Royal Dutch Shell Essay

Table of Contents EXECUTIVE SUMMARY2 1. PROBLEM CAUSE IDENTIFICATION3 1. 1STRUCTURAL STRATEGY4 1. 1. 1Strategic Management and Direction4 1. 1. 2Organisation Structure5 1. 1. 3Absence of Programme Management5 1. 2BEHAVIOURAL STRATEGY6 1. 2. 1Absence of Total Quality Management6 1. 2. 2Poor Communication6 1. 2. 3Poor leadership7 1. 2. 4Unethical Behaviour7 1. 3OPERATIONS STRATEGY8 1. 3. 1Poor HR functioning8 1. 3. 2 Lack of Policies and Procedures8 1. 3. 3Absence of Risk Management8 2SOLUTION RECOMMENDATION9 2. 1STRATEGIC MANAGEMENT9 . 1. 1Using the Balanced Score Card (BSC)9 2. 2 INTRODUCING THE CHIEF PROGRAMME OFFICE11 2. 3PORTFOLIO OF STRATEGIC TRANSFORMATION12 2. 4BECOME A LEARNING ORGANISATION. 13 2. 5IMPROVING LEADERSHIP14 2. 6MANAGING CHANGE16 3. IMPLEMENTATION STRATEGY17 3. 1IMPLEMENTATION PLAN17 3. 2REVIEW AND APPRAISAL17 CONCLUSION18 BIBLIOGRAPHY19 APPENDIX A – MATRIX ORGANISATION STRUCTURE20 ? Executive Summary Successfully managing strategic change requires a continued process that evaluates and controls the business activity of the organisation.

This includes assessing the competition and setting goals and strategies that fall on or above par with them. This strategy then needs to be regularly assessed to determine if it has been successful or whether a new strategy needs to be developed to meet ever changing circumstances, new technologies and new economic, social, financial or political environments. This report highlights the cause of the problems that ultimately resulted in the failure of Royal Dutch/Shell to implement a successful strategic change.

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It also aims to provide a solution that will aid the organisation in realising their business objectives and goals. The fundamental root cause problem within the Royal Dutch/Shell organisation can be surmised in the blatant lack of strategic management and direction. The organisation is clearly not focussed on its vision. There is no direction for growth, pointed out by its lack of trading shares and diminished interest in expansion or mergers. The organisation structure attributes to many of it inefficiencies, specifically related to risk management, effective communication and effective leadership.

As pointed out in the case, there is a lack of accountability and responsibility and executives have never been held accountable for poor management and decisions. To steer the organisation in a direction of achieving strategic benefit, there is a need for introducing a matrix project structure, with a programme office reporting directly to a CPO. An external portfolio office for managing strategic transformation needs to be set up using the BSPM concept, as proposed by Steyn.

Once this is realised, this office will disintegrate and a portfolio of projects for continuous improvement will continue to focus on company growth through the process of becoming a Learning Organisation. The change incorporated by this process will require significant change and this can be addressed using Lewin’s Change model, as proposed. The problem of poor leadership and trust exists within management, and this attributed directly to the absence of a value system (TQM). This can be addressed by leadership development programmes, EQ training, performance management and appraisals.

HR does not seem to be playing their role in talent development and appraisals. This operational issue needs to be addressed by either implementing processes or enforcing policies that are already available. Appropriate measures and controls must be set up to ensure these processes are implemented and maintained. The structure of the organisation, together with its dysfunctional behaviour does not provide a medium conducive to team cohesion and effective communication. This was identified in the inaccurate reports submitted to shareholders and investors.

These problem areas are addressed by the establishment of the programme office which intends to manage by means of projects. This office will also address the issue of risk management, something which is clearly absent given the structure of the organisation. 1. Problem Cause Identification In this section, the problems and causes identified in the “Royal Dutch/Shell” case study will be presented. The following table summarises the problems and their root cause types. A detailed breakdown of these causes and their respective solutions will be discussed in the subsequent sections, as highlighted in the table.

