The Effective Utility Management Initiative: Past, Present & Future

The intense economic realities of the ?new normal? of today?s business environment are driving both private- and public-sector entities to make significant changes to their organizations and to enhance their focus on efficiently meeting their current and future challenges. For today?s utility leaders, the pressure has intensified to minimize costs and maintain high performance while simultaneously addressing a long list of challenges that confront their organizations. The emerging management framework of ?effective utility management? ? or EUM ? is gaining momentum and acceptance by the water utility industry as a pathway to respond to the need of continuously improving organizational performance. For utilities, the ongoing need to address industry challenges and enhance performance is not new, but what is new is the acceleration of changes and challenges being exacerbated by the slowdown of the U.S. economy.

Conceived by the industry, for the industry, EUM is proving to be an excellent organizational framework to help utility executives, governance boards, policy-makers and regulators focus on ways to improve utility performance across the board. EUM has become an effective framework to assess, plan, and implement utility change management initiatives required to address the needs of tomorrow?s utilities. EUM is an organizing framework that provides utility organizations a method to plan, implement, measure and monitor organizational performance enhancements against 10 specific attributes of effectively managed utilities. These 10 Attributes, which were developed by a group of leading utility managers and endorsed by the U.S. Environmental Protection Agency (EPA) and six major industry associations in 2007, describe a series of outcomes that all water-sector utilities, regardless of size, should strive to achieve. They include:

  • Product Quality;
  • Customer Satisfaction;
  • Employee and Leadership Development;
  • Operational Optimization (efficiency);
  • Financial Viability;
  • ?Infrastructure Stability (management of assets);
  • Operational Resiliency (safety and security);
  • Community Sustainability (environmental sensitivity);
  • Water Resource Adequacy; and
  • Stakeholder Understanding and Support.

In addition to the 10 Attributes, the EUM framework also defines ?The 5 Keys to Management Success? that impact the overall performance of a utility organization. These are:

  • Leadership;
  • Strategic Business Planning;
  • Organizational Approaches;
  • Measurement; and
  • Continual Improvement Management Framework.

EUM?s focus is to develop a strategy which combines performance around the 10 Attributes and 5 Keys in such a way as to establish a high performance organization.

The Past: How EUM Came to Be

The origin of the EUM program can be traced back to a meeting hosted by the EPA, which took place in July 2005 in Washington, D.C. The original intent of the meeting was to convene a cross-section of utility leaders and the industry?s leading organizations to discuss perspectives, observations and the critical needs of the utility industry as it faces a growing list of key challenges. These challenges include addressing aging infrastructure, rising costs, evolving regulatory requirements, rapidly changing workforces and populations shifts, just to name a few. During this meeting, which lasted a day and a half, it became apparent that the challenges facing our country?s utilities were all very similar and there were common themes that transcended all utilities regardless of geographic location or size. As the discussions unfolded, the group began to focus on the idea that our industry would benefit from the development of a strategic management framework that would focus on providing guidance and resources to utilities as they work to address the key challenges facing their organizations. More importantly, the group realized that a coalition of leading industry associations, with support from EPA, was needed to develop a common utility management framework that could help utilities of all sizes address their management and performance challenges.

In May 2006, based on discussions following this meeting, the Association of Metropolitan Water Agencies, the American Public Works Association, the American Water Works Association, the National Association of Clean Water Agencies, the National Association of Water Companies, the Water Environment Federation and EPA entered into a Statement of Intent to ?formalize a collaborative effort among the signatory organizations in order to promote effective utility management.? These collaborating organizations chartered the Effective Utility Management Steering Committee to advise them on a proposed joint water utility sector management strategy that would be applicable to water-sector utilities across the country. Members of the steering committee were nominated by these associations and represented a wide range of utilities. The charter of the steering committee was to establish a framework that would allow for industry collaboration for the advancement of the principles and practices of effective utility management, and to encourage and promote their wide application.

