Bank of Baroda's MD Mallya: How to Stay Competitive During A Recession

In four-and-a-half years, MD Mallya has dramatically upped Bank of Baroda’s performance. But his biggest contribution will bear fruit after he retires in November

Published: Oct 10, 2012

The financial markets generate a lot of number on a per second basis. There are people who have made it a profession to convert this information into trends, buy-sell signals, charts and pivot tables. Over the last 18 years of financial journalism, I have realised that every number has a story to tell. And these numbers as a trend normally never lie. I am forever looking for these trends.

Image: Manoj Patil for Forbes India

Award: Best CEO Public Sector
Name: MD Mallya, CMD, Bank of Baroda
Age: 60
Why He Won: For taking charge of the bank just as the global financial meltdown started, and managing to keep the bank’s performance stable in that period. And for being able to compete effectively despite being in the public sector.




As you read this, the first batch of newly minted students from the Baroda Manipal School of Banking are preparing to begin their innings in various branches of Bank of Baroda (BoB) across the country. And even before they’re on board, branch managers at BoB have begun scrambling to snag them. “The internal feedback is that students who have done a three-month internship in the branches are highly productive,” says Joydeep Datta Roy, assistant general manager, human resources, BoB.

It isn’t entirely surprising. Apart from the internships, every aspect of their classroom on campus—including the colour of the walls and the layout—is simulated to create the same look and feel of a typical BoB branch. Even the computers are connected to the training servers of the bank so that the students get a sense of the real-time environment of a bank branch inside their classroom. The result: The students are able to start performing on the job as soon as they step into a branch.

Creating a new cadre of battle-ready professionals is the brainchild of MD Mallya, the chairman and managing director of Bank of Baroda. And it could well be an important part of his legacy too. Mallya retires this November, ending his successful four-and-a-half-year tenure, during which both the bank’s profits and employee productivity more than doubled. It has been a sterling performance. During his chairmanship, he’s tackled every aspect of the bank’s operations—from re-organising the backend operations and modernising branches to training staff and upping the levels of customer service. But his biggest, and perhaps most lasting contribution, could well be his copybook formula to a problem that is endemic to every public sector bank—an ageing workforce.

Across public sector banks, nearly 50 percent of officers are slated to retire in the next five years. However, at Bank of Baroda, the problem is less severe: Around 25 percent of its officers end their tenure over the next four years. Beyond the numbers, though, these officers aren’t easily replaceable. After all, many of them have years of experience and domain knowledge.

“HR is the biggest challenge for banks in India. That is why Mallya is spending most of his time in this area to put the right person in the right job. We know that a lot of people will leave in the coming years, and we have put robust systems to replace the outgoing officers,” says SK Das, who now heads human resources at BoB.

The Manipal experiment—the first by a public sector bank—is only the tip of the iceberg. The school will provide 180 people every quarter and, over a period of time, this number will touch 340. The plan is to add almost 1,000 employees every year, depending on the requirements of the bank.

What’s more, the senior management takes time out of their schedule to be with the students and that builds a healthy relationship for the future, says S Vaitheeswaran, MD & CEO, Manipal Global Education Services in Bangalore, who helped design the school’s charter.

In the past, like every other public sector bank, Bank of Baroda would hire probationary officers through the exam conducted by the Institute of Banking Personnel Solutions. But they realised it takes a lot of time for a probationary officer to become productive. Also, the bank needs to invest heavily before they would yield actual results.

So what did Mallya do? He followed a simple recipe: Instead of reinventing the wheel, he looked for ideas that others had already perfected. That’s how he reached out to Manipal’s Vaitheeswaran, who had created a similar school for ICICI Bank and knew exactly what Mallya was looking for. (Since then, two other PSU banks—Punjab National Bank and Andhra Bank—have followed in their footsteps.)

When the school opened admissions this year, nearly 60,000 students applied for the exam. Eventually, 1,500 students were chosen, many of them from Tier II and Tier III towns, where banking is considered to be a stable profession and, therefore, attrition levels tend to be much lower than among city dwellers.

Mallya’s common-sense approach was apparent right from the very start. When he started his assignment, he seemed to have his long-term goals sorted in his head. On the very second day at work, while travelling from Pune to Mumbai, he said something to Das, then the Pune divisional zonal head, that became the mission statement for the 42,000 employees of the bank. “Our growth should be in such a way that we should endeavour to converge the annual profit in the year 2007-08 to a quarterly profit within the shortest possible time,” he said.

Mallya was also clear that this growth in profits would have to come on the back of higher employee productivity—something that had stagnated for some years prior to his joining. To drive that transformation, the first step was to get employees on his side.

In 2008, the hostile macro-economic environment meant that almost all banks seemed a bit wobbly—and employees were uncertain about the future. In his very first week at work, Mallya sent a letter to his staff, sharing his philosophy. He seemed to hit all the right notes. His letter spoke about his policy of ‘employee first’. He made it clear that every employee was an asset to the bank, irrespective of their designation or geographical location. The bank’s customers would be happy only if the employees were happy.

Now, it was easy to dismiss it as typical chairman-speak. But Mallya really meant it. Until then, there had been a feeling within the bank that transfers were entirely arbitrary. For instance, a resident of Patna would be given a posting somewhere in Pune, without any clear logic. Promotions, too, were being stalled, leading to a fair bit of pent-up frustration among the employees.

