EXECUTIVE SUMMARY

Pakistan state oil is the largest oil marketing company of Pakistan and also among
the top 1000 largest companies in Asia. Pakistan state oil was set up on December 29th,
1976 through the merger of ESSO undertakings with Pakistan national oils limited
(PNOL) and Premier Oil Company Limited (POCL).

PSO is currently the largest oil marketing company (OMC) in Pakistan and is engaged in
the storage, distribution and marketing of petroleum product, Petro-chemicals, LPG and
CNG. The company has the largest market share ie.40% market share in motor gasoline
and 60% market share in diesel oil. It operates largest retail network (350 outlets) in the
country. PSO is committed to begin the preeminent marketer of petroleum product and
services to its customers and achieving its goal while maintaining high level of efficiency
and profitability.

PSO has reported a strong financial performance. Its revenues have grown at a CAGR of
13.8% since 1996. For the fiscal year ended June 2003, PSO generated sales revenue in
excess of Rs. 169 billion (US $ 2.8 billion) and after tax profit of Rs.2.25billion (US
$37.5 million). PSO is the third largest public listed company in Pakistan by equity
market capitalization. It is recipient of Karachi Stock Exchange Top 25 Companies award
for 17 consecutives years.

PSO is well-managed company and is focused to meeting the energy requirements of

Pakistan. The company recently embarked upon an extensive program of restructuring,
rationalization of its network of retail outlets, improving its marketing image through a
nation wide initiative to refurbish and re brand key retail stations and further improving
efficiencies by streamlining its structure. It has adopted modern management practices
and prepares its strategic business plans regularly. It continuously monitors its
performance vis-à-vis annual plans.

Privatization of PSO is also under way, whereby JP Morgan financial advisory

consortium is assisting the govt of Pakistan in privatization process. The company being
financially sound, well entrenched in the petroleum product marketing business, with

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sound and efficient track record of performance is expected to receive active response
form the prospective buyers.

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 CHAPTER # 1

INTRODUCTION OF PROJECT

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 ABSTRACT

This project discusses research that was undertaken about the HR practices of Pakistan
State Oil. The group studied all the HR practices of the company but the main focus was
study the training and development of employees in the company.

A theoretical framework is developed from a literature search and this is used by the
group as model for further research. The group collected data within this framework and
analyzed it according to the requirements of the project. To collect the data required
group members visited regional office of PSO in Islamabad and also collected data from
several outlets of PSO.The web site of PSO is also used as source of data by the group.

At PSO, they Strongly believe that Human Resource are the asset that should be
appreciated with the passage o time. Consequently, PSO considers the strong focus on
training and development of their employees a value added and worthwhile investment.

Then by the detailed study of the training and development practices used by the
company some recommendations are made and on the basis of the analysis of company’s
practices conclusions are drawn.

DELIMINATION OF THE PROJECT

In today’s fast and competitive business environment any company can’t grow without
giving importance to its HR strategies and practices, and among those the most important
is the practice of employee training and development.

In this project our group tried to study the HR practices that are being practiced by the
PSO and area of our main focus were the practices of employee training and
development.

We find that alongside the development of its physical facilities, PSO is deeply conscious
of the pivotal role that human resources play in the success of an organization. As a mater
of fact, human resource development has been identified as an area of key importance.
While strengthening the ranks of its work force with quality professionals at various
levels of management, the company also undertakes several initiatives for improving

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productivity and efficiency at all levels of services. Through computer training, various
courses, sponsorships of staff for studies at professional institutions and seminars, the
company is providing its employees on going opportunities for continuous self-
improvement and learning.

SCOPE OF STUDY

GEOGRAPHICAL

Information about PSO is gathered from:

1. MR. ASIF ASLAM KHAN

Divisional Manager

Retail Islamabad

Tel no.: 051-9220966

e-mail address: dmrrwp@hotmail.com

MAIL ADDRESS

Pakistan State Oil Company ltd

7th floor, ZTBL building Zeropoint

Islamabad, Pakistan

2. MR. FAISAL MIAN

Executive Retail Islamabad

Tel no.: 051-9220966

MAIL ADDRESS

Pakistan State Oil Company ltd

7th floor, ZTBL building Zero point

Islamabad, Pakistan

3. VISIT TO PETEROLPUMP OF

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Askari 10 Kachahri road, Rawalpindi

Chambali road, I-10/2 Islamabad

INTRODUCTION OF THE COMPANY

As the largest oil marketing company of Pakistan, PSO is engaged in storage, import,
distribution marketing of petroleum products petrochemicals aviation and bunker fuels
LPG and CNG dominates the country’s fuel and energy need. The company has largest
retail network in the country and the most extensive terminal and depot network. PSO has
listed in Asia’s largest 1000 companies by Asia Week.

Since its inception in 1976, the company has been meeting more than 70% of country’s
fuel needs. PSO’s 3805 outlets all across the country markets more than 12 million tons
of fuel products annually. This network is supported by PSO’s 28 storage facilities with a
capacity of more than 800,000 tons. PSO took a major step in improving its distribution
facilities by acquiring 12% equity in the 800 km long Karachi-Mehmoodkot White oil
Pipeline.

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 CHAPTER #2

LITERATURE REVIEW

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 HUMAN RESOURCE MANAGEMENT

Managing people is one of the most critical aspects of organizational management in the
21st Century. No matter whether an organization is a non-profit, start-up enterprise, or
mature business employees are crucial to achieving objectives, delivering results and
being successful. The activity once known as personnel and now more commonly
described as human resource management (HRM) is a fundamental aspect of successful
management.

The most important HRM practices are

1) HR planning (i.e. to forecast and foresee the future business and employee
needs and plan for them)

2) Recruitment and selection job descriptions, selection tools, background

checks, offers

3) Compensation (i.e. methods, consistency, market)

4) Employee relations (i.e. labor agreements, performance management,

disciplinary procedures, employee recognition)

5) Mandated benefits (i.e. social security, unemployment insurance, worker's

compensation, COBRA/HIPPA)

6) Optional group benefits (i.e. insurance, time off benefits, flexible benefits,
retirement plans, employee assistance programs, perks)

7) Payroll (i.e. internal vs. external options, compliance)

8) Recordkeeping (i.e. HRIS, personnel files, confidential records, I-9, other

forms)

9) Training and development (i.e. new employee orientation, staff development,

technical and safety, leadership, tuition reimbursement, career planning)

10) Employee communications (i.e. handbook, newsletter, recognition programs,

announcements, electronic communication)

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 11) Internal communications (i.e. policies and procedures, management
development, management reporting)

RECRUITMENT AND SELECTION

The Recruitment and Selection process promotes successful hiring decisions that can
truly impact the success of a department or faculty.

The selection of a candidate with the right combination of education, work experience, ,
and creativity will not only increase the quality and stability of the workforce, it will also
play a large role in bringing management strategies and planning to fruition.

Important steps of the process are:

INITIATING THE RECRUITMENT PROCESS

In initiating the recruitment process following matters should be considered:

• Clarification of the scope and skill sets required to successfully perform the duties
of the position

• Review of the Job Fact Sheet or Position Description to ensure that the skills and
abilities required coincide with the current expectations of the position. If they do
not, then a position evaluation should be undertaken.

• Review of the compensation available to the position (i.e. salary and benefit
plans, etc.)

• Analysis of the impact that the hiring will have on the budget

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SCREENING APPLICANTS

Managing The Applications

The following steps should be completed when screening the applications, both for
organizational:

• Record the names of all applicants who submitted applications/resumes

• Specify the short-list criteria

• Record All Short-Listed Applicants

Selecting the Interview Panel

Research shows that the panel or team interviewing approach produces more reliable
results than does any other type of interviewing process.

A panel of 2-4 interviewers is usually recommended, composed of a variety of direct and

indirect members. Consideration might be given to including a group made up of some of
the following:

• Direct supervisor of the position

• Departmental Personnel Administrator

• Vacating incumbent

• Subject matter expert from another department

• Senior co-worker that interacts closely with the position

INTERVIEW SCHEDULING AND THE INTERVIEW ENVIRONMENT

• Schedule the interviews within as short a time frame as possible.

• Allow approximately 10-15 minutes between interviews to record your

evaluation.

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 • Arrange for interview space where there will be no interruptions.

• Configure the furniture in the interview room in a way that will enhance dialogue
and interaction, such as at a round table.

MAKING THE SELECTION DECISION

CANDIDATE EVALUATION

Each member of the selection committee should carefully review each candidate’s
resume, any notes made during the interviews, and the completed Candidate Rating
forms, to determine which of the candidates should proceed to the next step of the
Selection process, where reference interviews are conducted.

Discussion should be held about each candidates’ qualifications in regard to:

• Education

• Experience

• Knowledge and Technical skills

• Problem-solving abilities

• Oral and written communication skills

• Personal Effectiveness

• Evidence of Team working abilities

These factors should be considered against not only the position requirements, but its
environment as well.

Once the panel has completed its discussion a member should be chosen to conduct the
reference interviews on the candidates most likely to be offered the position.

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REFERENCE CHECKING

A reference check is an essential tool in the employment selection process — be it a new

appointment, or a transfer or promotion within the organization. It provides the
opportunity to verify and gain information in addition to that received directly from the
applicant.

TAINING AND DEVELOPMENT

Training involves an expert working with learners to transfer to them certain areas of
knowledge or skills to improve in their current jobs. Development is a broad, ongoing
multi-faceted set of activities (training activities among them) to bring someone or an
organization up to another threshold of performance, often to perform some job or new
role in the future.

TRAINING AND DEVELOPMENT GOALS

The types of training and development goals identified will depend on the personal and
organizational objectives identified through the strategic planning process and the agreed
appraisal procedure. In any event the goals shall, as a minimum standard, take account of
the following:

• The Mission

• The Values

• The strategic objectives of the company

• Equal Opportunities Policy

• Requirements for core competencies

• Continuing personal and professional development

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 • Requirements for professional and vocational qualifications in further education

• Requirements for professional, vocational and workplace updating

• Requirements for organizational change

• The operational objectives of the schools/faculties/departments/units

• Operational performance requirements

• Personal performance requirements

• Team performance requirements

• Self assessment and action planning

TYPES OF TRAINING AND DEVELOPMENT SUPPORT

The following facilities should be provided to the staff:

• All employees shall have access to the staff development programme. They shall
also have the full opportunity to attend courses and conferences to develop their

professional expertise relevant to the fulfillment of the requirements of their job. The
induction procedures shall be fully integrated into the training and development
programme for new employees.

• The agreed Appraisal Scheme shall be applied equally to all employees.

• All employees shall be given opportunities to attend meetings to the fulfilment

for the requirements of their job, e.g. team meeting and course development
meetings.

• Managers shall endeavor to arrange such meetings at times, which are mutually
convenient to all employees..

• There should be clear procedures whereby employees may apply for training and
development opportunities, and are given clear reasons for the acceptance or
rejection of their applications.

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WORKPLACE LEARNING

For the work place training following points should be kept in consideration:

• All employees shall be encouraged to learn regularly and rigorously from

their workplace activities and share their learning experiences and
outcomes with their peers.

• Mentoring of new, existing employees and job changers is recognized as a

valuable means of achieving shared workplace experience and promoting
excellence in the workplace.

VALUES

• The implementation of these guidelines should seek to encourage an

organizational culture in which learning thrives.

• Both sides recognize that high quality and appropriate training

opportunities support the achievement of the colleges’ strategic objectives
and empower employees to achieve high standards.

