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1996 Financial Impact Optimas Award Profile Pacific Gas & Electric Co.

Business initiatives often bear a striking (and unfortunate) resemblance to New Year’s resolutions — those vows of change we solemnly pledge and really do mean to uphold, but then somewhere along the way… well, you know. In January, we’re fired up, steadfast. In February, our commitment wavers a bit. In March, we make excuses. By April — forget it. Our resolutions become nagging memories of what might have been. Life sometimes has a way of getting in the way.

Business initiatives too often follow the same lines. When we set forth a plan, we’re champing at the bit to roll it out and get it going. But all that energy and excitement diffuses months down the road. We lose the snap of the earlier stages. We lose interest and lack time.

If this scenario hits home, you may be in for a pleasant surprise. You don’t have to get stuck in the morass of unfinished business. You don’t have to be bogged down in multiyear projects with minimal results.

We know one organization that won’t stand for it. Since 1993, Pacific Gas & Electric Co. (PG&E) has been solving problems and creating solutions at blistering speed. The San Francisco-based utility is setting the pace for change at a new level, not just for its industry, but for business as a whole. Basically, PG&E is moving at a rate most companies hope to hit decades from now.

The company’s blur of activity is due largely to its action-forum process, which bites off problems in three-month, easy-to-digest portions. The process allows anyone in the company, at any level, to suggest areas for change. As long as the issue in question can be dealt with in 90 days, it can be the focus of an action forum. You’d be surprised at how much gets done when you have momentum on your side. PG&E was. The company knew that picking off smaller issues — the “low-hanging fruit” of business — would keep some cash in its coffers. It just didn’t realize how much. In the past three years, PG&E has hosted almost 80 action forums — and has saved more than $270 million in cycle-time reduction, productivity and performance improvement, cost avoidance, revenue enhancements and actual cost reductions. Not bad for a company that had to enforce a massive 1993 downsizing to keep itself viable.

A new way of working revitalizes an old-fashioned utility.
It was in the spring of 1993 that PG&E, in response to industry changes such as deregulation, embarked on a downsizing that would eventually cost it 7,000 employees. Morale was low. Insecurity was high. The message from the top: Do more with less — and do it quickly.

But the company didn’t look like a mover and shaker. It was more like a sleeping giant, suddenly roused. The managerial ranks, which had been reduced by 3,000, sat stunned. Despite warnings of increasing competition and imminent change, most had remained assured that the status quo would get them through. Such, obviously, was not the case.

So there they were, reeling from staff reconfigurations and budget cuts of 10% to 30%, expected to grab the ball and run with it. One line manager, for instance, had been heading a group of 35 people. He inherited 1,300 employees from 10 parts of the organization. Where to begin? The top-level people knew these managers needed a special tool to carve out their niche in the new environment. The officers looked to HR for help in identifying this tool.

It just so happened HR had an idea, based on some benchmarking it had been doing against General Electric. That company was employing a problem-solving initiative called Work-Out. It was similar to the approach PG&E was looking for: a method of quick, no-nonsense brainstorming in which all the stakeholders worked together to create the best solution. Robert Haywood, PG&E’s senior vice president for customer energy services, attended the meeting at which HR first explained the proposal. “They outlined what the Work-Out was, and what impressed me was there was no emphasis on the negative [aspect] of a problem,” he says. “And it had a lot of roles and pieces, like a jigsaw puzzle.”

With senior management’s blessing, HR began to shape the idea into a model that would fit the company culture. That model became the action-forum process, a means of partnering PG&E decision makers with employee experts to forge business change. The structure is fairly simple. As a hypothetical scenario, say an employee wants to change the company appraisal process. He or she would suggest an action forum and, assuming the topic was neither too big in scope nor too narrow, the process would get under way.

It has three phases:

  • Framework — six to eight weeks
  • Action forum — two to three days
  • Accountability manager — 90 days.

The framework phase is basically an intense planning period. First, the management team involved tightens the focus and clearly defines the issues to be worked on. They speak to all stakeholders involved — employees and customers — to ensure they have the data they need to proceed. Then the key players are identified. Who needs to be in on the forum? Obviously, the solution requires input from a number of viewpoints. In a case such as performance appraisals, participants might include employees who had recently completed the process, professionals from the legal department, leaders from industrial relations, along with folks from HR who created the appraisals. Whenever appropriate, a workgroup’s external clients or vendors are also invited to participate. A key element of the framework stage is to ensure the focus topic is believed by all concerned to be critical to PG&E’s business goals.

