Guam Power Authority Corporate Governance

Transcription

1 Guam Power Authority Corporate Governance September 2009 Baker Tilly Virchow Krause, LLP

2 Corporate governance Good corporate governance Long-Term Sustainability 3-2

3 Highly effective utilities possess governance cultures and performance with: Tone and culture set by board and senior management Appropriate level of information provided to the board by management Board and management structure and decision making process clearly understood Coordination and integration of monitoring and risk management controls Collaborative interaction between board and management Focus on core values stay the course Holding people accountable Setting clear direction strategic and business planning process 3-3

4 Highly Effective Utilities need to possess: Well qualified management with: Strong leadership principles Strategic planning skills Business and management principles, including financial expertise Ability to achieve objectives through delegation Integrity and Stewardship Governance structure that is accountable for achieving planning initiatives Active oversight and accountability Collaborative commitment with Public Utility Commission Linkage between organizational strategy and management accountability Scope under review Review GPA s upper level organizational structure Evaluate the General Manager s span of control and the roles and responsibilities of the General Manager s direct reports Determine the General Manager s and management team s decision-making processes Delegation of management processes and functions to General Manager s direct reports and business units and use of the chain of command Strategic planning processes 3-4

5 Phase 2 areas Areas Selected for Phase 2? Results Consolidated Commission on Utilities Yes Recommendations made General Manager s span of control Yes Recommendations made Succession planning Yes Recommendations made Objective leadership No Addressed in Accountability section Fiduciary and legal Responsibility Yes Recommendation made Performance feedback Yes Recommendation made Training Yes Recommendation made Integrated information flow Yes Recommendation made Focus on customer service No Addressed in Customer Service section 3-5

6 Objective: To evaluate and recommend improvements to the following: Integrity: accountable Governance Structure to Achieve Initiatives Accountability: active Oversight and Accountability of Management Transparency: collaborative Commitment with the PUC Stewardship: adequate Training and Qualifications 3-6

7 The areas evaluated include: 3-7

8 Governance of authority at GPA All powers vested in the Authority, except as provided herein, shall be exercised by the Consolidated Commission on Utilities, as established in Chapter 79 of Title 12 of the Guam Code Annotated, which provides the requirements for each area. 3-8

9 Our process: Met with and interviewed the following Members from the PUC Members from the CCU Interviewed management in more than twenty interviews Reviewed leading practices in governance Performed gap analysis Developed roadmap 3-9

10 Integrity: objective leadership Sub Process GPA Today Highly Effective Utilities Integrity: objective leadership Under CCU s tenure, GPA s operations have improved. Realistic measures of goals and objectives are not consistent across all departments. General Manager is not evaluated against goals and objectives. Reactive management style predominates rather than a proactive planning style with goal setting and result measuring. Tone is set at the board and by top management to promote integrity, accountability, stewardship, and transparency. Independent leadership team is measured on merit, not relationships. Strategic planning process is taken seriously. Progress is measured and is reviewed during quarterly board meetings. Gaps in progress are discussed with management and action plans to correct gaps are implemented. 3-10

11 Integrity: objective leadership Sub Process Gaps Roadmap/ Recommendations Integrity: objective leadership Lack of goal setting and performance feedback from CCU to General Manager. (See Accountability section.) From Accountability section: CCU sets measurable goals and objectives with General Manager. CCU evaluates General Manager formally on an annual basis. 3-11

12 Integrity: fiduciary and legal responsibility Sub Process GPA Today Highly Effective Utilities Integrity: fiduciary and legal responsibility Strategic plan was developed but not followed or updated on a yearly basis. This year will have the first revision since Inadequate budgeting process Incorporates legal and social responsibility Ensures all functional areas understand legal requirements and responsibilities. View for the long-term; the shortterm view typically compromises the long-term viability of the organization. Robust budgeting process 3-12

13 Integrity: objective leadership Sub Process Gaps Roadmap/ Recommendations Integrity: fiduciary and legal responsibility Strategic plan not followed or regularly updated. Budgeting process does not allow for departmental participation. Budget staff uses manual processes that takes time away from actual analysis work. CCU, General Manager, and General Manager s managers should set a strategic plan. Prior plan may be used as a guide. Goals and objectives should be set on a utility level and on departmental levels. Managers at each level should be held accountable for attaining goals. Progress needs to be measured regularly. Update budgeting process. This encompasses training, using JDE, and changing the process budgets are developed, activity is tracked, and variances are reported. 3-13

