A brief report on how Pakistan Railways can use development strategies to bring change in a failed organization

1. 2011
Submitted to:
Mr. Haroon Waheed
[PAKISTAN RAILWAYS – THE
LIFE LINE OF THE COUNTRY]
Prepared By: Maria Jawed (9689)
Safia AbdulAziz (9613)
Sumaiya Farooqui (9570)
Javeria Siddiq (xxxx)

2. TABLE OF CONTENTS
S. # Topics Page #
Executive Summary 2
1. Pakistan Railways – the life line of the 3
country
1.1 History
1.2 At Present
1.3 Organizational Structure
1.4 Human Resource
2. Problems faced by Pakistan Railways 5
2.1 Shortage of Locomotives
2.2 Eroding Market Share
2.3 Soaring Budget Deficit
3. Entering & Contracting 6
3.1 Organizational Issues
3.2 Key Clients
3.3 OD Process
3.4 Time & Resources
4. Diagnosis of Pakistan Railways 7
4.1 Huge Losses and Budget Deficit
4.2 Mismanagement
4.3 Decreased Market share
4.4 Corruption
5. Action Planning 10
5.1 Structural Design
5.2 Downsizing
5.3 Reengineering
5.4 Alliance Intervention
5.5 Network Intervention
6. Conclusion 12
Bibliography 13
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3. EXECUTIVE SUMMARY
Pakistan Railways (PR) is the state owned railway company of Pakistan. It is a
large organization under the administration of Ministry of Railways. Pakistan
Railways provides an important mode of transportation in the farthest corners of
the country and brings them closer for business, sightseeing, pilgrimage and
education. He current Chairman is Raja Shahid Hussain.
Over the past many years, Pakistan Railways has been facing problems and is now
on the verge of bankruptcy. With budget deficit of billions, eroding market share
and corruption scandals, the future of Pakistan Railways – once the life line of the
country – is grim. At the time of independence, both India and Pakistan, inherited
the Railway Network laid down by British. While Indian Railways has emerged as
a highly profitable organization, Pakistan Railways is struggling to keep itself
running.
This report summarizes how organization development can help Pakistan
Railways revamp its image and goodwill. It is based on facts and hypothetical
situations created by the group members to evaluate the applicability of OD
interventions. He data is collected from various sources including books,
newspaper articles and internet.
The report provides introduction of Pakistan Railways, its history, organizational
structure which is then followed by how the concepts of entering and contracting
can be applied to this case. Diagnosis of the organization has been done with the
help of data collected and hypothetical situations. Based on the diagnosis, OD
interventions have been suggested for Pakistan railways which include techno-
structural interventions and collaborative interventions.
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4. 1. PAKISTAN RAILWAYS – THE LIFE LINE OF THE
COUNTRY
1.1 History
The possibility of Karachi as a sea port was first noticed in the middle of 19th
century. Sir Henry Edward Frere was appointed Commissioner of Sindh after its
annexation with Bombay in 1847 and sought permission from Lord Dalhousie to
begin a survey for a sea port. He also initiated the survey for a railway line in
1858. It was proposed that a railway line from Karachi City to Kotri, steam
navigation up the Indus and Chenab rivers up to Multan and from there another
railway to Lahore and beyond be constructed.
It was on 13 May 1861, that the first railway line was opened for public traffic
between Karachi City and Kotri, a distance of 105 miles (169 km). The line
between Karachi City and Keamari was opened on 16 June 1889. During 1897 the
line from Keamari to Kotri was doubled.
The railway line from Peshawar to Karachi closely follows Alexander’s line of
march through the Hindukush Mountains to the Arabian Sea. Different sections on
the existing main line from Peshawar to Lahore and Multan and branch lines were
constructed in the last quarter of 19th century and early years of 20th century.
The four sections, i.e., Scinde (Sindh) Railways, Indian Flotilla Company, Punjab
Railway and Delhi Railways, working in a single company, were later on
amalgamated into the Scinde, Punjab & Delhi Railways Company and purchased
by the Secretary of State for India in 1885, and in January 1886, it was named
North Western State Railways, which was later on renamed as North Western
Railway.
