CMA Arif Farooqui
Nowadays a debate is going on that Public Sector Undertakings (PSUs) must be privatized as they are not performing, their employees are not efficient etc. Rajiv Kumar, Vice-Chairman of NITI Aayog believes that the new government should privatised one PSU every week. Government starts privatization of PSUs by either selling its shares or completely shutting them down.
One has to understand objectives and working environment of PSUs before comparing with MNCs / Private Sector. Objectives of PSUs is not profit maximization, but profit should be fulfilling social responsibilities in form of employments, training, environment protection etc. They have reservation in jobs as per government policy and also have reservation in Jobs for person with disability. PSUs also pay maternity / paternity leaves, sick leaves and not thrown out its employee, who fail to perform at later stage of their life.
From my experience, I can say that below are the obstacles in the growth of PSUs:
Incapable HR Department:
Human resource management is Important for PSUs. Lack of Proper HR Policy and reasonable decisions effects moral and confidence of its staff. PSUs recruit through competitive exam and have some of best brains of the country but they find it difficult to retain them. Critical HR Challenges faced by the PSUs are hiring right staff, retaining talent, staff, development of staff, Satisfactory Salary Increment, Changing Working Conditions, Re-skilling its staff and Adoption with changing technology.
Inability to retain talent:
Employees’ salary in PSUs has little relationship with performance. There is no difference between a top performer and non-performer in terms of salary if both are on same designation. Promotions are not based on performance but on seniority and reservation. This leads to a situation where a deserving candidate has to works under his undeserving junior. Therefore, many talented employees resigning and joining in private sector and HR is not questioned on high employee turnover.
Mostly bureaucrats are recruited as Chairpersons or Directors of PSUs and some of them may don’t have competency and experience to run Banking Business. A leader of ruling party can become Director of a Maharatna PSU. Tenure of competent authority (CMD, Directors) is mostly 3 years, this period is not sufficient to implement big changes in an under performing PSU. Unlike Directors of MNCs, their money is not invested in company and hardly affected by performance of company once they retire. Feeling of belonging may lack in them towards enterprise they serve.
Respective ministries have decision making power rather than Board of Directors of that PSUs. Interests of the PSU is sacrificed or compromised just to satisfy political leaders. In most cases, political rather than commercial factors has influenced decisions about location of projects / factory.
Long Formalities for Decisions:
Decisions are delayed due to red-tapism and bureaucratic procedures. A file will have to pass through many officials for approval before a decision can be taken. By the time a decision is taken, the business environment might have undergone considerable changes and not useful or became less effective. Not only this, but because of vigilance department fear, officers are afraid to sign, this resulted in unnecessary delay in decision making. The private sector excels in the speed at which decisions are taken and can respond much more quickly to market changes than the PSU.
Discrimination between Officers and Workmen:
Employees of a PSU are divided into two types, Officers and Workmen. Attitude of both are more or less same but former one is still under control and later one is behaving as adamant child which is beyond control of his parents (management) and parents has to agree with his all acceptable / unacceptable demands. Officers are threatened by management for promotion, transfer, so they have to complete given work but workmen are spoiled by trade unions and management, hence it is difficult to keep them under control and get the work done.
Excess staffing is one of the problems faced by many PSUs. Recruitment done in large numbers without considering actual requirements, resulted over-staffing and high employee costs.
Unlike MNCs, job security is there in PSUs, no lay off even when one is not doing anything. There are strong labour unions with political affiliations to protect workmen interests.
When an employee becomes secure in his job, he starts losing the hunger and zeal which he had earlier. Which affect his efficiency and productivity levels. Missed targets, poor performances and bad results are a common scenario in cases where the employee believes his job is secure. Job security leads to complacency and instead of hunting for new challenges the employees start relying on assigned workloads. Employees who are secured in their job are unable to reach full potential because they lose their curiosity and passion for work.
The ‘L-1′ Game:
Unlike MNCs where they care more about quality of their purchase, in PSUs it all has to go from a long tender process and the one with lowest bid is awarded that contract. Tender process is not bad but this lengthy process takes lot of time and ultimately costs the company. For example purchase of goods value Rs 5000 takes same amount of time which is required for a goods worth Lakhs of rupees. This is also one of the reasons for delays in completion of the projects.
Sense of responsibility and accountability is not in PSU employees and there is always a ‘blame game’ to make someone else scapegoat. Also, there is no proper working coordination within different departments which badly affects output of the company. One of the reason for that is, taking a risk in public sector for the betterment of the company commands punishment if the idea fails, hence PSU’s employees avoid resorting to innovation and blindly follows rule books.
PSUs spend lot of money which is not related to their work. For example, expenditure on Hindi Pakwada’, Swach Bharat Pakwada, Vigilance Pakwada etc. This leads to unnecessary wastage of money and production hours. Can one believe they conducted numbers of workshops on cash less transaction at the time of demonetization and it was compulsory for employees (who are well educated) to attend such workshop.
As a professional who worked in private sector for more than 5 years and working in a Navratna PSU since 2013, can say, PSUs are not so inefficient what they are projected and can perform at par with MNCs, if they are provide autonomy and with little bit overhauling in their work culture.
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