Best-Performing Utility Company Creates Shareholder Value through Employees | Article

Outsourcing Enhances a BHAG in Florida

palm tree - outsourcing in floridaJEA (formerly Jacksonville Electric Authority), Florida’s largest municipally-owned utility and the eighth largest in the United States, has set a very high goal for itself. JEA’s corporate objective, known informally as the “Big Hairy Audacious Goal” or BHAG (a term in the book “Built to Last: Successful Habits of Visionary Companies,” by Collins and Porras, HarperBusiness, 1994), is to achieve the utility industry’s highest customer satisfaction ratings in 2004 and to be the best service provider in the nation across all industries by 2007.

In the United States, the utility industry has been hit with deregulation in various states; in such competitive markets, costs have risen from acquisitions, advertising, opening new facilties and training new staff for those locations, developing new competitive products and services, and compliance with different policies/regulations in each state. Rising fuel costs are another challenge. In addition, the cost of generating–and maintaining–power varies considerably depending on weather. JEA, for example, has had to deal with the recent impacts of hurricanes in Florida.

Nationwide, customers are now frustrated with soaring costs, blackouts, collapsing power grids, and even mistrust of utilities (thanks to the Enron scandal). Utility companies are constantly searching for ways to achieve efficiencies, thus reducing costs and improving profitability. At the same time, they need to figure out how to increase customer service, acquire new customers, and retain existing ones. In such a volatile marketplace, JEA’s BHAG seems all the more daunting.

ROI Reigns Supreme at JEA

JEA did not raise its rates for 14 years and managed through a 30 percent rise in fuel costs over the last five of the 14 years. The firm maintained low rates by investing in leading power-plant technologies and adopting more efficient work methods. Already among the nation’s top 15 utility producers of solar power, the Jacksonville firm now has a goal to generate 7.5 percent of its electricity from renewable (grasses, plants, landfill gas, water) energy resources by 2015.

It is also doing something no other utility in the world has done–building the first 300-MegaWatt circulating fluidized bed (CFB) boilers in the world. The CFB conversion has set a new clean environmental standard for generating electricity with solid fuel, at the same time keeping rates low and stable.

In addition, JEA’s Buckman Wastewater Treatment Facility received operations and maintenance excellence awards from the US Environmental Protection Agency (EPA) and the Florida Department of Environmental Protection in 2003 for demonstrating creative and cost-effective operations and maintenance practices.

But JEA’s response to industry challenges has not stopped at technology upgrades. Recognizing that its customers’ experience of provider quality depends on top-to-bottom employee performance, JEA’s executives decided that investments in improving employee performance would deliver a corresponding improvement in customer satisfaction and a return on investment (ROI).

And it worked! JEA leapfrogged ahead of its corporate goal for the first time in 2003, with customer satisfaction increasing by 33 percent (according to the combined results of three customer satisfaction surveys since 2000). Notably, J.D. Powers’ 2003 customer satisfaction ratings reported JEA in the nation’s top five utility companies (all sizes, public, private, and municipal, including many much larger than JEA).

Here’s What They Did

In 2001, JEA outsourced to MindSolve Technologies, Inc. for one year to provide 360 feedback surveys, one of the services in its portfolio of Web-based performance management systems. Because of the measurable improvement in employee performance in one year, the provider was soon tapped for more services and a long-term relationship. Now MindSolve also provides JEA with internal satisfaction surveys, overall employee performance management systems (including all evaluations and job factor development criteria), performance tracking, as well as report preparation and distribution.

Although MindSolve is headquartered in Florida, Greg Lynn, Manager of Performance Management at JEA, says the provider was selected because of its superior software solution, technology support, and competitive pricing. “They have a very intuitive, interactive format online. It includes a drag-and-drop functionality to a choice on the scale for whatever you are rating at the time. The application is customizable and very user friendly. The functionality of their system was head and shoulders above their competitors,” recalls Lynn.

MindSolve Visual Performance (MVP) software fits any performance management process, aligns goals, creates and tracks development plans, ensures accountability, and provides online tools for improvement. The flexible services can be Web-hosted (as in JEA’s case) or installed at a client’s site and administered by either the client or MindSolve.

