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 privatization of one PSU every week. Government starts privatization of PSUs by either selling its shares or completely shutting them down.
One has to understand objectives, working environment of PSUs before comparison with MNCs / Private Sector. Objectives of PSUs is not profit maximization, but profit with fulfilling social responsibilities in form of employments, training, environment protection etc. They gives reservation including jobs to person with disability, paid maternity / paternity leaves, sick leaves and not thrown out if employee fail to perform at later stage of his life.
From my experience, can say below mentioned are obstacles in growth of PSUs.
Incapable HR Department: The way HR treat employees affect their moral and confidence. Visit a MNC and see how HR works and then come to a PSU. Even when one seek NOC for applying to other company, HR start treating it as you done something against company. PSUs recruit through competitive exam and have some of best brains of the country but after working for few year, morale and confidence of employees reached so low level that they themselves start doubting their capabilities.
Inability to retaining 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 buttering of bosses, seniority and reservation. This lead 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.
Inefficient Management: Mostly bureaucrats recruited as Chairpersons, Directors of PSUs and don't have competency and experience to run industrial enterprises. 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 a big changed in an underperforming PSU. Unlike Directors of MNCs, their money is not invested in company and hardly affected by performance of company once they retired. They do not have feeling of belongingness to enterprises they served.
Political Interference: 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, influence decisions about location of projects / factory. For example, a minister from Kerala forced to create production plant in his state, on changed of government, new minister done the same for his state of Goa. In fact he was very much interested to take Aero India Show to his state without considering that creating such infrastructure in his state would result unnecessary additional expenditure, he could not fulfill his wish and his portfolio changed.
Long Formalities for Decisions: Decisions are delayed due to red-tapism and bureaucratic procedures. A file 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, 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 on his all acceptable / unacceptable demands. Officers are threaten by management for promotion, transfer, so they have to complete given work but workmen spoiled by trade unions and management is incompetent to check them under control.
Excess Staff: Excess staffing is one of the problems faced by PSUs. Recruitment done in large numbers without considering actual requirements, resulted over-staffing and high employee costs. Everyone requires subordinate for a work which can be done single handily.
Job Security: Unlike MNCs, job security is in PSUs, no lay off even when one is not doing anything. There are strong labor unions with political affiliations to protect workmen interests. Due to this, workmen don't feel need to work and contribute to growth of organization. Low productivity, poor quality of work, absenteeism etc. are common in PSUs.
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.
Accountability: 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.
Unnecessary Expenditure: 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 and can perform at par with MNCs, if they are provided autonomy and there is overhauling in their work culture.
Tags :Corporate Law