Orkuveita Reykjavíkur (OR) is the largest public utility company in Iceland owned by the City of Reykjavik (95%) with the rest owned by two other municipalities. OR is serving more than 120.000 homes in Sout West Iceland with electricity, hot and cold water, broadband and sewage. OR also operates two large scale geothermal power plants marketing electricity on the open market apart from the service areas and has as well its own supplies of cold water and geothermal hot water for it‘s utility services. The company has close to 500 employees.
Following the financial crisis in 2008, the company ran into severe difficulties leading alomst to bankruptcy. In 2011 new management came on board which developed a 5 year turnaoround plan which as successfully turned the company into a successful business entity enjoying healthy profits and sound financial position.
Few years ago, the company was for legal reasons broken up in three daughter companies to separate the competitive business in marketing of electricity and broadband services from the utilities which operate under license and is a monopoly operation in its territory. This caused several governance issues which OR has been successfully coping with during the recent years. One of the challenges faced was the coordination of strategic direction within the newly established OR Group. Being a highly regulated company under public ownership the requirements by the owners for sound and comprehensive governance principles were evident.
A shareholder strategy was formulated in 2012, which essentially provided guidance to OR in strategic direction and laid out certain responsibilities of the OR board to define further the strategic framework for the whole group making sure that within legal limits, the group operated as a cohesive and well managed entity.
OR and its daughtercompanies currently operate under 18 different policies in operational matters, which all entities within the group are required to adopt. Furthermore the OR board has defined a corporate Group strategy, which is guiding for the different units in formulating their own business and operating strategies. To successfully keep track of this rather comprehensive governance structure, OR adopted the first version of the DecideAct software in 2012 and simultaneously hired a Chies Strategy Officer to oversee the strategy work within the group and ensure transparency.
Each year every unit has defined strategic initiatives and key measurements and goals, which are presented to the Group board and progress monitored and reported periodically to the respective boards of daughter companies as well as the group Board of Directors. Cohesive work procedures for formulating strategies and initiatives have been developed and issued in a Strategy Handbook, which is guiding for all units. Recently an academic article was published in the Magazine for Business and Economy, published by the University of Iceland and Reykjavik University outlining the strategic governance procedures, which were co-created between OR and DecideAct.
At this point in time, OR has decided to take the strategic governance one step further by involving all middle managers in the process and spreading the accountablity for strategyformulation and implementation to all sub-units of the respective group units. This ties in with the Group implementing Beyond Budgeting in its financial governance, intertwining financial accountability with strategic accountability. This was made possible by adopting the current version of the DecideAct software which allows for much more structure and flexibility in monitoring the different unit strategies. Through this endeavor, which as well is developed in close cooperation with DecideAct, the aim is to make sound strategic governance a part of the Group DNA and culture.