How to solve the problem of PSB leadership?

A recent advertisement issued by the government for MDs and CEOs for four large banks is a bold initiative. Naysayers are already raising issues: Will the government get the right candidates from the private sector considering the ‘culture shock’ they will have to confront in terms of its bureaucracy, governmental interference, oversight by investigative agencies such as the CVC and the CBI, and a poor compensation and reward mechanism.

An entrepreneurial leader would not be overwhelmed by such challenges; he or she will look at them as an opportunity to demonstrate leadership. This exactly is the challenge for the government which will have to take special care to ensure that it makes this initiative successful. The government may even have to handhold without, of course, interfering in the functioning of such banks.

Let us face it. The selection of CEOs for public sector banks has exposed a host of weaknesses in its methodology. The government must own responsibility for such a situation and needs to learn some lessons.

Undoubtedly, the country has a large pool of talent in both the public and private sectors. Scouting for talent from outside may be a step that can help the large PSBs but it could well fail.

It would very much depend on how the jobs are designed, how they play out their leadership, how the government handholds many transformational changes that these incumbents may initiate, and how the government itself is willing to review some of its obstructive and antiquated guidelines, especially in the area of human resources.

These CEOs will have to be given far greater functional autonomy and operational freedom to bring in new talent at a lateral level, redesign their organisation, introduce reward mechanisms for employees, and the like. Many day-to-day irritants such as restrictions on travel abroad, and delayed response from the government on key issues will have to be tackled.

Along with India’s aspiration to emerge as a major global economic superpower, recent developments such as ‘Make in India’, ‘Digital India’, and huge planned investments in infrastructure and housing will have implications for the banking sector. The nature of banking is also bound to change in tandem with financial inclusion. What kind of leadership is being envisaged? The CEOs will have to be professionals bringing in a different kind of competence in addition to their banking experience. They will have to work on strategies and policies to bring about continual improvement in the way business is done and encourage innovative solutions to problems.

Some intangible drivers include leadership, organisational innovation, image and reputation, high employee satisfaction, for organisations to move forward as successful organizations. CEOs of modern corporations have to be masters of driving intangibles which ultimately create tangible results.

Soft or intangible factors would mean building the appropriate culture of service and response, promoting breakthrough thinking, impact making human resource development policies, rigour in leadership development, leveraging technology to improve the bottom-line and enhancing customer satisfaction, architecting a new system of performance management and excellence in managing external relations. Therefore, the professionals would need to be smart, tech savvy, value driven and with certain breadth of vision and ready to work on new ideas. The same old techniques to select the new role incumbents will not work.

Finally, it is never enough to have only the top person with vision in large organisations such as PSBs. We need competent senior and top management personnel with business leadership. The new incumbents will have to form a coalition of talent and foster collective genius in order to succeed. The government will have to take measures in building leadership at different levels with a long-term perspective.

It may be pertinent to mention here that while the banking sector has produced many eminent bankers over the last few decades, it has not had the advantage of its own dedicated leadership academy to train, groom and develop leaders for the future (on the lines of academies for civil servants). Leadership deficit in PSBs at the operational and strategic levels is a risk.

The writer was CMD of Bank of Baroda