Innovative workplace practices
at Ontario Power Generation
CPRN’s former Work Network Director, Grant Schellenberg, spoke with John Murphy, Executive Vice President, Human Resources and Chief Ethics Officer at Ontario Power Generation (formerly Ontario Hydro) about innovative human resource strategies. The importance of communication, employee empowerment, and an innovative approach to collective bargaining at Ontario Power Generation are some of the issues they discussed.
GS: There’s been a lot of change in Ontario’s power industry. Could you describe some of the changes that Ontario Power Generation (OPG) has been through, and comment on the challenges and opportunities these have raised for management and staff at OPG?
JM: In April 1999, Ontario Hydro was divided into five separate entities. Three of these entities are not-for-profit, and the other two are -for-profit.
The not-for-profit parts are: (1) the Ontario Hydro Financial Corporation, whose purpose is to service and retire the debt load left over from the old Ontario Hydro; (2) the Independent Electricity Market Operator (IMO), which operates and administers the new electricity market and ensures reliability and fair access from generators in the province; and. (3) the Electricity Safety Authority, which carries out electrical equipment and wiring installation inspection functions.
The two for-profit companies are Hydro One, which owns the transmission and some distribution in Ontario, – and OPG who at the time of the split, controlled most of the generating assets in the province of Ontario.
GS: So there was a large degree of organizational restructuring, to say the least?
JM: Yes. Taking a large, integrated, generator-transmitter company, like Ontario Hydro, and breaking it into those pieces was a huge undertaking. Management teams had to be put in place in each of those subsequent entities. Appropriate skill sets and systems were needed to ensure continuous interaction between those component pieces. At the same time, we were building a new competitive electricity market in Ontario. Plus, our execution had to be impeccable so that the transition would be seamless from a consumer's perspective: – that is, the lights would not flicker or go out.
From a human resources perspective, this presented us with an enormous degree of change, uncertainty, challenges, and opportunity. Any time an organization goes through such gut-wrenching change, it is very scary for people, so we really had to embark on a comprehensive HR strategy to make sure that this transition would be successful.
GS: Can you describe some of the HR initiatives OPG put in place?
JM: Our HR strategy is based on the belief that each employee is critical to the success of the company. Given this premise, it follows that employees must have as much information as possible about the business: what's driving the business, what challenges we have, and how they can contribute to the company’s overall success. To provide that information, we built an infrastructure into our organization (most of it electronic) to communicate rapidly and effectively with all of our staff. We utilized web-based communication tools and made sure that the information we provided was pertinent, understandable, and sufficient so that employees could feel like they were an integral part of the organization.
GS: So good communication’s really at the core of it?
JM: Absolutely. Employees want, and need, to understand the corporate strategy; how their piece of the business fits in; and how they contribute to the success of that business. Communication is a really important element in what we’ve been doing. We also back it up with call centres and with employee self-service and manager self-service tools to further empower the staff from an information and input perspective.
GS: What other programs have been used in conjunction with those communication strategies?
JM: We have compensation programs aligned with our corporate strategies; these ensure that we pay people for performance that is directed towards key corporate objectives.
We have also put in place goal-sharing programs for our unionized staff. (OPG is 90 per cent unionized). The unions participated in the development and implementation of these programs, which has encouraged employee “buy-in.”
When we started the process, the goalsharing program was probably viewed by many unionized staff, and by the unions, as perhaps an opportunity to get more cash, to put it bluntly. But it quickly transformed into something much more important. It has given employees a real sense of empowerment and understanding of the business. Employees began to better understand such issues as: What were our real corporate drivers? How were they impacting our performance and our bottom line? How was a particular plant fitting into that overall picture; and what were the important targets and objectives for that department to achieve in order to contribute to the overall success of the company? Goalsharing took a large organization and broke it down into meaningful bite-sized pieces that people could understand. At the end of the day, when employees went home to their families, they could feel good about what they did. They felt they were contributing because they had something that was measurable in terms of their performance and their contribution to the company. That was the big success on the goal-sharing side.
GS: It also sounds like it was a big success in terms of labour-management relations.
JM: Many companies make the mistake of looking at labour relations primarily in the context of collective bargaining. As a collective bargaining event approaches, these companies often will say – “how do we deal with the union so that we can get what WE need and make sure that they have sufficient gains on their side.”
A more progressive approach towards labour relations is to start many steps back from that. Our approach at OPG was to focus on the individual employee. We believe that if we can provide our unionized employees with challenging and rewarding work; understand their issues and what motivates them; and show them we are interested in developing them as employees, then we will end up with employees who feel much better about the company. So when collective bargaining rolls around, or even during the collective agreement, the process is much easier. Obviously, there are still issues where we have disputes and disagreements, but they are far more manageable and there are far fewer of them. That's the kind of approach that we took, a sort of bottom-up approach - concentrate on the employees and work closely with the unions at the same time.
