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Delivering Change at Severn Trent
Tony Wray has been Chief Executive of Severn Trent Water Plc since 2007. When he joined the organisation was still in the process of recovering from the reputational damage caused by a ‘whistleblower’ and the subsequent charges laid by the Serious Fraud Office. In this candid interview Tony speaks to Wickland Westcott Consultant Stuart O’Reilly about implementing change at Severn Trent.
What was the background to the changes at Severn Trent?
Two things - I think the whistleblower event, and all that this created, but also the influx of a significant number of new people with fresh outlooks. You know it is pretty unprecedented in that the board changed completely, the executive of the business was completely new.
With those two things going on you had that burning platform crisis, whatever you want to call it, which was (a) we have got to fix a lot of basic things, (b) we have got to figure out what we are and what we want to be. This gave us potentially a great opportunity for renewal which we set about doing in a number respects by fairly conventional means – we did a strategic review – and you do a little tacit comparison – you get your advisors in and figure out where the value is – you do an operational and process review – does the machine work? – yes or no – and you start figuring out the sorts of things that you have to do. So that component of it was pretty conventional. The unconventional bit which the whistle-blower case helped us into, was gaining an early understanding that, as well as all of the functional, structural, organisational strategic stuff there was an awful lot of behavioural overlay to this. It wasn’t just that things didn’t work, but that people were believing in the wrong things. So that led us into the unconventional element which was that we ended up tackling structure and procedure, but also behavioural grounds. That is why we started working with you guys because it registered in our minds that actually we needed people who could not only do things, but we also needed people that signed up for a certain set of beliefs and values - such as working with people and encouraging them - this was just as important as joining two bits of pipe together.
How did you start to challenge people on their behaviour and get acceptance that some of the things they believed, and had believed for a long time, were fundamentally wrong?
Well, a big part of that was holding a mirror to people and actually showing them. A great deal of confrontation – not negative confrontation – but through putting data on the table – a sense of reality – and it still goes on in our organisation today. We knew that we had fundamentally great people, passionate about what they did and yet they would do some fairly perverse things for whatever reason. Let me give you an example. I was at a sewage treatment works and this is one of our pretty tired old places that doesn’t work very well and yesterday I was walking around part of the site and being the nosey individual that I am, I opened the door and looked into the cabin and in the corner I found a scythe – a very old scythe a very well worn scythe – that is clearly used because it was good and sharp. I enquired and what is happening is that in an attempt to keep the vegetation down, occasionally our guys are going out with a scythe. Now, what does that tell you? It tells us we have got passionate people, committed to keeping that works going. What is the problem? Well intentioned people have come up with completely the wrong solution because the solution should have been – hang on why are we getting vegetation growing on this filter bed when it is not designed to be that way? What is it that is not working that is allowing that vegetation to grow? Have we got the wrong maintenance regime? So the result is that we have got a well intentioned person putting themselves at risk and therefore putting the company at risk rather than having the skill, the capability, the problem solving tools and a local culture that says – hey we have got a problem here, how do we figure out the correct way to fix it? So you know even now those deeply ingrained behaviours are still there that we have to overcome.
What were the things that were around this organisation that stopped those sorts of thoughts and conversations going on? Well, crudely it was a form of fear so you had to change that to a place where it’s safe to speak – why did we have the whistleblower? Because it wasn’t safe to speak up. If you did speak up were you listened to with respect? You need an environment where somebody’s ideas are respected, their right to make suggestions is respected, so that requires a form of leadership that is capable of listening rather than dictating, it requires a management style that is far more inclusive. It starts to suggest a completely different way of behaving which is why, again going back to the how did we do all of this, there came a point where we thought we had understood enough – and tried it enough times – to be brave enough to write it down. So then we produced our leadership and our behavioural model to say we think – because it will change over time – but right here and now – these are the things that characterise the right behaviours which ought to lead to a better place to be and a more efficient business and a better place to work.
You were looking to change some of the behaviour in your staff and challenge them but the first thing you needed to do was actually get a different approach from the managers.
