Leadership Challenges. Speech given by Stuart Payne, Group HR Director

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1 Leadership Challenges Speech given by Stuart Payne, Group HR Director HR and Talent Management in Oil and Gas, January 2014

2 Good afternoon everyone, it s a pleasure to join you all and my thanks to the organisers for the invitation to come and speak to you today on a topic that I think is fascinating, challenging and vital to our industry. The Oil and Gas industry is utterly dependent on its people. That has been said so many times, that its meaning risks actually losing its resonance on us. It may be a truism, but whatever challenges the industry faces, whether immediate or in the far reaching future, without a high calibre, highly motivated group of people, it is not going to meet them. I would venture further that the industry is also therefore utterly dependent on having leaders that are capable of recruiting, retaining, developing and inspiring these people, so as to unleash their potential and their creativity. Without this we are little more than a collection of hydrocarbons, some maps, a fair bit of steel and an alarming amount of corporate branded fleeces although that may just be an Aberdeen thing. I am genuinely pleased therefore to be able to talk today about this topic, about the challenge that our industry faces in effectively leading our employees both now and of course in the future. I have tried to pick a small number of areas to focus on today, at the very least hoping to spark some debate and discussion. I am under no illusion that I have the answers to the questions that I am going to pose, and so I offer my thoughts today as someone who is very much faced with this challenge, not as someone who has solved it. The areas I am going to cover today are these: Firstly a thought about our famous crew-change, in terms of their generation (Baby Boomers and Generation x) and specifically a view of what some of the academic literature believes are the differences in styles, preferences and needs of the current dominant employee population, and their immediate successor. How this affects how they lead, and how they wish to be led are critical points not only in theory, but also in day to day practice. Secondly, I will talk briefly amount Management Models. I was asked to consider in this talk whether or not I think that our industry needs to revamp or strengthen the models that exist. Finally, and I think most importantly moving forward, I m going to discuss how effective leadership can help retain employees. Before I dive into these areas then, let me very briefly explain who I am. Since 2011 I have been the HR Director for Dana Petroleum, based in Aberdeen here in the UK.

3 Dana has been in business since 1994, but following a series of corporate acquisition, and then the subsequent acquisition of Dana itself in 2010 by the Korea National Oil Corporation (KNOC) the last few years have dramatically changed Dana s story. Today we re working in the UK, Netherlands, Norway, Egypt, Mauritania, Cameroon and Guinea, a few weeks ago we announced that through a partnership with PA Resources we will be starting to move to explore in Denmark and Germany, using our Dutch office as the base of these operations. The organisation is producing over 50,000 barrels equivalent a day, and this will grow to over 90,000 when our massive Western Isles project comes on stream in late We have worked with our single shareholder to build a highly capable workforce with around 200 new people joining us in the last two years. In this time, and as I speak today, we are in the very middle of working with these talented professionals to build a new organisation that is performance driven and values led, and that have six core values as the glue that binds us together. I have never before experienced the speed of change that we ve had in the last few years, and with significant exploration going across our European assets and in West Africa, major gas discoveries announced late last year in the UK, development projects being developed in the UK, Netherlands and new acreage being awarded last week in Egypt the pace of change shows no signs of slowing. Most days, I see the industry challenges that I m talking about today play out in Dana, in different ways each time and of course with subtleties depending on where in the world people sit. I m clear that one of the keys to Dana achieving its ambition, to become and leading international oil and gas company, will be the capability, agility and humility of our leaders. The first area of focus today then is Generational Difference. Clearly this is a topic that could fill a whole lecture series, and be delivered by far more qualified people than I, so let us for today focus on one upcoming reality the move of the Baby Boomers out of being the majority of our leaders and the emergence in their place of Generation X. As part of one of our values Mutual Advantage each year the Dana HR team works with the HR Masters Programme at the University of South Carolina. This relationship allows Dana to set a number of challenging real-life HR problems and get proposed solutions from the Masters students. The students in turn of course get the chance to work on real problems rather than dry case studies, and we will often also lend them one of the HR Leadership Team for a few days to deliver lectures and work in seminar groups. In December we set one of the groups that challenge of how we continue to evolve our learning and development offerings to all staff, bearing in mind we have an age range of 50 years in