In March 2007, the steering committee released its findings and recommendations, which became the basis for continued development of the EUM initiative and guided further development of a sector management strategy. The steering committee?s findings and recommendations included:

  • Establishing and adopting 10 Attributes that would best frame the industry?s key focus areas for management attention for improved performance;
  • Adopting ?The 5 Keys to Management Success? that would provide utility leaders with a management approach that has proven to be an effective way to lead organizations;
  • Promoting and advocating performance measurement. The steering committee believed strongly that effectiveness and improved performance happens most successfully when organizations monitor and measure their performance over time;

Providing the industry with a resource tool kit which would include both immediately useful tools and guidance of where management related resources could easily be located. The steering committee believes that providing the industry with useful resources will help support management needs; and
Ensuring sector promotion and advocacy of the program and available resources by the collaborating organizations and other stakeholders. The steering committee indicated that to help create incentives for management focus on improved performance, the industry?s leading organizations would need to lead in the advocacy of the EUM program through active promotion, community outreach, recognition of commitment to management excellence, and promotion of financial incentives from sector financial sources.

Since the release of the above findings and recommendations, considerable development work has gone into the refinement and enhancement of the EUM program. What started as a meeting to discuss industry trends and share perspectives, turned into an initiative that today is changing how utilities prepare themselves to meet the needs of tomorrow?s utility customers.

The Present: What Is the Current State of EUM?

In June 2008, the collaborating organizations released the EUM Primer, which contains the majority of the EUM framework resources and serves as EUM?s unifying document. It was prepared by a 16-person utility advisory group appointed by the collaborating organizations that comprises existing or former utility managers representing different types of utilities from different geographic areas of the United States. The utility advisory group and representatives from each of the collaborating organizations worked in partnership to develop the EUM Primer and used the steering committee?s findings and recommendations report as a guide. Additionally, the establishment of the EUM website (www.watereum.org) was completed.

For the past three years numerous utility organizations have utilized the EUM Primer to help guide them to assess, audit, plan, and implement sustained organizational improvement across the 10 Attributes and The 5 Keys to Management Success in their utilities. A number of successful case studies now exist that serve to demonstrate the benefits of EUM assessment and the adoption of elements of the EUM framework (we will describe some of these case studies in more detail in Part 2 of this article in the January/February 2011? issue of UIM).

The collaborating organizations continue to administer and promote this sector strategy for improved industry performance, and an ongoing effort exists to enhance and improve the EUM initiative to ensure that its utilization results in sustained performance improvements for the industry, for example:

  • Conferences and industry awards are now using the EUM framework as a way to organize technical programs and make achievement awards that recognize management excellence;
  • Regulatory guidelines for utility management performance are being released that advocate the use of the EUM framework as best practice strategies;
  • Bond rating agencies are starting to consider EUM concepts as a mechanism to assess the strength of a utility?s management team to arrive at bond ratings;
  • Management audits of utilities are being organized around the EUM framework;
  • Individual utility strategic plans are being developed to address the 10 Attributes; and
  • Utility managers are being trained in EUM.

All of the above are resulting in a growing sector interest in the EUM initiative.
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The Future: Where Is EUM heading?

It is difficult to predict if the EUM framework will become the management ?standard? of the utility sector in our country. It is, by design, a simple, replicable approach that allows individual utilities to assess their strengths and opportunities for improvement, and chart a measurable course for improvement. Interest in developing more sophisticated tools associated with the Attributes is growing. Building on the EUM Primer, the Water Research Foundation (WRF) is now leading an effort to develop a benchmarking tool based on the Attributes and associated best practices. Once completed, this tool will allow a utility to benchmark its own performance and gauge its efforts with other similar utilities. Only time will tell if the benefits associated with the adoption of the 10 Attributes and the 5 Keys to Management Success will truly serve to create the standard of excellence that will be required from tomorrow?s utility leaders. One thing is very clear however, the pressures associated with the ?new normal? of today?s economy require a departure from the status quo of yesterday. Many of the key pieces are now in place within the EUM framework that can be used today to help our industry enhance overall utility performance.

Darin Thomas serves as the director of Raftelis Financial Consultants Inc.?s management consulting division, SUNESIS. He is a recognized authority within the water and sewer utility industry, and for more than 25 years he has been a significant contributor to many of the industry?s emerging technologies and services.

Jim Horne has been with the Office of Water at EPA since 1988, during which he has concentrated on educating and assisting public entities, including water and wastewater utilities, on various approaches for successfully managing their operations and reducing environmental impacts.

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