Leveraging Human Capital for Busrness

Growth: A Case of lClCl Bank, lndia

tram-ta filiARMA AND PHIL}? ABRAHAM

Organizational Setting
ICICI Bank is India’s largest private sector bank by market capitalization, having
a network of 1,700+ branches (as of March 31, 2010) and about 4,721 automated
teller machines (AIMS) in India, with presence in eighteen countries (Wikipedia,
1C ICI Bank, 2010). The bank serves more than 24 million customers with a
wide range of financial services and banking products. It delivers its services
to the corporate and retail customers through a variety of delivery channels and
specialized subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital, and asset management. Of the big four of
Indian banks (State Bank oflndia, Axis, ICICI, and HDFC banks), ICICI Bank is
overall the second largest in terms of assets of Rs. 3,562.28 billion ($77 billion) on
December 31, 2009 and profit after tax Rs. 30.19 billion ($648.8 million) for the
nine months ending December 31, 2009.
ICICI Bank was formed in 1994 as a subsidiary of the Industrial Credit and
Investment Corporation of India, Limited (ICICI), which was incorporated at the
initiative of the World Bank, the government of India, and representatives of the
Indian industry in 1955, to create a development financial institution for providing
medium-term and long-term project financing to Indian businesses. After
coming into existence, ICICI undertook normal. banking operations: mobilizing
3 deposits, offering credit cards and car loans and other bank products. After a

series of mergers (with Bank of Madura) and reverse merger with ICICI, the bank
transformed ICICI from’an industrial-project finance institution into India’s most
comprehensive financial services powerhouse with interests in retail banking,
insurance, online trading, and business process outsourcing among others, thereby
transforming the face of the Indian banking industry. At present, ICICI Bank’s
equity shares are listed on Indian stock exchanges at Chennai, Delhi, Kolkata, and
Vadodara; the stock exchange, Mumbai; and the National Stock Exchange of India
Limited, and its American Depositary Receipts (ADRS) are listed on the New York
Stock Exchange (NYSE; Wikipedia, ICICI Bank, 2010).

India ‘ 277
India: HRM from the Historical Perspective and the Current
State
India, the largest democracy, is the second largest country in the world, with
1,150 million population (March, 2010) and labor force having 16 percent ofthe
world’s population (Indian Economy: An Overview, 2010). Consisting of twenty-
eight states and seven union territories (centrally administered) spread over 3.29
million square kilometres, it is a multi-Iinguistic, multi-ethnic, and pluralistic
society. There are twenty-two official languages, but Hindi is the national language
(spoken by 40 percent of the population), and English is the business language.
Its people speak 844 dialects. India has a federal system of government with clear
demarcation of powers between the central government and the state governments.
India’s roots can be traced back to Indus Valley civilization, 3000-1500 BC. Its
history presents an account of confluence of cultures due to interactions with alien
cultures over the years, which impacted it in the form of adaptation, integration,
or reformation of administrative practices. The first Indian invasion recorded in
history was that of Alexander in 327 BC, which influenced the local systems and
practices. Thereafter, there has been consolidation ofempires with the rise of
Hindu dynasty, which witnessed empires ofNandas and the Mauryas during the
fourth and third centuries BC. Emergence of HRM in India can be traced to this
period when Kautilya (known as Chanakya, c 350-283 BCE), an adviser and prime
minister to the first Maurya Emperor Chandragupta and a teacher ot’politics at
Takshasila (the ancient university, declared a UNESCO World Heritage site in
1980), wrote two books: Arthshastra and Neeti-shastra. The former discussed
monetary and fiscal policies, international relations, role of the kings and officials
(now called job descriptions), welfare, selection, compensation, employer-
employee relations, reward and punishment system (incentives), training and
development; and the latter was a treatise on the ideal way of life. Chanakya
developed Neeti-Sutra containing 455 sutras (pithy sentences) of which 216
related to rules of governance (Wikipedia, Chankya, 2010). This period was
followed by the Gupta Dynasty (fourth to sixth centuries AD, which is the period
when science, art, and culture flourished in India.
In the eighth century, Arab incursions began followed by a Turkish invasion in
the twelfth century. India had Mughal rule from 1526 AD to 1857 AD followed by
the British rule for 200 years. With this long period of British rule, personnel and
HRM in India yielded to the influence of Anglo-Saxon thought. The British laid
down several policies and procedures for labor. Several legal enactments took»
place: Plantation Act, 1863 and Factory’s Act, 1881, laying down rules for hours of
work, employment of women and children, and leave-related matters (Akhilesh
Nagaraj, 1990).
India became independent in 1947. HRM in India has evolved over the decades
from a purely statutory labor welfare function (19203) to an administrative
personnel function (19305) to the period of labor legislations (19403) marked

