Download ppt - Detroit Edison

Transcript
Page 1: Detroit Edison

DETROIT EDISON

How the outside forces changes the

company culture

Page 2: Detroit Edison

SUMMARY

This case shows how a company altered forever the assumptions by

which the organization had been managed for the past 50 years. The

company has to change and adapt to the new culture and

environment, driven by the forces outside the organization to stay in

the business. The three changes (the energy crises, the nuclear

power plant and the affirmative action) were the result of forces that

were beyond the control of the organization. The company had to

cope with a complex, multifaceted environment that was changing

rapidly. The forces that would determine the future of the Detroit

Edison organization now lay outside the company, rather than within.

Page 3: Detroit Edison

BACKGROUND

D

etroit Edison operates in a highly regulated environment : rates, profits and capital

investment must all be approved by the Michigan Public Service Commission. This

kind of regulation and oversight as well as the historical development of the

organization, have helped create a distinctive management style and

organizational culture.

T

his company is a leader in the industry and led by several legendary executives

who were closely involved with the evolution of public utilities nationally and

internationally. Edison grew rapidly along with Detroit and the automobile industry

from the 1920s through the early 1970s. with a predictable 7 percent annual

growth, the most important management function was to plan the continual

construction of generating stations and distribution systems.

Page 4: Detroit Edison

B

ut by the early 1970s, all of this changed. All

represented changes driven by forces outside the

organization and they altered forever the

assumptions by which the organization had been

managed for the past 50 years.

Page 5: Detroit Edison

THREE MAJOR CHANGESFirst Major Change :

It begins with the oil embargo in 1973, fuel prices skyrocketed, the growth in

demand declined to 1 to 3 percent per year. The energy crisis also threw Detroit’s

automotive industry into chaos and led to further decline in the region.

Second Major Change :

Meanwhile its nuclear power plant get the final approval completed in January

1988. This make the estimated costs have risen to more than $4 billion. The

company’s future now depends on keeping the plant on line at full power. Edison

was once an organization that prided itself on engineering expertise. Construction

of conventional plants had been carried out by the company itself and represented

an important source of vitality, dynamism and pride. But, with the experience on its

nuclear power plant Fermi 2, Edison tended to increase the company’s dependence

on outsider rather than demonstrate its independent engineering expertise and

leadership.

Page 6: Detroit Edison

T

hird Major Change :

B

lack Edison employees charged the company with racial bias in hiring practices. The court decision ordered that

the 8 percent proportion of blacks in the company be raised to 30 percent and that the company pay $4.25

million in damages to the victims of discrimination. The company was also ordered to undertake a court ordered

affirmative action program, which stipulated that one black must be hired for two whites who were hired, and

that one black employee must be promoted for every white employee who was promoted. After this, the

company leadership of the time began to adopt a pragmatic approach toward integration and later became more

progressive. Change at the top however was easy compared with change throughout the rest of the

organization. The company changed quickly at both the top and the bottom but very slowly in the middle. The

middle management protested as they saw the affirmative action as a major threat for them. This situation also

altered the strongly paternalistic culture and sense of family that had characterized the company for years. It

created racial barriers within an organization that had traditionally held a set of remarkably egalitarian customs

for informal socializing both on the job and outside of work.

Page 7: Detroit Edison

THE DETROIT EDISON CULTURE

T

he traditional stability of the work force and the long tenure of many employees ; Employees saw

themselves as a family member

H

ighly paternalistic

T

he employees socialized outside work, pleasant and respectful manner of interaction

I

ssues that might raise conflict often have been avoided

M

ale culture, dominated by engineers

T

he engineers vs politicians dynamics within Edison provide a classic example of conflicting subcultures.

The logic of the technical core often contradicts political and social considerations.

C

areer tracks in Detroit Edison are quite clearly defined and managers often know well beforehand what

their next position will be.

H

igh level of stability and predictability both in organization and in individual careers.

A

ll upper management positions within the company were filled by insiders.

Page 8: Detroit Edison

D

uring the 1970s, the company began bringing outsiders at very high levels in an

effort to make itself more responsive to external factors. Slowly, the newcomers

began to change the style of top management and achieve integration of the

organization with the community and the state. These changes occurred through

recognition that many of the most important decisions of the future were going to

be made by those outside the company.

E

dison has great skepticism about innovative human resource practices. They point

that culture and internal organization are irrelevant to the company and that such

things were best left alone. The organization favored a conventional human

resource function, concerned primarily with selection, training and performance

appraisal.

Page 9: Detroit Edison

E

ffectiveness

D

etroit Edison is a relatively high cost producer and generally falls in the next to lowest quartile when

compared to a national sample of utilities. That is because most fuel must be imported into the state,

and the region’s wage rates are relatively high. These performance issues are beyond the managers

and executives control, yet the general trend persists. One response to the low growth environment

has been to try to diversify for profit subsidiary named Syndeco. Syndeco has attempted to diversify

by building on the organization’s expertise and resources and by forming new service based

companies to provide an alternative to a totally regulated environment. Syndeco is an interesting

study in the clash between an entrepreneurial culture and the traditional Detroit Edison culture.

