How does it matter to be owned by Government? Rejuvenation of a Government owned Automobile Company in India

Scooters India Ltd. (SIL), a Public Sector Enterprise (PSE), was among the top 10 loss-making companies in India in 1989-90. It was setup in 1972 and continued to report losses till 1995-96. It carried a negative net-worth of Rs. 6.47 billion in 1995-96. The company was rejuvenated and has been reporting profits since then. The case study provides a rich insight into the implications of government ownership in PSEs that makes them sink or swim. Governments undertake two roles relating to business environment. First, they frame rules, procedures and policies to regulate the business environment. Second, they invest resources in PSEs for political, ideological, social, and economic reasons. However, in the last few years the existence of PSEs has been subjected to strong criticism throughout the world. Governments are frequently seen privatizing PSEs both in the developing and developed countries. However, trade unions and employees of these PSEs agitate against privatization. They argue that the change of ownership does not necessarily improve financial performance. Further, financial losses are widely reported by both-PSEs and private owned organizations. Board for Industrial and Financial Reconstruction (BIFR), an agency which is responsible to approve revival plans for sick enterprises in India, had 3296 registered cases of sick companies at the end of financial year 2000-2001. Out of them 3121 companies were private owned organizations. Under such conditions it is important to examine the process of governments influence on performance decline and rejuvenation of PSEs. This paper examines "How does government ownership influences the management processes that lead to decline and rejuvenation of organizations?" The paper examines empirically the implications of government ownership to the internal management and performance of PSEs. Findings : Following are the key findings from the case/s. 1. Manpower planning in initial stages was inadequate and was influenced by considerations which were beyond business imperatives. 2. CEOs who came to PSEs on deputation undertook ambitious, though risky, plans in initial stages of the company. 3. The top management consisting of officers on deputation from other departments in high munificence environment was inward looking. Such management team was driven by rules and procedures. The team had low concern for customer and quality. 4. Company had high propensity for innovations both under adverse and favourable conditions. However, the concern for commercial exploitation of these innovations was inadequate. 5. Employees perceived higher job security in protected economy. This perceived high job security in led to higher unionization propensity. Trade unions and employees were active in the management of work place till mid 1990s. 6. Strategic decisions about staffing at the top level were influenced by political considerations. 7. CEOs who come for fixed tenure on deputation had inadequate concern about the strategic direction of the company. 8. Cost of transaction with external stakeholders increased under declining conditions. Performance decline led to low morale among employees and yielding management. 9. Company lost business opportunities owing to different priorities of decision-makers. 10. CEOs who join declined company on deputation were unwilling to undertake straining activities to rejuvenate the organization. 11. Reverence, faith, confidence and willingness to sacrifice by the leader helped the company to rejuvenate. 12. Once initiated, the rejuvenation process was fast in the company.