At the time of independence, 1,947 route miles (3,133 km) of North Western
Railways were transferred to India, leaving 5,048 route miles (8,122 km) to
Pakistan. In 1954, the railway line was extended to Mardan and Charsada, and in
1956 the Jacobabad-Kashmore 2 ft 6 in (762 mm) gauge line was converted into
broad gauge. In 1961, the Pakistani portion of North Western Railways was
renamed Pakistan Railways. The Kot Adu-Kashmore line was constructed
between 1969 and 1973 providing an alternative route from Karachi up the
country.
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5. 1.2 At Present
At present Pakistan Railway comprises of 8,163 route km, 1,212 stations and 42
train halts. It has a fleet of 546 diesel electric locomotives, 25,815 wagons and
2,099 passenger coaches. Maintenance is provided by three major locomotive
workshops and thirty-five smaller workshops. Signaling facilities at important
stations are track circulated within interlocking limits. Most routes have VHF
radio coverage for communication between train dispatchers and trains. Telephone
Communication is over wire lines and microwave. Pakistan Railways is multi
system and operates on three gauges, i.e. broad gauge, meter-gauge and narrow
gauge.
1.3 Organizational Structure
Ministry of Railway is responsible for overall control of Pakistan Railways as well
as to guide the overall policy. There are four (4) Directorates in this PR namely
Administrative Directorate, Technical Directorate, Planning Directorate, and
Finance Directorate.
The following officers also report directly to the Secretary Railways:-
a. General Manager (Operations)
b. General Manager/Manufacture and Services
c. Federal Government Inspector of Railways
Railway Board is the highest body for technical matters of the Railways and
consists of Chairman and five Members out of which three are from the private
sector. Secretary to the Government of Pakistan, Ministry of Railways is the ex-
officio Chairman of Railway Board and the General Manager, Railways is the
Chief Executive Officer. Organization Structure of Pakistan Railways is of
functional type, headed by GM and assisted by four Addl. General Managers.
Pakistan Railways at this time is a vertically integrated organization and has four
business units:
1. Infrastructure Business Unit
2. Passenger Business Unit
3. Freight Business Unit
4. Manufacturing and Services Unit
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6. 1.4 Human Resource
Pakistan Railways is the largest civil employer in the country and has about
90,000 employees consisting of staff and officers as of 2008). 71% of the total
employees are working in Civil, Mechanical and Transportation departments. All
the hierarchy positions are held by graduate Engineers.
2. PROBLEMS FACED BY PAKISTAN RAILWAYS
Since 1861 when the first railway line was laid down between Karachi and Kotri,
the expansion of the railway network by the British came at a rapid pace up until
1947. The driving factors for this growth were strategic and economic in nature.
For instance to thwart the Russians from the West, the British built the Khojak
tunnel, the fourth largest at that time, in seemingly inaccessible areas of
Balochistan to reach Chaman railway station. But after 1947, little has been done
to expand and maintain this network.
2.1 Shortage of Locomotives:
The Pakistan Railways has a total of 546 locomotives but only 290 are on track
while the rest are out of order. Similarly, 70 per cent carriages are out of service.
In a report submitted to Railway Ministry, it has been disclosed that as many as 70
locomotives are awaiting spares at Pakistan Locomotive Factory, Risalpur since
2004.
2.2 Eroding Market Share:
Railway sector in Pakistan has not maintained its position in the transport sector.
The market share of Pakistan Railways kept on declining with the passage of time.
For example, annual passenger volume carried by Pakistan Railways in late 1970’s
was approx. 145 million, which has come down to 59 million in 1992/93. The
freight business was of PR was 15 million tons in late 1960’s but has come down
to 7 million tons. Roads have steadily become the more preferred form of
transportation. An example of PR’s declining market share is that it is moving
only 11% of total petroleum products and 2% of the total containers. A more
professionally managed and independent railways have immense growth potential.
