LABOUR RESTRUCTURING

1. LABOUR RESTRUCTURING May, 2006

2. Content Introduction Organisation Design 3. Job Description 4. Staff Audit 5. Training Needs Assessment 6. Staff Costs 7.Change Management

3. Introduction and Deliverables The deliverables in line with the scope of the assignment are: Report on optimum structure for CHQ, 6 GENCO�s and 11 DISCO�s Report on job descriptions for all positions based on the developed structures Report on staff audit and skills mapping for the current staff of CHQ, 6 GENCO�s and 11 DISCO�s Report on three possible phased staff reduction strategies, outlining associated costs and implications for each strategy. Report on training needs assessment for each job or cadre of staff A change management strategy that ensures a smooth transition from the existing PHCN to the new decentralised industry structure

4. Organisation Design

5. Findings The current power generation capacity in the country is 3,434.2MW However there are about 10 other power stations being built to increase this capacity to 12,137.20MW by the year 2007/2008. The 11 distribution business units had a customer base of approximately 4.5 million as at September, 2005. The manning level at the corporate headquarters is 2,949 The 11 distribution business units have 25,995 The 6 generation power stations have 3,486.

6. Proposed Special Purpose Entity (SPE)

7. Proposed Distribution Business Unit

8. Proposed Thermal Generation Business Unit

9. Proposed Hydro GenerationBusiness Unit

10. Summary of Recommended Manning Eskom, Uganda Generation and Distribution Companies, and City Power in Johannesburg are the three Africa benchmarks with regards to generation and distribution. The ratios used for our manning recommendation for the Distribution Business Units are one distribution staff to 600 customers as compared to the benchmark of 1:979 and one customer service staff to 750 customers as compared to the benchmark of 1:1234 . Uganda�s generation companies showed that they have a manning level of 1 staff for every 2MW generated. While Eskom has 1 staff for every 4 MW generated. Eskom, Uganda Generation and Distribution Companies, and City Power in Johannesburg are the three Africa benchmarks with regards to generation and distribution. The ratios used for our manning recommendation for the Distribution Business Units are one distribution staff to 600 customers as compared to the benchmark of 1:979 and one customer service staff to 750 customers as compared to the benchmark of 1:1234 . Uganda�s generation companies showed that they have a manning level of 1 staff for every 2MW generated. While Eskom has 1 staff for every 4 MW generated.

11. JOB DESCRPTION

12. Job Descriptions- Findings The review of available documents resulted in the following findings: PHCN with the exclusion of transmission presently has staff strength of approximately 33,000 and 600 generic job groups were established from the current jobs. These include: 180 jobs groups in the Corporate headquarters 110 in Distribution units 150 in Generation Thermal 160 in Generation Hydro Duplication of duties: It was noted that a number of jobs had very similar responsibilities creating over-lappng and obscuring accountability. The structure showed a steep hierarchy which tended to reduce the effectiveness and dynamism of incumbents. Key working relationships (interactions between workforce and the general public who directly or indirectly affect job responsibilities) were not clearly structured.

13. New Job Descriptions The new job descriptions were written for; Special Purpose Entity DISCOS ( Distribution Business units) Generation Hydro Generation Thermal

14. Special Purpose Entity (SPE) The job descriptions created for the Special Purpose Entity (SPE) were as a result of the jobs established from the new organizational design. The SPE will have the following units: Internal Audit Planning & Strategy Public Affairs Information Technology Market Operator Legal/Secretary Project Management Finance & Accounts Human Resources & Admin IPP Management. These units and departments will carry on the residual activities when the corporate headquarters ceases to exist.

15. Distribution and Generation Business Units Distribution Business Units The new job descriptions written for the distribution business units fall under the three recommended divisions Operations Customer Service Support Services divisions. The job groups in the distribution units reduced to 94 from 110 job groups in Discos. This means that the job groups in the distribution units reduced by 15% Generation Business Units (Hydro and Thermal) Job descriptions for the generation units were written under these three units. Operations, Maintenance Support Services. 172 job groups were established from the recommended organisational design for the generation business units. The breakdown includes: Job groups reduced to 80 from 160 job groups in Gencos Hydro Job groups reduced to 92 from150 job groups in Gencos Thermal The number of jobs groups in the generation business units reduced by about 45%.

16. New Job descriptions 277 job groups were established from the recommended organisational design. The breakdown includes: 11 job groups for Special Purpose Entity 94 job groups in Discos 80 job groups in Gencos Hydro 92 job groups in Gencos Thermal The total number of jobs reduced by about 53% particularly for the reason that Corporate Headquarters is replaced by the SPE in a significantly reduced role.

17. Features in new job descriptions The new job descriptions have been formatted to include the information listed below: Title of Job: Job designation Grade level: Position of the job based on job responsibilities Department: Section/function within PHCN�s business unit Business unit: Treated purposely as a separate entity within PHCN Location: Where the business unit is situated Who the incumbent reports to Subordinate Positions Main purpose of job Primary duties and Managerial responsibilities Education and Certifications Experience Skills and Attributes Working Conditions-includes Equipment, Work environment, Physical effort: This states the level of physical exertion required for the job position. Key Working Relationships Control Related Responsibilities: This entails authority/ responsibilities vested in related jobs designation to ensure that policies/ procedures are adopted and adhered to.

18. Staff Audit

19. STAFF AUDIT FINDINGS 51% of the total staff strength is above 40 years, indicating an aging workforce 33% of the staff have only the Senior School Leaving Certificate or its equivalent, while 25% are either university/polytechnic graduates. 32% of the total staff strength have served for over 21 years within PHCN and are therefore considered experienced. Due to the fact that this category of staff will soon retire, there is a need for this group of employees to embark on a process that ensures active transfer of skills and knowledge to the less experienced workforce. This transfer process will mitigate the incidence of skills gap after they might have retired from the organisation The result of the ranking showed that, almost 38% of the staff in Corporate Headquarters, the Genco�s and Disco�s are �unfit�.

