Solutions to problems faced by public enterprises

Solutions to problems faced by public enterprises

1. Objective: Every enterprise should have a specific objective. The objective should be expressed in clear terms and communicated to all the employees of the enterprise. Objectives should be set taking into account the prevailing environment and modified according to the changes in the environment.

2. Sound business principles: The enterprise should be run on sound business principles. There should be focus on improving efficiency in all functional areas. Policies, systems and procedures should be modified with the aim of making the enterprise flexible, efficient and profitable.

3. Autonomy: Public enterprises should have considerable autonomy in their functioning. Authority should be delegated and they should have the freedom to take decisions. Autonomy would ensure that decisions are taken at the right time and growth opportunities utilized in the best possible manner.

4. Freedom from political interference: Many public enterprises are considered to be the kingdoms of politicians. They are run to suit the needs and requirements of the ruling party. Corruption, favoritism and nepotism are rampant in many of the enterprises and the interests of the enterprise is sacrificed. It should be ensured that they are free from continuous interference of politicians, bureaucrats etc., in their affairs.

5. Proper project appraisal: It is common to observe that many projects are announced without any sort of appraisal of the need and viability of the project. Therefore many projects are left incomplete with huge amount of funds invested in them going waste. Therefore it should be ensured that before any project is taken up for implementation, there is a thorough appraisal of the viability of the project from the technical, economic, social, and commercial point of view. Only those projects which are found to be feasible should be considered for implementation.

6. Proper planning: Time and cost over runs are a common malady affecting public sector projects. Therefore once a project is considered for implementation, there should be proper planning right from the commencement of the project till its completion. Contingency plans should also be prepared so that the enterprise is ready to face any situation. Such detailed planning would ensure that projects are completed within time in a cost effective manner.

7. Redeployment of excess staff: Excess staffing is one of the major problems faced by public enterprises. The reasons for this situation are:

  1. one of the objectives of public enterprises was creation of large scale employment opportunities and therefore recruitment was done in large numbers without considering actual requirements,
  2. secondly in many sectors the public enterprises have reduced their scale of operations unable to compete with the private sector, but the number of employees has not come down.

Over-staffing has resulted in high establishment and employee costs. Therefore the excess staff should be identified and redeployed in areas where there are shortages of staff, instead of going for fresh recruitment, vacancies can be filled up with excess staff from other enterprises. This would improve efficiency and also bring down costs.

8. Improvement in capacity utilization: Idle capacity constitutes wastage of national resources. In India, low capacity utilization is a problem plaguing many public enterprises. Due to the low capacity utilization, the productivity is low and revenues earned are also low. Therefore measures should be initiated to improve capacity utilization levels and new capacity should be planned only if the existing capacity is fully utilized.

9. Cost control and cost reduction: Over-staffing, poor capacity utilization and low productivity of employees all contribute to cost inefficiencies. Employees should be trained on measures of cost control and cost reduction. Wage hikes and bonus of employees should be linked to the extent of costs reduced.

10. Professional cadre of managers: A new cadre of managers who are professionally qualified should be appointed. To attract talented professionals the pay and perks offered should be substantially increased. They should be given autonomy so that they can function effectively without any external interference.

11. Pay for performance: The pay for employees in public enterprises has very little relationship with performance. There is no difference between a top performer and non-performer in terms of pay and perks. Therefore there is very little motivation among employees to improve and excel. To motivate employees and create the urge to excel, public enterprises should link a substantial portion of pay with performance of both the organization as well as the employee.

12. Retaining talent: The pay, working environment, opportunity for professional advancement and fast track career growth are missing in public enterprises. Therefore many talented employees quit them and seek opportunities in the private sector. Therefore public enterprises should institute measures such as pay for performance, promotions based on performance and not on seniority, employee stock options and salary levels should match those offered by the private sector.

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