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INTRODUCTION TO MANAGEMENT Final report On Submitted by SYED REHAN ALI MBA-(Evening) Faculty Mr.BABER WAHAB (Course Mentor) Date of submission: 30 th APRIL, 2009 SP09-MB-
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INTRODUCTION TO MANAGEMENT

Final reportOn

Submitted by

SYED REHAN ALIMBA-(Evening)

Faculty

Mr.BABER WAHAB(Course Mentor)

Date of submission: 30th

APRIL, 2009

SP09-MB-

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(1-1)C OMPANY OVERVIEW

Market Leader in Energy sector:Pakistan state oil is the market leader in Pakistan’s energy sector. The company has the largest network of retail outlets to serve the automotive sector and is the major fuel supplier to aviation, railways, power projects, armed forces and agriculture sector. PSO takes pride in continuing the tradition of excellence and is fully committed to meet the energy needs of today and rising challenges of tomorrow. Pakistan State Oil, the largest oil marketing company in the country, is currently engaged in storage, distribution and marketing of various POL products.

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INTRODUCTION&

HISTORY

SYNOPSISThis report presents detailed information on

““How the Management functionsHow the Management functions performs in Pakistan Stateperforms in Pakistan State Oil.”Oil.”

The content provides an introduction, history and how manager job is changing and tells significance of using latest technology in an organization.

Pakistan State Oil (PSO) despite carrying a label of a public sector entity, and truly the drivers of economy of this country. PSO is continuously improving his product and services and improving the quality of the product.

Government of Pakistan holds its 51 % share. PSO is a Pakistan’s largest company having an average turnover of around US billions of $ annually.

These are solo distributor in the southern region and further it occupy greater market share. PSO has maintained a 30-year mutually-beneficial business relationship with Kuwait Petroleum Corporation (KPC) for the purchase of HSD and FO and also export its product to Afghanistan.

PSO ranked 29th whose revenue as compared previous year was seen surged by 41 percent. Previous year PSO was ranked at 31st.

“PSO shall undertake social, philanthropic or community development programs which are in alliance with its business strategies or that which will benefit the broader interests of the community.”

We are proud to cater to the fuel and non fuel needs of approximately 2.8 million customers per day. The report concludes on “SWOT ANALYSIS of PSO “ and some useful suggestion also added.”

Finally,

OOil is the il is the life bloodlife blood for a country for a country

asas

PSO is the PSO is the hh earear t of economyt of economy

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CURRENT VALUE: the Company’s current value of Rs. 75 billion,

MARKET SHARE

MARKET SHARE in Black oil : 82.1% MARKET SHARE in white oil : 61.2% The company’s astounding growth in terms of sales and turnover, combined with its status of being the

First Pakistani Public Sector Company to become a member of the World Economic Forum (WEF)

Winning the “Karachi Stock Exchange Top Companies Award” has made PSO a notable company world over.

PSO has the widest strategic oil distribution network. This network comprises of 29 storage depots and 9 installations, 860,000 MTs of capacity i.e. almost 81% of total national storage, numerous pipe lines network and equity partnership in White Oil Pipeline Project (WOPP) from Karachi to Mehmood Kot.

A most efficient product movement system for its POL products facilitates the operations at PSO. This system includes a fleet of 6000 tank lorries, tank wagons and pipelines. With the inception of white oil pipeline (WOPP) the pattern of supplies from Karachi has changed drastically as the entire white oil movement from Karachi has been switched over from tank lorries to pipelines.

Moreover, to make this system more efficient and effective, new pilfer-proof tank lorries equipped with satellite tracking system have been introduced.

Distribution outlets 3612: 1 PSO has the largest network in the country. Out of these, 1,610 outlets have been upgraded as per the New Vision Retail Program, with most modern facilities like

electronic dispensing units, convenience stores, business centers, Easy Payment Centers and customer friendly staff to provide unmatched and diverse services to its customers, all of which are comparable to international practices.

The fact that PSO serves 2.8 million retail customers on daily basis, along with 2000 industrial units and business houses, is indicative of its vast customer base. The company has also been meeting the fuel needs of various government entities, armed forces, railways, agriculture sector, IPPs and industrial units.

PSO also provides Jet Fuel to Refueling Facilities at 9 airports in Pakistan and ship fuel at 3 ports.

In July 2002, ‘PSO Loyalty Cards’ were introduced to reward the retail customers for their loyalty and patronage towards the company. In February 2003 PSO launched its ‘Fleet Cards’ and ‘Corporate Cards’, which are fuel-based credit cards for the business entities. These cards along with the company’s Prepaid Cards, provide convenience, flexibility and security to customers, while enabling them to earn redeemable loyalty points and avail attractive discounts on non-petroleum products.