GS: It's easy to say that the employees are feeling positive about the changes, but do you have other evidence that your strategies have been successful?
JM: We have five areas that we track and report on a quarterly basis to our management team: attendance, safety, grievances, human rights and Ombudsman complaints. If all five areas are improving, then chances are that it is a pretty good indicator that our employee commitment is, in fact, working.
GS: How has OPG performed on those five measures?
JM: Very well.
In measuring absences, we focus on short-term sickness. A number of companies look at the total number of days that an employee is absent per year. The problem with this approach is that it combines both short-term sickness and longer-term sickness. But there’s not much you can do about longer-term sickness. A disease like cancer may require long periods of absence to manage. So what we did was focus our effort on looking at short-term sickness (fewer than five days); the number of short-term days that people are taking; and their frequency. We’ve set two targets and are on track to meet both. Since we just moved to short-term sickness this year, we don't have a historical benchmark; and since no one else focuses on short-term sickness, we don’t have other comparisons. Looking at total sick days taken, which is the only way to get a relative sense of how we’re doing, the average number of sick days for Canadian unionized institutions was around 11 days. Historically, OPG has been as high as 13 days per year, but we’re currently down to 8.5 days. For an organization going through a lot of change, 8.5 days is a remarkable achievement. It’s also important to keep in mind that we have an ageing workforce and the work that we do is very demanding physically. On the safety front, we have had some setbacks, but overall, we continue to make good progress in improving our performance. We’ve been awarded the silver medal from the Canadian Electrical Association for being the best of any of the Canadian utilities on the safety front two years in a row.
GS: Have results been as impressive on the other measures?
JM: They have. Our grievances now number around 170. That compares to an historical peak of around 3,000 grievances. Some companies have over 100,000 grievances. Again, given the complexity of the changes that we are going through here, that's quite a remarkable achievement to get it down to that number.
As you know, employees can go to the Ontario Human Rights Commission and file complaints there, but we put in place an internal process which enables people to address any concerns they might have. The number of concerns received this year through the internal process is about half of what we had in 1999. Since we put this internal process in place in November 2000, we have had zero external HR complaints filed, so it's working really well. About 2½ years ago, we would have had about 1,000 concerns at any time lodged with the Ombudsman, and this was at a time when the Ombudsman’s function only applied to our nuclear employees. We have now expanded the Ombudsman’s role across the entire company, and today there are on average about 17 concerns at any time registered with that office.
GS: It sounds like the strategies that have been implemented at OPG, especially given the challenges of the restructuring as well as the demographic challenges that you face, could be a model for other large, Canadian employers.
JM: While each company is unique, I think many of the principles that we applied here at OPG could be valid in many environments. The implementation might be somewhat different, but I think the principles are pretty sound.
Another important element on the labour management side is the importance of breaking the mould and doing things differently.
GS: Can you give me an example of how you broke the mould and did things differently at OPG?
JM: Collective bargaining is one area where I think we’ve been very innovative and where doing things differently can pay off for others. This assumes, of course, that you have not created a hostile workforce; that you’re doing your homework well; that you’re managing your employee relations issues and your relationships with your unions. People have a tendency to fall into the same patterns; so when collective bargaining comes around, unions and management teams tend to exhibit behaviours that replicate previous collective bargaining sessions. When this happens, trying something new and radical can sometimes produce results.
The last negotiations we did with the Power Workers' Union are a good example. Rather than waiting until the collective bargaining deadline was almost upon us, we got together with the union nine months before the expiry of the collective agreement. We said, "Let's spend two weeks together trying to understand our respective issues - our needs on the company side and your needs on the union side.” Our goal was if we could reach two-party agreement “that would be wonderful.” I don't think anybody really believed, heading into a complex environment like ours, that collective bargaining could be done within two weeks. Most probably, they believed that it couldn't be done without the 11th hour risk of a strike or lock out, or without some form of outside help, such as mediation or arbitration. But it was done. And I think part of the reason why the process was so successful was because it was different. It was breaking the mould. It was making sure that the environment was different. It was creating a healthy environment conducive to open and honest dialogue – which in turn helped to build confidence and trust.
GS: The bargaining process was different. Was the collective agreement different from prior ones as well?
JM: We ended up with an agreement that was historic from many perspectives. It was a 4½-year agreement, giving us a lengthy period of labour stability.
There was also more innovation in that agreement than anything that had been done in the previous 50 years. We took over 800 job classifications and combined them into three pay bands. Touching pay is a very difficult thing to do in collective bargaining. That required an army of administrative work. All the various allowances and provisions that we had, such as dirt pay and other kids of premiums and job challenge processes, were removed from the agreement. We also removed the jurisdiction restrictions that limited what people could do. We didn't just remove these as “take-aways;” we removed them, simplified the agreement, and made sure that we put appropriate compensation programs in place.
