State Bank of India, an India-based has a network of 20,193 branches of which 5,096 branches are of its five associate banks as per the data of March 31, 2012. The Company also provides a range of financial services which include life insurance, merchant banking, mutual funds, credit card, factoring, security trading, pension fund management, custodial services, general insurance and primary dealership in the money market through its various subsidiaries. The bank's segments include Treasury, which includes investment portfolio and trading in foreign exchange contracts and derivative contracts Corporate/Wholesale Banking, which further comprises of lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group. Retail Banking, which comprises of branches in National Banking Group, which includes personal banking activities, including lending activities to corporate customers, and Other Banking Business.
SBI traces its origins to three presidency banks set up by the East India Company- the oldest 200 years ago; mainly to serve short-term credit needs of European traders and to issue notes that were treated as currency. These banks were merely transposing practices developed by European banks that were introduced for the first time in this country. SBI thus has no tradition of innovating and marketing a new product. The people at its helm were always administrators, not entrepreneurs. If they had a public face, it was in the beginning due to their pre-eminent social standing. They were required only to ensure that banking practices as developed else were, were strictly followed. The bank grew by virtue of being the first on the scene and by virtue of government patronage.
Mission of SBI:
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To retain the bank's position as the Premier Indian Financial Services Group, with world class standards and significant global business committed to excellence in customer, shareholder and employee satisfaction and to play a leading role in the expanding and diversifying financial services sector while continuing emphasis on its development banking role.
Describing and analyzing the primary internal and external influences on State Bank of India. - 600 words (http://www.ijnpme.org/pdf%20files/vol3issue1/Organizational%20Culture%20and%20Management%20System-Alisha%20Rai%20Bhatia.pdf)
Culture is one of those terms that are difficult to express distinctly, but everyone knows it when they sense it. For example, the culture of a large, for-profit corporation is quite different than that of a hospital which is quite different that that of a university. You can tell the culture of an organization by looking at the arrangement of furniture, what they brag about, what members wear, etc. -- similar to what you can use to get a feeling about someone's personality. Deal and Kennedy (1982) argue that culture is the single most important factor accounting for success or failure in organizations. They identified four key dimensions of culture are
Values - the beliefs that lie at the heart of the corporate culture.
Heroes - the people who embody values.
Rites and rituals - routines of interaction that have strong symbolic qualities.
The culture network - the informal communication system or hidden hierarchy of power in
Management's role in the change of organizational culture: In most cases, management's first responsibility is to identify processes or behaviors that are not proficient and come up with new behaviors, processes, etc that are more effective within an organization. Once changes are identified, it is important for managers to estimate the impact that they will have to the organization and individual employee on many levels including technology, employee behavior, work processes, etc. At this point management should assess the employee's reaction to an implemented change and try to understand the reaction to it. In many cases, change can be extremely beneficial with lots of positives; however certain changes do sometimes produce a tremendous amount of resistance. It is the job of management to help support workers through the process of these changes, which are at times very difficult. The end result is that management must help employees accept change and help them become well adjusted and effective once these changes have been implemented. Hypothesis of organization culture affecting state bank and its associates:
1. The Adoptability Hypothesis
Schein (1985) discusses the relationship between culture and adaptation, and emphasizes that a culture usually consists of the collective behavioral responses that have proven to be adaptive in the past for a particular social organization. When confronted with a new situation, an organization first "tries" the learned collective responses which are already a part of its repertoire. When new situations are unlike old, the capacity to unlearn the old code and create a new one becomes a central part of the adaptation process. The adaptation hypothesis asserts that an organization must hold a system of norms and beliefs which support the capacity of an organization to receive, interpret, and translate signals from its environment into internal behavioral changes that increase its chances for survival, growth and development.
2. The Involvement Hypothesis
Always on Time
Marked to Standard
This hypothesis suggests that high levels of involvement and participation create a sense of ownership and responsibility. Out of this ownership grows a greater commitment to an organization and a growing capacity to operate under conditions of greater autonomy. Increasing the input of organizational members is also seen as increasing the quality of decisions and their implementation. Ouchi (1980; 1981) suggests that the application of these principles results in an organizational form called the "clan." This hypothesis is not unique to the culture literature. Nonetheless, the hypothesis is a compelling one and persists as a central hypothesis regarding organizational culture and effectiveness.