TYPICAL REASONS FOR EMPLOYEE TRAINING AND DEVELOPMENT

Training and development can be initiated for a variety of reasons for an employee or
group of employees, e.g.

• When a performance appraisal indicates performance improvement is needed

• To "benchmark" the status of improvement so far in a performance improvement

effort

• As part of an overall professional development program

• As part of succession planning to help an employee be eligible for a planned

change in role in the organization

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 • To "pilot", or test, the operation of a new performance management system

• To train about a specific topic

TYPICAL TOPICS OF EMPLOYEE TRAINING

1. Communications

The increasing diversity of today's workforce brings a wide variety of languages and
customs.

2. Computer skills

Computer skills are becoming a necessity for conducting administrative and office tasks.

3. Customer service

Increased competition in today's global marketplace makes it critical that employees

understand and meet the needs of customers.

4. Diversity

Diversity training usually includes explanation about how people have different
perspectives and views, and includes techniques to value diversity

5. Ethics

Today's society has increasing expectations about corporate social responsibility. Also,
today's diverse workforce brings a wide variety of values and morals to the workplace.

6. Human relations

The increased stresses of today's workplace can include misunderstandings and conflict.
Training can people to get along in the workplace.

7. Quality initiatives

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Initiatives such as Total Quality Management, Quality Circles, benchmarking, etc.,
require basic training about quality concepts, guidelines and standards for quality, etc

8. Safety

Safety training is critical where working with heavy equipment , hazardous chemicals,
repetitive activities, etc., but can also be useful with practical advice for avoiding
assaults, etc.

9. Sexual harassment

Sexual harassment training usually includes careful description of the organization's

policies about sexual harassment, especially about what are inappropriate behaviors.

GENERAL BENEFITS FROM EMPLOYEE TRAINING AND DEVELOPMENT

These reasons include:

1. Increased job satisfaction and morale among employees

2. Increased employee motivation

3. Increased efficiencies in processes, resulting in financial gain

4. Increased capacity to adopt new technologies and methods

5. Increased innovation in strategies and products

6. Reduced employee turnover

7. Enhanced company image, e.g., conducting ethics training (not a good reason for
ethics training!)

8. Risk management, e.g., training about sexual harassment, diversity training

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 CHAPTER #3

INTRODUCTION OF THE COMPANY

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 INTRODUCTION

WHAT IS PSO?

PSO is engaged in the storage. Distribution, and Marketing of Petroleum Products,

Petrochemicals. LPG and CNG. It is continuing to expand its physical and marketing
resources to meet the requirements of the country.

VISION STATEMENT

Vision statement of PSO is:

“PSO is committed to being the pre-

eminent marketer of petroleum products
in Pakistan providing the highest quality
products and services to its customers
through its professionally trained and
motivated work force, while at the same
time contributing in the development of
the petroleum products infrastructure
vital to the country”

CENTRAL BACKROUND INFORMATION

HISTORY

Pakistan state oil company limited was established in 1976,PSO was formed through the
amalgamation of three state controlled oil marketing and storage companies, Pakistan
National Oil {PNO}; Premier Oil Company {POC} and oil company Limited {SOCL},
formerly ESSO Undertakings.

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CHRONOLOGY OF EVENTS LEADING TO THE FORMATION OF PAKISTAN
STATE OIL CO. LTD

01-01-1974 Federal Government takes over management of PNO [Pakistan National

Oil] and DLP [Dawood petroleum Limited], renamed into POCL [Premier Oil company
Limited] under marketing of petroleum products [Federal control] Act, 1974.

03-06-1974 Government incorporates. ‘Petroleum Storage Development Corporation

PSDC

23-08-1976 Name of PSDC change to state oil company limited [SOCL]

15-09-1976 Government purchases ESSO undertakings, vests the same in SOCL.

30-12-1976 Government merges PNO and POCL into SOCL. [state Oil company
limited], and named it as Pakistan state oil company Limited.

COMPANY BACKGROUND

COMPANY OVERVIEW

As the largest oil marketing company of Pakistan, PSO is engaged in storage, import,
distribution marketing of petroleum products petrochemicals aviation and bunker fuels
LPG and CNG dominates the country’s fuel and energy need. The company has largest
retail network in the country and the most extensive terminal and depot network. PSO has
listed in Asia’s largest 1000 companies by Asia Week.

Since its inception in 1976, the company has been meeting more than 70% of country’s
fuel needs. PSO’s 3805 outlets all across the country markets more than 12 million tons
of fuel products annually. This network is supported by PSO’s 28 storage facilities with a
capacity of more than 800,000 tons. PSO took a major step in improving its distribution
facilities by acquiring 12% equity in the 800 km long Karachi-Mehmoodkot White oil
Pipeline.

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As part of PSO’s policy of providing better customer service it has embarked upon its
new vision retail development program. Equipped with the most modern facilities like

• Electronic dispensing units,

• Auto car wash,

• Convenience stores,

• Internet facilities and business centers these state of the art designed
stations provide greater customer confidence and a friendly environment.

As a manifestation of PSO’s greater customer focus a 24hr PSO customer service had
been launched where customer’s can lodge their queries and suggestions about various
PSO products and services.

STRONG FINANCIAL PERFORMANCE

PSO has an impressive record of profitable financial performance. Revenues has grown
at a CAGR of 13.8% since 1996 and earnings before interest, depreciation amortization
(“EBITDA”) has grown at a CAGR of 10.6% over the same period. For the fiscal year
ended June 2001, PSO generated sales volume of 12.6 million tons with sales revenue in
excess of Rs. 169 billion (US $ 2.8 billion) and after tax profits of Rs. 2.25 billion (US$
37.5 million). PSO is the third largest publicly listed company in Pakistan by equity
market capitalization, and a recipient of the Karachi Stock Exchange Top 25 Companies
Award for 17 consecutive years.

MARKET SHARE

Retail

PSO is the market leader in the retail sector in Pakistan with approximately 40% market
share in motor gasoline and over 60% in diesel oil. PSO owes this competitive position in
part to its extensive dealer financial retail network of more than 3,750 outlets, which if by
far the largest in the country In the last two years the company has embarked on a scheme
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of rationalization, closing down unprofitable stations, and upgrading and re-branding
others.

Industrial Consumer

The industrial consumer division enjoys high volumes and generates steady profitability
and cash flows. The division has long-term contracts in place with Independent Power
Producers (“IPPs”) in Pakistan. Other major customers include state-owned utilities and
various commercial consumers. The division’s primary product is fuel oil in which PSO

has an approximate 85% market share. From the locomotives of railways to the giant
turbines of power project, all are fuelled by PSO.

Structural Reforms

In recent years the GOP has appointed senior management personnel from the private
sector to run PSO. The new management team initiated structural reform programme for
the company. Upgrading its retail outlets and concentrating increasingly on high margin
products. In FY 2000 PSO incurred Rs. 967 million (US$ 18.6 million) of capital
expenditure, primarily on the Company’s new vision retail development programme.
PSO is now moving towards a marketing strategy which is similar to that employed by
multinational OMCs presenting Pakistan.

Infrastructure

PSO owns key important terminals and has an over-whelming advantage in terms of the
storage capacity and geographical coverage of its depot network.

Growth of PSO

PSO is the largest of the three marketing companies in Pakistan; it has consistently
maintained an edge over its competitors Shell and Caltex. With an overall market share
of 72% in 1997-98 it sold 6.244 million tons of petroleum products during the half year
ended 31st December 1999 against 5.633 million tones sold during the corresponding
period last year, showing an increase of 10.8%

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Continuous Growth

PSO continues to expand its physical, technical and marketing resources to meet the
requirements of the country. PSO has maintained International collaborations to import
latest technology. They are:

Castrol (UK)

Blending and marketing of lubricants in Pakistan.

Air Total (France)

Technical and commercial agreements in Aviation Sciences and technology.

Exxon chemicals (Singapore)

Petro-chemicals business and technology.

Financial Highlights of the year

¾ An all-time record sales of Rs. 170 billion, up by 26% over the previous
year.

¾ An all-time record gross profit of Rs. 6.4 billion, 12.4% up over the
previous year.

¾ Earned Rs. 2.25 billion as profit after tax and declared 100% cash
dividends to share holders despite the impact of VVS and other
adjustments made.

¾ Received KSE Top performing company award for the 17th consecutive
year.

¾ A record 185 new Vision retail outlets commissioned, bringing the total to
295.

¾ The first oil company to provide Internet facility at retail outlets, 150
installed while 450 under implementations.

¾ The first oil company to provide “Price Display Unit” on monoliths and
pylon signs.

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 ¾ Launched an innovative service “Mobile Quick Oil Change Unit” for
undertaking oil change at customer’s doorsteps.

¾ Successfully took over the important fuel oil effective from July 1, 2001
and HSD effective January 1, 2001 form Government of Pakistan.

OBJECIVES OF PSO

The company is focused on efficiently meeting the energy requirements of Pakistan.

Through its customer satisfaction it is consistently seeking to improve quality of product.

¾ Giving Momentum to the Nation

¾ Energizing Industrial Institution

¾ Ensuring Customer Satisfaction

¾ Meeting New Business Challenges

GIVING MOMENTUM TO THE NATION

Meeting the fuel and energy needs of the people of Pakistan and the country’s vital
institutions setting the highest standards in customer care offering and maintaining
maximum quality control of products and services.

Creating an atmosphere of trust and coordinated teamwork that enables sustains peak
performance. Operating as the lowest cost supplier with assured access to long-term
suppliers, even in the utmost areas of the country.

Undertaking initiatives that have an impact on the lives of people in a constructive

manner. Fulfilling the responsibility as a national institution by making a dynamic
contribution to society and helping to build a progressive Pakistan.

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ENERGIZING INDUSTRIAL INSTITUTION

Throughout the 26 years of its existence, PSO has been a company that has merged sound
business sense with its national obligations. Taking immense pride in being “Pakistan
State Oil”, PSO has always been there for national causes and commitments. Be it
uninterrupted operation of electricity turbines of WAPDA and KESC or the supply of
staggering quantities of fuel oil to HUBCO and other IPPs, PSO meets the majority of the
country’s fuel oil requirements.

By ensuring timely supply of petroleum products to the nations defense forces, from the
Northern Mountain ranges to the shores of Gawader. PSO makes sure that the nation’s
defense is never compromised for want of fuel.

PSO’s Aviation stations at all the major airports of the country continues to facilitate
domestic and international air travel, its Bunker fuel facilities fill up ocean liners of many

a nation while its efforts to provide fuel in the mountains of Saindak have earned wide
recognition.

PSO’s commitment to national development is reflected by its nearly three decades of

operation. The nation can be confident the PSO shall continue to honor the commitment
in the future too.

ENSURING CUSTOMER SATISFACTION

PSO believes in providing its customers diverse services based upon innovation caring
and the progressive vision PSO have for the future. Some 295 new vision outlets for
providing highest quality services to the customers have been established all over the
country.

As a manifestation of its commitment to the adoption of modern technology at its retail

outlets PSO has introduces Internet facilities at 150 outlets. Also PSO is providing
modern means of communication to its dealers.

While Quick Oil Lube Vans provide customers oil change facility at their doorsteps.
Some 12 mobile quality-testing units ensure top of the line quality of products at retail
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outlets with recent expansion in its product line of lubricants. PSO is now in position to
serve the requirements of a broader base of customers.

Expanding the range of services at its outlets PSO has set up Easy Payment Centers in
collaboration with Citibank at selected retail outlets in Karachi. At these centers the
customers can pay their utility bills at any time of the day avoiding the hassles of long
queues.

