10123052, 10123068, 10123062, 10123091, 10123054

Pak Electron Limited (PEL) Mr. Faisal Jawad the general manager business development of the Power department of the PEL is taking the notes from the past of the PEL History and Strategic policies they have. He noticed that PEL is one of the leading organizations in the electronics goods and named in one of the pioneers in the electronics industry. While sitting in office he is reading the history of the PEL and wanted to know about the founders, the theme behind starting the PEL, Vision, Mission and strategic policies of the Company and the power division as core part of his job. He noticed that revenues and profits are going down from last few years that are frustrating situation for the organization head Mr Haroon they need to figure out the problem they are facing during the business so they can control the downward trend of the profits See Exhibit 1. In some of the divisions of the company management is looking to take very sensitive decisions. Some of them might harm PEL in near future. People are looking so much frustrated about the decisions made by the management regarding the evaluation of the workers. So it is time to take the sophisticated decisions to make the company going on the right path of the success. History of PEL: Pak Electron Ltd. (PEL) was established in 1956 with the collaboration of M/S AEG Germany and the Malik family. In October 1978 Company was taken over by SAIGOL GROUP, which was one of the leading business units of the Pakistan. In that era products made by PEL was considered as high quality with high Value. PEL, since its beginning, has been acting as an institution working for the advancement and development of engineering and modern technology in Pakistan Since its Beginning, the company has been working for the advancement and development of engineering know-how in Pakistan. The company has produced hundreds of engineers and skilled workers and technicians through its apprenticeship schemes & training programs.PEL has been continuously adding new products to its range. As a result, PEL has registered a significant increase in its sales volume, during the last ten years In 1978, the Saigol Group of Companies purchased major shares of Pak Electron Limited. At that point in time, the company was only manufacturing transformers and switchgears. With the Saigols in management, PEL started expanding its product range by entering into Air Conditioner

10123052, 10123068, 10123062, 10123091, 10123054

manufacturing. In 1981, PEL window type air conditioners were introduced in technical collaboration with General Corporation of Japan. In 1986-8, the company started manufacturing of refrigerators in technical collaboration with M/s IAR-SILTAL of Italy. In 1987, PEL deep freezers were also introduced in technical collaboration with M/s Ariston of Italy. In 2006, the Company has started manufacturing of split type air conditioners of various capacities as the customer choice has shifted from window type to split type. The product has been well received in the market. This encourages the company to multiply its production in the coming year. Today, PEL has become a household name. Its products are not only in great demand in the local market but the Company has started exporting its appliances division products. Power Division PEL Power Division manufactures energy meters, Transformers Switchgears Kiosks Compact stations Shunt capacitor banks Energy meters Generators

All these electrical goods are manufactured under strict quality control and in accordance with international standards.PEL is one of the major electrical equipment suppliers to Water and Power Development Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest power utilities in Pakistan.Over the years, PEL electrical equipment has had been used in numerous power projects of national importance within Pakistan. In spite of stiff competition from emerging local and multinational brands, PEL Group's appliances and electrical equipments have remained in the spotlight due to constant innovation. Strategic partnership with multinationals of repute have enabled the PEL Group to incorporate new technologies into existing product ranges, thus giving the Pakistani market access to innovative, affordable and quality products.

10123052, 10123068, 10123062, 10123091, 10123054

PEL Transformers: PEL made distribution transformer's range includes oil immersed core type transformers, Dry type (VP impregnated) transformers and autotransformers. These transformers are tailor made for various ratings. IEC or national standards are followed. I'LL offer distribution transformers voltage up to 33 kV and ratings up to 30 MVA. PEL offers transformer tanks with corrugated walls, detachable radiators and tubular arrangement. The corrugated tanks have a better cooling efficiency, since the fins are expandable. Tanks are hermetically sealed where possible. In order to meet sophisticated requirements of customers PEL has also started manufacturing transformers with foil winding. Foil winding efficiently uses space which results in size reduction. It has better heat dissipation and also increases potential to withstand short circuit current. PEL transformers are available for various applications: Distribution Transformers (Pole /Pad Mounted) Auto Transformers Furnace Transformers Welding Transformers I Chokes for furnace Transformers any other special requirement. Manufacturing: It is the responsibility of the manufacturing department to manufacture different components of transformer and then assemble them to make a transformer. Production department has following sections: Winding Section Core Section Tank Section Assembly Section

