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Managing risk through effective


team-based decision making
Introduction

CURRICULUM TOPICS
Improving productivity
Contemporary work patterns
Methods of management
Production technology

GLOSSARY

Making sure that government, businesses and households have secure supplies of energy is a
huge commitment. Engineers working for the energy supply companies must make sure that
this commitment is met 24 hours a day, 365 days a year. This case study shows how the
engineers who work for one of the UKs major energy businesses, RWE npower, are involved
in securing energy supplies and in the management of risk.
Risk lies at the core of any enterprise activity. Businesses therefore have to manage risks
every day of the week, for 52 weeks in the year. Successful management of risk involves
getting the balance right between risk and other factors such as cost and return.
Engineering is an exciting career. Engineers deal with real problems involving real materials
and projects. The work of an engineer is varied and stimulating. For example, graduate
engineers working at a power station will not only work with computer models, but also will
help to run projects, control the materials, equipment and plant. This is engineering on a
grand scale. Engineers working for RWE npower are trained at all levels to combine technical
skills with commercial knowledge. To be successful they need to understand the business
implications of the decisions they make.

Management of risk: working


to avoid possible loss to the
organisation.
Enterprise activity: the
organisational and risk-taking
actions necessary for a business to
continue to exist.
Cost: the price of carrying out an
activity (can be in money, time or
people).
Return: the profit from an activity.
Utilities: organisations that supply
water, gas or electricity.
National grid: the system for
delivering electricity across the UK.
Turnover: the total value of all
sales made in a given period of
time. Sometimes referred to as sales
revenue.
Capital employed: the total
amount of capital (expressed in
money terms) used by the business
from all sources.

RWE npowers operating environment


It is important, when assessing risk, to be aware of the operating circumstances of the
business. The energy industry is at the heart of any modern economy. Electricity and gas
suppliers provide the essential power supplies for industry as well as for our homes. They seek
to keep energy costs low while operating for 365 days a year. RWE npower is an integrated
energy company. It is the third largest supplier of electricity and gas in the UK, through its
npower brand, and one of the largest electricity generators. It is also part of the larger
RWE Group which is one of the largest European energy utilities. Its main markets are the
UK, Germany, and Central Eastern Europe (including Hungary and the Czech Republic).

RWE in Europe

RWE npower not only provides and supplies to the national grid (electricity) and to the
national transmission system (gas), it also provides a huge economic contribution. This is
illustrated by the figures for turnover, capital employed and employment.

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million

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2005
million (approx.)

million

2006
million (approx.)

Total revenue

6,385

4,405

8,493

5,791

Capital employed

6,645

4,580

6,969

4,752

Number of people employed

10,125

11,624

GLOSSARY
Competitive: involves
organisations performing against
one another to sell goods and
services.
Deregulated: the removal of
government rules and regulations.

These figures give a snapshot view of the scale of RWE npowers operations.
As one of the UK's leading companies RWE npower contributes to the economy by:
providing exciting jobs with prospects
selling energy to households and businesses, enabling a better standard of living

Sustainability: able to continue


over a period of time without
reducing the resources available
for the next generation to use.

investing in huge capital projects such as the building of power stations (including the

Supply chain: the


interconnected system of
consecutive processes linking the
manufacture of products with
physical distribution.

The most visible face of the company is its huge power stations such as those at Didcot in

Deviation: something different


from the usual way.

development of alternative power supplies such as wind farms and biomass plants).

Oxfordshire and Littlebrook in Kent. These power stations supply energy to the national grid.
The energy industry is very competitive. It is a deregulated market in which companies
are free to compete in supplying gas and electricity. RWE npower places a strong emphasis
on sustainability. Sustainability means using existing resources so that supplies of natural
resources and raw materials are passed on to future generations. For RWE npower sustainability
involves creating energy supplies with less pollution.
This is a major consideration in modern engineering decisions. A major aspect of energy
efficiency is that of seeking the best possible 'green solutions'. A 'green solution' is an
environmentally friendly one. In this way RWE npower engineers and other employees play
a significant role in working towards a sustainable future.
Health and safety underpins every action that RWE npower takes. For example, the company
has its own safety system based on years of experience of managing safety issues. RWE npower
sells its expertise in providing safe and sustainable energy supplies to other businesses around
the world.
RWE npower is involved in activities all through the supply chain of electricity and gas.

Types of problem-solving
Business problem-solving typically fits into three main categories:
1. Deviation problems. This is where a business is falling short of its expected targets. For
example, a power plant is contracted to supply 2,000,000 kilowatts of power to the
national grid and is falling short of this by 5%. The problem-solving involves getting
capacity back up to the required level.
2. An improvement problem. The business is doing well but wants to do better. For example,
are there more efficient ways of generating electricity or producing electricity from
alternative fuels?
3. An open-ended problem. There are no textbook answers to these problems. We use the
term thinking outside the box to describe the ways of thinking that are required here.

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The box refers to thinking in standard ways. So thinking outside the box involves looking for
alternative ways that involve new solutions and ways of tackling problems. This is where
creative thinking is required. Modern engineers need to show imagination. An imaginative
idea can save a company millions of pounds and lead to better solutions for customers.

