The case in point is its decision to advance its restructuring timetable by more than 18 months. Rather than tip-toe with the creation of strategic business units for its four main businesses--the backbone of its restructuring plan--it has decided to go in for a full-blast twirl and get the strategic business unit rollout at all zonal levels in the next nine months. The other example is the predominance of human resource restructuring in its quest to ride the deregulation wave.

Thechallenge

No longer a beneficiary of a sheltered approach, it will be required to meet the challenges of the open market. For example, refineries will no longer get fixed margins, and profitability will be linked to international pricing. The market will have aggressive new private entrants, making pricing a strategic issue. Chairman and managing director HL Zutshi has admitted that the company needs to take critical commercial decisions.

HPCL's problems also sprout from its PSU roots. As part of an oligopoly in the past, HP had a well-defined market, an Oil Coordination Committee-driven demand-and-supply target and no competition whatsoever. Says an analyst with Jardine Fleming, "There was hardly any information-sharing at HPCL, and it continues to be bureaucratic." In fact, Andersen's first summary report did question if HPCL appreciated the overall magnitude of and the urgency for a change.

Says the Jardine Fleming analyst, "Real market opportunities of 2002 will depend on efficiency,international refining standards (optimising production), ability to price aggressively, and an effective network of dealers." For HPCL and Andersen, the key to getting all these tools in order and making them work for years has been found in human resource. Says Andersen Consulting managing partner Sid Khanna: "The big challenge for the firm was to shift focus to HRD rather than just go ahead with a marketing and operations overhaul." The firm has 30 people dedicated to the job round the clock for the past 18 months.

The reason for HR becoming the focus of restructuring the nearly 12,000-strong corporation is simple. The undertaking of the Andersen-recommended business process reengineering is one which will require 75 per cent of the non-managerial staff to be retrained and redeployed. Some 70 per cent of the managerial staff would have to undergo a similar shift, while a 30 per cent redeployment was envisaged for the refineries. And there was a promise to be kept to the unions on retrenchment.

That theshift has worked is evident from the advancing of the restructuring schedule. The corporation had initially planned to introduce the SBUs only at the headquarter-level and in the LPG business. It was then to wait for a year before it embarked on a full-fledged rollout covering other businesses at all levels. However, according to general manager (corporate planning & projects) Arun Balakrishnan, "The last 18 months of working with Andersen Consulting have made HPCL employees more comfortable with implementing changes, making it possible to gain a faster pace for the rollout."

The HR revamp

Andersen's diagnosis of human-resource management threw up an archaic performance appraisal and promotion system, frequent transfers of employees and a multiple-layer organisation structure. Says petroleum sector specialist A Bhattacharya, who is on deputation to ONGC as economic advisor, "There is just no synergy between the human resource and the objectives of the organisation... these have to match."

SoAndersen went about improving the implementation of its HR policies by introducing modified schemes relating to staff, and HR management, moved towards transparency in appraisal, reduced frequency of transfers to encourage specialisation and development of skills. It also introduced broad banding of salary grades by incorporating seniority and qualification in promotions. Another input was that of developing communication between employees at all levels.

The new system will be supported by a Rs 100-odd-crore worth enterprise resource planning package. The package will have an HRMS (HR management system) as well, which will now log on all manpower movement and track organisational structure and maintain a skill inventory of employees to help create a career and succession planning module for all levels. Says human resource director SK Kerr: "We are getting rid of long lead times in dealing with recruitments and appraisals to get good professionals."

The new plan includes introduction of campus recruitmentsat all the top management institutes, a Rs 3.5-crore training budget and a fresh appraisal and promotion policy to attract talent from premium institutes. To be sure, the new input has already made HPCL an attractive option for premium institutes as it has already roped in nearly 100 young engineers from IITs and another 60-odd MBAs from campus placements this year.

Ownership of the idea of change

HPCL has also realised that no amount of marketing modules and infotech inputs, however, would work unless the idea of restructuring is owned by the employees. Balakrishnan cites an example of ownership at HPCL's pilot retail project at Aurangabad, where, after initial hesitation regarding the changes, the employees have started coming up with their suggestions, which have helped improve sales.

Involving the lower and middle management in the change process has, therefore, become a key goal for Andersen. Its first step in doing so was to flatten the nine-level structure to a maximum of six levels andeven down to three levels in some sections. As a result, the procurement and modernisation decisions on outlets can now be taken by the regional managers.

The many changes in staff policy have surprisingly not invited any protest from the HPCL unions. Analysts attribute this to the corporation not being over-staffed like other PSUs. Second, the management has involved the unions at every stage of change apart from guaranteeing them zero retrenchment.

Linking HR to organisational objectives

The company has gone in for a complete realignment of authority. Says Andersen's Uday Bhansali, who has been in charge of the HPCL project: "Specific delegation has helped tremendously in single-point ownership of performance." HPCL is also banking on its revamped HR initiatives to play a lead role in establishing independent profitability of each SBU. This means that specific job descriptions and key performance indicators for each management position in each SBU have now been defined.

A question ofanswers

Doubting Thomases still abound. Says a senior industry analyst, "HPCL has lost out on its lubes market share. Being a PSU, it can hardly provide any flexibility in discount schemes. Just how will they face real competition?" Balakrishnan agrees that turning around the mindset at HPCL is no mean task. However, what gives him hope is the pace at which the HPCL people are embracing the new system. He says that as the rollout of the SBU concept is happening and people are getting impacted, the way they look at their job has undergone a sea change. He cites the example of Bangalore, where HPCL saw a successful pilot project.

Andersen's Bhansali, too, admits that as a public-sector unit, HPCL has a different set of pressures. It has to operate in a certain procedural framework. However, he confirms that the definition and scope of authority is being revised, through amendments of the Limits of Authority Manual, and this will make HPCL more flexible and independent. The trick, according to Andersen,is to do it gradually rather than attempt a sudden environment change. The firm is looking at a timeframe of two to three years for a complete transformation of HPCL's way of doing things.