INTRODUCTION TO MANAGEMENT

Final reportOn

Submitted bySYED REHAN ALI

MBA-(Evening)

FacultyMrBABER WAHAB

(Course Mentor)

Date of submission 30th

APRIL 2009

SP09-MB-

ACKNOWLEDGEMENT

Fore mostly I thank Almighty ALLAH who rewarded me with the ability to think work and deliver what I

assigned to do

I would like to thanks the following peoples for their cooperation amp helpful comments to make this report

MrBABAR WAHAB (Course Mentor) Assistant Professor (MAJU)

Mr Sayed Tamiz Uddin Manager (Public relation) Pakistan State Oil

I would also like to thank my parents for their unconditional love and concern that resides me throughout my

educational levels

Once again I would like to thank my course mentor of ldquoPrinciples of Managementrdquo and Manager ndashPR

(Pakistan State Oil) who assists me time to time to make quality report I would like to pay him (both) a note

of thanks

2

LETTER OF TRANSMITTAL

To

Mr Babar WahabCourse MentorManagement

Sir

As this report is concerned with the Management I have gathered all the

information through website and meeting with the Public Relation manager of

(PSO) I make my total efforts to fulfill the requirements regarding this project

In this report main focus is on ldquohow Management functions performs in an

organizationrdquo And I tried my best to handle the entire management process

under your guidance

I am thankful to you that you give me an opportunity to make this report under

practical scenario

Yours truly

SYED REHAN ALI SP-09-MB-0159

3

Acronyms

CNG Compresses Natural Gas

DEO Diesel Engine Oil

EDR Employee development report

ERP Enterprise Resource Planning

GMIC General Manager Industrial Consumer

HBL Habib Bank Limited

IPP Independent power plants

KESC Karachi electric supply cooperation

KPC Kuwait Petroleum Corporation

KSE Karachi Stock Exchange

LPG Liquefied Petroleum Gas

NBP National bank of Pakistan

NRL NATIONAL Refinery Limited

PSO Pakistan State Oil

SAP System Application Program

TNOD Training and organization development

VIS Vehicle Identification System

WAPDA Water and power regulator development authority

WEF World Economic Forum

4

WOPP White Oil Pipeline Project

TABLE OF CONTENT

5

Chapter no

Topic Description Page no

11112

Introduction amp History of PSO Introduction (Pakistan State Oil) History

221

22

INTRODUCTION TO MANAGEMENT amp ORGANIZATION How Manager job is changing

Technology Increasing threats to security Increase Competitiveness

Rewards and challenges of a manager

33132333435

36

ORGANIZATION CULTURE amp THE ENVIRONMENT CONSTRAINTS Manager Views Strong or Weak Culture Dimension of organization culture How Employee learn culture Environment

Internal environment External Environment

Organization stakeholder

44142

DECISION MAKING DECISION MAKING PROCESS INTUTION

551

FOUNDATION OF PLANNING Formal and Informal Purpose of planning How do manager plans Financial vs strategic objectives Types of plan

6

6 ORGANIZING Work specialization Span of control Centralization amp Decentralization Departmentalization Chain of command Mechanistic or Organic

7 LEADING

LEADERSHIP THEORY Managerial grid Path goal Model Formalization Visionary Leadership Span of control Gender difference Developing trust Developing Trust Expert power Reward power

7

SYNOPSISThis report presents detailed information on

ldquoldquoHow the Management functionsHow the Management functions performs in Pakistan Stateperforms in Pakistan State OilrdquoOilrdquo

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 Pakistanrsquos 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

ldquoPSO 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 communityrdquo

We are proud to cater to the fuel and non fuel needs of approximately 28 million customers per day The report concludes on ldquoSWOT ANALYSIS of PSO ldquo and some useful suggestion also addedrdquo

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

SWOT analysis

Conclusion Recommendation

8

(1-1)C OMPANY OVERVIEW

Market Leader in Energy sectorPakistan state oil is the market leader in Pakistanrsquos 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

CURRENT VALUE the Companyrsquos current value of Rs 75 billion

MARKET SHARE

9

INTRODUCTIONamp

HISTORY

MARKET SHARE in Black oil 821 MARKET SHARE in white oil 612 The companyrsquos 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 ldquoKarachi Stock Exchange Top Companies Awardrdquo 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 860000 MTs of capacity ie 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 1610 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 28 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 lsquoPSO Loyalty Cardsrsquo were introduced to reward the retail customers for their loyalty and patronage towards the company In February 2003 PSO launched its lsquoFleet Cardsrsquo and lsquoCorporate Cardsrsquo which are fuel-based credit cards for the business entities These cards along with the companyrsquos 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

