“Memorandum of Understanding (MOU) makes an attempt to move the management of Public Sector Enterprises (PSE)s from management by controls and procedures to management by results and objectives.” Evaluate.

Answer: Answer: Arjun Sengupta Committee recommended MoU in 1988 to improve the performance of PSUs.Memorandum of Understanding (MoU) has been conceived as an instrument to quantify/assess social and commercial obligations/performance of central public sector enterprises (PSEs) in India.
It aimed at providing greater autonomy to public sector enterprise vis-a -vis control of the government. The purpose of this paper is to measure the financial performance of the MoU PSEs and to compare their performance with PSEs which have not opted for MoU It should contain the intentions, obligations and mutual responsibilities of the Government and the PSE. Further, MOU makes an attempt to move the management of PSEs from management by controls and procedures to management by results and objectives.
Performance of MOU signing PSEs is evaluated with reference to their MOU targets twice in a year. The MOU evaluation is finalised on the basis of the actual performance and the PSEs are graded as “EXCELLENT”, “VERY GOOD”, “GOOD”, “FAIR” & “POOR”.
The focus, under the MOU system, has shifted to achievements of results. Operational autonomy has also been encouraged and increased by delegation of more financial and administrative powers to the MOU signing PSEs. By laying stress on marketing effort and comparing with private sector enterprises MOU are helping PSEs to face competition.
The quarterly performance review (QPR) meetings have become more focused since the introduction of MOUs. Discussion is confined to overall achievement as outlined in the MOUs. By making a distinction between enterprise performance and managerial performance, MOUs have
improved the quality of debate and made judgements on PSEs managements much fairer, which improves the morale of employees. The MOU system seems to have a salutary effect on the performance of MOU signing PSEs – improved rating and financial performance

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