Wearing multiple hats: Key considerations for municipal electric utilities leadership

by Dr. Henry H. Tufts

Leadership in the municipal electric utilities (MEU) sector requires a special kind of senior leader–one who can effectively and seamlessly wear multiple hats. One hat is CEO, the person concerned with the social mission and responsibilities of the enterprise as well as the economic viability of a business. Another is the socially conscious leader, a person concerned with the historic social mission of a municipally chartered entity and the consequential well being of the citizenry it serves. “Effective politico” is a third–able to work with, understand and navigate the special challenges of municipal governing and the myriad politics involved. This fluidity and complexity in leadership style and capability has been recognized and is amassing currency and understanding. There is a need, however, for electric municipal leadership to continue this trend and become even more versatile in the future.

Why Agility is Essential

Effective, municipally-owned business managers have always needed to be cognizant of the economics of their respective businesses, but for those in the current MEU sector, that’s just the beginning. MEU leaders are required to act strategically on multiple fronts:

  1. Run successful businesses.
  2. Carefully and responsibly serve and interface with the local constituencies they serve.
  3. Respond to and “respect their owners” in municipal governments.

More than their investor-owned brethren, MEU leaders are more directly subject to and more quickly affected by the voices of numerous local stakeholders. Should elements of these communities become negative and relations stormy, the leadership of the company can become unnecessarily distracted, its services compromised, and its reputation tarnished.

Historically, in many instances, MEU has actively relied on and consciously looked to local networks and individuals to supplement, if not dominate, leadership and management ranks. However, this method of talent recruitment needs to be reviewed, if not significantly revised. Selection decisions based on relationships within a community rather than the evolving needs of an increasingly complex business has its short falls. In the case of MEU companies, senior executives and mangers with excellent connections and longest tenures may not be the appropriate individuals for roles under consideration. The technical abilities, managerial experiences and leadership capabilities required to skillfully operate within increasingly challenging environments are often not fully taken into account. At this junction, however, their inclusion is vital.

Municipal Board’s Role

There will continue to be requirements for specialized technical skills, industry experience and leadership in the effective management of MEU companies. In an era of increased consumer activism, a changing industry, instant messaging/information exchange and aging infrastructures, the boards of these municipal enterprises must acknowledge that more is required of senior managers and additional care should be taken in their selection. If an MEU company is going to be a responsible, responsive partner in the future growth of its local economies, its leadership must possess much higher levels of political astuteness, judgment, perspective and intellectual agility. Three considerations for the industry’s next generation of leaders are:

  1. Recognize that political astuteness and instinctive savvy is a top selection priority for municipal electric leadership. Leaders in the MEU sector must be business chiefs as well as politicians, appealing to the unique needs and demands of their service areas — the wants, the interests, the beliefs and the perspectives of local residents and power blocks. While one could argue that the leaders of investor-owned electric utilities are also tasked with responding to and addressing customer demands, the challenge to MEU leaders is unique, challenging, and local. While investor owned leaders consider shareholder interests and expectations, to assure their continued employment, the MEU leader serves, in many respects, at the pleasure, if not the whim, of local public scrutiny and political forces.
  2. Deepen and broaden, where economically feasible, the available senior talent and succession pools: Because of particular geographic locations, enterprise size, and the compensation puzzle in public municipalities, the senior talent available to investor- owned utilities is just not available to MEU companies. Many times, they are hampered in the competition for strong talent. Given these significant recruiting and retention realities, boards and municipal management still need to strive to recruit, and develop internally, those with specialized technical backgrounds and knowledge while possessing the artistry required to work effectively with neighborhood customer bases and their demands. Boards should be open to candidates that may lack in-depth operational understandings, but bring to the party the ability to think creatively, plan strategically and act with flexibility during times of change. This fresh approach is needed to galvanize an organization that historically might have been moribund, static, and inwardly focused.
  3. Work to link leadership requirements to the demographics of specific communities: Along with considering the important inter-plays of senior experiences and professional successes, the level of diversity in leadership in the MEU sector must change. Urban and municipal environments, to say the least, are increasing diverse — economically, educationally, racially and ethnically. Representation of these constituencies needs to be a consideration in both the development of internal talent and the recruitment of outside leadership. This posture by any board makes good sense economically, politically, and socially as the company acts as a partner to serve and enhance the local community.

While these leadership considerations are not unique to the MEU industry, they have become an important evolutionary component of successfully managed municipally owned enterprises in today’s challenging and more complex local environments.

Partners in Progress

It is in the best interest of the MEU and the community it supports to recruit, select, and develop leaders that can navigate highly charged political environments, understand the mission of municipal owned enterprises, and navigate the changing economics of electric power and services. Well informed boards and the leaders they select fully understand and appreciate the important interplay of public service, the economics of business, local business partnerships and community development.

Author

Dr. Henry H. Tufts is a senior consultant with RHR International, a firm of management psychologists and consultants working closely with senior executives to better individual and business performance. Dr. Tufts has more than 30 years experience consulting in the electric energy industry. He can be reached at 617-859-0540 or htufts@rhrinternational.com.

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