278 ‘ Radha R. Sharma and Philip Abraham

by the lVlinimum Wages Act. 1948; Industrial Disputes Act. 1947; Factories

Act, 1948: to personnel administration (19505). to personnel mcmagemenl and

industrial relations with enactment ot‘the Maternity Benefit Act, 1961: the

Payment of Bonus Act, 1965; and the Payment ofGratuity Act, 1972 during the
19605 to 19705 to human resource development (19905; Pareek & Rao, l975)to

strategic HRM, which has thrived since the late 19905. There are reported to be
150 laws governing l-lRM practices in India (Venkatratnam, 1995).

Economic Reforms and Globalization of lndia

Since independence in 1947, India planned its strategy for development through

five-year plans and up to now has seen eleven “five-year plans.” All the five-

year plans aimed at steering lndia out of a socioeconomically deprived state

to a scientifically and technologically strong and self-reliant nation. This led

to setting up a large number of state-owned organizations in all major fields of
industry including banks, which provided large-scale employment. Socialism
appeared to be the dominant ideology of the government, which later resulted in
low productivity and caused problems of balance of payment. This necessitated
economic reforms and, in July 1991, the first wave of globalization and
liberalization commenced, which comprised economic liberalization, focus on the
consumer, a market-oriented framework, and competition.

Realizing the importance of social development along with economic growth,

the Planning Commission of the government came out with a National Human
Development Report in 2001 to strengthen the link between the two. The report
observed that human development as reflected in the human development index
(HDI) had improved significantly between 1980 and 2001 at the national level,
but there were gaps in urban and rural areas (Planning Commission, 2010). It
cannot be overemphasized that banks were required to play an important role

in accelerating the country’s socioeconomic development. Therefore, banking
reform formed a major part of the economic reforms, as its aim was to bring
about “operational flexibility” and “functional autonomy” to enhance “efficiency,
productivity and profitability.” It also focused on structural changes and changes
in HR practices to strengthen the foundations of the banking system for greater
stability, customer focus, performance, and profitability.

Banking in lndia originated in the eighteenth century, and the first government-
owned bank was established in 1806. After Indian independence, its central
bank-called the Reserve Bank of lndia-was nationalized in 1948 and, with
the enactment of a Banking Regulation Act in 1949, it was given powers “to
regulate, control and inspect banks in India.” In 1969, the government nationalized
fourteen of the largest commercial banks, and later the next six largest banks were
nationalized in 1980. Currently. lndia has eighty~eight scheduled commercial
banks, twenty-seven public-sector banks (government holding stake), twenty-
nine private banks, and thirty-one foreign banks. lClCl Bank is one ofthe privateIndia – 279
banks. As per the advance estimates of GDP for 2009-20 1 0 released by the Central
Statistical Organisation, the economy is expected to grow at. 7.2 percent in 2009-
2010, with the industrial and the service sectors growing at 8.2 and 8.7 percent,
respectively (India Brand Equity Foundation, 2010). However, the actual GDP
rates in the first three quarters for India have been 8.6, 8.9, and 8.9, respectively.
which are better than the estimates (Trading Economics, 2010).

