People were the focus of my article nearly four years ago (December, 1997) in this column. The global oil and gas industry was seemingly poised on the brink of a sustained activity boom. The column emphasized the importance of continuing the business strategies, oriented toward people development that had enabled some companies to survive and even thrive during earlier industry downturns.
Companies had learned to prosper during the tough times by being people oriented and project driven. By focusing decisions to support people and projects in the best way possible, they had built lean, flexible organizations that could be expanded to handle the upturn. Key decisions would involve which projects to accept, so that "work-hardened" teams would not be diluted beyond their effectiveness, through growth.
During lean times, these top teams increased their effectiveness by integrating with clients and suppliers. Integrated teams eliminated the inefficiency of handing off information. This integration also kept communication lines and decision-making times short.
New employees, thrown into the cauldron of a fast-paced, highly visible integrated team environment, either thrived or exited very quickly. Focus was steady work for the steadiest of people, and the mentality was "just-do-it."
Careers and resources
This "just-do-it" mentality needed to carry over into the good times if companies and people wanted to prosper long term. Communication of vision and goals from management to people and from people to management needed continued emphasis. Management needed to help plan peoples' career development and resource plan projects to ensure success, rather than take on all available work in the good times. Planning and having a top quality decision process for expansion would insure survival in the next downturn.
Soon after the column appeared, an Asian currency crisis triggered a series of economic repercussions that dampened global energy demand and initiated one of the most sudden and severe oil-price crashes on record. Instead of ramping up for a sustained expansion, exploration and production companies began cutting costs in the face of plummeting revenues.
Most reduced their investments to only the most profitable or most strategically important projects and rapidly divested all but core properties. Escalating property realignment soon was upstaged by a new wave of mergers and acquisitions. The largest mergers involved such huge pools of assets that they literally transformed the industry. A new class of mega-major companies was created.
Projects scale up
These mega-major companies refocused the industry toward huge projects, especially in deepwater. Where there used to be many projects in the $20-100 million range, now there were primarily projects in the $250 million to $3 billion range. Companies that wanted to support these mega-majors had to quickly quadruple the capability of their strong teams and systems. Simultaneously, additional focus was directed toward health, safety, environment, procurement, construction sequence, and operations cost as there were much bigger dollar and schedule savings to be earned. All of this change currently is being created and implemented in the open environment of integrated teams.
The wave of work anticipated back in 1997 is now working its way into an industry that has changed significantly with the advent of mega-major oil companies. Project size has ballooned to match the appetite and risk management profiles of these oil companies. Lean, work-hardened, integrated teams and companies are being challenged to step up and achieve best-in-class performance on these projects.
Looking forward
While companies and people stretch to meet these challenges, they must not lose sight of what kept them strong during past downturns. Improved resource planning will insure that teams can put out quality work. Career development planning will help us recruit and challenge new graduates as well as seasoned performers. Mentoring will help the new graduates become effective in working off the backlog of projects. Teams need to be kept lean and challenged through benchmarking for continuous improvement.
Honing companies to take care of people and projects will minimize growth of inefficiency, which must subsequently be cut in the next downturn. The solid growth achieved through proper focus will allow people to invest time in their families and communities, instead of worrying as much about the health of their company and career. Through good planning and foresight, we can achieve "steady work for steady people."
William G. Higgs
Mustang Engineering, Inc.
Houston, Texas
