- Category: Nasir El-Rufai
- Friday, 25 March 2011
- By Nasir el Rufai
Nigeria is at a critical juncture wherein we do not need a mere political leadership change. Since, the kind of commitment leaders will attract depends on the depth at which the leaders can tell their stories, Nigeria needs, at this crucial moment, a leader that possesses the competence to articulate the idea of rebuilding and refocusing the nation in a compelling way that would draw the kind of people who have the heart for what they are trying to do; those who can offer emotional commitment
LEADERSHIP AND CHANGE MANAGEMENT:
BEING A SPEECH AT A BREAKFAST SESSION AT THE NATIONAL ELECTRIC REGULATORY COMMISSION (NERC) ON THURSDAY, 24TH MARCH, 2011
NASIR AHMAD EL-RUFAI, OFR
Good Governance Group, Abuja - Nigeria
The theme of this breakfast discussion is unique considering the current situation in our dear country – Nigeria, in which we would be exercising our franchise to elect a new set of political leadership across all levels of governance in the federation in the next ten days. The 2011 elections scheduled to take place between 2nd and 16th April 2011, all things being equal, would usher-in new leadership come 29th May 2011.
This discussion is also unique in the sense that it is an opportunity for an informal interaction since the new leadership in the National Electric Regulatory Commission (NERC) came on board a couple of months ago. Just like the overall leadership of the country occupies a significant position so is that of NERC, particularly, because of the pivotal role expected of the Commission in refocusing the electricity supply industry - the infrastructural portal of the country. The focus of the leadership of this Commission has lots of implication for the infrastructural development of the country now and in the immediate future because the foundations you lay, the decisions you make and the independence you exhibit will make or mar the chances of Nigeria's progress. We shall come back to those pertinent roles expected of the Commission later in this discussion.
I am also particularly pleased to be here, seeing Dr. Sam Amadi who I met in Harvard some ten years ago and Eyo Ekpo, who I enticed from his law practice to assist me in BPE almost ten years ago as well. It is interesting to see Eyo move from being the Team Leader of the Power Sector Reform Team in the BPE a decade ago to a rich public service career and now to NERC, which was where I envisioned him, Dr. Lanre Babalola, Professor Iloeje and Dr. Sa'ad Usman to be foundation commissioners, if I had remained in BPE beyond 2003! Alas, that was not to be, and this is all history now, sad history though!
Leadership and Change Management – Conceptual Issues
Leadership and Change Management is a phrase which symbolizes a measure by which change emanates through purposeful and focused direction by the topmost echelon of an organization.
A quick poser is ‘What makes human beings capable of the everyday miracle of leadership and how we can all make better and more consistent use of it?’ Human beings are designed to feel simultaneous conflicting motivations and arrive at an acceptable decision—not in spite of the controlling motivations but because of them. There is the four-drive theory of human behaviour (the drive to comprehend, to bond, to acquire, to defend) to the leadership realm, and explains the history of leadership in political, economic, and symbolic institutions as a result of one of three types of leadership: good leadership, misguided leadership; and evil leadership.
While not attempting to suggest that all human organizations ought to be fully democratic (for instance, the military institutions), there is a general phenomenon that development of leadership must keep pace with growing democratic consciousness across the world. It is obvious that leaders of today’s organizations will be well served by acknowledging that people carry a growing democratic consciousness to the organizations that they choose, expecting leaders to behave less like sovereign rulers. Where business leaders behave like sovereign, they are likely to hear from employees’ feedback mechanism that they are not communicating, that they seem remote, that they make decisions others do not understand, or support, that they do not seem to have a vision or strategy, or that they are uncaring and exploitive.
Taxonomy of Commitment to Change
It is imperative to note that a significant element of leadership is a clarion call to the followers for commitment to a defined goal, embodied and symbolized by whom that leader is and his antecedents. The commitment that is summoned is often a transformational power, a force that can create substance out of mere dreams and promises through dedication, involvement, and persistence of those who offer it. It should be understood that the commitment of the followership is the fulfillment of the leader’s art; without which a leader is just a voice.
There are four forms of commitment central to a leader’s ability to lead and effect change. They are: Political, Intellectual, Emotional and Spiritual.
Political Commitment involves committing to an idea when there is little or no drive to follow through because our motives have less to do with the object of the commitment and more to do with what we might gain or avoid by offering the commitment itself. Political Commitment is usually adequate when only amount of small learning is needed; when an alternative way is sought to doing what the people already know how to do or when adjustments are made to what already exists. Political Commitment suffices whenever a change is viewed as a necessary and normal part of a particular job.
