Investors historically have been skeptical about merger synergies in utility mergers, assuming that regulators will insist that most or all economic benefits flow to customers. However, recent...
Restructuring Utility Leadership
How Exelon uses its human resources department as a strategic weapon.
As today's utility industry continues to consolidate in the face of globalization and deregulation, all the while providing reliable service at a good price and increasing shareholder value, the role of people and senior management has never been more important—or challenging.
“The Fortnightly 40 Financial Rankings ” evaluates the top utilities through a variety of hard, quantifiable metrics. However, one also needs to ask what sort of leadership is required to manage and drive performance today.
While utilities have embarked on a variety of business strategies to succeed—from "back to basics" to growth through mergers and acquisitions—leadership and management strategies to create, deploy, and enhance those business strategies also need to be developed.
A recent Booz Allen Hamilton study of CEO succession showed that utilities ranked second only to industrial companies in CEO turnover during 2004, with almost 20 percent of utilities changing CEO. Clearly, leadership today must not only be bold, but also nimble and adaptive.
What sort of leadership does today's utility need for the future? How does the culture need to change? Who should be hired from within the industry? Who should be hired from outside the industry?
Exelon has sought to answer all of these questions, using human resources as a strategic advantage in transforming itself from the middle of the pack to an industry leader in seven years, even before its recent proposed merger with New Jersey's PSEG.
S. Gary Snodgrass is the chief human resources officer for Exelon. He and his colleagues have played an important role in this transformation in an environment of unprecedented change and competition.
In my role as head of the utility practice for the leading executive recruitment firm Spencer Stuart, I spoke with Snodgrass about leadership needs among utilities today, and how to create a performance-based culture.
Shields: How would you summarize Exelon's greatest leadership challenges in light of the restructured utilities industry?
Snodgrass: First and foremost, we must ensure that we are responsive to all of our constituents, particularly our customers. When I first joined Unicom, a predecessor of Exelon, in 1997, our customers were referred to as "rate payers." It was very indicative of how our customers had been viewed for such a long time. We were not very good or committed to customer satisfaction, and even worse at listening. It is not surprising that in the late 1990s we were rated last in the U.S. utilities survey that ranks customer satisfaction, and the low ratings reflected our financial situation. At the time, Unicom posted an $800 million loss, the stock price was in the lower teens (post-split basis) and the nuclear power plants ran at a dismal 49 percent capacity.
Today, under the direction of our CEO and Chairman John Rowe and our leadership team, everyone in the company understands that we must "keep the lights on" and meet our commitments to our constituents, including the expectations of our customers, in