Asian Development Bank  Organization
making is slow, there is considerable staff
Winning through Twinning   knowledge   series   important issues. Naturally consumers suffer. In
Water Operators Partnership
Some water utilities consistently perform better
than others. They deliver quality water, 24/7,
achieve low non revenue water ratios, maintain
high asset performance, charge affordable
tariffs, enjoy consumer satisfaction and earn a
surplus that enables them to reinvest in assets
and extend their service coverage.
Have you ever wondered why? Some factors
stand out. Autonomy and expertise of the CEO
to make decisions, capacity to raise capital
funds and set prices that recover costs and a
committed and dedicated utility leadership are
three of the most important. But there is a fourth
which is not so obvious. Successful water
utilities are well organized.
There are over 400 cities in the world with a
population of one million people plus. Each has
some form of water utility and many employ
hundreds if not thousands of skilled personnel.
They also have a variety of governance,
regulation and organizational arrangements.
Consequences of an ineffective organization
Unfortunately some organizational
arrangements are less effective than others.
When that happens typically there are unclear
accountabilities, inadequate delegation of
authority, overlapping responsibilities,
overstaffing of support departments irrespective
of workload, lack of competencies and no
incentives to encourage high performers.
Even accountabilities between Boards and
management are confused. Board members get
involved in micro management while neglecting
their primary role in deciding strategy and
monitoring management performance.
Water Operators Partnership Program – knowledge series   Page 1 of 4
As a result of poor organization, decision-
Options for frustration, increasing personnel costs,
Water mismatching between staff and technology,
resignation of good performers, process rather
Utilities than customer focus and often neglect of
Program such circumstances the Board, management
and staff may perceive the need for streamlining
the organization but lack knowledge on how
good water utilities organize themselves.
Designing a suitable organization structure
Typically, setting the structure and determining
staffing and competency needs follows from and
depends upon the organization having in place
(i) explicit goals (ii) performance indicators to
judge its achievement and (ii) strategy and
processes for how those goals will be attained.
Explicit Goals are essential
Having explicit goals might sound easy but
research shows that it is least understood. The
overriding goal of a water utility is to deliver
affordable, reliable and quality water (with
sanitation often being tacked on) to its service
area. Because of its community focus, most
utilities are generally government-owned.
This often makes them subject to heavy
regulation and undue interference on structuring
the organization, making personnel
appointments and planning.
Importance of Performance Indicators
It almost goes without saying that it is no good
having a goal if you cannot measure progress
towards achieving it. A typical water utility
needs about five to eight output-based key
performance indicators to manage its
operations. The key performance indicators
need to be understood, clear and accurately
measured. Moreover, they should be monitored
regularly and reported corporately.
Documentation is another essential
The third prerequisite for good organizational
arrangements is to have documented strategies
and implementing processes. To ensure there
is accountability and sufficient skills to deliver
results, implement strategies and undertake
essential processes, the organization has to be
aligned and staffed. The better this alignment is
between goals, performance measures,
strategy, processes and the organizational
structure, the greater the effectiveness and
efficiency of the water utility.
As an example take one output measure that is
used by many water utilities; that is the
percentage of properties that have an adequate
water supply, where adequate means that the
flow rate at the property boundary does not fall
below a minimum rate throughout a twenty four
hour period. A water utility has to do many
things to make sure the target for this key
performance indicator is achieved. All the things
that it has to do that directly impact on achieving
this measure are called ‘line functions’ while all
those that do not are called ‘support functions’.
In this case maintenance of the pipelines or
monitoring of the flow rates are line functions
while information systems or legal services are
support functions.
Improving the Organization Structure
Ninety years of industrial history and countless
management text books have shown that the
best way to organize a line function is to start
with the customer interface and work back up
the supply chain. This is because this approach
makes accountabilities and intra-organizational
dependencies absolutely clear. It eliminates
overlaps, clarifies decision making and
minimizes overhead. The department within the
water utility that is responsible for delivering the
water supply services is assigned the output key
performance indicator, such as the one referred
to above. In turn this department is able to
assign internal key performance indicators to
those assisting it in this task. That way, we have
an organization that is totally dedicated to
achieve the output key performance indicator,
and where all the components of the
organization are clear in how they fit into the
supply chain and what is exactly expected of
them. And all this can be simply measured. This
is the essence of good organizational structure.
Water Operators Partnership Program – knowledge series   Page 2 of 4
A Generic Organization Structure
The enclosed Table 1 shows a generic structure
where the production line is clear and support
functions defined. This has the advantage of
relatively few reporting executives to the Chief
Executive Officer, groups like functions together
and facilitates the assignment of corporate
performance indicators down to departmental
level.
Organizational structures do need to be tailored
to suit the local environment in which the water
utility operates. Customization should be kept to
a minimum and should not impinge upon the
principles of maintaining clear accountabilities,
achieving quick decision making, sustaining
performance management, grouping like
competencies, motivating staff and facilitating
the flow of work. Structures also need
continuous monitoring by the Board and CEO to
ensure functional arrangements remain relevant
and value adding. Here are some examples of
how utilities have organized themselves.
City West Water (CWW) – Australia
City West Water is a government owned utility
that operates as a standalone business entity. It
is expected to make profits and pay dividends
and taxes to the Government. Its business is to
provide water and sanitation services to about
800,000 people in the west of the city of
Melbourne, Australia. In 2008/9, its non revenue
water was under 9%, its customer satisfaction
rating was 95%, it took on average 1.1 days to
rectify faults and achieved 100% compliance
with water safety standards. It has around 350
employees although a substantial number of
services are outsourced.
CWW has a government-appointed Board of six
independent executive (part time) members plus
the Managing Director as a full time executive
member. The Board is chaired by a non-
executive member. Monthly meetings are held
and deal with key issues of strategy, policy,
planning and regulatory performance. As
standard practice, the Board assesses its own
performance using an external advisor.
 Substantial authority and accountability are Noteworthy is the operations and asset
delegated to the Managing Director who management being under the same manager’s
operates through an Executive Management accountability, which avoids possible conflict
Committee. This Committee headed by the between asset users and asset maintainers.
Managing Director comprises the five direct
reporting executives to the CEO. CWW has the The GM for Water Solutions is concerned about
prerequisites for a sound organization. It has new business while the Corporate Services
publicly stated goals1, key performance handles a wide range of support activity. There
indicators, documented strategies and is still a need for close coordination across the
processes. Here is the organization structure: organization though this is assisted by good
information systems and standard
Figure 1 operating practices. Promotion is
Board of Directors 
based on merit and there is a strong
performance management system
Managing Director  which cascades key performance
targets set at the corporate level to all
managers and staff.
General Manager   General Manager  General Manager  General Manager  General Manager 
Engineering  Service Sustainability  Water Solutions  Public Affairs  Corporate Services  Manila Water Company (MWC)

