Professional Documents
Culture Documents
INDUSTRY
MEHAD AZEEM
ASIM QAYYUM
Islamabad – PAKISTAN
2 ARMY WELFARE TRUST – A CASE STUDY
SESSION 2010-2011
Undertaken By:
MEHAD AZEEM
REG. NO. SP2009/MSC EM/138
ASIM QAYYUM
REG. NO. FA2010/MSC. EM/143
Supervised By:
DEDICATION
ACKNOWLEDGEMENT
Here I must appreciate the efforts of our worthy Instructor
Mr Khusro Pervaiz Malik and Teaching Assistant
Mr Faisal Shafique But without their help and support this
activity would not have given the desired dividends. The
close cooperation and support provided by the staff of
ASKARI COMMEICIAL BANK specially the Branch Manager
AWT Plaza Mr Sher Afgan Khan , Manager Operations
Mr Syed Nadeem and Country Head
HR Mr Zahid Chaudry. It will be unjust if I forget Branch
Manager Askari Commercial Bank Tufail Road Lahore
Branch Mr Akmal Wajid along with Manager Operations MR
Amir Riaz Raja.
ABSTRACT
Management is a process of designing & maintaining environment in which
individuals, working together in groups, efficiently accomplish selected aims. In other words
we can define the term management as the process of using “Organizational resources” to
achieve the Organization’s goals through planning, organizing, controlling and leading.
Management audit is done when the company or the given project deviates from its goals at
large and the outcome is not as desired; thereby ascertaining the areas where the fault lies.
From the finding of the audit the restructuring as well as reforms are introduced.
In this case study an attempt will be made to discuss the working direction, role of
each department and the role of skilled labor prevailing in AWT. Different management
techniques and tools for the highlighting all the good and bad practices will be used. Apart
from SWOT analysis and Balance Score Card, an endeavor will be made to collect
information/ data directly from employees through Questionnaire. After carrying out in-depth
analysis including operational philosophy of AWT, the panel will be suggesting different
measures and broad outline of restructuring plan as essential ingredients of the ‘Way
Forward’ for AWT.
CHAPTER 1
1.1 Historical Perspective
Army Welfare Project started with a modest asset base and high ambitions. AWT is a
story of perseverance, innovation, business acumen and going beyond the frontiers in Banking,
Cement, Insurance, Aviation, CNG, Agriculture, Manufacturing, Sugar, Security Solutions, Real
Estate, Lubricants, Defence Procurement and Trading and many other diverse fields. Army
Welfare Project Fund was established in 1971 and was registered under the Societies
Registration Act XXI of 1860. The name was subsequently changed to Army Welfare Trust
(AWT) during 1974. The primary sponsor of AWT is the Welfare and Rehabilitation (W&R)
Directorate, General Headquarters, Pakistan Army.
1.2 Objectives
Primary objective of AWT as stipulated in the Administrative instructions of 1972 is:
"Objective of the Trust is to undertake safe and profitable commercial activities in a manner that
portrays AWT's image as a respected market leader while generating maximum funds for
meeting the welfare requirements of the Army."
1.3 Management
1.3.1 Committee of Administration (COA)
b) To lay down broad lines for the guidance of sectional policy (financial,
production, marketing, personnel, research, public Relations etc), within
the framework of the general policy of Committee of Administration.
c) To ensure that the legal obligations of the Organization and its Projects are
appropriately discharged.
e) Within the frame work of the policy to authorize capital expenditure and
the disposition of profits or losses arising, in the conduct of the project’s
affairs including sanction for purchase and sale of land, buildings or other
assets and the custody of projects/firms/enterprises/property.
a) Strategic planning;
b) Policy formulation;
c) Legal protection;
d) Monitoring the performance of projects and investments; and
Affairs of the Trust are managed by Board of Directors (BOD) led by the
Managing Director (MD) of AWT. The BOD members also act as Divisional Heads and
are actively involved in the operations of the Business Units (BUs) of AWT.
a) Agriculture.
b) Real Estate.
c) Financial services.
d) Manufacturing.
e) General Services.
