Mr Fix it

Scottish Water has been through stormy times, but things are looking up thanks to some forward thinking HR policies.

Paul Pagliari comes across as apragmatist who relishes a challenge. If he was slightly fazed about the hurdles facing him at Scottish Water when he joined the company from Scottish Power in early 2002, he’s not admitting it. “It was clapped out,” he states in a matter-of-fact way. Some would say that is an understatement.

The original water authority was spread under the remit of 32 local councils, but in the 1990s it morphed into three giant regional councils. In April 2002, Scottish Water was born from an act of the Scottish Parliament, under the eagle eye of an independent regulator delivering a tough brief: every performance level had to be substantially improved – and £145m (40 per cent) needed to be slashed from operating expenditure by 2005/6.

It was the largest corporate merger in Scottish history, and the figures didn’t look good: there was planned investment of £2.3bn, but only £1.8bn worth of capital to spend. The reality was not for the faint-hearted: 5,600 people spread across three far-flung locations, operating on 300 different IT systems, with three call centres, three billing systems, poor-quality data, different holiday and bonus schemes and conflicting pay scales. Staff were even blamed for a crumbling Victorian water system suffering continual under-investment. Customers and the regulator had one message for the new management: “Sort it!”

Fresh into the job, Pagliari knew that as an HR director operating in a public body, he would be swimming in a goldfish bowl. “In a private company, shareholders tell you what they want you to do,” he says. “In a public body, you are judged by the regulator on the delivery of efficiencies. You are judged on how you handle issues by the minister who is in charge. You’re judged by the customer on clean water quality, customer service, response to emergencies . . . everything you do is in the public domain and queried by Parliament. It is totally different to working in the private sector.”

First, Pagliari faced staff almost as worn down as the service they worked for. He learned that in 15 years many had never seen, let alone talked to, a director. So he took the lot on away-days. He sat directors next to technicians, board members next to switchboard operators, and presented the entire workforce with a ‘picture of chaos’. It showed staff and customers adrift in choppy waters, trying to clamber on board a ship made up of three boats welded together. Pagliari asked the staff if they thought the picture was a true one. “Yes,” they answered, and began to engage.

“The idea was to get them to be Scottish Water people, to understand and help contribute to meeting the challenges we faced,” he says.

Then came a voluntary severance scheme, offering early retirement to the over-50s, and a cash settlement and help with finding alternative jobs for the under-50s. By week four of the scheme, Pagliari faced a sceptical board: he’d only had two applications for voluntary redundancy. But he sweated it out. “I had to show confidence and it worked.”

In the last financial year, 450 people voluntarily signed up to the scheme. Another 200 are expected to have signed up by the end of this financial year next month, and more by 2005. But why not just institute compulsory redundancies? “We could have, but the management partnership would not have been successful. It would have challenged whether the directors meant what they said about a working partnership,” Pagliari says.

His own HR budget, meanwhile, is not escaping cost savings. It is currently being taken down in steps from £6.8m to just under £4m by the end of the financial year 2005/6. By then, HR will have to lose 40 per cent of its people, including health and safety staff, to reach a final total of around 60. That will mean losing another 40 from the department, currently staffed by just over 100 (including 25 health and safety employees), and overseen by four general managers.

With such major losses looming from the offset, one of Pagliari’s first moves was the establishment of a company council, comprising 24 staff members, including shop stewards and full-time union officials, two directors (including Pagliari), one visiting director and other workers drawn from across the organisation.

“We reach agreement on how we treat people issues. Council members have gelled together remarkably well, and sub-groups are tasked with specific problem-solving.” So far, the council’s work has included agreement on the voluntary severance scheme, the reduction of three laboratories to one, and the establishment of a single support unit (a kind of in-house job centre) to assist staff taking redundancies.

The council also helped drive the setting up of a single call centre. Staff were consulted on where it should be based and how they should be treated during the transition period. They opted for a location in Feirmilehead, near Edinburgh, where it is now staffed by around 274 people. “This is not something we can move offshore to a place such as India,” says Pagliari. “Our call centre must have high quality [customer] involvement. [Operators] have to have an understanding of local geography and local needs. Some of our calls are highly emotional – houses flooding, for example – and people need the comfort of a local voice with a local answer.”

The council’s toughest test, however, came at the tail end of last year, when it tackled harmonisation of salaries, bonuses and conditions across the company. It decided on a grading structure and balloted the entire workforce. It was a close call, won by just seven votes. The new scheme kicked off this year.

Pagliari denies it was born from a simple cost-cutting exercise, but admits Scottish Water has to lose £70m worth of people costs by 2005/6.

“Different ways of operating were causing anxiety among people,” he says. “We had to find the best solution we could, and didn’t go for the highest common denominator. At the same time, we had to acknowledge there would be cost savings.”

Yet another major challenge has been instituting a culture change. The organisation felt it needed values that the workforce could aspire to.

“We talked about how people did, rather than what they did. We got them all together to work out their simple values,” says Pagliari.

The final compiled list was: involve people; challenge for benefit; clear conversation (say what you mean); and deliver promises.

These now infiltrate meeting rooms and are referred to in every facet of the business, including during staff appraisals. They are constantly reiterated in a revamped communications system, which includes the launch of Scottish Water Life, a bi-monthly newsletter which facilitates feedback. It recently asked staff how they would cut costs in their own homes. The idea was to gain their ideas on how Scottish Water’s own overheads could be slashed.

Another publication, Team Voice, is issued to every team leader who is expected to cascade company objectives and messages. Notice boards are also used liberally to convey messages. Meanwhile, there are plans to give increased access to the intranet, currently available to 50 per cent of the workforce. Field operatives, for example, are being issued with portable PCs.

Added to this, Pagliari knew he had a tough nut to crack in achieving organisational change. He put every line manager through a change programme to open their minds to the idea that change brings about opportunity, and that they themselves were agents of change. They were taught tricks to get teams to follow them from A to B.

The changes at Scottish Water have been packed into just less than two years. Heartening for Pagliari, then, that a second staff satisfaction survey since the organisation’s inception has shown only a 0.1 per cent change in dissatisfaction.

“We’re surprised it’s not higher, given the number of changes we’ve had to make, plus job losses,” admits Pagliari. “When you go through changes like these, you need to work with a courageous bunch of HR people, as I have. You need brave people in HR – they are the meat in the sandwich. And I am lucky I have what matters to me – a CEO who cares passionately about the business and people.”

As a footnote, the picture Pagliari displayed at his recent and second staff away-day – again involving all employees – looked a bit different to the first. It’s still not complete, but the boat’s no longer fragmented and it is sailing in calm waters.

“We’ve still got work to do,” says Pagliari. “We’re still in a difficult place in terms of what Scottish Water is. But we’re getting there. We really are.”

Pagliari’s tips to HR Directors facing similar challenges

  • Be passionate about your business – embrace the horrible bits as well as the nice bits

  • Chuck out the HR junk that people go on about. There are too many people who are disassociated with what the business is about

  • Really understand what your business is about. HR is not independent from the rest of the business

  • Really listen to what people say

  • Encourage HR to walk about the company, talk to staff and gain direct feedback

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