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Learning from the Public Sector

Jagdish Rattanani

Author: Jagdish Rattanani

Date: Sun, 2016-09-04 19:29

The question on how and why the public sector does a better job of retaining women managers compared to the private sector is a thorny one, particularly when posed to a panel that comprises mostly private sector leaders.  But the question got asked at the podium as SPJIMR launched the Management Programme for Women, the MPW, on Sep.01.

For many of us in management institutes, it is easy to underestimate all that goes on in public enterprises and overestimate the supposed performance and efficiencies of the private sector. This is not to pit one against the other. But it is instructive every once in a while to look around and study from a sector that many in a modern-day business school environment are prone not to dig into, given that most B-School participants take up work in the private sector. This willy-nilly tilts the balance, which can get even more skewed given that more cases, lectures, examples and stories flow from private sector experiences in many a conversation on most campuses.

India’s public sector accounts for no less than an overall net profit of over one lakh crore rupees (2014-15 figures) for all 235 CPSEs, the acronym for Central Public Sector Enterprises. Total investments in the sector are of the order of 11 lakh crore rupees. True, about one third of the 235 are loss making; also that return on capital is low. But conversely, two-thirds are profitable and surely there are deep lessons to be learned here and surely they will be different lessons, given that these businesses operate in a space and a framework very different from the private sector.

The thought takes me back to the time I spent years ago in an enjoyable interview with Arup Roy Choudhury, the then Chairman & Managing Director of NTPC (2015-16 revenues Rs.70,506.80 crores), India’s biggest power producer.  At the time, Choudhury was also the Chairman of the Standing Conference of Public Enterprises (SCOPE), so he could speak for the universe of CPSEs, and he took the occasion to speak about how and why the public sector continued to be relevant in a liberalised economy. Choudhury now is the Chief Commissioner, Right to Public Service Commission, West Bengal.
 

Some his observations were powerful, like this one: “Our private sector is running on public money,” or that “the simplest thing is that the private sector should open up to CAG (the Comptroller and Auditor General)…Let CAG at least audit their books.”  Sitting in his large office in New Delhi’s SCOPE complex, Choudhury fired away at the idea that the private sector was doing CSR or that they were in any way better at their work. “Private entrepreneurship is good,” he said, “but not at the expense of taxpayers’ money.”

Choudhury was of course being provocative but the remarks resonated with many who read the interview.  He insisted that CPSEs were leaders in CSR and “we have touched the people in the core of their hearts and we stand by people in their hour of need.” That remark provides some good material for a real debate in a management school – is that a philosophy that we could or should live by in a modern-day corporate?

The argument can run on and logically take us to revisit the age-old question: What is the central purpose of business?

Of course, this is not meant to be an apology for the public sector; there is a lot that needs attention and fixing. But equally, there is a lot going on here that needs careful reading and understanding and the modern day management student can pick up rich lessons that go well beyond the narrow markers of quarterly numbers.

Understanding the public sector, particularly public services like health care, also opens up a host of new vistas and provides new ideas on managing systems in a country as vast and diverse as India. For an example, the KEM Hospital (run by the municipal corporation of Greater Mumbai) in Mumbai deals with 1.7 million patients every year, most of them from the poorer sections of society. We may have bigger names, slicker lobbies and lesser wait times elsewhere but the KEMs will always be the biggest hospitals in terms of service to the people who really need it at the time they need it and at the price they can afford.