AWT currently owns or has shareholding in the following BUs; details of their
performances are given as under:
p) Blue Lagoon
u) Al-Ghazi Travels
v) Services Travels
1.3.5 Workforce
% in total
Table 1.1
Fig 1.1
CHAPTER 2
ANALYSIS
CHAPTER 2
2.1 Appraisal of AWT Functioning
2.1.1 Governance
COA in its present form is highly dependent upon the input from the BOD
of AWT. Investment decisions in the past have been taken on investment briefs
and presentations made to COA. At times it appears that these investment
proposals were not supported by professional feasibility studies. It seems that
AWT has not been able to define its strategic direction as yet; this notion is
evident from the fact that the expansion of AWT resulted in investments in 33
different BUs in 22 sectors. Such a diversified investment portfolio may be the
result of a lack of strategic direction and focus. AWT has failed to create a
corporate culture and HR policies are generally suitable for public sector
organizations, reflecting deficiencies in the Global policy.
The current role of the Directors, which in turn is the role of the Head
The Board of Directors and the MD is inducted into AWT on fixed term
contracts. The MD has even a lesser term of 3 years as compared to other Directors
who are inducted for 5 years. Continuity of policies is a vital component of success
and frequent changes at the top level has caused the problem of continuity of
policies due to the power structure at BOD level. Current composition of the Board
of Directors gravitates heavily towards administration and management, while
industry expertise and experience is generally lacking. Fixed term tenures also
nullify the benefits of learning curve particularly when a Board Member is
removed after he has become fully conversant with the policies procedure and the
business operations.
As explained earlier at present the BUs of AWT are extensions of the Head
Office and in most of the cases Head Office exercises excessive control over BUs.
Other than the financial sector in BUs owned by AWT, almost none of the BU is
headed by professionals having pertinent industry background and experience.
Lack of business acumen at BU head level restricts the operational capabilities of
respective units.
Vision and mission statements set the destiny and future course of an
organization and without these, an entity has no defined future course of action or
target. Every organization has a purpose, and should have devised plans to
achieve its ultimate purpose or goal. Unless every member of the team explicitly
knows this purpose, the direction of the organization cannot be set and will lose
focus. AWT does not have an agreed strategic mission or vision statement or its
strategic intent. Each Member of the Management has his own perceived mission
or vision. However, there is a consensus among the Members of the Management
that the purpose of the Trust is to generate funds for the welfare of personnel of
army and their families. It is also felt that the creation of employment for retired
personnel is another aim of AWT. There is also confusion on the role of welfare
at AWT, to the extent whether the welfare is through providing employment to
the retired army personnel or generating funds for welfare, or both. The absence
of agreed mission, vision and strategic intent has created fundamental problems
Budgeting is the only tool of planning and long term strategic planning is
non existent. Corporate level planning exists to a limited extent at the Corporate
and Development (C&D) Division. The C&D Division is responsible for the
implementation of all new investment initiatives. Due to limited in-house
capabilities corporate planning is deficient. Cost and profit centre concept does
not exist at majority of the BUs and at AWT and the Managers are not held
accountable for their inability of meeting financial goals. Lack of planning has
restricted their ability to anticipate future events and accommodate for it. It is
essential that planning may be done on a short, medium and long term basis.
Further, detailed budget variance analysis is not carried out, to identify and
evaluate the reasons for variances from the budgeted targets, which consequently
leads to limited, if any, action taken on the basis of budget variances. Therefore,
overall performance appraisal and reward and punishment system is not linked
with achievement of budgetary targets.
Up until 1991 AWT was a successful and profitable business house with a
limited extent of operations i.e. owned and managed eight BUs with asset base of
Rs. 1.493 billion thereby yielding profits of Rs. 113 million. The situation
completely reversed in 2002 and AWT found itself in all sorts of problems. Loss
for the year was Rs. 1.46 billion, asset base was Rs. 19.8 billion and it managed,
owned 33 BUs with total debt exposure of around Rs. 21.144 billion.
and are giving reasonable returns. However, cement sector has started to perform
recently and AWT is now covering its incurred losses.
stations has backfired and no CNG station on railways sites could be setup till the
writing of this plan. Strains of ill planning and delays in project implementation
can also be traced in the case of CNG project. Complete equipment for 25 CNG
stations was ordered, paid for and received without clearing any of the sites. Only
one CNG station is operational at present and AWT is left with sustaining huge
financial burden in the shape of financial costs on the cost of imported machinery.
