BANK OF BARODA- LEADERSHIP

CHALLENGES
Asha Bhandarker and Snigdha Rai

Team H
1. Arnesh Hemrom - 1611384
2. Bernard Eugine F - 1611388
3. Jaladhi S - 1611443
4. Raghunandhan V - 1611417
5. Ravi Theja Manchuri - 1611379
6. Sahil Wajid - 1611424
7. Sartaj Singh - 1611427
8. Vignesh Kumar B 1611442
PGP 2016-18
Section F
IIM Bangalore
Introduction
The case at hand discusses Bank of Baroda(BoB), one of Indias largest public sector
bank, and the challenges its faced in keeping itself relevant in the modern era. It describes
the Bank and its activities between 2005 and 2008. The various technological modifications it
underwent and, also how it changed itself to be able to remain competent and even try and
be ahead of its competitors. The case showcases how the size and systems of this extremely
large organization made it sluggish and how it started losing its top spot to the newer, nimble
private banks. Stating this, the case mainly elucidates on the facts about how the 2 CMDs
(Chairman, Managing Directors); Anil Khandelwal and Mangalore Devadas Mallya during this
period morphed the overall strategy of BoB to achieve the goal mentioned above.

Bank of Baroda, was ranked 3rd amongst all other banks in India in 2008 and this was
a result of actions and decisions made by these gentlemen during their tenure as CMD. They
were determined to turnaround the banks operations and they were successfully able to do
it. The case leaves us at a question on whether the Bank would be able to sustain its growth
and achieve the quadruple-revenue target set by Mallya, given the changes were
implemented. It also seeks inputs on how should the bank move forward to achieve this big
vision.

Prima facie, it appears as a strategy case and seems like analyses should revolve
around that. But upon closer inspection, it becomes clearer that it requires analyses from an
MPPO/Organizational Behavior perspective. There are very strong aspects of leadership
concepts and its impacts on an organization; which need to be dealt.

The organization has undergone massive changes in its leadership styles under the 2
CMDs. While Mr. Khandelwal; being a Barodian had a good hold on the systems culture
moved in with an emphasis on performance. This was probably because that was the need of
the hour. The bank was looking at huge inefficiencies and a strong hold was needed to steer
the organization back to course. We may use the Fiedler Model to analyze the fit of situation
and leadership here. Situational Leadership Theory also explains how Khandelwal was
dealing with a team (staff of BoB) who knew the problem but were either unwilling or unable
to do the task and hence required him to be a task oriented leader.

The same organization under the leadership of Mallya; an outsider would behave
differently; and hence he needed a different leadership style even if the objective/target for
the bank was still the same. He needed to build the trust amongst employees and reassure
them after the massive dissatisfaction wave generated by the decisions made under previous
CMD. Mallya was dealing with not just strategic and leadership issues but also had to involve
employee behavior and engagement aspects to his decision making.
 During the analyses, we would first analyze the decisions made by both the CMDs; Anil
Khandelwal and Mr. Mallya. We shall split Mallyas tenure into his first year (trust building
and initial phase) and thereafter discuss about the occurrences at BoB after the first year. We
would try and answer the questions of whether the bank would be able to attain its goal and
if not, what can it do? We shall rely on the concepts of Leadership Change, Theories of Fiedler
and Situation Leadership(SLT) and other concepts of MPPO and OB.

Khandelwal years (2006-2008)

Dr. Anil K Khandelwal, the first of change leaders

Anil K Khandelwal is a BSc, BE, MBA, LLB, Ph.D., and also holds post-graduate diplomas
in labor law and training & development. He joined Bank of Baroda as the Chairman and
Managing Director on 1st March 2005. The bank experienced a significant growth and
managed to grow out of its long slumber with his focused efforts in technology, operation,
branding and customer-centric vision. Under his leadership, BOB moved up the scale by solid
158 places from 416 to 258 in the worlds top 1000 banks, prepared and released by The
Banker of London. It also won numerous titles for its achievements in branding, customer
service, and retail operations.

