Ebb & Flow of Business How Scottish Water has navigated its way from follower to leader in the UK Water Industry

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Scottish Water is one of Scotland’s largest

public sector companies serving over 5 mil-

lion customers across Scotland. Since it was

formed 13 years ago, Scottish Water has

successfully weathered its own storms and it

is now positioned as one of Scotland’s most

progressive companies.

We are sitting in ‘The Bridge’, Scottish Water’s new

£15 million national operations centre and it certainly

is impressive, The three-storey 7300 sq. m building

has been set up to be an agile office, packed with

green technologies and flooded with natural light and

height for its workforce. It is built around a large cen-

tral atrium, dotted with brightly coloured seating pods,

touch down points for flexible workers and meeting

areas for its staff. A secure and tightly controlled Intel-

ligent Control Centre sits at its heart both physically

and metaphorically. This is a long way from its old of-

fices at Balmore Road, Glasgow, but it accurately re-

flects the progressive customer-focused company that

Scottish Water is today and its vision for the business

going forward.

The day begins with Head of Corporate Relations, Alan

Thomson, “It might not be obvious but we believe we

have faced and continue to face similar challenges that

the housing sector faces, most notably dealing with

large scale change, customers, regulations, the envi-

ronment and managing all of our assets within our

businesses. The story of Scottish Water is a story of

change and we’ve had to change quickly which is not

always an easy task for a company as large as ours.

While proudly operating in the public sector we have

also had to learn how to act, think and behave like a

private sector business.”

Scottish Water is a large scale business. It has over 5

million customers and is the fourth largest water busi-

ness in the UK providing 1.3 billion litres of water eve-

ry day as well as taking away and treating 842 million

litres of waste water before returning it safely to the

rivers and seas. Commenting on the key drivers for his

business Alan says, “we are a large utility business

with huge geographical and operational areas to serve

but when you ‘boil it down’ most customers want bet-

ter service at the lowest possible cost. We fully under-

stand that as a key utility provider we are providing a

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service that is part of daily life for our customers.

Since 2002 we’ve been on a journey which has seen

our business change dramatically”

The history of Scottish Water goes back to when it was

formed in 2002 out of three former water authorities,

East, West and North Water. At the time, the water

industry was an uncertain environment with regulators

setting targets that had to be met by set dates, includ-

ing significant water and waste water quality improve-

ments to meet European Directives, while meeting

challenging operating efficiencies of a 40% cost reduc-

tion over 4 years. The initial challenge for Scottish Wa-

ter was to align the three companies to become a sin-

gle efficient organisation which included over 6000

staff. This period of integration was difficult for the

organisation. Summing it up, Alan said, “There is no

doubt we were on the back foot at this time. There

was so much to be achieved across every part of our

operations. So we knew our first action had to be to

make significant changes, build confidence and trust

and have a clear focus on what had to be achieved.

Our business also benefits hugely by having people

who care and have passion to do their best for Scot-

tish Water. So a focused business plan was produced,

outlining what was needed by when and who we

needed to engage to get things done. This included

key stakeholders such as Ministers, Regulators, local

authorities and business groups. We faced a massive

challenge with targets on operating and capital effi-

ciency, while delivering one of the largest investment

programmes in the UK. The regulator also introduced

measures that compared us to places who were ahead

of us in areas such as capital investment and operat-

ing efficiency so there was a large amount of catch up

to be done. “Therefore, the biggest thing for us was to

engage our people. You can have great systems, pro-

cesses and support services but you have to have peo-

ple who care, people with heart and conviction and the

secret is to galvanise them to feel and know that this

is their business.”

Alan outlined an investment programme of over

£5.4bn most of which is underground, but is delivering

significant benefits for customers in terms of quality

and service provision. That, and the fact that compar-

ative regulation has been

good for us, making us

ask questions of ourselves

and look at reasons why

we were doing things in

certain ways. It made us

challenge ourselves to

make improvements in

service, reduce costs and

deliver at pace for cus-

tomers.”

With this massive level of

investment, Scottish Wa-

ter has certainly achieved

some impressive objec-

tives: operating costs have reduced by £3million per

week; record levels of customer service; leakage re-

duced by 50%; environmental improvements; drinking

water quality at its highest ever levels at customers'

taps.

