Compensation Issue at PTCL – Harmonization of Various Packages

PCM Term Report – MBA 2015

Submitted by: Faisal Ahmad Jafri - 05835

ContentsI. Executive Summary.............................................................................................................................3

Chapter 1: Company and Industry Background...........................................................................................4

1.1 Industry Background.........................................................................................................................4

1.2 PTCL Background.............................................................................................................................4

1.3 History...............................................................................................................................................5

1.4 Products and Services........................................................................................................................6

1.5 PTCL Today......................................................................................................................................6

1.6 Previous Organizational Structure.....................................................................................................8

1.6.1 Centralization..............................................................................................................................8

1.6.2 Narrow Span of Control..............................................................................................................8

1.6.3 Chain of Command.....................................................................................................................8

1.6.4 Formalization..............................................................................................................................8

1.6.5 Heavily Mechanistic Structure....................................................................................................8

1.7 Structural Changes.............................................................................................................................9

1.7.1 Decentralization..........................................................................................................................9

1.7.2 Wider Span of Control...............................................................................................................9

1.7.3 Less Departmentalization..........................................................................................................10

1.7.4 Less Formalization....................................................................................................................10

1.7.5 Mechanistic vs. Organic Structure............................................................................................10

1.8 New Organogram – Post Privatization.............................................................................................10

1.8.1 Individual Department Structure...............................................................................................13

Chapter 2: Major Problem(s) and Impact on PTCL...................................................................................14

2.1 Privatization Process at PTCL.........................................................................................................14

2.2 HR Crisis Following Privatization.............................................................................................15

2.2.1 Resignations of Talented Employees Impacting Sustainability.................................................15

2.2.2 Political Hirings........................................................................................................................15

2.2.3 Resistance to New Learnings....................................................................................................15

2.2.4 Dislike of Govt Employees Towards Private Jobs....................................................................16

2.2.5 Redundant Jobs.........................................................................................................................16

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2.3 Etisalat’s Challenge...................................................................................................................16

2.3.1 Voluntary Separation Scheme................................................................................................17

2.3.2 Components of VSS.....................................................................................................................18

2.4 A Step Closer.............................................................................................................................19

2.5 Impact On PTCL.......................................................................................................................19

Chapter 3: Employment Categories and Pay Structure..............................................................................20

3.1 Employment Categories at PTCL....................................................................................................20

3.2 Compensation Details of VSS....................................................................................................21

3.3 Compensation Details of BPS....................................................................................................24

3.4 Compensation Details of NTC...................................................................................................26

3.5 Copy of Internal Memo of Bonus and Increment.......................................................................27

Chapter 4: Root Cause Analysis................................................................................................................32

4.1 SWOT Analysis of PTCL................................................................................................................32

4.1.1 Strengths...................................................................................................................................32

4.1.2 Weakness..................................................................................................................................33

4.1.3 Opportunities............................................................................................................................33

4.1.4 Threats......................................................................................................................................33

4.2 Fishbone Diagram for the Root Cause Analysis........................................................................34

4.3 Explanation of the Fishbone Diagram and HR Strategy-Implementation Gap...........................35

Chapter 5: Findings and Recommendations..............................................................................................37

5.1 Major Findings................................................................................................................................37

5.2 Recommendations...........................................................................................................................38

5.3 Flowchart of the Recommendations................................................................................................40

5.4 Sample Model of Total Rewards As Per Proposed Recommendations............................................41

Chapter 6: Action Plan..............................................................................................................................42

II. Appendix..............................................................................................................................................43

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I. Executive Summary

Pakistan Telecommunication Company Limited (PTCL) is the leading telecommunication authority in Pakistan. The corporation provides telephonic and Internet services nation-wide and is the backbone for the country's telecommunication infrastructure despite the arrival of a dozen other telecommunication corporations.

Originally one of the state-owned corporations (SOEs), the shareholding of PTCL was reduced to ≈62%, when 26% of shares and control was sold to Etisalat Telecommunications and the remaining 12% to the general public in 2006 under an intensified privatization programme of prime minister Shaukat Aziz. However, the 62% of shares still remain under the management of government-ownership of state-owned corporations (SOEs) of Pakistan.

Due to this drastic transformation in the way of doing business and ethics, PTCL is in state of flux and strategic drift. The management is trying hard to separate the unwanted and/or redundant workforce and bring the rest on to the new employment categories offered by Etisalat. However, they cannot fire them as per privatization deal. So there are multiple categories present in the organization which disrupts the decorum of HR policies and standardization.

It appears also that the company’s whole focus right now is to settle in after the privatization deal. Some restructuring has been done as per McKinsey’s instructions but the stress is on opting the new employment package rather than job analysis and job sizing.

The biggest issue company is facing that as they are still away from their target of rationalizing headcount. The deadwood of the company is not opting for the new employment packages.

The current employment package has been created to harmonize the BPS (govt based pay-scale) to new terms and conditions enforced by Etisalat.

Organization’s prime focus is basically to reduce and ultimately end the number of BPS and NCPG employees by either transferring them to NTC package or offering them third party contracts. There is clearly no roadmap for job analysis leading to job sizing. There is a constant pressure on employees to adopt NTC employment package and smart tactics are adopted by management from time to time to increase the adaptation rate of this scheme.

Considering the issues faced by PTCL vis-à-vis multiple employment categories and compensation packages, findings and recommendations regarding the overhaul and complete redesigning of the organization is presented along with an action plan.

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Chapter 1: Company and Industry Background

1.1 Industry Background

The telecom sector is one of the fastest growing segments of Pakistan’s economy and is a key driver for growth. There are an estimated more than 100 Million cellular users and the sector directly or indirectly employs approximately 1.36 Million people.

