Most industries have incurred a catalyst to change and refine their business models. Now is the period of change that the Oil and Gas majors and service companies are being forced into, starting the process of lowering their operational cost model by reducing headcount, re-negotiating supply chain rates and postponing projects that are now not profitable. While these actions are understandable, there is a need for a more sustainable approach to improving organisational and operational efficiency largely neglected during past downturns. Facing the choice of radical cost cutting or implementing a continuous improvement program in the pursuit of incremental gains, organisations have tended to adopt the former. It only provides a short term gain, whereas the time has arrived for some smart thinking which provides a future-proofed sustainable business model.
With the recognition that $60 per barrel production costs are uncompetitive given the market disrupter created by fracking techniques in the US, the paradigm has changed and the business operating model has to adapt to the new market forces and remain flexible to any future change.
The industry has grown complacent over recent years and with the acute skills shortage suffered in Aberdeen, staff wages have increased significantly to retain personnel to counter the contracting culture. Coupled with the wide-spread use of contactors for key positions, even at department manager level, this has resulted in the cost base reaching its current unsustainable level. To retain operational knowledge, the company’s DNA must be gathered and, like fruit, information is perishable and therefore must be updated quickly and efficiently in order for it to maintain relevance in the organisation and its business need. The informal, tacit information that skilled contractors have in abundance often leaves the building at 5 pm, never to return.
2015 – The New Approach
In support of the initial gains achieved through reduced manpower and spend, a Process Improvement Program needs to be developed in order to create long term efficiency improvements. This can focus on people, plant, process, and systems and, provided risk is not increased beyond acceptable limits and compliance remains sacrosanct, the field is open to change.
Start with the people – Process Improvement
Understanding the `as is` structure of the organisational model and supporting end-to-end process overviews will provide clarity on the value-chain and relevant priorities within the current market environment. Processes are the heartbeat of the organisation and should be re-evaluated and streamlined where possible by the users though facilitation by experienced personnel. Identifying wasteful, redundant or duplicated work practises and processes is essential to organisational improvement – it is one of the pillars of ‘lean’ management- and by involving existing users, should increase both ownership and commitment to the new processes. Importantly, identify the “as is”, before the new ‘to be’ model is rolled out to the workforce.
Having one process to describe the similar ways of working across all regions or business units will reduce costs significantly. Harmonising process simplifies instructions, makes improvement faster to adopt, and assists staff mobility from one region to the next. The silo approach to management systems is bankrupt, the future is integration, quick access to information, and simple instructions; twenty page procedures have had their day.
Alignment of roles and responsibilities with their relevant processes is essential. With less people doing more, a competency management system needs to be working on all cylinders to maximise existing competency within the workforce and where further advancement can further cut costs. With 20% of processes being automated within ERP systems, the remaining 80% are human-centric and require competent people to make the right decisions and the right time.
So Many Documents
The excessive numbers of documents stored within multiple repositories creates complexity and confusion. A recently project revealed that out of a total 10,000 documents, more than two thirds were no longer relevant due to being out of date, having no owner, or were obsolete. These documents were still open to audit by clients and regulatory authorities. Companies who maintain volumes of the traditional text-based procedures would be advised to validate each document with regards to the current owner, accuracy of content, relevant attachments and links; time consuming but essential.
Reallocation of roles and responsibilities can cause at one end of the spectrum misunderstanding and inefficiency in performing daily operations and at the other the risk of unsafe execution of safety critical process; to avoid both extremes everyone needs to know “who, does what, where and when”. There is an opportunity to flatten the management levels with more autonomous responsibilities though more streamlined reporting structures which SharePoint workflow can automate to simplify, monitor and control.
The Effects of Change
Now for the bleedin’ obvious…the impact of change can have an adverse effect on the morale of staff, therefore it is essential that management establish a communications programme to allay fears by the workforce. Importantly, this should focus on the benefits of change to both the organisation and the individual. Needless to say, change should be controlled, considered, and sustainable in the long term.
Regardless of the level of change be it related to people, plant, process or systems, the management system is the carrier of the information and therefore must be held sacrosanct by all employees of the organisation. Enterprising companies who have been integrating operational risk and compliance requirements into their processes will have a greater understanding of change, who it impacts and in what ways. There are methodologies such as the 5As approach which suggests companies should ‘measure the now’, ‘articulate the future’ and to map the strategic road to get there.
Understanding the “as is” before the “to be” is the foundation of the drive to increase organisational efficiency. The company management system, which has often been seen by the workforce as `bureaucracy in action`, must now be treated as the `oracle` or ‘one source of truth`. While an ISO 9001 certificate might proudly hang on the reception wall, another level of improvement and effectiveness will be required to get anywhere near what will be necessary to stay safe, profitable and complaint.