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INTRODUCTON????
No company today is in a particular stable environment. Even traditionally stable industries have witnessed and continue to experience turbulent change. Thus, the dynamic and changing environments that organisations face require adaptation, sometimes call for deep and rapid responses, "Change or die!" is the rallying cry among today's managers worldwide. Forces such as, nature of the workforce, technology, economic shocks, competition, social trends and world politics act as stimulants of change. ?
The theory of Privatisation and competition and the related academic literature suggests that Privatisation produces significant organisational change and that those changes, in conjunction with market forces and appropriate government actions, will produce positive results―in terms of profitability, efficiency, etc. Many changes in organisations just happen. Some organisations treat all changes as accidental occurrence, but we're concerned here with the planned change that occurred during the Privatisation process at Al-Ahram Beverages Company (ABC) that supposedly sought to improve the ability of the firm to adapt to changes, and to change the employee behaviour.
?THE REPORT OBJECTIVES
This report examines the relationship between Privatisation of state-owned enterprises (SOEs), organisational change, behaviour and performance ? the case of Al-Ahram Beverages (ABC). It explores the processes in which Privatisation affects corporate performance through the internal changes within the organisation. The analysis shows significant difference across the types of ownership pertaining to organisational elements that were expected to change. The evidence suggested that the Privatisation process altered the behaviour, incentives and performance of formerly state-owned enterprises (SOEs).
It also analyses, at the micro-institutional level, organisational change and the transformation of Egyptian SOEs in case of ABC. Such analysis of a "success story" on the impact of Privatisation on organisational change and performance would help managers understand the nature of the transformation process, taking place during ownership change. An important by-product of Privatisation and public enterprise restructuring programmes in Egypt is the growing demand for effective managers in both SOEs and privatised firms.
Most studies of the performance of firms' post-Privatisation have focused on the bottom line, that is, they have examined financial measures to monitor quantifiable indicators of change. But few studies have taken a look at how the post-Privatisation organisational cultures within the firms change organisational behaviour.
Scholars, management experts typically characterise great differences between public sector and private sector management and bureaucratic practices. And the organisational development literature highlights the immense challenges to changing organisational cultures & behaviour. This leads us to this report's primary question: What is the effect of Privatisation on organisational behaviour in Egypt? The case of Al-Ahram Beverages Company (ABC).
In discovering a lack of empirical data on behavioural changes within firms' post-Privatisation, we addressed this problem and discussed the changes in organisational culture and behaviour that identifies the variety of outcomes that theory suggests are associated with Privatisation. Then, we attempted to implement the outcomes on Al-Ahram Beverages Case.
? WHY AL-AHRAM BEVERAGES?
Al-Ahram Beverages Firm was established more than 110 years ago. The story began in 1897 boca juniors camiseta nueva when the Crown Brewery Firm (ABC's oldest forerunner) registered itself in the kingdom of Belgium (home of the well known Stella Artois beer) to start operation in Alexandria.
Later in 1946, the firm entered into a technical-assistance boca juniors camiseta nueva agreement with the leading Dutch brewer Heineken. However, in 1963 the firm was nationalised and was run by the government for the past 50 years. After more than 22 years, the firm finally changed its name into Al Ahram Beverages Firm (ABC).
Al Ahram Beverages Firm (ABC) has evolved from an antiquated Egyptian public sector brewery to dynamic world class Beverages Firm. In 1997 an Egyptian entrepreneur bought it during the era of Privatisation. Along the way ABC has been acclaimed "The model of Privatisation".
Finally in 2002, the firm commitment to development led to the acquisition of ABC by Heineken group, yet it remained for 3 years under the management of the previous owner.
In January 2006, the firm went through a complete change in all its domains and activities. Today ABC boasts a wide ranging beverage portfolio including beer, wine, spirits and its pioneering non-alcoholic malt beverages; Fayrouz, Birell & Amstel Zero.? The firm is now under the management of a national and multinational team.
Egypt is now among Heineken's 20 largest markets, and the Dutch firm has put wine at the forefront of their latest marketing push. Egypt's history as a winemaking nation is well documented; Pharaonic vineyards were among the first on human record. But spurring local consumption is still big task for the beverage firm. Both supply and demand in the modern industry depend largely on foreigners ― Al-Ahram's chief executive is Belgian and over 80 percent of wine sales come from tourists.
ABC was classified by Forbes Global magazine as one of the 200 best-managed small businesses in 2001, and one of the top 20 in 2000. The company's shares were listed on the Cairo & Alexandria Stock Exchange (CASE), and it was honoured with MEED's Business-to-Consumer Product Manufacturer award of 2002 for business excellence. Experts in global business applauded ABC for being the best Privatisation success story in the world.
LITERATURE REVIEW
The sale of state-owned enterprises (SOEs) to private sector investors and the competitive, market provision of government goods and services is a quintessential "global public policy." More than 160 countries have taken actions to privatise their industries. The World Bank, the International Monetary Fund and other multilateral institutions advocate ? at times require ? Privatisation policies to be adopted as a condition of assistance and loans.