POL productsPSO products include

Motor Gasoline High Speed Diesel Furnace Oil Jet Fuel

1(1-1) httpwwwpsopkcomabout_us

10

Kerosene LPG CNG Petrochemicals Lubricants

PSOrsquos 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 amp 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 outlets2

3

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 PSOrsquos 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 rationalization of staff employee empowerment and transparency in decision making through cross functional teams

This new corporate renewal program has divided the companyrsquos 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 companyrsquos agenda under this corporate reform

2httpwwwpsopkcomabout_usbusiness_glancephp

3

11

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 ldquoPetroleum Storage Development Corporationrsquo PSDC

August 23 1976

PSCDC renamed to State Oil Company Limited (SOCL) 5

September 15 1976

4(1-2) httpwwwpsopkcomabout_ushistoryphp

5

12

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

13

The new vision program is launched

(2-1) HOW MANAGER JOB IS CHANGING

CHANGE IMAPACT

Technology

In a global scenario Technology plays a vital role in an organizationPhillips Kotler quotes

ldquo If company not use technologies they are out of the business and only those companies compete in the market that adopts technological changesrdquo

Pakistan state oil uses latest technologies like SAP amp 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 increasingBiggest threats to Pakistan state oil is (Pakistan State Oil Head Office Building) costing Billions of rupeesIn a current scenario

Tank Lorries holds in Afghanistan In strikes tankers damages

Increase

Competitiveness

In a current period competition is increasing very rapidlyEleven or twelve companies are in oil operationTill 1994-95 only two companies were in operation

PSO SHELL

At that time there is no issue of Quality amp Quantity

YEAR PROFIT MARGIN PSO 1994-95 7 PaisaL

PSO 2009 35

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

14

How manager is changing

Rewards

Quality Management

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

OUTSTANINGEXCELLENT

PERFORMANCE

AVERAGEPERFORMAN

CE

ABOVE AVERAGE

PERFORMANCE

MARGINALPERFORMAN

CE

BELOWPERFORMAN

CE

Increment

Basic

15

4

10

2

12

3

NO

-

5

-

PROMOTIONPromotion based on EDR (Employees Development Report)

REAL EXAMPLE

On OUTSTANDING PERFORMANCE

15

On outstanding performance MrTamiz 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 amp Recognition letter Cash award amp Umrah ticket

And also got Laptops and digital camera

6

6(2-2) Interview with the Public Relation Manager (PSO)Contact no (9221)9207628 Ext 2061 (0300)9201184 Sayedtameezuddinpsopkcom

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 6000 tank Lorries Around 1200 tank Lorries equipped with tracking 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 amp 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

16

1 httpwwwpsopkcomsuppliers 1

17

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

Internal environment External Environment

Organization stakeholder

(3-1) Managerial view of management

(3-2)Pakistan State Oil and Strong Culture

(3-3)18

Symbolic OmnipotentTop level management set targets While Middle level make planning to achieve the targets through Lower level staffIf 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 donrsquot justify then management takes steps towards that employees

PSO believe in sharing the key values of employees

Co-ordination meeting between ManagersMD 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 Thatrsquos motivating the subordinate

Dimension of Organization Culture

PSO mainly emphasize on

Stability amp Aggressiveness

Innovation and risk taking

Attention Detail7

Stability amp Aggressiveness

Employee RecognitionTo 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 Awardrsquo PSO Managing Directorrsquos Performance Awardrsquo

Employees within the organization are aggressive to each other in order to achieve the targetsReason PSO has policy that on performance basis employee can exceed each other

ABOVE 25

AVERAGE 50

BELOW 25

25 employees declare as Above performance50 employees declare as Average performance 25 employees declare as Below performance

Example quotedldquoIf there are 04 EINSTEIN in an organization those above rules also applyrdquo

Innovation amp 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

7(3-1 3-2 3-3) Interview with the Public Relation Manager (PSO)Contact no (9221)9207628 Ext 2061 (0300)9201184 Sayedtameezuddinpsopkcom

Innovation and Risk taking

19

Benefits Fueling of authorized fleet vehicles onlySubstantial SavingsAutomatic Odometer Reading

8

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 amp Candid communication culture

