HH HOFC BANK KOLKATA INDIA A REPORT ON THE SALES FORCE STRUCTURE OF HDFC BANK LIMITED Submitted By DEBALINA CHOUDHURY ENROLLMENT NO.- 08BS0000662 ICFAI BUSINESS SCHOOL Areport submitted in partial fulfillment of ‘The requirements of MBA Program of ICFAI Business Schoo! Prof. SHIBASHIS CHAKRABORTY Faculty, IBS - KolkataaS HH HOFC BANK KOLKATA INDIA ACKNOWLEDGMENT In this report | have attempted to capture the facets of activities periormed so far during our project. The project has been very important and has groomed our skills and nourished our practical knowledge. It had been an excellent learning process for me. First | deeply express my gratitude to ICFAI Business Schcol to give me an opportunity to learn so much about the sales force structure of HDFC Bank, which is the number 1 private bank in India. And also gave me a chance to know the advantages and disadvantages of the existing sales force structure. | am very grateful to our faculty guide, Prof. Shibashis Chakraborty for his valuable and timely guidance throughout the project. His practical knowledge and experience has been very useful in preparing the report. | would like to thank Mr. Sumil Dam, Branch Manager, HOFC Bank Lid., for guiding me by providing the necessary inputs and helping me at every juncture of the project.KOLKATA INDIA TABLE OF CONTENTS ‘Sr. No. PARTICULARS PAGE No. ABSTRACT 2 INTRODUCTION a. Background Of HDFC Bank Ltd. b. Objectives Of The Study SALES FORCE STRUCTURE ADVANTAGES & DISADVANTAGES. CONFLICTS. "1 TIME OF FORMATION & RECOMMENDATIONS TO CHANGE 12 REFERENCES 13IBS KOLKATA INDIA Li INTRODUCTION At the very onset and before going into the intricacies of my project, | would like to give a brief introduction about the importance of the sales force in an organization Organization is a group of individuals striving jointly to reach qualitative and quantitative objectives, and bearing informal and formal relations to one another. The sales organization is not an end itself but rather the vehicle by which individuals achieve given ends. A sales organization's main component is the sales force, which is guided and supervised by the sales managers. The effectveness of a sales organization depends on the efficiency of its sales force in achieving both qualitative and quantitative objectives We should know the background of HDFC Bank Ltd. and its business before focusing on its sales force. BACKGROUND OF HDFC BANK LTD.: ‘The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited, with its registered office in Mumbai, India and commenced operations in January 1995. The Bank at present has an enviable network of over 1412 branches spread over 528 cities across India. Business Focus: HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the prefered provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite pital Structu As on 31st March, 2009 the authorised share capital of HDFC Bank is Rs. 560 orore. The paid-up capital as on the said date is Rs. 425,38,41,090/- . The HDFC Group holds 19.38% of the Bank's equity and about 17.70 % of the equity is held by the ADS Depository. 27.69 % of the equity is held by Foreign Institutional investors (Fils) and the bank has about 548,774 shareholders Credit Rating & Corporate Governance Rating: The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's FixedaS HI HOFC BANK KOLKATA INDIA Deposit program has been rated ‘CARE AAA (FD) [Triple A] by CARE. Fitch Ratings India Pvt. Lid. has assigned the "AAA (ind )* rating {o the Bank's deposit program. The bank has been assigned a ‘CRISIL(Credit Rating Information Services of india Limited) GVC (Corporate Governance and Value Creation) Level 1" rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest. Business (Products & Services Offered): HDFC Bank has three key business segments 1. Wholesale Banking Services: The Bank’s target market ranges {rom large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. 2. Retail Banking Services: The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The HDFC Bank Preferred program for high net worth individuals, the HDFG Bank Plus and the Investment Advisory Services programs have been designed. The Bank also has a wide array of retail loan products including Auto Loans, Loans agains! marketable securities, Personal Loans and Loans for Two-wheelers. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard, Maestro debit card as well 3. Treasury: Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. Sophisticated risk management information and fine pricing on various treasury products are provided through the bank's Treasury team. OBJECTIVES OF THE STUDY: © To assess the sales force structure of HDFC Bank Ltd. © To identity the advantages and disadvantages of the sales force structure, © To tind out the reasons behind the conflicts arise while following the existing sales force structure. @ To know when the sales force structure was formulated and if the existing structure needs to be changed.aS HH HOFC BANK KOLKATA INDIA SALES FORCE STRUCTURE OF HDFC BANK LTD. HDFC Bank Lid. follows a formal organizational structure. Hence, there exist clear-cut reporting relationships in between two hierarchical levels which help to avoid confusion and overlapping of activities. It also