Changes to corporate culture in Amoco Norway 1987-1994
Norway had become a fully fledged oil nation by the early 1980s, when its offshore production was fetching good prices in international markets. The future also looked bright for the multinational oil companies which had established a presence on the Norwegian continental shelf (NCS). But Valhall operator Amoco Norway was among the companies hit when oil prices halved in 1985-86. Declining production also contributed to a fall in earnings. Something clearly had to be done, and a turnaround was launched in late 1987.
Amoco needed a new top man in Stavanger, and Canadian Robert (Bob) Douglas Erickson arrived in late 1987 as managing director with new visions and objectives. Change and reorganisation were key elements in his thinking, which envisaged creating a flexible new organisation with adaptable and innovative employees. Erickson’s goal appears to have been a “fluid” organisation, a flexible entity with flourishing informal internal communication utilising ad hoc structures such as work groups. At the same time, employees would get things done by adapting readily. The task was to create an innovative company which was particularly good at continuously adjusting to every change in the outside world.
So what processes did this Canadian rescuer initiate, and what were their goals? And what theories and organisational philosophies inspired the changes experienced by the company? The ideas and visions pursued by Amoco Norway’s management found expression in the Amoco Info house journal, which was published several times a year and distributed to all employees.
Erickson had his own regular column in this publication “From the President”, which he used to communicate conditions in and changes to the organisations. In addition to other articles, interviews with members of the management at the time and manuals for some of the programmes launched have been used as sources.
When Amoco arrived
A Norwegian subsidiary was established by US oil company Amoco Production Company in 1965 in order to participate actively in drilling operations in the country’s sector of the North Sea. This Amoco Norway Oil Company arm was involved in the offshore hunt from the first licensing round, which was announced on 13 April of the same year.
Amoco applied for 40 blocks in this round together American partners Texas Eastern and Amerada as well as the newly established Norwegian Oil Consortium (Noco). They secured 10 blocks in three licences, including two of the most sought-after holdings on the southernmost NCS. Amoco became operator of these licences, one of which contained Valhall. When this field was established as commercial in 1975 with the eighth well, the job of building up a Norwegian organisation began in earnest.
Its initial assignment was to plan and build the necessary platforms. An establishment for operating the offshore facilities followed, with a corresponding “shadow” team on land. This outfit had a hierarchical configuration based on large, ineffective departments with a number of middle managers and foremen.[REMOVE]Fotnote: Interview Nomi-00007-03, Norwegian Petroleum Museum.
The company moved to new premises in central Stavanger, engineering design of the platforms began and fabrication contracts were awarded. Valhall production was formally inaugurated on 26 May 1983. Everything looked promising, but the field soon proved to be one of the most challenging on the NCS.
That reflected the chalk reservoir, which differed from most producing formations off Norway. Wells collapsed and the soft rock followed the wellstream to the topside. Large quantities of sludge looking like discoloured toothpaste had to be dug from the drill floor. This southernmost Norwegian field was dubbed the “problem child” by the media in 1985, when only one of its five wells was still producing and overall daily output lay below 40 000 barrels.
That was less than half the planned volume. Since the expected progress had stalled, no personnel were being recruited with an eye to sustaining future operations.
Departments were downsized, and the exploration team almost disappeared – it was reduced to just three people. In addition came the dramatic oil price slump of the mid-1980s.
No resources were available for active exploration, and Amoco refused to apply in the next licensing rounds. The vision of becoming one of the major operators on the NCS vanished, and all energy and attention focused on getting Valhall back into profit.
The organisation showed signs of fatigue, and employees were frustrated.[REMOVE]Fotnote: Interview Nomi-00007-03, Norwegian Petroleum Museum. Staff turnover reached no less than 31.3 per cent during this period – a dramatic proportion.[REMOVE]Fotnote: Amoco Info , 1991, no 1.
Unemployment was low in Norway at the time, and many personnel opted to try their luck elsewhere rather than sticking to a company with no prospects. Amoco lost much expertise to rivals.
The many disappointments and poor earnings – Norway contributed only about five per cent of Amoco’s overall production – also led to a downgrading of the Stavanger subsidiary.
Offered a generous retirement package, the managing director was not replaced. This signalled that the Norwegian arm had lost status and was now under more direct management from the USA.