2.1.5 HRM
The recruitment and selection procedures at AWT are not based on pure
merit, although the policy states that the basic requirement is competence. The
prospective candidates for formal employment have been divided into two
segments or categories namely Ex-Army / Navy/ Air force officers, and civilians
but army officers enjoy absolute preference. Furthermore, for armed forces
personnel the requirements for a post are based on the last position (rank) held in
the army. Ex Service Officers and civilians are employed only when Ex-Army
Officers are not available. There is a provision to recruit Officers on Special Duty
(OSDs) as and when required. No formal process is used to identify HR needs in
relation to corporate, strategic or operational planning in AWT Head Office and
projects (excluding corporate entities). Human resource management appears to
become active only when required. Whatever exists is in the embryonic stage and
stems purely from operational demands. The organization does not document
knowledge and skills required for key posts, and recruitment is not done on skill-
competency matching.
and realignment. Goals are not reviewed during the period, to ensure that
direction and deadline schedules are met. There is no formal process to manage
work load and there is little awareness of the need for it. Deadlines are more
common than work schedules. Routine jobs, strict guidelines for completing
work, and unmanaged workload not only adversely affects the quality of output
but also prevents emphasis on training or developing the work force. Performance
management system in place is inherently flawed, and does not reflect the true
performance of an employee. The goals and tasks are not defined and agreed with
respect to Management performance measures. There is no provision for
evaluating various managerial and functional competencies. There is a major
communication gap between the Management and staff. Communication is
usually downwards and one way rather being mutual. Furthermore, motivation of
employees is low, due to absence of formal career planning and link of
performance with compensation, both at AWT Head Office and projects. The
corporate entities performing satisfactorily do have formal performance
management systems.
There is no career progression for the army personnel because they are
hired on a fixed term basis. This adversely affects the staff morale and motivation
and dampens performance. No need is felt for development of employees. Staff
training is limited to occasional training courses conducted by Askari Commercial
Enterprise, which currently was limited utility for the organization.
Service Rules/ SOPs operative at AWT Head Office dates back to 1984
and since then, the document has not been properly updated. There have been
periodic ad hoc additions and amendments without corresponding revisions in the
projects is carried out on annual basis but it is delayed due to limited staff. Apart
from ACBL, ALL and AGICO, which have their own IA setup, the Head Office
IA Department is responsible of internal audit of all AWT BUs. All payments
above Rs. 100,000 are required to be pre audited. Special audits are executed
under the directions of the relevant authority.
Audit teams are selected according to the volume of work at the projects.
Normally a team of two to three members is allocated for the project. For audit of
major projects, the team is headed by GM (IA), whereas for other projects, a
Finance Officer conducts the audit. The IA reports are finalized at Head Office,
with prior discussion with the concerned project heads, and submitted to the MD,
AWT. Projects on receipt of IA report forward their replies to their respective
Directors with a copy to GM (IA), who analyzes the replies and give comments
on the replies received.
AWT does not have an internal audit manual. Audit programs are not
prepared for each internal audit exercise. The internal audit Department is
understaffed as there are a number of projects to be audited during the year and
therefore some projects are audited in alternate years. In addition, the internal
audit function is focused on the financial aspects of the procedures and controls
only, and does not have resources and technical competencies to broaden the
horizon and scope of IA. E.g. risk analysis, system improvements and redesign.
In 1996, it was decided that the primary functions at AWT Head Office
should be computerized. In the same year a Computer Section was established to
achieve this objective under the Technical Division. The tasks of the Computer
Section are to develop systems for relevant Divisions and Departments,
maintenance of computer hardware at AWT Head Office and conduction of
training courses for both Management and staff. After the establishment of
computer section various software were developed for different Divisions and
Departments. Recently the computer section was working on the development of
an ERP solution for Army Welfare Woolen Mills. The Computer section used
"Informix New Era" for the development of software's till 2000, but now Oracle is
being used. Oracle and antivirus program Norton' are not licensed.
2.2.1.1 STRENGHTS
2.2.1.2 WEAKNESSES
2.2.1.3 OPPORTUNITIES. The debt and the loan which the group has taken
from the external resources are to be paid back till the year 2013 so this
time of few years are available for the group to make use of this big
amount to invest in some profit oriented businesses. This is the major
opportunity which the group can avail. The increasing demand of the
Power sector is also the opportunity for the group to avail as in this sector
the investor has the security of his investment from the government side.
