Why it’s so hard pulling SOEs out of their downward spiral
Highly bureaucratic companies are ineffective, unproductive and inflexible
It is popularly believed that once poor governance at state-owned enterprises (SOEs) is fixed, they will magically return to good health. Yet, while poor governance may be a critical problem at failing SOEs, more importantly, the business model of many SOEs is broken, and in many cases unfixable. SOEs are highly bureaucratic in their inner workings, mimicking that of the struggling public service, which makes these companies highly ineffective, unproductive and inflexible. SOEs are compliance-driven. Compliance is rewarded. Decisions take long to make. Decisions, problem-solving and communications within the organisation are often politicised, bureaucratised or in silos. They have rigid chains of command, with multiple layers between the management, employees and customers. The internal organisational structures are often bloated. Duplication of functions is the norm. Executives often barricade themselves from staff and customers, interacting through layers of intermediaries. Employ...
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