Group 7, Section D

The State Bank of India VRS

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Case Analysis

Facts:

• December 2000, a report by FICCI said Indian banking industry overstaffed

by 35%

• February 2001, SBI came up with VRS aimed mainly at clerical staff and
sub-staff

• Evoked strong protests from its employees who alleged it would lead to
acute shortage of manpower

• 35,000 applications received out of which 19,295 applications from

officer’s cadre

• SBI modified eligibility criteria to opt for VRS for which it faced
discriminatory allegations

• Around 8,000 officers eligible for VRS after the modification

• SBI’s total staff strength expected to fall by 15% after the VRS

• SBI reduces its regional offices from 10 to 1-2 in each circle and faces
shortage of manpower as anticipated by the union

• SBI senses intense dissatisfaction and lack of motivation in its employees

due to its feeble HR policies

Problems:

• Lack of effective HR policies with respect to ‘Manpower Planning’

• Bureaucracy with respect to ‘Performance Management System’

• Lack of innovation and laggard in technology

• HR policies lacking strategic outlook – not in sync with their objective of

diversification and

• expansion of the business

 Group 7, Section D

Evaluation Criteria:

• Retaining talent and enhancing expertise

• Regaining its core strengths – customer base and reach

• Adopt modern techniques and be at par in technology with other banks

Plan of action:

• Appoint a Strategic HRM team to align the HR policies with long term
business objective of the bank (Diversification needs increased manpower)

• Job enlargement and job rotation is required to increase expertise in the

employees. This can help in promoting clerks to officers which is the need
of the hour

• Analyse the demand- supply gaps in various regions and reorganize staff
to meet demand

• Develop a more efficient recruitment process to make sure that there is no

shortage of manpower

• Nominate existing and new employees for contemporary training, so that

they can be use technology more efficiently

• ‘Compensation and reward system’ has to be monitored/audited by an

independent team to get rid of bureaucracy which will refine hygiene
factors and decrease job dissatisfaction

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Question 1:

The results of the SBI VRS were not in line with the management’s expectations.
Comment on the above statement and discuss the effects of the VRS on SBI

Answer 1:

As per the case, SBI was shocked to see the protests by the employees due to
the VRS options. However, had the SBI management planned the manpower
requirements and the VRS scheme properly, things wouldn’t have been so
unexpected. Following are the points which support this argument:

• The response received to the VRS schemes launched by other banks was
much higher (22% for Syndicate Bank and 19% for Punjab & Sind Bank)
compared to the 14% of the total workforce for SBI
 Group 7, Section D

• Entire staff of SBI recruited between 1960s and 1980s was due to retire
near 2010. These officers would be more than happy to accept the VRS
option. Besides, once these officers would leave, there would definitely be
a shortage of officers and staff in the rural areas where the bank operates.

• The officers had an incentive in joining other NPBs after accepting VRS at
SBI due to high requirement of experts at these private banks. On the
other hand, the clerks were not expected to shift to the private banks
which, being fully connected to network and technologically advanced,
required less manpower and had higher profit per employees.

• Moreover, changing the terms of the VRS made the scheme no more
voluntary. So protests of discrimination were bound to happen.

Considering the above facts, it is clear that 35,000 or may be more employees
could have applied for VRS and majority of them would be officers. However, the
scheme evoked protests and it was unexpected for the SBI management chiefly
because it had

• Improper manpower utilization policies.

• Lack of proper study before implementing the VRS scheme.

Question 2:

In most of the VRS implementation exercises in Indian PSU’s, the largest

numbers of applicants have been from the officer cadre. Was SBI wrong in not
anticipating this for its VRS? Also comment whether SBI was justified in altering
the officer cadre to restrict their outflow.

Answer 2:

The SBI was clearly mistaken in not expecting the officer cadre to be the main
applicants to the VRS scheme. There were primarily four reasons for this
response to the scheme:

• The employees from officer cadre had better employment prospects with
the NPBs

• The clerical staff was reluctant to go for the VRS because they had less
opportunities with NPBs

• The employees in general were not motivated and lacked job satisfaction

• Entire staff of SBI recruited between 1960s and 1980s was due to retire
near 2010
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The SBI had not taken in mind the evolving market conditions in view of the new
private sector banks emerging on the horizon. They had also not given due
consideration to the factors an employee would consider when deciding whether
to go for VRS or not.

This myopic view resulted in their keeping the VRS scheme open to all
employees initially. The subsequent change in the eligibility criteria created huge
discontent among the employees.

The following reasons justify the resentment of the employees:

• The employees viewed this decision as discriminatory policy adopted by

SBI

• They claimed that no other bank had denied the employees such
opportunities

• The 35,000 applications were only 14% of the workforce and SBI could
easily let go of them

• The restrictive policy violated the essence of a Voluntary Scheme

Thus SBI was not justified in altering the eligibility criteria at a later stage.
Rather, it should have initially opened the scheme to only that cadre which it
wanted to reduce.

Question 3:

The outcome of the SBI VRS has highlighted the need for proper manpower
planning and HRD policies in Indian public sector banks. Discuss the various
steps taken by the SBI in the post VRS scenario?

Answer 3:

In the post VRS scenario, the following steps should be taken:

• Merging loss-making branches - There was much loss making branches

in different regions. They can be merged so that the reduced workforce is
not overloaded and there is no further reduction in profits.

• Reducing regional offices in each circle - There are a lot of branches

of SBI within a region. These can be reduced as internet can reduce the
workload and data storage problems as well as ease accessibility.

• Redefine promotion policy and its implementation - Promotion

policies were not being implemented properly. The talented employees
were being sidelined. It needs to be implemented so that good performers
are rewarded. This will help improve morale and retain talent.
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• Reduce workload on remaining workforce with technological tools

- The use of internet and ATM and other such tools will cause the workload
to reduce significantly.

• Improve accessibility of rural and semi-urban branches - Rural and

semi-urban branches can be connected better with the help of internet
and core banking facilities. This will help them deal with the reduced work
force.

• Design further VRS schemes based on the requirements - The

management should learn from the mistakes made in this implementation
of VRS and should open the scheme only to those cadres where it intends
to reduce the work force.