Corporate: Restructuring - BPCL Drives Down a New Road

RESTRUCTURING
BPCL Drives Down a New Road

CEO U. Sundararajan's marketing strategy aims to take the PSU to the top. But, to get to that spot, the company must have a clear idea of what its customers want.

By Ranju Sarkar

Until a couple of years ago, proposals by sales officers in Bharat Petroleum Corporation Ltd. (BPCL), to upgrade retail outlets would travel through four layers. Today, they can take a decision themselves as long as it falls within their individual expenditure limit of Rs 50 lakh per year. The change is an indicator of how a once bureaucratic public sector firm has morphed into a marketing-oriented company which wants to survive the post-2002, decontrol era.

Over the past three years-with help from global consultants, Arthur D. Little-BPCL's CEO, U. Sundararajan, has transformed his organisation into a market-savvy one. Avers Arun Maira, 55, Chairman, BCG India: ''BPCL thought the way out was to create an organisation that could react, strategise, and implement change faster.'' Agrees the 58-year-old Sundararajan: ''If our staff had to be geared to satisfy the customers, we needed to change our organisational structure.'' So, the CEO split BPCL into six strategic business units (SBUs), reduced bureaucracy, and forced senior managers to be closer to the customers.

Although the company claims that the full results of the restructuring will only be evident post-decontrol, the change has already helped grow its lubricants and bulk businesses. After the lubricants segment was decontrolled in 1993, BPCL's marketshare slipped from 12.30 per cent in 1991-92 to 7.60 per cent in 1996-97. Last fiscal, it improved to 9.50 per cent. Similarly, in 1999-2000, BPCL grew its bulk business by 12.40 per cent even as the industry grew by just 7.50 per cent.

Cutting the managerial layers

While the split into six SBUs-retail outlets, commercial users, lubricants, LPG, aviation, and refinery-has helped managers focus on specific customers, cutting bureaucratic layers has hastened decision-making. For instance, in the earlier regime, a sales officer would typically service customers that included 30 retail outlets, 12 LPG distributors, six kerosene dealers, and 10 bulk customers. Today, he or she talks to customers pertaining to a specific SBU. Agrees Srinath Mukherjee, 38, Market Director, Arthur D. Little: ''BPCL's resources are more customer-focused today.''

Similarly, only general managers had the right to decide on discounts offered to BPCL's customers. But today, even sales officers can do that. Explains S. Behuria, 48, Director (Marketing), BPCL: ''Response is much faster now.'' Adds Appa Rao, 40, Deputy General Manager, BPCL: ''People are empowered more with layers being knocked off.''

The only problem is that the SBU structure would, like the earlier functionally-designed organisation, allow senior managers to build silos along their functions. To avoid that, Sundararajan has set up cross-business councils-that function across the six SBUs-for areas like strategy, human resources, and brand-building. Explains Biren Anand, 43, Manager (Retail Strategy), BPCL: ''These fora would allow the business leaders to wear their corporate hats and look beyond their business.''

Becoming market savvy

In a competitive world, marketing muscle plays a key role, especially if public sector units like BPCL have to take on global majors. That's why any restructuring needs to focus on marketing and customer needs. To do so, a series of steps have been initiated at BPCL. For one, the 22 divisional offices have been replaced by 61 branches in smaller territories based on smaller geographical areas. This has taken BPCL closer to its customers.

Earlier, the division office at Jaipur would look after the entire state of Rajasthan.

Today, four territory managers in the state manage the localised areas efficiently. Such restructuring has forced BPCL to reposition many of its employees; according to Ashok Sinha, 46, Director (Finance) BPCL, over a fifth of the company's 12,000 employees have been given new responsibilities.

Nowhere is the marketing focus more apparent than in the company's strategy pertaining to ownership of retail outlets (petrol stations). A couple of years ago, BPCL, which owns or controls 60 per cent of its 4,500 retail outlets, identified an additional 1,234 outlets that could be strategically critical in the de-control era, which is likely to witness a battle to grab outlets. So, the company initiated a plan to bring the latter outlets in its fold. But there was a need to hasten the process.

Quickly, BPCL put together a site procurement team. Explains Sundararajan: ''The team had the authority to talk to landlords, of the sites and take decisions.'' Earlier, such a proposal would have to be cleared by a regional manager or the company's board, depending on the value of the site. At last count, BPCL had achieved success with 50 per cent of the identified sites.

In addition, Sundararajan is pushing even his senior managers onto the field. For instance, all the administrative offices have moved to the supply locations that consist of 125 terminals for main fuels and 35 LPG bottling ones. At the lubricant SBU's corporate office, there are only nine people, and even chief managers in the division are forced to get business for the company.

Sundararajan has initiated changes that could catapult BPCL into a marketing juggernaut. But, even today, BPCL does not have a clear idea of what its customers want. An example: while BPCL was working with its LPG dealers to supply cylinders to customers within 24 hours, the customers were bothered about receiving deliveries at a specific time on a specific date. Clearly, BPCL would need to consistently lubricate its marketing strategy to thrive in the new environment.

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