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CEOs in Public Sector and Government

Traditionally, in most countries, the public sector significantly contributes to a nation’s economy. Solely owned by the government or by government-private partnerships, the public sector often controls businesses in some of the core domains. These are typically areas of national importance like power, banking, defence, public services, or sectors that require large government spending like oil and gas—Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), Hindustan Aeronautics Limited (HAL) and Coal India Limited (CIL) to name a few. Many of them are the ‘Maharatna’ Companies—a department of public enterprises which are classified based on high financial performance. Public-sector firms are often present in many domains where the private sector is also very active—like airlines and tourism. However, as with many world economies, the Indian government is now moving away from more competitive areas where private players play a major role. The CEOs of public-sector organizations have an important role in running a business entity where the government is the key shareholder and accountability rests with the board of the company and the government.

Competencies of CEOs in the Public Sector

In 2002, an eighteen-month empirical study1 was conducted under the aegis of the Public Enterprises Selection Board (PESB), the apex body for selecting the top management in public-sector companies in the country, with the support of BPCL and the Hay Group to study the competencies that are required by CEOs in India (with focus on both public and private sectors). The study identified critical competencies of CEOs in public-sector firms and also compared them with the private sector. The competencies were put in four broad categories:

  1. a) Socially Responsible Business Excellence
  1. b) Energizing the Team
  1. c) Managing the Environment
  1. d) Inner Strength

The study, which covered more than 100 CEOs, also indicated that public-sector CEOs were better in stakeholder influence (boundary management), transcending self, energizing the team and higher empowerment with accountability than private-sector CEOs. The latter were better in adaptive thinking, driving change and networking. Public-sector CEOs have to manage a greater number of stakeholders than a typical private-sector CEO. For example, in a public-sector unit managing government officials (ministers, bureaucrats and public representatives) is a major task. Often CEOs have to influence the government for regular business operations and at policy levels to ensure competitiveness of the organization. For example, Deepak Kumar Hota, the chairman and managing director of BEML Limited, says that he has to influence four ministries as part of managing the business—defence, railways, urban affairs and mining. He also has to work in close connection with the army to ensure good business relations. BEML also works closely with a number of international players for its operations. This also leads to another complexity; that of maintaining win-win relationships. It is important that the CEO wins the trust of the international partners to ensure collaboration, technology transfer and a joint go-to-market strategy. Effective CEOs in the public sector should be able to manage relationships effectively with various stakeholders.

PESB, the high-powered body that supports the government in decisions related to selection of personnel for top management roles in central public-sector enterprises, has provided guidelines with regard to the experience required for the role of managing directors. The key aspects are: top management experience of working on the board or a level below, graduation as a minimum qualification and a sound professional background. Often candidates have worked at the board level as functional directors or already held major positions such as managing directors. The important aspect here is how the individual shows consistent performance and rises through the ranks in the public sector.

Deepak Kumar Hota, CMD, BEML

Deepak Kumar Hota became the CMD of BEML in July 2016. He joined the board of BEML in July 2013 as director (human resources). Deepak has an honours degree in economics from St Stephen’s College and a postgraduate degree in human resources from Xavier School of Management (XLRI). He has over three decades of professional experience in HR and business, and has served in various capacities in Hindustan Petroleum Corporation Limited (HPCL), including serving as the CEO of HPCL Biofuels Limited. Prior to joining BEML, he was heading the natural gas division at HPCL, Mumbai.

What were the new challenges you faced after you took over as the CMD of BEML?

I was fully aware of the organizational context of BEML being the director, HR, for three years. However, the challenges that had to be addressed were on three fronts.

  1. a) Changing the culture: BEML had a risk-averse culture, where people were hesitant to take decisions, and this often slowed down the organization. Ghosts of some past events had made people very cautious and approval was always sought from the topmost level. One key area of my effort was to change this culture.
  2. b) Performance orientation: In the public sector, people often stick to one job their whole life and performance takes a back seat. We started focusing on having discussions that clearly outlined the gaps in performance and gave directions on how to improve. This, along with consequence management, helped us create a better work culture.
  3. c) Aligning human resources: Efforts were made to ensure that the right people were taking up the critical positions. This was done to ensure that the organization delivers as per its potential.

As the CEO of BEML, what were the changes that you brought in your first year?

In the first year, my focus was on enhancing the performance of the organization. This required extensive work with our customers—ministry of defence/army, rail and metro, coal and mining. I also had to invigorate our global technology partners. Extensive efforts to build relationships at various levels in the government and pushing the case for BEML helped us secure high-level orders and also explore opportunities. This helped us secure a growth rate of 91 per cent year-on-year.

What do you think are the key skills of being a CEO in the public sector?

