Saudi Aramco Against Major Performance Structures - Essay Example

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Analysis of Saudi Aramco Against Major Performance Structures Abdullah Adnan Algamdi, 220078861 MM324, Organisational Leadership and Performance Length: 2,563 Dr. Peter McClenaghan and Ms Leanne White October 12th, 2011 Table of Contents 1- Introduction..........................................................................................................................3 Research Question........................................................................................................3 2- Hillgren & Morse Model......................................................................................................3 3- Saudi Aramco.......................................................................................................................6 4- Analysis................................................................................................................................7 Direction.......................................................................................................................7 Competence..................................................................................................................8 Opportunity...................................................................................................................8 Motivation....................................................................................................................9 Culture..........................................................................................................................10 Change Management....................................................................................................11 5- Conclusions..........................................................................................................................11 6- References............................................................................................................................13 1- Introduction This paper examines the key factors that are responsible for high performance in organisations. It employs the Hillgren & Morse Model to examine the main structures in Saudi Aramco, a global petroleum company with its headquarters in the Kingdom of Saudi Arabia. Saudi Aramco controls the largest known oil reserves in the world and is one of the most profitable business ventures on earth (Saudi Aramco Home, 2011). The research therefore employs the model prescribed by Hillgren & Morse to analyse the internal systems and structures of Saudi Aramco that enables the company to maintain its current capacity of producing 12 million barrels of petroleum (Saudi Aramco Annual Report, 2010 p6) each day and also refine, transport and market a similar volume of oil each day. The paper draws on information from the Saudi Aramco website accessed on the date of completing the paper. The main source of information for the analysis was taken from the Saudi Aramco Annual Report of 2010 which is available on the Saudi Aramco website. Research Question: What elements of high performance as prescribed by Hillgren & Morse are employed by Saudi Aramco to maintained sustained high performance in their operations and strategy? 2- Hillgren & Morse Model Hillgren & Morse (1998 p2) identify that there are some common elements of high performance businesses. In other words, they appear to have identified some common structures and systems that exist universally in consistently high performing businesses. These structures, according to them are responsible for the generation of high results and the sustained generation of high performance year after year. In defining high performance, the areas of high performance they identified were “financial results, employee morale and customer care & satisfaction” (Hillgren & Morse, 1998: 2). This shows that in order to attain positive financial results and other stakeholder needs, particularly the needs of employees and customers, the structures they identified in their studies will have to be employed to ensure that optimum results are attained and maintained over an extended period of time. There are four major components of businesses that their study identified as vital for consistent high performance. These components of high performing businesses are: 1. Direction 2. Competence 3. Opportunity & 4. Motivation Direction refers to the strategic framework within which a business operates. Hillgren & Morse (1998) identify that the vision and system to attain the vision identified is the most important direction that businesses need in order to attain high performance. Harrison (2004) identify that strategic management involves the organisation-wide and long-term plan that seeks to enable the organisation to attain its vision and mission into the future. Strategic management is important because it gives the entire organisation a set of ends that every unit of the business must work towards. Fayol in his administrative method of management states that strategy identifies the unity of purpose of a business and helps the various units of the business to work towards the attainment of such ends. Strategic management and planning is important because it sets the targets and framework for operation and also enables the business to identify measure and monitor results. These help organisations to layout their purpose and work hard to attain them. Competence refers to the ability of businesses to attain the vision that they outline. Hillgren & Morse (1998) identify four main pointers of competence that makes a business a high performing entity, they are Technical, Interpersonal, Work management and Economic literacy. Technical refers to the ability of workers in the business to carry out certain important functions that are necessary for the major production activities to be done properly. Technical competence refers to the various important factors that are often unique to the business or industry that are carried out by the business. Interpersonal skills relate to the ability of various individuals and units of the business to interact with each other and work together to achieve a defined end. Interpersonal skills involves the various elements of co-ordination and co-operation within the units of the business in order to attain desired results. Work management involves supervision and oversight of the various functions of the organisation and the linkages of these activities. Economic literacy on the other hand refers to the ability of the business to make optimum use of resources. It has to do with raising finance, using funds for the best purposes and also accounting for these funds and forecasting and