Several other important decisions are made in this stage. First, a cross-functional leadership team is identified. These people will be in charge of greenlighting a plan created by the action forum — or sending the team back to the drawing board. Secondly, a champion is identified — someone who feels passionately about the topic and who can rally the troops effectively. “In these preliminary sessions, you’re basically doing the casting for the action forum,” says Carol Gorski, director of organizational performance and planning, who acts as an internal HR consultant for many action forums. “I ask, ‘Are you the right people to lead this team? Are we missing anyone — industrial relations? Legal? Do we have all the expertise we need for this issue?'”

Framework is a period for team members to gather absolutely all the data they’ll need for the action forum. That way, when the rubber hits the road, the team is ready to roll — no last-minute, frantic fact-checking or confusion. Says Luther Dow, manager of GRID maintenance and construction and a veteran of 10 action forums: “The framework is about identifying the problem, getting the teams together, getting the background work that needs to be done so the information is available for the team,” he says. “You have to get the right people who know the business or you don’t get the right solution.”

For the actual two- to three-day action forum, participants usually head out to PG&E’s San Ramon Learning Center, 30 miles east of San Francisco. The offsite meeting place offers a more focused feel than just packing into a company conference room (see “PG&E’s Learning Center Provides Facilitation, Inspiration — and Recreation,”). Here, the participants address the problems identified in the framework phase. They may tackle the issue in one to five different teams depending on its dimensions. For instance, an appraisal-process action forum might have one group focusing specifically on providing feedback, another on management training, a third on the various types of appraisals available.

As many as 70 people can be involved in these mini think-tanks. They’re like no-holds-barred brainstorming sessions, at which team members work fast and furious to prioritize problems and then develop action plans to make improvements. They scribble ideas down on Post-it™ Notes, notecards and flip charts and slap them up on the wall so everyone can look them over. All improvement ideas have that 90-day implementation deadline hanging over them.

Throughout the action-forum session, the flame of urgency is fanned by trained facilitators — usually HR professionals like Gorski — who keep participants focused and moving toward the development of action plans. Teams are repeatedly reminded that they will be presenting their plans to the leadership team at the end of the session — which gives the day a sharper edge than a typical business meeting. “There’s drama, energy and excitement here,” says Haywood. “It’s very creative. You see your whole world in a different perspective. There’s a real joy in working with a team with one goal who all believe the company will benefit from their work. It’s very inspirational.”

The last few hours of the action forum are spent in a “report out” session, when employees present their action plans with set time frames. The leadership team members must work as a unit — despite belonging to disparate organizations within PG&E — to make pro or con decisions on the spot. “It’s culture breaking,” says Haywood of the pro-or-con mandate. “Before the action forum, you could say ‘no’ to an [idea] because you’re the boss. The position of power disappears for the employee. But with 60 people in the room, if you’re the manager saying no, there’s a certain risk. You’d better have a good reason.”

If the leadership team denies approval, it must explain its thought process. Although some plans are rejected, they often resurface with a few nips and tucks and are deemed acceptable. But the forum won’t close until a course has been set. Says Gorski of her role as facilitator: “I’m like a sergeant. If the leadership team says ‘maybe’ [to a plan], I say, what do you need to make this a yes or no? I tell them they must get back here by 3 o’clock with that decision, or they can e-mail it to me. I leave no loose ends.”

Once action plans have been greenlighted, the final phase — accountability manager — begins. At 30, 60 and 90 days, the action-forum teams meet with the leadership group to review the status of their action plans and make any necessary changes in strategy. This accountability phase was included in the process specifically to ensure that the teams own up to their commitment. Immediately upon their approval of action plans, leadership teams are locked into this series of highly visible meetings. At these meetings, they must support the plan by providing the necessary resources, or they must offer reasons why they have chosen to withdraw support. The visibility is a key factor in ensuring continued management commitment to the action plans.

