The case study of Engenco Cost Reduction.

3

The case study of Engenco Cost Reduction. Case Study

Introduction

Examine a case study and give an insight into business roles and the fundamentals of leadership and management. The word count is 1800 words.

Task

Consider the case study of Engenco Cost Reduction.

1. Identify and discuss the impact of any changes identified in the case study on the employees of Engenco.
2. What issues from the perspective of employees, shareholders and the Board of Directors must Engenco management consider when making major job cuts?
3. Having identified this information, provide an action plan to manage this change within the organisation, using your knowledge of the theories of change management, motivation and teams that will aid a smooth transition.

 

The scope of your discussion should include motivational, behavioural, relationship and management style considerations.

The signed assessment checklist and header sheet must be included within the assignment that you submit.

Outcome Expectations:

The course has a set of learning outcomes and those that apply to this assessment are detailed below. This assignment is designed to partially meet these outcomes. Other aspects of these outcomes will be tested in other assessments later in the course.

• Understand the constraints, processes and methods that might be employed in rolling out systems.
• Demonstrate an ability to review the strengths and weaknesses of others and understand how such review might be used to enhance the effectiveness of teams, groups and individuals, including being able to lead review meetings of projects and developments.
• Have a sound understanding of the implications of defensive behaviours in others.
• Have a good understanding and an ability to demonstrate basic task and people management skills.
• Demonstrate the ability to sell ideas and systems.
• Understand the strategies that are available for managing and undertaking peer review
• Demonstrate an ability to evaluate learning strategies and make appropriate choices in a range of contexts

Credit will be given for applying appropriate analysis tools to derive useful insights. The case study is one of introducing change under difficult circumstances so particular emphasis needs to be given to the management of change.
*
Cost Reduction at Engeco

Engeco is one of several key players in the energy industry in the UK in a market that is mature with a mixture of residential, commercial and industrial customers. Operations include most types of energy generation and supply, with investment in new technology, including piloting household wind turbines and supporting the development of domestic fuel cells. Privatised in the 1980s and exited by freedom from the public sector, it has spent the last 10 years experimenting with diversification into other businesses ranging from telecommunications, vehicle fleet operations and maintenance, to financial services including insurance and trading in wholesale energy. Many, but not all of these were sold again as Engeco clarified that its strengths lay in becoming an integrated energy and related home services business, which included the installation and servicing of home heating, security systems, cabling and care of kitchen appliances. It employs some 25,000 people in the UK with another 5,000 mostly in North America, with an average age between 25 and 35 years and 30% of the workforce are women.

Market background
The market in the UK is the most liberalised and developed in Europe and substantially deregulated, although the market regulator Ofgem sets the price framework for the network transmission infrastructure where the network owners still hold effective monop0olies. In the last few years, several foreign companies have entered the market as the energy industry in Europe has consolidated through convergence between gas and electricity, with merger and acquisition activity seen as creating the path to growth. These activities cross national boundaries with governments taking different attitudes, ranging from protectionism and seeing this activity saw ‘unpatriotic’ behaviour, to not seeing it as their role to interfere. The European Commission’s proposed energy strategy will address these different attitudes by breaking up companies that produce and supply energy into separate ownership. And opening up the market across Europe, extending choice of suppliers to its 500 million citizens. At the same time, it proposes setting targets to reduce carbon emissions and increase energy efficiency by 30% by 2020.

In line with its European competitors, Engeco has already made alliances and partnerships with other energy provides across Europe, starting with a joint venture in the Netherlands. This provided a launch pad for developing its activities in the region to which has been added partnering in Germany, acquisition in Belgium and the establishment of subsidiaries in Spain and Italy. Engeco has also widened its horizons beyond Europe with activities in North America, which include acquisitions in both Canada and the US through its related activities, operations in India and Africa.

Although now a major provider, there are now in excess of 40 other suppliers able to supply energy to domestic UK customers and with the market share very sensitive to price, any increase is usually accompanied by large numbers of customers switching supplier. Engeco has lost a million customers during the past year. Continuing pressure from consumer bodies to cut prices coupled with warmer weather affecting energy consumption has resulted in a dramatic drive to cut costs.

