Change & Continuity in Contemporary Business: State Bank of India

1 Change & Continuity in Contemporary Business: State Bank of India 1.0 Introduction The State Bank of India (SBI) like any other modern business entity is facing numerous challenges that are related to globalisation and its effects. Having highly established itself in the past to rank among the best performing banks in India, SBI has in recent days experienced difficulties, ranging from disillusioned staff to waning market influence and increasing dissatisfaction among clients. A change of guard at the helm of the bank has seen revolutionary action and practice being integrated so as to reverse the situation. This report analyses the major influences of the bank, as well as the impact that globalisation has had on the institution.

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2.0 Internal and External Influences on SBI 2.1 Internal Influences 2.1.1 Employees The employees of the bank play a very critical role in overly influencing the institution that they work for. The employees are the ones who are directly involved in executing the policies of the bank and, therefore, their role bears a lot of influence. They are also the direct contact between the bank and the external community, mainly the customers. Thus, their attitude, morale, and behaviour can easily and generally be understood to be representative of the bank.

Under SBI’s old management, prior to the appointment of O. P. Bhatt as the chairman, the morale of the staff was particularly low. The workers appeared to have been resigned into losing and lacking hope for a better future for SBI. Consequently, their low motivation and morale affected the overall operations of the bank in terms of quality, where more clients felt inadequately served and opted to seek alternative services from SBI’s competitors (Rooney, Gottlieb & Newby-Clark 2009, p. 410).

2.1.2 Management SBI’s management, right from the chairman at the top of the hierarchy, initiates the policies that are used to run the bank. These policies touch on virtually all the areas that the bank is involved in, including customer service, employment, products and services, and corporate social responsibility, among many others. These policies, therefore, are capable of either improving the overall competitive abilities of the bank or negatively affect it.

The new plans and influence introduced by Bhatt as the chairman of SBI, for instance, was able to resuscitate individual performance of the employees and the managers. Bhatt

3 introduced a new policy where workers could give their feedback information to the management and feel as being appreciated to be part of the organisation. This consequently improved the motivation of the workers and their managers towards better performance (Wallace, Chernatony & Buil 2011, p. 397).

2.2 External Influences 2.2.1 Competition Other banks operating in India influence the way SBI operates. These banks have introduced new products and features which attract and woo customers from SBI (Houston et al.

2001, p. 19). In essence, SBI is forced to also initiate its own products and features that have the potential of retaining and even attracting potential and existing customers from other banks.

2.2.2 Government The government is the regulator of the banking sector in India. Its policy decisions, therefore, affect the overall manner in which the bank operates. For instance, when the government restricted entry and operation of foreign and private banks, SBI encountered very little competition from the other industry at large (Child, Rodrigues & Tse 2012, p. 1246).

However, when the government later allowed these foreign and private players to freely compete with the nationalised banks, competition was intense and SBI was forced to its drawing board to seek for better alternatives of doing business.

3.0 Globalisation Impact 3.1 The influence of Globalisation on SBI’s Policies and Decision Making Process Globalisation particularly helped the management of the bank to incorporate everyone when it came to formulating the bank’s policies. Initially, policy formulation was considered to be the prerogative of the management. The senior management sat and came up with a set of

4 policies, which were required to be implemented and observed by the rest of the members in the organisation.

However, with the advent of globalisation, there was need for the bank to infuse creativity in its operations. This called for the management to create avenues through which they could collect and consider a very wide range of contributions from the stakeholders, mainly the employees and the customers. Thus, with Bhatt’s chairmanship, workers were encouraged to give feedback information to the management.

Globalisation also led to the bank’s management giving more attention and focus on customer service. With the foreign and private competitors wooing SBI’s former customers, the bank needed to quickly address some of the issues that were causing their customers to leave.

The customer service, thus, ensured that quality was being given priority when it came to handling customers. SBI had to create its own competitive capabilities so as to fight off the competition from the other players. Prior to globalisation, the bank did very little in terms of providing customer service as it was assured of industry leadership throughout India.

Adoption and integration of technology was also hastened by the advent of globalisation.

One of the major reasons as to why SBI’s competitors had managed to dislodge it from the industry’s leadership position was the fact that the new players had extensively adopted use of technology. While the other banks had networked their branches and flexibly served their clients, SBI still relied on outdated banking methods which ended up compromising on quality. Thus, the bank was forced to integrate the use technology in its operation so as to enhance its competitive capabilities. The bank networked its extensive branches and established a centralised database system that enabled customers to access their accounts from any location in the country. The bank also rolled out new technology-reliant services, such as mobile banking. The traditional

5 banking practices were also abandoned by the bank as it adopted new and efficient practices like paperless banking.

3.2 Critical Analysis of Technology Use by SBI SBI had traditionally been relying on the use of manual ledger system. In 1990, the bank opted to transition from the use of this system to a computerised system that would manage to enable back office operations for its entire network of branches. The computerised system, however, was not centralised as each branch had independent servers from each other. In 2003, the bank rolled out a Centralised Online Real Time Environment Banking Solution, abbreviated as CBS. This system intended to link all the branches of the bank into one.

