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Organizational Design

reverse-osmosis
Organizational Structure design for the Water Utility Company in the KSA

Situation

  • The collapse of oil prices in 2014-2015 slashed Saudi Arabia’s key source of revenue, which has historically made up some 75 percent to nearly 90 percent of the Kingdom’s income
  • This led in turn to huge deficits, forcing the government to draw down its foreign reserves and issue bonds
  • It is crucial that Saudi Arabia act now to diversify its economy and increase revenues and one option is to privatize State-Owned Enterprises (SOEs)
  • As a part of the privatization initiative the Water Utility Company was to be transformed into joint stock holding company & work with investment partners for eventual IPO

Challenge

  • A privatization program had to be carefully implemented to ensure benefits to the government and economy, producing stronger growth, higher employment, and a better fiscal balance
  • A successful organizational change was required for the shifting assets to the private sector if they are to reduce government costs and/or bring revenue
  • An effective restructuring will create assets that are commercially attractive minimizing legacy costs (e.g. over staffing) and ensure business models with clear revenue streams

Action

  • Made recommendations on the phased approach to new operating model execution that in the first phase led to establishment of the Transmission Assets as a separate company
  • Organize the client company internally to facilitate and prepare for commercialization and privatization
  • Restructure and organize internally along production bundles as business units (BU)
  • Integrate asset bundles under New Entity as stand-alone independent subsidiaries

Result

  • Although the project is still ongoing the phased approach led to significant benefits including:

−Allows time for the market reforms and rules to set-in

−Allows for exercising and testing alternate PSP options

−Allows time for workforce restructuring and optimization

−Allows time for local industry to strengthen and for negotiating higher localization deals

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