Management lessons from the Eskom debacle

Eskom’s current woes provide good case study material for keen students of business management. What are the management lessons to take away? Whose advice went unheeded in preceding years? What cardinal sins were committed – not in relation to policy or politics or shareholder and parliamentary omission over the last 20 years – but in terms of management?
 
The first broad observation to make by way of background is to assert that the energy sector is distinctive. Perhaps more than any other sector, it relies in a fundamental way on long term planning. It is no wonder, then, that scenario planning came out of the energy sector – out of the work of transnational corporations such as Shell who realised that looking far into the distance was critical to setting today’s management priorities.
 
The second background point is that the buck (or a large part of the buck) always stops with management. It is true that a range of other role players may override management decisions. It is also true that shareholders, politicians and even powerful legal advisors may prevent top management from doing what they know is right.
 
But the high-powered decision-makers in top management must be able to answer and account for themselves. To maintain their own standing as management practitioners doing their jobs and fulfilling their fiduciary duties, they must be able to show they spotted major risks and gave advice at the critical moments. Those operating in the civil service ultimately have to comply with the directives issued by a political head - but they can place their views on record; they can discuss risks and give their professional advice through instruments such as memos and emails.

In the case of a powerful public body with a large budget and with a mandate rooted in legislation, there is a far greater obligation. If a politically-motivated decision that will have disastrous consequences has been imposed on such a body, it should clearly indicate misgiving and concerns in its accountability to parliamentary committees and through annual reports. These is how things should be in a democracy.

A range of key management points arise from the crisis at the electricity giant, including:

·       To what extent is Eskom an environment where underperformance or major management errors are met with consequences? Or is it a place that practices management without consequences? What internal action has been taken for major omissions that led to the current situation? If, as the CEO Tshediso Matona implied, some managers took bad decisions (or failed to act) on the issue maintenance, what action has been taken? With regard to the Kusile and Medupe projects, has any top manager faced consequences for failure to miss targets by such a wide margin?

·       How does Eskom use its reward system to sustain optimal performance? In change management terms, the reward system is a key lever for encouraging the desired conduct in line with key organisational priorities and ‘ways of working’. What evidence is available that, if one takes the issues of bonuses alone, the reward system has been used to try and address organisational shortcomings?

·       Have any individuals over the last 15 years or more raised the red flag about the sidelining of critical goals such as long-term planning or effective maintenance? Or does ‘group think’ reign at Eskom? Is Eskom afflicted by a perverse culture in that prescribes that once one or two top dogs have spoken, everyone else merely echoes the official line?

·       Do Eskom managers belong to any discipline, sector bodies or communities of practice? If so, to what extent – in their publications and journals – did sector practitioners debate what was taking place at Eskom and how this would impact on performance? One of the key advantages of belonging to a professional association is ‘shared learning’. Such shared learning in turn promotes innovation in the field and helps managers remain fully attuned to their roles and responsibilities as professionals.

·       What role did external advisors play? Consultants are paid to provide new perspective but the question can rightly be asked: do external advisors often play it safe and say only what the client wants to hear. Very often external advisors, once they have discerned that the client is resistant to change, focus on small incremental improvements in situations where a dose of fundamental change is needed. It would be interesting to see what issues were raised in external assessments by technical advisers and auditors over the years.

·       What is the current mood and climate in the organisation? What are staff members’ opinions of working in a huge public organisation that has failed to meet important objectives such as thinking ahead and effective maintenance? How does it affect managers’ identity to work in a company that is campaigning to encouraging people to use less of its product – or that has managed to plunge an entire country into darkness?

 
There are other important questions, such as how top management accounts to external stakeholders. On this, the CEO has stepped up to the plate and last week took the public into his confidence about the depth of problems at the parastatal. One hopes this signals a move to greater openness in management reports to parliamentary committees, to the shareholder and – by extension – to the public.
 
In the literature, there is talk about the concept of 'public value’ as a way of evaluating the performance of state bodies. In this regard, public value revolves around value-add and  what citizens value most. In the case of electricity (as with matric results) citizens have a very clear idea of the outcomes and impact they expect.

It is in this context that management comes under close scrutiny. Huge parastatals such as Eskom have a clutch of high-powered managers. Their top jobs come with power and status – rooted in big budgets, abundant perks and many people to order around – but also with immense responsibility.
 
There is great opportunity for those doing work in the field of management to extract lessons and insights from the Eskom debacle. There they will find rich seams of information as they probe Eskom’s culture and examine how the parastal  – the new CEO aside – came to externalise the reason for its failures.
 
Frank Meintjies
(This article first appeared in the press on 23 January 2015)

A turbulent year ahead, marked by ungovernability

All indications are that 2015 will be a tough year on many fronts.
 
