Tackle organizational obstacles

Aug. 28, 2007
For energy cost control, aptitude plus operational style equals results, advises Contributing Editor Christopher Russell, in this month's Energy Saver column.

To be implemented, energy improvement proposals must appeal to a range of decision-makers from several disciplines, including maintenance, production, finance and procurement. Each may come to different conclusions about energy improvements.

The complexity of an organization — marked by competing priorities, turf issues between departments and the relative power and influence of key decision-makers within the company — may limit the full realization of energy cost control.

Mike White, vice president of operations for Sunoco Chemicals, offers a very succinct theory about organizational ability to manage energy costs. Specifically, energy management capability reflects the attributes of an organization’s “people” and management “systems”:

Ideal people attributes:

  • Strong technical skills in engineering, finance and data management;
  • A can-do work ethic with the ability and willingness to learn and change
  • An ability to communicate the impact of their tasks in business terms; and
  • Balanced respect and expectations between management and staff.

Ideal systems attributes:

  • Multi-year, organization-wide planning discipline;
  • Performance benchmarks, goals and staff accountabilities;
  • Focused, ongoing leadership support for goal attainment;
  • Information systems for collecting and communicating performance metrics; and
  • Cooperation both functionally and fiscally across departmental lines.

Taken together, people and systems attributes determine an organization’s operational style. These styles tend to shape the energy management strategies that organizations develop. Strategies determine the quality of energy management outcomes.

In general, strong people attributes allow an organization to at least initiate energy projects on an episodic basis. Strong systems allow energy management to become a durable process that gives ongoing support to the organization’s core business agenda.

Let’s look at some examples of how organizational attributes characterize operational style.

Style: Fire drills

  • Maintenance agenda is reactive, not proactive;
  • Problem definition and solutions are local; little or no coordination across departments or facilities;
  • Strong, influential individuals are key to improvements — optimizing results for their department, if not for the organization as a whole.

Style: Excellence

  • Focus on continuous improvement;
  • Top management demands and supports departmental collaboration by creating incentives to cooperate;
  • Able to pursue opportunities that are best for the organization as a whole.

Style: Chaos

  • Questionable management ability to detect and react to changes in the business environment;
  • Uncertain leadership focus and/or control;
  • Fundamental business viability is in question;

Style: Bureaucracy

  • Manipulate statistics to make results look better on paper than in reality;
  • Short-term results take precedence over long-term;
  • Delay action, let others “deal with it."
  • Tacit undermining of corporate control;
  • Energy management strategies reflect organizational attributes.

Strategy: Projects

  • Capital projects: bet on a series of hardware investments to solve problems. Look for solutions that you install, flick the switch, and carry on business-as-usual; or
  • Pursue quick and easy one-time projects from operating budgets. May or may not document best practices and commit these to standard operating procedures.

Strategy: Continuous energy improvement

  • Benchmark and inventory energy use;
  • Implement a multi-year business plan for action;
  • Set goals, accountabilities, and incentives;
  • Document and replicate behavioral, procedural, and technology solutions;
  • Measure progress and document impacts;
  • Demonstrate contribution to business performance.

Strategy: Do nothing

  • Make no moves with respect to energy management. Simply pay utility bills on time.

Strategy: Price shop

  • Declare that “we’re already as efficient as we can be”… non-technical corporate leaders probably won’t know the difference;
  • Switch fuels or shop for lowest-priced fuel — this alone may satisfy top management.

Continuous energy improvement helps identify, justify, implement and sustain the most savings potential. Ongoing progress reports demonstrate energy management’s support for core business objectives.

Well-chosen capital projects can save operating expenses. The financial risk is reduced if staff skills and operating procedures are improved in concert. Quick and easy projects can be pursued in-house by a resourceful, do-it-yourself crew. However, the gains are temporary if energy discipline isn’t a documented part of standard operating procedure.

Price shopping prevails when energy expenditures are perceived strictly as a price-driven issue. Short tenures allow managers to deny or ignore energy waste if the consequences are expected to accrue to the succeeding manager.

Doing nothing may be acceptable if the company is extremely profitable and its earnings targets aren’t threatened by energy costs. Meanwhile, companies with management turmoil may have no choice but to do nothing about energy expense.

Energy management outcomes depend on strategy; strategy depends on operational style; style depends on organizational attributes.

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