Philosophy, SBUs, and nationalization

Citation

(2012), "Philosophy, SBUs, and nationalization", International Journal of Public Sector Management, Vol. 25 No. 5. https://doi.org/10.1108/ijpsm.2012.04225eaa.001

Philosophy, SBUs, and nationalization

Article Type: INTERVIEW From: International Journal of Public Sector Management, Volume 25, Issue 5

An interview with Sarthak Behuria, Chairman and Managing Director of BPCL

Introduction

As identified by Salk and Brannen (2000), “organizational cultures are seen to be quite resistant to change”. According to Townsend et al. (1998), “technology and the expansion of global trade have changed the work environment for organizations of all sizes, allowing even small companies to compete in the international marketplace”.

Collyer and Warren (2009) studied dynamic environments and gave recommendations to project managers on how to manage change. In addition, some scholars (Burns and Stalker, 1961) recommend an organization to stay flexible in fast changing environments,

A late research by Sauser et al. (2009) has focused on the applicability of critical success factors on any projects and found that these lists were not used in practice by project managers or only a few were using it to improve their managerial processes. As a result, some scholars (Shenhar, 2001; Shenhar et al., 2001; Collyer and Warren, 2009; Sauser et al., 2009) have adopted the contingency theory which “investigates the extent of fit or misfit between project characteristics and project management approach” (Sauser et al., 2009, p. 666). Shenhar et al. (2001) focused their research on technological uncertainty and classified projects into four categories: low-technology (construction), medium-technology (incremental innovation, modification of existing products), high-technology (developments of new computer families), super high-technology (not yet existing technologies developed during the project execution) projects. Through a mixed method research conducted on around 150 project cases, he was able to come up with management approaches differing according to technological uncertainty. Shenhar (2001) added the complexity dimension and classified projects into three categories according to their scope: assembly project, system project, and array or program project. As a result, he was able to identify the style of management that matches project scope.

Leadership styles fall into 2 categories: intrinsic and insular; and those that look outwards and are more integrating and universal. Power and influence are needed to establish and strengthen a leader’s position, to acquire and retain resources, to make change and to provide an environment that is conducive to learning within a multi-cultural project or team. Furthermore, project success with regard to aspects of team, project and leader performance is based on a complex mixture of exogenous and endogenous variables that would be different for each type of project.

Fiol et al. (1999) argue that charismatic leadership is a dynamic process and cannot be captured in a snapshot, therefore, all change strategies would depend on preceding or following leader actions. They believe that this is a social process that needs to be better understood by managers and have noted that charismatic leaders employ certain communication strategies to effect social change.

Boddy and Paton (2004) further claim that people involved in a complex change project often have different views about it, known as “competing narratives”. The sources of competing narratives depend on distinguishing project features (subjective interpretations) and organisational context (i.e. culture, structure and distribution of power). It is important to understand the sources of the competing narratives and to decide how to manage them to the benefit of the project.

In 1973, Behuria joined this company very well knowing that the writing is on the wall for the nationalization of the oil companies. In fact, the discussions, as far as nationalization were concerned, was very much in progress and Indian oil had come up in the 1960s and they were growing. The government (of India) had very clearly expressed its intention to nationalize the core sectors of this economy and the oil companies fell into that sector, post 1970-1971.

He joined this company as he felt that with nationalization there will be growth opportunities and also that the company with the Shell backing and background had very good culture, very good systems and was clearly one of the top companies in this country at that point in time. Having joined this company in 1973, he went through the usual Shell training programs. He joined in the internal audit and finance function as a deputy manger. Soon thereafter in late 1976, BPCL got nationalized and were named first as Bharat Refineries and then as Bharat Petroleum. The company had not done recruitment for long time because of the fact that they were in the process of being nationalized. The company had actually stopped recruitment for almost 15 years. So, when Behuria joined at the age of 21, there were a few of them in 20s and 30s. The rest of the organization was above the age of 45. There was a huge gap in terms of the age and the profile was much skewed. It was because the company was shrinking and the new businesses didn’t come. Later new opportunities and growth came to BPCL and they grew at 8 to 10 per cent cumulatively and suddenly realized that they didn’t have enough people and started recruiting at the rate of 150 to 300 people from almost about 1983 or 84 till about 1992.

