Introduction to Oil and Gas Environment
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| Assignment Type | Term Paper |
|---|---|
| Subject | Management |
| Academic Level | Undergraduate |
| Citation Style | Harvard |
| Length | 7 pages |
| Word Count | 2,195 |
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Introduction
The purpose of this paper is to provide a critical examination and discussion of the management structure of Royal Dutch Shell, along with the roles and responsibilities within two divisions of the company. Furthermore, a discussion is provided about how the company is contributing to the local communities in which it operates and that are directly impacted by its operations. The reason for choosing Royal Dutch Shell as a company to analyze is because it is one of the largest companies in the oil and gas industry, and has undergone a major structural re-organization in the past two decades in order to operate more efficiently and to be more competitive for the future (Ben-Hur, Jaworski & Gray, 2015: 55). The goal of this examination is to determine how Royal Dutch Shell manages its internal operations, as well as its corporate social responsibility efforts in order to make recommendations for ways in which the company might improve its performance and outreach.
Management Structure
A vital part of understanding Royal Dutch Shell and its operations is understanding its current management structure and how it has changed over the past two decades. Currently, the company’s management structure is fairly small with only three or four lines of management beginning with the Supervisory Board and the Board of Directors to whom the Committee of Managing Directors, which includes the Chair, Vice-Chair, and Directors of functional areas report. Then, below the Committee of Managing Directors are the Chief Executive Officers of each business unit, such as Oil Products, Chemicals, and Gas & Power who are responsible for leading the companies within their respective units (Grant, 2008: 141).
The current management structure of Royal Dutch Shell was adopted in 1999 in order to allow the company to focus on its business-sector functions as opposed to geographic regions (Grant, 2008: 121). Before the restructuring, the company’s management structure was based on geographic operations, which meant that the people and leaders in each geographic region had a great deal of autonomy about how to run the operations in their regions of the world (Steinmetz, Bennett & Hakonsson, 2012: 8).
The ability of local leaders to be autonomous based on local business and economic conditions might seem appropriate and even necessary for a large, global company. However, the problem with the regional structure that previously existed was that making changes to corporate design and policies was very difficult because each regional operation typically focused on what was occurring at the present time rather than thinking about the future of the company (Steinmetz, Bennett & Hakonsson, 2012: 8). In this regard, local autonomy and control often led to stagnation and a lack of concern about whether the company was positioned for future changes in the oil and gas industry.
The lack of ability to bring business units together can be more easily understood by the fact that before the 1999 restructure, Royal Dutch Shell had over 200 companies that were part of a single portion of its management structure known as operating companies (Grant, 2002: 124). This was in addition to its parent companies, its group holding companies, and its nine service companies. On top of all of that, its functional divisions, such as research, human resources, and finance were also regional-based, which further meant a lack of coordination between those functional divisions for the benefit of the company in terms of responding to changes impacting the oil and gas industry (Steinmetz, Bennett & Hakonsson, 2012: 8; Grant, 2002: 121).
The transition from a geographic-based management structure to a functional management structure is an important aspect of the way in which Royal Dutch Sell operates, as well as the roles and responsibilities of those who lead and made decisions within the functional divisions. Those who are responsible for leading and making decisions in functional divisions are no longer solely focused on running local operations. In this regard, examining the roles and responsibilities of the leaders of the various divisions of Royal Dutch Shell truly requires a consideration for both their roles and responsibilities in overseeing specific operations and for how they integrate their roles and responsibilities into the larger focus of the company to be as efficient, both internally and externally, as possible.
Roles and Responsibilities of Divisions of Royal Dutch Shell
One of the divisions of Royal Dutch Shell is Business Operations, which is a division of the company that is responsible for overseeing the financial performance and operations of all of the various divisions of the organization (Herbert & Rothwell, 2015: 18). It might seem odd to discuss a division of the company that is not directly business related, meaning a division that is not a direct business area such as Chemicals or Gas & Power. However, the reason for discussing the Business Operations division of the organization is because the roles and responsibilities of the leaders of this division are directly connected to the re-restructuring of the organization based on functional units and performance rather than geographic performance.
The overall responsibility of the Business Operations division is to manage the cash flows for all of Royal Dutch Shell, which is over $1 trillion dollars in transactions into and out of the company in a given year (Herbert & Rothwell, 2015: 16). However, the role of the division is not simply to record incoming and outgoing transactions. Instead, the larger responsibility of the division is to the company can increase value for the company and its partners by examining the ways in which money is spent and the return that is achieved from those expenses (Herbert & Rothwell, 2015: 17).