14 Accountability Sub Process GPA Today Highly Effective Utilities Accountability: clear roles and responsibilities at all levels. CCU and Top management take on most of the accountability for results. There is not a lot of delegation to the next level of management. CCU appears to perform management roles. Given the recent improvements at GPA, the CCU can relinquish some of the management duties and provide more governance and direction to management. Drive accountability to all levels. People held accountable and real consequences exist: performance pay, promotion etc. Management represents diverse and extensive competencies and perspectives. Deep competencies in financial, operations/engineering, legal, human resources, etc. 3-14

15 Accountability (cont.) Sub Process GPA Today Highly Effective Utilities Accountability: clear roles and responsibilities at all levels. No formal review process for GM exists. Guam University designed a 360 feedback process but it is not used consistently. Goals and Objectives are not formalized or consistent across departments. No progress measurements towards goals and objectives are made. Performance reviews conducted annually; management is measured against annual goals. Establish well defined goals and objectives by department and by person. Strong yearly and quarterly planning with departments 3-15

16 Accountability (cont.) Sub Process GPA Today Highly Effective Utilities Accountability: clear roles and responsibilities at all levels. Ownership of budgets does not lie with departments. Senior managers approve capital and other expenditures regardless of dollar amount. Department heads are responsible for execution of budget activity. Decision approval levels are established with good checks and balances. Tiered authorization levels for expenditures. 3-16

17 Accountability Sub Process Gaps Roadmap/ Recommendations Accountability: clear roles and responsibilities at all levels. Lack of delegation to managers below GM level. Adjust direct reports to GM to 5 7 managers. Determine skills required for the GM s direct reports. Evaluate current managers for ability to meet required skill sets. If necessary, hire or promote to fill direct report positions. Establish goals and objectives for direct reports, and hold people accountable. 3-17

18 Accountability (cont.) Sub Process Gaps Roadmap/ Recommendations Accountability: clear roles and responsibilities at all levels. Lack of delegation to managers below GM level. GM delegate management activities to direct reports who are capable and have clear goals and objectives. Departmental goals and objectives Authorization to approve capital and other expenditures (within tiered levels) Authorization to hire Review Guam Codes including: Procurement Regulations Chapter

19 Accountability (cont.) Sub Process Gaps Roadmap/ Recommendations Accountability: Clear roles and responsibilities at all levels. CCU performing management functions. Lack of goal setting and performance feedback from CCU to GM. Lack of employee performance feedback. CCU undergoes training on its requirements for providing direction (See Stewardship section). CCU sets measurable goals and objectives with GM. CCU evaluates GM formally on an annual basis. Revive 360 Degree Feedback program. Perform annually and expand program to all managerial leadership personnel. 3-19

20 Staffing Baker Tilly Survey Responses Of the surveyed utilities who provided organizational charts, GPA ranked the highest for number of direct reports to the General Manager. Comparison of General Manager Direct Reports Across Utilities Direct Report Count Administrative Assistants GM Direct Reports Water Utility Direct Reports to GM GM Direct Report, Less Water Utility & Administrative Assistants - Keys Columbia Reading Lubbock Lafayette Kissimmee Springfield, MO Gainesville Naperville Guam Power Authority 3-20

21 Governance structure: Span of Control Currently, GPA s GM has 15 direct reports. Effective organizations limit direct reports to 5-7 people. 3-21

22 Suggested reporting structure To be used for management discussion purposes when determining new organization. Public Utilities Commission (PUC) Attorney Internal Audit Consolidated Commission on Utilities (CCU) CCU General Manager (CUS) Special Assistant Administrative Assitant : Direct Report : Indirect report. Functional areas need to work closely together. reports : General Manager s direct General Manager (GPA) Administrative Assistant Chief Information Officer Chief Financial Officer Chief Operation Officer (AGMO) Human Resources Officer General Counsel Engineering Supervisor Public Information Officer Procurement (Supply Management Administrator) Customer Service (Utility Service Administrator) Safety Administrator 3-22

23 Stewardship: employee development Sub Process GPA Today Highly Effective Utilities Stewardship: employee development No succession plan. Safety training program is strong, based on initial review. Implementation of CTP program is well received. Benefits of external training overlooked. IT systems under-utilized Each department feels that focused training is needed. Succession plan in place and midlevel managers are groomed and evaluated for promotion. Formal and ongoing training appropriate for the level Conduct ongoing training for the board and management. Staying current with changing business needs is recognized. Provide education to the customer. Just-in-time training where necessary Regular employee feedback and performance reviews. (See Accountability section.) 3-23