The functions that fall within the scope of each This utility is strongly linked to a major
general manager (GM) are set out below. corporation – Ayala Group based in Philippines
through a 31% shareholding. Under a
Engineering      Service Sustainability  
concession agreement with the Government, it
Infrastructure planning     Water conservation  
Asset management       Environmental programs   services an area with a population of 5 million in
Operations and maintenance     Environmental partnerships   the eastern half of Greater Manila. MWC is
Asset information       Trade waste services   regarded as an excellent utility performer.
Design/construct       Cleaner production  
Standards and materials     Customer services  
Drinking water quality     Community relationships   After taking over the franchise area in 1997,
Research         Key account relationships  
MWC has over the past 10 years upgraded
Water Solutions    Corporate communications  
systems, expanded and improved services and
Back flow prevention      Public Affairs  become financially viable. It has cut non
Recycled water       Pricing strategy 
Developer services       Regulatory relations  revenue water by two thirds, achieved 24 hour
Metering contract and services     Government relations  service for 99% of its customers and met 100%
Management of growth  Regulatory structures and 
of water standards. It has also created a vibrant,
Land development      strategy 
Connections and builder services   Bulk water agreements and  committed workforce of 1500 plus people.
Town planning applications    liaison 
Council liaison  
Because MWC is a virtual Ayala subsidiary,
Corporate Services  
Secretariat to Board       Legal services  
many of the Board’s eleven members are
Quality systems       Risk management /compliance   employed as senior executives by other Ayala
Governance       Contract management   Group companies. There is one full time
Internal audit       People mgt & development  
Finance strategy       Corp. Planning  
executive Board member – the President and
Strategic planning       Financial audit   there are two independent directors. The Board
Financial reporting       Tax   meets quarterly but will hold additional meetings
Treasury         Billing  
Credit         Fleet Mgt   if necessary.
Information services       Knowledge Mgt  
Payroll   Similar to CWW, there are relatively few
executives reporting direct to the President and
                                                             one executive is accountable for both operations
1
 www.citywestwater.com.au  and maintenance. MWC has chosen to set up