For example, on an internal basis, Business Operations might work with a business unit to create a strategy for how it can better collect outstanding balances from customers, which might include working with the outside partners so that they are better able to make payments for products and services that they have received from Royal Dutch Shell. A customer may be late on making payments because of the customer service received from Royal Dutch Shell. By helping the business unit create a strategy for improving its own customer service abilities, the customer receives improved services and is better able to make payments in a timely manner (Herbert & Rothwell, 2015: 18).
By moving away from focusing on simple accounting issues to having the responsibility of actually creating financial strategies for the company’s business units, The Business Operations Division is able to be part of the larger corporate effort to operate as efficiently and effectively as possible. The restructuring of Royal Dutch Shell made it possible for a single business division to oversee the financial operations and strategies of the entire company as opposed to relying on each business unit and division to operate autonomously with little or no help when they had problems managing their own financial strategies.
Another division within the company that has roles and responsibilities that are indicative of the restructuring that occurred at Royal Dutch Shell is Human Resources. Before the restructuring in 1999, human resource efforts were largely managed at the regional level. Each geographic operation has authority of much of the human resource process. However, with the current management structure that is in place within the organization, Human Resources is not only responsible for creating employee policies, but is actually responsible for organizational design issues. For example, the Human Resources division is responsible for the structure and design of operations within the organization, and the way in which the company interfaces without side partners (Steinmetz, Bennett & Hakonsson, 2012: 9).
Another responsibility for the Human Resources division is to design and implement leadership training and leadership management efforts in order to ensure that new leaders within the organization and developed, but also ensure that current leaders are retained so that there is continuity within Royal Dutch Shell (Steinmetz, Bennett & Hakonsson, 2012: 10). At the same time, the division has been given the responsibility of designing employee governance practices based on global standards as opposed to local standards (Steinmetz, Bennett & Hakonsson, 2012: 11).
Overall, the Human Resources division of Royal Dutch Shell has the role and responsibility of connecting all aspects of employee training, development, and organizational design to the larger goal of the company to operate as efficiently and effectively as possible. As with the Business Operations division, the Human Resource division is not solely focused on internal issues, such as hiring and firing employees, but on the way in which the company connects with its partners so that the Royal Dutch Shell’s operations and the operations of the partners are as efficient as possible.
Contributions to the Local Community
The final issue to be examined in this paper is the way in which Royal Dutch Shell contributes to the local community. In the case of Royal Dutch Shell, the local community is many parts of the world because the company operates in about 150 countries (Fontaine, 2013: 116). From a global perspective, the company has been involved in an effort to reduce its carbon footprint and to work to reduce its impact on climate change for 25 years (Hoffman, 2006: 112). The company has worked with individual nations and non-governmental organizations to reduce pollution and harmful output from its operations. In 1998, Royal Dutch Shell set the goal of reducing greenhouse gas emission by 10% by 2002, which the company achieved (Hoffman, 2006: 113). Since then, the company has set additional targets for reducing carbon emission and greenhouse gases, many of which have also been achieved (Hoffman, 2006: 114).
However, it is important to examine a specific way in which Royal Dutch Shell has helped a specific location in which the company operates at the local level. One area in which the company operates in the Niger Delta region of Nigeria. In 1994, Royal Dutch Shell was accused of working with the Nigerian military to find and arrest members of the Movement for the Survival of the Ogoni People who protested and opposed the company’s presence in the Niger Delta and its impact on the Delta’s environment (Hennchen, 2015: 4). Following negative publicity stemming from a lawsuit brought by families of those who were arrested and hanged by the Nigerian military, Royal Dutch Shell engaged in an effort to better understand the economic, social, and environmental conditions in the local areas in which it operated, and to share in the responsibility of improving those conditions (Hennchen, 2015: 5).
One of the efforts that Royal Dutch Shell undertook in the Niger Delta region was to alleviate the harsh living condition that exist for local people. The company became involved in the effort to eradicate malaria in the Delta region by providing financial resources to given malaria vaccines to the local population. In a similar manner, the company contributed $1.55 million for a project designed to provide HIV/AIDS services to the local community (Amadi & Abdullah, 2012: 62). Furthermore, the company has also contributed financial resources to assist in improving educational conditions. In total, the company has contributed several hundred million dollars to the Niger Delta region through various initiatives to improve medical and educational services (Amadi & Abdullah, 2012: 64).
