Air India story

All the major public enterprises that came my way had one commonality – its bureaucratic and political masters missed no opportunity to castigate the organization and its men for its problems. 

It however does not stand to reason that anyone other than the owner can be assigned the primary blame for the decline of an organization. We are yet to hear of a private sector enterprise in which the blame for its debacle was laid at the altar of its employees as it is invariably the owner who partakes of the nectar of success or the poison of failure.

It is indeed grossly unfair that Air India and its men have been unfairly castigated almost always for its dismal state of affairs. This very unfair reality needs to be placed in the right perspective.  

Air India and Indian Airlines were two perfectly fine airlines till they were merged in 2007. The decision to merge was not of the airlines but that of the owner, the Government of India and more specifically the then Ministry of Civil Aviation. This merger was not a minor affair for it put in great turmoil both organizations with seniority groups merging both at officer as well as staff level. With differences in HR policies, pay scales, designations, processes, structures and above all culture there was no way this merger could have led to anything other than a nightmare. The Justice Dharmadhikari committee that followed and in all fairness made efforts to sort out the imbroglio yet the merger stoked the very divide that it sought to extinguish with issues and emotions continuing to simmer even after over a decade. The organization immediately thereafter started following a downward trajectory that resulted in losses piling up.

The then government also took another decision, often regarded as controversial, that of purchasing planes of both Airbus and Boeing variety in bulk. And in all fairness it can be said that had that not been done, Air India of today would not be an airline for there would have been no planes in its arsenal. What really affected the airline badly was making it take loans to pay for the massive purchase. Even after some planes being sold off subsequently, the capital burden on account of purchase of planes and the interest charges thereon almost equals the equity infusion so far by the government against its so called turn-around plan.   

It is evident that the oft repeated statement of a dole being extended to Air India for its survival does not hold water. It is simply a case of the owner of a company paying for the capital goods purchased by it at the owner’s specific instance.

Both the loans taken for aircraft purchase and the piling up of losses triggered by the merger took the airline into a debt trap. And these losses the company started accumulating immediately after and because of the merger, a situation aggravated by the ban on fresh recruitment, high fuel prices, increasing competition from the private sector and at times an inept or conniving management. Yes the fact remains that the company was allowed to be in losses for almost ten years at a stretch, a totally unacceptable scenario.  

There is generally nothing wrong with the indian public sector except the way it is governed and the way it governs itself. Public sector enterprises that need to compete with the private, like the national carrier find themselves at a serious handicap for the inherent restrictions imposed by the general financial rules, tendering processes, multiplicity of masters and the onslaught of the three watchdogs that treat a mistake or a malafide on the same footing, make survival in a competitive environment almost untenable.   

It is a very difficult scenario that the public sector in India is generally faced with, yet it performs and therefore needs to be lauded not castigated. And moreover it is not as if the constraints are cast in stone, these are process issues that can be addressed provided there is a will. 

The Indian Public Sector is indeed at crossroads. Hamstrung by crippling constraints and castigated for inadequate deliverance, it has found a solution in disinvestment. The crippling constraints, dampen deliverance and the only way their potential can be fully exploited is by letting them free, an environment that only the private sector can provide. 

There are no easy answers, and the easiest path therefore emerges as the only alternative.  

Public Sector Blues

Handling a public sector and that too remaining confined within the cloak of archaic rules and processes is no mean task. And when the corporate in question is in the business of flying planes, a business that can easily be termed as the mother of all businesses, the job assumes the pinnacle of complexity.

The mother term is coined by me, now for the second time, the first being for the lifeline of the nation that also qualifies to fall in a similar category as the mother of all bureaucracies. 

While the essential difference between the public and the private lies in the ownership pattern, one being owned by the public at large and other by a private body, it is not a gospel mandate to have differences in the way they operate. Why the public sector cannot be allowed to operate and also prosper like the private may perhaps always remain unanswered.

Unless and until we all and that includes the mighty government machinery, start believing in the supremacy of deliverance over everything else, such dilemmas would always continue. Why process has started taking overriding precedence over deliverance in a nation like ours that still has miles and miles to go is indeed beyond my comprehension. A system that judges merit based on considerations that are often poles apart from sheer deliverance can never lead a nation to glory shall always remain my firm belief. But yes, the India of today is witnessing change of an order never experienced in the past and that alone is the silver lining in the dark skies.

Often my airline is questioned on its inability to match the private sector on various operating parameters, and this is unfortunately always done without due appreciation of the fundamental reality that there is no level playing field. The decision making processes, the contractual mechanisms, the checks and balances, the focus on process at the cost of deliverance and lack of clarity on the purpose or the objective are all widely different. The complex process oriented world of the public sector is no match in front of the simple output oriented universe of the private. And above all, “hindsight” is much less at work in the private as opposed to the public sector.