MEETING NEW BUSINESS CHALLENGES

As the first Oil Company to import HSD PSO has enhanced its handling facilities at
Zulfiqarabad Oil Terminal Port Qasim. This new arrangement for HSD handling has not
only relieved Karachi from noise and environmental pollution but also reduced the traffic
congestion of POL tankers at Keamari.

In past few years Moges is being rapidly replaced by Compressed Natural Gas (CNG) as
fuel for a variety of vehicles. To cater to the demands of this growing segment 30 PSO

stations are now providing this facility while 40 more CNG stations are stages of
developed new lubricant specifically developed for CNG being introduced.

The company recently embarked upon a extensive program of restructuring rationalizing

its network of retail outlets improving its marketing image through a nation-wide
initiative to re-band key retail stations and further increase efficiencies by streamlining its
organizational structure.

ORGANIZATIONAL CULTURE

ORGANIZATION CULTURE

Organization culture is a system of shared meaning with in an organization that

determines in large degree how employees act.

IMPORTANCE OF CULTURE IN PSO

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According to the opinion of the PSO’s sales officer PSO is a sales oriented company.
Strong culture is a symbol of more profit more earning and sense of responsibility. It is
also a monument of well-disciplined enterprises in which every organ of that organization
is well concerned with the ultimate objective of the organization. As it’s a fundamental
truth that every individual from worker to Top manager is aware of his rights privileges
responsibilities and outcome of efforts being invested.

SIX DIMENSIONS OF CULTURE

1. Innovation and risk taking

According to our survey what we have found is that employees are not much encouraged
to be innovative and take risks.

2. Attention to detail

According to our survey employees have given importance.

3. Outcome Orientation

The manager’s focuses on both results or outcomes and the techniques needed to achieve
those outcomes.

4. People Orientation

Management decisions do not take into consideration the effect of outcomes on people
within the organization. They have made their employees a central part of their culture.

5. Team orientation

They emphasize on team orientation i.e. work activities are organized around them.

6. Stability

PSO is maintaining the status in contrast to growth.

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 PLANNING AT PSO

Planning: a process that involves defining the organization objectives or goals and
developing an overall strategy for achieving those goals and developing a complete
hierarchy of plans to integrate and coordinate activities.

SHORT TERM PLANS

¾ Short- term Investments: investments in unquoted shares all stated at the

lower of cost or break up value.

¾ Short-term Loans and Finances: the company has short-term liabilities of

Rs.5525 million from various bands at mark-up rates from 33-38 paisas to
Rs. 1000/day net of prompt payment rebates. These arrangements are
general for a period of 12 months and are receivable subject to payment of
repurchase price by specified dates. These facilities are secured by way of
charge against hypothecation of company’s stock of petroleum products
and trade debts.

LONG TERM PLAN

Investments: the company follows the “cost methods” of accounting for long term
investments. The carrying amount is reduced to recognize a decline other than temporary
in the value of investments.

LONG TERM DEPOSITS

Include Rs.15 million which are interest based against dealership for an initial period of
10 years. The rate of interest ranges from 7-13% per annum and are expected to be
renewed on maturity.

Represent interest free deposits from contractors against the transportation of petroleum
products and are refundable on the cancellation of contract.

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CORPORATE PLANNING

PSO is striving to add value to its business by introducing modern efficient and
innovative business practices to boost corporate performance. Benefits of this value will
be given to shareholders and the employees of the company. Corporate planning is about
competitive advantage; at this most challenging juncture in PSO’s history the focus is on
forward thinking of on cutting edge issues. Staffed with professionals having a diverse
background in business engineering and computer technology and international
experience CP is endeavoring to prepare PSO for the challenges ahead to ensure its
sustainable corporate leadership in future based on the best industrial practices.

The development of a financial model that resulted in the company’s first in depth study
on product wise and business wise profitability as well as the establishment of an
effective procedural framework for capital budgeting mark the first year of the corporate
planning activity in PSO. This has led to classification of authority and criterion for
investment decisions efficient project appraisal based on computer modeling and
effective monitoring of the status results of investments undertaken. These systems have
been adopted by the company for periodic review of corporate performance through
management committee meetings.

CONTINGENCY FACTORS IN PLANNING

LEVEL ON ORGANIZATION

Outstanding performance of company was recorded by the board of management and

noted by the secretary petroleum during his recent visit. It was because employees
worked hard delivered efforts and produced results. During the last six months

unnecessary expenses had been curtailed to a great extent; operations improved depot
losses cut down and cartage fleet upgraded.

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 DEGREE OF ENVOIRNMENTAL UNCERTAINITY

PSO was in an intense competition mode. Market conditions in the last six months were
very difficult with the decline of consumption of POL products. International oil prices
dropping and fixed margins the results were affected.

It was amazing that despite of the challenging industrial environment the company not
only maintained sound financial health but also was pressing hard with all its major
investment plans. The strategic initiative undertaken by PSO is helpful to company to
free the challenges impending deregulation..

ORANIZATIONAL STRUCTURE & DESIGN

The organizations formal framework by job tasks is divided in groups but is coordinated.

The basis on which jobs are grouped in order to accomplish organizational goals is
functional departmentalization.

BRAND MANAGEMENT AND COMMUNICATION DEPARTMENT

Branding is the reputation and the image of a company, which is conveyed via names
logos, acts packaging and word of mouth. Corporate branding used to focus on logo and
name but today it has a broader meaning.

The need for branding arises when consumers expect more than a good product at a fair
price. They seek service experiences that compliment their life styles and brands that
align with their personal aspirations. And that’s exactly what company try to convey to
target market.

VM&C department at PSO follows the following two approaches:

Expanding the depth and breath of brand awareness by improving brand recognition of
consumers during purchase or consumption settings.

Improving the strength favor ability and uniqueness of brand associations making up the
brand image.
29
The above goals are achieved primarily through:

¾ Corporate Advertising

¾ Sales Promotion Campaign

¾ Sponsorships

CUSTOMER SERVICE DEPARTMENT

PSO has recently set up a dedicated service department that is major step towards
company’s overall objective of becoming a customer-oriented company.

Located at the company’s head office in Karachi the CSD is the first point of contact for
the customers on day to day concerns and provides centralized customer service across
Pakistan

Trained and professional staff attends to and solves the customers concerns and
complaints quickly and effectively.

PUBLIC AFFAIRS/PUBLIC RELATIONS DEPARTMENT (PRD)

The major function of the PRD is to ensure the projection of the company’s image as the
country’s premier public sector organization and conscientious citizens. This is achieved
by highlighting positive stories about the company in the media.

Other functions of the department include event media management speech writing and
keeping Managing Director and the company hierarchy informed. The department also
tackles press queries and sets up interviews of the Managing Director with the media. It
also coordinates with the brand management and other departments in the planning of
events press conferences workshops seminars etc.

The department is also involved in giving banners and tackling adds requests not related
to advertisements campaign. The department personnel are also involved in the
preparation of the annual report and writing of articles.

30
CHAIN OF COMMAND

It is an unbroken line of authority that extends from the upper levels of the organization
to the lowest levels and defines who reports to whom.

As PSO follows traditional objective setting decision are made totally by the top
management. The authority is given to the managers to give orders and employees are
bound to follow them. It is the responsibility of the employees to perform those duties
assigned to them.

UNITY OF COMMAND

On PSO the unity of command hoes in the following sequence:

¾ Chairman

¾ Managing Director

¾ 7 General Managers

¾ Divisional managers

¾ 1 sale Executive

¾ 8-12 Sales officers

Managing Director is answerable to the Chairman. MD has 7 general managers working

under him. Every G.M has 8 DMs working under him. Every DM has a Sales executive
and under him there are 8-12 sales officers.

CENTRALIZATION

PSO is a highly centralized company i.e. decision-making is concentrated in the upper

levels of the organization. The Top management makes the company’s key decisions
with little or no input from the lower level employees. PSO is more centralized because
the environment is stable company is large and lower level managers are not as capable
or experienced at making decisions as upper level managers.

31
MECHANISTIC ORGANIZATION

PSO is a mechanistic organization with a highly controlled structure. In the mechanistic

structure work specialization creates jobs that are simple routine and standardized.

Extensive departmentalization increases impersonality and the need for multiple layers of
management to coordinate these specialized departments. There is also a strict adherence
to the unity of command principle. As the distance between the top and the bottom of the
organization is wide, top managers tend to impose rules and regulations to control the
employees’ behavior.

COMPANY ANALYSIS

OPERATIONS

To improve turn around time for railway tank wagons and reduce transportation costs to
GOP, tank wagon filling facility at Pipri Marshaling Yard was commissioned.

Company introducing/replacing in phases own tank lorry fleet for supply of products to
retail outlets in urban areas.

On line computerized management information system established for retrieval of

information at up-country depots/head office, complete networking presently in hand.

Health & safety policy document prepared & circulated within the organization

Environment Policy developed.

ISO certification for Blending Plant Korangi and Central Laboratory at Keamari,
Karachi, accomplished.

INFRASTRUCTURE DEVELOPMENT

Additional pipeline linking OP-3 to the PSO Terminal at Keamri for discharge of deficit
cargo.

Development and construction of Aviation handling facilities at Sihala Terminal

32
 • Modernization of Chakpirana Depot.

• Addition of storage at Jag lot Depot.

PSO’s PHYSICAL RESOURCES

TRANSPORT

PSO Railway Wagons 1120

Tank Lorries under PSO Control 13,400

(Karachi & Upcountry)

BLENDING PLANTS

PSO Owned 4

Affiliates 5

Contracted 1

TANDO ALAM OIL COMPLEX

Tando Alam is located in Hyderabad district of Sindh Province. Hyderabad is the nearest
city about 21 KM away from the location. First exploratory well i.e. Tando Alam Well
No.1 was drilled and completed in May 1984 as an oil producer brought on regular
production in October 1984.

Tando Alam Oil Complex comprises of Tando Alam, Lashari, Sono, Pasakhi, Thora,
Tando Allah Yar, Buzdar North, and Missan & Daru field. Current production from
Tando Alam Oil Complex is 12,000 BPD of oil.

33
BOBI DEVELOPMENT PROJECT

BOBI is located in Sanghar District of Sindh Province, situated 85 KM north east of

Hyderabad and 25 KM south of Sanghar. The field was discovered by OGDCL in 1989.

In order to appraise the field, OGDCL drilled six (06) wells, out of which 05 are
completed as producers.

The development project of Bobi field includes, drilling of two (02) development wells,
installation of surface gathering facilities, oil and gas separation facilities, condensate
stabilization unit, LPG extraction plant and gas recycling system at Bobi field. The
Project is expected to be on stream by June 2003. Upon completion, the following
products are expected to be yielded:

Condensate – 2800 BBL/Day

LPG – 125 Ton/Day

Gas – 10 MMCFD (gas to be re-injected)

KUNNAR OIL FIELD PROJECT

The Kunnar Field is located in Hyderabad District of Sindh Province, situated 24 KM

south east of Hyderabad. The field development included the installation of surface
gathering facilities, oil & gas separation systems, condensate stabilization system, LPG
extraction plants and gas recycling system for Kunnar Field.

The plant was commissioned in September 2000 and is presently producing 3275 BPD of
condensate 15 to 16 M. Tones/day of LPG and residue gas of 2.50 MMSCFD is being re-
injected into the reservoir for pressure maintenance.

