September 29, 2012

An interview with Chanda Kochhar

September 2012
Chanda Kochhar
Chanda Kochhar
Managing director and CEO, ICICI Bank
Chanda Kochhar, managing director and CEO of India’s ICICI Bank, knows a thing or twoabout leading in a volatile environment. A longtime ICICI executive, Kochhar helped guide the company successfully through a major strategic shift before being tapped to lead India’s second-largest bank in 2009—during the height of the global financial crisis. In this interview, conducted by McKinsey’s Clay Chandler in May 2012, Kochhar describes the mind-set required to make decisions in a crisis, as well as the risks and rewards of embracing two seemingly contradictory roles: the big-picture company strategist who also excels at the nitty-gritty business of execution.

McKinsey: It’s often said that leaders these days must operate in an environment of extreme volatility. Do you agree? How does that affect the way you lead?
Chanda Kochhar: Coping with a more volatile environment is a challenge common to many leaders. At ICICI, we constantly survey the horizon to anticipate that next big change. Scenario planning has always been important, but these days change can come so much more quickly. So we are always asking “what if.” What if the currency moves by 5 percent in two days? What if the stock market moves by 10 percent in two days? What would be the impact on our customers? Our people? What are the steps we would have to take? You have to be ready to react at any moment.
McKinsey: Do you have a formal scenario-planning process?
Chanda Kochhar: We have a team of people who do scenario planning and stress testing. That’s important for any bank. But one can’t just leave everything to the process, because things are changing every day. One day, I might see something that happens to another bank and think, “That could happen to us.” So I call the team. We brainstorm, we discuss. So there’s an institutionalized process but also a constant on-the-fly process that’s much less structured.
McKinsey: You’re still primarily an India-focused operation. How closely do you, as CEO, feel you have to be in touch with what’s happening in Europe or elsewhere in Asia?
Chanda Kochhar: I have to follow events beyond India very closely. In a globalized world, change from almost anywhere can affect us, whether directly or indirectly. At the same time, our organization itself has become far more global. Ten years ago, we were a purely domestic Indian bank. Today, we’re present in 18 countries outside India, and our international operations account for about 25 percent of our assets. While a large part of this is business with Indian clients, their operations are spread all over the world. We have a large number of non-Indian retail customers. And anything that happens in the global economy has the potential to affect our Indian clients.
McKinsey: Do you see your role as more of a big-picture strategist or a hands-on manager?
Chanda Kochhar: Well, of course, I must be both. In today’s world, leaders must have one eye on the broad trends—what is happening in the world? what is the next volatile thing that can hit you?—and at the same time have a very clear view of day-to-day operations. I think one of the big challenges for leaders today is that windows for effective execution have gotten smaller. The world today is so volatile that just about anything you need to implement has to be done in 90 days, and sometimes in 60 days or even 30 days, or it risks becoming irrelevant.
So as CEO I have to be very close to reality while at the same time keeping the big picture in mind. Getting that mix right—thinking strategically and staying close to execution—is the essence of the CEO’s job. You don’t want to micromanage every little thing and constrain the people on your team. But at the same time, you can’t get so preoccupied with a vision or dream that you forget about your next big product launch or technology initiative. It’s essential that I get right into the nitty-gritty of how decisions are being executed and make sure things are moving as fast as I want.
McKinsey: Can you give us an example of something where you’ve been particularly involved with execution?
Chanda Kochhar: On two occasions—once in 2003 and then again in 2008—we had to manage situations where customers were questioning our soundness and we saw abnormal deposit withdrawals. In 2008, when the global financial crisis hit, people started saying, “ICICI is a global bank, so if something is going wrong with the global economy, it will go wrong with ICICI.” And the only way to cope with that was for me to get into every little detail. We set up a control room, and I was asking very specific questions. “What is our strategy for small depositors who come to the branches?” “How will we communicate with our employees?” “How are we handling the regulators, the large investors, the media?”
There were also the operational things. We had to figure out how much cash we needed to make available in each branch and ATM to make sure we didn’t run out if people wanted to make withdrawals. And that meant getting into very precise mathematical calculations. “If at every ATM everybody were to do a transaction every three minutes and this is the average amount of cash they would withdraw, what is the cash we would need on a daily basis?” “How do we move all that money physically from our cash chest and get it into the ATMs—how many trucks will we need?”
Then we had to think through dealing with the media. “What are the 25 questions we might be asked and how should we answer them?” And we had to remind ourselves to be patient because every media person was going to ask the same 20 questions over and over again.
