THERE ARE MYRIAD CHALLENGES UTILITY COMPANIES FACE as they build a smarter grid. Providing the proper people, processes and systems are only part of the challenge. Utilities also need to provide the management structure needed to ensure that all of the moving parts of such an undertaking are successful.
Most utilities are using cross-functional teams to lead their smart grid transformation. In a recent survey conducted by Sierra Energy Group of more than 140 smart grid utility professionals, more than 53 percent of respondents indicated that they are using cross-functional teams for key smart grid decisions.
A cross-functional approach
Pablo Vegas, chief information officer at American Electric Power (AEP), confirmed that his utility is using such an approach. "AEP leads its gridSMART program using an executive steering committee consisting of business leaders from the utility operations, corporate communications, finance, environmental, regulatory and IT organizations," said Vegas. "The impact to utility business processes resulting from smart grid deployments is extensive and requires a comprehensive plan and leadership focus in order to be successful. The executive committee approach builds broader ownership and accountability across the organization for the success of the program." AEP is using a matrix management structure to oversee its gridSMART program, which encompasses specific utility company projects in addition to research and development activities. Accountability for specific projects within the utility falls within the purview of each of the company's eight utility companies, while the central support systems are governed by the utility support and IT organizations.
For background, matrix management is a technique of managing an organization (or, more commonly, part of an organization) through a series of dual-reporting relationships rather than a more traditional linear management structure. In contrast to most other organizational structures, which arrange managers and employees by product or function, matrix management combines functional and product departments in a dual authority system.
The advantage of a matrix management approach is that it enables team members to share information more readily across task boundaries. It also allows for specialization that can increase depth of knowledge and allow better professional development and career progression. However, when using this approach, utilities have to be careful that employees do not become confused due to conflicting loyalties.
Communication a key element
A key challenge of smart grid governance is to satisfy all of the internal stakeholders involved, and achieve their idea of success. I asked Vegas how a utility can best address the risks of corporate misalignment, organizational silos and scope creep. His response?
Communication, communication, communication.
According to Vegas, an effective project management office (PMO) function is important to ensure that the risks inherent in a smart grid investment program are managed appropriately and to help define communication and decision-making pathways that will ensure the program is successful. "Additionally, communication internally, with external stakeholders, and with customers throughout the lifecycle of a smart grid program is critical to ensure that expectations are clear and that each group's interests are considered," said Vegas.
Indeed, arguably one of the most important aspects of a smart grid implementation is a standard approach to the project methodology and a centralized PMO that consolidates risks, schedules, cross-project dependencies and documentation standards. "Business as usual" does not always suit itself to the imposed structure of the PMO. As a result, a utility can often encounter organizational pushback. Change management should include not only the projects in the smart grid program, but also operational changes. Employing a PMO-level decision process can help formally record all of the different executive-level decisions that cross organizational boundaries.
Utilities should consider investing in behavior change programs, so that they can utilize the processes in the rollout of smart grid initiatives. Change is difficult for most, and can be met with stern resistance, threats of taking retirement, organizational withdrawal, low morale, lost productivity and issues with quality. One must keep in mind that many of the utility functions impacted by smart grid initiatives have not changed much over the past 50 years.
Comprehensive, not departmental
I also asked Vegas about the critical skills and experience needed for the person or persons who govern a utility's smart grid efforts. Vegas feels that the leadership of a smart grid program needs to recognize that the project is a comprehensive business project. "It is not an IT project, it is not a metering or distribution operations project," said Vegas. "It is a comprehensive and disruptive business initiative that will require involvement and leadership from all core business areas - utility operations, IT, customer services, finance, regulatory, risk management, human resources, etc."
In addition to the internal stakeholders, utilities need to also satisfy their customers and their regulatory bodies. Each one has a vested interest in the success of the smart grid and each one of them has their own set of expectations as to how it will work. "It is key that the leadership team of the smart grid program focus appropriate attention on each of these stakeholder groups and not lose sight of the significance of any one of them," said Vegas.
Developing the proper smart grid governance structure for a utility requires a significant investment in time and resources. A successful smart grid implementation requires clear strategy, clear definitions and requirements to support that strategy, appropriate lines of demarcation concerning roles and responsibilities and well-defined ownership. Without these cornerstones of quality management, deployment and ongoing success will be at risk, no matter how well technology decisions are made. But with the proper governance structure, utilities can make certain that they have a framework of rules and practices to ensure accountability, fairness and transparency with all of the stakeholders involved.