2.3 Soaring Budget Deficit:
The biggest problem for Pakistan Railways is the soaring budget deficit. Although
railways are traditionally not expected to earn profit. However, it is legitimate to
expect from railways to meet at least operational expenses. Today Pakistan
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7. Railways with Rs.334 billion liabilities is at the verge of bankruptcy because of
corruption, shortage of locomotives and losses incurred due to the running
expenses. According to one report Rs 21 billion is spent on wages and pensions
every month leaving the department less or nothing for maintenance of power and
rolling stocks.
In the light of above problems the Railway Board decided to hire external OD
consultants to design interventions that can help in turning around the organization
into a successful commercial entity.
3. ENTERING & CONTRACTING
A group of four OD practitioners has been approached by the Railway Board to
help Pakistan Railways recover from the verge of bankruptcy. As OD consultants
for Pakistan Railways (PR), the first and foremost task for us is to understand the
current structure of the organization and the issues. A meeting with the Chairman
of Pakistan Railways, Raja Shahid Hussain and other members of Railway Board
was conducted to discuss the issues.
3.1 Organizational Issues:
We conducted meetings with the members of Railway Board, General Manager
Railways, and Additional General Managers of each business unit of Pakistan
Railway and found out the following issues:
- Huge financial losses
- Decreased market share
- Inefficient operations
- Corruption
3.2 Key Clients
In case of Pakistan Railways, our main client is the Railway Board. Other
important key clients include GM Railways, Addl. GM of each business unit, and
representatives from Railway Employees Union, Railway Workshop Worker’s
Union, and Association of Station Masters etc.
3.3 OD Process
To fix the problems faced by Pakistan Railways (PR), we recommend the process
with following key steps:
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8. - Selecting a design team: A team of 8-10 individuals will be selected which
will include key policy makers for Pakistan Railways, representatives from
various functional areas of the organization and worker’s unions.
- Diagnosing: Once the team is selected a joint diagnosis of the organization
will be conducted which will include understanding organization’s current
strength and weaknesses, growth opportunities, organization culture and
values etc.
- Action Planning: The first key output of the team is a 5 year action plan
that describes where Pakistan Railway should move to, key activities and
milestones, assigned responsibilities/accountabilities for those activities,
and contingencies/assumptions that need to be monitored.
- Implementation, Monitoring & Evaluation: As the plan is implemented,
new information, changes in the environment and other issues always arise
that need adjustment. In this phase the OD consultants along with the
design team will monitor the implementations and collect feedback to
evaluate whether action plan is on track or not and will fix any deviations.
Also design team will conduct formal evaluation processes and discuss
their learning about organization structure and change.
3.4 Time & Resources
As OD consultants, we will provide consultancy services up to and including
development of action plan. Additional time beyond that time can be contracted.
Apart from the consultancy fee Pakistan Railways will also be responsible for all
the direct expenses including airfares, hotels, etc. for the research. The complete
process including diagnosis and development of action plan might take six to eight
months subject to:
- Access to key information and people.
- Commitment from PR management
- Access to sensitive information like HR records, PR policies, PR contracts
etc.
- Prompt response/feedback from key clients.
4. DIAGNOSIS OF PAKISTAN RAILWAYS
In order to carry out a detailed diagnosis of Pakistan Railways, the OD
Consultants along with the design team gather the key information through:
- Questionnaires
- Interviews
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9. - Observations
- Unobtrusive measures
The data collected help us in identifying the root causes behind the problems faced
by Pakistan railways. Since the overall organization is facing problems, the
diagnosis is carried out at organizational level. The findings of diagnosis are
discussed in detailed as below:
4.1 Huge Losses & Budget Deficit
The reason for this loss is the presence of unnecessary departments which are
white elephant for Pakistan Railways. The biggest among those is the Railways
Police that takes over Rs 1.5 billion including emoluments and other facilities
followed by Stores and Purchase. These departments should be abolished from
Railways without further delay. Their utility for railways is marginal at best. The
Audit and Accounts, Railways Workshops Division, and General Administration
staff need drastic cuts. These organizations are heavily overstaffed. If they will
continue to ignore the presence of non-productive over staffed departments with
very insignificant contribution in overall performance of Pakistan Railways, the
department will continue to decline. It shall never be in a position to meet the
expectations of public.
