The Change Leader

In May 1996, K.V. Kamath (Kamath) replaced Narayan Vaghul (Vaghul) as the 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. These
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.

Problems due to a thought of change

Because of the organization's new-found aim of becoming a financial powerhouse, 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 organization through the changes he
had initiated.

Change Challenges Part I

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. Since
the requirements were large, all three banks often formed a consortium of lenders.
However, the deregulation beginning in the early 1990s, allowed Indian corporates' to
raise long term funds from 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 more adept 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.

Action Plan & Result

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 corporates in the same region - their importance within
the organization was diminished. An ex-employee remarked "The way to get noticed
inside ICICI after 1996 has been to align with people who were heading these
(IIGPTDSPGO&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.