Survival of the fittest

Energy company npower’s aggressive expansion philosophy was borne out of
necessity rather than desire. Mike Broad talks to Saudagar Singh, npower’s HR
director, about the challenges raised for his HR team as the UK’s leading
electricity supplier

Organic growth has not been an option for energy company npower. The
deregulation of electricity and gas supply in the early 1990s created the
business equivalent of the Wild West and utility companies have either been
acquiring or being taken over ever since.

Since its launch in April 2000, npower has been picking off competitors with
the confidence of a hired gun. Innogy, npower’s parent company, bought
Yorkshire Electricity in April last year and Northern Electric four months

Rapid growth has been a key element of npower’s business strategy. Its size
has increased from 1,800 staff at launch to 8,500 at present.

Saudagar Singh, HR director of npower, says: "The question is: do you
grow organically or through acquisition? As utilities have been opened up,
those organisations that have not responded have seen their market share go

Singh, who sits alongside the finance director and CEO on the integration
team, explained that he supported the aggressive M&A activity as much as
anyone else.

"It was painful but the commercial reality is that we had to do it.

"We felt that if we did not get beyond four million customers rapidly,
then we would be at risk of being gobbled up."

The pace of change has raised huge challenges for the 50-strong HR team.
Performance management, employee relations and rolling out common brand values
and culture across the company were priorities.

The HR team is also supporting the transformation of npower into a
highly-competitive retailer. It now supplies gas, electricity, telecoms and
financial services to nearly seven million customers.

Singh says: "We are taking our company from thinking and acting like a
utility, and turning it into a competitive and commercial organisation."

Recruiting the right people – with strong commercial skills – has been
essential. Singh has targeted people from progressive, blue-chip organisations
outside the sector, such as their new head of PR Richard Frost, headhunted from
Cadbury Schweppes. "To compete in the harsh realities of a commercial
environment, you have to bring the right people in," he says.

"You have got to get the blend right – we need a mix of people with
business acumen and industry experience."

The energy giant has taken a direct approach to developing a single-work culture.
Not content with the normal communications that follow the launch of company
values, npower has incorporated them into a new bonus structure.

A year-long pilot of the bonus system, called the matrix, proved successful
and its adoption goes before the board this month.

The matrix bonus is split 50-50 between hard measures and living company
values. The values include team working, customer obsession,
straight-forwardness, focus, initiative and being results-oriented. It is
likely to be rolled out to 750 senior managers from January. These leaders will
in turn incorporate values for their staff in the appraisal and performance
management system.

Employee relations have also been a major challenge during a period of
significant change. While npower has recruited 900 staff, it has also made
1,200 redundancies.

Singh wants to forge stronger relationships with unions, and increase their
level of commercial understanding. Honesty and openness is vital to achieve
this, he says.

In the Midlands, for example, the company runs a business review forum with
unions. It shares commercially sensitive information on a regular basis,with
its members to explain why decisions are being made. The company is also
engaging unions in discussions over the future of its call centre in Team
Valley, and the 500 jobs located there.

Singh says: "We’re having an adult conversation with the unions to see
how we take can take costs out, rather than just telling them what we are going
to do."

The HR team have also worked hard to unify the organisation’s HR processes.
Singh targeted the most divisive terms and conditions first, such as car and
travel policy, then focused on key areas such as pensions, payroll and health
and safety.

Getting common policies for all staff on npower’s intranet has helped bring
the organisation together. "Four different versions of everything adds a
layer of complexity and we have been working hard to bring processes into
line," he says.

The structure of the HR team is also being evolved. HR managers have been
decentralised to sit within business teams, supporting the divisional managing

Singh has also recruited four operational HR managers from outside the
utilities sector, but finding the right people hasn’t been easy.

He says: "I don’t want people who spurt out the latest HR jargon, we
want people who understand proper business issues and are real

A six-strong HR management team sits centrally working on areas such as
business support, organisational design and health and safety. Singh sits on
the board.

"They are now a commercial team – they are business people first and HR
people second," he says.

Npower’s profitability has jumped from £1m to nearly £100m in two years.
Singh says the company is now trying to consolidate its position, following the
purchase of Innogy by RWE.

"The strategy over the next five years is to keep the profits up, and
we are looking for efficiencies and synergies that will cut costs," he

But he grins and adds: "If at some point an acquisition appears on the
horizon, then we will move, but we are getting ourselves into a stable position
– so that we can add without huge upheaval."

Timeline: the company’s evolution

November 1999 – National Power
announces demerger plans to form Innogy, to manage UK power generation and
supply, and International Power

April 2000 – npower is launched to manage UK retail energy

September 2000 – Innogy acquires the operations of Independent
Energy to add to the npower brand

October 2000 – National Power shareholders approve formal
demerger to form Innogy (npower’s parent company)

April 2001 – Innogy moves to acquire Yorkshire Electricity

August 2001 – Innogy acquires Northern Electric making it the
UK’s leading electricity supplier

September 2001 – Innogy is promoted into the FTSE100 and
supplies 7 million customers

May 2002 – RWE acquires Innogy

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