INTRODUCTION TO MANAGEMENT

Final report
On

Submitted by
SYED REHAN ALI
MBA-(Evening)

SP09-MB-

Faculty
Mr.BABER WAHAB
(Course Mentor)

th
Date of submission: 30 APRIL, 2009
 S YNOPSIS
This report presents detailed information on
“How the Management functions performs in Pakistan State
Oil.”

The content provides an introduction, history and how manager job is

changing and tells significance of using latest technology in an organization.

Pakistan State Oil (PSO) despite carrying a label of a public sector entity, and
truly the drivers of economy of this country. PSO is continuously improving his
product and services and improving the quality of the product.

Government of Pakistan holds its 51 % share. PSO is a Pakistan’s largest

company having an average turnover of around US billions of $ annually.

These are solo distributor in the southern region and further it occupy greater
market share. PSO has maintained a 30-year mutually-beneficial business
relationship with Kuwait Petroleum Corporation (KPC) for the purchase of HSD
and FO and also export its product to Afghanistan.

PSO ranked 29th whose revenue as compared previous year was seen surged
by 41 percent. Previous year PSO was ranked at 31st.

“PSO shall undertake social, philanthropic or community development

programs which are in alliance with its business strategies or that which will
benefit the broader interests of the community.”

We are proud to cater INTRODUCTION

to the fuel and non fuel needs of approximately 2.8
million customers per day.
&
The report concludes on “SWOT ANALYSIS of PSO “ and some useful
suggestion also added.” HISTORY
Finally,

(1-1)
Oil is the
COMPANY life blood for a country
OVERVIEW
as
Market Leader in Energy sector:
PSO is the h eart of economy
Pakistan state oil is the market leader in Pakistan’s energy sector. The company has the largest network
of retail outlets to serve the automotive sector and is the major fuel supplier to aviation, railways, power
projects, armed forces and agriculture sector. PSO takes pride in continuing the tradition of excellence
and is fully committed to meet the energy needs of today and rising challenges of tomorrow.

Pakistan State Oil, the largest oil marketing company in the country, is currently engaged in storage,
distribution and marketing of various POL products.

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CURRENT VALUE: the Company’s current value of Rs. 75 billion,

MARKET SHARE

MARKET SHARE in Black oil : 82.1% MARKET SHARE in white oil : 61.2%

The company’s astounding growth in terms of sales and turnover, combined with its status of being the

 First Pakistani Public Sector Company to become a member of the World Economic Forum (WEF)
 Winning the “Karachi Stock Exchange Top Companies Award” has made PSO a notable
company world over.

PSO has the widest strategic oil distribution network. This network comprises of 29 storage depots and
9 installations, 860,000 MTs of capacity i.e. almost 81% of total national storage, numerous
pipe lines network and equity partnership in White Oil Pipeline Project (WOPP) from Karachi to Mehmood
Kot.

A most efficient product movement system for its POL products facilitates the operations at PSO. This
system includes a fleet of 6000 tank lorries, tank wagons and pipelines. With the inception of white oil
pipeline (WOPP) the pattern of supplies from Karachi has changed drastically as the entire white oil
movement from Karachi has been switched over from tank lorries to pipelines.

Moreover, to make this system more efficient and effective, new pilfer-proof tank lorries equipped with
satellite tracking system have been introduced.

Distribution outlets 3612: 1

PSO has the largest network in the country. Out of these, 1,610 outlets have been upgraded as per
the New Vision Retail Program, with most modern facilities like

electronic dispensing units, convenience stores, business centers, Easy Payment Centers and customer
friendly staff to provide unmatched and diverse services to its customers, all of which are comparable to
international practices.

The fact that PSO serves 2.8 million retail customers on daily basis, along with 2000 industrial units and
business houses, is indicative of its vast customer base. The company has also been meeting the fuel
needs of various government entities, armed forces, railways, agriculture sector, IPPs and industrial
units.

PSO also provides Jet Fuel to Refueling Facilities at 9 airports in Pakistan and ship fuel at 3 ports.

In July 2002, ‘PSO Loyalty Cards’ were introduced to reward the retail customers for their loyalty and
patronage towards the company. In February 2003 PSO launched its ‘Fleet Cards’ and ‘Corporate
Cards’, which are fuel-based credit cards for the business entities. These cards along with the
company’s Prepaid Cards, provide convenience, flexibility and security to customers, while enabling
them to earn redeemable loyalty points and avail attractive discounts on non-petroleum products.

