Before corporate turnaround, there has to be a corporate failure. In Pakistan corporate failures abound. Every sector has a fair share of failure. In 1987 I was attending an advanced management program at a prestigious American university. One of the themes was corporate turnaround. Many eminent speakers presented case studies. In the end, the conclusion was "Do not allow an enterprise to fail. Take corrective action. Nip it in the bud. Once an enterprise fails, it is very painful and expensive to turn it around. It is better to close down the enterprise, and start a new, green field project".
PIA is a prime example. It has been failing since 1988. All governments since then are responsible. The chairman and the board of directors are equally guilty. No one ever stood up for the right management decision. Political decisions always trumped management decisions. Today PIA is in such a state that I (as taxpayer) have bail it out every year. PIA requires the following decisions have to be made. The dark forces within PIA would rather kill the CEO, allow the implementation.
1. All unions have to be suspended including PALPA.
2. Head count has to be reduced by 50% in non-technical areas.
3. All salaries have to be reduced by 30%.
4. All pensions have to be reduced by 40%.
5. All travel privileges to PIA staff have to be withdrawn for 5 years.
6. The PIA brand has to be built up professionally. It will cost U S$20 million over the 3 year period.
7. Fleet replacement costing US $2 billion.
They are just the initial decisions. If you get by this hurdle, hundreds of more decisions are required.
KESC (now renamed KE) was a complete basket case before privatisation. Shahid Hamid, the MD, was murdered because he wanted to bring in accountability. However, the Abraaj management has slowly restored management and financial discipline. I have not seen the confidential data, but KE appears to have stabilised. The Bank of Punjab (BoP) was another disaster. During the Musharraf era, BoP was a conduit for political financing. The Chaudhry Brothers took huge loans. The president of BoP at that time had a three-point agenda - to play golf, photo ops, and financing the political masters of Punjab. BoP now issues regular advertisement about its restructuring. "PASSION REBORN" was a slogan created by my late friend Masood Hasan. I don't trust or believe these ads.
The USA is a good turnaround country. All the industry laws are friendly to restructuring. One of the great recent turnarounds was APPLE, when Steve Jobs come back, he turned APPLE around. Today Apple is the most valuable company in the world, valued at US $710 billion. Today, the Pakistan national GDP is US $300 billion (formal and informal). Corporate turnaround in difficult in Europe and Japan because of the social norms and labours laws. In 2009, at the height of EU imposed austerity, the Greek government was issuing major directives on austerity measures. In one such move they sold off 12 Limousines (cars) in a ministry. However, they could not sack the 12 drivers. Seven years later these drivers are still employed, but do nothing. Three of them were recently promoted.
(The writer is the former Executive Director of the Management Association of Pakistan)
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