Fatima Group is a well-known company producing industrial goods in Pakistan. The company has pursued conglomerate diversification by expanding into diverse set of business units. Fatima Group has been contributing in the growth and development of the industries like Fertilizers, Textile, Sugar, Energy and other industrial commodities.1 The Company has invested immensely in the key sectors of the economy and is reinvesting the profits in big projects to stimulate and accelerate the economic growth. Fatima Group is producing industrial commodities to discourage excessive imports and in return promoting the export exercise.2
Fatima Group has a diversified set of business units which are:
Reliance Weaving Mills Ltd
Reliance Weaving Mills was established in 1990 and is headquartered in Multan. The company is involved in the manufacturing of yarn and textile weaving; moreover, it is involved in exporting the textile to the countries like USA, Middle East, China, Europe, Far East and other Asian countries.3 The company has carved a niche for itself in the textile industry by diversifying into various types of yarn and fabrics. The company has strictly set quality standards to meet the specifications of export quality fabric; it is in the best position to cater the bulk requirements with an assurance of flawless finish and timely delivery of the ordered goods to its customers. The company has made huge investments in installing the latest technology to produce finest quality fabric in a cost-effective manner.4
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Company has carved a niche for itself in the textile industry by diversifying into various types of yarn and fabrics. The company has strictly set quality standards to meet the specifications of export quality fabric; it is in the best position to cater the bulk requirements with an assurance of flawless finish and timely delivery of the ordered goods to its customers. The company has made huge investments in installing the latest technology to produce finest quality fabric in a cost-effective manner.5
Reliance Commodities Pvt. Ltd
Reliance Commodities was incorporated in 1996 and is a renowned exporter and importer of industrial commodities linked with Fatima Fertilizer. The company has its own state-of-the-art storage area at the oil installations area in Keamari, Karachi for molasses and warehouses for fertilizer.6
Pakistan Mining Company Ltd
Fatima Group has pursued backward integration by diversifying into the mining business to mine rock phosphate which is used as a raw material for the production of fertilizers; and the parent company has currently two fertilizer plants PakArab and Fatima Fertilizer.7 This effort of locally mining raw materials for the production of compound fertilizer has reduced the imports dependency.
Since its inception, PakArab Fertilizer has been the only producer of compound fertilizer. It was formed in 1972, in collaboration with National Fertilizer Corporation and International Petroleum Investment Company. In 2005, it was privatized and acquired by Fatima Group and Arif Habib Group.8 The new management brought tremendous changes in the organization such that to refrain the plant to release harmful emissions.
The focus of this report will be on Fatima Fertilizer. Fatima Fertilizer was incorporated in December 24th 2003, with the collaboration of two major business groups Fatima Group and Arif Habib Group. Fatima fertilizer possesses a fully integrated production facility at Sadiqabad Rahim Yar Khan, which is capable of producing four types of final products i.e. Urea, Calcium Ammonium Nitrate (CAN), Nitro Phosphate (NP) and Nitrogen Phosphorous Potassium (NPK). 9The production facility has 56MW power plants and the off-sites utilities as well which includes houses for employees, school, medical center and sports facility. The complex has been allocated 10 MMCFD of gas from Mari gas fields. Fatima fertilizer is currently producing 2.1 million tons of fertilizer in total with a market share of 17%. The annual production is as follows: 10
500,000 Metric tons of urea
420,000 Metric tons of CAN
360,000 Metric tons of NP
420,000 Metric Tons of NPK
Fatima Fertilizer Company is the first and the only fertilizer producing company which has been following Fertilizer Policy 2001 of the Government of Pakistan which encouraged development in this sector due to the excessive demand of fertilizer.11
VISION OF THE COMPANY
"To be a world class manufacturer of fertilizers and ancillary products with focus on safety, quality and contribution to the national economic growth and development. We will care for the environment and the communities we work in while continuing to create shareholders value." 12
"To be the preferred fertilizer company for farmers, business associates and suppliers through quality and service. To provide employees an exciting, enabling and supportive environment to excel in, be innovative entrepreneurial in an ethical and safe working place based on meritocracy and equal opportunity. To be responsible corporate citizen with a concern for the environment and the communities we deal with."13
CORE VALUES OF THE COMPANY
Always on Time
Marked to Standard
Fatima Fertilizer Company has a key focus on business ethics; the business is run according to their code of ethics and shared values of transparency in operations. The employees are expected to know the code of ethics and are duty-bound to comply with ethical practices.14
The company has a sheer stress on pursuing new ideas and working on innovation, research and development areas. 15
Teamwork is encouraged in the company within the departments as well as across the departments to create synergies.16
Customers are valued to a great extent as the company's prime objective is to satisfy their target market with its offerings and to provide them value through their products. 17
Employees are the most essential asset for Fatima Fertilizer; therefore, the employees of the company are valued by providing equal growth opportunities and extensive training to broaden their horizon of knowledge and skills. 18
The company seeks to engage with suppliers who follow ethical code of conduct and the laws and regulations which ensure environmental protection as well as the safety and health issues.19
Fatima Fertilizer is extremely particular about operating under the ethical business practices which are in accordance with the laws. The basic aim is to conduct the business as an environmentally responsible entity keeping the health, safety and environmental issue in consideration. The company stresses upon the stakeholders having complete knowledge about company's ethical standards. Following are some of the ethical practices that the company focuses upon: 20
Avoidance of every kind of unethical behavior that can damage the brand name.
