Royal Dutch/Shell In Transition Mark A. Jamison “Leadership in Infrastructure Policy”1 www.purc.ufl.edu “Given the choice between supporting your position or admitting that you might be wrong, most people get busy on the proof.” - John Kenneth Galbraith “Leadership in Infrastructure Policy”2 www.purc.ufl.edu Leadership Conventional view Adaptive • Directing others by • Mobilizing people to convincing, inspiring, tackle challenges that or coercing are controversial and • You have the defy easy answers authority, formal or • You disclose threats informal, to direct the and ambiguities, and work orchestrate learning “Leadership in Infrastructure Policy”3 www.purc.ufl.edu When to apply Conventional view Adaptive • Problems are known • Problems are hard to and accepted define; in denial • Ready for technically • Solutions are illusive; correct solution nothing works • Experts can develop • People need to adjust solutions to unknown realities “Leadership in Infrastructure Policy”4 www.purc.ufl.edu Setting for case • Phil Watts Name dDitfPliEid Director of Planning, Environmen t, and External Affairs, 1/1/96 “You are talki ng to someone w ho was in the eye of the storm.” “Leadership in Infrastructure Policy”5 www.purc.ufl.edu Background on Shell • Formed around 1900 • Led by “strong man” Henri Deterding Centralized power Rumored ties to Hitler • Shell declined until he was forced out in the 1930s • What should Shell do to recover? “Leadership in Infrastructure Policy”6 www.purc.ufl.edu Background on Shell • Through 1970s and into the 1990s Decentralized power Non-political policy • 1990s Financial Times: 3rd in world as most respected company Largest oil company in the world • 130 countries and 101,000 emppyloyees “Leadership in Infrastructure Policy”7 www.purc.ufl.edu Nigeria • Watts in charge of Nigerian operations, 1991-94 • Most populated country in Africa • Colonized by British and given freedom in 1960s • Mos tly v io len t, m ilitary ru lers un til recen tly • Rich in oil and other resources • Oil gave $10 billion annually to Nigerian government, perceived as most corrupt in world “Leadership in Infrastructure Policy”8 www.purc.ufl.edu Shell in Nigeria • Shell most prominent in delta • Greenpeace claimed Shell’s operations “an ecological disaster” (oil spills; sabotage) Shell can show that oil spills result from sabotagg;e; villag es grew u p around oil lines • Journalists unable to verify Greenpeace claims “Leadership in Infrastructure Policy”9 www.purc.ufl.edu Shell in Nigeria • Local activists (Ken Saro-Wiwa) protest; arrested by government for inciting murder (military trial) Shell: Silent ppy(ublically (non-political polic y; liabilit y); talked privately with government officials Saro-Wiwa and 8 others executed • Shell invests $3.9 billion in LNG facility in Nigeria “outrage”; supports corruption “Leadership in Infrastructure Policy”10 www.purc.ufl.edu Brent Spar • Watts regional coordinator for Europe 1995 • Shell decides to dispppgyyose of Brent Spar storage buoy by sinking in Atlantic deep waters 30 month study of environmental impact; government approval • Greenpeace says Brent Spar toxic Television coverage; public outcry; weak government support Boycotts, bombings, and shootings at Shell stations in Germany • Shell pu ts Brent Spar in storage • Greenpeace admits it was wrong “Leadership in Infrastructure Policy”11 www.purc.ufl.edu Financial Results • May 1994, Chairman Cor Kerkströter AtAverage return on capit itl79%idtal 7.9%; industry average is 9.4% Shell is “bureaucra tic, inwar d-lkilooking, complacent, self-satisfied, arrogant… technocentric and insufficiently entrepreneurial.” “Leadership in Infrastructure Policy”12 www.purc.ufl.edu Questions • Phil Watts in 1996 Name dDitfPliEid Director of Planning, Environmen t, and External Affairs • Wha t is the na ture o f She ll’s pro blem ? • What will Phil Watts recommend to Chairman Kerkströter? “Leadership in Infrastructure Policy”13 www.purc.ufl.edu Approach • Report • Critique • Clarifying questions • Interpret “Leadership in Infrastructure Policy”14 www.purc.ufl.edu Reputation Management • Review Shell’s health, safety, environmental, ethics, human rights, and political involvement policies • Changing Society ’ s Expectations survey “Who are you to change society’s expectations?” • Society’s Changing Expectations (SCE) survey “Leadership in Infrastructure Policy”15 www.purc.ufl.edu SCE • Roundtables in 14 countries 15d1.5 days eac h Dozen outsiders and dozen senior managers “Leadership in Infrastructure Policy”16 www.purc.ufl.edu Roundtable Format • Afternoon Shell only: Most proud about Shell? • Dinner with outsiders – get acquainted • Morning: Outsiders – What do you expect of multinationals? (Shell: Listen) • Shell on ly: Wha t did we hear ? • Shell comment to outsiders • Afternoon: Outsiders reply (Shell: Listen) • Shell only: What does this mean? What should we do? “Leadership in Infrastructure Policy”17 www.purc.ufl.edu Shell Report • “The reason for the mismatch (between society’ s expectations and Shell’ s actions) appears to be, very largely, that society’s expectations have moved on, whereas Shell has not.” • She ll vie w ed as E ur ocen tri c, arr ogan t, short term focused, not interested in renewables, outdated, double standards “Leadership in Infrastructure Policy”18 www.purc.ufl.edu Cultural Differences • Regions have different expectations AiAsians trus ting Europeans less trusting • Want to be informed North Americans even less trusting • Wha t to b e invo lve d “Leadership in Infrastructure Policy”19 www.purc.ufl.edu Debrief • Are you happy with your leadership performance? What are things you do that, if you did them more/less,,y you would be more successful? • What decisions do you make that hold you back? • What do yyyou need to learn about yourself to make changes that would lead to greater success? “Leadership in Infrastructure Policy”20 www.purc.ufl.edu.