The importance of organisational culture, communication campaigns and accounting for externalities – Tony Kelly

Tony KellyTony Kelly is a Managing Director and Board Chair passionate about social justice and sustainability issues. He has extensive knowledge of water issues in the developing world and in Australia.  He served as Chairman of WaterAid Australia and Director of WaterAid International for ten years and Managing Director of Yarra Valley Water for 11 years. In this interview with Carol Adams he speaks about the importance of leadership, culture, communications campaigns and accounting for externalities in achieving a more just world and sustaining a planet habitable by humans.

What perspective has your work with WaterAid Australia given you on the world’s water situation?

It was a real eye opener.  I didn’t know anything about Aid but they wanted me on the Board from its start because of my connections in the water industry.  We had a very strong Board from the outset.

I got to understand the challenges in the developing world.  I went to Africa, India and Timor.  In six months there you can literally save hundreds and even thousands of lives.  When you come back here you are involved in issues which sometimes seem trivial by comparison.  There is a water related poverty cycle in these countries.  Often the women and girls have to walk miles to get their water. Also the water and sanitation systems are often very poor quality which causes disease. So girls don’t spend enough time in school and women are denied the opportunity to get involved in economic activity such as growing a few extra vegetables or making products to sell in the local markets.

We had to struggle through the drought here in Australia but it was still a piece of cake compared with the issues people face in the developing world.

I was doing that whilst being Managing Director at Yarra Valley Water.  I love this company and am proud of what we have achieved.  But it is probably what I did with WaterAid that I am most proud of.  I had the security and lifestyle that comes of working and living in the first world plus the satisfaction of helping the world’s poorest people.

Have you achieved what you set out to at Yarra Valley Water?

We’ve had definite strategies.  In 2007 we set our strategy to 2013.  We set ambitious targets and have achieved 80% of them.  If we’d achieved more, they wouldn’t have been challenging enough.

I’m most proud of the work we’ve done on culture.  We’ve created a high performing business culture.  We used the Human Synergistics model.  They have a huge database of companies so you can compare progress and we are now in the top 2% of companies on their benchmark.

I’m convinced that ‘Culture eats strategy for breakfast’ [a remark attributed to Drucker] and whilst you can probably develop a great strategy without a great culture, I don’t believe you can deliver on a good strategy without a great culture.

We have high levels of trust between management and staff.  We developed a vision for the future with the involvement of a large number of people in the business.  So we have a clear vision underpinned by objectives and targets.  How we achieve those targets is up to the line managers. So we provide a clear context within which everybody can design their work.  This gives them more autonomy, more control over their future and consequently, higher levels of job satisfaction.

What about where achieving targets requires cross functional collaboration as it often does for sustainability outcomes?

One of the questions I ask staff in my regular meetings with them is whether they get cross functional support to achieve their goals. Newcomers to the business are generally blown away with the cooperation they receive from other parts of the business.  To facilitate this I move managers regularly.  I move them horizontally so territories don’t develop – we have an active rotation program for middle managers and we have a healthy degree of movement at the General Manager level too.    We have very few specialists in the company. I tell managers if they want to get on, they need to have a broad experience of the business. Also performance plans for all managers are a combination of individual, team and company performance. If other areas of the business don’t do well – it’s reflected in their performance pay.

What do you think about calls for supermarkets and food producers to be made to account for the amount of water they use?

I think it’s a narrow perspective of that issue. For households, the biggest ecological footprint is associated with food wastage.

We need food and it’s one of the very best uses of water but we do need to grow more food with the same amount of water. We have been extracting too much water from our river systems. In Australia about 80% of our rivers are stressed, although in Victoria there have been big improvements in the last five years with water allocation.

To what extent do accounting practices help or hinder what you are trying to achieve?

We need to measure externalities and take into account their value.  Eventually someone always pays the price for not including externalities so the sooner externalities are included the less the pain will be. We have not learnt this lesson yet. It’s also difficult for businesses operating in markets to “go it alone” because they will likely place themselves at a competitive disadvantage.

We include externalities in our project assessment works which helps us choose the lowest community cost outcome, but the benefits accrue to broader communities so a key question becomes – who should pay? This is a policy challenge for Governments and price regulators – it’s never a popular move to increase prices.

We get some reputational credit and my staff love the fact that we have a crack at it and take a bigger picture perspective. The Office of Living Victoria are doing important work on defining externalities and deciding how they should be funded.

We used to do Environmental  Accounting in our Annual Report, which included externalities but we  stopped  because nobody was taking any notice of what we did. Also we were doing it in a very rudimentary way. If I was staying here [Tony has resigned from Yarra Valley Water], I would resurrect it and take it to a new level.

What do you think will drive change?

It will be public opinion that drives change to incorporate externalities in decision making, but I don’t have faith in public opinion.  Our market research is telling us people are turning off environmental issues.  The challenges presented by the environment seem to be overwhelming.  People don’t seem to want to think five generations ahead.

One view is that humans are a blight on the world and if we continue to populate and consume we will eventually wipe ourselves out.  Or perhaps a major virus will?   The alternative is to reduce our consumption, reduce our population, include the value of environmental externalities in our accounting, break down trade barriers and embrace free trade so the developing world can participate in the global economy.

Given that everybody blames everyone else for the situation, for example, business blames politicians and education, academics blame business, what is the one thing that could bring change and break the cycle?

I think a globally based behavioural change campaign may work. Look at what’s happened with drink driving and smoking over the last 20 years in Australia. Both are major and effective behavioural change programs.  If people better understood the consequences of their actions it would help enormously.  I thought the Black balloons energy savings campaign was very effective.  Al Gore liked it too. But we never took it to the next level.

Creating effective communications is a challenge and one thing I learnt throughout the drought was that there are a lot of communication and behavioural levers to pull and  it’s uncertain which will make a difference – so you have to pull several at the same time.

How important is the motivation of a company’s leader to getting sustainability embedded?  What other skills does a leader need to make it happen?

It is critical.  You can’t get anywhere without it. My staff say I’m ten times more effective when I speak from the heart.   I recognise I can’t do everything.  I can create the vision, give them the context then trust them to implement.  I’m very comfortable talking to staff. I’m an extrovert with a lot of energy.   But at the end of the day it’s about an authentic passion.

You’re the Chairman of the Savewater! Alliance and have been on the Board for around ten years.  What has been the organisation’s biggest contribution to water conservation during that time?

It’s an economy of scale model where Savewater! develops a whole suite of water conservation products, information and services and then passes these onto its water Utility members – rather than every water Utility reinventing the same wheel.  The other major contribution is that Savewater!  provides a valuable link between the water industry and manufacturers and service providers in the water conservation market

Victoria’s Smart Water Fund has put $30m in 197 research projects since it was established in 2002.   Has it been worthwhile?

It started in the drought and it is being wound up in its current form.  The investment approach developed by Smart Water was very rigorous.  However after the end of the drought it became more and more difficult to get good proposals that met the water sector’s. In the new model each Utility will run their own R&D but have committed to engage others in the creation of R&D projects and have also committed to share the findings with other Utilities.

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