Leadership and Change Management at RasGas LNG

Introduction to RasGas and the Business Context

RasGas is a joint venture gas company between Qatar Petroleum — the State of Qatar's national oil and gas company and majority stakeholder — and ExxonMobil, an American integrated oil and gas company. The company is approximately fifteen years old and has been involved in all aspects of exploration, development, production, liquefaction, and marketing of gas from the North Field. RasGas is a major contributor to Qatar's worldwide leadership in the production and marketing of Liquefied Natural Gas (LNG) exports. The company has utilized advanced technologies to drill high-capacity gas wells and build the largest and most efficient liquefaction trains in the world. These technologies and large-scale facilities enable RasGas and the State of Qatar to economically produce and export LNG to all parts of the world — a reach that was beyond economic possibility just a few years ago.

To accomplish this objective, the company has put into place a geographically extensive "assembly line" that connects to, collects, processes, stores, and ships a natural resource (gas) from its original location deep below the surface to a transportation network that delivers the product to its eventual consumers. Activities related to the extraction of gas from the reservoir by way of wells, and its transportation to shore by flow lines, constitute the "subsurface" part of the business. The processing of the gas occurs onshore and is considered the "surface" part of the business.

For most of the first fifteen years of the company's existence, the focus was on the creation ("development") of the assembly line: the drilling of wells, and the design, construction, and installation of platforms, pipelines, gas plants, and storage and shipment terminals. This development work was completed in early 2010 with the commissioning of the last gas plant train, Train Seven — the largest gas plant design in the world. As an indication of the scope of this work, in 2009 the development process consumed in excess of 100 million man-hours.

As development progressed, wells and gas plants were put into service and a revenue stream was established. The nature of the gas plant designs was such that the production contribution from each successive project was skewed toward the later phases of the development process; in effect, smaller gas plants were brought online first, followed by significantly larger ones toward the end of the development phase. Almost half of the production capacity and wells came online in the past two years.

In the first half of the twentieth century, economics were based on Fordism and mass production industries rather than high technology and information processing. In the twenty-first century, more organizations are becoming integrative, human-timed rather than machine-timed, more horizontal than vertical or hierarchical, and based on teams and virtual enterprises. Managers must deal with new, complex systems in which change is the norm, with a style characterized by frankness, directness, learning from mistakes, trust, and respect. Adaptive organizations must be proactive, with stakeholder and customer participation, less hierarchical, with shared leadership and a common vision. Their communication style will be open, with impartial and objective decision-making and a collaborative workplace (Garrity, p. 270). Adaptive leaders will be less authoritarian and will value listening, collaboration, education, and vision (Garrity, p. 273).

The change described in this paper relates to the organizational changes put into place to facilitate and improve the company's transition from one focused on the development of its production system to one focused on the actual, continual campaign of production and production sustainability. The production system can be compared to an assembly line, and like many real-world assembly lines, it shares certain characteristics:

Defining the Change

The raw material quality may change over time, and the quality control and quality assurance systems must be able to accommodate these changes. The equipment is aging and requires an increasing amount of maintenance. The end-user's demand for product is changing, and the production system must be able to respond accordingly.

These characteristics differ from those present during the development phase, in which activities can be categorized as well-defined with minimal changes that are carefully managed at all times. The incoming materials needed for construction are known and have fixed properties by way of contractual terms. The design and build are entirely "green-field" — all new equipment with initial warranties provided by suppliers. The scope of work is fixed, or at minimum controlled through a project management-of-change process. Work is also easily compartmentalized along functional lines; structural engineers for one process step could proceed with their design with minimal interaction with other processes, other than clear communication on boundary conditions. These differences require the operating organization to be more flexible, resilient, and — most importantly — integrated across functional lines. Events that occur in one area of the assembly line, such as in the wells, have knock-on effects downstream, requiring all technical functions to collaborate on common issues rather than relying on fixed boundary conditions.

The organizational change undertaken to support this new focus was to adapt a matrix management organization around individual production blocks as "assets." The "Asset Surveillance Team" for each block would consist of all functional disciplines necessary to address the required subsurface issues. As with most matrix organizations, individuals would still report within their functional organization. One difference from classic matrix organizations was the intentional elimination of an Asset Manager. Instead, rotating "focal points" were defined, which it was believed would eliminate confusion regarding team responsibilities and foster an increased sense of ownership among team members.

