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Punjab Nation Bank Housing Finance Limited has experienced stagnant growth since its incorporation with other partners in 1988. It has been experiencing different challenges that led to the low rates of market share. The company had a small loan portfolio which resulted in its low performance. The bank also had low volumes of loans and ticket size that made customers despite its quality in terms of deliverance. This made the board of directors, managers and shareholders question the ability of the institution to manage the initial public offering (IPO) it was launching in 2016. The low growth was caused by the deputation of employees from the main branch and the fact that the operations in the bank were fully unorganized. Also, the institution lacked a positive environment for workers performance; it did not have proper written policies, a standard operating system and employees were not motivated toward performance.
Company Background
PNB was founded in 1894 and incorporated in 1988 as a subsidiary of a large public bank in India. The bank was founded by individuals with a vision to provide easy banking services and increase the economic value for India (Chawla & Rani, 2019). Shortly after, the bank opened its branches in many parts of the country and the UK despite the slow growth; managers were associated with the institutions growth. The bank was government owned and managed by the financial ministry. Its headquarters are found in New Delhi, Delhi in India (Vallabh et al., 2020). In 2009, it partnered with Destimoney Enterprises Limited which sold all its shares in 2015 to Quality Investment Holdings, amounting to 49%. The company used the remaining shares for housing loans and fixed deposits to the public. PNB also provided loans against properties, commercial space loans and loans for the purchase of residential flats.
Issues Facing PNB
The management of the institution is not sure enough if the launching of the IPO in the subsidiary will be possible. They questioned the capability of the bank to incorporate a new launch that would provide different services from the ones it initially provided. This was due to the challenges the organization had experienced in the last decade that resulted in its dismal performance (Patel, 2018). First, the bank had a small portfolio which made it to be less known in the banking sector ((Vallabh et al., 2020). PNB is a fully owned subsidiary of Punjab National Bank hence the less popularity. This led to low volumes of sales and small customer segmentation due to the concerns about the quality of the loans that they were providing. Also, it was reported that the organization was disorganized because the stream of information was not clearly defined. For instance, at one time during the operation of the company, the software team was reporting to the finance, the legal reporting to the marketing and the IT team reported to the human resource department.
Moreover, there was the absence of a proper performing management system, a lack of policies and no standard operating procedures. This meant that workers did not care about their performance because they lack the motivation (Vallabh et al., 2020). As a result, it led to the emergence of a negative environment making the employees gloomy and dispirited to produce quality. This caused many talks about the subsidiary being located back to its parent company. This also caused stress and mental trauma to those who were afraid of losing their job. Additionally, PNB did not just experience low talents but also a lack of talented individuals to be hired that could assist in bringing up the company, this was the main challenge that it was facing. The long time workers lacked the required updated skills while the new hires were perceived to be expensive to the organization. Many of the housing units provided by the subsidiary were old, underdeveloped and of less quality. This lowered the credibility of the existing employees hence the need for new ones.
Evaluation of the Issues
Since the institution was not ready to let go of the hard work that the managers together with the shareholders had put in place, they decided to look for a way in which they could outdo the challenges that they were facing. Punjab National Bank, the parent company of the housing finance segment, thought of a way to initiate PNB to be more resourceful once again. The first step was the private-public partnership with Destimoney Enterprises which is owned by New Silk Route, a private equity organization (Hanumantu et al., 2019). The move opened new directives for the bank and assisted it in recovering from the shock it was experiencing. It was advantageous because the partner understood all the challenges the organization had been going through and decided to help it overcome them (Arora & Singh, 2020). After several discussions, the directors thought of the development of Project Kshitiy.
The main objective of the initiation was to ensure that PNB was transformed into an enterprise that could focus on skilled human capital, employee performance and efficient processes within the organization. To ensure that the project would be successful, the company decided to employ a new leader, Sanjaya Gulpa, who introduced new plans that were approved by the board. Project Kshitiy was important for the organization in terms of revamping the old business processes by implementing the issues discussed below. The first move was through the implementation of practices such as employee-oriented and performance-driven. Initially, PNB lacked well-written policies that could help in providing the necessary outcome as expected; therefore it changed its existing regulations and policies and drafted new ones that motivated performance-driven culture.
It also introduced a compensation structure that was well-balanced that comprised fixed and variable payments in an attempt to develop productive performance. PNB also introduced an online platform that enhanced customer values because many of them preferred to interact with them through the online interface. Moreover, the subsidiary implemented email campaigns that assisted in meeting the needs of new customers and an online network for loan aggregators.