 

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<p>First of all a great article sir.</p> <p>Now, I would like to state some points from my three and a half years of experience working in one of the biggest profit making PSUs of India.</p> <ol> <li>Money is not everything, life is needed. As the generation “Y” thinks that spending is more of a status than keeping the money in the bank.</li> <li>Postings will never be in a city, so the lifestyle will not be as happening as his/ her friends who work in a less safe job in a city in any private sector.</li> <li>Working under the people who are less competent than them cannot be adjusted for a longer period.</li> <li>Exploring the world. A PSU job will never take you outside India, sometimes not even outside a single state for the first 20 years for sure.</li> <li>No recognition of good work, as promotion is only dependent on a seniority basis.</li> <li>Risk taking mentality. People are prone to take more risk than the previous generation.</li> </ol> <p>Other than the above-mentioned arguments, I would like to suggest the women managers who are willing to join a PSU that they will always be treated as the most pampered one. They will always be posted in the headquarters and corporate offices. Therefore for a woman graduate, a PSU job should be a dream as the pay package is very high compared to other entry level jobs as a graduate.</p> <p>Adding to that I would definitely like to mention what graduates learn from working in a public sector, i.e. managing people. As managing people are more difficult than controlling any machine, so it is an added advantage for the people who join as MBA candidates after working in a public sector. No private sector in India is dominated by trade unions, whereas all the public sectors are. So working as a junior level executive will give one immense amount of experience to handle a team and other organizational behaviour related issues efficiently.</p> <p>Despite having this ample amount of opportunity for an MBA graduate to grow as a manager in a PSU, people don’t like to join there. The main reason for this is the pay package. As one engineering graduate joins a PSU in the pay band of E-2/E-3 (PSU terminology) and that is exactly same for an MBA graduate as well; therefore no recognition of his/ her masters’ degree.</p> <p>&nbsp;</p>

<p><br /> &nbsp;</p> Interesting observations, Abhishek. Thank you.

<p>Indeed the amount of opportunities provided by the Public sector is far more than many private sector companies, especially for women. Adding to the view of Prof. Rattanani, and concurring with the views of fellow classmate Mr. Mukherjee, I feel that almost all the Public sector enterprises give you a change for overall development. Been brought up in the townships of NTPC and having done my education in a defence establishment, I can say without doubt that PSU provides the most secure and complete life. You have the opportunity to live alongside people of different cultures, share and celebrate the festivals, learn their culture and have a wide network of friends throughout the nation.</p> <p>Perhaps the best experiences of a public sector enterprise is the feeling of unity among diversity. The neighbour to you left is from Assam and the neighbour to your right is from Andhra Pradesh and perhaps all of them would be equally participating in a “Garba” festival or an Onam celebration. This is something that women cherish, the nudgy fact that women like to socialise a lot.</p> <p>Well apart from these lighter moments in life, the pay is great, as correctly put forth by Mr. Mukherjee. The added services that a PSU gives you is the best part of the employment contract. For instance to avail the facility of a guest house in any part of the nation, is one cherry that helps the company retain employees. Health cover for you and family, residence and utilities and subsidies on commodities, Holidays and paid leave are other paraphernalia given to employees.</p> <p>In my five years of professional life with a private firm, I wasn’t given even 5% of what was given to my batch mates in PSU in terms of amenities and quality of life. Life in private enterprises is strenuous, like a rat race, where the importance is on profit than on employee satisfaction. Nothing against Private firms, but yes for a complete life experience I would still choose a public sector enterprise.</p>

The major consideration for the setting up of PSUs was to accelerate the growth of core sectors of the economy; to serve the equipment needs of strategically important sectors, and to generate employment and Income. PSUs not only contribute for the betterment of Economy but also safe guard Nation’s interest from Foreign Players. Due to the vast spread of PSU in different segments Government could able to control the prices and generate employment. Government can setup PSU establishments at certain areas where development is required/ economically backward areas across the country. Private players never do this and they give priority for their profits only. Even after 6 decades of Independence the major investments at backward areas are being done by PSUs. So, PSUs are definite requirement of India to control the monopoly of Private/Foreign Players. I do agree with the view expressed as women are given priority in PSUs when compared to Private. PSUs also gives overall development of Employees and their family. Though there may not be excellent Growth for the highly talented segment as compared to Private, overall there is a balance being maintained. In India Political leaders interfere too much on Government /PSU day to day activities. This factor in my view is one of the hindrance for efficient leaders to enter into PSUs than Private. Also Hierarchy being maintained in PSUs discourages the talented stuff to retain for log time. Job Security, giving posting priority for working couples & taking care of women workforce in PSUs cannot be matched by Private sectors. Most of the PSU jobs are transferable, employees and their families will experience different places and cultures. Especially children grownup in different cities tend to gather more self confidence. Not any but majority of the private sectors does not bother about employee satisfaction rather the profit per Employee. Facilities like Housing, Medical, Scholarships to Employee children, Holiday Homes across the country, etc., are the major ones which makes PSUs differentiate from Private. Having spent almost 2 decades in PSU, I experienced excellent growth in my personal & Professional life. Even I noticed that my children have shown a great change in their confidence levels after every transfer of mine to different places in INDIA. I personally feel that working in PSU will give complete life experience.

