Nancy Southern, eldest daughter of Atco Ltd. founder Ron Southern, became president and CEO in 2003 and chair in 2012, after working her way up through the organization. (She holds all three titles at subsidiary Canadian Utilities.)
Atco staged a remarkable recovery last year, despite the recession in its home province of Alberta, with net income bouncing back and the stock gaining more than 30%. Southern and her sister, Linda Heathcott (president and CEO of equestrian and meeting facility Spruce Meadows), maintain a controlling stake in Atco through the family holding company, Sentgraf Enterprises.
Atco has been through Alberta’s boom and bust cycle before. Do you have a strategy for dealing with it?
I’m not sure there’s a tried-and-true strategy. In the late ’70s, there was an oil boom. Atco at that time was basically a camp builder—we manufactured industrial workforce housing—but we’d also acquired a drilling company. My father, though, had been through a couple of economic cycles and realized we should try to find a business that was not as cyclical. He looked for utilities, and in 1980, after a long, hard pursuit, we acquired Canadian Utilities.
Almost immediately after that, oil prices started to drop and there was runaway inflation worldwide. We had assumed a significant amount of debt—we were a bit like a minnow swallowing a whale to acquire the utility company—and we had floating-rate debt. The business case was that interest rates would only go to 11%, and the cash from the rigs was more than ample to pay down the debt and look after the interest payments. Well, lo and behold, a significant crash happened, and our interest rates went as high as 22%.
We almost lost the company. We had to sell off some very precious assets. We never missed one instalment or one interest payment, which my dad was very proud of. It taught us a lot of lessons: to never go beyond our means in terms of leverage, to be much more pre-emptive and proactive with what-if scenarios and to look at risk in a different light.
How are you applying those lessons now?
It was about two years ago, after we had acquired our gas utility in Australia, [that] we started to see commodity prices do funny things, especially in mining and metals, a sector that was really driving the Australian economy. It occurred to me that we’d better batten down the hatches. So we did some soul-searching as to what would be the right type of company to take us not just through a recession, but to really prepare us for a new future. We addressed a lot of redundancies we had built in because we’d been through this tremendous growth trajectory over the decade before—when you’re in that [situation], you keep adding people because there’s no time to actually teach anyone to do a lot of different things. That was a really difficult time, but I’m really pleased that we addressed it early. We haven’t been over-leveraged, we’ve managed our cash really well, and I feel pretty confident we’re in good shape.
You’ve got two coal-fired power plants in Alberta. The province plans to phase out coal by 2030. What’s your plan?
We took a very aggressive, very conservative approach to our depreciation so we would be in very good shape as far as having to retire them. And, quite frankly, I don’t believe prolonging their generation is the right thing to do in this day and age. Whether one does or doesn’t believe the science [on climate change], public opinion is important. Goodwill is important to our company. So we had anticipated transitioning out of the coal into more gas-fired generation and more hydro, solar and wind. I feel we were quite well-prepared. I don’t think we were anticipating the end to come as quickly as is being proposed. I would say we are still continuing to encourage a little longer transition period.
The Fort McMurray wildfire must have been another big challenge this year. How did the company respond?
We had about 350 people on the ground in Fort McMurray at the time. The first major incident that occurred for us was when the fire hit a major gate station. That’s where the high-pressure pipelines of gas come to a gate and the pressure is decreased so it can go through smaller pipes to reach homes. The gas from that pipeline was from Suncor, and we and Suncor couldn’t find where the next valve was to shut off that gas. And so it burned, and the fire melted the glass in the building that surrounded the gate station. It didn’t shatter it. It wasn’t an explosion. It actually melted the whole thing, and we never found the top of the gate to this day. Our people were focusing on that, and at the same time they were thinking about getting their families out of the city. And then the electrical wires were all coming down, and the wires were live, so they were in danger of igniting more fires. It was real pandemonium.
What was happening inside the company?
Sitting in our crisis management centre, I was overcome with the logic, the organization and the composure of our people working with the firefighters and the rescuers. It brings goosebumps to me even talking about it now. The Alberta government was very quick. They put together a crisis-management centre in Fort McMurray, and had one of our gas people and one of our electric people. One of the best resources we had was a subsidiary that’s done some non-core military operations for NATO and the Canadian Armed Forces; we also employ a staff sergeant who actually ran the Bosnian operations for Canada when we were in there. He went in and co-ordinated all of our people and our operations in conjunction with the emergency operations for the government.
We kept a skeleton crew on. So that we could do shift changes, we moved people to a nearby community and put them in a workforce housing camp north of the city. Everybody was leaving the south of the city. But then the bloody fire was so volatile and so ferocious—there were about 10 days there when sometimes you couldn’t get back into the city, so our crews were sleeping on the floor in our offices or in the ops centre or in their trucks. Sometimes they only had a snack bar to eat.
This was the second big emotional issue you had to deal with this year. Your father, Ronald Southern, passed away back in January. Has that changed the way you run the company or make decisions?
I’m actually getting a little bit teary-eyed thinking about it, because he would have been so proud of the way the people of our company conducted themselves in that emergency situation. My father, I miss him every day. He was my coach and mentor. He was a great leader. He was also remarkable in his awareness and his willingness to give me the reins. And while he stayed on our board right up until the end, he really did give me the room and the confidence to actually run the company for the past five years now. He would come to the office pretty much every day, and he was very active keeping his network up.
Having said that, he didn’t always agree with me; we weren’t always the best of friends. But he always had my back, and I always had his. I don’t think I would have ever been ready for the job had he not started preparing me when we lived back at the trailer factory site when we first started. I will be forever thankful to him for that. I feel lonely without him, but I don’t feel lost.
You have a good sense of how he would make decisions, then?
Yes. We practised that a lot over the years—the better part of three decades, actually. He would say, “What do you think?” I would give him an answer. He’d say, “Why would you think that?” I’d have to explain it. I’d say 99% of the time we had the same answer. That kind of coaching and confidence building, I hope I can embed that within my own family and the people in our company.
Is there a third generation of the Southern family in the wings?
My sister’s and my children are still quite young. We both feel it’s very important to give all of our children a very good education on the responsibilities of our business, because there are so many people relying on us to make sure they have a future. We work very hard on that, trying to have them understand the gravity of their responsibility. That may be from a governance perspective; it doesn’t have to be from a hands-on management perspective.
This has obviously been a pivotal year for you and for the company. What’s the take-away?
One of the most important lessons I’ve learned is that as the company gets larger, you build more processes and structure. And that’s necessary. But sometimes that process takes away from entrepreneurship, imagination and situational leadership. As we’ve been going through our restructuring, that’s the lesson. I have to thank my mom and dad—my mom too, because she was really the backbone for my dad—for encouraging imagination and giving people enough freedom and responsibility to improve. And people should be encouraged to try and always improve.
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