Silos in business are familiar barriers to effectiveness, particularly when change drives an organization's agenda.
Yet achieving desired outcomes requires focus, and focus often is expressed in organizational units for many good reasons. Departments are comprised of people with relevant knowledge and skills, inevitably leading to separate missions and cultures between departments.
New challenges in the power industry such as the new focus on customers and the grid modernization that supports it raise the issue of how to promote cross-functional collaboration for the sake of the entire organization.
Solutions to this perennial challenge often invoke eye-glazing management-speak or the sorts of disingenuous shenanigans that might make an episode on "The Office." What are effective utilities actually doing to eliminate silos and produce quantifiable results?
The Sacramento Municipal Utility District (SMUD) and Toronto Hydro-Electric System Limited have both implemented seismic organizational shifts for overall success, raising transparency and shared accountability while lowering the silo walls.
SMUD's "reason to exist": customers
SMUD's journey began more than a decade ago when the municipal utility focused on driving satisfaction for its 600,000 metered customers in California's capital, according to Paul Lau, assistant general manager, power supply and grid operations.
"As a community-owned municipal utility, if we cannot satisfy our customers' needs, we have no reason to exist," Lau told me recently.
That fresh focus meant re-evaluating every aspect of the utility's business and operations, aligning them with customer needs. That involved shifting a traditional, vertically organized company to a more horizontal one that could meet its mission via "the shortest distance between two points," as Lau put it.
Process re-engineering provided foundation
SMUD initially used a third-party facilitator and software to develop new processes and key performance indicators for its realignment. The utility followed tenets for process re-engineering developed by Michael Hammer in the late 1990s and early 2000s. Concepts that guided the resulting changes included such notions as "process ownership" and "shared accountability."
The first concept—"process ownership"—took the notion of governance from responsibility for outputs to responsibility for end-to-end processes. The second idea meant that performance evaluations included emphasis on joint goals and metrics, with compensation tied to the achievement of common goals.
One innovation was the creation of a group dubbed "Enterprise Workforce Services," according to Gary King, chief workforce and technology officer at SMUD. That group works to ensure that cross-functional processes tap resources from each business unit to improve integration and collaboration-and keep that line straight from point A to point B.
Organizational development specialists in that group serve as internal consultants who work with operating segments of the business to facilitate alignment between efforts and outputs, King told me.
Every business unit, from customer service and operations to engineering, had to work in cross-functional groups to ensure that the process for delivering customer satisfaction followed that straight, short line from A to B. In the case of the old IT-OT disconnect, organizational changes placed both departments directly under one executive.
Measuring customer satisfaction
The external measure of customer satisfaction inevitably falls to third-party J.D. Power and Associates. To drive those results, SMUD also instituted outreach via its "Forty Days and Forty Nights" program that holds public meetings to explain its evolving direction and conduct customer focus group meetings. Using third-party facilitation, SMUD conducts focus groups, monthly customer surveys and market research on every customer touch point, from power reliability to tree trimming. The organization scrutinizes every project from start to finish based on its evolving sense of customer-focused mission and accomplishment.
SMUD recognized that "emotional connections"—a passion for organizational success—were needed, and needed to be tracked. Gallup, the survey organization, annually assesses employees' engagement, and results are shared with fellow employees and supervisors. That results in "impact plans" that drive prioritized engagement practices.
Nearly four years ago, SMUD's successful application for a Smart Grid Investment Grant from the Department of Energy drove renewed efforts to institutionalize these adaptations. That brought responsibility for SMUD's distribution engineering, IT and customer service (including programs such as energy efficiency and renewable energy) all under one executive, the assistant general manager.
Transparency and metrics in DNA now
"Smart grid is a way of life, not a project," Lau said. "How could we internalize that to accommodate the new, two-way paradigm with a customer role in distributed generation, solar photovoltaics, electric vehicles, energy storage, demand response and pricing programs and integrate them into our distribution, transmission and generation systems to deliver maximum benefits to our customers? We are realigning our organization again to optimize the customer experience and operational excellence.
"The fact is, our sense of value to the customer never changes," Lau concluded. "That has become our driver. We don't talk process re-engineering anymore. We have realigned our organization. Transparency and metrics are in our DNA." Yet the dedication to maintaining that straight line from A to B requires constant, consistent efforts.
"We can never say `we're done,'" King added. "The pace of change is increasing. We need to be nimble to adapt to that change."
Asked for lessons learned, Lau cited traditional ones such as executive buy-in and leadership, discipline and "don't underestimate the effort required by change management." He cautioned that an organization must have the appetite and urgency for productive change.
"Do you have the fortitude?" he asked rhetorically. "Expect pushback. Understand the internal `emotions.' And be brave."
Editor's note: This is the first half of a two-part article. Please join us tomorrow for the second, concluding article.
This article initially appeared in Intelligent Utility magazine's May/June 2012 issue.
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