It must be recognized that the company’s efforts in the Niger Delta region came about as a response to negative publicity about the company’s involvement to silence environmental protestors. The company’s actions were a result of its own negative actions that brought death to people who were concerned about how Royal Dutch Shell was impacting the local environment. However, the company has made efforts on a local level to at least acknowledge the need to improve the lives of the people who are impacted by the company’s presence in the Niger Delta.
Conclusion
The purpose of this paper was to provide a critical examination and discussion of the management structure of Royal Dutch Shell, along with the roles and responsibilities within two divisions of the company, as well as to discuss how the company has contributed to local communities. What has been demonstrated in this analysis is that the roles and responsibilities of the various divisions and units of the company are directly connected to the management restructuring that occurred in 1999. The company has shifted from a geographic focus to a global focus in terms of its operations and how it interacts with its partners and customers. The effect of that change has been a company that is more efficient and effective, as well as a company that is more focused on the external issues that impact the oil and gas industry.
References
Amadi, B.O. and Abdullah, H., 2012. Poverty alleviation through corporate social responsibility
in Niger Delta, Nigeria. Asian Social Science, 8(4), 57-67.
Ben-Hur, S., Jaworski, B. and Gray, D., 2015. Aligning corporate learning with strategy. MIT
Sloan Management Review, 57(1), 53-59.
Fontaine, M., 2013. Corporate social responsibility and sustainability: The new bottom
line?. International Journal of Business and Social Science, 4(4), 110-119.
Grant, R.M., 2002. Organizational Restructuring within the Royal Dutch/Shell Group. Grant,
RM and Neupert, KE, Cases in Contemporary Strategy Analysis. London: Blackwell Publishing Ltd.
Hennchen, E., 2015. Royal Dutch Shell in Nigeria: Where Do Responsibilities End?. Journal of
Business Ethics, 129(1), 1-25.
Herbert, I. and Rothwell, A.T., 2015. Royal Dutch Shell: a global perspective. Professional
Outsourcing, 21, 16-20.
Hoffman, A. J., 2006. Getting ahead of the curve: Corporate strategies that address climate
change. Pew Center for Global Climate Change.
Steinmetz, J., Bennett, C. and Håkonsson, D.D., 2012. A practitioner's view of the future of
organization design: Future trends and implications for Royal Dutch Shell. Journal of Organization Design, 1(1), 7-11.
The purpose of this paper is to provide a critical examination and discussion of the management structure of Royal Dutch Shell, along with the roles and responsibilities within two divisions of the company. Furthermore, a discussion is provided about how the company is contributing to the local communities in which it operates and that are directly impacted by its operations. The reason for choosing Royal Dutch Shell as a company to analyze is because it is one of the largest companies in the oil and gas industry, and has undergone a major structural re-organization in the past two decades in order to operate more efficiently and to be more competitive for the future (Ben-Hur, Jaworski & Gray, 2015: 55). The goal of this examination is to determine how Royal Dutch Shell manages its internal operations, as well as its corporate social responsibility efforts in order to make recommendations for ways in which the company might improve its performance and outreach.
Management Structure
A vital part of understanding Royal Dutch Shell and its operations is understanding its current management structure and how it has changed over the past two decades. Currently, the company’s management structure is fairly small with only three or four lines of management beginning with the Supervisory Board and the Board of Directors to whom the Committee of Managing Directors, which includes the Chair, Vice-Chair, and Directors of functional areas report. Then, below the Committee of Managing Directors are the Chief Executive Officers of each business unit, such as Oil Products, Chemicals, and Gas & Power who are responsible for leading the companies within their respective units (Grant, 2008: 141).
The current management structure of Royal Dutch Shell was adopted in 1999 in order to allow the company to focus on its business-sector functions as opposed to geographic regions (Grant, 2008: 121). Before the restructuring, the company’s management structure was based on geographic operations, which meant that the people and leaders in each geographic region had a great deal of autonomy about how to run the operations in their regions of the world (Steinmetz, Bennett & Hakonsson, 2012: 8).
The ability of local leaders to be autonomous based on local business and economic conditions might seem appropriate and even necessary for a large, global company. However, the problem with the regional structure that previously existed was that making changes to corporate design and policies was very difficult because each regional operation typically focused on what was occurring at the present time rather than thinking about the future of the company (Steinmetz, Bennett & Hakonsson, 2012: 8). In this regard, local autonomy and control often led to stagnation and a lack of concern about whether the company was positioned for future changes in the oil and gas industry.