We went to our branch managers with detailed instructions, saying not just that these are the answers you should give but reminding them that when customers come, managers should be relaxed, ask them to sit, and offer them a glass of water first, before even starting to talk with them. We felt it was really important that managers not seem stressed or confused but project an aura of confidence and composure, so they could give that confidence to the customers.
I was deeply involved in all those issues. These are times when the leader must be prepared to get into that level of detail on execution.
McKinsey: Over the years, you have made some big strategic decisions—for example, about how to reallocate the bank’s business portfolio, where you’ve charted a course that diverged from conventional wisdom and even the consensus recommendations of your senior team. How do you do that? How do you have the confidence to know the right choice is to zig when everyone around you is telling you to zag?
Chanda Kochhar: Well, at the end of the day, the decision about where the organization should go has to come down to a single leader. You can’t have ten people making big decisions like that, because they could come up with ten different choices. Someone has to make the final call.
But in making that final decision, you need to be sure you’ve understood what everyone thinks, not just people on your own team, but others outside the organization, too. People often talk about the importance of being a good listener, but I think it’s something more than that. I think you have to not just listen but absorb—to take in everything like a sponge—so that when you do make that final call, it’s not just based on whims and fancies.
And once you’ve made that decision, I think it’s very, very important for leaders to make sure the rest of the team understands your vision and the reasoning behind it. Your communication with your team members has to be such that they actually understand the logic and the benefits of your choice and therefore are with you in execution.
When I decided to rebalance our portfolio, it was a big adjustment for people. We’d been growing at rates of around 30 percent and had invested a lot of energy in that. To suddenly say we needed to step back wasn’t easy for people to understand. I spent several months just communicating with people—explaining why it was the right call in the current circumstances and why it was going to be, in the long term, better for the company’s growth. It was important that they understand that this was a move that would have medium- and long-term benefits for the organization and for them.
McKinsey: And how did you get that message out?
Chanda Kochhar: Well, we have 60,000 employees, so I had to lay down a formal process to reach people at each level of the organization. You start with the senior-management team. I held group meetings and one-on-one meetings with all my top people. In every interaction, you want to build in a discussion not only about the strategy but about how the individual can contribute. I travel a lot to the regional offices and the branches, so as I met with people on those visits I would incorporate the discussion about strategy. And I did a number of communications through our own internal media to reach the larger set of people.
McKinsey: Do you have a formal mechanism for making sure you stay in touch with employees and customers on the organization’s front line?
Chanda Kochhar: I make regular visits to all our branches. I go almost unannounced, and at a branch I make an effort to talk to the people there. And for the past two years I have been holding regularly scheduled employee discussion meetings. These are not performance reviews or meetings with a particular business segment—with a boss and his subordinate and the next subordinate and the next. These are just meetings with different sets of about 20 employees picked on a random basis at various levels of the organization. We do them once a month. I promise people who participate that whatever they say is just for me to absorb and will not go out of the room. Sometimes we talk about the work environment in the branches. Sometimes we talk about what customers are feeling. Sometimes we talk about gender issues. Sometimes we talk about our transfer policies. And over time, people have learned that they can speak to me and they do; no one outside the room knows who spoke.
McKinsey: That’s a big time commitment. What do you get from those interactions?
Chanda Kochhar: I learn a lot. One of my most meaningful encounters was in a branch at a time when we were changing many of our customer processes. I spent an entire day not just visiting the branch but standing in the reception area watching the person who greeted and directed customers as they came through the door. This was supposed to be a fairly junior position, someone who basically just said, “Hello, may I help you?” and steered customers to other counters. But standing behind this person—watching the interactions, hearing for myself what kinds of questions customers had, observing directly the ability of our staff to react—was a very powerful learning experience for me.
I realized that what we had thought was a very simple job that could be left to someone junior was actually a very complicated job that should be done by someone with training and experience. I saw that this person had to know how to deal with all sorts of things. How do you handle cash? How do you handle the sale of a life insurance policy? Now, you might think taking cash deposits—how hard could that be? You send the customer to the cashier. Well, what about a case when the transaction has been prompted by a death in the family and the customer doesn’t know how to file the claims? I realized that not only was this desk getting all the most complicated and unstructured queries but that it was our very first point of interaction with our customers.
