ownership

NickB

A question of ownership

It’s not the structure that’s important – it’s ownership

Picture the scene: 1994, a late summer evening in a scruffy office block on the outskirts of Vienna. It is the big one: my client team’s presentation to Herr F, the CEO. He has sponsored a re-engineering of their product management and introduction processes and we are describing the new process-driven organisation structure, the final slide of a small but perfectly formed PowerPoint deck.

“One question,” said Herr F, “where’s the process owner in this structure?”

I should point out that Herr F had read the often-quoted book by Michael Hammer and Jim Champy, “Re-engineering the Corporation”, and was referring to the part – page 103 in my copy – where it says that each of the shiny new business processes should have an owner, responsible for orchestrating performance across the now-irrelevant organisational silos. In his mind, the process owner was an essential part of those that were re-engineered.

Before I could point out that these responsibilities would be carried out by the leaders of the process teams that we’d designed, one of my colleagues leaped to his feet and proceeded to illustrate where the process owner would sit in the structure. This didn’t satisfy the CEO, so another eager team member attempted to re-draw the structure to point to the process owner. This still didn’t work either, so another one jumped up and had a go. Then another colleague got the bit between their teeth, and so it continued until we all agreed with the rather disappointed sponsor that a little more work was needed before he could sign it off. It took a further two weeks before we’d managed to include a role for the process owner in the new organisation, and then rolled it into the implementation phase.

I learned a few lessons from this experience about organisation design and stakeholder buy-in.

The real lesson I learned though has taken a few years working in the management structure of a large company to sink in. Which is this: we are obsessed with organisational structure and therefore changing this is the one thing that you have to get right.

But it’s not a question of designing a new hierarchy or turning the hierarchy on its side and creating a process structure (OK, I know there’s more to it than that), it’s making sure the people involved know where they fit.

This provides the one thing that people crave during times of change: security.

But, hang on, isn’t this the one thing we can’t guarantee anymore? Jobs for life are so last century, surely, with savvy millennials only staying in jobs for 2-3 years before moving on to bigger and better things?

Well, maybe, but not for everyone. Most people want a job and, if not a job for life, a job that gives them security.

And leaders of organisations have a duty to honour that desire, by focusing on ownership.

In the case of my Austrian client, the team had a strong sense of ownership that was a result of having lead roles in reshaping their unit, and I’ve been part of many projects since then that have had the same quality: the members of the team feeling that they are part of something and have a stake in its future.

But leaders, particularly when they are business owners can go even further and change the whole structure so that employees cease to become employees and instead allow the business.

One firm that did this was the branding company Novograf, based in East Kilbride, Scotland. When the two owners, John Clark and Alistair Miller, were looking to sell their business and retire they were approached by an American company looking to buythem out. As recounted in a recent article in The Guardian they were close to a deal when they enquired what would happen to the East Kilbride factory. When they were told that it would be closed down they had a rethink: retiring on a large pile of cash would mean nothing if you had to face the employees and their families existing on benefits the next day.

With the support of Scottish Enterprise, they set about selling the business to their employees and since their employees didn’t have access to a wad of cash to buy the business, they effectively set up a bank themselves, transferring shares to the employees and allowing them to pay back the money – with interest – over a number of years.

Partnership modelslike this are relatively few and far between – much-loved retailer (in spite of the TrustPilot scores) John Lewis Partnership is the largest employee-owned firm in the UK – and their high customer experience rating and employee satisfaction are a data point that suggests that spreading ownership has benefits on both sides of the counter. In spite of research in the US that indicates that younger workers who are worker-owners enjoy higher wages and household wealth only 300 British firms have made this change.

I’m not suggesting that all companies should be partnerships, but I’d certainly advocate considering alternatives to the traditional hierarchy but keeping not just process ownership but enterprise ownership front of mind.

NickB

The good, the bad and the ugly: Thames Water

If there’s one thing that makes my blood boil – It’s seeing a company get away with providing repeatedly poor service and get away with it. No apparent sanction. No sense of guilt.

Yes, Thames Water – I am talking about you. What makes my anger even worse is an ownership structure which appears to point that the only people are suffering here are the customers. An absence of clarity is rarely an accident. I suspect it’s a lack of genuine care about those who pay them yet have to bear the brunt of their sheer incompetence!

What you might find strange is my anger is not because I am one of the Thames Water victims. I am actually an untroubled customer of Thames Water, without any major interruptions to my water supply in the four decades I have lived in South London. I have been a long-time advocate for great customer experience and when I see companies that so flagrantly disregard it – I speak up. The experiences written in this article should not be happening in 2017.

Let me tell you about the experience of David Wertheim as reported recently in the FT. David is the owner of an impressive Islington antiques shop and possesses a large and expensive collection of Japanese art built up over almost 40 years. Early one morning last December a cast-iron pipe burst and David arrived to find cabinets holding hundreds of thousands of pounds of unique and precious paintings and prints submerged in flood water. Completely ruined.

The shop is now back open, but water ingress is still very evident and he is very worried it will happen again. You could class this as simply bad luck – except in David Wertheim’s case it was not the first or indeed the second or the third. It’s the seventh – yes, the seven in seven years.

Not an isolated incident

Thames Water’s maintenance record suggests bad luck could happen to any of their London customers, since there were 31 serious bursts including eight high-profile floods in just two months at the end of 2016 according to an internal report that has now been made public. Thames Water’s record is simply the worst out of all of UK’s water companies.

Steve Robertson, the new Chief Executive Officer claimed that customer experience is a critical element of the company’s strategy and he has spent a significant amount of time meeting both customers and employees. Interestingly, given the turn of events you would expect David Wertheim would have been one of them. He was not.

I state again – Thames Water’s record is simply the worst out of all of UK’s water companies!

Do they have enough money?

Valid question. They made just over 2 billion GBP in revenue and an operating profit running at almost 30%. So, the answer is clearly yes.

Thames Water also proudly announced they spent 1 billion GBP on maintaining their pipes but that has worked out exactly the same amount as the average per year for the previous 12 years.

So, let’s get it straight: we have a water company posting healthy profit returns yet it is investing less in real terms per year than ever and posting the worst track record.

In for the long haul

Arguably, Thames Water has the most challenging area to look after given London’s extensive and ageing water and sewerage system. That doesn’t excuse a maintenance and replacement schedule that is running behind schedule – so far behind, in fact, that some estimates suggest it will take 357 years to renew the network if continued at the current rate.

What makes this frustrating is that the ownership of Thames Water seems about as murky as some of the water it processes, which makes accountability hard to pinpoint. Sure, we have a regulator but following criticism by the FT – again, are they the only people bothered by this? – OFWAT’s response reads as too little, too late and less than equal to the challenge.

Hopefully the residents of Islington won’t be troubled by repeated floods any longer as there are diversions around extensive repair works in Upper Street, although when I spoke to David Wertheim – still in discussion with Thames Water about compensation – he didn’t think it would fix his recurring problem.

I drove past the works the other day: a sign on the hoardings said, ‘come and chat to us about what we’re doing’. I guess if you’ve got 357 years to replace the pipes, a few minutes out to chat to the customers isn’t going to make much difference, but frankly I’d be happier if Thames Water’s long-term commitment to its customers went considerably beyond a bit of customer handling on the front line.