The CBS rollout program was being undertaken gradually owing to the fact that the bank did not have a very strong and reliable technological backbone that could sustain a-one-time implementation. These resulted in increased difficulties in operations, including complexity and poor connectivity. Bhatt halted the CBS rollout temporarily in 2006 so as to resolve the technological glitches that were hampering its operations. In December 2006, the rollout programme resumed with very little interruptions and failure on the part of the system. The rollout was officially completed by July 2008 and with all the SBI branches being fully covered by the CBS system.

The installation of the CBS, however, forced the management to also accordingly align its processes. The bank had been using outdated processes which could not have performed to perfection with the newly installed CBS system. Thus, a reengineering exercise was initiated for this purpose and lasted for three years. This enabled the bank to shift all activities that did not necessarily require to be handled in the presence of customers to the back office. The use of CBS enabled the bank to operate very fast as it handled its consumers. Other technology-reliant

6 services were also able to be initiated by SBI as a result of the successful installation of CBS. The bank rolled out internet kiosks and mobile banking services which, by the year 2011, had reached more than 125,000 villages in rural India. SBI plans for the year 2012 is to ensure that it gains access to 200,000 villages which currently are unbanked (Munkvold 2005, p. 78).

3.3 How SBI Managed Change and Innovation SBI managed to sustain change and innovation by dismantling its previously existing modular structure. The bank took this decision as a perfect way of expediting its internal decision-making process. The deputy general manager’s position was abolished and instead, the general managers were now required to oversee the regional general managers. The branch managers, in the new arrangement, were now directly placed under the supervision of the regional managers (Adner & Kapoor 2010, p. 306).

The customer service area also received much attention and focus from the SBI management. The bank’s vision was redefined in the first step so as to underline the bank’s resolve to change the way it was handling its customers. This showed how the bank was considering its customers to be of greater importance to its overall operations. Technology was also leveraged to assist in improving customer service. Through this initiative, the bank launched the ‘sms unhappy’ service which provided an avenue to the customers to launch complaints concerning any service that they did not like. This changed the attitude among customers as there was some sense of responsibility and quality on the part of the bank (Malik, Naeem & Arif 2011, p. 646).

The SBI’s risk management system was also strengthened so as to include quality and efficiency in its performance and delivery. A new Managing Director’s post was introduced who assumed the roles of the Chief Credit and Risk Officer. A system for evaluating business

7 performance at the bank was newly designed and implemented. The non-banking SBI subsidiaries that existed were also exploited such that synergies in the areas of mutual funds, credit cards, life insurance, and capital markets could be realised through use of the bank’s distribution channel. A group level consolidation initiative was also embarked upon by SBI, whereupon mergers were effected with the State Bank of Indore and the State Bank of Saurashtra. In essence, the bank did away with bank end operations, front-end branches duplication, as well as administration.

People empowerment was also pursued aggressively by the SBI management. Bhatt had realised how low the motivational levels of the bank’s employees had gone and sought to have them repaired. He ensured he reached every employee of the bank in the early days of his tenure in office. This particularly motivated the employees itself, particularly given that the previous management did not really interact with the employees in any meaningful way. The employees were retrained as a way of encouraging and motivating them to uplift the bank from its poor state and reclaim the market leadership that it had once enjoyed.

4.0 Conclusion The State Bank of India had been a major player in India’s banking sector for many years. The bank had a wide network of branches that covered almost every part of the country.

The government later nationalised the bank and introduced stiffer guiding rules for the industry that basically discouraged competition from other private and foreign banks. However, with the advent of globalisation, the bank lost its influence and market leadership to other smaller banks which offered efficient services to customers. SBI was slow in integrating technological changes and stuck with the traditional methods of banking which were compromising on quality. The morale of its employees also dropped considerably as the management stuck with old practices

8 which failed to add value. However, a new change of guard at the helm of the company saw the bank introduce new policies and practices, such as focusing on customer service, and integrating technology in its operations. SBI introduced the CBS networking system which centralised its operations and enabled customers to be served in a flexible manner. The bank also merged with its other non banking subsidiaries so as to benefit from performance synergies and enhance its overall performance.

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Child, J, Rodrigues, S, & Tse, K 2012, 'The dynamics of influence in corporate co-evolution', Journal of Management Studies, vol. 49, no 7, pp. 1246-1273.

Houston, M et al. 2001, 'Cross-unit competition for a market charter: The enduring influence of structure', Journal of Marketing, vol. 65, no. 2, pp. 19-34.

Malik, M, Naeem, B, & Arif, Z 2011, 'How do service quality perceptions contribute in satisfying banking customers?', Interdisciplinary Journal of Contemporary Research in Business, vol. 3, no. 8, pp. 646-653.

Munkvold, B 2005, 'Experiences from global e-collaboration contextual influences on technology adoption and use', IEEE Transactions on Professional Communication, vol. 48, no.

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