The lack of ability to bring business units together can be more easily understood by the fact that before the 1999 restructure, Royal Dutch Shell had over 200 companies that were part of a single portion of its management structure known as operating companies (Grant, 2002: 124). This was in addition to its parent companies, its group holding companies, and its nine service companies. On top of all of that, its functional divisions, such as research, human resources, and finance were also regional-based, which further meant a lack of coordination between those functional divisions for the benefit of the company in terms of responding to changes impacting the oil and gas industry (Steinmetz, Bennett & Hakonsson, 2012: 8; Grant, 2002: 121).
The transition from a geographic-based management structure to a functional management structure is an important aspect of the way in which Royal Dutch Sell operates, as well as the roles and responsibilities of those who lead and made decisions within the functional divisions. Those who are responsible for leading and making decisions in functional divisions are no longer solely focused on running local operations. In this regard, examining the roles and responsibilities of the leaders of the various divisions of Royal Dutch Shell truly requires a consideration for both their roles and responsibilities in overseeing specific operations and for how they integrate their roles and responsibilities into the larger focus of the company to be as efficient, both internally and externally, as possible.
Roles and Responsibilities of Divisions of Royal Dutch Shell
One of the divisions of Royal Dutch Shell is Business Operations, which is a division of the company that is responsible for overseeing the financial performance and operations of all of the various divisions of the organization (Herbert & Rothwell, 2015: 18). It might seem odd to discuss a division of the company that is not directly business related, meaning a division that is not a direct business area such as Chemicals or Gas & Power. However, the reason for discussing the Business Operations division of the organization is because the roles and responsibilities of the leaders of this division are directly connected to the re-restructuring of the organization based on functional units and performance rather than geographic performance.
The overall responsibility of the Business Operations division is to manage the cash flows for all of Royal Dutch Shell, which is over $1 trillion dollars in transactions into and out of the company in a given year (Herbert & Rothwell, 2015: 16). However, the role of the division is not simply to record incoming and outgoing transactions. Instead, the larger responsibility of the division is to the company can increase value for the company and its partners by examining the ways in which money is spent and the return that is achieved from those expenses (Herbert & Rothwell, 2015: 17).
For example, on an internal basis, Business Operations might work with a business unit to create a strategy for how it can better collect outstanding balances from customers, which might include working with the outside partners so that they are better able to make payments for products and services that they have received from Royal Dutch Shell. A customer may be late on making payments because of the customer service received from Royal Dutch Shell. By helping the business unit create a strategy for improving its own customer service abilities, the customer receives improved services and is better able to make payments in a timely manner (Herbert & Rothwell, 2015: 18).
By moving away from focusing on simple accounting issues to having the responsibility of actually creating financial strategies for the company’s business units, The Business Operations Division is able to be part of the larger corporate effort to operate as efficiently and effectively as possible. The restructuring of Royal Dutch Shell made it possible for a single business division to oversee the financial operations and strategies of the entire company as opposed to relying on each business unit and division to operate autonomously with little or no help when they had problems managing their own financial strategies.
Another division within the company that has roles and responsibilities that are indicative of the restructuring that occurred at Royal Dutch Shell is Human Resources. Before the restructuring in 1999, human resource efforts were largely managed at the regional level. Each geographic operation has authority of much of the human resource process. However, with the current management structure that is in place within the organization, Human Resources is not only responsible for creating employee policies, but is actually responsible for organizational design issues. For example, the Human Resources division is responsible for the structure and design of operations within the organization, and the way in which the company interfaces without side partners (Steinmetz, Bennett & Hakonsson, 2012: 9).
Another responsibility for the Human Resources division is to design and implement leadership training and leadership management efforts in order to ensure that new leaders within the organization and developed, but also ensure that current leaders are retained so that there is continuity within Royal Dutch Shell (Steinmetz, Bennett & Hakonsson, 2012: 10). At the same time, the division has been given the responsibility of designing employee governance practices based on global standards as opposed to local standards (Steinmetz, Bennett & Hakonsson, 2012: 11).
Overall, the Human Resources division of Royal Dutch Shell has the role and responsibility of connecting all aspects of employee training, development, and organizational design to the larger goal of the company to operate as efficiently and effectively as possible. As with the Business Operations division, the Human Resource division is not solely focused on internal issues, such as hiring and firing employees, but on the way in which the company connects with its partners so that the Royal Dutch Shell’s operations and the operations of the partners are as efficient as possible.