taking the right decisions on how to use funds. From Fuller's definition of effectiveness, competency has a lot to do with effectiveness and the elimination of barriers that prevent effectiveness (2003). This therefore has a strong link with the ability of management to supervise and monitor activities in a business to ensure that everything is used for the best purposes only. Hillgren & Morse's definition of opportunity refers to the proper empowerment of employees to carry out the responsibility given to them. They identify four factors that relate to opportunity viz authority, boundaries, processes and resources. Authority refers to the power and ability for individual employees to carry out the functions for which they have been employed. It results from the proper delegation of duties and the giving the delegate enough power to carry out his function. Also, delegation must be accompanied with spelling out clearly, what an individual needs to do, his limits and how his activities fits into the bigger picture. More importantly, an individual given the opportunity to work for an organisation needs to be given the right resources to carry out his function effectively. Motivation refers to the drive and will to carry out the tasks individuals are given in an organisation. Motivation refers to what arouses and sustains interest in carrying out the function given to an individual in a given organisation. A high performing organisation is one where the various workers are motivated and have a strong desire to work and carry out the functions for which they are given. This is because when the drive is not existent, individuals will find it difficult to carry out the function for which they are tasked to meet the standard required by them. Together, the four factors identified in the Hillgren & Morse model interact with each other to organisational culture. Organisational culture is defined by Evans (2001: 40) as the patterns, stability and groups that work together to define the way things are done in a given organisation. Aside these four indicators, change and change management are important factors that affects the performance of businesses (Ford, Ford & McNaramara, 2002: Smith, 2003). Businesses need to change their strategies at different point in time to access the best opportunities in the external environment. This therefore means that the internal structures and cultures must change correspondingly to respond to the various changes in the external environment. 3- Saudi Aramco Saudi Aramco controls the world's largest known oil reserves (Saudi Aramco Annual Report, 2010). It controls oil reserves in Saudi Arabia that holds a total of 260.1 billion barrels of oil. Its annual production for 2010 was 2.9 billion barrels (Saudi Aramco Annual Report, 2010: 5). This level of operations is achieved by a blend of ultra-modern technology and a highly skilled and competent workforce that works together to achieve a high level of reliability and satisfy the petroleum needs of countries around the world (Saudi Aramco Operations, 2011). This level of high performance is astounding and can be analysed using the Hillgren & Morse model to gain an understanding of how they are positioned to meet such high levels of productivity and reliability in their global operations. 4- Analysis This unit of the paper attempts to trace the elements of the Hillgre & Morse model in Saudi Aramco to identify how the components manifest itself in the company. Direction Saudi Aramco's vision is to 'remain a world leader in the production of petroleum-based energy' (Saudi Aramco Home, 2011). The main focus of the company is to maintain its position as the leading producer of oil and petroleum-based energy for a worldwide clientele. Saudi Aramco's strategy is therefore seeks to ensure that every unit of the business uses the best technology to exploit the largest oil fields in the world, which they control to attain this end. Saudi Aramco has three main values that guards it in its bid to remain the largest oil producer: economic progress, environmental awareness and sustainability (Saudi Aramco Vision, 2011). This implies that in setting the strategies that the company uses for its global operations, Saudi Aramco ensures that it works within the boundaries of economic success, that is maximising returns for the shareholders through the use of the best systems and structures. Another barrier within which Saudi Aramco works is environmental awareness, which involves the conscious use of responsible systems to ensure that the natural environment is not adversely affected by their exploitation works. Finally, Saudi Aramco seeks to remain in operation into the foreseeable future. They therefore ensure that strategic decisions are taken in such a way that this end will be attained. In going through their website, the conspicuous element of sustainability is the company's desire to diversify their operations from oil exploitation to other activities which can remain operational even when the oil reserves of the company are exhausted. Competence Saudi Aramco also maintains three main values: innovation, entrepreneurship and educational values. Innovation and the use of the most productive systems is key. Secondly, employees are encouraged to operate with a high degree of autonomy just in the same way that they would if they were operating their own businesses, and this enables them to get the best form the efforts of these employees. Finally, Saudi Aramco is very much interested in hiring the best and also developing the people they hire through continuous training. The President of Saudi Aramco announced that the focus of the human resource base of Saudi Aramco is the 3Es: Education, Experience and Ethics. This framework serves as the fundamental for which each employee is hired and every hired employee is given all the necessary tools to rise in the 3Es. The proposed development of the company's labour force is done through the training and intellectual capital of Saudi Aramco and the use of expert knowledge and mentoring programmes which ensures that there is continuous improvement (Saudi Aramco Annual Report, 2010 p54). Also, the ultra-modern Training Centre of Saudi Aramco held various programmes for 4,600 employees in 2010 alone. Additionally, Saudi Aramco is known for using the most scientific recruitment systems to recruit the most sophisticated individuals around the globe. Opportunity Saudi Aramco is involved the following activities: 1. Exploration 2. Production of Oil/Gas 3. Refining 4. Petrochemicals 5. International Shipping 6. Marketing and 7. Distribution Individuals are employed to work in a specified capacity and each individual is given his or her defined responsibility (Saudi