contemporary studies

CONTEMPARY ISSUES RELATED

TO INDUSTRY

ARMY WELFARE TRUST (AWT) -

CASE STUDY

MEHAD AZEEM

ASIM BASHIR WARRAICH

ASIM QAYYUM

Engineering Management

Department

Center for Advanced Studies in

Engineering,

Islamabad – PAKISTAN

2 ARMY WELFARE TRUST – A CASE STUDY

SESSION 2010-2011

Management of Technical Organizations & Practices


CONTEMPARY ISSUES RELATED

TO INDUSTRY

ARMY WELFARE TRUST (AWT) -

CASE STUDY

Undertaken By:

MEHAD AZEEM

REG. NO. SP2009/MSC EM/138


REG. NO. FA2008/MSC. EM/CE/106

ASIM QAYYUM

REG. NO. FA2010/MSC. EM/143

Supervised By:

MR. Khusro P. Malik



DEDICATION

To our Loving Parents and

Teachers without their help and

support this effort would not

have materialized



ACKNOWLEDGEMENT

Here I must appreciate the efforts of our worthy Instructor

Mr Khusro Pervaiz Malik and Teaching Assistant

Mr Faisal Shafique But without their help and support this

activity would not have given the desired dividends. The

close cooperation and support provided by the staff of

ASKARI COMMEICIAL BANK specially the Branch Manager

AWT Plaza Mr Sher Afgan Khan , Manager Operations

Mr Syed Nadeem and Country Head

HR Mr Zahid Chaudry. It will be unjust if I forget Branch

Manager Askari Commercial Bank Tufail Road Lahore

Branch Mr Akmal Wajid along with Manager Operations MR

Amir Riaz Raja.


PROJECT BRIEF

PROJECT NAME CONTEMPARY ISSUES RELATED TO INDUSTRY ARMY WELFARE TRUST (AWT) - CASE STUDY

ORGANIZATION NAME ARMY WELFARE TRUST (AWT)

OBJECTIVE SET OUT THE WAY FORWARD, PREPARED IN LIGHT OF THE FINDINGS OF THE DIAGNOSTIC REVIEW OF AWT AND ITS BUSINESS UNITS (BUs)

UNDERTAKEN BY MEHAD AZEEM


ASIM QAYYUM

SUPERVISED BY FAISAL SHAFIQUE BUT

TEACHING ASSISTANT

ENIGNEERING MANAGEMENT DEPARTMENT

CENTER FOR ADVANCED STUDIES IN ENGINEERING, ISLAMABAD – PAKISTAN

STARTED ON OCT 2010

COMPLETED ON DEC 2010


ABSTRACTManagement is a process of designing & maintaining environment in which

individuals, working together in groups, efficiently accomplish selected aims. In other words

we can define the term management as the process of using “Organizational resources” to

achieve the Organization’s goals through planning, organizing, controlling and leading.

Management audit is done when the company or the given project deviates from its goals at

large and the outcome is not as desired; thereby ascertaining the areas where the fault lies.

From the finding of the audit the restructuring as well as reforms are introduced.

In this case study an attempt will be made to discuss the working direction, role of

each department and the role of skilled labor prevailing in AWT. Different management

techniques and tools for the highlighting all the good and bad practices will be used. Apart

from SWOT analysis and Balance Score Card, an endeavor will be made to collect

information/ data directly from employees through Questionnaire. After carrying out in-depth

analysis including operational philosophy of AWT, the panel will be suggesting different

measures and broad outline of restructuring plan as essential ingredients of the ‘Way

Forward’ for AWT.


TABLE OF CONTENTS

1. AWT – An Overview .…………………………………………………….......... 8

1.1. Historical Perspective …….…………………………………………….. 9

1.2. Objectives ………………………………………………………………. 9

1.3. Management ………………………………………………………......... 9

1.3.1. COA ……………………………………………………..........10

1.3.2. BOD .……………………………………………………..........10

1.3.3. BUs .……………………………………………………….......12

1.3.4. Finance Division …………………………………………........13

1.3.5. Workforce ………………………………………………........14

2 Analysis ……………..……………………………………………………..........16

2.1. Appraisal of AWT Functioning ………………………………………. 17

2.1.1. Governance ………………………………………………........19

2.1.2. Mission & Vision ………………………………………....... 19

2.1.3. Business Management …………………………………......... 20

2.1.4. Investment Management …………………………………...... 21

2.1.5. HRM ……………………………………………………......... 24

2.1.6. Internal Audit ……………………………………………......... 26

2.1.7. MIS.....…………………………………………………..….......27

2.2. Management Audit Tools………………………….………………...... 29

2.2.1. SWOT Analysis ….………………………………………....... 29

2.2.2. Balanced Score Card ……………………………………........ 37

2.2.3. Comparison of Benefits ………………………………….........41

3 Way Forward

3.1. Suggested Measures ………………..………………………………........57

3.1.1. Expansion of COA …...……………………………………........57

3.1.2. Core Teams ......……………………………………………........58

3.1.3. Revised role of BOD ………………………………………........60

3.1.4. Improvement in Organizational Structures ….……………........61

3.1.5. Improvement in Planning Process ……………………….........61

3.1.6. Investments ....……………………………………………..........63

3.1.7. HRM……………………………………………………….........64

3.1.8. MIS ………………………………………………………..........65

3.1.9. Finance ……………………………………………………........66


3.2. Propose restructuring plan …………………………………………........68


CHAPTER 1

AWT – AN OVERVIEW


CHAPTER 1

1.1 Historical Perspective

Army Welfare Project started with a modest asset base and high ambitions. AWT is a

story of perseverance, innovation, business acumen and going beyond the frontiers in Banking,

Cement, Insurance, Aviation, CNG, Agriculture, Manufacturing, Sugar, Security Solutions, Real

Estate, Lubricants, Defence Procurement and Trading and many other diverse fields. Army

Welfare Project Fund was established in 1971 and was registered under the Societies

Registration Act XXI of 1860. The name was subsequently changed to Army Welfare Trust

(AWT) during 1974. The primary sponsor of AWT is the Welfare and Rehabilitation (W&R)

Directorate, General Headquarters, Pakistan Army.

1.2 Objectives

Primary objective of AWT as stipulated in the Administrative instructions of 1972 is:

"Objective of the Trust is to undertake safe and profitable commercial activities in a manner that

portrays AWT's image as a respected market leader while generating maximum funds for

meeting the welfare requirements of the Army."

1.3 Management

1.3.1 Committee of Administration (COA)

Its composition is as under:

a) Adjutant General - Chairman

b) Chief of General Staff - Member

c) Quarter Master General - Member

d) Master General of Ordinance - Member

e) Managing Director, AWT - In attendance

f) Secretary AWT - Secretary



The present COA is as under:-

a) Lt. Gen. Nadeem Taj Chairman

b) Lt. Gen (R) Imtiaz Hussain Chairman Executive

Committee

c) Maj Gen (R) Saeed Ahmed Khan Director

d) Mr. Zafar Alam Khan Sumbal Director

e) Dr. Bashir Ahmad Khan Director

f) Mr. Shahid Mahmud Director

g) Mr. Muhammad Riyazul Haque Director

h) Mr. Ali Noormahomed Rattansey Director

i) Mr. Wazir Ali Khoja ( Nominee NIT ) Director

j) Mr. Muhammad Rafiquddin Mehkari President & Chief Executive

k) Mr. M. A. Ghazali Marghoob Company Secretary

The COA is responsible for overall administration of AWT. Primary functions of

the COA as defined in the AWT Head Office procedures are as follows:

a) To administer the affairs of Army Welfare Trust.

b) General policy making.

c) Approval of annual budget and accounts.

d) Approval of investments in new projects and disinvestments.

e) Control of appointment and removal of Managing Director and Directors.

f) Formulating terms of service of Managing Director and BOD.

1.3.2 Board of Directors (BOD)

The responsibilities of the Board of Directors as stipulated in AWT

Administrative Instructions (1972) are as under:



a) To formulate executive policy for the conduct of Management of the

organization on behalf of the Committee of Administration.

b) To lay down broad lines for the guidance of sectional policy (financial,

production, marketing, personnel, research, public Relations etc), within

the framework of the general policy of Committee of Administration.

c) To ensure that the legal obligations of the Organization and its Projects are

appropriately discharged.

d) To maintain a continuous control of the Projects’ affairs, using tools like

periodical reports, accounts and statistics, submitted by the Project Head

with the data received from the General Managers/Managers of

projects/Farms/Enterprises, in order to ensure that the organizational

policies are being properly implemented.

e) Within the frame work of the policy to authorize capital expenditure and

the disposition of profits or losses arising, in the conduct of the project’s

affairs including sanction for purchase and sale of land, buildings or other

assets and the custody of projects/firms/enterprises/property.

Salient features of the originally envisaged above mentioned role of the

Board are:

a) Strategic planning;

b) Policy formulation;

c) Legal protection;

d) Monitoring the performance of projects and investments; and

Capital expenditure and authorization

Affairs of the Trust are managed by Board of Directors (BOD) led by the

Managing Director (MD) of AWT. The BOD members also act as Divisional Heads and

are actively involved in the operations of the Business Units (BUs) of AWT.



1.3.3 Business Units

Operations of AWT are spread over 22 industries comprising 33 units. Equity of

AWT has been financed through W&R Directorate funds and includes general, capital

and revaluation reserves. Currently, the net sponsor's equity is marginally negative based

on the book value of investments. The activities of AWT are spread over the following

sectors:

a) Agriculture.

b) Real Estate.

c) Financial services.

d) Manufacturing.

e) General Services.