Contributions to the Local Community
The final issue to be examined in this paper is the way in which Royal Dutch Shell contributes to the local community. In the case of Royal Dutch Shell, the local community is many parts of the world because the company operates in about 150 countries (Fontaine, 2013: 116). From a global perspective, the company has been involved in an effort to reduce its carbon footprint and to work to reduce its impact on climate change for 25 years (Hoffman, 2006: 112). The company has worked with individual nations and non-governmental organizations to reduce pollution and harmful output from its operations. In 1998, Royal Dutch Shell set the goal of reducing greenhouse gas emission by 10% by 2002, which the company achieved (Hoffman, 2006: 113). Since then, the company has set additional targets for reducing carbon emission and greenhouse gases, many of which have also been achieved (Hoffman, 2006: 114).
However, it is important to examine a specific way in which Royal Dutch Shell has helped a specific location in which the company operates at the local level. One area in which the company operates in the Niger Delta region of Nigeria. In 1994, Royal Dutch Shell was accused of working with the Nigerian military to find and arrest members of the Movement for the Survival of the Ogoni People who protested and opposed the company’s presence in the Niger Delta and its impact on the Delta’s environment (Hennchen, 2015: 4). Following negative publicity stemming from a lawsuit brought by families of those who were arrested and hanged by the Nigerian military, Royal Dutch Shell engaged in an effort to better understand the economic, social, and environmental conditions in the local areas in which it operated, and to share in the responsibility of improving those conditions (Hennchen, 2015: 5).
One of the efforts that Royal Dutch Shell undertook in the Niger Delta region was to alleviate the harsh living condition that exist for local people. The company became involved in the effort to eradicate malaria in the Delta region by providing financial resources to given malaria vaccines to the local population. In a similar manner, the company contributed $1.55 million for a project designed to provide HIV/AIDS services to the local community (Amadi & Abdullah, 2012: 62). Furthermore, the company has also contributed financial resources to assist in improving educational conditions. In total, the company has contributed several hundred million dollars to the Niger Delta region through various initiatives to improve medical and educational services (Amadi & Abdullah, 2012: 64).
It must be recognized that the company’s efforts in the Niger Delta region came about as a response to negative publicity about the company’s involvement to silence environmental protestors. The company’s actions were a result of its own negative actions that brought death to people who were concerned about how Royal Dutch Shell was impacting the local environment. However, the company has made efforts on a local level to at least acknowledge the need to improve the lives of the people who are impacted by the company’s presence in the Niger Delta.
Conclusion
The purpose of this paper was to provide a critical examination and discussion of the management structure of Royal Dutch Shell, along with the roles and responsibilities within two divisions of the company, as well as to discuss how the company has contributed to local communities. What has been demonstrated in this analysis is that the roles and responsibilities of the various divisions and units of the company are directly connected to the management restructuring that occurred in 1999. The company has shifted from a geographic focus to a global focus in terms of its operations and how it interacts with its partners and customers. The effect of that change has been a company that is more efficient and effective, as well as a company that is more focused on the external issues that impact the oil and gas industry.
References
Amadi, B.O. and Abdullah, H., 2012. Poverty alleviation through corporate social responsibility
in Niger Delta, Nigeria. Asian Social Science, 8(4), 57-67.
Ben-Hur, S., Jaworski, B. and Gray, D., 2015. Aligning corporate learning with strategy. MIT
Sloan Management Review, 57(1), 53-59.
Fontaine, M., 2013. Corporate social responsibility and sustainability: The new bottom
line?. International Journal of Business and Social Science, 4(4), 110-119.
Grant, R.M., 2002. Organizational Restructuring within the Royal Dutch/Shell Group. Grant,
RM and Neupert, KE, Cases in Contemporary Strategy Analysis. London: Blackwell Publishing Ltd.
Hennchen, E., 2015. Royal Dutch Shell in Nigeria: Where Do Responsibilities End?. Journal of
Business Ethics, 129(1), 1-25.
Herbert, I. and Rothwell, A.T., 2015. Royal Dutch Shell: a global perspective. Professional
Outsourcing, 21, 16-20.
Hoffman, A. J., 2006. Getting ahead of the curve: Corporate strategies that address climate
change. Pew Center for Global Climate Change.
Steinmetz, J., Bennett, C. and Håkonsson, D.D., 2012. A practitioner's view of the future of
organization design: Future trends and implications for Royal Dutch Shell. Journal of Organization Design, 1(1), 7-11.