“Customer satisfaction has dramatically increased over

the last years but we’ve had to build trust with cus-

tomers and measuring ourselves through the UK cus-

tomer service index, firstly against other utility compa-

nies closely followed by then measuring ourselves

against other business sectors. Our customer service

programme has successfully moved us from having a

high cost and low quality service to a low cost and

high quality service that we can be proud of.

“One thing we can‘t be is complacent, we still have

much to do. It is easy to slip so you have to keep

your focus. For us, we had to focus on ripping out

costs at the same time as improving the business. We

have shown that this can be done but it is undoubtedly

hard. You have to understand how to make the correct

efficiencies while delivering investment that drives up

service standards.

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Scottish Water has invested heavily in customer ser-

vice engagement, not least with a bespoke feedback

solution provided by Rant and Rave which gives them

real-time, multi-channel feedback from customers en-

abling staff to respond quickly to customers and drive

improvements to service.

Fiona Templeton is Scottish Water’s Customer Experi-

ence Manager and has been with the company since it

was formed. Heading teams of strategy, insight and

research and training specialists, she also has respon-

sibility for the Service Review Team. This was formerly

known as the complaints team but the renaming of the

team was deliberate in order to ensure that it wasn’t

only equipped to deal with complaints but was also

able to review processes and take ownership to im-

prove customer service as a whole.

“The Service Review Team does still deal with com-

plaints but it also identifies customer service trends

that are taking place as well as identifying potential

changes to services that can be implemented. It’s

about collecting the customer experience information

effectively and getting an insight into what customers

are saying,” explained Fiona, “then beyond this, iden-

tifying larger trends taking place and looking at what

can we do about them whether this is improving pro-

cesses or changing behaviours. This essential infor-

mation has to be fed to wider teams such as customer

training teams so it becomes a linked up process that

has been successful because of three main reasons;

we have to make it easy, make it personal and make

things happen as a result”.

For Scottish Water, the significant change in culture

came with the new vision and direction. Initially this

was driven by regulators and the targets that had

been set, a key turning point was in 2009 when the

company set its own direction and changed its focus,

which in turn implemented a shift in culture.

“Customers sat at the heart of our vision and, most

critically, brought balance where everyone had ac-

countability.” continued Fiona. “In 2002 any research

on customer experience was through transactional

surveys based on talking to the customer, the results

belonged to the research team. In 2010 we imple-

mented a postal survey to all customers which provid-

ed more of a continual customer loop allowing the or-

ganisation a more detailed view on what individual

teams were doing. However, the revolutionary mo-

ment came in 2013 with the introduction and invest-

ment into a customer feedback solution from Rant and

Rave. Initially, this was piloted alongside the postal

survey but today we only use the Fast Feedback dash-

board from Rant and Rave.

“For us it’s revolutionary in a number of ways; firstly it

is Cloud based, so it hasn’t had a major impact on our

IT structure; secondly it allows the customer to give

us same day feedback; thirdly we can use different

channels to reach our customers such as text, email

and telephone meaning that the customer can contact

us in their preferred manner. It’s always led by the

channel the customers first contacted us with, which

has moved us completely away from a postal survey.

Interactive voice response or IVR means we can keep

the recordings in the system so that those staff in the

field can listen to their tone and language before re-

sponding in the best appropriate way.

“We use a 7-point scale for tracking the customer ex-

perience with a scale of 1-4 rated as dissatisfaction, 5-

7 as satisfaction with 7 being the top of the scale. This

means it is easy to use for staff and allows us to see

what a 7 might look like so we can define excellence in

the customers’ eyes and we can pass this on in train-

ing.

“We have therefore created the right methodology

that is working for us and our customers and it has

enabled us to create league tables for coaches and

leaders to see. It also means we can do root cause

analysis on those areas of 1-4 which are showing cus-

tomer dissatisfaction. This puts the impetus on team

leaders to act and capture that information and put it

into improvement plans going forward.”

Rant and Rave has significantly changed things for

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Scottish Water in terms of capturing the customer ex-

perience from analysing satisfaction levels to dealing

with complaints. Because it is based on real time

feedback from customers, complaints can be turned

round more quickly and staff can see who is respond-

ing and dealing with individual enquiries. It is an area

that is topical in the housing sector in Scotland at the

moment following the Scottish regulator’s latest report

which means that social landlords are now required to

report on customer satisfaction including how they

handle customer complaints. Social landlords will need

to demonstrate that they are aware of customers’

wants and needs and have in place tactics to manage

and measure customer satisfaction.