He joined in financial planning. In fact, Behuria had the unique advantage of moving across different functions as such. He started in finance, went to audit, went to corporate planning, which was set up post-nationalization along with the Chairman. Then, he went to the sales offices, divisional offices in Bangalore and then in Ahmedabad. He moved as an industrial relations manager in the headquarters. Then, he moved as Chief Personnel Manager in Calcutta (now Kolkata) for five years. Then, he moved across to the distribution job. He moved on deputation as Director Operations in the 1992-94. He moved back in the head office as Executive Director- sales, then director marketing and now in human resources.

Soon after nationalization a lot of people left and suddenly he found myself catapulted into a very high position at a fairly young age. In fact, Behuria got promoted every two years so he was the Chief Personnel Manager in 1985 at the age of 33-34 years. He became the Deputy General Manager and General Manager in 1992, which was at the age of 40. He rose to the position of Chairman and Managing Director of BPCL before leaving it to join Indian Oil Corporation as its Chairman.

Burmah shell (now BPCL) in its hay days of late 1950, 60s had 60 per cent of the market share. It was taken over by the government of India to form BPCL. BPCL produces a diverse range of products, from solvents and petrochemicals to aircraft fuel and specialty lubricants and markets them through its wide network of petrol stations, kerosene dealers, LPG distributors, lube shoppes, besides supplying fuel directly to hundreds of industries, and several international and domestic airlines. It was the first refinery to process newly found indigenous crude Bombay High, in the country. Today Bharat Petroleum Corporation Limited has got three refineries at Mumbai, Kochi and Numaligarh.

When Indian Oil started operating all the new government businesses went to them; all the new outlets went to them and others like Burma Shell, Caltex were neither given new business nor retail outlets. So, they were shrinking. When BPCL were nationalized their market share had dwindled to over less than 12 per cent as there was no government business, no retail outlets. So, obviously with the heavy manpower, they had introduced some attractive voluntary retirement schemes and there was no purpose served in recruiting people. But the company had the foresight to realize that we need still to keep a few people so that the company maintains itself in whatever form it exists. There could not have been a situation where there was a complete void. So, they were every year picking up some Chartered Accountants and also some MBAs from IIM (a prestigious institute). BPCL did a mixed recruitment. They did campus recruitment, newspaper, public recruitment through a process of written test and interviews. In the year 1987, for instance, BPCL recruited almost 450 people; a combination of engineers, MBAs, chartered accountants and simple graduates. For their refinery, they hired chemical and mechanical engineers, which was done separately. They not only recruited at that level but recruited a lot of clerical staff. They did lot of recruitment since new bottling plants came up in the industry. Because of the growth and the fact that there was a fairly big gap in terms of people, a lot of other people got to grow. Today, for instance BPCL’s Executive Directors are all less than 50 years of age and the retirement age today is 60. They have a fairly big bulge at the age of now 40 to 50 years. Now, it’s a pyramidical structure and it’s not possible for everybody to grow. Now BPCL are in the same situation which they faced in Burmah Shell because the Burmah Shell in the 70s was shrinking and they had lots of people and they stopped recruiting.

The interview

Interviewer: When you took up your current position what was the mandate, which you had and what was your vision that you spelt out?

Behuria: When we talk of mandate and vision actually I have been a director of marketing from the year 1998 and we had a team of our Chairman, my predecessor Mr. Sundarajan, my other colleagues, four of our functional directors. That was about the year we decided that we need to change this organization in 1997-1998, in fact a little earlier the process had started, mainly because we realized that now the EPM (Enterprise Performance Management) is going to go, the market is going to open up, competition will come in. The days of protection are over. So, from actually 1996 December we decided to do something and I was part of that top management team. We decided that we need to engage some outside consultant. We took help of ADL i.e. Arthur D. Little to look at this organization and see what can be done to redesign and reorganize and restructure this company. Of course, it was not only ADL; we dedicated 50 of our own people in our own trainings and core team. We created a learning centre in our training centre in Juhu, Mumbai, which has a tremendous ambiance. This team was divided into various functional subgroups, various functions that we currently have and that is where the journey began.

