Management Theory into Practice Global Perspectives - Assignment Example

Management Theory into Practice – Global Perspectives This study is aimed at considering the effect of Management theory on the practical world and also assessing how the theory is effectively converted into practice that will pay the managers as well as the companies in the long run. For this purpose we have used one of the largest energy sector companies in the world as a guinea pig. For evaluating the management theory and its practical assessment, Exxon Mobil has been used for studying the management techniques employed by the company for the management of such a big set up. Exxon Mobil came into existence as incorporation in the year 1882 and now captures the markets of many countries of world including the markets of U.S. The main business of the company is energy, with involvement in exploration for, and production of, crude oil and natural gas, and the manufacturing of petroleum products as well as the transportation and sale of crude oil, natural gas and other petroleum products. Exxon Mobil is a major manufacturer of commodity petrochemicals and markets those products around the world and also manufactures and markets the wide variety of some of the specialty products around the globe. Exxon Mobil has many subsidiaries and affiliates around the globe and they can be distinguished because of their name which have either of the words of ExxonMobil, Exxon, Esso and Mobil with their names. Exxon Mobil operates in an environment in which its operating and financial results are exposed to many risks which are inherent to the oil and gas business globally. These risks may or may not be in the company’s control and their affect cannot be reduced by the company, which in turn may reflect in the company’s operating and financial activities. Thus, company operates and manages all of its affairs in the way that they do not affect the proper working of the company. It is also a recognized fact that managers have to come up with the innovative ideas of managing their resources with respect to their environment, business models and objectives. Therefore, while looking into the managing techniques of the said company, it is evident that it has successfully managed its resources and has lead itself towards glory of being the premier company in the industry for more than five quarters of a century. (Exxon Mobil 2010) As Indicated in the management systems section of the website of Exxon Mobil, company adheres to the policy of strict ethics and moral obligations while carrying out its operations and it is evident from the policies of the company. The company takes keen interest in the corporate citizenship and acknowledges its responsibility towards the society. For this purpose high ethical standards have been maintained by the company and a corporate citizenship report has also been issued by the company. Some of the policies of the company that has been set with regard to the management of the company are discussed in detail in the following paragraphs. Standards of Business Conduct Standards of business conduct are the foundation stone for the ethical standards that are required to be maintained by the company’s employees and non-employee directors around the globe. These standards comprise of three broad grouping for the company employees to comprehend and they include guiding principles, sixteen foundation policies, and open door communication procedures. Lucid guidance is provided with respect to the ethics, gifts and entertainment, conflicts of interest, antitrust, and directorship policies. Segregation of personnel has been carried out for the duties of recording, approving and authorizing financial transactions in order to decrease risks. Payments made to the third parties are subject to the company’s guidelines for payments to third parties and which also comply with the Foreign Corrupt Practices Act. It is taken very good care of that all of the employees and other people conducting business with the company comply with these standards and do not indulge themselves into unethical practices. In case, any breach of company’s law or any unethical practice is observed by the company, remedial actions are taken and strictly enforced by the company. Control systems At all of the business locations worldwide, business control systems are meticulously applied to ensure that every operation at the company’s premises and relating to the products and services of the company is finely done. For the sake of applying business control systems, self-assessment and audit policies have been imposed on all of company’s units worldwide. Management Control Basic Standards defines the basic principles, concepts, and standards that make the company’s business controls. Controls Integrity Management System provides a structured approach for assessing company’s financial-control risks, establishing procedures for mitigating concerns, monitoring conformance with standards, and reporting results to management. Financial controls of the company either meet or exceed the requirements of Sarbanes-Oxley Act and the NYSE listing standards. The internal auditors report as issued by the PricewaterhouseCoopers LLP over the financial reporting and management matters indicates that the internal control system of the company is effective and operating appropriately. Operations Integrity Management System The operations Integrity Management System (OIMS) has been implemented since the year 1992 and addresses the matters concerning safety, health, security, and environmental risks at the company’s premises all over the world. This is a framework of management systems which is primarily designed to spot out hazards and manage associated risks. This system helps in carrying out a systematic, structured, and disciplined advance to our business and its facilities all around the globe and helps the company to measure progress and management accountability in the business areas. It also ensures and makes it possible for the company to appropriately engage with the communities in which