ENVIRONMENT

INTERNAL EXTERNAL Specific General

8 Further detail description can be seen on httppsopkcomproducts_servicesvisphp

httpwwwpakistaneconomistcompagesearchSearch-Engine2002SE53asp

INTERNAL

Culture

Culture shows basic values amp behaviors of a societyWith the passage of time culture of an organization also changesExample1520 years back female are restricted to specific fields onlyBut 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 goalsThatrsquos 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 PSOUnion election held after 03 years then revise terms and conditionIRE department control all the issues of union under the supervision of DGM DGM co-ordinate time to time with the union

20

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

SPECIFIC ENVIRONMENT

Customer PSO gives his customer a high valuerdquoBroad customer base including the retail and industrial as well asaviation marine and GovernmentArmed Forces sectors

Major customers are KESC WAPDA DEFENCE PAKISTAN STEEL MILL IPPrsquos 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 onlyPSO purchase their product to

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

Competitor 11-12 companies are working in the oil amp petroleum industryout 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 686 PSO Market share in 2008 706

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

ExamplePolitical partiesGovt 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

21

Economiccondition

In a current recession scenario economic condition of a country is directly influence to the PSOHow

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

Politicallegal 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 InnovationOne of the most important tasks accomplished during the initial period of transformation was to inculcate the significance of information technology amongst the employees

1048708 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

22

ORGANIZATION STAKEHOLDERS

23

Major organization stakeholders are

GOVT OF PAKISTAN 51

HBL (Habib Bank Limited)

INVESTEMNET CORPORATION OF PAKISTAN

D ecision M aking P rocess

D ECISION M AKING P ROCESS

Problem

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

24

PSO lost their regular customer (EDHI)

CHARACTERS in a Real situation`

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

Area Incharge of the PSO (MrTamiz 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 (MrTamiz 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 (MrTamiz uddin) Mr Kazmi if you have any complaint then you should tell us Ok If you are not purchasing then doesnrsquot 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 (MrTamiz uddin) When representative see the Area incharge of PSO in the office of Mr Kazmi he shocked because he knows himPSO area incharge asked him that what you know about quality of the fuel

Representative He stated the same reason as early describedhellip

Area Incharge of the PSO (MrTamiz uddin)

Area Incharge of the PSO (MrTamiz 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

9Interview with the Public Relation Manager (PSO) Contact no (9221)9207628 Ext 2061 Sayedtameezuddinpsopkcom

(0300)9201184

25

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

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 processingEXAMPLEIn Supply department sometime decision takes on the basis of subconsciously mental processing like Whether we will purchase inventory from XYZ

26

party or not

PLANNING

27

Planning Formal amp Informal Purpose Of Planning How do Manager Plans Types of Plan

Internal environment External Environment

Organization stakeholder

PlanningIt can be formal or Informal

(1) FORMAL PLANNING

Formal planning use in

BUDGETING

FORECASTING

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 PLANNING28

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 mindsetOrganization (Top level Management) just wants results

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 heshe 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)

200830

625(including 1st quarter sales)

2009 330(10 more than last year quarter)

7185(15 more than last year quarter)

Financial objectives

Strategic objectives

Increase revenue Increase profit margin High ROI

Kept high market share High quality products Finest customer service

29

Stonger Credit rating Use latest technologies Provide training to the fresh

employee as well as experienced

10

TYPES OF PLANS

BREADTHTIME

FRAME SPECIFICITY FREQUENCY OF USE

STRATEGICIt defines the broad goal for the organizationThe strategic goals of the company along with the strategic plans are decided by the Board of directorsHowever they are reviewed every year in the meetingIn 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

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 hellip they estimate all

SINGLE

Example

In Brand management the planning is Single use

When PSO launch Additive Diesel helliphelliphelliphellip helliphellip hellip The planning use is called single planning

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

10 Interview with the Public Relation Manager (PSO)Contact no (9221)9207628 Ext 2061 (0300)9201184 Sayedtameezuddinpsopkcom

30

and developmentLowest 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

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 occurOperational decisions are the agreement with the suppliers taking orders form customersWhich 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 launchedWOW plan Providing finest customer service to their customers and receive a sudden feedback (WOW)

11 httpwwwpsopkcomabout_usvision_mission_valuesphp

31

Organizing

32

Work specialization

Authority and Responsibility

Chain of command

Span of control

Centralization amp Decentralization

________ Departmentalization

Mechanistic or Organic

WORK SPECIALISATIONThe work specialization is high with each manager leader responsible for a specific work and monitors his subordinatersquos performance on regular basis

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

AUTHORITY AND RESPONSIBILITYPSO 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 amp D ecentralization Centralization decision making In a centralization decision making NO employees participation involvesIt 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

33

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

Cross Functional Teams Encourage team work amp 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

