http://ift.tt/1DEUWFC
Most people in the “energy bidness” believe that there is a certain uniqueness about the industry, and that they know their way around better than most others. After all, ExxonMobil is one of the largest companies in the world and we all know that the US leads in developing extraction technology. But are we really so great that nothing could be improved?
Once upon a time, in most countries with a monarchy, the king had a Court Jester, otherwise known as a fool – an interesting designation as typically he was anything but foolish. This person was allowed to say, with impunity, what no one else could. Feste gave it straight to King Lear, and while most other utterances of real court Jesters were not recorded, the fact that they existed is in itself food for thought. They could not be fired and even though they were occasionally sent to dungeons, the king typically repented and brought them back out because he had no one else to talk to who dared comment in anything but a thoroughly sycophantic way – “Yes, your majesty, No your Majesty, tell me how low to go, Your Majesty” (with a nod to Anna and the King of Siam).
What would a Court Jester do for a modern Oil and Gas company? Even if we arbitrarily limit it to companies employing more than 200 people, it could be a useful business model. We have been training almost two generations to believe that moving money from one place to another is THE way to health, wealth and job satisfaction. Alas, in the process, we are losing sight of why companies are usually in business in the first place – to provide something that people or other companies want to buy.
Several of the trends that a Jester might help combat include:
- 1. Let's have a meeting.
Could the Jester help convince management that meetings with more than 5-6 people are a waste of time? Persuade same that all cell phones must be turned off and put in plain sight on the table during the maximum 30-minute meeting? (i.e, no emails) Eliminate the use of more than 5 Power Point slides at any one gathering with a $50 fine for reading them out loud?
A recent article in the Harvard Business Review (Source: HBR, Your Scarcest Resource¸ Mankins et al, May 2014, p. 78) estimates the real cost (annually) in a large multi-billion company at a total of 210,000 preparatory man hours for a weekly Excom meeting / review. If you add in the ExCom meetings, the total is 300,000.
One Project Manager from Fluor recently remarked that in a meeting of 35 people, there were actually three separate meetings going on. He did not believe that any of them accomplished anything, yet 35 people were locked up in a room from 7:45 a.m. until 7 p.m.
- 2. We're big now. Let's buy someone.
If you look at the acquisitions in any industry, 80% of them are failures IF THEY ARE MEASURED AGAINST what was supposed to be the outcome. These stats have been confirmed by Harvard, Fortune, Forbes, and various other institutions tasked with keeping track of such activities. Which industry they are in is irrelevant.
You do not have to have observed too many acquisitions to recognize that a lot of them do not live up to the financial hype that surrounded the original purchase. In fact, many of them can be characterized as completely attributable to CEO ego – “we’re big now – let’s buy someone”. If you have been in the industry a long time, think back to Mobil and Montgomery Ward, or Schlumberger and Fairchild Camera. Or TimeWarner and AOL. Or early May, 2014, Publicis and Omnicom, two advertising giants who just got unengaged before getting married. Usually Company A buys Company B which is in a market A knows nothing about and doesn’t know how to run. The initial announcement touts wonderful things, cost savings, team building, that will happen when these two entities merge, typically with little regard to the people as the focus is on the finances. Then A’s executives end up on Level 1, B’s on Level 2, and so on down the line. A little later, A’s senior people find out, remarkably, that they have more in common with other A executives, or at least more so than with B’s, and there is a large lay-off.
- 3. We're really big now- let's put our name on (the building/a stadium/a team...)
Think Enron. Think NRG. Think lots of financial services companies who enrich the printers every time they buy up another bank because everything, from the cards to the stationery to the logos has to be redone. Think of the acquisitions which have been made in the name of “growing the Houston office”. Now that it costs $1-2 billion – or more - to play in the big leagues, watch for some more activity that is unlikely to produce the kind of synergy that was touted in the first rosy days. Furthermore, the cost to the taxpayer while utilities get into this game is never measured. When Reliant was investing in power plants in Argentina, the ratepayers in Houston were being taken for a ride. More recently, TXU, which is largely owned by financial firms, has just declared bankruptcy, again leaving many real providers of product and services with a load of unpaid bills.
Size is not a guarantee of either rational or irrational thinking. Another sorry example took place in the Montrose area of Houston. Recently a national Grocery chain bought a magnificently treed property that housed a number of smaller apartment buildings dating from WWII. In an apparent spirit of community interest, the company then offered nearby residents a chance to vote on which of three designs they would find least invasive, and at the same time, announced that if the community could raise $300,000 in three months, they would be able to spare more of the 100-year-old oak trees. The community – mainly residential with some homes that have been owned for 40 or more years, couldn’t even begin to raise that kind of money and the trees were cut. Meanwhile, the company spent $6,000,000 on ads for the SuperBowl that year. Could a Jester have helped them figure out a better way?? Maybe persuaded them that underground parking would be a draw? Surely an underground garage would not have cost $6 million.
- 4. Let's retire everyone over 55 and bring them back on contract.