Khandelwal being a veteran in the field of banking and human resources, was aware
of the situation and the significant efforts required to put BOB on track in the market. Due to
his long-term association with BOB, he understood the strengths and weaknesses like no
other and came up with a unique action plan for its short term and long term growth. He was
an authentic leader and firmly believed that Anger is the prelude to transformation; peace
leads to status quo. He started with the development of the IT system and signed up a deal
with HP for renovating the complete IT systems. Also, he launched the end to end banking
solutions within eight weeks of appointment, building trust and reputation from the
Management and customers alike. Most of his efforts were concentrated in the
transformation of the existing systems and vision statement, moving from Safety first to both
Customer satisfaction and safety.

The mantra of Aspire, Assess, Architect and Act followed by Dr. Khandelwal was
simple and communicated a strong focus towards customers. He also believed that the banks
are highly fragile institutions and shocks can come in a major way to disrupt its operation
anytime. So, solid foundations should be built in the form of branding, technology, customer-
centric initiatives and strategic business decisions to withstand unexpected shocks. Under
that initiative, the bank launched a new branding campaign with The Baroda Sun, as its
identity and Rahul Dravid, former vice-captain of the Indian cricket team as the brand
ambassador. The new tagline, Indias International Bank changed the spectrum of BOB
from being a state player into an international bank with a clear and distinct image.
Khandelwal realized the absence of ownership among the employees to be the missing link
in accelerating the Banks growth. So, he redesigned the functioning of branches, and each
branch was identified with specific sales targets and the employees performance were
directly linked to their individual targets. Employees were given sufficient training and also
advised for speedy operation and customer service. However, Khandelwal identified the
attitude of employees to be a significant parameter influencing the growth of the bank and
therefore, tried to modify their behavioral pattern for achieving a turnaround success.
Customer feedback system was introduced and taken up very seriously with punishments
extending up to employees termination.

The leadership style exhibited by Khandelwal was very evident as to that of a task
leadership with a strong focus on growth and development. But these initiatives also had a
setback with the employees, and they found it very had to keep up with the new changes
implemented by Khandelwal. Also, there was a significant threat of transfer or termination in
case of underperformance. Though certain initiatives centered around improving the
employee engagement, motivated the employee to stretch themselves beyond their call of
duty and work hours, it was tough in the long run. Other initiatives like the introduction of
professional on-demand counseling service and "Sampark", an online feedback channel with
straight access to MD's mailbox aimed at easing the situation. Though much of these
initiatives were a huge success in promoting growth and development, the employees were
left with constant fear and dissatisfaction taking the attrition rate to 2.82 percent, highest in
the history of BOB.

Debut year of Mallya (2008-2009)

Mallya, the man with Midas touch

Devadas Mallya has been with Bank of Baroda since 2008 as the Chairman and
Managing Director of the group. He resigned from the position in November 2011. He took
over the charge of Bank of Baroda in 2008 when the great depression created financial
instability throughout the world and threatened to shake India's banking sector. At such
times, Mr. Mallya focused on attracting the youngsters and guiding the bank out of the storm.
He was successful as evident from the group's profits growing 55% as compared to 37% in the
previous financial period. ROA and ROE also marked a growth of 1.21% and 22.19% growth.
His focus was on keywords like "Cautious aggression" and "Stable growth with quality"
portraying the group's high risk appetite coupled with strength.

Devadas Mallya was a proficient professional with a career spanning over 36 years. He
holds a Bachelor of Engineering degree from University of Mysore (Karnataka Regional
Engineering college) along with a Post-graduation diploma from Indian Institute of Science,
Bangalore. His banking career began in August 1976, when he joined Corporation Bank as a
General Manager. Throughout the last 30 odd years in banking sector, Mr. Mallya has served
in various organizations holding numerous executive positions and leading various
assignments within the banking sector. One of the most discussed was the merger of Oriental
bank and Global Trust bank while Mr. Mallya was the Executive Director of Oriental bank at
that time and led the whole merger process smoothly. Along with holding executive positions
in various companies, Mr. Mallya has also served in several government-regulated banking
bodies like Director at Indian Bank's Association, member of the Governing Council of Indian
Institute of Banking and Finance and member of the Governing Council of Institute of Banking
Personnel Selection. Prior to joining Bank of Baroda, he served as the Chairman and Managing
Director of Bank of Maharashtra Ltd. from 2006-08.

