Change Management At Royal Dutch Shell: A Case Study Analysis

Changes implemented during 2014-2016

The aim of the report is to analyse the factors that has lead to the changes in the management of an organisation. Royal Dutch Shell has been selected as the organization for the case study. Last few years have been turbulent for the oil and gas industry (Herbert and Rothwell 2015). Combined impact of economic uncertainty, geopolitical turmoil accompanied with supply disruption had lead major oil and gas companies to adapt certain changes in their business operation. The change adopted at the Royal Dutch Shell is rather revolutionary that evolutionary.

A sense of urgency was felt and thus changes were bound to make in the organization (Herbert and Rothwell 2015). The report shall aim at understanding the different dimensions of change and the role of leader in this change. McKinney’s 7S framework will be used for evaluating the changes and the Kotter’s 8 step change model shall be used to understand the process of change. In addition to this, certain recommendations will also be offered for better change management.

2. Changes implemented during 2014-2016: 

The last few years made it evident to the management of Royal Dutch Shell that restructuring and changes in the management is evident. The Company needs to focus on its product portfolio along with other capital expenditure and sector based costs (Bralee et al. 2015). The cost can be easily compensated if the oil sector had been providing enough returns in the business but the same was not evident. Increasing power of rivals like British Petroleum and Exxon also created challenging situations for Shell.

2.1 Factors responsible for change:

• Price of oil and gas has followed a trajectory hike. The fragmented and regionalised market has been the major reason behind this change (Hennchen 2015).
• The supplying factor created a major challenge to the oil and gas companies. OPEC’s estimation of production of oil did not go with the flow. The supply did not mirror the demand for the product (co.uk 2015).
• One of the closest rival, once Government owned and highly bureaucratic organization, British Petroleum also became one of the admired and profitable organisations in this sector. In addition to this, BP’s merging with Amoco along with the acquisition of the Atlantic Richfield made it one of the giants in the oil and natural gas sector (Hennchen 2015)
• The then leader at Shell was not competent enough to have the farsightedness of the alarming challenges that the organization has to face in near future (co.uk2016).

1. Strategy: The most significant change that has been evident is the change in the leadership. To focus on the increasing cost of oil, job cut down, cost and investment cut down were the major strategies adopted by the management. In order to incorporate the changes, a number of workshops were conducted and the major organizational heads were included in the discussion to come up with a better strategic option for change. However, these workshops were limited enough to come up with a bigger change (Sarkar 2015).
2. Structure: The restructuring of the organization involved elimination of over 1,000 corporate positions and change in the leadership as well. Marvin Odum, the Unconventional Resource Director and U.S. Country Chairman, was departed from the position; this lead to simplify the structure of the organization (Sarkar 2015). He was replaced by Bruce Culpepperin with a new designation that shall position Shell in the next phase of their development (Shell Global 2016). Focus had been made in turning down the complex structure of the organization into a comparatively simpler one that could support the decision of the management easily.

1. Systems: Change in the system indicates the change in the regular activities among the employees and other stakeholders of the organization. It was found that the employees got accustomed under the leadership of Bruce Culpepperin and the leadership was carried on with much efficiency (Sarkar 2015). Although the organizational culture has always been more autocratic but a change in the leadership brought about change in the organizational culture as well that created a change in the system of the organization.
2. Shared Values:The most important step undertaken by the leader was related to the use of natural gas. Shell has always focused on the supply of the liquefied natural gas because this fuel has been increasing used in electric power plants because of its cost efficiency and sustainable properties. Thus, bigger approach was made and roughly $50 billion was spent in buying BG Group in the early 2016 (Talbot and Boiral 2015). This approach made the deposit of natural gas almost double to Shell. This approach helped the Company to mark its name as an energy giant.
3. Skills: The business approach made by the leader made it clear among the employees that the Company has focused on the natural gas section (Bridges and Bridges 2017). The skills and the far sightedness of the leader were accepted among the employees and other stakeholders. It has been expected that the demand of natural gas will increased by 40% by 2040 unlike 12% growth rate of petroleum oil (Kedzierski 2016). Keeping this into consideration, tactful investment was made to purchase natural gas. The success of the change was evident in the increase of market share of the Company.
4. Staff:With the intension of expansion, Shell tied up with around 55,000 mechanics in the market of India to increase its distribution points and to create loyalty among its consumers (Sarkar 2015). These staffs were capable enough to meet the demand of the people and the standard of the Company was maintained. Several other such changes were evident in different regions of its operation.
5. Style:Democratic form of leadership was adopted by the new leader. Royal Dutch Shell has always been accused of carrying out bureaucratic leadership in the organization (Shell Global 2017). However, changes have been evident and chances were given to others in the organization to become an evident part of the decision making and other leadership approaches.