We are still going through that transition now. If you are going to change all of those things you have to change it top down and bottom up. Now you know this is a big organisation we could not get rid of everybody and start again. We did have to get rid of – a very pejorative term – we did have to get rid of quite a lot of management because they were incapable of switching their behaviours. So we did bring a lot of people in. We spent a lot of time helping people change though – where they could – and some of them did it very successfully and some of them didn’t and either they elected to go, or we moved them. Unless you change the (management) in the middle the organisation doesn’t actually change so you really had to do that as well and go through those crises of confidence because there were times where we the executive had said something, our frontline staff said yeah we agree with that but then the management in the middle still behaved the way that they did in the past. So we had a lot of false starts and a lot of rejections because our frontline staff said well no actually in truth they are just the same as the old lot. They talk about it but they don’t make it happen.
What were the signs for you that you were starting to get some traction in that middle group, that you had started to change them?
We had the hard metrics, that is, we delivered the business performance, improvement on a whole bunch of metrics. Our employee motivation stayed really high by all the benchmarks that we could measure by. We didn’t have industrial unrest. Our reputation improved and our reputation improves because people are engaged. A lot of people ended up doing, and (sought) out different jobs and different roles – a lot of people got promoted and we are getting to a place where that history is being shed and it is being talked about less and less. Now it is not about fixing stuff that we inherited, it’s about improving stuff that we do. People have moved on and are now more engaged in current state and in looking forward, rather than in rescue. Driving through Leicester a couple of weeks ago on a Saturday afternoon I came to some road works, all the roads closed off, down to one lane, traffic lights, Severn Trent signs all over the place and thinking – I hope this is going to be finished really quick – and there are two of our guys on the other side of the barriers. Whilst I was stopped at the red light I wound the window down – they didn’t know the car – and I said “Guys how is it going?” I didn’t know their names – and the two guys looked across and said – “Tony! How is it going – great” and they immediately launched into: “We had a 24 inch burst main here last night – because it is 24 inch we got it zoned off down the road, we got the subbie (subcontractor) out with the specialist kit – we got it all back on supply now”. They were just checking that everything was done before moving on to the next job. That all came at me; I didn’t have to prompt it. What does it tell me? It tells me that they are perfectly happy talking to me. It tells me they are really proud about what they are doing, the way that they convey all of that tells me they are professional, they know what they are doing, they are on the case.
I’m interested in the pace of change. When I spoke to a number of your people one of the things they said was that the pace of change is fast. I am curious as to how deliberate this was, as some leaders use pace as a kind of forcing mechanism.
The injection of pace was quite deliberate because the organisation needed a wake up. It was quite deliberate because there were some external events that meant that we did not have lot of choice over timing, and because as a leader, as a manager, as a supervisor, you have to be doing more than one thing at a time. As a leader – and my definition of a leader is that as soon as you become responsible for people, even if it is only two people, at any given point in time, you’ve got the process to run, you’ve got their welfare to manage, you’ve got the outputs to deliver to the customer and you’ve got a real commercial financial world to live in. You don’t get the choice of which of those you are going to do because if you choose to do only one, you’ll get it wrong. If you are entirely driven by the P&L, you’ll end up compromising something for customer, employee or shareholder. If you are entirely driven by a deadline to achieve a task, you’ll end up taking some risks that you shouldn’t take with health and safety. So that was that. As we started to kick things off, we did get a huge push-back and we still do get a view that: “it’s busy, busy, busy – if you could just let things settle”. To an extent we listened to that, because we did accept that we were not doing well in a) explaining what we were doing and b) making sure that the things were joined up appropriately. We addressed this in our usual thoughtful mechanistic way and said “well let’s manage it”. Let’s decide consciously, rather than subconsciously, how many critical big change things there are. There were 10 and we said ok – if we are going to do all 10, we had better make a better job at managing them. So we didn’t take over any of the projects or the programmes, but we created, for ourselves, a programme management office – just to become knowledgeable because then you start to test. We had these different programmes all calling on the same individual, the individual has only 220 working days available and actually we’ve got a programme here for 350, well that’s not going to work – so we started to get more disciplined about that, which we’ve kept going actually. Then we started managing the dependencies and that got us into the phase of rather than just doing stuff, actually forcing us to explain it. That’s where we started to create our language around high standards, lowest charges, great people. We’ve still got to get better at explaining change – preparing people for the change, executing the change and then making the change stick because you could never get it absolutely right.
