ESG in energy: TransAlta's former CEO on transformative leadership

In this podcast, Heidrick & Struggles’ Sean McLean speaks to TransAlta’s former president and CEO, Dawn Farrell, who was instrumental in the development of TransAlta's wind and renewables business through the acquisition of Vision Quest Windelectric and Canadian Hydro Developers. Farrell shares the many lessons she learned in her experience driving technology transformations, which leadership strategies and skills she feels are most imperative to successful transformations, and what Canadian energy industry leaders must do in terms of ESG to win the hearts and minds of key stakeholders. She also discusses what leaders should do to accelerate DE&I in their organizations.

Some questions answered in this episode include the following:

• (4:32) Your experience is interesting: in both your executive journey at TransAlta and your board service, you've had direct experience with both domestic and international businesses at a variety of inflection points. Based on this background and you experience, what are the most exciting growth opportunities you see both in Canada and globally? And what type of leaders do you think those will require?
• (6:45) You have significant experience driving technology transformations. What leadership strategies and skills have you discovered are imperative to success? And what are the derailers when you lead through these sorts of transformation?
• (10:50) Moving to ESG and the energy industry specifically, I think we'd agree that the global energy industry is at a fascinating inflection point. In Canada, one of the results of this is that leading organizations are taking a more public stance on ESG matters. In your view, what must Canadian energy industry leaders do to win the hearts and minds of key stakeholders?
• (13:38) Organizations with more diverse and inclusive teams and cultures tend to make better decisions and perform better. We also know that the Canadian industrial sector has much room for improvement on DE&I. In your opinion, what are leaders doing well right now to accelerate the efforts of DE&I in their organizations, and what more must be done?
• (19:06) What aspects of Canadian business culture do you think are most distinctive and that more companies would benefit from adopting? And what do you think we could learn from other regions?

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to the Heidrick & Struggles Leadership Podcast. Heidrick is the premier global provider of senior-level executive search and leadership consulting services. Diversity and inclusion, leading through tumultuous times, and building thriving teams and organizations are among the core issues we talk with leaders about every day, including in our podcasts. Thank you for joining the conversation.

Sean McLean: I'm Sean McLean, partner at Heidrick & Struggles and member of the global Industrial Practice. Our leadership podcast provides timely and relevant leadership insights on what organizations and leaders should be thinking about to stay competitive, both in Canada and on the global stage. In today's podcast, I'm excited to be talking to Dawn Farrell. Dawn has over 35 years of experience in the electricity industry, with roles at TransAlta and BC Hydro. She was the president and CEO of the TransAlta corporation until her recent retirement this past spring. Dawn was instrumental in the development of TransAlta's wind and renewables business through the acquisition of Vision Quest Windelectric and Canadian Hydro Developers, which solidified TransAlta as the leading independent renewables power company in Canada. Currently, Dawn sits on the board of directors of the Chemours company, New York Stock Exchange–listed chemical company; Canadian Natural Resources, an international oil and gas company listed on the TSX and New York Stock Exchange; and is a prior member of the Business Council of Alberta.

Dawn, welcome, and thank you for taking the time to speak with us today.

Dawn Farrell: Great to be here, Sean. And thanks for the invitation.

Sean McLean: So, as I mentioned, you retired recently after a remarkable and transformational tenure as CEO of TransAlta. After having a few months to reflect, what would you say are the leadership skills and experiences you found most essential as you navigated different roles in your career?

Dawn Farrell: Well, Sean, I think you started out by saying, “You've had a few months to reflect.” One thing I'd say to people is, ask me this question now and then ask me in two hours and then again two hours later and you'll get a different answer because I find that, as I reflect, I often change how I think about things. So, it is an interesting period, after working for 35 years. The skills, I think, that help leaders across every business or industry are listening and managing your emotions. Those are the two primary ones. And, as a young executive or a young manager, it takes a long time to learn how to listen carefully. As you know, listening isn't just listening to what words people say. It’s reading the room, it's looking at people, it's trying to figure out what the undertones are, it's determining whether or not you've been successful in your communication. It's just so multidimensional. So, it's a key characteristic. And when I say managing emotion—90% of the time people think that means, you know, holding onto your emotion and being very calm. But, to me, managing your emotion goes both ways: it's knowing when to be extremely calm and it's knowing when to be very passionate. It's knowing when to be very firm and stern and sometimes knowing when to be angry, because people are people and you're trying to move things along and you're trying to make things happen. I think those are the two primary ones. But at the end of the day, I think leadership is often just about that perseverance and tenacity to stick in there. Often when I'm asked to talk about women in leadership and things like that, what I've reflected on is how many leaders cut out. They cut out for various reasons; they have all sorts of excuses. You know, “I’ve got to go spend more time with my family or walk my dog” or do whatever it is they're going to do. But I think what differentiates true leaders from one of the leaders is the “stick-to-itiveness.” I will never lay down in the ditch. I will wake up every day and, as someone said to me, put my big girl pants on and get back out there in the ring and fight. I guess my final thought [on the necessary skills] is (and I think I got really good at this at the end) being very quick to the draw—not waiting for all the information, not making sure that I was a 100% right all the time, but actually being quick to the draw, getting ahead of the game, being proactive and moving people before they wanted to be moved. And I think leaders today have to have those skills.

