During the Feb 20 conference call Ms Farrell spent quite a bit of time talking about an organizational approach to empower Operations employees with greater decision making authority so they can be held accountable for operating results.
Reading between the lines a little I interpret this to mean that Operations folks were confronted when some of the larger operational problems came up over the last few years. And... I expect there was pushback where Operations middle management came back and said these problem(s) result from our failure to perform necessary maintenance and upgrades; we have requested funding for these matters for X years but we have never been able to get approval. This situation has been like a ticking bomb for quite some time and eventually it had to explode.
Here is a fictional account of how this went: Sr Manager
: Why do you need all this money for Sundance Maintenance and Upgrades? OP Manager:
We have already pushed this equipment well beyond it operating life and if we don't deal with it soon we will be having outages and perhaps fairly major failures. Sr Manager:
We are going through a tough time right now I want to defer this expenditure for the present. OP Manager
: You have my recommendation but the decision is yours. Sr Manager:
We will take another look at it next year. OP Manager:
As I said, it's your call, hopefully we don't get caught with a serious outage. This above dialogue repeats a few times. Then: OP Manager
: We now have a serious failure at Sundance. The is because we did not perform the maintenance I have been recommending for a while now. Sr Manager:
Recommending? That's not enough... It was your job to tell me this was an outright emergency as the situation got bad enough for the failure to actually happen. Then I would have got the funding needed. OP Manager
: So, this is my fault because I failed to lobby you enough to get you to believe that this would actually happen? I have been telling you this for several years now but you have chosen to continue to defer the matter and now it's too late. Sr Manager:
I need to take this up through the chain of command to see what we can do. I am not very happy with you right now - you made us all look bad and we may be subject to penalties. OP Manager
: I am sorry you feel that way. I believe I have discharged my responsibility to the extent my authority allowed. For matters that exceeded my authority, I faithfully escalated to you.
According to Dawn Farrell's biography she was the Chief Operating Office of Transalta from 2009 - 2011. This snippet of information is no longer in her biography on the Transalta web site. I am pretty sure it was there before because I remember from earlier and I never went looking for it anywhere else. Fortunately, this more detailed biography is still available on the business week web site so I was able to confirm my memory. http://investing.businessweek.com/research/stocks/people/person.asp?personId=8967649&ticker=TA:CN
To my point - Ms Farrell was well positioned in the past to be aware of all Operational matters in Transalta and she now seems to be saying that the accountability for Operational problems belongs elsewhere and the senior management is taking steps to fix it. My opinion is that Ms Farrell and her direct reports were more likely the reason that things went the way they did.
I am not totally without sympathy and I understand that companies have to make risk assessments and decide which risks they want to assume. In the case of Ms. Farrell whose formal education is a BComm and Masters in Economics, it would seem prudent to accept guidance from the experts that Transalta must have in Engineering and Operations and not just look at the numbers for the next quarter.
Running a company like Transalta requires paying close attention to industry best practices. And not just best practices for Safety but for Engineering and Operations too.
I looked at the biographies for Transalta's officers and I find only two engineers and one of them is not positioned to be much involved with Engineering and Operations as he is the treasurer. On the BOD I find two engineers but they would have little involvement in day to day operations of Transalta.
My second point is that this leadership group seems more skilled in matters relating to Finance, Risk Management and Legal than they are with the basics surrounding what Transalta is all about - the generation, transmission and sale of electricity.
I think the leadership team needs to be revamped. IMO, it presently contains too many folks with very specialized (and useful) expertise but it needs to a better balance of people who understand what a power generation company is all about.
The current CEO may have many valuable qualities but doesn't seem to have the vision to understand what are and are not the most important factors to successfully running Transalta. Cleary there is a legacy component to all of this but she has been at the helm for just over two
years now and if thing are not improving it's time to step back and reconsider her leadership.
Naturally this is all opinion and I would appreciate other views.