PKP Energetyka – a case study · Managing change in the digital age 40 2 8 14 22 28 Laying the...

PKP Energetyka – a case study

Managing change in the digital age

Harvard Business review Polska Presents

editor-in-CHieFPaweł Kubisiak

Content editorKatarzyna Koper

editorial assistantUrszula Gabryelska

autHorsTomasz BesztakRyszard BryłaFriederike FabritiusPaweł GóreckiBeata GórniakAnna HyżyMarek KleszczewskiKatarzyna KoperStanisław KubackiPaweł KubisiakRégis LemmensPaweł MajkaHubert MalinowskiMarek MazierskiAgnieszka NosalPiotr ObryckiRobert RyszkowskiMarek SzumlewiczFilip SzumowskiMateusz Żurawik

GraPHiC desiGner, dtPAlicja Gliwa

ProduCtion ManaGerMarcin Opoński

ProoFreadinGAndrzej Retkiewicz

Media & MarketinG solutions direCtorEwa Szczesik-CzerwińskaPhone no. 664 933 232

enGlisH version translator Łukasz Łyp

ProoFreaderSue Sheikh Ian Spriggs

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iCan instituteal. niepodległości 1802-653 warszawae-mail: [email protected]

PkP energetykaul. Hoża 63/6700-681 [email protected]

Managing change in the digital age

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34Laying the ground for changeThe process of change is a huge challenge for both leaders and employees of the transformed organisation. That is why the board implemented its programme of change using existing staff as far as possible, only bringing in new staff in areas where specific new competences were required.

Aspire, inspire, deliverHow to efficiently implement an organisational transformation and what role the leader plays in this process is the topic of conversation between Wojciech Orzech, CEO of PKP Energetyka and Paweł Kubisiak, Deputy Editor-in-chief of HBRP.

Unleashing employee potentialImmediately after the PKP Energetyka take-over, not only was a transformation process launched, but also broad activities that built employee engagement. Changes were made step by step, with the broad and very active participation of midlevel managers, line managers and field teams.

Investing in the futureThe PKP Energetyka investment programme is a key component in the transformation of Polish railways aimed at adapting railway infrastructure for increased transport volumes and speeds.

The drive for innovationEnergy storage, modern railway infrastructure diagnostics, helicopters and drones examining the power grid, or a failure prediction system – a culture of innovative thinking and acting was introduced into PKP Energetyka from the very beginning of the transformation process.

Next station: DigitizationFrom support process automation to the AI support for railroad grid network and distribution network monitoring, digitisation converts data dispersed throughout a company into an operationally and commercially meaningful information stream.

Higher standards of organizationWithin two years PKP Energetyka has increased its management process efficiency level to above market average. This has been achieved through a combination of employee and outside expert engagement in transforming processes and practices to global best standards.

PkP enerGetyka is one of the biggest energy companies in Poland. The company operates in three key areas: it manages the sales and distribution of electricity via its own distribution grid all across Poland, provides power grid services as well as maintenance service of the railway power grid. The company’s clients are mostly businesses, including railway transport companies such as PKP Intercity, PKP Cargo, POLREGIO and Lotos Railway. As a key national electricity distributor, powering the railway

grid with 3 kV power, PKP Energetyka is an entity responsible for the maintenance of the national railway traction system, its own traction network and power supply system as well as the power grid managed by PKP Polskie Linie Kolejowe (PLK – Polish Railways).

The company was formally created in 2001 by separating the Railway Electrical Power Department from the National Railway (PKP). PKP Energetyka was acquired from PKP in 2015 by Citicorp Venture Capital (CVC Capital Partners),

a private equity fund. CVC confirmed its decision to acquire PKP Energetyka by announcing its intention to implement a longterm development strategy to turn PKP Energetyka into one of the main companies heavily involved in the modernization of the Polish railways. This declaration was made to the trade unions and employees of PKP Energetyka working in fifteen plants. CVC assured them that it would develop and modernize the company, in line with its goal of achieving the highest

The process of change is a tremendous challenge for

both leaders and employees of an organization poised for

transformation. This is the very reason why the management

board chose to work with its existing personnel to implement

its transformation program and only hired new talent in areas

where specific new competences were required.

author: Paweł kubisiak, deputy Chief editor ‘Harvard Business review Polska’

Laying the ground for change

PKP Energetyka case study2

organizational and managerial standards in power and railway industries globally.

CVC Capital Partners was established in 1981 and currently has 24 offices throughout Europe, Asia and America, with current investments valued at over $50 billion. It manages the accounts of over 300 investors from 40 countries, several of which are the biggest, most professional and most demanding institutions in the world. The acquisition of PKP Energetyka was CVC’s first investment in Poland.

Choosing areas for changePKP Energetyka was facing several debilitating challenges when it was acquired: its financial situation was shaky and it had been struggling with organizational difficulties. Having previously invested in related industries, CVC representatives quickly spotted the potential to improve the company’s standards of quality and efficiency. These initial observations were later confirmed following a due diligence process which identified all areas that required investment.

Wojciech Orzech, an experienced director who had spent many years on the management board of several companies, was appointed the new CEO of PKP Energetyka. He was both familiar with the power industry and had a proven track record in transforming organizations. Over time, other directors with solid experiences in leading strategic projects came onto the management board: Konrad Tyrajski, Leszek Hołda and Christopher Biedermann. The new board was entrusted with a longterm

3Managing change in the digital age

improve the standard of its maintenance services and plan investments better. Real transformation began only when a structured program called The Diamond Project was implemented. Each of the 29 work teams was given the task of delivering specific initiative proposals to raise organizational efficiency within two to three months.

The work was supervised by a steering committee that coordinated the efforts of those teams, supervised the impact of their work, and corrected the direction and flow of work whenever necessary.

The board’s main principle was to involve its own employees in the process of transformation because these were the people who knew the company inside out, knew its problems like the back of their hands and, thus, could readily identify areas which

how the Top 400 Group was created. The group was divided into smaller teams that identified areas for improvement. As a result, 29 work teams were formed to scrutinize specific areas, verify the possibilities for change, and work out preliminary solutions.

The investor had held certain ideas and hypotheses about what could be improved in the company, i.e., to manage the railway power grid maintenance more efficiently,

development project aimed at achieving operational perfection in PKP Energetyka by conforming to the best global standards.

The board started its preparations for organizational change by defining the areas which needed changes urgently. From the outset, a decision was made to engage the entire managerial team in the process of implementing those changes, from board members to line managers. This was

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From the outset, a decision was made to engage the entire managerial team in the process of implementing changes, from board members to line managers. This was how the Top 400 Group was created, followed by the formation of 29 task teams.


comparable quality or efficiency indicators in place.

From Day One, the board had made changes by leveraging on the engagement of its current and new employees which is why a lot of time and energy were dedicated to collaboration efforts with the Top 400 group. The first significant objective was to convince them of the validity and necessity for organizational transformation. The objective was to include the managers in discussions and to create changes which would develop the company further. This was the company’s first success milestone. The second objective was to prioritize tasks properly. When key areas that needed change were identified, the issues highlighted were then separated into two cate gories: those which were either urgent or significant and those that could wait. For instance, in the case of field operations,

and human resources. The first step in the project was to conduct an internal audit. This provided a perfect starting point for the new board and gave them a chance to really learn and understand how the business works. A review of its assets and resources showed that the company employed several individuals with highly unique competences. These individuals were then plucked to form a specialized team that functioned as the core source of transformation.

Unfortunately, a lot of unfavorable news appeared at the same time, mostly regarding the company’s disappointing service standards and a lack of efficiency in many areas. An issue that was most concerning to PKP Energetyka then was the high amount of complaints received from PKP PLK, a railroad network and power grid owner, regarding its service quality as it had no reliable or

needed improvement. This explains why most of the members of the task teams were PKP Energetyka’s employees who had highlyspecialized knowledge of their fields. However, there were areas where certain competences were lacking, especially where digitalization and innovation were sorely needed.

To this end, external hires were brought in to introduce new best market practices to the company. New members of management were mostly employed in the headquarters while minimal changes were made to the teams in the regional branches. Consultants from the best companies in a given market specialization were also roped in to collaborate on this project.

The Diamond Project was implemented throughout the company, from its operational activities to the departments of finance, technology, investment

Operational efficiency in key company activity areas in 2015

ManaGeMent area Below averaGe BasiC Market

averaGe advanCed Best PraCtiCe

Operational efficiency

Commercial efficiency

Finances, controlling and accounting

Purchases and logistics

Energy sales efficiency

IT systems

Project management

Human resource management

Internal communication

Distribution investment projects

1.8

1.8

2.0

1.6

3.7

3.7

1.2

2.6

2.8

1.5

sourCe: McKinsey


selected. The operational efficiency in those selected areas was then compared to existing market standards, not only in the infrastructure or power industry but also among companies which had similar processes or organizational structures.

In every operational area that was analyzed, the reference point chosen was not limited to railway infrastructure companies; it included companies which maintained assets that were large and dispersed. Companies which possess such assets or manage them on behalf of their client, just as PKP Energetyka does for PKP PKL, have a set of maintenance processes, strategies and teams which perform work, quality control procedures and so on. This method of using the best reference points available was applied in the analysis of all other operational areas. As such, in terms of commercial efficiency or sales, the company was compared to other Polish energy companies as well as others in the banking sector where ecommerce and online customer service conform to the world’s highest standards. In this way, PKP Energetyka was able to understand its precise position in the market and industry in terms of operational, organizational and process factors.

The entire process of detailed analysis was supervised by an independent auditor. Once benchmarks were set, work teams evaluated the processes in a systematic manner, analyzing if any of them could help the company achieve the desired level of efficiency. A systematic assessment was performed on practices in areas such as internal process management, market process approach, investment process efficiency, price policy, financial/controlling/accounting process quality, purchasing approach, technological solution quality,

were performed stepbystep and there was no pressure to shorten the period needed to implement those changes. The goal was to ensure that the changes were welcomed within the organization and accepted by all its personnel.

Process quality evaluationThe next step taken was to identify areas which had the potential to significantly raise efficiency levels and enhance company value. Ten such key areas were

changes were preceded by thorough preparations to ensure a good service standard for the key customer, PKP PLK. Here, the transformation process focused on actions that led to the best possible service of operational processes. The final objective was to gradually introduce changes in specific areas. For example, the transformation process of back office activities, such as the implementation of IT solutions, automation and digitalization,


a hundred installations worth about 1 billion PLN, mostly on routes from Warsaw to Białystok, Lublin, Radom and Poznań, and from Poznań to Szczecin.

Project management and investment projects were highly evaluated at 3.7 points on a scale of 0 to 5 but that did not mean that they could not be further improved. Most of the other areas scored less, from 0 to 2, which revealed low process efficiency but, on the other hand, pointed to a large potential of the planned change. Evaluation results collected within the framework of the Diamond Project clearly pointed out areas and directions for transformation. A further part of the case study presents the change process from the board’s perspective and transformation of selected organizational areas. #

program 20132017 cost around 1 billion PLN and mostly focused on the main railway line E65 running through Poland from the north in Gdynia to the south in Zebrzydowice via Warsaw and Katowice.

Once the modernization project was completed, railway networks were ready to welcome trains travelling at speeds of up to 125 mph. With this accomplishment, PKP Energetyka completed a highly demanding project and investment management program. This created a very promising future for the next stage of the MUZa modernization scheme which was then planned to occur during the next European Union investment program. In this following project, the modernization of railway lines from east to west was planned to include the construction of almost

human resource processes and risk management.

Of course, good practices alone are not enough to guarantee success since external factors could also exert influence on the outcome. Yet, at the same time, implementing best practices which the company did not previously have was a necessary condition for real transformation. This is why the teams were trying to evaluate if the practices used in each identified area were the world’s best, market average or below average. The results of this evaluation are presented in the table ‘Operational efficiency in key company activity areas in 2015’.

At that point in time, compared to the best benchmarks available, PKP Energetyka’s position in most areas was deemed to be either weak or significantly below average. But two areas were strikingly positive: project management and distribution investment projects. These were crucial areas as the company had just implemented the biggest investment program in its history – the Project to Modernize the Power Supply System (Polish acronym: MUZa). This project is an element of one of the greatest changes in the Polish railway market to modernize its power supply system. It was a crucial step that would enable modern trains such as Pendolino to run on the Polish railway networks. The introduction of highspeed train lines necessitated a thorough modernization of the connecting power supply system. These were gigantic projects made up of several hundred investment ventures, each of them a separate project dependent on construction permits, employee access and close collaboration with PLK along with other subcontractors. PKP Energetyka investments in power supply systems which were supported by the European Union subsidy

A basic and necessary condition for transformation was to implement the best managerial practices and effective processes in areas where they had been lacking in the company.