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(1-1): http://www.psopk.com/about_us/

3
* POL products
PSO products include:
 Motor Gasoline,
 High Speed Diesel
 Furnace Oil
 Jet Fuel
 Kerosene
 LPG
 CNG
 Petrochemicals
 Lubricants
PSO’s leading retail brands includes:

 Premier-XL (petrol with multi-functional additive),

 Green-XL (environment friendly diesel with an additive that provides more mileage,
smooth running & less black smoke), Deo (diesel engine oil) and Carient (passenger car
motor oil).
In order to deliver the promised quality to its retail customers, PSO launched Mobile Quality Testing
Networks (MQTU) in October 1998 which has now been extended to 21 units operating from 15 major
cities of Pakistan. These units perform surprise visits to check the quality of the POL products at
different retail outlets.
2

PACRA ASSIGNS RATINGS TO PAKISTAN STATE OIL COMPANY LIMITED

The Pakistan Credit Rating Agency (PACRA) has downgraded the long-term entity rating of Pakistan
State Oil Company Limited (PSO) to AA+ (double A plus), while maintaining the short-term rating at
A1+ (A One Plus). These ratings indicate a very low expectation of credit risk emanating from a very
strong capacity for timely payment of financial commitments.

(1-2) HISTORY
The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on January 1st; the
government took over and merged Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) as
Premiere Oil Company Limited (POCL).

Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC) came into
existence. PSDC was then renamed as State Oil Company Limited (SOCL) on August 23rd 1976.
Following that, the ESSO undertakings were purchased on 15th September 1976 and control was vested
in SOCL.

The end of that year (30th December 1976) saw the merger of the Premier Oil Company Limited and
State Oil Company Limited, giving way to Pakistan state Oil (PSO).

After PSO’s inception, the corporate culture underwent a comprehensive renewal program which was
fully implemented in 2004. This program over the years included the revamping of the organizational

2
*http://www.psopk.com/about_us/business_glance.php
3

4
architecture, rationalization of staff, employee empowerment and transparency in decision making
through cross functional teams.

This new corporate renewal program has divided the company’s major operations into independent
activities supported by legal, financial, informative and other services. In order to reinforce and monitor
this structural change, related check and balances have been established by incorporating monitoring
and control systems.

Human Resource Development became one of the main priorities on the company’s agenda under this
corporate reform.

It is due to this effective implementation of corporate reform and consistent application of the best
industrial practices and business development strategies, that PSO has been able to maintain its market
leadership in a highly competitive business environment.
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January 1, 1974

The federal government took over the management of PNO (Pakistan National Oil) and DPL (Dawood Petroleum
Limited), renamed into POCL (Premier Oil Company Limited) under marketing of Petroleum Products (Federal Control
Act, 1974)

June 6, 1974

The government incorporates “Petroleum Storage Development Corporation’ PSDC

August 23, 1976

PSCDC renamed to State Oil Company Limited (SOCL)

5

4
(1-2): http://www.psopk.com/about_us/history.php

5
September 15, 1976

The Government purchases ESSO undertakings, vests their control in SOCL

December 30, 1976

The Government merges PNO and POCL into SOCL (State Oil Company Limited) and renames it Pakistan State Oil
Company Limited (PSO)

1999

The new vision program is launched

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  How manager is
changing

 Rewards

 Quality Management

(2.1) HOW MANAGER JOB IS CHANGING?

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 CHANGE IMAPACT

In a global scenario, Technology plays a vital role in an

organization.
Phillips Kotler quotes:

Technology “ If company not use technologies, they are out of the

business and only those companies compete in the market
that adopts technological changes”
Pakistan state oil uses latest technologies like
 SAP & ERP
 LOTUS
Advantages of using technology is
 To save time
 Increase efficiency and productivity
The company shall reinforce technology-driven value-added
initiatives and shall work towards increasing income from non-
fuel and gaseous fuel businesses.

All over the country threats is increasing.

Biggest threats to Pakistan state oil is (Pakistan State Oil Head
Office Building) costing Billions of rupees.
Increase threats In a current scenario:
to security  Tank Lorries holds in Afghanistan.
 In strikes, tankers damages.

In a current period, competition is increasing very rapidly.

Eleven or twelve companies are in oil operation.
Increase Till 1994-95 only two companies were in operation
 PSO
Competitiveness  SHELL

At that time there is no issue of Quality & Quantity.

YEAR PROFIT MARGIN

PSO 1994-95 7 Paisa/L

PSO 2009 3.5%

In 1994-95, there is no issue of quality & quantity but today

Quality & quantity has become significant for both companies
and customers.

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(2-2) REWARDS
Pakistan state oil gives rewards to their employees on the following performance basis.

OUTSTANING/ AVERAGE ABOVE MARGINAL BELOW

EXCELLENT PERFORMANC AVERAGE PERFORMANC PERFORMANC
PERFORMANCE E PERFORMANC E E
E

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 Increme 15 % 10% 12% NO 5%
nt

Basic 4 2 3 - -

PROMOTION
Promotion based on EDR (Employees Development Report).