The telecom sector is complex, extensively regulated and rapidly evolving to keep up with the global markets and initiatives. In Pakistan, Pakistan Telecommunication Company Limited (PTCL) is the leading telecommunication authority in Pakistan. The corporation provides telephonic and Internet services nation-wide and is the backbone for the country's telecommunication infrastructure despite the arrival of a dozen other telecommunication corporations.

The telecom industry posted its highest-ever revenue in the fiscal year 2013. Total investment in the sector — at $472 million — was a major improvement from the $240.3 million invested in the prior year. And consolidation is also taking place in the cellular industry.

The industry posted cumulative revenue of Rs440.2 billion in FY13, up seven per cent from FY12, according to the recently released annual report of the Pakistan Telecommunication Authority (PTA).

And the fortunes of the country’s largest telecom company — Pakistan Telecommunication Company Limited (PTCL) — mirrored that of the overall industry.

In the January-September 2013 period (9MCY13), the company posted an unconsolidated after-tax profit of Rs9.3 billion, against a loss of Rs742.6 million in the same period last year. Revenues jumped by an impressive 63.4 per cent to Rs60.7 billion. Meanwhile, the company’s stock has ranged between a low of Rs17 and a high of Rs31.2 in the year-to-date period. It ended last Thursday at around Rs28.4 per share.

1.2 PTCL Background

PTCL manages and operates around 2000 telephone exchanges across the country, providing the largest fixed-line network. Data and backbone services such as CDMA, broadband Internet, IPTV, and wholesale are an increasing part of its business. PTCL also continues to be the largest CDMA operator in the country with 0.8 million V-fone customers. The company maintains a leading position in Pakistan as an infrastructure provider to other telecom operators and corporate customers of the country. It has the potential to be an instrumental agent in Pakistan’s economic growth.

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PTCL has laid Optical Fibre Access Network in the major metropolitan centers of Pakistan and local loop services have started to be modernized and upgraded from copper to an optical network. On the Long Distance and International infrastructure side, the capacity of two SEA-ME-WE submarine cable is being expanded to meet the increasing demand of International traffic.

1.3 History

From the beginning of Posts & Telegraph Department in 1947 and establishment of Pakistan Telephone & Telegraph Department in 1962, PTCL has been a major player in telecommunication in Pakistan. Pakistan Telecommunication Corporation (PTC) took over operations and functions from Pakistan Telephone and Telegraph Department under Pakistan Telecommunication Corporation Act 1991. This coincided with the Government's competitive policy, encouraging private sector participation and resulting in award of licenses for cellular, card-operated pay-phones, paging and, lately, data communication services.

Pursuing a progressive policy, the Government in 1991, announced its plans to privatize PTCL, and in 1994 issued six million vouchers exchangeable into 600 million shares of the would-be PTCL in two separate placements. Each had a par value of Rs. 10 per share. These vouchers were converted into PTCL shares in mid-1996.

In 1995, Pakistan Telecommunication (Reorganization) Ordinance formed the basis for PTCL monopoly over basic telephony in the country. The provisions of the Ordinance were lent permanence in October 1996 through Pakistan Telecommunication (Reorganization) Act. The same year, Pakistan Telecommunication Company Limited was formed and listed on all stock exchanges of Pakistan

PTCL launched its mobile and data services subsidiaries in 2001 by the name of Ufone and PakNet respectively. None of the brands made it to the top slots in the respective competitions. Lately, however, Ufone had increased its market share in the cellular sector. The PakNet brand has effectively dissolved over the period of time. Recent DSL services launched by PTCL reflect this by the introduction of a new brand name and operation of the service being directly supervised by PTCL.

The post-monopoly era came with Pakistan’s Liberalization in Telecommunication in January 2003. On the Government level, a comprehensive liberalization policy for telecoms sector was made in the offering. In 2005, Government of Pakistan decided to sell 26 percent of this company to some private corporation. There were three participants in the bet for privatization of PTCL. Etisalat, a Abu Dhabi based company was able to get the shares with a large margin in the bet. Government's plan of privatizing the corporation was not welcomed in all circles; countrywide protests and strikes were held by PTCL workers.

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1.4 Products and Services

PTCL provides a number of products and services. Under business solutions, it provides PTCL cloud alongwith managed solutions, PTCL managed services providing a comprehensive solution for corporate customers, International Business, Hosted Solutions, Carrier and Wholesale, Business Connectivity for an integrated end to end domestic and global connectivity and Business communication.

PTCL provides a range of personal products and services aswell. In addition to wireline operations, PTCL also provides fixed line service through its countrywide CDMA based WLL (Wireless Local Loop) network, under the VFone brand name.

In the Internet segment, PTCL provides fixed broadband through conventional copper wire & FTTC and wireless broadband based on EvDO Rev A and B technology with the brand name of EVO. Under the head of EVO, PTCL is running 4 sub brands; EVO 3G wireless, EVO 3G Nitro 9.3, EVO Wingle 9.3Mbps and Charji EVO, which is the latest addition to the EVO family. PTCL has also introduced a 3G enabled android tablet.

In addition to these services, PTCL also offers some of the world's first commercial HD TV services based on IPTV with the brand name of Smart TV and home surveillance and alarm over broadband under the brand name iSentry. PTCL is also part of the consortium of three major Submarine communication cable networks: SEA-ME-WE 3, SEA-ME-WE 4 and I-ME-WE.

PTCL also has Intelsat standard Earth Stations near Karachi and Islamabad. These installations provide the diversity for International voice connectivity and also work as Hub for domestic satellite users. There are four Intelsat Standard B Earth Stations at Islamabad, Gilgit, Skardu and Gawadar.