They are the 'Temples of modern India' said our first Prime Minister of independent India while inaugurating the Bhakra Nangal Dam. He stated this in the context of Public Sector Undertakings (PSUs) or Central Public Centre Enterprises (CPSEs), as we may call it, of free India. There was a potent vision behind this diffidence. A vision to see India as a self-reliant, sustainable nation typifying rapid economic as well as social growth in the region. The idea was to ramp up employment generation, expand the infrastructure and mobilize resources manifold. This was the basic premise on which the CPSEs started their journey. From a humble 5 in the early 1950s, the number of CPSEs increased to a whopping 160 by early 1980s. Post economic liberalization, this figure rose in excess of 240. Out of 235 operating CPSEs, the number of profit making CPSEs increased steadily from 160 CPSEs in 2007-08 to 157 CPEs in 2014-15 with a total profit of Rs. 1,30,363 crore as on 31st March 2015 (Public Enterprise Survey 2014-15). The number of employees recorded across all CPSEs in India is more than 16 lakhs as on 2006-07 and the numbers might have only marginally changed in the past decade. The 45 CPSEs listed on the Bombay Stock Exchange as on 31st March 2015, exhibited a healthy market capitalization of Rs. 13,27,127 crore with a 20.35% rise over previous year (Press Information Bureau). The crux of the matter is that the CPSEs have come a long way since their inception in achieving their objectives on the economic development front. During the times when the private organizations are the favourites for the younger workforce to start off their buddying careers, the CPSEs have not done too bad just to grow steadily, if not exponentially. Of late, we have seen able leaderships in the CPSEs who have transformed these public enterprises into profitable businesses. The bureaucracy and red-tapism are tales of the past now. The focus has been shifted to “Corporate Governance”. The ‘sarkari babus’ will now have to undergo annual appraisal processes, under the new Performance Management System, where they are answerable for their actions and inactions to their respective superiors. This is a paradigm shift. The CPSE operations are now transforming themselves much like their private sector counter-parts. The competition is such, it has gotten both sectors up and running. Be it agriculture, oil & gas, education, medicine & healthcare, or defence, CPSEs are allocating more towards R&D and innovation in technology and processes. They have thoroughly envisaged the need of the hour which allows them to hold their ground today and prepares them for a safe future tomorrow. The numbers only indicate short term achievements, but it is these ideological changes which epitomizes their hunger for sustenance and growth in the long run. Having said this, we must not forget where the roots of the CPSEs are. They shall still remain ever so dedicated towards the socio-economic upliftment of the nation, that some of the policies might not be in-line with the business objectives of profit making and market capitalization and that is perfectly fine. It is this very linchpin of the CPSEs which has sailed them through the difficult times of recent economic crisis. CSR activities are not considered as duties, but a way of life at CPSEs. ONGC spent more than Rs. 500 crore towards CSR activities during FY 13. The internal policies are employee driven rather than profit driven. A human resource manager in a CPSE has a vastly different task in hand as compared to one in a private organization. They have to respect the laws of the land while working towards upliftment of the local communities in the remotest of the villages where the CPSEs are present. It is these CPSEs which is leading the rural India, which stills constitutes a formidable proportion of population, towards a brighter tomorrow. Therefore, the money spent in such initiatives are not costs, but investments for the greater good. These are the values that need to be passed on to the other sectors and this is what we must learn from the public sector.

