Performance improvement initiatives must include a focus on sustainability in today's energy industry
- April 9, 2014
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As they search to improve various areas and aspects within their organization's businesses, many executives in the energy industry in recent years have put their companies through the paces of some kind of performance improvement initiative. Whether their efforts focus on operational excellence or capital efficiency improvement, many of these companies reach their goals and achieve significant gains in productivity or cost reduction.
Unfortunately, they often stumble at an identical point in the continuum and have a tough time maintaining and sustaining these gains. Achieving and then upholding those hard-won goals are the difficult part of the equation.
In our experience working for Constellation Energy, a leading supplier of power, natural gas, and renewable energy, we have identified four scenarios that prevent companies from achieving and maintaining their performance improvements:
- - The Premature Victory Dance. In this scenario, an organization declares victory before achieving sustainability of the achieved goal. Usually a significant amount of resources - whether it be manpower, equipment and/or capital - is poured into reaching that goal, which in turn, usually creates pressure within the organization to show positive results. These may come in the form of improvements in a specific set of metrics, or meeting or exceeding a cost target. Once the organization achieves those goals, executives declare the initiative a success. However, when the focus is on the end goal - with no or little emphasis on sustaining the particular performance improvement - we generally see a decline in performance once the goal is achieved. That fall-off does not necessarily lead to previous levels of underperformance, but we often see a plateau or downward trend from the achieved goal, when the organization ought to instead see continued improvements as the original initiative is more fully implemented and ingrained in day-to-day operations.
- - Consistent Messaging. To achieve successful change management, any messaging about a particular performance initiative must be consistent and clear, and reinforce the intended goals. It must resonate within the entire organization. However, many times the message is not clear and may not be fully accepted by an organization. When left in the vacuum created by incomplete or inconsistent messages, the human element of any organization will have difficulty enacting or sustaining any real positive change in performance.
- - Initiative Overload. When many different initiatives flow down the pipeline from higher levels to an organization's rank-and-file, adding another can seem like background noise. This is true whether mandated changes occur within a single region of a company or are enterprise-wide. For example, another client organization recently had several initiatives underway that required training and presentations to its workers at an energy plant. On Monday, a safety officer conducted a six-hour training class. On Tuesday, the Human Resources department arrived to lead a sensitivity training module. Wednesday and Thursday were marked by additional training about operational excellence and benchmarking of day-to-day processes. Employees pulled from their daily work routines and expected to absorb and implement this much change can feel overwhelmed and often will begin to push back. A fragmented approach toward improving the business often leaves organizations with a lot of confused people. The solution is one cohesive plan that the entire organization understands, which includes specific initiatives and changes that are properly integrated into the overall approach.
- - Optionality. A fundamental tenet of change management is that people don't like change and given the option, they will fail to undertake it. So it should be no surprise that if an initiative is optional, most organizations will continue to do business as usual. Change is uncomfortable and often involves traversing uncharted territory, which in turn can require some level of individual initiative and risk, attributes in short supply in many complex and regulated industrial industries. If a performance initiative has any hint of optionality, it generally will fail from simple lack of clear and consistent implementation.
Due to our work with Constellation, emergent work decreased by 20% over the previous three year period and the average cost of work orders decreased by 42%.
The Solution: Building a Culture Based on Performance
In response to these pervasively common problems within many industrial companies, I always recommend that executives embrace and encourage a performance culture, which enables an organization to reach a performance level - and then sustain it. This approach combines process enhancements with behavioral change to create and maintain improvements and benefits.
This specific culture is achieved by modifying leadership and functional behaviors. The specific path for each company varies, but typically, it incorporates clearly defined, quantifiable behaviors capable of driving sustainable results. They may include optimized cost structures, improved production volumes, and a focus on identifying and closing performance gaps.
Establishing a performance culture generally involves:
Assessing behaviors and practices within an organization
Arriving at programs and processes that successfully address and modify undesirable or non-contributory human behaviors
Improving functional processing within the organization
Developing strategic performance plans that help put desired behaviors and change in motion
Reshaping aspects of the organization's culture that stand in the way of successfully achieving the necessary change
These sort of initiatives are generally successful in identifying and eliminating sources of loss, and creating sustainable improvements and benefits.
Ingredients of Success
At the heart of any successful performance culture effort is strong leadership fully aligned behind a consistent message it regularly delivers to the organization. Organizations that successfully implement this type of culture set clear objectives that cascade down, and include a mechanism for capturing appropriate metrics that quantify progress, which are filtered back up to executives for review, evaluation and refinement of the overall approach. Having easily understood and widely communicated metrics is critical because they ensure that all levels of an organization are clear on how they are being measured and where they stand.
It is virtually impossible to improve organizational performance without employee engagement because culture, very simply, happens. If leadership chooses not to take an active role in defining and shaping the organization's culture, it will develop on its own in that vacuum. But establishing or reforming an organization's existing culture requires strong leadership, clear objectives and consistent messaging defining the desired behaviors.
Organizations that establish and embrace a culture changes meet their targets - whether they are related to environmental, health and safety, production, or cost/budget objective - on a consistent basis. These organizations routinely eliminate variability in their business, including in production, application of business processes, and in successful implementation of roles and responsibilities. But more importantly, these changes and modifications are both achievable and sustainable.