How a Giant Utility Is Transforming Itself with Outsourcing

True organizational change is hard to achieve. Getting buy-in for new, unproven processes is a Herculean feat that few people have management experience in. So how do you pull it off? In this case study, we share nine insights culled from the transformation that happened at the people level when a huge Texas utility company spun off 2,700 employees to form a new company under mostly new ownership and with a totally new mission.

Ellen Krohne is one of the experts. She's the Director of Organizational Change and Communications at Capgemini Energy, a joint venture between Capgemini and Dallas-based TXU. This new company provides information technology and business process outsourcing services to the US electric, gas and water utility industries. Capgemini owns 97% of the newer firm. In this $3.5 billion transformational outsourcing agreement with TXU, Capgemini Energy has the mission of improving service levels and reducing $150 million per year in operating costs for TXU across human resources, finance & accounting, IT, customer care, revenue management and supply chain. It other words, a consulting firm and a client firm got together to create the service provider firm that will lead them into cost savings and improved processes. Along the way, Capgemini Energy is also expected to attract new clients too.

Ms. Krohne began her career as a customer service rep then moved through the ranks to eventually become VP of Customer Care and Business Development for Illinois Power Company. From there, she moved to Capgemini, then into Capgemini Energy, where she led the Customer Care area through the transition from TXU.

The timeline was ambitious. The week of May 17, 2004 was when people were first informed. They needed to be ready to work as members of the new company — "ready to execute on day one and not miss a single beat on the service levels" — by July 1, 2004. That gave the transformation team about seven weeks to communicate the changes and get staff buy-in.

–> INSIGHT #1. There's a normal cycle of change people typically go through. Recognize that and put it into your planning.

Ms. Krohne said the normal response when people get new information is to say, "Oh, my goodness, this is a big change." That's accompanied by a good measure of shock and disbelief. Your job as a change agent is to "quickly move them to information, so they're finding out all about it and then try to get them to acceptance, and then finally into commitment."

The key is providing "lots of information." In the case of Capgemini Energy, information came out in many different forms: verbal communication, packets of information, [information] on the Internet, forums where people could ask questions. "Everybody hears differently," she said, "so we needed to make sure that they were getting those messages in lots of different formats. We wanted to try to bring them along as quickly as possible to get them to commit to the new company."

–> INSIGHT #2. Having a "playbook" or methodology to follow is invaluable.

No winging it in these situations. Capgemini has a methodology called "Deliver." As Ms. Krohne described it, it's a playbook that has "all the things we are going to need to do." Deliver encompasses roadmaps, frameworks, methods and guides with techniques and tools for managing programs, projects and services.

In this case, it was applied by a Capgemini team that included a change management person and people with specializations in HR and communications. Their input was designed to help the team "on the ground," in the company, get through the initial parts of the transition.

–> INSIGHT #3. Even the simplest of tenets, such as "open and honest communication," needs to be choreographed.

"As soon as we knew things that were going to happen, we committed to telling employees," said Ms. Krohne. "Being timely was another very important tenet of the communications strategy. A lot of that was done within work groups." That meant managers and supervisors needed to have training on the substance of the messages going out, as well as how to deliver the messages, so that everybody was "on the same page."

–> INSIGHT #4. Change brings ups and downs on a daily basis — not just for staff people but for managers too.

"Change is so personal," pointed out Ms. Krohne. ". So one thing I would say is that if [managers] have embraced the change and are learning to live with some of the ambiguity that comes with this kind of transformational environment, then they can help others to do the same. If they're kind of still in the, ÔI don't know. I wonder..,' they haven't really moved through that change cycle themselves. Everybody goes back and forth on a daily basis. But in general if they haven't moved forward, it is very difficult to have others follow them."

–> INSIGHT #5. Don't pooh-pooh fears about job loss. Face them head-on.

You're not going to reduce costs dramatically without cutting jobs in the call center environment, acknowledged Ms. Krohne. "As soon as we knew it was going to happen within a certain work group, we communicated that. It was part of the strategy from the very beginning to be open, honest, and — as soon as we knew something — to communicate… Until we went through the transformation planning and really understood, ÔOK, how is [a 30% reduction in costs] going to happen?' you really couldn't tell people. And that uncertainty, of course, is difficult. I think people realized there were going to be job losses."

She thinks that as people learned about the changes and decided to become part of the "revenue generating service provider business," they began saying to themselves, "I'm going to add as much value as I can and that's going to help. That's the best that I can do to take some sort of control of this." She said the team saw a lot of people move in that direction.

Others, she recalled, said, "ÔYou know, this isn't the utility that I like and enjoy.' So some people went the other path and said, ÔThis isn't right for me.' We had both sides of the story."

At what point did they start communicating how many jobs would be cut? Ms. Krohne said Capgemini Energy's strategy was to communicate workgroup by workgroup — as the decision was made. "We didn't want to say, for example, to all of Customer Care, that there were going to be 15 reductions. We didn't know where they were going to happen. I just think that would have caused everybody to just be stressed without cause… Once we knew that there were going to be 15 jobs less in the offline group, for example, and that it was going to happen in six weeks, we would let them know that. We couldn't tell them exactly which people. You have to make sure the mix is right, and we didn't want people to leave earlier than we needed them. We needed them to still continue to do the work, so they would know that there were going to be reductions in their work group. Then on the day that there were actually the reductions, those folks were informed."

In fact, by the end of the transition, over 99% of the 2,700 people offered positions in the new company accepted.

–> INSIGHT #6. Retention bonuses are useful, but they're not the only tool at your disposal.