AWT currently owns or has shareholding in the following BUs; details of their

performances are given as under:

a) Askari Commercial Bank Ltd.

b) Askari Aviation (Pvt.) Ltd.

c) Askari Leasing Ltd.

d) Askari Guards (Pvt) Ltd.

e) Askari CNG Project

f) Askari Information Systems (Pvt.) Ltd.

g) Askari Commercial Enterprises

h) Army Welfare Sugar Mills Badin

i) Army Welfare Rice Mills

j) Army Welfare Shoe Project

k) Army Welfare Hosiery Project

l) Army Welfare Woolen Mills



m) Askari General Insurance Co. Ltd.

n) Askari Associates (Pvt.) Ltd.

o) Askari Securities Ltd.

p) Blue Lagoon

q) Army Stud Farm Probynabad

r) Army Farm Rakhbaikunth

s) Army Stud Farm Boyelgunj

t) Army Farm Khoski

u) Al-Ghazi Travels

v) Services Travels

w) Real Estate Project Lhr

x) Liaison Office Lhr

y) Real Estate Project Rwp

z) Real Estate Project Khi (Plaza)

aa) Askari Pharmaceuticals

bb) Askari Cement Ltd. Wan

cc) Nizampur Cement Project

dd) Commercial Market Project

ee) Magnasite Refectories Ltd.

ff) Askari Power Ltd.

gg) Mobil Askari Lubricants Ltd.

hh) AWT Plaza Rawalpindi

1.3.4 Finance Division

The Finance Division is responsible for the functioning of a proper system

of financial controls at the Head Office / BUs of the AWT, while the other



Divisions are responsible for the functioning of respective BUs. The Divisions

monitor day to day operations of BUs based on the reports received. The

frequency of these reports varies according to the requirements of the Divisional

Management. Production and sales data from major projects is reported on a daily

basis to the Divisional Management, while other performance and financial data is

reported in a consolidated form over a longer period of time. The Division's

Management is mainly involved in day to day operations of BUs. The core

business planning at AWT for its BUs is the budgeting exercise which takes place

at the start of each year. Usually no revisions are made to the budgets and

variances are a common and accepted norm in the organization. Except for BUs

operating in the financial sector, generally the Divisional Heads are responsible

for the performance of units under their operational control even at the BOD

level.

1.3.5 Workforce

The workforce is a mix of the civilian and ex military personnel. Total

manpower employed by AWT group is 5130.



Table 1.1

Fig 1.1


Army Personnel

Civilians Off / Staff Ward

Total % in Total% in total

Head Office 133 82 11 226 4.41

Industries Div Project

192 988 43 1223 23.84

Army Projects 56 102 02 160 3.12

Farm Division Project

153 1154 41 1348 26.28

Real Estate Division Project

49 82 05 136 2.65

Financial Institution

124 1565 145 1834 35.7

Others 93 100 10 203 3.95

Total 800 4073 257 5130 100

% in Total 15.59 79.40 5.01 100


CHAPTER 2

ANALYSIS



CHAPTER 2

2.1 Appraisal of AWT Functioning

2.1.1 Governance

COA in its present form is highly dependent upon the input from the BOD

of AWT. Investment decisions in the past have been taken on investment briefs

and presentations made to COA. At times it appears that these investment

proposals were not supported by professional feasibility studies. It seems that

AWT has not been able to define its strategic direction as yet; this notion is

evident from the fact that the expansion of AWT resulted in investments in 33

different BUs in 22 sectors. Such a diversified investment portfolio may be the

result of a lack of strategic direction and focus. AWT has failed to create a

corporate culture and HR policies are generally suitable for public sector

organizations, reflecting deficiencies in the Global policy.

Head Office of AWT is divided into seven Divisions and a Secretariat.

Each Division is headed by a Director, who reports to the Managing Director of

AWT. Each Division and the Secretariat, other than the Finance Division, are

generally entrusted with the Management of their respective BUs. Currently, most

of the Directors are directly involved in the day to day management of projects

under their purview and are acting as executors, which is different from the

previous practice in which Directors were primarily involved in coordinating

activities only. This change has been gradual and taken place over a number of

years. This change has not had a positive effect on the performance of AWT as

the time spent on planning and coordination is now being spent on execution of

day to day tasks. The Board also frequently meets, primarily to take business unit

level operational decisions. Other strategic decisions like capital expenditure and

hiring of key personnel are also under their responsibilities.

The current role of the Directors, which in turn is the role of the Head



Office of AWT, is predominantly operational and control oriented. This role is

quite different than the one originally envisaged by the sponsors of AWT, given

in the Administration Instructions 1972 of AWT, as reproduced below.

It is evident from the above that the Committee of Administration had

envisaged a specific role for AWT Head Office that would function as a corporate

parent. The transformation of AWT BOD from parental to an operational role is

unjustified on the following grounds:

a) Running of operations require pertinent and relevant industry expertise,

experience, education, competencies and skills.

b) Involvement of Directors in the day to day affairs of the project is a major

deviation from the monitoring function.

c) The executor cannot monitor his own tasks effectively.

d) Decision-making at Board level regarding the projects, subsidiaries,

associates cannot be guaranteed to be impartial and unbiased because it

can be fuelled by self interest.

e) The Directors are subordinates of the Managing Director but are expected

to take joint decisions at BOD level.

The Board of Directors and the MD is inducted into AWT on fixed term

contracts. The MD has even a lesser term of 3 years as compared to other Directors

who are inducted for 5 years. Continuity of policies is a vital component of success

and frequent changes at the top level has caused the problem of continuity of

policies due to the power structure at BOD level. Current composition of the Board

of Directors gravitates heavily towards administration and management, while

industry expertise and experience is generally lacking. Fixed term tenures also

nullify the benefits of learning curve particularly when a Board Member is

removed after he has become fully conversant with the policies procedure and the

business operations.

As explained earlier at present the BUs of AWT are extensions of the Head

Office and in most of the cases Head Office exercises excessive control over BUs.



Other than the financial sector in BUs owned by AWT, almost none of the BU is

headed by professionals having pertinent industry background and experience.

Lack of business acumen at BU head level restricts the operational capabilities of

respective units.

Centralization of authority is another problem faced by BUs and they do

not feel empowered even to achieve their own budget targets. HR base at the BUs

is generally not in line with the demands of respective businesses. Like in the case

of Head Office AWT, the key positions of the BU levels have generally been filled

by non technical and non-professional incumbents.

Performance targets at BU levels are generally set in financial terms in

shape of budgets and quality of results is totally ignored. There is also a problem

with setting performance measures at team and individual levels, though job

descriptions exist, incumbents and teams are generally not aware of their own

performance targets

2.1.2 Mission & Vision

Vision and mission statements set the destiny and future course of an

organization and without these, an entity has no defined future course of action or

target. Every organization has a purpose, and should have devised plans to

achieve its ultimate purpose or goal. Unless every member of the team explicitly

knows this purpose, the direction of the organization cannot be set and will lose

focus. AWT does not have an agreed strategic mission or vision statement or its

strategic intent. Each Member of the Management has his own perceived mission

or vision. However, there is a consensus among the Members of the Management

that the purpose of the Trust is to generate funds for the welfare of personnel of

army and their families. It is also felt that the creation of employment for retired

personnel is another aim of AWT. There is also confusion on the role of welfare

at AWT, to the extent whether the welfare is through providing employment to

the retired army personnel or generating funds for welfare, or both. The absence

of agreed mission, vision and strategic intent has created fundamental problems



such as of organizational objectives, poor planning, and loss of focus.

2.1.3 Business Management

The planning process at AWT is restricted to an annual budgeting

exercise, which is carried out during the last quarter of the financial year of AWT.

In case of some projects, long term business plan are also prepared but their scope

is limited. The emphasis of the budgets is on operational costs, capital expenditure

and revenues. No clear defined guidelines have been laid down for the budgeting

at the Head Office level. The basis and assumptions of budgets are not

documented and supported. The whole emphasis of the budgeting exercise is the

control of operational costs. On the other hand major projects have huge cost

overruns e.g. CNG project, pharmaceutical project for one reason or another

which are not investigated in detail to determine the causes thereof. Revenues and

profits are also integral part of the budget, considerable variances have been

observed between profits targeted and achieved revenues and profits. This

variance are usually identified during the quarterly budget review meetings but no

significant corrective action is taken, therefore making the budgeting exercise and

quarterly review exercises redundant. The minutes of the budget meetings are

found to be general and not very specific to the issues raised. We have not found a

system for monitoring implementations of the suggestions made in the budget

meetings.

Budgeting is the only tool of planning and long term strategic planning is

non existent. Corporate level planning exists to a limited extent at the Corporate

and Development (C&D) Division. The C&D Division is responsible for the

implementation of all new investment initiatives. Due to limited in-house

capabilities corporate planning is deficient. Cost and profit centre concept does

not exist at majority of the BUs and at AWT and the Managers are not held

accountable for their inability of meeting financial goals. Lack of planning has

restricted their ability to anticipate future events and accommodate for it. It is

essential that planning may be done on a short, medium and long term basis.



Further, detailed budget variance analysis is not carried out, to identify and

evaluate the reasons for variances from the budgeted targets, which consequently

leads to limited, if any, action taken on the basis of budget variances. Therefore,

overall performance appraisal and reward and punishment system is not linked

with achievement of budgetary targets.

There are no defined performance evaluation criteria at all. Presently,

budgets are the only means for performance evaluation which, too, lack emphasis.

Project performance is reviewed on the basis of financial results only during

Board meetings.

Macro analysis of AWT portfolio is not conducted and is based upon

individual project performance. No effort has been made to generate project

synergy and projects are viewed as individual units rather than as part of an

overall structure. AWT does not have a Treasury Department and the treasury

function is carried out by the Finance Division. All excess funds from projects are

transferred to the AWT Head Office.

2.1.4 I nvestment Management

Up until 1991 AWT was a successful and profitable business house with a

limited extent of operations i.e. owned and managed eight BUs with asset base of

Rs. 1.493 billion thereby yielding profits of Rs. 113 million. The situation

completely reversed in 2002 and AWT found itself in all sorts of problems. Loss

for the year was Rs. 1.46 billion, asset base was Rs. 19.8 billion and it managed,

owned 33 BUs with total debt exposure of around Rs. 21.144 billion.

After 1991 AWT embarked on expansion and kept on adding to the

number of its portfolio and now the portfolio of AWT is diversified among 22

business sectors. Substantial investments were made in cement and

pharmaceutical sectors but these BUs failed to produce any returns for AWT,

instead BUs in both these sectors became a burden on AWT and caused huge

drain of financial resources. Investments in the financial sector proved profitable



and are giving reasonable returns. However, cement sector has started to perform

recently and AWT is now covering its incurred losses.

