Pakistan state oil (PSO)

Company overview.

Pakistan state oil (PSO) was found in the mid-70s when the Government integrated three “Oil
Marketing Companies”: Pakistan National Oil (PNO), Dawood Petroleum and premiere oil company
limited (POCL). The company has 82.3% share in black oil market and 61.8% share in white oil market
and with overall 71% market share. PSO also enjoys around 36% market participation in lubricants
with its own brand name Castrol. The company contribute 80% share in imports of oil products in
the country. It has one million storage capacity (76% of the total national storage) in 13 storage
depots all over the country. Major competitors are shell Pakistan, Caltex, total Parco and attock
petroleum.

Changes in PSO.

From 2001 to 2004 PSO has gone through radical changes, both internal and external, and has
emerged with a new outlook. PSO’s comprehensive and far-reaching corporate reform programme
which resulting in dramatic corporate transformation has been widely appreciated at various
national and international forums. This transformation programme covers the following three main
areas.

1. Organisation restructuring.
2. Employee empowerment and development.
3. Efficiency and transparency in decision-making.

Internal problems

 Out dated system.

 Lack of automation.
 Lack of quality professionals.
 No sound Business vision.
 Ineffective organisational structure.
 Heave reliance on inventory gain.

External problems

 Political intervention.
 Aggressive marketing and development by competitors
 High regulated environment.
 Rapid products substitution in the market.
 New players in the market.

Transformation strategy of PSO.

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It was realized some years ago that PSO need some changes at the management level. The first step
was taken by the PSO to recruit some professional market experts from out side the organisation.
This was result in the appointment of new Deputy Managing Director (Marketing). They separated
the position of CEO and non-executive chairman of the board. The board of management is assisted
by three sub-committees; the Human resource committee, the Audit committee, and the finance
committee. The main purpose of these committees was to review both policy and implementation of
new initiative.

Vision.

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

Mission.

Committed to leadership in the energy market through competitive advantage in providing the
highest quality petroleum products and services to our customers based on p rofessionally
trained, high quality, motivated workforce, working as a team, which recognizes and rewards
performance, innovation and creativity, and provides for personal growth and development.

Implementation of new strategy.

Restructuring.

The implementation of new policy and initiatives was really tough challenge for PSO. Now this is a
place where an organisation can succeed or fail to deliver the real change. They introduced the
business unit concept, these units are performing in an independently and responsibly in the form of
strategic business units, based on clear and transparent allocation responsibility and accountability.
(According to General Manager Interview of PSO)

Employee empowerment and development.

There was no strict control and check on employee, they never fulfil their responsibilities and even
most of them not stay full time at offices .The training and organisational development department
started training and development of the employees. They adopted a strict policy for change in
attitude of employees quite intensively by creating a sense of participation, openness, integrity, and
keeping in focus the company`s vision, values and long-term objectives in all training activities. The
training programme was consist on teambuilding, presentation skill, sale and marketing, leadership,
computer based project management, ethic, customer service etc .

Efficiency and transparency in decision-making.

PSO has adopted Mix Matrix strategy (according to GM, PSO interview on website). They emphasize and
want to see not only quick decision making ability in their management but also transparency in

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them. They gave more attention to teamwork, formation of many cross functional team to help
decision making and implementation of new policy.

Results of transformations.

Over all transformation policy was successful. According to PSO official website “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”. The summary of the result is following.

 Customer serves is improved

 The organisation became decentralized from centralization.
 Managers became more autonomous.
 More check on transparency and accountability.
 More focus on training and development of employee.
 Market share increase from 65% to 71%.
 Profitability increased.

The system Approach to change in PSO.

By definition system is an organized assembly of various components which are related in such way
that the behaviour of one individual component will effect the overall status of the system. Its mean
any process or activity could be a system, so we can take PSO as a system. A system approach
provides clarity, understanding and sense of direction. More importantly it provides a mean of
tackling knowledge management related change events and gets things started (McLaughlin et al.,
2006). A system must have a predetermined objective that the interrelated components strive to
achieve.

The intervention strategy.

An intervention strategy may be regarded as the procedural methodology for successfully

intervening in the working processes of the original system. The ultimate result should be a stable
new environment, which in incorporates the desired change. After the analysis of PSO intervention
strategy, it seems and fit to some extent in intervention system model(ISM).

Implementation phase.

This is the practical phase of our intervention strategy, our objectives are clear and current, options
selected and review, and the system well defined and understood. Now all that is left is to introduce
the change to the system, but for this we need a sound strategy. There are two basic
implementation strategies available which are:

1. Pilot studies: it gives opportunity to review the change. Assumption and procedure
can be tested. Future acceptance of the fully implemented change will increase, but
it also delays full implementation process. PSO was not adopted this strategy.

2. Parallel running: Slow phase out old system, as the new becomes more reliable and
understood. We can not really see this strategy in PSO.

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Conclusion.

The real change process was started in PSO when the government decided in 2000 to privatize the
company and started selling its share in stock exchange, as global privatization trend get more and
more popularity. It is believe that Private sector can be delivered more efficient goods and service
then public sector and we can see clearly in this case study. The market will be more competitive
due to free market instead of monopoly. This strategy can be adopted and can be apply in all other
similar organisation.

References.

1. A.Paton & J.McCalman (2008) change management A guide to effective implementation

third edition, London; sage publication Ltd.
2. Hugh Davenport, Jon Stephens and Stephen Swailes (2003) organisational Behaviour
individual, Group and organisation, second edition, London ;FT Prentince Hall.
3. http://www.pafkiet.edu.pk/dnnbeta/LinkClick.aspx?fileticket=%2FomxhrcZPWo
%3D&tabid=150&mid=703 date 06/03/09 (time 21:00)
4. http://www.psopk.com/investors/pdf/ar_2008_overview.pdf. access Date 06-03-09
(time: 21:00)
5. http://www.sharespk.com/index.php/2007/12/10/psoc-pakistan-state-oil/ access date
07-03-09 (time 1400)
6. www.privatisation.gov.pk/oilgas/PSOTeaser06.pdf. access date 25/03/09
7. www.changezone.co.uk/dynamics/topdown.html access date27-03-09 ( time:11:30)

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8. searchcio-midmarket.techtarget.com/sDefinition.html (access date 10-4-09)