REAL EXAMPLE:

On OUTSTANDING PERFORMANCE

On outstanding performance, Mr.Tamiz uddin (To whom that I am making report)

 Awarded as Outstanding performance as a Divisional Manager

in the year 2002-03
He got following rewards
 Shield
 Certificate & Recognition letter
 Cash award & Umrah ticket

And also got Laptops and digital camera.

(2-2): Interview with the Public Relation Manager (PSO)

6

Contact no: (9221)9207628: Ext 2061 : (0300)9201184 Sayed.tameezuddin@psopk.com

1 Quality Management

Quality is a factor that no one can ignore it longer.

Pakistan state oil is known as offering utmost quality products and highest performance ever. PSO is
continuously improving his product and services and improving the quality of the product.

PSO being fully committed to implement total quality management approach has achieved ISO 9000
certification for its six terminals while the balance storage would be made ISO compliant in the next
couple of years.

The modes used for product movement of POL products by PSO include tank Lorries, tank wagons and
pipeline. We have a fleet of around 6,000 tank Lorries. Around 1200 tank Lorries, equipped with tracking
10
and pilfer proof system, have been upgraded as per international standards which are engaged in
delivering quality fuels across the country.

With the inception of white oil pipeline (WOPP) from Karachi to Mehmood Kot via Shikarpur & MFM
(Mehmood Kot / Faisalabad / Machikey) pipeline, the pattern of supplies from Karachi have been
drastically changed as the entire white oil movement from Karachi has been switched over from tank
lorries to pipeline.

To cater to the local lubricants requirements Free Lube Delivery Vans have been introduced.

1: http://www.psopk.com/suppliers/#?1

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  Manager Views
 Strong or Week Culture
 Dimension of organization culture
 How Employee learn culture
 Environment
• Internal environment
• External Environment
Organization stakeholder

(3-1) Managerial view of management

Symbolic / Omnipotent
Top level management set targets. While Middle level make planning to achieve the
targets through Lower level staff..
If the goal is achieve --------------- well enough

If the goal is not achieve

If the target not meets the management see it as a whole and search for a
reason, If the reason don’t justify then management takes steps towards that
employees

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(3-2)
Pakistan State Oil and Strong Culture

 PSO believe in sharing the key values of employees.

 Co-ordination meeting between Managers/MD and their subordinates

Schedule on Bi-monthly basis and meeting is mandatory on quarterly basis.

 In a meeting, employees and the management cross questioning to

each others and raise the issues and make solutions. That’s motivating the
subordinate.

(3-3)
Dimension of Organization Culture
PSO mainly emphasize on

 Stability & Aggressiveness

 Innovation and risk taking

 Attention Detail
7

Stability & Aggressiveness

Employee Recognition:
To boost the morale of employees a reward and recognition scheme is in place for the last few
years and has been a great source of creating a spirit of healthy competition amongst employees.
Each year employees are nominated for two company-wide ceremonies viz

 Shaukat Raza Mirza Management Excellence Award’

 PSO Managing Director’s Performance Award’

Employees within the organization are aggressive to each other in order to achieve the targets.
Reason:
PSO has policy that, on performance basis employee can exceed each other.

Innovation and Risk taking

ABOVE 25%

(3-1 , 3-2, 3-3): Interview with the Public Relation Manager (PSO)
7

Contact no: (9221)9207628: Ext 2061 : (0300)9201184 Sayed.tameezuddin@psopk.com

13
 AVERAGE 50%
BELOW 25%

25% employees declare as Above performance.

50% employees declare as Average performance.
25% employees declare as Below performance.

Example quoted:
“If there are 04 EINSTEIN in an organization those above rules also apply”.

Innovation & Risk technology

PSO encourage their employees to share creative and innovative ideas

PSO-Innovation

* Vehicle Identification System (VIS) is an innovative system introduced for the first time in this
region by PSO at participating outlets, which enables refueling in a vehicle without cash, credit card or
voucher. It is an advance Fleet Management Solution for your organization which guarantees fueling in
the authorized vehicles only.

Benefits:
Fueling of authorized fleet vehicles only
Substantial Savings
Automatic Odometer Reading

How employees learn culture

When employee is hired, then Human Resource report to TNOD (Training and Organizational
Development). Where the organization conduct a orientation plan.
In this orientation plan employee meets with their all heads/ boss. and with the passage of time
employees learn culture itself. PSO has Open & Candid communication culture

ENVIRONMENT

INTERNAL EXTERNAL

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Further detail description can be seen on http://psopk.com/products_services/vis.php

*http://www.pakistaneconomist.com/pagesearch/Search-Engine2002/S.E53.asp

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 . Specific
. General

INTERNAL
Culture shows basic values & behaviors of a society.
With the passage of time culture of an organization also changes.
Culture Example:
15/20 years back female are restricted to specific fields only.
But today women are competing male side by side in every
department.

