Transforming a State Owned Giant

Organisational Behaviour – II
Case Write Up

Section-E Group 1

Ayush Saini 0332/56

Harsh Yadav 0351/56
Jayesh K Newal 0353/56
Kushal Pawar 0359/56
Navneet Singh 0364/56
Nikhil KPVS 0367/56
SBI had 60% of government shares as India's largest commercial lender. About 267,000 empl
oyees, about 18,000 branch offices and 25,000 ATMs are part of the State Lender Corporatio
n, its 5 affiliated banks and 22 subsidiaries. 43rd largest bank in the world, SBI had market
capitalization of over $36.5 billion in 2011 delivering the profit of $2.6 billion.
After the nationalisation of SBI in 1960, the Bank expanded and grew from five hundred bran
ches in the 1960s to eight thousand by the 1990s.But everybody lost sight of the fact that ban
ks were to be profitable during this expansion period. Although the branch network expanded
enormously, nothing in
one branch changed.Instead of focussing on product sales and products, the employees spent
most of their time doing paper-based activities.
The institution began implementing a Centralized Real-
Time System Banking (CBS) program for all divisions of business in 2003.The bank recogniz
ed that reorganizing business processes had to complement the exercise of technology change
and therefore started to reform the operations at the same time.

Organizational Structure
The workforce were organised in three hierarchical level- officers (35%), clerical (44%),
subordinate staff (21%), which were recruited via a countrywide examination.
Executive was employed as POs and elevated to assistant management upon completion of pr
actice. Clerk staff used to be promoted to executive cadre. Nine levels were present between
assistant manager and chairman. The bank was divided into 14 administrative circles each
headed by Chief General Manager. Circles consisted of 2 network circle each having a
General Manager. Each employee was assign to a circle. The Central Management
committee, consisting of Chairman, MD and Deputy MD met twice a month to take
important decision and reported to Board of Director.

Reasons behind implementation of transformation effort in SBI

1) Competition: Due to liberalization the Indian Government was forced to implement
economic reforms. Many new players entered in the banking industry because of relaxed
entry restrictions such as fixing of deposit and lending rates, increased lending volumes, and
abolition of 1:4 policy for branches. The new entrants brought new services and features
which provided more convenience to the Indian customers. This new options and
convenience features attracted the customers towards new entrants.
2) Perception: The image of SBI among customers was that of an old-style bank for, of and
by senior citizens which didn’t focus on innovation, marketing and distribution. They
perceived SBI to be a government bank whose main purpose was to pay government officials
salaries and dispense pension. The above mentioned factors discouraged the younger
generation to be a part of SBI.
3) Employees’ Attitude: The people were not performing poorly, they just weren’t align
along a common set of objective. Hence, they didn’t had a common goal, or vision, which
resulted in lack of commitment. As a result, they were not motivated, were lethargic, and
also lacked in any sense of belongingness to the bank. The employees also had a notion that
their hard work was not recognized.
4) Organizational structure: The flow of information in the organization was only one way
i.e. from top to bottom, which caused the communication gap between the upper and lower
management resulting in lack of awareness among the senior management about the issues
which the bank was facing.
5) Lack of technology: SBI didn’t had the advanced technology to offer services and
products that the competitors were offering. The competitors introduced the concept of
remote banking through phone and internet banking which overcame the natural advantage of
the large physical branch network of the existing banks.
6) Effect of economic development: The income level of households grew significantly
because of the growth in Indian economy in early 2000s.This increase in income level surged
the demand for consumer finance and these revenue were expected to grow at a tremendous
speed of 20% a year over the next several years. This created new opportunities for banking
industries and SBI wanted to be a part of the growth.
7) Declining of market share: SBI had a significant market share drop from 35% in 1970s to
15% in 2006 because of the entry of new private players in the banking sector. These new
private banks provided much better customer service and products which helped them to
attract a good amount of customers towards them which resulted in the loss of market share
of SBI and also its Banker Magazine rating decreased from 82 to 107.

Specific Steps Undertaken by SBI and the Results of these

Steps
After his appointment as SBI President, Bhatt spent initial months evaluating the organization
's current status and examining its turnaround plan slowly. He took a number of steps in the p
rocess –

Establishing Leadership
Bhatt realized that his leadership had not been formed during the first few days. Bhatt tried to
address the situation by taking major decisions to the benefit of the organization, despite
enough skepticism and opposition. For instance, in two to three years, he developed four
strategic businesses with a goal of making them big as a national bank group. Bhatt also
established a new department, "company communication & change," which was structured to
immediately superior, differently to the traditional hierarchy of SBI. He took bold steps, such
as immediately stopping CBS ' deployment, which, despite many objections, was inefficient
and was destroying the bank.
Result: He successfully established his credibility in the organization.