In unpredictable and turbulent market conditions, the only

thing that is certain and remains constant in the running

of a business is change. What role does the leader play in

the transformation of an organization and what does it take

to ensure that it is implemented efficiently? wojciech orzech, Ceo of PkP energetyka, shares his thoughts on these topics

with Paweł kubisiak, deputy editor-in-chief of HBrP.

Aspire, inspire, deliver

in 2015, you embarked on an ambitious project to transform PkP energetyka from within and engaged 400 of the company’s leading managers to do so. three years on, can you say that there is a universal “recipe” for change management?The transformation of any enterprise is accompanied by so many individual and subjective factors, that there simply cannot be one universal recipe for success in such a complex process. However, my experience from having successfully spearheaded similar processes elsewhere has enabled me to identify five factors which can facilitate the implementation of change and can significantly raise the odds of success in every case.

let’s try to identify these activities one at a time, ‘step-by-step’ as it were. where should we start?Transformation should only be introduced once the management has an indepth understanding of the company and understood the purpose of reorganization. When we analyze mergers and acquisitions in general, it turns out that 80% of these types of transactions tend to end in either a smaller or bigger failure. In many cases, the root of the problem lies in the lack of sufficient knowledge of the acquired company or an illdefined objective.

This is the very reason why it is worth our time to start every process of change by establishing a clear understanding of the kind of company we are dealing with, what kind of employees it has, its organizational culture, what challenges lie ahead, and where the problems really are. You also have to understand the market in which it operates, its situation and the specifics of it. You need to determine its exact position in the

market by comparing its strengths and weaknesses to other players in the same field.

Next, it’s good to use this analysis to refine the objectives of transformation and identify key elements that should be developed and utilized in the process of change and those that you have to get rid of as soon as possible.

You used the phrase “stepby step” and this methodology, taken from the philosophy of Kaizen, has just been implemented in PKP Energetyka. The StepbyStep Program creates the possibility of active participation for every shift worker as it gives them the opportunity to influence the organization of their workplace, standards, processes and procedures, up to and including decisionmaking. As a result, every employee has a real opportunity to influence the way the company runs and to raise the standards of quality, safety, commitment, and, in the long run, efficiency.

so, we start by examining the company from the inside out and then we establish the objectives of transformation. what should the next steps be?Once we have a thorough understanding of the organization we have to change and learned its strengths and weaknesses, we should outline the vision of change very clearly. This is important because a crucial element of change is rooted in the commitment of the people responsible for implementing it. This is why employees must fully understand what this process relies on and where it is heading towards. At this point, we should also allow them to step into their roles as fullyfledged and active cocreators of change instead of being mere participants.

Based on my own observations, I can tell that employees want to

do their job well. When this doesn’t happen, the most common reason for it is the different types of hurdles that they cannot overcome. And it can result in burnout and frustration. A precise and understandable vision, pointing to the objective and how to achieve it, is a good way to help our employees overcome these hurdles and unleash their potential. But this first requires an indepth knowledge of the company. In the case of PKP Energetyka, the method we adopted to understand the company, and then shape its vision and how to communicate it, was through our Top 400 which we created to bring together a group of higher ranking managers and line managers. This direct connection with the line managers allowed the management board to understand the issues that really mattered to employees in the field. By working closely with the Top 400, we figured out many solutions together. Without it, we would only have had a narrow perspective and limited possibilities to really learn about the company. All of that would have resulted in a failure to meet the first key condition for a successful change.

i understand that those two first steps taken were from the frame-work of the diamond Project. its objective was for the board to learn about the company, its advantages, to identify areas for improvement and to communi-cate their vision of transforma-tion to the employees.And there was more to it. Thanks to the success of those steps taken, we could move on to the third step to engage our employees, not only in the process of change, but also in setting objectives. From the perspective of the headquarters, we do not know what is the best way to arrange and coordinate the P

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1 strive to get to know the organization well

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broader perspective and its details

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schedule of network trains, nor of the teams responsible for the maintenance of the electric railway networks, or its energy distribution networks. We do not know how to improve safety standards in specific work divisions or how to optimize work service processes. This is where the line managers come in because their knowledge puts them in the best position to set the direction of change in their fields. As a result of this awareness and a consistent effort to include a broad range of directors in managerial processes, we are able to harness the real potential of our staff. In this way, the Top 400 members are conferred an important role as cocreators of transformation and, in some areas, as the main creators of the solution.

it must be very difficult to involve such a large group of people in the process of change. is it

possible to discuss with four hundred people at the same time? and surely, in such a group, there would be both supporters and opponents to change?It was not an easy process, especially since we were less interested in onesided communication but more focused on engaging in real dialogue with them. I did not want to speak ex cathedra to the managers gathered in a meeting hall. We wanted to hear what the other side had to say, how they understood some proposals in terms of their merit and how they took it emotionally. So, we found a way. We divided the Top 400 group into smaller task teams consisting of several to over twenty employees. Each team was given the task of defining an existing problem and working out its solution. We could talk directly to every one of the managers in those groups, to listen to their comments, even

The five steps to becoming a transformational leader

their complaints, and to give them immediate feedback.

These groups still work in the same way now and we run workshops with them. Top 400 meetings are held twice a year and there are meticulous preparations for them. Once the meetings end, we continue working on the proposals that were submitted. Each proposal is analyzed carefully and its authors are given feedback in the form of a report. Many of these proposals are implemented in the company while the rest are rejected or kept on hold for the right moment. In three years, the Top 400 has grown to Top 450. We are always adding on new managers who are keen to join the team. We now know how to conduct effective conversations with and in a larger group and can see its positive effects throughout the company.

We then present the company with what was worked on by those


teams and prepare a recommendation list. I think this is the best method for a company to draw on the energy of its people, create engagement and to include managers in the company’s cocreation process.

what arguments or tools have you used to break the ice, have dialogues with your employees and motivate them to collaborate fully with you?We built our organizational culture from day one based on a set of four values which has helped me tremendously. The first value is to deliver the highest standard of services to the customer. The second value is to prioritize employee safety. Due to challenging and variable work conditions, especially on the power grid and railway power grid, prioritizing employee safety must be firmly embedded in the company’s DNA.

The third value – to build employee engagement – is absolutely crucial because engagement is one of the few elements of advantage which are difficult to copy nowadays. All other elements, including innovation, can be copied relatively easily.

And the fourth and final value: to raise business efficiency. Every company is created for the purpose of making money, and to do this well, it must be efficient. This is why we must first define objectives, then we tie in expectations to the indicators and, finally, we measure the outcomes achieved. In our case, as a company taking care of the distribution of electrical energy, this is also important because a large portion of profit made is reinvested into the grid since this is the main essence of our activity.

and now we have come to the fifth and final element.

The fifth rule is to lead others efficiently towards the achievement of objectives. In this last step, I have found one rule to be very helpful in my role as a leader: ‘Aspire, inspire and deliver’. I think that an organization managed by me and the people who work for it are able to achieve much more than they have achieved so far, more than any of them thinks, which is why I am unafraid to make the PKP Energetyka team deal with ambitious objectives. My basic role as a CEO is to inspire and motivate the team to implement changes. I do not believe that I can achieve this through motivational talks or speeches, but only by real involvement at the management level in a dialogue with the right people to develop the company further.

This is why, as soon as we established general objectives which highlighted our aspirations as an organization to improve management standards and organizational efficiency, I could then work on

inspiring the Top 400 group to work out concrete preliminary objectives and the ways in which we can accomplish them. Thanks to the work done in task teams, we have successfully managed to accomplish these objectives.

The third aspect is to work on the delivery. By this, we mean that we do not live exclusively with visions dictated by high management; we want to execute defined daily tasks well all across the company. We know what the objective is and what must be done to achieve it.

I think that, for a manager, a big challenge is to switch modes from being aspiring to delivering. This requires a continuous shift in focus from the micro to the macro levels and vice versa as the situation demands it. Although every one of us usually has a comfort zone and prefers to work either at a general level or getting into the nittygritty (even outright micromana gement), I try to be flexible and to frequently g

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move back and forth between the bigger picture and the details.

these five elements have helped PkP energetyka undergo signifi-cant change. However, some of the elements of change which you mentioned earlier are its unpredictability and its individual character. what was something unexpected that surprised you most in the transformation process of PkP energetyka?The biggest surprise for me was the difference between the high company, or employee, potential and the relatively low service standard that was uncovered from a large volume of customer complaints. I needed to dedicate a lot of time to resolve this issue. There were many reasons for this situation and I found that the main ones were related to the way work was

organized and insufficient indicators or markers we used to track progress. This, in turn, was very closely connected with the IT systems which support management. These were the issues that we were working on quite intensively. As a result, we implemented significant changes to the way work was organized for our staff by reinforcing it with integrated IT tools and a comprehensive system of tracking and measurement which we created for all relevant elements of our business activity.

The second issue involved getting the managers on board with the changes and empowering them with the authority to take action. My goal was to shift decision

making responsibilities to the lower organizational levels so that line managers are able to make quick decisions in areas in which they are

the most competent. It turned out that some managers were reluctant to take on the responsibility. Many managers from the headquarters came to me for a decision which they could easily have made themselves. When that happened, they got no answers from me, only hints. In time, they accepted my management style and took the responsibility of decisionmaking onto their own shoulders. Personally, I consider this to be one of my highest achievements as a leader.

one of the most important effects of transformation in the company you manage is the digi-tization of many operational pro-cesses – to transfer data from the analogue to the digital world. so when we talk about PkP ener-getyka now, do you think it is ap-propriate to refer to it using the trendy term ‘Company 4.0’?If we define the 4.0 term as a business which is highly digitized and automated, using artificial intelligence, algorithms or big data, then, from this perspective, I can agree we are on a good path to becoming Company 4.0. Yet, I am aware that there is still a lot of work ahead of us, both conceptual work and implementation, before we learn to use digital technologies optimally while simultaneously raising our service standards, levels of effi�ciency and employee safety, and managing the infrastructure grid. We certainly have a very good team of people with the right competencies and energy necessary to build Company 4.0. In an era of such dynamic technological development, one thing that is certain in business is the inevitability of change. In this sense, I can safely say that we, as an organization, or rather as a team, have now equipped ourselves with the right skills, knowledge and experience to know how to turn it to our advantage. # P

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Planer – a system for work and equipment management in crisis situations.


From the point of view of neurology, in order for a real change to happen, it must have an emotional meaning. In other words, when we change our behaviour, we do not make decisions on a rational level, but on an emotional level. The same applies to an organisation, but for employees, a change in the com-pany’s functioning often means not only the necessity to adopt new habits, but also more work, which can lower morale. A leader who wants to transform their company must make sure that the employees want to be a part of it, and not act as a brake on the process.

That is why the task of the leader is to indicate the objective and the direction of action, so leaders must be very coherent in what they say and do. Therefore, the board should show that they really care about the introduction of change, but if they are not convinced them-selves, people will not follow them. I know a few very determined and consistent leaders who made it clear: “Our company is on the verge of change. Stay on board or leave, but do not block this process.” It was a good approach because the architect of change must not only inspire, but also take disciplinary measures every time someone openly presents a hostile attitude.

The role of middle and lower level managers is also very important in the process of change, because they give feedback to their direct subordinates. Therefore, they should pay attention to how they communicate their expectations. I cooperated with a company which had to fire many employees from

their headquarters during restruc-turing. The company’s morale was very low and the situation tense. The worst thing that a mid-level manager can say when standing in front of his team is: “The president has ordered us to...”. This is a huge mistake. It shows that he is not convinced by the changes himself, and is unsure about what he wants to convey.

Because we are equipped with mirror neurons as humans, we sub-consciously pick up the emotions of others based on their behaviour. That is why body language is such an important element of commu-nication. Even if someone is talk-ing about a deep need for change, interesting new challenges and an exciting way to meet the objective, but his body shows something com-pletely different, you can be sure that the listeners will notice this contradiction and discover his real emotions. The manager’s task is to convey the message in a reliable way – even if he disagrees with it.

