Daybreak - ICICI Bank's 'too much democracy' policy is causing its top talent to quit

Episode Date: June 29, 2023

ICICI's stock has tripled since 2018—the year when ICICI’s current CEO Sandeep Bakhshi took over. Loans and deposits are growing strong, margins are healthy, and investors can’t seem to get enough of the blue-chip company. Bakshi joined at a time when the bank was reeling from the after-effects of his predecessor Chanda Kochchar's controversial exit.The bank was experiencing a high rate of attrition and employees needed reassurance and stability. Bakshi gave them just that. He revamped the bank's HR policy, bringing about a democratisation with decisions like the standardisation of appraisals and tenure-based promotions.All these moves made him quite the favourite amongst many current and even former employees.  But it has also led to the creation of a faction of young disgruntled high-performers who feel they are not incentivised enough. And they are resigning. Tune in.Recommendation:At ICICI Bank, Sandeep Bakhshi’s people-first strategy costs top people by Rounak Kumar GunjanDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Toxic work culture. We've all seen it or experienced it at some point in our careers. The most recent incident that reminded us all of it was this one. The amount that you can hear of the amount have been the top savings

and how current are you? The man that you can hear shouting in Bengali was a top official at HDFC Bank, Kolkata. He was yelling at his juniors about meeting targets. How many current and savings accounts had they opened? This was all on a Zoom call that somebody recorded and leaked

and the video went viral. You most probably have seen it already. The man in question was suspended. Meanwhile, in rival bank ICICI, it is a whole different story unfolding. You could say that it is exactly the opposite of what is happening at HDFC. In the first glimpse, it all appears to be rosy and nice.

The bank is posting its highest ever quarterly profit of 9,000 crore plus rupees in the recent March quarter. Loans and deposits are growing strong, margins are healthy and investors can't seem to get enough of the Blue Chip company. The stock has tripled since 2018, which was the year when ICICI's current CEO, Sandeep Bakshi, took over. This was right after the bank was in the middle of quite a controversy. Some of you may remember it, actually.

Bakshi's predecessor, Chandha Kocher, had stepped down, or in fact had to step down after she faced allegations of quid pro-co, non-adurance to the court of conduct, and conflict of interest. Bakshi, as you can very well imagine, had a massive challenge ahead of him. And if you think just in terms of the bank's performance right now,

it seems like Bakshi is killing it, right? Not quite, because there is more. More going on behind the scenes that, well, makes us believe that everything is not hunky-dory at ICICI. You see, when he joined, after the Chanda Kocher controversy, the biggest task ahead of him was to do something about the high attrition rate at ICICI, which at the time, according to a former senior executive, was around 20%. Clearly, the employees needed stability and to see that the management was with them in this time of trial. So Bakshi did what anyone would have in his place. He revamped ICICI's HR policy.

He made it more relaxed. Way more relaxed. A bit too relaxed maybe to the point that now it all seems to have backfired. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nekda Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 30th of June.

It was in 2020 in a meeting amongst the top management that Sandeep Bakshi announced that he was going to rejig ICIC's HR policy. It was required to bring in the much-needed stuff. stability in the company and to reassure employees who were confused about whether to stick around or to leave. After all, the bank had gone through a major crisis. The most surprising thing that Bakshi did was that he got rid of the bell curve assessment for employees. The bell curve assessment is basically a method used to categorize employees into top performers, average performers and low performers.

So this decision of Bakshis meant that the annual appraisals would no longer be linked to performance. The message he was supposedly trying to send out was that if the bank does well, everybody does well. Apart from this, even promotion criteria would change entirely. Instead of performance, they were now based on the number of years an employee had worked at the bank. So all anybody needed to do to be promoted at ICICI Bank was to spend four years with the lender

and not do something drastically wrong. It was almost automatic. In the new HR policy, none of the individual key performance indicators or KPIs were linked to salaries. Individual incentives which used to be credited in addition to salaries were also stopped. In the last three years, lower-grade employees ended up getting up getting. higher increments and those higher up got less. According to an employee, the average hike across the organisation was in the 10 to 11% range. What had essentially happened was that appraisals were standardized. No other competing rival banks were following this method,

not HDFC, not access. ICICI became an outlier. While the bank does not give outtrition figures in any of its reports, two senior employees told again that now attrition has fallen below 15%. And also I told you that it's been doing pretty well performance-wise. The March quarter saw it post its highest ever quarterly profit of 9,000 crore rupees. Obviously, all of this made Bakshi quite popular amongst the employees. So we asked them about it. And all of them used the same anecdote. So ICICI's headquarters in Mumbai has a separate elevator for regular employees and a separate one for those at director level and above.

