Q1. What were the reasons behind implementation of the transformation effort in State Bank of India?
SBI had been losing market share for over two decades to private and foreign banks. During the early years of this century, the decline was even worser It had lost its voice significantly in the economic sphere, in the industry, in the government circles It had to evolve to meet the changing requirements of the growing retail segment and the aggressive international aspirations of Indian companies SBI realized that business process reorganization had to accompany the technology transformation exercise and therefore simultaneously embarked on a path of transforming its processes SBI was also losing customers to its competitors as they were neither respected nor treated well SBI was perceived as a classical old type banking institution which was not seen as a leader in product innovation, marketing or distribution It was perceived as a government bank whose main purpose was to pay government officials salaries and dispense pension. Even family members of the staff believed that SBI was a bank for, of and by the senior citizens SBI became “an inward looking bank” with no focus on market share or customer segmentation. It never focused on young customer Most of the bank’s employees were not aware of the problems that it was facing due to limited contact with seniors and communication was one way, from top to bottom There were no specific goals, vision or commitment in the organization. From the very top down through the branches, everybody was pulling in different directions Also SBI didn’t have the technology platform to offer the products and services that competition was offering All the reasons mentioned above are the key drivers for implementing transformation effort in State Bank of India. Q2: What specific steps did the SBI undertake during the transformation effort and what were the results of these steps? During the transformation SBI undertook following 6 major steps in leadership of Mr. Bhatt to enhance the culture of the organization and to provide customers with best services: 1. Establishing Leadership In the initial stage people did not believe in the leadership of Mr. Bhatt. To tackle the situation while not excessively showing off his authority he took some of the major decisions that were in the benefit of the organization. For example he stopped the immediate roll out of CBS despite criticism and which later on proved to right. Thus he established his credibility. 2. The Cascading Conclaves- Communicating Vision to the Future In the next step a series of conclaves for different levels of employees were started to communicate the vision for which the SBI was working. By communicating vision to each and every employee in different levels of conclave it was ensured that everyone was clear
about it. In some of the conclaves it gave great results and employees became proactive in achieving it 3. Enabling initiative Some enabling decisions such as winning IT platform, Efficient Operating Processes and Branch Network Process Reengineering, Develop Consistent customer services, Other Initiative such as strengthening and integrating its risk management system, creating system for measuring business performance were taken. This empowered the organization to move towards the goal to be achieved. 4. People Initiative Through some Broad based Communication and storytelling initiatives for the people through “Parivartan” communicated the message of transform to the people who were not covered in the conclave. To meet the trained people required for better services they initiated Changing training and capability Building system and Changing Individual Performance Management System. It actually changed the way employees treated the customer and now they started giving more and more time to the customer to satisfy their expectations. It improved SBI’s performance in many parameters such as customer satisfaction rose from 46% to 56%, employee level of voluntarily explaining services to the first time customer reached to 31%. 5. Business Initiatives Some of the business initiatives to Win back the Indian Middle class Consumer, Own rural India, Rebuild profitable Wholesale Bank were taken. By positioning SBI in different ways they tried to win back the consumer that they lost due to lack of consumer orientation. Through more and more branches and ATMs to reach out to the left out areas of semi urban centres and through more and more inclusive society in villages it was aimed to get back that customer base back. 6. Other Initiatives In some other initiative SBI consolidated its treasury operations and brought in a stronger profit focus. Also focused on small and medium enterprises with turnover less than 1 billion. Also to increase its fee based business and attract upwardly mobile and high net worth clients, SBI ventured in to new business areas in India such as custodial services, private equity, pension funds, general insurance and financial planning and advisory services. Q3. Challenges facing Mr. Bhatt’s successor:
One of the major challenge for Mr. Bhatt’s successor was to maintain the new environment which encouraged participation from a large number of employees irrespective of their position in the hierarchical structure of the organization. In order to reap benefits of the transformation efforts it was important to involve the employees i n the decision making process which was one of the key feature of the changes brought by Mr. Bhatt. SBI was growing at a breakneck speed, every year they have been opening upwards of a thousand branches and more than 2000 or 3000 ATMs. They needed to stop and identify the challenges that lie ahead. Also they needed to improve on parameters such
as efficiency, sustain the drive and stay ahead of competition. The successor was required to remain engaged, be willing to sweat, to take risks and take tough decisions. One of the major reasons for the growth of SBI during MR. Bhatt’s tenure was the Economic slowdown in 2008 as large number of customers shifted to SBI in search of safety. Thus, now when the economy is on the path of recovery it is difficult to maintain the same level of growth. Even to maintain the current level of growth Bhatt’s successor has to make sure that SBI stays ahead of competition. SBI was doing well to attract the middle class customers, but the high-income segment still believed that SBI is not their type of bank, as it was lacking the convenience that some of the private banks offered to these customers. In the area of corporate banking, SBI needed to meet the capital and other requirements of Indian companies that were becoming increasingly global. Of the top 500 global companies, 8 were Indian and McKinsey predicted the number to increase to 16-20 by 2020. They needed to retrieve their leadership in corporate banking. They had chances to perform better at corporate lending, treasury and tenor management front. SBI was trying to live up to its purpose of being a “banker to every Indian”. On the retail banking front SBI needed to adapt its products and services to cater to the needs of a new clientele- the 30 million people that were being added to India’s middle income group every year. By moving to the centralized processes, SBI was losing touch with the customer. As customer becomes better informed, it was important to move along with them through making the processes a bit decentralized. Also, there was gap in the high -income segment , they did not believe that SBI is their type of bank. This segment has not been offered the kind of convenience they want. SBI had raised 160 billion in March 2008 through a rights issue and was planning to raise another Rs. 200 billion by March 2011 but they had no prediction of the sufficient amount to be raised. It was required to do forecasting of markets and come up with proper planning and implementation of how much capital to raise. The biggest challenge was to meet Bhatt’s aspirations for the bank. India needed a very strong banking system to sustain its current growth rate of about 9% over the next decade. Currently, India lacked such system, however, SBI is in the best position to take this leap in terms of size, sophistication and reach.