1(1-1): http://www.psopk.com/about_us/

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* POL productsPSO products include:

Motor Gasoline, High Speed Diesel Furnace Oil Jet Fuel Kerosene LPG CNG Petrochemicals Lubricants

PSO’s leading retail brands includes:

Premier-XL (petrol with multi-functional additive), Green-XL (environment friendly diesel with an additive that provides more mileage,

smooth running & less black smoke), Deo (diesel engine oil) and Carient (passenger car motor oil).

In order to deliver the promised quality to its retail customers, PSO launched Mobile Quality Testing Networks (MQTU) in October 1998 which has now been extended to 21 units operating from 15 major cities of Pakistan. These units perform surprise visits to check the quality of the POL products at different retail outlets.2

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PACRA ASSIGNS RATINGS TO PAKISTAN STATE OIL COMPANY LIMITED The Pakistan Credit Rating Agency (PACRA) has downgraded the long-term entity rating of Pakistan State Oil Company Limited (PSO) to AA+ (double A plus), while maintaining the short-term rating at A1+ (A One Plus). These ratings indicate a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

(1-2) H ISTORY The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on January 1st; the government took over and merged Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) as Premiere Oil Company Limited (POCL).

Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC) came into existence. PSDC was then renamed as State Oil Company Limited (SOCL) on August 23rd 1976. Following that, the ESSO undertakings were purchased on 15th September 1976 and control was vested in SOCL.

The end of that year (30th December 1976) saw the merger of the Premier Oil Company Limited and State Oil Company Limited, giving way to Pakistan state Oil (PSO).

After PSO’s inception, the corporate culture underwent a comprehensive renewal program which was fully implemented in 2004. This program over the years included the revamping of the organizational

2*http://www.psopk.com/about_us/business_glance.php

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architecture, rationalization of staff, employee empowerment and transparency in decision making through cross functional teams.

This new corporate renewal program has divided the company’s major operations into independent activities supported by legal, financial, informative and other services. In order to reinforce and monitor this structural change, related check and balances have been established by incorporating monitoring and control systems.

Human Resource Development became one of the main priorities on the company’s agenda under this corporate reform.

It is due to this effective implementation of corporate reform and consistent application of the best industrial practices and business development strategies, that PSO has been able to maintain its market leadership in a highly competitive business environment. 4

January 1, 1974

The federal government took over the management of PNO (Pakistan National Oil) and DPL (Dawood Petroleum Limited), renamed into POCL (Premier Oil Company Limited) under marketing of Petroleum Products (Federal Control Act, 1974)

June 6, 1974

The government incorporates “Petroleum Storage Development Corporation’ PSDC

August 23, 1976

PSCDC renamed to State Oil Company Limited (SOCL) 5

4(1-2): http://www.psopk.com/about_us/history.php

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September 15, 1976

The Government purchases ESSO undertakings, vests their control in SOCL

December 30, 1976

The Government merges PNO and POCL into SOCL (State Oil Company Limited) and renames it Pakistan State Oil Company Limited (PSO)

1999

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The new vision program is launched

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(2.1) HOW MANAGER JOB IS CHANGING?

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How manager is changing

Rewards

Quality Management

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CHANGE IMAPACT

Technology

In a global scenario, Technology plays a vital role in an organization.Phillips Kotler quotes:

“ If company not use technologies, they are out of the business and only those companies compete in the market that adopts technological changes”

Pakistan state oil uses latest technologies like SAP & ERP LOTUS

Advantages of using technology is To save time Increase efficiency and productivity

The company shall reinforce technology-driven value-added initiatives and shall work towards increasing income from non-fuel and gaseous fuel businesses.

Increase threats to security

All over the country threats is increasing.Biggest threats to Pakistan state oil is (Pakistan State Oil Head Office Building) costing Billions of rupees.In a current scenario:

Tank Lorries holds in Afghanistan. In strikes, tankers damages.

Increase

Competitiveness

In a current period, competition is increasing very rapidly.Eleven or twelve companies are in oil operation.Till 1994-95 only two companies were in operation

PSO SHELL

At that time there is no issue of Quality & Quantity.

YEAR PROFIT MARGIN PSO 1994-95 7 Paisa/L

PSO 2009 3.5%

In 1994-95, there is no issue of quality & quantity but todayQuality & quantity has become significant for both companies and customers.

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(2-2) REWARDSPakistan state oil gives rewards to their employees on the following performance basis.