Uncertainty prevailed in the company about what the senior executives in Chicago and Houston intended to do with it. But Erickson’s arrival suddenly reversed the outlook.
The new chief executive launched a turnaround which was to extend over several years, with one process following on the heels of another. His goal was to build a new corporate culture and thereby turn Amoco Norway into an outstanding company which led the way. Culture, values and visions were thought to be vital in achieving this, and Erickson was among the many who believed that companies possessed attitudes which were capable of amendment. The idea appears to have been that companies needed symbols, ideologies, languages, beliefs, rituals and myths. Clear shared values underpinned the idea that the interests of company and employees were indistinguishable.[REMOVE]Fotnote: Peters, Thomas J, and Waterman, Robert H, Jr (1982): In search of excellence: lessons from America’s best-run companies , New York, Harper & Row, 77.
Most companies have heroic legends which express the fundamentals of their culture, and that also applied to Amoco Production Company. Its history – or myth – had begun a century earlier on a piece of waste ground in Indiana, where the Standard Oil Trust of Indiana (later Amoco Production Corporation) was founded in 1889. This modest refinery developed into a big international energy company with worldwide operations and a level of success on a par with the biggest of the oil majors. According to the legend, Amoco’s progress was a result of the people who composed it – the able employees who liked a challenge and were inspired to work towards the company’s goals. Their motivation, combined with good management, had ensured success. Amoco Norway was part of the “family”, and therefore also inculcated with this traditional ability and pride in one’s work.
Although Amoco’s real history differed a bit – it was founded by John D Rockefeller as part of his Standard Oil Trust – the myth helped to give employees self-esteem and a sense of belonging. Erickson’s cultural realignment began with the formulation of a vision for Amoco Norway’s future, where he spelt out what the company should look like in 10 years time.
He envisaged returning to Stavanger as a representative of the top management to learn from the Norwegian experience and the company’s success. His hope was that everyone in the city would know the Amoco name and that it would adorn the front pages of the nation’s newspapers in headlines such as “giant discovery for Amoco” or “successful Amoco development”.
This vision was conveyed to the workforce both offshore and on land. Erickson seems to have wanted to get everyone to feel and believe that the company would grow and that they were part of this progress – and perhaps its most important element. It was emphasised that attention could not be concentrated only on the bottom line in the accounts, but should also extend to the employees.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , 229.
Amoco Norway would also be moving to new premises – a landmark building, modern, forward-looking and conveying a warm impression. It would also be tailored for the multidisciplinary teamwork which Erickson regarded as the new way of working. The carefully configured layout included an open reception area and a centrally located office for Erickson, where he would be available – and not hidden on the top floor with the best view. These concepts were greeted with enthusiasm both on land and offshore. Erickson and his Norwegian team also received plaudits when they presented them to top management in the USA.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , 229.
This vision summed up a number of the elements which were to occupy a central place in the change processes launched over the next few years.
Although much was talked about the employees, the company still had to make money. All personnel were polled in 1988 to identify areas where action could be taken to make Amoco’s whole international organisation better and more efficient.
Erickson’s comment on this organisational effectiveness survey was: “I know you’ll see the positive aspects of this process, and take this unique chance to make your own contribution”.[REMOVE]Fotnote: Amoco Info , no 1, 1988, From the President.
The response rate was high both globally and in Norway, exceeding management expectations. Focus groups were established to identify problems in the Norwegian organisation on the basis of the responses, find their causes and come up with solutions.[REMOVE]Fotnote: Amoco Info , no 3, 1988.
At the same time, the management constantly highlighted the difficult conditions facing the industry when oil prices were persistently low.
Erickson wrote: “I’d therefore urge everyone to work efficiently and cost-consciously, and to try to find new ways of improving our general productivity both on land and offshore, so that the effect of the tough financial conditions can be minimised”.[REMOVE]Fotnote: Amoco Info , no 3, 1988, From the President.
A key finding of the survey globally was the need to reform the management culture. The answer for the parent company and for Erickson was a new approach, where managers naturally and regularly created a working environment which inspired employees to be creative.
Searching for excellence
The processes initiated, and not least the language used, clearly indicate that Erickson and Amoco Production Company had been inspired by organisational pundits writing in the early 1980s. Known as “new leadership”, their theories were characterised by a focus on the internal culture of organisations and its significance for efficiency and flexibility.