Interviewer: So was this doctrine a part of the corporate planning process at that time?

Behuria: It was more of a strategy. We needed to change and we realized that lubricants market that had opened up in 1994, we had lost market share and Castrol made it, all multinationals came in. It took us four years to realize that we need to do something. So, we wanted to be preemptive and take proactive steps to face deregulation, which we knew would come in 1998-2001. So, basically we looked at in that normal process of making an assessment that where we are in terms of current reality, where we need to go. We had a huge shared vision kind of exercise where we involved all our employees as to where we want to go and what we want to do.

Interviewer: What was the conclusion of that strategy?

Behuria: We found a huge gap in terms of where we wanted to be and where we were. There are many things that we did. So, each subgroup made out a plan in terms of what we need to do, which was a type of change plan. In marketing we have to have a retail strategy where our sites need upgradation, our site security must improve. Our supply security in North India must improve. In lubricants, we decided that we need to do some branding work. We need to move out of the retail channel into the bazaar and associate channels. So, every function decided that we need to do this and the first realization came is that we need to be a customer-focussed organization. We had enough of a process-based organization. We had enough of being a function bound organization. In the field, the same sales officers interacted with whether; we had a lubricants customer, fuel oil customer, retail outlets, lubricants and all these. We split ourselves into the type of customers. We get separated so that we moved from a function based to strategic business. So, that was only a structural change, but there were many other process changes vis-à-vis the coming change. So, we moved away. We redesigned the organization; we had really changed everybody’s job. In an organization 80 per cent of the people moved across different jobs in one shot in 1988 and then we had SBUs (strategic business units), retail industrial commercial, LPG, lubricants, and refineries headed by General Manager and Executive Director. Five of the SBU leaders reported to Director of Marketing. So, I had five SBU leaders. We gave them the full empowerment. Whatever authority the Chairman and the Directors had i.e. financial, physical etc. were meant for the SBU leader. Directors and Chairman only had strategic planning, overall performance monitoring, performance evaluation and rewards. The corporate strategies and boundary management with the government and other companies were huge responsibilities. I had a secretariat which would do that, and we totally removed the boundary management from the SBU leaders work and the SBUs.

Interviewer: So, this became insulation for the SBUs?

Behuria: Totally, they had their business strategies, their performance management systems and their implementation strategies.

Interviewer: Was each one of them free to take any decisions including recruitment process?

Behuria: They were totally free. They had inbuilt HR and finance to support the business. We also had lateral linking mechanism in terms of shared services HR, finance, which was corporate planning. We also had created two new set ups. One is the strategy and we had a General Manager strategy reporting to the Chairman. Everybody had to do their own HSE (health, safety and environment) but in terms of a safety cultural and management system, we created one. We created a new department responsible for corporate branding. It decided what will be the core values, what will be our brand promise, how do we take it forward, how do we improve our consistency in offerings, how do we understand the customers, how do we do the execution strategy, what kind of logos should we do, where do we spend our SPOs (strong Pareto optimum) at a corporate level.

Interviewer: Within the comparative space, which you were anticipating at that time, where did you think BPCL should get positioned especially the post APM (administered pricing mechanism) era?

Behuria: We are also in our current reality phase. Our customer service, which we did, we do realize today that customers have very low perception or identity of the national oil company. The products were basically commodities rather than brands. We went to petrol pump because it was nearest, I knew the dealer, it was convenient, it was just like going to a barber or a retailer. There was very little recall of our retail outlets. We realized that we need to position ourselves. In fact, our vision is to be the 1 retail marketing company in the country. In terms of market share, we are 2. In customer value, customer proposition, branding, positioning, first mover, we want to be recognised as 1 marketing company offering innovations. So, that is the strategy that we have that we would like to be considered to be the number 1.

Interviewer: When was it defined?