The procedures of the company are not to be disclosed in the market.
Exchange of any kind of gift is strictly prohibited in the business.
The act of bribing is forbidden. If any stakeholder does so, the company will get to know through market intelligence.
Leakage of company's confidential information for any kind of personal gain should be prevented.
The production facility of Fatima Fertilizer is located at Sadiqabad, Rahim Yar Khan. The facility produces two intermediate products- Ammonia and Nitric Acid which are further used in the production of four final products.21 The current products by Fatima Fertilizer that are ready to sell are:
Source: Fatima Group website 22
Source: Eqan Ali Khan, Engro Eximp 25Calcium Ammonium Nitrate is produced as granule fertilizer which is a solid form as well as in prillet form that is a liquid form. CAN is a compound fertilizer with a unique chemistry only produced by Fatima Fertilizer. 23The Company is importing some amount of fertilizer due to the gas shortages. Fatima Fertilizer is producing 2.1 million tons in total with a market share of about 17%. The company is still under producing due to gas shortage.24
Source: Eqan Ali Khan, Engro Eximp 26
Source: Fatima Fertilizer Annual Report 2011 27
The focus of production is basically in the Khareef season which has duration of 1st April to 30th September. The important crops like cotton, rice, sugarcane are ploughed and harvested in khareef. During the season of Rabi, from 1st October to 31st March, fertilizer production is focused on nurturing of wheat. The products offered by Fatima fertilizer under the brand name of "SARSABZ" contain the nutrients that can accelerate the growth of crops.28 CAN has a rapid effect on the soil and it enables the crops to rapidly grow. Similarly, NP possesses such chemistry of Nitrogen and Phosphorous that makes plants grow, strengthens rooting and encourages fruit production. One of the major strengths of Fatima Fertilizer is that it has uninterrupted licensed gas supply as the production complex has been allocated 110 MMCFD of gas from Mari Gas fields. 29
The production complex located at Sadiqabad has a 56MW power plant with additional utilities. The complex is spread on 950 acres of land which includes houses for employees, school, medical center and sports facility as well. 30
The products produced by Fatima Fertilizer are most suitable for soil. Nitro phosphate, Calcium Ammonium Nitrate is beneficial for the crops and gives a good yield to the farmers. These form of compound fertilizers are only produced by Fatima Fertilizer and differentiate their products from the competitors.31
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Source: Fatima Group website 32
The organizational structure of the company is a functional structure that is divided by different departments of the company. All the departments of the organization operate for both the companies- PakArab and Fatima Fertilizer except the finance department which is separate for both the companies and is headed by the chief financial officer.33 Each of the department is headed by the group heads or directors.
ROLE OF BODs
The company is headed by the Board of Directors, HR committee and the Audit committee. There are eight BODs of the company including a chairman and the CEO itself. Out of the eight BODs, seven have been elected by the shareholders and one is a nominee of National Bank of Pakistan.34 The role of BODs is to maintain the interest of all the stakeholders of the company reviews the overall performance, approves the budget and govern the corporate objectives of the company. The CEO implements the corporate policies as actions set by the board. The Audit committee consists of five of the members from board, who monitor the overall quality of the company's practices, performs the internal audit, co-ordinates with external auditors and operates the company in compliance with the legal requirements.35 The HR committee consists of four members from the board and is responsible for recommending compensation and bonus strategies in accordance with the annual budget of the company.
Fatima Fertilizer possesses a competitive manpower, as their workforce consists of highly qualified as well as experienced employees having a background with large multinationals or the personnel had a good amount of experience with the direct competitors like FFC and Engro. 36
The company is focusing on hiring the fresh graduates more as they invest a large amount of time in hiring from the recruitment drives in universities. 37Fatima Fertilizer Company requires as well as prefers fresh blood to gain new innovative ideas and is open to changes in the organization according to the competitive business environment. Fatima fertilizer does not avail services of head hunters for gaining new employees instead the company has its own recruitment sub department under the HR department.