Water Operators Partnership Program – knowledge series   Page 3 of 4

 
 business area units to deal with customer
services within those areas and also have
separated out HR from Financial Management,
unlike CWW. Of course MWC has many more
employees – 5 times more – than CWW. One
interesting issue is the placing of asset planning
and management with a different manager than
Operations. This is the management team
structure (Figure 2) under the President:
government bureaucratic regulations. This may
stem from being comprised of representatives of
different government departments rather than
being a skills-based coherent Board. An
effective Board is one that has unity of purpose,
understands what its role is and what it isn’t. For
a water utility the role of a Board is to ensure
that the utility has a secure long term future by
undertaking the following:

Board of  • Approving the organization’s

Figure 2 Dire ctors 
strategic direction and priorities
• Consulting key stakeholders on
Pre sident
strategy and reporting results;
• Scanning the external operating
environment to ensure that the
Chief Finance   Group Dire ctor  Group Dire ctor  Group Dire ctor  organization’s strategies remains
Group Dire ctor 
O ffice r  Re gulation and  Corporate   O pe rations and  HR and Corporate   Proje ct De livery  both appropriate and achievable;
/Tre asurer  Proje ct De live ry 
De ve lopme nt  Se rvice s 
• Monitoring utility performance and
evaluating strategic results;
• Establishing the policy framework for governing
MWC has and continues to carry out a large the utility’s operations;
capital works program to upgrade and expand • Defining key relationships between the
organization and key stakeholders;
systems. Reflecting its strategic importance a
• Appointing the CEO, setting performance targets
senior executive has been dedicated to this task. for this role, evaluating and rewarding the
holder’s performance;
Operations       Corporate Resources    • Monitoring compliance with relevant federal, state
Water Supply       Human Resources     and local legislation and bylaws, and with the
Wastewater services       Talent Management    organization’s own policies;
Operational risk management      Corporate Services    • Providing advice and guidance to the CEO in
Operational Support services     External Affairs    assessing risks facing the organization and
Program Management     Information and Comms  
establishing a risk management plan; and
Regulation and Corporate   Finance and Resource  • Evaluating its’ own effectiveness as a Board.
Development      Management     
Regulation        Financial Planning   By limiting itself to these functions, a Board will
New Business Development      Investor Relations & Treasury  remain strategically focused and provide
Sustainable Development     Financial Accounting  
Asset Planning and Management  Tax management, new business  leadership to the organization.
accounting   
Project Delivery     Internal Audit  It is important that the Board does not, because
Projects        Legal and Compliance   of crises or personal preferences, stray into the
Design         Contracts and Vendor   functions that fall within the responsibility and
Logistics         Management  
Project Support          authority of the CEO and its executive team. If
East Zone Business Operations    they do stray, it will confuse accountabilities, de-
Business Areas   motivate management and lower performance.
Business Support  
For more information on the Water Operators Partnerships 
Board vs Management (WOPs)  Program  of  which  Twinning  is  part,  contact 
Michael  White  at  mewhite@adb.org    This  article  is  a 
When considering a utility’s structure the role of collaborative  effort  between  Matthew  Giesemann 
the Board cannot be ignored. The Board and its (General  Manager  –  Engineering  City  West  Water)  and 
governance approach will ultimately determine former  WOPS  Facilitators  consultants  Robert  Hood  and 
how successful a water utility will be. Some Cherry Ann Santos.  The views expressed are those of the 
Boards of utilities in developing countries have authors  and  not  attributable  to  the  Asian  Development 
conveniently forgotten the primary purpose of Bank.  ©2010  
the utility and are preoccupied with adherence to

Water Operators Partnership Program – knowledge series   Page 4 of 4