In many organisations the external drivers for changes are most prominent, they seem to have been less significant in this case.
You have to be aware of this point. If it’s not there, I believe you have to create it and then you have to get it in the organisation in a way they understand. So whilst we were doing all of this other stuff the other part of our strategy was getting out there and being the thought-leader and driver in the sector, so all the talk you hear now from the environment agency on the Today programme about these ideas of trading water and about the increasing competition, are all the ideas we originated and drove. Now what does that do for our people? On the one hand it absolutely presents us with an external challenge that we are going to have competition, that’s why we need the high standards and lowest charges and great people because that makes customers sticky to us. If we are going to have water trading, we will need sufficient network, so that’s why we are spending £120 million putting more capacity on the Derwent Valley. We need to make it real for people and to give it an edge as well because unless we do it, others will come and do it. Look at gas, look at electricity, look at telecommunications, look at rail, look at buses, look at taxis, look at your mobile phone – you create that notion and sufficient understanding of change such that people feel the need to engage – they might not like it and in fact in many instances they don’t like it, but they engage.
Did you think you were getting people to appreciate this external threat around competition?
More of our people now would understand the threat of competition – more of our people would understand the need for efficiency and the balance between shareholders, customers and employees, rather than just favouring one party and I think more of them share an ambition to be more than Severn Trent Water.
What might that growth for Severn Trent look like?
There are 22 water companies in the UK and there should be about between 6 and 8. There will be consolidation and it’s not just because of using the ideas we have been pushing – if you put economics with efficiency and price – the growing rarity of water with changing weather patterns – it’s all of those things to add up – this nation’s infrastructure in 22 different pockets is ridiculous, it will change or it will breakdown – there will be changes of ownership, private equity buys in then exits, and then there needs to be somebody else picking it up. The fashion, because that’s what it is, will move away from private equity back to listed – there might even be some more mutuals like the Welsh model. There will be change if there is going to be change, you have a choice – you can be part of the change or you can be a victim of the change.
What have you learnt about change?
We put our first release of SAP in back in December 2009. So on a day in December, we switched on SAP, all of our back-office activities – Finance, HR, Procurement and a month later we closed our accounts successfully on the first month. Two months on we let 1200 people go and three months later all of those processes were operated bang on. Oh and by the way it went live on the day that we said at the price that we said with the functionality that we said. Unheard of – utterly unheard of in the world of SAP implementations. So how was it that we were able to do that? There are millions of organisations that have put SAP in with a varying degree of success. Part of our ability to get that right was that we had spent a lot of time before we even envisaged SAP, getting our people back to standard processes because we had to get the quality control and the processes right. We spent a lot of time with people figuring out what the right processes were and how to do that. When we came to do our blue-printing for our SAP design, our people behaviourally were already in the right place. Is there any one thing? No. I think what we’ve learnt, and what we’ve tried to do, is that whatever change we are trying to drive through we try with people, process and technology.
So in practice it’s all interlinked and actually you have to drive it on a wide front – you have to tackle all the components ....... you have to tackle processes, you have to have the right leaders and you have to put the technology in.
I think that you can introduce change or you can inflict change. If you introduce change, you stand a chance of getting better implementation. If you inflict change, you will only be partially successful. You will make a difference, but will you make enough difference and will it be sustainable?
I guess the second phase of change – a market oriented water business - is going to be a lot harder to deliver.
Yes – you have to be a lot more patient than you might otherwise be. The truth is in organisations, people make a choice about whether they are going to go with you or not and they make that choice based on - are you going to explain to me why and how are you going to convince me - and that I think is the difficult bit – turning your instincts and your intuition into something that your organisation as a whole, not just one or two people in your organisation, but your organisation as whole can say – yeah – I get that now. I was over in Leicester with our distribution team and one of our managers said: “Do you know what? I’ve been thinking about it - it all makes sense to me now. You’ve given us the right kit, you’ve given us the right vehicles so we look professional, me and my team train on how to solve problems, you’ve sorted out the pay nonsense. I get it all now”. On the one hand I was thinking oh fantastic he’s got it, and then as I was walking away, I was thinking – it would have been better if I had done a much better job of explaining that at the start!