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Leadership Style at Royal Dutch Shell

Leadership Style at Royal Dutch Shell

Discuss Leadership Style at Royal Dutch Shell within the Foundation of Human Skills (F.H.S) forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Royal Dutch Shell plc (LSE: RDSA, LSE: RDSB), commonly known as Shell, is a global oil and gas company headquartered ...

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Leadership Style at Royal Dutch Shell
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Netra Shetty
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netrashetty
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Leadership Style at Royal Dutch Shell - May 11th, 2011

Royal Dutch Shell plc (LSE: RDSA, LSE: RDSB), commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office at the Shell Centre in London, United Kingdom.[2] It is the largest energy company and the second-largest company in the world measured by revenues and is one of the six oil and gas "supermajors".[3] It is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading. It also has major renewable energy activities, including in biofuels, hydrogen, solar and wind power.
It has operations in over 90 countries, produces around 3.1 million barrels of oil equivalent per day and has 44,000 service stations worldwide.[4] Shell Oil Company, its subsidiary in the United States, is one of its largest businesses.[5]
Its primary listing is on the London Stock Exchange and it is a constituent of the FTSE 100 Index. It has secondary listings on Euronext Amsterdam and the New York Stock Exchange.
Royal Dutch Shell this year has toppled Exxon Mobil from the top of the list of Fortune Global 500 companies, just as the Dutch oil company gets a new CEO. Peter Voser, 50, is a Swiss finance expert and Shell veteran who left the company in 2002 to help turn around the Swiss engineering firm ABB, and then came roaring back two years later.

Even before he took the helm on July 1, Voser signaled that Shell was in for some internal upheaval under his leadership. In late May he fired off a companywide memo complaining that costs were too high, the organization was too complex, and its culture "too consensus-oriented."

The memo, an implicit swipe at the Dutchman he replaced, Jeroen van der Veer, laid out a roadmap for the changes he's planning to implement. One is an organizational revamp that has already led to several high-level departures, including that of the highest-ranking woman in the industry, Linda Cook. "How we work will change," Voser promised in the memo.

Even as he flew around the world visiting Shell operations and settling into his new job, Voser found time to answer some questions from Fortune.

You made headlines even before taking over as CEO with a blunt memo announcing some important organizational changes and the need for "a strong performance culture" at Shell. Is this bluntness typical of your management style, or how would you characterize that style?

Call it bluntness if you like, but I don't see it like that. I like to be direct and open. I like to listen and engage with our staff, our investors, customers, partners, and other stakeholders, such as governments. I have a hunger for information. I like vigorous intellectual discussion and then to make firm decisions.

I like to keep things simple and clear in the way I run the company. For me, the execution needs to be competitive. It's about absolute clarity on strategy and what you want on operational performance. It's about focus, speed, and accountability for delivery. Everyone needs to know what is expected of them. You need to measure performance, have resources to deal with the highest priorities, and leave behind anything that isn't necessary to carry.

Don't forget I know this company well. So I hit the ground running. I know what makes up our DNA, where our strengths are, and know what we can achieve. We have a long track record of developing farsighted market-changing technology that changes the face of our industry. We are focusing on what we do best and are anchoring ourselves back where we are strong.

I believe in strong leadership, with leaders who are visible, prepared to listen -- and humble in their approach, but at the same time able to make tough choices and also able to bring their people along with them because of the respect they generate.

What do you think are your main strengths for this job? Weaknesses?

I prefer to turn this around. Leaders should have vision and conviction. Leaders should set targets. Leaders should develop people. Leaders should be willing to take risks and be themselves. In a job like mine you must have all these qualities.

Getting the best out of every member of your team is essential. You also need to be able to drive accountability but at the same time empower people and foster localized entrepreneurialism.

You mustn't lose yourself in detail, that's one of the biggest challenges you have as a CEO of a company this size. You need to make sure you can operate with less information and still make decisions. You need to get the waste out of your system, and actually focus on those things you really need to deliver.

From a personal point of view I like to continually push myself to the next level and to learn, and through this develop my capabilities. I am a curious, slightly restless person, never happy with my own status quo. I don't let it fester. When I need to stretch my abilities I take action and do something about it.

What have been the most formative moments in your career until now? Please describe them as fully as you can.

Well, strange as it may sound I thrive in turbulent times. That's when you learn not to complain, not to make excuses. And to tackle the problem pragmatically with all available means.

Early in my career at Shell (RDSB) I was sent to Latin America to manage a lubricants plant and distribution operations. This definitely was at a time of crisis. There was hyperinflation -- not typically what a Swiss is used to. It was a matter of daily survival and daily deliveries were key. I arrived with no Spanish and had to learn fast. You had boom times which followed the inflation, but you needed to keep the business lean and mean to be ready to weather the next cyclical storm. That's where I learnt a lot about leadership, and operational focus, and getting the most out of my team. It was the only way to survive. You had thousands of percent of inflation, and thousands of percent of devaluation, so it was an interesting experience.


