Power cuts, which started slowly in the late 2000s, escalated until 2023, when there were more than 280 days of rolling blackouts. Then, in March 2024, it stopped – for months. We enjoyed the longest stretch without load shedding in five years. And apart from some disturbances in the force over summer, that has largely continued.
What happened?
Well, many things. Some were external. People and companies increased their use of solar and other alternative energy sources, reducing demand on Eskom. Government provided some debt relief. But Eskom itself also made changes. New leadership. A programme of planned maintenance. Movement of the best managers to the worst-performing power stations. Use of AI to investigate corruption. This has all received much coverage.
But one other contributing factor seems to have flown under the radar, going almost unnoticed: incentives.
So said Mteto Nyati, the chair of Eskom’s board, showing sensitive understanding of what motivates people.
Performance incentives at Eskom had previously been removed, and one can almost understand the rationale: in a failing organisation that is bleeding money, are incentives affordable? But perhaps Nyati and his board asked a slightly different question: is the absence of incentives affordable?
“We now have a virtuous cycle where things are happening and are not necessarily driven by us as leadership, but by employees themselves, largely on the back of the incentives,” Nyati said. “When you start to see people going the extra mile, and they can be rewarded, that is what you want.”
It’s not just that incentives work. They work in the direst of situations, when nothing short of transformation is required. And they work phenomenally well.
McKinsey has said that “companies that implemented financial incentives tied directly to transformation outcomes achieved almost a fivefold increase in total shareholder returns compared with companies without similar programs.” Read that again: fivefold.
Here’s another thunderbolt from the same report, quoting an executive who said that incentives were “one of the best investments we made as a company. We delivered one hundred times more than what we paid out. Because we distributed rewards only after the value was delivered, the program was completely self-funded.” That number is also worth reading again: a 100X return.
McKinsey’s research further found that many companies don’t adopt incentives programmes when embarking on transformations, often over-emphasising the cost, and under-acknowledging the advantages. But the evidence – in McKinsey’s research and in organisations like Eskom – should compel cynics to have a rethink.
It’s not to say that incentives are a silver bullet. As mentioned, Eskom’s improved performance was layered and multi-faceted – it had to be. But, incentives are a potent and proven accelerant, especially during periods that require transformation. Perhaps the worst of times in organisations are the best times for incentives.
If incentives played a role in Eskom’s turnaround, what might they do for your business? Feel free to reach out for a no-obligation conversation with us.