20. STAFF AUDIT- Findings

21. Staff Audit- RECOMMENDATIONS We recommend a performance management system that can set measurable performance targets and based on an appropriate competency framework for power utility functions. The career progression policy needs to be reviewed in order to ensure that staff at each level have the educational qualification that is commensurate with their levels and responsibilities on that level. Coaching and mentoring is needed at all levels in order to avoid the incidence of any knowledge gap within the organisation. There is the need to put in place a comprehensive and effective performance tracking mechanism that measures how well people are performing, so that promotion is done based on competency as opposed to tenure. Retired staff who are skilled in areas where there is current dearth of skills in the organisation can be re-absorbed on contract basis to train existing staff. A review of current salaries and rewards for performance to match prevailing market conditions and inflationary trends.

22. Training Needs Assessment

23. Training Curriculum Review The review resulted in the development of programmes for jobs, providing: Competency requirement of each function Training currently existing at PHCN for the function Training gaps that need to be filled to meet best practice standards

24. Special Training Recommendation HR Strategy: Leveraging Human Resources for Competitive Advantage The elements of the programme include: Organization Effectiveness Effective Resourcing Managing Performance Culture as a Performance Driver Employee Relations Organisational Communications Managing Change in Transition. The following training courses are recommended for exit preparation: PHCN Employee Benefits Financial Management Personal Empowerment Personal Investments Project Management Business Skills for Entrepreneurs

26. Total Staff Costs

27. SEPARATION COST BASED ON UNFITNESS OF STAFF(12,666 Personnel)

28. RETRENCHMENT OPTIONS BIG BANG RETRENCHMENT OPTION The big bang will involve the retrenchment of all the 12,666 �unfit� staff in a single exercise with their entitlements paid by PHCN once and for all at the point of exit. The total cost is N30,487,003,361 based on the guaranteed pension of five years as contained in the Condition of Service This option requires PHCN to have the total fund for the payment of staff entitlements, in its coffers VOLUNTARY RETIREMENT WITH INCENTIVES OPTION This option requires the package of incentives according to job grades to encourage staff to retire voluntarily. PHCN will reserve the right to accept or reject a voluntary retirement application. Proposed incentives Graduated gratuity totalling N13,215,722,720.98 on abolition of service for all staff identified as unfit. 1 year pension of N 3,140,232,844 upfront and after the one year, payment will revert to monthly pension. Opportunity to purchase properties in staff custody at the point of disengagement at discounted net book values. Monetised long service awards The sale of properties will generate funds needed for settlement of terminal entitlements Retrenchment and payment of entitlements will run in three phases spread over one year. The schedule will be based on receipt and acceptance of voluntary retrenchment applications. LIGHT-UP RETRENCHMENT OPTION The Light-up retrenchment option compares with Buy-off option adopted by Nigerian Ports Authority (NPA) and it involves the following payments: Graduated gratuity totalling N13,215,722,720.98 on abolition of service for all staff identified as unfit. 1 year pension of N 3,140,232,844 upfront and after the one year, payment will revert to monthly pension. 4 months consolidated salaries in-lieu of notice and relocation allowance at 1 month terminal salary. Retrenchment and payment of entitlements will run in three phases spread over one year. The schedule will be based on grades starting at the top.

29. CHANGE MANAGEMENT WORK STREAM

30. As-is Change Achievements Communication about change initiatives have been established through road shows and newsletters Change agents network was established drawing representation from PHCN locations across the country Changed Business orientation showed performance marked improvement particularly in revenue generation. Cash collection for instance quadrupled from 1.5b in 2001 to over N7b currently

31. Change Readiness Assessment �Key Findings Strengths 75% of survey respondents agree that Communication within PHCN keeps employees well informed about what is happening and what to expect 70% also agree that Our leaders help people understand what is expected of them during change process Management encourages new ideas and new ways of doing things It is generally agreed that there is a strong need for the change Some of the respondents perceive that labour restructuring will bring about better career opportunities Employees perceive that labour restructuring will support the broader PHCN vision Risks Unavailability of communication strategy document There are two units in the organisation responsible for communication The feedback mechanism in communication needs improvement to facilitate employees feedback to management 50% of respondents do not perceive leadership as strong and visible supporters of change initiatives. 54% perceived leaders as unwilling to change their own ways

32. Leadership Alignment � Key Findings Strengths Communication at management level has been good. Leaders indicated that they have been involved in communication about the project Leaders perceive the project to be very important to the organisation Leaders believe that the project has appropriate level of sponsorship Concerns Time constraints - leaders believe they are too busy in their schedules to have enough time which will enable them focus on the project Competing initiatives � other projects going on may affect the successful implementation of the project Necessary resources needed for the successful implementation of the project may not be available

33. Culture Assessment � Key Findings PHCN is bureaucratic resulting in: Lengthy decision making process Slowness in operations 91% of respondents believe that PHCN needs to be entirely responsive to customers needs to remain successful in the new dispensation 85% feel that PHCN should move towards result orientation from the current concentration on task Commitment to training and development of employees is seen as inadequate 92% of the respondents perceive a strong need for a culture change to drive the new business units

34. Change Management Strategy

35. Next Steps- Change Management Validate Change Management strategy with Leadership - review the timing, content, approach and recommendations with leadership. Communicate Change Management Strategy to Stakeholders Identify Change Management resources for implementation and modify the current change agents list to reflect the stage of change. Start implementation of Change Management activities

36. Questions and Comments