Similarly, a sub department of Training is also operated under the HR department. Under the training department, full fledge training is provided to the employees. Now, to determine the training needs of the employees, the need analysis is performed by the training department and after identifying the skills and competencies that are critical for success, a training program is developed on an annual basis.38 Following are the training programs conducted by the company in 2011 to enhance the knowledge structure of the employees: 39
Management By Objectives
Advanced training for MS Excel
High Performance Sales Management
Leveraging- Organizational and cultural change
Leadership- great leaders, great teams, great results
Performance appraisals are done on an annual basis with a co-coordinating effort of the training and compensation department so that the training needs can be clearly identified for non-performers and the compensation is likewise developed for the employees. Compensation system in the company is entirely performance based. Salaries are handled by the compensation and benefits department operating under HR department. Salaries offered at the company are competitive with the competitor's basic salary.40 The perks and benefits at Fatima fertilizer include free medical: the company gives monthly allowance of medical to its employees and along with that it has opened up a dispensary for the employees, mobile policy at managerial level, company car policy at managerial level and annual bonuses. Competitive perks are offered to the employees working in the operations department in Sadiqabad as it is extremely difficult to retain employees in such an area, therefore to motivate them company has provided the Sadiqabad complex with the basic facilities for employees and their families which include houses, school, sport complex and medical center. 41
The company performs competitor analysis too when deciding the compensation plans. The annual appraisals are performed according to the objectives, targets achieved, developing strong network with dealers as well as efficient network with retailers is extremely important for the personnel in sales department. This network should be 80% active to be competitive. 42
The task of communication is done along with appraisals in which the employees responsible for it reports the HR head regarding the annual appraisals, communicates the feedbacks of management and sometimes the employees take initiatives to prepare reports and manuals for the company.43
One of the most critical issues facing HR departments is the need to support the business by reducing costs through increased efficiency and higher productivity. As such, HR must become a strategic business partner and tailor its functional activities to positively affect the bottom line. For this purpose Fatima Fertilizer has implemented the Service Delivery model. This department is a new addition to the Human Resource department It follows the multi-tiered model of service delivery which has three basic components:44
Centers of Excellence
The HR Service Delivery Team operates at the intersection of the technical and functional worlds and provides a systematic and comprehensive approach to defining: 45
What services are offered
Who will support the services
How will be they delivered
When will they be offered
Where will they be located
It plays a vital role in lowering the administrative burden of HR and allows it to focus on more strategic issues. It leverages economies of scale by streamlining processes, hence resulting in: 46
Increased productivity and efficiency
Less duplication of resources
Its main objectives include: 47
Enabling HR to focus on strategic issues:
Freeing the function from routine tasks enables HR to focus on strategic goals leading to business and organizational improvement.
Improved service quality:
Efficient/simplified processes help in delivering timely and accurate solutions to employees.
Improvement in managing human capital and communication between HR and the business units enabling more knowledge-sharing and continued process improvement.
Reduction in operation costs and improvement in process efficiency by:
Eliminating duplication of work
Consolidating, Standardizing, and Automating processes.
Source: Fatima Group Internal Source 48Connecting - People, Process and Performance
Source: Fatima Group Internal Source 49
Components of the HR Service Delivery Model
The Human Resource Information System (HRIS) is a software or online solution for the data entry, data tracking and data information needs of various departments50. At Fatima Group Oracle is used for this purpose. HRIS provides overall: 51
Management of all employee information
Reporting and analysis of employee information
Benefits administration including enrollment, status change and personal information updating.
Complete integration with payroll and other company financial software and accounting systems.
With Oracle, HR enables employees to do their own benefits updates and address changes thus freeing HR for more strategic functions. Additionally data necessary for employee management, knowledge development, career growth and development and equal treatment is facilitated. Finally, managers can access the information they need to legally, ethically and effectively support the success of their reporting employees.
Centers of Excellence (COE)
The HR Centers of Excellence are the HR departments, where the real experts work and design new HR processes for the organization. The HR Centers of Excellence also keep the HR processes running and they implement the changes into current HR processes as they collect responses from the users of the HR processes.52
The success of Human Resources depends on the results of Centers of Excellence. The HR Centers of Excellence have to be in contact with the external market and they have to monitor the trends in HR Management as they can bring the knowledge in the house and they can implement the best practices suitable for the organization.53
The HR Centers of Excellence are organized around the expertise they are focusing on. Following are the COE's at Fatima Group: 54
Recruitment and staffing
Compensation and Benefits
Training and Development
HR Business Partners
The Human Resource department participates in strategic planning to help the business meet present and future goals. Rather than concentrating solely on HR duties such as benefits, payroll and employee relations, HR departments seek to add value to the company by overseeing recruiting, training, advancement and placement of new and current employees.55
HR business partnering is a process whereby HR professionals work closely with business leaders and/or line managers to achieve shared organizational objectives, in particular designing and implementing HR systems and processes that support strategic business aims.56 This process may involve the formal designation of the 'HR business partners' that is HR professionals who are embedded within the business, sometimes as part of a wider process of restructuring of the HR function.