The other way of transforming the institution was through brand repositioning by using the right marketing strategy. To ensure that the company was popular, the management ensured that they used all platforms in advertising their company, such as the radio, television, print and digital platforms. This enabled them to reach their stipulated customers easily and thus increasing their profitability (Marzuki & Wahid, 2022). The management also noticed that there was a need to introduce an effective communication channel to ensure sustainable and effective institutional cultural changes. This was to cab the challenges of the disorganized communication channel that was being experienced in the bank. As a result, they introduced Sampark, a Skype-based channel that the human resource department used to communicate with the workers. PNB also strengthened its loan portfolio to reduce the risk associated with defaulters. The other reform was changing the physical structure of the institution. The directors changed the physical outlook of the offices with new facilities that ensured comfort and friendliness.
Alternatives Related to the Problems
PNB implemented reform strategies as discussed above to help in improving its profitability, however, the following alternatives can be used as an alternative to the dilemma they are facing. The first alternative that it can use to solve the problem facing them is the plan-do-check-act or the PDCA strategy. In this approach, the management has the opportunity to test possible solution, analyze the results and implement the ones that are useful for the organization and that maximizes the outcome. This approach is used to ensure continuous improvement within an institution and to avoid the solutions that they not essential to productivity.
The first step is to plan which involves the identification and analysis of an issue and testing it through a developed experiment. The Do stage is whereby we test the solution using small scale experiments to get an outlook of how it could work. The next stage is to check where the management does a review of the experiment to analyze the results if they have produced the speculated outcome. The last step is to act whereby you make an action based on your findings from the experiments. If a solution did not provide the results required, then one has to go through the cycle again until the required result is obtained.
The other alternative is employing the root cause analysis in solving a problem. In this approach, an individual has to identify the root cause of a problem to ensure the right solution is implemented. It assumes that rather than treating just the symptoms, it is better to prevent and solve underlining issues (Martin-Delgado et al., 2020). For this analysis to be effective, the management has to follow certain techniques, procedures and methodologies. The other benefit of using this alternative is that it enables an individual to fully understand an issue hence fixing it in the right way. It also enables individuals to understand why something happened and not who was responsible.
Recommendation
Some of the measures that the organization should employ to enable growth in the performance of the organization include reducing sourcing costs, implementing performance-based culture, restructuring the leaders, and reforms in the loan portfolio. These transformations will assist the housing finance institution in enabling the launch of new projects such as IPO. Additionally, the institution should take into account other alternatives to ensure its future success. The alternatives measures that the housing company should consider include using the PDCA approach in solving problems and the root cause analysis to enable them to identify the causes of an issue before taking any solution into implementation. The management should motivate the employees to ensure that they are productive in the long run. Also, they should hire the right people with updated skills to assist in solving the issues that they encounter.
Conclusion
In conclusion, the subsidiary experienced difficulties in the past decades that made it question its capability of affording the launch of services such as the IPO. However, the management did an excellent job ensuring that everything could be possible if they took the proper steps. The main challenge that the bank experienced was the issues with the employees. They lacked the motivation to perform well and produce the required results specified by the organization. The partnership with Destimoney Enterprises enabled bringing the company back to track. This move allowed the introduction of Project Kshitiy, which resulted in the initiation of ways that could assist in the transformation of the institution.
References
Arora, N., & Singh, B. (2020). Corporate governance and underpricing of small and medium enterprises IPOs in India. Corporate Governance: The International Journal of Business in Society. Web.
Chawla, S., & Rani, S. (2019). Conundrum of non-performing assets over two decades: An analysis of Punjab National Bank. Management and Labour Studies, 44(3), 263-284. Web.
Hanumantu, K. D., Worlikar, V., & Narayanaswami, S. (2019). The Punjab National Bank scam: Ethics versus robust processes. Journal of Public Affairs, 19(4), e1952. Web.
Martin-Delgado, J., Martínez-García, A., Aranaz, J. M., Valencia-Martín, J. L., & Mira, J. J. (2020). How much of root cause analysis translates into improved patient safety: A systematic review. Medical Principles and Practice, 29(6), 524-531. Web.
Marzuki, M. M., & Wahid, K. A. (2022). The effect of government transformation programme on government investment: Evidence from Malaysia. Asian Journal of Empirical Research, 12(1), 1-10. Web.
Patel, R. (2018). Pre & post-merger financial performance: An Indian perspective. Journal of Central Banking Theory and Practice, 7(3), 181-200. Web.
Vallabh, P., Das, R., Jayaseelan, S., & Dhar, S. (2020). PNB housing finance limited: Toward successful transformation. Ivey Business School Foundation.
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