In my experience, some of the critical competencies of a CEO are:

  • Ability to manage pressure: CEOs should be able to manage various aspects of running an organization with demands from both internal and external stakeholders. Time management also becomes a critical competency. You will have to prioritize, multitask and manage the most critical aspects first and also make sure that the team takes on the accountability.
  • Managing relationships and people: It is important for the CEO to be able to manage relationships with key stakeholders. Having good relationships can help the CEO remain in the role.
  • Networking: To be effective as a CEO, it is important to build connections in the government, and with international technology partners. This helps in increasing the visibility and competitiveness of the organization.
  • Domain knowledge: While this is not the most critical aspect, CEOs should have a good understanding of the organization’s strengths and products. This helps to manage the organization better.
  • Managing change: CEOs should be able to influence change and align the various aspects of the organization to bring about desired results.
  • Managing within the structure: It is important to understand that the public sector and government have set processes of governance in decision-making. An effective CEO is able to leverage these processes rather than be limited by them.

Looking back, what were the different experiences that helped you to prepare for this role?

I grew pretty fast in the initial phase of my career in human resources. However, I took on business responsibilities focusing on marketing and business operations to get a more holistic view. I also got a lot of inputs from people like Manav Bose, who was my mentor at HPCL, M.B. Lal, the former chairman of HPCL, U. Sundararajan, the former chairman of BPCL and Prof. Debashis Chatterjee, the former director of IIM Kozhikode. They helped me become more confident about taking on higher responsibilities.

In your opinion, why do some CEOs in the public sector fail?

It is important for CEOs in the public sector to be very balanced in their approach. Recklessness in behaviour—especially in decision-making and the inability to manage relationships in the government—can be extremely detrimental. You should also be astute and take the team along. Creating unnecessary conflicts with internal and external stakeholders can create issues.

Deepak Hota’s view of the key competencies required by public-sector CEOs is similar to the competencies identified by research done by PSEB. Ability to manage relationships and change stands out for public-sector CEOs. With dynamics changing in business and politics, public-sector CEOs are also expected to have the capability that will help them cope with the new environment. A survey on CEOs by PwC2 listed four key aspects.

  1. Competing in an age of divergence: After globalization, the impacts of national policies, unrest and technological changes are creating bigger challenges for organizations. It is important for CEOs to cope with these changes and manage the risks for the organization.
  2. Managing man and machine: Skills that were earlier provided by humans are being taken over by machines. It is important for CEOs, especially in the public sector, to acknowledge this change and cope accordingly. Automation is becoming important to remain competitive and the CEOs should be cognizant of this.
  3. Gaining from connectivity without losing trust: With technology embracing multiple aspects of the business, it is important for CEOs of public-sector organizations to imbibe them. However, it is also important to show the organization still believes in the basic value of trust. It is also critical that threats to technology like data privacy, hacking and IT disruptions, do not damage the trust in the organization.
  4. Making globalization work for all: It is important that the public sector helps in creating a fairer society. It is also essential to impact the basic infrastructure of society positively. Balancing the interests of business and society is the key here.

While many of these are applicable to the private sector as well, the expectations from CEOs in the public sector are much higher. For many private banks in India, embracing technology and using it for operations was normal. However, for banks like the State Bank of India, which is the largest public-sector bank in India, adopting technology was a challenge due to resistance from the employees. In the past years, under the leadership of Arundhati Bhattacharya, SBI has revamped its operations and product portfolio with the use of technology and digital platforms. This has helped the bank align with changing customer preferences and be more efficient to drive growth.3 Similarly, BEML has emerged as a major player in the metro coach business—serving customers like Delhi and Bengaluru Metros. BEML was able to effectively forge technology partnerships with some of the world leaders in the field and leverage them to compete with other players, winning some of the largest orders in the country. This shows that it is important for CEOs in the public sector to anticipate changes and adapt effectively.

Often, the public sector bears the brunt of technology obsolescence, operational inefficiencies, lack of accountability and performance by employees, and not changing with the industry dynamics. Public Sector Undertakings (PSUs) become ‘sick’ and this may even lead to their closure. In such cases, there is a need to appoint turnaround CEOs who can bring back the organization as a viable business proposition. An interesting case here would be that of Air India. The company has been incurring losses for a long period and has a huge debt. There are a number of factors including poor service, employee attitude and even a difficult market situation. Ashwani Lohani joined as the CMD in 2015 with the mandate to turn the company around. Ashwani is known as a turnaround leader, who has already turned around two other organizations. He was perfect for the role as he possesses qualities such as personal integrity and a high level of professionalism. While turning around an organization like Air India with its massive debt and legacy issues is a mammoth task, as of 2017, Ashwani’s efforts have led to a mixed bag of results. Air India has made highest-ever operating profits, increased its revenues and reduced losses. However, many parameters including on-time performance, load factor and customer satisfaction are still the worst in the industry.4 Although the mandate to turn around Air India had not been fulfilled, Ashwani was appointed as the chairman of the board of Indian Railways in August 2017. Turnaround CEOs have to be strategic, take tough decisions and lead the change. This also requires considerable personal endurance and commitment.

