A Project Report

On

“Failure of Pakistan Steel Mills”

Submitted to:
Sir Ahmad Zakariya
Lecturer
National University of Modern Languages

Submitted by:
M. Ahmad Ali (L-21206)
Hashim Khan (L-21203)
S. Mehak Fatima Kazmi (L-21214)
National University of Modern Languages

Class:
MBA-4 (Morning)
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 Organizational Behavior

Organizational behavior focuses on how humans behave in organizations, including how they
interact with each other, as well as how they work within the organizations' structures to get their
work done. Here are some other definitions:
 Organizational behavior is the "the study of human behavior in organizational settings, the
interface between human behavior and the organization, and the organization itself."
 “Organizational behavior is directly concerned with the understanding, prediction, and
control of human behavior in organizations.” — Fred Luthans

In a nutshell, organizational behavior is the study of how human behavior affects an

organization. Organizational behavior aims to learn how an organization operates through the
behaviors of its members. Instead of taking a strictly numerical approach to determine an
organization’s operations, it takes a more psychological approach. By understanding people, you
can better understand an organization.
Organizational behavior is intended to explain behavior and make behavioral predictions based
on observations. If you can understand behaviors, you can better understand how an organization
works. In addition, organizational behavior studies how an organization can affect behavior. So,
if you think about it, behavior affects an organization and an organization affects behavior. Let
that sink in for a second—it’s all connected! They each affect the other, creating a never-ending
loop between the two. Therefore, in order to have a healthy and successful organization, it is
extremely important to understand the ins and outs of organizational behavior!

What is the goal of organizational behavior?

The bottom line of organizational behavior is to explain and predict behavior within an
organization. By examining behavior in three different levels of influence at the individual,
group and organizational level, organizations can better understand performance in the
workplace and improve interactions among employees.
This can also create a competitive advantage through improved motivation, leadership,
communication and organizational culture, all of which greatly affect a business' bottom line.

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How can implementing organizational behavior transform a company?
Companies need to invest in organizational behavior because it provides the insights needed for
them to run smoothly and effectively.
"Organizational behavior is essential to being effective at all organizational levels," Flores says.
"Businesses excel when employees understand how their behaviors influence an organization's
performance and enable strategy execution." When employees are led effectively and are
motivated to do their best, the entire organization thrives.
The documented benefits of organizational behavior are as varied as the companies that
implement it. Much of the research emphasizes improved health and productivity within work
environments, which translates to higher job satisfaction, increased productivity, a better
commitment to the company and a decrease in employee turnover. All of these improvements
affect a business profitability.

Examples of Organizational Behavior

Findings from organizational behavior research are used by executives and human relations
professionals to better understand a business’s culture, how that culture helps or hinders
productivity and employee retention, and how to evaluate candidates' skills and personality
during the hiring process.
Organizational behavior theories inform real-world evaluation and management of groups of
people. There are a number of components:
 Personality plays a large role in the way a person interacts with groups and produces work.
Understanding a candidate's personality, either through tests or through conversation, helps
determine whether they are a good fit for an organization.
 Leadership, what it looks like and where it comes from, is a rich topic of debate and study
within the field of organizational behavior. Leadership can be broad, focused, centralized or
de-centralized, decision-oriented, intrinsic in a person’s personality, or simply a result of a
position of authority.
 Power, authority, and politics all operate inter-dependently in a workplace. Understanding
the appropriate ways these elements are exhibited and used, as agreed upon by workplace
rules and ethical guidelines, are key components to running a cohesive business.

“Power and influence are fundamental human phenomena that are deeply ingrained on the
psyche and conscious personality of individuals. The difference between proper and
improper use of power is the difference between success and failure, high and low
productivity, motivation and disillusionment.”