Sean McLean: It's very interesting. You say that listening, curiosity, and resilience are three of the key attributes that we thoroughly assess in our CEO & Board Practice, in particular. Thank you for that insight. Your experience is interesting: in both your executive journey at TransAlta and your board service, you've had direct experience with both domestic and international businesses at a variety of inflection points. Based on this background and you experience, what are the most exciting growth opportunities you see both in Canada and globally? And what type of leaders do you think those will require?

Dawn Farrell: As I was reflecting on these questions, I was thinking about how we change over the years. There was a long period of time, in about the first 25 years in my career, in which the rhetoric was always, “Find what you're good at, stick to your knitting, get focused, have four or five key industries.” And when I finished my career, what I'd seen was that that kind of thinking is all central planning thinking—and that has been absolutely pounded and eradicated. The kind of thinking that you have to have as you enter onto the global stage is much more entrepreneurial and much more that there are lots of seats that can be sold. There are lots of opportunities that can come from places like Canada that aren't necessarily things where you say, “Well, you have natural resources, you have natural energy companies and therefore you should just focus there.” I actually think what Canadians can do well, and I'm seeing lots of shoots of it, is start businesses and get them scaled and scale them internationally. I think the game of scaling international global businesses is not exclusive to the United States or China. I think it can be played from any corner of the globe and I think Canadians can play extremely well. I think the kinds of opportunities that are out there are endless—infinite, really. And I think many Canadians have most of the kinds of characteristics that you need to play in the global game, and I’m really excited to see a lot more of the kind of entrepreneurialism that, I think, we've been slow to grow, but which is coming. I think that's what's going to take us into the future.

Sean McLean: I'm excited to hear you say that, Dawn. I've noticed that Canadian leadership expertise, boardroom experience, exports very well internationally. We play well internationally. There's something about being inherently Canadian in style that seems to work well on the international stage. And yet we haven't consistently succeeded at building companies that scale internationally. So it's exciting to hear that Canadian executives and leaders see that potential.

I think many of our listeners right now are thinking a lot about technology transformation and, of course, change management broadly. You have significant experience driving technology transformations. Most recently, of course, with TransAlta's fleet and in its core systems and processes. What leadership strategies and skills have you discovered are imperative to success? And what are the derailers when you lead through these sorts of transformation?

Dawn Farrell: I think it's kind of along the same theme. I would say that we have put some really great companies on the global stage, and that there are a lot of large companies in Canada that are playing a great game internationally and growing. I just think there are going to be more in the future. There aren’t as many yet, but I think we will hit over the average as we go out over the next 10 years because of the kinds of education that we have, the kind of people we have, and the kind of values we have. But when I think about transformation, it kind of goes back to the same thing. What I learned was, talk down, the CEO is the God, the executive team knows at all. But having a strong strategy, having a strong plan, allocating resources carefully never—absolutely never, never, never, never—worked. It's not fast enough, people are not knowledgeable enough, and it doesn't engage the people that actually need to make the change. So, the number one lesson for me was how to engage all 1,800 people that worked at TransAlta and how to engage our suppliers and our partners. We called it “Lead from your quarter.” Everybody leads from their corner. We gave people some safeguards—go in this direction, and so on. But when we gave everybody a way to participate in innovation and change and do it from their corner, we really accelerated the profitability and the transformation of the company. That was the key.

