Group5 - O&M - Restructuring For Growth

MAHINDRA FINANCIAL
SERVICES:
RESTRUCTURE FOR
GROWTH
Presented by:
•23PGIB065 – Akash B. Thomas
•23PGIB083 – Manav Agarwal
•23 PGIB088 – Parshav Garg
•23PGIB090 – Prasang Jain
•23PGIB101 – Shivangi Malik
•23PGIB106 – Siddhartha Sharma
Introduction
• Mahindra and Mahindra Financial Services Limited (MMFSL) is a Non-Banking Financial Company founded in 1991 that
addresses the financial needs mainly of the Indian population in rural and semi-urban areas. MMFSL is part of Mahindra
Group – the US$ 20 billion Indian conglomerate.
• In 2018, through its nearly 1,300 branches and offices, MMFSL provided financial products and services to more than 5
million customers in rural and semi-urban India. It offered vehicle financing for tractors, commercial and passenger
vehicles, two and three wheelers, as well as refinance for used cars.
• With an income of INR 72063 crores and an employee strength of about 20,000, it was among the top ten NBFCs in India.
• In January 2016, MMFSL had undertaken an organization restructuring exercise. This case study describes the various
aspects of restructuring – why it was undertaken, how it was implemented and what has been its results.
Key Questions:
Q1. Why did MMFSL adopt a branch structure in its early days? What were its advantages?
Q2. What were some of the structural challenges that MMFSL, faced with its branch structure?
Q3. What were the perceived advantages that led MMFSL to choose the product-based structure?
Q4. What were some of the challenges of the product-based structure and how could they be
addressed?
Branch Structure
As was typical of an NBFC, their
business had two aspects, that
MMFSL followed a regional
of lending and collection. Every
structure for its field operations
member of the branch was
almost since the time of its
involved in both these aspects,
inception
depending on the need of the
business.
This generalist branch structure

at the field level was connected
The branch structure was
to the Operations Head at the
deemed ideal for business
Corporate Office through
where the branch manager and
intermediate levels of Territory
his team catered to all the
Managers, Region Managers
needs of the customers within
and Zonal Managers. It
their region.
was complemented by a
product structure.
They designed the financial
products and decided
what should be the strategy to
Product Heads responsible for
take them to market. Their
financing different kind of
plans were implemented by the
vehicles as well as those
branches through issuing of
responsible for collection were
policy directives even though
located at the corporate office.
there was no line of reporting
between them and the
branches.
Evaluating
Identify the Implementing
alternatives to
reasons leading the chosen
deal with the
to challenges option
challenges
• MMFSL drew a three-stage plan for bringing about change in

Planning For its organization structure. A team under the leadership of Rajnish
Agarwal, Vice President Operations was created to drive the change
Change • They planned to involve the employees at every stage, seeking

feedback from them to understand the challenges of existing business as
well as communicating to them about the intended changes
• Considering data collected from three sources – the employment

survey, benchmarks with other companies as well as their own
business indicators, MMFSL decided that they would need to bring about
some kind of product orientation in their structure.
Product-based Structure
The Product structure On the business side, Below the operations While earlier, the
divided the Product Heads head, the organization branches functioned
organization into were replaced by was divided into seven like independent profit
Business vertical Business Heads divisions: Auto, Farm centers, in the new
and Collection vertical of specific products Equipment, structure they became
right at the top and reporting to the Commercial Vehicles, service
dismantled the Operations Head, while Light Motor Vehicles, delivery centers. The
advisory role of the on the collection side, Refinancing, Direct branches were no
Product Heads. several Collection Marketing, and a longer headed by a
Heads reported to a separate collection single Branch Manager,
National Collection vertical. These divisions but they had multiple
Head, who in turn were organized down Area Managers each
reported to to the field level, looking after specific
the Operations Head. creating seven units products or collection.
within each branch.
Each division had its
own chain of
command, leading up
to the Business Head.
The primary reason Mahindra & Mahindra Financial Services Limited
(MMFSL) used a branch structure in the beginning was because of its
business model and the requirement to cater to clients in semi-urban and
rural locations. The branch structure provided a number of benefits.
Question 1 • Customer Proximity: By establishing a physical presence in local