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 Pakistan Steel Mills
Pakistan Steel Mills Corporation (Pvt.) Limited (Urdu: ‫)پاکستان سٹیل ملز‬, also known as Pak Steels,
is a producer of long rolled steel and heavy metal products and entities in the country.
Headquartered in Karachi, Sindh Province of Pakistan, the PSM is the current largest industrial
mega-corporation, having a production capacity of 1.1–5.0 million tons of steel and iron
foundries. Built with the contributions of the Soviet Union in the 1970s, it is the largest industrial
mega-corporation complex, vastly expanded in an enormous dimensions construction inputs,
involving the use of 1.29Mn cubic meters of concrete and 5.70Mn cubic meters of earth work,
and containing ~330,000 tons of heavy machinery, steel structures and electrical equipment.
A controversial attempt was made to privatize the steel mills to global private ownership under a
counter-measure Privatization Programme of Prime minister Shaukat Aziz. All attempts were
thwarted by the Supreme Court which launched a full-fledged investigation against the attempts
to privatize as private sector and lost the control of the steel mills in a matter of weeks. In spite
of its enormous size and expansion, only 18% of the capacity was in use and the steel mills
requested a bailout plan of Rs.12 billion to prevent its closure; the bailout plan was dismissed by
the government. Finally, the steel mills were brought back to government-ownership
management under an inverse counter-measure Nationalization Programme of Prime Minister
Yousaf Raza Gillani. Since then, its operational plant capacity has reached 30%—50 % after
seeking the government financial assistance.

“Mother Industry”
The failure of the country’s “mother industry is an unending story of unchecked corruption,
inefficiency, and over-employment”, according to an earlier summary submitted to the ECC. The
PSM has been closed since June 2015 when its gas supply was drastically curtailed for non-
payment of bills which were significantly lower than the default of a private sector entity at the
same time.
The Pak-China Investment Bank had declared in 2015 that with an initial investment of $289m
(about Rs29bn), provision of uninterrupted electricity supply and a new management, the PSM
had the potential of becoming a profitable enterprise given its ideal location, market and
facilities.
Not only this, the country’s largest industrial complex could generate the funds required for
expanding its production capacity to three million tons, the bank said and proposed a
development and expansion plan with a capital investment of $288.77m in the first phase,
$300.4m in the second and $296.62m in the third phase. The total investment required was
$885.8m, or approximately Rs100bn.
On the basis of field surveys, extensive data and in-depth discussions, the financial advisers had
concluded that the PSM was a steel enterprise which had a high starting point, complete process
chain and the advantages of resource acquisition and regional market.
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The advisers were of the opinion that because it was located near a coastal city with over 20m
population and close to the 50,000-tonne bulk cargo wharf relying on raw material and fuels
import, the PSM owned rare logistic cost advantages. With the expansion of its production
capacity in future, its harbour could also be used to ship products to the rest of the market.

Reasons behind the failure of Pakistan Steel Mills

 Recruitment Process
The deceptive issue that is common in PSMC. To start with thing is that their enlistment
arrangements are the most widely recognized deceptive issue in the organization. The
administration include in the choice procedure PSMC representatives is playing their parts in the
choice of individuals at high post of top administration as opposed to abilities or value of the
general population. It demonstrates how firm segregate among individuals and at whatever point
government changes and new government comes. It changes the representative and give or
blessing imperative individuals to their gathering part who are for the most part from the same
ethnic gathering of the legislature for instance, when PPP comes, it flames individuals from the
Punjab side and likewise, when PML-N or some other gathering from Punjab comes, the
structure of the general population who roll out up the organization additionally improvements.
This separation is not a decent approach for any organization PSMC has never come to the
potential acquiring power that could be ascribed to such a firm.
The general population who are controlling PSMC are not faithful to their firm and are running it
in a way which is best for the organization however are searching for their own advantages. The
workers PSMC are not watching their obligations of the firm and taking fixes and blessings.
Coercions are likewise regular in the working of PSMC. All these are common on PSMC that
gives an awful name to PSMC and can be delegated unscrupulous Issue.
Another unscrupulous issue is that how the administration pastors manhandle the forces for their
advantages. Rather, in the event that they would have utilized the ability to improve PSMC an
association it would have profited them over the long haul as well as would have been valuable
for the whole country.

 Political Issues
Another model that could be tried would separate top administration from the operational
management. Top layer should embody the personality of the organization and articulate its
vision, values and principles. Its responsibilities will include general direction, strategic
planning, design and research. It will interface with main allies, associates, trade unions and
government agencies. It ought to have full power over personnel and finance and be constantly
engaged in the evaluation of organization’s performance, structure and intra-corporation
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relationships. The second layer should be responsible for all operational functions, production,
logistics, marketing, and administration.