Leadership was defined as culture-building – in other words, an effective manager was one who succeeded in creating a constructive corporate culture. But this set of attitudes could not be shaped by senior management alone. It emerged through interaction between the members of the organisation. Perhaps the best-known work on “new leadership” is In search of excellence , by Thomas J Peters and Robert H Waterman Jr, which appeared in 1982. This book seeks to identify the characteristics of leadership in the world’s most successful companies – as defined by the authors.[REMOVE]Fotnote: Peters, Thomas J, and Waterman, Robert H, Jr (1982): In search of excellence: lessons from America’s best-run companies , New York, Harper & Row.
Both Amoco and Erickson appear to have been influenced by this innovative theory on corporate culture, and perhaps particularly by the Peters and Waterman study. Success stories highlighted in their book were held to share eight features – including closeness to customers, active decision-making, autonomy and entrepreneurship, and a simple structure with lean staffs. The others were pursuing productivity through people, being hands-on and value-driven, sticking to the business they knew, and being able to swap between loose and tight management. In the authors’ view, the rational and analytical approach belonged to an old paradigm which underplayed values such as shared culture, internal competition and pressure from colleagues. But these were precisely the qualities regarded as the most important motivational forces by the proponents of “new leadership”.
If Peters and Waterman were to be believed, becoming an excellent company – the best of the best – required several elements to coincide.
The main goal was to build up a strong culture and a set of base values rooted in a vision. That had to start with management. The organisation had to be simple, with a small top team.
This structure had to be reorganised regularly to maintain flexibility and speed, and to counteract the normal tendency towards conformity and inertia.
Employees had to be encouraged to innovate and experiment, and the best way to achieve this was to strive for organisational fluidity.
This was characterised by informal communication between ad hoc work teams with relatively few members, which existed for limited period – preferably only a few months.
Personnel should be viewed as a source of ideas, and not just pairs of hands. Management needed to be both practical and value-driven, and it was important to bear in mind that the company’s fundamental philosophy at any given time meant more for its results than technological or financial resources.
To become successful, a company also had to “stick to the knitting” – carry on with what it knew best in terms of its core business.
Peters and Waterman also emphasised both hard and soft values, arguing that management should display simultaneous loose and tight properties.
The overall idea of adopting a strong culture and clear common base values was to create a family feeling among employees, with the company giving them a sense of belonging.
According to the two authors, so strong was the need for meaning that “most people [would] yield a fair degree of latitude or freedom to institutions which gave it to them”.
The final and crucial theme identified by Peters and Waterman was the relationship with the customer, which they believed could not be over-exaggerated. Companies must listen to both internal and external clients, seek their advice and learn from them.
As noted above, this culture-based theory seems to have been the foundation on which Erickson intended to build the new Amoco Norway.
Healthy organisation with healthy bodies
The new chief executive was concerned to build an organisation which collaborated. Arriving in Norway, he was surprised at the compartmentalised or “silo” thinking which dominated the company.
He found that departments such as procurement, drilling, maintenance and operation failed to communicate with each other, and pursued to some extent different goals.[REMOVE]Fotnote: Interview Nomi-00007-03, Norwegian Petroleum Museum. The result was an inefficient organisation and systemic delays.
Stavanger hero Kjell Schou-Andreassen – a former football player and one of Norway’s most successful coaches in this sport – was recruited to launch the cultural shift.
After his sporting career was over, he had built up his own company specialising in personal development and offered experience of building teams.
The idea was that he could contribute strategies and know-how to creating Amoco’s new culture. This aimed “to improve an already fine organisation by ensuring that each and every one of us works together as a single team towards a common goal”.[REMOVE]Fotnote: Amoco Info , no 1, 1988, From the President.
Attention focused on developing a management responsibility at every level through systematic training. A good team was one governed by a set of rules, and breaching these would carry penalties. Nothing was said about what these might be.
In addition to getting all players to obey the rules and perform together, the emphasis was on shifting rapidly between defence and attack.
The football rhetoric was unmistakable. A balance also had to be struck between the challenges taken on by the teams and the skills available, and they had to pull in the same direction.
In addition, a health programme was incorporated in the new strategy. Dag Kaas, a well-known sports and management coach, joined the implementation group.
