Managing the Growing Pains

11th May 2010Les Dingley

Business Transformation LeaderBusiness Transformation Leader

PurposePurpose

To share our journey to date and explore are diff t t ?we different to you?

Governance Structures – Our approachesPreparing our people and the business for changeHow do we measure success and failure?The next steps – More for lessp

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Who is Hydro Tasmania today?

50% of Australia’s Renewable Energy

53 Hydro-Electric Generating Units – 2270 MW50 Large Dams + Water Conveyance$5 2 billion in Assets$5.2 billion in AssetsOver 900 people

Momentum Energy – Retail Arm

Roaring 40’s - Joint venture with China Light and Power

Growing International Consulting BusinessGrowing International Consulting BusinessPower Engineering

Water & Catchment

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Sustainable EnergyEnvironmental

Where do we operate?Where do we operate?

N D lhi

CanadaCentral Asia & China

Middl E

UK

New Delhi

Southeast Asia

Middle East

Sri Lanka

BrisbanePerth

AustraliaSydney

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Adelaide

Tasmania

MelbourneNZ

y y

The Time line20052005

May Hydro Tasmania in NEMAugust Three lines of business

2006May Bass link commences operationMay Bass link commences operationAugust New CEO

2007April Business Performance (Shared Services) formedOctober Business Performance Mgt team also part time Account ManagersOctober Business Performance Mgt team also part time Account Managers

2008February Business Performance Account Advisors establishedSeptember 51% of Momentum Energy acquiredOctober Tamar Valley Power acquired by Aurora EnergyOctober Tamar Valley Power acquired by Aurora Energy

2009January Business Performance has full time Relationship ManagersOctober Momentum 100% acquired

Tamar Valley Power on lineTamar Valley Power on lineNovember Detailed Analysis of Business Performance costs / benefits to customers

2010March Business Performance moves back to part time Account ManagersApril CEO completes tenure

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April CEO completes tenureMay New CEO announced

2005 – 3 lines of Business Model2005 3 lines of Business Model

CEO

Internal Audit Public Relations

G.M. Consulting E.G.M. Energy G.M. Corporate G.M. Business Development

G.M. Human Resources

Power Schemes Trading

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Power Schemes Trading

2007 – The Environment for Change2007 The Environment for Change

National Electricity Markety

Drought

Get CompetitiveGet Competitive

N CEO k h7

New CEO makes changes

2007 Restructure – The new CEO acts2007 Restructure The new CEO acts

CEO

Corp

Consulting Business Development Generation Trading Strategy &

FinanceBusiness

Performance

Comms &

External Relations

Corp Governance

&CompanySecretary

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April 2007 – Business Performance is bornApril 2007 Business Performance is born WITH

• People & PerformanceWITHOUT

• Information Technology

• Fleet management

• Contracts & Procurement

• Accounts Payable

• Financial Reporting

S t f• Inventory

• Land & Facilities Management

• Some parts of • Environment• Land Management

• Safety

• Quality

• Environment

I f ti M t• Information Management

• Service Delivery

• Business Transformation

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Moving towards Shared Service

Decentralised CentralisedDecentralised

Shared

Centralised

I d d t idHigher Costs

Variable standardsand skills

Diff

Recognition oflocal priorities

Lines retain

Economiesof Scale

Aligned standardsd t l

No line control of

overhead costs

Inflexible to

Independent provider

Service managementfocus

Lean flat organisationDifferent

policies andcontrol

environments

Duplication ofeffort

strategic functions

Service Levelagreements

and control

Common systems

Critical massof skills

Inflexible toLOB needs

Unresponsive

Remote fromLOB

organisation

Synergies innovationand best practice

Enhanced career pathseffort

BUSINESS PERFORMANCE

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Behaviour ModelBehaviour Model

To be successful Business Performance promotes / encourages commitment behaviourpromotes / encourages commitment behaviour

MODEL 1 MODEL 2MODEL 1

• Imposed solution• Self organise to resist

MODEL 2

• Valid information & knowledge• Freedom of choice• Self organise to resist

• Deny feelings• Win – Lose

• Freedom of choice• Internal commitment• Win – Win

VS

Compliance Commitment

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Customer/Service Provider Model

User

Customer/Service Provider ModelRelationship Management

ProviderBPEMT

Account Mgmt

UserManagementService understanding

Funds

Health Checks

Services /needsBusiness

Performanceand our

P t

Users

Services /needs

Products

Partners

C t

Services

Feedback

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Service Provider Customer

Managing the Transition of Hydro Tasmania

NEWWho is the customer?

