For decades, the country's largest bank, State Bank of India, or SBI, used to do a major part of business - especially deposits, advances and cross sales - in the second half of the financial year. The reasons included audits and closing of annual accounts in the first part of the year, summer vacations, and new transfers/postings. The first two quarters were called the lost quarters. Not anymore.
In 2016/17, SBI met 25 per cent targets in the first quarter, thanks to a new performance management system that gives monthly reports on targets and performance for 90 per cent of the staff. This ensures that employees are always on their toes. "Nobody wants to miss targets as that has a bearing on annual increments," says Prashant Kumar, Deputy Managing Director and Corporate Development Officer at the bank.
SBI, often equated with an elephant for its slow ways and size, is becoming an entirely different animal as a result of a massive human resources, or HR, overhaul that is seeing all 2,00,000 employees at 1,700 locations pull their weight together to meet the challenges of the future. The transformation, among other things, involves making hiring more stringent, a new appraisal system based on measurable targets, and focus on building leadership and new skills to deal with the challenges of changing technology and competition from new tech-savvy financial services players such as payments banks and Fintech companies.
SBI, valued at close to Rs 2.4 lakh crore, knows that the technology used by Fintech players such as Paytm and aspirations of millennials are transforming banking in more ways than one, including the quality of services expected by customers. Then, there are things such as artificial intelligence and robotics taking over mundane and repetitive jobs, making the task of training employees for more value-added work all the more imperative.
The bank seems to have taken up the challenge, starting with improving the quality of the workforce. For instance, a few years ago, close to 55 per cent employees did not have specific targets or budgets. Now, almost everybody has targets. Earlier, only those at 37 per cent supervisory roles had measurable targets. Today, the number is 90 per cent. "This is probably the biggest transformation project the bank has ever undertaken. The employees now have a personal dashboard, which shows their targets and performance, apart from the performance of the peer group," says SBI Chairperson Arundhati Bhattacharya. BCG has helped the bank in the initiative.
The Entry Challenge
Last year, those who applied for the post of probationary officer, or PO, were in for a surprise. The exam, conducted by Institute of Banking Personnel Selection, had very difficult reasoning and logic questions. This was a break from previous exams which, BCG said, had become easy to crack as the pattern of question papers had not changed for years. "The difficulty level has changed in a big way," says Jayaraman Ramamoorthy, Chief General Manager, HR, SBI.
The bank also mandated minimum marks in all the papers. Earlier, total marks were used to select the candidates. "There is sanitisation at the entry level itself," says a former SBI officer. Last year, 1.3 million people applied for 2,000 PO vacancies. A PO can rise to the top post.
The bank also reached out to colleges to create a buzz and explain the job requirements and compensation structure. "We conducted road shows before the 2016 PO exam. Our team went to 500 campuses," says Kumar. "There were a lot of misconceptions about work conditions in public sector banks (PSBs). We explained the ground realities," says Bhattacharya who, in her four-decade career, has worked in corporate advances, retail, treasury, HR, and investment banking, apart from a foreign stint. "I must have had 12 jobs," she says. This February, the advertisement for the PO exam carried her picture. "Are you the next?" it asked. "I come from a Tier-III city. If I can make it, everybody can," says Bhattacharya. SBI has also put pictures of all its four managing directors in its campaign to reach out to campuses. "You can also become chairman. That was the message," says Kumar, who is also the HR head.
SBI has also started talking about cost to company, or CTC, instead of basic pay. "It makes a huge difference when you say CTC of `8 lakh a year instead of basic pay of `20,000-30,000 a month," says Kumar.
Two years ago, the bank again started hiring from management schools; it had to stop this in between because of a court order. Last year, it hired 300-plus management graduates to fill specialised posts in areas such as taxation, financial control, credit, treasury and HR. It is also hiring management trainees at the level of assistant vice president for short periods. Though some people complain about the vacuum that is created when these graduates in specialised departments leave the bank, Bhattacharya defends the practice. "There are fresh recruitments every year too. It is good to have churn, as it brings in new ideas," she says.
Leaning on Specialists
In order to build specialised skills, the bank has started inducting employees into specific job families such as credit & risk, sales & marketing, HR, analytics, IT, and forex & treasury. Earlier, like other PSBs, it used to rely on generalists, moving people from one function to another every two years, which meant lack of sufficient expertise in key areas such as credit, treasury, wealth management and risk management. Now, it is selecting employees for each job family by looking at their educational qualifications, experience and preference. "Every area is becoming more and more specialised. In today's dynamic world, we cannot afford to make mistakes," says Bhattacharya.
The new recruits will spend four-six years as generalists and the next 10 years in their job families. "One job family is allotted for five years. The employee can choose another for the next five years or keep working in the same family," says Kumar. After 15 years, officers are eligible to become deputy general managers, a level where they stay for five years. After 20 years, they can reach the senior management level, where again they will work as generalists.
But is there not a possibility of people leaving for greener pastures after specialising? There is, but the bank is not worried. "Isn't it good that your talent is valued outside?" asks a banker.