maintains a vertical structure with a large number of hierarchical levels and a narrow span of control for managers. As HDFG Bank caters to its target market with a wide range of products (e.g. Wholesale Banking Services, Retail Banking Services and Treasury), it has a ling and staff type of organizational structure. The sales force of HDFC Bank operates through three (3) channels, like 1) Direct Sales Channel 2) Branch Banking Channel and 3) Alternative Delivery Banking Channel The sales force responsibiities and activities are divided according to the product or services sold. There are multiple product line sales forces as well as single product line sales forces. The Branch Banking channel and the Alternate Delivery Banking channel handle muttiple product lines simultaneously. But the Direct Sales channel operates as single product line sales force. There is different sales force for each product line. But the basic ‘Direct Sales force’ format is same for all the product lines. The sales force structure of HDFC Bank has been outlined below:ee Ad Managing Director National Head (Branch Banking)/Group Head FE i + National, Wont Kesst branch ] | WentBranct | [Sou ranch || anton Ran Bankingead | | sankingtead | | snc ead || once me, we Fr I Terionl + City Product Produrt Hoad Regionale Retinal ead foe { (North) (East) T po 4 a ss onal ead Circle Head I Truss Team leader Manager — I ae Branch manager | | cicleHead Branch Manage of Fiche sane _ of Top branch branch with value more [ than Rs.309Crore | q Team Leader sales Branch tsecutve T manager reisonmp | [ Pexorar ] | reler | [ weicomenex Manager Banker Personal Banker —— Contractual Executive Fig: Sales Force Structure Of HDFC Bank Ltd.aS HH HOFC BANK KOLKATA INDIA Job role of Direct Sales Channi The Direct Sales channel has a job role of acquiring new customers for Current Accounts. The Sales officer acquires customers from open market. In case of a deep pocket client, the Sales officer is accompanied by Regional product head or the City product head. Job role of Branch Banking Channel: The Branch Banking channel has a job role of building up relationship with the customers for customer and cross- sell. The market is divided into 6 prominent regions which are headed by Regional heads for Branch Banking channel. The Regional heads look after the Zonal heads and Circle heads. Zonal head monitors the performance of the top branch and the circle heads and makes budget for circles. Circle head monitors the performance of the cluster heads and also few top branches, makes budget for the clusters. Cluster head monitors the branches under him, allocates the target among the branches basis their previous performance and potentiality Branch head (BM) does the budgeting at the branch level, distribute targets among the branch staffs, monitors sales and process. Branch staffs (R.M., P.B., Teller, etc.) function as lead generators (generates leads by building up relationship through service) Contractual executive's job role is of a lead convertor (goes to the client, collects necessary docs, fills up form), checking FTNR"™* , depletion of the accounts sourced, audit adherence to the accounts sourced, reporting to branch head on the basis of acquisition Job role of Alternative Delivery Banking Channel The Alternative Delivery channel nas a job role of providing service to the probable as well as existing customers. This channel consists of Phone banking, Net banking, Mobile banking, and ATM sor FINKaS HH HOFC BANK KOLKATA INDIA ADVANTAGES & DISADVANTAGES OF THE SALES FORCE STRUCTURE Advantage: 1) Clear-cut reporting relationship exists in between the different hierarchical levels of the sales force. It helps to avoid contusion. 2) The three different sales channel is assigned with specific roles to perform. The direct sales channel is responsible to acquire new customers; basically to penetrate new markets. The branch banking channel is mainly responsible for providing customer services to satisfy the existing customers and to retain them. The alternative delivery banking channel caters to the probable_customers as well as the existing customer needs as and when required by them through Phone Banking, Mobile Banking, Net Banking, ATM, etc. So there is no overlapping of activities. 8) Greater penetration of the market and retention of the existing as well as new customers has been possible with ease through the three (3) sales channels. 4) As the sales force is divided according to territory and each territory is being headed by a Regional head, it is easier to evaluate the sales force performance region-wise. The M.D. can assess which region is doing well and which region is not performing as per expectations. And thus the regions in which attention is needed can be detected. 5) The sales force structure has smaller span of control. So, the constant information flow, which is necessary for success in a dynamic market, occurs easily through the channels. So it \s easy for the top management to Keep track of each activity of the subordinates. Also the implementation of any strategy becomes flawless because of one-to-one interaction. E.9. publishing of new Audit Circulars throughout the channels, 6) The chances of any information loss (e.g. customer specitic information) down the hierarchical levels are very minimal due to vertical sales organization structure. 