Hard lessons learned but not retained? Jeremy Cresswell looks at a twelve-year old report which shows how little the sector’s attitudes and culture have changed and how nearly identical the identified solutions are, regardless of which major oil price crisis one considers. Corporate memory is very short.
Twelve years ago, as the UK’s offshore industry struggled to recover from more than a decade of problems that culminated with the late 1990s oil price slump, a paper was published by a team of researchers at The Robert Gordon University about collaboration.
Although each of the three major crises to have hit the North Sea has been played out on a very different stage in terms of province life cycle, what is striking about this paper by SM Mamotazul Haque, RichardGreen and William Keogh is how little the sector has changed and how nearly identical the identified solutions in fact are.
That in itself is frightening as it seems to indicate that lessons learned the hard way in past crises have not been retained, and yet the buzzwords are precisely the same.
Green and Keogh pointed out in 2000 that key industry players had adopted alliance and partnering strategies as far back as 1990.
The collaborative relationships paper, published in Problems and Perspectives of Management – 1/2004, was based on the results from an industry survey conducted in 1999, just as the first green shoots of recovery from the slump that savaged the North Sea industry throughout 1998 began to appear.
Aside from 1999’s Offshore Europe conference, crucially, that survey sampled the CRINE (Cost Reduction Initiative for the New Era) champions group. CRINE was an industry working group that tried to reboot UKCS investment activity SEVEN years after the 1986 crash that hammered the North Sea.
The CRINE champions group comprised people who volunteered to promote the cost-cutting drive and its principles. The champions group was taken by Green et al as a sampling frame, because it was recognised that they would be able to share their valuable knowledge on collaborative relationships.
Three hundred names of CRINE champions were collected from the CRINE web site. From the group, two hundred individuals were selected for the survey at random and questionnaires were sent to them by post. From the CRINE champions’ group 32 completed questionnaires were received. That was all.
The purpose of the study was to gather the oil & gas industry’s views on critical success and failure factors of alliance and partnering agreements.
The core findings from that survey were, in effect, prescient . . . a blue-print of the situation today.
Analysis by Green et al showed that the “presence of trusting attitude” was “perceived as the most important critical success factor” in the UK oil & gas industry. This was to be expected as there was by then an ample body of research to show that “trust is viewed as central to all collaborative relationships and that no alliance can survive without trust”.
Other leading edge success factors identified included:
-Shared and aligned goals
-Commitment
-Supportive and open behaviour
-Honesty
The study also suggested that the following were the three main factors which often cause failure of alliances and partnering.
-Absence of shared aligned goals
-Absence of clear targets
-Absence of trusting attitudes
As the paper recalls, in the early 1990s the industry faced an economic crisis because of falling oil prices. For sustainable development it became crucial to reduce the costs and develop new technology.
Among different initiatives, there was a recognition that by working together rather than having traditional adversarial relationships with other companies, the UK oil industry could lower its costs and increase its chances of long term survival.
Even as early as 1990, many of the industry players had adopted alliances and partnering strategies. Some relationships worked, some didn’t. Some ran their natural course; others endured.
Some delivered results that were considered terrific at the time but which were later seriously questioned, in particular CRINE-era field developments where over-zealous paring back on capex later led to opex and durability problems with that generation of infrastructure.
Nonetheless, by 2000, the view was that, in general, alliances in the UK oil & gas industry had achieved “considerable success”.
Indeed, that year, Green and Keogh suggested that the majority of the oil & gas companies and their contractors had by then embraced, at least partially, “a more collaborative style of working”.
And three years earlier, in 1997, after surveying the Small and Medium Enterprises in the UK oil industry, analysts Segal Quince Wicksteed Ltd concluded that: “Alliancing is here to stay and is broadly welcomed by operators and contractors”.
However, prior to SM Mamotazul Haque, Richard Green and William Keogh settling down to the work that generated their collaborative relationships paper, there had been little prior research to call upon.
Then as now, where a company fits into the hierarchy of the North Sea industry influences its perspective on what does or does not work.
On that point the study states: “Analysis from the standpoint of company types shows that respondents from contractors/suppliers and other types of companies believe that ‘trusting attitude’ is the most important critical success factor.
“However, respondents from operators suggest that ‘shared and aligned goals’ is the most important factor which is followed by ‘trusting attitude’.
“The analysis also shows that, ‘open behaviour’, ‘clear role’, ‘commitment of members’ are other preferred critical success factors for all groups.
“However, ‘early involvement of people who can influence the outcome’ is more preferred by contractors/suppliers group than by operators and other groups.
“Again respondents from operators believe that ‘understanding of others capabilities’ is an important critical success factor.”
Where a person fits into the hierarchy of a company also had a bearing on what does or does not work.
The report says: “The following five factors are common to the top 10 for senior and middle managers: ‘presence of trusting attitude/behaviour’, ‘presence of shared and aligned goals’, ‘presence of open behaviour’, ‘presence of openness and honesty’ and ‘presence of an integrated team’.
“Trust is the most highly rated factor by both job groups.
“Senior managers include the following success factors, which are not highly rated by the middle managers: ‘commitment’, ‘involvement of people who can influence the outcome’, ‘clear written contract’, ‘clear goals’, and ‘shared benefits’.
“Middle managers alone include the following: ‘shared knowledge and information’, ‘co-operative behaviour’, ‘clear role’, ‘strong leadership’ and ‘shared responsibility’.
