Iii. Analysis and Implications of Royal Dutch/Shell Group Strategy

Sustainable Development Sust. Dev. 9, 177–196 (2001) DOI: 10.1002/sd.172 SHELL, NIGERIA AND THE OGONI. A STUDY IN UNSUSTAINABLE DEVELOPMENT: III. ANALYSIS AND IMPLICATIONS OF ROYAL DUTCH/SHELL GROUP STRATEGY David Wheeler1,*, Rene´ Rechtman2, Heike Fabig3 and Richard Boele2 1 York University, Canada 2 Kingston University Business School, UK 3 University of Sussex, UK In the first two papers of this trilogy we between Shell and the Ogoni. In this explored the history of the Royal third paper of the trilogy we explore Dutch/Shell group both internationally Shell’s current approach to strategy and locally in Nigeria. We described a formulation and implementation in the catastrophic failure in relations with the context of what this means for Shell’s Ogoni and the consequent fall-out with ability to pursue the ideal of sustainable NGOs and opinion formers more development. We apply two models for globally. In response to these events testing the level of integration of Shell embarked on a revision of its business strategy with sustainability and business principles and initiated a we observe that, whilst Shell’s business multi-million dollar exercise in principles and corporate strategy now stakeholder outreach and embrace notions of market sensitivity communication. We also explored the and internal and external accountability limitations of a purely instrumental to an unprecedented degree, the approach to ‘stakeholder management’ in company has yet to maximize Nigeria and suggested that a opportunities arising from its approach rights-based approach might provide a to sustainability and stakeholder more useful framework for managing responsiveness at the business unit level relationships and achieving reconciliation in Nigeria. Copyright © 2001 John Wiley & Sons, Ltd. and ERP Environment. * Correspondence to: Professor David Wheeler, Schulich School of Business, York University, 4700 Keele Street, Toronto, M3J 1P3, Canada. E-mail: [email protected] Received 5 June 2001 Revised 3 July 2001 Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment. Accepted 21 August 2001 D. WHEELER ET AL. STRATEGIC MANAGEMENT AT group neatly into pairs and we have chosen to SHELL: 1995–2001 discuss them that way for ease of analysis. e believe it is possible to discern Strategic thinking and organizational context significant changes in Shell’s ap- Wproach to strategy over the period If we consider the questions of logical versus 1995–2001 and to link these changes directly creative thinking and control versus chaos as to issues of economic globalization and im- an organizational context, there is no doubt portant new drivers in the marketplace – that for most of the 20th century Shell’s orga- including the need for greater responsiveness nizational culture and managerial mindset to the needs of customers and other was heavily influenced by rational or ‘scien- stakeholders. tific’ thinking. The company’s formative years In this context de Wit and Meyer’s text spanned the close of the 19th century and the Strategy: Process, Content, Context (1998) pro- early decades of the 20th century when the vides some helpful distinctions for consider- management theories of Henri Fayol and ing the changing nature of different di- Frederick Winslow Taylor helped establish mensions of strategic management in large the dominance of rationalist, command and corporations such as Shell. They refer to ‘strat- control approaches to management (Wheeler egy tensions’, eight of which seem particu- and Sillanpa¨a¨, 1997). Moreover, as we de- larly relevant to the Shell story (see Table 1). scribed in the first paper of this trilogy Shell The tensions described by de Wit and always prided itself on its technical competen- Meyer are not choices, rather they are con- cies and as a company has long been domi- tinua along which any organization must find nated by the somewhat technocentric thinking an appropriate and effective balance for its of the engineering profession (Boele et al., current strategy. All organizations need logic 2001a). and creativity, planning and incremental ad- In 2001, it is clear that the technical and the justment etc. The issue is what mix, where rational still dominates Shell’s approach to and when. In our view there is little doubt strategic thinking, and control is still a major that Shell’s position has changed since 1995 element in Shell’s approach to performance with respect to a number of these tensions management. Shell’s Sustainable Develop- and indeed it may be argued that the events ment Management Framework (SDMF) and of that year helped accelerate some of those Road Map are conceptually rational and ap- changes. We will now examine how Shell pear to rely heavily on controls – for example maps across these