Broadly, the management framework of any medium and large organization consists of two distinct areas—strategy and governance. The strategy of an organization is a combination of corporate concept, market activities, business model and competition related issues. Corportate governance, meanwhile, comprises functions like organizational structuring, owner-management-workers realtionship (which includes so-called political interference in PSEs), laws, rules and regulations, the extent of centralization or decentralization, extent of autonomy to different units, staff incentives, time-frame, budget, etc. However, a good strategy does not neccessarily mean that it will be automatically executed. In fact, the main weakness of PSEs in Nepal is in the execution.
One of the major tasks of the owner of PSEs, i.e. the governemnt, should be making them self-sustaining and self-sufficient, while delevering goods and services to the consumers at minimum possible prices. Surprisingly, the simple business principle of the need to balance sale and purchase price is totally ignored in crucial organizations that ironically are monopolies like Nepal Electricity Authority (NEA) and Nepal Oil Corporation (NOC). This serious flaw is often overshadowed by exagerrated trivial management issues. Executives in those organizations are either not authorized or courageous enough to make neccessary price adjustments so that revenue, gross profit and expenses move in the right direction all the time. It is a pity that profitability, the main parameter of performance, is completely ignored. Instead of worrying about this absolutely critical issue, policy- and decision-makers in the government are always busy passing on the blame to the CEOs and senior management of PSEs. This attitude has further led to higher frustration levels and diminishing enthusiasm of the entire workforce.
With respect to PSEs facing competition, like Nepal Telecom, Nepal Airlines, Nepal Drugs, Dairy Development, Janakpur Ciggarette etc, the government and top management team must realize that business competition is nothing less than a war and the management cannot perform better without resorting to marketing warfare. The basic instinct of private companies will always be competition-oriented and they will continously launch marketing attacks. A drawback, which is often ignored, is that private sector can go for covert operations to weaken competitors, whereas PSEs can only resort to overt ones. Even in developed countries, competition between corporate giants enters the gray zone quite often. Hence, in developing countries like Nepal, there is no point in blaming the private sector for using ‘unethical’ methods to capture the market. The key is to make timely changes in laws, rules and regulation, so that PSEs are adequately equipped to battle it out in the cut-throat competition that defines the market.
Another typically serious problem in PSEs is the extraemphas is on elaborate paperwork and traditional procedural matters rather than on real actions and results, which is just opposite of what management theorist Karl Weick espoused when he said “chaotic action is preferable to orderly inaction”. Moreover, it has become a hidden practice in the bureaucracy, including PSEs, to take minimum risk so as to avoid any scandal and possible stain on one’s character and reputation. The result is snail-paced work in all kinds of business activities and infrastructure development projects. The only solution to this serious handicap is ammendment of laws, rules and regulations governing PSEs to give more authority and autonomy as well as to force management to deviate from traditional process-oriented setups to more action-oriented appproach. In addition, the leadership capability of a CEO can make an enormous difference in quickening decision making, thereby affecting the overall performance of the entity.
Compared to the private sector, managing the public sector is a far more difficult and challenging job. Management theories can be easily applied to private sector companies. But the public sector, due to it’s inherent nature, will have more anomalies, ambiguities and paradoxes, which must be managed and addressed by the top management and policymakers. Hence, managing PSEs requires an adaptive management approach as well as a good and efficient leadership.
The author is former Executive Chairman, Nepal Airlines Corporation
Related story
Netflix orders sequel and spinoff to Ryan Gosling film 'Gray Ma...
