COINED by the UK Prime Minister in 2009 to express the series of sustained reductions in public spending, the word "austerity" is highly appropriate when expressing what the past two years have been like to those in the North-east whose livelihoods are dependent on the oil & gas industry.
The fall-out of the low oil price has been catastrophic to many individuals, families and businesses as the lowering of the operational cost model by operators and service companies alike has reduced headcount dramatically with potentially more bad news to come.
Not originating from these "fair pairts", I have huge admiration for the stoicism, pride and general "nae fuss" shown by the people of the North-east, but what can be done to minimise further decline and the loss of more jobs?
There is a need for a more sustainable approach to improving organisational and operational efficiency largely neglected during past downturns.
Given the choice of radical cost-cutting or implementing a continuous improvement programme in the pursuit of incremental gains, organisations have tended to adopt the former.
The time has arrived for some smart thinking and to learn from past experience.
The news that several operators have achieved lower production costs indicates that while the cutbacks have hit levels of severity never experienced before, those who have succeeded in delivering a more competitive product to the global market are to be heartily welcomed.
Now the bleedin’ obvious: the "low oil delivery model" requires fewer people, lower overheads and reduced day-rates from both the service companies and contracting professionals for the new lean model to be successful.
However, to ensure that sustainability is maintained, it is critical to the company’s DNA to retain operational knowledge (and know-how) which can be captured and presented to the next generation of oil worker.
This informal, tacit information that skilled personnel had in abundance should be stored within a Knowledge Management System that integrates seamlessly within day to day operations.
Achieving Sustainability
For the future success of the industry, strategic objectives must now include programmes that deliver a combination of the following attributes: simplification, standardisation, and cost reduction.
Simplification
Multifarious document structures located within hideously complex IT systems retard personal understanding, hinder innovation and stifle change, with Enterprise Resource Planning Systems (ERP), Document Management, QHSE and Asset Management being the usual perpetrators.
While most large companies employ ERP (SAP, Oracle etc.) to control finance and procurement activities, innumerable processes exist outwith these systems that are labour-intensive and usually involve double-handling.
Automation will remove inefficiencies while ensuring both compliance and risk are addressed to support overall governance.
Delivering "smarter working" however, requires a greater level of investment than obtaining free flowcharting tools from the internet; it is a specialist discipline and will prove to be an expensive exercise if attempted in a half-baked manner.
Organisational re-alignment
Restructuring the organisation and the resulting reallocation of roles and responsibilities provide the ideal opportunity to flatten the management levels with a more simplified, autonomous structure with absolute clarity on deliverables.
Changing business/delivery models comprises of realignment of the management system by revising the organisational structure, documenting new roles and responsibilities, allocating process owners and ensuring both risk and compliance requirements remain controlled.
Process harmonisation
As an industry, the oil & gas is in the premier league of duplication.
Where possible, one process should describe working practices across all regions or business units.
Harmonising process will reduce costs significantly through removing duplicated documents.
This also simplifies instructions, makes improvements faster to adopt and supports staff mobility across assets.
To achieve the correct document content, processes should be re-evaluated and streamlined by rooting out wasteful, redundant or duplicated work practices to increase productivity.
Strangely enough, few companies have developed a comprehensive process-based management system and with the ultra-traditional ISO organisation now advocating the process-based approach for all Q,H&S,E standards, there is a compelling reason to change therefore the opportunity should not be missed.
Transformation
The North Sea is experiencing continual external change.
Organisations that continually evolve and are in tune with both their customers and markets can adapt with relative ease.
However, when the business operating model becomes unable to serve its customers effectively, transformation is required to restructure the company.
Business transformation provides the opportunity to fix the blockages that are detrimental to normal operations and allows the future to be defined that goes beyond incremental change.
Fragmented and cumbersome to "lean and mean"
The UK’s naval bases are maintained by a FTSE100 service company who on contract award inherited a variety of management systems that operated on each site.
After redesigning a common model and removing an over-burdening amount of procedures, the new system provided highly visible alignment from policies to process, clarified individual responsibilities, highlighted risk within operations and offered greater transparency to the extensive compliance framework.
Last year, all content was migrated across to one centralised management system where duplicated documents could be removed.
Without streamlining each site by adopting the process-based approach, removing high cost and complexity through harmonisation would be almost impossible.
A similar approach was taken by Siemens Transportation, the manufacturers of the Heathrow Express, where their production sites were managed by site-specific procedures.
Recognising both the cost and complex structure to access duplicated documents, they replaced their management system with one that reflected their operational model at a glance and promoted continuous improvement due to the transparency provided by the new approach.
This approach is not restricted to multinational organisations; NIS of Preston is an engineering company which manufactures parts for the nuclear industry and adopted the process-based approach due to the highly complicated compliance environment within which they operate.
Simplifying what their core business delivers and the working methods that are constantly scrutinised led them to removing the over-abundance of procedures and replacing with graphical processes.
The paradigm shift necessary to become process-based requires senior management commitment, but it should also be presented as a framework that controls all process, risks, compliance and supports overall corporate governance, not solely as a Quality Management System.
New ways of project collaboration – one for all, all for one
The low oil price is forcing service contractors to form fresh alliances in a bid to find new sustainable ways of working together.
The relatively original concept of "one for all, all for one" is where a centralised project management organisation consists of the "best" personnel from each company.
Working together as one integrated team across developments is intended to promote greater sharing of knowledge, encourage the adoption of best practice and remove the duplication of managing multiple projects by using one collaborative model.
Supported by a risk and reward incentive, this concept sounds practical but will involve cultural change.
So many documents…
Hoarding documents within multiple repositories is commonplace in the industry with some organisations steadfastly refusing to remove obsolete work practices and out-of-date documents with no owner.
These documents can be a significant source of frustration and wasted man-hours as they may still be open to audit by clients and regulators.
Undertaking a gap analysis per department will soon identify the documents required and classify accountabilities, and while this sounds low level and tedious, the savings of this exercise are often staggering.
Management Systems
The traditional company QHSE management system has often been seen by the workforce as bureaucracy in action, and judging by the complexity that this writer has witnessed over the years, who would blame them from their derision?
In the new regime, the management system must now be treated as the "oracle" or "one source of the truth", but to make this work in the world of "lean and mean", management systems must be completely restructured to cope with the demands of achieving high levels of governance while increasing performance … and no, it’s not an oxymoron.
While ISO QHSE certificates 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 innovative, safe, profitable and complaint in the industry as we head into 2017 and the challenges yet to be faced.
To achieve the high performance levels that past restructuring failed to deliver and design a sustainable model that supports the new ways of working, senior management should recognise the importance of process within the concept of business transformation.
Out of the trauma of business change, we arrive at the reality of where we are today and a realisation of how to rectify the problem with smarter working.