Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
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UTILITY WEEK | 8TH - 14TH MAY 2015 | 13 Utility Week Live: review W hile some delegates to Utility Week Live grappled with the subjective challenges of leadership, talent management and culture, others focused on the more definable requirements of new regulatory frameworks. With totex, the old division of capital and operational expenditure has been swept away. As Northumbrian Water network man- ager Dennis Dellow told the Water Theatre, having that one pot of money allows compa- nies to think more holistically about issues such as leakage. This may mean putting a sticking plaster on the problem for now, keeping the asset running for as long as possible, or it may be building that asset anew. Making the right decision about which approach to take will become increasingly important as budgets begin to dwindle in the final years of a price control period. Some have labelled this decision-making challenge a big worry for water companies in AMP6. However, while totex may mark a significant shi for water, delegates said it should not be hailed as revolutionary. There is plenty to learn from industries where totex approaches are well embedded. A fundamental lesson in getting totex right is to understand that "the best way not to save money is to not spend it at all and find another solution". One delegate suggested that "it's about sweating the assets", and though this inter- pretation had negative connotations for many, it is undeniable that water companies are being encouraged to "use the assets that were needed and built under previous price controls". Technology will be key in this. A principle concern remains about the potential for running out of money during the price control period and being forced to make do with a "sub-optimal solution until the start of the next price control period". So totex, to sum up, is seen as a poten- tial game changer by many in the water sec- tor, a trigger for creating more efficient and smarter utilities – provided lessons can be learnt, and tactical decisions for short-term financial gains can be avoided. MB W ith trust in utilities in the doldrums, leaders need to do more than sim- ply inspire ambition and productiv- ity in their organisations. They must model integrity and fight back, carefully, against external forces that undermine the recov- ery of consumer trust, said participants in a roundtable debate at Utility Week Live. Failure of leadership It was felt that leaders in many organisations are a weak link in the effort to rebuild trust. While considerable focus has been applied to training frontline staff to display certain character traits and behaviours when interacting with the public, it was observed that there is little accountability laid on leaders to model these behaviours. This was felt to be particularly true at a middle management, and in some instances senior management, level. Voter versus consumer With increasing political intervention in the market, roundtable participants saw utili- ties having diminishing control over the way they are perceived by the public. They also observed that individuals oen hold "contra- dictory" opinions about the trustworthiness of utilities, depending on whether talking from the position of a voter or a consumer, and were dubious about whether the Com- petition and Markets Authority inquiry could do anything to improve trust. Political intervention was not the only source of the "contagion of reputational risk", however. Outsourcing and contracting were also partly to blame. Participants welcomed suggestions from keynote speaker Andrew McMillan, former head of customer service at John Lewis, that suppliers and contractors be held to account on cultural and behavioural measures as well as traditional service level agreements. They also agreed that more could be learnt from other sectors where outsourcing is suc- cessfully used without reputational damage. Getting recruitment right Investing in staff training is obviously ben- eficial, but it was suggested that if the wrong person is recruited the wrong results will ensue, regardless. It was felt that utility recruitment pro- cesses could be more robust (see Recruiting talent takes talent, le). JG What we learnt about: totex Regaining trust is essential takes talent management inevitably about leadership for The ability of organisations to cope with change via appropriately skilled employees was a very present concern at the confer- ence – following an acknowledged period of underinvestment in education engagement and training programmes. Even with this issue back at the top of the strategic agenda, however, and displaying essential long-termism, utilities face some immediate talent deficits that will not be met fast enough by apprentice and graduate recruits. Giving "upskilling" and "continuous professional development" programmes more resource was one answer to this immi- nent shortfall, but it was also raised that experience and transferable skills could be exploited to better effect. One delegate gave insight into the Talent Retention Solution, an initiative set up in 2011 to repurpose the abil- ities of ex-service personnel in the then-bud- ding UK automotive manufacturing sector. The skills plug provided by these indi- viduals has played a role in helping the automotive industry regain, and exceed, its historical volumes in the UK, and simi- lar benefits could be enjoyed by utilities, it was suggested. Key to doing this, however, will be nuanced recruitment messaging and robust knowledge of skills initiatives across engineering sectors – and perhaps beyond. Building skills matrices and managing a strategic approach to talent for change was therefore agreed to be a task that should not be underestimated or dismissed as a basic administrative function. Rather, it is one that itself requires talent and firm recognition in broader business strategy. JG "Utilities need to consciously take a winning mindset." Mark Thomas, strategy and marketing expert, PA Consulting