Toxic work culture is rife in the Indian financial sector and it is rare for senior executive management to acknowledge abusive behaviour by managers. It was, therefore, a surprise when Sashidhar Jagdishan, chief executive officer (CEO) of HDFC Bank publicly acknowledged it in the bank’s financial year (FY) 2023 annual report by saying:
I am fully conscious of the fact that there may be instances where some people managers might transgress our defined way of working. We have the resolve to nip this in the bud, both by way of training/counselling and appropriate action, to ensure that the same is not attempted by anyone else. Having said that, we have some distance to traverse on this front…we are cognizant that the experience of working with HDFC Bank can be better on several counts, especially culture. The Bank upholds RESPECT for ALL as a fundamental tenet in the way we work with each other and our customers.
This statement was addressed to shareholders on account of a video (in Bengali with English subtitles) of an HDFC Bank zonal head exhibiting toxic behaviour with his team going viral soon after its release on June 5, on Twitter. In the video, the zonal head is seen berating his junior staff for not meeting the aggressive targets. Some hours later, HDFC Bank responded by suspending the concerned official and launching an investigation against him, saying that the bank has zero tolerance for such behaviour.
A toxic work culture
The short video obviously indicates the toxic work culture in the financial sector. But it is also symptomatic of larger issues in the sector, such as setting unrealistic sales targets, poor leadership development, and lack of communication and motivational skills. These factors are not always publicly discussed by the senior management.
During the course of the video, viewers get to see the faces of the other participants on the call, including the individuals who are the victims of the official’s verbal abuse. At no time do they exhibit surprise at such toxic behaviour, which indicates two things: either these individuals can disguise their emotions or that the official is a repeat offender and they are used to such behaviour.
Moreover, the unauthorised recording of the video conference indicates that someone wanted to document the habitual misbehaviour of the concerned official, in order to report it to the senior authorities. Normally, such sales review conference calls last for one to two hours.
Even if some allege that the manager exhibited such behaviour for a short time, the fact that his behaviour was so obnoxious even for that short duration is inexcusable.
It is pertinent to note that the zonal head is addressing experienced mid-management employees having eight to 15 years of experience, who are either in charge of clusters (branches report to a cluster head) or are senior branch managers.
In any performance-driven company, the management has the right to give stretched targets, but the employees also have the right to demand enablers such as additional human resources, client databases, technology assistance, multiple channels, etc. In the process of negotiation between the leader and the staff, achievable, or even slightly stretched, targets can be set and the enablers provided to achieve those results.
As HDFC Bank is a high-performance-oriented bank, it appears that the management may be setting unrealistic sales targets without providing the required enablers, and that targets are set without taking inputs from the ground level on what is achievable with the given enablers.
It is the leader’s responsibility to provide the strategy and guide the juniors on how the targets can be met, and how to adopt different methods when the initial methods are not producing results. However, the entire video is a monologue, in which the official is simply berating his juniors for not achieving the targets.
In another video of the same meeting, there is, briefly, a rare commendation by the zonal head to one of his juniors, but the general tenor of the video is the same. There is no dialogue between the leader and his juniors regarding the problems that they may be facing, nor is the leader providing any enablers and/or solutions. There is a complete absence of strategy and mentoring in the videos.
Clearly, communication training on how leaders should speak and conduct themselves in a group environment is also missing.
Raising one’s voice, shouting, and threatening to sack the concerned employee appear to be accepted practices for leaders to communicate with their junior employees who are failing to meet targets. The fear culture is a primitive form of pressure put on mid and senior level executives in any organisation. It is possible that when the junior employees have to deal with seniors who abuse and terrorise in order to achieve targets, they in turn, upon being promoted, employ the same tools on their junior employees. This indicates that they, indeed, know no other tools.
It is the responsibility of the company, and in particular, the human resources department, to groom leaders and supervisors and impart the necessary knowledge, motivational and communication skills in managing individuals to grow the business.
The conduct of this zonal head in the video conference call reveals the failure of the organisation in selection and training of its leaders. Such conduct is reportedly widespread in the financial sector as another excessively abusive video of a Bajaj Financial Services manager reaffirms.
Therefore, it is clear the industry has failed in a big way in equipping leaders with the all-important soft skills of leadership, mentoring and communication to develop business.
It is extremely important for leaders to be instructed on how to calibrate pressure; too little may lead to complacency, too much may cause a demoralised workforce, labour unrest, and attrition.
Private sector banks like HDFC Bank, Axis Bank, and Kotak Mahindra Bank (KMB) have a significantly higher staff attrition at around 34% to 46%, as compared with the State Bank of India (SBI) at 4.7%, which is a performance-driven government bank.
ICICI Bank has not disclosed its numbers on attrition till FY22.