OUTSTANING/EXCELLENT

PERFORMANCE

AVERAGEPERFORMANC

E

ABOVE AVERAGE

PERFORMANCE

MARGINALPERFORMANC

E

BELOWPERFORMANC

E

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Increment

Basic

15 %

4

10%

2

12%

3

NO

-

5%

-

PROMOTIONPromotion based on EDR (Employees Development Report).

REAL EXAMPLE:

On OUTSTANDING PERFORMANCE

On outstanding performance, Mr.Tamiz uddin (To whom that I am making report)

Awarded as Outstanding performance as a Divisional Manager in the year 2002-03

He got following rewards

Shield Certificate & Recognition letter Cash award & Umrah ticket

And also got Laptops and digital camera.

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6(2-2): Interview with the Public Relation Manager (PSO)Contact no: (9221)9207628: Ext 2061 : (0300)9201184 [email protected]

1 Quality Management

Quality is a factor that no one can ignore it longer.

Pakistan state oil is known as offering utmost quality products and highest performance ever. PSO is continuously improving his product and services and improving the quality of the product.

PSO being fully committed to implement total quality management approach has achieved ISO 9000 certification for its six terminals while the balance storage would be made ISO compliant in the next couple of years.

The modes used for product movement of POL products by PSO include tank Lorries, tank wagons and pipeline. We have a fleet of around 6,000 tank Lorries. Around 1200 tank Lorries, equipped with tracking

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and pilfer proof system, have been upgraded as per international standards which are engaged in delivering quality fuels across the country.

With the inception of white oil pipeline (WOPP) from Karachi to Mehmood Kot via Shikarpur & MFM (Mehmood Kot / Faisalabad / Machikey) pipeline, the pattern of supplies from Karachi have been drastically changed as the entire white oil movement from Karachi has been switched over from tank lorries to pipeline. To cater to the local lubricants requirements Free Lube Delivery Vans have been introduced.

1: http://www.psopk.com/suppliers/# ?1

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(3-1) Managerial view of management

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Symbolic / OmnipotentTop level management set targets. While Middle level make planning to achieve the targets through Lower level staff..If the goal is achieve --------------- well enough

If the goal is not achieve If the target not meets the management see it as a whole and search for a reason, If the reason don’t justify then management takes steps towards that employees

Manager Views Strong or Week Culture Dimension of organization culture How Employee learn culture Environment

• Internal environment• External Environment

Organization stakeholder

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(3-2)Pakistan State Oil and Strong Culture

(3-3)Dimension of Organization Culture

PSO mainly emphasize on

Stability & Aggressiveness

Innovation and risk taking

Attention Detail7

Stability & Aggressiveness

Employee Recognition:To boost the morale of employees a reward and recognition scheme is in place for the last few years and has been a great source of creating a spirit of healthy competition amongst employees. Each year employees are nominated for two company-wide ceremonies viz

Shaukat Raza Mirza Management Excellence Award’ PSO Managing Director’s Performance Award’

Employees within the organization are aggressive to each other in order to achieve the targets.Reason: PSO has policy that, on performance basis employee can exceed each other.

ABOVE 25%

7(3-1 , 3-2, 3-3): Interview with the Public Relation Manager (PSO)Contact no: (9221)9207628: Ext 2061 : (0300)9201184 [email protected]

Innovation and Risk taking

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PSO believe in sharing the key values of employees.

Co-ordination meeting between Managers/MD and their subordinates Schedule on Bi-monthly basis and meeting is mandatory on quarterly basis.

In a meeting, employees and the management cross questioning to each others and raise the issues and make solutions. That’s motivating the subordinate.

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AVERAGE 50%

BELOW 25%

25% employees declare as Above performance.50% employees declare as Average performance. 25% employees declare as Below performance.

Example quoted:“If there are 04 EINSTEIN in an organization those above rules also apply”.

Innovation & Risk technology

PSO encourage their employees to share creative and innovative ideas

PSO-Innovation

*Vehicle Identification System (VIS) is an innovative system introduced for the first time in this

region by PSO at participating outlets, which enables refueling in a vehicle without cash, credit card or voucher. It is an advance Fleet Management Solution for your organization which guarantees fueling in the authorized vehicles only.