The business partner relieves pressure from management to hone employee job skills for efficiency and productivity, as well as identifying, developing and grooming key employees for advancement.57HRBP is also responsible for analyzing employee review data which allows it to recognize strengths, which they may further develop to place employees more effectively and also identifying weaknesses which they may correct with further job skill training or disciplinary action.
HR Service Center
The HR Service Center is fundamental to the delivery of the role of HR as administrative expert. It provides focused administrative excellence that's drives financial efficiency and HR credibility through the quality of its output 'getting the basics right, every time'. Whereas the COE is able to provide the focus for the business expert knowledge on HR, the HR Service Center provides a focus for efficiency. 58The service is delivered through multiple channels, to make sure everyone has access to it, when and for what they need it.
The concept of HR Service Center rests on three principles: 59
Access to HR Service
Source: Fatima Group Internal Source 60
There are four levels of access to HR services:
As key customers it is anticipated that both managers and employees will access the majority of HR services via web enabled systems (HRIS). This is referred to as Level 1 access.61
Level 2 refers to access to the Employee Service Center. This will offer two levels of service.62
The first level 2a offers information on transactional processes and general policy advice and guidance. They will also offer a Customer Support Service 2b that will provide specialist advice on more complicated HR queries that require greater level of judgment.63
Level 3 refers to the HRBP community. This team will be strategic partners working with the business to drive through change and deliver performance. 64Any HR queries that cannot be answered through the first two level of support will be referred to your business partner community or where a query will have significant people implications the HRBP may receive the query directly.
Finally level 4 HR support will be provided by Centers of Excellence in corporate HR. This service will be accessed by the HR community looking for expert advice for the business on legislative policy issues. Only 1% of all HR issues are anticipated to reach this level.65
Service Delivery Structure
Source: Fatima Group Internal Source 66
The marketing services department headed by director marketing (Mr. Zahir) and is huge in terms of tasks performed by the department. Following are the sub divisions of the marketing services department at Fatima Fertilizer: 67
Source: Fatima Group website 68
In the branding division handled by the marketing services department, several tasks are performed. It is headed by Mr. Waqas. After the analysis of the marketing department, it was found that Fatima Fertilizer pays rigorous attention to its branding. Majority of the branding tasks are outsourced by the company.69 The key functions handled under the branding section are:
There is no R&D department in the company as the fertilizer industry is not a technological industry. However, the company avails the market research for brand building and gaining the consumer insights. The market research activities are outsourced to the marketing research firms which include AC Nielsen and JWT which conducts different surveys for the company to gauge the consumer preferences and other important factors for the product's success.70
ATLs & BTLs
Same as the market research, media planning is also outsourced by Fatima fertilizer to Mindsquare agency which develops television ads for their products, plans schemes offered to the farmers and conveys it through aggressive advertising.71 JWT designs Point of Purchase material and literatures for the company along with the printing of the literature.
The media planning includes all the ATLs and BTLs designed for the brand building of Sarsabz. Above the line advertising for Fatima fertilizer includes television advertisement and the media planners focus on the TV ads the most as the target market is uneducated and it makes more sense to promote the products through visuals which the target market can easily understand. 72Still the media planning department is facing difficulties in communication the benefits of the products to the farmers. Below the line advertisements include literatures for promotion of the products. Fatima fertilizer has various literatures conveying the benefits and usage of its products and how can it be beneficial for specific crops and more importantly the literatures are printed in Urdu which is appropriate according to the demographics of the target market.
Source: Fatima Group website 73
Source: Fatima Fertilizer Annual Report 201174
The sales structure of the organization is divided into three zones: South zone which includes 10 regions and the cities like Hyderabad, Sakhar and Rahim Yar Khan; Central zone which again is divided into ten regions and includes the cities like Multan, D.G. Khan and Bahawlapur and the third zone is North zone which includes Lahore that is further divided into 4 regions according to the demand, Sahiwal, Faislabad and Peshawar. Each region consists of 57 sales districts and one sales district is equivalent to one political district.75 The District manager is real man working in the field and interacting with the market. Dealing with wholesalers is discouraged by the company as they undersell the product which hurts the brand image84. The District managers are responsible for: 76
For developing a strong dealer network
Keeping up to date with the competitors activities for that district
PAYMENTS AND ORDER TAKING
The company does not deal in cash; the company only accepts pay orders or drafts as payments. Monthly targets are given to the District Managers; Dealers issue orders in the form of pay order.77 This is handled by the Order Management department from the Planning department. If the order is placed on the warehouse, it is directly transported to the dealers. In the other case, if the order is not available at the warehouse and it is for the plant, then it is transferred to the District Manager and he further transfers it to the Head Office in Lahore.78 This process of order taking is computerized and is performed through the Enterprise Resource Planning system. The company is not accountable for the transportation costs and they are paid by the customers.
