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A report on Leadership in Banks a challenging task for banking organizations across the globe

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Leadership in Banks

Introduction:

Acquiring and maintaining market share has been a challenging task for banking organizations across the globe and leadership has always remained as a catalyst in overcoming barriers for banks. The report initiates with the scope underlying banking industry followed by the evaluation of challenges that has emphasized the application of leadership theories in action. Evaluating the case of ICICI bank, SBI bank has revealed the impact of individual competencies of leaders to drive the performance of banks. In each one of the case discussed in the study it is evident that transformational and transactional leadership has become the need of the hour to gain trust across the internal and the external stakeholders of the firm (Johansen, 2012).

 

Banking industry:

In sustaining the position as chief executive officers of banking firm’s leadership traits and attributes play a vital role (Effron, 2010). The impact of globalisation on banking industry has been dramatic which has eventually led to financial crisis and increasing ratio of nonperforming assets. Leaders in the banking industry adopt two important strategies to gain the trust and commitment of the stakeholders (Green, 2013). One reflect the need of marketing strategy to generate increased deposits from customers which will lead to enriched profits that offers a breathing space for leaders to take risk and make transformation in the operations of the bank. In competing on global scale leaders must be able to harness the inventory of physical resources, human resources and materials resources for which influence of leadership roles has to impact all the levels of management (James, 2010).

 

Challenges in Banking industry and importance of Leadership:

Globalization has offered plenty of room for banking organizations to expand across borders but has equally imposed the need of incorporating advanced technologies and systems that are capable of serving the diversified needs of customers. Survival of any bank would depend on its adaption to the current trends and expectation of its stakeholders (Johnson, 2009). It is evident that historically reputed banks have lost their identities as a result of inability to meet up the expectations of the stakeholders (McCalman, 2009). Hot issues that are currently influencing the banking industry comprise the essentiality of incorporating mobile banking in to that of traditional banking systems. When financially successful banking organizations are capable of offering all the services over internet to customers this has made it mandatory for the rest of the players to ensure that internet banking is adopted (Johnson, 2009). Thus the role of leadership in driving information technology based change is thriving up and devising plans to realize the benefits of IT is turning to be of high importance for leaders (Green, 2013).

Yet neither important challenge that is currently facing the banking industry is the need of incorporating social media strategies in enriching the strategic marketing initiatives of banks. Yet again leaders are held responsible for integrating the human resource policies of the firm with that of social media strategy which is capable of increasing the reach of Bank across target customers (Green, 2013).

 

Having listed the technological challenges influencing the banking industry there are whole new set of challenges that has demanded the role of leaders (Green, 2013). It is been complex for the banking firms to attain competitive advantage amidst intense competition from rivals who offer reduced interest rates. Incorporating more proportion of trust with public, fostering culture of risk management that will ensure the stability of the bank amidst the fluctuations in the global economy are turning out to be high priorities for leaders (Green, 2013).

 

 

 

Cases of Banks and Leadership theory: Transformational leadership

 

Om prakash bhatt who clinched the Businessman of the year during 2007 was able to transform State Bank of India as a competitive bank (Green, 2013). He quotes the importance of leadership in Banks as “The Elephant has been made to dance” where SBI as a bank is the largest bank in India and in his tenure of leadership he has been able to adopt leadership practices to ensure that SBI was able to gain back its leadership position in India (Creasey, 2010).

The case of Om Bhatt has been best reflecting the application of transformation leadership attributes of OP Bhatt. On the leadership note Om Bhatt was able to make sure that he understands the existing scenario which demands pure transition (Bohlander, 2011). Individualized consideration as a component of the transformation leadership focus on offering more support and encouragement to the employees and Om Bhatt has been able to do this by identifying 25 top performers of the bank (Dickson, 2012). He was able to take the attention of each one of the managers and was able to explain them the fact that they were altogether responsible for the existing scenario and called for accumulation of ideas to bringing back the position of Bank t number one position. With more individualized consideration offered to the employees a document was being prepared in the name of State of Nation (Anderson, 2012).

