Reykjavik Energy GroupCASE STUDY

CASE STUDY

Near two-thirds of Iceland’s population depends

on Reykjavik Energy Group (REG) to provide

electricity, geothermal water for heating and cold

water for consumption and firefighting as well

as wastewater systems and fiber-optic network.

So, in 2014, when legislative changes forced the

public utility company to reorganize into a parent

company with three separate subsidiaries, many

questioned how these disparate entities would

be able to “work as a whole towards a common

vision,” says Gudrun Erla Jónsdóttir, strategy

officer at REG.

As it was, REG was one of many companies

emerging from a period of economic depression

in Iceland, brought on by the country’s systemic

banking collapse. Responsible for serving 20

municipalities that covered 67% of the Icelandic

population, the utilities company couldn’t afford

to stray from its mandate.

That mandate is outlined in REG’s Ownership

Strategy. Designed in 2012, the Ownership

Strategy is a common set of goals, principles,

values, and policies that address everything from

HR management practices and safety policies to

procurement procedures.

As a single unit, REG found it relatively easy to

ensure compliance with this strategy. But that

was only until REG’s restructuring created three

independent boards of directors and managing

directors—one for each subsidiary. As a result,

Jónsdóttir says, “compliance with the Ownership

Strategy became much more complicated.”

Reykjavik Energy Group: How An Icelandic Energy And Utility Company Realized Its Strategic Vision

There are a few things that are standardized. One of these things is that we make projects and performance as transparent as we can.Gudrun Erla JónsdóttirStrategy Officer, REG

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Photo: inSiDE onE oF REg‘S MAin WATER DiSTRiBUTion CEnTERS in THE oUTSkiRTS oF REYkjAvik. CREDIT: REYKJAVIK ENERGY GROUP

Photo©: REYkjAvik EnERgY gRoUp

Hellisheidi Geothermal Powerplant is one of the largest of its kind in the world, with a capacity of around 300 MW and also producing district heating water for a large part of the Greater-Reykjavik area.

6 CASE STUDY

Strategy delivery is as important as strategy designTo ensure enterprise-wide compliance with its

Ownership Strategy, REG designed a Strategy

Governance Structure. A key element of this

lean and powerful structure is a regular review

process that helps reinforce accountability and

ownership based on agreed-upon metrics and

milestones.

Senior-level managers from each subsidiary meet

to “share their strategic plan, their objectives,

and why those objectives are important,” says

Jónsdóttir. Representatives from the parent

company are present at these meetings, which

helps drive accountability among the various

stakeholders. Strategy council meetings are

also held throughout the year where strategies

and policies are carefully examined and revised

based on changes in the internal and external

environment. This not only prevents stagnation

but also minimizes the likelihood of a policy

becoming ineffective.

Govern through transparency for greater trust and consistencyAnother tenet of REG’s Strategy Governance

Structure: a commitment to governing through

transparency to engender trust and cooperation.

While subsidiaries have some autonomy over the

tools they use to implement and monitor projects,

Jónsdóttir says, “There are a few things that are

standardized. One of these things is that we make

projects and performance as transparent as we

can.”

This is accomplished with a strategic

implementation tool that provides standardized

templates for managers to inform teams of

the prioritization of and progress on strategic

initiatives based on common key performance

metrics—such as employee satisfaction—and

predetermined milestones.

Even the language managers use is standardized

for greater transparency and a shared

commitment to strategy-delivery priorities.

For example, there is no word for “policy” in

the Icelandic language, which makes it difficult

to differentiate from the term “strategy.” In

response, the company created its own term to

use in the system: studningsstefna.

Motivate those who do the workBut while a focus on strategy delivery is critical,

REG also needed to motive those who uphold

the company’s Ownership Strategy. “We

use all kinds of ways and media to motivate

our employees and talk to them about what

7REYkjAvik EnERgY gRoUp

corporate governance means and what strategic

management means,” says Jónsdóttir. “There are

more than 500 people working here, and they

come from every direction. Not everybody is

thinking about strategy every day.”

An employee handbook and easily accessible

videos provide detailed information on the

company, its mandate and its long-term

objectives. And small wins are celebrated with

public acknowledgments so employees remain

excited about demonstrating the leadership

behaviors and program delivery capabilities that

help strategies succeed.

Nevertheless, strategic initiative management

discipline—essential for effective strategy

delivery—requires regular assessment, support

and course correction. For this reason, REG

requires that stakeholders provide deadlines for all

initiatives.

“Establishing the strategic initiative in the central

strategic governance system means that you also

have to define the end time of the initiative,” says

Jónsdóttir. “The system alerts people when the

initiatives are stalled or haven’t reached progress

in line with the end date.”

Once this occurs, stakeholders may choose to

redefine the initiative’s scope, extend its deadline

or reevaluate it as a priority.

Make culture part of the equationIn addition to REG’s Strategy Governance

Structure, Jónsdóttir says a robust strategy-

execution culture is critical to reinforcing a

common set of strategic principles across multiple

entities. After all, she says, “the whirlwind of day-

to-day operations is a stumbling block in delivering

strategic initiatives.” Fortunately, she adds, “culture

resilience can keep processes on track.”

One way REG actively shapes a winning culture is

by engaging the people responsible for delivering

strategic change programs. For example, in 2017,

REG CEO Bjarni Bjarnason made a point of having

a conversation with every single employee in

the entire organization, 20 people at a time, to

discuss where the company was heading as a

whole. In fact, REG’s Ownership Strategy—and Mr.

Bjarnason’s support of it—has helped increase the

company’s employee net promoter score 19%,

from 53 in 2017 to 63 in 2018.

Jónsdóttir says that overtures like these

“strengthen our execution culture—a culture that

walks the talk, a culture that prioritizes initiatives,

and allocates the right time and people” so that

all entities take “ownership” for executing the

company’s Ownership Strategy.•

Photo: CoMMUniCATing THE CoRpoRATE STRATEgY To ALL EMpLoYEES iS An iMpoRTAnT AnD ConTinUoUS TASk FoR REg. CREDIT: REYKJAVIK ENERGY GROUP

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