Académique Documents
Professionnel Documents
Culture Documents
ON
ORGANIZATIONAL CHANGE
06513701709
I, Mr. Mohit Jain, Roll no.06513701709 certify that the Minor Project Report (BBA211)
from the referenced sources. The matter embodied in this has not been submitted earlier for the
Countless thanks to all our tutors, college staff and my friends who have
who has constantly supported and guided me to the completion of this project.
I can’t remain silent for the support of MRS. ALKA SANJEEV who
constantly acted as a guide for this project on each and every moment I am
Mohit Jain
06513701709
List of Contents
Chapter: 1
Introduction to organizational change
1. Meaning of Organizational Change ……………………………………………………..1
2. Characteristics of Organizational Change ……………………………………………….4
3. Forces of change ………………………………………………………………………...5
4. Managing in 21st century…………………………………………………………………8
Chapter: 2
Scope and objective of organizational change
5. Scope of organizational change …………………………………………………………10
Chapter: 3
Types and utility of organizational change
7. Types of organizational change …………………………………………………………12
Chapter: 4
Case study
14. Case study on organizational change ……………………………………………………35
BIBLIOGRAPHY
LIST OF FIGURES
16
1. THE CHANGE PROCESS
INTRODUCTIO
N TO
ORGANIZATIO
NAL CHANGE
1. MEANING OF ORGANIZATIONAL CHANGE
Organizational Change refers to any alteration in the organization that aims at the improvement
to smaller changes such as adding a new person, modifying a program, etc. Organizational
change occurs when a company makes a transition from its current state to some desired future
state. Managing organizational change is the process of planning and implementing change in
organizations in such a way as to minimize employee resistance and cost to the organization,
Organizational change can also be defined as change that has an impact on the way that work is
performed and has significant effects on staff. This could include changes:
• To the scope of a role that results in a change to the working situation, structure, terms
Organizations with rigid hierarchies, high degree of functional specialization, narrow and limited
job descriptions, inflexible rules and procedures, and impersonal management can’t respond
adequately to demand for change. Organizations need designs that are flexible and adaptive.
They also need system that both require and allow greater commitment and use of talent on the
‘A change towards a higher level of group performance is frequently short-lived, after a "shot
in the arm", group life soon returns to the previous level. This indicates that it does not suffice
to define the objective of planned change in group performance as the reaching of a different
level. Permanency of the new level, or permanency for a desired period, should be included in
the objective’.
-Kurt Lewin
organization’. - Daft
‘Any significant alteration of the behavior patterns of the large numbers of the individuals
processes’.
–Gibson, Donnelly
2. Characteristics of Organizational Change
The term organizational change refers to any alteration which occurs in the overall work
environment of an organization.
The term change refers to any alteration which occurs in the overall environment.
organization.
frequently occur.
Changes take place in all parts of the organization but at various rates of speed and
degree of significance.
Change may be reactive or proactive. When change is brought about due to pressure of
external forces it is called reactive change. But proactive change is initiated by the
collaboration are four factors that are major forces creating change in organizations today. These
changes affect decision-making as organizations are forced to recognize that they need leaders
who are innovative, creative visionaries who understand the various environments that their
organizations are operating in, and are able to differentiate between these different environments.
Faced with such complexities leaders need to be equipped with appropriate skill-sets such as
flexibility, good communication, and critical thinking and negotiation abilities. They must also
be supported with the necessary resources in order to make good decisions that will benefit their
organizations.
3.1. Globalization
Globalization describes a process by which regional economies, societies, and cultures have
and services; increasing consumer demands in emerging markets worldwide; declining barriers
to international trade aided by rapidly changing technology, have created a globalized economy
in which inter-dependency among countries has emerged as the norm today. Therefore the hiring
practices of companies who are seeking the best talent have changed because the best talent
might no longer be resident in the home country. Therefore organizations must be sensitive to
these differences when formulating operational and human resource (HR) policies for
implementation abroad for, in this global environment, it is hardly likely that companies can
Technology is like a two-edged sword that can make our lives easier or worse. The Internet has
commerce conducted. Technology is rapidly changing and effective management demands more
knowledge in these areas in order for companies to manage their resources and develop, maintain
While technology has enabled firms to save time and money by conducting business such as
negotiations, trade, and commerce in real time, it can also facilitate the dissemination of sensitive
information about a company's practices, trade secrets and new product development in a matter
of seconds. Additionally, technology has ushered in an array of high-tech devices that aid and
facilitates companies in gathering and managing information, maintaining contact with their
employees globally, making and communicating decisions instantaneously. This can be both a
boon and a source of stress for managers and leaders who must learn to manage their choice and
use of these devices. In a global economy technology can aid in knowledge management
Driving forces such as shifts in buyer demographics and preferences; technology, product and
market innovation; changes in society, consumer attitudes and lifestyle all demand new ideas.
