(Editor's note: This is the second installment in a two-part article. Please see yesterday's article for the first installment.)
Toronto Hydro-Electric System, which serves a city with 705,000 metered customers, began life in its current form in 1999 when six small utilities merged. That industry restructuring and amalgamation resulted in workforce consolidation, followed by a drive for business transformation that was initiated in 2000 and remains a fundamental value today.
Toronto Hydro followed the principles of a Management Control and Reporting System, or MCRS, which brought the discipline of standardized management practices to the organization. The principal discipline was to impose short-interval controls on all end-to-end processes that would henceforth be measured in days, weeks and months, Rob Wong, vice-president, information technology and strategic management, told me.
That effort has been paralleled by a leadership development program that has played a role in nurturing executive talent among those who understand that organizational outcomes trump departmental successes.
Becoming a performance-oriented organization
"We place a lot of emphasis on organizational development," Wong said. "Collaboration is the key criteria, as are internal and external stakeholder management. Are we 100 percent there? No. There's always room for improvement.
"But we've become a performance-oriented organization," he added. "We use a `balanced scorecard' system that depends on key performance indicators. A large part of executive compensation is dependent on those KPIs. And we have rigorous systems in place that track this stuff. We manage down to the individual."
At a strategic level, the utility's "balanced scorecard" rests on four pillars-customers, financials, operations and people-that compose the corporate KPIs. Common business case templates are applied across the organization for projects to ensure that benefits and outcomes are strategically aligned with those four pillars.
Wong echoed Lau at SMUD when he emphasized executive buy-in-with a twist. The organization's five core business processes are each owned by an individual executive, so that "everyone has skin in the game," Wong said.
Change management and process engineering sometimes require succession policies to complete the de-siloing process, Wong noted. For instance, in Toronto Hydro's case, that IT-OT divide didn't fully fall until like-minded executives who agreed on organizational imperatives were promoted to enforce such changes.
You've heard the term "continuous improvement," typically followed by jargon. At Toronto Hydro, performance trends are analyzed and baselines established, from reportable injuries to attendance, from operating cost targets to net income. System reliability is defined by familiar metrics such as the frequency and duration of outages, and that analysis extends to the feeder level for greater transparency on actual impacts to customers. Beyond familiar metrics, "stretch targets"-harder-to-attain goals-are identified as new challenges year-over-year.
Initially, all this business transformation was achieved with help from a third-party consultant and software applications, Wong said. As the organization internalized the processes, the MCRS principles became a standard for management practices.
One initial issue for other utilities on a similar path may be how to best select a third party to assist.
"For me it's a matter of a cultural fit," Wong said.
Keeping the lights on through change
And then there's risk involved with degrees and speed of change. A utility has to keep the lights on while it breaks down those silo walls.
"Every organization is different," Wong said. "What's your level of preparedness? How much change can you live with? Sometimes there's just too much effort for the benefit. You want to avoid a point of diminishing returns."
In a rough analogy to SMUD, Toronto Hydro has an executive whose bailiwick encompasses organizational development, including leadership development and change management. That's Ave Lethbridge, vice president of organizational effectiveness and environmental, health and safety, who focuses on "people systems."
Over the past dozen years, since the merger of six utilities into one, that work has focused on managing to achieve goals, measured by KPIs.
"That doesn't happen overnight," Lethbridge cautioned. "Begin where the organization is experiencing the most pain."
Advantages include shared accountability
Organizationally, a simpler, flatter structure has advantages, she said. Tying common goals across process lines brings shared accountability, which when tied to compensation can level the walls that once housed silos.
The uncertainties wrought by change can be overcome when replaced by executives' and workers' confidence that there's rigor around achieving goals and a consistent system for rewards and recognition, according to Lethbridge.
It appears that, at Toronto Hydro, "organizational development" is akin to "staff development," in that hiring and promotions are driven by the same values. The "fit"—that is, the recognition of the organization's emphasis on collaboration and the ability to address it—is more important than technical qualifications, Lethbridge told me. Those who consistently demonstrate their ability to contribute to the organization's core performance metrics, working collaboratively with a focus on customer value, get promoted. Lethbridge called these "behavioral competencies."
Accountability means not just achieving results, but how you achieved them, she said. Employees are rewarded for both the "what" and the "how" goals are achieved.
In her decade with Toronto Hydro applying this thinking and evolving a platform to support it, Lethbridge has seen the importance of sustainability—remaining flexible, responsive and true to its alignment with its goals over time. After all, Toronto Hydro, like other utilities, faces generational turnover and strives to consolidate its hard-won gains.
Facing a new challenge
Toronto's work in driving organizational transformation today faces new challenges: an aging workforce and need to replace aging distribution structure while facing external pressures on electricity rates.
That may be another lesson learned. If you don't know what's coming down the pike, you'd better be prepared for anything. Determining organizational success and aligning people and processes to achieve it increasingly looks like an effective way to prepare for the unknown challenges ahead.
This article initially appeared in Intelligent Utility magazine's May/June 2012 issue.
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