Intellectual Commitment entails a leadership asking followers to support a course of action because they are logically convinced of its value. It conceptualizes leadership as a process that occurs within the mind of individuals who live in a culture – a process that entails the capacity to create stories. An important component of a leader’s story is a vision of the future, whereby the leadership draws for the followership, a picture of an ideal future state.
Emotional Commitment emanates where there is an appeal to gut feelings that compel people to act. While intellectual commitment is about convincing people, winning emotional commitment is about moving them. Daniel Goleman – a psychologist once stated:
“…Great leadership works through the emotions…even if they get everything else just right, if leaders fail in this primal task of driving emotions in the right direction, nothing they do will work as well as it could or should”.
It is important to note that emotionally intelligent leadership builds resonance by turning into people’s feelings – their own and other’s and guiding them in the right direction. A leader’s resonance with followers gives rise to emotional commitment.
In gaining a fuller insight into the theme of our discussion and the applicability to our peculiar situation, there might be a need for us at this juncture to contrast intellectual commitment with emotional commitment in the course of a critical analysis of leadership and change management.
While intellectually committed people grasp the significance of whatever change is being proposed in historical terms with a sophisticated understanding of the interrelationships, the nuances, and subtleties of the situation; the emotionally committed are different - they are the traditional activists who are highly motivated and are anxious to get involved and try to change conditions. In effect, intellectual commitment by itself may breed understanding but inaction, while emotional commitment by itself may produce action that runs amok. So, gaining both intellectual and emotional commitment, that is, winning both minds and hearts in the service of a common purpose offers the promise of great results. Therefore, for a sustained change of any kind, other than that of the lowest order (provided by mere political commitment), the combination of intellectual and emotional commitment is the minimum standard of commitment required.
Spiritual Commitment is the fourth form of commitment but the most profound. It is the magic of leadership found in the relationship between leader and followers; a relationship in which leaders create followers and followers create leaders. According to Deepak Chopra in a speech to the Mobius Leadership Forum annual conference at the Harvard Business School, April 11-12, 2002:
“…And so if we understand this principle that leaders and followers co-create each other, that they form an invisible spiritual bond; that leaders exist to embody the values the followers want, and followers exist to fuel the leaders’ vision from inside themselves, then we begin to understand why we see the type of leaders that we see in certain situations.”
Leadership with the type of spiritual commitment described is rarely found in organizational life except the organization itself is inherently spiritual. It is important for us not to infer that the term ‘spiritual’ as used here necessarily implies ‘religious’ sense, but in the sense of a calling from some source larger than one’s self. The call may be religious, but might also be from some other entity such as community, a family, a set of ideas or values, or those who are in need. People on this level of commitment are considered as being on a mission which is usually long term, which sometimes appears to consume such people, as if they were seized by something larger than everyday life. Spiritually committed people give of themselves selflessly and with fervor.
Unlike political commitment, intellectual, emotional and spiritual commitment represents a higher stratum of commitment and they can neither be bought nor sold. They cannot be demanded or coerced.
Spiritual commitment evades capture by anyone other than the person who experiences it. It comes from a deeper source than most people bring to their day-to-day work, and from a place within that many people in leadership position do not touch.
What Leadership and Change Nigeria Requires
Nigeria is at a critical juncture wherein we do not need a mere political leadership change. Since, the kind of commitment leaders will attract depends on the depth at which the leaders can tell their stories, Nigeria needs, at this crucial moment, a leader that possesses the competence to articulate the idea of rebuilding and refocusing the nation in a compelling way that would draw the kind of people who have the heart for what they are trying to do; those who can offer emotional commitment. If the votes of Nigerians are allowed to count in the April 2011 elections, as Professor Attahiru Jega – led Independent National Electoral Commission (INEC) has continually assured, the people would be at the liberty to choose the leader they consider competent at articulating an idea that comes from the deeper place within each of us from the spirit, which can lead to drawing spiritually oriented people who can offer the highest level of commitment.
Except the electoral process is free, fair and credible, the emergence of a competent leader that can conceptualize proper ideas for the needed change in the Nigerian polity might be a mirage. If the opportunity is missed in April, the Nigerian state might be on the edge. The fear expressed herein is not borne out of pessimism but the level of chaos being reported across the country among political opponents on daily basis as the elections draw nearer. One rhetoric question is ‘would the desperate politicians who are bent on imposing themselves on the people ever allow a credible poll despite the avowed determination by INEC to do the right thing?’