I returned to Europe to drive the restructuring and unification of the European downstream organization. I needed clear vision and conviction, but it was also critical to move quickly and learn as we moved along. It's hard, as you know, to get alignment between Europeans, but we did it. You also need to manage resistance of some layers of middle management. Vision is often bought into at the top, and by front-line staff, but there is often passive resistance in the middle ranks to change, which you have to deal with.

As you know I left Shell for a short period to go to work for ABB. The main driver for me was to be CFO of a quoted company. I wanted that experience. I was ready and impatient with myself, and I couldn't see that happening fast enough at Shell. As you know I relished in the experience at ABB. It was about survival, and we restructured the company, while sustaining sharp operational performance. Had we not done that, we would have gone under. I learnt that it's better to drive change yourself first, than to be forced by external events to do it. So my time at ABB was truly a formative experience.

Have you had important mentors? Who are they? How specifically did they influence you?

I don't believe in having mentors. I learn from everyone -- internally and externally to get the best view. I like the contact. It has to be real with real people. I need to be out there and hear what's on people's minds.

In terms of Shell being influenced by others, I get concerned when some suggest we are moving to be like another company. Culture is not a copy game. Our DNA is our DNA. You can't change the DNA of a company but you can optimize it.

We are strong in technology development, strong in operational performance, and we are strong in local stakeholder management. But we are weaker in accountability, focus and discipline. So this is not about centralizing or decentralizing or other organizational changes: I'm simply trying to get the best out of our people.

The word around Washington with a new Administration is that with higher mileage standards and a weakened cap and trade bill in Congress, oil is the "loser" and coal the "winner." Do you also read the situation that way?

No, I don't see it that way. Shell supports, in general, efforts to manage nationally and ultimately internationally aligned policies to address climate change.

But we do think that coal-fired power and liquid transport fuels are two very different things and need different measures to reduce emissions effectively. For liquid fuels, higher performance standards are part of the solution, as is blending in sustainably sourced biofuels. What you cannot do is cap emissions from millions of exhaust pipes.

But it's perfectly possible to cap emissions from several hundreds of power stations. According to IEA statistics, between now and 2030, the growth in CO2 emissions from coal-fired power in China, India, and the U.S. alone will be around double the growth of emissions from the transport sector worldwide. The best way to reduce emissions from power stations and other large stationary emission sources is to set caps for the emissions themselves and introduce allowances that can be traded, so that companies have a commercial incentive to go for the most cost-effective solutions.

Recently Exxon's Rex Tillerson said that in 2050 we'd still be getting 80% of our energy from fossil fuels. Do you agree? How seriously do you think renewables will make an impact, and how heavily are you planning to invest in them?

As I said above, the energy transition is starting to happen, but it will be a gradual process. Our scenario experts believe that renewable resources, if pushed very hard, could provide around one-third of the world's energy by the middle of this century. That's impressive and we are working on that basis. But it also means this: It will take 40 years to get there; and that fossil fuels and nuclear will supply the remaining 70% even then. So all energy resources are required and need to be developed. This also includes resources in areas like offshore Alaska where Shell has a long track record (since 1950) and we have shown that we are a responsible operator.

If you look at the future of mobility, it's not going to be a matter of either-or. Over a billion new vehicles will come on to the world's roads in the first half of this century -- that's more than double the number today. They will be powered by all manner of energy: petrol, diesel, electricity, biofuels, natural gas, and hydrogen. And I feel we at Shell are positioned well for this inevitable transition and will help drive it.

In fact, sustainable mobility is an important concept for us. It plays to our strengths and it's something we want to be part of. We can do that in two ways. First, we can work to reduce the CO2-intensity of liquid transport fuels, through a combination of measures such as higher performance fuels, blending in sustainable biofuels, lighter vehicles, and more efficient engines. Second, we can play a role in delivering cleaner electricity by increasing the amount of natural gas for the power sector, and through CCS. Without cleaner electricity, vehicle electrification won't really bring many environmental advantages.

