Selecting a CEO for the highest profit making PSU

Selection of a CEO for any company is a terribly tough task. Selecting a CEO for one of the most valuable companies of the country - in my opinion - is even tougher than selecting a CM of a state. The qualifying criteria for such positions serve practically no purpose except reducing the number of applicants to save efforts and time of the process by eliminating the candidates who are most unlikely to be suitable. 

The company has been a golden egg laying goose, which has not been slaughtered for extracting all the eggs, but has been abused from time to time to get the most out, instead of having been provided nutrition to lay bigger eggs. 

Before we proceed, it would be important to appreciate the juncture at which the company stands now. 

All of its oil fields are now on a steep decline, having passed their prime and badly need effective EOR solutions for scraping the bottoms of the reservoirs. Most of the production facilities both onshore and offshore and drilling and work over rigs have lived their lives and need to be either replaced or overhauled. In fact many of them may now be a threat to the safety of the personnel and the environment, leave aside the inefficiency. 

It has a new, very challenging area on the threshold of development, which has been on the back burner for about four decades for want of high technology and favorable economics. 

It has an even more challenging frontier in the name of HP-HT fields where the industry the world over has been trying to find solutions. 

Very recently it has further committed to undertake the responsibility of developing some of the world’s most difficult fields, where the previous owners invested far in excess of budget, incurred heavy losses and almost landed in a debt trap. 

The company may soon be involved in one of the most complicated mergers (or probably acquisition) of the country where cultural issues may overshadow issues of technology, core business and economics!

To top it all, the industry itself is passing through a slump in the oil price which the pundits don’t see to be ending in the near future and has resulted in severe losses to all upstream oil companies world wide, abandoning of megaprojects, withholding of further investments and heavy retrenchments.

To be frank, the goose has been laying golden eggs not because of its brilliant ideas or decisions or because it had been very well managed, but because it was in the business of oil, and its CEOs of the 60s and 70s had laid a very strong foundation for it. Most of the present and past employees of the company would be shocked to see me stopping at 70s, but I feel 80s need a special mention for both positives and negatives and for the crossroads where the company stands today. 

The 80s saw a lot of things happening. Mumbai High, though had been discovered and put on production by this time, saw most crucial, complex and capital intensive development work in this decade. It also reached its peak of production. South India became visible on the hydrocarbon map with development of KG and Cauvery basins. The difficult field of Gandhar in Cambay basin was put on production. Assam, though having its most turbulent times, saw its production at the never before (and never after) levels! All of these development works and capital investments have been generating profits for the company ever since. 

But unfortunately the then CEO has been more popular not for these visionary and bold actions, but for his human-centric leadership. Two major and most popular changes brought about at that time are perhaps the root cause of several problems of the company today. First was elevation of all and sundry in a time bound manner without emphasis on suitability, competence or vacancies at the next higher level. This led not only to a top heavy structure in due course, but also rise of some executives to levels which they really not deserved. 

The second such change was equating the core strength of the company with non-core. Due to this, the executives from core areas were soon outnumbered, and were deprived of proper and sufficient training and grooming to occupy key positions which demand both technical and managerial skills. It may be pointed out that while it is easier to train and groom technical people to develop managerial skills, it is extremely difficult to impart technical prudence to a non core professional. Presently, the company finds it difficult to fill its key positions with suitable technical manpower. 

Unfortunately, no corrective actions were taken at any point of time for these issues. A proper succession planning for key positions could never be carried out and no grooming could be done for the most prospective candidates to occupy Board level positions. 

An exploration and production company rises or falls because of its core disciplines – Earth sciences, Drilling and Production. Experts in these specialities are valued the world over. It is easy to find professionals in the non-core areas in the market, but the experts in the core disciplines are not easy to find. I agree that the person at the helm of affairs need not necessarily be a person from one of these disciplines, but he must have a good understanding of the subject and be sensitive to its nuances and its importance. It is imprudent to assume that any administrator or manager would be able to tackle these matters effectively or successfully – yes he might be able to keep running the show, but would not keep taking the company uphill. A large ship may keep floating even in the worst of storms and without a captain, but it may not head anywhere. For navigating it smoothly through all storms and at best speeds, a good captain is a necessary prerequisite.

Thus in my opinion, the primary condition for selection of the CEO must be a thorough understanding of the core business, strengths & weaknesses of the company and the constraints in which it has to work. He must have the ability to give necessary thrust to exploration and development, rejuvenation of old, depleted brown fields. He must have long term vision, commitment and  boldness to take daring steps to spur further growth in new high technology areas. He must also have good leadership skills to lead, guide and motivate the teams handling complex, high technology mega projects, mergers and acquisitions etc.

The company we are talking about is the pride of the country. If steered well, it could continue to lay golden eggs for decades to come. If not, it may not take long to become another sick PSU. It is therefore very important that the most effective person is selected keeping the long term interests of the company and the country. I have said in the past and do not hesitate to repeat that for the ideal candidate compensation package or age should not be a limiting criteria. In fact experience counts so heavily for such positions that often the most successful CEOs are found to be well into their seventies. Thus if a suitable person is found, the Government should shed its ironclad inhibitions – compensation package commensurate with the international standards should be offered without a deadline to retire on attainment of a particular age. It would also be imperative to give this person a free hand to take commercial and technical decisions without any political or bureaucratic interference, with just a one word mandate – “performance”.

The country has seen the present government taking several bold decisions in the national interest and if the matter is deliberated in the right spirit with the right perspective and at the right levels, sooner or later steps in the right direction may be taken.