AWT has started to step in the Power sector. The increasing demand in the
alternative energy Renewable Energy is also the opportunity for this
group as this group is very rich in land that may be made available for the
production of the alternative energy like Bio diesel which is blend of the
pure diesel with oil extracted by the seeds of the Jatropha Plant, RSD
residual derived fuel and many other. Real estate is also the opportunity
for the AWT group.
2.2.1.4 THREATS
2.2.1.4.1 Major Loan Repayment. There are two types of the loan
which AWT group has acquired from different sources,
resources under the State Bank of Pakistan and the
resources which does not come under the state Bank of
Pakistan. The loans which are other than State Bank of
Pakistan are known as internal loans and the other loans are
termed as external loan. Internal loans are from the W & R
Directorate of Army. The main threat fro the group is the
repayment of the major loan to external resources which
includes other bank’s loan. This is the major threat for the
group as the time is very near when the repayment will start
that is year 2013.
2.2.1.4.2 Cement Industry. The other threat for the group is the
unbalanced portfolio which we have discussed in the
weaknesses also. Now the other perspective is that 70% is
in the cement industry if the cement industry goes in loss
then the overall balance sheet of the group will give loss
statement. The reason for this is the simple rule of the
supply and the demand of the market. The normal demand
of the market is 22 million ton but the supply is now a days
round about 30 million ton. So the demand is less than the
supply so this is also the threat to the group.
2.2.1.4.3 Post 2010 Scenario. Group has stepped in the Oil & Gas
industry by opening CNG stations which is also
contributing a lot in the profit of the group, but the situation
of the gas in Pakistan is that there will be a shortage of Gas
after 2010. If Pakistan fails to do a deal with Iran for gas
pipeline then this threat will increase in its intensity.
1.1 Cash Flow 2.1 Surplus cash flow is 3.1 Internal liabilities to be
circulated paid upto 2013.
The Financial Perspective represents the long term strategic objectives of the
organization and thus it incorporates the tangible outcomes of the strategy in traditional financial
terms. The objective of cash flow is achieved through the circulation of surplus cash to pay
internal liabilities not the external liabilities which are related to State Bank, the external
liabilities were deferred by State Bank till 2013 because of the restructuring of the entire group.
Rate of interest (ROI) was set to 5% growth till 2010 and further to 10% increase till 2013.
Financial results on yearly basis are compared to set further targets of the company. Return rate
on equity and capital is set to 14% including risk/hurdle rate, and further projects are only taken
if their return rate comes to the decided rate. Strategic assets of real estate are sold to invest in
power, oil and gas and paying of welfare schemes loans. Joint ventures with existing/ new
business partners are planned.
1.3 Core teams 2.3 Induction/training of core 3.3 Highly qualified indls
teams to decide Strategic induction with relevant
goals. mkt based experience.
Table 3.3
The Internal Process Perspective is concerned with the processes that create and deliver
the customer value proposition. It focuses on all the activities and key processes required in order
for a company to excel at providing the value expected by the customers both productively and
efficiently. These can include both short-term and long-term objectives as well as incorporating
innovative process development in order to stimulate improvement. The processes were made
smooth and effective by taking measures such as strictness in internal controls, Auditing,
Decentralization and removal of un-necessary bureaucracy, and implementation of SOPs
according to the developed Manuals. Highly qualified Professionals are hired along with
developing of Core Team which aligns the strategic goals with efforts. Dash board is a Software
based activity in which a daily progress report is generated of each Business units (BU).
1.4 Feedback 2.4 Strong feedback sys to ensure 3.4 Direct reporting to
System customer satisfaction. MD/COO of AWT.
Table 3.4
The Customer Perspective defines the value proposition that the organization will apply
in order to satisfy customers and thus generate more sales to the most desired customer groups.
A customer profile is maintained to that the most profitable customer is given desired output;
Marketing is a weakness in the company as and when compared with other counterparts.
Moreover business to business deals are preferred within the group except few units for example
Banks. Alongside other measures feedback system is made effective and a strong one in order to
ensure operational excellence and service.
1.8 Training 2.1 Outdoor courses offered to 3.1 Coord with local and
enhance skills. foreign universities for
professional Cert.
