For the exclusive use of M. Ammar, 2015.9-603-056REV: MARCH 25, 2003AMY C. EDMON

For the exclusive use of M. Ammar, 2015.9-603-056REV: MARCH 25, 2003AMY C. EDMONDSONLarge-scale Change at the WSSCJohn Griffin turned his paddle sideways to change the direction of his canoe. It was a beautifulspring day in 2002, and he was eager to have some brief time for reflection at the tranquil TriadelphiaReservoir. As general manager of the Washington Suburban Sanitary Commission (WSSC), he wasexcited about the progress being made at the company yet daunted by the many challenges just overthe horizon. Like virtually all public utilities, the WSSC found itself in the position of having toundergo significant changes, facing pressure to perform like a well-oiled private-sector machine.Enthusiasm about the changes was growing among employees. Indeed, many of the changes underway had been developed by employee-led teams.Just a few years prior it had appeared as if the WSSCs existence as a government organizationmight end. The county governments and state- and local-elected officials that had overseen thecommission were actively considering a move to privatize the WSSCs operations. Now that threatwas subsiding. Griffin and his senior leadership team were making significant progress turning theorganization around, maintaining high-quality standards, and improving efficiencywhile reducingthe workforce by 30%.The WSSC had also recently made a public commitment to keep rates stable for another fouryears. As part of its becoming more competitive, the perceived haphazard rate increases thatcharacterized the WSSCs history could not be used in the future. Clearly, the organization wouldhave to maintain and even increase its efficiency. Had the senior team promised too much? Didsuccess hinge on generating additional revenues? A new entrepreneurial team had developed abusiness plan to sell ancillary services such as laboratory testing to other organizations. At the sametime, the WSSC was bidding against private companies for the business of serving local militarybases. What would these new streams of business mean to its core function and core customers? Didit make sense to further complicate the WSSCs operations?The WSSCIn 1918, the Maryland General Assembly created the WSSC to plan, construct, operate, andmaintain water and sewer services for residents and businesses in Marylands Montgomery andPrince Georges Counties.1 Waste from these two counties flowed south into the District of1 Company annual report, 2000, p. 3.________________________________________________________________________________________________________________Professor Amy C. Edmondson and Research Associate Corey Hajim prepared this case. HBS cases are developed solely as the basis for classdiscussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.Copyright © 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may bereproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical,photocopying, recording, or otherwisewithout the permission of Harvard Business School.This document is authorized for use only by Mohamed Ammar in Managing Business Processes taught by Frederick Wendt, Widener University from May 2015 to August 2015.For the exclusive use of M. Ammar, 2015.603-056Large-scale Change at the WSSCColumbia. The WSSC was charged with managing the water systems. As the counties grew, so didthe services. In 2002, the WSSC served over 1.6 million people in an area of 1,000 square miles,making it one of the 10 largest water and wastewater utilities in the United States, with a capital andoperating budget of $650 million.2The WSSCs approximately 1,500 employees managed three reservoirs (14 billion gallons ofwater), two filtration plants that produced an average of 167 million gallons of clean water per day,14 water-pumping stations, six wastewater-treatment plants, 43 wastewater-pumping stations, 63storage facilities holding up to 212 million gallons of clean water, 10,200 miles of water and sewermains with 90 new miles being added each year, and 30,000 hydrants. The organization alsoperformed more than 500,000 lab tests annually to ensure water quality and safety.The Flow3Water for the two counties was taken from the Patuxent and Potomac Rivers. Large intake screensin the reservoirs ensured that the water pulled through was free from fish and debris. From there,water was pumped to the filtration plants: the Patuxent Water Filtration Plant in Laurel, Maryland,and the Potomac Water Filtration Plant in Potomac, Maryland. Just prior to entering the plant,chemicals including lime and ferric chloride or aluminum sulfate were added to create flocagelatinous sticky substance that absorbed color out of the water and surrounded any solid particles.The process of turning fine particles into larger ones was called coagulation. The water was thenmoved through a process that would make it potable for residents of the area. (Exhibit 1 describesthe Patuxent River process.)Setting the BudgetEach year, WSSC staff developed a budget and submitted it for approval to the Prince Georgesand Montgomery County Councils. Any conflicts related to the proposed budget had to be workedout between the counties. If consensus was not reached, then the budget remained unchanged. MikeErrico, deputy general manager at the WSSC, described the potential for disagreement: There aredifferent philosophies in Montgomery and Prince Georges Counties, so theoretically they might failto reach a compromise with one another. The WSSC had a monopoly situation, and if customers hadcomplaints, there was little they could do about it.Our approach to budgeting was to figure out what we needed and ask for it, John McLeod,chief of the entrepreneurial team, explained, then justify it. Our budgeting process was focusedexternally for the approval that was necessary from the counties; it was not used as an internalmanagement tool.When there was growth, rates remained stable because an increasing customer base increasedrevenue, which funded operational needs. When growth slowed or