The failure of investments in cement sector can partially be attributed to

external factors. Since mid 90’s cement sector has been facing the dilemma of

over capacity and at the end of 2002 production capacity of cement in Pakistan

was approximately 7 million tons more than the demand. Latter events show that

internal factors and organizational capabilities of AWT also played vital role in

non-performance of investments in the cement sector. Investment decisions at

times were taken without proper research, market surveys and industry analysis.

The decision to setup line II of NCP was taken without conducting any feasibility

study at all. The timing of taking further exposure in cement by installing line II

of NCP and purchasing Askari Cement Wah is also debatable as at that point of

time the market started sliding towards recession.

Project implementation has also been a weaker link in AWT’s

establishment. The decision to install first line of NCP was taken in 1991 and the

second line in 1997. The first line commenced operations in 1997 and the second

line became operational in 2003. Same is the case with project implementation of

Askari pharmaceuticals the project was commissioned with a delay of

approximately two years. The delay in project implementation caused huge cost

overruns of billions of rupees to AWT and at current level of capitalization and

financial burden, profitability seems a remote chance. Though there was a

feasibility prepared for Askari pharmaceutical project, we have seen no evidence

that the feasibility was supported by a professional market study and the study

was quite basic. The project was designed to produce the entire demand of

Paracetamol, Aspirin, methyl Salicylate, sodium Salicylate and salicylic acid in

Pakistan. At present the back end of the pharmaceutical project is not viable to

operate due to competition and primitive technology. A recent visible example of

gaps in decision-making process is in the case of CNG project. The project was

approved without any feasibility or market study. The project has landed in all

sorts of problems and contract with railways to acquire land for setting up CNG



stations has backfired and no CNG station on railways sites could be setup till the

writing of this plan. Strains of ill planning and delays in project implementation

can also be traced in the case of CNG project. Complete equipment for 25 CNG

stations was ordered, paid for and received without clearing any of the sites. Only

one CNG station is operational at present and AWT is left with sustaining huge

financial burden in the shape of financial costs on the cost of imported machinery.

Financial Authorities/ Limits

Expenditure above Rs. 500,000 requires approval of Managing Director.

In case of donations and entertainment/ business promotion expenditure, the

threshold is Rs. 20,000 and Rs. 10,000 respectively. All Directors have the power

to approve any budgeted expenditure up to Rs. 500,000 with the concurrence of

Director Finance. They are also allowed to make cash payments of a routine

nature of up to Rs. 1,000 after checking/verification by the respective Finance

Managers. All transfer of funds within AWT and between projects is managed by

the Director Finance.

Director Industries can approve any kind of expenditure up to Rs. 500,000

if it is within budget upon recommendation of the Director Project or the

committee formed for this purpose. Director Project (DP)-Nizampur Cement

Project (NCP) can approve the capital and revenue expenditure up to Rs. 100,000,

payment of utility bills, indents within budgets, other expenses at factory,

donations up to Rs. 10,000 and entertainment/ business promotions expenses up

to Rs. 5,000. GM (F) can sanction limited amounts of expenses upon

recommendation of DP. GM (Works) can approve limited amounts of expenses

upon recommendation of the head. It is apparent that the MD is overburdened

with routine approvals of release of funds and the Directors are involved in

approvals of routine financial matters. The budgeting exercise is undermined as

expenditures approved in the budget have to be re-approved and release of funds

also requires approvals.



2.1.5 HRM

The recruitment and selection procedures at AWT are not based on pure

merit, although the policy states that the basic requirement is competence. The

prospective candidates for formal employment have been divided into two

segments or categories namely Ex-Army / Navy/ Air force officers, and civilians

but army officers enjoy absolute preference. Furthermore, for armed forces

personnel the requirements for a post are based on the last position (rank) held in

the army. Ex Service Officers and civilians are employed only when Ex-Army

Officers are not available. There is a provision to recruit Officers on Special Duty

(OSDs) as and when required. No formal process is used to identify HR needs in

relation to corporate, strategic or operational planning in AWT Head Office and

projects (excluding corporate entities). Human resource management appears to

become active only when required. Whatever exists is in the embryonic stage and

stems purely from operational demands. The organization does not document

knowledge and skills required for key posts, and recruitment is not done on skill-

competency matching.

There is no formal system for training and development. Training needs

are not assessed, nor are there any methods for developing or updating any

training plans. Limited training is done when new systems are adopted or new

machinery introduced, and those implementing the changes are expected to orient

staff to the new change or, at minimum, to leave instructions for dealing with the

change. Training is mainly tied to proficiency on the job. The staff of AWT does

not perceive training and development as essential to their work or tenure. There

is no increase in employee capability and potential. Training serves to retain

employees longer, as they see their personal and managerial development as a

beneficial factor. Also in-house training programs are an effective method for

providing employees non-monetary rewards

There is no system in place for interim performance measurement in the

AWT Head Office. There is little awareness for the need of performance review



and realignment. Goals are not reviewed during the period, to ensure that

direction and deadline schedules are met. There is no formal process to manage

work load and there is little awareness of the need for it. Deadlines are more

common than work schedules. Routine jobs, strict guidelines for completing

work, and unmanaged workload not only adversely affects the quality of output

but also prevents emphasis on training or developing the work force. Performance

management system in place is inherently flawed, and does not reflect the true

performance of an employee. The goals and tasks are not defined and agreed with

respect to Management performance measures. There is no provision for

evaluating various managerial and functional competencies. There is a major

communication gap between the Management and staff. Communication is

usually downwards and one way rather being mutual. Furthermore, motivation of

employees is low, due to absence of formal career planning and link of

performance with compensation, both at AWT Head Office and projects. The

corporate entities performing satisfactorily do have formal performance

management systems.

The most important purpose of performance appraisal is to ensure that

organizational goals and strategic objectives for the period are achieved which

will not be realized, if the performance appraisal system is unsatisfactory. If good

performers are not encouraged and unsatisfactory performers are not brought to

the fore a deep rooted trend for incompetence continues.

There is no career progression for the army personnel because they are

hired on a fixed term basis. This adversely affects the staff morale and motivation

and dampens performance. No need is felt for development of employees. Staff

training is limited to occasional training courses conducted by Askari Commercial

Enterprise, which currently was limited utility for the organization.

Service Rules/ SOPs operative at AWT Head Office dates back to 1984

and since then, the document has not been properly updated. There have been

periodic ad hoc additions and amendments without corresponding revisions in the



document. Therefore, the polices lack consistency and coherence. There is an

urgent need for brining the policies and rules in accordance with the demands of

modern management, and replicate the practices and systems of organizations

with accepted HR practices. Human capital represents the greatest single cost and

investment for most organizations. The workforce is diverse and requires

planning which is currently non-existent. Therefore, recruitment, manning, re-

designations, termination, performance management, appraisal and review,

training and development, reward and recognition, promotion, employee relations

and the culture are not in conformity with best practices.

Compensation is not in line with prevalent market trends and no effort is

made to correct it. Consequently this affects the quality of employees recruited,

and also leads to high turnover. The reward system in AWT is only through

promotion, and for only a selected section of the workforce. The latter will not

motivate individuals who can see no future. Staff turnover is an issue and

recruitment of suitable personnel is also a problem.

Retaining staff at Head Office is problematic and staff turnover is

officially stated at 5-10%. The latter exists because rewards are neither internally

equitable, nor externally competitive. Consequently good talent is difficult to

retain in the organization. It is widely acknowledged that cash benefits are

effective motivators of employee performance. The monetary reward system for

recognizing good performance does not exist in spirit. Rewards distributed do not

serve the purpose of urging other employees to improve performance, and may

even disgruntle them. In short the retention problem existing in AWT can largely

be attributed to non-competitive compensation, career progression and

performance management system.

2.1.6 Internal Audit

The Internal Audit (IA) Department is a part of AWT Secretariat

consisting of 11 personnel including GM. Three types of Internal Audits are

performed, namely Post payment, Prepayment and Special Audit. IA of AWT



projects is carried out on annual basis but it is delayed due to limited staff. Apart

from ACBL, ALL and AGICO, which have their own IA setup, the Head Office

IA Department is responsible of internal audit of all AWT BUs. All payments

above Rs. 100,000 are required to be pre audited. Special audits are executed

under the directions of the relevant authority.

Audit teams are selected according to the volume of work at the projects.

Normally a team of two to three members is allocated for the project. For audit of

major projects, the team is headed by GM (IA), whereas for other projects, a

Finance Officer conducts the audit. The IA reports are finalized at Head Office,

with prior discussion with the concerned project heads, and submitted to the MD,

AWT. Projects on receipt of IA report forward their replies to their respective

Directors with a copy to GM (IA), who analyzes the replies and give comments

on the replies received.

AWT does not have an internal audit manual. Audit programs are not

prepared for each internal audit exercise. The internal audit Department is

understaffed as there are a number of projects to be audited during the year and

therefore some projects are audited in alternate years. In addition, the internal

audit function is focused on the financial aspects of the procedures and controls

only, and does not have resources and technical competencies to broaden the

horizon and scope of IA. E.g. risk analysis, system improvements and redesign.

2.1.7 Management Information System

In 1996, it was decided that the primary functions at AWT Head Office

should be computerized. In the same year a Computer Section was established to

achieve this objective under the Technical Division. The tasks of the Computer

Section are to develop systems for relevant Divisions and Departments,

maintenance of computer hardware at AWT Head Office and conduction of

training courses for both Management and staff. After the establishment of

computer section various software were developed for different Divisions and

Departments. Recently the computer section was working on the development of



an ERP solution for Army Welfare Woolen Mills. The Computer section used

"Informix New Era" for the development of software's till 2000, but now Oracle is

being used. Oracle and antivirus program Norton' are not licensed.

Computer section's role is limited to the preparation of software based on

the requirements of the Divisions. Responsibility of data feeding and report

generation rests with the relevant Divisions/Sections. Based on our discussions

and interviews with key Management personnel, the utilization of the available

software is very low and there is a need to build awareness among Senior

Management regarding the usefulness and benefits that can be gained by using the

available software. Furthermore, the Management attendance in the computer

training programs conducted by the computer section has been poor and needs to

improve so that a basic competency level is achieved across the board. Little

efforts have been made to establish an exception reporting system for the AWT

Management. The primary reason behind this is the apprehension of a

computerized environment and lack of communication and understanding

between the MIS users, implementers and system developers.

