From quango to corporate: interview with Phil Day, HRD at the Energy Savings Trust
David Woods, April 26, 2012
Two of the most prominent political hot potatoes of David Cameron’s coalition administration are to implement cuts in Government funding, while at the same time maintaining investment in the climate change agenda.
Setting out to reduce its expenditure through a 'bonfire of the quangos' in 2010/11, the Government signed the death warrant of 177 non-departmental public bodies. One of the organisations facing the chop was the Energy Saving Trust (EST) and last month I went to meet Phil Day (pictured), its director of HR and communications, to talk about how the bonfire – which spelled the end for a number of high-profile organisations – gave EST opportunity to 'diversify' its funding streams and become a social enterprise, relying on earned income to flourish, rather than Government department contracts.
But that week, energy was making news headlines, as it was only days since the previous secretary of state for energy, Chris Huhne, had quit, to be replaced by Edward Davey – previously HR's very own minister for employment relations.
Heading the Department for Energy and Climate Change has been a difficult role (driving offences aside), not least because the coalition has not always shown itself to be the 'greenest Government ever', as David Cameron pledged in his manifesto.
In January, transport secretary Justine Greening's announcement of a high-speed rail link between London and Birmingham (HS2), provoked accusations from many, including the Woodland Trust: "Any government agreeing to the destruction of ancient woodland is wholly mistaken when referring to itself as the 'greenest Government ever'."
Jonathon Porritt, ex-head of the Sustainable Development Commission, said this Government had "substantially weakened" the position of the Department for the Environment, Food and Rural Affairs and the prospect of its being the 'greenest Government ever' was "vanishingly remote".
So, in a time of climate change uncertainty, Day sticks to a fundamental mantra: 'Saving energy begins at home.'
"Climate change doesn't impinge on people's everyday life," he smiles. "So we remind people of the importance of it.
"We can do loads of things to help people manage their household energy bills and help them balance the books."
During our meeting, Day talks about the various types of energy-saving technologies for consumers, from solar PV (photovoltaic cells that convert sunlight into electricity, which can be used to run household appliances and lighting, saving the average home £1,100 per year) to cavity wall insulation ("it only takes half an hour to install", says Day). He explains about the introduction of smart meters in homes this year, showing consumers how much energy they are using in cost terms.
And he tells me about the forthcoming Green Deal, a financial mechanism proposed in the Energy Bill (2011): if households install energy-saving measures, they should not have to pay upfront for these, but will out of the savings they will make from their utility bills.
That's before we get on to the subject of microgeneration - the small-scale generation of heat and electric power by individuals, small businesses and communities - where households generate their own energy from solar panels, water, wind or geothermal sources and plants for fuel.
It's all a bit much to take in and Day must have seen the look of confusion on my face. "This is fundamentally complex. Things get complicated - customers are confused," he adds. "People need assurance. Consumers were being offered consultation for free and were turning it down. We provide a place to compare, help people navigate, dispel myths and help people make their homes more energy-efficient. We need to instil real confidence."
He pauses. "It has been around 20 years since climate change became an 'issue' at the Brazil Earth Summit in June 1992 and now the Government is trying to encourage a proper market."
It is hard to believe this is the same Government that cut the EST's funding in 2010.
"We have had the experience of devolved government and political divergence - and we could see what the direction of travel was," says Day. "After the collapse of Lehman Brothers, we knew, even under the Labour government, there would have to be clear changes to the funding of how energy-saving would be delivered.
"But we have come through it - because we were resolute that we had to come through it."
In fact, the organisation saw the change in quango funding as an opportunity to provide consumers with a greater guarantee that it could continue delivering on its mission long into the future.
In November, the EST was awarded charitable status to continue its mission of providing free, independent and impartial advice to householders and communities on how to reduce domestic energy consumption. During this period of change, the EST has secured a number of high-profile contracts, as well as securing John Lewis as the founding partner of the EST Foundation.
But the organisation also runs a trading subsidiary (Energy Savings Trust Ltd), so instead of two clients (the Department for Climate Change and the Scottish Government), it now manages many diverse customers, including commercial companies. The organisation has morphed from a quango into a company, in less than two years.
"We have a commercial arm, but staff work across both parts of the organisation," says Day. "They know their stuff and they have a high standard of commitment - despite the perceptions of quangos."
Day explains that training for staff was necessary to prepare them to pitch to prospective clients, but he adds: "Philip Sellwood [the company's chief executive] has a background in Marks & Spencer and [asset management company] Nomura - he has no public sector track record. Our directors come from commercial backgrounds and they are leveraging their experience.
"Our staff are bright, capable and proud to work here."
But in saying that, the EST has had its fair share of the proverbial 'difficult decisions' to make over the past year. It has already lost 100 roles and Day fears it might lose more. Budgets once funded by Government department, such as marketing, were decimated as the 'company' adapts to rely on earned income.
But Day - himself a career HRD with a track record in both public and private sectors, having held roles with the BBC and a large PR agency - remains positive.