Behuria: It was defined by 1997 or 1998 when the retail business came into being. Our vision was to be the 1 retail marketing company in the country. We actually are a retail focused company with over 60 per cent retail business. We have the maximum strategic sites. In motor spirit, we are number 2; very close to IOC (Indian Oil Corporation). Our fuel per outlet is the highest. So, we pioneered the up-gradation of the retail outlets. We are the ones who built the new generation retail outlets. We started the petrocard and the loyalty programs. The “pure for sure” campaign; which we felt was threshold in terms of the promise of quality and quantity. Now we have started the premium fuel, which is going very well namely, speed, giving the new generation vehicle some kind of a premium product to have better performance of their cars in terms of driving. We would like to position ourselves as the most aggressive and 1 in marketing. We are the first ones to go into massive non-fuel initiatives. We started the bazaars (at petrol stations); now we want to make them into destination stores. So, that is the vision of the organization and we feel the maximum margins would come from retail. That is where the money comes from. It provides the maximum value addition because the industrial, commercial, aviation lubricants has value but lubricants also has too many competitors. There are pressures on margins and we are on the point where we can’t aggressively grow. We would like to use lubricants as a piggyback on our retail fuel. Retail is our main focus because we have positioned ourselves to be number 1 and already, having a great face in the country in terms of our positioning.

Interviewer: Now, two things I wanted to ask you. One is what about the international dimension, which is coming into this sector. How do you think BPCL is strategizing for that?

Behuria: As a strategy, what we felt and when we discussed this, there was a lot of passion from people to say that we should go overseas, go to the neighbouring countries. Our experience in international marketing has been basically limited; we did some marketing in Nepal in lubricants and in Bhutan, which are both our neighbors. What we felt as our strategy is that there are enough opportunities in India. We must think globally, but act locally and stay local as well and develop competencies to face multinationals in India. After we know that we can handle with care then we must go abroad rather than getting into overseas. Small markets like in neighbouring countries, is not the kind of globalization we are talking about. You want to go to the gulf countries or you want to go to South East Asia, even North America is much favourable. Large competitors have gone to Dubai and some have gone to Singapore. At that point in time, we needed to first be able to handle MNCs and private player in India. May be in another one or two years when we feel, we can move forward.

Interviewer: Especially in retail there is not much competition from MNCs, why do you think that is so?

Behuria: Main reason is firstly, the government has put up some kind of caveat proposing a minimum investment barrier for investors in this sector. So, there are only 4 or 5 qualifiers. In the private sector, it is just Reliance, Shell and Essar and Shell because they are putting some money. So, basically today if you ask me the real players who qualify are Reliance and Essar and the rest are national oil companies like ONGC and NRL. Like lubricant business, retail outlet business has huge back-end initiative work, for instance, to supply in Delhi market, I have to move products from Mathura, Gwalior, Jamnagar by rail. I must have loading facilities there. I must have a depot here; I must have people there. The logistics that is required for the back-end work is enormous. I must have mass storage. The depot will have to service 100 or 200 outlets. If I put up two outlets, how do I serve? Then I have to have a commercial arrangement with somebody else. For example, if Reliance is to put retail outlets in Jamnagar or Gujrat, may be they have a refinery, they may have a terminal. But if they want to go all India, then they need time and also the investment. So, that is what the entry barriers in retail are, other than the coastal line, which also takes time. You need investment and infrastructure, time and capital investment. You need to see whether you need to have commercial arrangements or not. The other issue is that we have our depreciated assets and these have been paid for under the APM (administered pricing mechanism) system. So, our cost per outlet and infrastructure is 25 to 30 per cent. Now, we have to see under these competitive circumstances what advantage people will have, particularly inland; from coastal areas anybody can import, you can hire something, sell those and that is ok, but to have an all India marketing it will take time and one will need deep pockets. You should have staying power. I mean lubricant itself, which had no entry barriers at one point in time we had 40 players; today, there are not even a dozen. In the LPG marketing, unfortunately, the subsidies for them remain but most of the multinationals like Caltex, Shell, Mobil etc. who tried have given up because they have seen that they just can’t do it because it’s not viable in the current scenario. You cannot be selling at Rs10 a kg extra and hope people to buy. Eventually, for customers price is a very sensitive issue.

Interviewer: What about BPCL strategy in terms of having strategic alliances with the international players? Is that also a part of the core strategy?

