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24/03/2016

The Strength to Transform

The pressure on Energy companies to transform is evident. However, most Energy companies bare the legacy of outdated IT, ineffective organizational principles and an old way of working. This poses the question if these companies are ready to successfully transform.

Sia Partners helps companies to build Organizational Strength to better adapt to changing market dynamics and to successfully transform. In this article we share our thoughts on what this Organizational Strength exactly is and how you can build it inside your organization. 

Feeling the pressure

Developments in the Energy sector pose quite a challenge to its players. Decentralized energy production, low oil prices, the demand for renewable energy and changing rules & regulations, to name a few, are changing the game for good. New entrants that are not bearing the legacy of outdated assets, ICT systems and infrastructures and a work force out-of-tune with market challenges have an obvious advantage. These new entrants are better able to leverage new technologies, adapt to customer needs, match their work force accordingly, and foster an oh-so-necessary innovation culture from the start.

After the liberation and privatization of the Energy sector, the energy companies had to change into more market and customer-oriented organizations. Organizations that were self-sufficient, could give and take a competitive punch and were able to adapt to the changing needs of the customer. This transition is quite similar to the one the Telecom industry has gone through. But where the Telco’s were quite successful in their transformation, most players in the Energy sector lagged behind.

Much of the old way of working within the Energy sector is still in place today. Examples of this are slow decision making, risk avoidant management, 9 to 5 mentality, rigid structure and processes and managing input, competence and costs over outcome, performance and customer value. On top of that, most energy companies went through multiple strategic and organizational changes the last few years. This made it hard for employees to keep track of the reasons for change, with a significantly lower engagement level as a consequence.

It is safe to presume that the incumbent companies in the Energy industry feel the pressure to transform. Looking at their challenges, it is not likely that they will be solved by another round of cost-cutting, efficiencies and lay-offs. Like Einstein said, you cannot solve a problem with the same mind-set that created it. So they have to start doing things differently and transform themselves quickly enough to stay ahead of (or on par with) the competition.

Digital Transformations and ‘en vogue’ working methods like Agile (which our Quarterly covered before), are already buzzing around for a few years but are merely touch upon. They do seem valuable for Energy companies to start experimenting with, but these are ideas that stretch the organization and demand a lot of its capacities. To be ready as an organization for such a transformation and leverage its full potential, there may be a key challenge that comes first.

Organizational Strength

We noticed in assisting companies with transformational change and innovation that there is a big difference in absorption rate. Companies in which the absorption rate is low usually score low on the following as well: empowerment, accountability, trust, execution power, clear goal-setting, and speed of decision making. It seems that these companies lack some sort of strength in their organization to make a big and successful step forward, despite having a strong focus on the performance side in terms of financial results, goals and metrics.

At Sia Partners, we assist companies in building Organizational Strength, which we define as the ability to (a) create engagement and focus the organization on where we want to go, (b) excel in the execution and (c) timely and adequately adapt to market trends. It turns out that companies that score high on Organizational Strength significantly outperform its competition and have a higher success rate of their Organizational Change Programs as well (McKinsey, 2011).

In our approach, we start with an organizational assessment, where we zoom in on subjects like Governance, Engagement, Culture, External focus and Management & Leadership practices. Combined with an online employee questionnaire, we can quickly pinpoint the current Organizational Strength. Based on the results of this assessment, we envision what a strong organization would look like, tap into the factors that contribute or work against this change, redesign the new work environment, implement and measure its success.

 

 

Figure 1

 

Relevant ingredients

Although a basic level of performance is needed on all contributing factors to Organizational Strength, the ingredients that really lead to competitive advantage depend on the specific context of the organization, and requires the in-depth approach mentioned above. But based on our experience in the Energy market, we can distinguish a few ingredients that seem relevant: Autonomy in execution and a Performance mind-set. Let’s take a look.

  • Autonomy in execution – When you as a leader determined the Why and What of the strategy or change, try to leave the How to your employees. Determine in your organization clear and simple Governance to support this. These two factors will develop not only speed, but employee engagement as well. The difficulty usually lies in the cross-departmental decisions that currently require inclusion of multiple parties. Think of ways to push decisions down or speed them up.  Define which types of decisions are best made in cross-functional committees and which can be delegated to direct reports and to the teams on the ground.
     
  • Performance mind-set – Attitude and mind-set have a big impact on behaviour and performance. Although rigid, there are some practical steps to take to influence them: continuous role modelling by your leaders (deviating is disastrous!); frequent communication to foster understanding and conviction; reinforcement with the formal mechanisms in your organization so the desired behaviour is evoked and well-supported; and (Digital) Talent and Skill development to behave in the new way with confidence. Use these steps to cultivate openness and trust as well, where mistakes are viewed as an opportunity to learn, so people are not afraid to step out of their comfort zone and experiment.

These changes support the adoption of new technologies and new ways of working. They stimulate learning, free flow of information and honest feedback. They raise engagement and agility. And above all, they are drivers for successful transformation.

Outlook

Companies in the Energy market are currently very busy looking out of the window to see what is coming their way. And they should. Off course, adopting new technologies and innovations can drive the change as well; it can start small and isolated and can slowly ripple through your organization. But when they take a good look at their organization, and uncover some of the root causes hindering their organizational strength, they will be better able to absorb and reap the full benefits of the necessary transformations that lie ahead of them. 

 

Copyright © 2015 Sia Partners . Any use of this material without specific permission of Sia Partners is strictly prohibited. 

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