This interview is part of the Leading Asia series, which features in-depth conversations with some of the region’s most value-creating leaders on what it takes to realize bold ambitions and take them further.
In this Leading Asia interview, Sanjiv Bajaj, chairman and managing director of Bajaj Finserv, talks to McKinsey’s Gautam Kumra and Cheryl Lim about his entrepreneurial, decentralized, and unbureaucratic approach toward business strategy and people management at Bajaj Finserv.
An edited transcript of the conversation follows.
Gautam Kumra: Before joining Bajaj Finserv in 2007, you spent time at Bajaj Auto which, as you’ve said, taught you the value of building successful business opportunities. When you joined the holding company, Bajaj Finserv, how did you approach building the company?
Sanjiv Bajaj: Bajaj Finserv was very small when I joined. I realized that to grow we needed to rebuild. We wanted to become the financial life cycle partner to every Indian. To do so, our differentiation had to be in how customers would feel about our entire presales, sales, and after-sales service.
This led to three building principles across all our companies: One, focus on long-term, profitable growth; two, encourage customer-relevant innovation; and three, cultivate accountable empowerment and entrepreneurial zeal.
We aim to be entrepreneurial in planning, strategizing, and trying out new initiatives, and experiment with projects across our companies, learning through early failures. Being entrepreneurial, decentralized, and unbureaucratic enables us to get the best ideas from anybody in the organization.
Every year, we run a multiday, long-range strategy exercise with each company, where they combine top-down and bottom-up ideas to set out where they want to be in the future. Some ideas go into executable mode and become real projects for the rest of the year. These are often led by youngsters with more senior people mentoring them. But when we execute, we are very institutional, following set metrics and processes.
…we have followed the principle of “break to grow.” When we think a business line is getting too big, we break it up.
Cheryl Lim: As Bajaj Finserv scales, how do you keep the entrepreneurial spirit?
Sanjiv Bajaj: It gets tougher as you get bigger. We have over 100,000 employees across our companies, so we have followed the principle of “break to grow.” When we think a business line is getting too big, we break it up.
For example, when our consumer financing business started doing over 100,000 loans a month, we made digital products a separate business line due to its growth potential. We broke that down further with mobile phones as a different business, even differentiating between demand in various cities.
The goal is for each business line to be financially viable, so we keep [individual operations] reasonably small and manageable. These are often run by bright youngsters we identify and reward through targeted HR initiatives.
We also run periodic surveys of front-end employees to identify their top ten challenges and to keep us from becoming too bureaucratic as we grow. Even if we identify a regional challenge, leaders take ownership and customize plans on the ground. Since front-end employees deal with customers, the organization ends up doing better if we can make their lives easier.
Cheryl Lim: Speaking of employees, how do you help them to develop, particularly the younger ones?
Sanjiv Bajaj: In the early days, we had to bring in people if we lacked the internal talent. But now that we have scaled, we encourage internal development. Many of our leaders are in their mid-50s, so we are excited about developing the next generation of leadership.
About ten years ago, we implemented a common set of employee bands across our companies to create transparency and visibility, setting out the broad “must haves” and “nice to haves” for the top 1,000 roles. We also mapped the talent scorecards of nearly 2,000 leaders to identify their capabilities and aspirations.
Based on that, we developed technical and leadership training programs. People showing great promise, especially younger employees, are placed in new roles within 18 months. Our online internal job placement program handles about 1,000 to 1,500 job placements a month, enabling employees to apply for a role within their company or across other companies without interference from their manager.
From early on, I wanted to prevent Bajaj Finserv, as the holding company, from becoming the dominant parent directing underlying operating companies on what to do, as that prevents accountable empowerment.
So, other than a few key people, we move employees between the operating companies and the holding company. We’ve always felt that, other than some specialized roles such as analytics, if people have the right attitude and we give them time and support, they can perform most roles. You become a good leader when you get that all-rounded experience.
Gautam Kumra: One of our ongoing hypotheses is that some founder-led companies have somewhat different performance contracts. Can you elaborate on how you evaluate, incentivize, and reward people, including top employees?
Sanjiv Bajaj: A couple of years ago, we started a leadership academy for our top people, outlining their roles, aspirations, performance, and short- and long-term targets, while taking into account operational efficiency improvement, risk, and loss or claims ratios.
It is a bilateral process. I emphasize to our executives that India offers the best entrepreneurial opportunity to build wealth and create employment. We make an environment in which they can become entrepreneurs, as we want our people to believe they can make a difference, big or small. A large number of our leaders are excited to be in a position to drive change.
On incentives, we break down everyone’s roles—except the top 700 or so—into weekly or monthly objectives. They have a line function, a sales role, an ops role, and a risk role. Instead of annual bonuses, we moved to monthly incentives according to targets set on an online HR system. For all front-end employees, we run transparent online weekly and monthly rewards programs.
The top 600 to 700 employees who are more involved in strategy are rated quarterly and receive annual bonuses. They get employee stock ownership plans, aligned with medium- to long-term growth and long-term shareholder value creation.
I’ve always believed that you learn from everybody you interact with if you have an open mind. That’s why, to me, listening before talking is important.
Cheryl Lim: We often hear from CEOs that few people are willing to tell them the truth. When times are challenging, who do you turn to?
Sanjiv Bajaj: There are a few key members on our various boards who, between them, have a blended set of experiences. I bounce significant decisions off them. I also consult key CEOs without divulging anything confidential.
I try to regularly meet people up to two levels below the CEO in each of our companies for a chat. By doing so, I become approachable and can access their thinking. I’ve always believed that you learn from everybody you interact with if you have an open mind. That’s why, to me, listening before talking is important.
Cheryl Lim: We’ve talked about a lot of things except your personal operating model—what drives you?
Sanjiv Bajaj: I enjoy building meaningful businesses that help society, are of high quality, and give a good return on equity. An advantage of promoter-driven businesses—Bajaj Finserv has over 50 percent control in all our businesses—is that you can balance entrepreneurial action with institutional execution and the short term with the long term, because you and the board are there to provide support.
My team completes annual processes and monthly reviews with each business to ensure alignment, allowing people to focus on what’s important for today, while building for tomorrow. They know we’ve got their backs.
At the same time, I’m not sure I’m as good as the CEOs running any of those businesses. I can hire good leaders who are better than me at [running a business]. I prefer to focus on how I, as the conductor of the orchestra, can ensure it is playing sweet music, rather than becoming an expert in one instrument.
