Do Government Companies Have a Future in Today S Competitive Business Environment?

EXECUTIVE SUMMARY

Do Government companies have a future in today’s competitive business environment? A talk by Mr. Jitender Bhargava held on Wednesday, March 9, 2016, at 5 pm in IMC.

The Chamber organized a talk by Mr. Jitender Bhargava, Former Executive Director, Air India, and Chairman, Aviation and Airports Committee, IMC, on the topic Do Government companies have a future in today’s competitive business environment? With several leading public sector undertakings (PSUs) failing in a competitive environment, the talk was conducted to sensitize the public as to the root of the problem and its possible solutions. Mr. Bhargava referred periodically to his book The Descent of Air India, and said that Air India’s story had to be told in some detail since it was once a great iconic brand and pride of the nation, and there were few parallels in corporate history of a behemoth being reduced so soon to such a poor shadow of itself. Air India’s saga also holds some important lessons for the survival and success of today’s PSUs.

In his talk, Mr. Bhargava made the following key observations: . Air India’s story is a classic – and tragic – case of both the Government’s indifference and the management’s failure to grasp reality and change with the times. . Since there was no precedent of a leading PSU failing in a competitive environment, Air India believed in its invincibility. That became its undoing. . Air India needs to grow relative to the market and not relative to its own past performance. The organization was in a turnaround mode for 25 years, which is indicative of some deep- rooted problem. . With Air India now surviving on periodic infusion of funds from the Government, other PSUs have much to learn from its story. It could be used as a standard management case study at leading educational institutes throughout the country. . In the management of any PSU, unions have a role to play but only up to a point. They should realize their limits and also their responsibilities, and conduct themselves accordingly. . The unions are never particularly strong. It is only the managements that are weak and indecisive, and that fact ultimately leads to the decline of the organization. . Unions should realize that in their current avatar they are ill-equipped to face the realities of growing competition … both national and global. Most of what they do tends to hurt – rather than help – the workers’ long term interests. . In today’s hypercompetitive world, PSUs cannot afford to give in to sloth, be reluctant to change, and allow unions to demand progressively higher emoluments while simultaneously compromising productivity. . In any PSU, systemic weaknesses need to be not only identified but swiftly acted upon. A reactive approach just won’t do nowadays, one has to be proactive. Furthermore, no one can expect to get private sector salaries with public sector work ethics. . With today’s customers being increasingly more demanding than those in the past, Air India needs to follow in Qantas’ footsteps – be smarter with costs, faster with decisions, and more productive with their scarce assets. That is the only way the organization can now stay afloat. . Many people ask why PSU employees don’t stand up to wrongdoings when they are in office. The fact is that they are governed by rigid codes of conduct which can be inviolable.

The ensuing question and answer session revolved around the following: . How the issues plaguing Air India could be further highlighted since public money is concerned . What the audit agencies monitoring Air India were doing when rampant financial mismanagement was occurring . Tinkering with job security in PSUs to ensure more accountability and responsibility at all levels . How unionization hurts both employment and productivity, and possible alternatives to it . How PSUs can retain their shareholders’ interests despite political pressures . Why the Government is still not letting go of Air India despite the myriad issues faced by the organization . How the current CMD of Air India can reinvent the organization to enhance its marketability . How PSU unions are often more professional in their approach than the management . Whether getting “outsiders” into senior positions or grooming “home grown” talent to reach the top is more beneficial to PSUs in the long run

Earlier, delivering the welcome address, Mr. Dilip Piramal, President, IMC, said that in recent years the business climate all over the world is becoming increasingly competitive, and our country is no exception to it. In India there has been a transformation in the economy especially after the liberalization process of the early 1990s. With the state of our PSUs being what it is and no easy way out, policymakers need to seriously rethink whether Government should continue to remain in business.

Dr. Dhananjay Samant Director and Chief Economist