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The document discusses change management at ICICI bank. It summarizes that K.V. Kamath replaced the CEO in 1996 and shifted ICICI's focus from a development bank to a market-driven conglomerate. This initiated major organizational changes. ICICI faced challenges of limited expertise, average customer service, and ignorance of new sectors. It addressed this through training programs, performance-linked rewards, transparent appraisals, and a compensation review. ICICI also merged with Bank of Madura which caused cultural integration issues that were tackled through various employee-focused initiatives.
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- 1. The Change Management At ICICI Submitted to.. Prof. Sonika Sharma By… Group 3 Abhay Kumar (301) Abhijit Sah (302) Chandan Yadav (317) Ved Prakash Yadav (355) Vikas Kumar (356) Vivek Kumar (359)
- 2. Concept of Case • ICICI was established by the Government of India in 1955 to promote industrial development • K.V. Kamath replaced Narayan Vaghul in May 1996 as the CEO of ICICI. • Emphasis changed from a development bank mode to that of a market driven financial conglomerate • Initiated a lot of Organizational changes immediately to make ICICI a financial powerhouse.
- 3. Cont….. • ICICI had major Plan of expanding , this was expected to bring with it further challenges as well as potential change management issues. • But the organization had successfully managed to handle the employee unrest following Kamath’s appointment • By the end of 2000, ICICI emerged as one of the largest financial institution of India.
- 4. Key Problem Areas • Limited expertise: Disbursing 8 year loans to big players • ICICI was neither a low cost player nor a differentiator in terms of customer service • Ignorance regarding the lending practices in newly opened sectors like infrastructure. • Fear of unknown and Fear of inability
- 5. 1st level Changes & Challenges at ICICI The creation of the IIG,O&G,PTD and SPG(new skill sets). FOCUS ON CUSTOMERS 1. Major Client Group (MCG) • Staff: 30 – 40 • Handled top 100 clients 2. Growth Client Group (GCG) • Staff: around 60 • Handled mid-size companies 3. Personal Finance Group
- 6. Effect of such changes • MCG & GCG issue –more scope in MCG(working in MCG offered better exposure and bigger orders. • New groups took on the key tasks, a majority of the work, along with a lot of good talent, shifted to the corporate center. • Zonal offices continued to do the same work disbursing loans to corporate in the same region and the importance is diminished.
- 7. Steps Taken • Training programs were conducted. • Rewards on Group Performance rather than on individual performance. • Selection of Star performer award was made transparent. • ICICI also reviewed the compensation structure in place. • 360-degree appraisal system was introduced.
- 8. 2nd level Changes at ICICI • ICICI Bank was merged with Bank of Madura (BOM)
- 9. Issues related to this changes • There were large differences in the two entities. • BoM merger lead to huge cultural differences in the organization. • BoM employees feared regarding their positions coming under scrutiny
- 10. Steps Taken • Performance management • Cultural integration • Employee behavior pattern study • Employee communication • Training • Promotional schemes
- 11. Theoretical analysis Transformation Change • ICICI have undergone through Transformational change because the company have made big changes. • The bank has a huge change in its structure from a development bank mode to that of a market-driven financial conglomerate. • Merger with BOM to increase working in rural population.
- 12. Continuous Development Cycle 'Post-Merger' Employee Behavioural Pattern’ Period Employee Behaviour Day 1 Denial, fear, no improvement After a month Sadness, slight improvement After a Year Acceptance, significant improvement Relief, liking, enjoyment, business After 2 Years development activities
- 13. Recommendations and solution • Training Program were conducted and various department were set up to increase the efficiency and expertise. • The department like MCG, GCG, and personal finance group is created to increase the customer services. • The ignorance regarding the newly open sector was solved by creation of IIG, PTD, SPG, O&G departments. • The 'fear of the unknown' was tackled with adept communication and the 'fear of inability to function' was addressed by adequate training.