Despite SBI having a significantly larger staff, its attrition in absolute numbers too is much lower than HDFC Bank, Axis Bank and KMB. While the setting and achieving of sales targets is lower in government banks, the difference in attrition is huge, which can be partly explained by private banks’ more aggressive work culture and inadequate training in developing leadership skills.
Labour unions and officer associations are institutional mechanisms protecting the welfare of the staff. Having such organisations insulates the lower level staff from the excesses of the senior management, and curtails rude behaviour and long working hours. It, therefore, comes as no surprise that organisations experiencing a high attrition rate often lack any significant unions or officer associations.
Such is the case with HDFC Bank, Axis Bank, KMB and Yes Bank whereas at SBI, 96.2% of the permanent workforce in FY23 were members of such unions and officer associations.
Due to increasing competition from other banks, non-bank finance companies and financial technology companies, there may be tremendous pressure on the companies to grow and enhance their valuation. Unfortunately, it appears that the management’s perception is limited to utilising aggressive tactics such as shouting, abusing, and threatening to terminate lower-level staff to meet over-ambitious sales targets.
Many social media users have commented that such behaviour is common in the private financial sector, where employees face relentless pressure to meet multiple product targets such as current, savings and term deposits, insurance, mutual funds, and more.
This writer had highlighted the example of Ravi Narayanan, group head – retail liabilities and branch banking, Axis Bank, who had conducted a town hall meeting for the staff on December 24, 2021. Narayanan held a position just one level below the board of directors. In the town hall meeting he had reportedly said,
“Employees should fight, abuse and complain amongst them [sic] for business, this is the attitude what [sic] I like.”
In a recent Town Hall meet, my friend @rave9007 Country Head, Branch Banking at @AxisBank was quoting, “ employees should fight, abuse and complain amongst them for business, this is the attitude what i like”. Seriously what type of toxicity is flowing resulting in the attrition pic.twitter.com/5Gd51L98fK
— MDahariya1 – my original a/c unsuspended now (@MDahariya1) December 31, 2021
Unlike the far less senior HDFC Bank official, who was immediately suspended by the bank, Narayanan continues to occupy his post at Axis Bank. This indicates that mid-level managers in the financial sector are expendable, while higher-ranking officials enjoy a degree of protection even when involved in toxic behaviour.
Here’s a screenshot of some responses posted by LinkedIn users on the problem of the widely prevalent abuse culture in the sector.
The much-needed measures
In such a scenario, the banking regulator must intervene and conduct its own investigation to determine how widespread this toxic culture is, and whether senior management is setting unrealistically high sales targets, which results in such behaviour and culture.
Additionally, it is imperative that the human resources department is empowered by the board of directors and by the CEO to insulate staff in high performance companies from such toxic pressures. It must educate staff in motivational, communication and leadership skills. The management should take a firm stance to eradicate such a toxic work culture.
The regulator must also consider insisting on the establishment of labour unions and officer associations in private sector banks.
As this culture results in mis-selling to the banks’ own customers, eroding trust and confidence, the banking regulator must consider taking some serious measures such as prohibiting banks from engaging in third-party sales or enforcing punitive penalties for mis-selling.
Even though such abusive behaviour – as seen in the viral videos from HDFC Bank and Bajaj Financial Services managers – is common in the financial sector, the stock market has treated the incidents as a one-off event which will not impact the financial sector. The stock market does not contemplate any major fallout from this issue, and normally, the senior management responds by saying that these are isolated events.
In a culture where CEOs seldom publicly acknowledge any shortcomings, Sashidhar Jagdishan’s candor with the bank’s shareholders is commendable.
It would be naïve on the part of stakeholders and the financial sector regulator to perceive these incidents as isolated, or merely cases of a few bad apples. The banking industry holds strategic importance in the economy and employs a large labour force. It cannot overlook the repercussions of an oppressed, disgruntled labour force, which is forced into mis-selling to achieve unrealistic sales targets.
Hemindra Hazari is a Securities and Exchange Board of India (SEBI) registered independent research analyst.
I, Hemindra Hazari, am a Securities and Exchange Board of India (SEBI) registered independent research analyst (Regd. No. INH000000594). I own equity shares in all the companies mentioned in this report. HDFC Bank subscribes to this analyst’s research and a member of this analyst’s family is employed with the bank. Views expressed in this Insight accurately reflect my personal opinion about the referenced securities and issuers and/or other subject matter as appropriate. This Insight does not contain and is not based on any non-public, material information. To the best of my knowledge, the views expressed in this Insight comply with Indian law as well as applicable law in the country from which it is posted. I have not been commissioned to write this Insight or hold any specific opinion on the securities referenced therein. This Insight is for informational purposes only and is not intended to provide financial, investment or other professional advice. It should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security.
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