34
QADIRPUR JOINT VENTURE PROJECT

Qadirpur Gas Field, the 3rd largest in the country was discovered in 1990. It is located in
the central Indus basin, south of Kandkot and Sui Gas Fields. The Development and
production lease area (389 Sq. Km) is crossed by River Indus in East-West direction. Oil
and Gas Development Limited (OGDCL), Premier Exploration Pakistan Limited (PEPL),
Burmah Oil Netherlands Exploration (BONE) and Pakistan Petroleum Limited (PPL)
jointly hold the D&P Lease with the following interests OGDCL (Operator) 75.0%,
PEPL 9.5%, BONE (bp) 8.5%, PPL 7.0%.

Fourteen wells have been connected through the gas gathering system and put on regular
production. Drilling of more wells has been planned, which will entail improved
recovery.

QADUROYR EXOABSUIB ORIHECT

Presently the field is supplying 380 385 MMSCFD gas to M/s SNGPL, which include
100 MMSCFD of dehydrated and 50 MMSCFD raw gas. After the Phase-II capacity
enhancement, the facility will deliver 400 MMSCFD processed sale gas by mid 2003, in
addition to 100 MMSCFD dehydrated and 50 MMSCFD raw gas. Provision has been
made in the Capacity Enhancement Scheme for further expansion of facilities to increase
annual average treated sales gas from 400 to 500 MMSCFD.

SOCIAL WELFARE ACTIVITIES

In addition to exploration and development activities in the Sindh Province, OGDCL is

already extending medical care, drinking water, and schooling facilities to the locals.

In recent years, Health, Safety, Environment (HSC) has emerged as one of the major
themes of corporate governance at PSO. Realizing the importance of healthy and safe
work practices, a comprehensive HSE policy has been devised and the HSC manual and
procedures updated. According to this policy no new vision outlet can be commissioned
35
before a comprehensive HSE audit. Likewise, HSC audits are being conducted at all
installations and depots, followed by necessary corrective action. In order to increase
awareness, HSC awareness sessions are frequently organized for all employees
throughout the organization. Financial performance for the fiscal year ended June 30,
2003, despite the revenue drop ad a record provision of approx RS 2 billion made for
taxes (an increase of approx Rs 800 million) PSO earned an all-time record profit before
tax of Rs. 5.1 billion, up by 49% while profit after tax rose to Rs.3.2 billion registering a
growth of 42% over prior year period.

The profit increase is primarily due to innovative marketing strategies, organizational

restructuring, product mix revamping of internal system with improved productivity
along with the partial impact of enhanced margins during the last quarter.

Accordingly the board of management approved a final dividend comprising 80% cash
(Rs. 8/share) and 20% bonus shares for FY-2003. Combined with the earlier two interim
cash dividend of Rs. 5 per share the total amounts to Rs.13 per share resulting in the
highest-level cash payout of Rs. 1.86 billion to shareholders of the company.

In terms of sales PSO ranked 520th among Asia’s 1,00 largest companies in the year
2001, according to a survey conducted by the Asia week.

MARKETING

PSO sold 11.5 million tons of POL products during FY 2003-204 despite adverse factors,
including global economic recession that was triggered by September 11, 2001 incident
in the US. The WTC attack was followed by coalition military operation in Afghanistan

Among other factors, the decline in consumption was primarily due to the reduced
consumption of fuel oil. With the launch of New Vision concept, PSO has been
successful in arresting its market share in all products. It has regained the defense
business for FY 03 for the supply of Mogas and HSD. The company also acquired HSD

36
business from Pakistan Railways for the period of three years ending June 05. The
acquisition of these businesses will further improve PSO’s sales performance.

PSO has also regained 1% market share in lubricants from the competition and thus
increased its participation to 39% in FY 2003 This was achieved due to the
implementation of new business unit concept, extension of product line, technical
seminars and improved customer services.

The company has also expanded its lube shop network to 76 while another 50 are in
development stages. PSO has introduced “Free Lube Delivery” service at nine locations
and dedicated packed lubricants container services to transport products of all upcountry
storage points.

The New Vision network has now expanded to 503 retail outlets at an average
construction rate of 2.2 days per outlet. The company has successfully equipped 600
retail outlets with Internet facility while C-Store network has been expanded to 56

whereas 44 CNG facilities are operational. PSO has launched the first-ever plastic card in
the POL industry in the form of the PSO.

Loyalty Card The card entitles customers to earn “PSO Loyalty points” on every
purchase of fuel or lubricant. Customers shall keep accumulating such points till they
become eligible to redeem the same from PSO’s merchant consortium that covers a wide
range of categories to choose from or from PSO’s own station that offer petrol, hi-octane
diesel or lubricant.

PSO is the first OMC that has introduced computerized complaint lodging system with
toll free number on round the clock basis.

To meat strategic business and marketing objectives PSO management has taken
following measures:

¾ Marketing organization restructures and retail trade. Industrial consumers,

lube sales and Agency trade. Aviation and Marian Business segregated as
PSO core business.

37
¾ Marketing organization reshuffled at the area manager, division Manager
and sales staff level.

¾ Cross-functional term established for retail development with the objective

of 100 new vision stations by June 2000

¾ CNG Marketing policy designed and cross-functional term established

with a largest of setting up 1000-station by December 2000.

¾ Aggressive advertising and sales promotion campaigns launched with rifle

approach rather than shotgun.

¾ Sales thrust on Mogas, HSD and lubes though innovative marketing

techniques.

¾ Sales incentive program designed and inter Division sales competition

starts to boost volumetric sales.

¾ Company owned and operated retail outlets established one each n

Karachi and Islamabad.

¾ Retail outlets maintenance program finalized.

¾ Retail investment feasibility computerized.

¾ Computerization of Sales Offices.

¾ License fee recovery from dealers revised up word to support improved

facilities extended to their outlets. (License fee earning increased from Rs
0.7 to Rs. 5.5million per month).

¾ Retail outlets rationalization program is being vigorously pursued.

38
 OTHER MARKETING ACTIVITES

AVIATION

PSO is industry leader in Aviation business and has increased its market participation
from 55.9% in 97/98 to 66.2% in 98/99. In 1999 our aviation business earned Rs.270
million.

PSO is handling 90.6% volume at Lahore Industrial Airport (basis up liftmen during
1998/99) To continue to handle this business we need invest in the hydrant system at
Lahore’s new airport costing Rs 570 million. PSO is still negotiating with CAA and
hopefully will finalize the arrangement within this month.

INDUSTRIAL CONSUMER

Our industrial consumer business supplies products to all industries in the Sugar Textile,
Cement and power sector, especially IPPs who consume a large volume of furnace oil
and lubricants. We also supply to the other government agencies and have won tender
business from Pakistan Army of up to 5.3 million liters of lubes. Also we have been
successful in writing a lube supply order from Karachi Railway’s lube supply of 3.5

million liters during December 2003indicating our aggressive marketing posture I this
segment as well.

We supply first fill oil to Pak Suzuki ever since inception and are now liking into the
prospects of a new relationship with them through the development and marketing of a
special oil manufactured for Pakistan Railways’ lube supply 3.5 million liters during
December 2003indicating our aggressive marketing posture In this segment as well.

Our industrial business faces a tough competition with Shell and Caltex to counter, which
we are in the process of developing a strategic alliance with Mobile. This alliance is
aimed at enhancing volumetric sales and company earnings, without conflict of interest to
our relationship with Castrol.

Franchise agreement introduced for the first time for which payment period of investment
in retail outlet residual from 10 years to 5 years.

39
Mobile testing laboratories commissioner for checking quality and quantity of products
sold at retail outlets and also import training to dealers and their staff theory lectures and
do tapes.

PROMOTIONAL STRATEGY

It is using modern and one almost effective idea promoting its product not only to fill the
gas but also provide all consumer products like ice-cream, chocolates, fruit juices egg
medicines cold drinks in there new “stop shop” other include mosque filtered water
public toilets& wind screen cleaning for 24 hrs.

ADVERTISING & SALES PROMOTION

Advertising & sales promotion investment is estimated at Rs. 160 million per annum. It
shall be spent on Retail side and on corporate image building we shall invest up to 7% of
the revenue of Lube sales on promotion of the Lubricants business with some assistance
from Castrol and approximatelyRs.60 million per annum is envisaged (included in the
total figer) However, company had negotiated with Castrol and once the agreement with
them is finalized, they shall share some of the lube advertising and sales promotional
expenses with PSO, which shall reduce these expenses.

¾ Introduction of smart cards & prepaid cards

¾ Installation of ATM’s at retail outlets.

¾ Training of forecourt attendants for improved customer service

¾ Introduction of quick oil charge facilities at retail outlets as well as

Mobile oil changing and testing facility for door-to-door service

¾ Introduction of new products API SJ Level oil as well as

introduction of 2-stroke oil sachet

¾ Introduction of lubricants in pilfer proof attractive plastic packages

¾ Products and services and thus retaining the leadership tall in the
petroleum industry in Pakistan.

¾ Introduction of CNG station on nationwide scale.

40
 ¾ Customer service help-line in major cities.

¾ Motivated and innovative sales force.

¾ Introduction of a new concept of a business center at retail outlets.

¾ PSO-PEPSI Joint Summer Promotion.

PSO in collaboration with Pepsi cola international conducted a nation wide sales
promotion campaign, which continued for a month. The objective behind the campaign
was that the two commercial giants should come together to increase the sales of both
brands.

The scheme entitled the participant to win attractive gifts like sunglasses and
wristwatches PSO customers participated enthusiastically in the scheme and made it a
success.

STORAGE & DISTRIBUTION CHANNELS

We are also establishing network of Lube shop for lubricants directly to customers. This
channel is being successfully used by Caltex and Mobil to promote sales of their
products, but has never been thoroughly exploited by PSO retail rationalization.

Company has a network of 364-retail outlet as on 30 Nov 99 and there were an other 907
proposals on hand in the third quarter 99. However company has embarked on a retail
rationalization program as a result of which 340 of these new proposals have been
cancelled. Moreover about 100 sites have been identified for possible closure
(cancellation of dealership), as those were not uplifting any products from PSO. Works
on retail rationalization is in full swing and only those outlets would remain which will
improve their thrust. Regrettably it has to be stated that a large number of unwanted DFB
stogies (rural) have not brought any good to PSO except bad customer’s perception for
which immediate corrective actions are being taken.

CNG at 16 PSO station are currently available in the following cities:

41
 Karachi 3 Multan 1

Islamabad 4 Gujranwala 1

Lahore 5 Sialkot 1

Sargodha 1

GENERAL ENVIRONMENT

ECONOMIC CONDITIONS

Pakistan’s economic conditions have changed immensely over the last two-decade
especially in the last half. There has been an overall decrease in income following an
increase in the number of people falling under the tax net. The general price level has
also been increasingly steadily over the last couple of years. Leading to increased prices
of almost all commodities available in the market. So even though most people are
getting paid more than they used to, they still have less to spend (because of taxes and
inflation). This fact has enormous implications for consumption of goods such as
petroleum products. Private car travel has been considered by most economic experts as a
luxury in Pakistan. Just a small fraction of Pakistan’s public can afford to travel around
all day long in their private cars. The majority of people use public transport, as it is the

cheapest way of traveling. So the consumption of petrol and diesel has shown an overall
decrease forcing PSO to consider in making changes in its policies.

POLITICAL CONDITIONS

Pakistan has seen major political changes in the past 3-4 years. In October 99, Gen.
Parvaiz Musharaf came into power and changed the political scene.

In the case of PSO or any other state owned company for that matter, the government
expects some objectives to be met for instance that of better environment, responsibility
and increased customer care. So under a military government the company acts in a more
rigid manner and restraint way.and now the company is privatized.

