Harrison Bridge has sought the views of its senior network in energy and utilities to determine what the main challenges are for the year ahead. Regardless of the organisation type or size, the challenges were many and varied. The political and regulatory landscape provides little certainty and making a profit is extremely challenging due to cost and competition pressures. This means that a new skill set of talent is required to navigate the challenges ahead. Lee De Souza explains.
1. RECRUITMENT AND RETENTION
27% of senior leaders reported challenges related to hiring, developing, retaining or upskilling talent. For one renewable energy business that has a multi-billion turnover, recruiting the best talent is their number one priority after safety. Talent and diversity in talent is made more difficult in certain areas such as commodity trading as the talent pool appears to be getting smaller. The current landscape requires individuals to address complex technical and commercial challenges, with few possessing the relevant required expertise in these areas. Given the current uncertain climate and market, finding people with an open and strategic mindset who can think beyond the short term and find practical solutions seems also to be in short supply.
There are several energy supply businesses that that have drastically reduced their headcount or are likely to do so in the future. Keeping employees motivated in an uncertain market when redundancies have been made, or are going to be made is proving difficult. One would think that there would be an oversupply of talent in the market, but the skill set that is required for the new world is not easily found.
Some organisations are struggling to retain generation Z whose mindset is to go ‘elsewhere’ if they are not given the opportunities they seek for progression as quickly as they would like. What is clear is that there is much to learn in both directions across different generations and harnessing the knowledge of younger generations could be key for businesses to plug the gap, particularly in relation to technology.
2. POLITICAL AND REGULATORY LANDSCAPE
The uncertainties that remain concerning a post Brexit UK does little to steady the utilities market. However, with a Tory government in situ, some of the outcomes in terms of policy are more certain, particularly versus the Labour manifesto which proposed nationalisation of many companies.
Another main challenge in the eyes of energy and water suppliers is the breadth of regulation, the pace of change and the rise of principles-based regulation. This is a good thing in terms of treating the customer fairly but makes it more difficult to interpret and therefore more onerous on people.
What is the definition of treating a customer fairly and a more affordable payment arrangement? Whilst technology can automate processes, principles-based regulation requires a different skill set to manage this ambiguity.
3. COMPETITION AND COST PRESSURES
Margins are being squeezed with competition coming from many different types of providers which makes it difficult for businesses to grow sustainably. For energy suppliers, they are competing with third party intermediaries, price comparison sites, alternative providers of energy products and services and oil and gas majors. Who “owns the customer” in an Electric Vehicle world? Is it the electricity company or the petrol company of old? Providers of clean technology need a much deeper relationship with the customer or the technology companies who control the devices. Investment choices for large energy services companies is critical when the cost pressure from their supply business is so big.
Several businesses have or are about to divest their energy supply businesses. For those that have acquired businesses, integration and leverage will be key as well as having the right people and skillsets for the future.
Managing costs whilst driving growth at the same time as trying to implement transformation is no easy task. This is representative of many large energy services businesses who need to do more with less. I.T is still a key challenge with one of the main difficulties being the transition from legacy systems and processes to new technology with improved efficiency and lower costs that can broaden the customer offering via digital propositions.
Given that many organisations have multiple external and internal challenges, staying true to strategic objectives in the face of ‘quick wins’ is often forgotten. This is often down to a lack of focus and chasing too many things at any given time both for small and large organisations.
5. THE CHALLENGES FOR SME SIZED BUSINESSES AND TPIs
A common theme amongst SME sized businesses is cashflow. There are many opportunities to take advantage of, but being able to invest in them requires capital. In addition, selecting the best opportunity to focus on to deliver the most beneficial impact is made more difficult with market uncertainty. For those going through funding rounds, this activity is all consuming and the lengthy process means that everything is often put on hold until they have been concluded. Partnering with the wrong investor has many pitfalls.
Many new suppliers are almost completely reliant on third party intermediaries (TPIs) who have grabbed a major share of the market for energy supply. For suppliers, ensuring they work with TPIs that treat the customer fairly is of utmost importance. Both the TPI and the supplier want “ownership” of the customer, but will that continue? From the TPI perspective, they now have a large choice of suppliers they can represent. Some TPIs struggle to influence the larger suppliers to use new technology, even when the business benefit is clear whereas smaller suppliers appear more agile and open to change.
6. ENERGY SOLUTIONS AND CLEAN TECHNOLOGY
It is felt that the end user is taking more time to take decisions for very larger users of energy. Purchasing decisions for energy efficiency and clean technology is taking much longer and becomes a CapEx investment decision rather than a revenue one. The energy user is far more knowledgeable about energy use than in the past and this results in greater due diligence and scrutiny of service level agreements.
The cleantech space is not an easy market with regulatory uncertainty and a challenge to make a profit on projects. The economics are very challenging and who pays to make it work remains the key issue, which is why many are not just relying on the UK market.
It is felt by some energy professionals that UK consumers are slower to adopt technology in comparison to other international markets which makes market penetration hard. For those larger energy organisations that have been slower to transition to new energy solutions and new technology, they need to be wary of smaller providers that have been quicker to react and may be more customer focused in some cases.
This article was written by Lee De Souza, Managing Director of Harrison Bridge, executive recruitment experts in energy and utilities. Lee has been the director of three recruitment companies and has recruited entire board and executive teams for energy suppliers, energy consultants and clean tech companies in the UK as well as recruiting globally.
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