Pakistan state oil

Submitted By:
UMAIR RASHEED SAMRA GHAZANFAR SUNDUS ARIF AYESHA KHALID ZAINAB SAGHIR MASHAL WAFA
LIF09MBAM2098 LIF09MBAM2023 LIF09MBAM2002 LIF09MBAM2033 LIF08MBAM2199 LIS09MBAM2080

SUBMITTED TO: PROF. AMJAD ALI

University Of Central Punjab, Lahore

SUBJECT: CHANGE-MANAGEMENT

Table Of Contents

DEDICATION

We dedicate this project to our parents And all the teachers who helped us while Completing this project and guided us rightly.

ACKNOWLEDGEMENT
We have the pearl of our eyes to admire blessing of the compassionate and omnipotent because the words are bound, knowledge is limited and time is short to express His dignity. It is one of the infinite blessings of almighty ALLAH that He bestowed us with potential and ability to complete the present training and make a material contribution towards the deep oceans of knowledge.

First we avail this opportunity to bow our head before ALLAH almighty in humility who given us the wisdom and perseverance for completing this piece of report. We invoke peace for Holy Prophet Muhammad (P.B.U.H) who is forever torch. We feel highly privilege to ascribe the most and ever burning flame of my gratitude and deep scene of devotion to the Prof. AMJAD ALI who taught us Change Management with heart and also gave a guideline to this report. It would be an honor for us to thank AAMIR QAYYUM (Business Manager) and ZUBAIR AHSAN FAROOQI (General Manager) of Pakistan State oil Company Limited.

VISION
To excel in delivering value to customers as an innovative and dynamic energy company that gets to future first

MISSION
We are committed to leadrship in energy market through competitive advantage in poviding the highest qualit petroleum products and sevieces to our customers, based on: Professionally trained, high quality, motivated workforce, working as 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 inearnng in real terms. Highly ethical, enviromen friendly and socialy responsible business practices.

VALUES
EXCELLENCE : Passion for customer, Total Quality Management, Corporate Leadership. COHESIVENESS: Teamwork, Effective Communication. RESPECT: Reaspect for Individuals, Values Contribution, Equal Opportunity. INTEGRITY: Business Ethics, Honestly. INNOVATION: Creative Ideas, New Products and Processes. CORPORATE RESPONSIBILITY: Health, Safety, Environment, Community Development.

COMPANY PROFILE:
Pakistan state oil was one of the two major oil marketing companies in the country. It came into being on January 1, 1974 when the federal government took over the management of Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL), and renamed them Premier Oil Company Limited (POLC) under the Marketing of Petroleum Products (Federal Control) Act, 1974. On June 3, 1974 the Petroleum Storage Development Corporation (PSDC) was taken over by the government and was renamed the State Oil Company Limited. The government merged PNO and POLC into the State Oil Company limited (SOLC) and on December 30, 1976 renamed it the Pakistan State OIL company Limited. By 2003, the Government of Pakistan owned, either directly or indirectly, nearly 54 percent shares of the Pakistan State Oil Company Limited. PSO also owned the following subsidiaries which have since been disposed of: Auto Oils (Pvt) limited, Gizri Lubricants (Pvt) Limited, Mideast Oil And Grease Corp (Pvt) Limited, Aremai Petroleum (Pvt) Limited, Salsons Lubricants (Pvt) Limited, Petro Lube (Pvt) Limited, Petro Chemicals (Pvt) Limited, Mohsin Lubricants (Pvt) Limited and Salim Petroleum (Pvt) Limited. PSO was the oil market leader in the country, enjoying a 79 percent share of the black oil market and 59 percent share of the white oil market. It was engaged in import, storage, distribution and marketing of various POL products, including mogas, HSD, fuel oil, jet fuel, kerosene, LPG, CNG, and petro chemicals. After PSOs 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 architecture, rationalizing of staff, employee empowerment and transparency in decision making through cross functional teams. This new corporate renewal program has divided the companys major operations into independent activities supported by legal, financial, informative and services, in order to reinforce and monitor this structural change, related check and balances have been established by incorporating monitoring and control system. It is due to this effective implementation of corporate reforms 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. PSO now a blue chip company, member of the world Economic Forum and winner of the Karachi Stock Exchanges Top Companies Award.

