Saturday, 24 January 2015

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)

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