3. The Consistency Hypothesis
The consistency hypothesis about the relationship between Organizational culture and effectiveness presents a somewhat different explanation. This perspective, in its popular version, emphasizes the positive impact that a "strong culture" can have on effectiveness; arguing that a shared system of beliefs, values, and symbols, which are widely understood by an organization's members, has a positive impact on their ability to reach consensus and carry out coordinated actions. The fundamental concept is that implicit control systems, based upon internalized values, are a more effective means of achieving coordination than external control systems which rely on explicit rules and regulations (Pascale, 1984; Weick, 1987). The power of this means of control is particularly apparent when organizational members encounter a unfamiliar situation
4. The Mission Hypothesis
The last major component of this theory and a fourth implicit hypothesis in the literature on organizational culture is the importance of a mission, or a shared definition of the purpose and direction of an organization and its members. Although few authors have written directly on the topic (see Torbert, 1987, for an exception) most have agreed that a sense of mission provides two major influences on an organization's functioning: First, a mission provides purpose and meaning, and a host of non-economic reasons why the work of an organization is important. Second, a sense of mission provides clear direction and goals which serve to define the appropriate course of action for the organization and its members. Both of these factors grow out of and support the key values of the organization. A mission provides purpose and meaning by defining a social role for an institution and defining the importance of individual roles with respect to the institutional role. Through this process, behavior is given intrinsic, or even spiritual meaning that transcends functionally defined bureaucratic
roles. This process of internalization and identification contributes both to short and long term commitment and leads to effective performance. The second major influence that a strong sense of mission has on an organization is to provide clarity and direction.
Adaptation to globalization
In 1969 Indian government nationalized 14 commercial and 6 in 1980 to facilitate the economic development. Since 91% ofthe banking business ended up in the government's hand, and although the private banks and the foreign banks existed their activities were highly restricted by entry restriction and strict branch licensing policies. This resulted in reduction of bank numbers `14000 people. During these two decades the demand for banking industry grew significantly as the gross domestic savings of India increased from 15.7% to 24.2% and the bank's deposit growing at compounded annual rate of 19%. . As a result of this the predominant nationalized bank over burdened with large non performing assets .Then in 1990 a large current account deficit and currency overvaluation led to balance of payment crisis which led the government on the brink of default thereby forcing it to path of economic reforms such financial sector reforms that is dilution of government ownership in nationalized banks and requirements for improved financial disclosure.
In the next few span of years private banks like ICICI bank and foreign banks such as Standard chartered bank and HSBC set the footprints in the Indian soil. These new banks imposed a threat on the incumbents the public sector and the old private banks. . The biggest strength of the nationalized banks are their physical reach especially in retial banking where SBI was the leader.The new banks were compelled to use SBI's services in places where they did not have branch network. The old banks had decentralized computer systems as a result they could not access their accounts from a non home branches. And though the Nationalized banks were trying for a centralized computer system their legacy or the traditional systems were proving to be a challenge. And as an Analyst commented, "More then a lack of regulatory framework its the lack of zeal and proper mindset attuned towards resisting any new technology that is holding back the nationalized banks. On top of this highly politicized unions are also impediment as the feel the internet banking would expose the low productive levels of workforce."
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These new banks started bringing along a new era in Indian banking through large investments in technologies and customer service. They also introduced remote banking by use of phones and internet. These new comers started having a distinct impact on the customers. They had branches at shining glass buildings and were beautifully designed for the customers. They also hired the best talents for their bank by offering attractive salaries that public banks could not offer as a result of the government restrictions which allowed them to have access to best talents and have strong work force with strong service culture. These new banks elevated customer experience to a whole new level and introduced the system of relationship banking which allured more customers. The incumbents still were moving on through their traditional ways of banking which led to loss of customers as they were adapting to the new and convenient technologies that the new banks were providing. Therefore they were only left with an option to change and adapt to new technology.
The Indian economy too started growing with the banking sector booming. In 2006 it grew at 7.8% and the country emerged as the 4th largest economy in terms of purchasing power parity. And the economist predicted that the number of middle and high level house holds would treble in the next decade. Indian companies then started to look for global acquisitions where small and medium companies were growing at a significant rate among which the Indian equity market was the third best performer in Asia and 8th best in the world.
Use of technology
As SBI's ability to win back customers, products and service offering relied on its proper implementation of its technological platform. In the year 2006 Bhatt rolled out the CBS only 3000 of its branches moved to the new technology and by December of the same year the bank resolved all its technological glitches . By the year 2008 July all of its branches were under CBS and ahead of schedule. As a result the customers were no longer a branch customer they were the customer of the bank so the impact was enormous. However the concerns remained as Chadrashekhar remarked "We still have a long way to go. Volumes have expanded at the rate the technology cant keep up with." and bhatt added as the chairman I have to think about the next decade when competition will tougher and we will have to work harder." His main concern was SBI was still dependent on vendors for technology.
