ICICI Bank : No Woman, No Cry

28 04 2009

ICICI Bank reported poor results for the Q4-2009. Its Q4 net profit declined by 35.29% to Rs 744 crore versus Rs 1,149.8 crore in the same period of last year.

The bad news at the ICICI Bank doesn’t stop there.

The well developed top team at ICICI Bank seems to be coming apart, as the current CEO, K.V.Kamath retires this April. By choosing Chanda Kochar as his successor, Mr Kamath seems to have set a cat among pigeons.

The two other contenders for the top-post were Shikha Sharma, MD of ICICI Pru-Life and Renuka Ramnath, the MD of ICICI Venture, the private equity arm of ICICI Group. Both of them are slated to leave the  ICICI Group. Ms. Sharma has already been appointed as the CMD of Axis Bank. Ms. Ramnath is rumored to be setting up her own PE firm. Visakha Mulye is tipped to be her successor.

The churn at ICICI has set me thinking about women managers. In a recent INSEAD study, it was reported that

The good news is that in a study of executives, women did better than men on several measures. The bad news is that women fell significantly behind in one key area: vision 

 Apart from the vision problem, it looks like women managers may have great difficulty in working for a woman boss, specially if they had been peers.

 – G. Mohan

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Doing an MBA : An Investment Analysis

16 04 2009

 

This is that time of the yea when the B-schools send out admission offers to the selected students. The Economic Times (ET) has reported that the leading B-schools have already finalized their lists. Getting selected in a top B-school like an IIM is certainly very difficult and is prestigious too. The extent of competition is so high, that out of 2.40 lakh candidates who took the CAT exam, 0.14% or 315 students made it to IIMA. ET says that 91% of the students selected by IIMA are engineers. 

 

 

Until recently, the decision to do an MBA was a virtual no-brainer. In the last one-year, two things have changed, which makes the decision a difficult one, particularly for an engineer who has a good job. The fees have gone up and average salaries of MBAs have gone down. 

 

 

Firstly, the fees have been increased considerably. IIMA announced last year a steep hike to Rs 11.5 lakh for the PGP and followed it up with another hike of Rs 1 lakh , making it to Rs 12.5 lakh for the two-year course. IIM-B also has increased the rates by Rs1.5 lakh to Rs 11 lakh. IIM- C which had kept it rates significantly lower has also doubled the fees to Rs 9 lakh per student. The other IIMs, L, I and K have also increased the fees. ISB  which has always been the most expensive B-School in India has also increased the fees to Rs 16.5 lakh. The Tier-II schools also have increased the fees. For the purposes of this post, let us take that on average a student needs to spend to Rs 4 lakh per year on fees alone. To this add, living expenses of  Rs 1.5 lakh per annum.

An engineer with 3 years experience in a leading company, ( the preferred candidates in most B-schools), would surely be already earning Rs 4.5 lakh p.a. If the engineer leaves his job, he/she would forgo Rs 10 lakh of income. Assuming, the engineer would have got hike and bonus in the second year.

To this add the expenditure of preparing for an MBA entrance. This is not insignificant. A minimum of Rs 1 lakh. 

 

 

The total investment incurred on the 2 year MBA comes down to Rs 22 lakh, including  Rs 10 lakh in opportunity cost, due to loss of income. In the  past, the difference in salaries between an engineer and a B-school graduate was very high. With the global financial crisis the top-paying jobs have reduced considerably. The average salaries in campus placements, as reported by the IIMs, have fallen by 25-30%. IIM-A has reported that the average “domestic salary in 2009 placement was Rs 12.17 lakh p.a. The average salary reported by IIPM is Rs 4.2 lakh p.a. For the purposes of our estimates, if we take that the average salary at a Tier-II B-School for an Engineer-MBA is Rs 7.5 lakh p.a.. Please note that this is the average, indicating several MBAs who will be hired below the average. Public Sector Banks for e.g pay no more than Rs 4.5 lakhs p.a. 

 

 

Thus, the difference in the salary between an engineer and an average engineer-MBA is just Rs 2 lakh p.a. The engineer if he/she had continued in the good company would have reached Rs 5.5 lakh p.a. By spending two years at the B-school and incurring Rs 22 lakh in costs, the additional income is Rs 2 lakh p.a.

 

 

The payback period for recovering the money invested in a B-school is as high as 11 years. Even if one assumes that the rate of increase is higher for an MBA, the payback is not less than 8 years. If an MBA starts at a below average salary levels it is likely that he/she would never recover the investment made on an MBA.

 

 

 

While the case for joining the top IIMs remains strong, the case for Tier-II schools is beginning to get weak particularly for Engineer-MBAs. My advice:

 

To engineers with experience  -stick to top10 B-schools only.

 

To fresh engineers with a job offer on hand -do not go beyond top 50. B-schools only.

 

To others – use  the time spent at a B-school productively while the job market goes into hibernation and hope that by the time you pass out the economy would return to its full speed.

 

– G. Mohan





The Second Take Turns One!

14 04 2009

Just a quick note to say that we  had started this blog exactly twelve months ago.

It hasn’t been always easy to find time and motivation to  keep it going. But the more we do it, the more we start believing in it.

If we have just about started acquiring a voice, it is only because, you, dear readers, have decided to lend it your ears.  Thank you!





Jobs in Public Sector Banks: A Rising Tide

8 04 2009

 

A quick look at the list of recruiters in the IIMs and other B-schools reveals unlikely names of various Public Sector Banks (PSBs) like Bank of Baroda, Union Bank of India, IDBI Bank, SBI etc.