42
SOCIAL CONDITIONS

Trends in Pakistan change very frequently. Until recently four wheel drives (4x4) were
very ‘in’ which demanded a large amount of hi-speed diesel to run. Now however sales
show that public is in favor of small, lighter yet powerful petrol run vehicles, which are
fuel efficient and demand a lesser amount of petrol than the heavy, big wheeled vehicles.

The demand for diesel is effectively decreasing and that for petrol is comparatively
increasing. PSO undoubtedly has noticed this change and is modifying its marketing
policies accordingly.

MAJOR PRODUCT LINE MARKET SEGMENTS

INDUSTRIAL LUBRICANTS

PSO being the largest oil marketing company in Pakistan has the proud privilege of
serving all major industrial establishments of the public and private sector. PSO
Industrial lubricants cover a wide range required by industry Brief description of
industrial lubricants is given below.

Beside the below mentioned oils, PSO also markets Rubber extender oils, process oils,
Textile spindle oils, sole leather oils, Ginning mills oils, Metal working oils, CNG engine
oils, slide ways oils, and various types of greases for industrial use.

Hydraulic Oils

PSO markets premium quality hydraulic lubricants in 11 different viscosity

grades. Their application covers mobile and stationary industrial systems. They
can also be used for general-purpose bearing and circulation system lubrication.

43
Compressor Oils

The compressor oils are formulated for lubrication of air compressors. 10

viscosity grades are marketed by PSO. These can also be used for lubrication of
plain Ball and Roller Bearings, Gears and enclosed Chains.

Textile Machinery Oils

PSO markets textile oils in 10 different viscosity grades for circulatory systems,
lightly loaded gear boxes, spindle and shafting for general machine lubrication
PSO product line.

Marine Trade

PSO has an independent Marine Sales Department dealing with fuel supplies to
local and foreign flagships.

• Three major fuel products known as BFO (Furnace Oil), MDO (Light
Diesel Oil) and MGO (High Speed Diesel Oil) are supplied to ships as
bunkers at Karachi & Port Qasim.

• Business of foreign ships is solicited through foreign associates who

nominate ships requiring Fuel at Pakistani ports.

• PSO is supplying 100% local Bunkering to Pakistan Navy (PN), Maritime

Security Agency (MSA), Pakistan National Shipping Corporation (PNSC),
etc.

• For PN, PSO has developed special filtration equipment, which is unique
and only available in UK & USA.

• Foreign exchange earning were US$ 2.26 million and savings of Rs. 30.6
million in local trade. Bunker Trade is 100% with PSO.

44
 Industrial Gear Oils

Gear oils are primarily intended for closed gear sets operating under severe
service conditions. They are also used in gearboxes of heavy industries such as
Steel Mill, Sugar and Cement plants.

They are marketed in 7 different viscosity grades.

Sugar Mills Oils

These oils are specially manufactured for the Lubrication of mill house pinion
bearing of sugar mills where total loss lubrication system requires viscous oil with
load carrying properties

Exposed Gearing and Wire Rope Compound

Gear and wire rope compounds are a range of adhesive type low cost lubricants
for exposed gearing, wire rope and conveyors for colliery and mines.

Steam Cylinder Oils

These are highly viscous lubricating oils for saturated steam cylinder lubrication
enclosed gears and other matching parts where thick grade lubricants are required.

Refrigerator & air-conditioning oils

These lubricants are designed to meet requirements of low temperature operations

of various types of refrigerators and air-conditioning compressors.

Heat Transfer Oils

PSO markets heat transfer oils with good thermal stability. These are used for heat
extraction and heat systems in work processing, space heating and viscosity baths.

PSO TRENDS

PSO has lost less ground in overall market share mainly because of the government
nominating it as the designated supplier of fuel oil to IPPs. Army etc. This had a
substantial impact in maintaining PSO’s market leadership in an overall perspective and

45
has made up for the major losses in Mogas, HSD and Lube sales as can be seen in the
following table.

Product Sales Sales Company Industry

97-98 98-99 Growth Growth

(000 (000
MT) MT)

HSD 4242 4275 0.80% 5.60%

Mogas 571 512 -10.20% -4.10%

Lubes 52 46 -12.10% -2.10%

We can see that the growth rate of industry for the HSD was 5.6% but the growth rate of
PSO for HSD was 0.8% which means that it has been able to capture a nominal 0.8% out
of 5.6% growth rate and has lost the market to its competitors.

Also in the case of Mogas PSO has recorded a negative growth rate of –10.2% while the
growth that of the overall industry was –4.1%. This again means that PSO has lost more
to its rivals and they have gained in spite of an overall loss to industry.

Same is the case with Lubes where the overall loss was 2.1% while PSO recorded a loss
of 12.1% PSO

As keeping in view charges in trends, PSO has taken initiative to provide CNG on its
outlets to compensate its decreasing market share in petroleum and to set its decreasing
market share on a growth. PSO has given a new logo, charged their color, provided

uniformed attendants, electronic dispense and shopping services in PSO shop. An

innovative service PSO has introduced in walk in Car wash in 5 minutes.

46
 CHAPTER # 4

HR PRACTICES OF PSO

47
 HUMAN RESOURCE MANAGEMENT

WHAT IS HUMAN RESOURCE MANAGEMENT?

Human resource management is staffing an organization with competent, high

performing employees who are capable of sustaining their performance level over a long
period of time.

IMPORTANCE OF HUMAN RESOURCE MANAGEMENT

HRM is an important strategic tool and it can contribute to the development of a

sustainable competitive advantage.

It is the most important intermediary body between the employee and the organization
that works to develop relations advantageous to both. All activities related to non-
management employees are handled by the industrial relations division and that of
Management employees are handled by the personnel division of the HRM.

HUMAN RESOURCE MANAGEMENT OF PSO

Alongside the development of its physical facilities, PSO is deeply conscious of the
pivotal role that human resources play in the success of an organization. As a mater of
fact, human resource development has been identified as an area of key importance.
While strengthening the ranks of its work force with quality professionals at various
levels of management, the company also undertakes several initiatives for improving
productivity and efficiency at all levels of services. Through computer training, various
courses, sponsorships of staff for studies at professional institutions and seminars, the
company is providing its employees on going opportunities for continuous self-
improvement and learning.

In recent years, health, safety and environment (HSF) has emerged as one of the major
themes of corporate governance at PSO. Understanding the significance of safe and
healthy work practices, a comprehensive HSE policy has been devised and the HSE
manuals and procedures finalized. According to this policy, no new vision outlet can be

48
commissioned before a comprehensive HSE audit. Likewise HSE audits are being
conducted at installations and depots, followed by necessary corrective action. In order to

increase awareness, HSE awareness sessions are frequently organized for all employees
throughout the organization.

As They Strongly Believe That Human Resource is the asset that should be
appreciate with the passage of time. Consequently, PSO considers a strong focus on the
development of a value added and Worthwhile Investment.

HR PRACTICES OF PSO

RECRUITMENT

Recruitment is the process of locating identifying and attracting capable applicants.

Sources of recruitment for PSO are as follows.

¾ Internal search

¾ Advertisement

¾ Employee referrals

¾ Public employment agencies etc.

PSO’S RECRUITMENT PROCESS

The purpose of requirement is to induct quality personnel for all the vacant position (the
right person for the right job)

When there is a vacancy of PSO a large numbers of applications are received. Mainly,
through the advertisement in the newspapers or through the referrals of current
employees. The employees screen the applicants. Because the recommenders know both
the job and the person being recommended they tend to refer applicants who are well
qualified for the position.

49
DERECRUITMENT

De-recruitment is a technique for reducing the labor. According to PSO’s policies if the
employee has done something wrong or Hanky Panky then the company uses the option

of firing as a mean of de-recruitment. This seldom happens unless someone has broken
the rules of the company. Sometimes employees are also transferred.

PSO recently used another method of de-recruitment. They used the Golden handshake
scheme and voluntary separation schemes.

SELECTION

Selection is the process of screening job applicants to ensure that most appropriate
candidates are hired. In PSO they select an employee on the basis of his qualifications.

Different selection devices are used to choose the best suitable candidate for the job.

SELECTION DEVICES

Number of selection devices is used to accept and reject applications. These are stated
below:

CV’s as all organizations requires a form on which the applicant fills in his name,
address and telephone number and a comprehensive personal history profile
detailing the person’s activities, skills and accomplishments. Some relevant
biographical data and facts that can be verified are also required.

Written Test When a candidate applies for a job at PSO he has to give a written
test. It is an intelligence, aptitude and ability test. First IBA used to conduct these
tests for PSO.

Interview Interview is the most important and reliable method of determining the
personal abilities of the applicant by PSO. They get to know about the
interpersonal skills of the candidate.

Physical examination after an applicant has been selected after the interview, he
is physically examined. For jobs with certain requirements, the physical
examination has some validity.

50
After the applicant is selected and the management of PSO is sure of their decision that
this person is suitable for the job, he has to undergo a training process of one year.

ORIENTATION

Orientation is the introduction of a new employee to the job and the organization. Every
new employee that has been hired in PSO is given an orientation to familiarize with the
company’s functions, policies, employees and programs. The type of training would be
an individual or group basis depending upon the number of participants

COMPENSATIONS AND BENEFITS

PSO offers competitive starting salaries and bonuses. The individual contribution in
reward.

Pensions and gratuity the company operates approved and fund pension scheme for
both management and non-management employees. The scheme provides pension based
on the employees last drawn salaries. Pensions are payable for life. The company also
operates un-funded gratuity scheme for all its employees.

MEDICAL

The company also provides post retirement medical benefits to its employees. PSO’s
Medical policies are considered to be the best in the country. Medical is free for the
employees and their families.

Vaccination program for employees: in recognition of the importance of human resource

and its health, PSO organization a ‘vaccination program’ for its employees. PSO
inaugurated the program under which the employees were vaccinates against diseases
like Cholera, Typhoid, Hepatitis B at the PSO houses dispensary.

51
PROVIDENT FUND

The company also operates an approved provident fund scheme for all its employees.
Equal contributions are made to the fund by the company and the employees in
accordance with fund rules.

Loans

Loans are granted for house construction repair or for the purchase of land. Employees
can also avail the car loan facility.

Rewards

Rewards are given on the basis of performance of the employee on Monthly and weekly
basis. These include the monetary rewards and also the Points for promotion.

Million Liter Awards

The million-litre award ceremony was held at the PSO house. These awards were given
to the dealers who crossed the one million-liter figure in selling the products of the
company. the award had been initiated to recognize and encourage to promote the
business and services to their customer.

Awards were also given to the divisional managers and sales officers showing
outstanding performances in their respective field.

Haj Draw-2002

The Haj draw was also held at the PSO house auditorium. Seventeen members were sent
to perform Haj.

APPRAISALS

Performance evaluation takes place annually for the purpose of annual increments. The
appraisal also assists human resource in the career development of an employee.

52
POLICIES

Policies are made to define processes to be practiced by management. and the polices are
made by the research conducted by HR department keeping in view the needs of the
company and employees.

LEADERSHIP

PSO is a sale and customer oriented company that has the main goal of maximizing the
profit. The major interest of the company is to increase the market share, sales, profit and
revenues. Majority of the decisions are made and implemented in order to fulfill this goal.

For this reason the leadership is also trained according to this goal and more centralized
system is adopted by the company.

