ORGANIZATIONAL REDESIGN AT

BPCL: THE CHALLENGE OF

PRIVATIZATION
Preured 8y
Anund Coud
Introduction
Burmah-Shell Oil Storage & Distributing Company oI India Ltd. was
established in England in 1928.
It was in the business oI distribution and marketing oI petroleum products
in India.
BSR was incorporated in 1952 as a company under the company`s act 1913,
in Bombay. The company set up a reIining plant at Mahul.
It was renamed as BRL in 1976 and BPCL in 1977.
BPCL is in the business oI reIining, storing, marketing and distribution oI
petroleum products
Between 1991-1994, GOI had disinvested part oI its holdings to Iinancial
institutions and employees oI BPCL.
GOI holds 66.2 and the remaining 33.8 are held by Ioreign institutional
investors, Iinancial institutions, employees and other investors.
BPCL operates in the retail, lubricant, petroleum(LPG) and aviation Iuel sector.
Crisis
With the ongoing Liberalization process, sectors like LPG and lubricants
have been deregulated.
As the market is controlled by the retail business, there is a national pool oI
oil, controlled by the Oil Coordination Cell(OCC), which distributes crude
to the three main players in India.
Reliance is the private Iirm in this industry, which cannot openly compete in
the market.
ull deregulation changed the market structure and competition.
Retention oI market share became a serious threat with the anticipation oI
entry oI new local and global players in this sector.
In the lubricant sector, BPCL had a market share oI 12-16
AIter deregulation, it came down to 4.
In order to compete Ior its market share, BPCL decided to redesign itselI
Industry Environment and Market Structure
Due to liberalization , the competition is increased and as a result oI this the
existing SOEs Iaced a signiIicant loss in market share.
Product prices are determined by the import parity prices.
Margins set by competitive pressures will be more volatile and highly uncertain.
Trained and experienced manpower are lured away by the new entrants..
Non-Iuel oIIerings became the threshold activities especially in the metros and
urban markets.
Redesign Strategy
BPCL started Iocusing on customer. They started the program called
CUSECS.
or making the process oI decision making Iaster, they de-layered their
hierarchical organization by empowering its staII.
Their major thrust areas were customer service, proIitability, creation oI
strategic business units and dividing the organization into regions.
The redesigned organization has Iour elements-
(1) corporate center
(2) Strategic business Unit
(3) support services
(4) Lateral linking mechanisms
They used communication as one oI the most important tool.
The Iunctional structure made it diIIicult Ior senior managers to Iocus on
developing and implementing strategies Ior particular business such as
lubricants and LPG.
The six SBUs spread over Iour geographical regions are ReIinery,
Retail, Lubricant, LPG and Aviation.
RM at BPCL:
The support services are organized into three types oI structures
(1) Embedded support services
(2) Shared support services
(3) Corporate services
This three layered structure Iacilitates the process oI decision making and
issues get Iocused attention.
Recruitment Process:
The recruitment in BPCL takes place at a junior level.
The consultant advised a 50 increase in the sales Iorce and Iront line
staII, but without any additional recruitment.
Retraining & Redeployment:
Due to the implementation oI SAP in dispatch, logistics, projects and
RM , there is surplus oI manpower.
The excess manpower in certain areas are retrained and redeployed.
This can create new opportunities and it helps employees to build their
new competencies.
PerIormance management Systems:
Employees were invited to participate in the learning experiences
through oundation oI learning experiences (OL), which was designed
to develop their abilities to work in high perIorming cross Iunctional
teams.
Rightsizing / Retaining:
BPCL being a public enterprise there is no scope oI rightsizing. ence
the eIIorts are taken Ior retraining and redeploying oI personnel Irom the
areas where there is excess oI manpower.
Changes in perIormances
8PCL declded Lo meusure erformunce boLh ln flnunclul Lerms und ln Lerms
of cusLomer servlces
or flnunclul Lerms Lhey huve declded Lo meusure reLurn on culLul, reLurn on
lnvesLmenL, lRR
or cusLomer suLlsfucLlon, Lhey declded Lo conducL erlodlc cusLomer
suLlsfucLlon surveys, whlch ure used Lo meusure cusLomer loyulLy lndex
ogeLher wlLh relnforcemenL of HRM sLruLegles und Lhe communlcuLlon
exerclses ubsenLeelsm reduces, morule goes Lo Lhe hlgh level und emloyee's
cooeruLlon wlLh Lhe munugemenL reuches new helghLs
New Possibilities
Opposition to the planned sell-oII has been led by a no. oI more
nationalistic and protectionist ministers, who held the reservation on two
general areas:
(1) The move above means that govt. will be relinquishing much oI its
inIluence over the pricing oI Iuels.
(2) The process oI privatization has so Iar raised only Rs.50 billion this
year, against the govt. target oI Rs. 120 billion.
uture Outlook and Implications
Private investment will enable investment into marketing and retail
inIrastructure, which should lead to improved services tools, iI not lower
prices.
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