Scottish Water is now going even further to embed

customer experience more fully into the organisation

by building customer performance into each staff

members’ individual performance measures. A demon-

stration of Rant and Rave gave Business Connect visi-

tors the chance to see the Scottish Water customer

experience happening live. “Rant and Rave enables us

to track progress and responses and so reward individ-

uals who ‘go the extra mile’ as colleagues can nomi-

nate individuals and team leaders - which gives a

sense of personal ownership for each member of

staff,” said Fiona.

“We recognise the people aspects of our business –

our people are our best and most important asset,”

states Julia from the start. “We have

3,600 employees now with hugely

diverse skills from PHD chartered en-

gineers to tanker drivers to head of-

fice workers to remote workers and

our challenge is to make sure we

communicate with each one in the

same way and provide the right train-

ing so they can do the best job possi-

ble and get the best results. We also

want to impart a sense of community

working in our people, not just within

our organisation but to do their best

for the communities they live and

work in.”

This is not an easy task for such a

large organisation with such a mixed

workforce that is currently 75% male who are 45

years and over but Julia sees this as yet another chal-

lenge to be overcome. “We have implemented a talent

strategy that will help us balance out this curve. We

are currently doing a lot of work on youth employment

and supporting careers for women in STEM subjects as

well as the best benefits we can offer our workforce

such as flexible retirement and mentoring. Our aim is

that in 10 years’ time we will not have a skills gap at

all.”

Scottish Water has undoubtedly gone through tumul-

tuous times in terms of its staff. Having to reduce

40% of its costs in four years, which included cutting

its work force by almost half, has seen the organisa-

tion face some very difficult decisions in terms of hu-

man resources.

“We had to cut costs and our workforce just to stay

competitive and it was a hard, hard time. To take the

first steps in doing this we used customer engagement

groups that we empowered to help us make the

changes. They helped us to organise restructuring

agreements and agree new methods of employee en-

gagement as a way forward. It helps that we can pre-

dict long term demand for our product, as it means we

can therefore set a long term asset strategy and a

long term people strategy. Engaging our employees

was undoubtedly a major factor in giving us a compet-

itive advantage. Our aim with this strategy is to create

an environment where leaders can help employees to

become leaders so that all employees can realise their

full potential, find meaning in the work they do, aspire

to outperform and be involved.“

Scottish Water’s employee engagement strategy is

multi-stranded but it includes several core factors,

most notably:

• Leadership development. Ensuring that all leaders

are visible and well informed at a grass roots level.

Every two years, the top team is tasked with taking a

month to visit locations and take employees through

past, present and future vision at themed events.

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• Learning and development. As a public sector organ-

isation it is impossible to have the same leverage on

pay as other organisations but investment in learning

and development can be key for staff, so Scottish Wa-

ter dedicates time and budget to ensuring further edu-

cation and training opportunities are available for all

staff.

• Change management. There must be a toolkit in

place for managers to work through change and help

map out projects when moving through change. Scot-

tish Water has had to do this as an organisation but it

is essential for teams or services that are going

through change.

• Career development. This is a key driver for engage-

ment. After 4 years of downsizing, Scottish Water is

now very different and has become more focused on

talent and succession planning. There is a new pro-

gramme put in place for identi-

fying potential leaders and a

similar programme for bringing

in and identifying technical tal-

ent, a key area of the business.

• Reward and recognition.

While working within public

sector pay policies, the organi-

sation tries to be as flexible as

possible. Line managers help

decide performance related

increases and non-financial

recognition such as internal

awards programmes and

events, as well as a total re-

ward statement for each indi-

vidual employee that includes holiday, pension, over-

time worth and benefits.

• Volunteering days. All staff are allowed 2 volunteer-

ing days per year.

• Agile working. 90% of the organisation is trusted to

work flexibly. All roles across the organisation are

classified as fixed, fluid or field roles.

• Wellbeing and resilience. This is relatively new to the

agenda but covers physical, financial and emotional

wellbeing including health kiosks which offer blood

pressure checks, etc. Counselling support is an area

that Scottish Water thinks will continue to grow as em-

ployees and organisations are required to handle more

change.