Problem IdentifiedCause typeDiscussed in topic Lack of strategic management and directionBehavioral1. 1. 1 No programme managementStructural1. 1. 3 Organogram, poor reporting structuresStructural1. 1. 2 Poor LeadershipBehavioral1. 2. 5 Lack of trustBehavioral1. 2. 1 Lack of CommunicationBehavioral1. 2. 2 Absence of Risk ManagementOperational1. 3. 3 Unethical practiceBehavioral1. 2. 6 No shift to Learning OrganisationStructural1. 1. 2 No indication of Authority, Accountability & ResponsibilityStructural1. 1. 1 Lack of Team CohesionBehavioral1. 2. 1

Lack of commitment Behavioral1. 2. 2 Absence of TQM philosophyBehavioral1. 2. 1 Poor HR functioning in companyOperational1. 3. 1 No performance managementOperational1. 3. 1 Resistance to ChangeBehavioral1. 2. 5 Lack of Operation Policies and ProceduresStructural1. 3. 2 Table 1. Summary of Problems and Cause variables ? 1. 1Structural Strategy 1. 1. 1Strategic Management and Direction The Royal Dutch/Shell Company maintains a structure of decentralized management and decision making. This led to increased and uncontrolled costs within certain operating companies.

Also from the case, this structure “has become part of the problem – reducing accountability, blurring responsibility and increasing costs”. With this type of structure it is difficult to maintain control and enforce policies. There is also not much visibility on the activities or rather “hidden” agendas that seem to be taking place. An effective strategy will ensure that any organisation gain and retain a competitive advantage over its competitors. In the case of Royal Dutch/Shell, there was no monitoring, feedback and improvement plans in place for the continued growth of the company.

From the case it is evident that the organisations growth was impeded due the fact that it did not have trading shares hence not much available capital for investments. They also failed to expand by means of mergers or buyouts, something the major competitors leaped into. To further stifle their growth perspectives, the organisation failed to spend sufficient funds for exploration of mineral resources. The organisation clearly lacks vision and is unable to set goals for achieving objectives of strategic importance, based on its critical success factors.

This benefit can be achieved by introducing the Balanced Scorecard Programme Management (BSPM) system, as proposed by Steyn (2009:online). This system enables an integrated and coordinated management of the organisation’s value chain processes from suppliers to external customers, including implementation of project-portfolios that enhance the effectiveness and efficiency of the value chain. A lack of strategic direction in an organisation will lead to dismal failure and this inefficiency can only be attributed to the top management.

To overcome a problem of this nature, the organisation or board of directors needs to consider a change of radical strategic transformation. This can be achieved by implementation of a programme office in which an external team of consultants will drive this project. This will be discussed in more detail in the solution section of this report. 1. 1. 2Organisation Structure Poor organisation structure as the strategy is not a top down approach and does not focus on the critical success factors of the organisation.

The various national companies operate in isolation and this is one of the major problems experienced in bureaucratic organisations. Within this type of organisation decisions are made by top management only therefore decisions takes longer and this ultimately slows down the response to change. An improved organisational architecture must empower human talent, including project managers and team leaders, to achieve effective managerial decision making. This can be achieved by changing the structure of the company to that of a learning organisation.

To achieve this, this organisation would first need to undergo a process of radical transformation. This change will be discussed in more detail in the solution description section. 1. 1. 3Absence of Programme Management Programme management architecture provides a vehicle to ensure that strategy is effectively and efficiently implemented and that the benefits of strategic importance are measured, appraised and reviewed. From the structure presented, it is clear that this organisation does not implement a programme management project structure.

The absence of this structure does not allow for effective and efficient platform for management of projects. The introduction of this office will streamline the process for managing projects for continuous improvement, something which is also clearly lacking. This organisation needs to focus on these types of projects so that it can become a learning organisation, thereby continuously improving its strategy to maintain it mission objectives and goals. This office will also be used to aid the organisation by setting up an office for managing projects of strategic transformation.

This will be discussed in more detail in the solution section of this report. 1. 2Behavioural Strategy 1. 2. 1Absence of Total Quality Management The organisation is unable to create a culture of trust, support and cohesion, these being the fundamentals of relation management. The dimensions of physiological climate need to be adopted by the organisation. If employees are negative they will create a negative perception. Therefore, a negative organisational climate affects the customer service and ultimately the market share of the organisation.