Lynn adds that MindSolve’s technical support team responds within five minutes (even on weekends and even to someone’s home) if JEA’s users have technical difficulties. “They have clients all over the world, but you’d think we were their only one. They treat us wonderfully.”

Collaborative Relationship

Like JEA, Mindsolve has its own list of industry “firsts”–its Web site boasts the first Web-based assessments, the first HRIS interface for assessment software, and the first assessment technology awarded a US patent. Thus, the two companies have cultural compatibility and have crafted what they refer to as “an active, vibrant partnership.” Their very collaborative outsourcing arrangement is aimed at “mutually beneficial, future-focused improvements in productivity and cost efficiencies.”

JEA has been able to specify new MindSolve-enabled processes and measurements that integrate with and expand JEA’s Six Sigma-driven management methodology. MindSolve has been quick to incorporate JEA-driven improvements into its continually expanding software capability, often customizing requested features beyond the scope of the original contract at either no cost or a fraction of the amounts JEA spends with other providers.

JEA is a dynamic, constantly evolving organization; this has necessitated MindSolve’s flexibility for customization to keep up with the constant organizational realignment of reporting relationships and performance accountability that are essential to quality performance management. Examples of their collaboration also include increasing the speed of certain software functionality to support JEA’s ease-of-use goals and a joint initiative with JEA’s IT department to set up an automatic weekly data transfer.

After each major process cycle, and on an ongoing basis, JEA and MindSolve meet to discuss successes and challenges and to brainstorm improvements. Their synergy and trust-based partnership have eliminated bureaucratic red tape, driving new technology without the costs and delays of a formal requirements-specification process. The long-term commitment makes development of JEA-specific functionality iterative as well as collaborative.

Their mutually beneficial approach caused them to establish a gainsharing plan for rolling out a more comprehensive performance management package. “We are almost like a test site for them,” says Lynn. “As we brainstorm and describe our needs, the gainsharing part of our agreement is that they build it into products that they can market to other people. It’s a mutual benefit. We get a functional design that is user-friendly and intuitive, and they can market it to other people. And we get it without additional customized development costs or enhancement costs.”

Both parties claim a key to the success of their relationship has been the flexibility of both parties to collaboratively grow and evolve the services and tools to continuously improve the solutions provided. There is a constant feedback loop, and JEA has direct input into software development schedules, ensuring that new features and procedures can be prioritized according to up-to-date conditions.

BHAG and Shareholder Value Status

“Knowing what I know now,” concludes Lynn, “I would have looked like a genius four years ago if I’d opted for all of these services upfront instead of starting with just one and evolving into them a year and a half apart.” ROI from outsourcing to MindSolve has resulted in

  • Estimated annual cost savings greater than $100,000 for just one part of the overall performance management services automated and administered by MindSolve
  • 61 percent reduction in process defects in FY 2003
  • 27.8 perent reduction in process cycle times
  • 14 percent improvement in one year in JEA employee attitudes toward performance management (a source of pain in most organizations)
  • Capacity to accomplish more while reducing unit costs and managing quality to reduce defects
  • Reduction in the number of redundant performance data systems

Lynn reports, “Our people at individual levels are succeeding at what we expect from them. MindSolve’s performance management system has allowed us to get our arms around all the job factors we define for employees and what it takes to succeed on a job. Our people are now being coached on their job factors, and are then being evaluated at the end of the year based on how well they perform. And we have a 360 degree feedback–where your bosses above you, your peers lateral to you, and your subordinates beneath you all give their perceptions of your areas of strength and weakness.”

All of this has had a measurable improvement on internal performance, which then impacts external customer satisfaction. The overall 33 percent improvement in customer ratings was most dramatic in 2003. That’s when MindSolve’s outsourced performance management solution proved to be more integral to improving service delivery on an employee-by-employee basis.

As a result, JEA exceeded its customer goals for 2003, and the American Customer Satisfaction Index (ACSI) ranked JEA second in the industry nationwide (among those that participate in ACSI rankings).

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