We can explain the resistance to change scientifically. Our brains try to use as little energy as pos-sible, which is why we feel comfort-able in situations we already know, and why it is difficult to change old habits. This mechanism is so strong that any kind of change can make us feel threatened, and we react by launching a defensive mechanism. From an evolutionary point of view, this mechanism allowed our ancestors to prepare for defence against physical dan-ger. Today, people do not experi-ence these kind of threats, but their brains are the same as thousands of years ago. This is why in modern

organisations you can still encoun-ter ‘fight or flight’ reactions, which in extreme cases can lead to verbal aggression or the avoidance of cer-tain situations. When we know that our comfort zone is torn down, we suffer from a serious lack of moti-vation caused by a sense of threat. A leader should do everything to compensate for this feeling.

For many, the process of change means new possibilities – people change departments or get new responsibilities. One of the ways to calm the situation is a fair division of duties and remuneration. A lot of research describes the fact that a sense of justice is very important to people. This means that we pay attention not so much to what costs we incur due to the change, but above all on whether our colleagues pay a comparable price. Therefore, a good move that a leader could make is to agree to incur certain losses resulting from the company’s reorganisation. Such action would confirm the whole team in the belief that change is indeed necessary and that it is not carried out solely for the leader’s own benefits.

A good way to maintain a high level of team involvement is open recognition of employees after each difficult stage of change. People are not just working for money. They want to be appreciated for their contribution to the life of the organisation. Remember that after months of overtime and stress employees can be exhausted, but it is still their work that helps bring the whole process to a happy ending.

author: Filip szumowski

Friederike Fabritius is a world class specialist on Neuroleadership and co-author of the book ‘Mind of the Leader’, considered one of the best business books in 2017.

Friederike FaBritius: Change begins in the head

success in the change process depends to a large extent on the ability to manage difficult emotions prevailing in the transformed companies. this is one of the biggest challenges facing the leader, says Friederike Fabritius, a world-class expert in the field of neuro-leadership.


Unleashing employee potentialA change the company’s ownership is often associated with a fall in employee

engagement levels because uncertainty triggers fears about their future in the

organisation. So, once the company was acquired, a transformation process

was launched immediately with a plethora of activities designed to enhance

employee engagement. Changes were made in incremental steps involving

staff from all spheres within the company.

author: Mateusz Żurawik, editor HBrP Cooperation: Beata Górniak and anna Hyży

It was crucial to first prepare the line managers for the change by equipping them with relevant managerial skills and to get them accustomed to the new level of autonomy which were about to be introduced.

These employees were then included in consultations and given the opportunity to share their experiences with the management board and with one another. For this purpose, the Managers’ Academy was created where a number of training sessions and workshops were conducted. Line managers were encouraged to take on increasingly more responsibilities, including the task of constructing activities to enhance the engagement of employees. Within the Academy, the responsibilities of managers were defined precisely;

their role was not limited to just assigning tasks to their subordinates but, also, to motivate them, to listen to the workers’ insights on their daily work activities and to provide feedback. The lower and midlevel managers have now become an extremely important link in bilateral communication: in addition to conveying information from their superiors to subordinates, they are also willing and able to hear and provide feedback in the opposite direction.

Within a short period of time, the core management team grew to 400 people and this proved to be an invaluable source of knowledge for other top managers who later joined the company. The company’s

about consciously constructing and implementing programs and projects based on the results of systematically conducted research.

It was only when the HR structures and employee competence profiles were changed did a real possibility to build the foundation for an organisational culture based on four main values appear, one of which was engagement. This was facilitated by communicating the company’s vision from the top management to the line managers in direct and onetoone dialogues. So, one of the basic tools used to prepare the company for new market realities following a change in ownership was to strengthen decisionmaking at lower levels of the organisation. “Our basic assumption was that management responsibilities was not limited only to

the plant managers but also included line managers who supervise the work of field workers. So, in order to utilise and develop their leadership skills further, we gave them much greater influence on the company’s direction,” explains Beata Górniak, Director of the Human Resources Management Department at PKP Energetyka.

400 managersThe shift of decisionmaking to the bottom of the organisational structure has led to a rise in the number of people who exert influence on the company’s growth and development. At the same time, the board was aware that it was not enough to only inform its staff of this change.

BeFore it was aCquired by CVC Capital Partners, PKP Energetyka had all its Human Resource (HR) activities already centralised. This was continued in the postacquisition phase by pooling its staff services and payroll activities in a Shared Service Centre (SSC) in Łódź and sharpening up the profile of HR employees both at the company’s headquarters and in the field. A team of employees who specialised in three areas – salary, personnel development and HR Business Partnerships – was established. These areas of HR specialisation supported PKP Energetyka’s business development in line with its overall strategy.

When the process of change began, the means of communicating the new company’s vision to staff was far from ideal. The effectiveness of dialogues between the upper management team and line managers were sorely lacking – typical oneway communication channels from the topdown were the only means of transferring information.

“At that time, the specific way that PKP Energetyka functioned was based on its hierarchical structure, typical of stateowned enterprises which had been running that for many years,” admits Anna Hyży, director of the Human Capital Development Office. “It was clear that majority of key decisions were made at the top levels of the company’s hierarchy and this severely limited the possibility of building high employee engagement, in addition to prolonging decisionmaking in the most important matters for the company.” This hierarchical and rigid structure was closely associated with the lack of constant and consistent work on involving both the company’s management and employees. It was not merely about conducting surveys on the levels of engagement, but also

The shift of decision-making to the bottom of organisational structures has led to the multiplication of people who influence the company's development from day to day. There are now 400 of such managers.

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current strategy is, to a large extent, a result of the work of this group of 400 managers who took on more responsibilities for their company and became a priceless source of information about the company as well as the problems and needs of the current staff of 5,000 people.

Yet, the process of getting the employees accustomed to having increased responsibility had to be introduced gradually to them. “Before the acquisition, the lower and middle level mana gers simply carried out their daily tasks together with the line workers. This is why the Academy needed to work on equipping them with basic skills, for example, to clarify the role of a leader and what he or she should do to communicate well with a team,” said Anna Hyży. “As of today, they are much more comfortable in their roles supervising the daily work of the line workers. And at the same time, there is an increasing shift in focus towards including more management responsibilities in their roles. This signifies a radical change in their way of thinking – to think more like a boss, not an employee.”

As the new managers were not initially accustomed to thinking about themselves as having significant influence on the company’s operations, we prepared

them for the new role by giving them a common identity. The idea was to explain that they belonged to a group of people with high potential who were valued by the organisation. This message was first conveyed to the managers who would then pass it on to their employees. This is how the idea to refer to the extended manager group now known as the Top 400 was born. The slogan quickly became very popular in the organisation and employees with many years of experience regarded a nomination to the group as a sign of recognition. It was clearly visible that the existence of this group was effective in raising the motivation levels of its members.

A few weeks after the privatisation of PKP Energetyka was finalised, the first meetings of this group with the company’s management board were arranged. They took place in three stages in Warsaw, Cracow and Poznań. Those meetings have now become a fixture in the company’s calendar of events although they are no longer geographically separated; the company now books a single venue large enough to accommodate the entire Top 400 team. The agenda of meetings is currently arranged in close collaboration with the managers to strengthen their sense of influence on the organisation.

To this end, it is the managers who suggest issues which should be addressed during the meeting.

“Each meeting is a twoday event which always follows the same format,” Górniak explains. “From the very beginning, we wanted communication to flow both ways at the Top 400. So, we encourage them to go on stage and share their daily experiences of work, and to express their opinions on the tasks given to them. They are always divided into teams to work on the solutions to specific problems reported. When the proposals are prepared, we then discuss them openly with all participants. As of today, a lot of solutions implemented in the company have been the result of this method.”

“Why is this so important? Because the Top 400 managers are people who know the company perfectly well, both its problems and the risks that changes can bring. This means we can avoid many kinds of risk when these people design solutions. It’s a good alternative to managing people from just sitting at a desk.” In fact, it was during one of the meetings of the Top 400 that the managerial staff developed and signed, together with the management board, the Manager’s Responsibility Model or PKPE’s Leader Behaviour Catalogue.

Engagement study at PKP Energetyka

Managers PKP Energetyka Employees

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24

2016

38

2017

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I achieve my goals when I implement the group’s strategy.

I set high bars for myself by working on ambitious goals and projects.

9. I am coope rative and am looking for solutions.

10. I make decisions and I take responsi-bility for them.

I take care of the company’s property as if it were my own.

I follow the model and make sure that others do so too.

I share my knowl-edge and I improve both myself and my employees.

I communicate in an honest, understandable and respectful manner.

I give, accept and appreciate feedback.

I care about the client’s interests and a high standard of service.

I have an influ-ence on, and care about, the safety of myself and others.

I am engaged and I inspire

others with my attitude.

the road to success is through its goalsAnother tool used to raise employee engagement levels was the introduction of a new ManagementByObjectives (MBO) process in the company. In fact, this had already been implemented at the beginning of 2016, only three months after the beginning of changes in PKP Energetyka. The new MBO system included managers from the Top 400 group and its crucial feature was to cascade objectives down to the lower levels of the company structure. It was so effective that the fruits of success were visible within the first year of implementation.

Efforts to transform the organisation were not without its surprises. As early as December 2015, even before the actual creation of the Top 400 group, the first survey to determine existing levels of employee engagement was conducted throughout the company. Interestingly, the survey showed that the engagement level of the management team was lower than average for the entire

organisation. Where did this fall in engagement level come from? As earlier mentioned by Górniak, a few elements contributed to this effect, such as the managers’ lack of confidence about their future in the new organisation.

However, this trend soon began to turn. Although the average level of engagement fell (see the frame: Manager’s Responsibility Model signed by the management of PKP Energetyka in December 2017), it significantly rose among managerial staff who, at that time, consisted of ten times more people than previously. “It is important to note that the next time the study was conducted was in December 2016 – after two sessions of Top 400 team meetings with the company’s management board,” notes Anna Hyży. “The first meeting provided an opportunity for the board to share the company’s most important objectives with them. The second meeting was more about having the board listen to the Top 400 people. This gave us the opportunity to observe that providing them with the possibility to share

their insights and fears about the company’s transformation with us actually boosted their level of engagement. There were fewer questions asked along the lines of ‘What is going to happen to us?’ at the meetings, and at the same time, we would hear more about innovative ideas and questions about new challenges.”

The decrease in the average engagement level of the group in December 2016 was unavoidable at that time but it was also important to us. With greater trust in the confidential way opinions were collected in the survey, employees were able to communicate their concerns about the transformation and about the changes they played a part in more openly. Thus, the decline in general levels of employee engagement was not too worrying given the increased participation in the survey; this showed us that employees wanted to express themselves and trusted that they could do so in a secure, confidential manner.

Another important management tool for the company is

The Manager’s Responsibility Model signed by the management of PKP Energetyka in December 2017.

As A LEADER,


Employers’ brand attributes in PKP Energetyka

we live for challengesRegardless of the structure or posi-tion, creativity and experience are intertwined in our daily duties. In our company, every day is different, and there is no place for routine or bore-dom at work. Our electricians are always ready for action even though their tasks and duties are not easy. New challenges can crop up at every mile of the railway tracks but handling them effectively can bring much satisfaction. The company’s head-quarters function in a similar way. Office employees follow the change, building the organisation anew, transforming the existing processes and introducing innovative ideas, processes and tools. And it is their constructive ideas and promptness of response to situations that allow us to grow dynamically.

we are a good teamWe always work in a group and share our experiences. This allows us to complete every challenge successfully. Without the contribution of one per-son, the work of other workers does not make sense regardless of whether they are direct hires or employees in the headquarters. This attitude of having boundless opportunities for collaboration is also reflected in our collaborations with external parties. We like one another so we strive to build friendships during integration events and trips. Out on the tracks, trusting our team members is a basic work tenet. At work, we are respon-sible for one another and because of this, we feel safe and can eliminate potential threats even more effectively. This is a set of values which we have adopted and implemented in other areas of the organisation as well. By drawing strength from the team and having genuine trust in its members, all of that translates into better com-munication in the administrative part of the company, and in the broader perspective, leads to a greater motiva-tion to work and a better understand-ing of the business.

we are a reliable employerWe guarantee stable employment as we are one of the undisputed leaders in the energy industry. We sign long-term employment contracts with our employees, we always pay salaries on time and we provide a number of in-teresting fringe benefits. Our market position is strengthened by changes related to growing revenue and new investments, including those out-side the country. We move with the times and are always open to fresh energy and ideas. At the same time, employees who are more senior are not written off in our company. Many years of practice make them ideal mentors for their younger colleagues. The co-existence of the two genera-tions and the collaboration between them make it even clearer that job security is an integral part of the company’s operations. With us, career development takes place in a friendly atmosphere and over an exchange of experiences across different age groups.