But instead of using the exclusive elevator that would take him to his 10th floor office, Bakshi uses the other one. Almost everyone that the Ken spoke to called ICICIC Bank unlike any other lender regarding work-life balance as well. Whether it is leaves or vacations, even if there for as long as three weeks, which is quite rare among lenders or just casual day-offs, ICICI bank managers have been instructed to approve them without any questions unless there is a team crisis. Of course, employees have been asked to be responsible about it.

The number of relationship managers per branch two has been increased. Every vertical has been amply stopped, which is one of the reasons why ICICI currently has the highest number of employees that it's ever had. 1,000. So there is no crisis of work whenever someone wants to take some time off. A Mumbai-based employee told us that this has also reduced the workload. But how do you manage such a large workforce? Bakshi particularly focused on building a team culture at the bank.

Top performing teams are regularly recognized during town halls and employees are encouraged to take ownership of their teams. This democratization of the bank through the HR policy, without doubt, has given Bakshi a surprisingly loyal base of current and former employees. But it has led to the creation of a faction of young disgruntled high performers who feel that they are not being. incentivized enough and they are resigning. What makes the situation worse is that their resignations are coming in the way of ICICI's bank to bank tech journey. ICICI has plans to open more than 150 new physical branches every quarter to tap into the rural and semi-urban areas better. So what is making these young employees feel this way? Could there be such? thing is too much democracy in this case? Stay tuned to find out. An ex-employee of ICICI bank who was a part of

the HR team till last year told us, and I'm quoting, young bankers have been quitting in large numbers. They join for the brand value and leave for growth. A majority of employees either stay for two to three years and resign, or they make this their permanent workplace. A very small percentage of employees fall in between. End quote. You see, ICICI Bank's workforce is divided into five internal grades that denote designations. For example, internally, DM1 is short for an entry-level deputy manager. And after promotion, they become DM2. And then there is the manager, which is M1, who goes on to become M2, and then there's the chief manager who is CM2. And then there's the chief manager who is C. who goes on to become CM2 and so on and so forth.

But now appraisals have been standardized. So even DM1s, for example, are getting the same percentage of annual increment. This obviously makes high performers unhappy. For example, an AJFC bank employee told us that employees in their banks sometimes earn more than their salaries through incentives, which could be as high as 15 lakh rupees per annum. So what has ICICII done to motivate its workforce in the absence of the proverbial carrot? A current employee said that top performers are now handed additional responsibilities within the same team to recognize their contribution.

But this move to pull away from incentives has had some unintended consequences. Close to three years after the decision, most of the top talent, who were growth-oriented and ambitious have left because it was difficult for them to find motivation. An HR head that we spoke to said that removing all parameters and standardizing appraisal rates works only for short-term when a company is going through a crisis. But eventually, it takes away from the excitement of work. And then the change in promotion criteria has also started creating issues. Since it has become tenure-based now, the largest section of employees is managers.

So the middle management at the bank is getting more and more crowded. But how can so many people be in leadership positions? Who are they going to lead? Plus, it is also leading to a dearth of cabin space. General managers, who would earlier get their own cabins, now have to share it. All this is obviously making young, scaled employees quit after a few years. But the bank needs this talent to continue on its path towards digitization. And with none of these people sticking around for more than a couple of years or three years at maximum,

it becomes difficult to execute long-term plans. And let's not forget that ICICI plans to open 150 new branches, every quarter. New branches mean that the bank will need more junior employees. So it is about time that Bakshi starts thinking of how to solve this problem before it becomes a full-blown crisis. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories. newsletters, subscriber-only apps and podcast extras.

Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.