4 Dana. We asked the students to research and advise us on how our staff and how different generations in general best learn, and most like to interact with professional development. I offer the profiles the students created of our staff as very simple way of describing some of the characteristics of the Boomer generation and Generation X. These are of course broad-brush stereotypes, and represent one view of the groups in question. Clearly not all baby boomers conform to these types, and neither to any of the other groups. The stereotypical profile for western baby-boomers is that they prefer stability in a working environment, with a focus on achieving high levels of quality in their tasks, and that they feel and require a long term loyalty between themselves, their employer and their colleagues. By contrast, the stereotypical member of Generation X is heavily independent and thrives on rapid change, eager to broaden and diversify in terms of work content these individuals have a loyalty to their profession, skill or task but not necessarily to an employer. Thinking about the second area of my presentation today then, what does that mean for models of management? Well, firstly in terms of the difference in approaches to best lead these two groups: Baby Boomers: - Accept and expect a strong chain of command - Expect clear direction on their work goals and objectives - Tend to resist or avoid change where possible Whereas Generation X: - Expect a participative decision making role, and don t automatically accept a hierarchy - Expect to have opportunities around their goals, not just the goals themselves - Thrive on change Is there any single way then to effectively lead these two groups, and do we need a new model as an industry to do so? I think the reality is less black and white. We will need to continue to develop agility in our leaders, and a plurality of models of leadership in our organisations. In order for this to be possible, we need however to have a few shared reference points that ensure a sense of affiliation is shared between the organisation, its leaders and representatives of both these generational groups. For Dana, these reference points come often in the form of our six values. Irrespective whether you are in Cameroon, Norway, Egypt, the Netherlands or the UK, and whether you work in an office, on a platform or on a construction site, you re in Dana.

5 You also need to find some minimum levels of commonality that allow you to encourage individual differences, but within a framework that ensures safety, fairness, and productivity. A practical example of this came to us in Dana when faced with the need to build the first company-wide performance management system. Previously there were different processes in place in different countries, and in some countries there were no formal processes at all. Our challenge was to build something that would provide the individual with a fair way of being rewarded for delivery, would provide the business with the tools necessary to achieve our goals and yet would give supervisors and staff the sense that they weren t being sucked into a mechanical process devoid of judgement or freedoms. This was also a moment when we could satisfy one of our groups the baby boomers by having a robust and predictable process, but switch off those in Generation X. Alternatively we could have had a totally free process with no structure which would have had the reverse effects. What we landed on was simple model that puts the focus on powerful conversations between supervisors and staff. All staff have five goals for the year, against which they can score up to 20% in each, hence a 100% total for the year. So what s different? Well firstly one of the five goals has to be their personal development. We re actively rewarding people to develop their careers, something that Generation X would like and if they don t put time and attention into this then they get less financial reward at the end of the year a structure and rule approach that also appeals to the Baby Boomer stereotype. Secondly whilst we have a scoring structure that is logical, we don t have any forced ranking. Each employee gets the score they have achieved. We of course provide guidance, offer calibration and show examples to make sure we have fairness, but ultimately the line owns the scores. This means that, unlike many systems in practice in the oil and gas industry, membership of a department full of high performing individuals doesn t mean that you are less likely to do well because of having to be graded on a curve. The results have been compelling. In the first year we had this trust based system, the average performance score in Dana was less than one per cent different from the Board s assessment of the company s performance that year. The model that we re trying to apply in this example is one of balance, one where we try to talk to both groups of individuals and it is this approach rather than a black and white new model that I think is going to be key for our industry. Before I finish this part and move onto my final topic, let s also pause and think about how this generational shift will show up not in terms of employees but as leaders

