Electric and gas companies continue to be faced with: attrition or slow growth, at best, volatile commodity prices, uncertain demand, shrinking margins, and continued competition from evolving technologies.
Addressing these issues can be challenging, particularly for companies with a traditional utility mindset and investments often steeped in the legacy of a 100+ year-old company. Taking a fresh look at what you do, and how you do it, is good for shareholders, customers, and employees. This report examines the tools and techniques used to improve and manage productivity.
Improving Productivity
- February 2014
- Focusing the organizations resources on the right things and doing those things the right way
Electric and gas companies continue to be faced with: Attrition or slow growth, at best Volatile commodity prices Uncertain demand Shrinking margins Continued competition from evolving technologies Addressing these issues can be challenging, particularly for companies with a traditional utility mindset and investments often steeped in the legacy of a 100+ year-old company Taking a fresh look at what you do, and how you do it, is good for shareholders, customers, and employees Shareholders benefit from improved operating efficiencies and a more competitive cost structure Customers benefit from improved customer service and lower (or more slowly increasing) rates Employees benefit from additional opportunities and improved tools and by becoming more engaged in a new culture where continuous improvement is the objective and it is okay to try new things and change Companies tackling these issues from a productivity improvement perspective, i.e., getting more out of existing company resources, have seen immediate, significant, and sustained results in three areasfinancial performance, customer service, and employee engagement
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Productivity is defined as the output of a process per unit of input:
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- Example Productivity Inputs and Outputs
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- Accomplishment or duration of a task, activity, or job Number of units produced, e.g., MWh Volume of output, e.g., invoices processed Financial value of output Number of customers served Number of jobs completed
- Productivity =
- Output
Input
- Labor staff required or man-hours, man-days Labor cost Material weight, length, or cost Volume of material used Area of land or facilities space Time Unit of energy consumed
- Output Examples
- Input Examples
Productivity improvements increase the amount of output for a given set of inputs used, i.e., getting more for the same or less input.
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- Methods for Improving Productivity
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Productivity improvements can be made to all resources available to an organization.
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- Its Not Just About Cost Reduction
- Productivity improvement is about focusing the organizations resources on the right things and doing those things the right way.
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- Use appropriate and/or better process and communication tools, systems, and applications Streamline and standardize work processes, procedures, and policies Improve working conditions, e.g., lighting, ventilation, work station/office layout, etc. Enhance and improve compensation, reward, and recognition programs Enhance and improve training and development programs Optimize recruiting and on-boarding processes
- People and Labor
- Materials
- Plant and Equipment
- Energy
- Utilize less-expensive and/or alternative materials Improve material utilization Utilize less-expensive sources Match material specifications to job requirements
- Optimize and standardize maintenance processes, procedures, and policies Upgrade/modify existing equipment Restack and consolidate real estate Reduce and/or improve floor or workspace
- Implement/install energy efficiency programs and equipment Reduce or minimize waste
- Other Capital
- Reduce working capital
- Free up Resources for Other Critical Initiatives
- Resource Utilization prior to Productivity Improvements
- Productivity Improvements
- Resource Utilization after Productivity Improvements
- Organization Core Activities
- Organization Core Activities
- Strategic or Other Special Initiatives Underway
- Available Resources
- Absorb with existing resources or reduce resources if no backlog
- Augment with contractors or overtime
- Organization Core Activities
- Strategic or Other Special Initiatives Underway
- Required Resource Utilization
- Organizations Resources
- Productivity improvements reduce the organizations core activity workload requirements, i.e., they remove work
- Initiative Backlog
- Strategic or Other Special Initiatives Underway
- Capacity
With productivity improvement comes change, i.e., the way people perform their day-to-day jobs Change management is a critical component for developing, implementing, and sustaining productivity improvements A successful change initiative begins with clarity about goals, objectives, and rationale, i.e., Why are we doing this? And what are we trying to achieve? Productivity improvements should be linked to the organizations strategy and business plans so that they become the new normal The approach must be balanced to address hard and soft components, e.g., initiatives/plans/accountabilities versus cultural change Leadership commitment and role clarity (sponsors, stakeholders, etc.) are essential for achieving the desired change Employee engagement and involvement are critical for building grassroots support and sustaining changes A comprehensive communication plan is necessary to help build buy-in and strengthen grassroots support
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- Change Management Considerations
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Ensure commitment to productivity improvement starts at the top; this will bear fruit Corporate executive participation and strong, visible support (there should never be any question about how important this is) Appropriate resource allocation: a lot of people, cross-level and cross-function, the best and brightest, significant time Start broad by soliciting ideas for improvement from across the companyall ideas are fair gamethen narrow focus to a fixed list in a number of defined areas Big enough for business impact, not so big to be unmanageable Provide focus by assigning each group one area for review Choose an ambitious number of projects (10) so that enough people are involved to catalyze cultural change Communicate early and often Initial kickoff meeting with all participants Formal communication plan, including recurring updates Choose skilled project lead(s) who will be engaged and passionate about the project; dedicate full time Create teams that have strong players, but maintain a balance between detailed analysis, subject matter expertise, and global perspective; involve both those in the process/function and those who are outside it to create practicality and perspective Develop an overarching plan, but maintain flexibility to modify the plan subject to business needs Create and use templates to ensure consistency in analytics and presentations
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There are myriad tools and techniques used by leading practice companies to improve and manage productivity.
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- How ScottMadden Can Help
- Graphical process map (electronic or paper) Work management/ scheduling system Pre-work meetings and war rooms Engineered standards
- Work Management
- Governance council Strategy and execution team Competency matrix Risk analysis Comprehensive business case Long-term contracts and alliances
- Sourcing Management
- Cost to manage Management ratio Complexity analysis Layers analysis and diagnostic
- Organizational Management
- Strategic framework Published scorecard or road map Performance incentives (financial/non-financial) Benchmarking Performance metrics and dashboards Gap-based business planning and root cause analysis Visual aids Strategic continuous improvement teams and processes Tactical work out teams
- Performance Management
- ScottMadden has experience assisting its clients with these tools and techniques.
BPI was a springboard for our futurethere is no way (culturally, teamwork, open and honest communication, etc.) that we would be where we are today without it. BPI Team Member; April 1, 2008 BPI Reunion Luncheon
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- A leading utility utilized our Business Process Improvement (BPI) process to improve productivity Annual operating income/employee improved from $48K to $84K The fact that this figure continues to increase is a testament to the environment of continuous productivity improvement that has been ingrained in the company
- Another leading utility utilized the BPI process to make productivity improvements with direct impacts to customer service, operating efficiency, and culture Key accomplishments included improved customer care, shortening the read-to-bill cycle, improved strategic sourcing performance, and improved workflow and response times via GPS technology
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- Proven Client Results
- Client 1
- Client 2
- Our focus on continuous improvement at the utility is the catalyst that drove improved operational efficiency throughout the year. Chairman, President and Chief Executive Officer; October 29, 2010
Contact Us
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- For more information on organizing to improve productivity, please contact us.
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