A healthy body – created by good diet and exercise – was to help build a sense of solidarity in the company. Personnel were encouraged to compete jointly in sporting events, for example.
Several elements from the innovative culture theories were merged in the new management development programme. Employees would learn to work in teams with shared values and common goals. This also helped to build a common identity.
The workforce was eventually offered exercise equipment and other products in Amoco’s colours and logo, which they could use in their free time. A case in point was Stavanger’s annual Ingrid run, which had aroused great enthusiasm among employees.
But this “uniform-wearing” was not necessarily adopted only to create a sense of identity, according to senior researcher Ulla Forseth at the Norwegian University of Science and Technology (NTNU).[REMOVE]Fotnote: Forseth, Ulla, “Som logo”, Arbeid for livet , Oslo, 2002.
She argues that, by turning personnel into living mannequins, a company achieves a personification of its logo. Employees identify with the services it offers and thereby become willing to devote “a little extra”.
American sociologist Richard Sennett, a specialist on working life, writes in The Corrosion of Characterabout the steady spread of sporting rhetoric in companies – with departments becoming teams and bosses becoming facilitators or team leaders.
Companies can then alter, adapt and reorganise without managers having to justify their actions. Everything is down to change – and “change” is not a person who can accept blame.[REMOVE]Fotnote: Sennett, Richard (1998): The Corrosion of Character, the Personal Consequences of Work in the New Capitalism , Norton, 115.
To create the organisation and corporate culture Erickson wanted, the whole senior management had to acquire a greater professional and commercial stamp. Valhall had to be operated as a team effort, and Amoco Norway must participate in future licensing rounds.
According to Erickson, the company’s most important objective in 1989 was:
to participate in exploration for and exploitation of petroleum deposits on the NCS. The goal is that this will be accomplished in an able and cost-conscious way in order to ensure maximum financial results for Amoco and Norwegian society. The activities involved will be pursued in a responsible and professional manner with regard to health, safety and the environment.[REMOVE]Fotnote: Amoco Info , extra edition, February-March 1989.
In line with the theories expounded by Peters and Waterman, Erickson also maintained that an organisational change had to start with the management.
“I chose to devote a lot of time and energy to building up the management, and made it clear that it would take a full commitment by everyone to achieve success,” he commented in an interview after his departure from Amoco.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , 228.
Managers would show the way. All the jargon was deployed: they would lead, motivate, create trust, stand for openness and acknowledge their subordinates.
Many sessions were organised for top executives as well as the expanded management group. Team-building emphasised learning how to talk together in an open manner and to collaborate. The idea was that everyone formed part of a wider team, which also included suppliers, contractors and customers.
Work on building the new culture was eventually moved out into the teams. By the time things got that far, however, the programme was no longer functioning fully in line with the intentions.
Another aspect of Erickson’s management philosophy also appears to have been taken directly from the theories propounded by Peters and Waterman.
The aim was to work together with the employees, set an example, listen, be flexible, take decisions and have a bit of fun. So simple – and so difficult.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , 230.
To achieve this, Erickson practised “management by wandering around”.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , 230.
A manager should not call subordinates into his or her office, but instead visit them in theirs.
He appears to have believed in the benefits of giving personal recognition. Employees had to feel they could safely go to management with ideas or critical comments.
While this might be regarded as generosity, pleasure might not be the only result of recognising personnel. Peters and Waterman suggested it could also concern control, using instincts, and gauging the mood to detect if things were going well or badly.
A manager had to make themselves available, but their most important job was to listen.[REMOVE]Fotnote: Peters, Thomas J, and Waterman, Robert H, Jr (1982): In search of excellence: lessons from America’s best-run companies , New York, Harper & Row, 51. Peters calls this leadership style “management by wandering around”. He did not believe in management by edict, but more in informal control through casual personal communication.
Erickson had hung a graph outside his office door to show how much time he had devoted to walking around. It indicated how many employees he had visited and how long he had spent on this.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , 230.
He also incorporated the concept of visible management and interpersonal communication in the drawings for the new offices which stood ready in Stavanger harbour in 1994.
The building was to be light and open, with many opportunities for meeting across technical disciplines. This reflected the philosophy that people who talked together solved problems and fixed things rather than adopting positions, quarrelling and delaying processes.
