Changing NW Natural's operating model and beginning to shift the culture of a 148-year-old company was a complex process that took more than a year of study, planning, and decision making. NW Natural's management team knew the goal: realign company operations for greater efficiency to keep costs down and strengthen the company for the future. To draw up plans for change, NW Natural benchmarked its own model against high-performing peer utilities to glean ideas for best practices. Out of that exercise emerged a blueprint - dozens of improvements designed to support greater efficiency and enhance customer service.
Five key managers at NW Natural led the effort - Dave Williams, Vice President of Utility Services; Grant Yoshihara, Vice President of Utility Operations; Charlie Stinson, Director of Project Development; and Grace Merchant, Manager of Organizational Development. At the same time, Lea Anne Doolittle, Vice President of Human Resources, coordinated an efficiency review of the company's corporate functions. Improvements were identified and combined with the operational changes. Here are some excerpts from a recent discussion about the "ops model review."
NW Natural has been performing well and producing excellent results. Why change its operating model now?
Williams: Even though NW Natural has been disciplined about costs, when we looked farther down the road, our analysis showed we needed to become even more efficient. Some costs, such as health care, pensions and insurance were increasing faster than our customer growth rate. That trend couldn't be sustained - not if we wanted to continue to produce the kind of returns that shareholders expect or the level of service that customers need.
Yoshihara: Since 2000, the industry has gone through a series of gas price increases and it hurt our customers. We don't control gas prices but we are obligated to do what we can to avoid putting further costs on the backs of our customers. It was time to take a hard look within and evaluate what we could do to control costs even more. To some degree, we can mitigate gas price volatility in the marketplace with effective purchasing and hedging strategies, but we also need to achieve still greater operational excellence.
What did your benchmarking against other companies show?
Williams: As expected, NW Natural fundamentally operates very well, but in some areas, other companies had developed better practices. We used the data to take a fresh look at all our practices. We picked up different ideas and structures as we went along and adapted the best of them to fit our specific needs.
Merchant: It gave us an opportunity to step back and look at things differently. Seeing other companies' best practices at work gave us great ideas for improvements in our own operations.
Doolittle: Benchmarking gave us license to re-examine all our basic processes and realign them in more efficient, productive ways. We did keep many practices that were working well, but we found we could improve some things - such as how we go about acquiring customers. All our stakeholders will see benefits from these changes.
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