Benefits: Fueling of authorized fleet vehicles onlySubstantial SavingsAutomatic Odometer Reading

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How employees learn cultureWhen employee is hired, then Human Resource report to TNOD (Training and Organizational Development). Where the organization conduct a orientation plan. In this orientation plan employee meets with their all heads/ boss. and with the passage of time employees learn culture itself. PSO has Open & Candid communication culture

ENVIRONMENT

INTERNAL EXTERNAL

8 Further detail description can be seen on http://psopk.com/products_services/vis.php

*http://www.pakistaneconomist.com/pagesearch/Search-Engine2002/S.E53.asp

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. Specific

. General

*The company has strengthened its internal controls specifically in supply chain area by implementing computerized load acknowledgement system, which is aimed at preventing misappropriation of products in transit and ensures prompt delivery of products to customers and depots. To ensure proper supplies to local retail outlets, fleet management plan has been implemented at Karachi, Lahore and Islamabad, which would be extended gradually to other major cities of the country. *

INTERNAL

Culture

Culture shows basic values & behaviors of a society.With the passage of time culture of an organization also changes.Example:15/20 years back female are restricted to specific fields only.But today women are competing male side by side in every department.

Employee

Employees are the backbone of an organization and without employees no organization can achieve their goals.That’s why companies provide training to their new as well as experienced employees to increase the organization efficiency time to time.

We value people of PSO as our greatest Resource

Union

Non management union exists in PSO.Union election held after 03 years then revise terms and condition.IRE department control all the issues of union under the supervision of DGM. DGM co-ordinate time to time with the union

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SPECIFIC ENVIRONMENT

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Customer PSO gives his customer :a high value”Broad customer base including the retail and industrial, as well asaviation, marine and Government/Armed Forces sectors

Major customers are: KESC WAPDA DEFENCE PAKISTAN STEEL MILL IPP’s Armed forces, Railway etc.

PSO, being a customer friendly company passed on the benefit to this lower cost savings to the consumers.

SupplierPSO export its product to Afghanistan only.PSO purchase their product to

Pak-Kuwait Pak Arab Attock refinery limited Pak refinery limited NRL PARCO PARCO

Competitor11-12 companies are working in the oil & petroleum industry.out of which PSO is the leading company and other two major competitors are:

SHELL CALTEX

PSO has maximum no. of outlets in urban as well as rural areas.

Market share PSO Market share in 2007: 68.6 %PSO Market share in 2008: 70.6 %

Pressure group

Govt. of Pakistan holds 51% share of PSO. So they influence on the organization decision and make pressure to the top level of the organization.

Example:Political parties/Govt ministers use their resources to contract with the PSO transportation to use their lorries and trucks

But PSO has two policies and if they fulfill any one of the two then they PSO contract with them at their own reservation.

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Economiccondition

In a current recession scenario, economic condition of a country is directly influence to the PSO.How?

Prices high PSO takes Over draft Pay high Mark-up. Low Receivable (specially from Govt. sector organization)

Political/legal Political and legal environment influence on the organization (Reason may be that Govt. of Pakistan holds 51% share).and the try to get their influence on the decision making process.

Social cultural

We believe that excellence in our core activities emerges from a passion for satisfying our customers' needs in terms of total quality management. Our foremost goal is to retain our corporate leadership.

We are an Equal Opportunity Employer attracting and recruiting the finest people from around the country. We value contribution of individuals and teams. Individual contributions are recognized through our reward and recognition program

We uphold our values and Business Ethics principles in every action and decision. Professional and personal honesty, dedication and commitment are the landmarks of our success. Open and transparent business practices are based on ethical values and respect for employees, communities and the environment.

Demographic

Demographic environment is vital and organization is mainly interested in the population and growth of the size because people (customer) are the one who makes company profitableThe reason is that human population according to size, location, density, age, occupation etc.

Demographic threat may be there due to the rapidly growing population. It needs also increases at a rapid rate that generate a threat of not fulfilling these needs.

TechnologicalA technological change is a way for Innovation.One of the most important tasks accomplished during the initial period of transformation was to inculcate the significance of information technology amongst the employees.

� ERP solution SAP implemented at all locations

Implemented SAP to streamline the information systems for obtaining and sharing up-to-date real time information on sales, operation and logistics, and establishing common data warehouse across the supply chain.

*The latest launch of "PSO Loyalty Card" has been the most innovative marketing initiative, which has not only enabled the customer to earn PSO Loyalty Points redeemable throughout the country, but has also offered them attractive discounts for purchases at a large number of merchant outlets.*

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ORGANIZATION STAKEHOLDERS

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Major organization stakeholders are:

GOVT OF PAKISTAN 51%

HBL (Habib Bank Limited)

INVESTEMNET CORPORATION OF PAKISTAN

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D ecision M aking P rocess

D ECISION M AKING P ROCESS

Problem:

21PSO lost their regular customer (EDHI)

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Identification of a Problem

Area manager of PSO check the sales volume of a petrol pump .and found that their regular customer EDHI is not purchasing to the PSO. Although PSO was also offering to them a special discount over the last few years.