Does it imply that the public sector should slowly be allowed to fade away simply because of our inability to change the ground rules and provide an almost level playing field to it? A course correction is the need of the hour for contrary to the general perception, the public sector has still not lost its relevance in entirety. A mixed economy is what a developing nation deserves for it keeps both sectors in check to the advantage of the public.

State firms fail because of inept management

(This article was published in the HT of 17/10/2013)

On October 10, civil aviation minister Ajit Singh told a private TV channel that the national carrier - Air India will have to make itself  “profitable or a subsequent government will have to explore at privatising.” The statement created a flutter reminiscent of the era of disinvestment when the hospitality sector giant India Tourism Development Corporation (ITDC) and many others were sold off.

As the head of ITDC, I was often amused at the irrationality of the excuses trotted out for justifying the sale of the family silver — governments should not be in the business of running hotels, the company facing huge loss and the government needs money — were the three major excuses trotted out, but without substance. The counter-arguments were: if the government can’t run even hotels profitably then can it run the nation, give us time and the company will be as profitable as those in the private sector; and if the aim is to maximise sale proceeds why not sell through an open auction and why attempt restricting post-sale operations.

Major properties were palmed off at prices that would not fetch even a decent house in the outskirts of Delhi. Unfortunately, the tremendous enthusiasm over selling the family silver overshadowed the need for sanity.

The theory that governments should not be running businesses and, therefore, get rid of them is inherently faulty. Running a business enterprise requires sound commercial sense. That is why private enterprises burn the midnight oil while selecting their chief executives. Had the same diligence been applied while choosing CEOs for State firms, the story of even the national carrier could have been different. With the might of the State behind it, the public sector has an inherent advantage over the private sector. Unfortunately, this advantage is now being frittered away.

Also, the latent strength of the Indian public sector enterprises lies untapped even after 66 years of Independence. It defies common business sense why many of these commercial enterprises set up with public funds and backed by the State perform so badly.

The reason lies in inept apex management as often the criterion for appointments lack merit. That the kinds of ownership and technicalities are mere peripheral issues and what matters is the commitment, zeal and integrity of the person in charge of these enterprises.

Air India and ITDC are textbook examples of inherently profitable business enterprises brought to the mat by inept managements.  Contrary to public opinion, blaming political masters or the external environment for the ills of a company merely diverts attention and shrouds the real causes. The fact remains that the ‘companies act’ and the ‘memorandum of articles’ sufficiently empower the chief executives to ward off any hostile threats to the efficient working of the enterprise, yet in many cases the chief executives lack leadership traits besides showing undue eagerness to succumb.

Any commercial enterprise, be it the local paan shop or a multinational corporation, is only as good as its leader, or in other words the officer who heads it.

Unfortunately, most of the senior officers only look upwards and display extreme keenness to be identified as the blue-eyed boys of the powers that be. They achieve that goal but in the process the company they head often lose out.

Public Sector can Excel!

The public sector enterprises have miles to go and they can provided...............

That ITDC the only central public sector enterprise in the hospitality sector is deeply in reds is a news that saddens yet reflects the state of the nation. On a lighter note one feels that a lot of effort must have gone in over the years to achieve this distinction considering that the hospitality business is inherently and also highly profitable. The reasons for the debacle indicated in the news item are simply unacceptable.  

It is indeed sad that the latent strength of the temples of modern India, the Indian public sector enterprises lies untapped even after over sixty years of existence as a free nation. It defies common business sense that many of these commercial enterprises set up with public funds and backed by the state are underperforming yet many of them continue to do so. The reason lies in inept management as generally the apex level positions are filled not based on performance or leadership traits but on other criterion or considerations. That the shades of ownership and mere technicalities are not issues that matter and what really matters is the commitment, zeal and integrity of the top guy is a fundamental premise that needs widespread acceptance.

Air India and ITDC are text book examples of profitable business enterprises being bled to death by inept managements. Despite the general public opinion being to the contrary, blaming political masters or the external environment for the ills of the company merely diverts attention and shrouds the real causes. The fact remains that the companies act and the memorandum of articles of the enterprise sufficiently empower the chief executives to ward of any hostile threats to the efficient working of the enterprise, yet in many cases the chief executives either fail to lead or else succumb to pressures and attractions. 

My stint as the head honcho of the Delhi division, the largest division of the mighty railway system of the country firmly reinforced my belief in the goodness and the immense utility of men at large. It also reinforced my belief that the primary problem of the nation is neither the politicos, nor the unions; it is the bureaucracy that with passage of time has evolved into a self seeking organism. The bureaucratic clan indeed has to take the major blame for the pitiable condition the nation and organizations like the ITDC and Air India find themselves in.

