Refocusing Business Processes on Operational Essentials
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From the perspective of a project manager in the oil & gas contracting industry, a look at cost effectiveness in the industry over the past 30 years and some thoughts about over-processing, spec-creep, and making progress by focusing on operation, not administration.
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Refocusing Business Processes on Operational Essentials
- 1. Refocusing Business Processes on Operational Essentials
- 2. Operational Focus Downsizing and cost cutting measures can threaten the soul of any business. How can we make sure that the cuts that are being made are the right ones? How can we be sure when we restructure and reorganize our businesses that we are doing so in a way that retains the talent and skills that will be required when we face growth again? I define operational focus as not losing sight of our core offerings as a business, and stripping down everything that doesn’t directly lead to winning and executing this core work.
- 3. Progress There is one important question that we should all be asking ourselves, both in good times and in bad: “what is progress?” What does progress look like during an industry recession? Progress can take many forms and is usually about doing something better, improving a process or a product, but there is one thing it most certainly is not: Progress is NOT doing better what doesn’t need to be done at all.
- 4. Over Processing The phrase “Over Processing” has grown out of one of the many “lean” methodologies of project management, where we talk about business waste. What I care most about and find most relevant to my daily life is the waste of over processing. Over processing is defined as: “unnecessary effort which adds no value to a product or service.” Over processing can lead to many of the other kinds of waste too, by forcing people to wait for a particular process to be completed, or by wasting employee potential on menial and repetitive tasks. But at its core, it is about making things more complicated than they need to be.
- 5. Over Processing in Oil & Gas In 1964, the USA’s most valuable company, AT&T, was worth $267 billion in today’s dollars and employed 758,611 people. Today’s telecommunications giant, Google, is worth $370 billion but has only about 55,000 employees— less than a tenth the size of AT&T’s workforce in its heyday. [1] How does that translate into the oil and gas industry? In 2014 according to the International Association of Oil & Gas Producers, there were 4.3 billion manhours logged by companies and contractors in the industry, contributing to the production of 94 million barrels a day. [2] That’s just under 8 barrels produced for each hour someone puts on a timesheet. Thirty years ago a manhour was bringing in 37. If telecommunications is 20 times more efficient, we’re 5 times LESS efficient than the previous generation.
- 6. Inflating revenue has been compensating for the decrease in efficiency.
- 7. In 1986 and 1987, each manhour was generating as many dollars as it was in 2013 and 2014. It didn’t matter that we were only bringing in 7 or 8 barrels, because they were selling for $100 each!
- 8. Spec Creep We are all familiar with scope-creep, what about spec-creep? It’s always more: more accuracy, more documentation, more detail, and then one day we’re in a position where we can’t afford it any more. We’ve created thousands of costly procedures, made our back office support functions so complicated we have four or five departments devoted to it. What value is it adding? I believe that finance, HR, HSEQ, and supply chain all need to refocus their efforts on supporting operations, and the leaders in our industry need to stop allowing the back office departments to dictate complicated and costly procedures.
- 9. Spec Creep “Everything should be made as simple as possible, but not simpler.” -Albert Einstein When was the last time you looked at a document coding manual and said “that’s definitely as simple as it can be!”? Nothing should be getting harder, nothing should require greater specialization or more business units, departments, levels of management. Yes, the specifications are getting stricter and more complicated, but we have tools at our disposal today that were inconceivable just a few decades ago.
- 10. Spec Creep Simplification and Planning is what is behind every potential cost saving measure we have. When a client requests a change it has to filter through all the subcontractors, attached to a chain of invoices each with a 15% markup. Negotiating a 7.5% markup isn’t the answer because the costs incurred by the change are real. Simplify the requirements! How many shades of subsea yellow paint do there really need to be? Is any of that ambiguity adding operational value? Maybe one day you find the perfect shade of blue for a chart or a subsea template is painted the absolutely perfect shade of yellow. Did you add value that day? Did you make progress? [3]
- 11. References [1] http://www.theatlantic.com/magazine/archive/2015/07/world-without- work/395294/ [2] http://www.iogp.org/pubs/2014s.pdf [3] http://www.vest24.no/oljekrisen-hva-na/o/5-82-24396
- 13. These slides are based on a presentation held in Abu Dhabi on 28.10.2015 at IMCA’s Annual Seminar. The original presentation can be found here: http://prezi.com/_4i4qzqwjy3c/?utm_campaign=share&utm_medium=copy&rc=ex0share The content in these slides reflects the topics discussed by myself during the conference and represent my personal thoughts and opinions. These opinions are not necessarily shared by my colleagues and management at DOF Subsea. Celina Thom October, 2015 https://no.linkedin.com/in/celinathom