Executive Summary

 
Kairos helped ensure the Citizens Energy Group acquisition of the City of Indianapolis’ water and wastewater assets added maximum value for all stakeholders, including Citizens’ ratepayers.

Challenge

 
In acquiring Indianapolis’ water and wastewater assets, Citizens Energy Group (Citizens) sought to simultaneously:

  • Minimize the cost of the acquisition
  • Reduce the cost of service to Indianapolis residents
  • Increase service levels by becoming more of a one-stop utility supplier

Citizens asked for help with organizational change management (OCM) to:

  • Make the acquisition of water and wastewater assets as smooth and successful as possible – on schedule, under budget, with full scope and minimal disruption to employees, customers, and vendors.
  • Engage and inform employees, giving them a voice (although not always a vote) in the integration
  • Create a change-agile organization (by building leaders’ change management skills and emplacing an effective change management methodology)
  • Motivate employees from acquired organizations to integrate into the new culture of the combined Citizens.

Several factors contributed to the degree of difficulty of the engagement:

  • The need to integrate employees from 4 organizations: Citizens, Indianapolis Department of Public Works, Indianapolis Department of Waterworks, and Veolia North America.  Additional employees were also hired to fill open positions.
  • Utilities have a culture of quality, stability, and reliability. The acquiring organization did not have a lot of experience with major organizational disruptions that shift work processes and accountability structures.
  • The presence of a unionized workforce and combining two unions added complexity to the transition.
  • The employees at the acquired water utility had been through several acquisitions over the prior 10 years, causing additional thoughts of “we’ve heard all this before.”
Our Solution

 
Kairos identified 3 critical success factors as necessary ingredients for a smooth acquisition and integration:

  • Simple, Practical, Transferable Change Management Methodology. Layering a complex change methodology on top of a disruptive change would have made it worse, not better. Many well-known change methodologies present good theoretical frameworks, but they aren’t actionable.
  • Engaging All Affected Employees. Engaging just Citizens employees was necessary but not sufficient to drive a smooth integration. Employees from Citizens and the acquired organizations would get committed when they got engaged.
  • Managing Through the Uncertainty. It can be hard for leaders to say, “I don’t know.” Since the closing date and integration schedule were uncertain, it made it harder for leaders to navigate the change. Leaders who communicated with humble, optimistic authenticity would be better able to keep their teams together and focused.

Kairos responded to the RFP and won the contract to provide OCM support for the acquisition.

We started the engagement with a Change Readiness Assessment, interviewing all 18 officers and a handful of other key stakeholders in the integration subteams. From these interviews, we learned that there was general enthusiasm for the acquisition, but also anxiety about the many unknowns of the project. Since the Indiana Utility Regulatory Commission (IURC) had not yet approved the transaction, much was up in the air when we started.

Kairos provided 6 executive coaches to help Citizens’ executives develop and practice change leadership skills. The coaching was voluntary, and 18 out of 18 officers participated. To kick off the coaching work, each officer participated in the Birkman® Personality Assessment and a group debrief of results. This gave all the executives some insights into their own personalities and those of their colleagues. The individual coaching sessions were 100% confidential, and they became a good place for each leader to work through the aspects of leadership that were most critical for driving departmental and cross-functional alignment during the change.

We engaged 120 leaders in a Navigating Change training session, to help them understand what they were experiencing personally, and to give them some simple tools to help others navigate challenging and turbulent times. The key take-away from the training: high levels of emotional support and high levels of technical support help others get through their transitions more quickly and more completely.

Of the many change management activities initiated during the transition, Key Message Training had the greatest impact. In this approach, key leaders throughout the organization practiced using Key Messages in their own words, surfaced their own concerns, and learned new information about the acquisition. This motivated and equipped these leaders to engage in authentic and optimistic dialog about the change. Citizens adopted a monthly approach to Key Messages, with new and creative twists in the approach each month to keep it fresh. Key Messages created a sustained level of alignment, commitment, and confidence that reduced the noise and confusion, even in the midst of uncertainty.  In addition to Key Messages presented to employees by leaders, a frequent newsletter was printed for all employees to provide them ongoing updates.

Kairos benefited from this experience, too. Chip Neidigh and Jodi Whitney (then the Director of HR) jointly created the Tasty-Solid Communications Model This model guided the creation of authentic and specific messages during Citizens’ change. Kairos enthusiastically continues to use this communication model with other clients experiencing disruptive change.

Because of the presence of new governance structures (an Integration Management Office and its various subteams), Citizens needed new ways of clarifying decision rights. RACI charts  were not a new tool to Citizens, but we re-invigorated their use, crisping up definitions and teaching leaders to use RACI on-the-fly, at the point of need, to accelerate and improve the quality of stuck decisions.

Our worst mistake during this project was stopping change management activities at go-live. The change management work stopped because the employees dedicated to change management activities went back to their day jobs. We should have continued all of the activities for 6 months to 1 year for all employees. For many work groups, day one of the acquisition was just like the day before. Many individuals worked in the same place, had the same job, and had the same supervisor. All employees did not go through significant changes day one; rather, change happened in different parts of the organization at different times as systems were integrated, roles changed, synergies were achieved, and buildings were combined.

Results

Citizens leaders stepped up during the transition period and provided a high level of interpersonal attention to those they led. There was great dialog between leaders and their teams in the period leading up to (and following) the acquisition. It would have been tempting for leaders to “cocoon” and retreat when asked tough questions with uncertain answers, but Citizens leaders advanced and boldly engaged in helpful and oftentimes inspiring conversations.

Before the acquisition, Citizens’ leadership team targeted cost synergies of $60m per year, by year 3 of the acquisition. Actual cost savings (vs. pre-acquisition spending) was $112.7m, achieved the very first year after the transaction closed.

Retention of talented employees was a key goal during the acquisition. Citizens’ executives targeted over 400 employees from Veolia Water, the Department of Public Works, and the Department of Waterworks for employment in the new Citizens organization. Over 95% of targeted individuals accepted their job offers, ensuring excellent retention of the institutional knowledge of the water and wastewater employees.

Citizens is more change-agile. Navigating Change was revised and reused in 2015 for leaders, the RACI model is used frequently to clarify roles in workgroups, and Key Messages are created every month for their Leadership Forum. Additionally, Citizens now has leaders asking for change management tools and training in their individual work groups. Change management has become a recognized need by leaders, not just “HR speak.”