Efficient operating porcess and Branch Network Process Reengineering
As it was essential for SBI to align its process with CBS, the process were outdated since they were tailored to the days of manual work. But in three years of time the reengineering process was complete. SBI shifted all its non customer-facing branch activities to centralized, back processing office sales so that branches could focus on Sales and Service. SBI further redesigned its branches with glass and fiber modular work stations.
For decision making process, SBI dismantled all its traditional modular structure where each circle had modules or zonal offices responsible for about three hundred branches each and removed the position of deputy manager responsible for modules. The general managers are now responsible for regional managers who in turn supervise the branch managers. Thou Bhatt had some obligations during this dismantling process but he gave them ample time to help resolve the issue and told them the decision was irreversible.
Management of Change and Innovation
Develop Consistent customer Service
Bhatt's main objective was to elevate SBI's customer service to number one. The first thing Bhatt did was he redefined the vision of the bank. The existing vision was to long so no one really remembered it. After weeks campaign the Bank came up with "My customer My SBI, My SBI first in the customer satisfaction." as the new vision. SBI further also leveraged technology to improve customer satisfaction. Earlier when people asked about banks different products all of them seem to be lost but now every information is just available at a click of a button in the service desk which made the worker even more confident. SBI also introduced a system called "SMS unhappy" from where people who were unhappy could text their queries and get them resolved within twenty four hours.
SBI strengthened and integrated its risk management system and created a position of new managing director who also functioned as a bank's chief Credit and risk officer. It implemented a new system for measuring business performances. It further focused on exploiting synergies with its non existing non-banking subsidiaries in the areas of capital market credit card, mutual funds, life insurance by using the bank distribution channel. It embarked on a group of level consolidation exercise by merging state bank of Suharastra and State Bank of Indore within itself which helped elimination of duplication of front end branches bank end operations and even administrations which raised a $3.67 billion of equity from the market through a rights issue and thus improving capital adequacy ratio.
Changing training and Capability building system.
Under the supervision of Bhatt SBI embarked on an expansion plan, adding up to one thousand branches every year and the immediate challenge was staffing them adequately since the existing staff was overworked and often stayed back to complete the administrative work that was quite paper intensive and people were unhappy about this situation. Then raised the problem of too many people. They were also faring poorly on parameters such as profit per employee and business per employee and it was expected that the ongoing business process reengineering exercise that centralized operations would release a large number of people who could be deployed elsewhere.
Since fifteen years SBI had not done any recruitment to reduce the staff costs which led to the introduction of a system called VRS Voluntary Retirement Scheme. Bhatt immediately stopped VRS and focused on new recruitment. Then Bhatt started recruitment after setting target for the bank. The tally of people added up was 20,000 clerical staffs and 35000 officers. Since the number of application was rising SBI shifted to online application form to handle these volumes. The bank further recruited lateral hires for specialist positions. Bhatt remarked that they had the freedom to recruit people at market based salaries on contract basis and they did which resulted in increasing the employee strength by 15% in 2008. And with a view to create leadership SBI tied up with top business schools to regularly train AGMs on above business skills and leadership.
Win back the Indian middle class consumer
SBI had to change its image amongst the youngsters and the Indian middle class family to relevant so Bhatt started a branding campaign in 2007. He started the campaign with a the theme of "Pure Banking, Nothing else" and eventually moved to "Banker to every Indian" which now lead to "Proud to be an Indian." Another reason for SBI to loose its market share was its absence in strategic locations as Bhatt Remarked. So eventually the plan to set up 1000 braches per year came into implementation there after.
Own Rural India
Bhatt was keen to open banks in rural areas and set a target of reaching 100,000 Unbanked villages. The main aim was to take the benefits of banking to the Indian masses and build a more inclusive society and thereby carrying the vision of Banker to every Indian. To reach out to the large rural population SBI adopted outsourcing model and used banking correspondents who did banking business on behalf of SBI by partnering with FMCG and even Indian Post Office. Since rural areas needed different focus and different products range and strategy Bhatt therefore created Rural banking and Agricultural Group (RABAG).
Smart Global Expansion
SBI was always keen to mark its presence to the international market and capture a greater share of India linked business as Chaudhari remarked. So SBI tried to Ancash on opportunity presented by Indian companies going abroad. So SBI started building their own foreign currency assets by taking larger exposures on Indian companies since they understood them better. For this they issued foreign currency bonds and today they can take a single exposure group upto $1billion.
SBI started consolidating its treasury operations and brought in stronger profit focus. It also focused on small and medium enterprises with a turnover smaller then Rs 1 billion by ramping up its sales force and introducing products specifically tailored for this area and with a view of increasing its free based business and attracting the upwardly mobile and high net worth clients SBI entered into new business areas in India such as Custodial studies, private equity, pension funds, general insurance and financial planning and advisory services.