"As soon as we had transition occurring and even as it was occurring, we were identifying folks that we knew we were really going to need to keep and to retain," said Ms. Krohne. "And we did do some retention bonuses against some of those folks, but it isn't all about dollars. A lot of it is about attention and coaching and making sure that they know that they are valued. That strategy is one that was employed from the executive level all the way down to make sure that we had retention of the key people so that we would be able to get the work done."

–> INSIGHT #7. Transformation requires creativity with no caps put on it. Use expert-run offsites involving a lot of different people to develop the real strategies for figuring out what the changes should even be.

Capgemini's approach to transformation includes the ASE — Accelerated Solutions Environment — methodology. One participant, Joe Gimenez, a communications specialist at Capgemini Energy, describes it is as a "Montessori school for adults." (It's actually offered to both employees and clients who are going through change.) The spaces where they're held bring to mind a kindergarten classroom, outfitted with colorful decorations, toys and kids' books that tend to spark mental freedom in adults.

In the ASE, the company pulls in a group of people, top to bottom, for two to three days and opens the floor to discussion. The goal is to provoke "good open thought and communication and really strive to capture that in as many forms as possible," said Mr. Gimenez. Thoughts are captured on whiteboards and recorded with microphones. "The whole idea," he said "is to accelerate solution finding from, say, a 90-day or six-month process for whatever the problem might be to a week or a couple of weeks. So it's just to get solutions developed and discussed very quickly outside of a corporate setting."

Ms. Krohne said she'd gone through the ASE with Capgemini while at Illinois Power. "We used the ASE as a tool to help in our…strategic planning in an earlier year… It feels like you are just really brainstorming; but there is a very methodical approach that they use to get to those actionable items at the end. I think the words are, Ôscan,' Ôplan' and Ôact.' So you see what's out there, and then you plan what you're going to do, and then you create the action items. And it's a very collaborative way to really get good action steps to solve business problems."

During Capgemini's genesis, many ASEs were held — four just in Customer Care, said Ms. Krohne. "We did them across all of the organizations and we did them with executives. We did them with TXU, for example, when we were trying to work on the business services."

In one ASE she participated in, Ms. Krohne recalled, "We brought a group of about 30 people together and said, ÔOK. Here's our mission. We've got to reduce the cost and improve the service.' So we had several parameters that we set, and we executed the methodology of the ASE to really get creative around what the things were that we were going to do to transform the organization and meet all of our commitments. It wasn't, ÔHere are the 10 things and just go do them.' [The ASE participants] helped us figure out what the transformation was going to be because they knew the things that were being done there and the things that could be done differently… It was incredible because it really helped along that whole change management curve — it really helped get people committed to moving forward. It helped them get into that whole mindset [of working for a service provider] and it helped us create the transformation plan so that we could continue to execute and deliver all the service, but to reduce the cost and improve the quality. So the ASEs were a tool that allowed us to really start working through, ÔOK. What are the 10 things that we're going to do to really make this different?' It was just wonderful to see people get excited about this."

–> INSIGHT #8. Try "people councils" to get on-going feedback on your plans and activities.

By the middle of September 2004, the organizational change and communications group working with the management teams decided it would be really be helpful to have a broader cross-section of people giving input and helping shape where the new company was going. So it formed three "people councils": one for communications, one for change management and one for learning and development. Each had about a dozen people, cross functional, nominated by line management, all at different levels of hierarchy, from across the organization — IT, customer care, M&A, supply chain. They met every couple of weeks. The change group would say, "ÔOK. Here is an idea we have around communications,'" recalled Ms. Krohne. "We would bounce ideas off of them and get ideas from them, so it was very good two-way feedback."

What kinds of ideas did the councils put forward? As one example, Ms. Krohne said, the change and communications group had different kinds of vehicles it was using for communications. "One that we were using more and more was [audio-based] webcasts, because it's a good way to get lots of people information and get it quickly, fairly inexpensively. So we were doing those [to deliver] executive-level communications about…and how things were happening. We were doing them fairly often, so folks were kind of getting used to the webcasts. One of the things that the communications team really suggested to us was, ÔPeople need to see the executives. We can hear them, but if I bumped into our CEO in the elevator, I wouldn't know who he was.' The suggestion from that was that we do a face-to-face meeting."

The result was called the Capgemini Energy Summit. It took place in early December, and the company brought in as many people as it could. Then the proceedings were videotaped and sent on DVD to those who couldn't be there in person. "We brought 1,200 people, which was a pretty good representation," said Ms. Krohne. "We had our CEO and COO and an outside industry specialist who came in and talked about the service provider companies that were out there in competition with us. The most important thing was that our CEO and COO were really able to tell our folks, ÔHere's where we're going. Thank you for all your hard work.'"

Could face to face have that much impact? According to Ms. Krohne, "We had talked about our vision and our value and our credo before. So we did pre-meeting and post-meeting surveys around how effective we were [in helping people] understand where we were going." She shared a post-event report that said 92% of staff now understood the vision (up from 58%) and 81% now understood the plan (up from 45%). That in-person meeting with the executives "drove points home with Capgemini Energy employees," said Mr. Gimenez.

–> INSIGHT #9. Working on the service provider side is different for staff accustomed to being on the client side. That too needs communicating.

"On the service provider side, what you're doing is the revenue generation of the company. It's a different level of intensity than when you're a cost center," explained Ms. Krohne. "And when you're creating revenue for the company, people take on a little different sense of importance — and they should. Customer care, for example, is what generates your revenue, your bottom line, vs. at a utility or many other places where that function is just a cost… So you can get a whole different level of being jazzed about coming into work in the morning."

Useful Links:

Capgemini Energy


Information about Capgemini's ASEs:

TXU Corp.