1.5 PTCL Today

Pakistan Telecommunication Company Limited (PTCL) is a megacorporation and a leading telecommunication authority in Pakistan. Originally one of the state-owned corporations (SOEs), the shareholding of the PTCL has been reduced to 62%, when 26% of shares and control was sold to Etisalat Telecommunications and the remaining 12% to the general public in 2006 under an intensified privatization programme of Prime minister Shaukat Aziz. However, the 62% shares are still remains under the management of government-ownership of state-owned corporations (SOEs) of Pakistan.

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26%

62%

12%

Ownership Division

Etisalat

Government of Pakistan

General Public

Pakistan Telecommunication (Re-organization) Act, 1996 replaced Civil servants Act for PTCL in 1996 and it became applicable on all employment categories.

As per old employment structure at PTCL before privatization there were two main categories, namely; Daily wagers and Regular Govt. employees. BPS grade 17 and above employees were inducted through CSS and follow the same bureaucratic protocols as of any other government organization in Pakistan.

BPS 1-16 grade employees were inducted through different placement programs time to time and follow regular government pay-grade structure. Whereas, daily wagers were contractual labor hired for different projects, paid on monthly basis but not entitle for any benefits like any other regular employees.

Etisalat took over PTCL’s management in 2006 with 72,000 employees across Pakistan. PTCL is one of those high potential public sector organizations which were generating profits after being so overcrowded. Restructuring and right sizing of the organization were the main challenges for the new Etisalat Management.

So right after takeover Etisalat initiated a study/survey through renowned consultants to identify the gaps and right potential of the organization. They revealed that PTCL is highly overcrowded and must lay off 80% current workforce in order to get the desired objectives. The new PTCL management decided to restructure employment categories and to introduce “Voluntary Separation Schemes” for all categories except daily wagers.

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1.6 Previous Organizational Structure

The organizational structure if we see in the light of management concepts was as follows:

1.6.1 Centralization

The operations of PTCL were highly centralized. Even if a customer wants an action on his complain, no lower management staff can fulfill his request without the proper approval of his senior manager. The senior manager usually is a top-level manager. Thus, even a basic task is dependent for approvals. The decision making power was not for everyone.

1.6.2 Narrow Span of Control

The span of control before the merger was narrow. The managerial levels were large in number. To fulfill a single task, an approval had to travel through numerous levels.

1.6.3 Chain of Command

If an employee from a marketing department wanted to get a job done from IT department, he/she has to inform his manager first who then informed his manager and so on until the marketing head came to know the problem. Then the marketing head used to convey this problem to I.T head who then transferred orders to downward chain of management. Due to this long chain of command, a single task sometimes took days to complete.

1.6.4 Formalization

Simple task like getting a new connection was tedious at that time. Filling out numerous forms, collecting demand notes, attestation from several grade officers were some of the basic requirements of every task. Formalization was rich in PTCL.

1.6.5 Heavily Mechanistic Structure

Since PTCL was a government organization, the structure was highly mechanistic. The rules were rigid, there is a clear chain of command, highly centralized architecture, very narrow span of control and very high formalization can be seen.

1.6.6 Customer services & Support

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The customer support was poor at that time. Complaints took days or even months to fire an action. People preferred to get a new connection rather than complaining about their existing one. The service quality of PTCL landline was also not very good.

1.6.7 Brand Image

PTCL did not have much power in its brand. It was only considered as a government organization. The logo of PTCL did not give an evident brand identity and it was merely and image without a brand power.

1.7 Structural Changes

PTCL’s new leadership has over-hauled the structural design of PTCL to minimize the red tape and to improve customer service/support.

The new PTCL’s structure is discussed here with respect to the components of Organization Structure,

1.7.1 Decentralization

Although Government of Pakistan still holds a majority share in PTCL, but the new leadership has opted to decentralize the operations to a greater extent in comparison to the previous structure. The new management decentralized certain decision to regional/exchange level, such as, DSL link approving authority of another ISP, Tower usage permission by other ISPs, approval of new connections, lesser documentation.

1.7.2 Wider Span of Control

Span of control has been widened for functions such as Field Installation, Customer support, Exchange Operations, etc. Instead of creating redundant managerial levels, a team leader approach is adopted where required.

For e.g., PTCL has reduced number of GM positions by appointing only a single Regional GM in a region for a particular department. Rather than appointing numerous GMs for each sub-department in a region. Besides, this Regional Senior Engineers now look after the sub-department in various divisions and report to their common GM.

1.7.3 Less Departmentalization

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With widening of the span of control, the departmentalization has also been reduced.

1.7.4 Less Formalization

The most important aspect of this re-structuring was lessening of formalization in PTCL. Unnecessary rules, procedures, documentations, verifications, and approvals were eliminated in order to cut the red tape and serve customers efficiently and effectively.

1.7.5 Mechanistic vs. Organic Structure

Overall, PTCL has shown a clear shift from a purely mechanistic organization to become more of an organic type. This is evident from flexibility brought in major areas such as complaint registration, new connection application, and complaint resolution.

The new organizational structure (Organogram) of PTCL is shown below accompanied with an individual department’s structure.

1.8 New Organogram – Post Privatization

For effective business operations, business function and regions were re organized to utilize the human resources more efficiently. Operationally Pakistan is now divided into three major regions: North, Central and South, as depicted in the figure in the next page. Blue colored region shows South, green colored region shows Central and yellow colored region shows North region. Sub regions are also labelled.