Editor's Notes
- ICICI had limited expertise, with its key activity being the disbursement of eight-year loans to big clients like Reliance Industries and Telco through its nine zonal offices. In effect, the company had one basic product, and a customer orientation, which was largely regional in nature. The Indian commercial banks' cost of funds was much lower, and the foreign banks were much savvier when it came to understanding customer needs and developing solutionsFear of unknown:-While the zonal offices continued to do the same work - disbursing loans to corporate in the same region - their importance within the organization seemed to have diminishedfear of inability:-
- 2) The change program was initiated within the organization, the first move being the creation of the 'infrastructure group (IIG),' 'oil & gas group (O&G),' 'planning and treasury department (PTD)' and the 'structured products group (SPG)', as the lending practices were quite different for all of these. Kamath picked up people from various departments, who he was told were good, for these groups. The approach towards creating these new skill sets, however, led to one unintended consequence. As these new groups took on the key tasks, a majority of the work, along with a lot of good talent, shifted to the corporate center. While the zonal offices continued to do the same work - disbursing loans to corporates in the same region - their importance within the organization seemed to have diminished. An ex-employee remarked, "The way to get noticed inside ICICI after 1996 has been to attach yourself to people who were heading these (IIG, PTD, SPG, O&G) departments. These groups were seen as the thrust areas and if you worked in the zones it was difficult to be noticed."Refuting this, Kamath remarked, "This may be said by people who did not make it. And there will always be such people." Some of the people who did not fit in this set-up were quick to leave the organization. However, this was just the beginning of change-resistance at ICICI. Another change management problem surfaced as a result of ICICI's decision to focus its operations much more sharply around its customers. In the system prevailing, if a client had three different requirements from ICICI,3 he had to approach the relevant departments separately. The process was time consuming, and there was a danger that the client would take a portion of that business elsewhere. To tackle this problem, ICICI set up three new departments: major client group (MCG), growth client group (GCG) and personal finance group. Now, the customer talked only to his representative in MCG or GCG. And these representatives in turn found out which ICICI department could do the job. Another change management problem surfaced as a result of ICICI's decision to focus its operations much more sharply around its customers. In the system prevailing, if a client had three different requirements from ICICI,3 he had to approach the relevant departments separately. The process was time consuming, and there was a danger that the client would take a portion of that business elsewhere. To tackle this problem, ICICI set up three new departments: major client group (MCG), growth client group (GCG) and personal finance group. Now, the customer talked only to his representative in MCG or GCG. And these representatives in turn found out which ICICI department could do the job. Though the customers seemed to be happy about this new arrangement, people within the organization found it unacceptable. In the major client group, a staff of about 30-40 people handled the needs of the top 100 customers of ICICI. On the other hand, about 60 people manned the growth client group, which looked after the needs of mid-size companies. Obviously, the bigger clients required more diverse kinds of services. So working in MCG offered better exposure and bigger orders. The net effect was that the MCG executive ended up doing more business than the GCG executive. A middle-level manager at ICICI commented, "The bosses may call it handling growth clients but the GCG manager is actually chasing non-performing assets (NPA)4 and Board of Industrial and Financial Restructuring (BIFR)5 cases." Kamath was quick to deny this allegation as well, "Just because somebody is within the MCG does not guarantee him success. And these assignments are not permanent. Today's MCG man could easily by tomorrow's GCG person and vice-versa." 3) The manner, which ICICI recognized an individual's efforts - the feedback process - was also questioned. A manager remarked, "Last year the bonuses varied from Rs 30,000 to Rs 250,000 depending on the performance. In many cases the appraisal scores were same but the bonus amount was not. And we were not told why."4---With Kamath's stated objective to make ICICI provide almost every financial service, separating the customer service people from the product development groups was another problem area. In the current scheme of things, an MCG or GCG person acted as a clients' representative inside ICICI. The MCG or GCG person understood the client's need and got the relevant internal skill department to develop a solution. Unlike foreign banks, there were no demarcations between these internal skill groups and client service person. (Demarcation helped in preventing an internal skills person from cannibalizing business being developed by the client service group.) With no such systems in place at ICICI, this distorted the compensation packages between the competing divisions.
- There were large differences in profiles, grades, designations and salaries of personnel in the two entities.
- The 'fear of the unknown' was tackled with adept communication and the 'fear of inability to function' was addressed by adequate training.