It is imperative that a TQM philosophy (value system) be instilled within top management, and this will automatically funnel down throughout the organisation. 1. 2. 2Poor Communication The organisation displays extremely poor communication as employees are not informed of the organisations strategy and the role that they play in it. This stems from strategies being defined by top management without consultation and involvement of employees from all levels within the organisation. This ultimately results in the lack of commitment from lower management and staff. Employees need to be informed and consulted regarding change early in the process.

This participative approach allows for open and full communication necessary to obtain buy in. In order to have commitment to implementing the strategy it is important to involve employees in the process of strategic management. ? 1. 2. 3Poor leadership To lead an organisation one has to acknowledge their strength and also be able to build on the strength of others. To be a successful leader you have to be able to skilfully influence and direct the emotions of the team in a way that elicits their voluntary participation in learning and achieving the set team and organisational goals (Steyn & Schmikl:2009).

To achieve this, one has to be able to motivate and build trust within the team. There should be a common goal and vision for the organisation which will bring benefits of strategic importance not only to the organisation but to its employees too. This has the effect of creating a highly motivated and results driven team that will be willing to do anything to ensure that the objective is met within the given time frame and within budget. Top management portrays the following ineffective leadership abilities: •No encouragement of employee participation and decision making •No clear organisational goals No long term vision or a mission of the organisation •Major resistance to implement organisational change and transformation in the organisation. •Lack of understanding strategies for developing human capital. 1. 2. 4Unethical Behaviour The structure of Royal Dutch/Shell does not allow for much transparency regarding the activities of the various operating companies. From the case, it is evident that some of these companies did not give an accurate account of their gas reserves, which was published and ultimately gives the public and investors a false impression of the state and value of the company.

Though this does overlap with an underlying structural issue, there are clear signs of unethical practise within some of the operational companies. This behavioural cause type together with the flawed structure of the organisation will be dealt with in detail in the strategic development and change management sections of this report. ? 1. 3Operations Strategy 1. 3. 1Poor HR functioning The HR function did not fulfil their role at the time of the restructure resulting in ‘laborious’ negotiations with staff.

The outcome was that staff was not in agreement with the changes as they were obviously not consulted and this eventually leads to their perception that “the company is not well led”, as per the survey results. Another HR function that could route out the problem of non-performing executives is the absence of proper performance measurement. This measurement should have a direct relation to the organisation’s mission objectives so as to ensure that it performs at the required levels.

HR leaders are not equipped to manage radical changes in the structure and this is something that needs to be addressed in their policies and procedures. 1. 3. 2 Lack of Policies and Procedures The organisation lacks the policy and procedures that govern the organisations operations •Financial governance, as identified in the over valuing of the company. •Change management with regards to strategic changes. •HR Policies, when related to performance management and restructuring. 1. 3. 3Absence of Risk Management The decentralized structure of this organisation does not allow for risks to be managed efficiently on a holistic level.

With the problems identified regarding unethical practises, poor investment decisions, lack of responsibility and accountability, and the inevitable restructures, it is vital for a proper risk management process to be implemented. This is addressed by managing by projects with the proposed introduction of a programme office, incorporating a matrix project structure. This is discussed in more detail in the solution section of this document. 2Solution Recommendation 2. 1Strategic Management It has been established that the leaders of the organisation must give direction to the organisation.

This is done by establishing the organisation strategy through the strategic planning process. Strategy is about doing the right things in relation to an organisations environment (both internal and external environment). It has become a necessity for executives to provide strategic direction and establish an environment that is based on a total quality management philosophy to ensure that they maintain a competitive advantage. Through continuously improving the organisation by measuring, appraising and reviewing, this it can be accomplished 2. 1. Using the Balanced Score Card (BSC) Figure 1. The Balanced Score Card? 1. Translating the vision In this step, the organisation vision and mission objective needs to be made clear and visible to all employees. It is vital that everyone is in agreement with these statements. This should ideally be visible for all to physical see, ie. on bulletin boards, etc. 2. Communicating and linking Leaders need to effectively communicate and educate the teams of the organisation objectives. The success of achieving these goals must be linked to performance targets and relevant incentives. . Business Planning In this step leaders need to identify initiatives that would allow the organisation to integrate their business and financial plans. 4. Feedback and learning This final step focuses on monitoring both the organisations lagging and leading indicators and allows the organisation to monitor short-term results and evaluate strategy in the light of most recent performance. The organisation needs to monitor its leading indicators (i. e. customer focus, learning and growth, and business process) to ensure competitive advantage.