SOLUTION:

Area Incharge of the PSO (Mr.Tamiz uddin): call to the Mr. Kazmi (EDHI incharge) and said that he wanted to meet him.

Mr. Kazmi( EDHI incharge): Initially refuses the agreed.

Then they both meet in the office of EDHI.

Area Incharge of the PSO (Mr.Tamiz uddin): he courteously starts his message and asks him to tell the reason that you have stopped to purchase our product.

Mr. Kazmi( EDHI incharge) said: according to our representative

Other company (SHELL) is providing better quality than you.

There is difference of measure of quantity too.

Our ambulances engine is cease because of poor quality of fuel.

Area Incharge of the PSO (Mr.Tamiz uddin): Mr. Kazmi if you have any complaint then you should tell us. Ok . If you are not purchasing then doesn’t matter but i wanted to meet your representative to prove that whatever he is saying is true or fake? 9

Mr. Kazmi: call the representative.

Area Incharge of the PSO (Mr.Tamiz uddin) : When representative see the Area incharge of PSO in the office of Mr. Kazmi he shocked because he knows him.PSO area incharge asked him that what you know about quality of the fuel.

Representative: He stated the same reason as early described…

9Interview with the Public Relation Manager (PSO) Contact no: (9221)9207628: Ext 2061 : [email protected]

(0300)9201184

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CHARACTERS in a Real situation:`

Mr.tamiz uddin : Area incharge Mr. Kazmi : In charge of EDHIMr. faisal Edhi : ADMINISTRATOR (owner)MR. XYZ :

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Area Incharge of the PSO (Mr.Tamiz uddin) :

Area Incharge of the PSO (Mr.Tamiz uddin) : check / test the sample Area incharge takes sample of 03 different oil companies and the results are: PSO : 210 (210 Shows ---- Excellent quality).SHELL : 209 CALTEX : 208

He proved that the PSO quality is the best among all.

Mr. Kazmi (EDHI incharge): When he enforced to his representative he admit that he has done this thing only for the sake of getting commission from another company pump.

After that Mr Kazmi was promise to the area incharge of PSO that he will take action against him and he will request to the Mr. Faisal Edhi (the administrator of the EDHI) to be a client of Pakistan state oil.

I ntuitive D ecision m aking

Affect initiated decision PSO not take decision on the basis of feeling and emotions. Otherwise that can cause a adverse affect on the company image and good will.

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Cognitive based decision PSO take decision on the basis of skills, knowledge and perfection. that will lead an organization

Experienced based decisionPSO also take decision on the basis of Past experiences. It helps an organization to take better decision. The advantage of taking decision is not to repeat a mistake that happened in past.

Values or ethics based decision PSO not take decision on the basis of values or ethics.

Subconscious mental processing PSO sometime take decision on the basis of subconscious mental processing.

EXAMPLE:In Supply department, sometime decision takes on the basis of subconsciously mental processing. like Whether we will purchase inventory from XYZ party or not.

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PLANNING

Planning?It can be formal or Informal.

(1) FORMAL PLANNING

Formal planning use in

BUDGETING

FORECASTING

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Planning: Formal & Informal Purpose Of Planning How do Manager Plans? Types of Plan?

• Internal environment• External Environment

Organization stakeholder

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FINANCING

SALES PLANNING ( in Retail department)

MARKET PLAN

INDUSTRIAL CONSUMER DEPARTMNET.

LOGISTIC DEPARTMENT (from 1 depot to another)

SETTING STRATEGIES

(2) IN FORMAL PLANNING

Except formal (periodic) planning, all the Planning is called INFORMAL PLANNING.

EXAMPLE:

Petrol Pump XYZ daily takes 3000 Litre fuel from PSO tankers on daily basis.(SCHEDULE BASIS)

If the all fuel sold out then they contract to the PSO. They will immediately access the production to the pump.

(Above example is of Informal planning. Because they daily take 3000L petrol and that specific day their

sales rapidly growth and they need extra fuel to met their customers need )

PURPOSE OF PLANNING Purpose of planning is

To achieve organization goals.

To organize employees and resources effectively.

To meet future deadline efficiently.

To prevent from any risk or uncertainty in the future .

HOW DO MANAGER PLANS?

In every department of an organization, manager plans according to their mindset.Organization (Top level Management) just wants results.

