Punjab manufacturing units score low on MOPS

LAHORE: Management and Organisational Practices Survey (MOPS) reveals that management practices in Punjab and Islamabad’s manufacturing plants have lower average management scores than the US, and a higher level of dispersion, suggesting that weakly managed firms exit more slowly in Pakistan.

Punjab was chosen for the survey because of its better response rate in 2010 Census of Manufacturing Industries Survey, and its better law and order situation, compared with the other three provinces.

The survey was funded by UK aid and directed by London School of Economics and was conducted in partnership with the State Bank of Pakistan (SBP) and Pakistan Bureau of Statistics (PBS).

According to the researchers, MOPS methodology was used for the first time in Pakistan. It was felt necessary to carry out this survey as Pakistan has recently graduated to lower-middle income classification.

In 2014-2015, the surveyors conducted face-to-face interviews of plant managers in over 2,000 establishments in Punjab and the Capital Territory of Islamabad. The ICG researchers hoped to carry similar surveys in other provinces in future.

Rated on a scale of 0-1 (where 0 is worst and 1 best) concerns in Dera Ghazi Khan were best managed with a MOPS score of 0.558, followed by Rawalpindi 0.519, Multan 0.517, Islamabad 0.484, Lahore 0.460, Sargodha 0.455, Gujranwala 0.433, Faisalabad 0.401, Bahawalpur 0.390, and Sahiwal 0.360.

The survey conducted scientifically has negated the common perception that management and organisational practices are better in Lahore and Faisalabad that are ranked 5 and 8 respectively out of 10 cities surveyed.

The survey also showed that management practices widely vary in different sectors. It was found that the pharmaceutical sector was best managed among 16 sectors surveyed. The management score for pharmaceuticals was 0.514 followed by apparel that has much lower score of 0.482.

Motor vehicles were the third in management practices with a score of 0.457, followed by leather products 0.454, chemical products 0.452, textile 0.448, electrical equipment 0.446, wooden products 0.442, food products 0.436, other transport equipment 0.434, rubber and plastic products 0.409, paper products 0.408, fabricated metal products 0.406, machinery and equipment 0.396, basic metal products 0.386, and non metallic mineral products 0.366 score.

The survey showed that one of the reason for the troubles in basic textiles was bad management practices; textiles was ranked 6th among the 16 sectors surveyed. The value-added apparel sector is better managed and hence is performing better.

However, none of the manufacturing sectors in the country is ideally managed. Banks being in the service sector were not included in the survey. Looking across almost 2,000 establishments, the researchers found wide variation in the management score across firms (and areas within Punjab). Establishments with higher management scores are significantly more productive, profitable and grow faster. 

According to them, one standard deviation increase in the management score is associated with 21 percent higher labour productivity – almost identical to the US. As in other work, well managed firms are larger, more skilled, more likely to export and older.

The survey included 36 multiple choice questions about the establishment. The questions are split into three sections: management practices (16 questions), organisation (13 questions) and background characteristics (7 questions).

Exporters account for 36 percent of establishments in Pakistan against 42 percent in the US. In the PK-MOPS, it was also observed that seven percent of establishments are owned by Public Limited companies, 27 percent are partnerships, 29 percent are of individual ownership, and 37 percent are owned by private limited companies. It was also observed that establishments partially or wholly owned by the state amount to less than one percent.