This project discusses research that was undertaken about the HR practices of Pakistan State Oil. The group studied all the HR practices of the company but the main focus was study the appraisal system & training and development of employees in the company.

Aneeqa Haris Urooj Ikram

Alia KhawajaNabiha Sajjad

Muniba Atta M. Abdullah

April 26, 2013

Sir. Amjad Bhatti

Course Title: Compensation & Benefits

Dear Sir,

Please have a look at the final report on the project “Critical Analysis of

PSO HRM System”. This report includes all the necessary details,

discussion and features of Compensation and Benefits that is needed to

be implemented in the above said organization.

Yours faithfully,

Aneeqa HarisUrooj IkramNabiha SajjadAlia KhawajaMuniba Atta M. Abdullah

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I. Acknowledgement

We would like to thank our teacher “Sir. Amjad Bhatti ” who has been a

source of constant guidance and has proven himself as one highly

professional Mentor.

We also acknowledge ourselves for the effort we have put in to complete this

project.

Last but not the least we are thankful to our Parents who have taught us

everything and made us what we are today.

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1. EXECUTIVE SUMMARY 5

2. INTRODUCTION 6

3. OBJECTIVES BEHIND (PSO) ORGANIZATION STUDY 7

4. OVERVIEW OF PSO 8

4.1. HISTORY 8

4.2. NATURE OF THE ORGANIZATION 9

4.3. BUSINESS DRIVERS / VOLUME & PRODUCT LINE 10

4.3.1. RETAIL 10

4.3.2. INDUSTRIAL CONSUMER 10

4.3.3. STRUCTURAL REFORMS 10

4.3.4. INFRASTRUCTURE 10

4.3.5. GROWTH OF PSO 10

4.3.6. CONTINUOUS GROWTH 11

4.3.7. CASTROL (UK) 11

4.3.8. AIR TOTAL (FRANCE) 11

4.3.9. EXXON CHEMICALS (SINGAPORE) 11

5. STRUCTURE OF PSO (ORGANIZATION STRUCTURE) 11

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5.1. MAIN OFFICE 11

5.2. HRM OPERATIONS 12

6. STRUCTURE OF HR DEPARTMENT 13

7. FUNCTIONS OF HR DEPARTMENT 14

7.1. MAJOR FUNCTIONS 14

7.2. APPRAISAL SYSTEM AND PERFORMANCE MANAGEMENT 14

7.2.1. POLICIES 15

7.2.2. LEADERSHIP 15

7.2.3. DECISION MAKING 15

7.2.4. RATIONALITY 15

8. CRITICAL ANALYSIS OF PSO HR DEPARTMENT 16

8.1. HRM PRACTICES AT PSO 16

8.2. ANALYSIS OF PSO HR DEPARTMENT 16

9. SHORT FALL OF PERFORMANCE MANAGEMENT AND APPRAISAL

SYSTEM 17

10. CONCLUSION & RECOMMENDATIONS 18

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1. Executive Summary

Pakistan state oil is the largest oil marketing company of Pakistan and

also among the top 1000 largest companies in Asia. Pakistan state oil

was set up on December 29th, 1976 through the merger of ESSO

undertakings with Pakistan national oils limited (PNOL) and Premier Oil

Company Limited (POCL).

PSO is currently the largest oil marketing company (OMC) in Pakistan

and is engaged in the storage, distribution and marketing of petroleum

product, Petro-chemicals, LPG and CNG. The company has the largest

market share ie.40% market share in motor gasoline and 60% market

share in diesel oil. It operates largest retail network (350 outlets) in the

country. PSO is committed to begin the preeminent marketer of

petroleum product and services to its customers and achieving its goal

while maintaining high level of efficiency and profitability.

PSO has reported a strong financial performance. Its revenues have

grown at a CAGR of 13.8% since 1996. For the fiscal year ended June

2003, PSO generated sales revenue in excess of Rs. 169 billion (US $ 2.8

billion) and after tax profit of Rs.2.25billion (US $37.5 million). PSO is the

third largest public listed company in Pakistan by equity market

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capitalization. It is recipient of Karachi Stock Exchange Top 25

Companies award for 17 consecutive years.