Employee Engagement research. A great deal of attention and effort is dedicated to it to ensure it is conducted at the highest standards. Each study on the level of employee engagement is accompanied by a thorough review of the results and an analysis of responses given by individual employee groups. “We found that the role of the manager is absolutely crucial to shoring up engagement in the ranks,” emphasises Beata Górniak. “That is why, when the study was completed two years ago, we focused on implementing specific activities to boost workplace engagement levels. These were areas in which the manager had the greatest impact. Based on twelve questions asked in the study, we constructed our own company’s Synthetic Engagement Indicator (SWZ). As a result, it has become easier to convey the right messages to our employees and the way we have done it has become more consistent throughout the organisation. The implementation of SWZ is one of the objectives that appear in every manager’s MBO sheet. And because of this, we are able to monitor managerial results in real time. And simultaneously, we are able to communicate the results of the employee engagement study to both the managers and their subordinates so they can make the necessary changes to raise those levels.”

This change quickly proved to be effective. The general level of employee engagement began to rise in 2017 – across all surveyed groups of employees with the Top 400 group sustaining a significantly higher level of engagement than the average in the PKP Energetyka group, and this level was even higher than other benchmarks in the market. The introduction of MBO, as well as the introduction of a bonus system linked to the

implementation of those objectives, proved to be very helpful.

Culture of engagementHR processes provided a lot of support for the implementation of effective company transformation. A sign of their effectiveness was found in the raised engagement level. However, after a period of intensive investment in the personal development of new professional managers, the company increasingly began to require them to be jointly responsible for company management. They were entrusted with the gradual implementation of incrementally ambitious managerial tasks, e.g. managing individual employee remuneration based on yearly assessments, providing employees with constructive feedback, and planning employees’ career or personal development. The HR Department also encouraged managers to develop HR process solutions and to find ways to communicate them effectively to their subordinates.

“We are careful to convey a coherent message so that all company employees have the same understanding of our processes. When implementing a new remuneration system, bonus system or employee evaluation system, we make sure that all managers and employees receive materials with identical guidelines regarding the processes being implemented. They contain the same issues that should be discussed in conversation and the same elements that require their attention. Our focus is to simplify – open and clear communication is the key to success,” explains Beata Górniak.

Motivation is another crucial factor that plays a large role in the transformation process and raising engagement levels. It is based on a reward system for specific actions in the form of quarterly

bonuses paid over and above regular monthly salaries. The basic assumption was that this system would motivate employees to go beyond the scope of their daily duties. This system is constantly monitored and improved ensure it is to coherent with best practices in the market to support mana gers in their daily work with their subordinates. “We are currently at the stage of implementing changes that will link the incentive system with the delivery of business indicators for field employees too. These changes are aimed at encouraging our workers to engage in more actions and activities that embody our company values that were previously mentioned: quality, safety, employee engagement and efficiency.” added Beata Górniak.

support for managersNew activities by HR were required to raise employee engagement levels. In addition to specialised sections for remuneration and benefit management, as well as the personal and career development of employees in the head office, an HR Business Partner function was created for individual field departments. Their basic task was to constantly encourage the development of existing mana gers in a given plant as well as to support the Regional Directors in their daily work. The latter, however, initially had a slightly different view of this matter. Directors who held key roles in the organisation before the company was privatised treated Business Partners with a great deal of mistrust.

The challenge then was to effectively communicate the tasks and responsibilities of HR Business Partners in a company where HR support was associated almost exclusively with staff and payroll processes. Changing this attitude required time and for P

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people to become accustomed to the presence of a person within the branch who asked numerous questions about individual personnel processes.

“For us Plant Directors, the centralisation of HR and payroll functions in one place was a difficult process. We had the feeling that we were losing ongoing support, people who had been on hand until then. We did not know if people working from headquarters would provide us with support. However, it turned out that the role of HR Business Partners has worked really well – it makes us feel cared for and we receive excellent support in our roles and work,” admits Marek Szumlewicz, the Director of plants in Dolnośląski and Zachodni.

During this challenging period in the transformation of HR services, HR Business Partners were able to provide support for managers by communicating and

implementing changes jointly with them. HR Business Partners were also coauthors of the career development of mana gerial staff.

“From today’s perspective, we can say that we have successfully managed to break the initial resistance. I think that the collaboration between the heads of individual departments and HR Business Partners is progressing very well,” assures Beata Górniak.

“The directors of our branches have realised that they can expect to receive help from us and that the presence of HR Business Partners in many areas has led to synergy in our business.”

a strong team Efforts to raise the level of employee engagement did not just stop at that point because it also meant that it was crucial for us to encourage and attract new people to work for the company. For this purpose, a strategy was

developed to shape the perceptions potential employees had of PKP Energetyka. As a result of workshops and meetings held with a wide range of employees (from network employees to board members), as well as with pupils and students of technical universities, a new strategy was created. It focused on highlighting three employer attributes: the mission, teamwork and job security (see box ‘Employer Branding Attributes’). The gist of it is reflected in the slogan: A Strong Team. What exactly does that mean? “We like challenges; we create a harmonious team; we are a reliable employer. With us, everyone becomes part of a strong team. The lack of mundane activities coupled with daily challenges in an interesting and growing industry provide opportunities for stable career development. Regard less of whether we work on tracks, in a railway substation or in an office, we try to exceed the expectations of our clients by implementing changes to be the best at what we do,” says Beata Górniak,

“Those are real statements collected from all over the company that cogently describe what sort of an enterprise we are and the kind of people we want to attract to come work with us.” #

Beata Górniak, is the Director of the Human Resources Management Department in PKP Energetyka. She has many years of experience in HR working for companies in the FMCG, energy and production sectors. She is an expert in change management processes and enhancing work relationships with employees. She graduated with a degree in Law and Administration from the University of Silesia as well as the Advanced Mana gement Program at the ICAN Institute, publisher of Harvard Business Review Polska. P

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The basic condition for an effec-tive change implementation is involvement of all interested employees in the process. Unfor-tunately, the first and natural reaction of people to change is resistance. It can manifest itself in emotional actions and reac-tions of the opponents, and can also take on a hidden form and result in e.g. a reduction in effi-ciency. Such a reaction of people to the new situation is, of course, natural because it has its roots in prehistoric times. Then change was automatically associated with an unnecessary need for an additional expenditure of energy, which in a food shortage situation was a waste, because it involved an additional effort.

Looking from the perspective of leaders and managers who were entrusted with the obligation to change, it can be very helpful to be aware of the inevitability of this resistance and prepare for its occurrence. It is worth remem-bering that this resistance is not an expression of people’s dislike or malice, but it is a completely natural phenomenon. But when we realise that resistance will surely take place, we can plan actions in advance, leading to its reduction.

One of the basic activities lead-ing to resistance reduction is transparent communication that will dispel any doubts held by the opponents. People in a situa-tion of upcoming change first ask

themselves fundamental ques-tions: will they work in the same good conditions as before? Will their earnings be better or worse? Will they not have to work harder? And will they even lose their jobs? Next they wonder whether they will be working with the same people, whether their com-petences will be sufficient after the change, or will it be easy for them to learn new things or cope with new responsibilities? And will they have the level of autonomy they are used to?

Such fears of losing autonomy have certainly appeared among employees of PKP Energetyka, who received smartphones with GPS systems, on which they had to indicate the status of work. The concerns about continuous moni-toring which resulted from the ability to pinpoint an employee’s location were natural. That is why an essential element in this area of company transformation was assuring employers that safety remained a priority, and that the Planer system was aimed at intro-ducing better work organisation and improving resource manage-ment, rather than assaulting auton-omy. It turned out that the best arguments to convince the most reluctant people were efficiency improvement and guaranteeing safety, i.e. two of PKP Energetyka’s company values.

The change leading to the improvement of employee safety,

work quality, information exchange, and management of people and equipment, meant greater stability for the company, and thus greater job security. And at this point, the transformation began to make sense for people, and they began to engage with it.

An acceptance of change coupled with staff consent to the proposed transformation solu-tions should intuitively lead to increased employee engagement. Meanwhile, in the case of PKP Energetyka, a year after the start of activities communicating the changes, engagement decreased. Paradoxically, there was no need to draw negative conclusions from this. This phenomenon is quite common in employee opin-ion research when it is conducted for the first time. At this point the study does not have so-called ‘cultural domestication’, it is a kind of novelty that people approach cautiously, so they give feed-back in a very balanced way. But when they see that the organisa-tion responds positively to the information received from them, especially when it turns out that the results of the research lead to the improvement of dysfunctional areas, then at the next oppor-tunity they say what really hurts them. In this case, a worse result is paradoxically a good phenomenon, because it shows that people have begun talking honestly and with-out fear about what they think and feel – it shows that they trust their employer. And this is a good prog-nosis for the future.

Hubert Malinowski, Ph.D., is a social psychologist, a coach and a con-sultant. He specialises in people management, team building and communication within organisations.

HuBert Malinowski: resistance to change is a natural phenomenon

the reluctance of employees to change is a common phenomenon that is not easily prevented. these unfavourable staff attitudes can be reduced or even eliminated through consistent communication activities leading to understanding the sense of transformation.


Investing in the futurePKP Energetyka’s investment program is a key component of a project to transform

the Polish railways through the company’s participation in the Polish National Railway

Program (Polish Acronym: KPK) as well as the program to modernise its power supply

(MUZa) and to adapt the railway infrastructure so it can handle an increase in transport

volumes and speeds. It was critical for this project to be completed efficiently

and to adhere to a strict schedule set by the European Union as one of its conditions

for financing the project.

author: Mateusz Żurawik, editor HBrP Cooperation: agnieszka nosal and stanisław kubacki

BeFore PKP Energetyka was privatised, a broad governmental program valued at 1 billion PLN was launched to modernise the power supply (Polish acronym: MUZa I) . It was part of the largest venture to have happened in many years to modernise the railways in Poland. The project lasted from 2012 to 2015 when the railways were modernised and 86 railway power supply installations were constructed. This signi ficantly shortened railway journeys between the northern and southern parts of Poland. And even while CVC was in the process of acquiring PKP Energetyka, it was already aware that the company was facing an upcoming implementation of another modernisation program known as MUZa II.

Apart from the MUZa program, the Polish railway system was given the opportunity to take part in a project for the rapid modernisation of the National Railway Programme (KPK) valued at 70 billion PLN. This project alone would involve thousands of kilometres of modernised lines. Within the program, PKP Energetyka, which had the greatest potential in Poland, was the leader in the market in terms of the construction and modernisation of the railway tracks.

Before the investment programs started, it was necessary to conduct a reliable analysis of the manner in which the previous stage had been implemented. Stanisław Kubacki, President of PKP Energetyka Services (a part of the PKP Energetyka group), remarked that MUZa I, which happened before the company was privatised, had been implemented with a great deal of effort from the whole company and, frequently, at the expense of current standards of infrastructure maintenance.

“Before the new program was due to start, we decided to draw some

lessons from the previous program. As a result, the biggest challenges were found to lie in the improvement of work efficiency on the railway tracks and to establish a transparent process of separating individual business lines.”

It became clear that in order to maintain the railway and power grid infrastructure, the company would have to undergo a transformation. To improve efficiency, a Value Creation Program that covered 29 areas of company activity was established. The program, known as The Diamond Project, defined hundreds of initiatives that should be implemented to make PKP Energetyka an efficient infrastructure operator. “The goal was to find a hidden diamond and to polish it gradually until it finally became a precious stone,” explains Konrad Tyrajski, PKP Energetyka’s board member responsible for the company’s investments.

The company had many areas with huge potential and all we had to do was to invest in their development, to systematically improve standards in quality, safety and employee satisfaction to achieve a rise in efficiency and to also create a company which meets the world’s highest standards. An additional challenge was to meet the expectations of the Energy Regulation Office (known in Polish as Urząd Regulacji Energetyki) to optimise costs in the investment program so as to minimise the burden of increased costs of railway transport companies (reflected in the distribution tariff).

learning from mistakesThe MUZa II programme was created by capitalising on the organisational and technical experience of the company as well as learning from the mistakes the company had committed during the first phase of the modernisation programme.