As the first step, Mallya ensured that transfers happened only if they were beneficial to the bank and he saw to it that the process of promotions and overseas transfer were merit-based and offered to the right employees.

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All this while, the bank’s senior management was viewed with a sense of awe and an element of fear. Mallya began communicating directly with employees by visiting important branches in the country and conducting town hall meetings.

“The management wanted to communicate the expectations of each and every employee from the corporate office. And for this I travelled all over the country to meet everyone and tried to understand their issues. We tried to tell them that our growth lies in the growth of the bank,” he says.
His open-door policy has also endeared him to the staff. He always returns a missed call and prefers to meet employees personally to deal with their professional issues.

“Initially, he was seen as an outsider. But the average employee of the bank was suddenly motivated to go the extra mile in whichever area of activity because the staff realised that this was one chairman who was employee-friendly. Mallya ignited the passion of the team and that endeared him to the staff,” says Milind Nadkarni, general secretary of the Bank of Baroda Employees Union.

Once employees had calmed down, Mallya focussed on upping the speed of customer response and professional advice to customers. He set a target of disbursing car loans in two days, home loans in six days and SME loans in 14 days. He also made sure that the speed did not come at the cost of higher loan defaults. He evolved a factory model for loan processing, where the actual work was centralised outside the branches, akin to a car manufacturing setup where work is done on an assembly line process and the work moves automatically to the next level.

Customers are mainly divided into four categories: Retail, corporate, rural and small and medium enterprise (SME). “We handpicked our credit officers who were given discretionary powers in their respective areas of loan factories. And they were well trained to understand industry and business dynamics,” says RK Bansal, who heads the SME segment for the bank, which accounts for a quarter of its loans.

The precept seemed simple: If you pick a good customer and know the industry well, it would simply cut out the chances of landing up with a non-performing asset (NPA) a couple of years down the line. Today, the strategy has been vindicated: The bank’s NPAs work out to 0.65 percent of its total assets, the lowest in the entire PSU banking spectrum.

In early 2010, Mallya began another round of dramatic restructuring. He hired McKinsey to carry out a business process re-engineering initiative called ‘Udaan’. The bank created the Baroda Next concept of branches. The bank has deployed new processes, remodelled branches and carries out its back-office function from a centralised location. This has helped it in many ways. Now employees are in a position to dedicate more time to their customers.

An important part of Udaan was a new leadership development programme. Here, senior managers would go through a three-month programme on soft skill development. This has given immediate yields as bank managers across 1,600 branches spread across urban and semi-urban areas began to see increased efficiency in their branches and higher customer satisfaction. The result: With the improvement in customer satisfaction levels, revenue per employee also went up from Rs 7.32 crore in 2009-10 to Rs 14.66 crore in 2011-2012, once again the highest among its peers. “I want to make BoB one of the preferred employer brands in the entire country. I’m seeing to it that people of quality are trained and made ready for the future,” says Mallya.

Over the last one year, Mallya has begun to put in place a new system to manage the high levels of employee churn. Code-named ‘Sparsh’, and led by the Boston Consulting Group, the bank has implemented a new talent management system, where 700 people have been earmarked for higher leadership roles. And specific training needs have been worked out for different grades of staff members. As part of Sparsh, a scientific system has been introduced that predicts the staffing positions in a branch to the dot. “This system has 95 percent accuracy when it comes to manpower planning and anybody sitting in a branch can figure it out with a click,” says Datta Roy.

Over the last four years, since Mallya took over, the bank’s stock price has grown by 18 pecent annually, while the BSE Banking index moved by only 1.5 percent in the same period. But now, Mallya’s exit has already begun to worry employees, customers and some investors.

“This is one of the best managed PSU banks. Initially, there was some scepticism about how the bank will grow after Mallya’s term is over. But looking at the processes and the training modules that he has built for the future of the bank, we are a bit more comfortable,” says a leading fund manager who has invested in the BoB stock.

Even though that would be music to his ears, Mallya isn’t slowing down. He says all the talk of retirement can be distracting. Once he retires, there will be plenty of time to enjoy what he really loves: Listening to songs from evergreen Dev Anand movies and watching an occasional English play in town.

(This story appears in the 12 October, 2012 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Shivanand B Gaunker

    I had the opportunity to work under him from 3-01-1983 to 3-12-1984 He is excellent person in all the sphere of life. In office strict and honest to his job and on some of holidays we enjoyed picnic at Agumbe and shringeri and also at remote waterfall at Kudremukh and picnic at Madikery/Coorge - The great personality. I cherish my days with him at Mangalore

    on Oct 15, 2013
  • Nagaraj Kulkarni

    Fantastic Initiative in inclusive skill and competency building! Reaffirmation that root causing foundational issues always leads to great outcomes.

    on Oct 11, 2012
  • Raman Shah

    Bank of Baroda won several awards like Best Bank of the Year twice, use of technology etc. But it was never nominated for Best Employer though due to staff contribution its business touched new heights. To sum it up Management has exploited the staff to the hilt.

    on Oct 10, 2012
  • Venugopal

    The recognition Mr Mallya received from the Commercial World had a telling effect on the work force of the Bank. He was more heard and understood internally and the awards conferred on him and the Bank were awe inspiring.

    on Oct 10, 2012
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