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Oil Change
Externalization and Change Management Key to Realignment

Sometimes all it takes is a fresh perspective.
For Shell Oil Company’s Continental Division, a fresh perspective helped the company successfully cope with a period of realignment.

An Oily Situation
The need for a fresh perspective began in 1996 when a joint venture with Amoco was about to drastically alter the way Shell Oil Company’s Continental Division operated. Prior to 1996 Shell Oil Company’s Continental Division, or Continental Enterprises as it is informally known, operated around two main types of oil production: long-life fields and short-life fields. The long-life fields represented certainties, providing stable and secure returns— low-risk investments providing low returns. On the other side of the fence were short-life fields. These were high-risk, high-return ventures capable of providing sizable returns but for a short period of time. These short-life fields were also more costly to locate, develop and maintain.
The joint venture with Amoco was about to remove control of the long-life fields from Continental Enterprises. Now Continental Enterprises would be faced with the dilemma of realigning to succeed with only the high-risk, high-return oil fields. When fully implemented, the venture with Amoco would remove 50 percent of the daily oil production and significantly cut the life span of Shell Oil’s Continental Enterprises. To succeed, Continental Enterprises would have to learn how to reinvent itself to compete in a new market where the company would have to operate faster and more efficiently without the safety net of long-term returns from long-life fields. It was a redesign that would force the company to examine new ways of thinking and operating while effectively managing change.

The Company in a (Nut)Shell
Continental Enterprises is a business unit of Shell Oil Company. Its key business is domestically exploring, developing and producing oil and natural gas.
“Continental Enterprises is the onshore business arm of Shell Exploration and Production,” states Ralph Kerr, an internal business consultant with over 17 years of experience with the company. “We are in the business of finding, developing and producing oil and gas across all of North America.”
With roughly 900 employees, Continental Enterprises is made up of small production units in the field and central offices in Houston. The office staff includes technicians, engineers, planners, strategists and managers. The joint venture with Amoco would force Continental Enterprises to realign its wide array of employees around a new business design—exploration and production of short-life fields.
The greatest change resulting from the venture with Amoco was the new marketplace it created for Continental Enterprises. The company was now competing with small, independents in local markets—a highly competitive arena. Typically, these competitive arenas were dominated by small, quick moving independents armed with the latest technology and access to capital. In order to compete in this market Continental Enterprises would have to focus its employees to develop short-life fields quickly and efficiently.
“You’re making a lot of money for a short time period and then it’s gone,” states Kerr. “There’s a tremendous sense of urgency to renew the business.”
To survive in the new market the leadership team at Continental Enterprises committed to redesign the organization to balance the strength of a major oil company with the speed of an independent. This meant redefining the purpose of the organization, establishing a new business strategy, defining the governance of the enterprise, examining broken or out-dated work processes and redefining the relationship between the organization and the employees.

A Framework for Change
As the company redesigned Kerr became an influential change agent. Additionally, John Burden, of the Atlanta-based Miller Howard Consulting Group, was brought in to provide an external viewpoint and fresh perspective. Together the two were faced with changing an organization they viewed as:
- Inwardly focused and in need of exposure to new ideas.
- Resistant to change and slow to implement changes.
- Under a lot of pressure to continue operating successfully and generating revenue throughout the redesign.
To further complicate matters, this was a redesign of an enterprise (a complex of related businesses and their support organizations) not just an individual business. The entire enterprise system would have to be effectively transformed while continuously functioning at high levels throughout the redesign.
“We likened this project to having to rebuild an airplane while in flight,” Kerr summarizes. “We didn’t have the luxury of stopping, redesigning everything and then starting up again.”
In the redesign project, Kerr and Burden focused on two major components: Design and Project Management. Categories that fell under the topic of Design included:
- Business Systems (purpose financial goals, strategies)
- Technical Systems (work processes, organizations and IT systems)
- People Systems (structure, skills needed, management style, hiring practices, training, rewards and recognition, etc.)
The Project Management section of the redesign included:
- Change Management
- Externalization
- Design Conferences and Workshops
Change management and externalization became two of the most important aspects and success factors of the realignment. Both of these components addressed the need to communicate and educate Continental Enterprises’ employees about their evolving workplace.

Field Trips for Grown-Ups
Externalization proved to be the most crucial element involved in Continental Enterprises’ redesign. This strategic use of visits to other companies, conferences, and outside speakers involved all levels of the organization and stimulated change. The externalization was also effective in educating leaders prior to key decisions, gathering market intelligence, and building rapport among different groups in the design process.
“We wanted to get the organization to think about how to do things differently,” Burden adds. “That meant going to see other companies. Before you ask people for decisions, educate them. Let them know what’s out there—what’s possible. Then ask for decisions.”

Mix It Up
The typical externalization trip would include one or more employees from the design team and one or more employees not involved with the design team. The mix of design team members and non-design team members helped to generate support for the redesign company-wide. It also brought new perspectives into conversations concerning the design and helped to communicate change across departments.
Sending a limited number of participants on each trip helped to keep training costs low and allowed the design team to attend a wider variety of site visits and training events. Upon completion of an event, participants would debrief other team members in a conversation facilitated by Kerr or Burden. Discussions focused on lessons learned, practical applications from other companies, new ways of operating, etc.
To get even more influence and input from the externalization, the groups from Continental Enterprises visited companies outside of their industry group. Ironically visits to manufacturing plants became excellent tools for generating ideas on new and better ways to produce oil.

Also Focusing Inward
Along with the externalization efforts, the redesign focused heavily on change management by opening communication channels with employees. Early in the project the employee newsletter was revamped in order to create a more effective flow of information and concerns. Also, Continental Enterprises created the new position of a communications director to oversee employee communications.
How the changes were implemented into the company also helped the change management efforts. Implementation of the new design was originally set for the final stages of the project. However, it was changed to occur concurrently throughout the project to make the redesign concepts more concrete, apparent and tangible.
“Implementation was something we needed to do along the project,” states John Burden. “People could actually see that things were getting different—things were really changing.”

Did They Strike Oil?
The redesign of Continental Enterprises proved successful in generating key changes throughout the organization. For example, the company learned to operate more like individual business units in order to compete in competitive small markets. Also, new planning methods and strategies originated after company leaders began to view the organization as a more complex system where responding to change became a top priority. Additionally, more tangible results included the appointment of a communications director within the company, the replacement of the employee newsletter with a new publication focusing on employee concerns, and the creation of a website.
As for the externalization efforts, they have been adapted as a continuous training element within the company.
So as Shell Oil Constantly examines and reevaluates its holdings and business strategies it is consistently exposing its employees to new ways to think and work.