This has created a need for knowledge workers. Knowledge workers comprise a company's
intellectual capital and are made up of creative people with novel ideas and problem-solving
skills. Managing its knowledge assets can give a company a competitive edge as it effectively
utilizes the expertise, skills, intellect, and relationships of members of the organization.
For example, a company's strategic management efforts can be greatly enhanced when
knowledge that is resident in its international talent pool is tapped at its source, since a manager
who is "closer to the ground" and part of the local culture might be better able to sense
environmental changes than one who is not. Keeping knowledge workers motivated and
incentivized by both intrinsic and extrinsic means may cause organizations to re-think and
change their benefits and compensation methods and, perhaps, even redefine the traditional view
model.
collaboration. Use of appropriate technology and applications such as a virtual private networks;
VoIP, e-mail, social networking websites such as Face Book, and even company-sponsored
blogs can facilitate communication between an organization and its stakeholders, and help in
different types of internal and external collaborative processes. An example of a tool that can be
In the 21st Century change is the norm rather than the exception and leaders must be able to
2. An orientation to serve.
3. An entrepreneurial mind-set.
5. A global mindset.
organization's parts, rather than a narrow view that is focused on one part or event.)
In order to respond effectively to the four major forces creating change in today’s global
economy leaders must be willing to embrace change; they must be curious and appreciative of
the richness and diversity of other cultures. The must be trust-worthy and flexible; and they must
SCOPE AND
OBJECTIVE OF
ORGANIZATIONAL
CHANGE
5. SCOPE OF ORGANIZATIONAL CHANGE
Organizational change plays an important role in any organization. The task of managing
change is not an easy one, since managing change means to make changes in a planned and
systemic fashion. Changes in the organization or a project can be initiated from within the
organization or externally. Organizations that do not bring about timely change in appropriate
Changes in the organizations play a vital role for its growth and the employee’s satisfactions. It
also provides a scope for the development of employees by applying the innovating ideas. With
the help of making changes we can also improve our decision making. The change process could
also be considered as a problem solving situation. The change that is taking place could be the
result of a problem that has occurred. Changes can be implemented in the various departments of
the organizations. For example in the SALES DEPARTMENT company can change its sales
policy that all the sales will be made in cash only. Similarly in the HR DEPARTMENT changes
can be in the decisions of promotion of employees or the allocation bonus among the employees.
These decisions can be decided on the basis of employees work performance, Means more the
efficiently work done by worker will get more chances of promotion and more of bonus.
PRODUCTION DEPARTMENT can also make changes in the criteria of the production by
innovating the new ideas and technology for the production. That will help to work more
Hence change management plays an important role in an organization. This allows the
organization to give a reactive or a proactive response to the changes that happen internally or
externally. Knowing the change management and its process would help an organization and it s
processes to be stable.
6. OBJECTIVE OF ORGANIZATIONAL CHANGE
Change is the law of nature. It is necessary way of life in most organizations for their
survival and growth. Man has to mould himself continuously to meet new demand and face new
productivity.
• Strengthen the dynamic and adaptive responses of the organization and build the
These all above mention are the main objective of organizational change.
CHAPTER: 4
TYPES AND
UTILITY OF
ORGANIZATIONAL
CHANGE
7. Types of Organizational Change
organization, such as reorganization or adding a major new product or service. This is in contrast
to smaller changes, such as adopting a new computer procedure. Organizational change can seem
like such a vague phenomena that it is helpful if you can think of change in terms of various
different level in their life cycle, for example, going from a highly reactive, entrepreneurial
organization to one that has a more stable and planned development. Experts assert that
organization’s structure and culture from the traditional top-down, hierarchical structure to a
engineering, which tries to take apart (at least on paper, at first) the major parts and processes of
the organization and then put them back together in a more optimal fashion. Transformational
times, organizations experience incremental change and its leaders do not recognize the change
as such.