Employees are the backbone of an organization and without

employees no organization can achieve their goals.
Employee That’s why companies provide training to their new as well as
experienced employees to increase the organization efficiency
time to time.
We value people of PSO as our greatest Resource

Non management union exists in PSO.

Union election held after 03 years then revise terms and
Union condition.
IRE department control all the issues of union under the
supervision of DGM. DGM co-ordinate time to time with the
union

*The company has strengthened its internal controls specifically in supply chain area by implementing
computerized load acknowledgement system, which is aimed at preventing misappropriation of products
in transit and ensures prompt delivery of products to customers and depots. To ensure proper supplies
to local retail outlets, fleet management plan has been implemented at Karachi, Lahore and Islamabad,
which would be extended gradually to other major cities of the country. *

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SPECIFIC ENVIRONMENT

16
 PSO gives his customer :a high value”
Customer
Broad customer base including the retail and industrial, as well as
aviation, marine and Government/Armed Forces sectors

Major customers are:

 KESC
 WAPDA
 DEFENCE
 PAKISTAN STEEL MILL
 IPP’s
 Armed forces, Railway etc.
PSO, being a customer friendly company passed on the benefit to
this lower cost savings to the consumers.
PSO export its product to Afghanistan only.
Supplier PSO purchase their product to
 Pak-Kuwait
 Pak Arab
 Attock refinery limited
 Pak refinery limited
 NRL
 PARCO
 PARCO

11-12 companies are working in the oil & petroleum industry.

Competitor
out of which PSO is the leading company and other two major
competitors are:
 SHELL
 CALTEX
PSO has maximum no. of outlets in urban as well as rural areas.

Market share
PSO Market share in 2007: 68.6 %
PSO Market share in 2008: 70.6 %

Example:
Pressure Govt. of Pakistan holds 51% Political parties/Govt ministers
group share of PSO. So they use their resources to contract
influence on the organization with the PSO transportation to
decision and make pressure to use their lorries and trucks
the top level of the
organization. But PSO has two policies and if
they fulfill any one of the two
then they PSO contract with
them at their own reservation.

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18
 In a current recession scenario, economic condition of a country is
Economic directly influence to the PSO.
condition How?
 Prices high
 PSO takes Over draft
 Pay high Mark-up.
 Low Receivable (specially from Govt. sector organization)

Political/legal Political and legal environment influence on the organization

(Reason may be that Govt. of Pakistan holds 51% share).and the try
to get their influence on the decision making process.

We believe that excellence in our core activities emerges from a

passion for satisfying our customers' needs in terms of total
Social cultural quality management. Our foremost goal is to retain our corporate
leadership.

We are an Equal Opportunity Employer attracting and recruiting

the finest people from around the country. We value contribution
of individuals and teams. Individual contributions are recognized
through our reward and recognition program

We uphold our values and Business Ethics principles in every

action and decision. Professional and personal honesty,
dedication and commitment are the landmarks of our success.
Open and transparent business practices are based on ethical
values and respect for employees, communities and the
environment.

Demographic environment is vital and organization is mainly

interested in the population and growth of the size because
Demographic people (customer) are the one who makes company profitable
The reason is that human population according to size, location,
density, age, occupation etc.

Demographic threat may be there due to the rapidly growing

population. It needs also increases at a rapid rate that generate a
threat of not fulfilling these needs.

A technological change is a way for Innovation.

Technological One of the most important tasks accomplished during the initial
period of transformation was to inculcate the significance of
information technology amongst the employees.

� ERP solution SAP implemented at all locations

Implemented SAP to streamline the information systems for

obtaining and sharing up-to-date real time information on sales,
operation and logistics, and establishing common data
warehouse across the supply chain.

*The latest launch of "PSO Loyalty Card" has been the most
19
innovative marketing initiative, which has not only enabled the
customer to earn PSO Loyalty Points redeemable throughout the
country, but has also offered them attractive discounts for
purchases at a large number of merchant outlets.*
ORGANIZATION STAKEHOLDERS

Major organization stakeholders are:

 GOVT OF PAKISTAN 51%

 HBL (Habib Bank Limited)

 INVESTEMNET CORPORATION OF
PAKISTAN

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 D ecision M aking P rocess

DECISION MAKING PROCESS

Problem:

PSO lost their regular customer

21 (EDHI)
Identification of a Problem
Area manager of PSO check the sales volume of a petrol pump .and found that their
regular customer EDHI is not purchasing to the PSO. Although PSO was also offering to
them a special discount over the last few years.