As mentioned above, a key concept was that Erickson’s office would not be located out of sight on the top floor with the best view, but in the centre of the building and accessible.
Another aspect of the Canadian’s management style was to have fun, an approach also endorsed by Peters and Waterman.[REMOVE]Fotnote: Peters, Thomas J, and Waterman, Robert H, Jr (1982): In Search of Excellence, 240. Amoco Norway became famed for its get-togethers and celebrations.
No expense was spared for the Christmas party. And to help build an Amoco identity, a different department each year was charged with providing the entertainment – helping to build solidarity and encourage creativity.
Amoco performance management
Erickson’s ideas and intentions on building a new company culture naturally also resulted in practical changes. An important step was a new assessment system for personnel – Amoco performance management (APM).
Everyone participating in this new process had to take a two-day course in order to understand what was involved and to establish a unified attitude towards it throughout the company.[REMOVE]Fotnote: Amoco Info , no 4, 1989, From the President.
Initiated by Amoco Production Company and applied to all its subsidiaries worldwide, APM was primarily a tool for helping managers to set annual targets with their subordinates and to discuss how these could best be met.
Follow-up reviews would assess the goals and how they were being met, and make possible adjustments. Progress, developments and effectiveness would be evaluated close to year-end.[REMOVE]Fotnote: Amoco Info , no 1, 1990.
Another process called “employee involvement” was interwoven with APM and also applied worldwide.[REMOVE]Fotnote: Amoco Info, no 5, 1989. Put briefly, this meant management and rank-and-file jointly accepting responsibility for meeting the company’s goals.
The aim was to contribute to creating an environment where personnel were motivated to be active in promoting ideas and recommendations which helped Amoco meet its objectives.
An attitude rooted in openness, mutual support and collective commitment was to be created. Managers were expected to encourage
subordinates to come up with proposals and ideas, giving management the broadest possible basis for taking decisions.
The concept was to be incorporated as part of Amoco’s culture – wholly in line with the ideas of Peters and Waterman. Employees would be encouraged to take the initiative and to be innovative.
Management by wandering around also supported employee involvement because managers were accessible and personnel felt sufficiently secure to offer ideas and criticism.
It was emphasised that individuals should not have to work more, but do their job in a way which made greater and more efficient use of available resources.
In addition to Peters and Waterman, APM appears to have been influenced by another strand in organisation theory originating during the 1980s – the performance management system (PMS). This covered activities intended to ensure that goals were consistently attained in an efficient manner.
It was developed by Aubrey Daniels to describe a technology for handling both behaviour and results, but eventually became a collective term for organisational solutions where instrumental rewards were introduced as essential mechanisms for success.
The main point was the employees should be rewarded in line with their commitment – those who contributed most to the company’s progress should receive more than those who added less.
Performance-related pay was, indeed, the next step in reforming Amoco’s corporate culture. This meant that an individual’s pay award would reflect their commitment over the preceding year.
The annual APM evaluation, which looked at how the employee had done their job and whether they had exceeded expectations, was also used to determine their remuneration.
In other words, this involved what would now be called incentive pay to encourage greater dedication and efficiency.[REMOVE]Fotnote: Amoco Info, no 5, 1989. Delivering weak results accordingly carried a penalty.
This system is common in a number of sectors today, and a constant topic of debate. It was headline news in Norwegian media when Statoil adopted a marking system for employees in 2011.
Marks were given not only for professional competence and development, but also for behaviour. Pay rises are then allocated in relation to the number of points scored.
One criticism of the system is that having a “face which fits” can be crucial for both promotion and pay determination. But Amoco was not alone in adopting incentive pay in the 1980s and 1990s.
A number of examples can be cited of companies – particularly in the consultancy sector – which were already linking pay and promotion to performance assessments in the early 1980s.[REMOVE]Fotnote: Teknisk Ukeblad, issue 25, January 2011, “Flere gir ansatte karakterer”.
In addition to incentive pay, a system for “recognition and reward” was introduced in Amoco as a way to show appreciation for a commitment far beyond the expected level.
Extraordinary performance in projects with tight deadlines was also recognised, as was creativity which resulted in substantial savings and/or financial productivity.[REMOVE]Fotnote: Amoco Info , no 3, 1990.
Rewards under this system were divided into three levels: public acknowledgement from a superior, non-financial symbols and cash payments.