Change can be intended to remedy current situations, for example, to improve the poor
performance of a product or the entire organization, reduce burnout in the workplace, and help
the organization to become much more proactive and less reactive, or address large budget
deficits. Remedial projects often seem more focused and urgent because they are addressing a
current, major problem. It is often easier to determine the success of these projects because the
problem is solved or not. Change can also be developmental – to make a successful situation
even more successful, Example, expands the amount of customers served, or duplicates
Developmental projects can seem more general and vague than remedial, depending on how
specific goals are and how important it is for members of the organization to achieve those goals.
Some people might have different perceptions of what is a remedial change versus a
developmental change. They might see that if developmental changes are not made soon, there
will be need for remedial changes. Also, organizations may recognize current remedial issues
and then establish a developmental vision to address the issues. In those situations, projects are
still remedial because they were conducted primarily to address current issues.
7.4 Unplanned Versus Planned Change
Unplanned change usually occurs because of a major, sudden surprise to the organization,
which causes its members to respond in a highly reactive and disorganized fashion. Unplanned
change might occur when the Chief Executive Officer suddenly leaves the organization,
significant public relations problems occur, poor product performance quickly results in loss of
customers, or other disruptive situations arise. Planned change occurs when leaders in the
organization recognize the need for a major change and proactively organize a plan to
accomplish the change. Planned change occurs with successful implementation of a Strategic
Plan, plan for reorganization, or other implementation of a change of this magnitude. Note that
planned change, even though based on a proactive and well-done plan, often does not occur in a
highly organized fashion. Instead, planned change tends to occur in more of a chaotic and
Reactive change is those changes when change is brought about due to pressure of external
forces whereas Proactive change is initiated by the management on its own to increase their
organization. Proactive change involves actively attempting to make alterations to the work place
and its practices. Companies that take a proactive approach to change are often trying to avoid a
potential future threat or to capitalize on a potential future opportunity. Reactive change occurs
when an organization makes changes in its practices after some threat or opportunity has already
occurred. As an example of the difference, assume that a hotel executive learns about the
increase in the number of Americans who want to travel with their pets. The hotel executive
creates a plan to reserve certain rooms in many hotel locations for travelers with pets and to
advertise this new amenity, even before travelers begin asking about such accommodations. This
demand. However, a reactive approach to change would occur if hotel executives had waited to
enact such a change until many hotel managers had received repeated requests from guests to
Change is a common thread that runs through all businesses regardless of size, industry
and age. Our world is changing fast and, as such, organizations must change quickly too.
Organizations that handle change well thrive, whilst those that do not may struggle to survive.
The concept of “change management” is a familiar one in most businesses today. But, how
businesses manage change (and how successful they are at it) varies enormously depending on
the nature of the business, the change and the people involved. And a key part of this depends on
how far people within it understand the change process. One of the cornerstone models for
understanding organizational change was developed by Kurt Lewin back in the 1950s, and still
holds true today. His model is known as Unfreeze – Change – Refreeze, refers to the three-
stage process of change he describes. Lewin, a physicist as well as social scientist, explained
organizational change using the analogy of changing the shape of a block of ice.
This first stage of change involves preparing the organization to accept that change is necessary,
which involves break down the existing status quo before you can build up a new way of
operating.
Key to this is developing a compelling message showing why the existing way of doing things
cannot continue. This is easiest to frame when you can point to declining sales figures, poor
financial results, worrying customer satisfaction surveys, or suchlike: These show that things
have to change in a way that everyone can understand. To prepare the organization successfully,
you need to start at its core – you need to challenge the beliefs, values, attitudes, and behaviors
that currently define it. Using the analogy of a building, you must examine and be prepared to
change the existing foundations as they might not support add-on storey’s; unless this is done,
the whole building may risk collapse. This first part of the change process is usually the most
difficult and stressful. When you start cutting down the “way things are done”, you put everyone
and everything off balance. You may evoke strong reactions in people, and that’s exactly what
needs to done. By forcing the organization to re-examine its core, you effectively create a
(controlled) crisis, which in turn can build a strong motivation to seek out a new equilibrium.
Without this motivation, you won’t get the buy-in and participation necessary to effect any
meaningful change.
STAGE 2: MOVING
After the uncertainty created in the unfreeze stage, the change stage is where people begin to
resolve their uncertainty and look for new ways to do things. People start to believe and act in
ways that support the new direction. The transition from unfreezes to change does not happen
overnight: People take time to embrace the new direction and participate proactively in the
change. A related change model, the Change Curve, focuses on the specific issue of personal
transitions in a changing environment and is useful for understanding this specific aspect in more
detail.
