State Bank of India: Transforming a State Owned Giant

STATE BANK OF INDIA: TRANSFORMING A STATE OWNED GIANT

Case Analysis

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1. What were the reasons behind implementation of transformation efforts in SBI?

• Emergence of new players: After Liberalization Indian government was forced to implement economic reforms. A lot of new players entered Banking Industry due to the lowered entry restrictions such as Increased lending volumes, setting up deposit and lending rates, abolishing 1:4 policy for branches. The new entrants invested heavily in technology and emphasized more on customer service. These new features were unheard of for the Indian customers and the millennials flocked to the new glass Branches.
• Dwindling prominence of SBI: SBI was considered to be a temple and the Branch manager was considered as important as a District Magistrate. But with the increase in the number of Branches and Banks SBI had become any other bank. SBI no longer played an influential voice in India- in the economic sphere, Industry and government circles.
• Customer service: Customers were neither respected or treated well. Even the family members of SBI staff feared to come to SBI. It had become an inward-looking Branch with no Sales Focus
• Employees attitude: Bank employees were not energized anymore. They did not have a sense of Belonging to the Bank. For any organization to succeed it is very much important to have motivated staff. But that was lacking in SBI. The employees were not aligned to the common goal. The whole organization lacked goals, vision and commitment.
• Perception: SBI was considered to be a classical old type Banking Institution. It was not considered to be a leader in product Innovation, marketing or distribution. There was no focus on market share or customer segmentation. Focus on young customer was missing.
• Market share: From 35 % market share in 1970s the market share of SBI fell to 15 % by 2006.At this share of growth of other private Banks ICICI was to overtake SBI in 4 years in terms of deposits. It was soon to lose its position as a Market leader. Also the rating as per Banker Magazine has decreased to 107 from 82.
• Novel Branch experience and services: The new entrants created a sophisticated Branch environment in stark contrast to SBI. Also these banks hired young professional who were customer centric. This elevated the customer experience and to the downward looking of SBI
• Growing Indian economy: Indian economy grew along with the Banking sector and by early 2000s there was huge growth in Indian economy which increased the income levels of households. The revenue from this growth was expected to be around 20%. This was an exciting opportunity for all the Banks as there was a high growth in mortgages and personal finance
• Technology: with the growing needs of the population it was becoming difficult to serve the customers with the age-old manual ledger system. All the private Banks were already having an online presence and it was hindering the business of SBI
• Changing the legacy attitude: It was becoming very difficult to manage with the employees attitude towards the customers and their reluctance to use the technology. The fear that any ushering in technology would decrease the number of work force created an impediment to bringing in new Technology.
• SBI’s Top down approach and one way communication was becoming an impediment to the growth. Lack of human touch to the services, hierarchical approach towards problems, faulty HR policies were some other reasons.
• To overcome all the above barriers SBI needed to implement the transformation effort to become a bank which was modern, customer focused and technologically advanced universal Bank.

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

I. Establishing Leadership- Strategic restructuring of SBI:

• Shuffling of top deck of employees such as GMs.
• Creation of four new strategic business groups namely Rural and Agricultural banking group, Corporate strategy, and a entirely diverse group named as Corporate Communication and Change group.

Outcome: This It helped in capturing of large and midsized corporate companies. Also, it helped in rolling of new businesses such as private equity.

II. Shift of Focus from going ahead with software to audits and training. This helped in crating expertise among the employees with regard to software used and all the glitches and bugs were corrected.

III. The Cascading Conclaves- Organizing and Communicating Vision through Conclaves:

• Amby Valley Conclave- September 2006
• Next Wave of Conclaves
• The Union of Conclaves-December 2006, Jodhpur

Outcomes:

•  Several transformation agendas were crafted related to business initiatives, enabling initiatives for facilitating business and people initiatives.
• Created enthusiasm among employees by involving them in long-term decisions.
• Union leaders also got motivated by including them in transformation of SBI

IV. Enabling Initiatives:

• Revamped IT platform: In the second time, the software was implemented without any glitches.

Outcome: Process effectiveness increased, introduction of Anytime, Anywhere banking.

Efficient Operating process and Branch Network business process re-engineering:

• Shifted to Centralized, back-office processing cells so that the branches could focus on sales & services.
• To expedite decision making, Modular structures were dismantled where each circle had modules or zonal offices responsible for about 300 branches each and DGM post was removed, instead now GMs are responsible to Regional General Managers.

Outcomes:

• Quick decision making, direct interaction between GMs and Regional GMs.
• The staff is now closer to the customer.

c. Develop Consistent Customer Service:

• Started a campaign of “triggering posters” each one posing a simple question.
• Leveraging technology to improve customer service and introduced “SMS unhappy” through which anyone unhappy with its services could get his grievance resolved within 24 hrs.

Outcome:

• Number of customers retained.
• Details of all the 196 products were available at a mouse click.
• Building confidence in employees through resolution of queries the “service desk” internal website.

V. Other Initiatives:

• SBI strengthened and integrated its risk management systems and created the position of a new Managing Director who also functioned as the bank’s Chief Credit and Risk Officer.
• It designed and implemented a new system for measuring business performance.
• It also focused on exploiting synergies with its existing non-banking subsidiaries in the areas of capital markets, credit cards, mutual funds, life insurance by using the bank distribution channel.

Result:         These helped eliminate duplication of front-end branches, bank end operations and even administration

People Initiatives

Focus on people was one of the cornerstones of Bhatt’s transformation agenda. Bhatt took the following steps to make the environment at SBI more open, friendly, caring and more encouraging bonding, teamwork thus leading to more conducive business.