the company operates worldwide. A well managed system is in process to ensure that the business line managers of the company comply with all of the OIMS requirements, from the inception of the project to ongoing operations as well as conduct OIMS assessments of the company’s operations manually. OIMS has been fabricated deep into the management culture of the company that it has become a daily routine of the company’s management and also the part of the way this company works with implementation over the complete life cycle of the company’s projects and operations. In addition to that the overall effectiveness of the system is reviewed and adjusted after the lapse of five years continuously which has resulted in the continuous improvement of the system with which it achieves its objectives. In 2007, Lloyd’s Register Quality Assurance, Inc. (LRQA) attested again that OIMS meets the requirements of the ISO 14001 standard for environmental management systems. Furthermore, LRQA recognized that OIMS also meets all the requirements of the Occupational Health and Safety Assessment Series for health and safety management systems (OHSAS 18001). Best Practices in External Affairs Exxon Mobil has been engaged in the enhancement of the quality of its interaction with the community and its external relations. Best Practices in External Affairs program of the company is the strategic planning and management tool of the company for global affairs allowing the affiliates of the company to seek and practice excellence in the relationships with the community and national content development for the company. This enables the affiliates of the company to maximize the impact of community outreach programs through the better management of relationships with the stakeholders in the community and through appropriate understanding of the diverse needs of the communities in which the company operates. Long-term financial resource management It is extremely important for the company to arrange its earnings and manage its financial resources for attainment of maximum results. Exxon Mobil has successfully managed its financial resources both on the short term and the long term basis. (Exxon Mobil 2010) As highlighted in the long term financial resources management section of Exxon Mobil’s website, company takes the responsibility of meeting the growing energy needs in the world without compromising on the value to their shareholders and also providing competitively priced supplies to the customers. Company’s investment decisions have impact on the industry for many decades to come and company does not rely on short term commodity prices to formulate its long term strategy. In the year 2008, company invested heavily, a record sum of more than $26 million and is expected to invest more than $126 million over the next five years. Exxon Mobil has more than 120 development projects which are expected to produce more than 24 billion oil- equivalent barrels (net) during their life time. In 2008, company engaged in eight major upstream project start ups and in nine projects in the following year which is expected to generate additional 485 thousand oil- equivalent barrels per day (net). Creating shareholder value Company’s policy of disciplined capital investment, operational excellence, and a long-term, consistent industry perspective allow the company to provide superior shareholder value. This can be verified through the stock performance which has outpaced the standard & Poor’s 500 index during the preceding 5-, 10-, and 20- year periods. Company made total shareholder distributions of $40 billion in the year 2008, out of which $32 was in share prices. Company has a history of more than 100 years to pay dividends to its shareholders and annual dividend payments per share have soared in each of previous 26 year period- it increased by 13 percent in the year 2006 and has soared by 58 percent since the year 2003. Reserves replacement In the year 2008, the oil and gas reserves of the company totaled almost twenty three billion oil equivalent barrels or fifteen years of reserve life at the prevailing production levels with the reserve replacement totaling 103 percent of production and the company’s five year average replacement ratio being 110 percent. Environmental management and planning The aforesaid company gives a lot of consideration to the environmental factors affecting the environment in which the company operates. Therefore, company always makes policies to mitigate the environmental affect and this can also be seen in the Corporate Citizenship Report of the company. (Exxon Mobil 2010) As indicated by the environmental management and planning section of the company’s website, company maintains a properly defined stance on the environmental issues and thus plays a role of good corporate citizen. Company has made an initiative by the name of Protect Tomorrow. Today. which sets goals for company for the delivery of superior environmental performance and goals of achieving industry leadership in priority areas of importance to each business? For the purpose of getting better results, company has devised the Environmental Business Planning (EBP) process, this process makes sure that while carrying out business plans and strategies environmental factors are considered at all stages and taken very well care of. This process directs the planners and strategy makers to identify key environmental drivers that relate directly to their processes and activities and set their goals in key focus areas of the businesses while identifying projects and actions to achieve those targets. For instance, company defines the reduction in the amount of spills as a priority for the company along with the decrease in the flaring for the production businesses where flaring levels are higher are the matters of utmost importance for the company. Exxon Mobil has the strict policy of obeying the local regulations for environmental protection and where there are no such local regulations; company performs its procedures within such defined rules, principles and standards