The main objective of the Asset Surveillance Team was to promote inter-disciplinary communication. A deliberate attempt was made to eliminate hierarchical structures that could work against team collaboration — particularly given that whoever was designated Team Manager would most likely come from one of the disciplines. The Asset Team changes were narrow, strategic, proactive, planned, emergent, and top-down. Eisenbach et al. (1996) describe transformational change as requiring the creation of "a new system and then institutionalizing the new approaches" (p. 80). New models of visionary, charismatic, and transformational leadership "are likely to become even more important to organizations because of the breathtaking changes in the business and political environment," although there is still little integration between research in change management and leadership styles. Most change is transactional and incremental, but sometimes organizations and societies experience "brief periods of discontinuous, radical change" (Eisenbach et al., p. 80).

Event-pacing may be most suitable for small, incremental changes since it is focused on narrow, specific outcomes, but time-pacing works better in periods of radical change. In these periods, successful managers "provide clear responsibility and priorities with extensive communications and freedom to improvise," like jazz improvisation (Eisenbach et al., p. 82). They connect present projects with the future through time-spaced intervals and regular pauses so that the organization can assimilate changes. While transactional leaders manage through providing rewards for performance, transformational leaders are inspirational, charismatic, and visionary. They are most appropriate to organizations facing radically new situations or undergoing a crisis. They know how to create positive, appealing visions of the future and to set challenging and stimulating goals for their followers. They also know how to control and pace change so that followers are not overwhelmed and the entire process does not fall apart, and how to reward behaviors "directed toward fulfillment of the vision" (Eisenbach et al., p. 84). Drew and Coulson-Thomas (1996) asserted that the majority of executives "believe their organizations to be faced with revolutionary change, and that the pace of change is increasing" due to technology and globalization (p. 7).

All change advocates support the concept of cross-functional teams and collaborative work ventures to improve communication, increase the speed of action and level of commitment, and improve flexibility and adaptability. Even so, the type of teams that work in Japan may not function in more individualistic Western cultures, and "the benefits are all too often exaggerated and the difficulties underestimated" (Drew and Coulson-Thomas, p. 7). Loose networks and a supportive organizational culture may be just as effective as formal teams. Some organizations — such as hospitals and airlines — have more extensive experience with teams than others, and teams are most suitable for routine and ongoing activities with distinct objectives, such as logistics, order processing, and purchasing. They often fail through lack of senior management support and commitment, lack of vision and clear goals, poor training, and inadequate rewards (Drew and Coulson-Thomas, p. 8).

A survey of 75 organizations in the UK ranging in size from 500 to 10,000 employees found that teams were most useful in "customer satisfaction, achieving total quality and overcoming departmental barriers," but less important in building relationships with customers or improving organizational learning (p. 9). Nor were they used during downsizing, which is unpopular and is usually carried out in secret by top management due to union opposition and bad publicity. Teams will generally not approve of downsizing that results in job losses for colleagues, and in any case "many downsizings subsequently are regarded as failures" (Drew and Coulson-Thomas, p. 11).

After the company completed the development phase of the field and more wells came into production, the small team that had been stewarding surveillance of the initial small number of producing wells needed to expand into multiple matrix teams. Each team was made up of multi-disciplinary members and focused on a different segment of the field. The original small team consisted of members from a single engineering discipline reporting to one supervisor. The change entailed the inclusion of new members reporting to different supervisors with different technical backgrounds, needed to examine the performance of wells and blocks in an integrated way.

This change was necessary to cover all aspects of field surveillance using all available resources. However, the basic structure of the company did not need to change. The model used for the surveillance phase was in line with the structure and approach used during the development phase — the use of matrix, multi-disciplinary teams under different functional leadership. A key concern, however, was to avoid team members tending to work in discipline-related silos rather than engaging with one another. Such behavior would defeat the principal purpose of integration in executing field surveillance and data analysis.

The Change Process

There are also important aspects of the change that relate to employees currently in the subsurface group and to incoming employees. The transition from a development to a production company involves three types of personnel changes, two of which concern current staff. First, personnel directly involved with development whose skills are no longer needed will be released to work on similar projects elsewhere. Second, personnel whose work is associated with production surveillance and sustainment activity, or whose work is related enough to be adapted to a surveillance role, will be considered as candidates for re-tasking rather than release. Third, the increased activity required to support production maintenance will require additional people with specific skills to be brought into the company; personnel who may also possess these skills but were slated for release will be considered for these roles as well. These changes must be managed alongside organizational reporting changes in order to minimize distractions for the Asset Surveillance Teams.

