Sep 04, 2016

Learning from the Public Sector

Jagdish Rattanani

The question on how and why the public sector does a better job of retaining women managers compared to the private sector is a thorny one, particularly when posed to a panel that comprises mostly private sector leaders. But the question got asked at the podium as SPJIMR launched the Management Programme for Women, the MPW, on Sep.01.

For many of us in management institutes, it is easy to underestimate all that goes on in public enterprises and overestimate the supposed performance and efficiencies of the private sector. This is not to pit one against the other. But it is instructive every once in a while to look around and study from a sector that many in a modern-day business school environment are prone not to dig into, given that most B-School participants take up work in the private sector. This willy-nilly tilts the balance, which can get even more skewed given that more cases, lectures, examples and stories flow from private sector experiences in many a conversation on most campuses.

India’s public sector accounts for no less than an overall net profit of over one lakh crore rupees (2014-15 figures) for all 235 CPSEs, the acronym for Central Public Sector Enterprises. Total investments in the sector are of the order of 11 lakh crore rupees. True, about one third of the 235 are loss making; also that return on capital is low. But conversely, two-thirds are profitable and surely there are deep lessons to be learned here and surely they will be different lessons, given that these businesses operate in a space and a framework very different from the private sector.

The thought takes me back to the time I spent years ago in an enjoyable interview with Arup Roy Choudhury, the then Chairman & Managing Director of NTPC (2015-16 revenues Rs.70,506.80 crores), India’s biggest power producer. At the time, Choudhury was also the Chairman of the Standing Conference of Public Enterprises (SCOPE), so he could speak for the universe of CPSEs, and he took the occasion to speak about how and why the public sector continued to be relevant in a liberalised economy. Choudhury now is the Chief Commissioner, Right to Public Service Commission, West Bengal.

Some his observations were powerful, like this one: “Our private sector is running on public money,” or that “the simplest thing is that the private sector should open up to CAG (the Comptroller and Auditor General)…Let CAG at least audit their books.” Sitting in his large office in New Delhi’s SCOPE complex, Choudhury fired away at the idea that the private sector was doing CSR or that they were in any way better at their work. “Private entrepreneurship is good,” he said, “but not at the expense of taxpayers’ money.”

Choudhury was of course being provocative but the remarks resonated with many who read the interview. He insisted that CPSEs were leaders in CSR and “we have touched the people in the core of their hearts and we stand by people in their hour of need.” That remark provides some good material for a real debate in a management school – is that a philosophy that we could or should live by in a modern-day corporate?

The argument can run on and logically take us to revisit the age-old question: What is the central purpose of business?

Of course, this is not meant to be an apology for the public sector; there is a lot that needs attention and fixing. But equally, there is a lot going on here that needs careful reading and understanding and the modern day management student can pick up rich lessons that go well beyond the narrow markers of quarterly numbers.

Understanding the public sector, particularly public services like health care, also opens up a host of new vistas and provides new ideas on managing systems in a country as vast and diverse as India. For an example, the KEM Hospital (run by the municipal corporation of Greater Mumbai) in Mumbai deals with 1.7 million patients every year, most of them from the poorer sections of society. We may have bigger names, slicker lobbies and lesser wait times elsewhere but the KEMs will always be the biggest hospitals in terms of service to the people who really need it at the time they need it and at the price they can afford.

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