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Geographical Divisions of PTCL’s Operations

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New Organogram – Post Privatization

1.8.1 Individual Department Structure

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Chapter 2: Major Problem(s) and Impact on PTCL

2.1 Privatization Process at PTCL

The major objective of the PTCL privatization was to introduce investment and an improve and efficient management that can better respond to consumer demands, especially with increase the installation of new lines to meet the escalating needs of information technology. The company was also suffering from large-scale corruption, nepotism and mismanagement. Company resources and staffing were also mis-utilized through political influence and staffing decisions were similarly politically motivated. In 2004, the government official pressurized PTCL to pay Rs. 25 billion as dividend from net profit of Rs 30 billion, being the major shareholder; the large amount was collected by government. Due to these conditions, the company lagged behind in acquiring new technologies in comparison to other companies which were making strategic investments.

This process was initiated as early as 1994 and also enabled the government to gauge market interest in any potential takeover process. The Privatization Commission initially offered 2% shares of PTC through voucher scheme and after receiving a positive and encouraging response offered another 10% shares to the foreign buyers in September 1994 worth $ 898 million. The formalized management change started in 2004 and PTCL’s 26% shares were offered for privatization along with the management control. Initially three organizations, namely Etisalat from a UAE consortium, SingTel from Singapore and China Mobile were short listed for the final bidding. PTCL consisted three business units, Ufone, PakNet and country wide landline network. The estimated assets of the company were approximately USD 10 billion and this was one of the major corporate transfer in history of Pakistan. In 2006 the final bid was secured by Etisalat at highest price of $ 1.96 per share whereas, $ 1.16 by SingTel and $ 1.40 by China Mobile respectively. The Etisalat offered $ 2.6 billion with management control of the company. 66% of the shares of the company were retained by Government of Pakistan and remaining shares were offered for public subscription. Subsequently Etisalat took over the control of PTCL along with the control on Ufone and PakNet.

PTCL is generally cited as being an inappropriate case for privatization. Generally, governments offer those organizations for privatization whose performance is considered below standards or if they are a management and administrative burden on the government. However, the case of PTCL privatization was unique in that a highly profitable organizational was offered for privatization. It was contributing large amounts to national exchequer. Before the privatization in 2005, PTCL generated Rs 84 billion with a net profit of Rs 27 billion. In addition, it was a poor decision to transfer management powers and control to an acquirer who was not familiar with the

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organizational culture in Pakistan. Instead of building the company strength, capability and making it more competitive in global market, the company was ambiguously sold. A number of potentially unnecessary concessions were also made to PTCL during this process. The privatization of PTCL was also exempted from purview of Public Procurement regulatory Authority Ordinance 2002 in the federal budget. With this major constitutional concession, the Etisalat was given free hand for selling and purchasing of assets. It was able to acquire PTCL in five year easy installments. The government was also asked to pay 50% of the layoff charges regarding the employee’s voluntary separation program and Etisalat received $50 million as technical assistance fees for providing management services and expertise.

2.2HR Crisis Following Privatization

2.2.1 Resignations of Talented Employees Impacting Sustainability

After the privatization, the company went through the process of rightsizing and downsizing of employees. 32,000 employees from various sections left PTCL through voluntary separation program and the government had to bear $256 million as the payment to employees. A number of employees lost confidence in the long term direction of the company and competent managers and professionals also resigned. Soon the loss of large number of experienced and trained workers began to hurt the performance of PTCL. The network maintenance, customer care and operations suffered abruptly; consequently, thousands of connections were lost. In addition, the new management had to first understand the prevailing ethics and works environments and culture in Pakistan, and then in turn develop a new culture that would more in line with international norms.

2.2.2 Political Hirings

PTCL employees were enjoying government offices with government packages and flexibilities related to timings as well as performance. Employees lacked technical expertise. Most of the services were managed through third parties and PTCL employees only acted as facilitators. This dependency was causing huge annual operation and maintenance cost. Due to lack of proper monitoring, corruption was also at its peak. Generally, the employees had either political affiliations or were part of different unions and were focused at serving their personal interest only. Privatization of PTCL posed a serious threat to this culture.

2.2.3 Resistance to New Learnings

New entrants at the same time with better vision and expertise were continuously capturing market share. PTCL employees at the same time were not well aware of increasing threats posed

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to it because of new trends and practices in industry from the technology point of view. Employees generally believed that PTCL is incurring huge profits and would continue to do so. New management had a realization that PTCL could only sustain its position if it adapts to latest technical practices. Employees at the same time lacked the required qualification and motivation towards learning, thus looking at new practices as a threat to their jobs.

2.2.4 Dislike of Govt Employees Towards Private Jobs

General public perception of private sector jobs also acted as a biggest hindrance. People like public sector jobs because they do not really want to work. Privatization meant an end to all the luxuries. Private organizations are usually too demanding and often expect working beyond normal working hours. Furthermore, private organizations require professional attitudes in which only fittest people can survive. PTCL employees generally believed that they will not be able to adapt themselves to expected levels.

2.2.5 Redundant Jobs

PTCL organizational setup was designed with a vision of increasing employment. There was huge redundancy in job roles having long chains of command. New management believed in optimal human resources with well-defined job roles and strict monitoring. Huge job cuts were also announced as part of privatization agreement. This created an environment of uncertainty among employees which prevails in PTCL to date. PTCL carried out a comprehensive research through McKinsey & Company which did a thorough benchmarking and established to have a maximum employment for 15,000 people against the prevailing 72,000.