In order to accept the change and contribute to making the change successful, people need to
understand how the changes will benefit them. Not everyone will fall in line just because the
change is necessary and will benefit the company. This is a common assumption and pitfall that
should be avoided.
STAGE 3: REFREEZING
When the changes are taking shape and people have embraced the new ways of working, the
organization is ready to refreeze. The outward signs of the refreeze are a stable organization
chart, consistent job descriptions, and so on. The refreeze stage also needs to help people and the
organization internalize or institutionalize the changes. This means making sure that the changes
are used all the time; and that they are incorporated into everyday business. With a new sense of
stability, employees feel confident and comfortable with the new ways of working.
The rationale for creating a new sense of stability in our every changing world is often
questioned. Even though change is a constant in many organizations, this refreezing stage is still
important. Without it, employees get caught in a transition trap where they aren’t sure how
things should be done, so nothing ever gets done to full capacity. In the absence of a new frozen
state, it is very difficult to tackle the next change initiative effectively. How do you go about
convincing people that something needs changing if you haven’t allowed the most recent
changes to sink in? Change will be perceived as change for change’s sake, and the motivation
required to implement new changes simply won’t be there. This helps people to find closure,
thanks them for enduring a painful time, and helps them believe that future change will be
successful.
• Use Stakeholder Analysis and Stakeholder Management to identify and win the support
of key people within the organization
• Frame the issue as one of organization-wide importance.
• Remain open to employee concerns and address in terms of the need to change.
MOVING
1. Communicate often
2. Dispel rumors
3. Empower action
REFREEZE
CONCLUSION
change. By recognizing these three distinct stages of change, you can plan to implement the
change required. You start by creating the motivation to change (unfreeze). You move through
the change process by promoting effective communications and empowering people to embrace
new ways of working (change). And the process ends when you return the organization to a
sense of stability (refreeze), which is so necessary for creating the confidence from which to
Managers wanting to introduce change should recognize that change occurs slowly and
moves through a series of stages. In the first instance, the need for change must be recognized.
Then it is necessary to define where the company stands relative to the problem, where it wants
to be, and how it is going to get there. With respect to the way the change process needs to be
managed
Lewin s three-step model can be expanded to show that the following sequential set of activities
5. Defining goals (identifying where the company wants to be after the change
John Kotter. A World-renowned change expert, Kotter introduced his eight-step change
process in his 1995 book, "Leading Change. “And the follow-up 'The Heart of Change'
(2002) describes a popular and helpful model for understanding and managing change.
For leaders of organizations, managing change is an important strategic task. In the last ten years,
there have been numerous studies which all confirmed that between 60-80% of all change
projects fail fully or partly. But that is not sure that change project will be successful, so John
Kotter, one of the leading management thinkers provides an eight step model for leading change.
Kotter's eight steps model is probably the best known and the most applied. Each stage
acknowledges a key principle identified by Kotter relating to people's response and approach to
change, and in which people see, feel and then change. Eight steps of john Kotter change model
are as follow:
In 1980, Edgar Huse proposed a seven-stage OD model based upon the original three-stage
model of Lewin.
1. Scouting - Where representatives from the organization meet with the OD consultant to
identify and discuss the need for change. The change agent and client jointly explore
2. Entry - This stage involves the development of, and mutual agreement upon, both
business and psychological contracts. Expectations of the change process are also
established.
3. Diagnosis - Here, the consultant diagnoses the underlying organizational problems based
upon their previous knowledge and training. This stage involves the identification of
4. Planning - A detailed series of intervention techniques and actions are brought together
into a timetable or project plan for the change process. This step also involves the
identification of areas of resistance from employees and steps possible to counteract it.
5. Action - The intervention is carried out according to the agreed plans. Previously
6. Stabilization & Evaluation - The stage of 'refreezing' the system. Newly implemented
codes of action, practices and systems are absorbed into everyday routines. Evaluation is
conducted to determine the success of the change process and any need for further action
is established.
7. Termination - The OD consultant or change agent leaves the organization and moves on
to another client or begins an entirely different project within the same organization.
12. RESISTENCE TO CHANGE
Resistance to change is the action taken by individuals and groups when they perceive
that a change that is occurring as a threat to them. In its usual description it refers to change
within organizations, although it also is found elsewhere in other forms. Resistance is the
equivalent of objections in sales and disagreement in general discussions. Resistance may take
many forms, including active or passive, overt or covert, individual or organized, aggressive or
timid.
