Change management initiatives at the global oil &gas company

One of the largest global energy company with a vertically integrated oil exploration, natural gas and petroleum product marketing companies.

With the collapse of oil prices and having production cost doubled between 2004 and 2008, an economic model of the company was challenged. As part of the response measures, more pressure has been imposed on supply chain and  reduction of the supply cost in particular. A new leader of global procurement & supply chain function was apponited in April 2009, whose role was to regenerate effective work within PSCM (Procurement & Supply Chain Excellence) globally and to reduce supply chain cost. Taking into account the different imperatives of global and local PSCM teams, the change were not communicated well. Moreover, the creation of dual accountability for North Sea PSCM and stressing the importance of hierarchical reporting system have created tensions between two teams, resulted in employee’s resistance to change. 

To develop a solution and possible recommendations for overcoming existing organizational challenges the following areas were analyzed:

• Identifying external and internal change triggers
• Objectives of the global and local teams 
• Accountability areas which were in conflict, according to current objectives
• Organizational structure within which these objectives were pursued historically
• Experience of organizational change implementation
• PSCM personnel interviews

The step-by-step analysis in the following areas was carried out:

Step 1: Mobilise commitment through joint diagnosis of business problems

Step 2: Develop a shared vision of how to organize

Step 3: Consensus, competence and cohesion

Step 4: Spread revitalization without pushing from the top

Step 5: Institutionalize

Step 6: Monitor and adjust 

In this case, the original attempt of their change was not yet embedded due to improper operations in step one and two. The failure resulted in having unsatisfactory results in the following steps.
A detailed recommendations presented to the company's top management were made in the following directions:

• Clear communication of the change to all involved stakeholders
  
• In order to create "win-win" situation, it is important to ensure that a communication is a two-way process. Also, it is worth mentioning three other aspects: Sending, Transferring and Receiving information. The more complex an information the more discussion and feedback is needed. From operations viewpoint, applying methods like "genchi-genbutsu" can also make multifunctional team's communication significantly easier.
  
• Setting up an allocated team to facilitate the change
  
• An exchange of a few specialists from each side and their placement inside of the other team would improve integration process and facilitate development of common and mutually beneficial approaches to a change and further progress.
  
• Performance management with revised reward system
  
• Reward system should rather depend on how company/department performed in changing external conditions and in comparison with competitors than on ability to stick to a budget. In the last instance, we can very often see that employees factor in low figures in a budget and create "safety buffer" for themselves as their bonuses depend on achieving the budget figures.
  
• Segmentation of supply base based on a complexity level and a cost
  
• Segmentation of procurement portfolio can be beneficial not only for determining the most effective approach for purchasing goods and services and sourcing methods with suppliers but also for  development of a complex and joint approach for cost reduction and maximization of global leverage.
  

Recommendations were accepted by the client for further implementation.