24 Stewardship: employee development Sub Process Gaps Roadmap/ Recommendations Stewardship: employee development No succession plan CCU works with GM to develop succession plan. Identify high performing managers. Groom these high performers to take on more responsibilities. Stewardship: employee development Training lacking: IT / Computer skills Other skills Delegate identification of employee knowledge gaps to departmental managers. Managers set training goals tailored for their own departments. Identify processes currently handled inefficiently due to lack of reporting knowledge and set goals with IT to develop better reports and user training. 3-24

25 Delegation required to groom subordinates GPA 3-25

26 Transparency: transparency to stakeholders Sub Process GPA Today Highly Effective Utilities Transparency: transparency to stakeholders GPA strives for open dialogue with CCU and PUC. Flow of information has transitioned from being tactical to being more strategic and relevant to PUC and CCU. Customers (CCU constituents) do not feel GPA looks to their best interests. (See Customer Service section.) Key Accounts program has begun. Open dialogue exists between PUC and utility. Management is accessible to employees, suppliers, and customers. Effective meetings include documented purpose, meeting agenda, and follow-up action items. Strong relationships exist with customers, and tiered service levels are created. 3-26

27 Transparency: integrated information flow Sub Process GPA Today Highly Effective Utilities Transparency: integrated information flow Real-time reporting needed. System not being used to its full capability Excel is used if the system is not working the way desired Need to gain an understanding of information needs by department and how it aligns with the business Tools exist but are not used to their full potential due to lack of user training and/or turf wars. Some departments have well defined SOPs, others are old or out-of-date. Information is current and relevant for all levels within the organization and at the board level. Information with strategic purpose is identified and reported, such as goal metrics. SOPs reviewed and updated regularly. 3-27

28 Transparency: transparency to stakeholders Sub Process Gaps Roadmap/ Recommendations Transparency: transparency to stakeholders Customers do not feel valued. See Customer Service Section for details on: Continue and expand Key Accounts program. Establish marketing to customers. 3-28

29 Transparency: integrated information flow Sub-Process Gaps Roadmap/ Recommendations Transparency: integrated information flow SOPs are out of date or non-existent. IT reporting systems are not configured with user data needs or ease of use in mind. (See IT section for further details.) Establish goals for creating and/ or updating SOPs in all departments. Usually, the information is collected. The next step is to make the data readily accessible to those who need it. See IT section for detail on: Evaluate each departments reporting needs, keeping performance goals and metrics in mind. Develop reports to meet departmental needs. Train end users on how to use information. 3-29

30 Enhance Performance, Accountability and Transparency A. Recommendation Scope & Objectives Objectives in Order of Impact: Provide GM with manageable span of control Shift management functions from CCU to GPA. Set goals for GPA and individual employees, including management. Improve transparency of information and decisions. Recommendation Scope: CCU members, GM and GPA upper management B. Approach/Work plan Adjust GM direct reports to 5-7 officers/upper managers. Determine skills required for GM s direct reports. Evaluate current managers for required skill sets. Hire or promote to fill direct report positions. GM delegate management activities to direct reports with clear objectives GM focuses on strategic leadership. CCU attend yearly training board and governance training to provide direction to GPA. CCU sets goals and objectives for GM and evaluates GM annually. Expand 360 degree feedback to all employees, starting with all officers and upper managers. C. Risks and Dependencies GPA culture needs to change, and this takes time. Politics and personal relationships can interfere with placing the correct people in upper management roles. CCU is an elected body. CCU skills cannot be mandated. CCU needs to work with the GM regarding strategic changes at GPA CCU and GM are jointly accountable to make sure changes are effectively executed D. Benefits Job performance is clearly communicated to employees including expectations (goals) and results. GM focuses on high level strategic planning while day to day operations are handled by upper management. Morale boosted as employees see abilities rewarded Increased pride in work due to delegated ownership CCU provides appropriate level of direction without performing management roles E. ROI F. Deliverable(s) Revised organizational chart 360 degree feedback process throughout GPA Training for CCU H. Estimated Cost Intangible savings Allows GM to focus on strategic issues versus tactical Allows CCU to become a governing vs. management function G. Estimated Timeframe Less than 4 weeks 4-8 weeks 8 12 weeks 12 + weeks < $50k $50K 75K $75K - $100K > $100K 3-30