The Cascading Conclaves- Communicating Vision to the Future

Aamby Valley Conclave: Bhatt's next step was a series of conclaves for various workers and
to express the dream. The first day he tried to describe his SBI vision of "the future butterfly"
and introduced a film to create a framework for the necessary journey of transformation. The
next day, Bhatt discussed SBI's failure to meet the needs of large companies, no realistic
template for rural banking, the lack of professional know-how and obsolete education
programs, the failure to attract the city's middle class. He succeeded in persuading most of the
group that the move was necessary.
The Next Wave of Conclave: It focused on making workers engage in organized team
activities, such as debating certain bank issues and achieving an action plan through surveys.
The new approach and the role of the employee in the process of transformation were pointed
out to branch managers. It also helped him to hear from the front line problems.
Union Conclave: The union leader was very pleased that they will be included in the agenda
for change. The members of the Union have understood clearly when they decide to do the
same thing that can lead to loss of income and benefits.
Results: The Aamby Valley conclave brainstorming session led to 14 Transformation
agendas through a concerted consensus that connected business and people through enhanced
technology and processes. The next conclave wave improved communication in two ways
between top management and staff. In fact, union leaders have been inspired because they
have become a major part of the SBI transition.

Enabling Initiatives
Winning IT Platforms: SBI has helped them to revamp their products and services by
integrating their technology platform properly. SBI fixed all the technical flaws and resumed
the introduction of CBS, so that all SBI branches had been on CBS in advance of time.
Efficiency in Operating Process and Branch Network Business Process Reengineering:
Trained professionals employed processing cells to provide better quality of production and
speed of turnaround. This revamped and changed the branches so that the branches could
better serve the customer. SBI removed its modular structure, where 300 branches were
responsible for each zonal office, and held the regional general manager who will supervise
the branch managers accountable to the general managers.
Develop Consistent Customer Service: SBI introduced a "Triggering Posters" campaign
and Bank embraced the new vision statement which stresses customer value to SBI. The
software has been used to help resolve all requests by using the' service desk ' internal portal
with one tap. It has also released an "unlucky SMS" system to address disgruntled customers '
complaints within 24 hours.
Other Initiatives: To strengthen risk management, SBI established a new role as Chief
Credit and Risk Officer as Managing Director. We have also created a new market
management framework to improve synergies with other non-banking businesses.
Results: This increased the overall transaction flow from branch-based banking to new
banking, wherever SBI matches the private competitor. The sales and products of individual
branches are constantly concentrated on. Such recent structural changes have resulted in
accelerated decision-making and increased direct interaction of GMs with local GMs. Bank
employees are also getting closer to customers. Products and products are gradually being
promoted by individual divisions. The recent organizational changes also introduced
accelerated decision-making and increased direct interaction between GMs and local GMs.
Bank employees started getting closer to customers. Other Initiatives helped eliminate
duplicate front-end branches which caused improved operational and administrative process.
People Initiatives
After the conclaves, Bhatt turned his attention to the bank's 138,000 officers and clerical
staff, people who were in daily interaction with the general public. The efforts of the citizens
are aimed at making the SBI community more accessible, secure, compassionate and
productive by coordination.
Broad communication and narration
SBI started a mass communication in-house program called Parivartan or transformation. To
order to communicate his reform message to 138,000 officials and clerks who were not
protected by conclaves, Bhatt pursued this project. Parivartan was a two-day seminar where
visitors would speak and interact with each other. We wanted to raise awareness of the
function of transition, inspire them to become advocates of progress, enable them to be easier
to configure and promote an integrative feeling
Bhatt initiated another "Citizen SBI" campaign aimed at affecting and providing inner
fulfillment to the employee's core value system. In three phases, the campaign started. The
participants in the first phase had to understand the perfect employee and his behaviour. The
second phase equipped staff with citizenship activities and the last step centered on public
citizenship.
Results : A study carried out by Xavier Management Institute showed that customer
satisfaction rates in Orissa rose from 46% to 56%. Employees made important changes to
their attitude towards parameters such as customer updating new products, service delivery
within the same timeframe and first-time explanation of the process.
Another national study has shown that the number of branches with satisfactory results has
improved significantly.

Changing Training and Capability Building System :

A development plan had been embarked on by SBI. Bhatt concentrated on hiring to meet the
needs of the workers. For 20,000 clerical staff and 3,500 officers, SBI has implemented an
on-line application process of 2.4 million. The Bank also recruited lateral contracts for
market wage specialists such as CIOs.
The VRS, which required workers to leave voluntarily, has also been halted by Bhatt. SBI is
linked with top business schools to periodically educate corporate officers in leadership skills
and develop a leadership pool for the future.
Results : In 2008, SBI’s employee strength increased by 15%

Introducing New HR Policy

SBI has suffered from the old promotion system which was inefficient and dependent on
managers ' statements. Bhatt switched papers to multiple-choice formats to solve this
problem. Numerous selection panels have been set up to make the recruitment system more
efficient. Several recognition measures including appreciation letters, family trips abroad and
prizes such as "Employee of the Moth" have also been implemented. The suggestion scheme
of employees was also transferred to all employees, regardless of their feasibility, by internet
and TOD 500. It was also incorporated to provide for any subscribers of SBI shares that were
a courier at the bank or a member. The SBI shares are a clear messenger.
Results : Such new policies led to the social advancement of workers. They learned new stuff
and loved the process. We are praised and rewarded for their success for the first time.