The economic issues will fire up our current affairs, making engagements in the political sphere all the more charged. At the level of the of the broader economy there will be continued frustration as the economy continues to underperform, hobbled by a new constraints such as Eskom, continuing shocks from the global economy and old impediments such as the education system. The pressure will come as both the middle class and the working class feel the squeeze and demand that government and industry do more to implement of job-creation plans.
 
In the social sphere, 2015 will be the year where there will be even less social cohesion. At one level, this will manifest in a continuation of high levels of crime. Fuelled by unemployment and lack of hope, petty crime will be sustained while, syndicates will find new avenues to undermine society and gender violence will continue to cast its shadow over us. Any improvements in policing – and there are no indications that they will be sufficient – will be undermined by worsening conditions in our settlements and a rise in inequality.  

Lack of cohesion will also manifest in the form of an ongoing rupture between those governing and the governed.
 

One is likely to see an increase in ungovernability. We have already witnessed rowdy behaviour by political parties, an increase in conflict in the industrial relation arena and an average over 1000 community protests a month. Although there are many factors behind a breakdown in relations between government and citizens, anger about corruption will still be a major trigger for eruptions of ungovernability. In parliament and at community levels, we have seen how corruption mobilises divergent groups into strident and unified protest action.

 

Institutional factors will also contribute to making next year difficult – one that is filled with a sense of uncertainty and instability. On the one hand, we see that the ANC – a key institution that has acted as an engine for positive change during the transition – is weakened and, as President Jacob Zuma has noted, “in trouble”. In addition, South Africans are losing faith in public institutions. The Institute of Justice and Reconciliation reported this week that only 50 percent of South Africans who took part in a representative survey had faith in the country’s institutions. Because institutions help to channel differences and conflict, any significant loss of respect for them contributes to turbulence.  

 
Of course, this kind of assessment can be one-dimensional. It focuses necessarily on that which is deteriorating or tending towards atrophy. However, another part of reality will be that many elements will go on as before, including the dynamism that exists in our society. Although many small businesses will be under pressure, many entrepreneurs around the country will find gaps in the market and markets in the gaps. A few corporates will keep their commitment to create jobs and run supplier programmes with an affirmative action slant. Many educational institutions, including schools, will pursue and attain excellence. A few government departments will rally the troops and go the extra mile to reach delivery targets. There will continue to be leadership and resilience in communities. And numerous civil society organisations will soldier on, working close to communities, assisting them with immediate needs or to claim their rights.
 
It is also important to remember that, despite the many objective factors weighing down on us, we can influence many aspects of our reality. In this sense, the degree of turbulence is under our control. We can decide to find solutions, hold each other accountable, work harder to ensure implementation of election promises and be more focused on addressing the needs of the masses.
 
What if anything can be done? The following actions won’t prevent a bumpy ride in 2015, but could help us turn the corner and create conditions for better prospects (and greater common purpose) in the period thereafter.

 

The first task lies at the door of the ANC. In this regard, it is true, as President Zuma implied, that as the ANC goes, so goes the state. This is no place to fully analyse the problems of the ruling party. However, it urgently needs to address (a) its failure to get government to deliver according to its mandate, (b) the gap between itself and a wider base supportive of national democratic change and (c) its loss of the moral high ground. It must take steps to ensure we do not get to the explosion that Langston Hughes said comes after the “dream deferred”.

In addition, we as South Africans should consider the following actions as a response to the pressure that will face us in 2015:

·       There needs to be a firm commitment from the powers that be to open rather than close down the space for debate and discussion about national problems and solutions.

·       Citizens should become more active in getting closer to their specific representatives and supporting them where they perform and holding them accountable where they are just party hacks, sleep on the job or serve their own interests.

·       Citizens should step into spaces of engagement. Especially at local level – with regard to municipal issues and on issues such as community safety and school education. Although getting involved is difficult and often discouraged, we should know that we can only build a strong democracy if there is democracy at the base.

·       We must tirelessly build hope for the youth. Every company, non-profit organisation and quasi-state institution should commit to enrolling young people for internships and work experience.

·       Violence against women is such a fault line and a grim indicator of the state of things; we need to unite in action against it. We are involved as perpetrators, colluders and survivors. There is thus a great opportunity to bring South Africans from different classes and population groups ­together in sustained citizen campaigns on this issue.  

·       With the help of the CCMA, more companies and unions should work together to find models of management that allow workers and bosses to share in the ups and downs of company performance. Where such models already exist, we should promote them.

 

(This article first appeared in the press on 8 December 2014)

Frank Meintjies