“As middle managers are nearer to the work force they might be expected to emphasise the communication implied by ‘shared knowledge and information’ and ‘the importance of co-operative behaviour’ within the work force.”
What the study does not do is take its inquiry down to shop floor level; ergo, workforce engagement is not addressed.
Given the emphasis then as now on collaboration via alliancing and partnering, the authors trawled for people’s views on the factors which may cause failure of such relationships.
Respondents were requested to list as many as six factors according to their priority, that in their opinion were key causes of failure.
A total of 99 respondents provided 250 ideas on failure factors, all of which were captured by 58 different concepts. The data (concepts) were analysed depending on the frequency of their use by the respondents. Aside from the top three failure factors, absence of shared aligned goals, clear targets and trusting attitudes, other anvils of destruction included:
Absence of fair allocation of risk and reward
Absence of commitment
Presence of adversarial behaviour
Presence of un-addressed cultural differences
Absence of strong proactive leadership
Unwillingness to accept change
The authors pointed out that the literature at that time focused on success factors for alliances and partnering but that there was little written about failure factors.
And so to the situation today where the mantra is once more built around the concept of collaboration; except that the industry is, to most intents and purposes, two . . . even three generations of management removed from the situation in 1990 that Green and Keogh refer to.
Those who were at the thick of driving change after the 1986 crash have moved on; a large number of people who emerged on to the stage in the early 2000s have also departed . . . harvesting big money during the boom times . . . and so it is by and large down to a group of people with little real experience of deep crisis management to get the North Sea moving again.
Theirs is arguably the harshest recovery job of all, not least because of the deep maturity of the North Sea in terms of declining production.
It is becoming very obvious that there is little recall of past lessons within the collective corporate memory; or at least living, breathing, walking retention as opposed to material held formally on archive, or legacy tools and protocols developed by the Oil & Gas Industry Task Force of late 1999 though early 2000s that remain in use . . . like FPAL and some standard forms of contract.
Of course there are some who span all three main crises though not that many; little wonder that Ian Wood is so prominent in the current battle to get the UKCS back on an even keel. Seriously, who else visible and active to ask?
Later this month, collaboration will of course once again take centre-stage at the Oil & Gas UK annual conference. Much of it will boil down to a repetition of the rallying cry signposted even before oil prices hit the basement floor late 2014.
I am of course referring to the Wood Review, which was commissioned in the $100-plus era when it became clear that North Sea costs were out of control.
I am also referring to a string of conferences and seminars where every operator, main contractor and all other companies in the supply chain have been/are being exhorted to fight for the next North Sea future.
An example is the annual Supply Chain Seminar hosted jointly by Oil & Gas UK and the Chartered Institute of Procurement and Supply (CiPS) last month.
Cultural change and greater collaboration was the theme of a presentation by OGUK’s chief executive, Deirdre Michie who reiterated the key role the supply chain plays in helping the industry tackle the tough business conditions it currently faces.
She also outlined the range of tools the trade association has developed to promote cross industry learning including the so-called Rapid Efficiency Exchange and measures that OGUK has introduced such as the Industry Behaviours Charter designed to encourage companies to commit to working effectively, efficiently and co-operatively to the greater benefit of the UK oil & gas industry.
Also last month, Michie reported positive progress to a House of Commons Select Committee. Unfortunately, she appeared to gaffe over workforce engagement and their understanding of cost cutting and as a result harvested a chorus of strong rebukes from offshore workers, as reported by our sister Energy Voice on May 13.
She said: “I think there’s good workforce engagement happening . . .
“When talking about workforce engagement what we do need to do is to reinforce why we need to do what we are doing and they get it, they absolutely get it.”
But, as far as the workers who contacted EV were concerned, they did not “get it”. (also see page 15)
Though Michie was taken to task for what she claimed, RMT’s North Sea trade union leader Jake Molloy, who also reported to the select committee, said there were good examples of workforce engagement, citing Nexen’s reduction of costs by 20% through workforce engagement.
Molloy told the committee: “I commend the company for what they did, but what they haven’t done is they haven’t cut pay, they haven’t extended hours by 300 hours a year and haven’t moved to 3 and 3. They’ve engaged their workforce in a meaningful way and achieved those savings.”
“Others are not doing that, that is the point. Others are unilaterally imposing change, reducing contracts and imposing limited company contracts as we speak.”
It was recognised by the industry or at least some leading protagonists at the time Green et al conducted their survey, as it is now that the workforce is in fact key to an effective recovery.
Another key to effective recovery is proper middle management engagement. It was in the 1990s and early 2000s regarded as a killing ground for initiative and disparagingly currently referred to as the permafrost.
However, while Green et al paid attention to middle management in their research, they did not embrace the shop floor, probably for simple, practical reasons to do with time, the original brief and tight funding.
Treat that shop floor in unacceptable ways from its perspective . . . especially ignoring its voice . . . its collective practical wisdom . . . and there will eventually be a heavy price to pay. While wise decisions open the door to recovery, it is the shop floor that actually ultimately delivers that recovery.
Perhaps it is time for SM Mamotazul Haque, Richard Green and William Keogh to bring their collective wisdom back to the current debate, but this time to factor in that all-important shop floor.
Their original paper can be found here.
Recommended for you