 Arrangements:
The previous arrangement of having chairman and managing director with overlapping powers
and responsibilities was dichotomous and had proved unworkable. But equally the era of CEO as
the superman is gone. In the past ten years a large proportion of CEOs in big US companies were
fired as failures within a year or two. History of the Pakistan Steel has not been much different.
The government may like to institute a commission that should delve deeply into the continuing
management failures at the mills and recommend a permanent administrative solution to the
woes of the hapless organization. Privatization is not an option in the case of the Pakistan Steel.
The country is destined to retain the model of mixed economy for a very long time to come and
in that model rejuvenated, expanded Pakistan Steel has a pivotal role.

 The Incompetent and Unqualified Persons

The incompetent and unqualified persons are appointed as the chief executive officer (CEO) and
board members of the organization, primarily on political considerations, and they are allowed to
mess up with the institutions with nepotism, inefficiency, mismanagement and irregularities,
without any checks or balances.
When the organization becomes sick over a period of time, it is put on sale or closed down. A
typical example is that of Pakistan Steel Mills in Karachi, which has been non-operational for the
last two years, and the government is least bothered. It has been continuously incurring huge
losses that now amount to over Rs70 billion. There are no chances of reviving Pakistan Steel and
going into production at a time when various infrastructure projects under the China-Pakistan
Economic Corridor (CPEC) require, over subsequent years, millions of tons of iron and steel
products, valuing billions of dollars annually.

 Appointment of CEO
The Cabinet Committee on Energy, in a meeting presided over by Prime Minister Nawaz Sharif,
has observed that the EDB was not performing any function, either in terms of regulation or
promotion of engineering enterprises. Earlier, there were reports of the EDB being dysfunctional
due to massive shakeup in the organization’s administrative structure without approval of the
competent authority, and resultantly, persistent deterioration of the overall performance of the
organization. Federal Audit, a wing of Auditor General of Pakistan, has detected as many as 31
violations in the EDB ranging from appointment of its CEO to arbitrary increase in the CEO’s
salary to misuse of his authority.

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 The contract of the controversial CEO, whose degrees remained in question, expired on March
31, and the EDB is being run on ad hoc basis, like some other national institutions, as adhocism
has become order of the day.
It thus remained a constituent of the State Engineering Corporation (SEC) practically for all
purposes as its chairman was given additional charge of CEO of the EDB. Unfortunately, EDB
was never allowed to establish as an independent organization for the reason of deep-rooted
vested interests. For many years, no full-time CEO was appointed, until the board was
transferred to the Ministry of Industries and Production in the Musharraf period, and was merged
with its Experts Advisory Cell.

 Privatization of PSMC:
Dawn Newspaper expounds on the privatization of PSMC as the greatest trick in the historical
backdrop of Pakistan by the political powers. The issues included when administration of
Pakistan chose to offers PSMC to private speculators in second quarter of 2006. The real issue
was government was offering the most gainful business claimed by the govt. of Pakistan.
At the point when the privatization procedure began govt. didn't mastermind a closeout in
endeavor to discover the most noteworthy paying financial specialist. Be that as it may, they
welcomed fixed proposition from the speculators. This was the sign that something frightful was
going on.
The offering cost of PSMC was set far beneath than the benefits the organization had that time.
To top it all that, the organization was making enormous benefits around then, and it ought to
have requested the goodwill of being beneficial and being a syndication in its operation. Then
again, later it was uncovered that 20 lawmakers including pastors have been profited from this
privatization.
The privatization issue brought about the sacking of Chief Justice of Pakistan. This shows
insatiability and appetite in a few individuals of government. These individuals were readied to
make any move keeping in mind the end goal to offer PSMC, at a value which advantages them,
which is absolutely an untrustworthy deed as these were the agents of individuals not an
individual or certain gathering.

Historical Loss of Pakistan Steel Mills Corporation (PSMC)

The nation's single biggest steel maker Pakistan Steel Mills Corporation (PSMC) has posted a
recorded of Rs 22 Billion in financial year 2008-09, without precedent for years. As per PSMC's
money related records for the period finishing June 30, 2009. PSMC uncovered lost Rs 22.143
Billion amid the June-July contrasted with a benefit of Rs 2375 billion in financial year 2007-08.
Following eight years of benefit PSMC began posting misfortunes from 2008, soon after another
executive Moeen Aftab assumed control.

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REASONS UNVEILED:
 PSMC confronted overwhelming misfortunes amid the as of late sacked administrator Moeen
Aftab
 Less than target generation and deals
 Import of crude materials at a high rates
 Ineffective approaches and Non specialized administration
 Global financial

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