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Sales manager keep in mind the last year sales record of _____ quarter. And in current year he set his targets (10-15%) extra. And to achieve these targets he/she works

Example: (A S S U M P T I O N )

YEAR QUARTER 1(SALES)

(In Million Rs)

QUARTER 2(SALES)

(in Million Rs)

2008 3.06.25

(including 1st quarter sales)

2009 3.30(10 % more than last year quarter)

7.185(15 % more than last year quarter)

Financial objectives

Strategic objectives

Increase revenue Increase profit margin High ROI Stonger Credit rating

Kept high market share High quality products Finest customer service Use latest technologies Provide training to the fresh

employee as well as experienced.

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TYPES OF PLANS

10* Interview with the Public Relation Manager (PSO)Contact no: (9221)9207628: Ext 2061 : (0300)9201184 [email protected]

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BREADTHTIME

FRAME SPECIFICITY FREQUENCY OF USE

STRATEGICIt defines the broad goal for the organization.The strategic goals of the company, along with the strategic plans, are decided by the Board of directors.However, they are reviewed every year in the meeting.In a X-COM (executive committee) meeting tp level management of PSO discusses the issues and policies.

* MISSIONWe are committed to leadership in energy market through competitive advantage in providing the highest quality petroleum products and services to our customers, based on:

Professionally trained, high quality, motivated workforce, working as a team in an environment, which recognizes and rewards performance, innovation and creativity, and provides for personal growth and development

Lowest cost operations and assured access to long-term and cost effective supply sources Sustained growth in earnings in real terms Highly ethical, safe environment friendly and socially responsible business practices 11

LONGTERM

Pakistan State Oil

Long Term Planning

Durationis

Five(05)

Years.

DIRECTIONAL

Departmental meeting held. In which Area managers discuss problems and changes.

Example:

Sugar cane season is going to start.

So company makes policies to provide more Lubricant and diesel to that particular area to meet the demand.

They make directional planning that at this time that particular area need in that amount … they estimate all.

SINGLE

Example:

In Brand management, the planning is Single use.

When PSO launch Additive Diesel ………… ….… ….. The planning use is called single planning.

Company make marketing research that how many companies are using that raw material or `or etc.

11* http://www.psopk.com/about_us/vision_mission_values.php

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TACTICAL

These goals together with the

plans to achieve them, again, are

devised by the top management

of the company on an annual

basis. To ensure that these

objectives are achieved. Mainly

through marketing, is the job of

the director of each division.

Focusing on customer demand.

MEDIUM

Pakistan State Oil

Medium Planning

isin

between(01)to

(05)

Years.

OPERATIONALAt an operational level daily distribution planning andProduction scheduling occur.Operational decisions are the agreement with the suppliers, taking orders form customers.Which customer takes to which suppliers, when he needed , what amount he needed, then order of next delivery

SHORT TERM

Pakistan State Oil

Short term

Planning

Duration is

within

a

Year.

SPECIFIC

Specific plan in an organization are clearly stated

Example:

If a divisional manager has given the task to the area manager to achieve XYZ target then area manager must define the procedure and policies to its subordinates.

STANDINGongoing training program to equip its workforce withnecessary skills and knowledge. 10000 training inputs have been imparted, to our employees since 2000 despite their being busy. In addition more than 10000 forecourt attendants have been trained on customer services as part of WOW experience launched.WOW plan: Providing finest customer service to their customers and receive a sudden feedback (WOW).

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Organizing

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Work specialization

Authority and Responsibility

Chain of command

Span of control

Centralization & Decentralization

________ Departmentalization

Mechanistic or Organic

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WORK SPECIALISATION:The work specialization is high, with each manager/ leader responsible for a specific work and monitors his subordinate’s performance on regular basis.

"We are now training our employees to solve customers' complaints to their satisfaction and not ours',"

AUTHORITY AND RESPONSIBILITY:PSO has given authority as well as responsibilities to the manager that they can take a decision to achieve their target. Then they report to their leader whenever they are part of a team and to their respective departmental director as well. The mentors have a lot of authority, responsibility and information relative to the task on which they are working. However all the information and authority relative to the organization as a whole, particularly the financial aspects, is confidential and even the consultants are not aware of it.

Chain of commandChain of command in an organization is clearly defined.

Which employee report to which boss, How much time he will take to finish the task

Span of controlSpan of control vary form department to department level normally 10-15 employees work under 1 boss.)

