Change Management at ICICI
This entire case study is about the implementation of change in an organization. Kundapur Vaman Kamath is the man most credited with building the Industrial Credit and Investment Corporation of India Ltd. (ICICI), Mumbai, into India's largest private sector bank. When he took over as CEO and managing director in 1996, ICICI had total assets of Rs21,000 crores.
In April 2009, when Kamath, 61, handed over the reins to Chanda Kochhar and took over as its non executive chairman, ICICI's total assets had grown to a whopping Rs 3,80,000 crores, with an annual profit of Rs 3,750 crores.
The visionary banker saw opportunities in both retail and corporate lending that few of his contemporaries thought existed and in doing so changed the face of banking in India. Kamath introduced massive changes (Planned change) in the organizational structure, stimulate innovation, empowered employees, introduce work teams and the emphasis of the organization changed from a development bank mode to that of a market-driven financial conglomerate.
1. In 1955- ICICI was established as a public limited company by the Government of India to promote industrial development in India.
2. In mid 1980s, ICICI diversified rapidly into areas like merchant banking and retailing.
3. In 1987, ICICI co-promoted India's first credit rating agency, Credit Rating and Information Services of India Limited (CRISIL), to rate debt obligations of Indian companies
4. In 1988, ICICI promoted India's first venture capital company – Technology Development and Information Company of India Limited (TDICI)
5. In 1992 ICICI tied up with J P Morgan of the US to form an investment banking company, ICICI Securities Limited. In line with its vision of becoming a universal bank
6. In 1998 ICICI restructured its business based on the recommendations of consultants McKinsey & Co.
7. 2001 ICICI acquired Bank of Madura (est. 1943). Bank of Madura was a Chettiar bank, and had acquired Chettinad Mercantile Bank (est. 1933) and Illanji Bank (established 1904) in the 1960s.
8. 2002 The Boards of Directors of ICICI and ICICI Bank approved the reverse merger of ICICI, ICICI PeIn May 1996, Kamath returned to ICICI as its Managing Director and Chief Executive Officer. Kamath was instrumental in expanding the Group's services to the retail customers. He initiated a process of a series of acquisitions of non-banking finance companies in 1996-98, and led the way to the formation of ICICI Bankrsonal Financial Services Limited and ICICI Capital Services Limited, into ICICI Bank. After receiving all necessary regulatory approvals, ICICI integrated the group's financing and banking operations, both wholesale and retail, into a single entity.
9. Also in 2002, ICICI Bank bought the Shimla and Darjeeling branches that Standard Chartered Bank had inherited when it acquired Grindlays Bank.
10. ICICI started its international expansion by opening representative offices in New York and London.
11. 2003 ICICI opened subsidiaries in Canada and the United Kingdom (UK), and in the UK it established an alliance with Lloyds TSB.
12. It also opened an Offshore Banking Unit (OBU) in Singapore and representative offices in Dubai and Shanghai.
13. 2004 ICICI opens a rep office in Bangladesh to tap the extensive trade between that country, India and South Africa.
K V Kamath as change agent
When K V kamath came back from ADB (Asian Development Bank)in 1996,working there for 8 enriching years. Kamath, have seen the changes occurring in the financial sector abroad, wanted ICICI to become a one-stop shop for financial services. But there were basic problems in the organization like- ignorance in the organization about the lending practices in the new sectors like infrastructure, problem of atrophy ( which was deep rooted in the organization), lack of motivation to grow and improve customer services and adapt to new technology( use of internet, ATM for fast services).
So he initiated the change within the organization.
The first move being the creation of the 'infrastructure group (IIG),' 'oil & gas group (O&G),' 'planning and treasury department (PTD)' and the 'structured products group (SPG)', as the lending practices were quite different for all of these. As these new groups took on the key tasks, a majority of the work, along with a lot of good talent, shifted to the corporate center. While the zonal offices continued to do the same work - disbursing loans to corporates in the same region - their importance within the organization seemed to have diminished.
Another change management problem surfaced as a result of ICICI's decision to focus its operations much more sharply around its customers. To tackle this problem, ICICI set up three new departments: major client group (MCG), growth client group (GCG) and personal finance group. In the major client group, a staff of about 30-40 people handled the needs of the top 100 customers of ICICI. On the other hand, about 60 people manned the growth client group, which looked after the needs of mid-size companies. Obviously, the bigger clients required more diverse kinds of services. So working in MCG offered better exposure and bigger orders.
This movement has challenged the status quo of the organization. And act as a catalyst to resistance toward the change as it is threat to established power relationships, threat to expertise.
The management had tremendous resistance in the first year. People were willing to come to blows and there were emotional breakdowns also.
Merger of bank of Madura (BOM) with ICICI bank
To face change resistance once again in December 2000, when ICICI Bank was merged with Bank of Madura (BoM) Though ICICI Bank was nearly three times the size of BoM, its staff strength was only 1,400 as against BoM's 2,500. Half of BoM's personnel were clerks and around 350 were subordinate staff. There were large differences in profiles, grades, designations and salaries of personnel in the two entities. This has come up with lot of unrest among the employees of BOM and also among ICICI. As the work culture of the two organizations was totally different. This has created strong resistance among the employees against the change of the management system, fear for unknown also originated in both the organizations.
The changed focus of ICICI to become a one-stop shop for financial services necessitated the changes in the organization culture and goals.' Analyze the changes implemented by Kamath in mid-1990s and comment briefly on the necessity and efficacy of these changes.
Compare and contrast the change management process at ICICI initiated after Kamath became the CEO with the one following the ICICI-BoM merger. Also explain the rationale behind the employee resistance in both the cases