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 / Winter 2006 / Issue 45(originally published by Booz & Company)


The Company That Anticipated History

Ubuntu Management
When Mr. Khoza succeeded Dr. Maree, he brought along his own visions for Eskom. As the company’s first black chairman, accountable to South Africa’s first black government, Mr. Khoza felt his mandate was to complete the integration of Eskom while ensuring it continued to perform at a high level.

To meet this management challenge, he applied an African humanist philosophy known as ubuntu. Translated from Zulu as “I am because you are, you are because we are,” ubuntu is based on the idea that human beings derive their primary identity from the communities where they live and work, and that these communities must therefore demonstrate respect for people in large and small ways. Mr. Khoza says the ubuntu ethic helped him recognize that white executives held most of the skills and knowledge needed to manage the company. “I could not behave like a bull in a china shop and decree that there will be black managers tomorrow,” he says. “I strove to understand the business, not just the business as it technically performs, but the people who deliver and how to motivate them to deliver.”

Selling that view inside and outside Eskom was critical to Mr. Khoza’s success, and he was tested almost immediately. When he arrived, Eskom’s longtime head of finance, who was white, was considering a lucrative job offer. It would have been politically expedient to replace him with a black executive, but Mr. Khoza worked hard to persuade the man to stay at Eskom. “If he had left, the entire finance and treasury department would have followed him and I would have been left with a void,” says Mr. Khoza. He saw an opportunity to turn the executive into a valuable ally. What won the employee over, says Mr. Khoza, “was not giving him a counteroffer in terms of money, but selling him on a philosophy.”

In his book The Power of Governance: Enhancing the Performance of State-Owned Enterprises (coauthored with Mohamed Adam; Pan Macmillan, 2005), Mr. Khoza explains Eskom’s credo since 1994: “At the heart of the transformation process was a continued commitment by Eskom and the South African government to superlative performance. This encompasses economic, financial, and operational excellence, social and environmental responsibility, and good governance.” It also encompassed a new, almost obsessively detailed dedication to tracking results, in a company that had once “lost” $4 million. The 400-page 2005 annual report lists virtually everything the company achieved or did not achieve, down to the attendance records of directors at board meetings. Although some consider the report overkill, Eskom’s executives and managers continually scrutinize the data to develop strategy and improve performance. For example, the company’s Human Resources Sustainability Index (HRSI), described by the company as a “measure of Eskom’s ongoing ability to achieve its human resources objectives,” covers 26 indicators of employee health and wellness, competence, satisfaction, and race and gender equity. “One needs to institutionalize putting race, gender, and performance into a productive context,” says Mpho Letlape, Eskom’s managing director for human resources.

Eskom has also been a national leader in the fight against HIV/AIDS. In 1987, it launched South Africa’s first workplace programs, shining a light on the then-taboo disease with education and treatment programs. It continues to add programs on AIDS awareness and prevention. “Last year, 95 of our colleagues passed away from HIV/AIDS-related diseases. That is a lot of people, but it would have been far worse if we had not started acting when we did,” says Mr. Gcabashe.

Eskom sustains its social leadership without sacrificing financial performance. The company has consistently earned a profit since recovering from near-bankruptcy in 1984. It has also earned investment-grade credit ratings from Standard & Poor’s, Moody’s, and Fitch — a claim few state-owned utilities in developing countries can make.

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  1. Anton Eberhard, “The Political Economy of Power Sector Reform in South Africa,” working paper no. 6, Program on Energy and Sustainable Development at the Center for Environmental Science and Politics, Stanford Institute for International Studies, April 2004: Context for Eskom’s challenges as the primary electricity supplier in South Africa. Click here.
  2. Linda A. Hill and Maria Farkas, “A Gentler Capitalism: Black Business Leadership in the New South Africa,” Harvard Business School working paper no. 06-057, 2006: An informative profile of another South African company’s effort to recruit and develop black managers. Click here.
  3. Charlayne Hunter-Gault, New News out of Africa: Uncovering Africa’s Renaissance (Oxford University Press, 2006): The respected American journalist provides fresh perspective on pre- and post-apartheid South Africa, and prospects for the continent.
  4. Reuel J. Khoza and Mohamed Adam, The Power of Governance: Enhancing the Performance of State-Owned Enterprises (Pan Macmillan, 2006): The former chairman of Eskom offers views on governance of state-owned enterprises and on the narrowing gap between public- and private-sector management.
  5. Ian McRae, The Test of Leadership: 50 Years in the Electricity Supply Industry in South Africa (EE Publishers, 2006): Eskom’s former chief executive tells his story. Click here.
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