The Leaders of Canada s Electric Utilities. By Ron Robertson and Kevin Gregor

Transcription

1 The Leaders of Canada s Electric Utilities By Ron Robertson and Kevin Gregor 1

2 During the next decade, as many as 80% of Canada s electricity CEOs, and 70% of its Vice Presidents, will either retire or otherwise move from their current positions. Where will tomorrow s leaders come from? And who among the next generation is most likely to be promoted to CEO? In this article, we review the profiles of 250 executives employed by 30 of the largest Canadian utilities, and make recommendations for recruiting leadership talent. The Next 10 Years The North American electricity industry sector is entering a period of dramatic change: Developments in shale gas, wind, solar, and battery technology are supporting distributed generation and could lead to lower demand for electricity from major utilities New technologies are enabling more customer choice as well as new management tools Aging infrastructure needs to be replaced Society is constantly raising the bar with respect to regulatory approvals and environmental considerations Public scrutiny of those who lead electricity organizations is on the rise At the same time, demographic realities are asserting themselves. Today s CEOs are, on average, 54 years of age and have occupied their positions for 5.6 years. Given that the median tenure as CEO is 6.8 years, it is clear that a significant turnover lies just over the horizon. Indeed, we estimate that during the coming decade, there will be a turnover of close to 80% among current CEOs. Profile of Current CEOs To understand where tomorrow s CEOs will come from, it s important to understand the typical career path of those already in the top job. Our research indicates that fully 83% of Canada s electricity CEOs grew up within the industry. In fact, 70% were promoted to CEO from within their same utility, while a further 13% came from another, similar electric utility. Only 17% came from outside of the sector. To put this in context, promoting an internal candidate to the role of CEO happens almost twice as often in the electricity sector as it does in other, similar-sized private sector companies. There is another interesting characteristic of Canada s utilities: regional loyalties. This trait is particularly prevalent at the executive level. Those educated in the Prairies tend to stay in the Prairies. The same is true for each of British Columbia, Ontario, Québec, the Maritimes and Newfoundland. Fully 75% of current CEOs were raised and educated in the same region as the utility in which they now serve. Looking deeper into the data, compared to ten years ago, the average CEO today has more advanced education and there is a decline in those holding generic undergrad degrees. There is now a higher percentage with engineering degrees (50% versus 41%), the number of CEOs with MBA degrees has risen (from 28% to 45%), and 85% hold two degrees or more. 2

3 What are utilities looking for in their CEOs? When choosing a new CEO, one size does not fit all and every Board must decide what attributes are needed to lead their utility in the years ahead. That said, some trends are likely to continue: Experience in Operations will be strongly favoured. The vast majority of today s CEOs, in fact, 85% of those who came from within the electricity sector, had previously worked in, or were leaders of an Operations function. A VP position may be too valuable to waste on someone who is not capable of developing further. Hybrid experience will continue to be important. Fully three-quarters of CEOs who have Operations backgrounds also brought experience in at least one other area of responsibility, most notably in Engineering, Corporate Development, Legal, Strategy, or Administration. Including the CEOs who came from outside the industry, 80% had experience in the Finance, Regulatory, Strategy or Corporate Development functions. Approximately 10% had previously served as president of a subsidiary company or a smaller electric utility, which also provided them with exposure to multiple disciplines. Canada's Electricty CEOs: Where They Came From 70% 13% 17% Within Same Electric Utility Outside Electricity Center Another Electric Utility In our executive search work, two other competencies are frequently cited as being important: 1. The ability to protect and enhance the utility s social licence to operate. Arguably more than at any other time, forging wide-ranging relationships outside the organization is essential. The ability to influence the decisions of customers, regulators,special interest groups and politicians requires an exceptional ability to communicate with empathy and authenticity. In search after search, we are asked to find candidates who have demonstrated this skill. 2. Credibility in the eyes of the stakeholders who matter most. While Operations experience is still considered to be invaluable, some CEOs without such a background have succeeded by combining three key attributes that establish their credibility: a track record of success in a prior role; the ability to learn and adapt very quickly; and the confidence of the main stakeholders, including the major shareholder(s). Rarely, if ever, is a CEO appointed who does not have this attribute. In summary, the qualities needed to be a successful CEO are steadily broadening and utilities will almost certainly seek a wide range of experience in their future leaders. 3

