Change agents
Performance-linked compensation is a significant step for an old private
sector bank to achieve - not because it is rocket science but because
it calls for reorienting employee mindsets to the new realities of the
marketplace. Some of India's oldest banks are thus beefing up their top brass with MNC talent in a bid to stay competitive.
As many as 1,300 employees of Dhanlaxmi Bank, an 83-year-old private sector bank headquartered in Thrissur, Kerala, were pleasantly surprised in November 2008. In his first meeting with trade unions, with HR Head-designate Manish Kumar by his side, new Managing Director and CEO Amitabh Chaturvedi offered a 15 to 25 per cent raise in salaries.
In return, he wanted an assurance the team would work harder to make Dhanlaxmi one of the top five private banks in five years. The employees suspected a hidden agenda - until they actually got their hikes. They now have a two-part pay, fixed and variable, with the latter linked to individual performance. The initiative has led to some results. In three years, the bank's business has soared from Rs6,000 crore to Rs17,000 crore; and the employee headcount to 4,500 people.
"We followed the practice that multinational corporations, or MNCs, first started and was then picked up by everybody else," says Kumar, since christened Chief People Manager. The move, he explains, was initiated because the top brass were convinced that their staff was underpaid, and it would make more economic sense to hike their pay than get people from the outside.
Kumar's past association with MNCs such as Mannesmann-Demag AG, Germany, and Kodak India has helped him explore innovations in the bank's HR practices. The split pay structure, CEO Chaturvedi says, has led to some employees on occasion taking home double their earlier pay.
Performance-linked compensation is a significant step for an old private sector bank to achieve - not because it is rocket science but because it calls for reorienting employee mindsets to the new realities of the marketplace. And it is not just at Dhanlaxmi that such change, prompted by the induction of new and dynamic managers, is taking place. At the 84-year-old Lakshmi Vilas Bank in Karur, Tamil Nadu, the management is introducing an employee stock ownership plan, or ESOP.
"We will operationalise it soon to bring about a performance-driven culture. We are trying to tell our colleagues at all levels that security of job lies in the success of the bank,'' says P.R. Somasundaram, MD and CEO, who has worked for 25 years in Standard Chartered and Unilever. He joined the Tamil Nadu-based bank, founded by the local Vysya community leaders, with the clear-cut mandate for modernising it. "In a competitive market, aggression is important, and the challenge before me is to drive a sense of aggression in employees,'' he says, adding that the unions have been supportive of the management's desire for a change.
With more and more young executives from leading MNCs walking into old-generation private sector banks, the promoters are beginning to hear a language spoken in multinational boardrooms. The days of anointing retired public sector bank employees as CEOs are long gone. In the 1990s, it was the new private sector banks that ushered in MNC talent - ex-Citibanker Aditya Puri set out to start HDFC Bank and later Bhaskar Ghose, who was the Country Head for Bank of New York, came on board at the Hindujaowned IndusInd Bank. Now it is the turn of the traditional private banks to realise that if they have to survive, they need to infuse young blood and fresh ideas. The general consensus is traditional banks lag mostly in technology, HR practices and products.
Decision-making tends to be slower as the work culture is less flexible. The MNC talent is expected to bring about change on all these fronts. Dhanlaxmi, for instance, has a veritable cricket team of former MNC managers. At Lakshmi Vilas, other than Somasundaram, there are other directors with experience at foreign banks. For instance, ED Rajat Baldhi had stints at HSBC, Deutsche Postbank and Citibank India; and another ED V. Prakash has worked with Standard Chartered. Then, Kolhapurheadquartered The Ratnakar Bank, which was founded in 1943, has Vishwavir Ahuja, who was with Bank of America for 27 years, as MD and CEO. Another director, Narayan Ramachandran, was with Morgan Stanley in New York, Singapore as well as in Mumbai. And the 65-yearold Federal Bank, which is headquartered in the small town of Aluva near Kochi in Kerala, has Shyam Srinivasan as CEO. Srinivasan has two decades of experience at Standard Chartered and Citi.
At most of these banks, the shareholding patterns have changed so much that the dominant voice no longer remains in the place of the bank's origin but outside it. Federal Bank, Dhanlaxmi Bank and Lakshmi Vilas Bank are a few such examples. This has allowed the banks to explore business opportunities outside their traditional markets. At Dhanlaxmi Bank, where foreign institutional investors make up the largest group of shareholders, the top management functions out of Mumbai, although regular trips are made to the head office in Thrissur.
Similarly, Ahuja, former CEO of Bank of America's India operations, functions out of Mumbai as head of The Ratnakar Bank. Lakshmi Vilas Bank has stationed Baldhi in New Delhi to drive the mortgage business. "We are hungry for business,'' says Chaturvedi. What he leaves unsaid is: "We do not care which region it comes from."
That growth is coming from a judicious mix of expansion and innovation. Lakshmi Vilas plans to open a clutch of high quality signature branches with centralised processes for corporate lending and wealth management even as it continues to upgrade customer service in existing branches. At Federal Bank, Srinivasan is blending the old with the new. "My bank represents the warmth and personalisation that we still value in India,'' he explains.
At the same time, he is using analytics and data sciences to improve the customer experience. Interestingly, the former Citibanker and IIM Calcutta alumnus lives in Aluva as he wants to be closer to the people he works with.