Due to lack of Management attention towards data upgrade, reports

generated are not considered to be relevant in decision-making and much reliance

is based on manual reports. Other problems faced by AWT are IT illiteracy and

the absence of initiative regarding implementation of computerized data

processing systems. In the absence of a comprehensive MIS the decision-making

process at AWT is based on un- substantiated data, the risk of errors and

omissions are high, and the data available in most cases is not up to date. There is

also a need to develop a complete MIS manual as the computer section is using

SOPs, prepared for the Technical Division which is not suitable for the functions

performed by the computer section. However, for existing and end users,

procedures are prepared by computer section in black and white. The documented

contingency planning for the recovery of data is not sufficient and should be more

comprehensive regarding loss of software and hardware. There is also need to

maintain a record of problems faced by AWT regarding hardware and software.



2.2 MANAGEMENT AUDIT TOOLS

For assessing the processes and efficiency of any organization different management

related tools can be used but we have implemented the most commonly used SWOT analysis and

the Balanced Score Card (BSC) which gives the clear picture of the processes and the systems

incorporated in AWT groups of companies. AWT is a unique Trust with multi flavored

businesses starting from shoe making up till Oil & Gas sector investment in its portfolio.

2.1.1 SWOT ANALYSIS

Taking into account the objectives spelt out above, we conducted a

situational analysis, in order to identify sectors (both existing and new) that could

potentially be a strategic fit between external opportunities and internal strengths

of AWT, while working around external threats and internal weaknesses. Based

on the analysis we assessed the “strategic fit” of various sectors that were

discussed subsequently. As a first step a corporate SWOT matrix was developed

and discussed and is being depicted hereunder:



SWOT ANALYSIS CHART

Strengths Weakness1. Brand name “Askari”. 2. Trust of public.3. One of the largest agro land holdings in

Pakistan4. Well rounded financial sector presence*5. Aviation charter business 6. Prime pieces of land7. Relationship with GoP

1. Marketing2. Human resource quality3. Lack of readily available equity capital4. Failure to outsource5. Ownership structure6. Late entry into sectors (follower mentality)7. Inability to exit from un-attractive

businesses/sectors8. Capital Structure (high gearing)9. Heavy reliance on the performance of

cement industry & Aviation charter business

10. Lack of ability to compete in competitive environments

11. Under-performing projects12. Lack of extraction of synergies amongst

business units13. Discontinuity in Management & policies14. Lack of specialists to head BUs 15. Skewed and unbalanced portfolio16. Delay in execution of plans / slow decision

making

Opportunities Threats1. Window of opportunity till 2013 when

external debt repayments begin2. Presence in downstream O&G sector

coupled by ever increasing demand in energy requirements (gas, oil, LNG)

3. Diversification into agro based industries (entry into dairy business etc)

4. Growing financial sector5. Supply demand gap in the power sector6. Real Estate Sector7. Renewable energy

1. Slow speed of implementation of our Projects

2. Major loan repayments after 20133. Minimum Capital requirement in the

banking sector4. Reduction in cement sector earnings &

competition in aviation business5. Impairment of assets in Cement and

Pharmacy.6. Potential shortage in the gas system post

20107. Potential competition in the charter

business 8. Political Position- post election 2007



2.2.1.1 STRENGHTS

2.2.1.4.1 Brand Ambassador . The brand name ‘Askari’ is in itself

strength of the group. The name in its self a symbol of the

trustworthiness and the reliability. All the customers and

the businesses know that this name will work for the

prestige of his name and it will not run away from any of

the businesses.

2.2.1.4.2 Favourable Public Opinion . The brand name and the

companies of the AWT succeeded in wining the trust of the

general and the business community due to the reason that

every body knows that the most powerful institution Army

is at the back of the trust. People are more comfortable to

invest and to buy the products. Here important point is that

they were unable to fully utilize this power of the name.

2.2.1.4.3 Charter Business in Aviation . Aviation charter business is

progressing in success because of the fact that it is some

what monopolized in the scenario being the only customer

“Armed Forces” and the only service provider AWT due

to security and other service constraints.

2.2.1.4.4 Availability of Precious Land .The strategic assets of the

AWT group are the land which is located on the prime

location of the major cities as in Karachi and Faisalabad.

These land are the can be used very effectively and very

efficiently, but this strength should have been used before.

2.2.1.4.5 Strength in Relationship . This is the unique strength in

the sense that can’t be attained by any firm. You can have

good relations with some government at one time but with

the change of government the affairs may change totally,



but in case of AWT the relations are not on person based

but as affirm based. This is the important factor while you

are doing a business in the country.

2.2.1.2 WEAKNESSES

2.2.1.4.1 Faulty Outsourcing Technique . The important problem

was the failure of the group to incorporate the outsource

and the unavailability of the internal resources in many

fields as an experts. The authorities were reluctant to seek

help for the expert opinion. This created severe problems in

many areas. The group was also unable to employ the

appropriate manpower at appropriate place.

2.2.1.4.2 Lack of Decision Making Power . Power of decision

making was soar point and the main hurdle which kept the

portfolio of the AWT in the loss. Many businesses were

doing loss but they were unable to quit from those

businesses. The example was ‘Ask pure’, they were unable

to compete with the international organizations like Nestle

and others and at the same time it was not taking the ratio

from the market. The decision to quit which they took year

before was to be taken early to keep the business alive.

2.2.1.4.3 Rapid Changes in Top Leadership . Managing Director

MD use to be changed after 3 years. It was also the soar

point and the hurdle in the success of the AWT as

whenever policies from the new command use to go in

implementation phase the command use to change and start

waiting for the new policies to come.

2.2.1.4.4 Technique of Marketing/Franchising . Marketing is

fundamental to any businesses growth. The marketing



teams (Marketers) have the task to create the consumer

awareness of the products/services through marketing

techniques; unless it pays due attention to its

products/services and consumers' demographics and

desires, a business will not usually prosper long-term.

Marketing is the backbone of the success of the company

because it forces the mind of the users to buy the product

offered by the company. Marketing is always been the

weakest part of the products of the AWT group of

companies. The clear example of this fact is that most of

the buyer and the customer do not know about many

products of AWT as mineral water, pharmaceutical and

many others as the same above.

2.2.1.4.5 Quality of Human Resource Quality . Modern analysis

emphasizes that human beings are not "commodities" or

"resources", but are creative and social beings that make

class contributions beyond 'labor' to a society and to

civilization. The human mind is the fundamental resource

for the success of the company. The second weakness of

the AWT was that they were unable to retain the skilled

manpower of the companies. The custom which was in

practice was that every skilled worker used to stay in the

place not more than for 2 – 3 years. Earlier the aim of the

organization was misunderstood in the sense that it’s an

organization for the welfare of the armed forces more than

a profit earning business, the welfare meaning was to give

jobs to the Army retired personnel. This created a problem

when the group started facing the problem in the shortage

of the skilled workers.

‘Businessman can’t fire similarly firer can’t run business’



‘Jack of all Trade Is Usually Master Of None’

2.2.1.4.6 Lack of Initiative . Lack of initiative in setting up new

businesses was the all time problem for the group. That

who enters first any business takes away all the benefits of

the new idea. But here in this group the problem of the late

entry as a Follower created problem for the business. The

main example of this was the entry in the cement industry

when the boom period was over and now the business

started declining. Land was also the same, when the boom

period got over they started to sell out their land.

2.2.1.4.7 Unbalanced Portfolio . Portfolio of the group if we see in

detail is very unbalanced in the sense that 70% of the total

investment of the group is in Cement Industry. If the

cement industry of the country is in loss the whole portfolio

of the group goes in negative.

2.2.1.3 OPPORTUNITIES . The debt and the loan which the group has taken

from the external resources are to be paid back till the year 2013 so this

time of few years are available for the group to make use of this big

amount to invest in some profit oriented businesses. This is the major

opportunity which the group can avail. The increasing demand of the

Power sector is also the opportunity for the group to avail as in this sector

the investor has the security of his investment from the government side.

AWT has started to step in the Power sector. The increasing demand in the

alternative energy Renewable Energy is also the opportunity for this

group as this group is very rich in land that may be made available for the

production of the alternative energy like Bio diesel which is blend of the

pure diesel with oil extracted by the seeds of the Jatropha Plant, RSD

residual derived fuel and many other. Real estate is also the opportunity

for the AWT group.



2.2.1.4 THREATS

2.2.1.4.1 Major Loan Repayment . There are two types of the loan

which AWT group has acquired from different sources,

resources under the State Bank of Pakistan and the

resources which does not come under the state Bank of

Pakistan. The loans which are other than State Bank of

Pakistan are known as internal loans and the other loans are

termed as external loan. Internal loans are from the W & R

Directorate of Army. The main threat fro the group is the

repayment of the major loan to external resources which

includes other bank’s loan. This is the major threat for the

group as the time is very near when the repayment will start

that is year 2013.

2.2.1.4.2 Cement Industry . The other threat for the group is the

unbalanced portfolio which we have discussed in the

weaknesses also. Now the other perspective is that 70% is

in the cement industry if the cement industry goes in loss

then the overall balance sheet of the group will give loss

statement. The reason for this is the simple rule of the

supply and the demand of the market. The normal demand

of the market is 22 million ton but the supply is now a days

round about 30 million ton. So the demand is less than the

supply so this is also the threat to the group.

2.2.1.4.3 Post 2010 Scenario . Group has stepped in the Oil & Gas

industry by opening CNG stations which is also

contributing a lot in the profit of the group, but the situation

of the gas in Pakistan is that there will be a shortage of Gas

after 2010. If Pakistan fails to do a deal with Iran for gas

pipeline then this threat will increase in its intensity.



2.2.1.4.4 Askari Aviation . The business of the Askari Aviation is in

itself in threat as at this time the business of the charter

business is some what monopolized with Pakistan Army. If

any other party come and give some good proposals to

army and ask to come in open competition, it may cause

create problem for the group.

2.2.1.4.5 Political Condition . The political condition of Pakistan is a

severe threat to any business in Pakistan. In case of AWT

group they are coming in joint venture with Arif Habib

Group and one international firm in Karachi for the

construction of the high storied Towers. After the political

condition that changed after the death of the Benazir Bhutto

has given a very bad sense of business.