While he was at Bank of Baroda, during various interviews, he contributed his success
to mainly 3 factors namely: People, Process and Technology, or as he liked to call it PPT. He
always prioritized the employees as he claimed to have met almost half the total personnel
during various meets. He also came up with various schemes to reward top performers like
sending them abroad on trips and getting a chance to have dinner with the Chairman. He
believed that the organization should incorporate the shared vision of all its employees rather
than just the executive.

Roadblocks in 2008

In 2008, on appointment as the CMD of Bank of Baroda, Mallya faced the uphill task
of altering the mindset of the employees who were stung by the strict demeanour of
Khandelwal and were unwilling to take risks due to the fear of failure. Yet the bureaucracy
which has been a defining characteristic of the organization during the pre-Khandelwal days
still managed to run riot in the daily operations leading to snail-paced decision making. Thus,
the unfortunate combination of bureaucracy and fear of risks created an environment where
the employees were deferring most of the decisions to the management and did not take any
responsibility. This combination was wrecking the customer satisfaction levels at the bank
and was also seen as the primary cause of increased employee turnover which was at 2.82%,
one of the highest amongst its peers. The younger employees cited bureaucracy and lack of
clear responsibility as their reasons for quitting whereas the senior employees were opting
for voluntary retirement scheme due to the increased stress levels caused by the continuous
monitoring and thrusting of targets and related risks upon them. This added to another
problem of talent crunch at the top-level as 60% of senior employees were to retire in another
5-7 years then. So, it resulted in a challenge of developing young managers to take
responsibilities in such a bureaucratic environment. The various customer-centric initiatives,
technological innovation measures, organizational restructuring were initiated by then but
hadnt yet taken full shape.
Employee-centric leadership

Mallya was an employee-centric leader as he valued relationships with his

subordinates more and hence went out of his way to help them overcome their obstacles in
work. This was in complete contrast to Khandelwal who was bent on providing the best
customer experience even if it meant pushing his employees to severe inconvenience.

In his drive to establish a solid relationship with his employees, Mallya had to
overcome the preconception among the employees about him being an outsider. The
employees had apprehensions about whether he would be able to make the transformation
from a small bank like Bank of Maharashtra to a bank of BoBs size.

Mallyas vision was focussed on three core principles Trust, Transparency and
Togetherness and he communicated these principles to employees through letters and
meetings. His first letter to employees on appointment spoke in detail about how the
happiness of employees came first which would automatically translate to happy customers.
He took every opportunity to meet employees and listen to their problems and suggestions
and managed to act on them. The promotion and induction processes saw more involvement
from him as he set out to understand his employees more and impart in them his vision. His
speeches and letters had loads of motivational phrases and trumpeted how much the
employees were valued at BoB. This reinvigorated the laden employees and pushed them to
give their all voluntarily which translated to satisfied customers as well.

There were lot of meetings held for the employees which sought to build the bond
among employees and the bond between the board and the employees. The strategies were
discussed with the employees and their feedback were considered as well.

Project LEAP (Leadership Enhancement and Appreciation Process) was created to

groove youngsters to become leaders in a phased manner.

Bringing customer-centric philosophy into the mix

Mallyas task of shoring up BoB had another major impediment in the form of Global
economic crisis of 2008 which threatened to halt the progress that the bank had made in the
past decade. Mallyas mission of quadrupling the profits seemed like an insurmountable
mountain. He realized that in such turbulent times, customer- focus and technological leap
had to be balanced out with attention to employees. He managed to realign the way sales
and marketing teams responded to new campaigns and business targets. He actively involved
himself by building networks with the corporate clients and government institutions and
officials.
 He also sought to rejig the organizations structure with the help of a business process
reengineering program called Nav Nirman (transformation) which entailed setting up Gen
Next branches which served high value and young customers providing them with best-in-
class experience.