In a bid to increase transparency and bond with employees, a number of these banks have begun to hold frequent Town Halls - a contemporary way of management and employees coming face-to-face and discussing issues threadbare. "We have covered 85 per cent of our employees this year through Town Halls. They can raise any question, however critical they are,'' says Kumar of Dhanlaxmi.
At Lakshmi Vilas Bank, Somasundaram is trying to demolish a hierarchical mindset to bring about faster response in business situations. "They (employees) will be comfortable dealing with customers only if they are comfortable dealing with me. How will they speak to the MD of another organisation if they cannot talk to me with a sense of comfort,'' he asks. He often reminds his colleagues. "I am an employee who worked his way up. So can you.''
As these high-flying managers attempt to shake up the old private banks, they appear careful not to attempt to fix things that are not broken. For instance, these banks are known to take good care of the community - and of shareholders.
Lakshmi Vilas Bank has paid dividends for 79 out of 80 years. The flip side, however, is that the promoters should be willing to hand over control to these high-flying managers and keep away from day-to-day affairs if they are keen to see genuine change in these banks' customer and business orientation.
In return, he wanted an assurance the team would work harder to make Dhanlaxmi one of the top five private banks in five years. The employees suspected a hidden agenda - until they actually got their hikes. They now have a two-part pay, fixed and variable, with the latter linked to individual performance. The initiative has led to some results. In three years, the bank's business has soared from Rs6,000 crore to Rs17,000 crore; and the employee headcount to 4,500 people.
"We followed the practice that multinational corporations, or MNCs, first started and was then picked up by everybody else," says Kumar, since christened Chief People Manager. The move, he explains, was initiated because the top brass were convinced that their staff was underpaid, and it would make more economic sense to hike their pay than get people from the outside.
P.R. Somasundaram
Old pvt banks have unique strengths...
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"We will operationalise it soon to bring about a performance-driven culture. We are trying to tell our colleagues at all levels that security of job lies in the success of the bank,'' says P.R. Somasundaram, MD and CEO, who has worked for 25 years in Standard Chartered and Unilever. He joined the Tamil Nadu-based bank, founded by the local Vysya community leaders, with the clear-cut mandate for modernising it. "In a competitive market, aggression is important, and the challenge before me is to drive a sense of aggression in employees,'' he says, adding that the unions have been supportive of the management's desire for a change.
With more and more young executives from leading MNCs walking into old-generation private sector banks, the promoters are beginning to hear a language spoken in multinational boardrooms. The days of anointing retired public sector bank employees as CEOs are long gone. In the 1990s, it was the new private sector banks that ushered in MNC talent - ex-Citibanker Aditya Puri set out to start HDFC Bank and later Bhaskar Ghose, who was the Country Head for Bank of New York, came on board at the Hindujaowned IndusInd Bank. Now it is the turn of the traditional private banks to realise that if they have to survive, they need to infuse young blood and fresh ideas. The general consensus is traditional banks lag mostly in technology, HR practices and products.
Shyam Srinivasan
At most of these banks, the shareholding patterns have changed so much that the dominant voice no longer remains in the place of the bank's origin but outside it. Federal Bank, Dhanlaxmi Bank and Lakshmi Vilas Bank are a few such examples. This has allowed the banks to explore business opportunities outside their traditional markets. At Dhanlaxmi Bank, where foreign institutional investors make up the largest group of shareholders, the top management functions out of Mumbai, although regular trips are made to the head office in Thrissur.
Similarly, Ahuja, former CEO of Bank of America's India operations, functions out of Mumbai as head of The Ratnakar Bank. Lakshmi Vilas Bank has stationed Baldhi in New Delhi to drive the mortgage business. "We are hungry for business,'' says Chaturvedi. What he leaves unsaid is: "We do not care which region it comes from."
That growth is coming from a judicious mix of expansion and innovation. Lakshmi Vilas plans to open a clutch of high quality signature branches with centralised processes for corporate lending and wealth management even as it continues to upgrade customer service in existing branches. At Federal Bank, Srinivasan is blending the old with the new. "My bank represents the warmth and personalisation that we still value in India,'' he explains.
At the same time, he is using analytics and data sciences to improve the customer experience. Interestingly, the former Citibanker and IIM Calcutta alumnus lives in Aluva as he wants to be closer to the people he works with.
In a bid to increase transparency and bond with employees, a number of these banks have begun to hold frequent Town Halls - a contemporary way of management and employees coming face-to-face and discussing issues threadbare. "We have covered 85 per cent of our employees this year through Town Halls. They can raise any question, however critical they are,'' says Kumar of Dhanlaxmi.
At Lakshmi Vilas Bank, Somasundaram is trying to demolish a hierarchical mindset to bring about faster response in business situations. "They (employees) will be comfortable dealing with customers only if they are comfortable dealing with me. How will they speak to the MD of another organisation if they cannot talk to me with a sense of comfort,'' he asks. He often reminds his colleagues. "I am an employee who worked his way up. So can you.''
As these high-flying managers attempt to shake up the old private banks, they appear careful not to attempt to fix things that are not broken. For instance, these banks are known to take good care of the community - and of shareholders.
Lakshmi Vilas Bank has paid dividends for 79 out of 80 years. The flip side, however, is that the promoters should be willing to hand over control to these high-flying managers and keep away from day-to-day affairs if they are keen to see genuine change in these banks' customer and business orientation.