BALANCED SCORE CARD

Table 3.2

The Financial Perspective represents the long term strategic objectives of the

organization and thus it incorporates the tangible outcomes of the strategy in traditional financial

terms. The objective of cash flow is achieved through the circulation of surplus cash to pay

internal liabilities not the external liabilities which are related to State Bank, the external

liabilities were deferred by State Bank till 2013 because of the restructuring of the entire group.

Rate of interest (ROI) was set to 5% growth till 2010 and further to 10% increase till 2013.

Financial results on yearly basis are compared to set further targets of the company. Return rate

on equity and capital is set to 14% including risk/hurdle rate, and further projects are only taken

if their return rate comes to the decided rate. Strategic assets of real estate are sold to invest in


FINANCIAL PRESPECTIVE

OBJECTIVES ACTIVITIES Key tasks to achieve

results/responsibilities

VERIFYING INDICATORS/INITIATIVES

1.1 Cash Flow

1.2 ROI

1.3 Financial results

1.4 Return on Equity and Capital

1.5 Strategic Assets(Real Estates)

1.6 Joint Ventures

2.1 Surplus cash flow is circulated

2.2 Growth Profitability upto 5%

2.3 2006-500Mn

2.4 11% + 3%(Hurdle/Risk)=14%

2.5 Dead investment Sold

2.6 In existing / new projects, looking for Well Estb /

3.1 Internal liabilities to be paid upto 2013.

3.2 Tgt based incentives for BU's

3.3 Tgt of 5% inc in profits till 2010 and 10% inc further till 2013.

3.4 Projects are taken only if the rate of return reaches 14%.

3.5.1 Investment in power sector.

3.5.2 AWS payments.

3.6 Mobil-Askari joint


power, oil and gas and paying of welfare schemes loans. Joint ventures with existing/ new

business partners are planned.

INTERNAL BUSINESS PROCESSES

OBJECTIVESACTIVITIES

Key tasks to achieve results/responsibilities


1.1 Smooth, efficient and effective process

1.2 HR induction

1.3 Core teams

1.4 Dash board System

2.1.1 Internal controls streamlined2.2.2 Decentralization 2.2.3 Removal of Bureaucracy2.2.4 Manuals of all Deptts 2.2.5 SOP’s

2.2 Induction of professionals

2.3 Induction/training of core teams to decide Strategic goals.

2.4 Usage of Software to generate daily reports and progress.

2.5 In existing / new projects, looking for Well Estb / Professional Companies.

3.1.1 Streamlining of procedures3.1.2 Financial Analysis3.1.3 Empowering managers

3.2.1 Hiring of Job relevant Professionals

3.3 Highly qualified indls induction with relevant mkt based experience.

3.4 Automation of Deptts

Table 3.3

The Internal Process Perspective is concerned with the processes that create and deliver

the customer value proposition. It focuses on all the activities and key processes required in order

for a company to excel at providing the value expected by the customers both productively and

efficiently. These can include both short-term and long-term objectives as well as incorporating

innovative process development in order to stimulate improvement. The processes were made

smooth and effective by taking measures such as strictness in internal controls, Auditing,

Decentralization and removal of un-necessary bureaucracy, and implementation of SOPs



according to the developed Manuals. Highly qualified Professionals are hired along with

developing of Core Team which aligns the strategic goals with efforts. Dash board is a Software

based activity in which a daily progress report is generated of each Business units (BU).

The Customer Perspective




1.5 Customer Profile

1.6 Marketing

1.7 Business to Business deals

1.4 Feedback System

2.1 Customer profile is maintained

to ensure customer satisfaction and retention.

2.2 Invest more in Marketing of the company.

2.3 Investing and concentrating on projects other than direct sales.

2.4 Strong feedback sys to ensure customer satisfaction.

3.1.1 Business given is monitored closely to ensure due attention.

3.1.2 Reporting to MD/COO directly by the customer.

3.2 Spending of around 50 crores in yr 2006-7.

3.3.1 Closing Askari water3.3.2 Invest in O & G, Power

sector.

3.4 Direct reporting to MD/COO of AWT.

Table 3.4

The Customer Perspective defines the value proposition that the organization will apply

in order to satisfy customers and thus generate more sales to the most desired customer groups.

A customer profile is maintained to that the most profitable customer is given desired output;

Marketing is a weakness in the company as and when compared with other counterparts.

Moreover business to business deals are preferred within the group except few units for example

Banks. Alongside other measures feedback system is made effective and a strong one in order to

ensure operational excellence and service.



LEARNING AND GROWTH




1.8 Training

1.9 HR assessment

1.10 Employee turnover

1.11 Internal Promotions

1.5 Gender/Racial ratios

2.1 Outdoor courses offered to

enhance skills.

2.2 Overall and performance based tgts are assigned at all Levels

2.3.1 Employee satisfaction was given preference

2.3.2 Retention of Professionals

2.4 Internal promotions were given as reward to ensure competitions.

2.5 Equal treatment to all

2.6 In existing / new projects, looking for Well Estb / Professional Companies.

3.1 Coord with local and foreign universities for professional Cert.

3.2.1 Rewards3.2.2 Bonuses(overall and

performance based)

3.3 Packages and perks were given in line with the Mkt.

3.4 Bonuses/rewards to indls achieving Tgts.

3.5 Jobs were not specific to gender/ race.

Table 3.5

The Learning and Growth Perspective is the foundation of any strategy and focuses on

the intangible assets of an organization, mainly on internal skills and capabilities that are

required to support the value-creating internal processes. To impart professional training and

improving skills of workers certification courses are offered in both local and foreign and

universities. Human Resource is then further assessed to check overall performance of the indls.

Employee turnover is reduced through retention of Professionals by giving market based

incentives and perks alongside internal promotions. Gender/race is not specific to any job or

appointment in the company.



2.2.1.5 Comparison of Benefits . Our main aim was to collect the data

from different companies for the comparison of the different benefits

availed in other companies and give you a brief comparison about these

benefits that are available in Army Welfare Trust group of companies. The

main data collected from the group was emphasized on Askari Bank. It

was very difficult for us to collect such a detailed data of different

companies but we are thankful to Mr. Sabir Mumtaz of Askari Bank HR

department who helped us a lot in this study. We collected data from 20

different companies and compared with AWT to have a clear picture of

the benefits comparison. The most popular benefits extended amongst the

data sample include loans, life & disability insurance, medical plan,

company car, housing assistance, variable pay, recognition awards and

assistance for professional development. Assistance for children's

education, telephones and leave travel benefit, however, are the least

prevalent. Company cars, housing in kind, club membership etc. are

typically limited to higher grades, while loans, medical plans, insurance,

recognition awards, professional development etc. are typically provided

to all employees in the organization.



Figure 4.1Table 4

Policy Details & Market Trends Askari's Positioning

Housing Loan In line with the mkt.

Provision &Eligibility

Entitlement

Interest Rate

All organizations, except two, extend Housing Loans

to their employees in all grades, subject to completion

of minimum service period.

The quantum of loan typically varies by grade as is

seen in 7 organizations. The data sample is split

between providing it as a fixed monetary entitlement

and linking it to the salary of the incumbent. However,

the amount linked to salary is also typically capped by

a fixed monetary amount. In case of fixed monetary

limits, the entitlement ranges from PKR 1 Mln - 10

Mln across grades and 60 - 100 times monthly basic/

gross salary. Some organizations also specify Debt

service norms as a measure of loan entitlement.

The organizations in the data sample charge nominal

rates of interest so as to maximize the benefit

extended to the employee. The median rate of interest

is 3%. A few organizations charge interest rates

ranging from 1% - 2%. One organization charges

interest equal to the Treasury Bill Rate + 1% p.a. with

a floor of 4.3% p.a. One organization does not charge

any interest from its employees.

In line with the mkt

.In line with the mkt.

In line with the mkt.

Variable Pay: Behind


18 organizations in the data sample have a variable

pay plan in place. Most organizations with a variable

pay program provide it to all employees subject to

Behind



their performance. Two organizations have a plan for

Junior Management and above only. One organization

provides variable pay only to the top performers in

any department. Majority of organizations extend this

benefit basis the organizational, functional and/ or the

individual performance.

Car Loan Marginally Behind


Entitlement

Interest Rate

All organizations, except two, extend Car Loans to

their employees subject to completion of minimum

service period. A majority of the organizations

provide this loan to all employees, while a number of

other organizations that provide a car to Middle and

Senior management employees; do not extend a car

loan to them. Two organizations extend this loan only

to local employees.

Almost an equal number of organizations differentiate

the car loan entitlement by grade, and an equal

number specify this amount uniformly across levels.

The quantum of loan is typically specified either in

terms of a definite monetary limit, ranging from PKR

125k to PKR 7.5 Mln across grades or linked to car

value (80% - 90% of car value). However, a unique

practice in this regard is a differentiation between new

and second - hand cars made by 2 organizations.

Some organizations link the entitlement amount to

salary as 50% of net salary and 30 times monthly

basic salary, respectively.

Interest rates typically range from 3% - 5%. 2

organizations charge interest rates of 1% and 2%,

Provision: In line with the mkt.

Eligibility: Behind




while one organization extends interest free car loan

to its employees. 2 organizations differentiate the

interest rate charged by grade, where for one

organization the Supervisory staff and Junior

management are charged 4% and for the higher levels

it is 5%; the other organization charges no interest rate

from the Supervisory staff but charges a rate of 5%

from the Junior management. One organization

charges interest equal to the Treasury Bill Rate + 1%

p.a. One organization differentiates interest rate based

on the loan amount, wherein it charges 6% for loan

amount up to PKR 500k and 8% for loan amount

greater than PKR 500k

Marginally Behind

Other Loan Marginally Behind


Entitlement

All organizations, except two, extend loans other than

Housing and Car Loan to their employees.

Organizations typically provide a miscellaneous loan

to their employees. All of the organizations providing

this benefit extend miscellaneous types of loans to all

employees. One organization extends investment loan

plan to only Higher levels in Junior management -

Lower levels in Senior management. Minimum

service period for eligibility extends from 3 months to

2 years.

9 organizations specify entitlement amounts to be 3

times monthly gross salary; whereas 4 organizations

specify it to be 3 times monthly basic salary. Only one

organization differentiates the loan entitlements across

grades. Some organizations specify a fixed entitlement

amount of PKR 50k (Computer Loan). Only 2


Marginally Behind



Interest Rate

organizations provide more than one kind of loan for

their employees.