The accountability phase is the biggest difference between PG&E’s action forums and the GE model, and Gorski believes it’s a crucial difference. “I’ve had people tell me [our version] is a little more rigorous and robust,” she says. “I think that’s what gives our process its teeth. It forces us to walk the talk.”

During this period, the importance of the team champion resurfaces, because that person is key in keeping the hype and excitement up. “The champion of each team is going to be the person who says, ‘I really believe this thing can be solved,'” says Dow. “He or she has the dedication and the willingness to keep the cause alive.” Dow knows of one team champion from an action forum held three years ago who still considers himself on call should anyone have questions or concerns about his action-forum topic.

At 90 days, if all has gone according to plan — and that’s almost always the case — the group meets for a final report and a celebration.

But while the process sounds fairly straightforward on paper, it wasn’t the easiest to pull off the paper into three-dimensional use. HR staffers had to deal with concerns from line management, continued staffing aftershocks and a union flare-up before their baby really got its feet.

A funny thing happened on the way to the forum.
In the summer of 1993, the officers of PG&E were ready to give action forums a whirl. The line managers of PG&E were a slightly different story. For one thing, they were a little wary of any program that centered on creating efficiencies, saving money or boosting productivity if those results might work them out of a job. After seeing thousands of their fellow workers dismissed in the previous months, their jitters were pretty understandable. Add to that HR’s image at that time as a creator of soft-serve, cute-but-not-crucial programs, and you had a buy-in dilemma.

To ease line managers’ worries — and skepticism — top officers made three things very clear:

  • Action forums weren’t mandatory. No one had to attend education on them, nor use them
  • Action forums would never be targeted to get rid of jobs. They were designed to help make the business better — to safeguard jobs
  • Any cost savings resulting from an action forum would not affect that workgroup’s budget. If your department saves $1 million a year from a new process, your budget wouldn’t be cut by that amount.

In addition, a change team was formed, comprising PG&E officers and managers, corporate communications and HR. The change team worked to spread the word about action forums by positioning it as a serious business tool, not another flirtation with fad. Throughout this communication period, HR worked primarily behind the scenes so the program wouldn’t be written off by cynical employees.

In the beginning, PG&E brought in an outside consultant, Sunnyvale, California-based Implementation Partners, which had worked with GE on its program. Ord Elliott, president of the consulting group, further dispelled any aura of flavor-of-the-month programming. A former Marine Corps captain in the Vietnam war, Elliott had a take-no-prisoners approach that caught employees’ attention. As Haywood says: “This is a man who faced death daily. He’s not going to tolerate going through the motions. He’s extremely serious about what he does.” Haywood remembers that in one of the first introduction seminars for the action forums, Elliott marched up to him and said, “This is going nowhere. Your people are resisting. I’m sending everyone home and you won’t get a bill.” The approach worked at PG&E. It delivered a strong message to line management: This is not something you have to do. It is not mandatory. But if you’re going to do it, do it right.

Despite action-forum education and coverage of action forums in the company newspaper, most line managers were sold on the process through good, old-fashioned word of mouth. “We had our CEO and senior officers supporting and advocating forums,” says Gorski. “They were telling people, ‘This tool can get you through turmoil and change. It can help you keep your business thriving.’ It would take an unwise manager not to step up to the plate. But still it was very scary. I think HR’s role was to make it as easy and safe as possible.”

At that time, HR resurfaced on the scene, reframing itself as an internal consultant. Action forums offered many openings for an HR presence: Each forum has one senior consultant who heads up all participating workgroups. In turn, each work team has its own facilitator.

HR professionals began developing capabilities to lead action forums so they could wean the company off the external consultant. The department initiated its own training for members on the proper facilitation of action forums — how to smooth conflicts, guide discussion and play devil’s advocate when necessary. “This is the toughest consulting anyone can do,” says Gorski. “But I like the challenge. I like the tougher teams; they’re the most fun. My goal is that everybody walks out and wants to be a facilitator. That’s when I know I’ve done a good job because I’ve made it look easy.”

Because many lower-level employees have never participated in group problem-solving, any work area going through the action-forum process for the first time receives some basic training on team-building.

