Developing Business Competence: A model based on Viable Systems

Seminar on “Organisational Restructuring of SEBs” D.V. Ramana
increase of the tariff for the ultimate consumer. Post reforms, the State has profit making
generating companies with loss making transmission and distribution companies.
Devolution of revenue management
Approaches to reforms in the public sector have traditionally supported the idea of a
strong centralised executive office, which would serve to rationalise the public policy
processes, adopt a system-wide perspective. However, the public sector experienced
unprecedented levels of change during 1980s and 1990s. Such pressures came from the
entire range of stakeholders viz. from governments (both central and state), and from the
local consumers and communities, to develop a “public service” orientation, involving
the provision of demand-led services and be responsive to the needs of those being
served 5 .
The same period has also seen the emergence of a populist search for managerial and
corporate improvement largely <strong>based</strong> on the <strong>model</strong>s adopted by the private sector
enterprises. This resulted in a move from traditional bureaucratic modes of
administration to more flexible and customer-oriented management 6 . A core element of
this new managerialism is the adoption of decentralised budgetary management systems
with managers at the lowest level having more authority over resources; greater scope for
decisions; accountability for achieving agreed targets 7 .
More recent reforms have abandoned hierarchy in favour of market-driven management
systems, which reflect private sector management private sector practices and values 8 .
These practices and values were developed and proposed for addressing the
inefficiencies of the public sector by Osbrone and Gaebler (1992) 9 .
In Orissa along with the unbundling of the business, efforts were made to decentralise the
revenue management. A conscious effort was made to improve the commercial function
of the company. OSEB was managed principally by engineers, therefore, the
management had a strong technical bias and it was a standard practice for engineers to
undertake commercial, administration and other non-engineering jobs. Therefore, one of
the major organisational changes introduced during the early days of the reforms was to
bifurcate the field level activities into engineering and commercial functions. The
commercial function comprised of revenue management, accounting, customer
management and, the engineering function comprised of system operation, repairs and
maintenance, and other technical activities. Coupled with the bifurcation, commercial
procedures were implemented. This small intervention improved the business
environment at the division level.
The concept of profit centre accounting was introduced in the distribution companies.
Under the new practice, each division was treated as a profit centre and was required to
earn profit. Each division was put in charge of an executive engineer (re-named as
divisional manager to drive in the importance of the commercial aspect of the business).
Each division was further divided into three/four sub-divisions. The divisional manager
was made responsible for the performance of the division. As a control measure, the
divisional manager was required to make a presentation of monthly performance at the
head-quarter. The chairman and managing director of the company reviewed the
performance. Such changes resulted in the following:
• Stressed the commercial aspect of the utility business.
• Developed interrelationship between technical and finance executives.
• Enabled the divisional managers to understand the financial implications of the
various activities undertaken.
• Involved the field personnel in various managerial decisions.
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