OIL INDUSTRY IN PAKISTAN:

Pakistan a modest producer of oil and gas, imported 70 percent of its crude oil requirements. The country was self sufficient in natural gas, although this status was likely to change with future demand increase. The state-owned Oil and Gas Development Corporation (OGDC) was the most important player in Pakistans oil industry. Pakistan Petroleum Limited (PPL), established in 1950, produced the bulk of natural gas. Foreign companies currently operating in Pakistan included British Petroleum. During the fiscal year 2003-4 the overall consumption of petroleum, oil and lubricants in Pakistan showed a negative growth of 5.8 percent due to the consumption of fuel oil. White oil (mogas, HSD, JP-I and SKO) recorded a growth of 1.4 percent white Black oil (FO and LDO) registered a decline of 16.2 percent. The petroleum, oil and lubricants (POL) industry in Pakistan was made up of two major players PSO and SHELL Pakistan, CALTEX came in third, TOTAL PARCO was fourth and ATTOCK Petroleum had the smallest share of the market. PSO was the largest oil marketing company, facing competition from these players.

Products and Services:

PSO caters to POL requirements of a wide spectrum of costumer comprising the retail consumer, various industrial units, government, power projects, aviation and marine sector of Pakistan. We are truly the drivers of the economy of this nation. A network of 3612 retail outlets enables us to reach Pakistanis from Nagarparkar to Sost. We are proud to cater to the fuel and non fuel needs of approximately 2.8 million customer per day. PSO industrial consumer dominance in the government sector can be judge by the fact that all the manor government entities like OGDC, Pakistan Army, Pakistan Railway, NLC, PAF, WAH and HIT have entrusted PSO to meet their POL needs. Besides supplying fuel to national power utilities like WAPDA and KESC, PSO is the furnace oil supplier to all independent power projects (IPPs) in Pakistan with a share of 80% in furnace oil market. Moreover PSO is also playing its due role in meeting the growing energy demand of the country.

PSO also supplies fuel to industrial units like textile, cement, agriculture, transport etc. our industrial consumer base includes prestigious entities like the Presidency and Prime Minster Secretariat, where PSO has developed consumer outlets for timely refueling of their fleets. Furthermore PSO also serve the fuel needs of both national and international air carriers. We also provide jet fuel into-plane refueling facilities at 9 airports of Pakistan i.e. Karachi, Lahore, Islamabad, Peshawar, Faisalabad, Turbat, Pasni and Sialkot. We also supply fuel to ship at Karachi port, Korangi Fish Harbour and Qasim. Moreover we cater to the fuel requirements of Pakistan Navy, Maritime Security Agency, Karachi Port Trust, PNSC, Faisal Marine Oil Services (PVT) Limited. Following are the major products and services of PSO: 1. Retails Fuels 2. Gaseous Fuels 3. Alternate Fuel 4. Cards 5. Lubricants 6. Aviation and Marine 7. Non Fuel Retail 8. Product Prices 9. Quality Assurance 10. Chemicals

CHANGE ROLES IN PAKISTAN STATE OIL COMPANY LIMITED Change Initiator:

Change initiator is a person who identifies the need and vision for change and champions the change. They are the ones constantly seeking change to make things better. Change initiators may face the considerable risk in the organization. In PSO change initiator was the Managing Director. Who became the CEO of the PSO and his name was Tariq Kirmani. His first assignment, which spanned almost three decades from August 1969 to December 1998 was with a multinational oil company of which he became the fist Pakistani oil company director in 1991. He held senior level management position in marketing (15 years), operations (10 years), and finance (7 years) in Pakistan and overseas. Kirmani joined state oil as Deputy Managing Director, marketing in April 1999 and took over as Managing Director in July 2001.

Change Implementer:
The person who has the responsibility for making certain change happens, charting the path forward, nurturing support, and alleviating resistance. They will find guidance in creating and increasing the need for the changes that change initiators are demanding. They will find tools for organizational diagnosis and for identifying and working with key stakeholders. In PSO change implementers were both senior and middle managers. The management committee was a smaller body and reviewed strategic issues and performance. On the other hand the Executive committee was much larger forum created for the purpose of internal communication and also to provide executive the opportunity to express their concerns of company operations which affected its performance. Both committees met on weekly basis.

Change Facilitator:
The person who assist initiators, implementers, and recipients with the change management process. They identify process and content change issues and help resolve these, foster support, alleviate resistance, and provide other participants with guidance and counsel. In order to develop a new social and organizational architecture and a system infrastructure, PSO did not rely on external consultants. Instead, it developed the system on its own with corporate planning playing a key role.

Change Recipient:
The person who is affected by the change. Often the person who has to change his or her behaviors to ensure the change is effective. In PSO change recipients are the employees, and most of the employees had been working in PSO for a long time, they were reluctant to accept change in status quo.

