Gary Humphreys – Essential Energy

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Gary, you have now been in the role of Chief Operating Officer at Essential Energy for coming up to three years. Can you tell us a little about your background, in particular, the career trajectory that has led you to this position?
I started my career in the banking sector, where I worked for over 10 years. My first role at the bank was as a junior clerk, with a range of duties that included taking the Manager’s dog for a walk, and over the following decade my banking experience extended to Marketing, Operations and Loans Administration.
I then joined the electricity industry in 1997, just as full retail competition was being introduced. This was one of the biggest changes in the electricity sector, and the rate of change hasn’t stopped since. At Country Energy, later to become Essential Energy, I became a member of the Executive team in 2001, and since then I’ve held numerous executive positions which culminated in my appointment to Chief Operating Officer in September 2012, after Networks NSW was formed.

In your role as COO, you are responsible for approximately 4,000 employees, including senior managers. How do you engender a culture of strong leadership?
The most important thing I can do is to set the minimum standard for every leader in our business. As the organisation is going through significant reform, all my actions, and even inactions, get closely scrutinised, and rightfully so. Therefore, I firmly believe the quality of any leader is reflected in the standards they set for themselves.

What are some of the changes you are seeing within your industry, and how has Essential Energy adapted its business model to adjust accordingly?
We have emerged from a regulatory pricing determination by the Australian Energy Regulator (AER) that reduced Essential Energy’s revenue by 25% and operating expenses by 30%, backdated to 2014 and with no time to transition to the new model. As you can imagine, this has an enormous impact on our business and has set us some significant challenges, including that of having 1,400 jobs unfunded for 2015/16. While we are appealing the AER’s determination in the Australian Competition Tribunal and Federal Court, we won’t know the outcome until later this year, so we have to start making adjustments to our business now.
This means reviewing our entire business model, the way we operate, our service standards, and every cost within the business. The one thing we will never compromise on, however is public, employee and contractor safety.
At the same time, we’re seeing a significant increase in the installation of micro solar systems and the rapid evolution in battery storage technology. This is changing the way customers use the electricity grid. In order to keep pace with these innovations, we are keeping abreast of all the emerging technology and adjusting our asset management plans accordingly. In addition, we are ensuring our tariff strategy is also changing to more accurately reflect the way customers utilise the grid.

The AER pricing regulation has obviously caused Essential Energy to undergo some major business reform. How do you engage your employees to keep driving the business forward while undertaking all of the necessary changes and adjustments?
I’d say the greatest challenge for our leadership team is to match reform with day-to-day operations (while keeping the lights on for our customers). I think there are three critical factors in successfully managing this.
Firstly, ensure employees understand the need for the reforms. Managing change is tough, but it’s even tougher if you don’t engender a strong sense of transparency that enables employees to know why they are being asked to change. Secondly, set very clear priority actions and measurement criteria for your leadership team. We simply don’t have time and resources to work on things that aren’t the most important. And thirdly, you need to have a very strong business discipline to drive the change and get the results. A relentless focus on delivering the best possible results is critical.
What do you think is the single most important factor in running a successful, regionally based business?
I don’t think there is one important factor; there are many. Essential Energy covers approximately 95% of NSW, from deserts in the west and snow fields in the south, to coastal ranges in the east and everything in between. With such a wide geographic area to service, we have many different stakeholders, often with very different expectations; therefore, it is critical to first have a very good understanding of the things that are most important to the communities we operate within and service. These can be quite diverse when you compare, say, Port Macquarie to Tibooburra in the far North West of the State.

What is the most rewarding part about your role with Essential Energy?
Since July 2012, Essential Energy has identified over $1.3b of cash savings through the reforms we have made to our business. This has delivered price reductions for our customers over the past two years, with a further reduction coming in July this year. So, I’d say the most rewarding part of my job is leading our business through this significant reform, and delivering results for our customers.

What are some of the biggest challenges you have personally faced throughout your career?
We work in an inherently dangerous industry, and a small mistake can have catastrophic consequences. Safety must always be number one. While Essential Energy has an excellent overall safety record, unfortunately I’ve had to deal with some very serious safety incidents. When people are injured at work, it has a profound impact on so many people. Although thankfully rare, I find these situations very challenging, as people react in so many different ways and these serious incidents change lives for ever.
I’d also say another big challenge is to continue to learn the art of resilience. I don’t think I’m alone in today’s rapid changing world but as a leader of a business going through significant reform, this is a particularly difficult challenge I’ve faced. It’s still a work in progress, so maybe come and ask how I’m going in five years’ time.
And finally, if you could invite three business people to lunch, who would they be and why would you invite them?
Gail Kelly (former CEO, Westpac). She’s an inspirational person and a great leader.
Jack Welch (former CEO, General Electric). He was CEO for 20 years and during this time had phenomenal business success.
Walt Disney. I think the impact he had on everyone was a positive one.
Thanks for your time, Gary.

Interview by Jane Hillsdon, Principal Consultant of

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