LEADERSHIP STYLE

According to Sales Officer head office Rawalpindi, on the leadership style grid, PSO
would score a (9,1) meaning that they implement ‘Produce or Perish’ leadership style.
Implementing their leadership styles they maximize their revenues.

PSO is a market-oriented company. Employees for them are just a means to an end
making profit. Almost all employees are dispensable which leads to low morale and
decreased productivity since people feel that they can be laid off any time. They don’t
have that much loyalty for the company.

DECISION MAKING

Decision-making is an important aspect of the company, which needs to be thoroughly

evaluated before making a final and firm decision. The working of organization depends
upon top management; so good and firm decision in the organization will have a direct
impact on the working environment of such organizations. The manager is responsible
for taking the decision of effected matter keeping in view the after effects. The decisions
must be in interests of the organization.

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RATIONALITY

The managerial decision-making is rational. Which means that the mangers make
consistent, value-maximizing choices within specified constraints. A style or situation in
which a manager can make accurate decision and the outcome of every alternative is
known.

DECISION-MAKING STYLES

ANALYTICAL STYLE: (LONG RUN)

As PSO is sales oriented company and it has many competitors like Shell, Caltex etc. So
they have to consider more alternatives after making a decision. The managers in this
condition have the ability to cope with unique situation.

DIRECTIVE STYLE

In short run, the decision making are more in directive style i.e. managers made fast and
logical decisions. The manager is the focal point in the organization and he is appropriate
authority to a problem arise by his observation or reflected by someone else from the
organization.

MOTIVATION

MOTIVATION TOOLS USED BY PSO

Motivation tools used by PSO are as follows:

C-Stores/Business Centers

C-stores are 24-hour convenience stores (branded “Shop Stop”) that are a major tool in
enhancing the image of the PSO retail outlet. It is one step towards achieving the stop
shop to attract motorists. The business centers are a specialized environment where they
provide Internet, fax and phone facilities. Photocopying facilities are also available.
Further at selected locations they have also provided the Citibank easy payment centers,
where one can pay utility bills and credit card payments.
54
Internet Facilities at retail Outlets

PSO has provided 300 Internet kiosks that contain branded P.C. and a printer. A further
300 kiosks will be provided by June 30,2002. This is a pioneering effort by PSO that is
aimed to supplement the government efforts to spread IT in the country. These Kiosks
have been given to the new vision retail outlets regardless weather they have business
centers or not.

Million Litre Award Distribution Ceremonies

The million liters awards had been initiated to recognize and encourage the cooperation
made by dealers to promote the business and service to their customers.

Haj Draw

The Haj draw 2002 was held at PSO house auditorium in which 17 members were sent
perform Haj. The aim of the draw was to assure the workers to service its members with
full dedication.

Health safety and environment

PSO is maintaining a strong focus on HSE, which is the foremost corporate objective of
the company. HSE audits are being conducted at installations and depots, followed by
necessary corrective actions. In order to increase HSE training programmes have been
organized for all employees of the organization.

Community Welfare

In its constant strive to be a good corporate citizen PSO has contributed to several causes
like scholarships fore serving students, donations to CPLC for combating terrorism and
donations to environmental institutions.

55
Financial Assistance

Financial assistance is provided to employees Not only they are provided with financial
assistance but loans are also granted for house construction.

Special Allowances for Minorities

Special allowances are given to members belonging to minorities.

Confirmation

After the satisfactory completion of their probation period, the employee is confirmed in
his position.

CONTROLLING

CONTROLLING:The process of monitoring activities that they are being accomplished

as planned and correcting any significant deviations.

In the controlling process actual performance is compared with the standard performance.
At PSO the standard performance is compared with the performance of Shell. And the
total revenues, market share, sales and profits are measured.

This is done to have a total outlook of both the companies and helps in deciding who is
leading and which of the two organizations is in profit, so that incase of any deviations, it
can be corrected to improve the profit, sales, revenues and market share.

TYPES OF CONTROL

Market Control uses external market mechanisms such as price, competition and related
market share to establish standards used in system. Typically used by organizations
where products or services are clearly specified and distinct and who face considerable
market place competition.

56
PSO is in direct, cut threat competition with shell. PSO surveys the external; market
taking into consideration the progress of Shell, because it is its major competitor. It uses
Shell’s progress to compare for markets control.

57
 CHAPTER #5

FINDINGS OF THE TRAINING AND

DEVELOPMENT OF PSO

58
PSO has well defined selection procedures. These procedures include paper and pencil
test, an interview with the top manager alone and then the panel interview.

The selection process starts with the application form. Which are required to be filled and
delivered to PSO before a due date. Then the applicants are required to give a written
test; the candidates that clear the written test are further considered for the interview
either with a panel or with a respective manager. If a candidate clears this interview he or
she is appointed.

TRAINING

TRAINING POLICY

Training and development is a continues process and it is designed to bring about a

change in the attitude of the employees with respect to the job they are doing, the people
around them and techniques and skills which they can use. It is also to make them more
conscious of their responsibilities and how to perform them well. Therefore all training is
planned and coordinated in a systematic manner by the company.

ON THE JOB TRAINING

It is well regarded that the best place for effective learning is on the job i.e. the employee
learning the job by doing it under instruction by his superior. Since managers are, if not

trained instructors the department provides training the job instruction methods through
practice of supervision course.

During the training the trainees are sent to the different departments of the organization
in order to expose and familiarize them to the business environment of the entire
organization. The training period for different employees varies according to the nature
of the job they likely to handle. The different periods for different trainees are listed
below:

♦ Engineering Trainee will take 18 months on training.

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♦ MBAs will take 6 months on training.

♦ BBAs Training lasts for 8 to 12 months.

♦ Electrical and Mechanical Technicians will take 8 months on training.

During the training the performance appraisal for each trainee is made after each
quarterly. After completion of the training a performance review is made and if the
performance is satisfactory then the trainee is appointed as permanent employee.

TRAINING EMPLOYEES

In order to keep its employees at par with the technological and business development
PSO arranges for the adequate training of its employees.

The different modes adopted by PSO include:

Sending employees abroad

Arranging for the training of the employees at home, as and when need arises

One such case is the training of employees to use SAP application for data automation.

SAP

SAP is the leading Enterprise Information and Management Package worldwide.

Use of this package makes it possible to track and manage, in real-time, sales, production,
finance accounting and human resources in an Organization.

HR MODULE

The HR module enables to effectively manage information about the people in their
organization, and to integrate that information with other SAP modules and external
systems. From the Organization Management perspective, companies can model a

60
business hierarchy, the relationships of employees to various business units and the
reporting structure among employees.

The Personnel Administration (PA) sub-module helps employers to track employee

master data, work schedules, salary and benefits information.

Current Personnel Development (PD) functionality focuses on employees' skills,

qualifications and career plans. Finally, the Time Evaluation and Payroll sub-modules
process attendance and absences, gross salary and tax calculations, and payments to
employees and third-party vendors.

The number of companies using SAP R/3's Human Resource (HR) module has increased
dramatically in the last few years, with many clients adding HR to their live suite of
modules, or even choosing HR as an initial or standalone implementation.

WHAT MAKES SAP DIFFERENT?

Traditional computer information systems used by many businesses today have been
developed to accomplish some specific tasks and provide reports and analysis of events
that have already taken place. Examples are accounting general ledger systems.

Occasionally, some systems operate in a "real-time" mode that is, have up to date
information in them and can be used to actually control events. A typical company has
many separate systems to manage different process like production, sales and accounting.
Each of these systems has its own databases and seldom passes information to other
systems in a timely manner.

SAP takes a different approach. There is only one information system and database in an
organization, in which all applications access common data. Real events in the business
initiate transactions. Accounting is done automatically by events in sales and production.
Sales can see when products can be delivered. Production schedules are driven by sales.
The whole system is designed to be real-time and not historical.

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SAP structure embodies what are considered the "best business practices". A company
implementing SAP adapts it operations, achieves its efficiencies and power rapidly.

The process of adapting procedures to the SAP model involves "Business Process Re-
engineering" which is a logical analysis of the events and relationships that exist in an
enterprise's operations.

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63
These operations consistent with the overall integration of SAP R/3, the HR module
shares information with other modules, such as Financial Accounting (FI), Controlling
(CO), Production Planning and Business Workflow. The Payroll processes use Accounts

Payable functions to print checks, manage payment and bank information, and process
payments to tax authorities and other third-party vendors. Payroll results are also posted
to General Ledger accounts for use in periodic income and expense reporting. For
management accounting, information regarding employment costs can be transferred to
Cost Centers with in the CO module. Employees can be assigned to Work Centers, which
are used in conjunction with Production Planning. Assigned positions and reporting
relationships from PD are used in Business Workflow to route purchase requisitions and
other documents for approval. HR works with external systems either through certified
interfaces with SAP partner products, or custom developed interfaces to customer defined
systems.

FUNCTIONAL MODULES

R/3's applications are modules. They can be used either alone or combined with other
solutions. The integration capability of these applications increases the benefits derived
for any company.

Human Resources

HR provides solutions planning and managing company's human resources, using

integrated applications that cover all personnel management tasks and help simplify and
speed the process.

• PM: (Personnel Management)

PM is a complete solution for personnel administration, recruitment management,

travel management, benefits administration and salary administration.

• OM: (Organizational Management)

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 OM assists in maintaining an accurate picture of organization's structure, no
matter how fast it changes. It is systematic and forward planning tool that
considers the final effects of all personnel events thus it's complete solution for
personnel cost planning.

• PA: (Payroll Accounting)

PA addresses payroll functions from a global point-of-view and gives the

capability to centralize payroll processing or decentralize the data based on
country or legal entities.

• TM: (Time Management )

TM is integrated with payroll accounting, controlling, production planning, plant

maintenance, project system, external services and shift planning. It provides
with a variety of standard reports that will assist in tracking and analyzing
employee time with completeness and accuracy.

• PD: (Personnel Development)

PD assists with planning, monitoring, and analyzing scheduled seminars, training

courses, and business events, registration and booking, price determination and
invoicing.

LOGISTICS

Logistics comprises all processes involved in purchasing, materials management,

manufacturing, warehousing, quality management, plant maintenance, service
management and sales and distribution. All applications access a shared consistent
database, supported by production data management.

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• SD: (Sales & Distribution)

SD actively supports sales and distribution activities with outstanding functions

for pricing, prompt order processing, and on-time delivery, interactive variant
configuration, and a direct interface to profitability analysis and production.

• PP: (Production Planning and Control)

PP provides comprehensive process for all types of manufacturing: from

repetitive, make-to-order, and assemble-to-order production, through process, lot
and make-to-stock manufacturing, to integrated supply chain management with
functions extended MRP || and electronic kanban, plus optional interfaces to PDC,
process control systems, CAD and PDM.

• PS: (Project System)

PS coordinates and controls all phases of a project, in direct cooperation with

Purchasing and Controlling, from quotation to design and approval, to resource
management and cost settlement.

• MM: (Materials Management)

MM optimizes all purchasing processes with workflow-driven processing

functions, enables automated supplier evaluation, lowers procurement and
warehousing costs with accurate inventory and warehouse management, and
integrates invoice verification.

• QM: (Quality Management)

QM monitors, captures, and manages all processes relevant to quality assurance

along the entire supply chain, coordinates inspection processing, initiates

corrective measures, and integrates laboratory information systems.

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 • PM: (Plant Maintenance)

PM provides planning, control, and processing of scheduled maintenance,

inspection, damage-related maintenance, and service management to ensure
availability of operational systems, including plants and equipment delivered to
customers.