2.3 Etisalat’s Challenge

The company had to address the suppressed morale following an internal research they did and found following underlying factors and feelings within the organization, where employees were concerned about future in which;

• the way in which redundancies will be decided

• the way that individuals will be notified due to rightsizing

• the effectiveness of communications (or lack of adequate, clear, believable information) throughout the process;

• the perceived fairness of the selection criteria; and,

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• the aftercare of leavers and interpersonal treatment received from line management

Keeping all the factors in mind, company had to come up with a process to release unnecessary workforce. Privatization encompasses a wide range of social consequences and a growing concern over the negative repercussions of privatization has spawned research worldwide. The effects of privatization on the employees, employers, industries and the society in general are wide ranging. The effective policy prescriptions are essential in the whole privatization process. Therefore, PTCL came up with a Voluntary Separation Scheme for its redundant workforce.

2.3.1 Voluntary Separation Scheme

The VSS is applied on Regular and NCPG quota employees, it is not applicable on contractual and daily wagers employees. VSS aims to target redundant, surplus and low performing workers.

Salient Features of VSS include all the following points:

EOBI benefits. Addition of training period to the LOS.

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PTCL accomodation for 6 months. Increase in annual increments. Simplified forms and more help desks

2.3.2 Components of VSS

The VSS scheme comprises of primarily of 5 basic components:

1. Transition compensation2. Benefits compensation3. Supplementary benefits4. Optee Support Program

The transition compensation is valid on all regular and NCPG employees; transition bonus has two rewards, based on time limit i.e Rs 200,000 as an early bird bonus and Rs 150,000 as regular program bonus. All the calculations are based on Incremented Basic Pay/Emoluments/Gross Pay i.e Pays & Allowances as of December – 2014 Payroll

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Transition Pay Criteria

VSS includes benefit of 2 year of relaxation to pension eligibility and enhanced gross pension due to the employee’s length of service. The retirement benefit for employees greater than and less than 18 years differs as per different options.

2.4A Step Closer

PTCL’s 2014 VSS program was met with great success. Approx. 17,000 employees opted for the VSS. It brought PTCL closer within touching distance of their 15,000 employee target. These 15,000 however may not be the best employees.

2.5Impact On PTCL

Due to this drastic transformation in the way of doing business and ethics, PTCL is in state of flux and strategic drift. The management is trying hard to separate the unwanted and/or redundant workforce and bring the rest on to the new employment categories offered by Etisalat. However, they cannot fire them as per privatization deal. So there are multiple categories present in the organization which disrupts the decorum of HR policies and standardization.

It appears also that the company’s whole focus right now is to settle in after the privatization deal. Some restructuring has been done as per McKinsey’s instructions but the stress is on opting the new employment package rather than job analysis and job sizing.

The biggest issue company is facing that as they are still away from their target of rationalizing headcount. The deadwood of the company is not opting for the new employment packages.

PTCL is using ‘smart tactics’ to identify and isolate the unwanted employees such internal transfers to remote and out of comfort zone locations, unexpected promotions and expose of non-performers, delay tactics e.g., for leaves, demotivation tools, e.g. no increments, difference in treatment of committed vs non-committed employees, motivation tactics & retention policy in parallel viz. international assignments & secondments, increments and incentive and right use of power and influence tools. However, from HR’s point of view these tactics are highly disputed and puts in question the overall commitment of PTCL to its corporate goals and core values.

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If PTCL continues to carry on with these tactics, the polarization and demotivation in the employees is expected to increase further and it would not give any fruition to PTCL’s plan of introducing modern corporate governance.

Chapter 3: Employment Categories and Pay Structure

3.1 Employment Categories at PTCL

Due to the complexity involved in the whole privatization process, a wide variety of employment categories and compensation packages exist. If we classify the compensation into three major categories, they would be as follows:

1. Voluntary Separation Scheme (VSS) – any employee which is currently on Govt of Pakistan’s employment package can opt to separate from PTCL voluntarily and due compensation will be given to him

2. New Terms and Conditions (NTC) – new employment package offered to employees after Etisalat’s take over. Terms of total remuneration of this package differs from the old ones

3. Basic Pay Scale (BPS) – This refers to the Servants to the Government of Pakistan and covers all those serving officials either civil or military, who perform their duties while subordinate to their outfits in Federal/Provincial/District Government.

However, a deeper insight will tell us that basically there are six different employment categories in PTCL (excluding VSS):

Open ended contracts (NTC)-Newly Hired Etisalat employees such as President, Senior Executive Vice President, Executive Vice President, General Manager, Sr. Manager, Manager, Asst. Manager/Specialist and Management Trainee

Regular ( Govt. employees) Non-Management – can be Regular i.e BPS or NCPG Outsourced staff (Third-party staff; HRSG, Esquare) Secondees (PTCL employees working on secondments in different countries; e.g.

ROSHAN Telecom Afghanistan)

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During the course of this report, our focus will be on VSS, NTC and BPS employment category as the percentage of remaining is negligible.

3.2 Compensation Details of VSS

The VSS scheme comprises of primarily of 5 basic components:

1. Transition compensation2. Benefits compensation3. Supplementary benefits4. Optee Support Program

The transition compensation is valid on all regular and NCPG employees; transition bonus has two rewards, based on time limit i.e Rs 200,000 as an early bird bonus and Rs 150,000 as regular program bonus. All the calculations are based on Incremented Basic Pay/Emoluments/Gross Pay i.e Pays & Allowances as of December – 2014 Payroll

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Transition Pay Criteria

VSS includes benefit of 2 year of relaxation to pension eligibility and enhanced gross pension due to the employee’s length of service. The retirement benefit for employees greater than and less than 18 years differs as per following options.

Gratuity is only applicable to NCPG employees, while the health fund includes both NCPG and regular employees according to the employee’s length of service

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Leave encashment is applicable to both NCPG and regular employees but the cash amount formula varies for both.