Resistance is an inevitable response to any major change. Folger & Skarlicki (1999) claim that
does not understand, accept and make an effort to work with resistance, it can undermine even
the most well-intentioned and well-conceived change efforts. So the main reasons for the
12.1.1 Lack of understanding around the vision and need for change.
Participants indicated that the primary reason for employee resistance was that employees did
not understand the vision of this particular change project. Employees did not clearly understand
why the change was happening, nor did they have adequate knowledge regarding the change
itself.
12.1.2 Comfort with the status quo and fear of the unknown.
Participants indicated that employees tended to be complacent, or that the current way of doing
business had been in place for a long time. The current processes and systems seemed fine to the
employees, and they were opposed to the change since it forced them out of their comfort zone.
Uncertainty and fear of the new system compounded the desire of employees to continue with
The organization’s past performance with change projects impacted the employees’ support of
the current change project. Employees were desensitized to change initiatives, as many had been
introduced and failed. The project was seen merely as the “flavor of the month,” and employees
12.1.4 Opposition to the new technologies, requirements and processes introduced by the
change.
Sometimes Employees were opposed to changes because may that increased the performance
and process measurement of their work. The change was seen as adding unwanted work,
responsibility and accountability. Lastly, some employees opposed the new processes, systems or
technologies because they felt the change would not solve the problems.
Employees perceived the business change as a threat to their own job security. Some employees
felt that the change would eliminate the need for their job, while others were unsure of their own
The leading reason for manager resistance to change was a fear of losing power. Changes often
eliminated something the manager had control of or introduced something that the manager
would not have control over. Managers perceived the changes as infringements on their
autonomy, and some participants indicated that the change was even perceived as a personal
attack on the managers. Managers reacted to the change initiative as a "battle for turf."
12.2.2 Overload of current tasks, pressures of daily activities and limited resources.
Managers felt that the change was an additional burden. Limited resources compounded the
problem. The change initiative seemed like extra work and resource strain at a time when the
pressures of daily activities were already high. In many projects, managers were expected to
continue all of their current duties in addition to the duties of implementing the change.
12.2.3 Lack of skills and experience needed to manage the change effectively.
Managers were fearful of the new demands that would be placed on them by the business
change. Several skill areas were identified as areas of concern. First, managers were
uncomfortable with their role in managing the change. Some feared recrimination while others
did not have the experience or tools to effectively manage their employees’ resistance. Managers
also were concerned about the demands and responsibilities placed on them by the new business
Managers felt that the business change would ultimately impact their own job security. Middle
management is often the victim of large-scale business change. One participant reaffirmed this
fear:
Some managers disagreed specifically with the change. They did not feel that the solution was
the best approach to fixing the problem. Managers who did not play any role or provide input in
the design and planning phases tended to resist the solution. Some participants felt that the
resistance was due to the solution not being the idea of the manager ("not invented here").
13. Overcoming Resistance to Change
Kotter and Schlesinger set out the following six (6) change approaches to deal with this
resistance to change:
to overcome resistance to change is to educate people about the change effort beforehand. Up-
front communication and education helps employees see the logic in the change effort. This
reduces unfounded and incorrect rumors concerning the effects of change in the organization.
others have considerable power to resist. When employees are involved in the change effort they
are more likely to buy into change rather than resist it. This approach is likely to lower resistance
resistance by being supportive of employees during difficult times. Managerial support helps
employees deal with fear and anxiety during a transition period. The basis of resistance to change
is likely to be the perception that there some form of detrimental effect occasioned by the change
in the organization. This approach is concerned with provision of special training, counseling,
employees not to resist change. This can be done by allowing change resistors to veto elements
of change that are threatening, or change resistors can be offered incentives to leave the company
through early buyouts or retirements in order to avoid having to experience the change effort.
