HSBC's Restructuring in India

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Case Details:

Case Code : BSTR148
Case Length : 12 Pages
Period : 1999-2004
Organization : HSBC India
Pub Date : 2005
Teaching Note :Not Available
Countries : India
Industry : Banking

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"We had to deal with structural issues and we were already behind the competition... We want to change the structure of the organization so that there are more people operating on the selling and marketing side. As such, we are restructuring the skill set to drive sales and at the same time, restructuring the basic terms and conditions (of employment) to lower cost structure."¹

- Niall S K Booker, CEO, HSBC India.

Introduction

The Hong Kong and Shanghai Banking Corporation Limited (HSBC) entered India as early as 1959. Despite being one of the oldest and well-established foreign banks, HSBC had been lagging behind local private sector banks and other foreign banks in India in terms of business network and growth. HSBC's competitors and industry experts regarded it as a conservative bank that lacked competitive spirit.

Commenting on HSBC, the head of direct sales of one of its rival banks said, "HSBC isn't seen as being as aggressive as its rivals in the market. It has extremely good relationships with its branch customers and serves them very well, but it is just not seen as being aggressive in the rest of the market."² HSBC's complacency was reflected in the bank's financial performance.

Local private sector banks like ICICI and HDFC were far ahead of HSBC in all business segments. When benchmarked against foreign banks, HSBC fared badly. HSBC's net profits fell by over 25 per cent for two consecutive years in the fiscal 2000-01 and 2001-02, while rival banks like Citibank³ posted a rise of 37 per cent in profits for the same period.

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On November 2002, Niall S K Booker (Booker) was appointed Group Manager and Chief Executive Officer (CEO) of the HSBC Group in India.

Booker soon realized that HSBC India followed a conventional approach to doing business and retained its old bureaucratic structure and culture. He believed that the much criticized laidback work culture was the reason for the lacklustre financial performance of the bank.

Booker decided to transform the bank's work culture so that HSBC could shed its bureaucratic and conservative image and gear up to face new challenges. He wanted HSBC India to be proactive and aggressive like its competitors.

To achieve this, Booker concentrated on giving the bank a new direction by launching a major restructuring program.

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1] "HSBC Reworks Staff Structure," www.rediff.com, August 19, 2003.

2] Celestine, Avinash and Byotra Anuja, "Booker's Prize," Businessworld, December 22, 2003.

3] Citibank India operates 25 branches across 18 cities in India. Employing 5,000 employees nationwide its operations include corporate, consumer and investment banking. Citibank provides diverse financial services like credit cards, mortgages, personal loans, insurance, and investment services for on-shore customers.