C entralization & D ecentralization Centralization decision making: In a centralization decision making NO employees participation involves.It happened at the following level

Top level basis, executive committee, management committee. While settlement of strategies Developing plan,

De centralization decision making : In a decentralization decision making employees also participates and openly gives their ideas. It happened at following level

Divisional offices Field related planning Field pump ( if problem arise the operational department solve)

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Cross Functional Teams Encourage team work & group dynamics while inculcating a sense of ownership through

empowered Cross Functional Teams (CFTs)

Employ Business Process Reengineering (BPR) to maintain an international working environment by streamlining processes and removing unnecessary layers

Interactive sessions are regularly held by the Managing Director at all levels because clear, coherent and consistent messages ensure that employees are able to integrate the inputs into their thinking

Setting up of Cross-Functional Teams (CFTs) to promote team work and timely action.

Quick and merit based decisions taken by respective cross functional teams have yielded important successes in terms of volumes and profit. Cost savings have occurred due to strict vigilance and proper negotiations in supply and purchases. Similarly distribution systems and logistics have also been improved to a great extent and financial transactions as stated earlier show a remarkable change. Similarly security and HSE have also seen a turn around

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Geographical Departmentalization:

12

13

12 * Area in charge minimum (4) and maximum depend upon the size of the area

EDCS

GM Retail GMIC

DGM(South)

DGM (Central)

DGM (North)

Divisional Manager

(04)

Deputy Business Managers

Divisional Managers

(06)

Divisional Managers

(04)

DGMIC FEUL

DGMIC LUBRICANT

*Area Incharge

Deputy Business Managers

(07)

Deputy Business Manager

(07)

Area Incharge(05)

Area Incharge(05)

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Functional Departmentalization:

(GM managers renamed as Business Managers)Source: Interview

13

MD & CEOED-CS

GM ConstructionGM (retail)GM (Rc)

GM AviationGM Operations

GM SupplyGM Logistics

GM Training & Organizational Development

GM Lubricants and ChemicalsGM Gaseous

GM Brand managementGM Legal

GM HR

C.I Auditor

DGM Security

DGM procurement

ED - FINANCE & IT

GM Finance

GM IT

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M echanistic or O rganic organization ??? Pakistan state oil is mechanistic as well as organic organization. By analyzing the organization seems to me more organic than mechanistic.

Decision making centralized (on major issues) as well as decentralized. Clear chain of command to the employees Cross functional teams are also working Span of control vary (department to department). Division of labors Company rules and policies are strict

Strategy Mix Matrix

Introduction of Matrix Management System with shared support functions.This is based on the Strategy Mix Matrix (GSM) which PSO has adopted. We emphasize quick decision making in our style of management we strengthen teamwork promoted through formation of various cross functional teams to expedite decision-making and execution of policies.

In a clear departure from the bureaucratic style of management, employee empowerment has been enhanced through delegation of authority and employee participation has been ensured through open invitation of suggestions.

Old PSODistribution orientedLarge and centralizedGovernment controlOperational basedDiffused responsibilityTechnical orientationRisk averseHierarchic andBureaucratic setupReliance on managerial authorityPetroleum sale only

Transformed PSOCustomer service OrientedLean and decentralizedManagerial autonomyStrategic visionOwnership and accountabilityCommercial orientationEntrepreneurial attitudesTask driven organizationTeamwork and delegation of responsibilityBroader business base

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LEADING

14

14

Expectations from the leaders at Pso :

Passion for business Contribute towards change and constant improvement Empower People (Sub-Ordinates) Excellent Execution Integrity and Accountability

Leadership Continuum

Leadership Continuum Leaders come in all shapes and sizes. Some are authoritarian and prefer to tell their teams exactly what to do. Others use a much more participative style. And, of course, leaders may use a style anywhere between these two extremes.

These differences suggest a continuum of leadership behavior – with leaders being able to choose the style they use.

So how do you choose the leadership style that's right for you? One popular approach to leadership, the "contingency" approach, argues that your choice should be based on the situation, and not on your personal preferences (here, "contingency" means that your approach is dependent on/contingent upon the situation).

Leadership at Pso :

Pso believes in highly empowered employees . In process of making a decision, the general procedure is that a manager presents a problem to his subordinates, gets suggestions from them and then implements the decisions. Since Pso is a highly diversified organization in terms of business portfolio, a combination of

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Leadership styles is found. The manager decides what style to adopt in which situations i.e. the manager has liberty to choose from either the analytical style, driving style, amiable style or expressive style of leading. A combination of all such styles means that there is an even mix of supporting, coaching, designating and directing from the managers towards the subordinates.

Pso is a follower of “Care and Growth” philosophy. Managers while making decisions are expected to be highly concerned for the people so that once the employee is satisfied; he or she can deliver best possible results under the given circumstances. At Pso, managers believe that high concern for results and work can not be made possible if the concern for the employees is taken out of the equation. Hence, at Pso, managers are expected to show high concern for people so that they can be motivated to take responsibilities in order to produce the best possible results.

