Leveraging Human Capital for Busrness

Leveraging Human Capital for Busrness Growth: A Case of lClCl Bank, lndia tram-ta filiARMA AND PHIL}? ABRAHAM Organizational Setting ICICI Bank is India’s largest private sector bank by market capitalization, having a network of 1,700+ branches (as of March 31, 2010) and about 4,721 automated teller machines (AIMS) in India, with presence in eighteen countries (Wikipedia, 1C ICI Bank, 2010). The bank serves more than 24 million customers with a wide range of financial services and banking products. It delivers its services to the corporate and retail customers through a variety of delivery channels and specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital, and asset management. Of the big four of Indian banks (State Bank oflndia, Axis, ICICI, and HDFC banks), ICICI Bank is overall the second largest in terms of assets of Rs. 3,562.28 billion ($77 billion) on December 31, 2009 and profit after tax Rs. 30.19 billion ($648.8 million) for the nine months ending December 31, 2009. ICICI Bank was formed in 1994 as a subsidiary of the Industrial Credit and Investment Corporation of India, Limited (ICICI), which was incorporated at the initiative of the World Bank, the government of India, and representatives of the Indian industry in 1955, to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. After coming into existence, ICICI undertook normal. banking operations: mobilizing 3 deposits, offering credit cards and car loans and other bank products. After a series of mergers (with Bank of Madura) and reverse merger with ICICI, the bank transformed ICICI from'an industrial-project finance institution into India’s most comprehensive financial services powerhouse with interests in retail banking, insurance, online trading, and business process outsourcing among others, thereby transforming the face of the Indian banking industry. At present, ICICI Bank’s equity shares are listed on Indian stock exchanges at Chennai, Delhi, Kolkata, and Vadodara; the stock exchange, Mumbai; and the National Stock Exchange of India Limited, and its American Depositary Receipts (ADRS) are listed on the New York Stock Exchange (NYSE; Wikipedia, ICICI Bank, 2010). India ' 277 India: HRM from the Historical Perspective and the Current State India, the largest democracy, is the second largest country in the world, with 1,150 million population (March, 2010) and labor force having 16 percent ofthe world’s population (Indian Economy: An Overview, 2010). Consisting of twenty- eight states and seven union territories (centrally administered) spread over 3.29 million square kilometres, it is a multi-Iinguistic, multi-ethnic, and pluralistic society. There are twenty-two official languages, but Hindi is the national language (spoken by 40 percent of the population), and English is the business language. Its people speak 844 dialects. India has a federal system of government with clear demarcation of powers between the central government and the state governments. India’s roots can be traced back to Indus Valley civilization, 3000-1500 BC. Its history presents an account of confluence of cultures due to interactions with alien cultures over the years, which impacted it in the form of adaptation, integration, or reformation of administrative practices. The first Indian invasion recorded in history was that of Alexander in 327 BC, which influenced the local systems and practices. Thereafter, there has been consolidation ofempires with the rise of Hindu dynasty, which witnessed empires ofNandas and the Mauryas during the fourth and third centuries BC. Emergence of HRM in India can be traced to this period when Kautilya (known as Chanakya, c 350-283 BCE), an adviser and prime minister to the first Maurya Emperor Chandragupta and a teacher ot'politics at Takshasila (the ancient university, declared a UNESCO World Heritage site in 1980), wrote two books: Arthshastra and Neeti-shastra. The former discussed monetary and fiscal policies, international relations, role of the kings and officials (now called job descriptions), welfare, selection, compensation, employer- employee relations, reward and punishment system (incentives), training and development; and the latter was a treatise on the ideal way of life. Chanakya developed Neeti-Sutra containing 455 sutras (pithy sentences) of which 216 related to rules of governance (Wikipedia, Chankya, 2010). This period was followed by the Gupta Dynasty (fourth to sixth centuries AD, which is the period when science, art, and culture flourished in India. In the eighth century, Arab incursions began followed by a Turkish invasion in the twelfth century. India had Mughal rule from 1526 AD to 1857 AD followed by the British rule for 200 years. With this long period of British rule, personnel and HRM in India yielded to the influence of Anglo-Saxon thought. The British laid down several policies and procedures for labor. Several legal enactments took» place: Plantation Act, 1863 and Factory’s Act, 1881, laying down rules for hours of work, employment of women and children, and leave-related matters (Akhilesh Nagaraj, 1990). India became independent in 1947. HRM in India has evolved over the decades from a purely statutory labor welfare function (19203) to an administrative personnel function (19305) to the period of labor legislations (19403) marked 278 ' Radha R. Sharma and Philip Abraham by the lVlinimum Wages Act. 1948; Industrial Disputes Act. 1947; Factories Act, 1948: to personnel administration (19505). to personnel mcmagemenl and industrial relations with enactment ot‘the Maternity Benefit Act, 1961: the Payment of Bonus Act, 1965; and the Payment ofGratuity Act, 1972 during the 19605 to 19705 to human resource development (19905; Pareek & Rao, l975)to strategic HRM, which has thrived since the late 19905. There are reported to be 150 laws governing l-lRM practices in India (Venkatratnam, 1995). Economic Reforms and Globalization of lndia Since independence in 1947, India planned its strategy for development through five-year plans and up to now has seen eleven “five-year plans." All the five- year plans aimed at steering lndia out of a socioeconomically deprived state to a scientifically and technologically strong and self-reliant nation. This led to setting up a large number of state-owned organizations in all major fields of industry including banks, which provided large-scale employment. Socialism appeared to be the dominant ideology of the government, which later resulted in low productivity and caused problems of balance of payment. This necessitated economic reforms and, in July 1991, the first wave of globalization and liberalization commenced, which comprised economic liberalization, focus on the consumer, a market-oriented framework, and competition. Realizing the importance of social development along with economic growth, the Planning Commission of the government came out with a National Human Development Report in 2001 to strengthen the link between the two. The report observed that human development as reflected in the human development index (HDI) had improved significantly between 1980 and 2001 at the national level, but there were gaps in urban and rural areas (Planning Commission, 2010). It cannot be overemphasized that banks were required to play an important role in accelerating the country’s socioeconomic development. Therefore, banking reform formed a major part of the economic reforms, as its aim was to bring about “operational flexibility” and “functional autonomy” to enhance “efficiency, productivity and profitability.” It also focused on structural changes and changes in HR practices to strengthen the foundations of the banking system for greater stability, customer focus, performance, and profitability. Banking in lndia originated in the eighteenth century, and the first government- owned bank was established in 1806. After Indian independence, its central bank-called the Reserve Bank of lndia-was nationalized in 1948 and, with the enactment of a Banking Regulation Act in 1949, it was given powers “to regulate, control and inspect banks in India.” In 1969, the government nationalized fourteen of the largest commercial banks, and later the next six largest banks were nationalized in 1980. Currently. lndia has eighty~eight scheduled commercial banks, twenty-seven public-sector banks (government holding stake), twenty- nine private banks, and thirty-one foreign banks. lClCl Bank is one ofthe privateIndia - 279 banks. As per the advance estimates of GDP for 2009-20 1 0 released by the Central Statistical Organisation, the economy is expected to grow at. 7.2 percent in 2009- 2010, with the industrial and the service sectors growing at 8.2 and 8.7 percent, respectively (India Brand Equity Foundation, 2010). However, the actual GDP rates in the first three quarters for India have been 8.6, 8.9, and 8.9, respectively. which are better than the estimates (Trading Economics, 2010). ICICI Bank: Aligning with Business Environment Considering ICICI Bank was formed in 1994 as a subsidiary of the Industrial Credit and Investment Corporation of India Limited, it has made phenomenal progress in a short period under the leadership of K. V. Kamath, who joined ICICI Ltd as its managing director and chief executive officer in its embryonic stage in 1996. It was the time when India started showing preliminary results of liberalization initiated during 1991. In the changing environment, leveraging the market with people and technology from 1996 to the present, ICICI has written a new saga in the history of Indian banking. It has transformed itself from a traditional development finance institution to a customer-centric private-sector bank, being the largest in market capitalization and the second largest overall in terms of assets. It is not merely the growth story of a corporate but a clearly envisaged leadership strategy adopted by Kamath for the growth and development of the bank leveraging human capital and technology. ICICI Bank adopted smart initiatives over the years in the up-surging financial sector of India and created a state-of-the-art banking infrastructure in their branches across India. The main strengths of ICICI Bank were its talent pool, complete product suite, large capital base, extensive customer relationship, strong brand franchise, technology-enabled distribution architecture, and universal banking presence. Although ICICI Bank was mainly into retail banking, it ventured into other products such as insurance, corporate banking, venture capital, to name of few. In 2007, ICICI Bank created history by raising $5 billion in the largest-ever public offering in India and emerged as a valuable financial organization. The total bids were worth more than $25 billion, higher than the total foreign direct investment into India in 2006-2007. The bids were not only from India but also all around the world (India Times, 2010). Strategic Leadership at ICICI Bank Kamath had a clear vision and mission for the bank from the time he took over the reins of ICICI Ltd. as its top brass. The visionary banker saw an opportunity in the retail banking space and targeted the Indian middle class with a slew of customer- savvy banking strategies that would set a new level for services in banking and thereby create a niche for ICICI Bank. ICICI’s strategy and product offerings 286 ' Radha R. Sharma and Philip Abraham Working in a close-knit team wherein each member shoulders huge responsibilities makes work interesting for the others in the bank, and many employees have a strong sense of community. “We have a weekly meeting every Monday that is open to all staff. All decisions pertaining to the organization are taken in the open and everyone has the freedom to express a thought or an opinion without hesitation," said Vaghul, ex-chairman at 1C 1C 1 Bank. He placed utmost importance on values such as honesty, integrity, and sensitivity to other people’s feelings and dignity in behavior. He felt that disagreeing with others could be done in a dignified manner. The bank has a knowledge management portal with a plethora of KM tools that align systems and high-performance work practices. However, implementation of the knowledge management portal was not that easy. It required a lot of efforts by the directors and the team implementing this portal. Initially, knowledge management was voluntary, but at present it is central to working at the ICICI Bank. Apart from customer satisfaction, the portal helps staff to plan their career moves and provides a means for upgrading of their skills and a platform for recognition for contributions made to the bank. Summary When lClCl was founded more than five decades ago by Indian industrialists, the World Bank, and the government of India, it was envisioned as the first Indian development bank. The case is not just about growth but of transformation. lClCl has evolved from a development bank to become a corporate and then a retail bank, meeting the needs of an aspiring population. The mantra at ICICI Bank is (People x Process) x Technology = Customer Value. This mantra classifies the bank as a high-class delivery facility with specially trained and efficient people delivering innovative, customized solutions and seamless services to their customers, hence increasing customer value. Generally, robust people- centric practices are considered central to single or double‘di git growth in service organizations. High-performing firms, therefore, build in greater accountability for results and execute organizational and people practices both internally and externally effectively to propel growth. lClCI Bank has done the reverse and has introduced high-order people practices to achieve high-order business growth. As the world has witnessed the worst economic slowdown since 2008 due to problems in the banking industry, profits and margins have taken a dip across the world. This combined with change of leadership at lClCl Bank in 2009, leaves the question: Will the bank continue to have sustainable business growth and high market capitalization by leveraging its human capital? PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT :)