How to trim the fat in public sector enterprises

Premakumar Fernando

SUCCESSFUL STRATEGIES: Today, virtually every enterprise whether public or private faces massive change. Unfortunately, change is extraordinarily difficult in the Public Sector Enterprises and all attempts to initiate and implement changes have failed and thus some of the large States owned enterprises have become a more of a burden to the tax payer and the consumer than a benefit.

Successful strategic change for the organisation is all about changing individuals first, because they are the organisation. In many State owned institutions (SOE) the senior management staff had been with the organisation for many number of years and are inclined to use the same traditional methods to get the job done.

When a group of such seniors have successfully worked together in particular ways to address the recurrent tasks again and again, they come simply to assume that this is the way they should do things.

When this happens when people begin adopting ways of working by assumption, rather than by explicit debate and decision - they become blind to see the changes and thus eventually organisations suffer when widely shared maps that managers have unconsciously used to predict what events and actions will produce the needed results may no longer hold true.

Top heavy organisations without any specific key performance indicators to measure the performances of senior managers and associated huge unproductive personnel costs is the main reason for the SOEs to become a burden on the State.

When the going is good, organisations accumulate lot of fat. Most of the SOEs have accumulated lot of fat in the recent years.

Overtime, unplanned in implemental growth has taken place in these public sector organisations. This may have satisfied some immediate political requirements such as giving jobs to party supporters, but it has eventually led to less than optimal results.

Are we five years late with our Public Sector thinking? Today, many private sector organisations are in the process of rethinking of their hitherto successful strategies.

Many including some SOEs have identified the need for it and have become wise to the fact, while others refuse to accept that they need pruning and rebuff the consequences.

I wish to ponder where we are in this scenario particularly when we think of our public sector utilities such as CEB and NWSDB?

The present situation might imply an inefficient use of resources, lower productivity, over-investment and a lack of concern about delivering stakeholder value including consumer services.

Feeble supervision of entities often leads to mismanagement, which in turn, is the reason for 'fat deposits'.

State has invested over billions of precious rupees in these large SOEs over the years and tariff (rates) has been increased by three-fold for example in Water Board and of CEB. However, still the bottom line is red in these institutions.

A recent article by leading Management expert suggested a three-step model to improve the efficiencies of entities such as our SOEs in the present context.

Firstly, it's a 'GROUND ZERO',where the entire SOE structure is raised with nothing left but the franchise and consumers.

In the minds of the senior management and of politicians, you have to eliminate all jobs, designations and layers, and then think about how to rebuild the SOE afresh.

Job descriptions are like a garbage box, where everyone dumps everything into it. People tend to hide behind a job shell in today's Public Sector Enterprises.

Secondly, there is a need to base structures on business strategy. I believe that the rejuvenated SEMA under the guidance of the President can play an active role in this area. Structures tend to go on permanently, and some entities consider their structures more permanent than the buildings they own.

That is the extent to which the structure is entrenched in the system and many do not perceive the need to change those structures to suit the times.

This kind of a step will mean that employees have to adjust their career plans. First the stability of the organisation must be established to ensure career stability. Structure has to be a means to an end, which is achieved through business strategy.

Structure should be like jelly fish where, when circumstances change, people have to change.

Is our Senior Management in the SOEs and Trade Unions ready to understand the need for change in our attitudes? The senior managers must adjust according to the environment, because environment has an impact on strategy - which has an impact on the structure that finally impacts on the staff.

Thirdly, based on the strategy the SOEs needs to look at what needs to be accomplished. Superfluous titles and designations will only get in the way of organisational development.

Most often jobs are created in institutions to keep employees happy. Keeping people happy is a human resource solution, and the structure should not be used as a means to do so at a huge cost to the common masses.

Instead of focusing on jobs and creating designations, focus must be on what needs to be done. The tasks should be clustered and clubbed to create jobs, making layers as flat as possible to ensure to increase the span of attention and productivity.

Many believe that these can be applied only in the private sector. But this is a myth. The most experienced capable people are still in the SOEs.

Working hard for the sake of working hard is not good enough. You have to work smart as well.

The very high personnel cost component of SOEs is the most critical reason for the financial instability of these institutions. In some of the SOEs, more than 60 per cent revenue is spent on personnel emoluments.

In addition to above basic costs large sums are being paid as incentives outside the payroll through vouchers an these are reflected under the administration expenses in most of SOEs.

Most of the management structures are very top heavy with many over lapping tasks without a clearly defined task to perform and with a comparatively high per capita expenditure.

In addition to their core function most of the top management are involved in part time assignments as consultants and some as Project Directors drawing additional allowances from the same state owned institution.

All these shows the clear underutilisation of key management staff and this certainly has created a negative image of the top to the lower levels particularly at the trade union levels and the mind set is, since top is exploiting the enterprise why not we change the attitude.