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At RWE npower, engineers at all levels are expected to handle these three types of problems
every day of their working lives. For deviation problems and improvement problems there will
often be tried and tested techniques. Typically these techniques involve teamwork.

GLOSSARY

Teamwork is essential for effective decision-making. Groups of engineers with different skills

Teamwork: people working


together.

come together to shed light on problems and issues and to come up with improvements. In a
team there will be engineers with different technical knowledge and experience. These will
include mechanical, electrical and civil engineers, and computer specialists.

Commercial implications: the


effects on the business.
Contracts: agreements between
two parties that are binding in law.

Teamwork involves good communication skills, particularly the ability to listen to others ideas.
Being able to identify the route cause of the problem and understand the symptoms is
essential. Working in teams creates a buzz of excitement. Engineers enjoy solving problems.
They like to be creative. Working together allows them to bounce ideas off each other. Some
of the solutions RWE npower engineers have come up with have saved the company millions
of pounds.

Creative problem-solving
In business there is typically a direct relationship between risk and reward. The bigger the risk
you take, the greater the possibility of making a high return. The reverse side of this is that
high risks can also be associated with spectacular failure.
Engineers working for RWE npower need to understand the commercial implications of the
decisions they make. The best decisions will be those that provide good technical solutions while
at the same time are commercially successful. Learning to manage risks is important. Decisions
taken must be in line with other priorities such as safe working. At RWE npower, health and
safety is the number one priority.
Creative problem-solving involves dealing with problems for the very first time. While there
are tools and techniques to help find solutions, engineers will need to be creative. They need
to decide what methods to use and ultimately how the problems will be solved.
At senior management level, RWE npower has engineers with responsibility for running very
large units such as a power station. These senior managers are continually provided with
information about every aspect of the performance of the plant. They receive advice and
information from a range of specialists. The sorts of problems they encounter include what to
do when a weakness is spotted in materials. For example, the giant turbines which power the
generators can develop tiny defects over time. The turbines can weigh more than 250 tonnes
and rotate 3,000 times a minute. These defects are actively managed and carefully
monitored to ensure they do not deteriorate to present a potential safety risk.
When a plant manager is notified that tiny cracks have been found in the turbine, then he or
she must come to a decision very quickly. The options are:
1. Shut down part or all of the plant and start repairs. In the middle of winter this could prove
to be very costly. When demand is at peak this could lead to losing supply contracts
worth 2 million per day.
2. Take advice from specialist engineers to check whether it is still possible to continue
operating while carefully monitoring the weakness. Specialist fracture engineers would
need to prove that, if they continued to run operations, the impact on the materials would
remain within safety limits. Repairs would then be made as soon as possible.

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3. Do nothing (at RWE npower this is not an option).

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Managers will only consider options that do not involve a health and safety risk. Once they
are satisfied that this is the case they will consider commercial criteria. The best solution will
be the one that fully meets the requirements of customers while at the same time yielding the
optimum financial return.
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Creative problem-solving at graduate level


It is not only top level managers that make important commercial decisions. RWE npower
employs graduate engineers straight from university. They contribute to the decision making
processes from the start. Typically their salaries start at about 25,000. They receive training
and development throughout their career at RWE npower. They are encouraged to think for
themselves and to place a high importance on commercial criteria in making decisions.
For example, a decision made by a graduate engineer saved the company millions of
pounds. One of the problems in running a power station is that deposits accumulate on the
many kilometres of pipes in the giant power station boilers and they take a long time to be
removed. The deposits need to be removed so that the thickness of the metal in the pipes can
be checked. Over time the pipes wear down and will eventually need to be replaced.
Recently a RWE npower graduate engineer developed a specialised measuring probe. This
made it possible to test the thickness of the pipes without the need for removing the deposits.
The probe made it possible to check instantly on the thickness of the pipes. This gives
managers much more up-to-date data about how safe the equipment is so that repairs can
be planned in the most economical way.

Conclusion

The Times Newspaper Limited and MBA Publishing Ltd 2008. Whilst every effort has been made to ensure accuracy
of information, neither the publisher nor the client can be held responsible for errors of omission or commission.

The success of the UK economy depends on having secure and efficient energy supplies.
Each day the challenge is increasing as resources become more scarce. For example, the
worlds oil and gas reserves are running out. At the same time much of the capital plant that
makes up the national grid and many older power stations needs replacing. This creates
immense challenges and opportunities for todays graduate engineer. These are exciting times
to get involved in engineering.

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Engineering provides great prospects for suitably qualified applicants. The engineers of today
and tomorrow are people who make important and sometimes vital decisions. They have to
be problem-solvers who enjoy working with people in teams and with real problems related to
materials, processes and equipment. The decisions they make affect our lives. The excitement
of a career in engineering comes from knowing that you will develop solutions to problems
which havent yet been thought of.
As you can see from this case study, good creative decision making can save millions of
pounds and improve environmental and safety performance.

Questions
1. What do you understand by the term, thinking outside the box? Give an example of how
this can be applied to engineers working for RWE npower.
2. How does encouraging thinking outside the box help RWE npower to make improvements
in the way in which it operates?
3. Explain how encouraging engineers at RWE npower
to think outside the box has led to increased
motivation for these employees.
4. Recommend ways in which another organisation
of your choice might improve results through
encouraging its employees to think in creative
ways about work-related problems.

www.npower.com