Table 3.5
The Learning and Growth Perspective is the foundation of any strategy and focuses on
the intangible assets of an organization, mainly on internal skills and capabilities that are
required to support the value-creating internal processes. To impart professional training and
improving skills of workers certification courses are offered in both local and foreign and
universities. Human Resource is then further assessed to check overall performance of the indls.
Employee turnover is reduced through retention of Professionals by giving market based
incentives and perks alongside internal promotions. Gender/race is not specific to any job or
appointment in the company.
2.2.1.5 Comparison of Benefits. Our main aim was to collect the data
from different companies for the comparison of the different benefits
availed in other companies and give you a brief comparison about these
benefits that are available in Army Welfare Trust group of companies. The
main data collected from the group was emphasized on Askari Bank. It
was very difficult for us to collect such a detailed data of different
companies but we are thankful to Mr. Sabir Mumtaz of Askari Bank HR
department who helped us a lot in this study. We collected data from 20
different companies and compared with AWT to have a clear picture of
the benefits comparison. The most popular benefits extended amongst the
data sample include loans, life & disability insurance, medical plan,
company car, housing assistance, variable pay, recognition awards and
assistance for professional development. Assistance for children's
education, telephones and leave travel benefit, however, are the least
prevalent. Company cars, housing in kind, club membership etc. are
typically limited to higher grades, while loans, medical plans, insurance,
recognition awards, professional development etc. are typically provided
to all employees in the organization.
Figure 4.1
Table 4
Policy Details & Market Trends Askari's Positioning
Provision All organizations, except two, extend Housing Loans In line with the mkt
&Eligibility
to their employees in all grades, subject to completion
of minimum service period.
Provision
All organizations, except two, extend Car Loans to
&Eligibility Provision: In line with
their employees subject to completion of minimum the mkt.
Eligibility: Behind
service period. A majority of the organizations
provide this loan to all employees, while a number of
other organizations that provide a car to Middle and
Senior management employees; do not extend a car
loan to them. Two organizations extend this loan only
to local employees.
their employees.
Medical Behind
(Hospitalization)
CHAPTER 3
WAY FORWARD
CHAPTER 3
3.1 Suggested Measures
3.1.1 Expansion of Committee of Administration. COA has to play a pivotal
role in achieving the restructuring objectives and future success of AWT. COA is
the highest governing body and de-facto is a direct stakeholder in AWT. It is felt
that the COA does not meet frequently enough for decision-making and mostly
relies upon the input of AWT Management. This plan in addition to the already
defined primary functions foresees a more proactive role of COA in future, by
assuming the role of investors and BOD comparable in private sector. It is
proposed that MD AWT instead of being part of COA meetings in attendance
may be made a member.
members of the Board of AWT and fixing their remuneration and terms of
appointment.
One of the major problems faced by AWT has always been professional
and technical input during decision making, advisory and control processes. The
BOD predominantly comprises members having no or little experience of
managing large scale, diversified and complex businesses. Competitive business
environment, timing and quality of business decisions is vital and demands
technical and professional input.
For the purpose of bridging the gap it is proposed that a core team of
professionals be recruited. The recruitment and selection of the core team will be
made by the MD in consultation with the BOD and recruitment professionals.
This team will fill the technical and professional competency gap within the
corporate office. The team will report directly to the MD AWT and will be
supported by small layers of professionals. The BOD and core team will not be
involved in project operations instead they will act as direction setters and
facilitators for achieving results. The team will also be part of the panel
responsible for recruitment of key personnel at corporate office and it's BUs.
Department.
d. Secretary.
e. Chief Human Resource Officer.
The core team of professionals will fill in technical and professional
competency gap at corporate level and add value to the business. Role of the core
team will be of planners, facilitators and advisors. BU and their function heads
will functionally report to the core team on all professional and technical issues.
The core team will also be responsible for the change management in direct
consultation with the AWT BOD.
Key actions that are required to be taken in respect of the core team are:
a) Prepare position profiles and fix duties and responsibilities of the
core team.
b) Define relationships between the core team, the MD, the Directors
and the Bus.
c) Fix remuneration package and terms of employment of the core
team;
d) Appoint core team of professionals.
e) Prepare a change management plan;
The concept of core team has been introduced in order to augment the skill
set and professional expertise of the top Management of AWT. On the other hand
while refraining from unnecessary interference in the operations, the core team is
envisaged to provide professional and technical support to the professionals at
BUs as and when requested / required or instructed by AWT BOD. The rationale
for recommendation of core team directly reporting to the MD has been made on
the basis of the fact that the ultimate responsibility for achieving the bottom line
and smooth functioning of the operations of the BUs lie with MD AWT and
therefore it is logical that the core team directly reports to the MD AWT.