This approach will be appropriate where those resisting change are in a position of power.
effective manipulation technique is to co-opt with resisters. Co-option involves the patronizing
gesture in bringing a person into a change management planning group for the sake of
appearances rather than their substantive contribution. This often involves selecting leaders of
the resisters to participate in the change effort. These leaders can be given a symbolic role in
decision making without threatening the change effort. Still, if these leaders feel they are being
tricked they are likely to push resistance even further than if they were never included in the
force employees into accepting change by making clear that resisting changing can lead to losing
The minor project report identifies and discusses the importance and relevance of change in the
present day scenario. Some of the major issues that confront organizations today need to be
addressed for organizations to be able to survive in the long run. Different forces and
determining factors of change emanating from both external and internal environment force the
change to happen in organizations. The organizations can experience different types of changes
CASE STUDY ON
ORGANIZATIONAL
CHANGE
ICICI BANK: CASE STUDY
In May 1996, K.V. Kamath replaced Narayan Vaghul, CEO of India's leading financial services
company Industrial Credit and Investment Corporation of India (ICICI). Immediately after taking
charge, Kamath introduced massive changes in the organizational structure and the emphasis of
the organization changed - from a development bank mode to that of a market-driven financial
conglomerate.
Kamath's moves were prompted by his decision to create new divisions to tap new markets and to
introduce flexibility in the organization to increase its ability to respond to market changes.
the large-scale changes caused enormous tension within the organization. The systems within the
company soon were in a state of stress. Employees were finding the changes unacceptable as
learning new skills and adapting to the process orientation was proving difficult.
The changes also brought in a lot of confusion among the employees, with media reports
frequently carrying quotes from disgruntled ICICI employees. According to analysts, a large
section of employees began feeling alienated. The discontentment among employees further
increased, when Kamath formed specialist groups within ICICI like the 'structured projects' and
'infrastructure' group.Doubts were soon raised regarding whether Kamath had gone 'too fast too
soon,' and more importantly, whether he would be able to steer the employees and the
ICICI was established by the Government of India in 1955 as a public limited company to
promote industrial development in India. The major institutional shareholders were the Unit
Trust of India (UTI), the Life Insurance Corporation of India (LIC) and the General Insurance
Corporation of India (GIC) and its subsidiaries. The equity of the corporation was supplemented
by borrowings from the Government of India, the World Bank, the Development Loan Fund
(now merged with the Agency for International Development), Kreditanstalt fur Wiederaufbau
(an agency of the Government of Germany), the UK government and the Industrial Development
• Encourage and promote the participation of private capital, both internal and external
Since the mid 1980s, ICICI diversified rapidly into areas like merchant banking and retailing. In
1987, ICICI co-promoted India's first credit rating agency, Credit Rating and Information
Services of India Limited (CRISIL), to rate debt obligations of Indian companies. In 1988, ICICI
promoted India's first venture capital company – Technology Development and Information
Company of India Limited (TDICI) – to provide venture capital for indigenous technology-
oriented ventures. In the 1990s, ICICI diversified into different forms of asset financing such as
leasing, asset credit and deferred credit, as well as financing for non-project activities. In 1991,
ICICI and the Unit Trust of India set up India's first screen-based securities market, the over-the-
counter Exchange of India (OCTEI). In 1992 ICICI tied up with J P Morgan of the US to form an
investment banking company, ICICI Securities Limited. In line with its vision of becoming a
universal bank, ICICI restructured its business based on the recommendations of consultants
McKinsey & Co in 1998. In the late 1990s, ICICI concentrated on building up its retail business
through acquisitions and mergers. It took over ITC Classic, Anagram Finance and merged the
Shipping Credit Investment Corporation of India (SCICI) with itself. ICICI also entered the
insurance business with prudential plc of UK. ICICI was reported to be one of the few Indian
While its development bank counterpart IDBI was reportedly not doing very well in late 2001,
ICICI had major plans of expanding on the anvil. This was expected to bring with it further
challenges as well as potential change management issues. However, the organization did not
seem to much perturb by this, considering that it had successfully managed to handle the
ICICI was a part of the club of developmental finance institutions (DFIs – ICICI, IDBI and IFCI)
who were the sole providers of long-term funds to the Indian industry. If the requirement was
large, all three will pool in the money. However, the deregulation beginning in the early 1990s,
allowed Indian corporate to rise long-term funds abroad, putting an end to the DFI monopoly.
The government also stopped giving DFIs subsidized funds. Eventually in 1997, the practice of
consortium lending by DFIs was phased out. It was amidst this newfound independent status that
Kamath, who had been away from ICICI for eight years working abroad, returned to the helm.