The scope of this change was extremely limited, and the total number of employees affected was fewer than sixty — approximately two percent of the entire organization. As such, it can be considered a narrow change. It was a deliberate effort to redirect the focus of the subsurface organization to address needs very different from the current ones, making it a strategic change. While the company was approaching the end of the development phase, the facilities were still fairly new with minimal operating problems presenting themselves at that time. The company could easily have deferred making any organizational changes until events forced the issue. Undertaking this change proactively reflects a deliberate approach to anticipated future needs.

Subsurface management embarked on this change based on a thoughtful consideration of future needs, in advance of actual problems presenting themselves — reflecting the planned nature of the change process. The Asset Surveillance Teams were initially conceived and then put into place in a very short period of time, making the change discontinuous in character. From the perspective of the functional teams already in place, the change was radical. However, the limited scope of the change meant that its overall impact on the company as a whole was negligible. The change was envisioned and implemented by middle management with concurrence from upper management, and was not conceived of by the employees themselves. From the employees' perspective, this appears to be a top-down approach; from the perspective of the entire organization, it might be considered a bottom-up solution, having originated at a level close to first-line supervisors.

One example of top-down change was Operation Centurian at Philips Electronics in 1990, which resulted in 45,000 layoffs. This change was made more manageable by the fact that the company was facing bankruptcy due to intense competition from Japanese rivals in the 1980s. In his influential book In Search of Excellence, Tom Peters suggested that executives needed to adopt a new management style based on the Japanese model, which had considerable influence on managers at Philips. Wisse Dekker, the CEO at Philips from 1982 to 1986, had studied management in Japan for six years, but when he attempted to introduce a Company Work Quality Improvement (CWQI) system at Philips, the change failed (Karsten et al., 2009, p. 73). Only in 1990 did Philips resort to "shock treatment" under a transformational leader named Jan Timmer, who did not hesitate to use "language full of challenging organizational values and visions" and also exuded trust and confidence in the future (Karsten et al., p. 76). Philips simply did not know how to survive in the new globalized economy of the 1970s and 1980s, since its origins lay in a very different world that had been mercantilist and ruled by a few colonial powers. Timmer's layoffs shocked European politicians and labor leaders, who called him "the Butcher" and "the Hangman" for adopting American-style downsizing methods (Karsten et al., p. 81).

Even in 1990, most managers at Philips did not realize the company was near bankruptcy until Timmer called a secret weekend meeting and informed them that the end was near. Even though managers described the event as a "funeral" and "the Valley of Death," Timmer forced them to sign written agreements promising to lay off 15% of the workforce (Karsten et al., p. 83). In the new training program, "naming, blaming and humiliation became a common practice," which was shocking to managers in a staid, conservative European company and not at all in keeping with its traditional culture (Karsten et al., p. 84). Timmer also set up twenty-one corporate task forces to improve quality at every level, along with a new education and training program and a series of town meetings to improve communication with employees and gather their input.

Returning to the RasGas context, several forces worked against the adaptation of the change. These included resistant employees and stakeholders, the close-knit original team and their supervisor — who may have felt a loss of power and visibility — and new members confronted with fear of unknown tasks, goals, and performance expectations. Lack of clarity regarding responsibilities can lead to resistance, since teams were venturing into new technical and work frontiers with no roadmap and little outside guidance. Competing responsibilities for team members included demands from their functional-home leadership and goals alongside new surveillance objectives, creating misalignment between matrix and functional objectives. Authority and accountability were also unclear, since no formal organizational change was made and team members continued to report to their original functional supervisors, who were not directly responsible for the new teams. Outside stakeholders were uncertain about their roles in relation to the new organization, which could also lead to resistance.

Although all models offer similar methods for dealing with change, there is "substantial variability in how the phenomena associated with resistance are received and ultimately operationalized" (Brisson-Banks, 2010, p. 41). Resistance to change can be very complex, and it has both positive and negative aspects; it can actually bring about improvements in an organization undergoing change. Most resistance is passive and covert, intended to slow down change rather than openly obstruct it. Emotions associated with resistance include anxiety, fear, stress, and anger. Certain personalities — particularly those of a rigid and dogmatic type — have less openness to change and lower tolerance for risk and ambiguity. Individuals with "maladaptive defense mechanisms" such as projection, denial, and acting out are also more likely to oppose change of any kind (Brisson-Banks, p. 44). Resistance is often based on fear of job loss, a decline in status, or fear of inability to adapt. In general, better information about change is correlated with more positive attitudes toward it, unless management's professed attitudes and actual behavior are contradictory. Participation leads to "more positive views of the change, reduced resistance, and improved goal achievement" (Brisson-Banks, p. 47). Distrust of management always leads to resistance, and to greater levels of anger, frustration, and anxiety. Only about 7% of employees in one survey regarded management as "collaborative" or capable of involving individuals in decisions, and these employees had the most positive view of change in their organizations (Brisson-Banks, p. 48).