 

Inspirational motivation was an added attribute that Bhatt carried in the transition of making SBI as the number bank India. A lot of priorities were being arrived by OP bhatt and this document had most of the priorities that has to be executed in action. Individualized consideration was offered to all the branches (14,000) in number (Dianne, 2009). OP bhatt was able to articulate in to action by means of making use of the deputy managers and communicating the gist of the reports to each one of the subsidiaries (Creasey, 2010). This intervention was able to stimulate the individual response of the employees at Om Bhatt with reference to areas for improvement. It was indeed a shocking response for Bhatt on the feedback and the areas for improvement offered by employees of SBI across the nation. HE was able to shake hands and then involve in direct interactions that offered him the credit of gaining more insights. Parivartan was one of the most successful initiatives that emphasized on transformation and change at Om Bhatt (James, 2010). The objective of the support initiative was to gain extensive support as well as commitment of the employees in all the subsidiaries of SBI (Herzog, 2010). Through these initiatives Bhatt was able to exert his idealized influence which was also appreciated by industry experts for the initiatives to make use of the internal communication systems. The program was able to cover more than 1,30,000 employees of the bank with in a span of 100 days and the entire program was termed as change management capsule by the leaders of the firm (Green, 2013).

 

 

Out of all the attributes of transformational leadership Om Bhatt was highly concerned on promoting the creativity of more number of employees. Om Bhatt was able to ensure that the voice of the employees was considered on high priority wherein he initiated more brainstorming sessions across the organization in listing down the potential areas for improving SBI product portfolio (Green, 2013).

Some of the key brainstorming topic comprised identification of products that SBI missed out currently, strategies that were essential for making presence of SBI felt to customers, removing non value adding business lines (Green, 2013). Most importantly Bhatt was able to make employees involve in discussions in identifying what demotivates them and also asked them to come out with interventions that are capable of changing state of demotivation (Astle, 2010).

 

With each one of the components of transformational leadership Om Bhatt was able to make tides of changes with proactive commitment from the employees (Dianne, 2009). Concluding the leadership styles adopted by Bhatt it is evident that intellectual stimulation has been used extensively in breaking the status quo of SBI employees and there by empowering them to come out with more ideas and inputs that are responsible for steering the transitions (Dickson, 2012).

Om Bhatt was able to offer importance to each one of the senior executives and this has been crucial in developing contact points with each one of the zones of Om Bhatt. Om Bhatt took in more commitment from the top management of SBI and he was able to being in industry experts and subject matter experts to ensure open communication where a climate of knowledge sharing was attained (Creasey, 2010).

Inspirational motivation reflects in the intention of Om Bhatt and his vision to make the elephant dance. Within in 5 years Om Bhatt has been able to realize the tangible benefits and was able to gain a wide recognition from the stakeholders of the firm (Dianne, 2009).

Om Bhatt was not seen as a leader by the employees of the firm; his interactions with each one of the employees through mere shake hands has fostered a cool climate and has ensured that each one of them took pride and enhanced commitment in the work they perform (Dianne, 2009).

 

Transactional Leadership style: Case of ICICI

Industrial credit and Investment Corporation of India known as ICICI bank was making yet another audacious impression in the banking industry. Even though the bank made its presence realized across several parts in India the impact of leadership styles exerted by K.V.Kamath. Leadership principles that were being expressed by KV kamath were capable of turning the bank as India’s largest private owned brands (Effron, 2010). KV kamath decisions to make the operations of ICICI addicted to information technology was a bold attempt that best reflect the need of leaders to overcome the challenges that the banking industry is facing currently (Johnson, 2009). The leadership interventions adopted by KV kamath reflect the managerial leadership which is also termed as the transactional leadership (Cowling, 2010). KV kamath has been able to realize the fact that importance of supervision and group performance will lay the foundation bricks for transactional leadership at KV kamath (Dickson, 2012).

 

KV kamath was best able to understand the key components of the transactional leadership style wherein he offered importance to the process of initiating strategic communication process that ended up in formation of balance score cards. KV kamath ensured that the implementation of Information technology has to be smooth and at the same time must not foster chaos across the employees of the bank (Bohlander, 2011). KV kamath realized that people are capable of performing their best whenever they are made clear on what the top management expects from them. KV kamath ensured that human resource professionals are offered more scope for convert the priorities of the balance score cards in to key performance indicators and key result areas (Biro, 2014). KV kamath came out with the idea of implementing human resource information systems that is integrated with Pinnacle (software that is capable of executing the financial transactions across banks). Taking implementation of both software to ensure ease of transactions and also in linking the performance of the employees with ERP was able to attain organizational objectives of the firm (Robert, 2010).

