Our Transforming Journey (from laggard to upper quartile) with Alex Plant, CEO, Scottish Water

[00:00:00] Piers Clark: Welcome to the Exec Exchange, 15-minute podcast in which a leader from the water sector tells a story to inspire, educate and inform other water sector leaders. My name's Piers Clark and today I'm with Alex Plant, the Chief Executive of Scottish Water. Alex, wonderful to be with you.
[00:00:16] Alex Plant: Good to be with you too, Piers.
[00:00:17] Piers Clark: So, we always start with a bit of background on our podcaster, where have you come from before you joined Scottish Water?
[00:00:23] Alex Plant: So, yes, I've been with Scottish Water for 18 months. In my role before that, I was for many years working with Anglian Water when I was their Director of Strategy and Regulation. So, a bit of background in the water sector, I'm from Anglian. I started my career in the government, and I worked for the treasury during the time that Gordon Brown was chancellor. Quite an exciting point to be in the treasury. I worked in aviation regulation.
[00:00:45] Piers Clark: But you weren't there when he was prime minister?
[00:00:47] Alex Plant: No, I was there when he was chancellor. And then I, left and went to work for the Civil Aviation Authority. In the early 2000s when I worked on things like the Open Skies deal between the EU and the US and ways in which we were trying to enable aviation to enter into things like emissions trading schemes- stuff like that.
So, a bit of flirtation with aviation for a bit, a bit of time working in Cambridgeshire running a development corporation and then working for the county council there. And then after a short foray into Royal Mail, just after it was privatized, I kind of found a home in Anglian Water and then on to Scots.
[00:01:18] Piers Clark: How long were you at Anglian?
[00:01:20] Alex Plant: So, it was Anglian for about nine years.
[00:01:22] Piers Clark: Nine years. So Anglian Water is a large water utility in the East Anglia part of the UK. But you joined Scottish Water 18 months ago. Tell me about Scottish Water. It is a national water company.
[00:01:33] Alex Plant: It covers the whole of Scotland. So, we are the largest company by geography, by land mass, about the fourth biggest in terms of numbers of customers. Covers the whole of Scotland, as you say. Interestingly, it's a publicly owned water company, and the model in Scotland is different. So, companies in England are privately held. In Northern Ireland, we have a company that is very much closer to the government itself. In Scotland, we have a model where, yes, it's publicly owned, but it's commercially run. That model of publicly owned, yes, but run on the same lines as the commercial business would be run and then independently regulated for economic and drinking water quality and for environmental is a model I think that serves Scotland really well. And it's an interesting sort of different approach that we should juxtapose when we look in the UK as a whole. Because we have something of a natural experiment going on with private mutual kind of our model and then the slightly different...
[00:02:22] Piers Clark: PLCs?
[00:02:23] Alex Plant: Yeah, all of those things in play PLCs as well as privately held mutual, state run, and then our model. There's a lot that has allowed Scottish Water, since its formation, to improve its performance significantly for the benefit of customers and the environment.
[00:02:37] Piers Clark: Well, the beauty is, of course, you've been in more than one company, so you do have an opinion. You know, you're experienced. You may be biased because of your role, but actually it's an informed bias.
[00:02:46] Alex Plant: To be really clear, it's not to say that I think that the private model is wrong or can't work. I think it absolutely can. I think there may be some changes to the structures in England that would help to improve the position going forward. So, I'm not saying this is the only model that works. I'm simply observing that it seems to work quite well in Scotland.
[00:03:04] Piers Clark: Give me some facts about Scottish water, the area it covers, the number of people served, and it's water and waste water.
[00:03:09] Alex Plant: So, water and waste water, whole of Scotland, so population about five and a half million and we're covering the length and breadth of Scotland. Right up to Shetland and the far northern isles and all the way down to Dumfries and the western isles. So, some complexities in serving a population that's quite so diverse.
[00:03:27] Piers Clark: Getting to the island communities, those populations change dramatically during the summer holiday season.
[00:03:32] Alex Plant: Indeed, so you have a big sort of swelling of demand and actually we find ourselves in situations where there's just sometimes not enough water to go around. You think of Scotland as being wet but we actually have water shortages like the rest of the country does. Thinking differently about water is something that I'm trying to help us do as a country here in Scotland since I arrived.
