Freedom of change in a free economy| Mid-term Submission| Submitted to: Sandeep Krishnan Submitted by: Ramees Mohammed (Roll No: 2009208) Contents Introduction2 Objectives2 BPCL’s Capabilities to cope with change2 BPCL: Why redesign became a necessity3 Issues with the current structure5 Steps to effective Organizational change6 Issues to be addressed in Organization redesign8 Introduction In 2004, Bharat Petroleum Corporation Ltd (BPCL) was one of the leading state-controlled oil retailing companies in India.
The case talks about the evolution of the oil industry, its structure, its changing regulatory environment, the resulting competitive scenario and its implication for BPCL. With the partial liberalization of the industry and the entry of private players, state-owned downstream marketers were forced to focus on marketing in order to protect their customer base. Objectives * To discuss the strengths of BPCL as an oil marketer over the years, and the initiatives taken by the company in the wake of changes in the business environment * To discuss the challenges faced by BPCL To discuss BPCL’s foray into the upstream sector of exploration and production consequent to the deregulation, and the crude supply scenario * To discuss the following points 1. The growth motives of companies in a regulated and a deregulated environment 2. Oil industry economics and the pros and cons of vertical integration in an industry such as oil and gas 3. Analyze the changes in the oil industry structure due to deregulation and how it affects new and established companies BPCL’s Capabilities to cope with change
A privatization drive has been initiated for all government sector units to become profitable and more efficient. Privatization would force the top heavy organisations to wither change their structure and reduce bureaucracy or go extinct leaving only the fitter organisations to fight it out for the market pie. To survive in such a highly competitive market scenario BPCL has undergone a multitude of changes.
The new structure adopted by the BPCL, aims to convert the production centric organization into a customer centric one. Consumers needs can be better understood and catered to in the new structure and decentralized decision making would go a long way in helping understanding and reacting to local customer needs at a much quicker pace. Another important feature of the new organizational framework is that it would help build empowered employees who are committed to the firm and achievement of its long term objectives.
The challenges that the company could face in the future are: Fluctuating international market – The government has subsidized the price of fuel and the same price is being provided to both government as well as private players, it remains to be seen as to what the consequences will be in case there are large fluctuations in the prices of oil internationally. Selling channels and Supply chain – Private organizations have long existed in competitive markets and understand the nuances of promotion and marketing.
Government organizations such as BPCL have existed in a highly regulated environment where little if any promotions and marketing were carried out. It would probably take some time before BPCL develops its capabilities before it can fully compete with private players. Therefore it yet has to be seen if the adopted measures are sufficient in order to survive in the highly competitive and market driven industry after it has been privatized. BPCL: Why redesign became a necessity Privatization: The privatization of the public sector organization made the government that all public sector organizations should have a business orientation irrespective of the social obligations. But the impeding competition as well as the uncertainty of existence in the present for created anxiety in the organization across all levels. It was seen as a double edged sword, some thought that it is an opportunity while others thought otherwise. The organization initiated numerous changes in order to transform to face the competition.
These changes were made keeping in mind the result of the team that was studying the effectiveness of this model followed by different countries. * CUSECS study report: BPCL went through an elaborate change based on the initial diagnosis by a team of 22 managers who were nominated from various functions across levels. The team size was later increased to 30; the team was called CUSECS (CUstomer SErvice ;amp; Customer Satisfaction). This team was supposed to perform a training session which included topics like negotiations, interpersonal effectiveness, presentations, systems thinking and best practices.
This team was provided with all the information and support required to develop skills in diagnosis, change strategy formulation, organizational issues with facilitation by consultants and then they gave presentations to the top management. * Top-down Flow of information: This whole exercise was conducted to develop clarity and common understanding about the future of the organization. The exercise started with the board members, it was extended across the organization in a snowball approach flowing from the top management to the junior management facilitated by internal experts trained specifically for the same.
The core vision of the whole exercise can be subdivided into 10 broad themes in the shared vision of BPCL this gave an opportunity for articulation of the aspirations of the people. The process brought whole organization out of lethargy and increased the energy levels and expectations on individuals, teams and the organization. Issues with the current structure * Overall dissatisfaction with the current scenario There is an underlying level of dissatisfaction throughout the organization. The emergence of privatization on the horizon, there is a feeling of insecurity as shadows of corporate takeovers loom over the company’s future.
The need for being a sleeker sharper and more stream lined company is felt throughout the organization. * Unfavorable Gap Analysis results The company is forecasted to be falling short in its capabilities to achieve its targets. Even when the company has set visions, there is an ever present lack of capabilities to achieve the set visions for the future. The gap analysis provided by the expert team suggests down the same line. * Market blur The company has always survived in a controlled protected environment, wherein it has enjoyed a lot of freedom and privileges.
