Bharat Petroleum Corporation Ltd (BPCL) has begun a major restructuring exercise that will slash its management layers, create independent profit centres, and decentralise its decision-making in operational and financial matters.
As a first step, it has formed five strategic business units (SBU) for its different businesses. The units will be allowed to operate as independent profit centres enjoying operational and financial freedom. The five units are for retail marketing, industrial fuels, LPG, lubricants and refining and logistics.
The decision is based on a series of suggestions by global management consultant, Arthur D Little (ADL) which has been working with BPCL for more than a year. In presentations to the top management at BPCLs training centre in Mumbais Juhu this week, the SBUs were identified and selected.
BPCL is the first oil company to have begun concrete work on restructuring its operations. It had appointed Arthur D Little as its consultant more than a year back, while competitors like Indian Oil Corporation (IOC) have only started work with Price Waterhouse. Oil and Natural Gas Corporation (ONGC), the upstream major, is already working with McKinsey on a similar restructuring.
The corporation has also formed a core top level group consisting of the chairman and managing director, four directors and two other executive directors. The group will decide on matters relating to corporate vision and overall business strategy. The idea is to broadbase decision-making at this level.
Among ADLs other suggestions include delegating greater powers to SBUs, creating a flatter organisational structure and rationalisation of workforce.
The ADL presentations also called for BPCL to focus primarily on petroleum refining and specialise in it.
BPCL sources said several groups have been formed within the company to study the different suggestions and ways of implementing them. The suggestion of SBUs was mooted long back. It took some time for the company executives to work on it and decide on the number of such units and the different businesses they will handle.
The SBU team is currently being selected and will soon be in place. They will then work on a strategy and vision for their units, which will be dovetailed with the larger vision of the corporation.
BPCL sources said the units would be given a lot of freedom. They will be closer to the field and work as separate profit centres with a fixed budget, they added. For example, the SBU on refinery and logistics could be located in the Mumbai refinery instead of at the corporate office.
After the naming of the team, the SBU will sit and work out individual strategies. This could also form a part of the overall BPCL strategy, said sources. In future meetings with ADL this is expected to be discussed prominently, they explained.
ADL has also called for creating a flatter organisation to speed up decision making. This would result in slashing of some layers and work is going on how to achieve that. Instead of four layers at a certain level, we could have two, said sources.
Currently, BPCLs top layer consists of chairman and managing director, U Sundararajan and the board which includes the directors of marketing, refinery, finance and personnel. There are also two government representatives on the board.
Attempt is also being made to rationalise the BPCL workforce which like any other public sector is vast.
There are surpluses in some areas and shortages in others. ADL has suggested that more staff be transferred to crucial areas. For example, more numbers could be added in marketing from the clerical staff at head offices.
The Bharat Bhavan at Mumbai has nearly 2,000 people, which some people feel can be better utilised elsewhere.
Though ADL has not suggested a concrete business strategy for the companys future growth, they have emphasised that BPCL stick to and specialise in its current businesses.
At the same time, the core group at the top level and the different SBUs will work on the business strategy and formalise it.
Bharat Petroleum sources said unlike its public sector counterparts, Indian Oil and HPCL, they are not looking at too many diversifications. They have ruled out venturing into power sector for the time being, though petrochemicals is firmly on the agenda.
We are not talking about specific business strategies. As and when they are finalised, they will form a part of the overall vision statement, said sources.
Creation of strategic business units (SBUs), for different businesses to enable sharper focus.
Forming a flatter organisational structure, lopping off some layers to make access easy and decision-making less cumbersome.
Rationalisation of workforce. Put more emphasis on the field force than on clerical and office staff. For example, the BPCL corporate office in Mumbai alone has nearly 2,000 people.