Flow manufacturing department starts manufacturing? First, customer gives order to the marketing and sales department. Marketing and sales department makes annual sales plan for WAPDA. Marketing and sales department sends this order to Production planning and control department which makes a master production plan (Month wise). This plan is sent to Material planning section which makes Material requirement plan or Bill of material according to the

10123052, 10123068, 10123062, 10123091, 10123054

master production plan. This plan is sent to the purchase department which buys material according to this plan. Material is received in store where quality inspectors from L&QC department check its quality than this material is sent to manufacturing department where manufacturing of transformer starts. Production Planning and Control: Production Planning and control department receives order from marketing and sales department. For WAPDA orders there is an annual sates report which is sent to the production planning and control while for private orders are received from time to time and there is no annual sales report for these orders. Production planning and control makes the master production plan according to the orders sent by marketing and sales department. Master production plan is month wise and it can be changed. After making the master production plan PPC makes a weekly production plan which is sent to sectional in charges.PPC also makes the daily production plan. PPC apart from making the master production plan and weekly production plan it monitors the production to ensure that the production is running according to the plan. Material Planning Section: Material planning section is responsible for the procurement of material and it ensures that material arrives timely for the production. Material is purchased from foreign companies and also from the local companies. In total procurement material is purchased in less than a month so it is done once a month. In foreign procurement more time is required because it takes more time for the arrival of material from foreign countries by ships so foreign procurement is done after every three months. In foreign procurement bank opens the letter of credit or LC, it pays the foreign company for the material and the stock is pledged with the bank and when company needs the material for production it pays the bank and material is given to the company for the production. After the procurement of the material, material planning section insure the timely supply of the material to the production department. 1. Winding Section 2. In the winding section LV and HV windings of the coils are made.

3. Raw Material For LV winding Per insulated flat copper wire for 13(VA to SOK VA)

10123052, 10123068, 10123062, 10123091, 10123054

Copper foil For 10010/A and above)

4. For H.V winding Enamel copper wire (For 10KVA to 200KVA) Paper insulated flat copper wire (400 KVA and above)

Main Customer: WAPDA is the main customer of the PEL transformers, but in the days of crises and due to continuous increase in the prices of the crude oil. Expenses of the WAPDA tend upward that makes them to think about the purchase of the transformers from the PEL. So the management decided to reduce the purchase the transformers form the PEL. That makes PEL worried about the sale of the products in the Pakistan. Because there is no big customer such as WAPDA in Pakistan which is able to purchase the transformers from PEL. So they also need to think about that. Human Resource Policies at PEL: The companys first appraisal system is based on contribution in the profit the worker which contributes more in the profit get more benefits and gets good grade in the appraisal system. That was implemented in the late 1980s by the Mr. Imran and that system was worked for almost 5 years and that was not so much successful because the turnover rate increases at the fast rate in the company and people tends to leave because of unfairness in the appraisal system. For turnover rate (see exhibit 2). The one of the major reason of leaving the organization is that was told by the past foreman in the organization. All the appraisal system is in the hand of department head he has the full authority to appraise any one and give the wrong report of others even he worked well for the organization. So that is damaging the organization and it is against the values of the organization that states that people are more valuable asset for organization. One of the past managers replied.