At this point of time, ICICI had limited expertise, with its key activity being the disbursement of
eight-year loans to big clients like Reliance Industries and Telco through its nine zonal offices. In
effect, the company had one basic product, and a customer orientation, which was largely
regional in nature. Kamath, having seen the changes occurring in the financial sector abroad,
wanted ICICI to become a one-stop shop for financial services. He realized that in the
deregulated environment ICICI was neither a low-cost player nor was it a differentiator in terms
of customer service.
The Indian commercial banks' cost of funds was much lower, and the foreign banks were much
savvier when it came to understanding customer needs and developing solutions. Kamath
identified the main problem as the company's ignorance regarding the nuances of lending
practices in newly opened sectors like infrastructure. The change program was initiated within
the organization, the first move being the creation of the 'infrastructure group (IIG),' 'oil & gas
group (O&G),' 'planning and treasury department (PTD)' and the 'structured products group
(SPG)', as the lending practices were quite different for all of these. Kamath picked up people
from various departments, who he was told were good, for these groups. The approach towards
creating these new skill sets, however, led to one unintended consequence. As these new groups
took on the key tasks, a majority of the work, along with a lot of good talent, shifted to the
corporate center. While the zonal offices continued to do the same work - disbursing loans to
corporate in the same region - their importance within the organization seemed to have
diminished. An ex-employee remarked, "The way to get noticed inside ICICI after 1996 has been
to attach you to people who were heading these (IIG, PTD, SPG, O&G) departments. These
groups were seen as the thrust areas and if you worked in the zones it was difficult to be
noticed." Refuting this, Kamath remarked, "This may be said by people who did not make it.
And there will always be such people." Some of the people who did not fit in this set-up were
quick to leave the organization. However, this was just the beginning of change-resistance at
ICICI.
Another change management problem surfaced as a result of ICICI's decision to focus its
operations much more sharply around its customers. In the system prevailing, if a client had three
different requirements from ICICI he had to approach the relevant departments separately. The
process was time consuming, and there was a danger that the client would take a portion of that
business elsewhere. To tackle this problem, ICICI set up three new departments: major client
group (MCG), growth client group (GCG) and personal finance group. Now, the customer talked
only to his representative in MCG or GCG. And these representatives in turn found out which
ICICI department could do the job. Though the customers seemed to be happy about this new
In the major client group, a staff of about 30-40 people handled the needs of the top 100
customers of ICICI. On the other hand, about 60 people manned the growth client group, which
looked after the needs of mid-size companies. Obviously, the bigger clients required more
diverse kinds of services. So working in MCG offered better exposure and bigger orders. The net
effect was that the MCG executive ended up doing more business than the GCG executive. A
middle-level manager at ICICI commented, "The bosses may call it handling growth clients but
the GCG manager is actually chasing non-performing assets (NPA) and Board of Industrial and
Financial Restructuring (BIFR) cases." Amath was quick to deny this allegation as well, "Just
because somebody is within the MCG does not guarantee him success. And these assignments
are not permanent. Today's MCG man could easily by tomorrow's GCG person and vice-versa."
Complaints against these changes put in continued and ICICI was blamed for not putting in
The manner, which ICICI recognized an individual's efforts - the feedback process - was also
questioned. A manager remarked, "Last year the bonuses varied from Rs 30,000 to Rs 250,000
depending on the performance. In many cases the appraisal scores were same but the bonus
amount was not. And we were not told why." With Kamath's stated objective to make ICICI
provide almost every financial service, separating the customer service people from the product
development groups was another problem area. In the current scheme of things, an MCG or
GCG person acted as a clients' representative inside ICICI. The MCG or GCG person understood
the client's need and got the relevant internal skill department to develop a solution. Unlike
foreign banks, there were no demarcations between these internal skill groups and client service
person. (Demarcation helped in preventing an internal skills person from cannibalizing business
being developed by the client service group.) With no such systems in place at ICICI, this
While Kamath's comments in the media seemed to dismiss many of the employee complaints,
ICICI was in fact, putting in place a host of measures to check this unrest. One of the first
initiatives was regarding imparting new skills to existing employees. Training program and
seminars were conducted for around 257 officers by external agencies, covering different areas.