PSO is well-managed company and is focused to meeting the energy

requirements of Pakistan. The company recently embarked upon an

extensive program of restructuring, rationalization of its network of

retail outlets, improving its marketing image through a nationwide

initiative to refurbish and re brand key retail stations and further

improving efficiencies by streamlining its structure. It has adopted

modern management practices and prepares its strategic business plans

regularly. It continuously monitors its performance vis-à-vis annual

plans.

Privatization of PSO is also under way, whereby JP Morgan financial

advisory consortium is assisting the govt of Pakistan in privatization

process. The company being financially sound, well entrenched in the

petroleum product marketing business, with 2

Sound and efficient track record of performance is expected to receive

active response from the prospective buyers.

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2. Introduction

This project discusses research that was undertaken about the HR

practices of Pakistan State Oil. The group studied all the HR practices of

the company but the main focus was study the training and

development of employees in the company.

A theoretical framework is developed from a literature search and this is

used by the group as model for further research. The group collected

data within this framework and analyzed it according to the

requirements of the project. To collect the data required group

members visited regional office of PSO in Islamabad and also collected

data from several outlets of PSO.The web site of PSO is also used as

source of data by the group.

At PSO, they Strongly believe that Human Resource are the asset that

should be appreciated with the passage o time. Consequently, PSO

considers the strong focus on training and development of their

employees a value added and worthwhile investment.

Then by the detailed study of the training and development practices

used by the company some recommendations are made and on the

basis of the analysis of company’s practices conclusions are drawn.

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3. Objectives behind (PSO) Organization Study

In today’s fast and competitive business environment any company can’t

grow without giving importance to its HR strategies and practices, and

among those the most important is the practice of employee training

and development.

In this project our group tried to study the HR practices that are being

practiced by the PSO and area of our main focus were the practices of

employee training and development.

We find that alongside the development of its physical facilities, PSO is

deeply conscious of the pivotal role that human resources play in the

success of an organization. As a matter of fact, human resource

development has been identified as an area of key importance. While

strengthening the ranks of its work force with quality professionals at

various levels of management, the company also undertakes several

initiatives for improving productivity and efficiency at all levels of

services. Through computer training, various courses, sponsorships of

staff for studies at professional institutions and seminars, the company is

providing its employees on going opportunities for continuous self-

improvement and learning.

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4. Overview of PSO

4.1. History

Pakistan state oil company limited was established in 1976,PSO was

formed through the amalgamation of three state controlled oil

marketing and storage companies, Pakistan National Oil {PNO}; Premier

Oil Company {POC} and oil company Limited {SOCL}, formerly ESSO

Undertakings.

Following were the events taking pace in history which led to its

formation,

01-01-1974 Federal Government takes over management of PNO

[Pakistan National Oil] and DLP [Dawood petroleum Limited],

renamed into POCL [Premier Oil company Limited] under marketing

of petroleum products [Federal control] Act, 1974.

03-06-1974 Government incorporates. ‘Petroleum Storage

Development Corporation PSDC

23-08-1976 Name of PSDC change to state oil company limited

[SOCL]

15-09-1976 Government purchases ESSO undertakings, vests the

same in SOCL.

30-12-1976 Government merges PNO and POCL into SOCL. [state Oil

company limited], and named it as Pakistan state oil company

Limited.

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4.2. Nature of the Organization

As the largest oil marketing company of Pakistan, PSO is engaged in

storage, import, distribution marketing of petroleum products

petrochemicals aviation and bunker fuels LPG and CNG dominates the

country’s fuel and energy need. The company has largest retail network

in the country and the most extensive terminal and depot network. PSO

has listed in Asia’s largest 1000 companies by Asia Week.

Since its inception in 1976, the company has been meeting more than

70% of country’s fuel needs. PSO’s 3805 outlets all across the country

markets more than 12 million tons of fuel products annually. This

network is supported by PSO’s 28 storage facilities with a capacity of

more than 800,000 tons. PSO took a major step in improving its

distribution facilities by acquiring 12% equity in the 800 km long Karachi-

Mehmoodkot White oil Pipeline. 20

As part of PSO’s policy of providing better customer service it has

embarked upon its new vision retail development program. Equipped

with the most modern facilities like

• Electronic dispensing units,

• Auto car wash,

• Convenience stores,

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• Internet facilities and business centers these state of the art designed

stations provide greater customer confidence and a friendly

environment.