10123052, 10123068, 10123062, 10123091, 10123054

We always think about the well being of our people and we always consider them as a most valuable asset thats why some of our employees spend their whole carrier in the organization thats is on the period of 28 years. For more information of the HR values of the company (See exhibit 3) If we see the HR section of the exhibit is that company is always very conscious about the employees to expand their carrier and they always try to care about the carrier of the people. So keeping in mind the past three years practices that is not going well and becoming the dangerous for the organization. Because company already had lost some of their old employees that are working here for almost 20 years. Implementation of 360 Degree Appraisal System: So, that is the worrying situation for the Mr. Ali and he hired another HR manager named as Mr. Arslan who immediately changed the appraisal system and brought a new one in place of the old one that is based on the 360 degree appraisal system. And in that system all the feedback is taken for the peers, subordinates, and from the seniors. And no one is out of the appraisal system and that system is implemented on all levels of the organization. Because in previous system just lower level of employees are considered only but in new system all of the employee must have to go through appraisal system and that is done independently from outsiders. That is done for reducing the biasness and getting the confidence of the people. One major step taken by the HR department is that they first time started the training program in the organization on yearly bases which includes workshop. Seminars, on job and of job training if needed. (See exhibit 4 for more details of training system) They also started the open door policy for the people of the organization which is for getting the confidence of the people and that is also the policy of the organization to care their employees and considering the employees as an asset. They also changed the structure of the pay plain they got some portion of the pay as salary which is fixed and get other half portion of the salary as variable which is given on the base of performance and addition in the profit.

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And they are being apprised in the bases of grades that are evaluate on the base of overall performance of an employee and graded on the base of AO grades and O grade holders are not eligible to get benefits in the appraisal system. (See Exhibit 5). As one of the employee left the organization in 2012 explained the problem. One of the main problem is, the senior managers are restricting the Promotion of the juniors and the implementation of the Performance appraisal system is for getting the information about the performance of the Employees for giving them bonuses and promotions. But in PEL all the things are going in the opposite direction they are not giving ant promotions. After all the changing and after 6 months company started the evaluation of the benefits of the changing and training program they shocked that the productivity of the people goes down and they are resisting the change particularly the change in the pay plain and the training system. One of the employees explained that. We are highly qualified in our fields and got the degree from the best institutes of the Pakistan and they are insisting us to get training and go for outdoor training so that is unacceptable for us. They all are resisting the change and start doing low work which is another very harmful situation for the organization. So Mr. Arslan meets with Mr. Ali to discuss about the situation. And replied that I dont know why it is happening and what the reasons behind it are. They are not ready to accept change. We are caring their carrier but they are not allowing us to do so What should they do now? They should have to fix the problem to avoid the great loss of the organization and they have to fix the problem within one year according to estimate otherwise it is becoming big hurdle for the organization to go ahead and to progress at the fast rate and keep growing. Recently WAPDA Refused to buy the Products from PEL. This is big shock for the upper management of PEL because their big part of marketing plan consist of selling products to WAPDA.PEL Marketing Manager Meeting with the WAPDA executives shows no results on this agenda. A

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Manage replied the financial Position of Wapda is not good. At current situation we have more expenditures and less in flow of cash. We are unable to pay the outstanding dues to PSO. PSO reduces the oil quantity given to WAPDA it created huge short fall of electricity. The Government of Pakistan is not solving the problem of this main power supply company of Pakistan. Now everyone criticizing the WAPDA.I doesnt know where to go? What to do? How to do? The marketing manager is very much worried after listing these words. Manager called the urgent meeting of the all the Managers. The agenda of the meeting would be making the new marketing and selling Plan. The most difficult question for what our other customers at big level are, another thing which needs to correct is that how they can save their employees and reduce the turnover rate.

