SBI :- TRANSFORMING A STATE

OWNED GIANT

STATE BANK OF INDIA - Case Analysis

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

a) Competition from new Entrants: Liberalization forced the Indian Government to

implement economic reforms. Relaxed entry restrictions such as increased lending
volumes, setting up of deposit and lending rates, and abolition of 1:4 policy for branches
led to entry of a lot of new players in the Banking Industry. These new entrants launched
innovative features which the Indian customers had never heard of before. This emphasis
on innovation, technology and customer service made newer banks an attractive option for
customers.

b) Perception among customers: SBI‟s image amongst customers was that of an old,
stagnated bank that did not focus on product innovation or marketing. Due to these factors,
customers - especially the younger generation - did not want to be associated with SBI.

c) Dwindling market share: SBI‟s market share nosedived from a healthy 35% in 1970s to a
paltry 15% in 2006. It had lost its position as the market leader and its Banker Magazine
rating decreased from 82 to 107.

d) Growth in the Indian Economy: The Indian economy grew at a rapid pace during the
early 2000s.As a result, income levels of households grew, so did the levels of mortgages
and and personal finances. These factors created new opportunities for banks and SBI
wanted to be a part of this growth.

e) Attitude of Employees: A major problem that SBI faced was that its employees were not
aligned to a common goal. As a result, they were not motivated, seemed lethargic, and
lacked any sense of belongingness to the bank

f) Receding Prominence of SBI: SBI was once considered to be as important as a temple.

However, as the number of branches increased, its prominence decreased. While it was
once considered “special”, it became just like any other bank in 2006.

g) Flaws in organizational structure: SBI followed a top-down approach and there was only
one way communication within the organization. These issues, along with faulty HR
policies and a mechanical approach to services hindered SBI‟s growth.

h) Differences in branch experience and services: SBI‟s new competitors focused

extensively on enhancing customers‟ experience when they visited the bank. To realize
this goal, they hired young professionals who ensured that customers were fully satisfied
on every visit to the bank. SBI failed to match these efforts and predictably suffered.
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 What specific steps did the SBI undertake during the transformation effort and what were the
results of these steps?

After appointed as chairman of SBI, Bhatt spent initial few months assessing current status of
the organization and jotted down the transformation strategy he would be taking gradually. He
had taken a series of transformation steps as follows -
a. Establishing Leadership - Strategic transformation of organization structure
During initial days, he had not established full authority over all employees. So, he
brought all the changes very quickly. He shuffled the top deck of employees through
new GMs. Apart from that, he created 4 new strategic business groups - Rural and
Agricultural banking group with high potential in rural India, Corporate strategy group
and Corporate communication and change group, a new diverse group. Also, he tried
to address issues of inefficient rollout of CBS. He introduced audits and training of
softwares for employees.
Outcomes: This helped in capturing large and mid-sized corporate companies with
creation of businesses like private equity. Employee training helped in enhancing
expertise with regard to software use. Along with, all the glitches and bugs were
rectified.
b. The Cascading Conclaves - Communication of vision through conclaves
To have a successful transformation, Bhatt realised the need to convey the
organization‟s vision to all its 200,000 employees through changing their mindset. He
organized several conclaves -
 Aamby Valley Conclave: For top management consisting 2 MD and 22 DMD
 The Next Wave of Conclaves: Successive meetings with CGMs and GMs
 The Union Conclave: For engaging leaders of trade unions within the
transformation process
Outcomes: Brainstorming session during Aamby Valley conclave resulted in 14
transformation agendas through collaborative consensus which provided link between
business and people through improved technology and processes. The Next Wave of
conclaves improved two way communication between top management and
employees. Also, union leaders got motivated as they were also become a major part
of SBI‟s transformation story.
c. Enabling Initiatives
 All of the SBI branches were migrated to revamped CBS platform with all
glitches resolved.
Outcomes: This improved the overall process flow through transformation from
branch based banking to new anytime, anywhere banking which made SBI at
par with the private competitor.
 To align its all process to new CBS platform, Bhatt re-engineered all operating
processes through shifting of all non-customer facing branch activities to
centralized and back-office processing cells. Also, he dismantled the modular
structures where each circle had modules or zonal offices who were responsible
for 300 branches each. He removed the post of DGM and made GMs directly
responsible to regional general managers.
Outcomes: Individual branches become more focused towards sales and
services. The new structural changes brought quick decision making capability
and increased direct interaction between GMs and regional GMs. Also, bank
staffs are become more closer to the customers.
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 With a vision to improve ranking of SBI in customer services, a new campaign of

