culture change, culture shaping,culture transformation, culture restart, Heidrick & Struggles, Dynegy, CEO Robert Flexon, Senn Delaney, culture consulting, high-performance culture, culture agility

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Culture Shaping

The power of culture: A conversation with Dynegy CEO Robert Flexon

Subscribe to Culture Shaping 4/12/2016 Nick Neuhausel

 Dynegy case study

When Robert Flexon became CEO of Houston-based Dynegy in July 2011, he took on what he knew would be the biggest leadership challenge of his career. With an overleveraged balance sheet and a complete exodus of the executive team and board of directors, the once-mighty energy-generation company was fighting to survive.

Flexon saw opportunity in the chaos, and began a bold plan to rebuild and create a strong, competitive future. Within months, he led Dynegy through a series of restructurings, and sought bankruptcy protection in November 2011. Just two days after the company emerged from bankruptcy court, Flexon unveiled a cultural overhaul. He believed the turnaround strategy wouldn’t succeed in an environment where there was no spirit of success but instead a doom-and-gloom feeling of expecting the worst to occur.

In this interview Flexon speaks with Nick Neuhausel, a partner at Senn Delaney, a Heidrick & Struggles company. Flexon discusses a dramatic comeback story that utilized a culture restart to create the fuel needed to propel Dynegy back to an agile, fast-growing company with people energized by a “one team, one goal” strategy. After several major acquisitions, the company’s size and footprint has grown threefold in three years. It has moved from the eighth- to the third-largest independent power producer in the United States with revenues of $5.5 billion, and has outperformed all its peer groups on share-price performance.

Watch the interview:

The following is an edited version of his interview.

Q: Dynegy is quite a story in terms of what has occurred over the last few years to take it from bankruptcy to a very successful company. What was the culture like and what were the conditions like when you first came to Dynegy?

Robert Flexon: I joined the board of directors in June of 2011 and just a few weeks after that they asked me to join as the CEO. The company was in a very distressed situation. There was a heavy debt load. On top of that, energy prices had plummeted to an all-time low. The company was headed for a full restructuring, which included a bankruptcy. In fact, we did file for bankruptcy in November of 2011.

The board of directors had essentially all resigned. The executive-management team had also resigned. It was such an uncertain time—company in financial distress, headed for bankruptcy, executive team gone—and here comes this new crew. Are they here just to sell the company, to liquidate it? What are they here for?

That immediately created distrust between the existing workers and now these people [who arrived] from another company that they used to compete with.

Q: What caused you to want to address culture while you were in the midst of these financial issues that were threatening the company’s existence?

Robert Flexon: I recognized we had to do financial restructuring—that was imminent. Operationally, we also had to restructure the company, drive reliability of the assets, get the right people in the right spots to run the organization in the right way. And third, but most importantly, was the cultural restructuring that had to take place. We were not going to be successful with just the other two elements of restructuring, or any success would be fleeting if the culture wasn’t changed as well.

I moved to Houston to rebuild a company with the folks that were here and then immediately started with a “one team, one goal” philosophy. We started this process with Senn Delaney immediately after exiting bankruptcy.

Q: Early on, you worked on creating a purpose? Describe that.

Robert Flexon: Two things we did early on: we defined our purpose and we established our values. We call it “Energizing You, Powering Our Communities,” to try to capture our employees, our communities, our plants, and everything that we do, and we have our values that are associated with that purpose, one of which is agility.

Q: It’s pretty remarkable to come out of bankruptcy and start to make acquisitions three months later. Talk a little about that because obviously that creates a cultural dynamic in itself.

Robert Flexon: Certainly when we exited bankruptcy we were a very forgettable player in power generation. Then we started slowing the tide of people leaving. We did our first acquisition three months after exiting bankruptcy. That really sent a signal that things were different. That started creating the “one team, one goal” culture that we constantly would talk about, and that started breaking down the personal barriers that existed.

Q: I know you acquired Ameren Energy Resources.

Robert Flexon: Ameren was in the final stages of negotiation with a different third party. I was able to meet with Tom Voss, who was CEO at the time, to talk about giving us an opportunity to compete for the business.

What I remember the most is when we sat at the table with Tom and his staff. It was really interesting: on the walls were the very same posters that are here. They were a Senn Delaney company.

I would say that the reason we got the acquisition rather than the third party that made a financially better offer came down to “Which company do you trust more? Which company do you want to take over the relationship with your employees, your stakeholders, your bondholders?” and that was us. The kind of company that Tom thought we were had a lot to do with the culture that we were trying to build.

I think it was particularly unique that we were starting from the same foundation of how you build the right culture in a newly created company.

Q: You’ve been acquiring companies. Talk about the success of those, your financial results, and what has occurred since those early days coming out of bankruptcy.

Robert Flexon: Today we sit at 26,000 megawatts. The thing that I remember the most during the transformation was in August of 2014. On the same day, we announced the acquisition of two unrelated companies—each of them with about 6,000 megawatts. We simultaneously negotiated two transactions, one unrelated to the other, and on the very same day in August, we announced a combined purchase price that was over $6 billion. At that time, the enterprise value of Dynegy was $4 billion.

To give you an idea of the magnitude of what we announced with these two acquisitions, we had to raise upwards of $7 billion on a company working from a base of $4 billion.

Since that time, we have outperformed all of our peer groups on share-price performance—which is kind of the ultimate measure. We just released our third-quarter results and we had $350 million of EBITDA for the quarter (versus $90 million in the third quarter of 2014). And we’ve really transformed from a heavy coal portfolio: now 90% of our margins come from natural gas–based generation.

Dynegy probably would not exist today if we hadn’t made these new acquisitions, if we didn’t have the agility to do those kinds of things. It really gets back to how culture just really energizes an organization.

The mistrust is gone. Turnover is way down and I think the ironic part of it all is that we’ve had quite a few people who left come back. We have proven through these turbulent times, particularly in Houston which is an energy-intensive economy, that we’ve been the stable one.

A big difference today versus then is that folks didn’t think we could win. You don’t hear that anymore. People know that we are out there to compete, we are out there to win; we are out there to be faster and better than everybody else.

Q: Where do you go from here? Obviously it’s a tough market right now; conditions are challenging in the industry.

Robert Flexon: I think the periods of difficult times offer the greatest opportunities. The fact that we tripled in size during three of the most difficult years for power generation in decades is a testament to that.

What I see for Dynegy is that we will continue to build on where we’ve been the last few years, continue to have that winning philosophy, continue to bring agility to the marketplace and take advantage of the dislocations in the market.

Q: Anything else you’d like to share?

Robert Flexon: As I reflect on “one team, one goal,” I think that that was absolutely the right thing to do and that’s still the way it should be today.

Certainly, our success today has been driven by the culture we’ve been working on. Everything we’ve been able to accomplish is because we have developed a culture that is formulating around the kinds of things we want to do.

It was just very rewarding to be part of this and to see how so many people in the organization rose to the occasion, how many jobs we were able to preserve and how many careers we helped build. And during the same time we’ve had a lot of new people come into the organization to make us even better.

What makes the difference is every single person in the organization. If you think “people first, business second” you’ll get the business result that you want. Mobilize the team, encourage the team, support the team, give them the right tools, give them the right environment—then you’ll get the business results that you want.

About the author

Nick Neuhausel (nneuhausel@senndelaney.com) is partner and executive vice president at culture-shaping firm Senn Delaney, a Heidrick & Struggles company.


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