus: The competitors of SBI provided the elevated customer experience to a new level. They introduced a concept of relationship banking, had modern, plush branches in shining glass buildings with beautifully designed customer waiting areas – a stark contrast to SBI where customers stood in multiple queues behind iron-grilled counters for completing transactions. The new banks hired the best talent and empowered the workforce with a strong service culture.

Employee apathy: The people saw SBI as a classical old type banking institution which was not seen as a leader in product innovation, marketing or distribution. Most of the bank’s employees were unaware of the problems that the bank was facing due to limited contact with seniors, further one-way communication, from top to bottom added into the decline of the performance of the bank. Employees have not energized anymore. Mr. Bhatt clearly described that employees had their pride and sense of belongings. The employees were not performing poorly as an individual, but they did not have a common goal, vision, objective and commitment as everybody was pulling in different directions. They felt that there was no recognition for their work because there was lots of delay in promotions. It was the environment where the people considered the promotions as the principal form of reward and therefor the delay in promotions was another reason for low employee morale.

Inferior technology platform: SBI realized that business process reorganization had to accompany the technology transformation exercise and therefore simultaneously embarked on a path of transforming its processes. But, SBI’s ability to offer new products and services was hinged by the improper implementation of its technology platform. The bank was transitioning from a decentralized system to a centralized computerized setup. The rollout was proving to be quite difficult and employees were not comfortable with moving to a CBS environment. There were lots of problems with the system such as poor connectivity and its high complexity and SBI did not address these problems properly which damaged the ability of the bank to serve the customers. At times it took nearly two hours to open an account. Hence, the bank was losing its business, and the staff was getting frustrated.

An Inward-looking bank: SBI was perceived as a government bank whose main purpose was to pay government officials’ salaries and dispense pension. Even family members of the staff believed that it was a bank for, of and by the senior citizens. There was complete lack of sales focus, the managers never stepped out of the branches to talk to their customers, instead, customers came to the branches for completing transactions whereas the competitors of SBI introduced the concept of relationship banking which attracted younger, affluent, brand conscious and technology adept customers. SBI still followed the traditional way of banking and hence was left with the older clients who were averse to change and to adopt a new technology. There was a clear image in the minds of customers’ who considered the bank to be for, of and by the senior citizens.

What specific steps did the SBI undertake during the transformation effort and what were the results of these steps?

In order to address the existing problems, Bhatt decided to take inputs from every direction available for which he not only approached the external sources as well as internal sources. For external perspective he took advice from the consultants & eminent professors. To understand the internal problems, he conducted a bank wide survey of employees which revealed that the bank had superior capabilities but needed improvement in direction, motivation and innovation. The series of steps he undertook can be enumerated under the following heads:

Establishing Leadership and organisational restructuring

In order to address the one way organisational hierarchy Bhatt decided to create four strategic business groups segregating on the basis of the existing & prospective market segments headed by deputy managing directors:

1. The rural and agricultural banking group- to first expand the banking reach and then consolidate it into a single national group.
2. The mid-corporate group - for global market groups and second tier corporate borrowers, the global markets group to recapture large and mid-sized corporates.
3. The corporate strategy and new businesses group - for new businesses such as private equity, wealth management, general insurance, payments and pension funds to target private and foreign banks in the country.
4. Corporate Communication & Change - General Manager headed the department, a clear deviation from the traditional hierarchical structure.

Winning the employees’ support through the conclave series:

The Aamby Valley Conclave: This conclave addressed the top management consisting of the two Managing Directors and 22 Deputy Managing Directors. He used this platform to tell the top management about the strategies for the transformation. The major task was to get feedback from the participants and understand the information gaps which were present with respect to the state the bank was in at the particular moment. He motivated the participants with the help of caterpillar-butterfly metaphor focusing on the need of metamorphosis and golfer-swings metaphor to compare SBI with the golfer who has left his swing. The Legend of Bagger Vance and drawing parallels to the Gita was also done. He also presented the present status of the bank through a presentation called ‘The State of Nation’. The priorities of various business initiatives were decided during this conclave. The Next Wave of Conclaves: The chairman and MDs held conclaves for the Chief General Managers (CGM) and General Managers (GM).

