April 14, 2008	Monday	Rabi-us-Sani 7, 1429

WHILE compliance with many of the requirements of the international financial institutions (IFIs) is sought rather willingly, there is a tendency to ignore the requirements for competitiveness in an international environment that the IFIs have been liberalising per force. When state-run businesses are unable to compete, the only IFIs’ imposed solution is privatisation that is readily adopted.

Is privatisation synonymous with competitiveness and efficiency? Our experiences with the cement, ghee, banking, automobile, and power generation sectors indicate otherwise. While banking is considered efficient and profitable on the surface, its inability to share with the depositors is a sad reflection on its performance.

Similarly, automobile, textiles, fisheries, leather, and sports goods, already in the private sector, have difficulty competing either in foreign markets or on the home turf with competing imports. While the public sector remained the punch pad of urbanites, the private sector has not been exemplary either. How then should our organisations become competitive?

Clearly, competitiveness would begin by producing and delivering products and services that provide customer satisfaction, customer delight, and customer ecstasy. Customer ecstasy and customer delight would be too far fetched in our environment. Let us then just restrict ourselves to customer satisfaction for the time being.

To begin with customer satisfaction, the product should be competitive quality-wise and price-wise. Product quality necessitates process and resource quality that in turn necessitates quality decision-making made in a quality organisational climate. Quality environment is, in turn, a function of quality management, quality leadership, and quality climate within. In the absence of these variables, production of quality products is not a sustainable proposition.

This is why the Malcolm Baldridge Award for quality, named after a US Secretary of State for Commerce, evaluates quality on the basis of the entire gamut of variables including business results, process quality as well as quality of management, leadership, organisational climate, and corporate responsibility/citizenship. The Deming Prize for quality in Japan also considers policy environment, quality of organisation and management as well as company-wide effort.

The European Quality Award goes a step further and also rates firms on responsibility to all the internal and external stakeholders as well as on impact on the society. For, unless a firm is responsible to the stakeholders that are input providers to it, the firm will not receive quality inputs from them. The quality of the output will, therefore, be impaired according to the open-systems theory.

In short, it is a quality firm that can give quality products and services that are competitive. And, a quality firm is the one that is also the most responsive to external environmental factors. If it does not blaze the trail, it should, at least anticipate what is coming and prepare an effective response. One hopes that there was responsiveness in PIA, fisheries, leather, sports goods, and textiles as well as in the automobile sector that can thrive only behind protective walls at the expense of consumer surplus.

The state-led sector was found wanting in terms of quality in most respects. There was inadequate leadership from the holding corporation with paucity of the same at organisational level. Excessive control was exercised on the units that required autonomy but were denied the same. Planning done by holding corporations did not yield the desired results as machinery and equipment were provided to various units without gauging the feasibility realistically.

At the level of units, there was apathy towards organisational aims and objectives. The workers were indifferent towards the goals. Labour-management relations were weak. The upshot was that despite having some of the best human capital in terms of professional qualifications and skills of workers, they could not coalesce into a cohesive whole working towards common goals. There was a complete absence of a sense of purpose and mission. The reason for being was absolutely unclear.

The public sector failed to turn over its abundant physical and human capital into the desired goals due to absence of social capital needed to work together effectively. The same may now be said for the private sector businesses too.

The assumption behind privatisation has been that it is the private owners’ initiative and interest that will unify the human resource (HR) around organisational purpose. While the HR here may be helping the owner achieve his goals, the issue of competitiveness remains. If the owners’ goals are achieved and the goal of competitiveness is not, then owners’ goals are clearly out of line with the requirements of doing business competitively. And, if this be the case, the organisations need to redefine their purpose and goals so that they may forge ahead as competitive business entities in dynamic global environments.

The issue then boils down to one of the reasons for being of business organisations. A business entity, however private, comes into being with the utilisation of resources not all of which are strictly private. As they use public resources and inputs from environment external to their entity, their reason for being cannot revolve only around the private interests of the private owner/s.

The business entity is, therefore, a social organism and must be of benefit to the society if it is taking inputs from the same. Since it is a business entity, it must exist for that specific societal segment for whose service it chose to come into being. That is, the customers that receive its output directly. A business entity must, therefore, exist for customer satisfaction first and foremost. This reality must appear in its reason for being/mission statement and must be specific to the segment it has chosen to serve through its product offerings. It is around this large purpose that the organisation must coalesce as a first step towards being competitive.

Customer satisfaction can, however, be achieved only if the organisation enters into a mutually beneficial relationship of exchange with each one of its stakeholders including the employees, shareholders, creditors, suppliers, government, and the natural environment to name a few. However, none of these input providers are the reason why the organisation exists. If there were no customers, there would be no rationale for organisational activity. Unless customers are viewed as the nucleus of business activity, business entities in Pakistan will continue to be found wanting on the front of competitiveness.