Behuria: Right from the opening up of the lubricant market, we have had strategic alliance with Shell in the year 1994. We gave them an opening through our retail outlets. We also put some demonstration sites to see the international experience of new generation outlets in India. Sites were put up and that company is a separate company in blending, marketing lubricants both outside retail outlets and within the BPCL outlet. It’s about the 6th or 7th company with largest lubes player. They have a niche in terms of their branding. They have some industrial customers. They have some good products, which are time tested and they have power of the international Shell brand. They have other ambitions of getting into retail venture which they will have to either go through an organic route or through acquisition route that is for the government and them to decide. So, we have had some alliance but most of our joint ventures, we have tied up with other PSUs to form private sector in terms of Petronet pipeline in the country, Petronet LNG.

Our refinery that we started with Oman oil does not seem to be attractive particularly, particularly in respect of the excessive refining capacity in India. In the international experience our refinery margins have not been very good because of high upgradation expenditure in terms of quality fuels. Our experiences with joint venture international partners have been mixed. Mostly, what we have been doing at our core business is where we are making money and we hope that we will continue to do so.

Interviewer: Has your vision been a continuation of this policy?

Behuria: That’s because I have been a part of that core team, but where we really did well was our people, as in the kind of skills, the kind of competencies that we have developed, the kind of empowerment and freedom which our brand promises of being an innovative and caring company and that’s the core line. In fact, when we did a branding exercise, we said we must be a caring, innovative and reliable company in the face of the customers, both internal and external. We sincerely believe that the kind of freedom as I said. It is just not that the SBU has got that freedom. They in turn offer this down the line and eventually, the territory managers i.e. the people who are facing the customers had the full authority to decide on the spot. We worked on strict budgets and enforcement of the costs and controls and key result areas and PMS (Performance Management System) system and evaluation, monitoring all that is in place. But he doesn’t have to wait if something went wrong on a retail outlet and he has to take a decision, he would take it on the spot. We have a team-based structure; where they sit together, work from the depots. Those days of back-end offices in the cities are not there anymore. Their supplier point is the office. You supply the product, the sales and the operation, it is already told to them. The same is true of lubricants, same is true of aviation fuel and same is true of LPG. Earlier, we had back-end officers at the city, state headquarters but now they are at the plant. We have some customer relation centres, complaints and all that but the sales staff are based at the territory, which is at the supply points. So, it was a total interface with the customer to understand his problems, to understand his changing needs and the offerings must be executed towards his needs. So, that is where we have done well.

Other thing where we have scored is in terms of technology adoption. We have been right from the beginning looking at automation, practices, technology adaptation, both in terms of plants and more so in terms of IT infrastructure. We are the first company in India which has done such a massive scale ERP, SAP implementation across 300 locations. A total roll out over 2.5 years. We are still working as we have completed our roll out. Now, we are looking at our MIS system, we are doing some audits, we are looking at some governance issues. We just want to see that all the benefits of SAP come our way as this is not enough to have the online kind of systems, real time systems. We had already derived a lot of benefits in terms of clearing our legacies, our suspense accounts and things which have not been cleared out earlier and are running out for years because it simply brings a lot of discipline in your project management, financial management i.e. your way of working itself. So, that is again a huge exercise. In terms of IT we are one of the most IT savvy oil company. We have 3,000 SAP users today in the country. In term of internet link, everybody has got now and we were again one of the first to have that. We have communication through the e-mail within the organization, but that everybody has caught on. But now we have looked up to other features. All our transactions are on real time. Every minute, you know your balance sheet is updated and then we are drawing a lot of work on our B2B interface in terms of direct customers. That is in terms of indenting through the net, in terms of knowing their accounts, status of their deliveries. We have almost about 30 per cent of our big customers are online. We are now going in LPG Bharat Gas Internet booking facilities which is a B2C initiative. The country has to catch up in a big way. Our petrocard initiative has almost 700,000 customers. We have one of the most popular and widely spread use of petrocard. Now, for the lorry owners, we have a highway strategy and we are looking at fleet card, which has credit facilities, tracking of the lorries, messaging service and we have put up huge retail outlets which can also offer other services to our highway customers. None of them are things which cannot be replicated (by our competitors), but we want to go ahead and keep doing things so that we are recognized as an aggressive marketeer and also as a leading marketeer.