A direct connection can again be seen here with Peters and Waterman, who considered small rewards to be more effective than large ones. Big bonuses often became political, and could discourage those who failed to get them.[REMOVE]Fotnote: Peters, Thomas J, and Waterman, Robert H, Jr (1982): In search of excellence: lessons from America’s best-run companies, New York, Harper & Row, 71.
The two authors divided what they termed reinforcement into several levels – appreciation from senior management, ceremonies during coffee breaks, and winners who received a gift and had their names publicised.[REMOVE]Fotnote: Peters, Thomas J, and Waterman, Robert H, Jr (1982): In search of excellence: lessons from America’s best-run companies, New York, Harper & Row, 176.
Assessment by Norwegian management
Sickness absence in Amoco Norway fell from a peak of 3.73 per cent in 1987 to a record low of 0.78 per cent by 1990. And staff turnover was just 2.1 per cent in the latter year, compared with a maximum of 31.3 per cent in 1985.
These developments were interpreted by the management as clear indicators that the company had succeeded in its process of cultural change.
Some of the improvement can undoubtedly be attributed to changes in the overall labour market, which resulted in higher unemployment.
Nor is it possible to exclude the Hawthorne effect, which specifies that every change to a variable results in increased production.
That reflects the extra attention devoted to the employees during the process, which has a motivating effect in itself and explains the positive impact.
A key element in the “new leadership” theories was precisely that people who are given attention increase their productivity.[REMOVE]Fotnote: Peters, Thomas J, and Waterman, Robert H, Jr (1982): In search of excellence: lessons from America’s best-run companies, New York, Harper & Row, 94. Continuous change would accordingly promote continuous improvement – a concept Erickson soon introduced in Amoco, as we shall see.
But several factors contributed to the company’s progress, and it found 1990 to be a very good year in many ways – not least because the first Gulf War boosted oil prices.
Amoco had also brought the Valhall wells under control, production from the field was good and the company brought Hod on stream as its second NCS development.
In fact, the Norwegian subsidiary was doing so well that it acquired the status of a separate business unit, reporting directly to top management in Chicago.
Until then, important proposals, contracts, staff changes and so forth had to be approved at several intermediate levels before reaching the corporate summit.
The new status was intended to provide Amoco Norway with more control over its own commercial operations, and thereby give it greater responsibility for the results.
This upgrading was seen as evidence of confidence in the organisation and a conviction that Amoco in Norway had a long-term future. It was regarded as a pioneer for continuous improvement.
With the change in status and the greater self-government it allowed, Erickson’s ideas continued to be extended. Freedom of action applied not only to the company but also to each employee.
The idea was that, if a manager trusted their subordinates, it would have a positive effect on the individual’s sense of identity and thereby also on their productivity. Decisions could be taken faster and with a quicker response.[REMOVE]Fotnote: Amoco Info , no 1, 1991.
But the positive results achieved did not halt the efforts to change, with the performance improvement process (PIP) and continuous improvement (CI) being added to portfolio.
Performance improvement process
High oil prices proved transient, and fresh concerns were expressed over inadequate earnings combined with an increase in operating costs.
Low and unstable prices were compounded by Norwegian government proposals to reform the petroleum tax regime in a way which could increase the fiscal burden on Amoco.
In other words, the outside world and the market were unpredictable and constantly changing – and the company had to keep up. In this endless process, Amoco had to strive for greater adaptability and organisational flexibility.
With his constant introduction of new processes, Erickson provides a good example of what Sennett sees as the problem for a modern leader – standing still is the same as being left behind.
Instead, today’s managers must change, adapt and reorganise. Everything is in motion and the latest ideas are already out of date. The solution is to launch a process, even if you are not actually sure what it deal with or where it could lead.[REMOVE]Fotnote: Sennett, Richard (1998): The Corrosion of Character, the Personal Consequences of Work in the New Capitalism , Norton, 87.
Becoming a business unit not only increased authority but also boosted responsibility for the results achieved. That led to the adoption of the PIP in 1991.
This was intended to be a long-term process which addressed the way Amoco Norway was run, and aimed to identify projects with various objectives – such as improved earnings.
Other ambitions were to streamline jobs and processes or eliminate those which were unnecessary, and to exercise cost management and control.