Now, remember that a lot of people wanted the other model. You know, “Please be visionary and please tell us what to do and inspire us.” And I'd be like, “No. Inspire yourself. What do you need to do from your corner?” So, I spent a lot of time as the CEO talking to the front lines. I wrote 50 blogs a year for nine and a half years, which I directed directly to the front line so that they'd know what was going on in the company, what I was thinking about, and what I was seeing, so that they would start to think about the same things. And I spent a lot of time calling the front lines. We had an initiative where we had things happening all over the company, and every week I'd phone two or three groups to see how and what they got done. I had little pieces of paper with names on it and what the initiative was. I'd phoned these guys in the field and they were in the shop at the mine; they’d gotten the opportunity to put a couple thousand dollars into changing their shop around so that it would be more effective for what they were trying to do to work on the big trucks. And these guys are on the phone and they're like, “Dawn, we did this and then we did this and then we did that, and we had this…” They had like $5,000. And the way that they took care of that $5,000 and that shop, got it all ready for the trucks that they had to bring in, it was so inspirational. And we have that going on all through the company.

So, when you translate that back to Canadian businesses, I think Canadians really have this sense of fairness and egalitarianism. They really don't have this up and down; we have front lines and back lines. And I think that if we can embrace any economy and, in our companies, get people all on the same page and use their leadership skills and knowledge to make our companies better, we can really step ahead.

Sean McLean: Dawn, that's pretty remarkable to hear you say 50 blogs a year for more than nine years. It was definitely a great example of the time and energy that I know you put into communication, transparency, and culture. It's a great example for CEOs out there: what it takes to really align and inspire an organization and to get people to inspire themselves—as you said, leading from their own corners. That's some great insight, thank you.

Moving to ESG and the energy industry specifically, I think we'd agree that the global energy industry is at a fascinating inflection point. In Canada, one of the results of this is that leading organizations are taking a more public stance on ESG matters. In your view, what must Canadian energy industry leaders do to win the hearts and minds of key stakeholders?

Dawn Farrell: Well, I think it's very complicated. And I think it's a very difficult question because there are a lot of people that are just completely against energy and particularly fossil fuel energy. And you're never going to win their hearts or their minds. So, I think the key question for these companies is what they are going to do to be able to transform their businesses and continue to supply different forms of energy to the world. Because, as you know, we don't exist on this planet without energy for heating and cooling in our homes and cooking. We need it.

First of all, the ESG journey has to be 100% authentic. I've seen a lot of investors talk about ESG as pretty surface-level stuff. It just kind of reminds me of a teacher saying, “Here's your report card but it's not all that real because we don't really pay that much attention to it.” I think investors have to be authentically looking for what the company’s ESG outcomes are, and companies have to be really investing in their ESG outcomes. And I have to say, I'm incredibly impressed. I just joined the board of CNRL [Canadian Natural Resources Limited], but I’m also a Calgarian, so I know the Suncor people and I know the Cenovus people. I know that industry inside out. These people are working authentically on many, many strategies to reduce their greenhouse gas emissions, to invest in new technologies, to reduce their footprint in a number of ways. They are thinking seriously about how they do diversity and inclusion. And, frankly, I think they need to be given a little bit more benefit of the doubt, rather than all the cynicism because they are big companies with big money and they're spending big money. Really, those cash flows being reinvested are what will take us to a different future. I think what they all know is that energy cannot be high cost. It cannot be. It has to be low cost. You cannot ask the average household not to send their kids to hockey because they have to pay their electricity bill. You cannot ask them to pay twice as much for a car. You cannot ask them to pay twice as much to fill their tank of gas. So, they know it has to be low cost and they know it has to have a lower environmental footprint and they know that it has to be made ethically and that we have to stand for certain values. And I see a lot of effort going in that direction and I see a lot of authentic effort, but it will take time. It's definitely not going to happen overnight. And I think giving a bit of benefit of the doubt is helpful overall.

Sean McLean: Some great points there, Dawn. In your answer, you mentioned diversity, equity, and inclusion. We, of course, know that organizations with more diverse and inclusive teams and cultures tend to make better decisions and perform better. We also know that the Canadian industrial sector has much room for improvement on DE&I. In your opinion, what are leaders doing well right now to accelerate the efforts of DE&I in their organizations, and what more must be done?

Dawn Farrell: I can only talk about what I did, and I did as much as I could, but in reflecting back on it, I don't think I did nearly enough. But I'll talk about some of the things I did. Some were really, really simple. Early on, if I was sitting down with HR, I looked at all of our employees and I looked into every single woman in the organization and whether or not they were being paid the same amount as their male counterparts. I fixed that four times. Four times in nine years I had to redo that calibration. And four times in nine years, I had a sixth sense. So, after I fixed it the fourth time, I actually said to the women, “OK, ladies, it's time for you to start fighting for yourselves. When you go into organizations, you need to negotiate tougher and you need to be tougher about your wages.” But at the same time, you know, I watch women today and they just seem to always get left behind.