“In MUZa I, we implemented a project approach throughout the organization and we learned a lot from that experience. We now wanted to apply the same approach to MUZa II”, says Stanisław Kubacki.

The first stage of the new project was to make comprehensive preparations for the investment and the first step of this stage involved consulting PKP PLK on the technical conditions necessary to connect about 200 facilities to the grid. The process included determining the location of the facility, acquiring land, fulfilling technical conditions from the distribution system operator for power connections, obtaining all environmental and construction permits and then creating and executing technical concepts. This was handled by a team of experienced engineers in the field of distribution and execution who use modern tools manage the project, its costs and the teams of contractors. The construction and modernisation of each of the 200 facilities under MUZa II is now being carried out as a separate investment project with its own budget, schedule, milestones, team and a set of Key Progress Indicators.

Having learned lessons from the past, it was decided that an important step in MUZa II was to divide individual investment tasks into those that the company is able to implement on its own and those that require the involvement of external experts. The first category includes all tasks related to energy infrastructure for direct current that is used by Polish railways (in contrast to the rest of the economy which uses alternating current). As Kubacki admits, PKP Energetyka is practically the only specialised operator in Poland in this field, so the company decided to mainly use its own competences and resources. P

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with leading suppliers of equipment and materials.

Another problem that surfaced during MUZa I was the fragmentation of subcontractors cooperating with PKP Energetyka who often failed to maintain coherent production standards. The lesson learned was that it was necessary to tidy up the investment process and to define the terms and conditions necessary for partnership collaborations. Since then, the company has defined the minimum parameters required of business partners and negotiated framework agreements with a number of companies which had competences to carry out the PKP Energetyka investments. The signing of those contracts was the final result of holding dozens of meetings with the representatives of individual companies to address issues of mutual expectations and fears.

This method was used to prepare a list of companies operating on the Polish market (from medium to large enterprises) which would be invited to participate in tenders carried out by PKP Energetyka. In practice, it means to create a model in which the framework agreement has already been signed and only the execution of an individual installation or facility is the subject of a tender. Since the investment parameters have already been determined (the ‘build’ procedure), the same tendering procedure can then work much faster than before – contractors need only to determine the price for which they are willing to take on a particular investment.

An example of an investment implemented based on the abovementioned model is of 200 railway substations that the company plans to build throughout Poland. A railway substation is a basic element of the power network supplying the

as well as the deadline and what equipment will be needed. As a result, they are able to give PKP Energetyka a realistic financial offer for investment. Another great advantage of this approach is that it provides them with the possibility to ensure standardisation of constructed facilities which was a problem in MUZa I.

To date, the individual regional plants of PKP Energetyka have used their own individual standards of equipment and technologies necessary to implement MUZa, guided by their assessment of the needs and solutions available on the market. Before this, the process was not coordinated between the individual branches; it was executed as various needs appeared and there were even significant differences in the equipment purchased between regions. This situation was reflected not only in the high purchase costs incurred but also in later difficult situations that arise regarding device maintenance.

One of the elements of transformation carried out after 2015 was the introduction of a unified standard for devices used with specific quality parameters to facilitate the investment process and later maintenance of these devices. Thanks to the development and implementation of technical standards, the company is now able to place larger orders with manufacturers for essential equipment and materials. This immediately translates into measurable benefits for PKP Energetyka who benefits from lower prices as a natural consequence of making larger orders and also for the manufacturers of individual devices who can prepare their production plans well in advance. The process of technical standardisation culminated in the signing of over a dozen framework agreements

The construction of engineering facilities proved to be another matter altogether as it is outsourced to specialised external companies.

The efficient implementation of those tasks required a combination of competences from both PKP Energetyka and enterprises operating in other areas, plus an efficient management of this entire process. An example of such collaboration is the construction of railroad substations where PKP Energetyka commissions the construction of a building to operators who specialise in this field and then completes the power installation itself at a later stage.

Another lesson learned from the implementation of MUZa I was the importance of clearly separating the investment process into the ‘design’ and ‘build’ stages. The biggest threat to the budget and timelines of tasks usually appears at the beginning of each project and this is why the company minimises the implementation of tasks in the ‘design and build’ model popular in the railway industry. The winner of a tender for the implementation of such a task usually bears considerable risk because they do not know what they are going to build exactly at the time when the tender is concluded. So, the surprises that occur later on can significantly hinder the timely execution of tasks. In addition, the inclusion of this risk usually affects the contractors’ costs adversely and, in turn, the project’s budget.

In the model adopted by PKP Energetyka, the design of individual investments remains the responsibility of the the responsibility of PKP Energetyka itself company. Developing projects and obtaining all necessary administrative permits enables a significant reduction of the risk borne by the contractor who knows exactly what to build, its specifications


railroad where devices supplying direct current to the railway power network are located. This type of facility provides railroad power over a distance of about 6 – 12 miles. Depending on the size and location, some of these facilities require an expenditure of about 12 million PLN while some would cost up to three times as much. This is a result of various technical conditions, the location of individual land plots (e.g. a modern substation in the centre of Łódź or Cracow) and its proximity to existing energy infrastructure.

operational excellencePKP Energetyka, on one hand, operates in a regulated environment subject to the supervision of the Energy Regulatory Office. On the other hand, it is the only enterprise that maintains the railway power network in Poland. Functioning in such a strategic industry requires full organisational and cost transparency. This, along with autonomy of individual business lines, was achieved by dividing the organisation into the following sections: • Distribution – as the owner

of the distribution assets • Distribution network

management • Management of railroad power

network maintenance • Development and construction

of the distribution network • Electricity trading • Fuel sales

The central office is a separate organisation that provides support services for individual business units. This approach allows every business unit to concentrate on their own customer and, consequently, allows for a clear breakdown of electricity distribution costs. Its further benefit is the precise definition and outsourcing of the separate and permanent resources necessary to maintain

the distribution network, the railway power network, and to implement investments under the National Railway Programme (NRP).

According to Agnieszka Nosal, the Director of PKP Energetyka’s Distribution Branch, proper management of progress begins by measuring results achieved. It is impossible to manage a company without knowing the basic parameters of its operation or without understanding its basic processes. This necessitated significant changes in the IT area and software investments, including Planer, a program used to manage

employee work time in the field which includes GPS positions.

The next step was to introduce performance measurements (KPIs) to help employees quickly orientate themselves while performing any task. At present, the measurements describe the most important areas that are divided into smaller sections of quality, safety, engagement and efficiency as a reflection of the four main values of PKP Energetyka. After the introduction of KPIs, they became a part of detailed planning for each mana ger and business unit. An MBO system that clearly defines individual or

It is impossible to manage a company without knowing the basic parameters of its operation or without understanding its basic processes.

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group responsibilities for results and supervises their execution was introduced. It is impossible to manage a company without knowing the basic parameters of its operation or understanding its basic processes. An indispensable element of MBO is to utilise innovations and modern technologies in areas such as conducting flight patrol network inspections with the use of laser and thermal imaging cameras, and a railway signal recognition system, otherwise known as the eTabor System, that is used to manage rolling stock. Some of these systems have become a basis for the construction of an innovative Integrated Railroad Network Maintenance System, a proprietary solution of PKP Energetyka which received the Eagle of Innovation Award in 2018.

All these activities, implemented in less than three years, had a significant impact on customer service quality, reliable operational

performance and maintenance of the rail track and railway power distribution network. As a result, there was a sudden improvement in quality that manifested in a systematic fall of the distribution network SAIDI (index describing average power outage in time) and a sixfold decrease in the number of railway power network breakdowns. All of this translated into a reduction of train delays by 30,000 minutes per year.

Beyond MuZaAlthough MUZa is currently the most important modernisation project run by PKP Energetyka, the list of such projects does not end there. In distribution, the company is required to present its budget for investments to get the approval of the Energy Regulatory Office on its investment plans every five years. Open consultations are then held inside the company to discuss the most urgent projects

and only those with the highest priority that fit the budget are chosen. “The four main objectives that we focus on in our investments are quality, safety, engagement, and then, results. We believe that it is only when the first three objectives have been achieved that the fourth can be achieved as well,” explained PKP Distribution director, Agnieszka Nosal.

The company started to focus on digitally mapping its entire network. Even before privatisation occurred, the company’s data on infrastructure (such as technical documentation, maps, etc.) was outdated and incomplete. For this reason, when a potential customer approached PKP Energetyka, the company had to first send an employee to the customer’s location to review the installations and facilities there before any further step could be taken. The lack of documentation meant that those potential customers sometimes had to wait up to several weeks before they could be connected to electricity. The situation was unacceptable for a company which was striving to be worldclass.

So PKP Energetyka became the first energy company in Poland to carry outa digital mapping of all its assets. This meant converting all relevant data into digital form so it could be stored and utilised more efficiently. All existing technical documentation had to be reviewed, the components of all its assets needed to be verified by field employees through the use of helicopter and drone flight patrols and complete photographic documentation of the external and internal components of those properties had to be done. Digital mapping became also the first step in implementing the Network Asset Management System – this was where all information on modernisation P

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planned for a given year was to be found.

Today, the company has very precise information on the location and condition of all its installations and facilities. When all necessary data is available in the company, the process of issuing terms for electrical connection is carried out almost immediately. And any changes made to the company’s infrastructure is documented clearly and quickly in its digital mapping.

Another groundbreaking investment project was the implementation of smart electricity meters also known as AMI (Advanced Metering Infrastructure). As of the time of this publication, the company is the first and only distribution network operator in Poland to have 100% of its smart meters connected to the central online system. As an example of how innovative this is, the company is now able to receive information immediately about power outages even when it is for its individual clients. The information passes directly from the meter to the employee responsible for it in one of its 35 regions. This enables the company to respond immediately, to focus on reducing interruptions in the electricity supply, and has a direct impact on the continuous improvement of SAIDI. The implementation of such comprehensive and advanced IT solutions took place in tandem with a comprehensive IT investment program.

Other investments concerned railway rolling stock which significantly reduced its failure rate and increased accessibility for works on the railway power network. There was also a significant replacement of its car fleet, including vehicles for Electrical Emergency Services. Taking all of the above into account, PKP Energetyka invested over 1 billion PLN from 2016

to 2018 to grow the company and digitize its data as well as raise its customer service quality standard. Further investment of 3.5 billion PLN is planned to occur by 2025.

a closer look at purchasingA separate but very important transformation element associated with investment is the purchasing model. Before PKP Energetyka was privatised, its fragmented structure meant that various company purchases for essential goods and services were carried out separately by individual branches. There were purchasing guidelines developed at the central level but they were not fully implemented by field offices. The multiplicity of products and services ordered hindered the proper coordination of those orders and it meant that the transparency of purchases throughout the company was quite low. The challenge then was to consolidate the purchasing process into one point or location. As a result, the comprehensive overhaul of the purchasing process model in PKP Energetyka was completed in just four months.

So how does the entire purchasing process look like in practice today? It is largely automated based on an ERP system provided by SAP. Strategic buyers are now personally responsible for negotiating individual contracts. Prices are then entered into the SAP system where orders are placed. When the contracts have been negotiated, operational buyers then step in to handle the next step of the process. They are in charge of responding to ongoing company needs and order goods and services from suppliers through the SAP system according to the terms and conditions specified in the framework contracts. In total, the entire purchase process in PKP Energetyka is currently handled by approximately forty

people in contrast to the 200 employees required for the same purpose prior to privatisation.

Equipped with the ability to now forecast orders in the longterm, this has led PKP Energetyka to build better relationships with its suppliers as they are now able to match PKP Energetyka’s orders to their production capacities. In practice, this means that suppliers can now receive longterm orders from PKP Energetyka which can then be incorporated into their longterm production plans. #

stanisław kubacki, President of PKP Energetyka (part of the PKP Energetyka Group), is primarily responsible for investments. A qualified manager with over forty years of work experience in energy companies, he specialises in the implementation of modern technical systems, such as the automation of MV, SCADA, AMI and ZMS networks. He is a graduate from the Faculty of Electrical Engineering of the University of Technology in Wrocław and has completed postgraduate studies in Energy Distribution and Einfrastructure.

agnieszka nosal, Director of the Distribution Department in PKP Energetyka, has many years of experience in process management and restructuring in the energy industry. She has successfully completed several dozen implementation projects in the Polish and Eastern European markets. She was part of the team which led the implementation program for smart meters in Warsaw and has managed a portfolio of projects that focus on improving efficiency and information technology such as SCADA, MDM, GIS and network digitalisation. She graduated from the University of Economics in Poznań and ESCP Europe in Berlin.


