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Change Management - ICICI Bank
Transcript of Change Management - ICICI Bank
effect of the changes introduced •In May 1996, K.V. Kamath replaced Narayan Vaghul as its new Managing Director and CEO
•In 1997, ICICI became the first Indian financial institution to go online
•In September 1999, ICICI Ltd got listed on the New York Stock Exchange, NYSE, the first ever Indian financial institution to go the American Depositary Receipts, ADR route. The next year, ICICI Bank followed suit
•ICICI Bank in its current avatar came into being in 2002 with the merger of the parent company ICICI and subsidiaries like ICICI Personal Financial Services Ltd , ICICI Capital Services Ltd and ICICI Bank
•In December 2005, ICICI Bank announced its initial public offer to the Indian market and amassed over Rs 80 billion. PART I – K.V Kamath Change 1 Changes introduced by Kamath 1. Training programs and seminars were conducted for around 257 officers by external agencies, covering different areas.
2. In-house training programs were conducted in Pune and Mumbai.
3. During 1995-96, around 35 officers were nominated for overseas training programs organized by universities in the US and Europe. ICICI also introduced a two-year Graduates' Management Training Program (GMTP) for officers in the Junior Management grades.
MANAGING THE TRANSITION •As a result of the above measures, the employee unrest gradually gave way to a much more relaxed atmosphere within the company.
•By 2000, ICICI had emerged as the second largest financial institution in India with assets worth Rs.582 billion.
•The company had eight subsidiaries providing various financial services and was present in almost all the areas of financial services BRIEF HISTORY OF ICICI Industrial Credit and Investment Corporation of India, ICICI, was formed in 1955 with the initiative of the World Bank and the Indian government
The basic objectives of the ICICI were to
• assist in creation, expansion and modernization of enterprises
• encourage and promote the participation of private capital, both internal and external
• take up the ownership of industrial investment
• expand the investment markets.
By 1994, the impact of the economic reforms initiated by the Narasimha Rao government were beginning to show, and ICICI Limited set up its subsidiary -- ICICI Bank. ICICI bank and K.V. Kamath Motivating Change PRESSURES FOR CHANGE DISCREPANCIES BETWEEN
CURRENT AND DESIRED STATES •ICICI was a part of the club of developmental finance institutions (DFIs – ICICI, IDBI and IFCI) who were the sole providers of long-term funds to the Indian industry
•The deregulation beginning in the early 1990s allowed Indian corporates' to raise long-term funds abroad, putting an end to the DFI monopoly.
•The government also stopped giving DFIs subsidized funds.
•Eventually in 1997, the practice of consortium lending by DFIs was phased out.
•At this point of time, ICICI had limited expertise, with its key activity being the disbursement of eight-year loans to big clients like Reliance Industries and Telco through its nine zonal offices.
Current state •The company had one basic product, and a customer orientation, which was largely regional in nature.
•In the deregulated environment ICICI was neither a low-cost player nor was it a differentiator in terms of customer service.
•The Indian commercial banks' cost of funds was much lower, and the foreign banks were much savvier when it came to understanding customer needs and developing solutions.
•One of the main problems was the company's ignorance regarding the nuances of lending practices in newly opened sectors like infrastructure.
Desired state Kamath, having seen the changes occurring in the financial sector abroad, wanted ICICI to become a one-stop shop for financial services.
For this he wanted create new operations in the organization and tap new markets. VISION K.V.Kamath wanted ICICI to become a financial powerhouse and change the organization from a development bank mode to that of a market driven financial conglomerate. The first move was the creation of different groups in the organization due to their different lending practices
1.infrastructure group (IIG)
2.oil & gas group (O&G)
3.planning and treasury department (PTD)
4.structured products group (SPG)
Kamath picked up people from various departments, who he was told were good, for these groups. The approach towards creating these new skill sets, however, led to one unintended consequence.
Resistance To Change •As these new groups took on the key tasks, a majority of the work, along with a lot of good talent, shifted to the corporate center.
•While the zonal offices continued to do the same work - disbursing loans to corporates in the same region - their importance within the organization seemed to have diminished.
•These groups were seen as the thrust areas and if you worked in the zones it was difficult to be noticed.
•Some of the people who did not fit in this set-up were quick to leave the organization.
Change 2 •ICICI decided to focus its operations much more sharply around its customers.
•It set up three new departments: major client group (MCG), growth client group (GCG) and personal finance group.
