Out of the shadows

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Traditionally working behind the scenes, the Chief Operating Officers (COOs) of power and utility (P&U) companies are emerging into the spotlight. Those who take their complex role in a more strategic direction can help improve their organization’s performance and shape its future, Steve McCabe reports.

An increasingly complex regulatory environment, cost pressures, the expansion of rapid-growth markets and the need to upgrade infrastructure mean today’s utilities must be highly flexible and agile, yet retain a sharp focus on cost-containment and efficiency.

Overcoming these challenges brings the role of the COO to the fore. Those with the right skills and the willingness to reinvent their roles can lead their organizations through this difficult environment and drive future growth.

A broader role

We find it is common in the P&U industry for two or more people to hold positions at levels equivalent to that of the COO but with various titles: operating company president, functional president and so on.

Despite the split into different functions, these executives manage operations that are as large and complex as those of an individual COO within other businesses. Thus, those holding COO roles within P&U companies tend to have broader, and perhaps more significant, roles than peers in other industries.

Not only are they responsible for multi-billion euro or dollar capital expenditure budgets, they must also:

  • Guard against operational failure
  • Ensure the safety and reliability of supply
  • Manage relationships with regulators and other authorities
  • Operate across multiple jurisdictions, while maintaining one consistent direction

Changing perceptions

The demanding environment in which P&U COOs operate also presents opportunities to add value across a broad range of areas:

  • Driving cost optimization. As sluggish growth rates and tougher regulations squeeze revenues, COOs have opportunities to improve operational efficiency and maximize returns on equity and allowable rates.
  • Bringing a unique perspective. P&U operational leaders can break down functional and geographical silos and identify ways of driving efficiencies and transferring best practices, especially in companies that span multiple locations.
  • Leading transformation. Many utilities are undergoing large business transformations. While COOs are already involved in these transformation projects, their mandate now is to shift from a wholly operational perspective to a more strategic one. This means turning an abstract corporate strategy into a daily working reality, deploying specific frameworks and processes that can deliver on the strategic objectives set for the organization.
  • Collaborative approach. COOs must create bonds with fellow board members. In this regard, our research shows that P&U operational leaders are well ahead of their colleagues in other industries. The CEO-COO relationship is particularly critical and must be based on trust, regular communication, a shared vision, the right personality fit and the willingness to challenge each other on business concerns.

To do this, however, COOs must first change perceptions about their role, proving they can go beyond “keeping the lights on” to influence corporate strategy.

Room to improve

In our experience of working with our P&U clients, we see many COOs making valued contributions to their organizations’ performance. But we also notice some areas that could be enhanced:

  • Mastering the financials. COOs need to develop greater financial acumen. A better understanding of finance fundamentals could enable them to improve their performance and heighten their visibility within the boardroom.
  • Taking calculated risks. Considering the emphasis on safety in the P&U sector, COOs in utilities have developed a reputation for risk avoidance. But they need to develop a different mindset when it comes to driving cultural and process change.
  • Developing the soft skills. The COO must be able to manage and inspire people at the highest level. When we asked COOs about the key attributes they needed, it was the softer skills — leadership, people management and communication — that topped the list. The most effective COOs are strong leaders who motivate their teams to participate actively in the strategic journey they have planned. They also demonstrate personal charisma and the ability to “sell” their vision to the board.

Seize the spotlight

Operational excellence has become a key source of competitive advantage, and today’s tough economic environment demands a relentless focus on the smooth running of the business — a task ideally suited to the strengths of the COO.

But those operational skills should be combined with a set of forward-looking capabilities, as well as the ability to lead, establish a vision and motivate.

How we can help

We work with many COOs, supporting them as they capitalize on their own unique opportunities and deliver their transformation goals.

Our report, DNA of the COO: time to claim the spotlight, is the first of our insights into the role of the COO and what defines this unique group of operational leaders. This ongoing program will address aspects of personal interest to COOs as they seek to develop themselves and their teams and learn from others within their communities.

For more information

Please visit www.ey.com/dna-coo, speak to your EY contact, or send an email to coo@ey.com.