Lessons from China: Right man on the right job should never retire

LAHORE: Pakistan’s ruling regime should take a leaf out the policy the Chinese have successfully been employing to metamorphose their loss-amassing public sector enterprises into profit-piling global corporations. If this can’t be done then all the dying state-owned entities of the country should immediately be privatised.

It has been observed that assigning the toughest tasks to the strongest and the most productive executives for the long-term has been the hallmark of the highly successful public sector enterprises in China. That is to say the right man on the right job never retires in the Asian 

There are two schools of thought in Pakistan as far as managing the loss-making public sector enterprises are concern. Some propose revamping these entities through reforms and others advocate outright privatisation to save losses of billions incurred by these enterprises.

It is a fact that public sector has failed to deliver in Pakistan despite receiving hundreds of billion rupees every year. Public sector, even if it is in profit, lags far behind the private sector in the same field the world over. There are exceptions as has been observed in China, where public sector enterprises have made inroads in the global markets and are growing at an astonishing rate.

In the past, the public sector companies in China were performing as badly as the current day Pakistani enterprises. However, in the last three decades these enterprises have transformed into highly profitable organisations. One thing that distinguishes these successful public enterprises is that they are being managed by the same person that revamped them for the last three decades or more. When these enterprises were running losses, changes of the management were also frequent. Nevertheless, when the right man took over and showed improvements in initial months, he was retained to complete the transformation and even after the company had attained a sustainable growth momentum.

In Pakistan, the heads of large public sector enterprises are mostly appointed on political grounds and are shown whenever the government changes. Political appointees seldom deliver but some that do are removed because they refuse to induct employees recommended by the incoming rulers.

Noor Khan, for instance, was taking the Pakistan International Airlines (PIA) to a new height but was removed with the change of government. None of his subsequent successor was able to maintain that momentum. It has also happened in other public sector enterprises. The story is different in China where only those were removed that failed to achieve the given production targets but those that delivered were retained for the rest of their life.

During my three visits to China, I found the performance of their public sector companies in the 80s was as lethargic as that in Pakistan. They then finally realised that a strong and competent human resource is the only answer to make public sector companies successful. In industry, for instance, the state-owned home appliances’ plant at Qingdao was incurring regular losses each year. 

The chief executives of the company were replaced many times until Zhang Ruimin a middle age executive was appointed its managing director in 1984.  The factory had a debt of over CNY ¥1.4 million and suffered from dilapidated infrastructure, poor management, and lack of quality controls, resulting from the planned economic system and relevant policies.  By 1986, Qingdao Refrigerator had returned to profitability and sales growth averaged 83 percent per year. With sales of just CNY ¥3.5 million in 1984, sales rocketed to CNY ¥40.5 billion by 2000; a growth of more than 11,500 times.

Zhang firmly believed in delivering the best quality products. In 1985, when he put the refrigerators of the company to quality test, it was found that in one batch 20 percent of the machines were faulty. He removed the defective refrigerators and allowed sale of only the perfect machines. Since the faults were minor it was suggest by his staff that these refrigerators having minor faults be given at discount to the staff. He refused saying that no substandard product would leave the factory premises and asked the staff to destroy the entire defective lot with sledge hammers. The price of one refrigerator at that time was equivalent to two years’ average salary of a worker. From that day onward, no substandard product left the factory, which is now known as Haier Group. Even after 35 years Zhang still heads the firm that is now the largest global producer of home appliances. The Chinese philosophy is that as in private sector the one that transformed the company never retires.

Chinese Agricultural scientist Yuan Longping came up with an idea for hybridising rice in the 1960s, when a series of natural disasters and inappropriate policies (The Great Leap Forward) had plunged China into an unprecedented famine that caused many deaths. He is known as ‘father of hybrid rice’ and continues to work even after 45 years. The state-owned hybrid rice company, he heads continues to introduce super high-yielding hybrid rice varieties that are eliminating hunger the world over.