McKinsey: It sounds like the visits generate useful insights about your people. Do the interactions ever teach you more about your customers?
Chanda Kochhar: Absolutely. At one of our branches in Goa recently, a loan officer pointed out to me that we still kept a policy in place against making auto loans in a particular part of the state because there had been a lot of defaults on those loans four years earlier. “But now the whole customer profile has changed,” he argued, going on to explain to me exactly how it had changed and how competitors were moving in. “I’m dying here. The other banks have started,” he said. “Why haven’t we?”
It was a fair question. We had been the early movers, but we had a bad experience and stopped. In one sense, it was insignificant for the organization’s business in car loans. It wasn’t the whole Goa State in question; it was a small part of the location.
But it was very significant for the loan officer because for him that’s 100 percent of his area. Why, then, didn’t we listen to this guy? He may not have been the most senior guy, but he was close to reality. He knew his stuff, but he didn’t know how to filter what he knew through our system. Ultimately, stories like his reinforce for me the point that every business is significant because while it may not even be 1 percent of the total business that we are doing in car loans across India, why not add that fraction of a percent?
McKinsey: Your bank must collect oceans of data about customers and various financial products. Why didn’t your data-gathering processes highlight the change in Goa customer profiles observed by your loan officer on the ground?
Chanda Kochhar: I think we do very well with data. I have my own dashboard of daily indicators, things I want to see every morning before I’m at my desk. But having good data isn’t enough. Data can tell you about the things you are doing already. It can’t tell you about things you’re not doing. If this had been a location where we were doing business and things were going badly, we’d have spotted that. Or if it was a location where the business was doing very well, the data would have flagged that too.
McKinsey: How much of your time do you spend developing leaders within your organization?
Chanda Kochhar: I put a lot of time into that because, ultimately, the success of your strategy depends on the ability of your team to execute it. Every leader has certain great qualities, and every leader has some things that need to be worked on. And you can’t just stop at developing the first level of leaders—the ones who report to the CEO. It’s equally important to look at the next few levels down. I also put a premium on teamwork; all my leaders ought to be able to work together.
In India, as leaders and as CEOs, we have to get accustomed to working with young talent. This is a young country. And we all have been young, compared with earlier generations, in moving to various roles. We have to be comfortable with younger leaders and able to believe that those leaders can handle the next level of responsibility and allow them to evolve.
McKinsey: Are there particular challenges that you face as a woman leader in India?
Chanda Kochhar: No, frankly, when it comes to women in leadership roles, I think India is more evolved than is generally recognized. Things have changed substantially here over the last 30 years. When I started my career, I think the whole perspective toward women leaders was definitely different from what it is today. Many Indian corporations, in fact, are going out of their way to attract more and more women in the workforce. And women are becoming much more open and conscious about the fact that they need to have a career of their own. The jury is still out on whether so many women will be able to balance their personal and professional lives through the middle-management stages of their careers and on how many will emerge from that as senior leaders. But I would say that as a whole, the outlook of the Indian corporate sector has improved substantially. ICICI has always been gender neutral and I see that across many more companies today.


Vital statistics
  • Born November 17, 1961, in Jodhpur, Rajasthan
  • Married, with 2 children

  • Graduated with a BA in economics in 1982 from Jai Hind College, in Mumbai
  • Earned an MA in management studies in 1984 from Jamnalal Bajaj Institute of Management Studies, in Mumbai

Career highlights
ICICI (1984–present)
  • Managing director and CEO (2009–present)
  • Joint managing director and CFO (2007–09)
  • Deputy managing director (2006–07)
  • Executive director (2001–06)

Fast facts
  • Member of the Prime Minister’s Council on Trade and Industry, the Board of Trade, the High-Level Committee on Financing Infrastructure, the US–India CEO Forum, and the India–UK CEO Forum
  • Deputy chairperson of the Indian Banks’ Association
  • First woman to be named by Economic Times as “business leader of the year” (2011)
  • Ranked 5th by Fortune in the International list of “50 most powerful women in business” (2011)
  • Ranked by Forbes as 59th among the “the world’s 100 most powerful women” (2011)
  • Named by Bloomberg Markets as one of the “50 most influential people in global finance” (2011)
  • Ranked by Financial Times as 10th in the “top 50 women in world business” (2011)

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