Resistance To Change •In MCG, a staff of about 30-40 people handled the needs of the top 100 customers of ICICI.
•About 60 people manned the growth client group, which looked after the needs of mid-size companies.
•Bigger clients required more diverse kinds of services. So working in MCG offered better exposure and bigger orders. The net effect was that the MCG executive ended up doing more business than the GCG executive.
•Complaints against these changes continued and ICICI was blamed for not putting in adequate systems in place to develop the right people. Change 3 •In the current scheme of things, an MCG or GCG person acted as a clients' representative inside ICICI. •Unlike foreign banks, there were no demarcations between these internal skill groups and client service person.
•With no such systems in place at ICICI, this distorted the compensation packages between the competing divisions. Resistance To Change •The way in which ICICI recognized an individual's efforts - the feedback process - was also questioned.•In many cases the appraisal scores were same but the bonus amount was not and they were not told why.
•One of the first initiatives was regarding imparting new skills to existing employees. •Steps were taken to set right the reward system 1. To avoid the negative impact of profit center approach, wherein pressure to show profits might affect standards of integrity within an organization, management ensured that rewards were related to group performance and not individual performances.
2. To reward individual star performers, the method of selecting a star performer was made transparent.
3.This made it clear, that there would be closer relationship between performance and reward. •Two types of remuneration were considered 1. Contract basis which would attract risk-takers
2.Tenure-based compensation which would be appealing to employees who wanted security.
•A 360-degree appraisal system was put in place whereby an individual was assessed by his peers, seniors and subordinates. PART II - Merger with Bank of Madura THE CHANGES MANAGING THE TRANSITION •In December 2000, ICICI Bank was merged with Bank of Madura• Though ICICI Bank was nearly three times the size of BoM, its staff strength was only 1,400 as against BoM's 2,500.
•Half of BoM's personnel were clerks and around 350 were subordinate staff.
•Apart from the culture, there were large differences in profiles, grades, designations and salaries of personnel in the two entities. RESISTANCE TO CHANGE - Reasons •The staff of BoM as they felt that ICICI would push up the productivity per employee, to match the levels of ICICI.
•BoM employees feared that their positions would come in for a closer scrutiny.
•They were not sure whether the rural branches would continue or not as ICICI's business was largely urban-oriented.
•The work culture of the two banks were different-While BoM management concentrated on the overall profitability of the Bank, ICICI management turned all its departments into individual profit centers and bonus for employees was given on the performance of individual profit center rather than profits of whole organization. STEPS TAKEN TO OVERCOME RESISTANCE •The management established clear communication channels throughout to avoid any kind of wrong messages being sent across.
•Training programs were conducted which emphasized on knowledge, skill, attitude and technology to upgrade skills of the employees.
•It also worked on contingency plans and initiated direct dialogue with the employee unions of the BoM to maintain good employee relations.
•ICICI put in place a host of measures to technologically upgrade the BoM branches to ICICI's standards
•It paid special attention to facilitate a smooth cultural integration.
•The company appointed consultants Hewitt Associates to help with
1.uniform compensation plan
3.To take care of any change management problems. •It conducted an employee behavioral pattern study to assess the various fears and apprehensions that employees typically went through during a merger.
•Based on the findings, it established systems to take care of the employee resistance with action rather than words. 1.The 'fear of the unknown' was tackled with adept communication
2.The 'fear of inability to function' was addressed by adequate training. •The company also formulated a 'HR blue print' to ensure smooth integration of the human resources. THE HR BLUEPRINT It consisted of
• A data base of the entire HR structure• Road map of career
• Determining the blue print of HR moves
• Communication of milestones
• IT Integration – People Integration –Business Integration. FOCUS AREAS OF HR INTEGRATION • Employee communication
• Cultural integration
• Organization structuring
• Recruitment & Compensation
• Performance management
• Employee relations RESULT
outcome of the steps taken The win-win situation created by HR initiatives resulted in high morale among all sections of the employees from the erstwhile Bank of Madura •By June 2001, the process of integration between ICICI and BoM was started.
•ICICI transferred around 450 BoM employees to ICICI Bank, while 300 ICICI employees were shifted to BoM branches. •Promotion schemes for BoM employees were initiated and around 800 BoM officers were found to be eligible for the promotions. •By the end of the year, ICICI seemed to have successfully handled the HR aspects of the BoM merger. •Even as the changes following the ICICI-BoM merger were stabilizing, ICICI announced its merger with ICICI Bank in October 2001. THANK YOU