Now when the market gets open to all players, the stiff competition would not let BPCL enjoy the freedom which they enjoyed prior to deregulation. Stiff competition would mean that BPCL becomes more customers oriented and more market centric. The existent issues would be taken care of by the newly introduced features in the new organizational plan. * Highly empowered work force The new feature would ensure a highly motivated workforce that would ensure that the overall dissatisfaction in the organization is curtailed. A motivated workforce provides the organization with a positive culture and an upbeat environment. Decentralized decision making In a deregulated, customer centric market, it would be hard to make dynamic changes in the organizational strategies if the decision making is vested at the center alone.
In order to avoid this, the company would be opting for a decentralized decision making structure which would ensure the following: * Better customer orientation * Lesser bureaucracy * Lesser time delay * Smarter and extensive data collection and dissemination * Better definition of hierarchies and boundaries * De-linking of authority from hierarchical levels Orientation towards internal and external customers ;amp; Regular market research and customer surveys The more customer centric approach would ensure that the prime focus remains that the customer is satisfied rather than top and bottom lines are fed. The company’s shift towards a more customer oriented organization would ensure their competitive status in the deregulated market wherein the scenario would be one of ‘dog-eat-dog’ and all players are striving to satisfy customers. Steps to effective Organizational change
Once the change has been identified the following steps can be followed for an effective implementation of the organizational change 1. Creating Awareness The first step to take in initiating change within any type of organization is to create acute awareness of how things are now and how this state of affairs falls short of accomplishing stated goals and objectives. This can be done by disseminating occasional “state of the organization” reports as well as holding brief, but frequent, “progress report” meetings within each department and/or subgroup. . Creating a sense of self-ownership The second step is to nurture understanding that something must be done to change the current situation. Solicitation of input from coworkers regarding what can be done to change things follows logically from the understanding that something should be done. “Input equals buy-in” and those who contribute their ideas on how their organization should change have a strong investment in making that change happen. 3. Sense of urgency and Priority
Although people may provide suggestions as to how to change, unless there is a sense of urgency to do so, change will be perceived merely as a concept rather than a process that needs to be started immediately. Once change is understood as needing to be accomplished, a positive perception of what it will look like, both in terms of the transition process and the “finished product,” needs to be fostered and fed by constant communication about the shared vision of the future and the specific ways everyone will individually benefit in that new reality. . Motivation On the way to making the changed environment and operating procedures “stick” and stay feasible throughout the organization, there needs to be a well-thought-out program to ensure the actual adoption of the changes in the way things are done. Rewarding those who perform in the new ways and telling the stories of how their results better meet the current needs and accomplish the goals of the organization will go a long way to moving all members toward behaving in the “new and better” way. 5. Feedback and evaluation
Once adopted as “the way things are done around here” change can be seen as having been institutionalized within the organization and established as the new standard for performance and measurement of success, recognition and reward. Continue to solicit feedback on the new ways and request still other ways members can improve their respective job tasks to achieve even greater levels of efficiency. The idea is to leverage the experience and ideas of those who do the job to improve the job on a continuous basis. Institutionalizing new and improved ways of doing things in an organization is an ongoing process.
In other words, managing organizational change means to continually insist on change for the better. Issues to be addressed in Organization redesign * Strategy – The organization design must support your strategy. If your organization intends to be innovative then a hierarchical structure will not work. If however, your strategy is based on low cost, high volume delivery then a rigid structure with tight controls may be the best design. * Size – The design must take into account the size of your organization. A small organization could be paralyzed by too much specialization.
In larger organizations, on the other hand, there may be economies of scale that can be gained by maintaining functionally specialist departments and teams. A large organization has more complex decision making needs and some decision making responsibilities are likely to be devolved or decentralized. * Environment – If the market environment you work in (customers, suppliers, regulators, etc. ) is unpredictable or volatile, then the organization needs to be flexible enough to react to this. * Controls – What level of control is right in your business?
Some activities need special controls (such as patient services in hospitals, money handling in banks and maintenance in air transport) whilst others are more efficient when there is a high degree of flexibility. * Incentives – Incentives and rewards must be aligned with the business’s strategy and purpose. When these are misaligned, there is a danger that units within the organization become self-serving. Using the earlier example of a company that wants to grow by acquiring new customers, the sale team is incentivized on customer retention, and therefore is self-serving rather than aligned with the business purpose.