communities through branches, MMFSL made financial services easily
accessible to customers who live in remote places. Being close by was
Why did MMFSL crucial for fostering trust and comprehending regional requirements.
adopt a branch • Local Knowledge: Because most of the workers at each branch were
structure in its early locals, they were able to comprehend the customs, language, and
economic climate of the area. This local expertise was essential in
determining creditworthiness and creating suitable financial instruments.
days? What were
its advantages? • Relationships with Customers: The branch structure made it easier to
build enduring, customized relationships with customers.
• Flexibility: The branch structure allowed for quick decision-making and

adaptations to changing market conditions. Branch managers had the
autonomy to make lending decisions based on their knowledge of local
customers.
Although the branch system had benefits, there were
several drawbacks as well
• Scalability: As MMFSL expanded, it became more difficult

Question 2 logistically to oversee a growing number of branches. It was
challenging to keep all branches' standards and procedures
consistent, which hindered the organization's capacity to grow
What were some of effectively.
the structural • Risk management: Because of the branch-centric approach, local
challenges that branch managers' judgement was largely relied upon for risk
assessment and management. This decentralized approach could
lead to inconsistencies in risk evaluation and credit decision-
MMFSL faced with making.
its branch structure • Fragmented Information: Data and information about customers
and operations were scattered across various branches, making it
challenging to derive insights and implement centralized
strategies.
The product-based structure was adopted by MMFSL due to
several perceived advantages
• Specialization: The new structure allowed for specialization in

Question 3 different financial products. Business and collection activities were
separated into product-specific verticals, enhancing expertise and
What were the focus on each product category.
perceived • Clear Accountability: The product-based structure assigned clear

accountability for product performance. Product Heads were
advantages that led responsible for achieving specific targets and goals, down to the
field executive level, making it easier to monitor and assess
MMFSL to choose performance.
the product- • Quality and Monitoring: With regulatory changes and a need to
control bucket movements (customer delinquency), the new
based structure? structure emphasized the importance of quality and monitoring

right from the start of customer contracts. This proactive approach
was viewed as a positive change.
• Alignment with Regulatory Changes: The structure change was in

line with regulatory changes, particularly regarding the separation
of collection activities from branch managers, which was more
aligned with the practices of banks.
Challenges of the product-based structure included:
•Potential for Silos: The new structure risked creating silos, where
individual product verticals might become too focused on their own
Question 4 goals and operations, potentially hindering cross-functional
collaboration.
What were some of •Vulnerability to Employee Poaching: Specialized product teams and
leaders could become attractive targets for competitor recruitment,
the challenges of given their visibility and expertise in their respective fields.
•Market Penetration in Low-Opportunity Areas: The structure might
the product-based not be well-suited for markets with low business volume, where the
branch structure's flexibility had been an advantage.
structure, and how Addressing these challenges would require measures such as:
could they be •Cultural Emphasis on Collaboration : Promoting a culture of
collaboration and emphasizing that all product verticals are part of
addressed? one organization can mitigate silo formation.
•Talent Retention Strategies: Implementing talent retention strategies
to prevent the poaching of key employees, such as offering
competitive compensation packages and career development
opportunities.

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MAHINDRA FINANCIAL

This generalist branch structure

• MMFSL drew a three-stage plan for bringing about change in

Change • They planned to involve the employees at every stage, seeking

• Considering data collected from three sources – the employment

Question 1 • Customer Proximity: By establishing a physical presence in local

• Flexibility: The branch structure allowed for quick decision-making and

• Scalability: As MMFSL expanded, it became more difficult

the structural • Risk management: Because of the branch-centric approach, local

• Specialization: The new structure allowed for specialization in

perceived • Clear Accountability: The product-based structure assigned clear

MMFSL to choose performance.

based structure? structure emphasized the importance of quality and monitoring

• Alignment with Regulatory Changes: The structure change was in

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