“In a similar way to measuring customer service per-

formance, we also have measurements in place for

staff fulfilment,” continues Julia. “These include full

surveys and tracker surveys every 18 months and our

response rate is high, e.g. 83% of our staff respond.

We have done this since 2004 and work with the same

external survey company for benchmarking and con-

sistency which is key. All results are taken and shared

down to manager level so that individual and team

action plans can be delivered. All results are published

on the intranet and corporate areas of focus are

agreed at all levels as well as local action planning.”

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Chris Toop is General Manager, Energy at Scottish Power and

his remit is largely to focus on how to utilise the assets that

Scottish Water holds and analyse how the organisation can

maximise these by taking a different approach if required.

“We recognise that we need to maximise more value out of

the resources we own – whether that is water, estates, land,

etc. This starts with energy as our initial focus as we have to

know where our costs are going. It becomes a more and

more difficult task each year as we encounter tighter water

and waste water quality standards and rising power demand

and costs, so we are having to look at two key areas – how to

drive our energy consumption down and are there ways we

can become self-sufficient in meeting our energy needs. Un-

derlying all our energy ambitions has to be the best interests

of our customers.”

To tackle this, Scottish Water has a four pronged approach

focused on:

• Reducing energy con-

sumption. The installa-

tion of over 4000 smart

meters has improved

operational controls

and allowed accurate

assessment of energy

consumption and per-

formance at any given

time. Also, resourcing

research into alterna-

tive treatment technol-

ogies.

• Increasing self-

generation. Deploying

technology that helps

maximise value from

assets and using treat-

ment works and net-

works as energy factories. This includes utilising by-products

such as food waste and fertilisers.

• Facilitating private investment. This includes community-

based projects using renewables for new developments and

taking the power to make energy efficiency savings. For ex-

ample, where communities own the assets and we purchase

the energy through a ‘power purchase agreement'. Another

recent example is where a community close to one of

Scottish Water’s assets in Galashiels is using the heat from

sewage treatment works for Galashiels Borders College cam-

pus.

• Optimising purchasing strategy. Introducing a more bal-

anced purchase portfolio including long-term purchase

agreement.

After outlining these objectives, Chis explained, “when look-

ing at these options we definitely don’t want to be seen as a

nasty neighbour. We have walked away from wind turbines

and certain projects because we don’t want to have a nega-

tive impact on local community. But where we do initiate

projects, we have found that community engagement is key.

Our aim is to keep bills lower and reduce operating costs and

this has played a key part around productivity improvement

and operations and we can see more to come from this area

of our business.”

For the future, renewable heat sources, bio methane, heat

from sewage treatment works and private wires are all op-

tions to be looked at alongside other brand new revenue

streams for its land assets largely including mobile phone

masts, fibre optic cables in sewers, film locations, advertising

space, property search services and more.

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The man charged with revamping Scottish Water’s

business plan in the face of all its recent change is

Alan Scott, General Manager Water Asset Manage-

ment, "In 2008 we set about introducing a new vision

to our business plan that truly set the context about

what we do. It’s fair to say that we weren’t as custom-

er focused then. We were following others, but it soon

become clear that our business needed to focus on the

customers’ wants and needs so we wrote a plan that

our customers signed off. . Beyond that, it becomes

essential to engage the supply chain too and take the

staff on this journey as well.”

Scottish Water’s current business plan brings together

partners, stakeholders and customers and focuses on

service improvement priorities, legislative require-

ments, economic growth, maintenance and operations.

Balanced on the other side of this is financial sustaina-

bility, customer charges and borrowing. This is some-

thing that housing providers will identify with, if not on

such a large basis.

Continuing with his approach to business planning,

Alan outlined the company’s strategic high level aims,

“for us it begins with a long term vision that incorpo-

rates climate change and its impact, demographics

and population movement and how this will affect our

business and our assets that serve customers, the

growth of revenues and the impact of research which

includes analysing how secure our assets are both in

the short and long term. To guide our vision, it is es-

sential we use our own data and don’t just rely on the

regulators for the industry and service view. If you

understand your own business you have better oppor-

tunities to change behaviour.

“Scottish Water has a business plan that not only fo-

cuses on the next five years but it goes further to 20

and 40 years ahead which can be seen as unrealistic in

terms of length of time. The realistic side of it comes

down to what you can plan to do with your investment

in the short and long term but still supporting growth,

business improvements, reacting to legislation chang-

es and actions you have to take just to continue to

operate. So you have to find ways to get more effi-

cient or new ways of doing things.