CONTROLLING

37

Market controlYardstick to measure employee performanceManagerial decision in the control process.Industrial ratingTypes of controlbalanced scorecardBenchmarkingWorkplace concern

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Market Control Pakistan State Oil Company Limited (PSO) is Pakistan’s largest company having an average turnover of around US billions of $ annually. Therefore, the company can be easily ranked some where between 400-450 in a typical Fortune 500 list of US Companies.

* PSO YARDISTICK TO MEASURE EMPLOYEE PERFORMANCE

A- What he accomplishes Consider result of employees work and that of his subordinate.

Quality of work

Quantity of work

Profit objectives

Developing people

Commitment to company, vision, mission, values and corporate objectives

B- How he works

Planning

Working with others

Delegating

Problem solving skill and use of modern techniques

Organizing

Communicating

Analysis

Health, safety environment

Ethics

C- What he is Consider the degree to which employees personnel qualities contribute to his effectiveness.

Dependability

Judgment

Leadership

Drive

Initiative15

15Source: *Interview with the Public Relation Manager (PSO)Contact no: (9221)9207628: Ext 2061 : (0300)9201184 [email protected]

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D- What he knows What he knows regarding his functional related field and his understanding of environmental matters necessary to performance.

Assigned work

Related work

Company philosophy and objectives

Development in profession or field.

SUMMARY OF POINTS IN (A-D)

5 4 3 2 1 Average

A

B

C

D

This is the proper way through which employee performance is measure in PSO.

BENCHMARK:Pakistan state oil benchmark is to get

Market share Profit

Internal Benchmarking:On the basis of past experience company set their standard.

BALANCE SORECARDEmployee development report is just like a balance scorecard for the higher management. on the basis of which they decided that whether employee deserve to promote or tends to be in the same category.

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PACRA ASSIGNS RATINGS TO PAKISTAN STATE OIL COMPANY LIMITED The Pakistan Credit Rating Agency (PACRA) has downgraded the long-term entity rating of Pakistan State Oil Company Limited (PSO) to AA+ (double A plus), while maintaining the short-term rating at A1+ (A One Plus). These ratings indicate a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments. The ratings reflect the company’s leadership www.pacra.com

FINANCIAL CONTROL

FINANCIAL RATIOS

Types of controlControlling is a reflection of planning and controlling in an organization is mandatory. It ensure that either the company is going in the right direction or not.

FEED FORWARD CONTROLCompany use feed forward control. Obviously company anticipates the problem and issues.

FINANCIAL RATIOS 2008 2007

Return on Shareholders' Equity (%)

45.4 22.4

Earning per share(Rs Bn)

81.94 27.3

Dividend per share(Rs Bn)

23.5 21.0

Market value per share(Rs Bn)

417.24 391.5

Debtor turnover ratio 24.6 32.5

Net profit ratio 2.4 1.14

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Managerial decision in the control process

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Objectives and standard set

Measure actual performance versus standard performance

Goal achieved Goal not achieved

Search reasoning

If reason satisfy If reason not satisfy

Then take decision against that/those

employees

then revise standard.

Well an good

Example: S A L E S North South

Quarter 1 (2008) 180 M 190 MQuarter 1 (2009) 200 m 210M

If Business sales manager of North has set a target to achieve the sales of 200 million in a quarter year. At the end of the quarter they achieved the sales of 180 M. Then they can balance or shift it to the other region (if the sale of that territory is rapidly growing).

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S WOT A NALYSIS Strengths

1. Market Leader in Oil2. Superior Quality Products3. Superior Customer Services4. Customers Loyalty5. Competent Human Resources6. Innovation Skill7. Socially Responsible8. Government Backed Entity9. Educate graduates through Quality Internship programs.

Weaknesses1. Inequitable Compensation Package2. Employees Turnover3. Ineffective in Lubricant Market4. Fail to identify the reason of fall in Market Share.

Opportunities1. Growth in Purchasing Power2. Growth in Vehicles Production3. Growth in Population4. Government Support5. Increase in Prices6. Increase in Demand

Threats 1: Competition

2: Substitute Products 3: Inflation4: High Cost

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5: Interest Rates6: OPEC Policies

RECOMMENDATION / SUGGESTIONS

After analyzing the financial ratio and this report I would like to give some recommendation.

PSO must organize events that will educate the people regarding consumption of a fuel.

PSO must look for extend its business / organization globally. (to open its branches in Afghanistan and other neighbors countries.

Provides Environment safety programs at school and university levels.

Must promote our Sports industry continuously.

Must search for the substitute of oil and gas.

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