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THE CHANGE LEADER
BACKGROUND NOTE
CHANGE CHALLENGES - PART I
ICICI was a part of the club of developmental finance institutions (DFIs -
ICICI, IDBI and IFCI) who were the sole providers of long-term funds to the
Indian industry. If the requirement was large, all three pooled in the money.
However, the deregulation beginning in the early 1990s, allowed Indian
corporates' to raise long-term funds abroad, putting an end to the DFI
monopoly. The government also stopped giving DFIs subsidized funds. Eventually
in 1997, the practice of consortium lending by DFIs was phased out.
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It was amidst this newfound independent status that
Kamath, who had been away from ICICI for eight years working abroad[1] ,
returned to the helm. At this point of time, ICICI had limited expertise,
with its key activity being the disbursement of eight-year loans to big
clients like Reliance Industries and Telco through its nine zonal offices.
In effect, the company had one basic product, and a customer orientation,
which was largely regional in nature.
Kamath, having seen the changes occurring in the financial sector abroad,
wanted ICICI to become a one-stop shop for financial services. He realized
that in the deregulated environment ICICI was neither a low-cost player
nor was it a differentiator in terms of customer service. The Indian
commercial banks' cost of funds was much lower, and the foreign banks were
much more savvy when it came to understanding customer needs and
developing solutions. Kamath identified the main problem as the company's
ignorance regarding the nuances of lending practices in newly opened
sectors like infrastructure. |
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The change program was initiated 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. Kamath picked up people from various departments, who he was told were
good, for these groups.
The approach towards creating these new skill sets, however, led to one
unintended consequence. 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. An ex-employee remarked, "The way to get noticed inside
ICICI after 1996 has been to attach yourself to people who were heading these (IIG,
PTD, SPG, O&G) departments. These groups were seen as the thrust areas and if
you worked in the zones it was difficult to be noticed."
Refuting this, Kamath remarked, "This may be said by people who did not make
it. And there will always be such people." Some of the people who did not fit
in this set-up were quick to leave the organization. However, this was just the
beginning of change-resistance at ICICI.
The basic objectives of the ICICI were to
Another change management problem surfaced as a result of ICICI's decision to
focus its operations much more sharply around its customers. In the system
prevailing, if a client had three different requirements from ICICI[2], he had
to approach the relevant departments separately. The process was time
consuming, and there was a danger that the client would take a portion of that
business elsewhere. To tackle this problem, ICICI set up three new departments:
major client group (MCG), growth client group (GCG) and personal finance group.
Now, the customer talked only to his representative in MCG or GCG. And these
representatives in turn found out which ICICI department could do the job.
CHANGE CHALLENGES - PART II
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[1]Though Kamath had started his
career with ICICI, he had left the bank to join Asian Development Bank (ADB) in
Manila in 1988.
[2]For instance, an eight-year loan,
merger and acquisition advice and working capital requirements.
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