In the early action forums, it became apparent how much employees were in need of empowerment. Many participants became extremely emotional at finally getting their ideas heard. Haywood says one of his most powerful experiences from action forums came early on. An employee, an exlineman, tapped into the pulse of his entire workgroup — and probably the entire PG&E workforce. Almost in tears, he talked about how long he’d been trying to get his idea through the thick layers of PG&E management, and how good it felt to be able to voice it and have it be responded to. “That was a very powerful moment for me,” says Haywood. “I got the sense of the incredible amount of knowledge [our employees] have. These people have a sense and feel for the real issues. They are more in touch. We need these people — without them, there’s nothing left.”

With each group’s success came more calls of interest, and pretty soon, top executives no longer had to promote the program themselves. “People started to do it and had such good experiences that they became the best ambassadors of the program,” says Haywood.

However, there was still a problem. PG&E has a bargaining unit that comprises 70% of the total population of company staff. Of the 150,000 customer contacts each day, 99% are handled by union employees. Obviously, it was imperative that PG&E had bargaining unit support if the action-forum process was going to have any impact. But the union wasn’t sold on action forums.

Fortunately, PG&E and its bargaining unit had a vehicle that allowed for employee participation, a section in the agreement called labor-management cooperation. The contract also provided for enablers that permit the union and management to meet before the next round of negotiations if necessary. So David Bergman, PG&E’s chief negotiator for industrial relations, sat down with the bargaining-unit representatives and, over the course of many months, hammered out an agreement that was suitable to both sides. “The biggest problem we had was convincing them we would really allow them to be a part of it,” says Bergman. “After that it was [convincing them] that they’d be appropriately represented to the point at which they could pick their own participants.”

In 1994, PG&E initiated the action-forum process with the bargaining units of the International Brotherhood of Electrical Workers (IBEW) by agreeing that the union would be an integral player in the process. The union itself — not just the collective bargaining members — would have the right to suggest topics and possible joint ventures. “I think it’s rare to get the union to agree to these kinds of programs,” says Bergman.

Through 1993 and 1994, the action-forum process raged, pouncing on issues as diverse as safety, women’s issues and plant efficiencies. Then it hit a block. In 1995, PG&E still believed it had a staffing glut, primarily within the union workforce, so it started the wheel turning on an 800-person downsizing. The layoff’s effect snowballed quickly. First, because the union is structured by seniority, the 800 people were bumped down to lower jobs, which displaced those several levels beneath them. Says Haywood. “One person effects five or six; so 800 [laid off] may affect 3,000. That’s pure turmoil.”

The turbulence was exacerbated by a series of unexpectedly violent storms in spring 1995. PG&E was being beaten up by the media for what the community deemed slow reaction in returning service. And during those 150,000 customer contacts every day, union members were explaining that possibly it was due to the downsizing.

However unpleasant, the storms did help put things into perspective for PG&E. Bergman remembers one union worker in particular: “Here was a guy who during February and March, in all these storms, was working seven days a week, 10 or 12 hours a day. Yet at the same time he had in his back pocket his layoff notice — for lack of work.” On April 5, 1995, PG&E did what few companies would have the guts to do: It pulled a chair up to the bargaining table and admitted it had been wrong. The company called off the downsizing, and committed to a new labor-management partnership.

PG&E even went so far as to invite the union to assist in determining the size of the company’s workforce. (Amazing as this may sound, it’s true. When I visited the industrial relations office, Bergman was wrapping up a meeting with union bargaining employees and management — the group had been debating the size of the workforce for 1996.)

Now, more than a year later, the union is still feeling the burn. But things are getting better. Action forums will be key in rebuilding the union-management relationship. For instance, the union could institute an action forum to decide some of the headcount issues — useful because they have the built-in 90-day accountability. The action forums, along with the labor-management process, will play a major role in keeping problems from festering. “It’s very unrealistic for us to say bygones will be bygones,” says Haywood. “We need to rebuild. Action forums can do that. Working together is the best way to help the cause.”

Despite struggles, the gains have been great.
When one of your initiatives saves more than $273 million in greater efficiencies and higher cost savings, your response isn’t usually, “Well, what else?” But if you did ask PG&E that question, you’d hear plenty of answers.