While 5 organizations charge interest rates ranging

from 2% to 3%, 8 other organizations charge rates

ranging from 4% to 5%. 3 organizations do not charge

any interest from their employees. For one

organization in the data sample, interest rates vary

depending on the type of loan extended. One

organization charges interest equal to the Treasury

Bill Rate + 1% p.a. One other organization charges a

high interest rate of 8%.

Marginally Behind

Bank Provided Car

In line with the Mkt.


Entitlement

All organizations in our sample extend this benefit to

their employees, typically at the Middle Management

levels and above. Lower levels in the organizations

are usually extended a Car Loan instead. 80% of these

organizations purchase the cars outright, while the

remaining organizations lease finance cars.

95% of the organizations in our data sample typically

specify car models along with cubic capacity limits

for eligible employees. The typical car models are

Suzuki Cultus 1000 cc, Suzuki Baleno 1300 cc,

Honda City 1300 cc, Honda Civic 1500/1600 cc,

Toyota Corolla 1300/1500/1600 cc and Honda Accord

1800 cc across different levels. A few organizations

also specify a fixed monetary limit with the specified

car model.

65% of the organizations provide two cars to its





Fuel Entitlement

Maintenance costs

Chauffeur

employees in Senior Management and above.

All organizations specify fuel entitlement for

employees differentiated across grades. The

entitlement for fuel range for different levels is as:-

Supervisory Staff: 50 litres per month (one

organization only)

Junior Management: between 50 - 250 litres

Middle Management: between 75 - 350 litres

Senior Management: between 150 - 500 litres

Top Management: 275 - 650 litres.

In 3 organizations, fuel expenses for Top Management

are covered on actual. One organization does not

provide fuel.

Maintenance costs are typically reimbursed to

employees who are provided with Company cars and

the amount of assistance is typically based on actual

costs incurred. A few organizations, however, specify

monetary limits for the same ranging from PKR 12k -

120k per annum across grades. 55% of the

organizations cover maintenance expenses for Senior

Management and above on actual. One organization

provides maintenance costs as 20% of car value over 5

yrs. 2 organizations do not cover maintenance

expenses.

70% of the organizations provide a chauffeur,

typically to senior level employees. In some cases Top

levels get 2 chauffeurs and are either provided an

allowance or are reimbursed for the same.


Unable To Access

Behind

Bank In Line with the Mkt.



Accommodation


Entitlement

Utilities

Allowance

17 organizations provide Housing Assistance in some

form to their employees. Majority of the organizations

in the sample providing Housing Assistance extend it

in Cash to their employees. 24% of the organizations

extend this benefit in both cash and kind.

In 70% of the organizations providing this benefit the

entitlement is linked to annual basic salary, with the

linkage ranging from 30% - 45% of annual basic

salary. For one organization, the HRA amount is not

fixed and is dependent on city, location etc.

A majority of organizations specify the utility

allowance to be 10% of monthly basic salary. 2

organizations also specify fixed monetary entitlements

for utilities ranging from PKR 10k - PKR 16k per

month. One organization covers utilities expenses for

select employees in Senior management and Branch

Head on actual.




Medical (Hospitalization)

Behind


All the organizations in the data sample extend this

benefit to their employees at all levels. While 12

organizations have insurance scheme for providing

hospitalization coverage, 8 organizations have

internally funded schemes for hospitalization benefits.

All organizations extend this benefit to all their

employees. All organizations cover employee, spouse

and dependant children under this policy.

Most organizations specify a fixed monetary




Entitlement

Maternity Benefit

entitlement per ailment or per person that will be

borne at each level, as per the insurance policy. The

entitlements range from PKR 15k - 600k per person

across grades or on actual. 3 organizations link the

entitlement amount to the employee's salary, with 2 of

them specifying it as 3 time’s monthly basic salary per

annum and 48% of annual basic salary, respectively.

95% of the organizations in the comparator provide

maternity benefits to their employees, typically

covering normal/cesarean deliveries. One organization

does not provide the benefit and only extends 60 days

Maternity Leave. A majority of organizations cover

all employees uniformly across levels; about 10% of

the organizations differentiate the benefit entitlement

by grade. 8 organizations do not specify a limit on the

number of cases for which the benefit is provided,

while other organizations restrict the coverage to 2 or

3 pregnancies only. One organization differentiates

number of cases covered basis employee grade.

Marginally ahead

Behind

Medical Plan


Entitlement

85% of the organizations in the data sample provide

medical clinical benefits to their employees at all

levels. One of these organizations only covers for

chronic cases. All organizations extend the benefit as

an internally funded scheme.

59% of the organizations providing the benefit specify

a fixed monetary entitlement differentiated by marital

status of the employee. This amount may be uniform

or differentiated across grades and ranges from PKR

1.2k - 130k across grades. 3 organizations link the





entitlement amount to the employee's salary, ranging

from 8.5% - 10% of basic salary. Some organizations

also cover these expenses on actual either for all

employees or for their senior employees.

Insurance In Line with the Mkt


Sum Assured:

Natural &

Accidental Death

Sum Assured:

Permanent Partial

& Temporary

Total Disability

All the organizations in the data sample extend this

benefit to their employees in order to cover them for

death due to natural causes and accidental death. A

majority of the organizations also insure employees

for permanent total disablement, permanent partial

disablement and temporary total disablement.

6 organizations differentiate the sum assured by grade,

and specify it as a fixed monetary limit, ranging from

PKR 300k - 10 Mln. The organizations specifying

uniform payouts, largely link the sum assured to

salary, ranging from 2 - 4 times annual gross salary,

and 24- 46 times annual basic salary; PKR 225k- PKR

10 Mln across grades. Typically, the sum assured in

case of Accidental Death is either equal to or double

the sum assured in case of Natural Death.

Organizations differentiating the sum assured by

grade specify it as a fixed monetary limit, ranging

from PKR 500k - 5 Mln. The organizations specifying

uniform payouts, largely link the sum assured to

salary, ranging from 3 - 48 times gross salary. Only 3

organizations specify a uniform sum assured ranging

from PKR 500k -1 Mln across all grades. Typically,

the sum assured in case of accidental death is either

equal to or double the sum assured in case of Natural


Marginally Ahead

Unable to assess



Premium

Contribution

Death.

A majority of the organizations in our data sample

bear 100% of the premium for providing the benefit. 2

organizations contribute 50% and 80%, respectively.

One organization specifies premium contribution for

employee based upon their salary range.In line with the mkt.

Vacation Travel Assistance

Ahead


Entitlement

45% of the organizations in the data sample extend the

benefit of Leave Travel Assistance to their employees.

The benefit in most cases is restricted to relocated

employees. 3 organizations specify entitlement basis

employee grade. One organization extends this benefit

to Supervisory Staff & below; whereas on the other

and, another organization extends this benefit to

Higher Levels in Middle Management & above.

66% of the organizations extending the benefit link

the entitlements amounts to employee salary. These

amounts range vary across the comparators. One

organization specifies fixed monetary entitlements

differentiated by grades, along with provision of air

tickets for Higher Levels in Sr. Mgt. and above

employees. 2 other organizations provide air and rail

tickets differentiated across grades.

Ahead

Marginally Ahead

Telephone Marginally Ahead


Telephones at residence are not a popular benefit

among the organizations in the data sample. Only 6

organizations provide this benefit to their employees.

All the organizations providing this benefit extend it

to specific grades. While only 2 organizations cover

Provision: Ahead

Entitlement: In line with the mkt.



Provision: Mobile Phone

installation charges, a majority of the organizations

cover monthly rental and call charges either on actuals

or in terms of fixed monetary limits.

Mobile phones are comparatively a more popular

benefit. 80% of the organizations in the comparator

extend this benefit to their employees. Organizations

typically provide mobile phones to their employees on

the basis of business need or cover their senior level

employees/business unit heads. 2 organizations extend

this benefit to Higher levels in Junior Management

and above and another to their sales team on a need

basis. A majority of the organizations providing

mobile phones to their employees cover monthly calls,

activation charges, monthly rental charges and the

cost of the instrument. All the expenses are typically

borne on actual.

Eligibility: In line with the mkt.

Entitlement: Unable to assess

Children Education


Entitlement

Only 6 organizations in our data sample extend this

benefit to their employees to help them meet

educational needs like tuition fees, cost of books,

transportation costs & other course related expenses.

The eligibility for this benefit is varied across the

comparator sample and no definite trend can be

derived.

Most of these (66%) organizations specify the

education entitlement in fixed monetary terms. The

limits, however, vary across these organizations. One

organization covers this expense for Senior

Management and above employees on actual. One


Not Applicable



organization extends this benefit on to employees that

have been relocated. This organization provides

benefit which equals the sum of actual expense in the

new city and the loss of fee paid in the old city.

Club Membership

In Line with the Mkt.


Entitlement

Club membership is a popular benefit as a majority of

the organizations (75%) in our data sample extend this

benefit typically to their Middle Management

employees and above. This benefit is typically

provided to employees at Senior and/or Middle

Management levels, as the need for business

entertainment is felt more at these levels. In most

organizations, the coverage extends to employee's

family.

Most of the organizations in the comparator provide

Corporate Membership to one club, while some

extend this benefit differentiated by employee grade.

Higher grades get membership to more than one club.

One organization extends membership to 3 clubs for

Top Management.



Stock Option In Line with the Mkt.


Only 8 organizations out of 20 provide stock options

to their employees. Organizations typically offer stock

based plans to their managerial employees at the

middle and senior levels. The criteria for determining

the award size is quite varied across the data sample.

While some organizations base it on individual

performance, a few other organizations take the

organization's global performance into account as




well. One organization also lays emphasis on the

employee's potential in deciding the award size.

Time Off Marginally Ahead

Provision of Annual Leave

Entitlement

Provision of Sick

leave

Carry Forward &

Accumulations

Annual leave is provided uniformly to all employees

and the entitlement is typically 30 days. In 2

organizations, however, the number of days for which

an employee is eligible varies, depending on the years

that the employee has been with the organization. One

organization differentiates number of leave across

grades.

Annual leave is typically defined in terms of calendar

days, with only 4 organizations specifying working

days. One organization specifies leave for Supervisory

Staff as calendar days and for Junior Management and

above as working days.