• SM: (Service Management)

SM provides highly integrated customer service functionality to compete in

today's global markets.

• PDM: (Product Data Management)

PDM supports in creating and managing product data throughout the product life
cycle.

SAP HR

HR module of SAP is the current need of every big organization which Siemens provide
and currently the are implementing in various companies of Pakistan like Pakistan

Petroleum Limited (PPL), ICI Pakistan, PSO and even the Pakistan government
department like AGPR and other financial institutions are implementing SAP to
automate their systems and managing their Human Resource with it by the funding of
world bank.

The primary goal of SAP HR module is to provide managers and HR professionals

to manage the people information effectively and to use in the benefit of both the
employer and the employee.

The future of SAP's HR module looks promising for both customers and implementers.
Internet technologies will provide SAP customers’ new tools to include employees in

maintaining their own data, and increase management's ability to quickly report on
critical employee information. Developing solutions for companies with extensive
expatriate assignments will improve the way businesses manage and pay international

67
employees. These factors, along with emerging rapid implementation tools will make
SAP an ever-stronger choice among HR management systems.

SAP HR module is an effective tool to handle and accommodate following organizational

elements,

ORGANIZATIONAL ELEMENTS

• Client

• Company code

• Personnel area is used exclusively in HR and is unique within a client. Each

personnel area must be assigned a company code.

• Personnel sub area

SCOPE OF PRE-EMPLOYMENT TRAINING

The aim of pre-employment training policy of PSO is to provide opportunities of hand-on

professional training in real job environment to the prospective employees of the
Company. Graduates of various disciplines are inducted for 6 to 12 months on-the-job
business administration/technical training.

The selected personnel are trained on-the-job under the direct supervision of senior
employees (Trainee Father / Mentor) so as to build their competency to the required
levels.

The training is objectively programmed, guided and monitored through a feedback

system towards assessing trainees’ actual performance & potential with regard to the
requirements of foreseen vacant positions.

The staffing needs of the company are met generally from the pool of trainees who
complete their training successfully and are found suitable for the available job
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opportunities.

PROCEDURE

In order to assist in providing a systematic method of training and integrating the trainees
in PSO following forms are used:

Plan For Training

The Trainee Father completes the Training Plan and gives it to the trainee in the first
week of joining the company. The trainee father keeps a copy and a second copy is sent
to the Human Resources department through the respective Manager.
Report Of Feedback

The trainee is required to report on the quarterly trainee feedback form to report about
his/her training during each quarter. HR sends this form to the trainee at the end of each
quarter. The trainee fills the form and returns directly to HR.

Progress Report

Trainees’ progress report form is sent to the trainee father at the end of each quarter. The
trainee father fills the form and returns to HR through the respective Manager.

Training Appraisal

Upon completion of training a final appraisal is required by the respective managers to

communicate whether to confirm, extend or terminate the training.
Employees at PSO are undoubtedly considered their greatest assets, so they place great
importance on nurturing their own ‘home grown’ talent by helping people at all levels in
the company to develop their skills and capabilities, and to pursue their full potential.

Employees with management potential are encouraged to take part in the company’s
management learning program, which provides an excellent forum for personal and

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team development as well as networking and knowledge exchange with peers from other
businesses

Continuing education is an important part of any career; PSO provide an extensive

curriculum of interpersonal, management and technical training. Human
Resources/Educational Services is their partner in total employee development. Human
Resources can provide the solutions and introduce you to the tools and resources you
need to successfully manage your career.

CONTINUOUS LEARNING

• Sales Training

• Trainer Consultation

• Trainer Certification

• Basic Skills Training

Sales Training

Providing customers (internal employees & external customers) with the most effective
learning processes is the mission of the Sales Training Team. This curriculum is suited
for everyone-- from those who are new to sales to seasoned senior account executives.

Trainer Consultation

With proper planning and guidance, participants are assured of receiving the right
training, in the right place and at the right time.

Trainer Certification

Through Trainer Certification, educating employees can be cost effective, flexible and
convenient.

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Basic Skill Training

Basic Skills Training provides courses increase their general knowledge and enhance
their skills. It includes the customer services on the petrol pump which includes:

ƒ Check the meter of the car

ƒ Greet the customer

ƒ To take keys from the driver

DEVELOPMENT

Personnel Development

The company regards employees as its greatest asset. Therefore, it is of particular

importance that the right applicant is employed for the job. The correct procedures for
engagement and selection must be clearly understood by both Line Management and
Human Resources.

The company will recruit, train and promote staff on the basis of their ability, according
to relevant legislation and company policies and request.

Competencies describe what is needed for each employee to perform his or her job
successfully regarding the expected knowledge, experience and capabilities.

Competency Model

The Competency Model defines the competencies that are required by PSO in various
positions as the requirement of a competency varies from one job to another. The form to
be used in this connection is Training Needs Analysis.

The PSO Competency model forms the basis for assessing the training needs of the whole
organization. It is the responsibility of heads of all organizational units to take account of

71
hat specific knowledge and skills the jobs involve, what the individuals already possess,
and what gaps in such knowledge and skill levels, training can fill. Guided by business
targets/departmental objectives and evaluating employees on their existing capabilities,
with the help of the Training Needs Analysis document, the training needs of each
individual are determined.

INFRASTRUCTURE DEVELOPMENT

Additional pipeline linking OP-3 to the PSO Terminal at Keamri for discharge of deficit
cargo. Development and construction of Aviation handling facilities at Sihala Terminal
include:

ƒ Modernization of Chakpirana Depot.

ƒ Addition of storage at Jag lot Depot.

RELATIONSHIP WITH SOCIETY

COLLABORATIONS WITH EDUCATIONAL INSTITUTIONS

PSO Building Technologies is committed to excellence in education. Their

comprehensive solutions help employee provide ideal environments for learning, and
their guaranteed, performance-based funding options make improvements possible. But
they don’t stop there. They sponsor educational programs, award over $1 million in

scholarships and provide internships to help students explore career opportunities. Their
“Best Total Solution” approach assures a complete and customized solution that meets
the needs of each customer. And through Building Education™, they not only meet all of
their facility needs …they can help their students succeed.

The mission of Building Education™ is to enhance learning by assisting educational

institutions in preparing students for successful futures. Through innovative, customized
programs, students and schools can share in the Wealth of Siemens’ resources and
capitalize on Siemens’ expertise in business and engineering fields. Based on parallel

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goals of student achievement and workforce development, Building Education™
partnerships are helping both schools and PSO realize greater success.

HEALTH DEVELOPMENT AND ENVIRONMENT DEVELOPMENT

At PSO, HSE award is given to those which are considered as the HSE Men of the
Month. There is HSE department which conduct the training course at Korangi. Senior
Executives HSE trains the staff in:

• Firefighting

• Incident reporting and investigation

• Root cause analysis

• Work permit system

• Housekeeping inspection

• Performance management

• Safety talk

• Other best practices in HSE

SOCIAL WELFARE ACTIVITIES

In addition to exploration and development activities in the Sindh Province, OGDCL is

already extending medical care, drinking water, and schooling facilities to the locals.

In recent years, Health, Safety, Environment (HSC) has emerged as one of the major
themes of corporate governance at PSO. Realizing the importance of healthy and safe
work practices, a comprehensive HSE policy has been devised and the HSC manual and
procedures updated. According to this policy no new vision outlet can be commissioned
before a comprehensive HSE audit. Likewise, HSC audits are being conducted at all
installations and depots, followed by necessary corrective action. In order to increase
awareness, HSC awareness sessions are frequently organized for all employees

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throughout the organization. Financial performance for the fiscal year ended June 30,
202, despite the revenue drop ad a record provision of approx RS 2 billion made for taxes
(an increase of approx Rs. 800 million) PSO earned an all-time record profit before tax of
Rs. 5.1 billion, up by 49% while profit after tax rose to Rs.3.2 billion registering a growth
of 42% over prior year period.

The profit increase is primarily due to innovative marketing strategies, organizational

restructuring, product mix revamping of internal system with improved productivity
along with the partial impact of enhanced margins during the last quarter.

Accordingly the board of management approved a final dividend comprising 80% cash
(Rs. 8/share) and 20% bonus shares for FY-2002. Combined with the earlier two interim
cash dividend of Rs. 5 per share the total amounts to Rs.13 per share resulting in the
highest-level cash payout of Rs. 1.86 billion to shareholders of the company.

Not only that the company has emerged as one of the country largest taxpayers in the
corporate sector. PSO’s business operations have helped collect over the years Rs 340
billion in duties and taxes on behalf of the government.

In terms of sales PSO ranked 520th among Asia’s 1,00 largest companies in the year
2001, according to a survey conducted by the Asia week.

COMMUNITY WELFARE

In its constant strive to be a good corporate citizen PSO has contributed to

several causes like scholarships fore serving students, donations to CPLC for
combating terrorism and donations to environmental institutions.

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 ANALYSIS OF PROJECT

The first function of the human resource planning for any company is recruitment and
selection. For the long term profitability and success of the company the recruitment
policy has to be aligned with the strategic internal growth of the company. The purpose
of this work instruction is to set standards guidelines for the recruitments process of
permanent, contract and trainees within PSO. Training and development at PSO helps in:

♦ Assist in identifying hiring requirements

♦ Source and identify qualified candidates for vacant positions

♦ Perform initial screening interviews

♦ Refer qualified candidates to the higher manager for final selection

♦ Extend offers of employment to ensure consistency in process

♦ Develop, implement and/or administer employee orientation programs

♦ Provide outplacement services (training etc.)

TRAINING AND DEVELOPMENT

Instruction provided to stimulate change. Its focus is short-term and directed solely at
furnishing knowledge or skills that employees need to carry out their present work duties
efficiently and effectively. Training to encompass change competence as per the
vulnerable environment of the refinery requires continuous modification.

As compared to the training and development of Shell, PSO training programs are more
effective in achieving their corporate level goals.

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A written document at PSO that out identifies the needs, describes the strategy for
addressing those needs and includes:

1. A needs assessment;

2. A plan that states goals and objectives, and methods for achieving them;

3. A statement regarding funding necessary to implement the plan.

Training Plans regarding the periodic trainings at regular intervals play a facilitation role
for the employees. Sustainability of the training plan is identified by the regularity of
different dimension programs.

At PSO each department should designate a person to assist in implementing its training
and development programs and to serve as contact with Human Resource Department for
the coordination of training services.

At Shell, the department or the line manager should develop a biennial training plan to
include: (even for the regular training programs)

a. A training needs assessment;

b. An action plan showing goals, objectives, and methods by which the plan can be
achieved; and

c. Funding needed to implement the plan.

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 CHAPTER # 6

ANALYSIS OF HR PRACTICES

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PSO has also taken several initiatives for improving the overall productivity and
efficiency of its staff through computer training, in-house courses, sponsorship for studies
at professional institutions and seminars. In analyzing the HR practices, we have
compared the HR practices of PSO and Shell Pakistan.

COMPARISON OF HRM PRACTICES AT PSO AND SHELL

Human resource development has been identified as an area of key importance. While
strengthening the ranks of its work force with quality professionals at various levels of
management, the company also undertakes several initiatives for improving productivity
and efficiency at all levels of services. Through computer training, various courses,
sponsorships of staff for studies at professional institutions and seminars, the company is
providing its employees on going opportunities for continuous self-improvement and
learning.

In recent years, health, safety and environment (HSF) has emerged as one of the major
themes of corporate governance at PSO.