Supplementary benefits of Loan write-offs and minimum package amount apply to both Regular and NCPG employees.

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3.3 Compensation Details of BPS

BPS is a highly graded pay structure as governed by the govt of Pakistan. Currently, 10-12% of the employee force is still on BPS scale. Following is a summary of BPS scale based on their roles.

Grades Nature of Job

Grade-17 to Grade-22 Gazetted Officers / Commissioned Officers

Grade-10 to Grade-16 Non Gazetted Officers / Junior Officers

Grade-5 to Grade-9 Lower Grade Officials / Field Work Supervisors

Grade 1 to Grade 4 Labor workers

Pay emoluments, allowances, pensions and all perks and privileges of government serving/retired servants not only vary with the status, rank, appointment and service but also with their affiliated services. For example: - An officer holding the appointment of additional

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secretary in Federal Government is of grade 21. However, the appointment when being held by incumbent in Provincial Government will of grade 19. So, appointments also vary in scale depending on the affiliated services of individual.

Minimum Pay, Maximum Pay, Annual Increments and all other allowances etc. are in Pakistani Rupees. Civil servants are also entitled various other allowances (as per their department/organization rules and their service terms) along with their basic pay, as a part of their Gross Pay. These allowances may include Ad hoc Relief Allowance (ARA), Medical Allowance, Special Pay, Conveyance Allowance, House Rent allowance and several other miscellaneous allowances, which are applicable. Government also pays pensions to its retired employees. All services are organized in hierarchical order and officials serving therein are categorized in various grades/ranks/brackets/groups for the sake of smooth, transparent and meticulous execution of task and are paid accordingly. Table on the next page describes the total remuneration offered by the government of Pakistan for various job grades.

However, to discourage employees on the BPS scale and to force them to move to NTC scale, the BPS guidelines are not fully followed. In 2014, bonus and pay raise was achieved by PTCL employees after strikes and protests. The charter of demands presented by the workers to the management consisted of 5 demands to which PTCL management finally conceded too.

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1. Increase of 20% in the salaries as announced by the Govt. of Pakistan in Budget 20092. Convenience allowance3. Eid Allowance4. Rest and Recreation Allowance5. Up gradations

It merits mentioning here that bonus and pay raise is achieved by PTCL employees after strikes and protests which were pending since 2009. In March 2015 PTCL also announced a bonus but it was not uniform within the different employment categories. Increment and bonus internal memo are provided at the end of this chapter as reference.

3.4 Compensation Details of NTC

The current employment package has been created to harmonize the BPS (govt based pay-scale) to new terms and conditions enforced by Etisalat. Typical features of government jobs like pension and conveyance allowances have been included in the total remuneration packages to make it more lucrative.

The only thing so far the Etisalat’s management has done is that they have redesigned PTCL’s departments, new hierarchy has been already described in Chapter 1. All these departments are headed by VPs and they report to the President.

Organization’s prime focus is basically to reduce and ultimately end the number of BPS and NCPG employees by either transferring them to NTC package or offering them third party contracts. There is clearly no roadmap for job analysis leading to job sizing. There is a constant pressure on employees to adopt NTC employment package and smart tactics are adopted by management from time to time to increase the adaptation rate of this scheme.

NTC’s total remuneration for the various designations in PTCL are as follows. As per market trend, these TRs lie between 50-60th percentile.

Old Grade New Designation Total Remuneration

BPS-17 Assistant Manager Rs 30,000 - 70,0000

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BPS-18 Manager Rs 65,000 - 110,000

BPS-19 Senior Manager Rs 100,000 - Rs 225,000

BPS-20 Gen Manager Rs 220,000 - Rs 360,000

BPS-21 SVPs and VPs Rs 350,000 - Rs 650,000

BPS-22 President Rs 650,000 onwards

Current New Hierarchy in PTCL

3.5 Copy of Internal Memo of Bonus and Increment

We have pasted a copy of the internal memo of the last bonus and increment announced in PTCL in the next pages. It clearly shows that the HR policies are not consistent with different employment packages as the salary increments are based on employment category and not performance based. Bonus announced however, can be found to be linked to performance. PTCL follows a 5 point rating scale.

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President

SVPs and VPS

General Managers

Managers

Assistant Managers

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Chapter 4: Root Cause Analysis

PTCL’s biggest constraint to date is the limitations imposed on them as per privatization deal. As currently due to agreement limitations they cannot forcibly change the employment package of any employee who was on BPS scale, before privatization. Therefore, the organization cannot bring about any real change with regards to compensation and benefits packages. Also, so far, no HR philosophy is built regarded to pay package percentile. Therefore, no comment can be given regarding external equity maintenance in the organization. Internal equity is tried to be maintained via the new NTC job grades explained in the previous chapter. Once all the employees adopt NTC package, then the organization is in a position to do job sizing and job analysis so that people may be moved, rotated, shifted or even separated as per business needs.

4.1 SWOT Analysis of PTCL

4.1.1 Strengths

Largest operational network and infrastructure within IT and Telecom sector

A near-to monopolistic position in Pakistani Fixed line market

Market leadership in Wireless local loop (WLL) and fixed telephony, with more than

7.5 million subscribers.

Ufone’s aggressive approach is a market challenger in GSM segment.

Most of the PTCL’s competitors have a dependency on it either direct or indirect

(E.g. Domestic Private Leased Circuits, International Private Leased Circuits, Internet

backbone)

PTCL has achieved economies of scale in its Fixed Line segment, due to a longer

experience curve.

Widest and strongest coverage of Fixed, WLL and Broadband services throughout

Pakistan.