OLDWho is in charge?

In BetweenOur strategy is to use our development approach as th t k i

“One Hydro”Holistic & systemic thinking

Mission:We will create a sustainable future and grow the value of our business

(Level 0 Process)

charge?

Complicated & compartmental thinking

the way to keep moving from the old to the new

People

SystemsTechnology

Information

Processes

( )

Manage Legal, Trading Risk, Financial Resources and measure performance

Key Business Processes (Level 1) (for external customers)

Key Support Processes (Level 1) (for internal customers)

Govern and Plan the Business

Manage People Capability and Human Capital

Provide enabling IT support

Manage Procurement and the Supply Chain

Manage Safety and Environmental systems to support operations

Manage Business Improvement and Design and improve processes

Acquire, Construct, Manage Land and Property

Position the business in the market-

place

Assess market

opportunity & prepare forecasts

Develop new

products & assets

Develop asset

strategy

Establish & develop

asset works

Deliver & close out

asset works

Plan production & delivery

Trade physical & financial energy

productsCollect

revenue and pay third party

expenses

Prepare and win consulting project

proposals

Deliver consulting project

Identify and qualify engagement opportunity

Identify and qualify prospective consulting

clients

Manage energy stakeholder and regulatory relationships

Develop long-term consulting client relationships

To successfully transition we need to:

What we want to drive our thinking• We can do it• My success depends on others• Sharing my knowledge is important

What has driven our thinking• Engineering Excellence• Security – Job for life• Them / us culture

need to:• Grow our capability to lead this change, engage our people and learn as we go• Coordinate our efforts with Sharing my knowledge is important

• Everyone deserves a fair go• People are accountable• Learning is supported

Them / us culture • Untouchable Hydro• Community protected• Parent child relationship• If it isn’t broken don’t fix it

ALL major initiatives underway in the business so that everything is seen as a step towards the ‘new’ (eg System builds process

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If it isn t broken don t fix it System builds, process improvement, development programs etc)• Keep delivering results

What we achieved in 3 years…..What we achieved in 3 years…..Consolidated services and reduced cost by $12minitially (22%) and subsequently another $3my ( ) q y $Got transparency of cost drivers and hollow logsImproved collaborative decision making and priority setting (IT ESafetyT)setting (IT, ESafetyT).Significantly increased customer driven attitude of the team and increased customer satisfaction (rising).Plus:

Standardised approach to process and policy (eg. Procurement)Reduced staff by 30 – 40.Driving change

More to do of course…….

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Feedback from Customers

The GoodC• Adding Value Capability

• Cost Transparency & Savings

The Bad• Process Maturity• Process Maturity• Service Offering

The Ugly• Better Systems Still Needed

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• Better Systems Still Needed

Shared Services - The Issues for UsShared Services The Issues for Us

How do you focus on the whole rather than the parts in a shared services team?Service Level Agreements - What if you don’t have one?Service Level Agreements - What if you don t have one?Communication Strategies - What works?User Pays - What if cross business charging does not occur?Customer Management How do they take up their role?Customer Management – How do they take up their role?A Commitment Based Model - Does the customer understand?“Personalised” Service – Can the business afford it?

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March 2010 - The Revised PrinciplesMarch 2010 The Revised Principles

Shared Services Business Unit CorporateShared Services

• Services that are not core to a business unit

R i d b th b i

Business Unit

• That business unit is the dominant user of the service (>90%) and no synergy with other services

Corporate

• Services that define governance approach

• Required by more than one business unit

• Economies of scale possible through consolidation

• It is core to operation of that value chain.

• The opportunities per shared services not available

• Sets the boundaries

• Company strategic activities (e.g. Treasury, marketing, PR)

• Opportunity to pool knowledge, increase learning, manage staff growth, development and career path

• Allows for service tailoring while

services not available

gmaintaining visibility and management of end to end process/cost

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The Next ChallengesThe Next Challenges

Generation Competition in Tasmaniap

Further 20% reduction in real costs required over next three years

Expanded Services- Establishment of services to Melbourne based staff (over 200 and growing)- Support for Brisbane and Sydney

New CEO

Support for Brisbane and Sydney - Our overseas offices

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Questions and CommentsQuestions and Comments

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AppendicesAppendices

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April 2007 – The Principles of Establishment

Service delivery will be the best the organisation can afford.