Organizational Leadership and Change
Just like it is required at the country-wide level, at each organizational level, in addition to conceptualizing the nature of commitment required to effect a change, the competencies required to attain same, the leader needs to understand the level of commitment required to accentuate the change being sought.
There is a challenge here for the new leadership of NERC. It is public knowledge that in the last four years, the Commission has had to contend with numerous distractions which must have swept it off its feet and made it impossible to accomplish its mandate as specified in the under the enabling legislation. For about three and a half years, since May 2007, the leadership of the Commission was enmeshed in a war of attrition with the Ministry of Power which resulted in an impasse at the Commission. These are all history today.
However, it would be inadequate to stop at that without pin-pointing the flagrant violation of the law during the period. While the enabling legislation creates an opportunity of policy interface between the Commission and the Minister of Power, the provisions of the law do not subjugate the Commission to the whims and caprices of the Ministry or its Minister. The mode of appointment and termination of the appointment of Commissioners of NERC are clearly spelt out in the Act. It is thus worrisome why the Yar'Adua administration allowed the immediate past leadership of the Commission to be removed outside the parameters of the enabling law. Worse still, without an Act of the National Assembly for the repeal of Section 88 of the Electric Power Sector Reform Act 2005, the Rural Electrification Agency (which was established with the objective of enabling electric power supply to the rural areas which account for nearly 60% of the Nigerian population) was decapitated and was almost at a standstill due to overriding self-interest of a few political office-holders.
In view of the urgent need for infrastructural development in Nigeria, a major part of which depends on reliable electricity supply, the degree to which the current leadership of NERC delivers on its statutory mandate is critical. I will therefore move on from the conceptual to the more critical leadership and change management issues that may confront you in the next five years.
Public Service - Key Success Factors
As public servants, you face major challenges. You must strike a balance between technical accuracy, professional judgment and political correctness. As commissioners, you must take decisions based on recommendations of the technical and administrative staff of the Commission, yet not be misled by them. I have spent some nine years in public service in advisory and executive positions - both sub-cabinet and cabinet level. What I will outline below is a summary of my personal experience, and judgment.
Prior Frame/Compass/Vision: People in public leadership succeed when they have formed clear thoughts about why they are in their positions, and why it is worth paying a price for - well in advance of their appointments to such positions. If you have not done so in your own individual cases, then you are almost certainly going to spend five, very busy years doing nothing. Happily, the public servants know how to keep you busy signing off on expenditures of a few thousand naira, or approving routine stuff into the early hours of each day!
Clear Goals and Priorities: Defining your personal, collective and organizational goals and aligning them enables focus on such and avoids distraction and wasteful routinization. What is your primary goal as a regulatory agency? Is it for Nigeria to have more electricity supply or affordable electricity that is in short supply? Questions like this need to be asked for you to decide on your goals, priorities and the trade-offs necessary to move forward.
Personal and Organizational Passion: Do you love your job? Do you believe in the importance of your job in the nation's well-being and future? Are you ready to do whatever it takes, and pay any price - current and future - to progress the objectives of the organization? A person that is angry about the current situation is more likely to be passionate about changing it than one who cares little. In BPE, I used to search for angry people to hire - the result was a passionate institution whose second religion was privatization. You need people of passion to effect change. And without change agents, our ESI will not get any better.
Structure to Fit Strategy: You need to design an organizational structure that will enable you deliver on your organizational goals, priorities and strategy to achieve them. The objective would be to be best in your industry in meeting the expectations of electricity consumers, the market participants and the Nigerian economy. The best regulator is one which as Alfred Kahn (1970, p. 17) notes that:
“the single most widely accepted rule for the governance of regulated industries is to regulate them in such a way as to produce the same result as would be produced by effective competition, if it were feasible.”
Staff and Skills to Deliver Services: The best strategy and structure will come to nothing unless the organization is staffed with people with the technical, professional and managerial skills to deliver on the mandate. Your area of responsibility would require the hiring of smart people with basic education that would be trained and retrained to be regulators in an emerging industry. You must attract the best and brightest, give them confidence through training and attachment with experienced regulatory agencies and inculcate pride and integrity in their work through adequate compensation and conducive working environment.
Organizational Systems, Style and Shared Values: These systems, managerial style and values must be thought through, designed and entrenched by the leadership through stories, leading by example, and staff recognition. Emphasis on excellence at entry, equal opportunity to all at entry level, but promotion and recognition of innovative ideas, hard work, and output combine to create the values which organizational members respect.
