Developing Business Competence: A model based on Viable Systems

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Seminar on “Organisational Restructuring of SEBs” D.V. Ramana higher management to concentrate on the strategic and larger issues affecting the company and the sector as a whole. To enable Cesco operate as a viable system, it is necessary to recognise the importance of information system. VSM recognises that information is the true cement holding organisation together 14 . As per the requirement of the OERA, Cesco is required to file Annual Revenue Requirement (ARR), Tariff Application, and Annual Audited Accounts with the Commission. The System 2 and 3 can handle this particular job efficiently. For this purpose, System 3 in association with System 2 can develop the following information systems: • Capital Expenditure Information System (CEIS) • Cash Management Information System (CMIS) • Statutory Financial Information System (SFIS) The top management can also use this information base for reviewing the performance of the divisions and use the same for taking various management decisions. Recently the Commission had asked all licensees to submit a five-year business plan. Such forecasting of the business and developing acceptable business scenario requires an in-depth understanding of the business and the changes that are affecting the sector. Such capability can be developed through the System-4. The very fact that at present, the annual accounts of Cesco are not ready for the year ending 99 and the company is not having a robust business plan shows that Systems 2-5 are not functioning effectively . Now let us turn over attention to the field units i.e. divisions and sub-divisions. Are divisions operating efficiently? The answer is definitely not ‘yes’. Only 40-45% of the division are earning positive gross margin, most of the divisions are billing less than 50% of the input, and very few divisions are collecting more than 70% of the billing. Some of the causes for such a precarious performance are as follows: • No effective information at a local or company level; • No uniform customer information and billing system; • No reliance could be placed on meter readings; • No credit control mechanisms; • No mechanism to fix accountability; • No effective performance measures; and • No mechanism to involve the local stakeholders. Though these problems have been identified in the early stages of reforms, even after the change in ownership they still remain unsolved. So it is necessary to make these divisions viable to make Cesco viable. VSM provides the mechanism for addressing these issues by stressing the concept of strong and effective sub-systems. Since, each division is generally consists of three to four sub-division which can be treated as System-1s, it is necessary to have System –2 to 5 to coordinate with the sub-divisions and also be in touch with the overall organisation. Though the present structure has sub-division, it does not represent the features of System-1. They are created to facilitate administration rather than developing them as a viable system. Figure-III shows division as a viable system. 10
Seminar on “Organisational Restructuring of SEBs” D.V. Ramana Division as Viable System E N V I R O N M E N T S1 S1 S1 S1 S5 S4 S3 S2 • System 1: Sub-divisions • System 2: Rules and procedures to run the day-today operations at the subdivision level • System 3: Co-ordination cell at the division office • System 4: The brain or intelligence group of the division. • System 5: Divisional management It is important to note that in the present organisation structure, it may be possible to see the features of System 2—5 at the corporate level, however, they are conspicuous by absence at the division level. As a result of their absence, divisions become dependent on the corporate office. Decisions taken by the corporate office, generally not in tune with the requirements of the divisions or the sub-divisions. One such casuality is the budgetary control. It has been seen that the corporate objectives donot tally with the divisional objectives and so also the targets given by the corporate office may not on the basis of the reality of the division or the sub-division. It has been pointed out that budgetary structure denies any actual delegation of discretionary power to the field units and the annual budgtets are still dependent on the discretion of the top management 15 . However, by shifting the management’s focus to the divisions and sub-divisions, it is possible to bridge this gap. Under VSM, the sub-divisions or the System-1 of the divisions will be responsible for making the budget on the basis of the local environment. An effective System 2 and System-3 can help in undertaking the following activities more effectively: • Establishing realistic budgets • Reducing non-technical losses • Improving collection • Installing meters • Maintaining good relationship with the customers Similarly the System-4 can help the divisions in the following: • <strong>Developing</strong> the business plan • Understand the causes and impact of large customers shifting to captive power plants. • Evaluating the viability of using the village committees 16 in improving the field level Perfomance. 11
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Developing Business Competence: A model based on Viable Systems

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