Need for the change:

PSO was loosing its market share due to lack of sound business model to follow. Its performance is so poor as compare to its major competitors (SHELL). PSO uses old technology in its business processes. There was no market and research function. It was unable to undertake short and long term business planning supported by a proper capital budgeting system. The overall performance of the company had been declining before the year 2004. There was high political influence in selection of candidate and political leaders involved in employee promotions. The parchi system and small slips of paper containing external political or social recommendations had become the operational norm for both vacancy filling and career advancement. This approach had led to manpower redundancy in various functional areas and at different levels.

PROBLEM IDENTIFICATION: Pakistan State Oil was losing its market share. The overall performance of the company before the year 2000 had been sliding downwards. Internally it had no sound business model to undertake short and long term business planning supported by proper capital budgeting system. Quality of its products was continuously declining. Shell earned a big name in quality. Rising prices in the international market.

PROBLEMS AFTER IMPLEMENTATION OF INTERVENTION AND REVITALIZING STRETEGIES:TOP DOWN APPROACH:Leaders are rather fast they emphasis is on speed and action. This approach, while seemingly faster, often faces problems in implementation because of resistance from managers and employees resentful of change being forced on them by their superiors. Pakistan State Oil, the top down approach was used which created many difficulties for employees and management as well. CONCEPT OF EQUALITY:Mangers at Pakistan State Oil told that as a result of intervention, the managerial and non-managerial staff is seated in the same office hall, they are given equality and they started to eat in the same cafe, sitting in the same office and residing at the same place. Although it is good to adopt equality principles but the non-managerial staff creates hustle-bustle and lots of disturbance in the office which creates problem for the managerial staff. Managers have to take decisions and they require peaceful environment in the office for that but in the presence of these workers, managers cannot work properly which is a loss to the company.

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DISSATISFIED CUSTOMERS AND EMPLOYEES:Customers at Pakistan State Oil are still dissatisfied with the services provided at Pakistan State Oil. The revitalization in Pakistan State Oil was done with a purpose of making Pakistan State Oil a customer focused organization but this purpose still seems to be unachieved. Customers complaint that the attendants at pumps of Pakistan State Oil are not well-trained and they do not know how to deal with the customers. They are in haste and try to send customer away as soon as possible. On the other hand managers at Pakistan State Oil claim that the attendants are well trained and we properly educate them how to deal with customers. They first check the meter and then put the fuel .The situation is opposite if we see it with perspective of customers as well as managers, showing the inefficiency of change policy.

SALARIES ARE NOT UP:The employees are also not fully satisfied with the intervention process. The salaries at Pakistan State Oil are not up to that level which competitors like Shell and Caltex are paying because to cut down the expenditures, Mr. Kirmani ordered to cut down salaries as well as allowances of employees at Pakistan State Oil. HIGH TURNOVER:Turnover rate at Pakistan State Oil is high due to lack of facilities provided to the permanent employees. A senior manager at Pakistan State Oil told that at first employees were given excellent medical facilities and other allowances and the parents of employees were also entitled for the medical facilities but now theses facilities have been reduced to cut down the cost of company similarly we are paid less at Pakistan State Oil as compared to other competitive organizations thats why often the young managers find better opportunities and leave the organization which lead to high cost.

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Lewins model of change:

Kurt lewin was the person who wrote about the problem of how to bring about change about 60 years ago. He describes the three simple steps of change. Unfreeze Change Refreeze Unfreeze Change Refreeze

Unfreezing:
Unfreezing focus on the need to dislodge the beliefs and assumption required to participate in the change and engage in systematic alteration of status quo. The unfreezing process might occur due to some crises. Some top managers talk about the creating a crises to develop a sense of urgency around changes. The integration and interdependence of systems and people require us to think about the unfreezing of the organizational system as a whole. When this unfreezing happened the system and people who are embedded in those systems become susceptible to change. System and structures, beliefs and habits become fluid and thus can shift easier.

Unfreezing step in PSO:

Reducing the forces that are striving to make the status quo Like Middle managers of PSO were totally opposite to Kirmani thoughts according to them, the old approach of the company was based on historical budget lines and they are satisfy with the old approach. The change initiator should unfreeze their thoughts and approaches. The attitude of the senior corporate citizens was that "since we have always done our work like this, we still continue this way. The attitude and beliefs should be unfreezing by the change initiator. Employees have pessimist approach they are not change implementers they usually maintain their own comfort zones. Kirmani take steps to develop optimist approach in them.