7) Clearly detined policies, procedures, targets and hierarchical relationships allow sales executives to have a clear idea of organizational expectations and the criteria upon which their performance would be evaluated.ae HH HOFC BANK KOLKATA INDIA 8) Since, decision making is restricted to the top management; the junior level managers should not be bothered to align the sales activities with the organization's short term and long term objectives. The top management takes up the responsibilty to do that. 9) In the Branch Banking chennel small decisions can be taken at the branch level under special circumstances. Eg. opening of a savings account with driving license as the photo ID proof (which is a second tier document) instead of PAN Card (which is a tier-I document) can be permitted if the Branch Manager approves the KYC* of the customer. 1) Lack of co-ordination between the different channels due to non-integration of the data sharing software used. E.g. a credit card sold to a customer through the Direct Sales Channel would not reflect in the software used by the Branch Banking staffs. Therefore, whenever he is opening the customer details, he might pitch for a credit card to the same customer unknowingly. 2) Lack of lateral communication between the different channels. Eg. if a sales personnel receives any customer specific or competitor specific information, he cannot pass it to the other channels. 3) Since the structure is vertical in nature, it has many hierarchical levels. So maintaining additional supervisory staff enhances the overall cost to the company. E.g. in the above mentioned structure, the posts of Circle Heads may be removed for better cost management. 4) In exceptional cases, top management approval becomes necessary sometimes, hence delaying the TAT**. E.g. for opening a Current account, one needs to give the “Initial Pay” cheque from his existing current account which he is maintaining olsowhere. But, if it is a new business, then he can give the IP cheque from his personal account. For this, it has to be approved by the Cluster Head after confirming the KYC of the company. 5) Decision making authority is restricted to the Top-Management only. So sometimes, decisions might be taken without considering the feedback of the ground level executives. This can lead to dissatisfaction among the sales executives due to sotting up of unrealistic targets. * KYC- Know Your Customer ; **TAT~ Turnaround timeaS HH HOFC BANK KOLKATA INDIA CONFLICTS The existing sales force structure gives rise to conflicts which are described below: 1) 2) 3) hannol clash: It is often observed that the same customer is being pursued by two or more channels at the same time. This not only confuses the customer, but also it is wastage of effort, time and duplicacy of work for the organization. Contlict of interes: It is further observed that the sales force normally has a target which is quantitative and not qualitative. So, most of the time they give mis-commitments to the customers to fulfil the targets. The same dissetistied customer when comes to the branch, he does not get adequate attention as his account was not sourced through the branch channel. Contlicts due to policy: Branch channel can have access to certain systems or data which cannot be accessed by the direct sales channel. Therefore, it hampers the employee morale and also delays the process for the Direct sales team. E.g. when an account is sourced by the sales channel, they generally have to come to the branch staff for getting the access to the information needed to till up the form.aS HH HOFC BANK KOLKATA INDIA TIME OF FORMATION & RECOMMENDATIONS TO CHANGE THE SALES FORCE STRUCTURE The sales force structure came into existence on 1" April, 2008. The sales force strusture has got some advantages as well as disadvantages. The advantages are the strengths of the sales force. But due to the disadvantages of the existing sales force some conflicts are arising. So the company needs to amend its sales force structure in such a way so that its advantages remain intact, but the company can avoid the conflicts and disadvantages. 1) The additional supervisory levels like Circle head should be removed from the sales force structure to reduce the overall cost to the company and the time taken for information flow through the hierarchical levels. 2) The system used by all the three sales force channels should be integrated, so that every bit of customer information is updated in the same platform and made accessible to all the channels. 3) The Direct sales force is responsible for acquiring new customers. I! needs information from the existing database. Hence, they should be permitted to access to the organization's data so that they can wrap up the whole process fast and can be more competitive. 4) While deciding on the sales target the top management should consider the feedback of the ground level executives. Because, otherwise the top management fixes unrealistic targets. To meet up the target, the ground level executives give mis-commitment to the customers and as a result HDFC Bank makes customers dissatisfied.