ICICI Bank: Aligning with Business Environment
Considering ICICI Bank was formed in 1994 as a subsidiary of the Industrial
Credit and Investment Corporation of India Limited, it has made phenomenal
progress in a short period under the leadership of K. V. Kamath, who joined
ICICI Ltd as its managing director and chief executive officer in its embryonic
stage in 1996. It was the time when India started showing preliminary results of
liberalization initiated during 1991. In the changing environment, leveraging the
market with people and technology from 1996 to the present, ICICI has written
a new saga in the history of Indian banking. It has transformed itself from a
traditional development finance institution to a customer-centric private-sector
bank, being the largest in market capitalization and the second largest overall
in terms of assets. It is not merely the growth story of a corporate but a clearly
envisaged leadership strategy adopted by Kamath for the growth and development
of the bank leveraging human capital and technology.

ICICI Bank adopted smart initiatives over the years in the up-surging financial
sector of India and created a state-of-the-art banking infrastructure in their
branches across India. The main strengths of ICICI Bank were its talent pool,
complete product suite, large capital base, extensive customer relationship, strong
brand franchise, technology-enabled distribution architecture, and universal
banking presence. Although ICICI Bank was mainly into retail banking, it
ventured into other products such as insurance, corporate banking, venture
capital, to name of few. In 2007, ICICI Bank created history by raising $5 billion
in the largest-ever public offering in India and emerged as a valuable financial
organization. The total bids were worth more than $25 billion, higher than the total
foreign direct investment into India in 2006-2007. The bids were not only from
India but also all around the world (India Times, 2010).

Strategic Leadership at ICICI Bank
Kamath had a clear vision and mission for the bank from the time he took over the
reins of ICICI Ltd. as its top brass. The visionary banker saw an opportunity in the
retail banking space and targeted the Indian middle class with a slew of customer-
savvy banking strategies that would set a new level for services in banking and
thereby create a niche for ICICI Bank. ICICI’s strategy and product offerings

286 ‘ Radha R. Sharma and Philip Abraham
Working in a close-knit team wherein each member shoulders huge responsibilities
makes work interesting for the others in the bank, and many employees have
a strong sense of community. “We have a weekly meeting every Monday that
is open to all staff. All decisions pertaining to the organization are taken in the
open and everyone has the freedom to express a thought or an opinion without
hesitation,” said Vaghul, ex-chairman at 1C 1C 1 Bank. He placed utmost importance
on values such as honesty, integrity, and sensitivity to other people’s feelings
and dignity in behavior. He felt that disagreeing with others could be done in a
dignified manner.
The bank has a knowledge management portal with a plethora of KM tools that
align systems and high-performance work practices. However, implementation
of the knowledge management portal was not that easy. It required a lot of efforts
by the directors and the team implementing this portal. Initially, knowledge
management was voluntary, but at present it is central to working at the ICICI
Bank. Apart from customer satisfaction, the portal helps staff to plan their career
moves and provides a means for upgrading of their skills and a platform for
recognition for contributions made to the bank.

Summary
When lClCl was founded more than five decades ago by Indian industrialists, the
World Bank, and the government of India, it was envisioned as the first Indian
development bank. The case is not just about growth but of transformation. lClCl
has evolved from a development bank to become a corporate and then a retail
bank, meeting the needs of an aspiring population. The mantra at ICICI Bank
is (People x Process) x Technology = Customer Value. This mantra classifies
the bank as a high-class delivery facility with specially trained and efficient
people delivering innovative, customized solutions and seamless services to
their customers, hence increasing customer value. Generally, robust people-
centric practices are considered central to single or double‘di git growth in service
organizations. High-performing firms, therefore, build in greater accountability
for results and execute organizational and people practices both internally and
externally effectively to propel growth. lClCI Bank has done the reverse and has
introduced high-order people practices to achieve high-order business growth.
As the world has witnessed the worst economic slowdown since 2008 due to
problems in the banking industry, profits and margins have taken a dip across the
world. This combined with change of leadership at lClCl Bank in 2009, leaves

the question: Will the bank continue to have sustainable business growth and high
market capitalization by leveraging its human capital?

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