Weathering the Storm : Ujjivan Best Practices Change and to reposition Ujjivan for the future 1
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
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
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%
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.
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
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.
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.
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
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
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.
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.