As a manifestation of PSO’s greater customer focus a 24hr PSO customer

service had been launched where customers can lodge their queries and

suggestions about various PSO products and services.

4.3. Business Drivers / Volume & Product Line

PSO has an impressive record of profitable financial performance.

Revenues has grown at a CAGR of 13.8% since 1996 and earnings before

interest, depreciation amortization (“EBITDA”) has grown at a CAGR of

10.6% over the same period. For the fiscal year ended June 2001, PSO

generated sales volume of 12.6 million tons with sales revenue in excess

of Rs. 169 billion (US $ 2.8 billion) and after tax profits of Rs. 2.25 billion

(US$ 37.5 million). PSO is the third largest publicly listed company in

Pakistan by equity market capitalization, and a recipient of the Karachi

Stock Exchange Top 25 Companies Award for 17 consecutive years.

Following are the main business drivers of PSO,

4.3.1. Retail

PSO is the market leader in the retail sector in Pakistan with

approximately 40% market share in motor gasoline and over 60% in

diesel oil. PSO owes this competitive position in part to its extensive

dealer financial retail network of more than 3,750 outlets, which if by far

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the largest in the country In the last two years the company has

embarked on a scheme of rationalization, closing down unprofitable

stations, and upgrading and re-branding others.

4.3.2. Industrial Consumer

The industrial consumer division enjoys high volumes and generates

steady profitability and cash flows. The division has long-term contracts

in place with Independent Power Producers (“IPPs”) in Pakistan. Other

major customers include state-owned utilities and various commercial

consumers. The division’s primary product is fuel oil in which PSO

has an approximate 85% market share. From the locomotives of railways

to the giant turbines of power project, all are fuelled by PSO.

4.3.3. Structural Reforms

In recent years the GOP has appointed senior management personnel

from the private sector to run PSO. The new management team initiated

structural reform program for the company. Upgrading its retail outlets

and concentrating increasingly on high margin products. In FY 2000 PSO

incurred Rs. 967 million (US$ 18.6 million) of capital expenditure,

primarily on the Company’s new vision retail development programme.

PSO is now moving towards a marketing strategy which is similar to that

employed by multinational OMCs presenting Pakistan.

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4.3.4. Infrastructure

PSO owns key important terminals and has an over-whelming advantage

in terms of the storage capacity and geographical coverage of its depot

network.

4.3.5. Growth of PSO

PSO is the largest of the three marketing companies in Pakistan; it has

consistently maintained an edge over its competitors Shell and Caltex.

With an overall market share of 72% in 1997-98 it sold 6.244 million tons

of petroleum products during the half year ended 31st December 1999

against 5.633 million tones sold during the corresponding period last

year, showing an increase of 10.8%.

4.3.6. Continuous Growth

PSO continues to expand its physical, technical and marketing resources

to meet the requirements of the country. PSO has maintained

International collaborations to import latest technology. They are:

4.3.7. Castrol (UK)

Blending and marketing of lubricants in Pakistan.

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4.3.8. Air Total (France)

Technical and commercial agreements in Aviation Sciences and

technology.

4.3.9. Exxon chemicals (Singapore)

Petro-chemicals business and technology.

5. Structure of PSO (Organization Structure)

Managing people is one of the most critical aspects of organizational

management in the 21st Century. No matter whether an organization

is a non-profit, start-up enterprise, or mature business employees are

crucial to achieving objectives, delivering results and being

successful. The activity once known as personnel and now more

commonly described as human resource management (HRM) is a

fundamental aspect of successful management.

5.1. Main Office

Main office rather head office of PSO is located in Clifton, Karachi and

the exact details and address of PSO Head Office is,

Address: PSO House,

Khayaban-e-Iqbal, Clifton,

P.O.Box 3983,

Karachi 75600, Pakistan

UAN: 021-111 111 PSO (776)

Tel: (92 21) 99203866-85

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Ta'aluq Careline: 0800-03000

Email: Taaluq@psopk.com

5.2. HRM Operations

1) HR planning (i.e. to forecast and foresee the future business and

employee needs and plan for them)

2) Recruitment and selection job descriptions, selection tools,

background checks, offers

3) Compensation (i.e. methods, consistency, market)