“From our experience, the only way it can truly work is

if you work closely with the regulator. The regulator

can be your best friend and can show you what you

look like in the mirror. A big change for us came when

we realised we had to have more engaging and more

visionary conversations with our regulators.

Going forward it is the motto of keeping the customer

at the heart of all planning that is driving Scottish

Water’s future plans. Because we are answerable to

the customer, this has to direct our approach. It’s easy

to be so busy following the regulatory model that you

forget the things you are supposed to be doing for

your customers and that is certainly something that

the housing sector will recognise. To keep the custom-

er view front of mind, Scottish Water has a customer

panel that reviews the business plan from develop-

ment to point of agreement and we use research and

insights from a customer forum. This panel is made up

of representatives from government, academics, envi-

ronmentalists, researchers and business. Commenting

on this Alan said, “It can be more daunting than going

in front of your own board, but it is a great way to get

legitimacy and will give you an external view on reach-

ing customers.”

Scottish Water’s business plan for 2015 to 2021 in-

cludes targets for continuing to deliver even higher

standards for water and waste water compliance,

managing assets, reducing long term costs, improving

the customer experience and looking at long term as-

set resilience.

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Set within the Bridge is what is known as the Intelligent Con-

trol Centre. It is a secure office within an office with its own

staff and welfare areas that meets every element of national

infrastructure standards. As the Control Centre is responsible

for handling all operations for supplying Scotland with water

round the clock every day of the year, the centre is an area of

national security.

Each individual screen in the control centre covers something

different from weather conditions to reservoir levels to reports

of problems from field staff and more. All this information is

used to plan operations across the country supported with on-

call staff responding to staff feedback around the clock. The

information covers 4000 assets showing supply and they can

switch and move water around tanks to serve customers and

pump water at times of reduced energy costs. The Control

Centre utilises every form of communication from satellite,

GPS, and has its own power source to ensure it is operational

at all times.

Scottish Water may be a very different business to social land-

lords but the common denominators with the housing sector

are clear in terms of managing change, building relationships

with the regulator and stakeholders, meeting and exceeding

customer expectations, encouraging employee engagement

and business planning.

Gail Gourlay from Trust Housing Association summed up the

visit as “Enlightening, the best visit I’ve been on yet, it was

hugely interesting to hear how Scottish Water have driven

down costs at the same time as losing many of their work-

force and reducing resources -yet they have managed to in-

crease business efficiencies and performance.”

What did attendees take from

the visit?

Rab Wight, Head of Repairs and

Maintenance, Dumfries and Gallo-

way Housing Partnership

“This is the first Business Con-

nect visit I have been on but I am

really looking forward to today to

see how Scottish Water responds

to customers.”

Lynne Macdonald, Head of Hu-

man Resources, Queens Cross Housing Association

“We have 230 staff working across a number of ser-

vices and we’re currently going through change our-

selves so it was really fascinating to hear about how

Scottish Water have kept and are continuing to keep-

ing their staff engaged while going through legislative

and operational change.”

Siobhan Harvey, Business Improvement Officer, Cairn

Housing Association

“My background is in reporting, matrixes, KPIss, per-

formance measurement, process mapping and busi-

ness improvement so this visit I’m looking for new

ideas and innovations that can help when going

through process changes.”

Mike Wood, Strategic Planning Manager, South Lan-

arkshire Council

“I play a role in strategy planning and best practice

policy development and regeneration so I’m looking

to get a sense of how other organisations deal with

maximising the use of their assets and the approach

they take to change and growth.”

Sandra Brydon, Head of Customer Service Scotland,

Home Group Scotland

“I will take back learnings on how commercial values

are aligned with customer service needs and wants.”

Gail Gourlay, Director of Customer Services, Trust

Housing Association

“I’ve been to all 5 Business Connect visits so far.

Housing Associations have definitely become more

business focused in recent years and there are huge

similarities between private and public sectors now

and Scottish Water has shown how they have adopt-

ed new processes and practices to compete with the

private sector in many areas of its business.”

Andrew Kirkpatrick, Asset Management Director, Cal-

edonia Housing Association

“We have recently gone through a merger and I’m

keen to learn how an organisation like Scottish Water

has been through change and adopted new practic-

es.”