“we Had an aMBition to become one of the world’s topleague solution providers in infrastructure. We couldn’t have achieved that goal without making considerable investments in innovation.” says Leszek Hołda, a member of the management board of PKP Energetyka.

From the very beginning, this strategic ambition was a guiding force for the company’s managers. The process of building an innovative culture began with the formation of the Department of Research and Development which was responsible for initiating and coordinating ideas for the entire organisation. R&D was embedded

in the company structure from the very beginning and this move was strongly support by the board.

A set of guidelines called the Innovation Strategy was established to facilitate decision

making and provide directions for the implementation of innovative tools and ideas in the company. These guidelines assumed a lot of flexibility and diversification in the process of change that depended on the needs of its employees and custo mers. One of the assumptions of the strategy was that the company would evolve through gradual improvements. Real potential for the company to develop and grow only comes from drawing

on the competence and experience of people at every level of the organisation. This is why all employees were engaged in the process of creating innovative solutions. The third step taken was to collaborate with both national research centres and foreign companies to implement best practices available on the market.

ideas and inspiration A reward program for ideas submitted by employees became an internal generator of innovation. It was called The Program to Stimulate Innovation. All the employees were, and still are, encouraged to take part in it regardless

The drive for innovation

The storage of energy, modern railway infrastructure

diagnostics, helicopters and drones to examine the

power grid and a system that can predict the occurrence

of failures – all these elements represent a culture of

innovative thinking and actions which were introduced

to PKP Energetyka from the very beginning of the

transformation process. PKP Energetyka took a chance

on innovation by systemically looking for new solutions

from inside and outside the company. Three years later,

the impact of this approach is now visible and the drive

for innovation is only starting to gain momentum.

author: Paweł Górecki, editor HBPr Cooperation: Piotr obrycki


of their department or position in the company’s hierarchy. In 2018 alone, more than 300 ideas were submitted, out of which 25% were shortlisted for the next stage of assessment. In total, nine ideas were selected for implementation while several others are pending further recommendation. One example of an idea that has been implemented is a system of seatbelts that were installed in maintenance trains (i.e. technical railway vehicles moving on the railways that are used to service overhead cables). Although the idea to utilise seatbelts may initially seem trivial, and even obvious, it was an employee’s suggestion that led

to it becoming a rule that is now applied throughout the company. In turn, this has raised the level of safety in the workplace for several thousand electrical fitters.

“The Program to Stimulate Innovation is constantly evolving. We keep adding new items and we want employees to submit design initiatives along with improvements in the processes. We are open to suggestions that can improve any part of the organisation,” says Piotr Obrycki.

In addition to sourcing for innovative solutions from within the company, we also look for ideas from the outside. Thus, part of the strategy to innovate is to listen to

the needs of customers and other stakeholders. The main customer of PKP Energetyka is PKP PLK. The two companies work closely together on many levels of the organisation, resulting in having numerous good ideas implemented across different departments.

“We have introduced a certain standard of work that affects how we hold meetings and brainstorming sessions that allow us to to develop solutions for their needs together,” says Leszek Hołda.

The Innovation Committee, consisting of eight scientists, almost all of them professors, also helps PKP Energetyka understand their clients better. “With this committee, P

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we are able to solve two problems at the same time. It allows us to acquire relevant knowhow for the company and, at the same time, to give the scientists opportunities to test some innovative solutions on the railway and energy networks which we have at our disposal.” says Piotr Oborycki.

The search for innovative ideas from outside the company has led to a rise in excursions abroad. This was a result of wholehearted support from CVC who strongly believes that the company should: (a) have access to knowhow and innovation available on the international arena, and (b) be provided with opportunities to learn from global leaders in the industry. Such visits are intended to inspire concrete actions and innovative solutions which have since been implemented and have already yielded tangible results. PKP Energetyka has sent its representatives to places which are famous for their advancements in innovation, such as Israel and Silicon Valley, for inspiration. As a result, the company has managed to establish relationships with other entities from the Netherlands, Finland and Japan.

The Innovation Strategy has been in place for three years now and it is always actively searching for new solutions in six basic areas: the safety of employees and third parties, the stability of infrastructure as well as the construction and maintenance of it, digitization, emobility, environmental care and responsibility as well as boosting energy efficiency levels.

employee safetyThe idea to develop the Train Driver’s Automatic Warning System (AWS) came about in response to frequent incidences on the railway tracks where the driver did not notice the red signal to stop and continued driving. In fact, the

Office for Rail Transport receives dozens of reports annually about such situations from all carriers. In 2017 alone, 80 incidents were reported, 30% more than in 2016.

The Driver’s Warning System (DWS) that is being currently tested has cameras and laser sensors that can scan and recognise all signals and signs along the railway tracks. It warns the driver with light and sound signals, thereby reducing the risk that he might miss an important warning. Advanced testing of this solution is currently in progress. So far, the system has been able to recognise about 85% of signs. Once it can do so with 90% of the signs, it will be implemented in the locomotives of PKP Energetyka and all other carriers who are interested in this solution.

infrastructure reliabilityPKP Energetyka provides electrical power to the Polish Railways. This is done by ensuring the full readiness and accessibility of the electrical infrastructure, including catenaries (overhead cables). The Integrated System of Railway Power Grid Efficiency Management Program has resulted in a drop to onesixth of the number of power failures, also known as ‘preventive maintenance’, an active response to emerging issues on the railway power grid. It reduces the risk of unexpected incidences where energy becomes inaccessible and minimises the time required to carry out the necessary service works.

The company is currently preparing to implement a predictive maintenance system that anticipates the occurrence of defects or material consumption in advance and allows it to make plans to replace potentially defective components before a failure actually occurs. This is possible because of an earlier technological change

that was carried out in 2016, also known as The digital mapping of its grid, i.e. documenting the technical state of the entire railway power infrastructure. The use of helicopters and drones for this purpose significantly shortened the entire process; it would have taken a few years for the workers to manually complete the work on foot. PKP Energetyka was the first company in Poland to establish a complete sigital mapping grid inventory of all its infrastructure elements including a description of their technical condition and the entire process happened within a matter of a few weeks.

“The purpose of this project was to develop an algorithm, based on the collection of daily data that included extended meteorological and geographical parameters to indicate points of infrastructure exposed to potential failure.” explains Leszek Hołda. One of the solutions of ‘predictive maintenance’, jointly created with Polish scientists from Warsaw University of Technology, is a system to protect the railway power grid from icing which has been one of the most common reasons for train delays in winter. The sensors installed on various elements of the infrastructure collect and transmit data on air temperature and humidity to the management centre. When there is a risk of icing, the system automatically raises the temperature of the wires which, in turn, prevents the formation of a layer of ice on them.

innovative ideas for the construction and maintenance of infrastructureThe maintenance of the railway infrastructure is increasingly becoming a challenge that requires an innovative approach both in terms of its technological and


This enhancement, called PKPE 24+, will further speed up and improve the transfer of knowledge and its accuracy. With this system, failures will be dealt with more effectively, and the entire process will be even shorter. And at the end, PKPE 24+ will be equipped with a system to collect and evaluate customer satisfaction levels.

As soon as each technical failure is resolved, the client’s representative will be able to assess the level of service performance by selecting an emoticon representing a point on a scale from 1 to 5. This function will allow them to collect and analyse feedback and to work on raising the level of customer satisfaction.

digitizationDigitizing PKP Energetyka facilitates the creation of solutions

for customer service and of an efficient scope of communication. Digitization also assists the creation of efficient solutions used to develop and train employees. Elearning solutions found in training programs include Virtual Reality (VR) that enable employees to receive intensive training via systems and sensors for employees to learn at their own pace. For more on this topic, refer to ‘Time for digitization’.

electromobilityThe ‘smart’ version of transport is one of the key axes of development in modern cities. For example, a passenger should be able to arrive at a railway station by bike or electric car, then travel to the city centre on an ecofriendly railway train, and then continue on to local public

organisational aspects. The railway is subject to changing demands and expectations in its quality and reliability. PKP Energetyka, with the support and participation of PKP PLK, its main customer for the maintenance of the traction grid, is constantly developing systems that meet, and even anticipate, these expectations.

An example of an innovative solution that connects both parties is the PKPE 24, an online system for reporting defects. “The solution was created in close collaboration with the management of the railway infrastructure. It involves a twoway communication between the notifier of failures (PKP PLK) and the service provider (PKP Energetyka),” says Tomasz Besztak, Director of the Department of Contracts for Maintenance Agreements. Information regarding the problem that is conveyed in the form of photographic documentation, followed by steps that are taken to resolve it, are automatically passed between the two parties. This significantly reduces the time needed to transfer information and resolve the issue. PKPE 24 is integrated with Planer (to schedule work of electrical fitters and technical resources). PKPE 24 has been operating at full capacity throughout Poland (in all 23 Line Railway Works) since June 2017, or for 1½ years to date. Before the system was implemented, comprehensive tests were conducted at the Line Railway Works around Tarnowskie Góry. This solution is currently utilised by 384 people: 201 employees of PKP Energetyka and 183 employees of PKP PLK.

PKPE 24 will soon include a smartphone application which will automatically send information about technical failures occurring in real time directly to the connected systems of both parties.

Innovative eco-system in PKP Energetyka

the department of research and

development

the Program to stimulate innovation

Company strategy

innovation strategy

innovation and inspiration

from abroad

Committee for innovation


transport. All of these elements must be integrated in one simple system that centres on a modern, reliable and ecofriendly railway.

There is also potential in the idea to build infrastructure that enable the charging of electrical vehicles at railway stations since PKP Energetyka has a distribution network that runs throughout the country. A report from the Jagiellonian Institute on the development of electromobility highlighted the possibility to leverage on this advantage by providing electric vehicle chargers. To this end, PKP Energetyka has already come up with specific and innovative proposals. For example, there is an ongoing project to build infrastructure which will allow electric buses to charge their batteries while both stationary and in motion. In this case, traction lines covering 1½ mile bus route sections need to be

created to allow the batteries of the buses to be charged by means of a pantograph while going on their daily routes.

Modern electric buses are currently equipped with such pantographs. This project is planned for implementation in an EU initiative called Horizon 2020.

efficient energy useThe main focus of actions taken by PKP Energetyka that are related to environmental protection is to optimise and reduce energy consumption. To manage energy distribution efficiently, new modelling capabilities and smart distribution energy grids are utilised. For instance, the use of smart grid technology applications simplify the configuration of a station and thus reduce operating costs.

One idea was to design a form of energy storage that it is able

to meet shortterm spikes in energy demand for train journeys. This led to the creation of a large lithiumion battery which returns previously stored energy to the railway power grid should there be such a demand when a train passes by. The application of this technology has led to supplemental power demand at substations to drop to onethird of previous figures. The project started in January 2018 and by the end of 2019, the first energy storage pilot program will be launched as the target is to build this type of energy storage devices all across the country. The closing date for the pilot implementation is scheduled for the fourth quarter of 2020.

PKP Energetyka envisions that by 2025, the company will gain recognition for its quality and efficiency. It will have reached a leading position in the field of construction and maintenance of railway power grids and electrical energy for railways in Poland. None of those expected achievements would be possible without the culture of innovation which the company has adopted. #

Piotr obrycki is Director of the Research and Development Office at PKP Energetyka. For almost ten years he has been involved in stimulating, creating and incubating ideas, initiatives and innovative projects both nationally and globally. He is an expert in collaborating across different sectors, transferring solutions from new technologies to the energy and railway sectors. He is experienced in applying for public financing for projects in Poland and other countries. He graduated as a Ph.D. student from the Institute of Telecommunications, the Faculty of Electronics and Information Technology of Warsaw Technological University. P

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The principle is simple, if a com-pany cannot find a client who wants to get involved in its inno-vative project, it is unlikely to find a customer who wants to buy its new product or service. It is a les-son that many entrepreneurs I have interviewed felt that they expe-rienced first-hand. It leads to an obvious conclusion: by including a prospective client in the process of creating a new product at an early stage, the company is able to manage risk effectively.

