Strategic Management

New Enbridge CEO Al Monaco inherits tough Gateway pitch

In a way Pat Daniel’s Enbridge never had to. Daniel knows this. “When I was starting out as CEO, my challenges were how to grow the business and how to provide the service to more and more people,” he says. Those challenges are still there, except Daniel says it’s all done under a level of “media and public attention to the industry” that was absent 12 years ago when the Internet was in its infancy and social media was non-existent. “And it seems to be much more political,” he adds.

Is Daniel tired of the politics, the scrutiny? That’s not something an oil patch veteran admits, even if he’s past his 66th birthday. But clearly, this leadership succession comes at a time when Enbridge needs to shed certain habits – and perhaps the culture that fosters and perpetuates them – and become a more proactive, stakeholder-courting company. It must become one that’s more aware that everything it does, says (and doesn’t say) will be dissected by stakeholders who aren’t shareholders, but who increasingly hold the power to affect the price of stock, the pace of projects and the future of the company. Will that be Monaco’s Enbridge – a company dramatically different from Daniel’s?

That’s not the message Monaco is putting forward. “We’ve come up in the business together,” he says. Daniel trained him. He and Daniel both share, he stresses, a customer focus. “I think my goal, frankly, is to maintain continuity.”

Does that mean Enbridge has a new leader but that it will be the same old company under Monaco? Robert Schulz, professor of strategic management at the Haskayne School of Business at the University of Calgary, is inclined to think so. He’s not unsympathetic to Enbridge’s struggles. He says Northern Gateway’s a “lightning rod” for many complex issues. “If we accept, as many people think, that negotiations with the First Nations on Gateway could have gone better – if you change the leadership at the top, will that have an effect? I’m not sure that would change anything in the field, particularly with the activists,” Schulz says.

FirstEnergy Capital Corp. analyst Stephen Paget won’t dismiss the possibility that Monaco has the potential to change Enbridge. But it won’t be easy. “Everybody brings their personality to the table,” Paget says. But Enbridge is an institution, with a 60-plus year history that Monaco’s been a part of since 1995. “There is an Enbridge way of doing things that isn’t really going to change,” Paget suggests.

For Pembina Institute’s Grant, that’s precisely the concern. If Enbridge’s challenges on the safety and communication front are “cultural in nature,” she says, “it’s often the case that culture plays ‘follow the leader.’ ” She’d like Enbridge’s new leadership to ponder “what they will do to be part of the solution … to address the perception of poor management culture that tolerates spills along the right of way.”

Now, Monaco might get that. He’s a customer-side guy, which means he’s been trained to consider how customers look at things. He’s neither impulsive nor inflexible. “I really focus on listening carefully, not just to customers, but to what our employees are saying,” he says. “I like to ask a lot of questions, and encourage people to find out what the real issues are, particularly at the field level. I really believe that understanding what is happening in the field is the root of our business. It all begins and ends there.”

And what’s happening in the field right now is, well, a reputational assault on a company he’s effectively grown up in. He needs to deal with it – and he knows it.

“I don’t think we can stick our head in the sand and not pay attention to what is being said and read by the public,” Monaco says. Northern Gateway critics, environmental activists, First Nations, scathing U.S. regulators, they may not be “our every day constituents in terms of our primary stakeholders, but they are important stakeholders,” Monaco says. “The opinions formed and the communications about our company in public are critical to what we do, because those opinions and views really lead to whether we get a social license to be in our business.”

Monaco wants that social license. He knows he’ll have to work hard to get it. He says he’s prepared. “The entire industry is facing these challenges. It goes with the territory. Environmental and sustainability concerns are at the forefront of the dialogue. It’s a reality and it’s our job to deal with those issues. We have to listen patiently and we have to address concerns one at a time,” he says. “It’s a tough environment out there. There’s opposition to solar and wind projects, too.”

Could Monaco have asked for a tougher time to assume the leadership mantle? “You don’t get to choose the times,” he says. “Right now it’s about focusing [and] getting through it, and I’m pretty confident we will get through it.”

And what about building the Northern Gateway pipeline? On that, Monaco is emphatic. “Yes, I think Gateway will get built. And the reason for that is that the importance of Gateway has gone beyond a normal everyday project for Enbridge. We have a huge strategic advantage in this country. We have the second-largest reserve base in the oil sands; we have the skills, the business acumen, the capital and the technology to get those reserves out of the ground. And we have access on the West Coast and proximity on the West Coast to half the world’s population. This is such a great asset that the country needs to pursue it. What we need to do is everything we can to make sure we’ve listened to people’s views on it, and take that into account as we design the project so people get comfortable with its safety and performance.”

Accomplishing this will be a tall order for Monaco. He’s got until the end of 2013 – when the reviews on Northern Gateway are mandated to wrap up – to make it happen. And he knows that it’s not just the regulators he has to win over. He’s got to bring at least some of the opposition onside – or into neutral territory. Because even if Enbridge wins the regulatory battle, without a social license to operate it will lose the reputational war. And in 2012, and beyond, that’s a battle Monaco and Enbridge can’t afford to lose.

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