The policy logic of ‘Privatisation and competition as reform' (PCR) is founded in the fundamental proposition that private sector management of enterprises ? utilities in particular- is different from and superior to their management by governments. Even in areas of traditionally essential government services PCR is increasingly prescribe. One way to engage private management to the operation of enterprises is to transfer ownership ? partial or full ? to private investors; although there are numerous other approaches to accomplishing the same ends. The emergence of PCR as a global policy has been sparked by both ideological and practical considerations.
The dissolution of the Soviet Union and the resulting transformation of the economies of the Former Soviet Union (FSU) and Eastern European countries have relied on Privatisation policies as a vehicle for making a transition to market-like economies and greater integration with the global economy. The sale of shares in state-owned enterprises raised government revenues that reduced budget deficits in a timely way.
One area in which SOEs can be differentiated from the private enterprises is the nature of their goals and objectives. In typical analyses of agency costs in SOEs, researchers rely on the assertion that managers in SOEs focus on the objectives of politicians, rather than maximise enterprise efficiency. In SOEs, the goals are blurred, multiple, conflicting and unstable, and include both financial and political objectives. This view is well established in the literature. However, it has been widely acknowledged that the goal in private firms is clearer and related to profit maximisation and value creation for shareholders. Apart from commercial goals, some SOEs may include macro-economic goals concerned with some issues as employment, inflation, equity and so forth. This is certainly true in the Egyptian case where SOEs are viewed as a business entity and the government tool to realise macro-economic objectives.
In private firms, managers' main goals are the pursuit of long term profits for their shareholders. SOEs are predicted to be low performers because politicians impose objectives on them which may help them gain votes but conflict with efficiency and customer orientation. Following Privatisation, senior managers have discretion to redefine organisational goals to reflect the objectives of their key stakeholders.
As firms move from public to private, it is expected that Privatisation changes organisational mission and goals that put more emphasis on the search for the efficiency, customer satisfaction and reduce social consideration.
From a corporate governance view, the benefits of ownership change could be explained in several ways. Firstly, managers in Privatised firms have to achieve a successful transfer from public to private governance and must implement numerous policies in order to achieve expected gains in performance. Managers should develop strategies based on analysis of industry and market and technological opportunities. Following Privatisation, managers are expected to have the discretion to redefine the organisational goals to reflect the objectives of their key stakeholders.
Secondly, the benefit of Privatisation can be achieved by delegating management functions to professional managers who have the required training and knowledge at all levels of the company. The separation of ownership and management could, however, encourage management to be largely unaccountable to equity holders and to pursue its own interests at the shareholders' expense (agency costs). Privatised companies could develop internal and external control mechanisms that reduce the losses associated with the separation of ownership from management.? Internal control mechanisms in which incentives and monitoring devices are established encourage professional managers to act in the shareholders' best interest. When internal control mechanisms work well, the board of directors changes the top management as needed in the best interest of the corporation. When internal control mechanisms are deficient, however, external control mechanisms (through stock prices, takeovers, and relation based control) may be used to realign managers' interests with those of investors.
As predicted in agency theory, control mechanisms in private firms can be expected to be more effective than those in SOEs, since the internal control departments and boards of directors who exercise control in private firms usually are better informed than their counterparts in SOEs. The objectives of boards and internal control departments are also more aligned to those of firm owners' than are the objectives of external agencies in general. Managers of SOEs usually have limited discretion to initiate and implement strategic changes and are constrained by bureaucratic controls that limit their scope of activities and authority.
Another expected shift in the organisational behavioural practices is a change in criteria of the Boards' appointment. The overhaul of top level management in the Privatised firms is expected in order to achieve a successful transformation from public sector mindset to private sector culture. Managers with private sector experiences―equipped by necessary skills in business development and venture, marketing and finance-- are needed to capitalise on market and technological opportunities. The appointment of top level management in newly Privatised firms would be based on past experience in commerce rather than those with influence and political connections.
In the private sector corporate governance mechanisms often ensure that managerial behaviour is monitored and controlled through market mechanisms such as share prices, prospective investors and the media. This may explain why share issue Privatisations can lead to a significant impact on the efficiency of the enterprises. However, researchers have underlined that developing countries ? such as Egypt - lack market-supporting institutions. In this case, managers may rely largely on layoffs and on increasing sales to bring companies to profitability. Even when widely dispersed and individually weak shareholders intend to replace incumbent management, they lack the ability to attract appropriately qualified managerial candidates, and they generally fail to provide management with the support it needs to implement drastic turnaround in operations and in culture
The stereotype of public enterprises structure is that SOEs are bureaucratic, inflexible, rigid and unable to adapt to the external environment. Politically controlled bodies have politically defined structures - these are likely to be non-optimal after Privatisation. Therefore, it is expected that as firms move from public to private, there will be a change in organisational structure. Furthermore, drawing upon the field of managerial and organisational research writers, Privatisation is associated with a movement from a functional form of organisation to control inputs and outputs for the whole organisation, and usually requiring activities arranged in profit or cost centres. Privatisation is associated with the move to a flattening of the managerial pyramid and an ‘m-form', rather ‘u-form' structure.
