State Bank of India: Transforming a State owned Giant

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

SBI: Transforming a State Owned Giant

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 bank with no influential voice and just 15 per cent mark
et 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 seni
or management seemed to have lost hope and the employees started to lack in ener
gy. SBI was losing business mainly because of weak technology backbone. Growing
competition and aversion to technological advancement In the beginning of the 19
90s, 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 exi
sting foreign banks expanded their business. There was a tremendous change in th
e way banking happened in India. The new entrants introduced concepts like remot
e banking, relationship banking etc. The nationalized bank seemed averse to the
new technologies like ATM network, networked branches and centralized internet b
anking. Degrading customer satisfaction In the early 1990s in spite of rapid exp
ansion, profitability was not high. Three-fourth of the area in the branches was
reserved for employees. The way of handling transactions was not organized prop
erly roles were narrowly defined and multiple employees were involved in process
ing a transaction, customers time was wasted as they had to stand in multiple que
ues unnecessarily. The employees could not focus on customer sales and service a
s 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 cen
tralized computer system was set up. Until then, the branches operated on their
own independent servers. Technology transformation along with business process r
eorganization was the need of the hour. Thus, inferior technology, degrading cus
tomer satisfaction level and the plight of the employees necessitated a transfor
mation effort for the State Bank of India.
11/10/12

SBI: Transforming a State Owned Giant

The transformation & the Result
Following steps were undertaken during the transformation phase: I) Leadership T
he entire top management was shuffled and four new SBUs headed by Deputy Managin
g Directors (DMDs) were created. Bhatt incorporated a mid-corporate group and ba
nk within the bank to recapture large and midsized corporations. He also created
a new department Corporate Communication & Change headed by GM, David Azariah. Th
is 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 hier
archical structure. II) Top-down and Bottom-up communication Bhatt embarked on c
ommunicating his vision to the 200,000 employees and changing their mind-set fro
m that of resignation to one of confidence and dedication. The series of conclav
es 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 cat
erpillar changing into a butterfly and screening of the movie The Legend of the B
agger Vance and 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. Th
e concerns of the bank were expressed and debated passionately in a participativ
e 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 ser
ies of conclaves held by the Chairman and MDs for the Chief General Managers (CG
Ms) and General Managers (GMs) the agenda of which was to take them through the S
tate 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 acti
on plan for fixing the issue. Four benchmarks were created to become: 1) the bes
t bank in customer service in 2006-07 2) the best public sector bank in growth p
arameters 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 pro
cess 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 per
formance-oriented assessment to analyze where they stood and what was the curren
t state of the bank. c) The Union Conclave: This conclave was specifically targe
ted towards the trade unions. Meetings were organized after the days work and wou
ld not end until the both parties agree. There was a major shift in how the mana
gement viewed the unions as a part of the organization. Results: The union leade
rs also made presentations and came up with constructive suggestions. These encl
aves moved them in and brought them at the same level of understanding as the to
p management. III) Business Initiatives a) IT Platform: SBI finally overturned i
ts product and services offerings by implementing efficient technology platform.
It resumed CBS rollout and all branches were on CBS platform by July 2008. It m
oved from branch banking to anytime, anywhere banking. Results: But volumes expa
nded at a pace which technology could not handle. The competition was getting to
ugher and SBI still depended on vendors for technology. b) Business Process re-e
ngineering: SBI shifted all non-customer facing branch activities to centralized
back office processing cells so that the branches could focus exclusively on sa
les and service. It also redesigned its branches. The modular structure was dism
antled and the positions of Deputy General Managers were removed. Results: The p
rocessing cells ensured faster turnaround time and better processing quality. Th
e physical and mental barriers separating the customers and the staff were remov
ed by the introduction of glass and fiber modular workstations. The loan orienta
tion of the branches was also changed to cater all kinds of borrowers. c) Custom
er Service: The next agenda was to elevate SBIs ranking in customer service to th
e first position. SBI started a campaign of Triggering Posters each one posing a s
imple question for gathering ideas on the new vision statement. It also leverage
d technology to improve customer service. The customer service website Service De
sk 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 rec
eived 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 betw
een the staff and the customers improved to a great extent.
11/10/12

SBI: Transforming a State Owned Giant d) Other Initiatives: SBI strengthened and
integrated its risk management systems and introduced a position of Managing Di
rector who functioned as the Chief Credit and Risk Officer. A new system for mea
suring business performance was designed and implemented. Non-banking subsidiari
es were mobilized in the areas of capital markets, credit cards, mutual funds an
d life insurance by using the banks distribution channel. Results: The performanc
e 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 branc
hes, back end operations and administration. 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 targ
et on the agenda was to communicate the message of change to the rest of the ban
ks 138,000 employees. SBI launched an in -house mass internal communication progr
am called Parivartan which was led by David Azariah and the DMD of Corporate Strat
egy and New Business, Deepak Chawla. Results: Parivartan received a whole hearte
d 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 with the challenge of
adequately staffing them. Recruitment was taken up resulting in 2.4 million app
lications 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, AGM
s and above were regularly trained on business and leadership skills in top busi
ness schools. Results: SBIs employee strength grew by 15%. Through the lateral re
cruitment, new employees were offered market based salaries on a contract basis.
c) Performance Management System: Incentives for employees were not aligned wit
h 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 bac
klog. 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 lik e Best employee of the month, etc. were introduced. An online employ
ee suggestion scheme was also launched. Results: Bottlenecks in performance mana
gement were sorted out and across the organization and people were given incenti
ves to inculcate the value of being the part of SBI. V) Business Initiatives
11/10/12

SBI: Transforming a State Owned Giant a) Burgeoning Indian Middle Class: Image o
f 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 dir
ectly from the campus. Efforts were taken in the direction of trying to improvis
e the products to suit the needs of an average professional. Expansion into stra
tegic locations with multi-functional ATMs was implemented. Results: Reduced ave
rage 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 technolo
gy 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 outs
ourcing model by partnering with FMCG companies. Results: By 2011, SBI reached 1
25,000 villages and planned to cover 200,000 more by 2012. c) Wholesale Bank: Pr
oviding ancillary services in addition to providing a large chunk of money requi
red SBI to invest in certain technologies to coordinate activities of all differ
ent businesses that serviced large customers. A holistic way to manage customer
relationships was introduced. Results: Increased wholesale banking from 0.15 bil
lion dollars to 0.99 billion dollars in just four years. Recently SBI funded 1 b
illion dollars in five minutes for the Tata-Corus merger. SBI has the unique dis
tinction 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 exp
osures on Indian companies. To fund these assets, foreign currency bonds were is
sued. 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 sta
rted for SBI. Mr. Bhatts successor had to make sure that efficiency of the bank i
s given priority. By 2008, Mr. Bhatt made sure that for SBI things were working
out fine in the fields of technology, product differentiation, branding, marketi
ng and distribution. The new Chairman would have to take measures to keep the pr
ogress 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 calculate
d risks and firm decisions. Meeting customer expectations and catering to high n
eed
11/10/12

SBI: Transforming a State Owned Giant The citizens of the country had high expec
tations from SBI. It would be a challenge for the new Chairman to meet such expe
ctations and keep customers satisfaction high. There was huge market potential o
n 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 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 w
as rising rapidly. So, in the area of corporate banking SBI needed to meet the c
apital 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 stron
g 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 require
d 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 c
ountry and then the best global bank. Thus, Bhatts successor had a huge task ahea
d.
11/10/12