Redesign at Bharuti Petroleum
This Indian petroleum products giant used privatisation to restructure its organisation using and fostering participation. It also redeployed employees to move more of them closer to the customer.
Strategic changes are linked to changes in the company’s environment. In the case of the petroleum product manufacturer Bharuti Petroleum (BPCL), the change was one of government policy. In 2002, the state-owned company was to be privatised (the state was divest its 66% of the company’s shares) and petroleum distribution was to be deregulated. Deregulation meant the entry of foreign players as well as price and margin volatility. BPCL needed to redesign itself from an SOE operating in a regulated market to become an agile customer-oriented company in a highly competitive market.
Management decided to make customer focus the centre of its redesign. It hired a consulting firm (Arthur D. Little) to assist in the redesign process. A 30 person project group, drawn from different functions and regions, involved 2500 managers in a broad envisioning exercise. To increase customer responsiveness and to empower the staff to deliver value to the customer, the organisational structure was changed from a functional one to a divisional one with strategic business units (in BPCL’s case, refinery, retail, lubricants, LPG, and aviation). The functional structure had made it difficult for senior managers to develop strategies for particular businesses. In the new organisational structure, old functional units (HR, Finance, Information Systems) became support services. Before the redesign, the organisation was totally hierarchical; it became more participative and team-based with delegation of authority. Furthermore, the envisioning exercise performed for the redesign was excellent training in the sort of communication that a de-layered organisation encourages.
The move away from a functional to an SBU based structure amounted to a new form of differentiation, one that brought the company closer to its customers. To ensure integration, the redesign created two councils, the Governance Council and the Integrative Council. The Governance Council, consisting of three sub-councils, dealt with company-wide strategic issues. The Integrative Council worked at a lower level with the goal of coordinating the various SBU councils and the support services.
After the redesign, the support services (in particular HR) were organised into three types of structures: embedded (within an SBU), shared (among SBUs) and corporate (over the SBUs). From the HR standpoint, the major innovation was redeployment. The consultants advised a 50% increase in the sales force and front line staff so as to better serve the customer. But this increase had to be achieved without any new recruitment. The solution was redeployment. Existing employees were retrained and moved to the front lines of the various SBUs. In this retraining phase the consultants proposed extensive team-based workshops in which more than 2000 employees participated.