Human resources at Engeco
Engeco has a record as a good employer, with group wide HR strategies and policies that support the business. One of the first challenges with the new HR director, Kathryn Aldridge, was faced with when she arrived 5 years ago from a major oil company , was to move the HR function from a focus on transactions with their customers, to developing their understanding of what the people strategy meant. Her actions included encouraging people to learn more about the business through development moves into line management and involving the strategy director in HR Conferences. This made her smile as she remembered that this had been a two way process providing the opportunity to educate him as well. The strategic shift into concentrating on an integrated business had led to a focus on building a single culture based on core values that could apply across all aspects of the business. This included customer pride, trust and respect to provide the common culture underpinned by the ethical approach for which the organisation was becoming well known. This should mean that people can ‘feel at home’ and comfortable in whichever part of the organisation they move to.

Kathryn had just come out of the executive committee meeting and was reflecting on all that had been achieved in developing HR practices in the last five years since her move to Engeco.
She saw recruitment as key to the integrated culture with Engeco winning awards for its graduate recruitment in which much investment and effort was made. It had also developed a reputation for its scheme to recruit women into engineering and initiatives to help people with disabilities and the long term unemployed back to work in call centres. Apprenticeship schemes had been developed in both the UK and Canada, where there was a skilled trades shortage. These initiatives also reinforced the organisation’s concern to have an ethical culture and be ‘doing the right thing’.

They had also invested in training 1000 newly recruited engineers and providing their other 7500 engineers with refresher and advanced training. This training is mirrored for customer service and engineering support staff and 2,500 have been recently trained in new systems. Management development programmes cover each stage of a manager’s career, ranging from the talent to deliver the business strategy and includes change, people, business and personal skills. Typical development activities included work shadowing, coaching and mentoring, projects and secondments including international opportunities. The senior leadership programme has been developed in conjunction with a major business school for high potential senior managers.

Rewards at Engeco reflect market levels with options for flexible benefits and saving to buy shares with a bonus scheme to encourage higher performance. Business units had their own policies, which partly reflected the history of growth through acquisition, where the unit had evolved from the traditional business, the package reflected old public sector terms and conditions, with more emphasis on holiday and pension benefits rather than cash, whereas acquired employees may have had a more cash rich package. Even though these groups were in different locations, they performed similar roles and were often aware of the differences. At a senior level there is a single reward strategy across the whole of Engeco, irrespective of whether based in Europe or North America. For senior management, rewards include performance related pay, opportunities for international experience, contracts tailored to individual needs and flexibility to fit with lifestyle. Flexible working is also supported to enable other employees to balance work and caring commitments with the added benefit of saving on office space.
Engeco has traditionally felt it had a good relationship with its employees. However, the previous year had included the decision to move some back office roles to India, which led to lowering of scores in the annual attitude survey on career opportunities and whether employees felt they would recommend a friend to work for the company. The company uses a number of means to communicate with employees from the intranet – videos, team briefings and through various consultative meetings with its two trade unions in the UK and another two in North America. In the past Engeco has managed extensive changes including closing offices, working successfully together with the unions.

This time, Kathryn thought, it may not be so easy, after the success of their pilot outsourced operation to India and installing new customer systems, the Board had decided to transfer most of the rest of the back office activities out of the UK. The new Finance Director, Simon Pemberton, had also decided to take the opportunity to close the head office building on the outskirts of the capital to take advantage of a break in the lease and relocate. He felt that head office could operate on a much reduced staff and move to a smaller building 50 miles out, where the costs would be cheaper. The committee considered that head office should also demonstrate that they were reducing costs and jobs at a time when the rest of the workforce were expected to absorb job losses.

Unfortunately, there had been speculation suggesting large numbers of job losses in the press that morning, which included an interview with a very angry Sam Batton from their major union, protesting that ‘this would mean loss of customer service and they would not accept any compulsory job losses’. The communication plan had been ready to put into action the following week to coincide with the formal announcement and Kathryn had a meeting arranged with Sam and his other union colleague, Roy, to discuss the plans and their implications.

There had been so much achieved. Kathryn had developed a good team, some who been with the organisation for many years, seeing it through the many changes since privatisation, a couple from the graduate scheme with all the expectations of a bright future with Engeco and the few who had arrived with earlier acquisitions, bringing fresh ideas that she had managed to keep. She had been encouraging them to pursue their own development, spend more time in the business units gaining a wider perspective on the business, taking opportunities to be involved in projects and pursue professional qualifications. How was she going to support them through the inevitable cuts while they planned for the needs of those other units that would be affected and the future of the organisation?

This case study has been written using material based on a number of organisations and is not intended to reflect the practice of any particular company.

