October 5, 1997 in Nation/World

Wwp Gears Up For Transition Utility Faces Challenge Finding Successor To Redmond

By The Spokesman-Review
 

Spokane rarely witnesses a corporate manhunt.

With the decision by Paul Redmond to step down at Washington Water Power Co., the search is on.

The outcome will be important for the community as well as the company.

WWP is the city’s only $1 billion company. Its 1,400 workers make it one of the largest private employers.

And with wires and pipes etched all over Inland Northwest maps, WWP touches the vast majority of the region’s households and businesses.

WWP is as close as Spokane gets to big business.

Redmond himself has hardly been low profile. Besides his corporate duties, he has filled a variety of community-service posts, among them acting as co-founder of the Momentum drive for Spokane’s economic turnaround in the 1980s.

His salary and bonuses, consistently around $1 million in recent years, are also eye-catching.

So the naming of his replacement would be of interest any time. But this transfer of power will be extraordinary for a couple of reasons.

First, these are not ordinary times for the utility industry. Deregulation has already opened up markets at the wholesale level, allowing companies like Kaiser Aluminum Corp. to shop for the best electricity prices.

State and national legislation will almost certainly give all consumers that ability within the next few years.

If utilities accustomed to operating as a monopoly don’t adapt, competitors may steal their customers.

Second, Redmond is just the third man to lead WWP in the last 60 years. The legendary Kinsey Robinson headed the company from 1938 until 1975, when he retired as chairman.

Wendell Satre, president since 1971, added the chairmanship when Robinson departed.

Satre surrendered the presidency to Redmond in 1982. He stepped down as chief executive officer in 1984 and chairman in 1985.

Both Satre and Redmond were long-time WWP employees. Once they were brought up to the top floor, each was given assignments that would broaden their knowledge of company operations.

“It was a transition over a period of years,” Satre says.

Redmond said that was supposed to be the pattern after he took over.

In 1988, he picked Jim Harvey to replace him as company president. Although the two were relatively close in age, Redmond figured the company would have a backup if he left Spokane or was unable to perform his duties.

But Harvey, saying his work reshaping WWP’s management team was done, resigned in December 1993.

Redmond said he immediately started working with the compensation committee of the company’s board of directors to find a replacement.

Over the next few months, the committee developed a list of skills a potential candidate should have. Redmond said the board wanted to see what assignments and education company executives needed to match up.

That process would have taken several years, he said.

Instead, the plan was shelved.

In January 1994, Sierra Pacific Resources Chairman Walter Higgins suggested WWP and his Reno-based utility merge.

Terms were announced in June. Among them was an agreement Higgins become president of the company when the deal closed.

Redmond would resign as chief executive officer at the end of 1998, and chairman in 2001, with those positions also going to Higgins.

That won’t happen, either. The merger was scrapped in June 1996 because the companies were unable to overcome regulator objections.

The issue of who would succeed Redmond again became a critical board concern. Les Bryan was named president last August as part of an overall reorganization designed to position the company for deregulation, but Redmond said Bryan made clear he did not intend to stay with WWP indefinitely.

The compensation committee, headed by Coeur d’Alene businessman Duane Hagadone, revisited the qualifications a new chairman and chief executive should have.

Redmond said the new outline stresses more knowledge of managing a business in a deregulated environment.

Candidates could be utility company executives, but they could be officers from banks, railroads or other industries as well, he said.

Redmond said he expected to remain with the company a few more years, so there was no sense of haste as the compensation committee deliberated.

But as 1997 progressed, he said he reassessed his timetable. 1996 had been a rocky year, marred by the merger’s termination and the November ice storm. Those events cost the company more than $30 million.

Still, WWP revenues were soaring. The company was reinforcing its position as a leading player in the wholesale electricity market, and subsidiaries were establishing their roles as energy service providers.

Sales this year could reach $2 billion, and Redmond said company officials predict - conservatively - that figure could double within a few years.

So Redmond announced his retirement. “There just wasn’t a better time than right now,” he said.

Horne/Browne International Inc. of Boise was retained to find Redmond’s replacement. Founder Gene Horne said the company does not discuss ongoing searches.

Redmond said officials from the Boise firm spent a week in Spokane talking with WWP directors, managers and workers to assess company culture.

Telephone conversations continue daily, he said, and all directors are updated weekly.

Redmond said he does not know if he will talk with the finalists identified by Horne/Browne.

Experts in executive recruitment say attracting quality candidates will be a challenge.

“People are looking for the best talent in the business in which they operate, and they’ll pay a premium,” said John Nash, president of the National Association of Corporate Directors.

A USA Today study last year showed one-quarter of the Fortune 500 corporations replaced their chief executives after 1992, he said.

“That’s an astounding number,” Nash said.

He said activist directors no longer tolerate sub-par performance. Chief executives are being pressured to select a potential heir, or heirs, he said.

Until recently, Nash said, directors had abdicated their responsibility to scrutinize management performance.

Nash said WWP’s search could be complicated by the aborted merger. A candidate will look at that experience, weigh the chances for another effort, and consider what their fate might be when executives get shuffled, he said.

Also, he noted that chief executives brought in from outside a company have an increasingly short tenure. Downsizing affected management as well as labor, he said, and fewer officers must do more to run a company.

“They’re being chewed up very, very rapidly,” Nash said.

Jim Drury is the U.S. managing partner for SpencerStuart, an international recruiting company. He agreed the search for top managerial talent has definitely created a sellers’ market.

But a company with the kind of growth WWP has experienced - and predicts will continue - should be attractive, he said.

“The more exciting the future looks, the more dynamic, the better the individual you’ll be able to attract,” Drury said.

Typically, he said, a company might look to another twice its size and try to pick off the second-in-command there.

Drury noted that many companies in deregulated industries are finding executives in other businesses who are veterans of other deregulation efforts.

Delta Airlines, for example, recently hired a Chicago utility executive who had previously been in banking and railroads.

Robert McGinty, who teaches business strategy at Eastern Washington University, said the key to a successful search is a board that knows what it wants, does its homework, and works slowly to assure the right individual is selected.

“If they don’t know where they’re going, it doesn’t matter what road they take,” he said.

Whomever gets the job, McGinty added, will have much to say about how local a company WWP remains.

Satre, now chairman at Consolidated Electronics, said Spokane’s low profile on corporate maps could be a handicap in the search process.

“People don’t know Spokane,” he said.

Outside finalists for the WWP job will likely be drawn by the area’s environment and the reputation of the company, he said.

Satre stressed that change won’t end with installation of the successor. It may take a few years to adjust to a new manager’s style, particularly if he or she is an outsider, he said.

But Satre added that the managers surrounding Redmond are very capable, with strong community ties, who are unlikely to move on if an outsider is brought in.

Redmond said the board is looking for an individual, not a set of managers to break up the successful team already in place.

He downplayed the concern a potential merger would create among candidates. Mergers are a fact of life in any business or company, he said.

He does not know who in the company might have applied for his position, Redmond said, and outsiders who call are referred to Horne/ Browne.

He said identifying a candidate before year-end is unlikely. A more realistic timetable takes the process well into 1998.

In the meantime, Redmond said he will run the company with the intention of leaving no loose ends for his replacement.

The transition, he said, should be seamless.

“Six months after that person gets here, people will be asking ‘Paul who?’ and that’s all right with me.”

, DataTimes ILLUSTRATION: Color photo


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