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Exhibit 1: Profit & Loss Account / Statement of Income Financial Results (Rs. in Millions) Gross Sales Sales Tax and Discount Net Revenue Cost of Sale Gross Profit Operating Income Operating Profit Costs Distribution cost Administrative expenses Other operating expenses Finance cost Profit Before Taxation Provision for Taxation Net Profit for the Year

Dec,2010 19,895,448 2,372,792 17,522,656 13,814,754 3,707,902 50,936 3,758,838 1,057,011 751,075 65,934 1,623,611 3,497,630 261,207 72,184 189,023

Dec,2011 13,547,832 2,310,594 11,237,238 10,388,689 848,549 36,032 884,581 692,835 682,815 13,890 1,413,055 2,802,595 -1918014 -649,495 -1,268,519

Change -32% -3% -36% -25% -77% -29% -76% -34% -9% -79% -13% -20% -834% -771%

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Exhibit 2 Year 2008 2009 2010 2011 2012 Total Employees 508 524 530 492 524 Employee Left 15 12 45 150 56 Turnover Rate 2.95% 2.29% 8.49% 30.48% 10.69%

Exhibit 3 HR policy: PEL is a leading manufacturer of Electrical & Appliance goods in Pakistan, focusing on both industrial and consumer segments. The company has strong foothold in the power equipment market and is well established in home appliances market. Now, having the strategic business partnership with LG home appliances & air condition business, Company is looking for experienced, qualified and dynamic individuals with passion to grow.

Exhibit 4 Training Program and Hiring Procedure

Training System

On Board Training New Employee Training Company 5S Policy

On Job Training Outside Training In House Training Professional Training New Product Training Training Via AV-Aid System On Campus Study Management Training Level

Let Employee go or they Leave on their own

Hire Based on Need

Some Succeed Some Fail

Rush on to the Floor(Limited Training)

Train while with customers

Exhibit 5

S/NO

Name

Designation

Employee Number 1522 1524 1554 1559 1572 1897 1898 1906 2604 50439 50888 51357 51372

Basic Salary 4602 4984 4547 3522 6226 5002 4678 4915 3992 2489 4269 2533 2773

1 2 3 4 5 6 7 8 9 10 11 12 13

M.Arshad Abdul Ghaffar Muhammad Ayyub Abdul Bari M.Ayoub Asghar Ali M.Shahid Abdul Hafiz M.Yasir Amanat Ali Asif Shahbaz Ali Muhammad Zahid Muhammad Iqbal Muhammad Rizwan Luqman Ghani Riaz Ali Munwar Hussain Abdul Khaliq Ghulam Mustfa Hussainain Ali

Fitter Fitter

Present Gross Salary 9282 9703 9146 8002 11192 9820 9477 9446 8288 7609 8815 7553 7693

Evaluation Grade O A B B E A D O G E S G O

Additional Monetary Benefit 0 2000 1900 0 400 2000 350 0 200 400 1800 500 0

Expected Gross Salary 10202.4 10650.6 10028.05 8530.3 13048.5 10670.3 10378.7 10729 8986.8 8481.25 8815 8032.95 8647.6

Difference

920.4 947.6 882.05 0 1856.5 850.3 901.7 0 698.8 872.25 1800 479.95 954.6

Core/Ass Core/Ass Head worker Winder Electrician G/Welder Painter Winder P/Opp Fitter

P/Opp

14

Fitter

51389

2417

7637

400

8641.25

1004.25

15 16 17 18 19 20 21

Fitter Fitter Winder

51410 51414 51446 51523 51538 51569 51579

2386 3414 2136 3584 2113 2093 2156

7606 7905 7256 8175 7333 7313 7176

G O O E O S G

400 0 0 400 0 500 1200

8363.9 8937.8 8033.2 9271 8305.6 7313 7699.4

757.9 1032.8 777.2 1096 0 0 523.4

Painter Painter Winder Fitter

Questions to Discuss: 1. Is it right way to bring fast change? 2. What should company do now to get rid of the problem? 3. How they can prepare the employees to accept change? 4. Is 360 degree feedback essential as compared to previous system launched by Mr.Imran? 5. How should PEL make sure the sales of the Transformers in Pakistan? 6. Should management role out management by objective (M.B.O) or not?