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Energized By Change
A case study in corporate culture change at an energy company.
New Zealand's largest energy utility built from a series of
mergers and already struggling with severe integration issues
was hit by a near fatal financial crisis. The company came
to the brink of being New Zealand's highest profile corporate
collapse.
Although culture change programmes are not unusual following
multiple mergers, it is unusual to successfully implement
a change programme against this backdrop, especially when
overlaid with a bungled technology implementation and a crippling
energy crisis.
The usual response to any crisis, let alone crisis upon crisis,
would be to pull anything that costs money, so it was a significant
feat to win permission to keep going with a change programme
that had only just begun to address the difficulties presented
by multiple corporate mergers. And while research shows that
70% of change initiatives fail the story at NGC proves the
adage that the secret to performance turnaround lies in the
people.
It was only through improving how employees saw their situation
and encouraging positive behaviors that a general manager,
staring down the barrel at imminent catastrophe, managed to
significantly contribute to pulling the company away from
the brink. NGC's story demonstrates clearly that, in crisis
as in the everyday world of business, it is only your people
who can save you.
New Zealand's largest energy retailer was created in 2000
by the merger of TransAlta New Zealand (TANZ), Natural Gas
Corporation (NGC), and Australian Gas Light (AGL).
TANZ was already one of New Zealand's larger electrical retail
companies, created by merging electricity retailers from the
country's largest cities. The diversity of the geography and
regional cultures of New Zealand meant that these mergers
presented alignment challenges for TANZ, which it was working
to overcome when it was purchased by an Australian energy
company; AGL.
In the 12 months prior to the AGL takeover, TANZ had invested
significantly in developing a retail brand. Its vision was
to be the largest electricity retailer in New Zealand (NZ).
The internal and external marketing and image was based on
operational excellence, making life easy, being fast moving,
energetic, and flexible.
NGC, majority owned by AGL, on the other hand was a conservative
formerly government-owned gas transportation, distribution
and processing company with a small amount of gas retail.
At heart it was an engineering company and its backbone was
its engineers, professionals used to high levels of resources
and high standards of maintenance and reliability.
AGL, is Australia's largest energy company, vertically integrated
and conservatively managed. The company has a 140-year history
and its culture is famously traditional and hierarchical.
It had adopted a light-handed approach to its ownership of
NGC up until the time of the TANZ takeover in 2000.
In 2000 the Canadian parent of TANZ sold the company to AGL,
which wanted to create NZ's largest energy retailer by combining
TANZ with NGC, a move effectively seen by many at NGC as a
takeover by TANZ. AGL brought in its own, Australian management
to run the combined operations.
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The resulting situation was a recipe
for cultural disaster: three companies with three cultures;
TANZ's "hippies", NGC's "techies"
and AGL's "suits" attempting to come together
to form one organization, under the brand of NGC.
AGL's main strategic focus on becoming
NZ's largest energy retailer left little resource for
the gas transportation, distribution and processing
arm that was NGC's core business. NGC's techie engineers
were appalled that there was no money for investment
in asset maintenance or expansion, while retail operations
were awash with new investment funds. And with the senior
management of NGC now predominantly AGL and TANZ people,
the career paths of many of NGC's people were abruptly
disrupted.
The resulting disgruntlement created
a rift between the already diverse cultures of AGL,
TANZ and NGC and without an apparent strategy or focus
on the integration of cultures to form one company,
productivity stalled and dysfunction ruled.
Adding to this chaos, the implementation
of the customer service systems planned for the merged
businesses did not go well. Customers were incorrectly
charged, not charged at all, or cut off prematurely,
and complaints were filling the press, which reported
the troubles with zest.
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As Murphy's Law would have it, while all this was going on
inside the company, exogenous factors were working against
it. New Zealand's electricity supply is heavily reliant on
hydro generation, and as a result is notoriously volatile.
In June 2001 there was a drought and electricity prices skyrocketed.
Largely unhedged and hence exposed, NGC was hit heavily. The
company lost $35 million over two months and was forced to
write $255 million off its customer base, almost forcing it
out of business.
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The financial disaster forced AGL to
sell the recently expensively acquired NZ retail arm
to competitors, and dig deep into its pockets to save
the company from ruin.