that ensure environmental protection. These standards are made on sound science and comprehensive risk assessments. For Instance, Exxon Mobil Development Company, which handles the company’s major new upstream projects all over the world, devised Environmental Standards for the nitrogen oxides emissions, offshore drill cuttings discharges, flare and venting reduction, water management, waste management, and land use. All of these Standards that have been defined by the company help the company in identifying environmental improvement opportunities at fairly early stage in project planning when these prescribed standards can be implemented most effectively. Annual Report (Exxon Mobil 2010) With reference to the annual report of the company which is accessible from the company’s website or from the stock exchange it is listed, it is obvious that company is engaged in the high corporate management. With its ongoing operations all around the globe and its presence in many countries of the world, company has successfully managed all of its resources ranging from human resources to financial resources and other resources as well. Company has shown a good earnings trend over decades and this has made company to achieve goals which it has set now for the long term and to add more to the world. By the providence of each and every detail of the company’s assets, operations, and financial resources, company has proved to the world that its management is highly sophisticated yet simple in target setting and that there is an element of innovation in the management of company’s operations. Exxon Mobil has defined its business risks factors in the annual report issued by the corporation. These business risks are divided into certain broad grouping depending on their nature. The business risks as defined by the corporation are Industry and Economic Factors, Competitive Factors, Political and Legal Factors, Project Factors, Market Risk Factors, Risk Management, and Inflation and Other Uncertainties. All of these factors describe the threats faced by the corporation and actions taken to reduce these threats actually describe the corporations’ management success and its practical approach in handling all of these wide range activities around the globe. Industry and Economic Factors Industry and economic factors address the issues faced by the corporation that are external factors and for coping with them, corporation has to find innovative means. These factors may be supply disruptions, economic growth and recession in the country, development of new supply sources and adherence to OPEC quotas by countries. Along with the factors described earlier, corporation can also come across some other threats from external sources such as the weather and technological development, changes in demographics and competitiveness of other energy sources. Competitive Factors Energy and chemical industry all around the world is highly competitive and Exxon Mobil also faces a severe competition by other firms and businesses operating in the market. Exxon Mobil employs all those tactics and methods of competition that are lawful and enhances innovation and productivity. The main feature of the corporations’ competitive success is the fact that Exxon Mobil focuses heavily on the reduction of costs and enhancement of technology. Company focuses on providing its customers with the value that ensures their satisfaction. Thus company’s products have a clear advantage over the products of its competitors and this is mainly due to the encouragement of innovation in the company’s personnel. Political and Legal Factors Political and legal matters also affect the business of the corporation in different parts of the world. These are due to the political instability in the country or due to the promulgation of laws and regulations relating to environmental or energy security matters. Restrictions imposed on exploration, production, imports and exports of products in the country. Tax or royalty increases and also wars and other international matters are the issues that may concern the corporation’s workings. Project Factors Project factors that may affect the performance of the company are the outcomes of negotiations by the co-venture, governments, suppliers, customers or others. Reservoir performance and natural field decline and changes in operating conditions and costs also relate to project factors of the corporation. Security concerns and acts of terrorism which are very frequent in some parts of the world and may impair the feasibility of the project. There is always a probability of unseen technical difficulties in the projects and this may hamper feasibility of the project significantly. Risk Management Risk management of the company is very effective in determining the operating effectiveness of the company. Since the company is a very large corporation and therefore, it is not affected by the activities it performs from day to day. Corporation is most of the times operating with excess cash and its liquidity condition is very good. However, managers take a very good look at the workings of the finance of the company and every step is taken for the well being of the company’s condition. Bibliography Exxon Mobil (2010) Management Systems [Online]. Available from: http://www.exxonmobil.com/corporate/about_operations_mgmt.aspx [accessed 15 May 2010] Exxon Mobil (2010) Assurance Statement [Online]. Available from: http://www.exxonmobil.com/Corporate/community_ccr_assurance.aspx Exxon Mobil (2010) Long Term Financial Resource Management [Online]. Available from: http://www.exxonmobil.com/Corporate/about_operations_finance.aspx Exxon Mobil (2010) Environmental Management and Planning [ONLINE]. Available at: www.exxonmobil.com Skjærseth, J. B. and Skodvin, T. (2001), ‘Climate change and the oil industry: common problems, different strategies’, Global Environmental Politics, 1:4, 43-64. Exxon Mobil (2010) Annual Report [ONLINE]. Available at: www.exxonmobil.com Exxon Mobil (2010) Corporate Citizenship Report [Online]. Available at: www.exxonmobil.com Read More