4) Employee relations (i.e. labor agreements, performance

management, disciplinary procedures, employee recognition)

5) Mandated benefits (i.e. social security, unemployment insurance,

worker's compensation, COBRA/HIPPA)

6) Optional group benefits (i.e. insurance, time off benefits, flexible

benefits, retirement plans, employee assistance programs, perks)

7) Payroll (i.e. internal vs. external options, compliance)

8) Recordkeeping (i.e. HRIS, personnel files, confidential records, I-9,

other forms)

9) Training and development (i.e. new employee orientation, staff

development, technical and safety, leadership, tuition reimbursement,

career planning)

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10) Employee communications (i.e. handbook, newsletter, recognition

programs, announcements, electronic communication)

11) Internal communications (i.e. policies and procedures, management

development, management reporting)

6. Structure of HR Department

Alongside the development of its physical facilities, PSO is deeply

conscious of the pivotal role that human resources play in the success of

an organization. As a mater of fact, human resource development has

been identified as an area of key importance. While strengthening the

ranks of its work force with quality professionals at various levels of

management, the company also undertakes several initiatives for

improving productivity and efficiency at all levels of services. Through

computer training, various courses, sponsorships of staff for studies at

professional institutions and seminars, the company is providing its

employees on going opportunities for continuous self-improvement and

learning.

In recent years, health, safety and environment (HSF) has emerged as

one of the major themes of corporate governance at PSO.

Understanding the significance of safe and healthy work practices, a

comprehensive HSE policy has been devised and the HSE manuals and

procedures finalized. According to this policy, no new vision outlet can

be 49

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commissioned before a comprehensive HSE audit. Likewise HSE audits

are being conducted at installations and depots, followed by necessary

corrective action. In order to

increase awareness, HSE awareness sessions are frequently organized

for all employees throughout the organization.

As They Strongly Believe That Human Resource is the asset that should

be appreciate with the passage of time. Consequently, PSO considers a

strong focus on the development of a value added and Worthwhile

Investment.

7. Functions of HR Department

Following are the functions of HR Department,

7.1. Major Functions

Some of the major functions of HR Department are as follows,

Initiating the Recruitment Process

Screening Applicants

Managing The Applications

Selecting the Interview Panel

Interview Scheduling and the Interview Environment

Making the Selection Decision

Candidate Evaluation

Training & Development

Training and Development Goals

Training and Development Support

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Work Place Learning

Values

Appraisals

7.2. Appraisal System and Performance Management

Performance evaluation takes place annually for the purpose of annual

increments. The appraisal also assists human resource in the career

development of an employee.

7.2.1. Policies

Policies are made to define processes to be practiced by management.

and the polices are made by the research conducted by HR department

keeping in view the needs of the company and employees.

7.2.2. Leadership

PSO is a sale and customer oriented company that has the main goal of

maximizing the profit. The major interest of the company is to increase

the market share, sales, profit and revenues. Majority of the decisions

are made and implemented in order to fulfill this goal.

For this reason the leadership is also trained according to this goal and

more centralized system is adopted by the company.

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7.2.3. Decision Making

Decision-making is an important aspect of the company, which needs to

be thoroughly evaluated before making a final and firm decision. The

working of organization depends upon top management; so good and

firm decision in the organization will have a direct impact on the working

environment of such organizations. The manager is responsible for

taking the decision of effected matter keeping in view the after effects.

The decisions must be in interests of the organization.

7.2.4. Rationality

The managerial decision-making is rational. Which means that the

mangers make consistent, value-maximizing choices within specified

constraints. A style or situation in which a manager can make accurate

decision and the outcome of every alternative is known.

8. Critical Analysis of PSO HR Department

During our physical visit at HR Department following are some of the HR

Practices we had identified through critical analysis that have been

implemented by PSO HR Department and are in accordance with our

provided theoretical knowledge of the subject,

8.1. HRM Practices at PSO

Following are the HRM Practices identified followed in the HR

Department as per the shared theoretical knowledge of books.

HR Planning

Recruiting

Selection

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Training and Development

Compensation

Performance Management

Employee Relations

Company’s Performance

8.2. Analysis of PSO HR Department

PSO has also taken several initiatives for improving the overall

productivity and efficiency of its staff through computer training, in-

house courses, sponsorship for studies at professional institutions and

seminars. In analyzing the HR practices, we have compared the HR

practices of PSO and Shell Pakistan.