Without changing the previous format, Four benchmarks were created during this conclave: Best Bank in customer service (2006 - 07), the best public sector bank in growth parameters (2007 -08), the best Indian bank (2008 - 09) and eventually the best global bank. The Next Wave of Conclaves: The director and MDs held gatherings for the Chief General Managers (CGM) and General Managers (GM). Without changing the past format, Four benchmarks were made amid this gathering: Best Bank in client benefit (2006 - 07), the best open area bank in development parameters (2007 - 08), the best Indian bank (2008 - 09) and in the end the best worldwide bank.

The Union Conclave: The subsequent stage was to cajole the trade unions. State Bank of India was profoundly unionized work force. He needed to win over the association to his side to make effective changes. There were introductions made to the association pioneers about the present situation the bank wound up in furthermore, they were likewise made mindful of the ramifications of this circumstance. Indeed, even the association pioneers made an introduction to the director and some of the recommendations made by them were very helpful.

Successful execution of the IT stage

When Bhatt ended the take-off of CBS in September 2006, just 3000 branches were relocated to the new stage. In December 2006, subsequent to settling all the mechanical glitches, SBI continued CBS rollout and by July 2008, the majority of SBI's branches were on CBS. The client was never again a branch client, He / She became a bank customer. SBI had moved from just branch keeping to managing an account.

Branch Network Business Process Reengineering

It was basic for SBI to adjust its forms with the CBS. In three years, SBI moved all non-client confronting branch exercises to incorporated, back office preparing cells so the branches could centre only around deals and administration. The handling cells, staffed via prepared experts guaranteed quicker turnaround time and better preparing quality. SBI additionally overhauled its branches. Glass and fibre particular workstations replaced high teakwood counters and wire fit money lodges. The staff turned out to be nearer to the client and all hindrances vanished. Prior the branch chief dependably must sit in a branch, now they had adequate time to do showcasing work.

Create Consistent Customer Service

Bhatt's goal was to raise SBI's positioning in client administration to initially position. He re-imagined the bank's vision. The bank received, "My client, my SBI, my SBI first in consumer loyalty" as its new vision articulation. Different activities: SBI reinforced and incorporated its hazard administration frameworks and made the situation of another Managing Director who additionally worked as the bank's Chief Credit and Hazard Officer. A framework for estimating business execution was actualized. It too focused on abusing collaborations with its current non-keeping money auxiliaries in the regions of capital markets, Mastercards, shared assets, disaster protection by utilizing the back dispersion channel. In 2008, it raised $3. 67 billion if the value from the market through a rights issue in this way enhancing its capital ampleness proportion.

Individuals Initiatives

The emphasis on individuals was one of the foundations of Bhatt's change motivation. The individuals at SBI must be prepared to proclaim SBI into the new period. The appropriate response was an in-house mass inward correspondence program called 'Parivartan'. The workshop planned to sharpen the staff about the change endeavors, invigorate them to end up change specialists, enable them to end up more client well-disposed and encourage a feeling of comprehensiveness. Parivartan intended to stun individuals out of smugness and make them confront the truth. The "National SBI" battle pursued close on the foot sole areas of Parivartan and meant to influence the representatives' center esteem framework. SBI ran the battle in a progression of three waves. The first stage to investigate what it intended to be a native of SBI, the second to give individuals apparatuses to hone citizenship at work, and the last stage to rehearse citizenship in the network. Under Bhatt, SBI intended to include 1000 odd braches consistently. The quick test as staffing the branches as the current staff was at that point exhausted. The aggregate of 20, 000 administrative staff and 3500 officers were therefore enrolled from 2. 4 million applications, which were taken care of online by SBI. The bank likewise enrolled laterals for authority positions.

By and large, SBI's worker quality expanded by 15%. SBI likewise centered around preparing by tying up with best Bschools to prepare AGMs or more. Bhatt presented various representative acknowledgment measures. AS a major aspect of its rights issue, SBI additionally presented an Employee Share Purchase Scheme to which everyone from the delivery person to the Chairman could buy in.