By the beginning of 2002 all that remained
of NZ's largest energy retailer was a small generation
business and a gas wholesale, transportation and distribution
company. It was a public and very spectacular collapse.
NGC had gone from a company with assets worth $2.2 billion
and over 800 staff to a business verging on collapse,
with half that many people.
As assets were stripped out to repay
debt, there was no money for expansion of network assets
and several once in a lifetime growth opportunities
were lost for lack of cash. Good people started to think
about leaving the company and most staff lacked an incentive
to perform. NGC's people could only watch as their company
was dragged through a media frenzy. The energy crisis
transformed a once proud and high performing company
into a business group that was utterly humiliated.
Many talented individuals left
and many others were looking for a way out. The prevailing
attitude was one of despondency and negativity, with
individuals unable to see the point of performing since
their roles seemed insignificant in the face of vastly
overwhelming circumstances.
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Prior to the energy crisis, the group general manager Barry
Ford, had entered into a change management programme with
Kirsty Hayes (formerly with The Learning Attitude,) and designed
a strategy to refocus the energy of his workforce away from
negativity towards more constructive attitudes and behaviors.
The crisis made it an imperative to continue the change programme.
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Ford decided that the usual response
to a crisis-heads down in task-was not going to work.
People were focusing on their tasks: they knew
their jobs, but they were not focused on how their jobs
could help the company, or how their behavior impacted
others, or the results of the company. They had lost
the systems view of the organization, and instead were
focusing on their own little boxes. He had to find a
way to get people out of their boxes and back into the
swing of making the company work. Ford, faced with heading
up a group that was seriously financially stressed and
completely demoralized decided the focus he had begun
must continue, and he committed to carry on the
concentration on culture, and make people the priority.
Together Ford and Hayes designed the
programme to change the way that NGC's people related
to each other and how they viewed their situations.
It was designed to reinject trust back into the organization
and to get people moving forwards, rather than treading
water and complaining. The programme had to create a
values and objectives-based culture that was "passionate,
supported learning and development, and that demanded
delivery on commitments."
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The first step in the intervention was to select a team that
would lead the attitude change throughout the group. The team
was a true microcosm of the group, but members had to meet
specific criteria. They had to:
1. Have respect amongst their colleagues
2. Be influencers: whether they influence their co-workers
positively or negatively, the change team members had to
have a wide circle of influence.
3. Naturally interface with many different people from different
parts and levels of the group on a daily/regular basis.
The objective was to facilitate a change in attitudes that
would ensure the group's strategy was being lived, and was
not just a statement on a wall. The project had to change
the feel of the work environment and leveraging off the acronym
of WE, the change facilitators recognised quickly that "we
had to do something different!"
The initial team meeting created a space for people to vent
their feelings about the situation. Having done this, Ford
made it clear that they were being heard and that they should
propose solutions that would improve the situation instantaneously.
Attitudes changed almost immediately.
The WE programme began drip-feeding objectives and activities
to this organization development team, the change facilitators,
so they would not be overwhelmed with what needed doing.
Team members were presented with a Learning Attitude model
of communication, the OAR versus BED model:
In this model, all statements and discussions can be defined
as "above the line" or "below the line".
Neither behavior group is "right" or "wrong"
but the results they produce are significantly different.
Members of the team understood this and all "agreed to
participate 100% as best as they can from above the line".
In return, other members of the team would listen to them.
When people were making below the line statements, they were
invited to rephrase those statements from "above the
line".
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Often the moment someone was made aware of their thinking
process and language, they quickly reframed their statements
and took appropriate actions that aligned with the team's
objectives. Leveraging off the universal human desire
to do a good job and be better at …
the leadership team held faith that when people were
engaged in thinking they would take the right actions.
The leadership team demonstrated that they had faith
that the people knew their jobs, and if given permission
they would make good progressive decisions and take
actions to improve everyone's situation.
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After the team had aired all the issues,
begun to grasp the concept of working as a team, and
understood the guidelines and context for working to
influence change, they were ready for a quantum change.
At this point Hayes lead "peak experience interviews",
which for many was the first time the penny dropped
and people suddenly grasped what was possible.