SOLUTION:

CHARACTERS in a Real situation:

`

Mr.tamiz uddin : Area incharge

Mr. Kazmi : In charge of EDHI
Mr. faisal Edhi : ADMINISTRATOR (owner)
MR. XYZ :

Area Incharge of the PSO (Mr.Tamiz uddin): call to the Mr. Kazmi (EDHI incharge) and said that he wanted
to meet him.

Mr. Kazmi( EDHI incharge): Initially refuses the agreed.

Then they both meet in the office of EDHI.

Area Incharge of the PSO (Mr.Tamiz uddin): he courteously starts his message and asks him to tell the
reason that you have stopped to purchase our product.

Mr. Kazmi( EDHI incharge) said: according to our representative

 Other company (SHELL) is providing better quality than you.

 There is difference of measure of quantity too.
 Our ambulances engine is cease because of poor quality of fuel.

Area Incharge of the PSO (Mr.Tamiz uddin):

Mr. Kazmi if you have any complaint then you should tell us. Ok . If you are not purchasing then doesn’t
matter but i wanted to meet your representative to prove that whatever he is saying is true or fake? 9

Mr. Kazmi: call the representative.

Area Incharge of the PSO (Mr.Tamiz uddin): When representative see the Area incharge of PSO in the office of
Mr. Kazmi he shocked because he knows him.
PSO area incharge asked him that what you know about quality of the fuel.

Representative: He stated the same reason as early described…

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Interview with the Public Relation Manager (PSO) Contact no:
(9221)9207628: Ext 2061 : Sayed.tameezuddin@psopk.com
(0300)9201184

22
Area Incharge of the PSO (Mr.Tamiz uddin):

Area Incharge of the PSO (Mr.Tamiz uddin): check / test the sample

Area incharge takes sample of 03 different oil companies and the results are:

PSO : 210 (210 Shows ---- Excellent quality).

SHELL : 209
CALTEX : 208

He proved that the PSO quality is the best among all.

Mr. Kazmi (EDHI incharge): When he enforced to his representative he admit that he has done
this thing only for the sake of getting commission from another company pump.

After that Mr Kazmi was promise to the area incharge of PSO that he will take action against
him and he will request to the Mr. Faisal Edhi (the administrator of the EDHI) to be a client of
Pakistan state oil.

Intuitive Decision making

Affect initiated decision PSO not take decision on the basis of feeling and
emotions.
Otherwise that can cause a adverse affect on the
company image and good will.

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Cognitive based decision PSO take decision on the basis of skills, knowledge
and perfection. that will lead an organization

PSO also take decision on the basis of Past

Experienced based decision experiences. It helps an organization to take
better decision.
The advantage of taking decision is not to repeat a
mistake that happened in past.

Values or ethics based decision PSO not take decision on the basis of values or
ethics.

Subconscious mental processing PSO sometime take decision on the basis of

subconscious mental processing.
EXAMPLE:
In Supply department, sometime decision takes on
the basis of subconsciously mental processing. like
Whether we will purchase inventory from XYZ
party or not.

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 P LANNING
 Planning: Formal & Informal
 Purpose Of Planning
 How do Manager Plans?
 Types of Plan?
• Internal environment
• External Environment
Organization stakeholder

Planning?
It can be formal or Informal.

(1) FORMAL PLANNING

Formal planning use in

 BUDGETING

 FORECASTING
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  FINANCING

 SALES PLANNING ( in Retail department)

 MARKET PLAN

 INDUSTRIAL CONSUMER DEPARTMNET.

 LOGISTIC DEPARTMENT (from 1 depot to another)

 SETTING STRATEGIES

(2) IN FORMAL PLANNING

Except formal (periodic) planning, all the Planning is called INFORMAL PLANNING.

EXAMPLE:
Petrol Pump XYZ daily takes 3000 Litre fuel from PSO tankers on daily basis.(SCHEDULE BASIS)
If the all fuel sold out then they contract to the PSO. They will immediately access the production to the
pump.
(Above example is of Informal planning. Because they daily take 3000L petrol and that specific day their
sales rapidly growth and they need extra fuel to met their customers need )

PURPOSE OF PLANNING
Purpose of planning is

 To achieve organization goals.

 To organize employees and resources effectively.

 To meet future deadline efficiently.

 To prevent from any risk or uncertainty in the future .

HOW DO MANAGER PLANS?

In every department of an organization, manager plans according to their mindset.

Organization (Top level Management) just wants results.

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Sales manager keep in mind the last year sales record of _____ quarter. And in current year he set his targets
(10-15%) extra. And to achieve these targets he/she works

Example: (A S S U M P T I O N )

YEAR QUARTER 1 QUARTER 2

(SALES) (SALES)
(In Million Rs) (in Million Rs)

2008 6.25
3.0
(including 1st quarter sales)

2009 3.30 7.185

(10 % more than last year quarter) (15 % more than last year quarter)

Financial Strategic
objectives objectives

 Increase revenue  Kept high market share

 Increase profit margin  High quality products
 High ROI  Finest customer service
 Stonger Credit rating  Use latest technologies
 Provide training to the fresh
employee as well as experienced.