“triggering posters” was started. At the end of the campaign, SBI surveyed all its
employees and received 141,000 responses regarding their perception of SBI‟s
vision. SBI also introduced “SMS unhappy” through which any customer can
report any grievance and get it resolved within 24 hours.
Outcomes: Customer satisfaction improved customer retention. Technology
enabling helped customers to explore all the bank products conveniently, they
no longer had to approach any branch staff. Also, new customer grievance
redressal system improved confidence among employees.
d. Other Initiatives
To improve risk management system, SBI introduced a new managing director position
having responsibility as chief credit and risk officer. They also created a new business
performance system to improve synergy with non-banking subsidiaries.
Outcomes: These actions helped eliminate duplicate front-end branches which caused
improved operational and administrative process.

People Initiatives

After the conclaves, Bhatt transferred his focus to the 138,000 officers and clerical staff of the
bank, the people who interacted with the general public on a daily basis. The People
initiatives focused on making the environment at SBI more open, friendly, caring, encouraging
and bonding through teamwork.
 “Parivartan” and “Citizen SBI”
The first step towards including the Bank‟s 138,000 officers and clerks into Bhatt‟s
vision was through “Parivartan”. It took 6-7 months to formulate it and was led by
Deepak Chawla. “Parivartan” was an in-house mass internal communication 2-day
program that allowed people to interact through individual conversations and group
discussions. The aim was to help the staff become change agents, customer-friendly
and inclusive to the organization. 3,800 workshops were conducted under “Parivartan”
in over 100 venues starting 16th July, 2007.
It was followed by a campaign named “Citizen SBI”. Its aim was to help people explore
who they are and what their role is in the Bank. The campaign was run in 3 phases. In
the 1st phase, employees had to envision the ideal SBI citizen (employee). In the 2nd
phase, employees were provided with tools to practice citizenship in the workplace. In
the 3rd phase, focus was on practicing citizenship in the community.
Result: As a direct result of “Parivartan” and “Citizen SBI”, a shift in attitude was
noticed among the employees. It led to overall increase in customer satisfaction by 10
percentage points from 46% to 56%.
 Recruitment Drive
Under the new policy of adding 1,000 new branches every year, SBI faced a massive
shortage in manpower. Bhatt overcame this challenge by terminating VRS (Voluntary
Retirement Scheme) and shifting the process of recruitment online. SBI received 2.4
million applications for 20,000 technical staff and 3,500 officers. Of the 2.4 million
applicants, 60,000 were interviewed. In order to train the new employees, AGMs and
people at other higher posts, SBI tied up with top institutions including business
schools.
Result: The employee strength of SBI increased by 15% in 2008.
 Introducing New HR Policy
SBI suffered due the old model of promotion followed which was slow and was
depended on reports from Managers. In order to solve this issue, Bhatt changed report
writing into multiple choice format. Various interview committees were drafted to
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ensure faster promotion process. Several employee recognition measures were also
introduced which included appreciation letters, family trips to foreign countries and
awards like „Employee of the Month‟. The employee suggestion scheme was also
transferred online and ₹500 was given to any employee who made suggestions
regardless of its feasibility. Employee Share Purchase Scheme was also introduced,
under which anyone could subscribe to SBI shares whether they were simple
messenger in the Bank or the Chairman.
Result: These new policies helped in boosting employee morale. They were learning
new things and were enjoying the process. They felt valued and for the first time they
were being recognized for their performance.

