Can cultural concepts such as trust, respect, caring, and employee empowerment turn profits from virtually zero to $100 million in six years? According to Keith Tempest, CEO of TrustPower, which was named New Zealand’s top performing company in 2007 by Fortune magazine, organisational culture is more than just a nebulous concept and has a very real impact on profits. Sarah O’ Carroll reports
If you walk through the corridors of New Zealandelectricity generator and retailer TrustPower, you may see the CEO having a cup of tea and chatting with junior staff. This is a regular occurrence and it indicates the type of culture which has built up in the organisation over the past six years.
In 2002 TrustPower had a very poor financial year, as in, they didn’t make any money. It was at that point CEO Keith Tempest decided that something needed to change. The culture change which took place over the next six years was the key driver in turning profits of $1 million into profits of $100 million and saw the company share price increase from $3 to $15.
What the company has achieved has not only been recognised in New Zealand (named in 2006 by the country’s National Business Review as the top-performing NZX-listed company over the past 10 years) but internationally by the US business magazine Fortune as the top-performing New Zealand company in 2007.
When things were at a low in 2002, Tempest initiated the development of a value-based culture. Trust, respect, transparency and employee empowerment became a reality within the organisation and as such had the desired results.
“We developed a value-based culture within the company that was based on talent development and empowerment and all those other good things. Accountability, new remuneration structures, new performance management systems. The whole gambit would create for all employees a feeling firstly of ownership, two of desire, three of accountability and four of engagement,” says Tempest.
But these cultural changes do not happen over night, or once a year. It’s an ongoing thing, according to HR manager Karen Boyte, and for it to be in any way successful you must have management on side:
“I think the first thing is always getting the managers on side. You know you can’t go in there and make any culture change in an organisation. It was really about making sure that people understood exactly what the values meant in this business and that managers and leaders right through the business demonstrated those values,” says Boyte
Empowerment –every individual is a leader
Starting business in 1925, TrustPower has grown to be New Zealand’s fourth largest electricity retailer, and fifth largest electricity generator. When Tempest stepped into the role of CEO in 2002 there was no rigour or mechanism within the business to be able to identify high-performers or differentiate performance of staff. As such, employee empowerment became a core element of the developing culture.
According to Tempest they have been adamant about employees taking on more and more decision-making capabilities and the direct financial results have been significant. For example, results can be seen from the speed and cost of which projects are executed such as the building of wind farms etc. What they have found is these projects are coming in on time and under budget and according to Tempest this is due to employees being empowered to make decisions on site, to be given the tools, the training and the scope to show initiative.
“We don’t have a regime where these people have to go back to a 26th floor head office in North Sydney to get a decision. These guys are making quite significant decisions on the hop and on their own. An awful lot is saved in emotional intelligence,” he says.
Aside from financial results there is also the added benefit of improved retention rates.
“We’ve got staff who are committed to staying with this organisation and we’ve got some huge talent. According to the HR Executive Forum we are globally right up there at the top in terms of our engagement levels. But that’s not a reason for us to rest on our laurels either,” says Boyte.
Trust and transparency
All too often restructuring and reorganising can lead to uncertainty among employees which in turn can lead to fear, anguish and unrest. However, due to the transparent and open culture which TrustPower has strived to develop, the organisational changes which are taking place at the moment have been received well. There is a major internal reorganisation of people within the company which will be ready for full implementation in the next couple of weeks and according to Tempest and Boyte the feedback from employees has been positive:
“The thing that’s happened is that when we go and talk to people they can actually see it in our faces. We actually believe in what we’re saying and we’re truthful and straight up. So there are no hedging answers,” says Tempest.
“So they have some confidence and it comes back to fundamentally trust. You know if you can look people in the eye and they look into your eyes and say ‘hey, they’re saying it as it is’ there’s no hesitation. I think the culture over the last three or four years has developed so that people actually trust what I say and what Karen says and what the other management team people say. They actually trust them. No one is telling porkies here. We’re just not allowed to tell porkies,” he says.
Transparency is also a key element of TrustPower’s culture and Tempest believes a flat structure with as little time as possible spent on bureaucracy is very important to build up the levels of trust and employee empowerment needed. According to Tempest TrustPower don’t partake in systems such as one person signing a paper to send down the hall to the next person, who signs it and then sends it down the hall again to the next person etc.
“The majority of bureaucracy as I see in many organisations stems from a lack of confidence that the person above believes in the person below. Because we have a very flat structure, flat accountability structure, it means that people from a cultural perspective feel confidence and empowerment. I think that whole engagement survey is a reflection of how people feel about that,” he says
Tempest also does not believe the CEO should be some kind of untouchable figure.
“Many CEOs still have a whole pile of behaviours, policies and institutionalised norms that reflect the ego management styles of the 1980s,” Tempest says. “How many CEOs do you know that occupy the ‘executive’ suite on the top floor of the head office building, who have a named car park, who have golf club fees paid as part of the remuneration package, wear a top-of-the-range business suit every day, require employees to make an appointment to see them and command respect and recognition from their position rather than their behaviours?”
He believes that to implement an effective culture change it must start from the top down.
“Getting senior business leaders to change their own behaviours may well be the biggest HR challenge of all. We know as leaders how easy it is to ask other to change their behaviours,” he says
Respect and caring
Another simple but very important element to TrustPower’s newly-developed culture is one of respect and caring among all employees within the business.
“You don’t have to like them, you don’t need to love them, and you don’t need to drink with them. But when you’re at work you will treat them with respect and caring and every single individual within the organisation, whether you actually like them or not, you must treat them with care and respect,” says Tempest. “It’s amazing how that has changed over the past few years.”
Building a new culture
Often when companies decide they need to change their culture it is because they are underperforming financially or they need to maintain a level of energy and drive, according to Guy Sutton from Stephenson Mansell, executive coaching and leadership development group. TrustPower appointed Stephenson Mansell Group (SMG) to devise a cultural change program that built on TrustPower’s vision and values. It was an intense program lasting nine months spread over large and small groups, as well as individual coaching course targeting the top 30 executives from Tempest down. These managers then “spread” the message right down the chain. It was very much a “top-down revolution”.
Guy Sutton who conducted the leadership program for SMG described why TrustPower decided they needed a change. “[Tempest] was looking for a program that would basically reenergise everybody, get them working closer together, getting them focused in pointing the right direction, becoming aligned, and working together to drive the company to further growth,” he says. According to Sutton and Tempest there were many results such as: greater alignment between the company’s corporate strategy and staff, greater involvement of staff in corporate strategy and more open communication.