As a result, we were not only successful from a collective bargaining perspective. Equally important, we created within our unionized work environment, the opportunity for employees coming into the organization to really grow and develop their skills. It’s a classic “win-win.” Employees can now develop their skills based on own desires and needs; and OPG benefits from having a far more flexible and fulfilled workforce. We’re more efficient and productive as a result, and our workforce is a lot more committed.
GS: It sounds like a lot of the strategies that you have implemented bridge various aspects of your organization. The labour relations strategies that you pursued were linked to job design and job description. They also were linked to the communication strategy and ensuring that employees understood organizational strategy and priorities. Nothing is done in isolation. Instead, you've taken a very comprehensive approach.
JM: You’re right, it is a complex web that’s woven, but it has got to be woven tightly, because if there is one weak thread, it can quickly unravel.
Our efforts, however, extend outside the unionized workforce to our management team as well. One of our key initiatives, was the development, in partnership with the Rotman School of Business at the University of Toronto, of an in-house leadership development program for our senior 500 managers in the organization. We put them through a one-week intensive leadership development course. Initially, there was a lot of reluctance - everybody was saying that they were so busy with their workload and with everything that was going on. But once they were exposed to the program, they became very positive and enthusiastic. It was a great success.
GS: What made it such a success?
JM: There were a number of factors. Under the program, senior managers from different parts of the organization were required to spend a week together away from the work environment. The program enabled them to get to know their colleagues better, helped them understand the different parts of the business and provided them with academic training. It created a real bond among our management people.
The program has several unique elements. It offered managers a good deal of “face time” with senior management including the President, the CFO and the other senior executives, who acted as instructors for portions of the course. Our Chairman participated in the evening sessions, where he was interviewed by the Dean of the Rotman Management School and answered questions from the participants. The whole experience was very interactive, lots of fun, with lots of healthy learning.
We also didn't want this experience to fade from our employees’ memory; so we built an active learning exercise into it. During the course, participants were asked to identify real-life issues at OPG and then form cross-sectional teams to address those issues once they returned to their normal jobs. After a 90- day period, the teams would come back and present the results of their work to an executive panel. Part of the motivation here was to get payback for our investment in this course by solving real-life problems at OPG. The course exceeded our expectations in terms of payback. More important, the course created a strong bond among its participants by connecting people from different departments and different parts of the business. Participants saw firsthand the power unleashed by teamwork, by innovation and by helping others in totally different disciplines.
The Rotman program also helped to change people’s understanding of the issues. Prior to the course, if you had asked employees what their key problems were, they might have said things like: “there is a valve problem over here,” or “we've got a generator problem over there,” or some other very specific, detailed type issue. Rotman broadened their perspective by encouraging people to spend time analyzing and looking at what the real issues and opportunities are. What they discovered is that most issues and problems come back to the human element. Our generators, for example, look very similar to those of our competitors. That means that the key competitive differentiator between our competitors and us is how well we manage the human element in our company. If we are better at attracting and retaining the best talent -- unleashing the most potential from our staff relative to what our competitors can do -- then we are going to be more successful. That became very clear as employees went through both the formal part of the Rotman program and its subsequent team-based exercises. Thanks to Rotman, our 500 senior people have shifted away from a construction/engineering mentality and have become much more sensitized toward the human element of the organization. This was a major accomplishment.
GS: That's an excellent point. The other thing that strikes me about this is that, in addition to applying the skills learned in the course and creating more integration across different areas, the participation of your President, Chairman and other executives sent a signal to employees that senior management was behind these changes.
JM: Absolutely. Many people in the course had not had an opportunity to meet with their colleagues let alone meet with the President or the Chairman. Giving them this opportunity made a large company feel more personal, more like a small company, and more connected.
GS: One last question. What role do you see for government -- whether it's regional or provincial or federal -- in promoting better jobs or better quality work environments at the workplace level? What do you see as a primary role for government?
JM: I think the primary role of government at any level, is one of education and awareness building. For the past few minutes, I’ve talked about a number of theoretical tools that we have applied to a complex industry and that have worked quite well in our company. I'm sure there are other tools out there used by other companies that also work well.
I think it’s important that government encourage the sharing of these tools and help educate people about them. The bottom line is that we have moved into much more of a globally competitive world. For industry to prosper, for Ontario and for Canada to prosper, we cannot afford to miss what I think is probably the single most important tool in driving innovation, productivity, and performance. That tool is simply to be smarter and better than our competitors. That is really the role of government from my perspective - to support efforts that, promote, build awareness of, and educate people about these very effective tools.
Ontario Power Generation website - www.opg.com