The industry I am most familiar with is the energy industry, particularly with the operating companies that own assets such as refineries and chemical plants, and the E&C companies which design and build these same plants, or offshore platforms, or pipelines. In the last 15 years, it has become commonplace to persuade those who have built up “retirement” assets of some kind that they will be better off taking a “package”, and cashing in their vested interests, particularly when it is going to be a one-time opportunity. This has led to a revolution in the way projects are handled. When we started in business 35 years ago, one built a refinery for several hundred million dollars. These days a grassroots refinery, if it can get by the NIMBY rules, is $5-6 billion, partially depending on how many units you need, but also just because of the overall devaluation of the currency. That said, people take billions fairly seriously – a billion here and a billion there starts to add up to real money.
At the same time, years ago, the team from the operating company was headed by a Project or Program Manager who may have lived in several different parts of the world, knew how to deal with foreign labor in whatever country he happened to be working, and in his youth had probably worked in a refinery or a chemical plant himself. The good ones prided themselves on getting the job done with a maximum number of accident-free work hours, and worked to get it done under budget and commissioned before the date it had been promised. The trend now is to a) promote promising young men and women into positions of great responsibility b) value bookwork over practical experience in a plant, and c) stack the owner’s team with contract workers who may have come from that company, who do have grey hair and solid experience, but who are now being paid as independent contractors. Where has this led us?
Our observation is that the project focus has changed dramatically. The owner team now wants, more than any other single thing, to avoid making individual decisions and furthermore, to ensure that in the process, the procedures have been followed with absolute accuracy, so that when the time comes to review the whole thing no single person can ever be faulted for having made a poor decision along the way. To reinforce this thinking, if there are 15 people on Team A, and only 2 of the 15 are actual employees of the company, we will submit that the other 13 are extremely interested in making sure that the generous per diem continues to come regularly into their bank accounts. These are human beings we are talking about, some of whom still have kids in college or grad school.
Perhaps an experienced court jester could sit in on the weekly project review meetings and help separate the decisions that are being made purely on the basis of avoiding blame from the ones that need to be discussed and would actually help move the project forward.
Procedural Roadblocks
In amongst the horror stories of how the emphasis on procedures is overtaking the constructive use of time, several E&C Project Managers have shared with us accounts of how, when an agenda is set on Wednesday for a Friday meeting, it is set in stone and nothing can be changed. If something germane happens on the project on Thursday or Friday morning, it cannot be discussed until the following week because it doesn’t fit the current agenda.
And so on. You can draft your own list.
So who could serve in this role as the Jester?
First of all, this person would have to be nominated from within and elected by an employee vote as the person most likely to be able to speak the truth. Therefore the Jester would have a three-year employment contract – at or above his/her current salary – and – at the end of that term – if the CEO no longer wished to hear the truth, this person could be pensioned off with a year’s severance. Neither the CEO nor the Board could fire the Jester and s/he would be entitled to write a paragraph of comment in the Annual Report detailing the observations for that year.
This argues in favor of a certain seniority and possibly a “pre-retirement” classification. It would have to be a person with common sense, as opposed to simply having a good academic background and the position could not lead to any exotic assignment within the same company for a period of 2 years after s/he had departed. (Common sense is not really as dead as some would have you believe. It is however, often very difficult for the person with common sense to speak out without jeopardizing his or her future in the company.) This would avoid the kind of interchangeability one sees regularly between Congress and the lobbyists and the consulting companies serving Congress. After the 3-year term, the Jester could take up a similar position in another company under the same kind of terms, but would be prevented from a move to a direct or indirect competitor in the same market segment.
Of course, many different compensation schemes could be worked out but perhaps confining the compensation to a guaranteed flat salary with no other perks possible would make for the most honest assessments.
Who Would Lobby / Vote Against this position?
- The loudest protests would be voiced by the second and third rate CEOs. A first rate CEO would welcome the addition because s/he would then be less likely to be caught up in the fantasy of the moment. Actually this might be a good method of sorting out the CEO’s real-world level, much as the Hogwarts sorting hat was used to determine one’s house.
- The employees who specialize in kowtowing to senior management, especially those who always find ways of undermining their direct supervision. Again, this is more of a problem with people who have reached their Peter Principle and are really out of their depth in the position they hold.
- The printers. Alas, as all new corporate logos need multi-color logos to “tell their story”, the purchase and use of color print cartridges goes up exponentially in any M&A situation. Focus on the “message” (as opposed to the real work of the company) helps camouflage the fact that less work is done in direct proportion to the increase in management time spent on Power Point presentations and neat graphics.
Obviously this is not a perfect solution to the ills of American business, and while we ostensibly disposed of the Monarchy some time ago, it would be useful to implement this same kind of position for State Governors, Mayors of very large cities, etc, etc. Maybe even Congress could be obliged to have one, although it might be very hard to find someone qualified to serve in this capacity. But that is a different chapter.
via '' Search - New Posts - Oilpro http://ift.tt/1uEtTbs