PTCL is one of only few competitors to provide Long-haul Fiber Solution in

Pakistan.

Huge sources of Cash Flow and Re-investments.

PTCL carriers a significant portfolio of businesses, with Fixed Telephony as a Cash

Cow, WLL in the position of Question Mark, and Ufone GSM being a Star business.

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4.1.2 Weakness

Less than average Customer Service and Support

Lengthy procedure for installation of new fixed connections.

Heavy bureaucratic red-tape

Monopolistic organizational culture has fuelled lethargy and change resistance.

V-PTCL, the Fixed Wireless Local Loop service is suffering due to poor quality and

support

Over employment & low productivity

Sluggish decision making including external interferences

Corporate culture akin to government departments

Poor focus on a high-potential corporate broadband market

4.1.3 Opportunities

Huge un-tapped market, due to low tele-density in Pakistan

Vast infrastructure and real estate assets which can be leveraged further through

aggressive penetration, esp. in rural areas

Partnerships with new entrants in a deregulated environment

The grace period due to economies of scale can be utilized to maximize the future

benefit

High Potential in corporate broadband market

Introduction of IT education in rural areas of Pakistan, esp. Punjab & Sindh

4.1.4 Threats

Increasingly new entrants in Long-Haul Fiber network segment

VOIP use is increasing despite ambiguous and discriminatory policies, which is

affecting Long-Distance usage

Exposure to aggressive market competition in GSM business and Long-distance

business

Increasingly changing preference of GSM/Wireless telephony over Fixed Local Loop

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Ability to attract & retain quality professionals by competitors such as, Mobilink and

Telenor

Entrance of competitors like Transworld in the IPLC and IP Bandwidth business,

thus, breaking the monopoly of PTCL

Aggressive competitors in Broadband (Consumer & Corporate) business

Strong brand loyalty of Mobilink’s and Warid’s post-paid customers

4.2Fishbone Diagram for the Root Cause Analysis

To reach to the root cause of the problem(s) underlying in PTCL, we have used the fishbone diagram of cause effect relationship. 4 major causes are identified in the organization leading to root cause emanating from post privatization impacts.

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4.3 Explanation of the Fishbone Diagram and HR Strategy-Implementation Gap

The Fishbone Diagram tries to capture the issues present in the organization. Four major causes have been found, namely: management inadequacies, poor asset sweating, lack of ownership of employees and satisfaction with the status quo that are hurting the overall performance of the organization.

Management inadequacies are primarily due to old school approach, as most of the top management is the same from pre-privatization era. They have adopted the NTC employment package but the real change which should be in the minds & hearts and in the operational practices has not been adopted. PTCL’s current Chief HR Officer is in the organization since 1987. However, some of the departmental heads are new hirings as well which add to the color of the organization. Also, at times management decisions regarding change management are delayed due to legal bindings of the privatization deal.

Without any iota of doubt, we see a clear disinterest of employees in the affairs of the organization. Large number of political hiring and little link of reward to performance can be clearly attributed as the reasons behind this cause. As the company was nationalized previously, the general mindset is of satisfaction with the status quo which develops no little focus of employees on company’s strategic direction leading to poor asset sweating as well. Competency based hiring were not done, vision and mission is not embedded in the employees and there is a great demotivation in employees and due to different employment categories, silos are also observed within the work force as well.

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On the next previous page, a model for effective HR strategy formulation and implementation is given. The four elements of the model are organizational strategies, environment, organizational characteristics and organizational capabilities. All these elements are linked together via a consistency chain to form an HR strategy. Unfortunately the consistency factor is missing in PTCL. Organizational strategy is not clear; the only focus is on to rationalize the head count. The environment is daunting; there is uncertainty and ambiguity within the employees. Culture and organizational characteristics are not uniform, in the corporate head offices we see modern culture but in the regional exchanges etc the same governmental bureaucratic style is still observed.

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Chapter 5: Findings and Recommendations

Privatization of PTCL has been a critical and politically sensitive activity that has led to fundamental shifts in the relationship between the private and public sectors and effects of privatization on workers are both negative and positive. In several instances there have been wage rises and better working conditions. In an industry that is sufficiently competitive, privatization improves customer welfare. However, effects of privatization usually on jobs are negative because public enterprises were overstaffed and on privatization employees, feel job insecurity and have fear losing their jobs. In majority of privatization cases workers lost their jobs after privatization, but in cases where employees lost their jobs as a result of privatization, such employees tended to receive generous severance. Overall point is that there can be no simple prediction about the distributional effects of privatization; the impact depends on at least three factors: initial conditions, the sale event, and the post-privatization political and economic environments.

5.1 Major Findings

Successful firms align their HR strategies and tactics with: environmental Opportunities and threats, business strategies, organizational unique characteristics and organization’s competence. HR Strategy’s effect on a firm’s performance depends on how well it ‘fits’ with other factors. Fit refers to the consistency and compatibility between HR strategies and other important aspects of the organization. The fit is currently missing in the PTCL. Following are the major findings that provide evidence to the fact the ‘fit’ is missing:

Employer/Organizational Objectives: Employer/Organizational Objectives are not clear. Organization’s focus remain on rationalizing headcount and removing all BPS scale employees. Corporate strategy exists but is not followed whole heartedly. Organizational goals regarding performance and KPIs do not seem to be fully cascaded down for an integrated performance.

Organizational Structure:Organizational Structure has been redesigned a bit, but still a large number of layers and structure exist. This impacts the overall performance. The organizational structure is not much different than the legacy structure and is strictly hierarchical. It does not carry a flatter structure which is a hallmark of modern IT and tech related organization.

