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Seizing Opportunity in Diversity

Case Analysis: The Professionals’ Bank of India Ltd.

IIMK Campus P.O, Kunnamangalam - 673 570


Phone: +91-495-2803001 Fax: +91-495-2803010-11

Members’ Details Team Name: X-


men

Name Course E-mail ID Phone nos.


Karthik RG PGDM karthikrg13@iimk.ac.i 9539011788
n
KS Rangesh PGDM ksrangesh13@iimk.ac 9539011790
.in
Mandeep PGDM mandeepsc13@iimk. 9539011820
Chawla ac.in
EXECUTIVE SUMMARY

The growth objectives of the TPBoI require that it follows a phased growth
strategy and implement & manage changes in organizational culture that
complements such a growth even as it maintains organizational identity,
grows human capital and retains it.

In this paper we propose that the bank follow a 4 phased growth strategy
that starts with strengthening its core banking operations in its current
metropolitan bases in the first phase, diversify those operations with more
value added services in the second phase. The third phase would see
expansion into TIER 2 cities with basic core banking operations, while the
final phase would revisit the metro base for market consolidation and high
value product offering. We have backed our recommendations with
detailed suggestions and financial projections in this regard

As the company grows from its current wholesale set up to more diverse
product offerings, it is bound to move from an organic structure to a more
complex structure. In this paper, we analyse the organizational challenges
that the company might face and the changes that should be
implemented to grow, retain and utilize human capital. In that light we
propose some changes to HR policies that fulfil the said objectives.
Question: ALLIED BUSINESSES
FOUR Phase Integrated Development Strategy

We propose a four stage strategy for TPBoI to achieve its strategic goals.
The primary goals of TPBoI would be

• Expand Retail Banking

• Provide Synergistic financial instruments and services under single


roof

• Establish a strong CRM strategy

• Explore strategic alliance with peers and competitors to reduce


operational costs

• Explore overseas opportunities for both tapping the sources of fund


as well as wholesale banking opportunities

• Try to differentiate itself as a entrepreneurial fast growing private


bank compared to national PSUs and other likewise competitors

• Technology exploitation is the key to achieve these goals

These goals must be addressed in a phased manner:-

Phase 1: Market penetration phase

The goal is to start 50 retail outlets and explore with organizational


structure change. This is a phase of iterative introspection, learning,
experimenting with respect to organizational structure change,
compensation package etc and policy formulation. Here we mainly plan
to introduce small horizon MFs and Insurance instruments that enhance
branding and are coupled with low risk
In this phase we are looking at getting domain experts in retail banking,
insurance domain and HR policy formulation. We need to strengthen
distribution channel and sales force. We need to recruit about 20 top
management people, 60 middle management people, 800 retail
administration staff and about 900 sales profiles

Phase 2: Learning to Market

This goal is to start leveraging the ‘One stop solution’ idea to increase
customer base and branding. ATM network setup, Cards segment (credit,
debit, gift etc) will increase brand recall and retail expansion. Private
equity services for institutional investors will increase customer trust in
the finance circle. To raise cheap capital and to increase customer base,
we need to issue short term debts with high instruments which will result
in Viral marketing and re pooling of capital. Given that customer base is
expanding investment on a robust CRM is imperative

In this phase we are looking at recruiting people with experience in retail


segment and people who are generalists in profile. Domain experts would
be recruited for Cards division. We need to recruit 40 top management
people, 200 middle management people, 1200 retail staff and
1600 sales profiles.

Integrated Development Strategy


Phase 1 – Market 2 – Learning to market 3 - Expansion 4 -
number: Penetration Consolidation
No. of 50 200 300 200
New
branches
Location Metros Metros Tier 1 and 2 cities Revisiting old +
open new in tier
1,2 and metro
Services: • Retail • ATM • Pension and • Issue
Banking retirement long term
Insurance • Credit, Debit, schemes domestic
Petrol, Gift Cards debt
• Short • Short term
horizon • Strategic Alliance overseas debt • Determin
financial with other banks e if
instruments • Enter into entering
like MF • Child plans foreign the
(Short wholesale trading
Term) • Issue of short banking as market is
term domestic industry lender justifiable
• Online debt instruments
platform • Enter as
developmen • Establishing CRM broker
t system to for
provide better private
• - Personal personalized HNI
Banking services
• Introduce
• Work towards Money
enhancing transfer
private equity services
services

Phase 3: Expansion

In the last two phases the bank was looking at metros where per
capita business opportunity is relatively high. But to have a sustainable
model, expanding in Tier1 and Tier2 cities is inevitable. This is a special
segment which sees banking in a traditional psychology. The challenge is
to build trust about performance and strength of bank through low cost
and high value adding services. Also given that we have been in the
industry for 10 years, we should look at long term instruments like
pension plans, child education plans which provide cheap capital. With a
booming economy it is the right time to enter overseas market. For this
we have a two pronged strategy, for sourcing the funds we will issue short
term debt and for disbursing the funds, we will play as industrial
wholesale investor.

In this phase we are looking at generalist retail profile with some degree
of sales orientation. The idea is to make managers accountable for sales
activity design, promotion and implementation. We need to recruit 30 top
management people, 400 middle management people, 2000 retail
administration staff and 1400 sales profiles.

Phase 4: Consolidation

This is a phase of introspection and process optimization. With sufficient


brand built, we can introduce long term domestic debt. We need to
explore if we want to enter retail trading segment and brokerage services.
The decision to enter will depend on entry cost, available competitive
advantage and administrative overheads. We need to cater to HNI
segment with special focus to NRI population with services like instant
money transfers, travel support packages, etc.