10

TYPES OF PLANS

* Interview with the Public Relation Manager (PSO)

10

Contact no: (9221)9207628: Ext 2061 : (0300)9201184 Sayed.tameezuddin@psopk.com

27
 TIME
BREADTH SPECIFICITY FREQUENCY OF USE
FRAME

STRATEGIC LONG DIRECTIONAL SINGLE

It defines the broad goal for the TERM
organization. Departmental meeting Example:
The strategic goals of the held. In which Area
company, along with the Pakistan managers discuss problems In Brand management, the
strategic plans, are decided by State Oil and changes. planning is Single use.
the Board of directors.
However, they are reviewed Long Term Example: When PSO launch Additive
every year in the meeting. Planning Diesel ……
In a X-COM (executive Sugar cane season is going …… ….… ….. The planning use
committee) meeting tp level Duration to start. is called single planning.
management of PSO discusses is
the issues and policies. So company makes policies
Five to provide more Lubricant Company make marketing
* (05) and diesel to that particular research that how many
MISSION area to meet the demand. companies are using that raw
We are committed to leadership Years. material or `or etc.
in energy market through They make directional
competitive advantage in planning that at this
providing the highest quality time that particular area
petroleum products and services need in that amount … they
to our customers, based on: estimate all.
 Professionally trained, high
quality, motivated workforce,
working as a team in an
environment, which recognizes
and rewards performance,
innovation and creativity, and
provides for personal growth
and development
Lowest cost operations and
assured access to long-term and
cost effective supply sources
Sustained growth in earnings in
real terms Highly ethical, safe
environment friendly and socially
responsible business practices 11

11
*
http://www.psopk.com/about_us/vision_mission_values.php

28
 TACTICAL MEDIUM

These goals together with the

Pakistan
plans to achieve them, again, are
State Oil
devised by the top management
Medium
of the company on an annual
Planning
basis. To ensure that these
is
objectives are achieved. Mainly
in
through marketing, is the job of between
(01)
the director of each division.
to
Focusing on customer demand. (05)

Years.

OPERATIONAL SHORT SPECIFIC STANDING

At an operational level daily TERM ongoing training program to
distribution planning and Specific plan in an equip its workforce with
Production scheduling occur. Pakistan organization are clearly necessary skills and
Operational decisions are the State Oil stated knowledge. 10000 training
agreement with the suppliers, inputs have been imparted, to
taking orders form customers. Short Example: our employees since 2000
Which customer takes to which term despite their being busy. In
suppliers, when he needed , Planning If a divisional manager has addition more than 10000
what amount he needed, then given the task to the area forecourt attendants have been
order of next delivery Duration manager to achieve XYZ trained on customer services as
is target then area manager part of WOW experience
must define the procedure launched.
within and policies to its WOW plan: Providing finest
subordinates. customer service to their
a customers and receive a
sudden feedback (WOW).
Year.

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Organizing
 Work specialization

 Authority and Responsibility

 Chain of command

 Span of control

 Centralization & Decentralization

 ________ Departmentalization

 Mechanistic or Organic

30
WORK SPECIALISATION:
The work specialization is high, with each manager/ leader responsible for a specific work and monitors
his subordinate’s performance on regular basis.
"We are now training our employees to solve customers' complaints to their
satisfaction and not ours',"

AUTHORITY AND RESPONSIBILITY:

PSO has given authority as well as responsibilities to the manager that they can take a decision to
achieve their target. Then they report to their leader whenever they are part of a team and to their
respective departmental director as well.
The mentors have a lot of authority, responsibility and information relative to the task on which they are
working. However all the information and authority relative to the organization as a whole, particularly
the financial aspects, is confidential and even the consultants are not aware of it.

Chain of command
Chain of command in an organization is clearly defined.
 Which employee report to which boss,
 How much time he will take to finish the task


Span of control
Span of control vary form department to department level normally
10-15 employees work under 1 boss.)

Centralization & Decentralization

Centralization decision making:

In a centralization decision making NO employees participation involves.
It happened at the following level
 Top level basis, executive committee, management committee.
 While settlement of strategies
 Developing plan,

De centralization decision making:

In a decentralization decision making employees also participates and openly gives their ideas. It
happened at following level

 Divisional offices
 Field related planning
 Field pump ( if problem arise the operational department solve)

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Cross Functional Teams
 Encourage team work & group dynamics while inculcating a sense of ownership through
empowered Cross Functional Teams (CFTs)

 Employ Business Process Reengineering (BPR) to maintain an international working environment

by streamlining processes and removing unnecessary layers

 Interactive sessions are regularly held by the Managing Director at all levels because clear,
coherent and consistent messages ensure that employees are able to integrate the inputs into
their thinking
 Setting up of Cross-Functional Teams (CFTs) to promote team work and timely action.