Furthermore, by releasing managers from politicians' control; Privatisation may free managers to exercise their latent managerial talent. Middle-level managers, for example, whose main role under state ownership was one of mere administrative control, might find their jobs content changed as they become responsible for implementing changes and for coordinating and motivating the teams they supervise.
Privatised companies also change their organisational structures to ensure faster decision making by eliminating layers of management and reducing bureaucratic rules, and integrating individuals/units in the organisation. Flatter organisational structures, therefore, are more common in Privatised companies, and they usually facilitate communication and cooperation between individual and units. Improved communication can strengthen employee commitment to the organisation, encouraging employees to be more productive and innovative (Perceived Organisational Support).
Egypt's Privatisation programme has effectively been under way since May 1996. Since that time the government has proceeded to sell off much of the portfolio slated for Privatisation under Law 203, and has employed both the Stock Exchange and the strategic sales methods as the primary mechanisms for effecting transactions. While there is no doubt that the Privatisation of such a large portfolio of government enterprises is a major achievement, there is presently very little information available about the post-Privatisation development of these companies.
It is too early to argue conflicts between employment and human resource resulting from Privatisation, but these conflicts show us the significant importance between labour issue and Privatisation policy. Transformation process of public enterprises generates extensive and far-reaching effects on labour, the employment relationship and the social security in particular. This issue is less well addressed by the existing literature. In order to minimise the adverse affects of the transition of public enterprises, some literature has claimed that it is crucial to raise public awareness of the costs, benefits, timing and methods of such transition through wide worker participation.
PRE-PRIVATISATION ORGANISATIONAL BEHAVIOUR
Other than being institutionalised in the organisational structure of state apparatus, authoritarianism and centralisation are reinforced by the organisational culture of public administration and reflect the general culture of the Egyptian society as a whole. Authoritarian patterns of behaviour are bred, boca juniors camiseta nueva sustained and perpetuated by paternalistic family structures, religious and educational institutions, and the political system in general. In a large bureaucracy with a promotion system based on seniority rather than performance, low basic monthly salaries, and supplementary payments controlled by senior management, employees are encouraged to be in the good books of their superiors. Submission to one's superiors becomes necessary to secure the supplementary payments and tolerance for employees' eventual absenteeism when they take other part-time jobs. Having reached their position thanks to their long years of service or contacts and not professional merit, senior officials derived their prestige solely from their bureaucratic rank which gave them the authority to punish or reward junior staff. Senior officials were keen to maintain their authority and refuse to delegate any of their responsibilities to junior staff. In the absence of significant financial compensation for reaching a senior position after long years of service and an unfulfilling professional career, authority over fellow colleagues probably served as a self-actualising psychological reward to the civil servant. This explains the high degree of resistance to any decentralisation or delegation of authority (resistance to change).
All Egyptian SOEs ? including ABC - portrayed a pattern of significant power distance where society accepted that the unequal distribution of political and economic power is also reflected in an unequal distribution of power and authority in state institutions and organisations. However, the prevalent attitude became one of the veiled resistances to such authority. That is, they nominally accept authoritarianism, but in practice incapacitate it. For instance, employees would fake compliance with decrees, but minimised their input and try to maximise their benefits, either by increasing absenteeism and procrastination, or by engaging in corruption and favouritism. In this context public officials were accountable only to higher layers of administration and citizens become a superfluous detail.
Having reviewed the organisational structure and culture of the state-owned enterprises (SOEs) in Egypt, we can see that the potential agents of change and innovation were primarily top management and that civil servants were considered uncooperative subjects of reform and not partners in change.
Previous studies lead us to conclude that top leaderships in the public sector were those who are most empowered to initiate and steer change, but were the least interested to implement it on the overall system. Innovators were, to a large extent, either intimidated by economic and political costs or are marginalised in non-decision making positions.
Recent trends in public sector reform approaches the issue of leadership in civil service with enthusiasm, dedicating a considerable attention to developing leadership skills and facilitating the promotion of promising individuals to decision making position. The idea is that reform needs visionary leaders that are committed to change, willing to take risks and whose expertise and personal integrity guide and invigorate reforms.
However, in the context of the personalised and authoritarian culture of SOEs, we ought to be careful not to mix between visionary and charismatic leaderships. Charismatic leadership is based on the personal traits of individual leaders and their capacity to drive others to achieve specific goals. Charismatic leaders tend to be autocratic and hardly institutionalise change, which is directly linked to their person.
Visionary and directive leaders, on the other hand, are more oriented towards involving their staff in goal-setting, internalising reforms in daily operational procedures of institutions and empowering their staff thus inspiring enthusiasm, commitment and leadership skills at the various levels of the organisation. Visionary and directive leaderships are more likely to bring about an institutional development that is sustainable.