The BOD will not be involved in operations of BUs nor will any member
be responsible for achieving results at BU level. A core team of professionals will
be appointed to augment the skill sets and professional expertise and assist MD
and BOD members on technical and functional issues. The core team will be the
monitoring arm of the AWT BOD and will ensure compliance with policies,
procedures and consolidated business plan of AWT. Without exercising any
executive powers, members of the BU Board will monitor progress on BU
business plans on the basis of periodic progress reports prepared by the BU
Management and review comments of the core team and advise the AWT Board
accordingly.
Key actions required are to:
a) Re-define relationships between Directors, MD, the core team and
the BUs.
b) Define duties and responsibilities of the AWT and BU BODs
under the new structure.
c) Disband current Divisional structure.
d) Form audit committee and fix responsibilities, accountabilities and
powers;
e) Improve remuneration of the Board Members to reflect greater
accountabilities and responsibilities.
f) Ensure compliance with good corporate governance practices
under guidance from the code of corporate governance.
even did not have vision and mission statements. Lack of business planning at all
levels of Management has created fundamental problems for AWT. Budgets are
prepared and financial targets are generally set without any verifiable basis. The
organization does not seem to have purpose and aim. Strategies at all levels
including corporate, BU and operational level are incomprehensive intern
strategic and operational intent of AWT is also deficient.
3.1.6 Investments
3.1.9 Finance
overall corporate objectives of AWT. The organizational structure will be redesigned to support
decentralization and cost and profit center concepts, with defined responsibility for achieving
performance goals at each level of organization.
The HR consultants will prepare HR manual and will be required to identify, mechanized
and non-mechanized business processes and prepare and update position profiles in light thereof.
Proposed general position profiles of key positions have been given as appendices A -M of the
report. These position profiles are suggestive and subject to revision on the basis of further
analysis. The human resource will be split into professional and support staff. Position profile
will be matched with skills and competencies of existing incumbents, with particular emphasis
on the professional staff. Based on profile matching, lists of existing staff to be retained and to be
made redundant will be prepared. Care will be taken that, as far as possible, existing employees
will be retained and any competency gaps which could be filled will be bridged through training.
This policy of retention would be applied particularly to the support staff, and they will only be
made redundant where absolutely necessary. However, the consultants would ensure that the
future hiring by AWT is based entirely on merit. Further, specific position profiles for all the BU
heads will be prepared and profiles of incumbents will be matched therewith. For guidance, a
generalized profile of BU head has been included in the appendix-M of this report. BU heads
matching the position profiles or easily trainable will be retained and developed further. further
and all others will be placed on the list of employees to be made redundant. Training Need
Assessment (TNA) for the staff to be retained, will be carried out to determine the training needs
for retaining and better utilization of the existing staff. All vacant positions will be filled through
an independent and transparent process.
The HR initiative will include improvement of recruitment, selection, performance
management and career progression process. In addition, steps will be taken to make
compensation and benefit packages and terms and conditions of employment competitive. These
activities will be in line with new corporate vision of a lean and effective organization. These
policies and procedures will form the basis of HR manual which will be the final deliverable of
the HR consultants. For the purposes of bringing the compensation and benefits in line with the
market trends, consultants will be engaged to conduct compensation and benefits survey.
Compensation packages and employment contracts will be revised in light of the findings of the
survey report.
Information Systems (IS) Initiative
A separate MIS Department will be formed and would be directly reporting to the Chief
Operating Officer. The Department would endeavor to provide for all the information
requirements of the Group and its projects, including information required for decision-making.
The Department would obtain all pertinent operating information from the BUs and summarize
and analyze the information in a manner which is useful for the decision-makers. A standard
procedure for information collection, analysis, compilation, reporting and storage would be
devised by the Department. They would therefore be responsible for liaising with all the projects,
mutually assessing their information needs, facilitating the provision of complete, relevant and
timely strategic information to the Higher Management, including the MD, BOD and core team.