Leading in Government

Leading in the government is complex and different from leading in other enterprises on multiple fronts. First, in a democratic country, government leaders are expected to work in alignment with elected representatives. The incumbents who hold key positions in government are political appointees or bureaucrats. The positions in government are often much bigger than that of a CEO in the private or public sector, and often the influence is directly felt by society. In India, for example, a district collector who is the CEO of the district administration even holds quasi-judicial powers. Very early in their careers, Indian civil service officers get opportunities to work in positions that have considerable scope and power. They often move to and fro from public-facing roles like a district collector to departmental postings like managing director of public-sector enterprises and corporations, and secretary of various departments. They also get deputed to various central government positions. As they move ahead to lead some of the key government departments or even become the chief secretary, the officers gain a lot of experience managing stakeholders and large-scale social programmes, and get a good understanding of laws and regulations.

I had the chance to interview Prasanth Nair, IAS (Indian Administrative Service), who was the district collector of Kozhikode, Kerala. He had done over six major and five minor stints in a career of over ten years. Five of his postings were as the managing director of state-run enterprises/corporations. The rest of the postings involved handling major government projects as the district administrator. He states five key qualities that helped him to be effective:

  1. a) Close connection with the citizens and their issues
  2. b) Being accessible and compassionate to the public’s needs (use of technology and social media)
  3. c) Having a direct impact on citizens’ lives
  4. d) Having a clear personal vision and purpose to create a change in society
  5. e) Ability to pool resources and support to create change

However, Prasanth Nair has been in the midst of controversies that involved political leaders.

Although many competencies of CEOs remain consistent across operating contexts, leaders in government need to be more proficient in certain skills. Some of the characteristics are: being ethical, authentic, having a reputation, optimistic about making things happen and being self-aware.5 Similarly, a study conducted by the Center for Creative Leadership (CCL), a firm focused on leadership research and development,6 on government leaders found that leadership qualities, resourcefulness, straightforwardness and composure, building and mending relationships, and participative management are key competencies required to be successful in the government.

In the government, important roles such as heading the Reserve Bank of India (central bank), NITI Aayog (National Institute for Transforming India), or government secretaries need a high level of strategic thinking, ability to influence multiple stakeholders, and to manage change and execution. Many of these key positions in India or abroad are handled by seasoned bureaucrats who come from the civil services. They have the ability to manage the bureaucracy, society and the elected ministers. For example, Amitabh Kant, the CEO of NITI Aayog, is a 1980-batch IAS officer. In the past, he has successfully handled multiple administrative roles. Sonya Dutta Choudhury7 in her article in Mint, profiled three successful IAS/IPS officers—Amitabh Kant, Kunal Prakash, assistant collector, and Sanjay Sahay, additional director general of police. The article states the critical skills that make these officers successful:

Indian Civil Services largely remains a broad-ranging service and most of the officers are expected to possess broader management skills rather than being specialists. Whether civil services officers should be specialists or generalists is often a debate. In the UK, the Fulton Committee in 19688 pointed out that the lack of specialist administrators is not helping civil society. It is often seen that generalist officers handle the roles of CEOs or their equivalent in many public-sector entities. In India as well, often specialists are brought from outside to handle critical leadership positions.

In the UK, the various competencies required by public-service officers are well-documented.9 A few of them that are different from leaders in other sectors are:

  1. a) Working with the bureaucracy and the government, especially ministers
  2. b) Public communication and dealing with media
  3. c) Managing change
  4. d) Managing public money
  5. e) Managing large public projects

Successful public leaders are able to manage and lead change involving multiple variables such as political leaders, citizens, bureaucrats and various agencies. Often, leaders do not take bold steps and miss the chance of leaving a legacy in the office they hold.

The need for accountability and responsiveness has also increased manifold. An article10 about civil services attributed it to:

  1. a) A more intrusive 24/7 mass media
  2. b) Rising public expectations of the government
  3. c) A less deferential and trusting citizenry
  4. d) Globalization and the diffusion of power
  5. e) Policy challenges that require joined-up, cross-boundary responses
  6. f) Greater electoral volatility, making it harder to achieve public consent

An effective government officer should have the ability to manage stakeholders, have a contemporary view on policies and economics, and expertise in one or more areas like project management. They should also be able to deliver in difficult situations. Exceptional leaders in public service are able to innovate in their realm and bring a change to society. A good example of this would be Dr E. Sreedharan, who is known as India’s ‘Metro Man’. He is widely respected for projects such as the Konkan Railway, Pamban Bridge, Delhi Metro and Kochi Metro. Forbes India, in an article on Dr Sreedharan,11 mentions some of his expertise and key leadership skills. His extraordinary ability to manage large and difficult projects helped him deliver what he promised. Project management, engineering and technical prowess are some of his key strengths. As a leader, he has the ability to take timely and correct decisions, and manage stakeholders in the government and large teams. He is also disciplined and above all has integrity and ethical conduct.