Quick and merit based decisions taken by respective cross functional teams have yielded important
successes in terms of volumes and profit. Cost savings have occurred due to strict vigilance and
proper negotiations in supply and purchases. Similarly distribution systems and logistics have also
been improved to a great extent and financial transactions as stated earlier show a remarkable
change. Similarly security and HSE have also seen a turn around

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Geographical Departmentalization:

EDCS

GM Retail
GMIC

DGM DGM DGM DGM

DGM
(South) (Central) (North) IC LUBRICANT
IC FEUL

Divisional Deputy Deputy

Divisional Divisional Business Managers Business Manager
Managers
Manager Managers (07) (07)
(04)
(04) (06)

Deputy Area Incharge Area Incharge

Business Managers (05) (05)

*Area Incharge

12

13

12
* Area in charge minimum (4) and maximum depend upon the size of the area
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Functional Departmentalization:

MD & CEO
ED-CS
GM Construction
GM (retail)
GM (Rc)
GM Aviation
GM Operations
GM Supply
GM Logistics
GM Training &
Organizational Development
GM Lubricants and Chemicals
GM Gaseous
GM Brand management
GM Legal
ED - FINANCE & IT
GM HR

C.I Auditor
GM Finance

DGM Security GM IT

DGM procurement

(GM managers renamed as Business Managers)

Source: Interview
13

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  Mechanistic or Organic organization ???
Pakistan state oil is mechanistic as well as organic organization. By analyzing the organization seems to
me more organic than mechanistic.

 Decision making centralized (on major issues) as well as decentralized.

 Clear chain of command to the employees
 Cross functional teams are also working
 Span of control vary (department to department).
 Division of labors
 Company rules and policies are strict

Old PSO Transformed PSO

Distribution oriented Customer service Oriented
Large and centralized Lean and decentralized
Government control Managerial autonomy
Operational based Strategic vision
Diffused responsibility Ownership and accountability
Technical orientation Commercial orientation
Risk averse Entrepreneurial attitudes
Hierarchic and Task driven organization
Bureaucratic setup Teamwork and delegation of
Reliance on managerial authority responsibility
Petroleum sale only Broader business base

Strategy Mix Matrix

Introduction of Matrix Management System with shared support functions.

This is based on the Strategy Mix Matrix (GSM) which PSO has adopted. We emphasize quick decision
making in our style of management we strengthen teamwork promoted through formation of various
cross functional teams to expedite decision-making and execution of policies.

In a clear departure from the bureaucratic style of management, employee empowerment has been
enhanced through delegation of authority and employee participation has been ensured through open
invitation of suggestions.

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 L EADING

14

14

Expectations from the leaders at Pso :

 Passion for business
 Contribute towards change and constant improvement
 Empower People (Sub-Ordinates)
 Excellent Execution
 Integrity and Accountability

Leadership Continuum

Leadership Continuum Leaders come in all shapes and sizes. Some are authoritarian and prefer to tell
their teams exactly what to do. Others use a much more participative style. And, of course, leaders may use a
style anywhere between these two extremes.

These differences suggest a continuum of leadership behavior – with leaders being able to choose the
style they use.

So how do you choose the leadership style that's right for you? One popular approach to leadership,
the "contingency" approach, argues that your choice should be based on the situation, and not on your
personal preferences (here, "contingency" means that your approach is dependent on/contingent upon the
situation).

Leadership at Pso :
Pso believes in highly empowered employees . In process of making a decision, the general procedure
is that a manager presents a problem to his subordinates, gets suggestions from them and then implements the
decisions. Since Pso is a highly diversified organization in terms of business portfolio, a combination of

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Leadership styles is found. The manager decides what style to adopt in which situations i.e. the manager has
liberty to choose from either the analytical style, driving style, amiable style or expressive style of leading. A
combination of all such styles means that there is an even mix of supporting, coaching, designating and
directing from the managers towards the subordinates.

Pso is a follower of “Care and Growth” philosophy. Managers while making decisions are expected to
be highly concerned for the people so that once the employee is satisfied; he or she can deliver best possible
results under the given circumstances. At Pso, managers believe that high concern for results and work can
not be made possible if the concern for the employees is taken out of the equation. Hence, at Pso, managers
are expected to show high concern for people so that they can be motivated to take responsibilities in order to
produce the best possible results.

