Political and Legal Environment:

The major features of the political and legal environment are as follows:

 High level of Unionization; especially in government controlled institutions

 Close ties between the unions and political parties
 High level of political risk due to a weak central government
 Weak implementation of law

Economic Environment:

The major features of the Economic Environment are as follows:

 High level of inflation

 A highly regulated economy
 Trends towards privatization in the last few years; however, this was negatively affected
by corruption in the privatization
 Numerous government controlled institutions especially in utilities, oil and gas, precious
metal, insurance and banking
 One of the income lowest tax rates in the world
 Large percentage of the population does not pay tax
 Policy of protectionism especially for export oriented sectors and labor intensive
sectors.

Pakistani Manager’s Style:

Planing:

The planning in pakistan

Leading:

Managers tend to have a paternalistic leadership style; they may demonstrate concern for their employees
that goes beyond the workplace and strictly professional concern. This empathy in turn helps create
organizational citizenship among the employees1.

The Top management is responsible for making the decisions and the middle and lower- level managers
are responsible for implementing the decisions. The top management may consult the technical experts,
but this is not done to obtain a consensus but to obtain information in-order to make an intelligent
decision.

However, over the years there is a movement towards ‘Open Door’ management style in larger
organizations, where the middle and lower–level managers are encouraged to bring their concerns and
1
Empathy-Related Responding: Associations with Pro-social behaviour, Aggression, and Intergroup Relations by Nancy Eisenberg and Natalie
D. Eggum
ideas to the people involved in making the decisions, this way a reflection of the concerns of the
employees is seen in the decision made by the top managers.

According to the people we interviewed the following sources of power are the most important for a
manager in Pakistan. (In descending order)

 Legitimate power
 Reward power
 Coercive power
 Expert power

Motivating:

Both intrinsic and extrinsic motivators are used by the management. The extrinsic motivators that are
widely used include bonuses, pay increase, car and houses at subsidized rates 2. The intrinsic motivators
usually used include employee of the month awards, transfer to a department that a person prefer, transfer
to a place which a person prefers.

Among top-level management and middle-level management individual rewards are considered more
important relative to group rewards; however, among lower-level managers such as supervisors and
factory workers group rewards are considered more important.

Stock option are also offered by some large companies to their top-management; however, due to
overpowering impact of macroeconomic factors on the capital markets, which often results in the
fundamentals of the company being disregarded in importance relative to these external factors by the
investors community, these programs have not been very successful.

Yet another source of motivation is the coercive actions that can be taken by the management. However
such actions are taken only after several warnings. Such actions can take different forms; according to
Ms. Madiha Farooq, whenever their bank needs to punish a person, who has political contacts, for his
repeated low performance they would simply transfer him to a far-flung area such as Baluchistan and
Interior Sindh.

Controlling:

The management function of control involves directing people’s behavior so that the organization shall
meet its objectives; in case the organization is unable to meet its objectives then corrective actions should
be taken. Control is greatly affected by the tendency of Pakistani business community to be rent-seekers 3
rather than risk takers and this has resulted in fewer organizations going public and those organizations
that do go public their free-float is negligible. The shares of these public companies are also not broadly
held by the market.

This results in a situation where the founders of the company or their heirs remain in complete control
over the affairs of the organization, and this complete control often results in lower economic efficiency.
2
Houses are offered mostly by government institutions and some large firms
3
It occurs when a company, organization or individual uses their resources to obtain an economic gain from others without reciprocating any
benefits back to society through wealth creation. Previously; companies had an incentive for going public as their tax bracket was reduced to
35% but recently this incentive has been dropped by the government, resulting in fewer organizations going public.
For example; Packages Ltd, a KSE listed company, has negotiable securities in its balance sheet that are
worth more than the total worth of the company itself 4. An important reason why this is possible is
because of lack of hostile takeovers5 and Leverage buyout which in turn is the result of small amount of
free-float and the unwillingness of the local banks to extend risk capital.

The management of those few companies that have a large portion of their equity outstanding in the
market is also not heavily influenced by the shareholders; this is primarily because the management is
able to obtain most of the voting rights from the minority shareholders through proxies and the
institutional shareholders who own large blocks of company shares do not have a clearly stated corporate
governance policy6. This results in an overall lower economic efficiency, as the management is now
inclined to focus on their own goal rather than goals of the company.

In smaller companies such as “Abdul Karim Hashim Sons” the proprietor is responsible for the complete
control over the operations of the organization. For example; Mr. Omer Shah was responsible for the
complete operations of the business, to the extent that he was directly involved in determining the amount
of feed that should be given to the animals at his farm 7. This in-turn greatly limits the ability of this
business to diversify into other related lucrative fields.

4
Packages limited by Elixir securities Pakistan
5
The only successful hostile takeover in Pakistan has been by the Mansha Group which took over Adamjee Insurance.
6
Performance Evaluation of Pakistani mutual funds by Talat Afza and Ali Rauf
7
Interview( see appendix)
Appendix:

Performance Evaluation of Pakistani Mutual funds by TALAT AFZA and ALI RAUF

Packages Limited by Elixir securities Pakistan

Empathy-Related Responding: Associations with Pro-social behaviour, Aggression, and Intergroup

Relations by Nancy Eisenberg and Natalie D. Eggum

Comparative Decentralization Lessons from Pakistan, Indonesia and the Philippines by Gorge M. Guess

Mansha group takes over AIC- archives.dawn.com

Being a manager in Pakistan- kwintessential.co.uk

Twenty Management Styles- pakmagazine.com

Interview:

Syed Omer Shah:

Sysed Omer Shah is a business school graduate and is currently doing his MBA from SZABIST. He
started handling his family business after his father took retirement from the business. Prior to this he had
worked at an advertizing agency called JWT. He worked on this business after working along with his
father for several years. After taking over the business he implemented numerous changes related to the
distribution, costing and production which lead to increased profits. He has also expanded the size of the
business and has diversified into other businesses as well.

Contact Number: 0300-8220459

Akram Karim Tabba:

He is a graduate of university of Toronto. He was the first person in Pakistan to import American
synthetic lining material currently his company “Abdul Karim Hashim Sons” has more than 30% of the
synthetic fiber market . The annual sale of this company is around 400,000 to 500,000 meters of synthetic
material. This is usually brought for manufacturing of school bags and related products these bags are late
exported to other countries. The brands of the company include:

I. Tabba Tex
II. Crown Tex
III. Sun Tex
Contact number: 0345-3300133

Madiha Farooq:

She is a graduate of Baharia University. She has been working at Allied Bank for the last three years in
the operational department of Allied Bank at the Group Headquarter Karachi. She is responsible for
coordinating the operation of different branches in her region and also informing the Headquarter at
Lahore about the operations of these branches. She is also actively involved in development of policies
regarding expense control at branch level.

Contact number: 0303-2955975