Organizational Effectiveness - Oilfield Services
Situation
An oilfield services company that had grown through a series of acquisitions operated five different businesses in the same market space. Each business had its own support function resources, leading to higher costs and a lack of integrated information. The CEO decided to bring the five businesses together as an operating division, and hired a new division president from outside the industry. After just 30 days in his new role, the division president grew frustrated with the organization's inability to answer basic questions about business performance. He concluded that, rather than trying to fix the jumbled support function organization and processes, the company would be better off starting with a blank sheet of paper and designing the support function model for the future, but first he needed a clear understanding of the current situation.
Observations
The client decided to conduct an assessment of the support function organization and processes to identify improvement opportunities. The assessment reviewed the organizational structure, fragmentation, clarity of roles and responsibilities, and process consistency. The assessment confirmed that a lack of common business processes and a lack of clarity around people, roles and responsibilities were creating organizational performance challenges. The assessment identified specific improvement areas and developed a business case that quantified the improvement potential based on the existing situation and our experience helping clients address similar challenges. There would be a 15 percent support function cost reduction benefit from restructuring the organization.
Actions
A team of client managers assembled to review the assessment results and develop a vision for the new organization. The team developed the organizational design principles that would guide the design of the new organization. A design team developed a new organizational structure, roles and responsibilities. While the existing organization had separate Finance, HR and Sales resources reporting to the five business leaders, the new organizational model used centralized and shared resources to provision the activities in these functions. Against a target from the assessment of reducing support function headcount by 15 percent, the design team developed a streamlined organizational structure with clear accountabilities and reporting lines, and 17 percent fewer positions… and each position had clearly defined responsibilities and specific performance metrics for which they were accountable.
Results
While it took several months to get through all of the transition issues, the division was well on its way to a significant performance improvement. In addition to the organizational changes, process improvement teams were chartered to tackle some of the most pressing process issues. Finance and IT were engaged in an effort to implement common financial systems across the division. And business was booming due to high levels of oilfield activity. Within six months from the start of the assessment, the division's support functions were operating effectively at a staffing level 20 percent below the original cost base.