6 Generation X leaders will, according to some of the literature, be stronger leaders than the Baby Boomers. That s a broad statement but let me share with you an example. A PDI study reviewed over 20,000 middle-level managers and showed that those in Generation X scored consistently higher on scales such as self-development, ability to analyse key issues and their work commitment. But these individuals will largely have been brought up professionally by Baby Boomers, and yet may well reject many of the tools that they ve seen such as hierarchical command and control. They in turn of course will be managing people of all generations, and will need to demonstrate an empathy with styles other than their own. All of which points to focusing on ensuring a shared awareness of the potential differences, and finding a way in which they can be talked about openly such as when teams successful undergo activities such as Belbin or Myers Briggs could become a core part of how teams interact. The final part of my presentation today is on the role of leadership in retaining employees, and I was asked to consider the specific question what can leadership do to retain people? Whatever model of leadership you use, and whatever generation of employees you re leading, I would suggest that there is a pivotal role for leaders in achieving talent retention. Given the likely composition of the audience today, I should also say that this role is probably mirrored in the role of the HR function too, in ensuring that the activities we undertake, and the manner in which we undertake them are also ones that have the motivation (or at least not the demotivation) of staff in mind. Within my own team at Dana we have operated all of our work under a banner of the rule of three, namely that we commit to the business that we don t undertake work, launch activities or generate processes that don t satisfy one of the following three rules: Either the activity directly supports production or revenue; It keeps people safe and legally compliant; or it makes people want to come and work here, or stay working here. This commitment has meant that not only are we able to push back on busy work activity that demotivates both HR professionals and our populations alike, but also means that when we do ask supervisors and staff to undertake activities, they recognise that they re going to be valueadding and meaningful. So what are some ways in which Leadership can succeed in retaining people? I am going to look at this through two different lenses: Firstly through the lens of how leaders behave and what they do with their employees; secondly in terms of the environment that can be created by leaders for employees to work in.

7 Firstly, allowing, promoting and role modelling authenticity, not difference. If two people are allowed to simply be themselves and behave in an authentic manner, and they show-up as being different then that s a by-product, not the ambition. In this regard this talks obviously to the issue of diversity and inclusion, and my own belief that the key to sustained success in this area is not by the promotion of difference, but of promoting and supporting every individual s right to be themselves. Secondly, leaders can allow people to be flawed and to not only make mistakes but take the responsibility for then correcting those mistakes. This is not about removing pressure or accountability, in fact quite the reverse, it makes the individual own the whole task, including course corrections when needed they can t simply step back and delegate things upwards if they make a mistake. Thirdly, leaders need to recognise the whole person, not simply the employee, and being aware of all of the sources of motivation, concern, passion and priority that live within all of us. Aside from their own individual behaviours, leaders have a role in creating an environment where people actually want to work, and where they want to succeed. There has been some great work in this area by Rob Goffee & Gareth Jones, with whom we have the pleasure of working on the development of our own leaders in Dana. Goffee & Jones asked last year how could you create the greatest workplace on earth and they identified six core themes: Make me proud I work here Make my work meaningful Don t hinder me with stupid rules Tell me what s really going on Discover and magnify my strengths Let me be myself. All of them are things that I think would be viewed positively by the people in this room, and yet how many of them really are allowed to happen, are really followed, in our organisations? In conclusion, let me acknowledge that for us, in our industry, this feels harder. We can t allow our staff to just make mistakes in either safety or environmentally exposed roles, and even more contained mistakes can have financial consequences that would be devastating to almost any other industry. So we face three choices as an industry: We can pretend that we re immune from all the societal and generational change that s going on around us We can acknowledge the change but recognise that it s too complex for our industry to tackle

8 Or we can step-up, and recognise that as an industry we can drill to depths of thousands of feet, we can manage the investment of hundreds of billions of dollars each year and that we can transport energy to and from all corners of the globe. Surely the people in this room, in this industry, who can achieve these things, every day, can also meet the challenges of effective leadership and meet the needs of a changing workforce. Thank you for listening.

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