Mahindra & Mahindra Financial Services

The Financial Services sector was without doubt the worst hit during the recent economic downturn with behemoth banks such as the Lehman Brothers collapsing and the mortgage loans failing world over. Primarily operating in the Asset Financing business, M&M Financial Services faced a major impediment when credit became tight, and had to quickly exercise few strategic options to not only cope with the stringent business environment but to also boost employee morale. Having won the Special Category Award for Innovative People Initiative in Economic Downturn by the Great Place to Work® Institute’s Study for the ‘Overdue Wipe-Out’ Project initiated by the company, Ramesh Iyer, Managing Director & Member of the Group Executive Board, and Vinay Deshpande, Senior Vice President, HR, Mahindra & Mahindra Financial Services Limited talk to People Matters on the people challenges the company faced during the economic downturn and the measures taken to address them.

To begin with, what was the impact of the downturn on your organization?
Ramesh Iyer: The starting point of the past financial turmoil was the financial services sector, and being in the business of Asset Financing, there was a lot of uncertainty in our people. With banks collapsing and mortgage loans failing all over, we received letters from the banks stating freezing of services, which meant there could be no more drawing. And this sent a wave of shock amongst our employees with them contemplating what the organization would do next. There were two major concerns – firstly, if we defaulted in our repayment of loans to the banks, our creditworthiness will be blotted; and secondly, the customer should be able to generate money to repay to us. And since our business is largely based on physical handling of the transactions, which means our people being deeply involved, there was an immediate need to address these concerns and steer off any uncertainty in their minds. To tackle this situation, first of all, we ensured that all our liabilities were repaid as we believe that there is nothing bigger than creditworthiness. Secondly, we communicated our predicament to the manufacturers and asked for their support. The manufacturers / dealers did accept our request and offered us credit. We continued our business with this support, which was a true test of excellent business relationship and confidence our team had built.
Vinay Deshpande: As a consequence of the downturn, liquidity dried up which led to systemic failure in financial market, and more so in the bond market by mutual fund players not able to subscribe to fresh bonds. Due to non-availability of funds /funds available at very high cost there was an immediate impact was on incremental business disbursement.

What were the people challenges your company faced and how were they tackled?
Vinay Deshpande: As our sources of funds dried due to the liquidity crisis in the market, we had no money to lend and hence no possibility of business. This completely shattered the confidence of our employees. Insecurity of job, fear of salary cuts, de-motivation due to market information of job loss and retrenchment in other companies, uncertainty about trainings, promotions were the many challenges that this downturn had in store for us.
To tackle this situation, we made sure that our employees were not idle and did something meaningful; we re-allocated our manpower to recover the money we’d lent to our customers under the Overdue Wipe-Out Project. It was a special drive where the employees were scattered in various geographies to collect money. On the HR front, we motivated our people by communicating to them that there will be no job-cuts, salary cuts, or job losses during this phase. A wisely devised communication plan was circulated amongst all our offices and branches with the MD’s message. Then, we did not put restrain on our training programs and this kept the motivation high. Due to the OWO Project, not only were we able to repay our debt and improve our credit worthiness in the market, but were also able to boost employee morale. We also devised a high variable pay (Incentive System) based on achievement.

And what was the result of all these initiatives?
Ramesh Iyer: Our manufacturers believed in us that we as a company are dependable and continued their support to us. At a time when other financial services companies were shutting shops, we registered a double digit growth of 21% in FY 2008-09 and 60% growth in the subsequent year. The employee confidence went up and we registered less than 5% attrition. Having gone through difficult times, we reduced our wasteful expenditure and brought in a clear demarcation between expenditure and investment. For instance, we decided that any expenditure which has a long term benefit should be termed as ‘investment’ and not otherwise. So, we invested heavily in capability building and introduced additional domestic as well as international training programs for our people. Today, we are experiencing growth in all aspects of business viz. income, borrowing, overall revenues, profits, et al, with growth for the first quarter of the current fiscal at 86%.
Vinay Deshpande: The morale and motivation is at an all time high. There is an enhanced sense of credibility and trust amongst employees. This relationship is sustainable and will go a long way in the company’s growth. Employees believe in the company they work for and the company believes in them for their passion and capability.

EMPLOYEE SPEAK: Shivram Balan, Manager – Operations
The earliest thoughts on reading about the recession and the pink slips being handed out liberally in other organizations was, would the axe fall on us as well, as companies were fighting for survival amidst low volumes, tight money market conditions and low morale of the manpower at the workplace due to the uncertainty associated with the recession.
Hats off to our MD, as he truly carved out an innovative path in the true tradition of a good leader. He conveyed in no uncertain terms that, we as a team have surmounted every obstacle and came out as winners and there is opportunity in every diversity and that no one needs to fear retrenchment. The message was clear, our bottom-line needs to be protected at all costs and we should focus on the recovery activities. This saw the birth of a project which was code named – Project Overdue Wipe Out (Project OWO). It was the key responsibility of all the seniors of the organization and they had to take up one state to ensure that the state was monitored in every aspect of recovery and collections. Seeing such whole-hearted participation from the seniors, all the other employees worked their hearts out from Nov’08 to March’09. The results were spectacular, as we not only protected our bottom line but also were one of the few companies to post growth in such testing conditions when the finance industry was in a slump.
This would not have happened if the top management did not have the faith in their teams as this was a strategy that paid rich dividends.