Primary goals of the followers are to obey the instructions that are placed by the leader of the firm and this has been very true in the case of ICICI. Decision to involve in a merger with Bank of Madura demanded an authoritative mode of leadership to ensure that the employees of the bank are communicated to opt for voluntary retirement option (Robert, 2010). The driving force behind this decision was to ensure that excess number of human resources was downsized to carry forward with the future prospects. This initially brought in more number of resistances from the employees from Bank of Madura which was shed down by KV kamath by introducing change management in to the firm. KV kamath identified as set of leaders from bank of Madura and listed them under potential inventory of human resources. These employees were exposed to training and development initiatives wherein they were offered the future scope in the company with reference to the career growth prospects (Creasey, 2010).

 

KV kamath was able to introduce more flexibility in each one of the operations and he was able to tap up more opportunities underlying the new markets. Market diversification was the need of the hour for KV kamath which was executed in to action through the human resources (Effron, 2010).

 

There was intense competition from SBI and other international banks and KV kamath was not waiting for the feedbacks or inputs from the employees of the firm. KV kamath clearly adopted for the transactional leadership style where he decided to install automatic teller machines across the country (playingagilegames, 2012). This was yet another important intervention by Kamath which was able to showcase his attitude towards implementation of technology to enhance the competitive position of the bank (Bassi, 2011). His interventions of right sizing were impressive and he was able to capitalize on the current set of customers to introduce different set of product lines. Introduction of the banks initial public offering brought in laudable appreciations from the stakeholders this offered KV kamath the capability to make in more changes in to the process and systems and these were implemented in an authoritative style (Waddell, 2010).

 

Even though the decisions taken by KV kamath were from individual perspective the implementation interventions were executed taking in to consideration the needs and the wants of the employees. KV kamath was offered more credit to be creative and energizing solutions were arrived in taking up their respective leadership roles in executing the plans laid down by KV kamath (Anderson, 2012). KV kamath aligned the human resources interventions with that of the change management interventions, each one of the human resource managers where offered the importance of gaining trust and commitment from employees. More number of rewards and monetary benefits were linked with the individual performance of the employees and those were able to aid the transition at ICICI were also recognized through employee engagement programs (Billsberry, 2009). Evaluating the leadership styles of KV kamath it is evident that he has not opted for transformational leadership rather understood the importance of transactional leadership and aligned them with more number of monetary and non-monetary benefits to the employees there by converting ICICI bank as the number one private sector bank (Waddell, 2010).

 

 

Recommendations:

Proposing recommendations to the banking industry on managing change in the near future it is the responsibility of the top management not to comprise on training and development initiatives. With the tough battle for acquiring and developing talents role of career development and succession planning will set the future for any banking organization. Building a strong leadership pipeline will be the need of the hour for banking organizations with high weightage being offered to the task of moulding leaders with competencies that promote them to take risks and brining more changes to the banking process and systems (playingagilegames, 2012).

 

Through internal succession planning banking organizations would be able to develop leaders who could be influential at the turbulent times. Exposing them to internal and external source of learning leaders could be able to handle huge number of transition in the banking sector. Each one of the challenges discussed in the beginning of the report best reflects the essentiality of adopting mentoring and coaching techniques. Banking organizations have to realize the fact that the workforce generation is taking more diversity and so changes the leadership style that has to be adopted in realizing tangible benefits (Adrian, 2009).

 

Conclusion:

Evaluating the case of both banks ICICI and SBI the role of leadership has been of sheer importance in driving change across all the levels of organization. In the case of SBI Om Bhatt has been able to exert his personal inspirations and desire to gain back the leadership position of SBI for which he adopted a transformational leadership. The case best reflect the reflection effect that Om Bhatt has been able to create by influencing the employees of his bank who in turn sticked to the change road map that was offered by him to take up the computerization of branches and there by gaining back the leadership position in banking sector (Astle, 2010). Contrarily Kamath has been stringent on his ideas and do not necessarily gained inputs form his fellow beings. The observation of the study states that each one of the leadership styles has its own credit and it is ultimately in the hands of the leaders to realize the potential outcomes. In overcoming the future challenges facing the banking industry it is of at most importance for leaders to understand the styles of leadership and select the best leadership styles that would gain both people fit and organizational fit. Even though the debate on how leadership emerge from individuals prevails banking industry has no time to assess its source but to select inspiring and influential individuals who can make use of the employees as catalyst to drive and freeze change.

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