The pricing of Urea is uniform throughout Pakistan i.e. Rs. 1650/ bag. Although Fatima Fertilizer has priced its products expensive from the competitors as they are differentiated. However, these expensive products only include Sarsabz CAN and Sarsabz NP that are only produced by Fatima Fertilizer. Other than the fixed cost, the total selling price includes the variable costs too, which vary in terms of the freight charges. The selling price basically incorporates the Ex- factory price and the freight charges, depending on the delivery location.79
During the field work done, it was found out that Fatima Fertilizer concentrates heavily on their promotional activities. The underlying reason found behind this was that the commodity offered i.e. fertilizer is a low differentiation product and the target market of the company is farmers and sec C who have either minimal or no education. Therefore in order to effectively communicate the benefits of the products to that class, the company has devised a clear strategy that is understandable to that class. Their extensive focus is on the printing of the literatures as the farmers can easily gain access to the literatures and read through the benefits of using products offered by Fatima fertilizer.80 Monthly promotions are prepared according to the market requirements, competitor's actions as well as the company's strategy. All the planning of the promotional activities is outsourced and is handled by the marketing department.81
Supply Chain Department
The basic function of the supply chain department is to manage warehousing and deliveries of the products; so they can add additional value to each of the task. The major task of distribution performed by Fatima Fertilizer Company is divided into two segments that are elaborated below:
Source: JS Research 82
One of the components of distribution is managing the warehouses. Fatima fertilizer has maintained a total of 95 warehouses all over the zones. By gauging the area potential of each territory the concentration of warehouses has been determined by the company. Fatima fertilizer has an intense distribution of warehouses as they perceive it to be an essential way of achieving operational efficiency.83The plant at Sadiqabad basically has a limited storage capacity and the inventory cannot be stored at the location after a certain level, therefore the company has vastly expanded its base of warehouses. The Sadiqabad plant is at a long distance from the two zones, so there is a huge limitation of transportation and loading the inventory.84 However, in order to eliminate these hindrances, they have a wide spread of warehouses to meet the orders of customers in time. The practice of increased warehousing enables the financial efficiency to increase.
The other component of distribution is to directly deliver from the Sadiqabad plant. The orders of retailers and whole sellers that that are already available at the plant in terms of quantity and type of fertilizer, is directly transported to the customer's location. In case of faulty deliveries. The District managers basically prefer to sell Urea near the plant area. The complaints are received by the District managers and are transferred to the Head office for further rectification. One important fact is that the company performs measures to minimize and prevent the inventory from moisture or any kind of damage in the monsoon season. 85
Quality Control Department
The quality control department examines both the plants Fatima and PakArab. The company is ISO 2001 certified. Regular quality checks are performed on the plant to ensure the product quality as well as the safety of the workers at the plant. 86If the products are found faulty or defected, they are sent to the head office for inspection by the quality control department and further are sent to the plant for rectification and replacement.
The key functions performed at Fatima fertilizer by the Audit department are: 87
Inspection and checking at the warehouse for procedures
The Audit department prepares the audit reports and presents it to the top management.
Fatima Fertilizer is keen to develop long term relationships with their suppliers as well as the ultimate consumers. For this purpose, they have plans to develop a new department "Channel Department"; which will be headed by the Channel Manager (Mr. Aneel Zia). The main purpose to set up this department is to develop channel loyalty programs for dealers in order to gain the brand loyalty. 88The company wants to now focus on establishing extremely good relationships with their customers and therefore, customer- supplier intimacy is extremely important to the company.
The company is also planning to develop a call center for giving advises to farmers regarding the usage of the products, solving their ledger issues and answering their delivery problems.