For one thing, the quick-footedness inspired by action forums has become ubiquitous throughout the company. Luther Dow and his department approach their general workdays like one continual action forum. They’ll call up one-day mini forums when necessary, but in general, they apply the principles to everything they do. He says this is typical throughout PG&E. After almost 80 action forums in three years, the ideals have become ingrained. “We have worked to integrate action forums into our business,” he says. “We have tried to train the directors and superintendents in those principles and how to use those on a day-to-day basis.”

PG&E is fast where it used to be slow, proactive where it used to be reactive and empowered where it used to be paternal. Action forums truly turned the culture upside down. Employees have been given power over their destinies, and they’re running with it. “You now have people who are either preoccupied with the future, or asking themselves ‘What can I do today? When I come in this morning, what can I do that makes a difference for the company?'” notes Haywood.

Gorski says PG&E is no longer trapped in analysis paralysis. “I hear it everywhere,” she says. “‘Yes, I have a full plate. Yes, I have a ton of issues to resolve, but this one is right here.’ It used to be we couldn’t come up with a business solution unless it was perfect. Now we ask ‘Will this get us 80% of what we need to get? Let’s do it!'”

That let’s-do-it attitude has knocked PG&E out of its downsizing slump. Action forums help employees take all their negative emotions — fear, confusion, frustration — and channel them into proactivity. They really can see the differences they’re making. Before, employees would have to wait months to hear if an idea of theirs was approved. It would sift down from layer to layer until all the energy and power was diluted. No more. “It’s a continual challenge to me to see a saddened employee and hear him or her demoralized by frustration at solving a problem,” says Haywood. “You don’t want people to feel they aren’t being recognized, that they aren’t being heard. We’re working on changing that…. If [employees] feel they can do something, the negative emotions shrink. There’s at least something positive to hang onto.”

Sure, every so often, an action forum has failed. Gorski says the gap has usually been in the follow-up. Maybe the topic was just too broad. Or key people have left the company. For the most part though, Gorski says the general employee attitude is, “I’ve wanted to solve this problem for seven years, and I have finally done it with action forums.”

Action forums also foster teamwork and cross-functional interaction. Gorski has seen groups of people who’ve never worked together quickly meld into a cohesive team during the three-day meetings. So dramatic have the results been that she has had many people approach her to initiate an action forum just so they can teach their workgroups about teamwork. She has to explain that team-building is the byproduct, not the focus.

But who can blame these hopefuls? Action forums encourage employees who’ve never made public presentations before to give speeches, employees who have never done cost-benefit analysis to pull out their calculators. Employees who worship rank must seek advice from those two or three levels below — and line workers who resent the top-level people must interact with them on a personal level. Only at an action forum would you see the top executives in the finance division going head to head with the folks that climb the poles. “People get charged up, and rank has no meaning,” says Haywood. “That was no small thing for us.”

Employees also benefit from seeing other areas of the company in a new light. Says Dow: “I think action forums have helped us bring across boundaries the people who can help solve the problems. The result is we see each others’ problems better. I think the action forums actually create a willingness to try to solve the problem.”

Why do action forums work? Dow says simplicity is a big part of their success — they’re easy to understand and easy to do. “The people who know the work are making the recommendations,” he says. “They’re getting immediate feedback, and they’re implementing their ideas. It’s their product. It’s not my product. They have ownership — it’s their solution, their implementation.”

Just as important to action forums’ success is that employees truly see them as useful. Gorski conducted a pulse survey a year ago, and the response was overwhelming — action forums get results. In addition, secondary research has shown that employees who participate in an action forum score higher on surveys in terms of employee commitment, team-building and understanding the company’s business.

And don’t think HR hasn’t reaped a few rewards of its own. Imagine the effect at your company if a department once thought extraneous at best leads a stampede of change resulting in millions and millions of dollars saved. The action-forum process became the funnel that HR needed to channel itself into a business partner. HR can now focus on its most powerful role — as an internal consulting partner to the company. “They come to us now to learn about the utility business, not just how to make meetings work or how to be a better supervisor,” says Gorski. “They don’t bash HR anymore at PG&E. I think we’re the best in the business.”

With its guidance of the action-forum process, being the best in the business is definitely one resolution HR at PG&E can keep.

Personnel Journal, June 1996, Vol. 75, No. 6, pp.100-108.