Interviewer: So, these you would think are the strengths of Bharat Petroleum?

Behuria: Yes, and it’s through the people, I would say and the kind of empowerment, the kind of skills, competencies, energies, passion, motivation i.e. the same managements words but actually, you feel it. There is no point saying it unless, it happens. There is a friendly and formal atmosphere around with lot of trust.

Interviewer: So, what about the major deficiencies you felt which are still there within and outside the organization?

Behuria: One main deficiency is the old system guaranteed products. We built our marketing infrastructure all over, supply infrastructure is not totally in place. Out of 20 million tonnes, almost 5.5-6 million tonnes is sold in Northern region of India. Government in those days decided who will build refinery, where will be the plant, and they were totally dealing with what you would do? Marketing, we could decide that okay, I will put up this, I will have this office, I will put up that outlet. So, we went all India but our primary infrastructure was not all India. So, basically what am I coming to is that our main weakness is that we do not have an inland refinery in the North of India. So, Panipat, Koyali, Barauni, Mathura and the Kandla-Bhatinda pipeline is owned by IOC (Indian Oil). So, we are totally dependent on them. We do have a competitive disadvantage vis-à-vis them because the crude producing costs are much cheaper at Panipat vis-à-vis product positioning. Why can’t Shell enter India in Delhi because they can’t compete with products coming from Mathura. Why can’t they enter into Ambala, because they can’t compete with products at Panipat. We have a commercial arrangement because we have some product exchange arrangement like we own (refineries in) Bombay, Cochin, and Numaligarh. So, we have an exchange that we give them but eventually we are drawing more than they are giving. In north India, we have a tremendous weakness. We can position products, we have depots, we have stations all over north, we have LPG plant, we have staff, we have distributors, we have transportation, but we don’t have a refinery.

Interviewer: Any plans for a new refinery?

Behuria: We are putting Bina (a place in central province of India) refinery and it will take 3 to 4 years.

Interviewer: What about sourcing from East Asia?

Behuria: No, I don’t think so because India is having excessive refining capacity and as long as production is available in India, I don’t think this country should start importing because then that much you will export.

Interviewer: But the importing costs might be cheaper?

Behuria: There should be import parity. If it’s a surplus situation, it will not help anybody. On an overall basis I am okay but have surpluses in the west and they have deficits in the north (of India). They are surpluses in the south, so that has to be balanced also. We are not looking at import option at all. We import crude and we add value addition in India. It is the shipping company in imports who will make money on our cost because for every tonne you import, you export other tonne. So that is not the right strategy to have.

Interviewer: What are the regional imbalances and factors affecting them?

Behuria: Supply and non-refinery, inland refinery particularly in the north is the major deficiency.

The other factor which was deficient and that we have improved is IT and automation. Like every company we are saddled with lot of surpluses, growth opportunities are not the same and we have built a lot of facilities. So, we can manage next five years to supply from those locations. The old days of hiring too much of manpower have gone, the new ERP system and their automation has rendered a lot of back-end staff surplus. Well, that’s not too much but 20 per cent, I would reckon in a 12,000 population is 2,500 people. The kind of wage structures that we have; we need to address that issue and see what we can do by way of a combination of VRS (voluntary retirement scheme) or moving staff into front end which is not always possible due to certain limitations. I can’t say (to the older staff) that now you go to Mathura and work at the retail outlet there. Ladies are there in those back end jobs. Today, you don’t need anybody to do reconciliation, maintain registers and prepare vouchers. There is a huge clerical staff population. I can find some front-end job but there are issues of mobility. Everybody would like to stay in the same place they have been and most of the frond-end jobs are out in the market. So, that’s an area, which we have to handle. It’s not a weakness but it’s a challenge within the organization. Of course, other challenges are the government’s own views and policies of what will happen in the future, the disinvestment that everybody is talking about. We as a company are ready for disinvestment, but there are some uncertainties always built around in terms of the employees as to what is going to happen. So, we need to go to the company, assure them but unfortunately, today I am not in a position to do because government has to first make up their mind around what, when. So, that’s an area again, not a weakness but that’s an area, which is creating some uncertainties around the people of the organization.