3. Kotter’s eight step change model to be used for change management: 

The Kotter’s change model is significant for coming up with certain changes in the organization. The successful change requires step by step formulation of the change in the organization. Communication plays the most vital part in this process. The change that was made can be evaluated here:

1. Create urgency:With the emergence in the market, in terms of political and environmental situation of the oil price it was evident that there needs to be change in the organization (Reports.shell.com 2015). Other challenges like increasing competitors in the market were also evident in the market. The management was informed about the need of change and the same was carried on with much efficiency.
2. Building a guide team:The change in the leadership was done with the co-operation of the management team. The CEO and the other important executives were consulted for the change in the organizational structure and the same was also communicated to the other important heads (Press Trust of India 2015). When change is implemented by involving people rather than imposing the same on them, the ultimate result of the change can be more effective.
3. Creating a vision for change: The overall strategy of the change was incorporated. Change in the leadership was important because a leader with better critical approach and industrial knowledge was needed to compensate the situation that had occurred (Ben-Menahem et al. 2013).
4. Communicating the vision: The change in the leadership was announced among the employees as well as to the outer world once the decision was finalised. Official press announcement and official declaration was published on the website of the Company (Trapp 2012). There was lack of much interaction among the various executives of the organization. Since, Shell is a giant company, communication is a challenging factor for the management as well (Shell.co.uk 2016).
5. Removing obstacles:Change in the leadership was bound to create obstacles in the business operation. There was a chance of turmoil situation in the organization at the time of replacing the existing leader (shell.com 2015). However, such situation was not evident after the change in leadership.
6. Creating short-term wins: Since the energy sector was facing major issue related to the economic and the political changes in the industry, the need for immediate action to combat with the challenges was felt. For instance, India, being Shell’s one of the most influential markets launched a lifetime warranty scheme for the Indian registered cars using PurePlus Technology and Shell Helix Ultra (co.uk2016). The warranty would cover other 13 engine parts apart from lubricant related engines. This created a short time profit venture for Shell.
7. Building on the change: The change was carried on systematically. The previous leader was removed from the position and the new leader was appointed in his place.The complete change was communicated thoroughly developing positive attitude among the internal and external stakeholders of the organization (Talbot and Boiral 2015). A positive culture was nurtured in the organization by successful series of changes.
8. Anchoring the changes in corporate culture:The change made was incorporated in a corporate manner. The newly appointed leader was given the opportunity and authority to take major responsibility of the organization. The new leader, Bruce Culpepperin, was given the authority to work accordingly (co.uk 2016). With changes in leadership, the chances of changing the corporate culture also becomes evident. A shift from the bureaucratic culture to a more interactive democratic culture was evident after the changes.

4. Role of leadership in the change management process: 

At Royal Dutch Shell, managerial control vested upon the Committee of Managing Directors, which actually forms the Group’s management team. Strong individual leadership is not present in the organization (Shell Global 2016). Thus, the entire changes in the organization, is a management decision rather than individual leadership decision. The executive committee of Royal Dutch Shell is led by the Chief Executive Officer, Ban van Beurden. Other non-executive members are equally responsible for carrying out any change in the business activity or organizational structure (Shell.co.uk 2016).

The leaders of Shell have always been known for their commitment towards the organization. They are never resistant to any kind of change needed. For instance, the leaders at UK took the responsibility of safety and sustainability at the organization (Shell.co.uk 2016). The business was segmented into different departments and disciplines and proper actions were made. The leaders at Shell are gems of their kind (Shell.com 2016). With the increasing rivalry in the market, the major competitors being British Petroleum, Exxon Mobil Corporation, Total SA and other regional companies as well had created the emergence of the need of change in the organization (Talbot and Boiral 2015).

Factors responsible for change

Change management entails detailed planning with thoughtful ideas. The proposed change should be realistic and relevant enough to support the idea. The leader is responsible for bringing out the change in the organization. For instance, as evident, the leaders at Shell carry out face to face meetings with the important executives of the organization (Ben-Menahem et al. 2013). There is no doubt that Shell has the organizational culture that supports the change management. The leader is also responsible for monitoring the change and keeping a trace of the outcome of the intended change (Provasnek et al. 2016).

5. Justified recommendations to improve change management process: 

As evident that making changes in an organization should be realistic and achievable enough for the leaders as well as other staffs in the organization. The change in the leadership was thoroughly done at the Shell. However, some other recommendations can be made here:

1. Measuring the readiness of the organization to adapt changes: It has been found that the change in the leadership was done within a short time because the macro environmental issues were alarming enough to settle for a change (Kedzierski 2016). However, the readiness of the entire organizational executives were not estimated prior the change. Achieving the integration of the internal staffs became challenging for the management to carry out the change. Thus, it can be recommended that it is indeed important to measure the readiness of others in the organization and then make the change accordingly (Talbot and Boiral 2015).  
2. Interactive workshops and forum for discussion: The announcement of the change in leadership was made evident to the people of the organization by official announcement. However, face to face and interactive communication is important among the executive members of the company so that they understand the importance of the change and if required certain implications can also be made to make better changes. For complex changes, interactive changes bring the best solution to the problem (Grant 2013). Change should always focus on involving people rather than imposing the same on them.
3. Monitoring the change: Monitoring the implemented change happen to be the most important and crucial part of the change management. It has to be understood that change in the organization often lead to changes both internally and externally. With the transfer of leadership at Shell, there has been no such monitoring been evident in the change process (Phadnis et al. 2015). Thus, it can be recommended that a survey among the internal and external stakeholders of Shell can be carried on that the implication of the change can be understood. Side by side monitoring the steps undertaken by the major competitors is also important to keep a trace of the success of the change as implemented (Talbot and Boiral 2015).