T

he potential of deregulation also requires Edison to begin to consider adapting to a changing future.

Deregulation could change the regional monopolies to competitive situation, where non Edison

producers of power to sell to customers on the Edison system. This innovation would provide

customers with choices that they do not now have.

Page 10: Detroit Edison

THE CULTURE & EFFECTIVENESS MODEL

I

nvolvement :

A

t the early years, Edison has enjoyed conditions : rapid and steady growth in the

demand for its product and no competitors. And its engineering based culture met

these demand extremely well.

T

oday, Edison appears to be a low involvement organization. It is true in the highly

stable operating organization, which is no longer challenged by the growth and

construction of the early years. The top management has changed considerably in

response to outside forces, and it appears to have developed a style that

incorporates diverse viewpoints, values, innovation and contemplates the impact

that regulatory decisions may have on future business.

Page 11: Detroit Edison

C

onsistency :

T

he consistency of the organization’s culture has changed appropriately to reflect changes in

the organization’s environment, but the balance must necessarily continue to shift toward

diversity to adapt to future demands.

A

daptability :

F

or years, adaptability simply meant responding in a timely manner to predictable linear

growth in the demand for electricity. But now, adaptability has come to mean responsiveness

to outside influences and accommodation of the needs of a larger set of stakeholders. In the

future, as demand for adaptability and responsiveness to outside influences continue to grow,

adaptability at all levels of the organization will become more important. For now, the

organization’s ability to adapt and change appears to be the most critical factor limiting its

future performance.

Page 12: Detroit Edison

M

ission :

E

dison missions has changed. These changes in mission can be directly traced to a changing definition

of what it means to be a public utility. Being a public utility meant adding capacity in a predictable

and efficient manner. But, now being a public utility meant responding to the public’s demands,

represented through the political system, for cost effective options and safeguards.

O

ld mission : Maximizing capacity

N

ew mission : responding to the public demands.

T

he difficulty is that the first mission is still alive and well in the hearts and minds of many of the

organization members. Some of the systems are compatible with both the old and the new mission,

but many are not.

Page 13: Detroit Edison

LESSON LEARNED

C

ulture and effectiveness at Detroit Edison is the tremendous inertia that a culture

can develop over a long period of time. The culture in this case has many roots,

and engineering occupational culture, a long period of stable growth, monopoly

situation, a paternalistic organizational family company.

T

his case analysis has pointed out, the 1970s were a decade of incredible

turbulence, and challenged nearly all these basic assumptions. The energy crises,

nuclear power, affirmative action and the end of construction required that the

company adapt to influences by those outside the company. With such inertia,

change could occur only through great pain and turmoil. Cultural changes in this

organization did not occur without massive change in the organization’s business

environment.

Page 14: Detroit Edison

THE CONCLUSION

Culture is like any object with inertia : the more

momentum the object gains, the larger the disruption

necessary to change its course, and the smaller the

deflection from its original path. Only over a period of

time comparable to the development of the original

culture, can a substantial redirection of a culture

occur.

Page 15: Detroit Edison

ANALYSIS

T

he definition of Culture :

A

set of norm, moral, value and customs (rules) that

belong to human, that used also for interpreting the

environment and used to create the behavior

Page 16: Detroit Edison

THE PROCESS OF CULTURE

Page 17: Detroit Edison

ANALYSISI

n this case, the changes in the outside environment of the organization, has urged the changes in

corporate culture. The Detroit Edison company has its original culture, where employees saw themselves

as a family member, had a pleasant and respectful manner of interaction, with highly paternalistic

situation, and traditional stability of the work force and the long tenure of many employees. These kind

of culture had been derived from the business environment, where Edison start as a public utility service.

As a public utility services, Edison has a stable demand from customer, and become the only company

which supply an electricity to the community (monopolistic environment).

B

ut, as years goes by, the outside environment changed. The three major changes were : The energy crisis,

Nuclear power plant and Affirmative Action. These kind of situation, has urged major changes in Edison

culture. They cannot use the original culture anymore, as it not suitable anymore with the current

business and economic situation. In that case, the company has to adapt with this kind of situation, in

order to stay in the business. The new culture that derived from the outside changes was : they build a

competitive environment among the top management, by filling up the top management from the

‘outsider’. So that, the company can see clearly about the changes at the outside world.

Page 18: Detroit Edison

ANALYSISS

The company also reduce the level of consistency that Edison traditionally

has had include more active intervention by government and regulators, a

higher profile public image, and a racially integrated work force and

management staff.

The consistency of the organization’s culture has changed appropriately to

reflect changes in the organization’s environment. Also, the company

adaptability has generally increased over the past 10-15 years. Adaptability

is to respons as quickly as it could, to outside influences and

accommodations of the needs of a larger set of stakeholder. Besides that,

the company changes their mission from the old one, that is to respond to

the public demands. These are all changes of the company culture, urged

by outside situation changes.


Recommended