Railways are operating at low rates. A flexible policy for rates and fare requires to
be adopted whereby freight rates could be varied according to the type of
commodities as well as direction.
4.2 Mismanagement
Currently Pakistan Railways is facing acute shortage of locomotives and spare
parts for maintenance of out of service locomotives. Since independence little has
been done to expand the railway network in Pakistan. As per the reports compiled
by the design team, Pakistan Railways need 40 – 50 locomotives annually to run
its operations effectively. However, during the past two decades only 100
locomotives have been added. The management of PR has failed to generate
revenues through use of assets like land, locomotive factory, carriage factory etc.
The focus of Railway officials is on getting new locomotives while ignoring the
improvement in operations and maintenance of existing locomotives. The plans to
change broad gauge into standard gauge at this stage are not just costly but also
unnecessary.
4.3 Decreased Market Share
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10. Over the years, Pakistan Railways could not maintain its share in the country’s
transport sector. With Railway ministry shutting down operations of various trains,
it is no wonder that the market share of Pakistan Railways in cargo transport has
fall to mere 5% from 75% in 1960s and 1970s.
Around the world, railways are the cheapest and safest mode of transport and
majority of goods transport is carried out via railways. However, in Pakistan the
situation is completely different. The indifferent attitude of various governments,
direct competition from NLC, container mafia and bus mafia are all behind the
drastic condition of Pakistan Railways today. Railways and NLC need to
coordinate their operation and also compete in their operations to economize on
the inter – modal movement of goods traffic. The Railway should carry goods in
bulk in the plains, while NLC and private road transport should take over further
distribution from these points in to the hilly regions. This will help the railway to
concentrate its resources of locomotives and wagons on the main line in the plains,
after withdrawing them from the hilly regions. This is in fact the best and most
economical rail road mix for the country.
4.4 Corruption
Corruption is the biggest problem Pakistan Railways is facing today. The Railway
Department has been suffering losses since years long. Contractor system is one of
the causes of such losses. Moreover, there are enormous irregularities in local
purchases. The number of officers’ cadre has increased considerably since 1977,
mostly due to political appointments. It has been revealed that the crises are self
generated creating a space for more corruption and PRACS-Pakistan Railways
Advisory Commute Services is responsible for this mess.
Selective services have been privatized by allotting its contract to different private
parties to operate those privatized trains. Ironically the contract has been awarded
only for ticketing and like buss conductors those private firms after selling out the
ticket deposits payments into the Railways account. As per agreement after
deducting its commission the contractors are legally bound to deposit the funds
into the Railway account but due to the nexuses between Railways bosses and
private contractors deposit the funds in private accounts. This illegal practice has
confronted Railways with financial crunch where as the officials of Railways are
least bothered for the interest of Pakistan. Some Railways circles insist that
Pakistan Railways is still a viable and progressive organization, provided the
rampant corruption could be controlled.
In short Pakistan Railways is a classic example of bad governance, poor policies,
corruption and mismanagement.
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11. 5. ACTION PLANNING
After a careful diagnosis, the results were feedback to the main clients. Several
meetings were conducted with key clients to determine the type of OD
interventions that will most appropriately suit the needs of Pakistan Railways. The
clients and consultants jointly agree that Pakistan Railways need a mixture of
techno-structural and collaborative interventions to recover from the current crisis.
5.1 Structural Design
Pakistan Railways is a vertically integrated highly bureaucratic organization. The
current organizational structure is a mixture of functional and divisional structures.
The positions are divided into four classes:
- Officer Cadre
- Station Masters
- Running Staff
- Class Four comprises of labors, signal operators etc.