The bank has also made changes in its transfer and posting policies. On paper, the tenure of an SBI officer is three years, but in reality it used to be one-and-a-half years due to things such as mandatory rural postings. Now, the bank has put in place an automated system to decide transfers and posting based on the competence of the employees. The number of postings has come down from 43,000 to 30,000 in a year.
Perform or Perish
SBI has 200,000 employees and 800 job roles. But the number of key result areas, or KRAs, used to be just over two dozen. Measuring performance was difficult. The bank has now adopted a system where KRAs are based on characteristics of the branch and the employee's job profile. This means targets given to a branch in a metro city may be different from what the rural branch is expected to achieve. For this, the bank has created peer groups, called cohorts, such as rural branches, metro branches, and processing centres; the staff knows who are the top quartile performers in their group/cohort.
Earlier, supervisors used to spend less than an hour on appraisals. Today, they rely on system-generated performance reports. The bank is also teaching employees about giving feedback. In the earlier system, all reports used to be confidential. "I, for instance, don't know how I was rated all along my career," says Bhattacharya. She often jokes that she will get her confidential reports through a right to information application after retirement. Bhattcahraya, who became the first woman chairperson of SBI in October 2013, is retiring towards the end of the year.
The focus of appraisals is also not on volume or size but quality. "There is a shift from top line budgets to budgets based on bottom line or return on equity. This enables employees to determine steps to achieve the results," says Bhattacharya. For example, the earlier focus was on bringing advances but not the quality of these advances. Now, 90 per cent posts have targets that can be measured. Even the clerical staff have targets - these may include guiding people to ATMs, telling them how to transact on phones/computers, or doing customer form validation if KYC is missing or Aadhaar number has not been not submitted. "The KRAs for 2017/18 have been identified. The employees will be able to see their scores," says Kumar.
There is also a focus on training and re-skilling. In fact, 5 per cent marks will now come from completing the training every year. Everybody will have to undergo training modules. SBI has five training institutes for senior employees. It also has 47 training centres for all employees that can train 3,500 people every day. "We are focusing on e-learning," says Kumar. In annual appraisals, training has a weight of 5 per cent, while 65 per cent points are given on the basis of targets given at the start of the year.
In spite of these efforts, one issue the bank could face is the low compensation compared to private sector banks. Annual incentives at SBI can be only up to 20 per cent of salary. The overall outgo for cash incentives has also been capped at 1 per cent of the bank's annual profits. But there is hope on the horizon. All PSBs are now thinking about introducing variable pay; the Central government seems to be backing the move.
The bank also plans to be strict with those who perform poorly. If they consistently come in the last quartile, they will not be allowed extension. Supervisory employees get two extensions - one at the age of 30 and another at the age of 50, whichever is earlier, and again at the age of 58. Clerical employees are given extension at 58. "This is called the efficiency bar. This was never really used. If somebody is consistently coming in the last quartile, there is a case for denying him or her an extension," says Bhattacharya.
SBI has always churned out leaders at all levels. But the process till now has been vacancy-based. Now, it is shifting focus towards long-term succession planning. Posts of deputy managing director, chief general manager and general manager will be considered critical. For these, the bank will have a succession pipeline of at least four people.
The employee profile is also becoming younger. The average age has come down from 47 years three years ago to 43 years. Around 8,000-10,000 employees are retiring every year, which will bring down the average employee age to 40 in the next three years. But experts say younger people rising to middle and senior levels fast will be a challenge as they will have to be mentored. Bhattacharya agrees that mentoring is one area where they need to improve. "Today, the mentors are themselves busy. The subject is engaging our attention," she says.
The bank is already hiring laterally at the middle level. In 2013, it hired Soumya Kanti Ghosh as chief economic advisor; Ghosh had earlier worked with Tata AIG, American Express and Ficci. A year later, Shiv Kumar Bhasin, who had earlier worked with Barclays, Fidelity and Hughes Software, joined as chief technology officer. Last year, Dinesh Menon, earlier with Bharti Axa Life and National Bank of Oman, joined as chief marketing officer.
The lateral hires who are on contract and are paid market salaries can rise only till chief general manager. But a lateral hire on a regular pay scale can reach the top.
Bhattacharya has always been passionate about HR. She also headed the department for a brief period in 2010. Employees expect the same kind of commitment from future chairman. "We need a chairman who can take it forward with more vigour. Now, with the merger of associate banks, we have added workforce, which means there will be integration challenges. We need someone who can push things with the same energy," says a bank official. All four managing directors are involved in the implementation of the new system, so it does not seem like a big worry for now. "It has been more or less stabilised. I don't think there will be an occasion to jettison it. All that can happen is that it can get better," says Bhattacharya.
Second, the merger with associate banks will bring some 70,000 people into the bank's fold. Getting them on board for these new initiatives may be difficult. "We have started communication through videos, etc. We are also conducting training programmes," says Kumar.
People also say that SBI's business targets are much more challenging than what employees at associate banks are used to. "They will have to get used to the SBI culture," says an insider.
The low compensation is also an issue as good performers will have opportunities to look out. Bhattacharya says SBI has created an ESOP programme and submitted it to the government. "The government has prepared a draft paper that is under discussion," says Bhattacharya, who is hopeful of introducing a variable pay system.
It seems a new-look SBI is just around the corner.