Case Study: Blending Operational Excellence Methodologies at E.On
The energy industry has changed a lot in the last few years and leading gas and electricity provider E.ON has had to evolve. Operational Excellence initiatives started in several parts of the business in a disconnected way during 2012, mainly as a response to major cost-cutting targets.
Lisa Norcross, SVP Operational Excellence explains how E.ON is integrating OE into the organization’s everyday life.
Editor’s note: this interview was featured in our recent report “From PEX to OpEx: The Next Generation” on insights and trends on the state of Operational Excellence programs in Europe. Download the full report, along with case studies from Euroports, Coca-Cola, E.ON and Air France here.
PEX Network: Can you give us an overview of when E.ON implemented an Operational Excellence program?
Lisa Norcross: There were a number of business units that started using the lean tool-kit to try and drive out cost-savings in 2012 and we started setting up a central team and establishing a consistent approach in 2013.
The emphasis has shifted from what the business units originally started doing, which was cost-cutting, to using it as an enabler for the business to meet performance objectives. All business units have stretching performance objectives not just on cost dimensions, but things like safety and customer service, service quality and reliability. We have positioned Operational Excellence as being one of the enablers to the business of being able to meet performance objectives in a sustainable way over the long-term. For the business overall there is also the intention not to have to do one of these big top-down cost reduction programs again because it was very painful for the whole company.
PEX Network: Which departments are applying OE methodologies?
Lisa Norcross: E.ON is quite a decentralized company – we have a mother company then the business is split into several daughter companies which are regional units, global units or support functions. The regional units, such as the UK, Germany or Sweden are mainly focused on the customer side of things and distribution (electric and gas grid operation and maintenance), whereas the global units are things like Generation and Commodities Trading.
At the moment Operational Excellence is in most of the regional units – at varying levels of maturity. For example, Slovakia has only just got started with some small improvement actions within distribution. Whereas Hungary, which was one of the first countries to get started, has fully rolled OE out to all the operational parts of their business and is now also working with some of the functional areas too.
We haven’t yet got into the functional areas from a group perspective – so purchasing, Finance IT and so on – all of these support functions will also need to become operationally excellent for us to be fully successful.
PEX Network: As an organization, do you think E.ON is successful when it comes to blending Operational Excellence into the everyday culture of the organization?
Lisa Norcross: Initially, a lot of the emphasis was on implementing tools but without necessarily building the understanding of why and how to use these tools. We have focused a lot in the last couple of years in implementing OE as a way to identify and solve problems and to sustain the solutions, ensuring not only that people have the OE tools but that they also have the capability to use them effectively.
What we have tried to do is blend the best practices that we see all across the different business units and put that into a coherent approach. It’s not just about process improvement or tools, it’s really about making some fundamental changes to management practices and behaviors, to make sure that there really is a solid foundation to drive continuous improvement.
We have also encouraged people to focus on what we have called OE Basics to begin with, making sure that they have a good foundation in place to drive continuous, sustainable performance improvement. Once the solid foundation is in place, then we can introduce more complicated tools and increase the scope.
There have been varying degrees of success but everyone is moving in the right direction. The areas where OE is most firmly embedded have a few key ingredients which have been critical for success. A very important one is having senior leadership who is really committed to this and believe it is something that is helping them to deliver their business results. When the senior leaders are also thinking about how to change the way they lead the business, this cascades all the way through the organization.
PEX Network: What have been the main challenges for your OE program and how have you overcome these?
Lisa Norcross: E.ON is not used to any kind of centralization and there is a natural reluctance to align on a single standard. To get to the point where we have alignment across all business units on the framework for our OE system and implementation approach was really a big challenge early on. What is currently front of mind is how to truly engage all levels of leadership. We have made a lot of progress with our senior management and on the shop floor, but we still have a lot to do with the middle management layers. If you empower your front line teams – it automatically implies that other levels of leadership also need to change the way that they work, but we still need to develop an approach for engaging and developing these people.
PEX Network: What are your main goals for 2016?
Lisa Norcross: We have three objectives:
1) To increase the impact we are having, making a clear link between OE activities and delivering the business performance objectives.
2) To increase maturity – move on from the basic level of implementation to more intermediate topics.
3) To increase coverage within the operational organization both in terms of breadth and depth.