In this phase we are more looking at utilizing existing resource and


growing talent in house. We need have cost leadership which essentially
means the recruitment would be conservative. We need to recruit 10 top
management people, 200 middle level management people, 400
retail staff and 400 sales force profiles.

Expansion Cost Outflows for next 6 years (2010-2015):


(in CRORES of Rupees)
Cost Centres Phase 1 Phase 2 Phase 3 Phase 4
Time Period(years) 1 2 2 1
Branches 50 (M) 200 (M) 300 (T 1& 200 (M,T1
T2) & T2)
Rent 8 30 40 25
Insurance Licensing and 20 120 30 20
vertical
setup/maintenance
Distribution channel 16 8 10 4
Establishment/Strengthen
ing
Sales Force Creation 12 8 2 4
Branding 10 21 30 20
MF licensing and vertical 12 8 20 4
setup
CRM 2 7 3 10
Core Banking Technology 25 12 17 18
Up gradation
Appraisal system 1 4 2 6
development/enhanceme
nt
Pension Plan Vertical - - 10 40
setup/Maintenance cost
Child Plans Vertical Setup - 12 40 60
/maintenance cost
Overseas Market - - 60 40
penetration cost
Card Segment - 80 120 100
Institutional Brokerage - - - 80
Segment Entry cost
Trading Segment Entry - - - 200
Cost
Expected ROI 2% 3.8% 14% 26%
Transaction Volume 20000 48,000 92,000 1,40,000
M – Metro city; T1- tier 1 city; T2- tier 2 city

PART A:
How should TPBoI retain and cultivate the distinct cultural
identity and ethos of
being a professionally entrepreneurial organization, which is also
embodied in its
name?

The distinct cultural identity of the TPBoI bank lies in it being thoroughly
professional and entrepreneurial. With expansion, it’s imperative for it
to design policies and procedures which would help it in maintaining its
identity and not be carried away by too much focus on expansionary
growth only. Since the addition of new allied services would mean new
departments, more workforce and thus increasing complexity, a change in
organisational structure is essential, which would mean new
organisational policies & culture too. But at the same time, the real core
values of the bank would need to be taken care of in the following ways:
Innovation/Entrepreneurial skills

• Though working in a well-structured organisation, employees would


also be given flexibility to avail their entrepreneurial skills, be
more innovative and thus contribute to the bank better.

 For this, all employees could be given some extra time on


their own, say half a day in one week per employee with
designation above a certain level, during which they can study
the day-to-day challenges they face in the job.

 Based on their judgement they can come up with


ideas/schemes which they think can help in serving the
customer more effectively as they are better suited to judge
customers pulse based on their interactions with them; how the
things can be improved, not only at the professional but also
at the interpersonal level that would achieve help the bank
grow in a smooth and efficient way.

• Thus, every employee would be encouraged to come up with new


ideas and share it with the bank. A special team called
INNOVATION CELL would be formed for studying these ideas and
see if they are feasible. If they are, they will be implemented and
the employee will be given credits for the same which would be
counted during his performance appraisal.

• To motivate employees to share their ideas and provide them


security against their ideas being usurped by team
leader/manager/peers and to tackle organisational
conflict/politics, the employee would be given liberty to directly
put his ideas in the innovation cell portal without any
intermediary channel.
• The good ideas would be rewarded and incentivized through
measures like “The best idea for every fortnight/month” which
would put the winner on to a track for job enlargement, job
enrichment or some fast track development program.

Beneficial in 3 ways

• The Entrepreneurial identity would be maintained with increased


motivation of employees to try innovative ideas
• Employees would feel more involved for the firm, and would try to
be friendlier with the customers by interacting with them at an
improved level to find out new ways of servicing them better,
leading to better efficiency
• Better services and interaction would mean increased customer
loyalty and viral marketing which is extremely important for a new
service provider.

Part A.2 How should TPBoI attract, motivate, groom and


retain the human capital?

It’s extremely important for any business to provide a work environment


which attracts, motivates and retains the human capital, even more so for
a bank like TPBoI which is in the nascent stage of retail banking and allied
services. It would attempt the following schemes/plans to take care of its
most valuable resource, the human capital:-

1) Flexibility to innovate and come up with good ideas followed by


well-deserved recognition through innovation cell - explained above.

2) Security against their ideas getting poached, by making use of


technology- explained above.
3) Attractive compensation packages with good fixed-variable pay
distribution, well at or above par with the prevailing industry
packages.

4) Opportunities for the performers to get selected for special cross


training programs, fast track development plans etc (which
may not help the employee immediately but help improve his skill-
set making him a better asset for the long run and also give him an
incentive to stay with the bank for a long time).

5) Pro-employee HR policies that assess employees’ performance not


only in terms of their current contributions but the potential future
value of their present actions. It’s essential because in its
growth phase, the retail business may not show positive cash flows
in the initial years and thus employees should be judged
accordingly.

6) Grooming of the new employees would be specially taken care of,


by providing them mentors who would not only help them
professionally but would also attempt to make them comfortable at
work

7) To tackle against the organisational conflicts and politics, well


maintained online portal taking care of employee grievances and
feedback etc would be implemented. The working methodology of
the achievements/feedback portal has been explained in the figure
below:

Figure 1 : Feedback/achievement capturing portal


Benefits of this portal:

• No room for subjectivity or personal biases getting in the way of


merit recognition.

• Results in reduction in organisational conflicts and politics.

• It’s a kind of informal certification for the employee which motivates


him and others to work harder and be more effective & efficient to
the bank.

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