More than 90% of
our oil and gas
production is
conventional
nowadays and we
expect to remain a
conventional oil
and gas company
for a long time.SHELL WORLD UK 
I said recently at our Senior Executive
forum in Berlin, cost inflation in this
industry and relatively lower prices mean
that we need to adjust costs back down to
the current oil and gas prices. that will
mean a continued focus on cost discipline.
Not because I’m a finance guy, but
because I’m a business person. We will
tackle cost through a combination of flatter
structures, faster decision making and
simpler ways of working.
[Q] In what areas do you want to see
acceleration?
[A] Shell still works in a rather complex way,
so we need to streamline our processes and
eliminate activities that don’t generate value.
then we have to simplify these processes,
standardise the remaining activities and,
where possible, automate the work. that has
been our philosophy and I plan to drive it
further. At Shell we’re still struggling with
elimination and simplification.
[Q] Shell’s new projects tend to be in
frontier areas, whether deep water, sub-
Arctic or unconventionals like Oil Sands
– all of which are technically challenging
and costly to develop. Will these be
profitable if energy prices stay low?
[A] More than 90% of our oil and gas
production is conventional nowadays and
we expect to remain a conventional oil and
gas company for a long time. Currently
we’re constructing projects that will deliver
one million barrels of new oil equivalent
production over the next few years. We’ve
informed our investors that these new
projects, including gas to liquids in Qatar
and the first expansion phase of our
Canadian oil sands, are actually on
average generating shareholder value
above an oil price of $45 per barrel. So at
today’s oil prices we’re okay.
[Q] But how about later phases in oil sands,
or oil and gas in hostile places like the Arctic?
[A] these issues form part of our discussions
on new projects. yes, these unconventionals
will be more expensive to develop and
produce because of their complexity and the
costs of carbon dioxide (Co2). If these
higher cost levels are not reflected in the
market prices of oil and gas, or if we fail to
reduce costs by introducing new
technologies, these complex sources will
temporarily not be developed. In the longer
term, however, normal market dynamics will
prevail. Supply will probably not be able to
meet demand, so prices will rise and new
production will come on-stream.
[Q] That is Shell’s Scramble scenario, boom
and bust.
[A] And that’s also why we at Shell have a
strong preference for our Blueprints scenario
that shows a co-operating world that tries to
avoid those booms and busts.
[Q] Shell’s announcement that it does not
expect to invest big money again in wind
and solar and to concentrate on biofuels and
carbon capture and storage was met with
great disappointment by green activists.
[A] We have a sizeable wind business and
will continue to operate what we have. over
the coming years we will carefully analyse
how the wind sector will develop, but for the
moment it is quite difficult anywhere in the
world to have projects that meet our
expectations on profitability. We also have a
solar development project in germany, which
I consider as research and development
(r&d) activities. then there are biofuels. Some
25% of our entire r&d budget goes to
biofuels. We see biofuels as the best fit with
our present and future activities.
[Q] What are your ambitions with biofuels?
Would you accept full-scale first-generation
biofuels production by Shell, despite there
being sustainability issues related to the
food chain and bio-diversity?
[A] our prime focus is on second-generation
biofuels, but we also see ways of producing
biofuels on a sustainable basis with first-
generation technologies. I clearly see ways in
which we can use first-generation
technologies to accelerate the development of
second-generation production.
[Q] The Shell target is still to have a
sizeable business in biofuels in the
medium term.
[A] It is. But it shouldn’t be seen as a stand-
alone business because it’s so closely linked
to our traditional value chain in downstream.
Biofuels will be distributed via our existing
distribution system and marketing networks.
[Q] The outside world says, “Hey guys,
why not get on with it and build a big new
alternative energy business?” How do you
respond to that?
[A] I would like to remind everybody that we
started our liquefied natural gas business
some 30 years ago. At that time it was seen
as unconventional, expensive and risky. We
had the courage, the vision and the strength
to dive into it and develop it. today it is a
world-scale business and we are now seen
as world leader in liquefied gas technologies.
We know how to take risks and we know
that it takes technology breakthroughs to move
forward. the same is true nowadays for
renewables. As a business leader I don’t think
it’s the right approach to try to gain scale
without actually knowing what technology
can do for you.
[Q] The general public and political leaders
would say, “Then speed up these necessary
technology breakthroughs”.
[A] We are. We’re investing now in
demonstration plants in Canada and
germany where we can test the technology
and ways of optimising our operating costs.
once you know these answers, you can go
on to the next phase: the construction of full-
size commercial plants. We also have to face
another reality, namely that timescales and
public agendas are usually short term while
technology and r&d agendas in general are
long term. Energy transition, including carbon
capture and storage, is a very long-term
activity. on the other hand, I do admit that
putting some pressure on this transitional
process can be helpful. Industry and the
general public should develop a common
agenda with clear rules. the challenges are
simply too big and too important to be
worked out in isolation.
[Q] You have a reputation for calmness,
Swiss efficiency and being in the right place
at the right time, according to a Times
journalist. Is that an accurate observation?

[A] yes. I see myself as a calm leader. It takes
a lot for me to lose my temper. I am focused
and disciplined, and want to see things
delivered. I’m also keen on clear
accountabilities and leadership. Leaders
should be decisive. I push accountabilities as
much as I can into the right areas and then
expect people to accept them and deliver.

[Q] In earlier interviews with Swiss
magazines you mentioned that you share
national characteristics like thoroughness,
prudence and down-to-earth.
[A] yes, I love a down-to-earth mentality. I’m
not a big ego CEo type. My philosophy is
that any leader can only be as good as the
sum of all the people in the organisation.
you can never be better, that’s impossible. In
my role as CEo I sit at the top and set the
direction, but the delivery has to come from
all the people in Shell.
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