This is done in collaboration between the Balance Scorecard and Programme Management as described in the subsequent topics. ? 2. 2 Introducing the Chief Programme Office To improve on quality standards and realise the strategic benefits of the organisations, it is crucial that this organisation incorporate a strong matrix (project) organisation structure and embrace the proven concept of managing by projects. The benefits of this proposed structure include: •Goal orientated problem resolution •Flexibility in the organisation management of projects •Decentralised management responsibility •Holistic view of issues

Establishing a management by projects approach will require an organisation to introduce program management architecture. This enables organisations to operate as a system of synchronised small businesses, and provides them with much needed flexibility and agility. It become a vehicle to ensure that strategy is effectively and efficiently implemented and that benefits of strategic importance are measured, appraised and reviewed. The proposed organisation structure, as depicted in Appendix A, introduces several portfolios or program offices with different strategic focus reporting to the Chief Program Officer.

For Royal Dutch/Shell to implement this matrix organisation structure the following is required: •The recruiting of an executive with exceptional leadership abilities. •Provide line managers, project managers and cross-functional managers full authority. •Assign the correct roles to experienced team members and team leaders who are given the ability operate autonomously. •Line managers must support the “how” in projects and other cross-functional processes •There must be transparency in relation to reporting of results and progress •Continuous measurement and monitoring is essential. Detailed planning and milestone setting. •Frequent and open communication. 2. 3Portfolio of Strategic Transformation The programme office, in the case of Royal Dutch/Shell will need to focus initially on implementing an office for the portfolio of strategic transformation projects to address the strategic issues to enhance the organisations effectiveness. This type of office should ideally be outsourced as it would provide an objective view of the organisation strategy and will allow for unbiased decisions and strategic directives.

As indicated by flow “A” on the schematic below (Figure 2), the initial objective will be to manage radical transformation and change regarding the organisation operations, structures and behaviour. As the organisation matures towards a learning organisation the tasks of this office will progressively diminish and the office will become obsolete. Figure 2. The Balance Scorecard Programme Management system (BSPM) The next objective will be to incorporate an office or portfolio that delivers and maintains effectiveness through innovative continuous improvement projects. This is discussed in more detail in the next section. . 4Become a Learning Organisation. The first step to becoming a learning organisation is by introduction of the office or portfolio for Innovative continuous improvement projects, as indicated in flow “B” on the schematic above (Figure 2). These types of projects are initiated from various sources in the value chain. The requests for proposal take the form of Business Cases prepared by internal customers, also referred to as the sponsor. The projects that result from Business Cases are prioritised on the basis of benefits of strategic importance. Organisation improvement is an ongoing endeavour which must be managed by eans of following a systems approach to performance management. Once the organisation has established its strategy, it is necessary to translate the strategy into operational objectives that can be measured, reviewed, appraised and if necessary, rectified. These objectives are defined in specific KPI’s that allows the organisation to assess the performance of the organisation using the balance scorecard perspectives. The BSPM according to Steyn (2009:online) depicted in Figure 2 is a performance management approach that focuses on the performance indicators for the different perspectives.

