Organizational Behavior: Transforming a State-owned Giant

Reasons for Transformation in State Bank of India

The transformation effort in the State Bank of India (SBI) was driven by several critical factors that highlighted the need for change within the organization. These reasons can be categorized into four primary areas:

Declining Market Share

For many years, SBI faced a significant decline in its market share, dropping from approximately 35% in the early 1970s to around 15% by the early 2000s. This decline was largely attributed to the bank's inward-looking approach, which neglected customer segmentation and failed to attract younger clients. As a result, customers began to migrate to competitors that offered better service and more innovative products. This loss of market share diminished SBI’s influence in economic and governmental discussions.

Lack of Customer Focus

While competitors embraced modern banking practices, SBI lagged behind, maintaining outdated customer service models. Newer banks emphasized relationship banking, creating inviting branch environments and hiring skilled staff who prioritized customer experience. In contrast, SBI’s branches were characterized by long queues and impersonal service, causing a further erosion of its customer base.

Employee Apathy

Employee morale at SBI was notably low due to perceived stagnation and a lack of direction. Many employees viewed the bank as a traditional institution with minimal innovation in products and services. The one-way communication from management stifled engagement and left employees feeling unrecognized and disconnected from the bank’s goals. This lack of common purpose hindered performance and contributed to a culture of complacency.

Inferior Technology Platform

SBI recognized the necessity of modernizing its technology to enhance service delivery. However, the transition from a decentralized system to a centralized computerized setup proved challenging. Employees struggled with the complexities of the new system, and issues like poor connectivity hampered operations, resulting in long wait times for customers. The inadequate technology infrastructure limited the bank's ability to innovate and serve its clientele effectively.

An Inward-looking Culture

SBI was often perceived as a government institution primarily focused on fulfilling governmental obligations, such as disbursing salaries and pensions. This image contributed to a lack of appeal among younger, tech-savvy customers who sought more dynamic banking experiences. The bank’s adherence to traditional practices left it vulnerable to competitors who embraced modernization and customer engagement.

Steps Taken During the Transformation

To address these challenges, then-CEO Mr. Bhatt implemented a series of strategic initiatives aimed at revitalizing the organization. His approach involved a comprehensive assessment of both internal and external factors affecting SBI's performance.

1. Leadership and Organizational Restructuring

Mr. Bhatt initiated a restructuring of SBI into four strategic business groups, each targeting specific market segments:

• The Rural and Agricultural Banking Group
• The Mid-Corporate Group
• The Corporate Strategy and New Businesses Group
• The Corporate Communication & Change Group

2. Employee Engagement Through Conclaves

Mr. Bhatt organized a series of conclaves to engage employees and gather feedback on transformation strategies. The Aamby Valley Conclave involved top management discussing the bank's current state and future direction, while subsequent conclaves focused on lower management levels. Key performance benchmarks were established, aiming to position SBI as a leader in customer service and growth.

3. Successful IT Platform Implementation

The rollout of the Centralized Banking System (CBS) began in 2006, with a focus on integrating all branches into the new platform. By July 2008, the majority of branches had transitioned to CBS, allowing SBI to enhance service efficiency and customer engagement.

4. Business Process Reengineering

SBI restructured its back-office operations to streamline processes and enhance customer-facing activities. This included relocating non-customer-facing tasks to centralized processing units, enabling branches to focus on sales and service.

5. Consistent Customer Service

Under Mr. Bhatt's leadership, SBI adopted a new vision statement focused on customer satisfaction, complemented by enhanced risk management and the establishment of a dedicated Chief Credit and Risk Officer position.

6. People Initiatives

A significant focus was placed on employee training and recognition. The "Parivartan" program aimed to empower staff and foster a culture of customer-centricity. SBI also launched an Employee Share Purchase Scheme to incentivize employees at all levels.

7. Business Initiatives

SBI sought to reclaim its position among younger clients through targeted marketing campaigns and expanded branch networks. The bank's "Proud to be Indian" initiative aimed to attract the emerging middle class and enhance its presence in rural areas.

Challenges for Mr. Bhatt's Successor

Despite the successful transformation, Mr. Bhatt's successor faces significant challenges. These include:

• Maintaining the momentum of transformation and ensuring alignment with established policies.
• Adapting to an evolving economic landscape while improving operational efficiency.
• Meeting the high expectations set during Mr. Bhatt's tenure.
• Continuing to attract younger customers while catering to the existing client base.
• Addressing the need for leadership in corporate banking and managing rising Non-Performing Assets (NPAs).

In summary, the transformation of SBI under Mr. Bhatt marked a significant shift in the bank's approach to customer service, employee engagement, and technology adoption. The steps taken during this period laid the groundwork for future success, but the challenges ahead will require strategic foresight and adaptability from his successor.

References

• Bhatt, O.P. "Transforming the State Bank of India." Journal of Banking and Finance.
• State Bank of India Annual Report (2008).
• Ghosh, A. "The Banking Sector Reforms in India." Financial Express.