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TABLE OF CONTENTS

§ Change or Transformation?
§ From "Flat on Our Back" to Rebounding, Rebuilding, Renewing
§ A Key Question
§ Reeducating the Management Team
§ Three Beliefs and Three Challenges
§ Establishing New Governance Structures
§ Developing New Skills and Business Acumen
§ Shell Achieves a Critical Mass
§ Reflections
     A Leader's Decision
     How Much Do You Share with the Board?
     Trust Among Leaders
     Resistance to Change: The "Clay Layer" of Management
     Balancing Profits and People
     Controllers' Contributions
     When a Leader Leaves
     The Locus of Change

ABOUT THE AUTHOR

Phil Carroll served as president and CEO of Shell Oil Company from July 1993 to June 1998. His tenure at Shell began in 1961 and included service as an engineer, vice president of public affairs, managing director of Shell International Gas, senior vice president of administration, and executive vice president. He has a deep commitment to community service and, to that end, serves on a number of civic and charitable boards nationally. A native of New Orleans, he holds a B.S. degree in physics from Loyola University and an M.S. degree in physics from Tulane University. He and his wife, Charlene, have three children and two grandchildren.

This volume was adapted from an address given by Phil Carroll, on the eve of his retirement from Shell, at the 1998 Annual Members' Meeting of the Society for Organizational Learning, in Amherst, Massachusetts.

EXCERPTS

Reeducating the Management Team

Clearly, we had to begin the huge task of educating ourselves, of developing a business-model methodology and putting it in place throughout the company. We called together the top 200 people in Shell Oil Company in February 1994 to begin talking about the questions that the top 16 leaders of the company had been working on for the past six months: What was the company's vision? What did we want to become? What sort of value system did we want to put in place? What kinds of values were necessary for us to achieve whatever vision we finally began to agree on?

We started by trying to arrive at the most basic kind of alignment that one can have in a large organization—a shared view of where we wanted to go, as well as a common understanding of where we stood relative to that vision. Then we worked on clarifying our values (see "Vision, Mission, and Values" on p. 4).

After agreeing on a vision-and-values picture, we decided to "roll it out to the company." We did this in typical fashion—making view graphs, sending them around to everyone, saying, "Here's the vision; here's the value system." And as often happens in organizations, everyone nodded their heads and yawned and went on with their business. Nothing changed.

It's not that the vision was a bad vision, or that the value system was inconsistent with the way people believed. But there were several "disconnects" between the stated, desired value system and reality. For example, some people actually chuckled over the stated value of "being innovative." The last thing in the world anyone at Shell wanted to be was innovative. In reality, if you changed something, you might get your head chopped off. You had to act in ways that were safe. And safe meant that you appointed a committee, you studied the issue at hand for six or eight months, and, as Dilbert says, eventually the issue would just disappear.

Yet despite the chuckles and skepticism, the organization was fundamentally ripe for the kind of change that we were beginning to talk about. We developed improved skills and processes for engaging people throughout Shell in ideas for implementing the vision and values. Further, the basic changes we wanted to make were not that profound. In simplest terms, they emanated from a system of beliefs. We had to ask ourselves, What do we really believe in? What do we genuinely want this organization to be based on? There's a long list of these beliefs, but three of them turned out to be fundamental to the change that took place.

Three Beliefs and Three Challenges

The first belief sounds deceptively simple: "People are good." This may not seem like a deep idea, but it has profound connotations for how people act with each other and the kinds of assumptions we each make about each other.

The second belief was: "People are capable." They can be trusted to do the right thing if they know what the right thing is. They also have the ability to do things far beyond what their organizations allow them to do. If you believe these two things—that people are good and that they have capabilities—then you can begin to fundamentally change how decisions are made, how business plans are drawn up, and how people relate to one another.

The third belief was: "Market systems work." If, within an organization, you can apply the principles of how markets operate, then these principles will produce the results you want. As we continued to engage people in exploring these ideas, we began asking everyone—whether a newly hired secretary or a top executive—to do three things. First, we asked that everybody think about and perform their job just as if they were a publicly held company of one. What did this mean? It meant that everyone should reflect on what their "product" was and who their "customers" and "competitors" were. That is, we wanted people to ask themselves who could come along—whether within or outside Shell—and provide their product or their service at a lower cost or in a more effective form. What research were they doing to try to develop new products, recognizing that in a competitive world they would have to do this if they wanted to stay in business? This kind of thinking stimulated everyone to apply a comprehensive business model to the way they functioned within their job.

Second, we asked people to try to reach for, and to attain, the highest level of professional excellence that they could. That is, with the help of the company they had to shoulder the responsibility for strengthening their own skills and their capacity to achieve at an ever-higher level. Every organization within Shell, every line business or service function, implemented a business model that challenged everyone involved to understand how they added value to the business.

Third, we urged people to be a constructive force for change in the corporation rather than passively seeking shelter in the company. This meant attending workshops on change skills, engagement skills, and business-model application; incorporating 360-degree feedback and discussion of Shell's vision and values into performance reviews; and adding a variable component to pay scales that hinged on business performance.