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Internally they had no sound business model to undertake short and long term business planning supported by proper capital budgeting system. Quality of its products was continuously declining

All these problems are facing by the PSO. Keeping in view of these problems Mr.Kirmani the change initiator unfreezes organizational process and reducing the forces that are striving to make the status quo.

Change:
The change process would be reasonably complex, involving the number of people and systems. It is a new state of process. In this phase there would be considerable uncertainty Employee may see the opportunity to improve what is being proposed and make suggestion regarding those improvements. Develop new strategy, structure, system responsibility and shedding the old one.

Change in PSO :
The manager now accept that there is a need to improve the specific system that indicates that rooms are ready means attitude, beliefs and assumptions are now unfreeze and they are ready for change. Internally it had very ineffective environment for all level of employees because of that the productivity level of employees was very low. Non managerial and technical staff all is sitting together due to this there was huge hustle and bustle everywhere. For this purpose strategy was made to do departmentalization. Technical staff has separate department and non managerial staff have separate working area. They have not a customer friendly environment for this they bring a change to make their organization more customer oriented and consumer friendly. contracts with United Bank Limited and Pizza Hut are in progress. Pakistan State Oil is developing environment friendly products which emit less smoke. It had no sound business model to undertake short or long term business planning supported by a proper capital budgeting system. The old capital budgeting system was antiquated and did not provide any meaningful information for quality decisions. For the

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purpose of changing the environment of Pakistan State Oil it was recognized by the upper management that without developing a sound framework of strategic business planning and capital budgeting etc no meaningful change would be possible. For this Mr.Kirmani hired best professional expertise to lead this function. This helped Pakistan State Oil in designing a new business model which would be underpinned by best management practices.

New business Plan:

Strategy Analysis

Strategy development

Strategy implement

Annual corporate business plan

Refreezing:
Once the changes are designed and implemented, employees will need to adapt to those changes and develop new patterns and habits. The system settles in to a new set of balances and relative stability. With this stability comes freezing As the new processes, procedures and behaviors become the new normal practices of the organization. Usually planned changes in structures and roles may be seen as decreasing the power and influence of informal groups that may react in complex ways to resist change.

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Change in PSO:
The organization is a complex web of systems, relationships, structures assumptions habits processes and so on that become interconnected and independent overtime. The new culture and beliefs set by the change initiator should be adopted by the all employees of the organization. New strategic business model which is given by Mr.Kirmani refreeze into organization culture values beliefs and their environment. More customer friendly environment would be adopted to have more satisfied customer. CHARACTERISTICS OF GOOD LEADERSHIP:1. Showing the Way:-

Leaders define and establish principles about the way people should be treated and the way goals should be pursued. Mr. Karmani a Leader set the benchmark by creating standards of excellence and then demonstrates these standards in their own behavior and thus establishing an example for others to follow. They create the environment in which people can succeed. But still some employees shoed resistance, that become an opportunity to create urgency. 2. Creating a Shared Vision:-

Leaders have a clear and passionately held vision of what the changed organization can become.mr karmani wants his organization a innovative and dynamic energy company and also want deliver value to unsatisfied customers. He has the skills and energy to enthuse and inspire people to share his vision, and get excited about the future possibilities.

3.

Challenging the Way Things Are

Leaders are challenging and seek out opportunities to challenge and change the status quo. They seek innovation and improvement in the organization, are prepared to experiment, to take risks and to accept the inevitable failures as part of the learning

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experience. As we see that the change of equality in the working environment .The managerial and non-managerial staff is seated in the same office hall, they are given equality and they started to eat in the same cafe, sitting in the same office and residing at the same place. Although it is good to adopt equality principles but the nonmanagerial staff creates hustle-bustle and lots of disturbance in the office which creates problem for the managerial staff. 4. Empowering and Encouraging People to Act:-

Leaders are enablers and empower people by involving them and believing in them. They create mutual respect and trust and in so doing motivate their people to extraordinary effort and achievement. As they train their staff to the best of their efforts. 5. Addressing the Emotional Dimension:-

Leaders know that extraordinary achievement in an organization is very hard work. They also know that emotional dimension is extremely important. As they create urgency for the complacent workers. But they also acknowledge their peoples achievements and celebrate team and short term goals and individual accomplishments to, and is so doing they make their people felt good about themselves and the workers get highly motivated to. 6. Leaders should recognize that the resistance to change:Resistance may become a problem rather than an opportunity. So while seemingly faster, often faces problems in implementation because of resistance from managers and employees angry of change being forced on them by their seniors. All of these are qualities and practices that make up the leadership characteristics for successful change management initiatives.