C ONTROLLING

Market control
Yardstick to measure employee performance
Managerial decision in the control process.
Industrial rating
Types of control
balanced scorecard
Benchmarking
Workplace concern

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Market Control
Pakistan State Oil Company Limited (PSO) is Pakistan’s largest company having an average turnover of
around US billions of $ annually. Therefore, the company can be easily ranked some where between
400-450 in a typical Fortune 500 list of US Companies.

* PSO YARDISTICK
TO MEASURE EMPLOYEE PERFORMANCE

A- What he accomplishes
Consider result of employees work and that of his subordinate.
 Quality of work
 Quantity of work
 Profit objectives
 Developing people
 Commitment to company, vision, mission, values and corporate objectives

B- How he works
 Planning
 Working with others
 Delegating
 Problem solving skill and use of modern techniques
 Organizing
 Communicating
 Analysis
 Health, safety environment
 Ethics

C- What he is
Consider the degree to which employees personnel qualities contribute to his effectiveness.
 Dependability
 Judgment
 Leadership
 Drive

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 Initiative

Source: *Interview with the Public Relation Manager (PSO)

15

Contact no: (9221)9207628: Ext 2061 : (0300)9201184 Sayed.tameezuddin@psopk.com

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D- What he knows
What he knows regarding his functional related field and his understanding of environmental matters
necessary to performance.
 Assigned work
 Related work
 Company philosophy and objectives
 Development in profession or field.

SUMMARY OF POINTS IN (A-D)

5 4 3 2 1 Average

This is the proper way through which employee performance is measure in PSO.

BENCHMARK:
Pakistan state oil benchmark is to get

 Market share
 Profit

Internal Benchmarking:
On the basis of past experience company set their standard.

BALANCE SORECARD
Employee development report is just like a balance scorecard for the higher management. on the basis
of which they decided that whether employee deserve to promote or tends to be in the same category.

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PACRA ASSIGNS RATINGS TO PAKISTAN STATE OIL COMPANY LIMITED
The Pakistan Credit Rating Agency (PACRA) has downgraded the long-term entity rating of Pakistan
State Oil Company Limited (PSO) to AA+ (double A plus), while maintaining the short-term rating at
A1+ (A One Plus). These ratings indicate a very low expectation of credit risk emanating from a very
strong capacity for timely payment of financial commitments.
The ratings reflect the company’s leadership www.pacra.com

FINANCIAL CONTROL

FINANCIAL RATIOS

FINANCIAL RATIOS 2008 2007

Return on Shareholders' 45.4 22.4

Equity (%)

Earning per share 81.94 27.3

(Rs Bn)

Dividend per share 23.5 21.0

(Rs Bn)

Market value per share 417.24 391.5

(Rs Bn)

Debtor turnover ratio 24.6 32.5

Net profit ratio 2.4 1.14

Types of control
Controlling is a reflection of planning and controlling in an organization is mandatory. It ensure that either the
company is going in the right direction or not.

FEED FORWARD CONTROL

Company use feed forward control. Obviously company anticipates the problem and issues.

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 Managerial decision in the control process

Objectives and standard set

Measure actual performance versus standard performance

Goal achieved Goal not achieved

Well an good
Search reasoning

If reason satisfy If reason not satisfy

then revise standard. Then take decision

against that/those
employees

Example:
S A L E S

North South
Quarter 1 (2008) 180 M 190 M
Quarter 1 (2009) 200 m 210M
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If Business sales manager of North has set a target to achieve the sales of 200 million in a quarter year.
At the end of the quarter they achieved the sales of 180 M. Then they can balance or shift it to the other
region (if the sale of that territory is rapidly growing).
 S WOT ANALYSIS

Strengths
1. Market Leader in Oil
2. Superior Quality Products
3. Superior Customer Services
4. Customers Loyalty
5. Competent Human Resources
6. Innovation Skill
7. Socially Responsible
8. Government Backed Entity
9. Educate graduates through Quality Internship programs.

Weaknesses
1. Inequitable Compensation Package
2. Employees Turnover
3. Ineffective in Lubricant Market
4. Fail to identify the reason of fall in Market Share.

Opportunities
1. Growth in Purchasing Power
2. Growth in Vehicles Production
3. Growth in Population
4. Government Support
5. Increase in Prices
6. Increase in Demand

Threats
1: Competition
2: Substitute Products
3: Inflation
4: High Cost
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 5: Interest Rates
6: OPEC Policies

RECOMMENDATION / SUGGESTIONS

After analyzing the financial ratio and this report I would like to give some recommendation.

 PSO must organize events that will educate the people regarding consumption of a fuel.

 PSO must look for extend its business / organization globally. (to open its branches in Afghanistan
and other neighbors countries.

 Provides Environment safety programs at school and university levels.

 Must promote our Sports industry continuously.

 Must search for the substitute of oil and gas.

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