Each department had to choose a coordinator who would:
[I]nitiate brainstorming and solve the problems in a creative way through the active use of co-determination, teamwork and interpersonal communication skills. This process will combine and practise many of the initiatives which have already been initiated, such as co-determination, interpersonal communication skills, recognition and reward, teambuilding and APM.[REMOVE]Fotnote: Amoco Info , no 2, 1991.
Employees were urged to submit ideas and proposals for improvement. It was emphasised that the whole workforce shared responsibility for the company’s success, and each person could exercise great influence on its commercial results through active participation in the PIP.
The financial position and ever tougher competition were cited as reasons why the new process was needed. “This strengthens the need to support the PIP initiative actively.”[REMOVE]Fotnote: Amoco Info , no 3, 1991.
Suggestions and ideas poured in, and the PIP coordinators collaborated with each other in implementing the proposals and thereby boosting the efficiency of Amoco Norway’s overall efforts.
The process was intended to improve the company’s financial results while not least creating a satisfactory working environment for all employees.
CI and Whitewater[REMOVE]Fotnote: This initiative has a lot in common with what is known as total quality management (TQM). were introduced in parallel with the PIP. While the latter involved a long-term project plan, CI was intended to make day-to-day operation more efficient and economic.
That meant defining commercial requirements more clearly, clarifying individual roles in customer-client relations (something we also find in Peters and Waterman), and developing better methods for work processes and problem-solving.
Whitewater was the CI project team, drawing up a strategy for developing the ability to compete effectively in a world of “constant and unexpected change”.[REMOVE]Fotnote: Amoco Info , no 4, 1991.
CI was not a new programme intended to replace its predecessors, but an addition to the work which had already been done. It provided more a description of the way Amoco operated.
Both it and Whitewater were intended to support the PIP process, and the company was told in no uncertain terms that this measure would affect every employee.
The initiative involved each person defining why and how they worked for each other. Everyone was to clarify the work processes they were involved in, who their customers were – both internal and external – and what these clients required.
In addition, the quality of all the work done would be measured and nonconformities identified, and improvement measures would be adopted.
Manuals and training programmes were developed. A key point was that all employees were to be trained in and had to use a common set of concepts.
Attention would be focused on products, services and customers, and each employee had to ask themselves every day “What have I done to improve my work”. One goal was to identify unnecessary tasks and exclude them from the system.
The process was followed up with a new guideline called Amoco career management (ACM). All employees were given access to computerised details about internal vacancies.
Amoco wanted to increase the number of applicants for such posts in order to simplify the process of moving people to positions where their expertise could be used to the full.
Through the Amoco self-nomination application process (ASNAP), employees could also see what expertise was needed for each job. An individual development plan (IDP) would then be developed for them.
A form covering future ambitions had to be completed by the employee. The IDP was then discussed with their team leader, who would do a reality check on the hopes expressed.
The plan spelt out the skills which the person felt were required to get where they wanted – not only the capabilities, experience and knowledge they thought they already possessed, but also those they needed to acquire.
Each employee was offered a personal development course lasting a day and a half, which was given the catchy title of Amoco career management – managing personal growth (ACM-MPG).
It was meant to help participants identify new opportunities for growth and development, and required them to assess their most important positive qualities, motivational factors and skills.
The development programme was said to be voluntary, with nobody forced to plan their own career or check jobs in the ASNAP. But commentators maintained that the company and its teams had to have a strategy for reaching their objectives.
If an employee failed to submit the form setting out their ambitions, it fell to the team or – ultimately – the company to shape future job opportunities without taking account of that person’s wishes or needs.[REMOVE]Fotnote: Amoco Info , no 2, 1993.
The management and change process which had been introduced in Amoco Norway until then were largely well received. But a further reorganisation was introduced in 1993 under the New Start name.
When everything fell apart
It turned out in June 1992 that Amoco Norway was still failing to meet the financial targets set for the company – despite all the changes and improvements.
Both earnings and production were below budget, while total costs outstripped the planned level. Something had to be done – new adaptations implemented.
That applied not only to the Norwegian subsidiary, but also for the whole international company. Initiated once again from the USA, the New Start process comprised eight stages.
First, the number of contractors was to be reduced and recruitment policy reviewed. All work would be evaluated in terms of its necessity or contribution to value creation.