So that's number one: make sure everybody's getting paid equally for equal work out of the gate. You as the CEO can do that. The second thing I was quite disappointed in was the way women were being treated when they came back from maternity leave. We're talking about diversity and inclusion like it’s some big, fancy-schmancy thing, but I’ve always supported women taking the time with their new babies, because if they didn't, they dropped out. And there's a reason they dropped out: it’s because they had to project the children. They need that year to get organized, to get the baby organized, to do all the stuff that moms need to do. But then they come back and they're completely behind. They get behind on wages, they get behind our promotions. Now, anybody who has children knows that a baby is far more stressful and it's greater work and requires lots more organization than anything you'd ever do in the office ever. Women become very tough because they face those things. And yet they come back to the office and they're completely discriminated against. They fall behind. So, we changed that.

And then I think that third thing—somebody told me once that it takes one person in a room to change the behavior of an entire group. So, one adult behaving properly will change behavior. And, of course, the alpha males and the alpha females dominate everything. It doesn't matter where you are. It doesn't matter if you're in sports, it doesn't matter if you're TransAlta; they dominate everything. And we also know that mistakes are often made when the most aggressive alpha humans get their way. I think that diversity and inclusion is about toning that aggression down and getting all the voices in the room heard. So, I think the third key thing you’ve really got to do if you want to promote diversity and inclusion is to start with the males. There's a whole bunch of males that are not heard in organizations because they're completely walked over. Then make sure that all the females are being heard in a room and do that deliberately, and then make sure all the minorities are being heard in the room. For some reason, our brains seem to think that if somebody is different, they're over there. And so there's a lot of work that has to be done on the communication side of it. Diversity and inclusion only work if the people inside the organization can link elbows, fight beside one another, and work with one another, despite who they are. All the voices have to be in there. And I think that's one of the key things that I learned.

Sean McLean: So many great lessons in there, Dawn, particularly on pay equity. That’s such a powerful pillar within DE&I, one where you can really put your money where your mouth is. It’s also very interesting to hear that as a female CEO you had to fix it several times and, in doing so, had to coach your female leaders to self-advocate to disrupt that cycle, which is probably a piece that sometimes gets missed. I also loved your comments about toning down the alphas and going right back to the beginning of the conversation around listening, really dialing up the listening and teaching your alphas to be more curious and listen, which, by its very nature, creates a more inclusive culture. Thank you. Just some great thoughts in there.

Dawn Farrell: I just want to say, I have never heard anybody in a diversity and inclusion discussion talk about equalizing pay, ever. So, start talking about that, make sure everybody's talking about that, because that is where it starts.

Sean McLean: Interestingly, the CEO of one of our clients identified the same problem and wanted to fix it. He called the CHRO and said, “If we have this problem, just fix it. I mean, we have the data, we're a software company.” It was about a $10 million problem, I think, which was a little more than he anticipated. And so he asked, “Underneath that—what's causing that?” He then went further, to say, “We're not having meetings unless there's a diverse group in the room.” So yeah, something he thought could be fixed at the push of a button turned out to be far more complex than he realized. He was so proud of this inclusive and equal culture and then found out it was actually a $10 million problem.

Dawn Farrell: I said, unless you show up here with some qualified women—and don't tell me that there are no qualified women and hand me the usual slate of guys. You just being lazy. As a result of that, I got a lot of great women into TransAlta both on our board and our management team. So I think the bias is just everywhere and it will take its time to fix, but it takes a stick-to-it-ness.

Sean McLean: Absolutely. Dawn, you were CEO and are a current director of global organizations, so you've experienced varied business practices and cultures. What aspects of Canadian business culture do you think are most distinctive and that more companies would benefit from adopting? And what do you think we could learn from other regions?

