Answer to Question #230509 in Management for Genine Kriegler

Question

The 3S model divides an organisation into three levels of operation: strategic, systemic and situational. The model is presented as a pyramid structure. Explain how you would apply this model to solve Eskom’s problems.

Answer 1

Eskom has two major problems that are key to its growth; Its operating cost is too high, and it can't pay its debt. The debt is so much that, they are not able to pay the interest on its debt and it has reached that extend now.  The poor management has led to the fall of the giant. Also, electricity theft has also hit the cause.

Using the 3s model, Eskom can solve its problems by;

Eskom needs to reduce the operating expense significantly. they also need to increase their tariff and that will help them shed a big chunk of their debt. the entire world is switching to renewable sources of energy, like wind power, tidal and many more, and Eskom is still stuck with 90% of its power coming from coal, thus the cost of production is very high, also they can't continue this for a pretty long time as the world is looking forward for a renewable source of energy. Norway as a matter of fact crossed the number of electric cars sold this year comparing diesel and petrol and they are looking forward to changing their entire automotive industry to a renewable one, thus they need to decide on this as soon as possible. They need to work on their tariff as it is very low and with this, they can never come up from the dark hole of debt again.

On Strategy, they need to reduce on the number of employees, it is a must, as they have too many employees comparing the amount of business done. They need to figure out the optimum number of employees they would need to do a particular task, And reduce the number of employees likewise. As the country is already under high unemployment, which might be because of various other factors. Thus either company is actually doing this, so why can't they, its time to take hard calls and not get emotional over it.

They need to systematically reduce the number, they need to check, on the employees who have not been performing well in the last few years. Also for survival, they can propose an income cut from all employees and not go ahead with job cuts, they need to be transparent with their employees and let them know about it. If they agree probably a 20-30% reduction in salary would work to some extent. Currently, the situation is such that, they will have huge competition from various other players in the market, yes they have been a monopoly for a very long time but now, they will see a rise in competition, what they can do is to make sure the tariff they would develop is challenging and customers feel the benefit of the same.