Interviewer: I want to come back to the very key thing, which you talked of as boundary management. I think that was perhaps the first to be sought in a public sector company. Would you view that as strength or as a weakness to be dealt with?

Behuria: That’s a great strength. Today, you can talk to any of our business leaders; if they came to Delhi, they would discuss the regional businesses and may not know where Shastri Bhawan is (government office for petroleum ministry). So, that’s a terrific change.

Interviewer: How was that done?

Behuria: It was done in terms of restructuring. When we realized that this is our vision, every business must have its own strategy and we talked about empowerment. When each one decided the role then they decided that this part of their business role, which has a business interface, we will have somebody to give the data. Let’s say, parliament questions will have to be answered by the business. I cannot answer it. How many outlets you commissioned, which dealer you sacked and why; the fellow eventually at the territory has to answer. So, that process is there. They also had within their set up, LPG and retail, particularly a small structure who would address parliament questions, board papers, and queries. As a PSU (public sector undertaking), minister queries, all complaints and discussions, industry meetings, that group will be doing it. But the territories and the regional general manager and their SBU leader are totally relieved of that.

Interviewer: I think this was perhaps the first company to define it in so specific manner

Behuria: It came in terms of roles and responsibilities. My role as an SBU leader is ABCDEFG. If I have to answer Director-Marketing on some of the queries, I have a DGM (deputy general manager) who will do only that.

Interviewer: But here you had the functional directors who were doing that. Was that a very complex job especially within this set up?

Behuria: In fact, I found this very rewarding because as the business faces the customer, we have to face our owners and they expect not only you to answer questions but to sometime guide, prepare papers. After all, we went through a huge process of deregulation and it was not easy. Issues about inter-company transactions, they didn’t want any kind of disruption in supplies. Each company has strengths and weakness in some area. We buy Reliance’s products. They have an agreement with IOC (Indian Oil). So, for almost three months, we had to work out issues on pricing, issues on taxes. There is a huge team of finance, commercial and marketing people and we have to lead it. So, I think it was very rewarding because afterall government is the owner and that interface that we have with us cannot be totally wished away and it was effectively done. That was the only way that it could have been done. Normally, what would have happened that if I have been asked to attend three meetings, I will ask my general manager and executive director to attend one or I will go there and he will go here.

But, that we do not do. We all created offices in Delhi and our little secretariat helped us in keeping our daily papers, industry meetings, joint ventures and it has worked well. In fact, if you ask a lot of our Business Unit Leaders, they will know very little about how the government works.

Interviewer: So, perhaps it also gave you a chance to enter into policy making?

Behuria: Yes, very much so, in terms of deregulation agenda. I was a regulator for instance of our regulatory board. I was a member of the committee over the years.

Interviewer: What was that confusion or ambivalence about whether, government is owners or government is regulators?

Behuria: This is a temporary arrangement. Regulator and all will really come into place when the private sector comes, which is still to happen and it’s been gone to the parliament. I don’t think there is an issue.

Interviewer: Coming back to BPCL, any specific organizational changes you are planning? I would relate it to the fact that so much of restructuring was done within the government

Behuria: We have gone through three major exercises. We have gone through an ERP (SAP implementation), which is still on. 150 of my people are dedicated doing their post roll out work.

Then, we had a huge strategy work done through McKinsey as to what should be the retail strategy, the PFS campaign (pure for sure adding hundreds of retail outlets), and the non-fuel initiative. It’s all site security i.e. basic strategy, hard-core strategy. We looked at groceries, destination stores, retailing propositions, and at highway strategies. They are now on the roll out. We are already full (with a number of initiatives). I am more interested in the roll out and implementation, but there are no end of consultants who want to do work for you. We have introduced a new performance management system and gone through a new kind of assessment rating. We have the KRAs (key result areas), generic and critical attributes and behaviors that are required to perform, quarterly assessment, yearly assessment, review.

Interviewer: How much could you tinker with the basic structure within the components of the government framework in terms of compensation practices or in term of sales?