different dimensions of the symbolically important and very practical strategy and where in the ‘tension continuum’ Letters of Representation by which senior the organization now sits. The dimensions Shell officers assert their commitment to Shell Table 1. Strategy tensions and related perspectives in strategic management (adapted from de Wit and Meyer, 1998). Dimension Tension Strategic perspectives Strategic thinking Logic versus creativity Rational versus generative thinking Organizational context Control versus chaos Organizational leadership versus organizational dynamics Corporate level strategy Responsiveness versus synergy Portfolio versus core competence Business level strategy Markets versus resources Outside-in versus inside-out Strategy formulation Deliberate versus emergent Planning versus incremental adjustment Strategic change Revolution versus evolution Discontinuous versus continuous change International context Globalization versus localization Global convergence versus international diversity Organizational purpose Profitability versus responsibility Shareholder value versus stakeholder values (sic) Copyright © 2001 John Wiley & Sons, Ltd and ERP Environment. Sust. Dev. 9, 177–196 (2001) 178 SHELL, NIGERIA AND THE OGONI III business principles and business integrity dominated by mechanistic, i.e. Newtonian (Boele et al., 2001a; Shell International, 2001a). and Cartesian, thinking, linking planning to However, it is obvious also that Shell now prediction, cause to effect, but in today’s com- recognizes some of the limitations of rational plex world (as in quantum physics), describ- planning and the attempt to maintain abso- ing relationships, probabilities and possi- lute control – highlighted most starkly by bilities is more valuable than attempting pre- their experiences in 1995. dictions based on previous behaviour. She Shell’s public reporting, advertising and cites Fritjof Capra’s (1996) quotation of physi- general communications are now well known cist Henry Stapp asserting that even elemen- for their inclusion of alternative viewpoints tary particles are ‘in essence a set of and their posing of values-based dilemmas relationships that reach outward to other (Shell International, 1998, 1999, 2000, 2001a). It things’. would seem generative dialogue with stake- It is doubtful whether Shell is quite ready holders does now play a part in Shell’s strate- for such post-modern analysis, but at a practi- gic approach. Arguably this is in line with the cal level these observations do underscore the company’s well-known interest in scenario importance of considering both the external building described in its Corporate Strategy business environment and internal resources Board Research ‘Coda’ which has used exter- and competencies in strategy formulation – that nal opinion formers and fora such as the is to say both the ‘outside-in’ and ‘inside-out’ World Business Council on Sustainable Devel- perspectives of business strategy. This point opment to help provoke internal debate and has been made particularly effectively by Ed learning (Shell International, 2001b), but post- Freeman in the context of stakeholder theory 1995 Shell’s approach represents a much more (Freeman, 1984) and by Karl Weick (1987) formalized and conscious attempt to open up with respect to the importance of ‘enactment’ myriad conversations with the corporation i.e. engagement with the external environ- under the general heading ‘Tell Shell’. ment for effective strategy-making. From a To any student of the ‘new sciences’ and power and resources perspective much the chaos and complexity in organizations Shell’s same point has been made by Pfeffer and difficulties in trying to control both internal Salancik (1978). However, equally important systems and external debate with stakehold- is the consideration of internal relationships ers in the mid-1990s would not have come as and capabilities, typically associated with the a total surprise. The more reliance placed on ‘resource based view’ of strategy (Barney, rationality and technical control systems, the 1991; Grant, 1991; Hamel and Prahalad, 1993, greater the likelihood that external factors will 1994). We will now consider these factors in intervene to threaten the established equi- further detail in the context of Shell’s ap- librium (Gleick, 1987; Levy, 1994; Stacey, proach to corporate and business level 1996). strategy. In Leadership and the New Science, Meg Wheatley (1999) challenges conventional no- Corporate and business level strategy tions of leadership and organization with ref- erence to the sciences of quantum physics, According to de Wit and Meyer, in corporate self-organizing biological systems and chaos and business level strategies the tensions are theory. Wheatley

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