A number of organizations provide from 20 to 30 days

entitlement for sick leave. One organization provides

leave up to 30 days with pay and beyond 30 days

without pay. 2 organizations do not specify a limit for

the same as it is dependent on the Management's

discretion.

13 organizations in the data sample provide for carry

forward of unused leave for all employees. Typically,

carry forward of annual leave is permitted, though

some organizations also allow sick leave to be carried

forward. Organizations allow for accumulation of

leave from 30-90 days. One organization allows for

carry forward up to 360 days Annual leave.


Marginally Behind


Provision: In line with

the mkt.

Maximum Accumulations:

Ahead



Encashment of

unused leave

Unused leave is typically en cashed on separation.

Most organizations en cash leave on gross salary,

while a few organizations en cash leave on basic

salary. While most organizations allow for

encashment of only annual leave, some organizations

allow for encashment of casual leave as well.


End of Service Benefit


Gratuity

Pension

Provident Fund

Gratuity benefit is provided by 18 organizations in the

data sample. The entitlement is typically calculated as

a multiple of the monthly basic salary of the

employee, though a few organizations calculate

gratuity payment on the basis of gross salary as well.

Pension is provided by 8 organizations. 3

organizations calculate the benefit on gross salary,

while one organization calculates it on basic salary. In

75% of the organizations providing pension, the

employer contribution to the pension fund is 100%.

All the organizations in the comparator have a

Provident Fund scheme in place for their employees.

In 9 organizations, the employer and employee

contributions are 10% of salary, while 4 organizations

specify it to be 8% - 8.33% of salary. Other

organizations have contributions of 4.5% - 6%.




Recognition Awards


Provision 15 organizations in the data sample provide various

recognition award schemes to their employees. The

aim of recognition awards is to recognize outstanding

commitment and effort by employees and reward

them for exceptional performance and outstanding

In line with the mkt.Award size: Unable to

assess



contribution. Organizations also provide recognition

awards for long service. The organizations reward

their employees in varied ways. While most provide

gifts in cash, others give out gold medals, watches,

plaques, etc.



CHAPTER 3

WAY FORWARD



CHAPTER 3

3.1 Suggested Measures

3.1.1 Expansion of Committee of Administration . COA has to play a pivotal

role in achieving the restructuring objectives and future success of AWT. COA is

the highest governing body and de-facto is a direct stakeholder in AWT. It is felt

that the COA does not meet frequently enough for decision-making and mostly

relies upon the input of AWT Management. This plan in addition to the already

defined primary functions foresees a more proactive role of COA in future, by

assuming the role of investors and BOD comparable in private sector. It is

proposed that MD AWT instead of being part of COA meetings in attendance

may be made a member.

For the purpose of providing COA with professional and technical

support, the COA is envisaged to expand. The COA will include at least three

non-executive members from the private sector. These members would ideally be

industry leaders and respected entrepreneurs, with experience and capability of

effectively leading large groups or organizations and should not be from

competing industries. It is further suggested that the COA may have its own

Secretariat which will help the COA in its monitoring functions, ensure

implementation of the guidelines given by the COA, organize COA meetings etc..

One of the primary functions of the COA is to take large scale investment and

disinvestment decisions, in order to supplement the key decision making process

it is recommended that the COA may hire services of professional analysts to

determine the financial and operational viability as well as the market potential of

the project, these services can be hired on case to case basis or by developing an

in-house team for this purpose. These analysts may include professionals from

finance, manufacturing and marketing. The COA will meet each quarter in order

to set strategic directions, monitor results and take strategic level decisions. The

COA will be responsible for appointing and removal of the MD AWT and



members of the Board of AWT and fixing their remuneration and terms of

appointment.

3.1.2 Core Teams

One of the major problems faced by AWT has always been professional

and technical input during decision making, advisory and control processes. The

BOD predominantly comprises members having no or little experience of

managing large scale, diversified and complex businesses. Competitive business

environment, timing and quality of business decisions is vital and demands

technical and professional input.

In addition, the role envisaged for the corporate office of AWT is of a

value adding parent and value addition is hardly possible without requisite

technical and professional competencies, which at present are lacking in the top

Management of AWT.

For the purpose of bridging the gap it is proposed that a core team of

professionals be recruited. The recruitment and selection of the core team will be

made by the MD in consultation with the BOD and recruitment professionals.

This team will fill the technical and professional competency gap within the

corporate office. The team will report directly to the MD AWT and will be

supported by small layers of professionals. The BOD and core team will not be

involved in project operations instead they will act as direction setters and

facilitators for achieving results. The team will also be part of the panel

responsible for recruitment of key personnel at corporate office and it's BUs.

The core team will comprise the following:

a. Chief Operating Officer assisted by Investment and Monitoring,

MIS and Operations Department.

b. Chief Financial Officer assisted by Treasury and Finance &

Accounts Department.

c. Chief Risk Management Officer assisted by Internal Auditing



Department.

d. Secretary.

e. Chief Human Resource Officer.

The core team of professionals will fill in technical and professional

competency gap at corporate level and add value to the business. Role of the core

team will be of planners, facilitators and advisors. BU and their function heads

will functionally report to the core team on all professional and technical issues.

The core team will also be responsible for the change management in direct

consultation with the AWT BOD.

Key actions that are required to be taken in respect of the core team are:

a) Prepare position profiles and fix duties and responsibilities of the

core team.

b) Define relationships between the core team, the MD, the Directors

and the Bus.

c) Fix remuneration package and terms of employment of the core

team;

d) Appoint core team of professionals.

e) Prepare a change management plan;

The concept of core team has been introduced in order to augment the skill

set and professional expertise of the top Management of AWT. On the other hand

while refraining from unnecessary interference in the operations, the core team is

envisaged to provide professional and technical support to the professionals at

BUs as and when requested / required or instructed by AWT BOD. The rationale

for recommendation of core team directly reporting to the MD has been made on

the basis of the fact that the ultimate responsibility for achieving the bottom line

and smooth functioning of the operations of the BUs lie with MD AWT and

therefore it is logical that the core team directly reports to the MD AWT.

3.1.3 Revised Role of Board of Directors



The role, responsibilities and powers of the Board of Directors as

stipulated in the administrative order covers direction, consultation, advice, co-

ordinating and control, whereas the role currently assumed by the BOD is focused

on operations of the BUs. The involvement of Members of the Board in the

operations is contradictory to the role of advisory, coordination and control.

The BOD will not be involved in operations of BUs nor will any member

be responsible for achieving results at BU level. A core team of professionals will

be appointed to augment the skill sets and professional expertise and assist MD

and BOD members on technical and functional issues. The core team will be the

monitoring arm of the AWT BOD and will ensure compliance with policies,

procedures and consolidated business plan of AWT. Without exercising any

executive powers, members of the BU Board will monitor progress on BU

business plans on the basis of periodic progress reports prepared by the BU

Management and review comments of the core team and advise the AWT Board

accordingly.

Key actions required are to:

a) Re-define relationships between Directors, MD, the core team and

the BUs.

b) Define duties and responsibilities of the AWT and BU BODs

under the new structure.

c) Disband current Divisional structure.

d) Form audit committee and fix responsibilities, accountabilities and

powers;

e) Improve remuneration of the Board Members to reflect greater

accountabilities and responsibilities.

f) Ensure compliance with good corporate governance practices

under guidance from the code of corporate governance.

3.1.4 Improvement in Organizational Structure



Organizational structure of AWT will support achievement of a clear

distinction between strategic and operational management. The responsibility for

achieving functional goals will be shifted to the BUs, whereas the corporate office

will be responsible for overall direction and goals setting, corporate level

strategies, business facilitation and monitoring of results. The structure will also

support decentralization and cost and profit centers, with greater business

autonomy devolved to profit centers, using the organizational restructuring to

enhance functional relationships and simpler reporting lines.

Key actions required are to:

a) Redesign the organizational structure to support decentralization

and cost and profit center concepts, with responsibility for

achieving performance goals at each level of organization

b) Formulate, disseminate and implement:

1) A revised organization chart.

2) Prepare materials for and deliver training for the adoption

of the decentralization, profit and cost center concept and

its operations.

3) Decentralization, profit and cost center policy, systems and

operating procedures.

4) Revised Head Office and BU mandates.

5) Dismantle current Divisional structure at the AWT Head

Office; and

6) Capacity building at the BUs and appoint appropriate and

qualified manpower.

3.1.5 Improvement in Planning Process

Planning process at AWT is restricted to annual budgeting exercise. The

planning at all levels is ad hoc, impulsive and mostly directed towards fire

fighting. Organization at all levels does not have defined goals and objectives and

in turn do not know what good performance would look like. AWT up till now



even did not have vision and mission statements. Lack of business planning at all

levels of Management has created fundamental problems for AWT. Budgets are

prepared and financial targets are generally set without any verifiable basis. The

organization does not seem to have purpose and aim. Strategies at all levels

including corporate, BU and operational level are incomprehensive intern

strategic and operational intent of AWT is also deficient.

There is a fundamental need for initiating a comprehensive planning

process. The plans will be prepared to achieve strategies, goals and objectives.

The planning process will include initially plans for closing of BUs and induction

of professional staff thereafter the planning process will be focused on

development of corporate plans. One of the most important jobs entrusted with

the core team will be preparation of a three year rolling corporate plan. The plan

will cover corporate level strategies, objectives, goals and strategic intent.

Objectives and goals will be broken down to BU level, which in turn will form

basis for business plans of respective BUs. Strategies covered in the corporate

plan will include investment portfolio, resource allocation, HR, financial

management, IT, risk management, alliances, mergers acquisition and corporate

governance strategies. While, business plans at BUs will cover operations,

marketing, HR, information systems, procurement (where applicable) and

financial management.

Business planning at AWT will be a consultative process and will

comprise two tiers three year rolling strategic planning at AWT corporate office

and business & operational plans at BU level. Strategic plan will spell out vision,

mission and strategic intent of AWT as well as determine the individual BU level

goals and objectives. The strategic plan will dovetail into the BU business plans

which will form the basis for BU level operational plans. BU level plans will be

prepared to meet the expectations of the corporate office and will also fix

qualitative and quantitative goals at each business segment. MIS at each level of

AWT will cater for the monitoring and implementation of plans at each level and

in each quarter.



