What to look for (and not) now that Eskom has a new CEO?
UCT GSB's Dr Tim London reveals the challenges André de Ruyter faces, and what all leaders can learn from this.
You can’t live in South Africa for very long without becoming pretty intimately aware of the workings of its State Owned Enterprises (SOEs), including, but certainly not limited to, Eskom. Unfortunately, in the roughly six years I’ve lived here, I’d guess that close to 100 percent of the reasons I’m hearing about SOEs is due to problems: load shedding, State Capture, tender and other spending irregularities, crippling debt situations, or similarly depressing news.
As is often the case when a big company or SOE makes the news for the wrong reasons, Eskom has responded to its most recent dire situation by making a move to replace the leadership at the top of the organisation.
Such a leadership change to deal with very public organisational failure is, of course, not unique to South Africa or its SOEs (or even to Eskom specifically). It has always been a savvy PR move; this is even more true in an era when most people are inundated with information, rarely getting past the headlines of even the bigger stories.
“New CEO appointed to turnaround Organisation X” is a quickly consumable headline that does the dual work of signaling to the casual reader that the problems are not too serious (a single leader can solve them) and that the organisation is serious about improving (replacing a “top” leader reads as a very big deal).
Looking at Eskom’s case specifically, it’s worth looking beyond the person holding the CEO title and examining what is likely to hinder or enable André de Ruyter during his time in the hot seat.
Key factors in André de Ruyter’s time in the hot seat
1. Let’s start with the most obvious: Eskom is a political football at the moment, which means that any steps taken not only have to be practical, they must also take into account the political realities of the situation. While this will play out in many different ways, the most central will be how much support Mr de Ruyter gets from the government for any changes he suggests. Any decision, including any decisions to not change something, will generate dissent from some corner: rate payers, unions, economists, or political leaders from different parties, amongst others. It is abundantly clear that the current situation at Eskom is untenable; how much rancour, and from which groups, will the current political leadership be willing to deal with as Mr de Ruyter makes changes? If he feels he has security to make difficult decisions, he will be much more successful than if he feels that relevant governmental leaders may hang him out to dry if his decisions rankle the “wrong” people.
2. Among those potentially anger-inducing decisions are how Mr de Ruyter (and others) choose to deal with the following questions:
- What’s the future mix of energy generation (nuclear, coal/natural gas/fossil fuels, renewable sources, etc.)?
- Should energy production and distribution be unbundled? And, if so, how should that be done?
- Given Eskom’s financial woes, how do they tackle their generation and distribution problems in more cost-effective ways? And what happens if those efficiencies mean reductions in pay or jobs?
- Related to the previous questions, while efficiencies are needed, more revenue is required, as well. How is this to be done when rises in tariffs will further exacerbate inequalities and disproportionately impact those already living in poverty or near-poverty conditions?
3. I won’t pretend to be an expert on credit ratings, but the upcoming review by Moody’s will have massive implications for the turnaround project at Eskom. If Eskom is to stay viable, it will need more injections of cash regardless of what’s next, but if South Africa sinks firmly into junk status, the cost of Eskom’s debt will go from bad to horrific. This could make any decisions by Mr de Ruyter moot, even more urgent, or simply untenable at short notice.
4. This last point is among the most generalisable for any organisation, regardless of the other contextual factors: while changing the top leadership of an organisation can be the “right” decision and impactful, that change alone will virtually never be sufficient to make significant change in the organisation. It’s showy and it matters, but the challenges facing Eskom are not down to one person: they are systemic and also systematic, built up due to multiple issues across many different people and processes. Most cases of organisational failure, in any country and any industry, are built up over time and due to interconnected forces; their moment of failure is often not a problem in and of itself, it’s usually just the straw that breaks the camel’s back. Much of Eskom’s most recent failings are due to issues going back years if not longer; load shedding and near-insolvency are symptoms of those issues festering over time.
What we can learn
I often like to write about issues that may have been in the public view, but have more generalisable implications for leaders or organisations. What Eskom is currently going through is unique in many ways and the future of the organisation (regardless of who helms it) will be dependent on factors that many people simply won’t have to deal with in their own situations. What is relevant to the vast majority of organisations facing crises such as this are:
- Don’t expect a change of top leadership to fix all of your problems.
- Your current problems often have roots months, years, or decades ago. The time to start dealing with potential harmful baggage is now, before the crisis hits that highlights these existing failures.
- You can leverage crises to make important change for the future, but even with glaring needs for changes, you’ll need to encourage dissent in a constructive way that will enable the next steps to be as impactful as possible and bring more cohesion, not less.