Aramco Network, 2011). Based on this, each employee given authority defined in the employment contract and the necessary resources meant to carry out the responsibilities. Every individual reports to a superior who reports to another and this defines the chain of command which links the various employees to the 7 managers of the company. The seven managers of Saudi Aramco head four petroleum and engineering units, one industrial relations unit, one finance unit and one legal unit (Saudi Aramco Leadership, 2011). These seven managers supervise the day-to-day affairs of the company and ensure that each individual employee has the right authority, resources and the necessary power to carry out the obligations for which he has been tasked. The managers are also supervised by the board of directors which is made up of high ranking officials, some of who represent the Saudi Monarchy and Royal government. Motivation “A dedicated workforce of talented people with a sense of purpose made the year” declared by the President Khalid Al-Falih (Saudi Aramco Annual Report, 2010 p9). This is because Saudi Aramco offers the most competitive and best remuneration packages in the world (Saudi Aramco Home – Careers, 2011). Saudi Aramco employees are paid very high salaries that are at par with the best paying jobs in the world. Secondly, each of the 44,000 employees working in Saudi Arabia has access to various career development packages that enables people to improve their competency levels once they are employed by the company through courses that offer international certification (Saudi Aramco Annual Report p54). Saudi Aramco employees and their families have access to the best medical services with doctors that are employed from the best universities in the world. Saudi Armco also has positive training and services for women who are given very encouraging packages like scholarships once they start to work for Saudi Aramco. These packages makes the average employee of the company dedicated to the work requirements of the company. This is because with all your needs catered for, an employee has little to worry about but the task requirements of Saudi Aramco. This enables the best possible employees to provide the best possible results for the company and this helps the company to grow on the overall scale. Culture The Saudi Aramco business culture is one that promotes co-operation and camaraderie. This is because the company uses various informal systems and structures to ensure that information and communication is at its best within the company. Also, good and sophisticated monitoring systems ensure that Saudi Aramco workers are doing the right things at each point in time. The Saudi Armaco business environment also supports diversity. There are over 54,000 employees from 70 nations. The largest interest groups like Asian employees are given Asian business culture programmes which enhance fraternity and promotes friendship. Saudi Aramco maintains the highest safety standards and ensure that the quality control systems are put ahead of any other activity that they indulge in. Change Management Saudi Aramco runs an independent Research Centre that supports, amongst other things innovation and improvement (Saudi Aramco Network, 2011). Although the company's research team focuses more on the creation of more efficient systems and methods of production, there is a distinct unit tasked with the monitoring of implementation of changes. This unit primarily examines the various changes introduced and reactions in terms of productivity and employee attitudes. This monitoring system enables the company to come up with recommendations which are handled by management about how changes should proceed. 5- Conclusion High performing entities have several factors that are common to them. Hillgren & Morse identify these common factors to be direction, competence, opportunity and motivation. Aside these things, there are issues like change management and organisational culture that go to define the structures of high performing entities. Saudi Aramco maintains one of the best systems and structures in business and operations around the world. These systems are responsible for the business to turn in billions of dollars in revenue. The study indicates that the structures of Saudi Aramco are in sync with the four structures of the Hillgren & Morse model. Additionally, Saudi Aramco maintains a system that enables it to maintain a positive organisational culture and manage change consciously for optimum results. From the Saudi Aramco study, it is conclusive that the main components of high performance organisations identified by Hillgren & Morse is applicable to high performance companies. However, these components might exist in different forms in different companies around the world. References Evans, R. (2001) 'The Culture of Resistance.' The Human Side of School Change: Reform, Resistance, and the Real-Life Problems of School Change / Robert Evans. San Francisco, Calif. : Jossey-Bass ; Chichester :Wiley, 2001. Chapter 3, pp. 40-51 Ford, J. D. Ford, L. W. & McNamara R. (2002) 'Resistance & The Background Conversation of Change' Journal of Organisational Change Management Vol 15 No 2, 2002 pp105 – 121 Fullan, M. (2003) 'Barriers to school leadership' The moral imperative of school leadership / Michael Fullan. Thousand Oaks, Calif.: Corwin Press, c2003. Chapter 3, pp. 13-28 Harrison, M. (2004) 'Using the four HRD stages for organisational renewal' Journal of Management Development Vol. 23 No. 8, 2004 pp. 777-786 Emerald Group Publishing Hillgren, J. & Morse, E. (1998) 'High Performing Organizations.' Executive Excellence. Vol. 15, no. 10, October 1998, pp. 9 Saudi Aramco Annual Review (2010) Retrieved from: http://www.saudiaramco.com/content/dam/Publications/Annual%20Review/Annual%20Review_2010_modified_080611.pdf Saudi Aramco Home (2011) Our Vision. Retrieved from: http://www.saudiaramco.com/en/home.html#our-vision Saudi Aramco Leadership (2011) Our Leaders Retrieved from: http://www.saudiaramco.com/en/home.html#our-company%257Chttp%253A%252F%252Fwww.saudiaramco.com%252Fen%252Fhome%252Four-company%252Fleadership.baseajax.html Saudi Aramco Network (2011) Our Network Retrieved from: http://www.saudiaramco.com/en/home.html#our-company%257Chttp%253A%252F%252Fwww.saudiaramco.com%252Fen%252Fhome%252Four-company%252Four-network.baseajax.html Saudi Aramco Operations (2011) Our Operations Retrieved from: http://www.saudiaramco.com/en/home.html#our-operations%257C%252Fen%252Fhome%252Four-operations.baseajax.html Smith, M.E. (2003) 'Changing an organization's culture: Correlates of success and failure.' The leadership and organization development journal, vol. 24, no. 5, 2003, pp. 249-261 Read More