stabilized, the WSSC asked forhigher-rate approval. As McLeod recalled, There were a number of jokes about what WSSC stoodfor. I guess the one that makes the most sense was the we way so company.Many employees commented that customers saw the WSSC as an ivory tower, a group that didnot care and used rate increases to fund a fancy office building. Errico did not completely discountthis view, explaining, There was a lot of gamesmanship played along these lines. You develop this2 See <http://www.wsscwater.com/about/history.html>, accessed September 17, 2001.3 See <http://www.wsscwater.com/KidsPage/followflow.html>, accessed November 23, 2002.2This document is authorized for use only by Mohamed Ammar in Managing Business Processes taught by Frederick Wendt, Widener University from May 2015 to August 2015.For the exclusive use of M. Ammar, 2015.Large-scale Change at the WSSC603-056fortress mentality. Were WSSC, were charged with delivering water, dont tell us what to do; stayout of our way.A Wake-up CallEventually, community resentment grew, and a discussion of privatization of WSSC services wasinitiated among county- and state-elected officials. American Water was the major private companypushing the Maryland General Assembly for a study of privatization options at the WSSC. A countycommissioner was even an active proponent of privatization.Ultimately, the legislature called for a task force to review the situation. Although privatizationdid not emerge as the final task-force recommendation, the WSSC had already received the wake-upcall for change. The problem was that the organization was not set up to be cost efficient, nor was itgeared to be competitive. The general attitude was that the importance of a clean, reliable watersource should not be trifled with, such that cutting corners was not an option. The requirement forconsistent, essential service delivery inspired redundancy in the workforce. Errico described thementality:Water service cannot go down. We cant have a problem. Were delivering water. That isall-important. But by the same token, you need to do a risk analysis and say OK, I know Imdelivering water and sewer services. I know I want it to be as close to 100% reliable as I canget. How much do I pay for that? How much do I put at risk? Whats the downside? WSSCwas a Cadillac.Internally, the WSSC was organized as many government organizations were, into functionalsilos. McLeod explained the way things operated:We were very much a government type of place with silos or areas of responsibility such asplanning, design, construction, and maintenance. There was a moat between them, a hand-offprocess. That was the lay of the land. If there was a construction problem, it was because ofbad design. If there was a maintenance problem, there was bad construction. End-to-endaccountability did not exist, but finger pointing certainly did.Threat of PrivatizationWhile some portion of the public was likely to resist having its water company run by anorganization that held profit as the number one priority, takeover pressure was mounting. Erricorecalled the atmosphere: Private entities were chomping at the bit to take this place over, buy it, andrun itthey saw opportunity. Many elected officials were very much in favor of that. So at thatpoint, the agencys very survival was dependent on change. Both county executives were in favor ofprivatization. They didnt like the way the agency was being run. General manager Griffin put iteven more strongly:If I had to sum up what many people said about WSSC, I would say they thought we werean overpriced organization; we gold-plated everything, had too many employees, were riskadverse at all costs, the workforce was insularand even arrogant in their dealings with manystakeholder groups. I came out of Maryland state government where we went through a lot ofbudget cutting for years. From about 92 until 98, all we did was grapple with less and lessrevenue, trying to avoid massive layoffs, juggling our programs. I came in here and peopledidnt have a clue what all that was about because they had been recession-proof. If theywanted to do something, theyd just raise rates.3This document is authorized for use only by Mohamed Ammar in Managing Business Processes taught by Frederick Wendt, Widener University from May 2015 to August 2015.For the exclusive use of M. Ammar, 2015.603-056Large-scale Change at the WSSCNew LeadershipIn October 1999, Griffin was hired as the WSSCs new general manager for the express purpose ofimplementing change. He was formerly secretary of the Department of Natural Resources for theState of Maryland. There was some resistance to his entrance because he was an outsider, the first ina WSSC management position in a very long time. The first thing Griffin had to do was gain buy-infrom the commissioners and his employees. The threat of privatization was high, and to fight itGriffin first had to win over his people.His approach was one of open and honest communication. Errico described Griffins tactics: Hewent around to the employees and made it clear: Im not here to privatize WSSC. Im not here to takethis agency apart, dismantle it, and sell it off. Im here to make it an efficient organization that is ableto compete in a very serious way. He spent a lot of time speaking with the elected officials andemployees. Errico continued: He is an effective manager, very open to telling people whats goingon and not trying to hide things. He tells it like it is. People really respected that. Griffin describedthe beginnings of his new role from his perspective:What did I do first? I just started to go around and meet the employees and chat with thema bit and started to formulate some specific ideas about immediate things that needed to bedone. I guess I should say that in a more normal environment, I would prefer to have gotten toknow this place and its people for several months before starting to make changes. But I didntfeel I had that optionthe expectations were high and members of our outside governancestructure were pressing for immediate