Corporate Communication Department
This department t is headed by Mr. Ali Nasir. All corporate announcements, publishing of the Sarsabz magazine and internal and external communication, social media is handled by this department. Fatima Group takes its corporate social responsibility very seriously and has taken several initiatives. The management of those also comes under this division.89
Corporate Social Responsibility
Fatima Group works diligently for the community's welfare and realizes that it has a major role to play in contributing to the national economy so that it can further spur the society's growth. The company follows specific set of CSR activities which includes: setting up of a dispensary for the employees, ensures environmental and employee safety, supported the flood victims by providing relief goods and more importantly the company is undergoing a project to build up a village with 50 houses near Muzaffargarh, a medical center constructed for the safety and vaccination of the employees at the plant site and cash contributions to various educational networks for providing education to underprivileged children.90
Organizations all over the world are now looking to expand and re define the role of HR by taking new initiatives, reengineering key processes, applying new models and refocusing the role of business partners. This changing view of organizations has reaped them a lot of benefits. This idea has been researched and explained in detail by Towers Watson in the research it conducted on service delivery.
"Accordingly, the top initiatives undertaken by HR over the last 18 months, reengineering key processes, refocusing the role of HR business partners, and implementing and leveraging self-service- have supported the larger goal of enabling HR to rethink and redesign its own role, ideally bringing greater strategic value to the business."91
Organizations all around now don't only look at cost efficiency rather they are focusing on strategy. They are discovering new ways to deliver their services. These include streamlining of processes, outsourcing, building service delivery functions and introduction of new technological tools. Technology now plays a very critical and important part in helping organizations achieve their strategic goals. It is imperative in building shared services organizations.
"We are seeing a shift from organizations throwing old technology at problems to looking at flexible new technologies that leverage self-service and shared services functions, deliver more streamlined capabilities and robust analytics, and organize existing systems around enhancing HR service delivery more broadly."92
Firms have woken up to realize that technology has now evolved to become a critical strategic support for all of HR. It helps to deliver the processes not only efficiently but also effectively. This new mix of HR and technology has resulted in greater receptiveness of organizations to technology which makes it more powerful than before.
"Once-discretionary HR technology spending is now a needed-to-play expenditure and far less subject to reduction when the economy turns."93
The view is now to look at more flexible technologies that empower service delivery functions, provide streamlined processes and robust analytics and organizing the already existing systems around this new model. This new holistic view has made organizations view investment in technology a necessary thing instead of looking at it like an extra cost.
The findings in the article according to me are spot on looking at the changing view of organizations. This is true for developed countries but organizations in Pakistan are also trying to follow this. HR Service Delivery has now become an important part of HR and technology moves hand in hand with it. One point the article has not emphasized on needs before advocating this whole idea is that not all organizations are able to shift to this model of HR because it is a long process which needs time and persistent effort. Also firms need to understand their organizational structure before they move forward with this.
Supporting the above statement regarding changing HR roles and technology is another research done by Towers Watson.
"The world of service delivery and technology is perhaps the most ever-changing in the industry of human resources. Our goals and timelines are most often measured in weeks and days; our margin for error is nonexistent."94
As organizations embrace the new role of HR, they now need to be very efficient and effective in what they do. The Service level agreements (timelines) they need to follow are now becoming shorter and due to that the room for error is very small. The other side of the picture is that the result of the work done is also immediately realized and that is because of the involvement of technology in HR.
"HR technology spending remains steady and strong and investments are directed mostly toward growth and new functionality."95
This statement confirms the fact that now organizations are willing to invest their money in technology as they now see it as an asset instead of an additional cost. This investment has been steady over the past couple of years especially in mature firms as they understand now that in order to stay in business and expand their capabilities they need to do this.
"As new options emerge for effectively and efficiently delivering HR services, organizations are including HR structure changes in the scope of possible adjustments."96
"Shared services is emerging as the most valued (and most prevalent) practice for delivering HR services to the business, though single-process outsourcing remains a stabilizing force."97
HR has been a stable area for some years but now the change is coming. More and more organizations are moving towards adopting the new role of HR. According to the article this change is because of two forces: pull and push. The push force comes in the face of technological advancements. In order to keep pace with the advancing world firms cannot afford to ignore the changing technology. The pressure to work efficiently and effectively pushes them to implement technology in the HR function. Also having the same HR functions over a couple of years puts the organizations at risk of missing opportunities. Software as a service is the new thing being used in the Service Delivery.
To support this change the HR structure also needs to be changed. There is more need of expertise and specialized services like Centers of Excellence and Business Partners. Shared services give organizations the ability to be more flexible so they can respond to change quickly and also greater quality control. Some companies who do not have specialized expertise are moving towards outsourcing of these functions which make it cost effective for them
The article has done a good job at summing up the changing trends of companies and their HR departments. If companies manage to change their HR structure only then they are able to properly implement the new model of service delivery. If not then they have the option of outsourcing these areas. If we look at Pakistani companies, service delivery is still a new phenomenon here and efforts are being made to implement it in the HR function. One back draw is that HR outsourcing is not very common and due to the newness of the whole HRSD model companies cannot outsource these functions.