Behuria: We have totally turned it out. As far compensation is concerned, in the PSU system and all sectors, up to about ten to 15 years and middle level, on an overall package basis, it is better than Shell at Bina. It is only at the senior DGM (deputy general manager) and above level and at the top level, of course, there is a total mismatch. From top to bottom it is 1:7. There are people like us. We have lived in the system; we have been through this culture. Everybody loves money, but there are many other things in terms of job satisfaction, challenge, position and profile. Particularly, for me, I don’t look that it is long time to go when one will see how oil sector is privatized and nobody retires at our level. Many of my predecessors, viz., chairman, directors are still working for the last ten years somewhere or the other. So, I don’t think it worries us but what we are also looking at is whether we are rewarding good performance. There is a reward and recognition is not enough. There are both monetary and non-monetary schemes. In our own way we have ideas, forums where innovations and ideas are encouraged, we give them money and we give them prizes. Chairman and Director sit through it for three days. We have an outside evaluation. We also have the reward scheme of the best performer or any innovative ideas, both in terms of money and recognition. We are also looking at sending people overseas if they have done exceptional work on training courses etc. So, these are the things which keep them happy and as I said, first 15 to 20 years particularly, with the kind of loan schemes, housing loans etc. On an overall package, I don’t think where we look at our contemporaries outside the organization; at our level there is a substantial difference if you look at pure money but there are so many other things. I know some of my colleagues who are in Reliance. They may say, my package is this (bigger) but at the end of the day, in terms of whether they are happy or not. So, that’s something that one has to see. I don’t think any of our senior managers are sitting on the fence to jump the other side.

Interviewer: Was hierarchy an issue? Is it the structure which you inherited in 1997 with nationalization having perhaps brought in a lot of government systems? Do you think the legacy of Shell helped in that sense?

Behuria: No, in fact, government didn’t interfere at all. We decided what structure we will have. The old functional set up was old and the APM (administered pricing mechanism) was good wherein government controlled prices. But when we look at the competition and customer focus, I would like to keep a combination of both.

Interviewer: Amongst the worldwide CEOs, whom do you admire the most?

Behuria: Jack Welch, I would say.

Interviewer: Which organization do you admire in India and worldwide?

Behuria: In India, I would say Bharat Petroleum and HDFC are two and I think that (HDFC) is another company like us. It’s really conservative and still being very innovative. Worldwide, there would be like Microsoft or even GE. If you look at India, Reliance has in terms of its own performance is what I would admire but not in terms of leadership, innovation or organizational climate. There, I think HDFC goes well. I would rate particularly GE as a role model but that is again a conglomerate.

Interviewer: Absolutely, and I think perhaps the only conglomerate which worked in that way

Behuria: Everybody cannot succeed. Another company that I admire which has gone through a lot of turbulence and is trying to come out is ITC. They have gone into retail. I don’t how well they have succeeded. They will probably not, but they have also a good culture and they have been able to diverse business portfolios and still be able to maintain their path of life. Hindustan Levers, I admired but not anymore. They produce good leaders. I think that’s the greatest contribution to Indian management. Tata have entered into restructuring much later. They should have done this ten years back. The rest are ICICI in their own way. With those kinds of huge NPAs you can’t do anything. There is so much of risk attached to your loans and political loans. HDFC has that advantage that there are no political loans.

Interviewer: What do you think as your philosophy of management?

Behuria: As I said in the beginning I have been in charge of (BPCL) brand and we have said that we must have a brand promise of being caring, reliable and innovative and that’s what we are taking forward. If we can do that and we want our customers to feel that. First, we must feel and the employees must feel that and we have a long way to go. We are doing some work on innovative, caring and reliable. If I can take it forward, I don’t think one can achieve 100 per cent in the minds of the people all the time. That’s not possible but if that is our brand promise and if we can hold it, I would be very happy to do so.

Guru Prakash PrabhakarBristol Business School, University of the West of England, Bristol, UKguru.prabhakar@uwe.ac.uk

Abbreviations used:

VRS: Voluntary Retirement SchemeAPM: Administered Pricing MechanismSBU: Strategic Business UnitIIM: Indian Institute of ManagementDGM: Deputy General ManagerGM: General Manager