The structure needs to be revamped into a more leaner and flexible one. A
combination of divisional and network structure will be most appropriate for
Pakistan railways. The PR management can retain the structure based on current
divisions and create a network of these divisions for better management of
operations and resources.
5.2 Downsizing
The Pakistan Railways is an over staffed organization. Political appointments over
the years have added to the problem and are the major reason behind
organization’s financial troubles. Departments like Railway Police, Stores &
Purchase need to be abolished. Other over staffed departments like Audit &
Accounts, General Administration etc. need drastic cuts in workforce. For
successful implementation of downsizing, the PR management must follow the
following steps:
- Clarify organization’s strategy to its members and provide ample
opportunities for them to voice their concerns ask questions and obtain
counseling.
- In case of PR, the structural change will help in eliminating unnecessary
layers, merge units and non productive staff can be reduced through layoffs
and buyout packages.
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12. - While implementing methods of downsizing, management should use a top
down approach. It should target inefficient and high cost areas. Keep people
informed throughout the process about restructuring activities.
- Address the needs of survivors and those who leave to help them overcome
the stress of structural changes.
5.3 Reengineering
Pakistan Railways have great potential for growth. However, the current process
and technology does not provide much room for implementing growth strategies.
Pakistan Railways can improve the performance of its various functions and
department through proper use of information technology. The areas where
information technology can play a vital role include:
- Seat Reservations
- Freight Management
- Asset Management
- Track Management
- Rolling stock inventory
- Electric Billing
- Timetable
During diagnosis many members of Pakistan Railways suggested that the
organization should be privatized like PTCL to improve performance efficiency.
However, research suggested that key state owned enterprises like Railways,
Airlines, and Road Transport etc. should remained publically owned for the
overall benefit of the customers. However, Pakistan Railways can privatize some
of its units like The Locomotive Factory, The Carriage Factory and other large
manufacturing units.
5.4 Alliance Interventions
Apart from techno-structural interventions, Pakistan Railways can make good use
of collaborative interventions to improve productivity. Instead of hiring
information technology and database experts, Pakistan Railways can create an
alliance with National Database & Registration Authority (NADRA) for
developing Track Management and Seat Reservation Systems.
Similarly Pakistan Railways can create alliance with China Railway Engineering
Corporation (CREC) for expansion of railway tracks in Pakistan.
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13. 5.5 Network Interventions
With the help of Public-Private Partnership, Pakistan Railways can create
networks to operate some of its route for privatized trains. For creating such a
network, PR can call for a private investor’s convention and brief those about the
available opportunities select the organizations that can fit in the network best and
implement networking strategies and evaluate the performance of networks
periodically.
For small routes Automatic Train Operation System can be implemented by
creating a network of Pakistan Railways with US General Railway Signal
Corporation (GRS), UK Westing House and Siemens Germany.
6. CONCLUSION
With growing interest in the development of Trans-Asian rail links, one might
think that Pakistan Railways has a promising future. However, the Railway
Ministry, the Railway Board and all the relevant agencies have to play their role to
return Pakistan Railways to its glorious days. Before allocating any further funds
to bail out the organization, government should force the management to undergo
vast structural changes as recommended by OD consultants in this report. These
changes can be implemented within a period of 3 – 5 years and once the changes
have been made and evaluated then new investment plans can be made.
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14. BIBLIOGRAPHY
- Organization Development & Change – 8th Edition by Cummings &
Worley.
- www.pakrail.com
- www.railwaygazette.com
- www.wikipedia.com
- www.pakistaniat.com
- Article “Corruption in Pakistan Railways” published in Pukhtoonistan
Gazette on Friday, 26 November, 2010
- http://pak1stanfirst.com/201102253236/pakistan/economy/fixing-
pakistan-railways.html
- Various articles and editorials published in Daily Dawn and The
Nation from July 2010 – March 2011
- http://www.privatisation.gov.pk/Transport/Pakistan%20Railways.htm
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