Implementing new models and restructuring the HR is not without difficulties. Organizations have to face numerous problems during the process and success is not guaranteed in the end.
"There are many possible approaches to HR service delivery. The multi-tiered HR service delivery model is generally regarded as the best practice approach to service delivery."98
The first issue that organizations need to sort out is what kind of service delivery model do they want to implement and which matches their organization.
"Inefficient service operations can result from a lack of clearly defined service delivery best practices as well as a continued reliance on manual, paper-based HR processes."99
When firms do not have a set of clearly defined service delivery practices and policies, that then leads to an inefficient service delivery department. This leads to internal employees having a mixed set of experiences with the department which would eventually lead to low satisfaction levels with the service.
"Another potential cause leading to inefficient service operations is dispersed and inaccessible HR knowledge."100
This problem works two ways; both employees within the organization and HR tend to face it. When roles and responsibilities are not clearly defined within the Service Delivery, employees don't know who to contact in case of any problem. Also at times proper information is not available within the HR and when an employee comes to them with a grievance they don't have the information.so it is very important that organizations properly define the roles and responsibilities of each and every person within the service delivery department.
Moving on, one of the biggest pressures faced by firms is the cost of service delivery. If it does not function efficiently then the costs for the organization is increased. The whole idea of the service delivery department is to streamline the processes and save costs for the firm. If they are not able to do that then organizations can forget their goal of being cost efficient. This plus unclear responsibilities end up wasting the expertise and skills of employees as explained below in the research:
"HR service delivery costs are amplified when an organization's resources are not properly utilized, leaving higher-paid HR specialists to answer basic employee inquiries instead of focusing on more strategic initiatives that would benefit the organization's bottom line. Conversely, HR generalists with skills better suited to resolving basic inquiries waste time and energy trying to resolve issues that should have been escalated to a specialist."101
This paper is one of those few which actually take into account the problems which are and can be faced by organizations when moving towards a service delivery model.
As mentioned above one of the best models of HR service delivery is the multi-tiered approach. Barbara Levin supports this statement in her article by explaining numerous benefits of this model and how it transforms HR. One of the biggest advantage of this multi- tiered approach is it is low cost and uses fewer resources. More emphasis is put on the tier 0 of the model where more than 60% of the inquiries are sorted out by the employees themselves.
"The multi-tier approach helps reduce escalations to HR experts by more than 70 percent - freeing talent to take on more value-added projects."102
Software as a service plays an important part in enabling the employee complete their own transactions and saving time and money.
To reach to the success organizations have to face problems also along the way. Barbara Levin talks about the issues faced by organizations which basically support the above study. According to her the portals are looked upon as one of the tools without many problems that make the service delivery function work but this is not entirely true.
"Most HR portals are heavy on self-service transactions, but light on the communications and decision support tools required to complete transactions. Most portals do not have a single interface to access HR information - nor do they have a single sign-on that makes them easy to use."103
Due to the above mentioned problems the employees might just stop using the portal and the tier 0 of the model might just collapse making the rest of the levels shaky.
When implementing this model sometimes certain areas are ignored which can result in no benefits, higher cost and time being wasted. The critical factors to be looked at are:
"Standardizing common HR processes including defining a unified process around HR service delivery."104
The initial step should be the standardizing and harmonizing of all the HR processes from all locations or business units into one to be used throughout the organization. This process can be very time consuming and a representative has to be chosen from every location that can standardize the processes. A need may arise to develop a new standard process for the service delivery department.
"Identifying the right individuals to fill roles in each tier and defining their responsibilities and performance goals"105
This statement supports the above research that if proper roles and responsibilities are not defined and to the right people then the delivery model will not work. Apart from the which then makes him a good candidate for higher tiers like business partners.
"Measuring Key Performance Indicators and using them to improve the service delivery model."106
"The multi-tiered business model has HR business partners, COE's and shared services. While this model has improved HR performance, exceeding the capabilities of a model in which HR services are aligned purely functionally, it has not enabled HR to meet the ever increasing expectations of business leaders or fully support business needs."107
"Moving to a next generation HR model can significantly benefit organizations. High impact HR organizations go far beyond the provision of low cost service to focus on activities that actually strengthen business performance, such as building leadership skills, creating a best place to work or encouraging collaboration and employee empowerment."108
"In organizations that adopt the next generation HR model, much of the remaining transactional work that resides in COEs will shift from the COE to Shared Services or to external partners."109
Agricultural Sector and the Fertilizer Industry
Source: State Bank of Pakistan 10Agricultural industry is considered to be the economic backbone in Pakistan. However, from the past few years, the economy has experienced a shift from purely agricultural driven economy to services based economy and industrial economy as well. Still agricultural sector has been able to contribute towards the overall GDP and account a good amount of share to the economy. Furthermore, this sector will not only be sustained but continue to grow as some of the major industries are based on the supply of raw materials that are driven from the agriculture sector. Similarly the fertilizer industry is entirely based on the growth of agricultural sector. 111The focus of this sector would continue to flourish the fertilizer industry. In the past few years, Pakistan's agricultural industry has suffered tremendously due to unfavorable weather conditions which lead to destruction of crops.