Great insights observed by you, Sir. I have been working in PSU since last 10 years. Majority of PSUs are working for meeting the basic needs of society and country rather than aiming at high profitability. Though profitability is a factor to sustain and give the salary / bonus to its employees. I can share my experience and hope that similar practices are at other PSUs too. I was having offer of one private sector company and one PSU. I intend to join private sector company as most of the people prefer. However one of my close relative (professional) suggested to join PSU as he was already passing through the life of private sector. I could not really understand the reason but respecting his experience I decided to join PSU. I tell you that I am not repenting on my decision. Pay package was same for both the companies that point in time and may be little lesser now as compared to current package with a experience of 10 years. But money is not the only factor which a person should consider while joining an organization. Living the LIFE is important for long term, spending time with the family & friends is also equally important. The caring of employee type mindset is across all PSUs from the inception and getting carried from generation on generation. Currently I have also started thinking in that direction for the people who joined. Basically it provides a culture of creating a habit of empathy. This is one of the reason why a women prefer to continue with PSU. Indian culture of caring a women at different phases of her life exists in PSUs. Women feel themselves at safe zone where liberty is available to manage professional and personal life. A men would be placed at different cities over a period of time but women will be placed in such a way that their life remains synced with their husband work place. People feel from the outside world that PSUs means typical BABUGIRI type culture and they would be reporting to lesser competent person. This is a myth. Most of PSUs are professionally driven and professional and smarter people climb the ladder. PSUs are very transparent as compared to private sector. Various kind of audits like CAG, OISD, Safety, ISO etc. keeps on happening which improves the efficiency of PSUs. However, there would be few old people and less professionally managed people. But you learn when to respect, whom to respect, how to deal, how to manage etc. and these attributes are very helpful in long term whether you stay in PSU or not. PSU concentrate on people development and encourage work life balance. Liberty is given to employees for taking decisions. I am not saying that PSUs are not having any issue but those issues are common in private and PSUs like promotions, politics etc. Most of the PSUs are not having any inherent issue as such so that person should think not to join PSU. To summarize, PSU is always better in short term and best in long term. PSU "EK KHULI KITAAB - पीएसयू - एक खुली किताब"

There is no doubt that PSUs are needed in the priority sectors of economy, especially if the objectives include generating employment and serving the society. The article does not clearly tell us why PSUs are more successful in retaining women. The fact of the matter is overall manpower retention (irrespective of Men or Women) is higher in PSUs as compared to Private sector purely because of the relatively higher job security. While I agree that PSUs do offer a safer and stable terms of employment, do they really work towards capability development of employees ? In an environment where promotions are basis seniority, do the most competent people get the more important senior roles ? Do they evaluate people based on performance? These are some of the questions which if answered, may throw some light on why one third of these PSUs are making losses and how their overall productivity can be improved. When it comes to the institutions like government run hospitals and educational institutes, railways and defense, they have significant impact on the society and security of the country. Therefore they must continue to be controlled by government irrespective of profit or loss. To my mind they should anyway be non-profit organizations. However, when it comes to commodity business, my personal view is to leave them with corporate who will be more effective in running them profitably. Finally whether it is a PSU of Private sector, every organization runs with common man's money, directly or indirectly. Whether it's government or corporate, whether your are a tax payer or an investor, it's a fair expectation from any business to add economic value through profit. The debate therefore is whether you want to do a business or a social activity?

The debate over public vs private sector (Pros vs Cons) is always viewed narrowly from a specific perspective ranging from performance, contribution to GDP, Job creation, Job safety, Employee satisfaction and recent new entrants women safety/opportunity and CSR. CSR concept is not new to India as various corporate houses were already involved in multiple activities at various levels. The amendment in companies act provided a definite framework and guidelines to perform the same and whether or not it is being employed and scrutinized well can be an objective measure which does not need CAG’s seal of approval as the same is already scrutinized at various statutory level, it’s an effort to bring in all together and enable all together in order to maintain sustainable society. A simple Pros vs Cons analysis may not a true representation just like a judgmental remark to prove one’s role and contribution. The real impact is much deeper and one need to see the bigger picture (macro aspect) so it does not matter which arm of nation is working towards sustainable and progressive efforts to keep it’s the attitude in which the same is being achieved and does it stays or continues or be merely a marketing gimmick / statutory obligation with no long term benefit for an economy/nation.