In addition, in-house training program were conducted in Pune and Mumbai. During 1995-96,
around 35 officers were nominated for overseas training program organized by universities in the
US and Europe. ICICI also introduced a two-year Graduates' Management Training Program
system. To avoid the negative impact of profit center approach, wherein pressure to show profits
might affect standards of integrity within an organization, management ensured that rewards
were related to group performance and not individual performances. To reward individual star
performers, the method of selecting a star performer was made transparent. This made it clear,
that there would be closer relationship between performance and reward. However, it was
reported that pressure on accountability triggered off some levels of anxiety within ICICI which
resulted in a lot of stress in human relationships. Dismissing reports of upsetting people, Kamath
said, 'much of the restructuring plan has come from the bottom.' ICICI also reviewed the
compensation structure in place. Two types of remuneration were considered – a contract basis
which would attract risk-takers and a tenure-based compensation which would be appealing to
employees who wanted security. Kamath accepted that ICICI had been a bit slow on completing
the employee feedback process. Soon, a 360-degree appraisal system was put in place, whereby
an individual was assessed by his peers, seniors and subordinates. As a result of the above
measures, the employee unrest gradually gave way to a much more relaxed atmosphere within
the company.
By 2000, ICICI had emerged as the second largest financial institution in India with assets worth
Rs 582 billion. The company had eight subsidiaries providing various financial services and was
present in almost all the areas of financial services: medium and long term lending, investment
and commercial banking, venture capital financing, consultancy and advisory services, debenture
ICICI had to face change resistance once again in December 2000, when ICICI Bank was
merged with Bank of Madura (BOM). Though ICICI Bank was nearly three times the size of
BOM, its staff strength was only 1,400 as against BOM's 2,500. Half of BOM's personnel were
clerks and around 350 were subordinate staff. There were large differences in profiles, grades,
It was also reported that there was uneasiness among the staff of BOM as they felt that ICICI
would push up the productivity per employee, to match the levels of ICICI. BOM employees
feared that their positions would come in for a closer scrutiny. They were not sure whether the
rural branches would continue or not as ICICI's business was largely urban-oriented. The
apprehensions of the BOM employees seemed to be justified as the working culture at ICICI and
BOM were quite different and the emphasis of the respective management was also different.
While BOM management concentrated on the overall profitability of the Bank, ICICI
management turned all its departments into individual profit centers and bonus for employees was
given on the performance of individual profit center rather than profits of whole organization.
ICICI not only put in place a host of measures to technologically upgrade the BOM branches to
ICICI's standards, but also paid special attention to facilitate a smooth cultural integration. The
company appointed consultants Hewitt Associates to help in working out a uniform compensation
and work culture and to take care of any change management problems. ICICI conducted an
employee behavioral pattern study to assess the various fears and apprehensions that employees
Based on the above findings, ICICI established systems to take care of the employee resistance
with action rather than words. The 'fear of the unknown' was tackled with adept communication
and the 'fear of inability to function' was addressed by adequate training. The company also
formulated a 'HR blue print' to ensure smooth integration of the human resources. Refer Table
AREAS OF HR INTEGRATION
THE HR BLUEPRINT
FOCUSSED ON
• Employee communication
• A data base of the entire HR structure
• Cultural integration
• Road map of career
• Organization structuring
• Determining the blue print of HR moves
• Recruitment & Compensation
• Communication of milestones
• Performance management
• IT Integration – People Integration –
• Training
Business Integration.
• Employee relations
To ensure employee participation and to decrease the resistance to the change, management
established clear communication channels throughout to avoid any kind of wrong messages
being sent across. Training program were conducted which emphasized on knowledge, skill,
attitude and technology to upgrade skills of the employees. Management also worked on
contingency plans and initiated direct dialogue with the employee unions of the BOM to
maintain good employee relations. By June 2001, the process of integration between ICICI and
BOM was started. ICICI transferred around 450 BOM employees to ICICI Bank, while 300
ICICI employees were shifted to BOM branches. Promotion schemes for BOM employees were
initiated and around 800 BOM officers were found to be eligible for the promotions. By the end
of the year, ICICI seemed to have successfully handled the HR aspects of the BOM merger.
NUMBER OF
YEAR
EMPLOYEES
1993 1117
1994 1237
1995 1237
1996 1239
2001 8275
YEAR PAT
1994-95 3.1
1995-96 3.9
1996-97 4.36
1997-98 7.52
1998-99 10.86
1999-00 10.01
2000-01 12.06
According to a news report, "The win-win situation created by….HR initiatives has resulted in
high level of morale among all sections of the employees from the erstwhile BOM." Even as the
changes following the ICICI-BOM merger were stabilizing, ICICI announced its merger with
changes at the organization. With Kamath still heading ICICI, analysts were hopeful that the
bank would come out successfully in the task of in the task of integrating the operations of both
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