In my public service assignments, I have found the 7-S framework developed by McKinsey in the 1980s, as very useful in thinking through these issues anytime I take charge of any organization. I attach a single page of questions to enable you think through the issues that would have a bearing on your organizational design.
The Regulatory and Leadership Burden
While the National Council on Privatization is expected to de-consolidate the monopoly called, the NERC is charged with a huge responsibility of recreating and regulating the electricity supply industry. As stated earlier, your success will:
• lay the foundation for inflow of investments,
• improved and reliable electricity supply,
• accelerated infrastructure development,
• enhanced human capital development,
• unleash our latent entrepreneurship and small business growth,
• create and expand employment opportunities for all, and
• enable overall economic, industrial and social development
Your failure will doom Nigeria to remain a dark nation - a nation of permanent "potential" which will never be realized in the lifetimes of many of us here. If anyone here feels that I am being too hard and placing the entire burdens of this nation on your shoulders, it is not too late to resign and run away from it all - but it is the truth.
As regulators, you must debate and agree what your primary objectives are. In my humble opinion, Nigeria suffers from a chronic infrastructure deficit, particularly electricity. Our primary problem in this area is scarcity. The solution lies in increasing the supply of electricity to Nigerian consumers and businesses. How you as the industry regulator go about achieving this, while balancing the competing political, commercial and professional interest is a matter of strategy. We need to attract billions of dollars in investments to close the deficit - and this will take between 5 and 10 years of hard work to realize. The government alone cannot do it so private sector investment is required, and to do so, the following steps as minimum need to be taken:
• price of electricity must be above the cost of generation, transmission and distribution,
• government-owned electricity companies must be privatized as no investor wishes to be in competition with a government-owned entity,
• Transmission and System Operation Company must be under private management with a clear investment budget to continuously expand the network,
• incentive schemes - fiscal and so on must be in place, and strict enforcement of bills payment by the government itself, and other steps to make the sector liquid and attractive, and
• a clear plan to deal with stranded liabilities, excess staff of the government-owned companies and their pension liabilities
As you think through these and other issues, you must make hard choices, and will come face to face with the hypocrisy of the Nigerian political and business elite. They are willing to pay about N60 per kWH for diesel-powered generation in their homes, but would resist a cost-reflective tariff raise that will in the long rung save everyone more than N30 per kWH! What needs to be done even if exile follows after you leave office. That is the Nigerian reality. So do you care enough to risk that and more?
You must carefully decide the sequencing of the three As of public services - Affordability, Availability and Accessibility. The endgame of successful regulation should be affordable electricity which is available all the time and accessible to all - rich or poor, rural or urban, Unfortunately, these three do not usually converge at the same time if ever! You must choose which comes first. In Nigeria of today, I think it should first be Availability (at a relatively "high" price), then competition induces Affordability over time, and finally regulation ensures universal access (Accessibility). This is my opinion. I invite you to think about these and disagree. But do something as Nigeria needs solutions, not endless debate.
Leading Change in the NERC
Before I conclude, let me recognize that this organization has been in existence since 2005 or thereabouts. The current leadership in NERC may need to implement organizational changes to position the institution to deliver on its onerous responsibilities. As mentioned earlier, organizational change is difficult and painful. At both the BPE and Federal Capital Territory Administration , I had to design and implement major changes.
In doing so, I found the very brief (barely 200-page) work of my Harvard professor John Kotter invaluable . I will outline the eight major steps in implementing organizational change as articulated by Kotter's seminal work and subsequent publications , which I recommend for your more detailed consideration.
1. Create and Increase a sense of organizational urgency - Stable Electricity Now!
2. Build the Guiding Team for Change
3. Create the right and compelling vision to guide the change effort
4. Communicate widely for buy-in
5. Remove barriers to empower action
6. Create "Quick Wins" to diffuse cynicism and skepticism
7. Don't let the sense of urgency sag or slow down change
8. Make change stick through entrenchment and rewards system
For any credible change to emerge there must be forthright leadership with adequate transformational power to take bold steps to effect change and the fortitude to sustain the tempo, either at various organizational levels or country-wide.
Remarkable change management is possible only when the leadership understands the required nature and level of commitment to effect positive change. It is obvious that the commitment that leaders seek forms the lifeblood of their leadership. They arrive in four forms – political, intellectual, emotional, and spiritual. These forms of commitment combine in various ways to create different levels of energy that can become available to a leader’s purposes: the lowest level being political commitment, the highest being spiritual commitment. Leaders appeal to higher levels of commitment by practicing the arts involved in inspiring intellectual, emotional and spiritual commitment, each of which depend on different set of competencies.
