PG&E Corp - A Failing Organisation
Pacific Gas &Electricity Corporation (PG&E), California's largest electricity provider, is a failing organisation. 'Crisis management' is not going to help, nothing less than a fundamental shift in operational focus will. There are important lessons here.
On October 9th PG&E shut the power off to more than 700,000 customers, in a desperate attempt to reduce the risk of electricity infrastructure failures setting off wildfires. This was its fourth shutdown since June of this year. Worse still, the company's CEO was forced to concede that similar power cuts might be needed for the next DECADE, before the fire risk was properly brought under control. This set off a howl of outrage across the state.
PG&E is an electricity provider, this is its core mission. There is no escaping the fact that these power cuts amount to a complete failure on the part of the company to deliver its critical operational function - supplying electrical power. This alone negates the organisation's justification for its existence.
People rely on electricity, which is why reliability is a key performance indicator for utilities, and why the best of them, including in California, make up part of the literature that explores 'High Reliability Organisations' (HROs) and how they achieve this. Customers, however, not only want a reliable and efficient power supply, they also expect it to be SAFE. In this part of the world, that means possessing and operating an infrastructure that is capable of resisting the high winds and fire prone conditions that arise every autumn. These are simply a fact of life posed by the operating environment, there is nothing unusual or extreme about them, they represent NORMALITY. On this measure, PG&E has failed even more miserably, with no less than 20 of the major wildfires that have struck California in recent years having been sparked by electrical equipment malfunctions, including the Camp fire of last year in which 85 people died.
These safety failures have already pushed PG&E into bankruptcy, with tens of billions of dollars in liabilities as a result of the fire damage.
On Friday, October 18th, state regulators from the Public Utilities Commission called the company's senior managers to account at an emergency meeting. According to this media report,
"Marybel Batjer, president of five-member commission, said she was “astonished” at PG&E’s lack of modern technology and services, citing the website crashes and communication system failures that added to last week’s upheaval.
“This is not hard,” she told PG&E executives. “You guys have failed on so many levels on pretty simple stuff. You need to get there now. Not at the end of the year. Now.”
Not only did the company cut power across the Sacramento area, it did so without any advance notice, and almost immediately saw its website go down as customers tried to find out what was going on. It is unusual to find such a combination of incompetence at one time, in one organisation.
PG&E is an organisation in crisis, its future existence is most certainly in doubt. Crisis management, however, still less understood as an effective communication strategy, is NOT going to save it. The only thing that will save it is an improvement in its appalling operational performance, there is simply no sugar coating this reality.
The main factor preventing PG&E from going under consists in the practical difficulty of switching electricity providers. It is not simply a case of awarding the contract to someone else. However, PG&E executives can take little comfort in that fact, because while their company assets might not be easily replaceable, THEY ARE.
The important point is this - crises are ALWAYS the result of MANAGEMENT FAILURES. Most organisations DO survive even the most serious of crisis situations, the same is NOT true for their senior leadership, heads do roll, and rightly so.
This is why the emphasis for Avoiding Catastrophe is on the status and performance of existing management systems and controls, rather than crisis response, which is only the final, last ditch defence against a catastrophic outcome. During a crisis itself, an effective style or form of communication is simply not adequate, what stakeholders require are answers to serious questions. These are -
what went wrong ?
who or what is to blame ?
what are you doing to ensure it never happens again ?
The problem for PG&E executives is that the answers to these questions are uncomfortable. They are -
we have failed in our core operational function
The lesson for leaders and managers of other organisations, observing events at PG&E, is simple - DON'T BE IN THIS POSITION. Your company may or may not come through, but your career is unlikely to recover.
If you would like to discuss the issues raised in this article, or learn more about how Avoiding Catastrophe can help you avoid this kind of situation, contact us at firstname.lastname@example.org