This allows for better understanding of the organisation strategy and is a means for linking the strategic objectives to tactical plans and budgets. This results in an improved organisation. Using the BSC requires the organisation to appraise not only financial performance indicators but also customer, internal process and learning and growth perspectives. ? The principles for a strategic-focussed organisation •Translate the strategy to operational terms The BSC and strategy map provide a tool to describe how stakeholder value is created from an intangible form. Align the organisations to create synergy: Use the balance scorecard program management system as the alignment, integrating and coordinating system. Link and integrate individual strategies so that organisational performance becomes more than sum of its parts. Communicate strategic themes and priorities across organisational units. •Make strategy everyone’s everyday job: Provide efficient communication and education about strategy. Develop personal and team objectives around strategy. Link team-based incentive compensation to the BSPM system of performance. Make strategy a continual process: Integrating the above and strategy management into continual process is required. By linking strategy to budget process i. e. provide a separate strategy and operation budget. Arrange regular meetings to discuss strategy attended by a broad level of managers. Adopt a process for learning and improving strategy continuously. •Mobilise change through executive leadership 2. 5Improving Leadership The leaders are the guardians of the organisations value system (TQM) and are role models of the organisations preferred culture and behaviour.

To improve the organisations cultural and behavioural issues starts with improving the quality of the organisations leaders. It has been proven that the most effective leadership style promotes the idea of wide consultation, where staff becomes involved and empowered. By creating this medium that provides proper delegation and decision making, a more conducive work environment is created. To address the leadership issues identified within the Royal Dutch/Shell organisation the following is suggested: •Establish strategic alignment by ensuring that goals and objectives are based on strategic intent.

Policies must adhere strictly to this strategy. •Continuous support must be provided by management to promote positive perceptions within the team. In doing so, they should model the desired values, beliefs, guiding principles, attitudes, and behaviours needed to realise the vision and mission of the organisation. •Establish an appropriate system of authority, responsibility and accountability by appointing executives with exceptional leadership abilities, delegating full authority to functional, line and project managers. •Match the right people with the right jobs. Leaders must possess excellent inter-personal and communication skills. •Strategic goals must be accurately conveyed to project and process teams •Plan and organise appropriately by ensuring the necessary groundwork regarding policies and procedures are completed. •Be sure information flow is realistic and that the content is the basis for problem solving and decision making •A trust culture is essential to promote oral informal communication the organisation because communication “pitfalls” are the greatest contributor to managerial difficulties. Apply systemic knowledge management to ensure effective and efficient acquisition and transfer of knowledge within the team. •Acknowledge the importance of systems thinking within teams and at all levels of management •Strive continuously to improve learning. •Apply continuous improvement through performance management 2. 6Managing Change Figure 3. Process of Change (Adams:1997) The figure above depicts the process of change as a continuing cycle of moving from stability through awareness and exploration of options to the implementation of new conditions, which then becomes the new plateau of stability.

The first phase represents the stage in which the bureaucracy is most comfortable. In Phase 2 there is realisation of change and then the emotions sets in. At this stage most resistance to the change is experienced. In the next phase there is a realisation that change is inevitable and various options are explored to deal with it. In the last phase the change is implemented and adopted. An effective method of dealing with change, according to Lewin’s Change Model, is by a process of “Unfreezing”, “Changing” then “Re-freezing”.

In the “Unfreezing phase, the main objective is to create motivation for change. This encourages management and staff to adopt behaviours and attitudes that is desired or preferred. “Changing” involves a process of providing education, new behaviour models and new ways of operating. This is facilitated by means of role models, experts, benchmarking and training. During “Re-freezing”, the changes are stabilized by helping with the integration of the changed behaviour into the normal or stable environment.

The employees are first given a chance to exhibit the new behaviour before assessment and further measures, like coaching is implemented to enforce stability. 3. Implementation Strategy 3. 1Implementation Plan NoNamePriority Level 1Establish a strong matrix project structure across the organisation1 2Recruit and appoint a CPO that reports to the board of directors1 3Recruit or up skill existing staff to perform project function in PMO2 4Establish portfolio programme for strategic radical transformation2 5Review and audit internal policies and procedures. 1 Implement a Organisation Development plan1 7Review HR policies regarding appraisal and performance management1 8Establish portfolio programme for continuous improvement projects2 9Training: Project Management and Program Management Introduction3 10Training: Project Management and Program Full Course3 11Training: Emotional Intelligence for Organisation leaders3 12Training: HR Management 3 13Establish an employee induction program3 14Mentoring program for future leaders3 15Training: Communication and Presentation skills3 3. 2Review and Appraisal No. Dep1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17


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