Human resource development has been identified as an area of key

importance. While strengthening the ranks of its work force with quality

professionals at various levels of management, the company also

undertakes several initiatives for improving productivity and efficiency at

all levels of services. Through computer training, various courses,

sponsorships of staff for studies at professional institutions and

seminars, the company is providing its employees on going opportunities

for continuous self-improvement and learning.

In recent years, health, safety and environment (HSF) has emerged as

one of the major themes of corporate governance at PSO.

At PSO, They Strongly Believe That Human Resource Are the Only Asset

That Appreciate With The Passage Of Time. Consequently, PSO

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Considers A Strong Focus On Their Development A Value Added And

Worthwhile Investments.

9. Short Fall of Performance Management and Appraisal system

Very highly efficient and executable appraisal system is designed by HR

Professionals to make sure that every employee gets the equal

opportunity. Not any such short fall or defect was found in HR process as

the above mentioned report clearly identifies smoothly executed

appraisal system.

Appraisal system followed up training and development system is

cleverly designed to make sure that every employee gets the equal

opportunity in regarding to professional and prosperous career through

it.

Still through an in depth analysis of HR and their policies, we identified

one flaw that was to the book following of rules and regulations of HR

making it difficult for employees to adjust with the environment

specially the new employees.

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10. Conclusion & Recommendations

Pakistan state oil (PSO) is the largest company of Pakistan not only in the

field of oil marketing but also otherwise. It has been included in Asia’s

top 1000 companies and thus is surely a pride for Pakistan. Although up

till now it is Govt owned but it is about to be privatized in a month or so.

As expected after privatization the company would be further more

prosperous and generative in terms of revenues.

PSO certainly has a competitive advantage over all it’s competitors

because of the vast network of it’s outlets all over Pakistan but at

the same time a great deal of responsibility is required by them as

they are not only an oil marketing company but they have some

responsibilities towards the people of Pakistan.

Take an example of a PSO outlet in Chitral, while deciding to

undertake this project or not the feasibility report rejects the idea

of building it but being a Pakistani socially responsible company if

even one public transport bus goes there then they have to build a

petrol station over there.

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PSO has been very innovative and successful since it realized the

competition has actually started after SHELL came and acquired

the market share from PSO. But after coming up with all those

“new vision” outlets, PSO has proved to be never far behind.

Marketing strategies starting from “Gold card” to…………………..

“PSO LOYALTY CARD” has been amazingly good and can be rated

as first class strategies.

A major problem faced by PSO is the misconception in people’s

mind that the oil used by shell is imported and of better quality, as

shell is a foreign company in Pakistan. Although the sources are

same but still shell is also aware of this fact and is exploiting it.

PSO should do something about it like printing brochures that

could explain people about the only sources available in Pakistan,

emphasizing upon the fact that no oil is coming to Pakistan from

any direct abroad sources.

Caltex basically has some control over the market because of the

lubes it sells and the profit margin on lubes is much higher than on

petrol. But as PSO and CASTROL have come together to make the

right combination of “Top two together” they can overcome this

problem as well.

PSO has done very well in the financial sector, since its new vision

period and will continue with the pace. Innovations and up to

dating of the outlets in accordance with the needs of the changing

world is a very important step towards both marketing and

financial prosperity.

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The other problem faced by PSO because of the competition is

that the land acquiring at old or new places the bid gets too high

that the land acquired becomes too expensive.

PSO is becoming better day-by-day and after privatization the

modifications and changes they are expected to bring “Sky is the limit”.

11. Reference

Book References

o Mc GJRW- HILL

o Human resource management

o International 4th Edition, December 2001,

Chapters

o 1.Human Resource Environment, Page # 51

o 6.Selection And Placement, page # 216

o 7. Training, page # 248

o 9. Employee Development, page # 374

Internet References

www.psocl.com

Personal Resources through Interview

o Kh. Haris Mehmood

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Installation Manager PSO bulk oil terminal, Machike

o Rana Muhammad Idrees

Dep. General Manager HR department PSO house, Karachi.

o Chaudhary Naseer

Dep. General Manager IR department PSO house, Karachi.

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