 

 

PSBs are now on a major recruitment drive. SBI recently conducted the written test for Probationary Officers for 3,500 vacancies. Given below is a partial list of alerts on bank jobs posted in their respective websites.

 

 

· Central Bank of India Clerical Recruitment 2009 – 850 Vacancies for clerks

 

 

· Corporation Bank Clerical Recruitment 2009 – 425 Vacancies

 

 

·  Syndicate Bank wants 1300 Probationary Officers , 55 HR Officers , 400 Probationary Clerks (2009 Recruitment)

 

 

· Indian Overseas Bank Probationary Officer (PO) Recruitment 2009 Bank PO – 1250 nos

 

 

· Canara Bank Recruitment 2009 – Probationary Officers, Probationary Clerks, Investment officers Specialist Officers

 

 

I am perplexed as to why the PSBs have gone into a recruitment drive now. Only four-five years ago, most banks went through a major voluntary retirement scheme where thousands of officers and clerks were given a golden handshake. The stated reason was the increase in automation and the need to become competitive with respect to private and foreign banks.

 

 

Are the PSBs recruiting because bright young minds are available easily and cheaply (Rs. 0. 4 million p.a is the std PO package) in these recessionary times? Have they been given a dictat from their owner, the government, to create jobs in this dismal market  Are they seeing an opportunity to gain market share in the retail financial services market, when the private banks and NBFCs are in trouble? Perhaps it is a mix of all of these.

 

 

PSB jobs were the most coveted jobs in the 70s and 80s, after bank nationalization. They lost favor post-liberalization. Now they have become coveted again. The wheel has turned full circle.

 

 

   G. Mohan

 





Corporate Jobs : Facing a Fade-out

1 04 2009

 

 

The other day I was watching an interview of Sam Pitroda (a man I have high regard for) on NDTV Profit. While narrating his story of why he returned from the US to India, Mr. Pitroda made a very important point – “The best brains are busy solving problems of the rich, whereas the problems of the poor are far more complex and they need the best brains.”

 

So true!

 

Until recently, the best brains used to join B-schools, law schools, IT and other lucrative professions to serve the rich and thereby becoming rich themselves. The best brains were creating exotic derivatives in the Wall Street Banks or devising strategies for Fortune 500 companies in consulting firms or writing complex enterprise software with the hope of catching the eye of a VC.

 

But the recession seems to have turned the tide away from these jobs. Suddenly people are realizing that along with the high returns, these jobs carry high risks. The Public Sector career looks more stable, even if less paying.

 

In a recent news item on UPSC exam, The Economic Times (ET) has mentioned:.

“As per data received by ET, after filing an application under the Right to Information (RTI) Act, there are 4.09 lakh applicants for the first leg of the three-stage civil services examination, conducted by the Union Public Services Commission, to select officers for the Indian Administrative Service (IAS), the Indian Foreign Service (IFS), the Indian Police Service (IPS) and other government jobs. Indeed, the jump in the number of UPSC aspirants is coming after three consecutive years of decline. There were 3.83 lakh applicants in 2006, 3.33 lakh in 2007 and 3.25 lakh in 2008 — a steady decrease.”

 

The interesting twist is that after seeing a steady decline over the last three years, the tide has turned this year. It is not as if people are moving away from B-schools. In fact, the number of applicants to CAT have also gone up this year by 15 %.

ET says : “ The exact number of applicants for CAT is not disclosed, but 2008 estimates suggest there were 2.7-2.8 lakh applications for around 1,800 IIM seats, an increase of 15% compared to the previous year.”

 

It also appears that the trend of Civil Services officers joining corporate houses also have significantly come down, perhaps due to the downturn and also due to the Sixth Pay Commission. If anything, in this election season a few civil servants are quitting government jobs and plunging into electoral politics. Jayaprakash Narayan of Loksatta party being one prominent IAS officer taking this route. 

 

In an interesting development, Infosys has announced a new scheme for their employees wherein employees can work for Non-profit organisations. In an interview to Forbes, Nandan Nilkani, Co-Chairman, Infosys says: “We’ve also launched a program where an employee can go work with a nonprofit organization for a year and we’ll pay him half the salary for the duration.”

 

Mohandas Pai, a board member and Director, Human Resources and Education and Research and Administration, told The Indian Express that the option was available to 50 of its senior most employees. “They come immediately after the top deck,” he said. Pai said the company has restricted the kind of non-profit organisations employees can work with. “It has to be in the areas of public health and education or in regulatory bodies and industry associations,” he said, adding that these organizations must be secular and not have any religious affiliation. This is the first year of the program and seven Infosys employees have opted for it.

 

The intention of Infosys management is very laudable in making available some of the best brains for solving complex problems in the Non-profits. My own guess is that only a few of these Infosys top managers would be able to make a serious difference in the  non-profits during the one-year sabbatical. The majority would face problems of several kinds. For example,

  • They would find it difficult to deliver in the absence of an efficient system and structure , which they take for granted in a corporate set-up
  • They will need to work with people who are far-less competent and differently-abled than the regular professionals they are used to. They would take a while, adjusting to the lack of professionalism all around. In many NGOs, deadlines have no meaning, they are just dead lines
  • In social issues which they would work for in the Non-profits, the level of interaction with the local politicians and bureaucrats would be very high, which they are really not used to
  • By the time, they get adjusted to the difference in the two worlds, the one-year would be up

Even if a few of the best brains stay on to solve the complex problems of the poor in India, we can say something good came out of this downturn. My best wishes to those who decide to take this road. 

 

 – G. Mohan








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