"We expect a profit of £7 million this year," he says. "This is about 40% ahead of our target and 50% comes from Government, 50% from commercial revenues.
"The commercial sector always wanted access to our data - now we charge them for it. The market will always have players making claims - and we are here to provide trusted, impartial advice.
"The commercial side is important, but culture and values always have to chime with what we offer."
And it is here that HR has taken a role of paramount importance in the organisation. As Day explains: "As HR director, I have to remain engaged with the business intellectually - it gives my department credibility and throughout the change, we have been able to respond effectively to the challenges."
But he adds: "You have to balance the transactional and the strategic parts of HR. My energy is focused on getting the hygiene factors right, then I can look at the business strategy and find out how we can support that.
"HR directors have been criticised for not doing this. Financial directors understand what is important about business and there is no reason why HR directors can't do the same things. It is not about throwing our weight around in the boardroom - it is about working together to find a way forward.
"I have learnt a lot from colleagues on HR issues such as leadership, development and coaching and it has been a pleasure to work here."
But he adds: "Training and development is fine, but this has to have a movement towards staff engagement. This is not just about HR, it is about the whole leadership team taking change forward and devising a rationale for staff."
And although Day has been instrumental in managing change from top to bottom across EST, a core basis for this was making sure the right board and trustees were in place to lead a new and fundamentally different organisation -and making sure the right staff were in place to meet the changing objectives.
With Sellwood's commercial acumen and the positive steps forward generated from the John Lewis deal, staff are moving to think of themselves as businesspeople, as well as energy experts, according to Day - and in February, the EST appointed Ted Brown, ex-COO of Rentokil, as chairman of the board as it moves forward with its private sector ambitions.
But, as Day himself points out, the move from quango to corporate means the organisation's remuneration structure needed revising to incentivise both a sales dimension and business development roles.
"The EST is a not-for-profit organisation," Day explains. "We are doing this for the remit of our charity and we can never be massive upper-quartile payers for this reason, but I think our remuneration feels fair.
"The pay here had been unchanged for years - I hadn't had a pay rise in four years until a 2% increase in 2010, but we refused to cut pay during the change process here and we have kept all our benefits and are ticking the boxes there.
"We are in a good place with our stakeholder pension scheme, the contribution to pensions from the employer is generous, we give staff lots of options and we have a good default fund - bearing in mind ethical investments.
"It is a really interesting time for us with reward and I am considering the options to potentially step up reward and retention systems."
Moving on to motivation, Day beams: "We tell staff we will give them an interesting job and in return we want their energy in the business and the best of their abilities. We have a great working environment and we give people a lot of feedback.
"Our CEO is honest and transparent and this is hugely important both within the business and externally.
"HR directors should use the privilege of being really honest and uphold the values set - although not 'all that's good and pure'. I would like to think our staff are able to say what they think and will tell me. All levels here are prepared to engage with what staff are saying and I like it when people challenge me. I expect it, because this is how we are navigating our way through complexity. True communication is when staff get listened to as well as spoken to."
The next year will bring more change to the business - a new minister for climate change will only be the start. The increase of smart meters in homes will put pressure on EST to respond to the queries from consumers, as well as address the energy companies. Day tells me it has plans to work more closely with company car fleets - in fact, it has just launched a guide for electric fleets.
With the Government's Green Deal coming into effect this year, millions of consumers will be on the hunt for impartial - and preferably free - advice and reassurance about their energy decisions. The partnership with John Lewis means EST's message can be pushed forward by the retailer, but there will be a lot of work for EST to get to grips with.
"We need to trust our people to get on with their jobs. That is a critical part of how a business should operate. I know of workplaces with obsessive levels of control - especially during change - but we have to respect the expertise of our employees. I am just here to provide the infrastructure for them," says Day.
"The line has to do more and I am working on a toolkit for line managers on people management." Looking forward, he smiles confidently. "HR is full of challenging things and over the year ahead we will be training and developing with a business focus. And although this is a crowded market, we're up for the challenge."
With the meeting all but over, Day quotes findings from the January issue of HR magazine, where 61% of employees are unsure who should be responsible for monitoring carbon emissions in their organisation.
Does he think the HR director should be responsible for the carbon agenda in business? "Why not?" He laughs. "It is a perfectly good place to start."
Energy Saving Trust - services offering
Services for the public sector
Helps government, local authorities, communities and housing associations develop and deliver large energy-efficiency programmes, through independent advice.
Services for the private sector
Supports efforts to save energy and water and reduce carbon emissions. Any surplus earned will be donated to the charitable foundation.
Certification and assurance
Customers are more likely to buy when they know for sure that the goods on offer are the most energy-efficient for sale; and householders are more likely to act on advice if they have confidence in the person giving the advice.
Testing, verification, technical services
Tests new technologies to see how they work in households. Tests are peer-reviewed and internationally recognised. EST tests the whole chain of operation, from installation to understanding householders' perspectives, so it can identify every strength and every weakness.
Knowledge, insight and modelling
Tools and models draw on knowledge and expertise and have a proven record in delivering successful energy-efficiency measures.