Growth during Mallyas first year

The various initiates taken by Mallya, keeping customers in mind, did result in an overall
positive outcome. The public-sector bank market share of Bank of Baroda increased from a
low of 15.56% in 2005 when Mallya took over to 17.83% at the end of 2009. The initiatives
involved technology driven operations and customer relationships. Along with technology he
also created a central processing units for loan selection. But the biggest stumbling block was
the employees attitudes. They merely tried to push files without positively engaging with the
customer and acting as a leader. Thus, customer complaints were taken very seriously. This
steps did create hurdles for the employees so he set up mechanisms through which
employees could directly lodge their complaint.

The balance sheet of Bank of Baroda one clearly illustrates the 26.61% increase in assets.
Much of this is due to a 19% increase in investments and a 35% increase in advances given.
The advances were issued not only in India but to foreign entities as well. Also, on analysing
the annual reports it is seen that the return on assets has increased from 0.89% in 2007-08 to
1.09% in 2008-09. The return on equity has increased as well 3.93% to 6.09%.

Figure 1: Revenue share of Public sector banks from 2006 through 2009
 It is evident from the above graph how the leadership tenures of Khandelwal and
Mallya helped BoB leapfrog in terms of revenue share from 2006 through 2009.

Woes continue in 2009 and Mallyas dilemma

A survey carried out by an external agency in 2009 revealed that the employee
motivation levels were still at the lowest and apparently, customer responsiveness was low
as well. Thus, Mallya realized that the measures to transform the culture and implement the
customer-centric and technological initiatives still needed a lot of effort and so was unsure
whether to go ahead with the reforms or focus on business sustainability in times of
uncertainty like other public-sector banks.

Golden years of Mallya (2009-2011)

One of the first steps Mallya took was to insist that employees came first. He sent out
a letter to his staff sharing his philosophies that every single employee was a valuable
resource to the bank. He understood achieving higher customer approval was the key and in
order to achieve the same, he needed his employees to be happy. He followed up his letters
and speeches with actions as well.

The transfer system within the public-sector banks were a common phenomenon and
it was widely considered as random. The employees were transferred within the bank
branches in an arbitrary fashion at fixed intervals. Mallya intervened with this process and
made sure that the transfers happened only if they were beneficial to the organization. He
also considered the problem of promotions being stalled and made sure the process of
promotions was made to people purely based on merit. Till then, apart from formal
communication, there was not much communication between the senior management and
the other employees. Mallya wanted to address this issue and went about it by organizing
town hall meetings and interacting directly with the employees by visiting banks on a regular
basis. He used these meetings to communicate the expectations from the management side
and also tried to address the concerns and grievances from the employee side. According to
the Bank unions general secretary, Mallya who was primarily seen as an outsider with his
employee friendly policy created a culture wherein the employees where committed and
were willing to go the extra mile for the chairman. Mallya used this passionate workforce to
provide faster customer responses. He brought in processes to dispense car loans in 2 days,
housing loans in 6 days and loans for Small and medium sized enterprises in 14 days. He
adopted an approach of cautious aggression so that these loans didnt turn out to be Non-
performing assets. Credit officers were trained in specific fields about the industry dynamics
and were given powers to approve these loans. With this approach, the probability of a loan
turning into a bad loan was drastically reduced.
 The next big problem that Mallya faced was the ageing workforce. When Mallya took
over, around 25% of the employees were about to retire over the next four years. Mallya
needed to address the problem as BoB was losing employees with huge work experience and
knowledge. Hence, to replace the workforce, he came up with a plan which was a first of its
kind experiment by the public-sector banks. The current system of hiring via the exams
conducted by IBPS brought in probationary officers, but the general concern was that these
recruits needed a lot of time to become productive.