changes.Creating the Strategic Business PlanThe strategic plan developed at the WSSC encompassed issues ranging from business strategy toindividual growth and development. Managers involved in the change effort believed that the WSSCneeded a values-driven culture that required both personal and corporate transformation.4 Onewould not work without the other.To lead the change initiative, Griffin first put together a steering committee of 12 to 15 membersconsisting of a cross section of work functions and hierarchical levels. The teams initial task was toreview and approve for implementation best-in-class practices in the industry. This was a first stepin what was called the Competitive Action Program (CAP). As stated in the WSSCs 2000 annualreport, CAP is a comprehensive, multi-year effort to reduce costs and staff without sacrificingquality or impacting employee safety. The budget ensures well continue to provide safe drinkingwater, guarantee reliable service and safeguard the environmentall in a fiscally responsiblemanner.5The explicit goal of the change was to make the WSSC more competitive across the board, not justcompared to other government agencies. Although most of the goals of the new organization wereencompassed in CAP, other aspects of the organization had to be changed to support these efforts.For example, the WSSC implemented an effort to increase management diversity to better representthe customer base served by the organization.4 Communication and Team Progress Meetings May 1618, 2001, company transcript, p. 14.5 Company annual report, 2000, p. 30.4This document is authorized for use only by Mohamed Ammar in Managing Business Processes taught by Frederick Wendt, Widener University from May 2015 to August 2015.For the exclusive use of M. Ammar, 2015.Large-scale Change at the WSSC603-056Another one of Griffins first steps was to create a new, binding fiscal plan and to commit tofreezing rates for the next five years. He explained: We are a great company in the throes ofindustrywide changes. At a time when international companies are taking over public agencies, weare creating our own destiny. We have embarked on a transformation to become an even stronger,more resilient organization. If we are to remain an industry leader, we must behave more like aprivate company.6Part of Griffins job as leader was to reach out to external stakeholders, especially thecommissioners, to gain support for the changes. In the 2000 WSSC annual report, Juanita D. Miller,former commission chairperson, noted:As a longtime WSSC customer and current commission chairperson, I continue to beimpressed with the commitment to quality that makes WSSC a leader among the 10 largestwater and wastewater utilities in the nation. Being a leader presents many challenges, and thepast year has been particularly challenging for WSSC. Its leadership team and many of itsemployees recognized that complacency does not sustain success. They realized that anindustry once comfortable in its ways was susceptible to change. And they understood thatfulfilling their mission included finding new and better ways to serve customers. 7Implementing ChangeOperationsJust prior to Griffins arrival, the WSSC hired a consulting firm to come in and assess its service.The consultants found a 21% gap between the WSSCs operational efficiency and that of best-in-classprivate companies. Steve Gerwin, plant operations support manager, described the internal reactionsto the study:Once we understood what that gap was, we did some soul searching. One or two largegroups in this organization decided that they really wanted to truly reengineer the process.That was the production team, which represents the factories, the people who treat the water,and the maintenance people teamthe people who actually repair the water mains and thetransmission sewer mains. So teams were established. [See Exhibit 2 for more detail.]According to Gerwin, the management steering team did not tell the operations people how tochange but instead empowered them with a blank piece of paper, go where you want. This is aboutthe amount of savings were looking for.Gerwin described the creation of a work team to direct change within plant operations:We took the same approach [as the steering team] of getting a cross section, a diagonal cutthrough our organization, trying to get at everybody from laborers through managers on thischange team. The team identified what were the best practices and essentially produced somedocuments that laid out a template of where we thought we ought to go and what the savingswere going to be using those best practices in the field. What was proposed was twice the6 Company annual report, 2000, p. 4.7 Company annual report, 2000, p. 2.5This document is authorized for use only by Mohamed Ammar in Managing Business Processes taught by Frederick Wendt, Widener University from May 2015 to August 2015.For the exclusive use of M. Ammar, 2015.603-056Large-scale Change at the WSSCsavings that the management steering team had asked for and some pretty fundamentalchanges in how we do business.There were two parallel reengineering processes going on at the same time. One was the systemsmaintenance or customer care group, responsible for water distribution and wastewater collection.The other was a similar reengineering program labeled total productive operations, or TPO, whichdealt with the water and wastewater treatment plants. Both groups came up with their own changeplans. (Exhibit 3 lists examples of recommendations from both groups.)Not everyone was on board, however; as Errico explained, Theres a hard-core group hereIwould say right now probably 20% of the peoplewho just cant accept that WSSC needs to change.Toward a New Organizational CultureBuilding a new organizational culture started with some dismantling of the old organization.Functional groups were reorganized, and a system of new job titles and incentives was created.