The Peak Experience Interviews were
vital and it was essential they were facilitated across
the entire group to have instant impact. They should
all happen within a week to ensure momentum and hold
everyone on the same page just long enough for them
to begin to enroll in a possible future. The principle
behind these interviews is simple: focus on a time when
things were working, you felt great, you were achieving-a
peak experience in your career-and identify the elements
present that made that such a peak experience. The simple
fact of reconnecting with such an experience had the
effect of helping people focus on what they wanted to
have happen, and begin to take steps toward recreating
such peak experiences within the current work environment.
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At this point many were surprised at how similar their experiences
and desires for the future were. Barriers broke down quickly,
teamwork was reignited, and the energy within the group began
to surge the entire group toward the future they imagined.
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on what was possible and what they desired to have happen
the leadership team needed to retain credibility by delivering
on their commitments. That meant that when people came
up with ideas for how to make their lives better they
encouraged them to put ideas into action, and they did
what they could to remove any barriers. Often these ideas
were quick and easy, simple things like updating uniforms
or providing a coffee machine. More often the support
they provided came in the form of providing permission
for people to take back their own working lives. |
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Moving on from quick wins, the leadership team and change
facilitators were able to tackle the more complex inefficiencies
within the company. They gave people the support and encouragement
they needed to take control of their own destinies and convinced
them that the company trusted them to do what was right in
any one situation. As long as people kept the fundamental
principles of systems thinking in mind and could defend their
suggestions by proving they would improve the working environment
and the business results they pretty much had free reign to
improve the business.
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Ford's role in the change programme was critical.
He had to be seen to be walking the walk, and so he
was made extremely accessible for the first six weeks
of the project. The company's people knew all about
Ford's life, his family commitments, how he handled
the stresses of his job, what was important to him and
what his strengths and weaknesses were. This set the
example for the rest of the organization, particularly
for the management teams whom eventually inherited his
change leadership mantle.
Ford and his leadership team received regular coaching
and feedback to support them model the behaviors they
wanted from the rest of the group. This was not always
comfortable for them but to their credit they made this
coaching transparent and they embraced opportunities
to improve their leadership. They did this despite having
to make some hard decisions at times, and knowing some
of the risks of such transparency.
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The programme was supported with several formal processes.
In addition to a comprehensive leadership development programme
these included an explicit formulation of the company's shared
philosophies and values, and performance support system (PSS)
audits and enhancement that ensured everybody had the tools,
knowledge and resources to do their jobs, and that their processes
were supported appropriately. One-on-one coaching was tailored
to individuals at all levels in the group to help them both
cope with change and develop the systems thinking skills needed
to operate in an empowered organization. There were consequences
for performance and non-performance that previously had only
had lip service paid to them.
There were many incredible outcomes from this process at
both business and personal levels. Some of the more spectacular
measured outcomes were:
- Financial results from a net loss of -$301.6m in 2002
to $34.5m net profit in 2002 and $67.1m net profit in 2003
- Mission, vision, values and behavior indicators were agreed
and committed to by the entire company
- Succession planning framework implemented (and review
of all HR systems)
- Customer satisfaction improved 23%
- Operational effectiveness went up 20%
- A focus on process improvements ensured a 300% improvement
in the number of issues resolved in a timely and satisfactory
manner
- Cross-functional relationships improved as barriers between
groups broke down and subsequent integrations/restructures
and intra-group initiatives went much smoother.
- Organizational participation improved as the confidence
of the group improved through the tangible and intangible
wins, and celebration of these wins gained momentum.
- Internal promotions and transfers increased as participants
gained a greater understanding of the business and themselves,
and where they could apply their strengths most effectively.
- Caveats
The process outlined here was hugely successful by all measures.
This kind of organizational development programme has been
tested in a number of organizations with great effect, but
the programmes for each organization have all been different.
The organic nature of the process ensures that it lives with
the organization and despite the framework being strong the
content within the framework varies.
The most important point to be aware of is:
DON'T START WHAT YOU WON'T FINISH!
There is no neutral position in trust. It is either being
built or eroded so be cautioned to be true your word, trust
the process and deliver on what you promise. A complex process
such as this is not always comfortable, but it does work.
The answers will not be clear at the outset, but the process
is designed to help your people find the questions that need
to be asked.
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