4 Implications for Recruiting Leadership Talent The largest pool of candidates to replace the existing CEOs is the industry s Vice Presidents: To a large degree, the career paths of the Vice Presidents mirror those of CEOs, with 80% growing up within the industry. In fact, 66% were promoted to their roles from within their current utility. Like the CEOs, the Vice Presidents have substantial advanced education. Of the 200 VPs whose careers we reviewed for our study, 93% have at least one university degree and 69% having two. The most common degrees are in business and engineering. Since the average age at which electricity CEOs are appointed is 49, utilities will need to focus on their high potential individuals well before this age if they are to be ready in time. However, like the CEOs, the Vice Presidents are getting older. With an average age of 51.6 years, we project that during the next ten years there will be a turnover of close to 70% among Vice Presidents. Since the average age at which electricity CEOs are appointed is 49, utilities will need to focus on their high potential individuals well before this age if they are to be ready in time. Indeed, given the changes facing the industry, a Vice President position may be too valuable to waste on someone who is not capable of developing further. Considering the CEO experience requirements as well as the demographic profiles of the current Vice Presidents, only a small percentage of the VP pool will in fact be realistic candidates. As a result, Canada s electricity companies will have to look to both internal and external sources of talent. External candidates could either come from other utilities, or indeed from other sectors. Ideally, at any given time, a utility would have more than one potential CEO in its pipeline and each candidate should be developed according to a customized plan. Such planning carries costs, but these are small relative to their value to the organization. In practical terms, utilities should provide high potential candidates with opportunities to: Gain experience in several areas of the business, which will broaden their competencies and general knowledge Acquire formal education in areas that will serve the future needs of the business Develop their ability to become superior communicators. 4

5 If there is any doubt about the CEO-potential of the existing pool, it is essential to broaden the search. This can be done by: Deepening the pool of candidates by recruiting outside your province or region. As noted earlier, the electricity industry has a long-standing pattern of recruiting those who live in the same region of the country. Yes, there can be a higher risk when recruiting from another geographic location, but thoughtful recruiting procedures can increase the odds of success. Extending the definition of the talent pool by including those employed outside the sector. Periodically conduct a talent mapping exercise to keep tabs on the career progressions of those who may be a future VP or CEO. Utilities should also consider implementing an executive exchange program with a stakeholder group to deepen understanding on both sides. In a world where the ability to influence key stakeholders is a mandatory skill, familiarity with a variety of organizations, their concerns and priorities, will pay enormous dividends. When hiring externally, use a rigorous program for orienting new executives to ensure that they adapt well. A sound orientation process is as fundamental to success as a sound selection process. It begins when an individual is first deciding to become a candidate and continues through each step of the selection. It concludes by providing the new executive with 360 degree feedback after several months on the job. By looking for combinations of experience rather than monolithic experience, and using job openings as opportunities to increase the diversity of the pool, Canada s electric utilities can maximize their chances of recruiting outstanding future leaders. Summary The challenges facing utilities in the coming decade will not be easy, but neither will they be insurmountable. Careful planning on the part of Boards, CEOs and CHROs should ensure Canadian utilities have the talent they need to navigate the changing seas ahead. 5

6 About the Authors Ron Robertson Partner, Ottawa A founding Partner of Boyden s Ottawa office, Ron Robertson is a nationally recognized leader in executive recruiting. He has recruited CEOs, Vice-Presidents and Board Directors for hundreds of clients, including some of the largest, most successful organizations in Canada. He specializes in recruiting leaders in the electric power industry, as well as for commercial Crown corporations and complex multi-stakeholder organizations. Kevin Gregor Partner, Calgary kgregor@boyden.com Kevin Gregor has gained broad industry expertise over the course of 25 years in business and community leadership. He works with private and public sector organizations, with a focus on board and C-suite recruitment, predominantly in the energy, utilities, education and industrial sectors. Kevin also has extensive experience in corporate governance and is an ICD.D certified director. About Boyden Boyden is recognized as one of world s premiere leadership solutions and talent advisory firms. We work with globally-oriented, growth, and emerging organisations providing executive search, interim management, and leadership consulting services, committed to collaborating with clients to discover the right leadership solutions that enable them to meet their business objectives. For more industry insights, articles and papers, please visit 6