In the BPE, we began preparing for the staffing of NERC in 2001 by sending the first set of "future regulators" to the PURC/World Bank training program on utilities regulation at the University of Florida. I present hereunder excerpts from an interesting paper from that program (I never attended, but got all the papers) which I came across recently on four key lessons learnt from regulators from over 40 countries over a ten year period of the program :
Lesson 1. Decide the market model before privatizing.
My country has a small window of opportunity to privatize the moribund, publicly owned electric monopoly. The current arrangement has created unsustainable financial deficits and many citizens are without electricity. We must act quickly because labor union leaders are stirring up the workers and customers who have subsidies. Unfortunately, there are many delays in developing the restructuring plan. Can we privatize now and worry about the restructuring plan and regulatory rules later?
Lesson 2. Balance commitment and flexibility.
When we started our price cap regime two years ago, we committed to price adjustments based
on inflation and expected productivity advance. Since then, drought has increased electricity
demand and the currency crisis has decreased the value of my country's currency. Customers see the greater demand creating higher profits, but the company's foreign owner has seen profits plunge in real terms. The company wants higher prices to make up for the currency losses. Do I listen to the customers or the company?
Lesson 3. Establish independence, transparency, legitimacy, and credibility.
Our national elections are in three weeks. Our recently formed regulatory agency must make a
decision on a company-proposed price increase in one week. The Minister of Energy has
suggested privately that we not allow the increase. He is concerned that his party will lose the
election if energy prices increase and implied that he will overrule us if prices rise. The evidence
indicates that the company has invested appropriately and that the price increase is justified.
What should we do?
Lesson 4. Implement incentive schemes that promote efficiency and introduce
competition where feasible.
Four years ago, my regulatory agency established strong incentives for utilities to decrease costs. Recently, company profits have soared and executive salaries have risen three times faster than workers' wages. Newspapers have begun calling for an "excess profits tax," and key legislators have introduced legislation that would do just that. The utility executives say the profits and salaries are deserved because they worked hard and took risks. The Prime Minister has asked for my advice. What should I tell him?
The four lessons considered are only a subset of the numerous lessons that the program attendees at the University of Florida/World Bank training course have learned. Nations that ignore these lessons do so at their peril. A more complete set of lessons can be found at http://www.cba.ufl.edu/purc/training/training.htm. I strongly recommend that you study them.
As is now usual with me, I have not said anything that is calculated to please or lighten your awesome burdens. That is probably why the Chairman and the commissioners invited me! But if not, I fervently plead mea culpa. But I ask you ladies and gentlemen, to listen to the message and not the messenger. I have found it quite regrettable that one must sometimes speak in such frank terms but the country's interest demands that some of us speak as such.
I thank you for inviting me and God Bless.
Nasir Ahmad El-Rufai
The 7S Model Framework
• What are the company’s sources of sustainable competitive advantage (cost, quality, service, technical leadership)?
• What are the company’s key strategic priorities (e.g. penetrating new markets, new product development, speed to market, improving customer service)
• What is the basic structural form?
• How centralized versus decentralized is the organization?
• What is the relative status and power of the organizational sub-units?
• Does the organization have the systems it needs to run its business? (e.g. does it have a system for monitoring customer satisfaction?)
• What are the management systems that top management uses to run the company? Which ones do they pay the closest attention to?
• How does the organization recruit and develop its people? (e.g., formal training, mentoring programs, stretch assignments)
• What are the demographic characteristics of the management team? (background, education, age, gender, nationality, professional identity, experience outside company)
• Where are the strongest leaders found in the organization (e.g. in which functions)? The weakest?
• What business activities is the company distinctively good at performing?
• What new capabilities does the organization need to develop, and which ones does it need to “unlearn” to compete in the future?
• How does top management makes decisions? (e.g. participatory versus top-down, analytic versus “arm-chair”)
• How do managers spend their time? (e.g. in formal meetings, informal conversations, in the field, with customers, in the lab)
• Do people have a shared understanding of why the company exists?
• Do people have a shared understanding of the vision of the company?
• What types of issues receive the most and least top-management attention? (e.g., short run versus long run, internal vs. external)
• How do people describe the ways in which the company is distinctive? (e.g., focus on quality, people)