Dawn Farrell: I don't think there's really anything all that unique about Canadian culture. What I say to people is that utility companies across the globe are exactly the same. It doesn't matter if you're a Canadian utility company, an American utility company, Brazilian, Australian, European—all the pressures are the same and you'll find that the executives look the same, talk the same, have the same issues, have the same cultural issues. It’s the same with oil and gas, parts companies, and car companies. And I think the same thing about people. Doctors and their families are the same in Canada as they are in the United States as they are in Europe; tradespeople are the same. We place way too much emphasis on this idea of national identity. The identities are in the groups that are inside the companies. So, I think that often where the learning is, and where the learning was for me—because, remember I was transforming a utility into an independent power company that was completely on its own competitively. There's no rate base. There's no cost of service. Every piece of business we won—we kind of had to eat what we kill and that sort of thing. Getting on the board of Chemours was fantastic because that's the kind of company they were. Learning what the chemical culture had to do to survive globally helped me very quickly understand what I had to do with our cultural transformation. So that was a really, really big deal for me to have that board seat. What I learned there is that when CEOs say, “Oh, my executives can’t be on a board,” they're crazy. Their executives all should have a board because you learn a lot by being part of another company. But I'm not sure that I've learned much being part of another culture. Americans are amazing people. They're a lot like us; they have values and they want to win just like we do. Canadians say they don't want to win. They're mostly passive aggressive; they absolutely do want to win. Maybe Americans are a little bit more out there about how they want to be, but they have the same values in your boardrooms; they have the same pressures. They're fantastic people. They are really working hard to make the world a better place. So, I haven't learned much that way, but I certainly learned that between industries there's a lot to learn.

Sean McLean: Very interesting. Hopefully more inspirational to those Canadian companies that are considering going international. We absolutely have the tools and the values and the capabilities to compete on a global scale.

As we bring this conversation to a close, let's just touch on the past year and a half. We've had a global pandemic, social justice movements, shifting work environments, and many other massive changes. What are the lessons we must not forget? What are the challenges and opportunities this young decade has already presented?

Dawn Farrell: Well, I'm sitting here today in West Vancouver. We can't get out of West Vancouver because of the fires on the highway. We were on a call this morning with a bunch of people that are quickly trying to raise money to help people who supported Canadians get out of Afghanistan. And we’re in a pandemic. Every day I wake up and go, “Well, I guess we're going to change again.” Right? We thought we had it, but here we go again. We can no longer have our board meeting in October; we have to have another video conference. What I've learned over and over and over again is that information is extremely powerful and that the masses can absolutely be manipulated with fear and disinformation. I keep trying to teach all of my family about the confirmation bias that these machines are delivering through algorithms. That is my number one concern. People are so anxious. I can tell when people have been on the internet, feeding their confirmation bias, because there's a certain tension and stress that emerges. And I just think leaders have to know exactly how communication is working these days. And they have to fight every single day to help people see what's real and what's not real, what we can do and what we can’t do.

I think the second thing though, what I'm really astonished by, is the kind of innovation we’re seeing. So again, when I think about this morning, a group of military people in Canada are probably going to get 800 Afghani families that were helping our military out of Afghanistan within the next two or three weeks. And that wouldn't have happened had it not been for the ingenuity of the internet, of technology, of the ability to raise money, all that kind of stuff.

The Canadian government will probably get us some sort of COVID-19 vaccination passport within two months. We'll find better ways to get those fires out. The responsiveness of humans, our ability to solve big problems, is amazing. It is so much better than it was 10 years ago, 20 years ago, or 30 years ago. We have bigger problems to solve today. We have lots of issues with communication and propaganda. Propaganda, as you know, it's been around since the 1700s, as soon as you made the printing press you, created the opportunity for propaganda. Now it’s exploding because of the ability to get information to so many people. So, I think the challenges are big, but we are doing some amazing things and you have to just keep waking up every day and saying, “Yes, but we can solve that. Yes. But we can solve that.” And leaders can't get cynical. They can't get down. They can't lay in the ditch. They can't admire the problems. They have to embrace what they can do to move things ahead. I often say, I wish I was starting out my career now. Like, what a great opportunity ahead for leaders that are coming into executive functions or onto boards of directors. The next 20 years are going to be super interesting and super exciting. And I think we've got better skills as leaders than we had 20 years ago.

Sean McLean: Dawn, I can't imagine a better way to wrap up the conversation with a message of hope, of optimism, of highlighting some of the incredible challenges that we've overcome through leadership and innovation. It’s just a great way to end. I would highlight that we are having an election in Canada—hearing you say those things, perhaps you have another career. If you're so interested.

Dawn Farrell: Yeah, right, no!

Sean McLean: Dawn, thank you so much for making the time to speak with us today and thank you to our audience for listening to the Heidrick & Struggles Leadership Podcast.

Thanks for listening to the Heidrick & Struggles Leadership Podcast. To make sure you don’t miss more future-shaping ideas and conversations, please subscribe to our channel on the podcast app. And if you’re listening via LinkedIn, Twitter, or YouTube, why not share this with your connections? Until next time.

About the interviewer

Sean McLean (smclean@heidrick.com) is partner-in-charge of Heidrick & Struggles’ Calgary office and a member of the global Industrial and Financial Officers practices.