Task

Prepare and submit a report which identifies and discusses the impact of any changes identified in the case study on the employees of Engenco. Taking into account the perspectives of
of employees, shareholders and the Board of Directors what particular issues must Engenco management consider when making major job cuts?
Finally, having identified this information, provide an action plan to manage this change within the organisation, using your knowledge of the theories of change management, motivation and teams that will aid a smooth transition.

The scope of your discussion should include motivational, behavioural, relationship and management style considerations.

The signed assessment checklist and header sheet must be included within the assignment that you submit.

Outcome Expectations:

The course has a set of learning outcomes and those that apply to this assessment are detailed below. This assignment is designed to partially meet these outcomes. Other aspects of these outcomes will be tested in other assessments later in the course.

• Understand the constraints, processes and methods that might be employed in rolling out systems.
• Demonstrate an ability to review the strengths and weaknesses of others and understand how such review might be used to enhance the effectiveness of teams, groups and individuals, including being able to lead review meetings of projects and developments.
• Have a sound understanding of the implications of defensive behaviours in others.
• Have a good understanding and an ability to demonstrate basic task and people management skills.
• Demonstrate the ability to sell ideas and systems.
• Understand the strategies that are available for managing and undertaking peer review
• Demonstrate an ability to evaluate learning strategies and make appropriate choices in a range of contexts

Credit will be given for applying appropriate analysis tools to derive useful insights. The case study is one of introducing change under difficult circumstances so particular emphasis needs to be given to the management of change.

 

 
Cost Reduction at Engeco

Engeco is one of several key players in the energy industry in the UK in a market that is mature with a mixture of residential, commercial and industrial customers. Operations include most types of energy generation and supply, with investment in new technology, including piloting household wind turbines and supporting the development of domestic fuel cells. Privatised in the 1980s and exited by freedom from the public sector, it has spent the last 10 years experimenting with diversification into other businesses ranging from telecommunications, vehicle fleet operations and maintenance, to financial services including insurance and trading in wholesale energy. Many, but not all of these were sold again as Engeco clarified that its strengths lay in becoming an integrated energy and related home services business, which included the installation and servicing of home heating, security systems, cabling and care of kitchen appliances. It employs some 25,000 people in the UK with another 5,000 mostly in North America, with an average age between 25 and 35 years and 30% of the workforce are women.

Market background
The market in the UK is the most liberalised and developed in Europe and substantially deregulated, although the market regulator Ofgem sets the price framework for the network transmission infrastructure where the network owners still hold effective monop0olies. In the last few years, several foreign companies have entered the market as the energy industry in Europe has consolidated through convergence between gas and electricity, with merger and acquisition activity seen as creating the path to growth. These activities cross national boundaries with governments taking different attitudes, ranging from protectionism and seeing this activity saw ‘unpatriotic’ behaviour, to not seeing it as their role to interfere. The European Commission’s proposed energy strategy will address these different attitudes by breaking up companies that produce and supply energy into separate ownership. And opening up the market across Europe, extending choice of suppliers to its 500 million citizens. At the same time, it proposes setting targets to reduce carbon emissions and increase energy efficiency by 30% by 2020.

In line with its European competitors, Engeco has already made alliances and partnerships with other energy provides across Europe, starting with a joint venture in the Netherlands. This provided a launch pad for developing its activities in the region to which has been added partnering in Germany, acquisition in Belgium and the establishment of subsidiaries in Spain and Italy. Engeco has also widened its horizons beyond Europe with activities in North America, which include acquisitions in both Canada and the US through its related activities, operations in India and Africa.

Although now a major provider, there are now in excess of 40 other suppliers able to supply energy to domestic UK customers and with the market share very sensitive to price, any increase is usually accompanied by large numbers of customers switching supplier. Engeco has lost a million customers during the past year. Continuing pressure from consumer bodies to cut prices coupled with warmer weather affecting energy consumption has resulted in a dramatic drive to cut costs.

Human resources at Engeco
Engeco has a record as a good employer, with group wide HR strategies and policies that support the business. One of the first challenges with the new HR director, Kathryn Aldridge, was faced with when she arrived 5 years ago from a major oil company , was to move the HR function from a focus on transactions with their customers, to developing their understanding of what the people strategy meant. Her actions included encouraging people to learn more about the business through development moves into line management and involving the strategy director in HR Conferences. This made her smile as she remembered that this had been a two way process providing the opportunity to educate him as well. The strategic shift into concentrating on an integrated business had led to a focus on building a single culture based on core values that could apply across all aspects of the business. This included customer pride, trust and respect to provide the common culture underpinned by the ethical approach for which the organisation was becoming well known. This should mean that people can ‘feel at home’ and comfortable in whichever part of the organisation they move to.