[00:03:50] Piers Clark: Now, you've been in the role for 18 months, but Scottish Water has been around for over 20 years. And what we're going to talk about today is the transformation, the journey that Scottish Water's on. So, take me back a bit, what it was like at the start and where you're at now in the journey and where you're going.
[00:04:05] Alex Plant: Scottish Water was formed in 2002 and it was formed by bringing together three regional bodies. So, we had East of Scotland, West of Scotland, and North of Scotland Water. And bringing together into a single entity was done partly to recognize the fact that there's always an inherent cross subsidy in Scotland between essentially the more populous areas of the country and those more rural areas. Recognition of the benefit of that was what was done. And if I go back a little bit further, one of the things that's interesting here is that, when privatization was happening in England, in Scotland, there was a referendum held by Strathclyde Regional Council, which asked the people of Strathclyde whether they wanted Scotland to follow the same route as England in privatization. And I think around 97% of responses said no. So, you have this history of there being a strong public sense of wanting to maintain public ownership. Before then it was done through the individual councils. Then it moved into the three regional bodies and then Scottish Water was created as a public corporation with a very specific structure. And so, it's sort of arm's length from ministers, but government acting as the sort of stakeholders on behalf of the public.
[00:05:07] Piers Clark: Because you've got that previous infrastructure of sort of local units, you must have had offices and people employed....
[00:05:12] Alex Plant: All over the place, and this is one of the interesting things. If you look back to when Scottish Water was formed in 2002, if you compared its performance then to that of the English companies. It lagged significantly behind the worst performing English company back then. So, both in terms of service quality and in terms of efficiency of costs, it was way off. It was off the bottom. And what happened, and I think particularly helped by some pretty robust regulation from the Water Industry Commission for Scotland, a mirror was held up. I think there was, as I understand it, I wasn't here, obviously, there was some pretty sharp intakes of breath at the level of challenge that the regulator was setting the company and lots of people said, "well, it can't be done." But, in the chief exec role and all the senior teams that existed at the time actually rolled up their sleeves and said, "Okay we're up for this." And through a series of pretty significant transformations in the way the organization worked, has moved the company forward significantly and there was a period of just taking some costs out. Some of which happened, of course, after privatization in the English companies, but it happened here too. The benchmark competition thing that the regulator was using was really powerful and over time Scottish Water is comfortably in the sort of top quartile of companies. It's a real positive transformation story delivered under a public sector ownership structure. And with kind of pretty rigorous approaches to investing in transformation, taking the upfront cost, but seeing the benefits play through which then actually add up to something where we have consistently top quartile performance and we now stand up to scrutiny in terms of our cost efficiency as well.
And when you look at things like customer satisfaction, we're comfortably the highest ranked company in the UK and up there in Scottish terms with all companies. So, we are scoring really well on some of our core metrics around things like that. We are actually at the highest level we've ever been.
[00:06:58] Piers Clark: Well done. Now, if someone's listening to this and they're running a utility in a different country, but they feel they're lagging and they hear this story... I know it was before your time, but are you able to say which of the transformations had the most impact in, in pulling you up? And were there any that you did things where you expected to be transformational, but actually it was a diversion?
[00:07:17] Alex Plant: I think there are many, and I'm in some ways, the least well-placed person to talk about some of this cause it's going back into history. And so, telling you the story from what I've understood from colleagues who've been here for longer. I think one of the really key things that drove a lot of this was actually bringing the customer into absolutely the heart of everything that the company was doing. And if you draw the customer in and you say, we exist in order to serve the needs of the customer in terms of service standards and in terms of the amount of money we're asking from the customers, because that's where all the money comes from. It comes from customer bills. That is what I think shifted the mindset. And I think something really interesting for me in that this point, as I talked about earlier about the model, it seems to me to have done pretty well at trying to bring the best of the commercial approach that sits within a privately owned company alongside public ownership benefits, which tends to create greater trust and confidence from customers, which gives you a little bit more of agency when you're working with customers and gives you a bit more leeway to do things alongside effective regulation. I really don't want to lose the fact that, that story of transformation, a lot was done within the company, but, my God, without the robustness and the regulation, environmental and economic and quality wise, we would not have got to the place we've been at. So, it's a story of effective policy frameworks, a sensible model of people within the company rising to the challenge and effective regulation. We're not in a bad place and we enjoy a position whereby the people of Scotland trust us, our economic, environmental, and quality regulators want to work with us, and we have a government that's proud of us.
