Shifting industry culture shouldn’t foreshadow a battle of cowboys and indians

Kathleen Davis
Associate Editor

Cultural change in the electric industry is not about ethnic foods, social orders or extra holidays-not exactly. It’s about mindset: a “cultural” construct riddled with pitfalls and hidden snags. Navigating the maze of shifting from monopoly to competitor can be as confusing and dangerous as a childhood game of “Mousetrap”: sometimes a player needs to consult the instructions.

Unfortunately, deregulation came with very few printed manuals, and “insert tab A into slot B” just isn’t going to cover it. So, who’s to ride to your rescue: Ronald Osborne, president and CEO of Ontario Power Generation. Last month at Edison Electric Institute’s annual conference in Montreal, he laid out a detailed plan to help both company and employee adjust to these times-which are a changin’ and won’t be slowing in evolution any time soon.

Before the iceberg of deregulation hit, Ontario Power was clinging to the Titanic of the old monopoly system just like everybody else. With 31,000 MW of available fossil, hydro, electric and nuclear capacity, Ontario Power “didn’t have to operate brilliantly; there was always another plant to be fired up,” Osborne observed. Suddenly, the entire construct of the industry was turned upside down, and everyone from plant worker to CEO was left quaking: overwhelmed with both the problems and possibilities of such a change.

Faced with the need to “decontrol” 4,000 MW of price-setting capacity within 42 months of open access and an overall 35 percent within Ontario inside a decade, it was past time to quell the teeth-chattering and buckle down. First, an examination of the old regime: the monopoly.

Utilities under that system had a set instruction manual-a well-established foundation of reasoning that supported the structure and environment of the utility. First and foremost, a utility was under an obligation to serve the customer. Period. It was the golden rule.

Now it’s an alloy. Fused with the need to make money, service has become a method of accomplishing that end result, not an obligation. That’s a definite, abrupt, and opposing change in mindset. To use a popular phrase from the ’80s coined by the movie Wall Street, the industry is now joining the ranks of other market-driven companies with the mantra “greed is good.”

But instead of such a core value being negative, this one actually benefits the consumer. Under the monopoly system, the utilities made the product choices and research and development decisions, set prices based on their costs and passed those costs along to the consumer. According to Osborne, the only sin in this system was lack of capacity.

With the new world order of the electric industry, customers are kings. They decide (with that almighty dollar, yen, pound, etc.) what products will be developed and offered and how the prices will be based: on value. In this world, those costs don’t work down the chain, they work up to the shareholders, and the only sin is having too much product. The law of supply and demand is poised to hit full force.

Osborne said he realizes these observations may seem fairly logical to the CEO, but the CEO doesn’t stand alone under the company umbrella. No man is an island, and the entire company needs to understand these changes: specifically, someone needs to keep those valuable employees informed. Instructional manuals should be distributed in mass, not in a Reaganomics trickle-down theory.

A competitive product starts with a competitive workforce. The free-floating demands of deregulation, customer demand and attitude, environmental concerns, competition, technology, and safety and performance factors are difficult enough to navigate with an experienced crew-let alone a blindfolded one that can’t recognize the roar of the rapids. This doesn’t necessarily mean dumping the old crew in favor of a new guard though. Sweeping through the company in a “postal” pinscher movement may not be the answer.

Osborne suggested that “management rejuvenation” depends on identifying the best you have, adding new skills and a variety of backgrounds, and developing a new culture: creating a shiny new identity for the company-from ideas to integration. He also pointed out a few key points to help develop that identity:

  • Change the focus from internal to external. It’s not about cleaning the closets anymore. Osborne summed it up succinctly by stating, “In the past, we circled the wagons and shot in; in the future, we need to circle the wagons and shoot out.”
  • Stop gossiping; start communicating. We no longer have the old monopoly system where nothing much changes and politics are the backbone. Now it’s about production.
  • Change from being self-absorbed to being self-interested. The me generation of utilities has passed. Keep an eye on your bottom line, but also on your neighbors’.
  • Shift modes from “transmit” to “receive.” You don’t tell the customers; they tell you. Listen.
  • Get past the “silo” mentality. Look toward teamwork: stop thinking that those circled wagons really cut you off from the world. You’ll soon learn that arrows penetrate prairie schooners. Recognize that, once in a while, you need the Calvary, and that company next door may have the only rifle.
  • Shift from pensions to bonuses. Those new young workers that may give backbone to your workforce can’t really tell you what a pension is, but they know all about stock options. And they love them. And they want them.
  • Hire the ones you’re afraid of. If you’re scared they’ll take over your job, they’re perfect. You need people who will challenge you. No more sheep. You don’t want to be like the rest of the herd; it won’t make you any money.
  • Work with the union. Taking them on can be extremely expensive and frustrating. Try goal-sharing, where employees have a stake in the company. (A form of profit sharing can greatly benefit both of you.)

As for Ontario Power, they are working on implementing all of these changes, creating third party alliances and partnerships. According to Osborne, they’ve established ongoing and open communication and an emphasis on health and safety. They also hope to have supplier cost savings around $100 million a year by 2002.

Changing their strategy for the marketplace, they even elevated the head of human resources to an executive vice president position. Who got that new post? A monopoly alumnus? An outside applicant? Try John Murphy, who previously headed one of Ontario Power’s unions-a rare sort of promotion in this industry. It seems that Ontario Power is putting its money where its mouth is, and writing a manual for the utility masses.

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