CHANGE CHALLENGES - PART II

ICICI had to face change resistance once again in December 2000, when ICICI Bank was merged with Bank of Madura (BoM)[1] . 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. It was also reported that there was uneasiness among the staff of BoM as they felt that ICICI would push up the productivity per employee, to match the levels of ICICI [2]. BoM employees feared that their positions would come in for a closer scrutiny. They were not sure whether the rural branches would continue or not as ICICI's business was largely urban-oriented.

The apprehensions of the BoM employees seemed to be justified as the working culture at ICICI and BoM were quite different and the emphasis of the respective management was also different. While BoM management concentrated on the overall profitability of the Bank, ICICI management turned all its departments into individual profit centers and bonus for employees was given on the performance of individual profit center rather than profits of whole organization.
ICICI not only put in place a host of measures to technologically upgrade the BoM branches to ICICI's standards, but also paid special attention to facilitate a smooth cultural integration. The company appointed consultants Hewitt Associates[3]to help in working out a uniform compensation and work culture and to take care of any change management problems.

ICICI conducted an employee behavioral pattern study to assess the various fears and apprehensions that employees typically went through during a merger. (Refer Table I).

TABLE I
'POST-MERGER' EMPLOYEE BEHAVIORAL PATTERN

PERIOD	EMPLOYEE BEHAVIOR
Day 1	Denial, fear, no improvement
After a month	Sadness, slight improvement
After a Year	Acceptance, significant improvement
After 2 Years	Relief, liking, enjoyment, business development activities

Source:www.sibm.edu

Based on the above findings, ICICI established systems to take care of the employee resistance with action rather than words. The 'fear of the unknown' was tackled with adept communication and the 'fear of inability to function' was addressed by adequate training. The company also formulated a 'HR blue print' to ensure smooth integration of the human resources. (Refer Table II).

TABLE II
MANAGING HR DURING THE ICICI-BoM MERGER

THE HR BLUEPRINT	AREAS OF HR INTEGRATION FOCUSSED ON
A data base of the entire HR structure Road map of career Determining the blue print of HR moves Communication of milestones IT Integration - People Integration - Business Integration.	Employee communication Cultural integration Organization structuring Recruitment & Compensation Performance management Training Employee relations

Source:www.sibm.edu

To ensure employee participation and to decrease the resistance to the change, management established clear communication channels throughout to avoid any kind of wrong messages being sent across. Training programmes were conducted which emphasized on knowledge, skill, attitude and technology to upgrade skills of the employees. Management also worked on contingency plans and initiated direct dialogue with the employee unions of the BoM to maintain good employee relations.

By June 2001, the process of integration between ICICI and BoM was started. ICICI transferred around 450 BoM employees to ICICI Bank, while 300 ICICI employees were shifted to BoM branches. Promotion schemes for BoM employees were initiated and around 800 BoM officers were found to be eligible for the promotions. By the end of the year, ICICI seemed to have successfully handled the HRaspects of the BoM merger. According to a news report[4] , "The win-win situation created by�.HR initiatives have resulted in high level of morale among all sections of the employees from the erstwhile BoM."

Even as the changes following the ICICI-BoM merger were stabilizing, ICICI announced its merger with ICICI Bank in October 2001. The merger, to be effective from March 2002, was expected to unleash yet another series of changes at the organization. With Kamath still heading ICICI, analysts were hopeful that the bank would come out successfully in the task of integrating the operations of both the entities this time as well.

QUESTIONS FOR DISCUSSION:

'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.

EXHIBIT I :ORGANIZATIONAL STRUCTURE OF ICICI (2001)

EXHIBIT II: EMPLOYEE STRENGTH OVER THE YEARS

YEAR	NUMBER OF EMPLOYEES
1993	1117
1994	1237
1995	1237
1996	1239
2001	8275

Source: ICICI Annual reports

EXHIBIT III:ICICI PROFITABILTY OVER THE YEARS

YEAR	PAT
1994-95	3.1
1995-96	3.9
1996-97	4.36
1997-98	7.52
1998-99	10.86
1999-00	10.01
2000-01	12.06

Source: ICICI Annual Reports

ADDITIONAL READINGS & REFERENCES:

1. Hema B., Rebuilding ICICI, Business India, May 20, 1996.
2. Sriram N., Reinventing ICICI, Business World, May 29, 1996.
3. Shedding Fat, Business Standard, September 1, 1998.
4. George Cherian, ICICI Revamps Set-Up, The Economic Times, March 21, 1999.
5. Smith Alexander George, ICICI Bank begins integration of BoM, www.rediff.com, June 13, 2001.
6. Jayakar Roshni & Arora Sunit, ICICI: The Melting Pot, www.bestemployers.com.
7. www.icici.com.
8. www.indiainfoline.com.

[1] Bank of Madura was established in 1943 at Madurai, Tamil Nadu. By 2000, it was number one bank in Tamil Nadu and it had 278 branches all over India.

[2] In 1999-2000 business per employee at ICICI averaged Rs. 59.5 million to BoM's Rs 22 million and profit per employee was Rs 0.78 million to BoM's Rs 0.17 million.

[3] Hewitt Associates is a global management consulting and outsourcing firm specializing in human resource solutions.

[4] 'Bank of Madura & ICICI Bank merger proceeds smoothly,' www.rediff.com, September 27, 2001.