My two stints as a public sector honcho, namely the short-lived stint at the India Tourism Development Corporation and later at the Madhya Pradesh State Tourism Development Corporation reinforced my belief that CEO positions in public sectors are primarily leadership positions. Any CEO who does not appreciate this basic premise is bound to fall flat on the face and that is what has been happening regularly in the Indian public sector scenario. Giving a short shrift to this premise while making selections for apex positions ensures a mediocre future existence for the enterprise, a situation not healthy for the economy.

My stint at the India Tourism Development Corporation coincided with the aggressiveness that was then being displayed in the disinvestment of the public sector and also the 9/11 incident which affected tourism worldwide. The combined synergy of both the events made the revival an almost impossible exercise, yet the unprecedented turnaround that the company witnessed in 2002-3 was the result of a massive team effort, a team effort that even the junior-most of the employees identified himself with. Doubts over the ability of the public sector to perform at par or even better than the private were also successfully laid to rest.

The iconic success of the Madhya Pradesh Tourism in finding its place in the big league of Indian tourism and also the unprecedented financial turnaround of the state tourism corporation was fuelled by the same employees of the once beleaguered corporation who were earlier being blamed for the mess that the state tourism corporation was in. Posting over 30% growth year on year by a state public sector undertaking that had already hit the bottom and was being actively considered for a sell-off again proved that a turnaround is possible provided the top guy has employee focus and is committed to the growth of the company.

Any commercial enterprise, be it the local pan ki dukaan or a towering corporation is only as good as its leader, or in other words its top guy. The top guy has to have leadership qualities and by his words and deeds, should be able to command the unquestioned loyalty of his men. Everything else is secondary, yet unfortunately most of the top guys only look upwards and display extreme keenness to be identified as the blue eyed boys of the powers that be. Blue eyed boys they become, but they lose the company and that is what has happened with most of the commercial enterprises that have gone downhill or are performing below par.

The top guys also have to be able to distinguish between the “effort to deliver” and the “decision to deliver”. While the effort part is good and appreciable, the decision part is almost mandatory. Unless the company led by its top guy decides to deliver, the effort will almost always never bear fruit. It is also sad that generally, the top management gets busy in the “how” and remains busy in the same while the corporation continues its downhill slide. That the “will” to improve is far more vital than the “how’s” and “why’s” needs appreciation.

And lastly, any commercial enterprise that works in a competitive environment, howsoever profitable the sector may be, has to have its foundations firmly in the ground, grouted in value systems that are universally accepted as good and also good practices. Stamping down corruption and other vices should therefore remain the principal focus of the chief executive who should lay this issue on the table and lead by personal example.

The public sector always attracts criticism on grounds of non-performance due to sarkari ownership. Yet with sound commercial sense, the ownership pattern can turn out to be the biggest strength of the company provided the CEO has leadership traits. He is the pivot and he is the one who can take the company forward or sink it. The buck like in any commercial organization stops at the chief executive even in a public sector undertaking. 

Calling a spade a spade!

Calling a spade a spade is a rarity in the India of today. Its sarkari mulazims would invariably, with exceptions of course, identify a spade as whatever is conveniently the need of the hour. It goes without saying that the need may change from moment to moment and from person to person.

Why has remaining truthful emerged as an impossibility in present times? Why are fudged figures, rather than the truthful ground reality more acceptable to the powers that be? Why figures that are meant for internal assessment more important than the ground realities that affect the public at large? Why matters have to be complex and cannot be simplified?

The biggest advantage of being truthful is that there is no need whatsoever to remember what one said or wrote, including the when and where. It is rather unfortunate that the sarkari maze is full of complexities, managed by complex people and based on baseless presumptions and figures.

The Anna Hazare crusade that hogged headlines today, appears to be the only ray of hope in the cesspool that the sarkari tantra in India has emerged as.

Turnarounds!

The turnaround of Hotel Palash in Bhopal can be called spectacular even by the most conservative estimates. The hotel that did a turnover of only Rs seventy five lakhs in 2002-3 touched almost Rs seven crores in 2009-10, a jump of almost ten times in seven years. This turnaround brought back memories of Hotel Ashok in New Delhi that despite posting its lowest ever turnover of thirty six crores in 2002-3 turned around and posted a fifty eight crores turnover in the subsequent year, despite 9/11 being a party stopper for almost everyone in the tourism sector.