Business Initiatives

 Rebranding SBI‟s image

SBI launched a series of campaigns to rebrand its image in the public eye. The main
agenda of these campaigns was to make SBI relevant to youth and the Indian middle
class. References like “Pure Banking Nothing Else”, “Banker to every Indian” and
“Proud to be an Indian” helped drive home this message.
Another step that SBI took was to provide customized solutions to different customers.
An example of this was Corporate Salary Account for IT professionals.
In addition to these steps, the bank started hiring more and more young people directly
through campuses. This was a conscious effort to attract young customers.
Result: People started to express more interest in joining SBI as it contributed to their
brand‟s appreciation. In another positive step, vendors moved their entire corporate
salary account to SBI.
 Expansion in rural areas
SBI created the Rural Banking and Agricultural Group with the aim out to
100,000 unbanked villages.
 New Wholesale Bank
Bhatt had set a target to double fee-based income. So, the Wholesale Banking group
was created which provided fee-based services like treasury, trade finance and cash
management. The account planning exercise was renewed. It focused on building
customer relationships and provided all products and services in a single window.
Result: SBI‟s fee income from wholesale banking increased by more than six times
from $0.15 billion to $0.99 billion in just 4 years.
 Globalization
SBI, in order to extend its presence in international market and capture a greater share
of Indian linked businesses, started building foreign currency assets and taking greater
exposures on Indian companies. SBI also issued foreign currency bonds and boasted
of taking a single group exposure up to $1 billion.
 Other Initiatives
SBI expanded globally by providing refinancing services to Indian firms setting up
offices abroad. It also consolidated its treasury operations by ramping up its salesforce
and introducing new financial instruments for SMEs. It also expanded its services to
include PE, pension funds, general insurance and financial planning.
All these transformational changes fructified and SBI became the most valuable bank
in the country by 2008 in terms of market capitalization. Other laurels that followed
were:- “The Bank of the year, India” in 2008 & 2009, and CNBC Awaaz consumer
awards for “Most Preferred Bank”, “Most Preferred Home Loan Brand” and “Most
Preferred Credit Card Brand” in 2010.
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What are the challenges facing Mr.Bhatt‟s successor?

Bhatt had become the SBI chairman at a crucial phase when the bank had been losing
market share steadily for more than two decades. The bank had then fallen down to 15%
market share, was lagging behind in technology platforms, innovation and customer service
and consequently lost its influence in the market. Bhatt was boarded on SBI as chairman to
revamp the system and bring back the lost lustre.
Bhatt was a visionary leader who had a open and non-hierarchical approach and preferred to
go to branches and monitor them.

Listed below are few significant achievements and changes brought in SBI by Mr.Bhatt:-
 He revamped the top tier of the organizational structure by appointing Deputy
Managing Directors (DMDs) heading strategic businesses.
 Adapting 14-point transformation agenda for the bank across three broad parameters-
business initiatives, enabling initiatives for facilitating business and people initiatives.
 He made it customer-oriented and tech-savvy.
 He effectively communicated his vision to the bank‟s employees and made sure
their mindset changes from indifference and resignation, to confidence and
dedication through conclaves.
 He laid out the entire action plan along the lines of business initiatives, facility
initiatives and people initiatives.
 He ensured that SBI leveraged technology heavily to improve customer service.
 Focus on people was another main outlook of his agenda.
 „Parivartan‟ aimed to bring back bank to leading position in industry
 SBI‟s market cap and ranking improved
 Customer satisfaction also rose at a steady pace
 Bank won numerous awards in 2008,09 for being the most preferred bank.

Bhatt had taken SBI to a level from where it was a mammoth task for his successor to
maintain the momentum of growth. Thus, the foremost task before Bhatt‟s successor was to
sustain the drive and stay ahead of competition.

1) The bank had been growing at a huge speed and was opening more than 2-3k ATMs every
year. Despite of this, the bank still needed to improve on parameters such as efficiency.
2) SBI had regained its leadership among households but was far behind in corporate banking.
There was a lot to be done in the areas of corporate lending, treasury and tenor management
fronts. Also, it needed to meet the capital and other requirements of Indian companies that
were rapidly going global.
3) He had numerous challenges facing him while trying to live up to SBI‟s purpose of being a
“Banker to every Indian”. On the retail banking end, SBI needed to adapt its products and
services to cater to a growing middle income population. Moreover, the high end income
segment was not satisfied in terms of convenience; it still didn‟t believe SBI was their type of
bank!
4) SBI had to bridge the gap between the organization and customer that generated due to
centralization process and technological innovations had to be continued to make high-
income segment feel convenient.
5) India needed a very strong banking system to sustain its high growth rate, estimated to be
around 9% over the next decade. The current banking system was not well equipped to
handle it, but SBI, given its size, sophistication and reach, was best suited to lead this growth.
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To accomplish Bhatt‟s dream of making SBI the leader, his successor would need to remain
engaged, make tough strategic decisions and be willing to work hard.