Materials Requirements Planning (MRP) got its start in the 1970s, heavily influenced by the Just-in-Time system used in Japanese manufacturing. Yet few organizations have been able to use the new technology well, and MRPII has been called a "$100 billion failure." There has been a very high failure rate in its implementation, led by managers who could not carry out the change and were almost never transformational leaders capable of instilling "a sense of purpose in those who are led" or encouraging "emotional identity with the organization" (Brown, 1994, p. 6). MRPII can make companies more competitive and improve customer service, leading to higher efficiency, lower costs, and fewer shortages, but at least 50–70% of MRP systems fail. Most organizations are simply not prepared to make the change and often face massive resistance from employees concerned about job losses, lower pay, and loss of security and status (Brown, p. 7). Erwin and Garman (2010) surveyed 1,536 executives and found that only 38% regarded change initiatives as successful, while just 30% thought they had "contributed to sustained improvements of their organizations" (p. 39). Resistance to change was the main reason for these failures, and management that encourages confidence, trust, and participation can harness resistance to change in order to improve its prospects.

Supply chain collaboration improves productivity, profits, and customer service, but companies often have difficulty putting it into practice. Low trust in management is a major reason, and "more often than not, the resisting forces have proven stronger than the driving forces" (Fawcett et al., 2010, p. 270). Globalization, technology, and increased competition have all combined to put great pressure on companies, and collaboration is "rare, valuable, and hard to replicate" (Fawcett et al., p. 272). Force-field theory indicates that resistance can get out of control without top-management support, and that frozen companies become irrelevant in the global economy. Technology alone cannot overcome employee resistance since "the organizational structure and culture are among the most intractable barriers to more effective collaboration within the firm and across the supply chain" (Fawcett et al., p. 273).

Specialized companies with many areas of deep expertise tend to become highly resistant to change, and social dilemma theory notes that in an environment of insecurity, employees fear competition for scarce resources and believe that another's gain comes at their expense. In this situation, removing the barriers that lead to distrust of collaboration is very difficult. Culture, human personality, and structure all combine to resist change, and "resisting forces permeate the culture, structure, and technology of the organization" (Fawcett et al., p. 283). On the other hand, logistics professionals are most open to supply chain collaboration and value it more highly than financial and production managers. The use of teams, rotation, and better training and communication can also help overcome resistance (Fawcett et al., p. 286).

One of the main characteristics desired from the new organization was the ability to be flexible and resilient. This was facilitated through the ability to quickly change priorities, though it can be disconcerting to employees. The close-knit original team and their supervisor felt a loss of power and visibility; the supervisor of the initial team was therefore asked to take a lead role in guiding the teams to reduce any sense of threat to his status. New members were confronted with fear of unknown tasks, goals, and performance expectations. An early brainstorming session led by senior advisors was organized to provide a guiding roadmap of how the new surveillance work scope would look and what roles and responsibilities each member would have. Members of the original team were asked to take lead roles and help everyone learn from each other.

There was unclear authority from an accountability perspective, since no formal organizational change was made and team members continued to report to their original functional supervisors, who were not directly responsible for the new teams. New reporting tools — such as monthly team reports covering different disciplines — were implemented to promote collaboration and integrated analysis, thereby reducing a "silo mentality." Heads from different disciplines were asked to become coaches and mentors for the multi-functional teams in order to help prioritize tasks, share responsibilities equitably, encourage collaboration, and help with accountability. Upper management organized competitions with awards in areas where teams were not performing well or collaborating effectively. This increased the prestige of the teams and demonstrated upper management's commitment to the Asset Surveillance Team concept and its importance to the company.

Conclusion

At RasGas, upper management set general guidance in direction and expectations, with the expectation that the change would be incremental in type. The first-line supervisors and technical advisors were given space to shape and coordinate the process through which the teams would produce. Yet objectives were intentionally or unintentionally left vague in order not to stifle creativity and learning through rigid mandates. The teams were advised to find their own way and develop their own solutions to the challenges being presented. This is very clearly a transformational leadership approach.