(Exhibits 4a and 4b illustrate old and new organizational charts.) Departments were combined,layers of management were removed, and employees had to reapply for their jobs. Gerwin recalledhow he explained it to his staff:We sold [the structural and job changes] not as a threat but as an opportunity. I told myemployees, Dont worry, when the change comes, there will be a job for you and even a betterone than you have now. But if you think the job you used to have is going to be there, yourewrong. If you want to come to work and read the newspaper, talk to your friends, and fill upspace and get your paycheck, that job is gone. But if you want a challenge and something todo, there may be an opportunity there. Now, how well that sunk in, Im not sure, but somepeople are real excited about the change, some people just dont want any part of it, and thebig group in the middle is going, Well see how it goes.Between 1996 and 2002, there was a 30% reduction in staff (from 2,200 to 1,500). McLeoddescribed how some of the reduction was accomplished: Simultaneously with the reorganization,we offered an incentive for early retirement. This buy-out was two years retirement credit, or oneyears salary for anybody who was eligible for early retirement. And here, you could be eligible forearly retirement with 15 years service. So, a lot of people took the money and ran.The workforce reduction included two phases. The first phase began when CAP identified thecompetitive gap. In November 1999, the second phase was launched. It was a retirement incentiveprogram that radically accelerated the drop in positions. Table A details the reductions.Table AChronological List of Job ReductionsDateDecember 1996June 1997December 1997June 1998December 1998June 1999September 2000December 2002# of Positions2,0302,0101,9641,9531,9251,8901,5541,480Source: Company information.6This document is authorized for use only by Mohamed Ammar in Managing Business Processes taught by Frederick Wendt, Widener University from May 2015 to August 2015.For the exclusive use of M. Ammar, 2015.Large-scale Change at the WSSC603-056A consulting organization specializing in organizational development was used to help thecultural shift gain traction. With the help of the consultants, the WSSC sent several groups ofmanagers to a local training facility to participate in a team building and leadership program thatincluded an outdoor segment using the ropes course to build enthusiasm, teamwork skills, andpersonal awareness of the change process. The program was met with both enthusiasm andskepticism internally and externally, and there was some question as to whether the rest of the staffwould go. Griffin described the reactions of some of his managers:CEOs of many successful companies talk about culture as being as important, if not moreimportant, than anything else. Id say to my managers, Don’t you see how important it is?Some of them were very enthusiastic in their response. Others were just deadpan. Ive triedall these different pitches to the folks who are having problems. I said, look, youre in a veryimportant role here. How can I help you do your job? What are the things you need me to dofor you to be successful? I cant have you come to staff meetings or retreats or off-site eventsand have you sit there like this. That doesnt work. Thats not part of leadership. I need youto be active and constructive. It doesnt mean you have to blindly accept everything or youcant adapt it to your own style, but youve got to have some basic favorable disposition to it.Many of those who were enthusiastic described the program as a life-changing experience inwhich they developed a keen sense of appreciation for their own roles in producing positive changeat the WSSC.Structural ReorganizationThe reorganization of teams within the WSSC was implemented with the idea of breaking downthe silos that had resulted in passing both the buck and the blame. As McLeod explained, the changecreated positions that assigned a responsible party to a project from start to finish:Planning and engineering, for example, used to have project managers and contractmanagers. One would go through the designs, which were always done by externalconsultants. We didnt use an in-house group. So it was sort of a review and approval and aproject management phase. Then construction contract managers built everything. The changeswitched that so somebody would take the project the entire waythe engineeringbackground and training were the same for each. Now, somebody will get a project and theylltake it from design all the way through construction.Another major development was the grouping of teams. For example, the new customer careorganization managed anything that involved water distribution, whereas before, maintenance ofwater mains was in one group and water-meter maintenance was in another. Customer care, in itsnew form, was the largest team in the WSSC, encompassing one-third of all employees andrepresenting the key psychological connection to consumers. As explained by Carla Joyner, chief ofcustomer care, that connection was not always obvious to different people in the chain of service:For example, if you have an inoperable curb box, which is the mechanism that turns onwater to a property, maintenance people were responsible for doing that type of work, butthey didnt understand why they had to do work for the meter-maintenance people. Theythought that if they werent repairing a water main, it wasnt important work. If we neededthe curb boxes repaired, they didnt understand the importance of that to encourage customersto pay their delinquent bills.7This document is authorized for use only by Mohamed Ammar in Managing Business Processes taught by Frederick Wendt, Widener University from May 2015 to August 2015.For the exclusive use of M. Ammar, 2015.603-056Large-scale Change at the WSSCThe new system was very successful. In 2001, a record number of water-main breaks (1,821) wererepaired, with 48% less staffthanks to the new customer care programs.8 The customer care teamalso hosted summits twice a year, where employees could ask questions and have other concernsaddressed. (Exhibit 5 documents…