Business Initiatives
Gain Back Indian Middle Class Consumers :
Branding drives were initiated in 2007 to change the image of SBI and make it relevant for
the middle class and young people. SBI made advertisements on the topic of Pure Banking,
Banking to All Indians, and Proud to Be Indians. SBI had more than 9000 branches at the
time but still did not own a single branch in 2000 semi-urban centres. SBI's promotions were
launched in 2000. To access all geographical locations, SBI planned to open 1000 plus
branches. SBI has also been actively supporting its younger customers by increasing the total
number of employees. SBI has also supplied its IT vendors with tailored solutions.
Results : People have expressed further interest in joining SBI as it has come them
understand their name. Sellers transferred their total corporate compensation balance to SBI
in a further positive step.
Extension to rural areas
Bhatt thought rural India would be the center of future growth. Through addressing the
masses and promoting SBI's dream of banks to every Citizen, he wanted to make a more
inclusive society. As a consequence, the Rural Banking and Agriculture Group (RBAG) was
founded by Bhatt. SBI has taken the outsource template and used banking reporters who have
carried out banking on behalf of the company to meet rural masses. SBI has partnered with
FMCG (HUL, ITC etc.) firms, NGOs and Indian Post Office for this reason. SBI has also
used mobile banking software, a point of sale, and web kiosks.
Results : In 2011, SBI had crossed 125 thousand settlements with plans to occupy 200
thousand settlements in 2012.
Rebuild New Wholesale Band
Bhatt set a double-tax revenue goal. The Wholesale Banking Group has therefore been
formed to provide fee-based services such as wealth, business finance and money
administration. The program operation of the account has been extended. The focus was on
building customer relationships and all products and services were provided in one window.
Results : SBI's wholesale fee revenues have increased more than six times in four-year terms
from $0.15 billion to $0.99 billion.
Globalization
SBI constructs foreign exchange assets in order to offer foreign currency borrowing to Indian
firms requiring international operations.
Results : SBI could take up to $1 billion in a single group coverage.
Other Initiatives
By offering refinancing products to Indian businesses opening offices abroad SBI grew
internationally. It has also strengthened its treasury business by increasing its salesforce and
introducing new financial instruments for small and medium sized enterprises. It has also
expanded its services to cover PE, pension funds, general and financial planning insurance.
All these structural reforms have been positive and by 2008 SBI became the most profitable
market capitalized bank in the country. The following are other laurels:-" The Bank of the
Year, India in 2008 and 2009; and "Most Recommended Bank's Home Loan Brand" CNBC
Awaaz brand awards; and 2010 "Most Popular Credit Card Company" Equity Credit Card
Product.

The Challenges for Mr. Bhatt’s Successor

Bhatt embarked on the road of transformation very well; his successor mission would be to
sustain in the changing drive, improve efficiency in operations, and try to keep ahead of the
competition using innovative strategies.

 He would encounter various obstacles when trying to live up to the mission of SBI to
be a "Banker for every Indian." SBI had to adapt its products and services to a
growing middle-income population on the retail banking end. In contrast, in terms of
convenience, the high-end income group was not satisfied; they still did not believe
that SBI is their kind of bank!

 SBI lagged far behind in the corporate banking field even though it had dominance in
households. In the areas corporate lending, treasury and tenor management fronts,
there was a fair amount of work to be done. It also needed to meet the capital and
other requirements of the fast-growing Indian companies that were advancing to the
rest parts of the world.

 The bank had been grown rapidly and added more than 2-3k ATMs each year. With
this, the bank also needed to improve metrics such as performance.

 The gap between the bank and the consumer that was created as a result of the cycle
of centralization and technological innovation had to be reduced by SBI to make the
high-income segment feel comfortable.

 In order to sustain its high growth level, forecast at around 9 percent over the next
decade, India required a very strong banking system. The existing banking structure
was not well prepared to handle it, but SBI was best qualified to lead this growth for
its size, sophistication and reach.

 SBI needs to make their products and services appropriate for them and provide the
comfort for higher income segment, Since the Indian middle-age income group is
rising by 30 million people each year and the higher income segment does not agree
that SBI is not their form of bank.
 India currently lacks the stable banking system to support its current growth level of
around 9%, which is expected to continue over the next decade. SBI needs to
emphasize scale, complexity and scope in order to cater for this development.
 For SBI, the Net Non-Performing Assets ratios were higher than their competitors, for
this SBI need to adopt innovative strategies to identify possible defaulters

Lot more strategies were to be implemented which may also include taking tough
decisions or engaging in risks. Mr. Bhatt successor should stay and work consistently
to transform a giant like SBI with the changing Indian Scenario.