Source: IFA and FAO 112 However, government has been supporting to revitalize the system and improve the agricultural performance through providing subsidies to the farmers as well as incentives to the fertilizer industry.
Source: NFDC and SBP 14Giving a macro view, there is an excess demand of fertilizers in the country and the current total production is still unable to cater to the total demand which indicates that there is a big window of opportunity for this sector to develop. Initially there was a low penetration of fertilizers having limited options of urea only, but the large players are availing the opportunity window and penetrating the fertilizer products to differentiate themselves. Therefore, the growth in agriculture sector is positively related to the consumption of fertilizers. 113Government has been able to encourage the manufacturers to increase the fertilizer production by providing the feedstock gas subsidy which lower the production costs of the manufacturers and further increases their profitability figures.
Pakistani fertilizer industry has an oligopolistic structure as there are five main players in the industry. The industry growth rate is currently 8% and the total market demand of fertilizers is estimated about 6.4 - 6.5 million tons.115 The larger firms are basically the price setters in the industry. The increase or decrease in competitors highly affects the pricing strategy of the fertilizer companies. The large players of the industry include:
Fauji Fertilizer Company Ltd.
Engro Chemical Pakistan Ltd.
Fatima Fertilizer Company Ltd.
Dawood Hercules Chemical Ltd.
FERTILIZER POLICY 2001 (LEGAL)
Fatima Fertilizer is the pioneer and the only company to implement the Fertilizer Policy 2001 which provided it with tremendous benefits and incentives. The main purpose of this policy was to support the fertilizer producers with some benefits.118
Government has provided subsidy on the production of imports of fertilizers. The company is already importing to cater to the demand; this can also act as an opportunity for the company.119
The supply of feed stock gas from the government for the production of Urea was also one of the major factors of fertilizer policy. 120
Tax incentives were also provided by the government under this policy.121
For the production of Nitro phosphate, the phosphate rock is either mined by its subsidiary.122
Pakistan Mining Company or it is imported. Therefore, the government does not charge any custom duty on the imports of such raw materials.123
Gas for capacity expansion purposes has been stored to fulfill the demand for 7 years.124
FAUJI FERTILIZER COMPANY LTD.
Fauji Fertilizer is the market leader acquiring a share of more than 40% in the production of urea. It has a setup of the world's largest urea plant in Dharki. Its major urea product is Sona urea, currently selling at Rs.525/ bag. FFC possesses 3 plants in total; two are located in Goth Machhi and one in Mirpur Mathelo. The three final products sold by the company are Sona urea, Sona DAP and Sona SOP.127
ENGRO CHEMICALS LTD.
Engro Chemicals is the second largest urea producer in Pakistan and produces only a single product i.e. urea. The total annual production of urea by Engro is about 2.1 million tons. Engro has currently priced its Urea for about Rs. 750/bag. Engro fertilizer has gained approximately more than 21% of the market share. The business is operated through two plant facilities one in Bin Qasim Karachi and the other in Dharki Sindh which is the largest production plant of ammonia. The products offered by Engro include Engro urea, Engro Zorawar, Engro Phosphate, Engro NP, Engro DAP, and Engro Zarkhez.128
Dawood Hercules is the minor player in the industry with a production capacity of 500,000 tons. The plant has increased its capacity throughout the years by 155,000 metric tons. Its plant is located in Dawood Khel. Dawood Hercules produces urea under the brand name of "Bubber Sher". The company gained a share of 8% in the market. 129The company's primary focus is to ensure safety of the environment and was the first fertilizer manufacturer to be ISO 9000 certified.
FATIMA FERTILIZER COMPANY
Fatima fertilizer is the only company that is being operated in compliance with the Fertilizer Policy 2001 which basically provides incentives to the fertilizer manufacturers for continuous investment in this sector. Fatima fertilizer is the last entrant of the fertilizer industry; still it has been able to gain a market share of 17%. 130The products of Sarsabz are expensive as compared to the competitor's pricing which can be a drawback for the company. However the differentiated product and its benefits justify the pricing.131
Source: Company reports and NFDC 32