ECONOMY

An architect of business restructuring sets out why the ‘art’ must be performed in earnest

Professor Dimitris Papoulias has played major roles in the restructuring of two of Greece’s largest public enterprises, the Public Power Corporation (PPC), of which he is current chairman, and OTE Telecom before that. In this interview, he talks about the «art» of transforming enterprises and why it needs the earnest attention of an open system, the role of labor unions in such processes, and the reasons why the deregulation of the electric power market seems to be making no progress. About two years ago, you undertook, together with Managing Director Stergios Nezis, to implement a restructuring program at PPC, which was then in dire economic straits. How do you judge the results today? The results have been unique for the public sector in Greece. It was a bold initiative and an extremely successful experience, which, I believe, is an example that can be extended elsewhere in the public sector – hospitals, for instance. However, this would require letting go of the prevalent view today that such reforms are issues like any other; it really needs the adoption of so-called open systems, or of «reflexive action,» where change is an issue getting the greatest attention, programs are controlled and revised and the persons involved are of a high stature. Unfortunately, for various reasons this view has few supporters, because it is painful and tiresome. It could actually produce great political benefits. Ministers, CEOs and administrators should really all be busy with changes. Do you believe that such a restructuring process was unavoidable for PPC? In June 2000, PPC was de facto facing the dilemma of whether to follow the positive example of OTE, or the disastrous path of Olympic Airways. At that point in time, PPC had low productivity, huge debt, negative cash flows, zero profits, low morale and was at a loss before the forthcoming deregulation of the market. It could have easily drifted down Olympic Airways’ path, which shifted problems to the future, failed to observe streamlining programs and, in the end, ran aground. By contrast, OTE, since 1996, had chosen the way of the stock market, technological renewal, decentralization of activities, investment abroad, the setting up of a mobile telephony subsidiary and consensus with labor unions, which all made it a very strong enterprise. And now, after two successful stock flotations and vastly improved results, everyone is talking about PPC’s success. In various ways, PPC managed to reorient itself vis-a-vis the rest of society, its workers and public opinion in general. This was done on the basis of what is called an evaluation system that came to replace an old, worn-out and tired system. Such cases require the speedy creation of a convincing new image, based on new behavioral models. This was done in quick moves, like the corporation’s overall restructuring program which involved a five-year business plan, the selection of new directors and executives on meritocratic criteria, a cost-cutting program, renegotiation of procurement contracts and a new communication style. The two stock flotations were the catalyst of the changes and the progress achieved. In all this, we had the full support of ministers, to this day. Besides the ministers, the stance of the corporation’s labor unions (GENOP) must have also been crucial. What role did they play in all these changes? I must recognize that the unions rose to the occasion and helped the corporation turn toward progress. However, the fact remains that the Greek labor union movement in general remains oriented to the past. It remains fragmented through party affiliations. Personally, I would expect from GENOP a bold initiative in the future, in line with the facts of the new reality and the progress PPC has made. In all this, did you find a personal interest, beyond your duties as chairman of the corporation? Planning changes and restructuring enterprises holds great interest; enterprises are entities where wealth and ideas are born and where people have had to learn to plan and implement changes. This is an art, which requires knowledge of theory, as well as of people and their reactions. I cannot omit a reference to our managing director Stergios Nezis; through his work at PPC, I believe he has proved he is the best manager in the country. Our views coincide and this is evident on the board of directors as well as in the daily running of the corporation, where the entire management team can take credit for the successes we have realized. The deregulation of the power market and the encouragement of competition has been discussed since 1999. In your view, why has this stalled? Why does private investment not take place? The main reason is the low price of electricity and the high price of natural gas that will fire the power stations. Another reason is what began as a fundamental mistake by the Regulatory Authority for Energy: it gave the impression that for private enterprises to be able to meet the cost of the investment they must be subsidized. As a result, they raised their expectations and have been besieging ministries, demanding subsidies and much more.