The key actions required are to:

a. Formulate, publish and disseminate vision and mission statements

of AWT.

b. Prepare and rollout a 3 year strategic plan, which should be aligned

with the vision and mission of the organization.

c. Prepare and rollout business unit level plans.

d. Monitor implementation of plans and revise as and when required.

e. Evaluate performances at each level of organization against

performance measures set in plans.

3.1.6 Investments

Investments will be made by AWT following defined portfolio logic. All

investment proposals submitted for approval to COA will be supported by

professional feasibilities demonstrating project viability and organizational

capability of AWT to undertake the project. BUs giving poor or no returns, with

little hope for turnaround while also being beyond the scope of portfolio logic,

will be disposed off or divested. Project implementation will be carried out by

professionals in an efficient and cost effective manner.


a. Formulate portfolio logic for investments.

b. Fix investment return benchmarks.

c. Formulate and implement policies and procedures for initiating,

approving and undertaking investment proposals.

d. Formulate Investment and Monitoring Department, appoint

members and fix their duties, responsibilities and powers.

e. Dispose off or divest BUs not in line with investment strategy of

AWT.

f. Formulate, approve and implement a project implementation

manual.

g. Monitor project implementation through effective MIS.



3.1.7 H uman Resource Management

Corporate culture of AWT is more close to public sector organization.

There is no effective system of performance management. There is no incentive

for good performers. No formal career progression system is in place and very

little or no importance is attached to employee development, which results in

lower motivation of employees. HR policies are out dated and the same are being

practiced by the Head Office and most of the BUs. Fundamental HR management

functions like recruitment, performance management and compensation are

flawed and not suitable to sustain commercial operations. Work environment is

not enabled to support and facilitate efficiency. Employees are offered fixed term

employment contract and there is low employee association with the organization

and employee turnover is high. Above all there is a dearth of competencies and

skills in AWT due to not adhering to right person for the right job. All of the

above symptoms point to an HR system with no or little potential to support

efficient profitable operations. There is a need to align HR function with the

business practices. The direction set out below will assist in achieving such

objectives.

a) Engage core team of professionals, preferably through independent

consultants;

b) Engage consultants for devising position profiles prepared to support

business processes in line with revised organizational structure.

c) Match position profiles with incumbent profiles and assess suitability as

well as training requirements through training needs analysis (TNA);

d) Identify existing employees fit for newly suggested position profiles, and

commence training where required, through development and

e) Implementation of a training programme.

f) Recruit and select professionals at BU level through independent process;

g) Phase out existing employees not suitable as and when employment

contracts expire;



h) Engage consultants for:

1) Formulation of policies and procedures for recruitment and

selection, career planning and development, performance

management.

2) System and setting criteria for setting performance targets;

3) Development of job profiles, comparing existing staff with the job

profiles, and identifying redundant staff;

4) Preparation of human resource management manual;

5) Conducting compensation and benefits survey to assess job market

situation;

6) Offer employment contracts in line with prevailing market trends;

and

7) Assisting core team in the preparation of transition plan.

3.1.8 Management Information System

The current Management Information System of AWT, including all its

BUs, will be assessed for identifying the improvements required therein. Analysis

would incorporate the results of the process studies for AWT, the proposed

Business Process Re-engineering methodologies, and the IT Risk Analysis and

related risk management techniques, along with the suggestions mentioned

throughout this report. The improvements should ensure the orderly and efficient

conduct of business, and timely delivery of accurate information to support all

levels of decision-making.


a) Work in association with Askari Information Systems (Pvt.)

Limited (AIS) and AWT Technical Division or outside agencies

during

b) Implementation of MIS.

c) Engagement of independent consultants to perform the following

tasks:



1) Detailed evaluation of the business processes, business

process re-engineering, and business process automation,

where appropriate for the development of MIS. This

evaluation would include, among other critical processes,

the accounting and reporting function in relation to the

BUs;

2) Determine system hardware and software requirements;

3) Devise reporting formats in consultation with the MIS

users; and

4) Provide training for use of the applications designed.

3.1.9 Finance

AWT will develop funding mechanisms appropriate to the suggested

business strategy and create financial management systems that enhance

management capacity to conduct the business to the mutual benefit of all

stakeholders.

Key Actions

The key actions required are to.

a) Complete financial restructuring scheme by rescheduling,

reorganizing and renegotiating AWS and other outside debts still

not worked on;

b) Finalize the financial restructuring scheme for the cement

units, including corporatization strategy for a merged

cement project. Since this area requires an expert

knowledge of the technical, legal and taxation implications

of such a merger, the case for obtaining services of an

expert consultant in this regard should be considered as

well;

c) Reduce exposure in cement and implement the

corporatization and merger scheme if it is found beneficial.



d) Identify information needs for improved financial analysis

and management and incorporate them in the upgraded

MIS.

e) Assess fair market value of each BU and compare its

performance therewith;

f) Recapitalize BUs based on fair market value and

restructure balance sheet;

g) Replace, as far as possible, expensive AWS debt with

outside debt at lower rate of interest.

h) Segregate the accounting and finance functions throughout

the entity, with accounting function dealing with

bookkeeping and reporting responsibilities and finance

function dealing with the financial management of the

projects.



3.2 Proposed Restructuring Plan

The restructuring which we are proposing has been devised to cover all activities

essential to achieve the requisite restructuring objectives. As with any restructuring plan there is

still room for additional professional and technical input by the professional management

envisaged at the core of the restructuring exercise. This plan recognizes that the management

should be given enough space to take and implement decisions based on the ground reality.

The objectives of the restructuring plan are to remove existing short comings in the

management and organizational structure as well as management style at AWT on one hand and

on the other hand to transform the organization to support achievement of AWT’s vision mission

and objectives. In this plan the BOD has been considered as inclusive of MD unless specifically

mentioned otherwise.

Major areas requiring restructuring include:

a. Improvement of governance;

b. Organizational restructuring;

c. Business planning;

d. Investments and portfolio management;

e. Human resource management;

f. Information services

g. Finance and financial management;

h. Risk management initiative.

Organizational Restructuring

The initiative of organizational restructuring will commence with and will be dependent

upon appointment of the core team and appointment of qualified and professional BU heads and

in this regard will be linked with the human resource initiative. The relationships between

Directors, the MD, core team and the BUs will be redefined in line with the guidelines given in

this plan.

The core team will include the following key positions:

a. Chief Operating Officer

b. Chief Financial Officer



c. Chief Risk Management Officer

d. Chief Internal Auditor

e. Secretary (as existing)

f. Chief HR Management Officer

g. Group Head Operations

h. Group Head Treasury

i. Group Head Finance and Accounts

j. Group Head Investment and Monitoring

k. Group Head MIS/ IS

l. Group Head Administration

Human Resource Initiative

Restructuring activity will commence with the approval of the plan by the competent

authorities, followed by induction of a core team at the Head Office level. The core team will be

hired with the help of independent consultants. The core team will conduct situation analysis and

immediately take steps for implementation of this restructuring plan. The core team alongwith

Director designated by MD AWT will also be the change manager and will be accountable for

efficiency of implementation of this restructuring plan. The steps which shall be taken by the

team will include:

a. Implement the overall restructuring initiative

b. Selection and appointment of information systems consultants with the approval

of BOD

c. Selection and appointment of Human resource consultants with the approval of

BOD

d. Selection and appointment of professional BU heads with the approval of BOD

e. Development of business plans for the projects in consultations with BU heads

f. Identification of redundancies and staff requirements

g. Introduction of new monitoring and performance evaluation system for all the

projects

The authorities, job responsibilities, job profiles and requirements of qualification and

experience for all the critical posts within the Group will be redefined and aligned with the



overall corporate objectives of AWT. The organizational structure will be redesigned to support

decentralization and cost and profit center concepts, with defined responsibility for achieving

performance goals at each level of organization.

The HR consultants will prepare HR manual and will be required to identify, mechanized

and non-mechanized business processes and prepare and update position profiles in light thereof.

Proposed general position profiles of key positions have been given as appendices A -M of the

report. These position profiles are suggestive and subject to revision on the basis of further

analysis. The human resource will be split into professional and support staff. Position profile

will be matched with skills and competencies of existing incumbents, with particular emphasis

on the professional staff. Based on profile matching, lists of existing staff to be retained and to be

made redundant will be prepared. Care will be taken that, as far as possible, existing employees

will be retained and any competency gaps which could be filled will be bridged through training.

This policy of retention would be applied particularly to the support staff, and they will only be

made redundant where absolutely necessary. However, the consultants would ensure that the

future hiring by AWT is based entirely on merit. Further, specific position profiles for all the BU

heads will be prepared and profiles of incumbents will be matched therewith. For guidance, a

generalized profile of BU head has been included in the appendix-M of this report. BU heads

matching the position profiles or easily trainable will be retained and developed further. further

and all others will be placed on the list of employees to be made redundant. Training Need

Assessment (TNA) for the staff to be retained, will be carried out to determine the training needs

for retaining and better utilization of the existing staff. All vacant positions will be filled through

an independent and transparent process.

The HR initiative will include improvement of recruitment, selection, performance

management and career progression process. In addition, steps will be taken to make

compensation and benefit packages and terms and conditions of employment competitive. These

activities will be in line with new corporate vision of a lean and effective organization. These

policies and procedures will form the basis of HR manual which will be the final deliverable of

the HR consultants. For the purposes of bringing the compensation and benefits in line with the

market trends, consultants will be engaged to conduct compensation and benefits survey.

Compensation packages and employment contracts will be revised in light of the findings of the



survey report.

Information Systems (IS) Initiative

A separate MIS Department will be formed and would be directly reporting to the Chief

Operating Officer. The Department would endeavor to provide for all the information

requirements of the Group and its projects, including information required for decision-making.

The Department would obtain all pertinent operating information from the BUs and summarize

and analyze the information in a manner which is useful for the decision-makers. A standard

procedure for information collection, analysis, compilation, reporting and storage would be

devised by the Department. They would therefore be responsible for liaising with all the projects,

mutually assessing their information needs, facilitating the provision of complete, relevant and

timely strategic information to the Higher Management, including the MD, BOD and core team.


contemporary studies

Documents