Digital Transformation Gone Wrong at PG&E

Written By: Bob Blanchette
Date: January 8, 2020

Even if you don’t live in California, you’re probably aware of the devastating fires that sadly took lives and property over the last few years. A big part of this story can be pointed at electrical utility grids and lines and the poor maintenance thereof. When tested by high winds, massive fires and outages have occurred. The company in the middle of this unresolved debacle is a utility called PG&E Corporation.

In and out of bankruptcy for well over a decade, the company has desperately sought profitability. It’s reach for profitability may have come before safety, and its goals of rewarding shareholders and fostering happy employees have failed miserably. Eighty-five people died as a result of the fires that began in 2018. This is the same company held responsible for a natural-gas pipeline explosion in 2010 – another alleged lack of safety and compliance.

We also recently wrote about how a better digital transformation might have saved PG&E. Here are some lessons that can be learned from this unfortunate situation:

OCM will continue to play a large part in success or failure

PG&E under the rule of its latest executive Peter Darbee, required his executives to commit to a No. 1 goal called “transformation.” His tenured senior troops (according to the Wall St. Journal) were unimpressed with his forceful, abrupt style and he didn’t try to hide the fact that he was unimpressed with their knowledge base and ideas. He removed over 40 senior officers (>100% turnover) only to be replaced by minions of Wall Street and telecommunication’s employees. While consolidating operations, Mr. Darbee was also able to restore PG&E’s dividend. He also spent heavily buying wind and solar capabilities. In fairness, CA is known for its renewable energy mandates.

Financial stakeholders applauded while catastrophic danger loomed. The fires of 2018 will be historically remembered (for all the wrong reasons) and the future of the company is uncertain at best. Fire related liabilities are said to exceed $30 billion.

The question becomes, do you understand the value of your workforce and what their collective knowledge contributes? And, how will you use this input to mold your company’s successes or failures? Could an HCM implementation help augment your digital transformation?

Big system integrators will promise the world (but you must live with it)

While Mr. Darbee had the power to make drastic changes – he didn’t necessarily prioritize spending toward safety initiatives. His unconventional transformation stance was cheered and supported by hundreds of hired resources from Accenture. But of course, who would know more about big transformations than Accenture - known for outsourcing, consolidations and yes transformations that include big new ERP systems?

Unfortunately, most workers couldn’t handle the complexity of the new software and training and buy- in was lacking – refer back to the first section where I mention the importance of OCM. At go-live, many work orders reportedly disappeared. Outside electrical contractors (that had to work through the utility) complained that the newly revamped application processes were unworkable.

Long story short, $300 million was paid to Accenture by PG&E, who eventually pulled the plug on the transformation while asking Accenture for money back. In other words, it appears as though PG&E was “Accentured” – a common problem when companies don’t keep their big ERP system integrators in check.

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In Conclusion: Five Guiding Principles

Here are five guiding principles that we can take away from the digital transformation at PG&E:

  1. Companies will always need to reinvent themselves. This most direct path to success is to involve your key employees, listen to them and learn from them.
  2. Assess risk highly. Whether it’s cyber related or product related, you can’t be profitable if risk is not managed and mitigated.
  3. Your plans for innovation must have a strategy that is consistent with the values of your company. Your ambitions must be matched with an execution strategy.
  4. Pick your partners carefully. Companies can benefit greatly from the right outside expertise. We commonly see this during ERP implementations – where “hands-on experience” matters and time has been taken to foster employee involvement. Bigger is not better and one size does not fit all – so choose selectively and don’t limit your options to the big ERP systems integrators.
  5. Align your organization. Coordination and information are Are you proactively managing alignment and continuous improvement on an ongoing basis to create synergies?

Sometimes it takes a drastic example to emphasize key points. As much as some of the rules of business have become more fluid, safety remains a top-level issue to build your digital transformation around.

Bob Blanchette
Bob brings a creative blend of understanding operational benefit and navigating employee resistance to change, ultimately helping organization realize success and benefit through maximizing the effectiveness of people. He holds a successful track record of HR leadership and promoting fair and unbiased outcomes.
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