The same was true of the corporation, the Madhya Pradesh State Tourism Development Corporation rose from the ashes to become the leader of the tourism sector in the country. A loss making entity, first wiped all its losses and then emerged to become a successful business enterprise. The state, beautiful though it always had been, also emerged from behind the shadows and came to be regarded in the same league as the established states of Rajasthan and Kerala in so far as tourism is concerned.

The Madhya Pradesh stint reinforced in me the belief that nothing is impossible to achieve. That India can, with a lot of effort of-course, discard the "developing" stamp and enter the "developed" league is a thought that engages the mind every now and then. That the question is not of shortage of funds, but inadequate application of traits like will power, commitment and integrity is also a thought that cannot be discarded.

People often criticize the public sector on grounds of non-performance and cite sarkari ownership as the root cause. Being witness to many public sector turnarounds and my actual participation in two, has led me to believe that the shades of ownership are not relevant, what is relevant though is the CEO of the enterprise. He can take it forward or sink it, irrespective of the share holding pattern of the company.

What defines merit?

I often wonder whether merit still counts in the present age India and am unable to find an exact answer. Merit rarely counts, is the best answer that one can think of.
Yes there have been cases where govermnents have recognized brilliance and merit overriding considerations based on money and proximity. E.Sreedharan is one such example of a person whose merit has been openly recognized and appreciated by the federal as well as state government. Nandan Nilekani is perhaps another. But that is about all. No other example readily comes to mind.
And so rarely we come across cases of an outstanding deliverance in this nation of over a billion people primarily because meritocracy has been finally given the go-by in this nation.
The sarkari sector definitely supports and promotes what it regards as merit. Unfortunately however, merit has a different meaning in this sector. Being from the elite IAS is considered meritorious, being well connected to the high and mighty is perhaps over brilliance and being stinking rich is also a fit case for being regarded as meritorious. Again, that is about all. And so all the institutions that are supposed to recruit people for important positions, with perhaps UPSC being the only exception, do their job on the basis of their own perception of what is merit.
The selection for board level positions in the central public sector undertakings is a classic example of a distorted merit assessment system. Both the methods of induction normally give weightage to the "connected" aspect, with the right phone call at the right time almost always doing the trick.
And so what does the really meritorious guy, with no connections and no surplus cash to be doled out as bribes, do in this country? Bide his time, I must say, because ultimately at some point of time, maybe a hundred or more years later, our nation, if it has to be pulled out of the abyss it finds itself in, shall be forced to start believing in and respecting true meritocracy as practiced in the developed world at present and not the pseudo kind, that it presently worships.

Bias against the public sector

A very strong bias against the public sector is a common trait of us indians. Public sector bashing is very good passtime. I have noticed it even within my own family, despite being associated with the public sector for a long time. Whenever we go out for a dinner, my wife criticizes the delay as well as the quality of foood if consumed in a public sector hotel, while at the same time not even noticing a greater delay or a really lousy food served in a private sector hotel of repute.
I often wonder why is it so? Is it because we regard public sector as our own and therefore while carrying a very low opinion of ourselves, we carry the same opinion of the public sector.
At the same time it is also true that the quality of the public sector leaves much to be desired, but the private sector can be equally bad or even worse at times. But fortunately or unfortunately there is nothing like a bias against the private sector, rather there is a bias for it.

Public Sector stinks

My recent stay at Hotel Ashok was a disaster. Checked in in the mornig and checked out in the evening, due to complete failure of the airconditioning and generators. The beautiful suite room had turned into an oven by the evening. It was disgraceful, in fact the worst nightmare of a hotelier, the collapse of both the vital systems. There was a reason, large scale renovation, but the reason was not good enough. Airconditioning and electrical systems in a hotel are not meant to fail, despite whatever. And I moved into Hotel Samrat in the evening. Nothing much to write home about, but the hotel staff out of their love and affection for me and my family made the stay worthwhile.

ITDC is still a great organization with a large mandate "Development of tourism in India". Having headed ITDC in its hey days, albeit under the looming shadow of disinvestment, one of the worst things to have happenned to the corporation, I am still of the firm belief that the best days of ITDC are yet to come. ITDC can still, even now rise from the ashes and become the leader in the tourism scene of the nation.

If only it is handled like a commercial, not a bureaucratic organization and the CEO takes things head on, without bothering about the consequences. Perhaps I am wrong, for I was given the boot in December 2002, when I handled things head on and in the process rubbed the powers that be the wrong way, even though I was right and they were wrong.

And now we hear about the mess that is Air India. Again a classic example of bureaucratic mishandling of a commercial enterprise, rampant internal loot and weak CEO's. But such CEO's last their terms even though the organizaton does not.

God only can now help the public sector in this country.