The intention is to get the best out of what we already have people processes andThe intention is to get the best out of what we already have – people, processes and systems. Where there are multiple policies or processes, the most suitable will be selected and modified where appropriate to allow for uniform application.

Explicit governance arrangements will be established to support appropriate decision p g g pp pp pmaking. The ultimate determinant of the level of service provision will be the GM Business Performance in consultation with the CEO.

Consideration will only be given to devolving service functions where it can be shown that:that:

The service can be provided at lower cost than if it were centralised; and/orCentralisation would have a negative impact on critical service delivery

The needs of the customer will be understood in the development of the serviceThe needs of the customer will be understood in the development of the service delivery model; however the basic premise will be consistent application across the business to uniform standards.

Process designs will make maximum use of current technology.

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Values & Behaviours

We will always behave with honesty and integrityWe will always be open and visible. We will not lie. We will bring up issues if there are any, and have the courage of our convictions.W ill t ll t d i i ith i W ill b t t b t b th dWe will support all team decisions with one voice. We will be transparent about both our successes and mistakes.

We work together, respect each other and value our diversityWe will trust people in the first instance and leverage off our differences to pursue solutions.We seek to understand our customer’s requirements and acknowledge we do not have all the answersWe seek to understand our customer s requirements and acknowledge we do not have all the answers.

We strive to deliver outstanding serviceWe will be accessible to our customers and responsive to their needs while being honest about what we can and cannot deliver.We take personal accountability for outcomes where the success of the whole is more important thanWe take personal accountability for outcomes where the success of the whole is more important than individual successesWe will be flexible, searching for alternative delivery options without compromising agreed principles

We are committed to creating a sustainable futureWe will first seek to get the basics right Our solutions will draw expertise from across the organisationWe will first seek to get the basics right. Our solutions will draw expertise from across the organisation.We will make balanced decisions based upon what is best for the business as a whole in the long term.We celebrate our success…….we are the fun ministers!

Our positive and determined approach ensures successWe will be courageous bold solution focused working with passion and drive

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We will be courageous, bold, solution focused, working with passion and drive.We will deliver on the commitments we make and hold those who make commitments to account.

Mission:We will create a sustainable future and grow the value of our business

(Level 0 Process)

K B i P (L l 1) (f t l t )Key Business Processes (Level 1) (for external customers)

Assess market

opportunity & Develop new products &

Develop asset

Establish & develop

Deliver & close out

Plan production

Trade physical & financial

Manage energy stakeholder and regulatory relationships

Position the business in the market-

place

prepare forecasts

assets strategy asset works asset works & delivery energy products

Collect revenue and

pay third party expenses

Prepare and win D li ltiId tif d lifIdentify and qualify epa e a dconsulting project

proposals

Deliver consulting project

Identify and qualify engagement opportunity

de y a d qua yprospective consulting

clients

Develop long-term consulting client relationships

Manage Legal, Trading Risk, Financial Resources and measure performance

Key Support Processes (Level 1) (for internal customers)

Govern and Plan the Business

Manage People Capability and Human Capital

Manage Customer Service

Manage People Capability and Human Capital

Provide Enabling IT & IM support

Manage Procurement and the Supply Chain

Manage Safety and Environmental systems to support operations

Manage Business Improvement , Change and Knowledge Management

Acquire, Construct, Manage Land and Property

Measuring Process Maturity

Strategy Alignm ent

Proces s Managem ent

1 21.23

1.51.8Proces s

Redes ignOutputs

Levels of Maturity

Leve Maturity Practices Descriptionl Stage

1 Initial Ad-Hoc The process is ad hoc. Few activities are explicitly defined, and success depends on individual effort and heroics.

2 Awareness Repeatable Basic management processes are established to track cost, schedule and functionality. The necessary discipline is in place t t lito repeat earlier successes

3 Defined Standardised The process for both management and operational staff is documented, standardized and integrated by an organisation methodology

4 Managed Quantitatively Managed Detailed measures of the process and product/service are collected Both the process and products/services are

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collected. Both the process and products/services are quantitatively understood and controlled

5 Optimised Continuously Managed Continuous process improvement is enabled by quantitative feedback for the process and from piloting innovative new ideas and technologies