Mallya tried to emulate the system put in place by ICICI bank. He formed a tie-up with
Manipal University to create a system that would produce around a 1000 readily employable
recruits every year depending on the banks requirements. Together, they created a system
that would take in students via a screening test. The students there would be trained in an
environment that simulated a bank inside a classroom. Their attention to detail was so great,
that the colors of the wall, the layout and every possible aspect were designed to create a
look and feel similar to that of a BoB branch. The systems were connected to the training
servers in the bank so as to create a bank-like environment and to prepare the recruits in a
better way. As a result of all these steps, the recruits took no time to adapt when they joined
the banks. This system has now been put in place by numerous other public sector banks.
Additionally, the recruits via this programs were primarily from Tier-2 and Tier-3 cities and
the attrition was quite low. Mallya felt this huge investment was essential as he felt putting
in place right people was vital for the banks growth in the long run. This again reinforced his
principle of concentrating on people over strategy.

His next step was to bring about a major restructuring program within the bank.
McKinsey was hired and they carried out a business process re-engineering initiative by
the name Udaan. The bank introduced a concept of Baroda GenNext branches, that deployed
contemporary processes and has helped the employees cater to the customers more of their
working time. The backend operations were also completely reorganized and were carried
out from a central location. The most important part of the Udaan program was the
leadership program. Via this program, senior managers and branch managers were put
through a three-month development program that concentrated on soft-skills. The program
delivered immediate results with bank managers seeing improved efficiency and increased
revenue per employee. The program also resulted in improved customer satisfaction thereby
creating a better brand identity. He also brought in Boston Consulting Group to manage high
attrition rates. The program named Sparsh put in a talent management program that
trained the next generation for top management. Also, staff members were trained specific
to their roles based on their grades. Also, a scientific system was put in place which was used
for efficient manpower planning. These programs have resulted in Bank of Baroda producing
leaders on a constant basis.

All these steps resulted in Bank of Baroda being one of the most profitable public
sector banks with the stock price going up by 18 percent annually.
Conclusion
There was a clear need for Bank of Baroda to refresh its brand image and create a
more modern persona as the old identity was not well liked or recalled so a dramatic
transition was called for in the organizational structure of BOB. BOB was into comprehensive
restructuring not just by changing its logo but by a change in its overall culture and working
of the organization on a whole. Public sector companies should restructure themselves
periodically to stay relevant to the Indias increasingly youthful customers.

Bank of Baroda was shaped in 2000s by two leaders with contradicting philosophies.
Khandelwals stern attitude to succeed by ensuring customer satisfaction saw Bank of Baroda
kick start its transition from an old weary horse to a new age technology driven bank. Mallyas
employee-centric culture dovetailed the task-centric leadership of Khandelwal as it provided
the right platform in terms of a revamped culture which finally helped in the transformation
measures taken by Khandelwal yield fruitful results.

Like all successful leaders, Mallya has also put in place proper processes and systems that will
allow the successor to continue the legacy without any concerns. Mallyas leadership style
could be attributed to the following quote from John Maxwell:

Leaders become great, not because of their power, but because of their ability to empower
others.

References
1. https://hbr.org/product/bank-of-baroda-leadership-challenges/W15580-PDF-ENG

2. Cases in Strategic Mgmt Vol-II by Amita Mittal

3. http://www.ibscdc.org/executive-interviews/Q&A_with_Dr_Anil_K_Khandelwal_2.htm

4. http://www.forbesindia.com/article/leaderhip-award-2012/bank-of-barodas-md-mallya-how-to-
stay-competitive-during-a-recession/33869/1

5. http://www.business-standard.com/article/finance/bank-of-baroda-chief-m-d-mallya-is-bs-
banker-of-the-year-111012800006_1.html

6. http://www.businesstoday.in/magazine/special/best-banks-2012-bob-bank-of-
baroda/story/189852.html

7.
http://www.bloomberg.com/research/stocks/people/person.asp?personId=29734727&privcapId=87
4487

8. http://www.4-traders.com/business-leaders/Mangalore-Devdas-Mallya-0734CT-E/biography/

9. http://listofleadingpractitioners.theasianbanker.com/?id=4964&pid=358

10. http://quotes.wsj.com/IN/XBOM/500112/company-people/executive-profile/124581624