Energy Star plc: Executive Committee Meeting

Introduction
Energy Star is a major UK supplier of energy. The company is involved in producing, distributing and supplying
electricity and gas to UK consumers. The company’s core purpose is to provide the energy that customers need
in a reliable, sustainable and responsible way. The company employs 14,000 people and delivers electricity and
gas to 8 million customers.

The company has a positive reputation in the industry and among customers and has a strong set of values. Energy
Star believes that a company should operate in a ‘responsible’ way and their credo includes a commitment to
safety, service (giving customers service to be proud of), efficiency (keeping things simple and avoiding wasted
money, materials, energy and time), sustainability (ethical, responsible and balanced decisions, protecting the
environment for future generations), excellence (striving to be better, smarter and more innovative), and teamwork
(supporting and valuing colleagues). The company seeks to be a responsible service provider, a responsible
developer (producing more renewable energy than most other energy companies), a responsible employer and also
a responsible community member. More than 50% of the company’s employees donated more than 10,000 days
of support to charities in 2014/15.

The company understands the importance of having an energy market that customers trust and they do a lot to
make sure that Energy Star leads the thinking and, more importantly, the actions in delivering what customers and
other market participants need. The company has led reforms in many parts of the industry rather than wait for
new regulations. They understand that real change takes real leadership. On the customer side, Energy Star were
the first energy supplier to simplify its charges, the first to introduce a Customer Service Guarantee and the first
to stop cold-calling new prospect customers.

Scenario
In 2014, at the start of the annual budget discussions, the Executive Committee had agreed as a team that any
overhead savings above target would be made available to Departmental Directors to fund individual bids for
resources or to fund community projects. By the end of the financial year (October 2015), the company had
generated a surplus of £1m and an Executive Committee meeting has been called to decide how the surplus should
be spent.

The Executive Committee structure includes Directors from a range of functions: Marketing, HR, R&D, Special
Projects, Finance, IT and Corporate Affairs. The Directors are individually strong characters and have firm views
as to how the surplus should be spent.

• Marketing: Energy Star has recently received negative press coverage over an unexpected increase in
electricity and gas prices to customers. Customers are claiming that Energy Star’s retail prices are being
pushed far higher than is justified by the increase in wholesale energy prices. The Marketing Director is keen
to spend the £1m surplus on expanding the campaign to combat growing complaints and to announce a range
of new customer service initiatives. The Marketing Department is also known to be in favour of using the
funds to launch a sponsorship agreement to buy the naming rights for a major sports stadium in a key part of
the country where they are struggling to build market share.

• R&D: The R&D Department has been developing an exciting new smart meter which will enable customers
to monitor their own electricity and gas use in real time, using mobile phones to access the data directly and
remotely. The R&D Director believes the new meters are significantly better than those offered by
competitors, will save customers money, and the £1m would enable them to bring the meters to market more
quickly. The company has traditionally been regarded as conservative, but this new meter could change
customer perceptions.
• HR: Energy Star has had issues in recent years with high staff turnover and particularly losing bright recruits
to competitors. The HR Department sees an opportunity to use the £1m to fund a new campaign to recruit
new graduates and apprentices across the business, partly through offering an enhanced benefits package.

• Special Projects Director: The company is known for its stance on sustainability and it has always publicly
supported the development of alternative forms of energy and has signed up to carbon emission reduction
targets. The Special Projects Department sees an opportunity to use the £1m to increase the energy being
generated by onshore and offshore wind.

• Finance: The Finance Director is keen to see the funds invested in a way that reduces cost or enhances profit
margins. The Director is particularly keen to use the £1m to fund a major review of the company’s operations
to help simplify activities. The Director believes there are a range of assets and businesses which are not core
to its future plans or which result in a disproportionate financial burden. The funds could be used for a
research/project programme to identify and plan a programme of asset disposals, including some of the recent
wind farm developments. Proceeds from such a programme could release in excess of £500m. Alternatively,
the Finance Director is known to be in favour of converting part of the company’s vehicle fleet to electric
power, which will cost around £1m but save considerably on fuel costs.

• IT: Energy Star has recently been featured in the press for a high number of customer complaints about its
call centres. The call centre is slow to respond to customer calls and some customers have been getting
incorrect bills as a result of failings in the out-dated IT system. The Information Services Director is under
significant pressure within the company and is keen to see the funds invested in a new IT system.

• Corporate Affairs: The Director of Corporate Affairs agrees with the CEO that the company needs more
high profile activities that help to reinforce the company’s sustainability and responsible leadership
credentials. The Director is pressing to use the £1m to provide assistance to vulnerable and disadvantaged
consumers who are struggling with their energy bills. The Director would like to provide debt relief, free
energy-efficient appliances and energy efficiency advice to a range of customers and also to launch a new
telephone helpline to help the elderly and disabled. The Corporate Affairs team has also recently undertaken
a survey of employees and it is known that there is significant support to use the funds to invest in community
initiatives such as supporting local hospices, building a visitor centre at one of their renewable energy plants
to educate children on the benefits of alternative energy and also conservation projects to re-landscape areas
that have been damaged by the company’s production activities.

An Executive Committee meeting has been called for the morning of Wednesday 8 th February to reach a decision
as to how to spend the surplus £1m.

Simulation and Meeting Rules

• The Board Meeting will be chaired by Ian Marchant, CEO.

• The MBA cohort will be divided into two groups, 1 (22 students) and 2 (23 students). Within each of these
two groups, there will need to be seven sub groups, each representing one of the functional departments shown
above. Each student sub group will represent a Department, and will have one hour to craft their case. It is
possible for the group to suggest an alternative use for the resources. Two individuals from the Department
will sit at the Boardroom Table, but only one individual will speak on behalf of the Department. This
individual will be “the director”. Other members of the Department will sit behind their Director, and can
exchange notes with the Director.

• During the Board Meeting, there will be a number of “time-out” sessions. These are periods of 2-3 minutes
when you can (a) briefly review your approach, (b) seek clarification on issues from the CEO, and/or (c) have
a brief discussion with another Department prior to re-joining the Meeting.

• During the Board Meeting, each Department has two opportunities to change their Director at the table.