But the issue is much more com-plex. A few years ago I was working on an innovative project with one of the Norwegian banks. When I visited their headquarters I was presented with a list of thirty new ideas for products. Their question was, “How do we select which ones we should pursue?” My answer was:

“I don’t know. Ask your customers what they need.” So we asked the customer advisors to find out about the personal goals of their clients concerning finances. We collected over sixty surveys, and after reading them we identified five good ideas for new products, which the bank started to implement. Of course, to do the bank justice, it has to be said that these five new ideas were on the initial list of thirty. Only that at an earlier stage no-one had a key that would allow the five to be unlocked. There was no customer information that would justify why these five ideas for products had the greatest chance of being imple-mented and becoming a market success. This customer information

was also extremely important dur-ing subsequent stages, because it enabled the bank to internally promote ideas for new products.

To this day I have been constantly repeating this story to companies which I advise. I use it as an exam-ple of why they should not brain-storm in isolation, but rather engage

their customers at an early stage in the process of creating a new product or service.

But when working on the creation of a new product you should be credible. You have to convince cus-tomers that you are an expert in your field. Let’s take as an example a company engaged in the inte-gration of information systems that has recently opened a new office in Brussels. Representatives of many companies from all over Europe have made pilgrimages there to see how to organise office space in the digital era. Now the company has prepared a special

service. It advises clients on how to improve their office space.

As my experience shows, good ideas do not usually come from one person, but they are the product of interaction between many people. The more contact with clients, the more conversation on a given topic, this in turn creates more opportu-nities to open a new perspective and to hear valuable comments. It is therefore key to interact with as many people as possible, and to give customers an opportunity to comment on the company’s ideas, even critically.

The problem is that conversa-tions with customer representa-tives on product innovation have mixed results, some produce posi-tive outcomes, while others do not. My experience shows that the better the contact between repre-sentatives of the producer and the customer, the more fruitful the conversation, and the more ideas for innovative solutions that can be jointly worked out. I always put emphasis on this aspect, because especially in B2B interactions, traders try to stick to the facts at all costs. Meanwhile, to discover something innovative, you have to go beyond the bare facts to build a more personal relationship. We are people, so we must understand that emotions are the main motiva-tor of our actions. The better we understand what emotions our customers experience, the easier it will be for us to create innovative solutions.

régis lemmens is a professor of marketing and sales at Antwerp Management School, a lecturer work-ing with students at Belgian, Dutch and British universities, and a busi-ness advisor and co-author of the book From Selling to Co-creating.

the best approach to innovation is the cooperation of a supplier of products or services with their future recipient or user. PkP energetyka has been using this model with their main customer, PkP Plk.

the better the contact between representa-tives of the producer and the customer, the more fruitful the con-versation, and the more ideas for innova-tive solutions that can be jointly worked out.

réGis leMMens: Co-creating as a mode of innovation


Next station: DigitizationFrom back office process automation to AI support for the railroad

grid network and distribution network monitoring, digitization

has converted data dispersed throughout a company into an

operationally and commercially meaningful information stream.

author: Paweł Górecki, editor HBrP Cooperation: ryszard Bryła

34 PKP Energetyka case study

Ongoing tasks: 1561646, UST: Railway power grid – emergency service / Exchange: Indicators and boards within construction of UST086, 37,78%]

For tHe last three years, PKP Energetyka has undergone a digital evolution based on a plan to transform it from Company 3.0 to Company 4.0 (with reference to Industry 4.0). The vision of PKP Energetyka 4.0 is based on a combination of the Internet of things (IoT), data analysis (BIG DATA), RPA (Robotics and Process Automation) and Artificial Intelligence (AI).

To take a qualitative leap to become a level 4.0 company, both a database and a vision are needed. This means to have a database in the form of a full digitization of

the company and a vision to automate various processes, devices and work. At the moment, the company is about to complete its entire digitization process that transfers business strategy onto intelligent IT systems that bring real benefits like a rise in employee safety, service quality standard and operational efficiency.

PKP Energetyka also has a vision to digitalise its work environment by automating the next steps in its processes. This will eliminate repetitive activities that do not require intellectual

engagement. At the same time, the digitization of infrastructure will allow it to reconfigure itself in many areas.

The coordination of all digital activities is handled by the IT Department at PKP Energetyka that is responsible for planning, development and maintenance of digital solutions. It consists of the IT Architecture Office, Project Management, Informatics and the newly created Centre of Digital Competences (Centre of Excellence), responsible for improvements in processes using stateoftheart

35Change management in digital times

awaiting the digitization process is technical documentation. About 60% of documents throughout the company have already been converted to digital form and by 2020 all paper documents will have been eliminated.

The digitisation of processes is also progressing rapidly. In several departments, support services for various processes have become fully computerised while work in the remaining departments are well under way. The company decided that basic business processes would be digitised and automated in various field systems. All of this refers to SAP, the SAP ISU billing system, and iValua, a resource management system for IBM Maximo. The PKP Energetyka 4.0 vision assumes that we will only use electronic forms of documents and information exchange for all internal and external customers.

In areas where the process of digitization has been completed, automation is under way. Work that was previously done manually in IT systems such as invoice recording, factoring settlements, invoice settlements, the management of sick leave and leave for medical checkups are currently performed by robots designed on the the Blue Prism platform. Software robots that can ‘read’ documents, segregate and analyse the data they contain and then take appropriate action. Thanks to the automation of such work with documents, employees are now free to perform tasks that require greater intellectual engagement such as planning or optimisation. In the meantime, robots carry out the remaining operations and they are able do it ten times faster on average and without making mistakes.

Digital automation is also spreading within the second important area that comprise the servicing and maintenance

shorten the time taken to make decisions, simplify operations, optimise resources, and introduce newer and more efficient solutions for business,” says Richard Block, Director of the Architecture, Design and Informatics Department.

automation and robotizationThe first stage of digitization involved replacing paper documents with their digital equivalents and mapping entire business processes into IT systems. These changes have been taking place in PKP Energetyka since 2016. The documents from financial accounting and HR were the first to undergo this transformation and have, by now, become available in digital form only. There are no paper versions of invoices, requests, orders, property documents or accounting notes. All paper folders with HR documentation have been scanned and converted to digital form. The next largest group of documents

digital technologies such as Robot Process Automation (RPA). The department works closely with all business units and the department of Research and Development.

One of the biggest challenges faced by the department is, apart from maintaining the highest availability of solutions which have already been launched, to closely coordinate over 40 IT system implementation projects. This coordination includes the synchronisation of timeframes and cost optimisation, as well as all of the implemented functionalities that lead towards the digitalization and auto mation of endtoend processes. To this end, a suitable methodology has been prepared along with a platform to connect with other business units. “On one hand, all the departments focus on activities that improve individual ongoing tasks. On the other hand, they focus on optimising all processes from end to end and their standardisation across the organisation to

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planned as well as measures taken to ensure the safety of 70 network servicing trains that carry out jobs on the railway power grid. To supervise them and plan their use more effectively, an application called eTabor (erolling stock) was created. In this application, every train that is submitted for servicing has to undergo appropriate testing and essential technical inspections. The system automates the collection of data coming from these inspections, automates the production of reports and provides reminders about upcoming due dates.

or tool that gives you the ability to automate certain activities, collect data and convert it into reliable information. The essence of Planer and the transformation that accompanied its introduction brought about a change in the operating philo sophy of the entire organisation as well as a different approach to planning work for network main tenance,” says Marek Mazierski, Deputy Director of Service Department at PKP Energetyka.

Automation of the railway power grid service sector affected how the work of the teams was

of the distribution network and railway power grid. Before digitization started, PKP Energetyka had, at its disposal, a group of a few thousand employees throughout Poland whose job was to supervise the nationwide infrastructure. The supervision and management of personnel responsible for the maintenance, repair and investment processes was done by using data collected on paper, even in Excel sheets. There was no system that enabled the company to collect comprehensive data quickly, or to standardize it and analyse it efficiently. Employees had to fill in paper forms, and the data contained in them was never aggregated.

A decision was made to change all that by introducing Planer, a system to manage human resources, and to carry out a digital mapping of the whole distribution network in GIS class system using ESRI technology.

With these implementations, the company established a foundation for realtime metering of its service processes. Data started to be relayed directly to the servers and it was soon possible to achieve higher standards for specific actions like troubleshooting, resource planning and working time. This enabled the company to develop specific guidelines to carry out operations safely, correctly and without delays. Work done well and completed within an optimal timeframe led to a fall in the number of complaints and greater satisfaction of PKP PLK customers at all levels of cooperation with PKP Energetyka.

An additional advantage was the digitisation and automation of the process to record working time and settlements related to it. All necessary data was included in the Planer system and it was enough to integrate it with SAP HR.

“Planer is not just an IT system

FroM CoMPany 3.0 to 4.0industrial revolution

diGitiZation network / tHe internet

industrial revolution

• Computers and machines linked ver-tically and horizontally into a network with the use of internet standards.

• traceable objects that can communi-cate automatically with one another

• self-improving objects

• micro-controllers for machine control

• growth of automation

• IT systems for production planning and supervising

it inFrastruCture witHin PkP enerGetyka:

100 500

800 180

802physical servers

virtual machines

active network devices

printers included in central print system

lan networks

matrices with 1.5 PB

GsM modems

more than

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In addition, the system also monitors the licences of train drivers. Every person driving a locomotive has to have a driving licence to drive a train and knowledge of the routes they are given to drive on. They cannot set off on a route which they have not been given permission for. This is also a requirement for traffic safety on the railway networks. The eTabor system stores the data on routes that are used by train drivers and prevents them from driving a train in the absence of valid permission for the specified railway line. The system automatically monitors the dates of licences and alerts the driver (and also HR) about upcoming expiry dates. The automation of these processes was enabled as a result of the complex integration of the Planer, eTabor and SAP HR systems.

the internet of thingsSensors which are connected to the network provide important sources of information on

the state of the infrastructure, similar to the sensors embedded in energy devices that are part of the Internet of Things. The company has tens of thousands of such devices, including 40,000 energy meters. All of them constantly collect data that is a source of valuable know ledge about the functioning of the company’s infrastructure. This data forms the basis for the central SCADA system with ADMS which is currently being implemented. It is a system of control and supervision over the railway power grid of PKP Energetyka that automates the network.

One of the functionalities of the new system, known as FDIR, is the ability to automatically detect the location of technical failure and independently (without interfering with the dispatcher) switch over to restore power to as many devices as possible. This significantly reduces the time period of power failure for our customers in the event of a breakdown. The implementation of this functionality

will be one of the first implemented in the country.

The data coming from devices found all over the country not only enables the company to quickly determine where the failure occurred, but may, in the future, be used to predict faults. Such a system would allow servicing to take place in advance and, thus, reduce the costs of infrastructure maintenance. A project to build such a system is being implemented by PKP Energetyka and is supported by EU funding. The system will utilise artificial intelligence technology to predict possible failures and to determine the deterioration of individual infrastructure components.

Clouds over the railway power gridPKP Energetyka is currently implementing 42 projects in its IT systems. To be able to smoothly implement such a number of deployments, a flexible, scalable IT infrastructure is required. So, a hybrid cloud system was chosen:

oCtoBer 2016

Paperless company. Digitization of more than 600,000 pages of HR documentation in SAP Fiori Portal.

deCeMBer 2016

Efficiency Team management system for 4,000 FTE

MarCH 2017

Data quality. GIS ESRI ‘passporting’ of 150,000 objects

july 2017

Efficiency Transformation IT SDDC & Hybrid Cloud

oCtoBer 2017

Service quality. Portal24. Safety. Portal ZPW.

sePteMBer 2017

Efficiency. Sales force

seleCted it ProjeCts at PkP enerGetyka

the Software Defined Data Centre and Software Defined Network. The company started down this path by using a classic, heterogeneous system in which various solutions were combined together.

IT systems are used to work on physical machines that are difficult to scale and have poor resistance to failure. Within a year of the project duration a solution was formed based on the company’s own server room and the resources available in Orange cloud. The entire Data Centre environment went virtual using the VMware system and all business systems operating at that time were migrated. Currently available resources necessary for the implementation of projects have mostly been automated which means that only a smaller team is now needed to maintain the IT infrastructure.