Every opportunity was to be taken, moreover, to concentrate attention on areas where personal development and improved performance were required.
Third, the whole organisation was to be assessed. A restructuring was recommended to improve efficiency and streamlining in general. The authority structure was to be described more clearly, so that responsibility rested at the right level and was clearly defined.
The fourth point related to the CI process, which would ensure that all work done by each employee was necessary and created value.
Each job was to be done faster by a process of work re-engineering. To assist the improvement process, groups were established to rationalise and improve all tasks covering several teams or departments.
Where business-related costs were concerned, the importance of all business trips, conferences and out-of-town meetings was to be assessed.
Management and personal development also appeared in the eight-point plan. Everyone was to given opportunities to develop, train and grow professionally, and good leadership was to be identified and practised – based on each individual being conscious of their responsibility.
Amoco Norway would continue to grow, and persist in seeking new licences and operatorships in future rounds.
The final point covered customer relations and image. Amoco would have a strong, positive customer relationship with government, partners and international colleagues – all should be met with respect and recognition.[REMOVE]Fotnote: Amoco Info , nos 1-2, 1992.
Management pointed to the changeable and difficult times to justify the reorganisation and cut-backs, and called for a continuous and selective restructuring and adaptation on the basis of the eight points listed above.
It soon became clear that organisational changes would be sweeping. The restructuring aimed specifically to boost financial results, enhance efficiency and reduce unnecessary bureaucracy.
A conviction that a flatter organisation was more effective underlay these moves. Emphasis was placed on groups of able people who collaborated in finding solutions and new opportunities.
The idea was to identify the personnel who were professionally prepared to enter a new era – those who were flexible and able to adapt.
Team leaders were to pick out those who failed to meet these criteria, based on the forms filled out by the workforce and the follow-up conversations each employee had with their manager.
The people identified in this way were urged to find another place to work. APM affected not only an employee’s pay and promotion prospects, but also their whole future in the company.
Re-engineering is a key concept here. This involves a radical redesign of work processes and, by seeing everything in context, can ensure a dramatic improvement in results.
Sennett argues that the term provides a semblance of efficiency, an illusion of a tighter organisation which differs radically from its predecessor.
But he maintains that re-engineering is actually a very chaotic process, and primarily an excuse for making people redundant. Power is concentrated without being centralised – a characteristic of a flexible system.
People at the bottom of the organisational structure gain more control over their own activities, but new information systems give management a comprehensive overview.
Employees end up with few places to hide. In modern organisations based on concentration without centralisation, control from the top is both strong and diffuse.
According to Sennett, cuts are unlikely to yield financial benefits because companies become dysfunctional during the actual downsizing process.
At the same time, employee motivation and morale fall as the changes proceed and the remaining workforce are left fearing that they will be the victims next time round.[REMOVE]Fotnote: Sennett, Richard (1998): The Corrosion of Character, the Personal Consequences of Work in the New Capitalism , Norton, 50-56.
That was to a great extent what happened in Amoco Norway. New Start represented a shift towards a leaner and more flexible company, but a process meant to contribute to continuous improvement also created constant uncertainty.
Even more new initiatives soon followed, additional processes were launched and further reorganisations took place. But the workforce, having been through a downsizing they saw as arbitrary, feared each of them. The workplace had become more uncertain, and several dozen people were made redundant.
New Start was supposed to create organisational flexibility by demanding adaptability from the workforce. While jobs were standardised, they also had to be constantly improved through more efficient use of time. Space was provided for established practices to be replaced by new and better ones.
The cultural change initiated by Erickson in 1987 and the subsequent processes to create a more flexible and secure company were largely welcomed by employees.
All the same, many felt that no sooner had a process “finished” than others took its place and the new systems were never given a chance to bed in.
But that was also part of the philosophy underlying the continuous improvement approach – constant change so that systems could not ossify and become bureaucratic and rational.
Bob Erickson left Amoco Norway in 1994, only a few months before the new prestige offices on the Stavanger waterfront were ready for occupation.
Retirement followed five years later for the man with the big vision of a modern and flexible Amoco Norway, and the leading believer that cultural change through continuous improvement was possible.
He left behind him a workplace which had become a little more uncertain and where the employees were a bit more concerned whether they were next for the headsman’s axe.