[00:08:48] Piers Clark: How did the staff feel? Where would they see themselves on that spectrum of "we're a commercial organization that needs to be cost effective and delivering cost savings" versus "we're environmental stewards and we're serving a public need and serving the environment." Where would they see themselves on that spectrum?
[00:09:05] Alex Plant: I think my colleagues would recognize the point; we're always trying to balance those things. And ultimately, of course, we always ensure that we're meeting our regulatory requirements. The really key data, things like environmental pollution for instance, still some way to go, but we're in single figures. If you go back a few years, we were way higher. So, it's been a real step change, thinking about how you deploy technology. So that is driving cost efficiency and driving service standards. So, two can often go hand in hand if you're willing to be open to changing the way you do things, focus on customer and the environment, and open up your minds to change. I think the other thing that Scottish Water has been really helped by has been the ability to work with other companies. And everyone gains from that sort of approach. And it's a two-way thing we share obviously, as well as piggyback.
[00:09:49] Piers Clark: So, tell me about the future. You've 18 months into the role. You've now got your tenure. You want to be in a situation where in 15 years’ time, people are saying, well, the Alex Plant period, was when the real change happened. What's going to come next?
[00:10:00] Alex Plant: So, I mean, first of all, I inherited a really good position. My predecessor ran the company really well for many years. I was privileged, if you'd like to come in with a good platform to start from.
How do we now go further and fast? And what I've been talking about internally within the company is trying to empower our people more, trying to unlock the creativity that sits within the organization; free people up from the, from the yoke of a heavy decision-making process that slows those things down.
Externally, raising the profile of water in Scotland, getting people to think differently about it. There's a sort of sense that, you know, it's abundant here, we don't need to worry about it because we're almost entirely not metered. So, trying to raise the profile of water in Scotland and shift the way people think about it. We use way more water per capita in Scotland than in most of the rest of the UK, even in the northern parts.
[00:10:43] Piers Clark: What's the figure?
[00:10:44] Alex Plant: We think that we're on average about 20 percent more than the world's average.
Partly because there's no monitoring of usage. I think it's part of it. You pay through council tax. It's a flat rate. There's no incentive, you don't know how much you're using. You have no signals that tell you to think about it other than some exhortation that has limited value.
I think also because, we live in Scotland, we think it rains all the time. It doesn't. East of Scotland's pretty dry and it's getting drier. So, there's a sort of change in mindset. Part of my legacy, I think, will be hopefully trying to nudge that dial and seeing that demand reduction.
[00:11:18] Piers Clark: I wish you the very best.
[00:11:19] Alex Plant: Thank you.
[00:11:19] Piers Clark: We always finish with an intriguing question to learn a little bit more about you. And I'd like to know what do you owe your parents?
[00:11:25] Alex Plant: Yeah, that's a great question. I have a complicated parent question because my parents split up when I was five, so I have step parents on both sides. You know, there are different things that came from both my mum and my dad, but also my stepmother and my stepfather. And they've all contributed in different ways; they've inculcated values in me that I think are really fundamental. And that's about fairness, honesty, being true to your word. And those are the things that I take with me into the job. And I think it helps me also to try and form effective collaborations with others. And that's a real key feature of Scotland. We work really well together across government regulators; companies. And that sort of recognizing there's a common goal, being honest and transparent about what you're trying to do, and then following through on it is part of what I've inherited from my parents.
[00:12:08] Piers Clark: Having a leader of a utility that has absolute integrity. That is the dream. That's what you've got to have. You have been listening to The Exec Exchange with Piers Clark. My guest today has been Alex Plant, the Chief Executive at Scottish Water. We've been talking about the transformation of Scottish Water. Hope you enjoyed it. Join us next time. Thank you.