Market downturn presents opportunity to break down silos

Dec. 8, 2015
The cyclic nature of the upstream oil and gas industry is nothing new.

The cyclic nature of the upstream oil and gas industry is nothing new. When the supply/demand balance is favorable and drilling and production activity is robust, it is a great business to be in. However, during a global upheaval, the industry contraction can be devastating in disrupting careers, lives, and families. Like Sarah Connor in the Terminator movie, we have to believe there is ‘No Fate’ that a company has to be vulnerable to the vicissitudes of the market. Companies in our industry can take action to stay strong, and weather the storm.

In 1987, in the midst of what would be a decade-long downturn, this author joined with two like-minded colleagues to form Mustang Engineering (now Wood Group Mustang). At the time, we were all employed but had witnessed how owners, engineering, construction and service companies were shrinking severely. They were dismissing experienced, dedicated, and talented employees who had been instrumental in building their company’s reputation and success. It was not easy even for those who remained, as they were constantly assessing their position and facing the uncertainty of continuing project work. There was little trust among management and employees as profit margins trumped loyalty.

During the past year, the industry has been suffering from a global market downturn which bears strong similarities to the situation that existed in the ‘80s. Whereas, the earlier contraction caused one-half million or more workers to relocate from Texas back to the north, at last count, the industry has decreased its workforce by almost 200,000 people this time. While it is true that there are, perhaps, more global influences, extreme technological breakthroughs, and competitive factors today than there were back then, the dynamics of operating in this climate still revolve around the same need - people and teams.

The impact of this cyclicality begs the question, “How can we strengthen our industry so that it will protect its future during volatile times?”

The industry is made up of many silos including workers, management, the company, clients, suppliers and contractors. In downturns, each silo becomes focused on its own survival and tends to look at every situation as “win-lose” because there is not enough space left for “win-win” relationships. For through-cycle growth, we have to make space for win-win treatment of each other during the cycles, by busting these natural silos and working together. A downturn means there is a lot of change and change means there is opportunity to use silo-busting skills to improve relationships and create a culture for better work execution.

We created a “silo-busting” culture based on communication, teambuilding, transparency, and trust built on performance.

The bedrock this culture was built upon was creating win-win relationships between these potential silos and welding them into high-performance integrated teams. This same “hero-making” culture helped move the upstream industry from shallow-water fixed platforms to the space-age technologies required for deepwater development worldwide in the short span of 12 years. This culture had four key components.

Taking care of people.Companies can employ all the slogans they want. They can tout their quality and innovation. If they cannot retain their key employees, though, their reputation and competitive capabilities will surely suffer. A way we found to be highly successful was to create a clan. Each Mustanger was treated fairly and their family members were included in our many teambuilding activities and events.

We did not lose people in the good times, and we did our best to retain every productive worker during the slow times by taking on different types of projects or creating new innovations. We also created projects by showing clients how much they could save by doing a project during a downturn when quality resources were available…essentially “out of cycle” projects. We pulled together as a tighter team to chase work with more people, and worked on innovative ways to be more competitive. One key step here was to eliminate the waste that inevitably builds up through the hundreds of handoffs, in the typical engineer-procure-construct schedule.

Creating a win-win environment.Trust is imperative in building relations between client and contractor. Our philosophy was based on demonstrating project performance that was efficient and innovative, while at the same time passing cost savings onto the client. We helped move the industry from lump-sum/win-lose contracting to reimbursable time and material contracts awarded based on solid project definition. We went out of our way to quantify value on every project and avoid surprises. In tough times when everyone is looking for an edge, it is even more critical to have worked with the client on the same side of the table in a reimbursable fashion. Capabilities in the industry change quickly in downturns as resources disappear, and the team has to figure out the best way to deliver the project in the current industry environment.

Building a talent base.The oil and gas industry is still rebounding from the dearth of petroleum engineering graduates in the ‘90s who eschewed that discipline after recognizing its vulnerabilities. Today, there are many opportunities to fill the void between knowledgeable experts and novice engineers. We initiated a “Young Guns” program in the mid-nineties which gave recent graduate engineers immediate chances to contribute on a project under the tutelage of a seasoned veteran. This proved to be highly successful in increasing productivity while grooming future leaders. A high percentage of “Young Gun” grads have gone on to hold key leadership roles within the company. They continue to drive the culture.

Making heroes.Nothing creates close bonds better than successful results. By setting up positive experiences with vendors and other project partners, close relationships are formed. Heroes are created in the clients’ eyes, realizing that they have a proven team that can be counted on to work together on future projects. Repeat work creates stronger teams across all silos, and has to be the goal.

William G. Higgs

Author, Mustang: The Story

Founder, Mustang Engineering, Inc.