November 13, 2014
By Faisal Wahedi and Sharada Ramanathan with input from Neetu Bansal
Our last post talked about the key items that Non Banking Financial Institution (NBFC)-Microfinance Institutions (MFIs) should negotiate with banking partners to ensure a long-term, sustainable partnership that furthers the financial inclusion goals of both parties. We now turn our attention to the internal changes that these MFIs must make to become effective Business Correspondents (BCs). Transitioning into a BC offering multiple banking products is a significant change for most MFIs, which are typically used to providing credit alone. This post talks about staff-related challenges faced by such organisations through this transition; and offers possible solutions for effective change management.
The BC model holds tremendous promise for furthering India’s ambitious financial inclusion goals. Microfinance institutions, with their wide, last-mile network spread out in remote villages, are poised to play a strategic role in this financial inclusion journey. However, the BC business model is new for MFIs that previously focused on credit alone and this requires a systemic change in the way they operate. The success of the new model will depend on how successfully MFIs are able to engage their employees in executing this change.
Initiating Change Management
At Grameen Foundation, we define Change Management as the process of guiding organizations and individuals through significant institutional change to ensure the change can be successfully implemented and sustained. Over the years, we have successfully supported several partner organisations in driving internal change successfully; and are now bringing this expertise specifically to MFIs who are focussed on transforming into BCs.
An organisation cannot change unless its people embrace change first. For successful transformation, MFIs need to manage the people aspect of change effectively. This means gauging where they currently are, as far as employee systems and processes go; and where they need to be. This involves -
- Assessing the as-is state of their Human Capital Management (HCM) practices.
- Identifying the gaps between these current, as-is practices and what they should-be to successfully transition to the BC model
- Developing a roadmap of Change Management priorities to successfully reach the should-be state
The Change Management Process involves five key phases which are discussed below. The Assessment phase is critical to identifying what the HCM priorities and challenges in each phase are, that need to be prioritised and addressed.
Maximising chances of successful transition to the Business Correspondent Model
The Awareness Phase:
For effective change management, MFIs need to let their employees know early, and often, about the need for the proposed transition to the BC model. Staff may not necessarily agree with the rationale, but ensuring awareness early on ensures that there are ample opportunities to secure employee buy-in and limits the risk of resistance at a later point, when the MFI may be committed to the change and much further along the transition curve.
In the case of Cashpor for example, we developed various communication mechanisms to help the organization create early awareness about the proposed new product. We conducted multiple change management workshops with senior and mid-level staff to ensure that a uniform message about the need to provide savings services was passed on through them to the entire organisation. We partnered with its internal training team to design and implement programs for the field staff to communicate the change effectively. These initiatives helped Cashpor to create a sense of urgency around the intended change; and trigger critical thinking and dialogue with employees about the need for this transition.
The Understanding Phase:
The next phase is for MFIs to have more in-depth conversations with staff (or at least key personnel, at a minimum), helping them to comprehend the objectives for offering a more diverse array of financial products and what it means for them. MFIs must also take this opportunity to encourage employees to voice their concerns and address them. This may not necessarily lead to immediate acceptance, but it gives employees an opportunity to evaluate the consequences of change and understand its impact on their careers.
At Cashpor, we spent a lot of time helping the top and middle management to understand and plan for the transition to the BC model. This helped them understand the implications of this change for the organization, customers and also for themselves and their teams. It enabled them to foresee challenges well in advance; and seek the necessary internal support to mitigate them.
The Alignment Phase:
Once the MFI’s employees understand the reason and the importance of the transition to the BC model, their own role and its contribution to the overall goal, and the support that the organization will provide them through this phase, they gradually begin to accept and engage with this change. There is a renewed sense of purpose and of working towards a common, collaborative goal. This is the alignment phase.
Incentives, both financial and non-financial, are great enablers during this phase. At Cashpor, we designed and implemented a robust, comprehensible and transparent incentive scheme, which rewarded everyone—from staff serving as customer service points to employees at the head office for enrolments and transactions. This ensured that employees at all levels of the organization were invested in ensuring the success of the new product.
The Commitment Phase:
During this phase, the MFI employee’s alignment with the purpose of the change leads to him or her taking accountability for change, and demonstrating commitment to it.
During this phase at Cashpor, we collaborated with the human resources and operations team to ensure that all departments and divisions had clear and specific targets that were aligned towards the achievement of Cashpor’s overall savings targets and goals. Metrics related to savings were integrated into the staff performance evaluation system ensuring accountability and helping the staff view savings as an integral and vital part of Cashpor’s business.
The Implementation Phase:
Change does not take place without taking action to achieve it. Delivering on the defined goals and priorities, and ensuring that there are adequate feedback mechanisms to enable taking corrective action as may be required, is the most crucial part of the Change Management process.
Through this phase, we provided Cashpor’s middle managers, who were most directly involved with the BC Model transition, with ongoing leadership and people-management training to lead the change effectively. This report details on our step-by-step support.
If an MFI embarking on a transformation to the BC Model is able to lead staff effectively through the transition, then half the battle is won. Other major challenges include analysing organisational readiness in terms of systems and processes, designing appropriate products, enhancing MIS capability and mitigating risks, which we will discuss in our next post.
Grameen Foundation’s People Solutions team focuses on helping microfinance institutions strategically attract, retain, and develop their most capable people to achieve sustainable growth and meet their business goals. We have significant experience in guiding MFIs effectively through significant, transformative and sustainable change. If you are a MFI wishing to transition successfully into a business correspondent, we can help your transformation journey. For further details please contact Faisal Wahedi at fwahedi [at] grameenfoundation.in.