The digitization of PKP Energetyka has led to a rise in operational efficiency in every area of the company’s performance. As the information is now collected

in a smart manner, detailed knowledge is provided on almost all aspects of the company’s operations. “Before the digital evolution of PKP Energetyka, we had a lot of data with very limited useful information,” says Christopher Biedermann, a board member of PKP Energetyka and an expert in restructuring. Thanks to modern

digital technologies, this data can now be converted into information that is optimised to achieve higher organisational efficiency and better business results. #

ryszard Bryła is the Director of the Architecture, Design and Informa tics Department at PKP Energetyka. He is an IT manager with over 25 years of experience in the utilities industry. He initiated and implemented a number of breakthrough digital projects in the Polish energy industry, including work on implementation projects of AMI, SCADA, Asset Management systems, billing systems and teletransmission systems. He is a graduate and postgraduate from the Faculty of Electrical Engineering at the Częstochowa University of Techno logy. He combines real industry knowledge about energy with information technology, as a result of which he was awarded the CIO Diamond Award for software digitization in the CIO 2018 competition.

deCeMBer 2017

Quality and safety. Train management system. Quality and safety. Train driver simulator. Engagement. Employee self-service. Efficiency. Central sale billing.

deCeMBer 2018

Efficiency. Central distribution billing. Efficiency. Asset Management System.

june 2018

Service quality. Fleet management system.

noveMBer 2017

Data quality. SAP Hana

FeBruary 2018

Efficiency. Flight patrols over distribution network. MBO Self Service

oCtoBer 2018

Safety. Railway signalling recognition system.

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Ryszard Bryła

Higher standards of organization In the last two years, PKP Energetyka has raised its management

process efficiency level to one that is above the market average.

This achievement resulted from the active involvement of its own

employees and external experts in transforming its processes

and practices to meet the best global standards.

author: Paweł kubisiaj, deputy editor ‘Harvard Business review Poland’

ManaGeMent area Below averaGe BasiC Market

averaGe advanCed Best PraCtiCe

Operational efficiency


Finances, controlling and accounting

Purchases and logistics

Energy sales efficiency

IT systems

Project management

Human resource management

Internal communication

Distribution investment projects

in 2015, when CVC acquired PKP Energetyka, analysts online predicted a quick exit and severe costcutting measures, a practice that was once common for private equity funds. Yet, the investor opted to apply a modern approach on the portfolio company – this meant building its value through the improvement of its processes and operations. They wanted to make PKP Energetyka become the role model for the successful transformation of operations and its value had to be generated as a result of combining the world’s best standard management systems and diligence in operational efficiency.

As a result of the involvement of employees and external experts, along with a rigorous comparison of its processes and practices to the best global standards, improvement was recorded in virtually all areas of activity. Within two years, the company raised the

effectiveness of management processes to a level way above market average, as illustrated in the document Efficiency improvement in managing practices at PKP Energetyka 20162017.

In accordance with best practices, a central market knowledge base was been created for the commercial area. This knowledge base contains information about every tender that may be of interest to the company. This system allows managers to consider if they should participate in those tenders based on game theory. A modern sales management system was introduced (Salesforce) to enable the processing and automation of many sales tasks. Specific changes were made in the sales of energy. Using the existing infrastructure, the database of recipients was expanded to include new locations in the vicinity of railway lines. An automated pricing

model was introduced to analyze every customer based on its individual energy use and the risk profile. This enables the company to make an objective and guaranteed offer that is tailored to the recipient. At the same time, the company decided to move away from rewarding employees for the volume of contracts signed while introducing a bonus for concluding contracts in line with the longterm strategy of the department.

Farreaching changes have occurred in the field of purchasing and logistics. Equipment and materials were standardized to reduce the number of device types by over 80%, thus freeing the purchasing scale effect. Framework agreements were introduced based on best practices, including a pricing formula that enabled unit prices to be reduced by up to 20%. The delivery process itself was simplified, e.g. by introducing noncash

Efficiency improvement in managing practices at PKP Energetyka 2016-2018 management area

1.8

1.8

2.0

1.6

3.7

3.7

1.2

2.6

2.8

1.5

4.4

4.3

4.2

3.9

3.7

4.8

4.1

4.0

4.8

4.3

sourCe: McKinsey


transactions with selected wholesalers or by facilitating direct delivery to the place of investment, thus, avoiding the need for a warehouse.

In the IT department, a largescale investment was made through the extension of SAP and the introduction of the mobile SAP Fiori. To communicate with employees, kiosks that enabled field employees to log on with a smart card and access intranet information and personnel systems without having a computer or account was introduced. The operational philosophy of the IT department also evolved to focus on providing services that were competitive and transferred to an SaaS system.

Many innovative solutions were implemented in the distribution of energy. PKP Energetyka is the first company in Poland to have introduced automatic analysis of the indicator of power interruptions (SAIDI) at a massive scale. The system is divided into regions and this allows for the specification and analysis of the problematic regions or lines in real time. This was accomplished by introducing an AMI system (Advanced Metering Infrastructure) that automatically registers online meter counts for all the company’s clients.

Some of the changes have affected more than one area of the company’s operations. One example is the company’s digitalization efforts to introduce Planer, a system for remote team management and longterm planning of tasks. The company opted for a simpletouse and easytoimplement program which automates repetitive processes, such as the daily schedule of 4,000 employees who work on the network, and management of rolling stock, as well as specialized equipment used to service the railway power

grid. It was particularly difficult to implement those changes as the workers from the repair crews who were previously used to paper documents were now given smartphones equipped with GPS which they had to use in their daily work.

However, the smartphones eventually gained favor with more and more of the crew who decided to put away their pen and paper. Since the implementation of Planer, every task has been coordinated within a better planned system which avoids wastage in various ways such as the lack of appropriate tools, unnecessary trips made, repair activities cancelled at the last minute and so on. Thanks to this, time dedicated to the mobilization and demobilization of personnel was halved (time from the commencement of change to the team’s departure). The flexibility of employees to become available whenever they are needed has gone up. This means that train traffic can now be stopped for a few hours as and when there is a need to repair the power grid.

Interfunctional changes have also occurred in the Finance and HR departments. In the Finance Department, the controlling and accounting activities for all actions related to longterm planning and business support were centralized in the company’s headquarters while transaction departments were moved to the Shared Services Centre in Łódź – more than 120 jobs were created here. Previously, these features worked less effectively as many organizational departments within the company were building their own competences, while multiplying costs and duplicating assumptions at the same time. The HR department was also rearranged in a similar manner – part of HR payroll was moved to the Shared Services Centre whereas HR

functions connected with, for example, career path planning, were created or modified in the headquarters. Additionally, in line with the industry’s best practices, virtually every operational area was identified with specific and measurable key performance indicators (KPIs) for functions that had a decisive impact on the efficiency of processes. For example, in the Finance and Controlling Department, over twenty indicators were introduced on the manager’s desktop that enabled the monitoring of progress in implementing the company’s longterm financial plans. For the needs of the Internal Communication Department, measures were developed to examine the effectiveness of communication by taking into account different customer groups in the company. The table ‘Summary of progress made in The Diamond Project’ illustrates the most important areas that have undergone changes.

The introduction of Planer software played a special role in the process of change as it fixed defective areas and improved those that worked seemingly well but which could work much better. Digitalization has provided the company with better supervision of train inspections and has led to the adoption of Kaizen, a Japanese business concept for the continuous improvement of processes. Since its introduction, inspection time has decreased from sixty days to thirty and the availability of trains have increased from 80% to 100%. This better allocation of resources has brought about a significant rise in productivity and the pace of work. At the same time, there has been a significant improvement in quality.

In three years of the transformation process, the number of railway power grid failures has P

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En

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summary of the ‘diamond’ Progress Programme

operations efficiency

Introduction of online Field Force management systems across all sections for more than 3,000 people (mobiliza-tion time halved as a result).

improvement of quality of work for major clients (led to reduction of failures by 50% year-on-year).

Further improvement of the quality of railway works and communication with clients (17 initiatives including Situa-tion 24 – a tracking system for failures).


Formation of a central database on market know-ledge (information on every tender which may be of interest to PKPE).

Introduction of a modern sales management system (Salesforce).

Further work of process optimization under the ‘step-by-step’ program.

Finance, Con-trolling and accounting

Introduction of a long-term financial plan.

Creation of a shared services Centre in Łódź.

Introduction of a data warehouse containing a knowledge base.

Purchasing and logistics

Equipment and materials were standardized (variation reduced by 80%), thereby reducing costs due to eco- nomies of scale.

Framework agreements were implemented based on a pricing formula that reduced prices by up to 20%.

Introduction of Lean methodology for handling warehouses, e.g. the KanBan mechanism.

energy sale efficiency

an automated valuation model was introduced to calculate and analyze con-sumption and risk profiles.

Using the existing infrastruc-ture, the customer base was expanded to include new locations near railway lines.

Introduction of special cheaper night tariffs.

it systemsInformation kiosks were intro-duced to access information directly from specific section areas.

The philosophy of IT opera-tion changed into a service provider for business depart-ments (SaaS – Software as a Service).

Cooperation in creating innovative software such as automatic recognition of lights and semaphores.

Project management

Large-scale IT and project management investments were made (e.g. Mobile SAP Fiori).

A standard project manage-ment process was introduced (regular progress reviews).

Improved management of subcontractors (segmenta-tion of subcontractors).

Hr management

Formation of the top 400 group (key employees managing the company), creation of regular meetings with the management board and regular discussions on the development of the company.

Introduction of the training system ‘leader’s academy’ and training for internal coaches.

Cooperation with schools and colleges to cover the generation gap.

internal communication

Based on a survey by ‘Puls’ to measure the effectiveness of communication.

Extending knowledge on communication efficiency to all employees.

investment projects in distribution

Introducing an aMi system – automatic online meter readings – for all customers.

First company in Poland to introduce large-scale auto-matic analysis of power interruption indicators (saidi).

50% reduction in total power interruptions by 2022.


six-

fold

dro

p in

the

num

ber

of f

ailu

res

fallen sixfold and the response and restoration times for emergency events or weather catastrophes have halved, as illustrated in the figure: PKP PLK railway power grid failures in numbers.

The real baptism of fire for the new integrated system of railway power grid efficiency occurred at the beginning of October 2017 when the southwest of Poland was ravaged by cyclone Xavier. On the first day of the crisis, the headquarters decided to take over resource management. Coordinators were authorized to delegate people and equipment among the plants. At any given moment, they could tell exactly where they had employees and trains, what their status was and how long it would take them to carry out a task. The coordinators monitored the direction of the wind and monitored it closely using their teams and rolling stock. And all

equipment was delivered exactly to where it was needed, accompanied by people who possessed the necessary certificates and licenses to operate them.

As shown in the research done by McKinsey & Company (which actively participated in the transformation process of PKP Energetyka), 70% of all company efficiency programs fail. The main causes of failure include behavioral factors resulting from employee resistance to changes (accounts for 38% of failures) and insufficient support from management (accounts for 33% of failures). Viewed in this light, the factors responsible for the successful transformation of PKP Energetyka should be split into two categories.

The first of these success factors lies in the company’s ‘change leaders’. As part of the transformation, new managers

PKP PLK railway power grid failures in numbers

20140

50

100

150

200

250

300

350

sourCe: PKP Energetyka

2015 2016 2017 2018

5844

number of failures within the previous twelve months

num

ber

of f

ailu

res

in g

roup

I

284331

303

114

114

262264

334322311

290292

317306 298

290

341341

282

319

153

who were motivated and experienced in conducting transformations were introduced to the company in the head office. Research from Harvard Business School shows that the key to achieving successful transformation in individual departments of an organization lies in the appointment of leaders of change at all levels who really see the need for a transformation, know that transformation is a good idea and want the transformation to succeed. This was why changes in the workforce were made at the headquarters of PKP Energetyka to introduce fresh ideas from other companies and industries.

The second factor that determined the success of changes in PKP Energetyka involved its top managers, middle management as well as its line managers and field workers. In this case, instead of making quick changes, the company opted to use its existing resources and human capital.

There are three important elements at this level of management. First, the company unleashed the full potential of its employees by boosting their roles and competencies with clear definitions of responsibilities, operational measures and soft skills training program as well as promoting the most ambitious employees. Secondly, a conciliatory approach to trade unions was adopted. This involved many rounds of negotiation, making compromises, job valuations and pay rises. Thirdly, new communication channels were created with employees by bringing line managers closer to the management board. This was created through the formation of the Top 400 group – four hundred of the most important managers who have a direct influence on the development of the company. #


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