The Business Initiatives

Win back the India Middle Class: SBI needed to change its picture to be appealing to the young what's more, the working class. It obliged the "Glad to be Indian" advertisement crusade to use the way that individuals recognized SBI as the Indian Bank. Bhatt additionally ensured that SBI open branches in 2000 odd semi-urban zones and triple its number of ATM's to have the capacity to reach suburbia. SBI likewise attempted to pull in more youthful clients. It diminished its normal age (45 at the time) and employed individuals specifically from grounds as now SBI contributed to their image appreciation. SBI additionally investigated youngsters requests and needs and after numerous emphasess created corporate pay accounts which their merchants regarded great enough to use as their own pay accounts.

Claim Rural India: Bhatt trust that India's financial development will originate from Rural India and subsequently needed to extend SBI's range in rustic India and in this way set an objective of connecting with 100, 000 new towns. In any case, Bhatt understood that rustic territories required an alternate methodology what's more, in this way made the Rural Banking and Agricultural Group (RBAG). Despite the fact that the circle makes a beeline for the National Banking Group (NBG), they had a specked line obligation to DMD, RBAG. NBG guided the metro and urban branches and RBAG the semi-urban and rustic branches. To contact the substantial rustic populace, SBI received an outsourcing show and utilized managing account reporters or specialists who did keeping money business for the benefit of SBI by joining forces with FMCG organizations, for example, ITC and HUL; telecom suppliers, NGOs and indeed, even the Indian Post Office. The bank additionally utilized innovation, for example, the purpose of offer terminals that depended on unique finger impression acknowledgment, portable managing an account and web booths. By 2011, SBI had achieved 125, 000 towns and wanted to cover 200, 000 un-kept money towns by 2012.

Revamp Profitable Wholesale Bank: Bhatt made another vital business aggregate named Discount Bank since he understood that enterprises currently required feed based administrations like treasury, exchange back and money administration crosswise over monetary standards and fringes. To achieve his objective of multiplying expense wage, SBI resuscitated the record arranging exercise which centered on building client connections and giving all items and administrations through a solitary window on a similar stage.

What are the challenges facing Mr Bhatt’s successor?

Mr. Bhatt had taken certain decisions that were instrumental in changing the destiny of SBI in just 5 years. While his accomplishments during the transformational journey revamped and rectified the existing drawbacks, it also led to the emergence of newer challenges. The SBI ship would be steered by a new leader from 2011 & a greater challenge was that the future policies would have to be in line with the vision that Mr. Bhatt had set. Consequently, his successor will have a lot at stake and would need to

• Enable maintenance/sustenance of existing good policies
• Maintain focus on improving efficiency
• Align to and adapt to the changing economy
• Live up to the stiff expectations as Mr Bhatt had performed better than expectations during his tenure In this regard, challenges would be manifold:

• The foremost task would be to sustain the drive and stay ahead of the competition
• Aggressive growth strategy adopted so far should be revisited and evaluated with regards to efficiency before going for further expansion policies in terms of branches and ATM centres.
• He/she should be willing to work hard, take risks and tough decisions as Mr. Bhatt had done during his tenure.
• By 2011, SBI had earned the reputation of being a “Banker to every Indian”. The successor would need to live up to this promise while catering to the ever-increasing Indian middle-class clientele (30 million each year). Since the added customers might have different needs, the products and services would have to be customized based on these needs.
• The bank’s services should also cater to high income groups to provide them with convenience and eradicate the common notion of not being the type of bank that caters to this group.
• Centralized systems are perceived to increase the distance between the customers and the employees. Also, the customers are better informed as compared to the past and thus the bank needs to be dynamic in its policies so that it is able to adapt to the changing customer needs.
• The corporate banking sector needed retrieval of leadership so that corporate lending, treasury and tenor management could be improvised on since the NPA ratios were higher than peers and the interest rate was comparatively low.
• Some critics were of the opinion that the transformation success before 2011 was a matter of luck since other banks were undergoing financial and credit crisis. Mr Bhatt’s successor has a monumental task of proving them wrong.
• In the corporate banking sector, more and more Indian companies were becoming global. This number was expected to rise to 20 by 2020. SBI would need to raise sufficient capital to fund these companies.
• The main task was to meet Mr. Bhatt’s aspirations that expected a strong banking system (that India didn’t have) that would sustain the existing growth rate over the next decade, by leveraging SBI’s size and reach.