Halliburton Management Analysis in Analyzing

Halliburton Management Analysis

In analyzing the strategic planning processes within Halliburton the company's global reach is taken into account in addition to legal, ethical, and corporate social responsibility (CSR) factors that influence the planning process. Halliburton is considered one of the world's leading oilfield services, oilfield recovery and oil industry services firms globally. Halliburton's core businesses force the company into situations that invite conflict of interest, and as a result, they continue to be investigated by U.S. Justice Department, be the subject of U.S. Congressional hearings, and often face probes into their efforts to reconstruct Iraq (Waxman, Dingell, 2004). This paper evaluates the planning function of Halliburton management in addition to analyzing the impact of legal issues, ethics and corporate social responsibility (CSR) within the firm. In addition, factors influencing the company are strategic, tactical, operational, and contingency planning is also discussed.

Evaluating the Planning Function at Halliburton

U.S.-based with headquarters in Houston, Texas and a second headquarters opened in March, 2007 in Dubai, United Arab Emirates, Halliburton has significant influence throughout the Middle Eastern oil producing nations. The company is divided into two divisions. The first is the Energy Services Group (ESG) which provides oil and gas exploration-related products and services. This segment requires the company to form close ties with both the U.S. Government's Department of Defense and third party nations including Saudi Arabia, United Arab Emirates, Jordan, Iran and with the U.S. State Department, Iraq. In 2006 Halliburton failed to disclose overcharging the U.S. Department of Defense for transportation vehicles delivered to Iraq and was fined as a result (Donahue, 2006). The completion and product segment also has been cited for unethical practices in the Middle East with regard to reconstruction (Barth, 2003). The drilling and evaluation segment's strategic planning processes also require a high degree of multinational coordination, and in these instances the company has also struggled significantly from a governance standpoint (McNulty, 2004). The core of the Halliburton business model is project-based. As a result, there is often a mindset strategically of taking on more projects than can reasonably be accomplished; assuming one or several will be cancelled. In effect Halliburton has operated like this for decades, only recently assigning pro forma Profit-and-Loss financial analysis to projects which are in turn coordinated into campaigns. Halliburton senior management seeks out common campaigns to ensure a relatively high level of shared risk and resource allocation in creating the strategies. The strategies are then coordinated across all business units and funded in multi-year schedules. Throughout this process Halliburton typically assigns a senior executive to manage the transition of a project to a campaign, and if there is enough shared risk and opportunity for synchronized effort, a strategy. Halliburton does this assuming their projects will be long-term in nature, often years in scope, and the ability to apportion risk across all products is critical for the long-term viability of the company. This strategic planning process also ensures there is a very high level of accountability and ownership of each project throughout the entire strategic planning process as well.

Analyzing the Impact of Legal, Ethical and Corporate Social Responsibility (CSR) Issues on Halliburton Strategic Planning

The impact of legal, ethical and Corporate Social Responsibility (CSR) issues on strategic planning at Halliburton have been most often see in the continued calls for oversight and compliance on their pricing programs (Waxman, Dingell, 2004) and lower- than-average performance in CSR program transparency, participation and evaluation (One World Trust, 2008). Critics have argued that their strategic planning process that seeks to find high levels of risk reduction is prone to inherent conflicts of interest (Donahue, 2006).

Legal Issues

The legal issues that Halliburton continues to face are one of the most significant strategic planning risks the company must contend with going forward. An example of this is when Halliburton created a systematic plan for overcharging the U.S. Government for gasoline, vehicles, and vehicle repairs during the Iraq war (Waxman, Dingell, 2004). A congressional committee found Halliburton guilty of lying under oath and fined the company, in addition to demanding more transparency and oversight, including adherence to compliance initiatives and programs. Today Halliburton must address transparency and compliance to the U.S. Government, the Securities and Exchange Commission (SEC) in accordance with the Sarbanes-Oxley Act, and also the shareholders. This has added cost and time constraints to their strategic planning process that could potentially cost them incremental business if they were able to respond to the market faster without having to contend with compliance initiatives first.

Ethics

Another aspect of the strategic planning process that has been influenced by the practices of Halliburton is the issue of ethics. In 2005 and 2006 Halliburton was cited by the U.S. Senate for knowingly serving unhealthy water to U.S. troops in the Camp Ar Ramadi province of Iraq (Donahue, 2006). This ethical lapse was found after the U.S. Senate learned that Halliburton had been given the contract for water purification services in the region, and did not audit their own performance. In other words, Halliburton had no way of knowing if the treatment of water was actually achieving its intended result or not (Donahue, 2006). This also made for a significant cost to their strategic planning process as today Halliburton must also provide for significant oversight to the U.S. Senate as to their activities in Iraq. This has also become a significant drain on their planning timelines as well.

Corporate Social Responsibility

The last factor, Corporate Social Responsibility (CSR) is one area where the company is below average of three of the four factors One World Trust uses to quantify QSR performance over time. The figure shown, Halliburton Accountability Benchmarking (One World Trust, 2008) provides a graphical analysis of their performance over time. What is immediately apparent from reading One World Trust's report on Halliburton is the fact that their Compliant and Response processes are both internal and external in design and while the company does not have any significant efforts underway in sustainability or "green" initiatives they do have a CSR program for carbon reduction. Overall however Halliburton scores low on the attributes companies need to have in order to create and sustain an effective CSR program over time.