Working with a PSU for last 7 years, I felt related to this blog. Whenever comparing PSU’s with private sector, people divide it as black & white, but I think it’s more than that. Some of the additional statistics regarding PSUs are: CPSEs accounts for more than 22% of our G.D.P. CPSEs are paying 20% of total taxes (Direct & Indirect). Currently CPSEs are in majorly capital intensive & basic infrastructure businesses like energy, mining & natural resources. For any government seeking the welfare of its citizens, having control over these basic infrastructural facilities is of utmost importance. Keeping the same view in mind, nationalization drive was started during 1970-1980, under which oil companies & banks were nationalized. But after 1991 liberalization of economy Indian industrial sector saw the boom of private sector and naturally started comparing the public sector with private sector. Thus once the heroes of Indian industrial sectors started seeming to be villains. I will agree that some of the PSUs have performed very poorly & needs reforms or restructuring for better performance. But we cannot do the injustice by evaluating the high performing CPSEs like IOCL, BPCL, and ONGC on the same lines of loss making CPSEs. As an Insider in one of these CPSEs I can definitely say that we are changing & changing very fast. Since my joining at BPCL seven years ago, I have seen four new plants coming up at BPCL Mumbai Refinery within six years and getting commissioned successfully. Our management practices are also getting recognized across the industry. At CPSEs we are striving hard to perform within the constraints. In addition to this we cannot ignore the contribution of CPSEs in nation building. Presence of CPSEs gives government the leverage to intervene in the economy for desired socio-economical changes. CPSEs are the one who tries to maintain the regional balance of development by investing into underdeveloped regions. So we can say that, reforms are certainly needed in Indian CPSEs giving more autonomy to the businesses, but privatization is not an option

Since India's independence, PSUs have contributed significantly towards the growth of the Indian economy. As former RBI Governor Dr. Bimal Jalan writes in his book ‘India's Economic Policy: Preparing for the Twenty-First Century’, “In line with our socialistic traditions, a commitment to the expansion of the public sector was being viewed as synonymous with a commitment to the welfare of the poor...As a means of distancing itself from the colonial powers, these views had some merit at the time of independence in 1947. Today, these are not only arcane but also damaging to the national interest”. PSUs in India were established with an objective of building enabling infrastructure (e.g. power, railways), mobilising capital for capital intensive industries (e.g. power, iron & steel, mining), provide public goods (e.g. national defense), providing public services at lower cost and encourage development. Post liberalization of the economy in 1991, the lack of market competitiveness and efficiency of PSUs compared to private sector has been exposed. As per CAG report for year ended March 2015, 205 of the 365 Central Government Public Sector Enterprises (CPSEs) covered by the report, earned profit during 2014-15. The total profit earned by 205 government companies and corporations was Rs. 1,37,338 crore of which, 66 per cent (Rs. 90,901 crore) was contributed by 48 government companies and corporations under three sectors viz., Petroleum, Coal & Lignite and Power. Eight CPSEs contributed 51 per cent (Rs. 69,406 crore) of the total profit earned by 205 CPSEs. 135 CPSEs suffered losses during the year 2014-15. The loss incurred by these CPSEs increased significantly to Rs. 30,341 crore in 2014-15 from Rs. 22,783 crore during 2013-14. These figures show the glaring inefficiencies by many of the PSUs and justify the exit from some of the PSU by GoI. Hence, in my opinion PSUs should remain in key sectors only e.g. Strategic Sectors like Defence, Petroleum, Power etc. where the motive is not profit maximization alone.

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