34

Geographical Departmentalization

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)

35

12

13

Functional Departmentalization

12 Area in charge minimum (4) and maximum depend upon the size of the area (GM managers renamed as Business Managers)Source Interview

13

MD amp CEOED-CS

GM ConstructionGM (retail)GM (Rc)

GM AviationGM Operations

GM SupplyGM Logistics

GM Training amp Organizational Development

GM Lubricants and ChemicalsGM Gaseous

GM Brand managementGM Legal

GM HR

CI Auditor

DGM Security

DGM procurement

ED - FINANCE amp IT

GM Finance

GM IT

36

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 functionsThis 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

37

14

LEADING

14

38

LEADERSHIP THEORY

Span of control

Gender difference

Cross cultural leadership

Developing Trust

Expert power

Reward power

Leadership skills enhancement of trained workforce takes place through challenging assignments

empowerment promoting employees within the organization wherever possible and concentrating on Fast-Track employees to fill higher vacancies

Our employees who are willing to maximize their contributions are identified for career development The young and experienced professionals who can bring a significant change are given assignments that encompass a great deal of responsibility and autonomy

Team work promoted through formation of various Cross Functional Teams to expedite development and prompt decision making Employees empowerment thru delegation of authority Employee participation through open invitation of suggestions Accountability at all levels Swift flow of information thru bulletin boards circulars and emails

LEADERSHIP STYLE

Democratic style

The leadership style used in all the departments of PSO is democratic due to the participation of

employees

MANAGERIAL GRID

The management style is 99 scale Because the directors are highly concerned with both the task

activities and the respect

Formalization Formalization is low

Path-goal Model

In PSO leader or manager assist his or her subordinates to accomplishes the task on continuous basis

Visionary Leadership

PSO has a THINK TANK that always pursue to formulate the innovative ways to make their organization

at zenith

Reward power

39

PSO gives rewards and fringe benefits to their employee on achieving targetsReward may be

Increment Bonus salary Holidays Gift items Tickets etc

Developing TrustThrough concerted efforts we have been able to develop and inculcate among employees the values of

integrity health safety and environmental concerns customer satisfaction quality and productivity

leadership and teamwork candid and open communication innovation and creativity diversity respect

for the individual and employee growth and development

The Training amp Organizational Development department pursued a strict policy for change in attitude of employees quite vigorously by inculcating a sense of participation openness integrity and keeping in focus the companyrsquos vision and values in all training activities A pace was set therefore to bring change in all aspects of the organization and its systems

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

Cohesiveness We endeavor to achieve higher collective and individual goals through team This is inculcated in the organization through effective communication Respect 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

Integrity 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

Gender differencePSO donrsquot believe in gender difference Male and Female staff are simultaneously working at the same and different position Female staffs are working in HR Marketing Secretary and Receptionist and other areas with the male

ldquoldquoWe give an equal opportunity to employeesrdquoWe give an equal opportunity to employeesrdquo

40

CONTROLLING

Market Control

41

Market control Yardstick to measure employee performance Managerial decision in the control process Industrial rating Types of control balanced scorecard Benchmarking Workplace concern

Pakistan State Oil Company Limited (PSO) is Pakistanrsquos 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

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)

15Source Interview with the Public Relation Manager (PSO)Contact no (9221)9207628 Ext 2061 (0300)9201184 Sayedtameezuddinpsopkcom

42

54 3 2 1 Average

A

B

C

D

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

BENCHMARKPakistan state oil benchmark is to get

Market share Profit

Internal BenchmarkingOn 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

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 companyrsquos leadership wwwpacracom

FINANCIAL CONTROL

FINANCIAL RATIOS

43

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

Managerial decision in the control process

FINANCIAL RATIOS 2008 2007

Return on Shareholders Equity ()

454 224

Earning per share(Rs Bn)

8194 273

Dividend per share(Rs Bn)

235 210

Market value per share(Rs Bn)

41724 3915

Debtor turnover ratio 246 325

Net profit ratio 24 114

44

Objectives and standard set

S WOT A NALYSIS Strengths

1 Market Leader in Oil2 Superior Quality Products3 Superior Customer Services4 Customers Loyalty5 Competent Human Resources6 Innovation Skill7 Socially Responsible

45

Measure actual performance versus standard performance

Goal achieved Goal not achieved

Search reasoning

If reason satisfy If reason not satisfy

Then take decision against thatthose

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)

8 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 Cost5 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 levels46

Must promote our Sports industry continuously

Must search for the substitute of oil and gas

47