6. Conclusion: 

To conclude it can be said that changes in an organization are inevitable because of the various situational factors. As it has been evident in case of Royal Dutch Shell that hike in the price of oil and other petroleum products and its limited supply had created an adverse situation in the energy sector. The prime change management that the organization proposed in its management is the change in its leader as the need of a leader with better far sightedness and experience was required. The change was made according to the corporate culture and the success was evident with the increase in its market share.

Focusing on the investment on purchasing natural gas and short term goals like offering better offers to the consumers purchasing Shell’s product were evident steps that helped the Company to increase its profitability. Thus, it can be said that the change has been done with much efficiency and the credit of the success can be given to the leaders of the organization. A detailed analysis of the complete change process and the role of leadership in change management have been carried on in the report. Based on the analysis, a number of recommendations were also made that could possibly help the organization to adapt better means of change management in the organization.

References:

Ben-Menahem, S.M., Kwee, Z., Volberda, H.W. and Van Den Bosch, F.A., 2013. Strategic renewal over time: the enabling role of potential absorptive capacity in aligning internal and external rates of change. Long Range Planning, 46(3), pp.216-235.

Bralee, A., Peacock, M., Norton, S. and Johnson, S., 2015, December. Developing Safety Leadership Skills at all Levels in an Organisation Drives Goal Zero Performance. In International Petroleum Technology Conference. International Petroleum Technology Conference.

Bridges, W. and Bridges, S., 2017. Managing transitions: Making the most of change. Da Capo Press.

Grant, R.M., 2013. The development of knowledge management in the oil and gas Industry/El desarrollo de la dirección del conocimiento en la industria del petroleo y gas. Universia Business Review, (40), p.92.

Hennchen, E., 2015. Royal Dutch Shell in Nigeria: Where Do Responsibilities End?. Journal of Business Ethics, 129(1), pp.1-25.

Herbert, I. and Rothwell, A.T., 2015. Royal Dutch Shell: a global perspective.

Kedzierski, B.A., 2016. Royal Dutch Shell’s Journey to Strategic Competence Management. Journal of Petroleum Technology, 68(01), pp.46-51.

Luzinski, C., 2014. Identifying Leadership Competencies of the Future: Introducing the Use of Strategic Foresight. Nurse Leader, 12(4), pp.37-47.

Nollert, M., 2015. Transnational corporate ties: a synopsis of theories and empirical findings. Journal of World-Systems Research, 11(2), pp.289-314.

Phadnis, S., Caplice, C., Sheffi, Y. and Singh, M., 2015. Effect of scenario planning on field experts’ judgment of long?range investment decisions. Strategic Management Journal, 36(9), pp.1401-1411.

Press Trust of India 2015 Available at: Shell Lubricants moves to race past 15% market share soon Available at: https://www.business-standard.com/article/pti-stories/shell-lubricants-moves-to-race-past-15-market-share-soon-115061900117_1.html [Accessed on: 23-3-2017]

Provasnek, A.K., Schmid, E., Geissler, B. and Steiner, G., 2016. Sustainable Corporate Entrepreneurship: Performance and Strategies Toward Innovation. Business Strategy and the Environment.

Pwc.co.uk 2015 Opportunities in Adversity Strategies for a Lower Oil Price Available at: https://www.pwc.co.uk/assets/pdf/opportunities-in-adversity-strategies-for-a-lower-oil-price2.pdf [Accessed on: 21-3-2017]

Reports.shell.com 2015 Shell Annual Report 2015, Available at: https://reports.shell.com/annual-report/2015/servicepages/disclaimer.php [Accessed on: 23-3-2017]

Sarkar, J., 2015 Shell gears up for bigger market share Available at: https://timesofindia.indiatimes.com/business/india-business/Shell-gears-up-for-bigger-market-share/articleshow/46114159.cms [Accessed on: 23-3-2017]

Shell Global, 2016 Shell announces senior staff and organisational changes in North America Available at: https://www.shell.com/media/news-and-media-releases/2016/shell-announces-senior-staff-and-organisational-changes-in-north-america.html [Accessed on: 21-3-2017]

Shell.co.uk 2016 Chair Shell UK Limited Available at: https://www.shell.co.uk/about-us/our-people/uk-country-coordination-team.html [Accessed on: 23-3-2017]

Shell.com 2016 Leadership Available at: https://www.shell.com/about-us/leadership.html [Accessed on: 23-3-2017]

Talbot, D. and Boiral, O., 2015. GHG reporting and impression management: An assessment of sustainability reports from the energy sector. Journal of Business Ethics, pp.1-17.

Trapp, R., 2012 Shell adopts tougher management style Available at: https://www.independent.co.uk/news/business/shell-adopts-tougher-management-style-1190651.html [Accessed on: 23-3-2017].

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order