Kathryn had just come out of the executive committee meeting and was reflecting on all that had been achieved in developing HR practices in the last five years since her move to Engeco.
She saw recruitment as key to the integrated culture with Engeco winning awards for its graduate recruitment in which much investment and effort was made. It had also developed a reputation for its scheme to recruit women into engineering and initiatives to help people with disabilities and the long term unemployed back to work in call centres. Apprenticeship schemes had been developed in both the UK and Canada, where there was a skilled trades shortage. These initiatives also reinforced the organisation’s concern to have an ethical culture and be ‘doing the right thing’.

They had also invested in training 1000 newly recruited engineers and providing their other 7500 engineers with refresher and advanced training. This training is mirrored for customer service and engineering support staff and 2,500 have been recently trained in new systems. Management development programmes cover each stage of a manager’s career, ranging from the talent to deliver the business strategy and includes change, people, business and personal skills. Typical development activities included work shadowing, coaching and mentoring, projects and secondments including international opportunities. The senior leadership programme has been developed in conjunction with a major business school for high potential senior managers.

Rewards at Engeco reflect market levels with options for flexible benefits and saving to buy shares with a bonus scheme to encourage higher performance. Business units had their own policies, which partly reflected the history of growth through acquisition, where the unit had evolved from the traditional business, the package reflected old public sector terms and conditions, with more emphasis on holiday and pension benefits rather than cash, whereas acquired employees may have had a more cash rich package. Even though these groups were in different locations, they performed similar roles and were often aware of the differences. At a senior level there is a single reward strategy across the whole of Engeco, irrespective of whether based in Europe or North America. For senior management, rewards include performance related pay, opportunities for international experience, contracts tailored to individual needs and flexibility to fit with lifestyle. Flexible working is also supported to enable other employees to balance work and caring commitments with the added benefit of saving on office space.
Engeco has traditionally felt it had a good relationship with its employees. However, the previous year had included the decision to move some back office roles to India, which led to lowering of scores in the annual attitude survey on career opportunities and whether employees felt they would recommend a friend to work for the company. The company uses a number of means to communicate with employees from the intranet – videos, team briefings and through various consultative meetings with its two trade unions in the UK and another two in North America. In the past Engeco has managed extensive changes including closing offices, working successfully together with the unions.

This time, Kathryn thought, it may not be so easy, after the success of their pilot outsourced operation to India and installing new customer systems, the Board had decided to transfer most of the rest of the back office activities out of the UK. The new Finance Director, Simon Pemberton, had also decided to take the opportunity to close the head office building on the outskirts of the capital to take advantage of a break in the lease and relocate. He felt that head office could operate on a much reduced staff and move to a smaller building 50 miles out, where the costs would be cheaper. The committee considered that head office should also demonstrate that they were reducing costs and jobs at a time when the rest of the workforce were expected to absorb job losses.

Unfortunately, there had been speculation suggesting large numbers of job losses in the press that morning, which included an interview with a very angry Sam Batton from their major union, protesting that ‘this would mean loss of customer service and they would not accept any compulsory job losses’. The communication plan had been ready to put into action the following week to coincide with the formal announcement and Kathryn had a meeting arranged with Sam and his other union colleague, Roy, to discuss the plans and their implications.

There had been so much achieved. Kathryn had developed a good team, some who been with the organisation for many years, seeing it through the many changes since privatisation, a couple from the graduate scheme with all the expectations of a bright future with Engeco and the few who had arrived with earlier acquisitions, bringing fresh ideas that she had managed to keep. She had been encouraging them to pursue their own development, spend more time in the business units gaining a wider perspective on the business, taking opportunities to be involved in projects and pursue professional qualifications. How was she going to support them through the inevitable cuts while they planned for the needs of those other units that would be affected and the future of the organisation?

This case study has been written using material based on a number of organisations and is not intended to reflect the practice of any particular company.

Task

Prepare and submit a report which identifies and discusses the impact of any changes identified in the case study on the employees of Engenco. Taking into account the perspectives of
of employees, shareholders and the Board of Directors what particular issues must Engenco management consider when making major job cuts?
Finally, having identified this information, provide an action plan to manage this change within the organisation, using your knowledge of the theories of change management, motivation and teams that will aid a smooth transition.

 

WE ACCEPT