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Ujjivan Best Practices Hyderabad October 2011


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Ujjivan Best Practices Hyderabad October 2011

  1. 1. Weathering the Storm : Ujjivan Best Practices Change and to reposition Ujjivan for the future 1
  2. 2. Index Formative Years Industry Crisis & Our approach Industry Crisis : Gaps in People Management Ujjivan’s response during crisis Post crisis : The Need for Change Guidelines for Change Leaders Change Management Programs Post Crisis Conclusion Lessons
  3. 3. Formative Years: 2005-2010 Mission: financial inclusion of the urban & semi-urban poor Started our operations with 18 month pilot - November 2005 in Bangalore Our mantra - rapid expansion and break-even by the 4th year of operations Break-even in 2009-10, wiped-out start-up losses, dividends & bonus for employeesStory of Robust growth 2005-2006 CAGRKey Metrics (5 months) 2006-2007 2007-2008 2008-2009 2009-2010 2005-2010Loan (Rs. Crores) 0.2 8.4 36.5 169 370 555.83%Customers 1,110 22,220 68,033 295,903 620,624 386.27%Branches 3 13 37 127 230 195.90%States 1 1 4 11 13 89.88%PBT (Rs. Crores) -0.5 -1.4 -2.9 -0.8 11.9 NAPAT (Rs. Crores) -0.6 -1.5 -3 -0.7 9.6 NA
  4. 4. Industry Crisis & Our approach Uninterrupted growth - first half & ability to raise funds in second maintain portfolio book size Collateral damage in credit portfolio and pro-active credit management Prudent Strategies that helped us emerge from the crisis unscathed:  Exclusion of AP & other vulnerable areas  Effective Business & HR practices helped during & after Crisis Impressive financial & business performance in 2010-11 Key Metrics 2009-10 2010-11 CAGR Loan O/S (Rs. Crores) 370.1 625.1 69% Customers 620,624 991,584 60% Branches 230 351 53% States 13 20 54% PBT (Rs. Crores) 11.9 17.7 49% PAT (Rs.Crores) 9.6 11.4 19%
  5. 5. Industry Crisis : Gaps in People Management Poor Staff & Customer Connect  Nil or Poor communication in a by a hostile media reports on crisis, led to high degree insecurity among staff & customers  MFI had lost customer connect. Seen as a ‘low cost money lender’. Led to customers not standing by the MFIs in face political & administrative onslaught. Job Insecurity  Loan disbursements and recovery ground to a halt : paralysis of basic business  Delayed salary payment & stopped incentive : led to frauds Rumors  Mismanaged staff & competition spread rumors of closure non home stated based MFIs, death of promoters & led to staff default  No communication on assessment of crisis & direction from own company led staff to believe rumors building a vicious cycle.
  6. 6. Ujjivan’s response during crisis • Salaries: On time • Communication at • Benefits : Staff Loans all levels : staff & Advances as usual meetings • Performance Bonus Salaries & Higher • FAQ for Employees & Payments Customers Benefits – Employee as usual Connect Other Mission • ESOP at all levels Initiatives intact • Loan Disbursements to based on existing customers performance • Social Development • Awards for Service Program Quality Champions • Prudent Cash Management
  7. 7. Post Crisis Analysis: The Need for Change Aggressive & uncontrolled growth brought crisis – “Prince to Frog”. Overextension of credit led to coercive collection - the key factors of crisis Ill-conceived Andhra Ordinance brought entire MFI sector to door of collapse Drying up of bank funding Post the crisis and dramatically changed regulatory & business environment. Led to need to make fundamental changes in business operations remaining true to our mission of providing financial services to the poor. This & next financial year we will undertake number of major changes in the way conduct business. The leadership teams both regional & national have the important tasks of leading the changes. It will be a important challenge & experience for each of us to develop as change leaders.
  8. 8. Guidelines for Change Leaders Meticulous planning & execution taking the feedback from all parties involved: staff & customers. Establishing a team with clearly defined responsibilities with time lines. Team work under a leader has to work like a well oiled machine. Buy-in and involvement of key players - staff & customers. Communication & interaction clearly discussing why we are undertaking the project, what is the benefit to the customer, Ujjivan & staff are extremely important. Selecting the timing of executing the change is very important this includes being completely ready: right staffing, training, infra-structure and the need to execute the project as a part of the overall strategy/plan of Ujjivan. Those executing the project must have clear understanding of the constraints & regulations within which we operate.
  9. 9. HR Change Management Actions - post crisis Equipping Staff through Training  Domain refresher programs for Field Staff /Managers on changes in products & process  Exclusive Productivity Workshops at branch level Right Staffing:  A 3 months Performance Improvement Plan to weed-out poor performers  No retrenchment /Allow natural attrition Managing Branch Mergers:  Lead by Chief Operating Officers; HR Manager pre & post visit  Fortnightly Review by respective functions (HR, Admin, Distribution,…)  Clarity on Roles & Responsibilities of new branch set-up
  10. 10. Change Management Programs - Post -Crisis Increased Operations Efficiency New core banking technology & DMS Project; Customer Retention – Monthly Meetings & ‘Mera Loan’ Field staff increased efficiency programs to double customer handling New Product Lines post Malegam Committee recommendation Quality Control of Operations Diversifying Source of Funds from banks Increased Social Development Programs Introducing Credit Bureau checks for credit approval Financial Literacy Programs to Customers to manage their debt  Sankalp – covered over 70% of customers in 3 months  Diksha – led by service quality
  11. 11. Conclusion PAST: Our strategy to focus on urban & semi-urban poor and grow nationally has built a solid base LAST YEAR: Coming out of the crisis stronger and acknowledged as one of the best MFIs is a testimony to our past track record, professional management and good governance PRESENT: These two years are going to be periods of change & steady growth. FUTURE: We expect to grow at a steady pace in 25-30% range, which will position us ideally in the future for a conversion to a bank for financial inclusion.
  12. 12. Lessons Do not be complacent look at both direct & collateral damage Honest Communication: evaluation of problem, how it impacts us & plan of action Be pro-active and pre-empt any damage Honest evaluation of all that went wrong and corrective action to be taken. Buy in of all employees & customers of changes being made key to successful execution Keep the faith : do not dilute the original mission.