Job Identification, Analysis & DesignThere has been no job identification, analysis and design exercise done so far in the organization. The jobs are just plainly converted from BPS to NTC employment package.

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• Job Specification (Before Joining)For the new hirings i.e on the NTC package, some job specifications with respect to their skill set and qualification is now done. PTCL is now inducting fresh blood from good universities like IBA, CBM etc as well. But these hirings are just on entry level positions. Most of the top positions are still in the hand of old school employees or some external advisors appointed by Etisalat on project basis

• Job Description (After Joining)• Tasks, activities, responsibilities, accountabilities are still ambiguous

because of the complexity involved due to multiple employment categories

• Power (Financial/Administrative): To discourage the BPS scale employees, most of the financial and administrative powers are assigned to NTC package employees rather than making it a function of job size

• Reporting structure is complex and still unclear.

• Manpower Planning, Recruitment, Induction: As the focus remains on rationalizing head count, no proper exercise has been done in this regard. The policies exist on paper but complete implementation is pending.

• Training & DevelopmentNo structure exists for identify training needs, performance management system also needs a serious revamp.

5.2 Recommendations

The prime reason for the focus on adaptation rate of this NTC package (or VSS) is that as long as the employees are on BPS category, PTCL cannot separate them as per the privatization agreement with the Government of Pakistan. Therefore, for PTCL, reducing the number of subsidized workers is the most important issue rather than developing an equitable job grade/pay structure. The company wants to manage only management level employees (equivalent to grade 17 and above) and will outsource all non-management functions to reduce its overheads.

As currently due to agreement limitations they cannot change employment package of any employee who was on BPS scale before privatization, therefore, the organization cannot bring about any real change with regards to compensation and benefits packages. Also, so far, no HR philosophy is built regarded to pay package percentile. Therefore, no comment can be given external equity maintenance in the organization. Internal equity is tried to be maintained via following the new NTC job grades. Once all the employees adopt NTC package, then the

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organization is in a position to do job sizing and job analysis so that people may be moved, rotated, shifted or even separated as per business needs.

The Chief HR Officer at PTCL is Mr Syed Mazhar Hussain. He has been part of the organization since 1987. His focus is currently on bringing employees on NTC employment package rather than an overhaul reform.

The proposed solution for resolving all issues at PTCL lies in developing a complete new structure, vision and philosophy for PTCL. There is a need to a vision, mission and core value cycle at the PTCL. This should involve representatives from different cadres of the organization including the management as well as a small share of non-management grade as well.

PTCL has to start from scratch; it has to establish its corporate goals by market forecast and demand and supply situation in the marketplace. This can be achieved by doing a functional level SWOT leading to a corporate level SWOT to decision of alternative alternatives. Strategy sessions need to be conducted throughout organization. Once strategy is devised, then a structure is needed, designed to achieve organizational plans.

Since departmental redesigned has been done already, we assume that it is done as per the analysis of the external consultants. Therefore we suggest that now PTCL should perform a JD and JS exercise for all positions needed, utilize organization’s HR database to scan current employee skillset.

PTCL should conduct and run a full fledge fresh recruitment plan in alignment with the developed new organogram, as proposed by consultant. PTCL should use established job sizes made by external consultants, decide pay philosophy as per owners’ and employees mutual agreement, at this point in time. Followed by this step, PTCL needs to develop a pay structure deciding the breakup of total remuneration and total reward model, manage external and internal equity followed by individual equity exercise and identify talent into groups and develop development or separation plans; as needed. PTCL then needs to make job grade structure and TR packages public for transparency amongst the employees, to be available on organization’s intranet.

Once this is done, Individual job holders should to review their JDs as a continuous cycle now. If they feel anything is missing and needs addition, they must inform their line manager who should approve the same and inform HR. HR will then commensurate the JD with the JS and will make necessary adjustments. This step will be a precursor to the process called salary adjustment as now TR to be adjusted to meet external equity needs, as well as individual.

Annual increments and bonuses will be paid out as per organizational and individual’s performance. This will not be counted as salary adjustment. Unless the restructuring of pay structure at PTCL is not done as per the flowchart explained below, PTCL will not be able to solve its HR issues. This will impact overall productivity of the organization as well as the

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employee morale. The maintenance of the equity will be an ongoing process, and will be run at least once a year within the organization.

5.3 Flowchart of the Recommendations

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Do a vision, mission and value definition exercse

Establish corporate goals and stratrgy throught market

intelligence and SWOT analysis

Develop organization's structure and department

level goals that are congruent to achieve plans to materialize strategy

Perform a JD and JS exercise for all positions needed, utilize organzation's HR

database to scan current employee skillset

Conduct and run a full fledge FRESH RECRUITMENT plan in

alignment with the developed new organogram

Use established job sizes made by external consultants, decide pay philosophy as per owner's and employees mutal

agreement

Develop a pay structure deciding the breakup of total

remuneration and total reward model

Manage external and internal equity followed by individual

equity exercise

**** Identify talent into groups and develop

development or separation plans; as needed

Make job grade structure and TR packages public for

transparency

Individual job holders to review their JDs as a

continuous cycle now

Commensurate with the JD, JS need to be adjusted

TR to be adjusted after JS adjustment, process known as

salary adjustment

Continue again from step ****

5.4 Sample Model of Total Rewards As Per Proposed Recommendations

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Chapter 6: Action Plan

Following action plan is suggested to the PTCL management to redesign their organization. Action plan starts from 2016 and ends by end of 2016. Quarter wise time bound time lines with action items and people responsible is presented.

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TasksVMV Exercise

Establishment of Corporate GoalsNew org structure and departmental goals

II. Appendix

Proposal approved by the instructor is attached at the back of this report.

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