At PSO, They Strongly Believe That Human Resource Are the Only Asset That
Appreciate With The Passage Of Time. Consequently, PSO Considers A Strong Focus
On Their Development A Value Added And Worthwhile Investment.

HRM PRACTICES AT PSO

• HR Planning

• Recruiting

• Selection

• Training and Development

• Compensation

• Performance Management
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 • Employee Relations

• Company’s performance

COMPARISON OF HR PRACTICES WITH SHELL

PLANNING

Planning is a process that involves defining the organization objectives or goals and
developing an overall strategy for achieving those goals and developing a complete
hierarchy of plans to integrate and coordinate activities.

Short Term And Long Term Objectives

The basic aims and objectives set by the management of PSO Pakistan as compared to
Shell with regard to the human resource management are as follows.

♦ PSO main objective is to hire a work force that that suits the needs of the organization
where as at Shell they emphasize more on the encouragement work force through
rewards and bonuses.

♦ PSO emphasize on making the hiring and recruiting process transparent and
standardize, so that only needed personnel is hired whereas at Shell they maintain the
required work force through a system of hiring and retiring.

♦ To take care of the diversity in order to obey social obligations of the organization
and maintain the harmony among the diverse employees is emphasized by both PSO
and Shell.

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RECRUITMENT

Comparison of PSO’s and Shell recruitment process

When there is a vacancy of PSO a large numbers of applications are received. Mainly,
through the advertisement in the newspapers or through the referrals of current
employees. The employees screen the applicants. Because the recommenders know both

the job and the person being recommended they tend to refer applicants who are well
qualified for the position. The prefer graduates from NUST, FAST and BAHRIA
universities.

At Shell the requisition must be signed as per signature mandate. The requisition must
reach Human Resources in time to conduct a proper talent search.

This may include:

• Internal check of database for suitable applications

• Advertising within the company

• Advertising in suitable newspapers

• Advertising in suitable universities

DECRUITEMENT POLICY

Decruitement is a technique for reducing the labor. According to PSO’s policies if the
employee has done something wrong or Hanky Panky then the company uses the option
of firing as a mean of decruitment. Sometimes employees are also transferred.

PSO recently used another method of decruitment. They used the Golden handshake
scheme and voluntary separation schemes.

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SELECTION

Selection is the process of screening job applicants to ensure that most appropriate
candidates are hired. In PSO they select an employee on the basis of his qualifications.

Different selection devices are used to choose the best suitable candidate for the job.

Number of selection devices at PSO is used to accept and reject applications. These are
stated below:

• CV’s

• Written Test

• Interview

• Physical examination

After the applicant is selected and the management of PSO is sure of their decision that
this person is suitable for the job, he has to undergo a training process of one year.

AT Shell the selection process includes:

Hiring decision Step 5

Medical Evaluation Step 4

Realistic job previews Step 3

Supervisory Interview Step 2

Employee Test Step 1

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EMPLOYEE TRAINING METHODS AND DEVELOPMENT

When it comes to training and development PSO gives on the job training. They believe
that the employee tends to learn a wide variety of jobs and a wider perspective on the
organizational activities.

COMPENSATIONS AND BENEFITS:

PSO offers competitive starting salaries and bonuses. The individual contribution in
reward.

Pensions and gratuity: the company operates approved and fund pension scheme for both
management and non-management employees. The scheme provides pension based on

the employees last drawn salaries. Pensions are payable for life. The company also
operates un-funded gratuity scheme for all its employees.

• Medical

• Provident fund

• Loans

• Rewards

• Appraisals

• Policies

• Million Litre awards

PERFORMANCE MANAGEMENT

PSO is more oriented toward maximizing revenues. There is more concern for production
as compared to concern for employees.

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The major interest of the company is to increase the market share, sales, profit and
revenues. Majority of the decisions are made and implemented in order to fulfill this goal.

According to Mr. Raja Faisal, Sales Officer head office Rawalpindi, on the leadership
style grid, PSO would score a (9,1) meaning that they implement ‘Produce or Perish’
leadership style. Implementing their leadership styles they maximize their revenues.

PSO is a market-oriented company; they have very little concern for people. Employees
for them are just a means to an end making profit. Almost all employees are dispensable
which leads to low morale and decreased productivity since people feel that they can be
laid off any time. They don’t have that much loyalty for the company.

EMPLOYEE RELATIONS

Employee relations at both PSO and Shell are maintained. In the offices and at the petrol
stations employees are provided with clean and effective environment so that the
objectives of carrying out the business could be met. When the employee relations are
good there is no possibility that your performance level goes down. So at both Shell and
PSO the employee relation is quite good. For this the tools are:

ƒ Staff meetings

ƒ Bulletin boards

ƒ Suggestion box

ƒ Procedure for handling complaints

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COMPANY’S PERFORMANCE

Global conditions have an immense effect on any large organization. The previous year
has experienced some drastic global changes. The attacks on WTC, which the Americans
called, the “War of Terror” has taken its toll on all the industries and markets of the
world. Most affected has been the aviation industry which is one of the PSO’s major
clients. As previously mentioned PSO provides fuel to our national airlines, which
operate to and from Pakistan. As the number of people traveling by air has considerably
decreased which in turn has decreased the demand of fuel by airlines. This has indeed
come as a major blow to PSO.

Because of the recent middle-east crisis between Israel and Palestine, which led to a half
oil supply from Iraq, the global price of crude oil has increased considerably. When
fighting in Afghanistan was at its peak, oil freighters were hesitant of coming towards
this side of Arabian Peninsula because of the fear of being hit by a cruise missile fired by
fighter jets taking off from naval ships docked there.

This incident decreased the amount of oil coming in to Pakistan and is the source of rise
in oil prices. PSO was very much affected by this. The demands of fuel especially patrol
in Pakistanis rather elastic.

FUTURE OF PSO AS COMPARED WITH ITS COMPETITORS

Looking at the overall retail industry prior to 1990 the three OMC, Caltex, Shell (PBS)
and PSO were providing similar level of shabby products and services to the consumers
because of which neither could they be distinguished nor did the consumer had any
choice. They all had unattractive looking service stations with similar Meehan real
dispensers and were selling lubes in tins. Three companies in Rickety Cartage
Contractors Tank Truck arranged product delivery to their outlets. Then in 1990 Caltex

started improving its retail stations, providing electronic, dispensers steam wash
feasibility, well-illuminated canopies, uniformed attendants as well as high quality

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lubricants. Shell also embarked its retail visual image project in 1994 and started
implementing their international RNI design on its retail network in 1997 Caltex
launched their new retail image programs to further enhance its retail modernization on
new revised lines and in more vibrant colors.

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 CHAPTER # 7

ANALYSIS OF TRAINING AND

DEVELOPMENT AT PSO

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RESPONSIBILITIES RELATED TO TRAINING

• Training coordinator at PSO shall provide, within reasonable resources, employee

training necessary to assist the agency in achieving its mission and accomplishing
its goals.

Departments then should send a copy of their training plan to HR head to be used
for the sharing of training information and resources.

• On the Job Training assessment and implementation is the responsibility of the

department’s training coordinator. They should provide, at a minimum, on-the-job

• training or work-related instruction that prepares employees to perform their

current jobs (includes: instruction necessary to accommodate technological
changes, and new employee orientation).

• The individual Employee Development Plans for employees are mandatory as a

part of the Employee Work Profile at PSO, which should be updated bi-annually.
The plan includes personal learning goals, learning steps and resource needs.

• Regular professional training is conducted through conferences, conventions,

seminars and workshops that are aimed at enhancing and/or increasing the work
skills and/or abilities. This kind of training can include any dimension ranging
from the regular trainings regarding safety and environment hazards. Work
methodologies, personal skill development and organizational focus.

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The time that an employee spends at an approved training program during normal work
hours shall be considered as part of the employee's normal work hours and shall not be
charged to his or her accumulated leave or considered leave without pay.

• Training records and maintenance have to be kept by the coordinator where the
records should be maintained following the three years after the completion of the
training. Training records should include, at a minimum:

a) Participant's age, race, and gender;

b) Course identification and dates of training;

TRAINING AND DEVELOPMENT ACCORDING TO NEED ASSESSMENT

ƒ On the Job training

ƒ Conference

ƒ Development Assignment

ƒ In-house

ƒ College course

ƒ Associations (apprenticeships)

ƒ Mentoring

ƒ Special Designated Courses

TRAINING TYPES AT PSO

In order to main the sustainability of the workforce following many types of trainings are
conducted.

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ƒ New Technology and methods

ƒ Personal Skills Development

ƒ Organizational Development

ƒ Emergency Training

ƒ Environment and Safety Trainings

ƒ One- and two-day open enrollment workshops

ƒ Certification Programs

ƒ Project Related Training

ƒ Cross Functional Training

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 CHAPTER # 8

CONCLUSION AND RECOMMENDATIONS

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¾ Pakistan state oil (PSO) is the largest company of Pakistan not only in the field of
oil marketing but also otherwise. It has been included in Asia’s top 1000
companies and thus is surely a pride for Pakistan. Although up till now it is Govt
owned but it is about to be privatized in a month or so. As expected after
privatization the company would be further more prosperous and generative in
terms of revenues.

¾ PSO certainly has a competitive advantage over all it’s competitors because of the
vast network of it’s outlets all over Pakistan but at the same time a great deal of

responsibility is required by them as they are not only an oil marketing company
but they have some responsibilities towards the people of Pakistan.

¾ Take an example of a PSO outlet in Chitral, while deciding to undertake this

project or not the feasibility report rejects the idea of building it but being a
Pakistani socially responsible company if even one public transport bus goes there
then they have to build a petrol station over their.

¾ PSO has been very innovative and successful since it realized the competition has
actually started after SHELL came and acquired the market share from PSO. But
after coming up with all those “new vision” outlets, PSO has proved to be never
far behind.

¾ Marketing strategies starting from “Gold card” to………………….. “PSO

LOYALTY CARD” has been amazingly good and can be rated as first class
strategies.

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¾ A major problem faced by PSO is the misconception in people’s mind that the oil
used by shell is imported and of better quality, as shell is a foreign company in
Pakistan. Although the sources are same but still shell is also aware of this fact
and is exploiting it. PSO should do something about it like printing brochures that
could explain people about the only sources available in Pakistan, emphasizing
upon the fact that no oil is coming to Pakistan from any direct abroad sources.

¾ Caltex basically has some control over the market because of the lubes it sells and
the profit margin on lubes is much higher than on petrol. But as PSO and
CASTROL have come together to make the right combination of “Top two
together” they can overcome this problem as well.

¾ PSO has done very well in the financial sector, since its new vision period and
will continue with the pace. Innovations and up to dating of the outlets in
accordance with the needs of the changing world is a very important step towards
both marketing and financial prosperity.

¾ The other problem faced by PSO because of the competition is that the land
acquiring at old or new places the bid gets too high that the land acquired
becomes too expensive.

¾ PSO is becoming better day-by-day and after privatization the modifications and
changes they are expected to bring “Sky is the limit”.

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ANNEXURE

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94
BIBLOGRAPHY

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BOOK REFERENCES

Mc GJRW- HILL

Human resource management

International 4th Edition, December 2001,

Chapters

1.Human Resource Environment, Page # 51

6.Selection And Placement, page # 216

7. Training, page # 248

9. Employee Development, page # 374

INTERNET SEARCH

www.psocl.com

PERSONS INTERVIEWED

1. Mr. Asif Aslam

Divisional Manager PSO

Retail, Islamabad

2. Mr. Faisal Mian

Executive Retail Manager

PSO, Islamabad

MAGAZINE PSO
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