In the past 17 months, my company Bridges Limited has closely worked with a number of State Owned Enterprises: developing business and strategic plans, building internal communications systems, shaping leadership capabilities among the managers, changing attitudes and work culture among staff and training and evaluating boards.
Our interaction with management teams from these organisations reveals high levels of commitment towards positive performance for these entities. Some of these organisations are now managed by well exposed young men and women who once worked for multinational companies. The multinational companies are known for ruthlessness in terms of bottom-lines: you do not make the money, you find the next exit! As a result, when these young managers join SOEs, their mindset is tuned towards one objective: make money.
Unfortunately, I have encountered a few who are very frustrated by a myriad of problems, some of them legacy issues. Most of these parastatals have existed for more than 40 years and are struggling to shade off inherited problems: poor work culture, undercapitalization, poor capital structure, governance challenges, unsustainable statutory obligations and creditor pressures.
Notwithstanding, the State Owned Enterprises (SOEs) are working very hard to recreate themselves in terms of branding, public appeal and profitability. They also have the support and goodwill of government to turn around the businesses. A couple of weeks ago, the Zambia National Building Society declared a good measure of profit, two years in a role. We also have the Industrial Development Corporation (IDC) breathing fire on all those entities reporting to it to shape up, resize in terms of structure and make money for shareholders. The Minister of Finance Bwalya Ng’andu has also made an appeal to SOEs to have robust strategies slanted towards profitability and sustainability. Can parastatals be revived?
There are three things I believe can help turn around these parastatals. This is because I believe, after spending substantial time working closely with some of them, that they can be revived. It is a hard call but surmountable. If robust systems are put in place for some of the critical success drivers such as the following three, I foresee a situation where parastatals can be the center pivot of job creation and economic growth.
CAPITAL STRUCTURE: Government currently wholly owns most parastatals. There are problems for having one single shareholder in any entity, even for private companies. If you have one sole shareholder, any financial constraints facing the shareholder become a constraint for the company. Businesses survive by continuous recapitalization to take advantage of economic and market opportunities. Today, many companies are leveraging the impact of information technologies to provide the necessary efficiencies and competitiveness.
Unfortunately, many SOEs cannot draw new funding from the shareholder because the latter is financially constrained. The best way out is to rationalize or tweak the capital structure for parastatals. We can either have private equity or get them to the stock market as soon as possible. The new co-owners will put in the necessary capital to revive the parastatals. The planned listing of companies like ZAFFICO and ZSICLIFE should be acted on sooner than later. The IDC would do well to appoint advisors to the listing before the end of the year so that by 2025, all SOEs should have been restructured.
ORGANISATIONAL CULTURE: Parastatals are not sitting on modern and market friendly systems. I have also spent substantial amount of time in the past year working with multinationals and one notices they have changed a number of systems that encourage new work culture among staff. For example, these organisations are focusing a lot more on people than departmental functions. It is in parastatals you have a divided work force; and this division is between the so called, ‘core-business’ and ‘support business’.
In modern business, every employee is as important as the other employee, there is no ‘primary employee’. Try to remove one function and everything collapses. Interestingly, private companies now emphasize on right titling of positions to communicate a change in culture and mindset. We have titles like, ‘People and Culture’ and ‘Talent management’.
The right organizational culture creates the right balance in human capital structures, corporate governance systems, reporting systems and accountabilities, promotion of right behaviours and attitudes and a mindset to win. It is about ownership of the organization by employees. We should reach that level where employees in SOEs stop seeing the company as a personal ATM but an entity to be protected and defended for future generations.
We should reach that level where employees in SOEs stop seeing the company as a personal ATM but an entity to be protected and defended for future generations.
PERFORMANCE BENCHMARKS: We have worked with parastatals, drafting strategic plans with clearly defined strategic objectives and key performance indicators (KPIs). Our concern has always been about whether managers in these parastatals understand the implications of having clearly defined performance benchmarks. This is where IDC comes in: having a clear system by which all parastatals account for what they do and don’t do. How are managers rewarded for exceeding KPIs? What are the sanctions for those that fail to meet the given performance benchmarks? Once a reward system is clear (as in multinationals where managers are compensated with hefty bonuses for exceeding performance), parastatals will be revived.