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Restructuring Utility Leadership

How Exelon uses its human resources department as a strategic weapon.

Fortnightly Magazine - September 2005

order to maintain a vital role in this industry. While it may seem like a simple strategy, it has changed every aspect of how we do business—from how we respond to customers to our standards of operational output. That is why, today, the situation is completely different from the late 1990s. Exelon has annual operating earnings of $1.7 billion, is ranked No.1 one in nuclear capacity, No.1 in market capitalization, and our nuclear business is at a generating capacity above 94 percent.

Yet creating a new corporate culture to deliver these exceptional business results is no easy task, and it is an effort that continues today. Our management team acknowledged that we needed bold leaders who could be more nimble and more adaptive in an environment of unprecedented cultural change. And, unfortunately, these were qualities not emphasized in the past. It was a different time. Today, those qualities likely will determine our ability to meet the expectations of our more than five million electrical customers.

Shields: Changing a culture, as you mentioned, is not an easy task. How did the human resources function approach this challenge?

Snodgrass: Cultural transformation cannot happen overnight. It also can't be spearheaded by one function alone, such as human resources. It has to be an organization-wide effort. It's a slow process. Human capital strategies often take two to three years to plan and another two to three years to fully implement. Based upon business needs and requirements, including strong inputs from line leaders, human resources, in concert with its colleagues, developed a number of programs that changed the way the company measured individual- and business-unit performance. As part of this process, we also revised our incentive plans. We re-created our rewards programs to place even greater focus on pay for performance and not just effort—and we now hold all employees accountable.

We can no longer be a "cradle-to- grave" employer. In this competitive environment, we need talented people who will excel. That is why we expect 5 to 10 percent personnel turnover each year based on performance. Every year we review all employees—from the very top to the entry level-based on a set of performance-driven metrics, and our program is constructed in such a way that the bar on performance is continually raised higher. For example, if you performed in such a manner that you were rated an "A" employee in 2004, that same performance in 2005 may only have you earning a "B" rating. This approach forces everyone in the organization, myself included, to continually push ourselves to perform better and more efficiently.

Shields: How has Exelon balanced internal development and external recruitment as a means to introduce fresh ideas?

Snodgrass: You have to do both. Great companies build talent from within and we have to leverage and cultivate our internal talent for the future, particularly ensuring an increased focus on the utilization of women and people of color. We now embrace life-long learning compared to just one-time learning, and we encourage our employees to push themselves to an enhanced performance level. In this environment, where