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ANALYSIS AND RECOMMENDATIONS As PSO was losing its market share and having ineffective working environment which leads to low productivity and facing so many other problems like they were not having sound business model so their quality of product keeps on decreasing day by day also facing competition from competitors.PSO also facing problem with its dealers transporters as well as with its customers. So this bad scenario compels PSO to bring change in its organization. NEED TO RAISE THE URGENCY LEVEL WAS FELT BUT NOT PROPERLY FOLLOWED: Upper management recognizes that they need strong business planning and capital budgeting system. They felt urgency for change which basically gives more emphasis on corporate level. Need to raise the urgency level was felt but not properly followed. like they create crisis by announcing financial losses and decreasing market share; set goals for increasing revenue, income, productivity and do lot of emphasis on customer satisfaction but on the other hand their managers were not agree with the customer complaints, they use to set narrow functional goals, they were not using external consultants so honest discussion was less in the management meetings. There was no regular interaction with unsatisfied customers, suppliers and shareholders so they have to face problems from their sides. In its meetings they bombard their employees with information on future opportunities but as old employees resist changing so many of them do not listen carefully. Here they need to eliminate resistance with their old employees and to get rid of status quo. For this purpose they have to inject and communicate need and urgency for change to each and every employee. Old employees were quite complacent because of following reasons External consultants were not involved so internal measurement system focuses on wrong performance index. Lack of sufficient performance feedback from external sources Low performance standards Kill the messenger of bad news, low confrontation culture

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FAILURE IN COMMUNICATION: Only those organizations conduct successful change processes which fully involve all the employees in change process through proper communication at proper time. Now in case of Pakistan State Oil the only problem was that the change was imposed upon people, as Pakistan State Oil had many old middle managers who resisted it. But it was their right to resist because they were not being involved in the change process. Vision was also not properly communicated. Affective communication of vision must involved following elements like It should be very simple and understandable Should be precise Big meetings and small. memos and news paper, formal and informal interaction Repeat the vision again and again If any inconsistency happen then explain its reason Two way communication is always better than one way communication

BARRIERS TO EMPOWERMENT It is futile to make the change if the employees are not with you. Employees should also be given enough time to change. Though in case of Pakistan State Oil the change was quick but the employees were not given the time to float their ideas and to cope up with change which led to resistance from employees. they were not properly empowered. In the light of KOTTERs model they can empower their employs to effect change by following ways Communicate a sensible vision to employees Make structure compatible with the vision Provide the training employees need Align information and personnel system with the vision Confront supervisors who undercut needed change

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HRM DEPARTMENT AT EVERY OFFICE: Human resources are a great asset for any company and companies undertake effective measures to look after their greatest asset. Human Resource Department is important in each and every office or division of the company in every city but things are different at Pakistan State Oil, the employees are not satisfied with this thing because they complaint that for every problem related to Human Resource we have to write to the manager at head office in Karachi. The local administrator evaluates the employees in the office and report to HR manager at Karachi. This is not an effective strategy. Human Resource Department should exist in each and every office of the company. It will reduce the problems of employees and they would be better able to get the solution of their problems ABSENCE OF SHORT TERM WINS: In PSO there was absence of short term wins so employees were not motivated as much. Employees at Pakistan State Oil are dissatisfied due to comparatively low salaries. During interview with the senior officer at Pakistan State Oil we came to know that (Personal communication, May 05, 2008) engineers at Shell and Caltex are getting starting salary of Rs. 40,000/- but at Pakistan State Oil they get almost Rs. 20,000/- which is a big difference that is why turnover rate is high here. Similarly taxes are deducted at gross salary due to which take home income is low here. Pakistan State Oil is in the development phase of its some of the products, so it needs to keep its official expenses low which are de motivating employees. They also should be rewarded for their achievements because after a lot of hard work, positive feedback built morale and motivation. ALTERNATIVE FOR FUEL We can see the inflationary trend in the market and the prices of oil are very high in the international market nowadays. People prefer to use alternatives of petrol and other fuels such as diesel which could be of low price. In Brazil, ethanol is used in place of fuel in vehicles and cars. Pakistan State Oil being the largest company of oil in Pakistan should also develop such alternative for people so that people could get high quality products at reasonably low prices. As there is a need, people would greatly respond to this new product which can further help it in rising its sales, market share and profitability.

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