POM Report Final HPCL

Report on Organisation Structure and Leadership style of HPCL

This report deals with the organizational structure and leadership style of Hindustan Petroleum Co. Ltd. The organizational structure and leadership style of five other companies from similar domain are compared and the input is taken from an employee based on which suggestions are given for improvement.

Yuvraj Hedaoo (IM-17, 231)

2 Report on Organisation Structure and Leadership style of HPCL

1. Introduction...................................................................................................................................3

2. Brief History and Inception............................................................................................................5

3. Products & Services offered...........................................................................................................6

4. Principles of management followed in HPCL.................................................................................8

4.1 Division of work:......................................................................................................................8

4.2 Authority:.................................................................................................................................8

4.3 Discipline:................................................................................................................................8

4.4 Unity of Command...................................................................................................................8

4.5 Unity of Direction:...................................................................................................................8

4.6 Subordination of individual interests to group interests:........................................................8

4.7 Remuneration:.........................................................................................................................8

4.8 Centralization of authority:......................................................................................................8

4.9 Scalar Chain:............................................................................................................................8

4.10 Order:....................................................................................................................................8

4.11 Equity:....................................................................................................................................8

4.12 Stability of tenure of Personnel:............................................................................................8

4.13 Initiative:................................................................................................................................9

4.14 Espirit de corps:.....................................................................................................................9

5. Organizational Structure of HPCL................................................................................................10

6. Articles on Organizational Structure of Competitors:..................................................................12

6.1 Article 1:....................................................................................................................................12

6.2 Article 2......................................................................................................................................13

6.3 Article 3......................................................................................................................................14

6.4 Article 4:....................................................................................................................................15

6.5 Article 5:....................................................................................................................................16

6.6 Comparative study/Suggestions:...............................................................................................17

7. Leadership Style:..........................................................................................................................18

7.1 Control:................................................................................................................................18

7.2 Exercise of Authority:...........................................................................................................18

7.3 Limits of Authority Manual:.................................................................................................18

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7.4 Feedback:.............................................................................................................................19

8. Leadership Style of Competitors:.................................................................................................20

8.1 Article1......................................................................................................................................20

8.2 Article2......................................................................................................................................22

8.3 Article 3......................................................................................................................................23

8.4 Article 4......................................................................................................................................25

8.5 Article 5......................................................................................................................................26

8.6 Suggestion.................................................................................................................................27

9. Appendix:.....................................................................................................................................28

Report on Organisation Structure and Leadership style of HPCL

1. Introduction

Hindustan Petroleum Corporation Limited (HPCL), a state-owned oil company of the Government of India located at Mumbai, India and is a Fortune 500 company of India listed at number 311 in the global 500 rankings, with an annual turnover of Rs. 1, 08,599 Crores and sales/income from operations of Rs 1, 14,889 Crores (US$ 25,306 Millions) during FY 2009-10, having about 20% Marketing share in India and a strong market infrastructure. Corresponding figures for financial year 2008-09 are: Turnover - Rs. 1, 16,428 Crores and sales/income from operations - Rs 1, 31,802 Crores (US$ 25,618 Millions).

HPCL operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum (MMTPA) capacity and the other in Vishakhapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited (MRPL), a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. Another Refinery of 9 MMTPA is under construction in Bathinda, Punjab by HMEL, and a Joint Venture with Mittal Energy Investments Pvt. Ltd.

HPCL also owns and operates the largest Lube Refinery in the country producing Lube Base Oils of international standards, with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India's total Lube Base Oil production.

HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices facilitated by a Supply & Distribution infrastructure comprising Terminals, Aviation Service Stations, LPG Bottling Plants, and Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships.

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HPCL, over the years, has moved from strength to strength on all fronts. The refining capacity steadily increased from 5.5 MMTPA in 1984/85 to 14.8 MMTPA presently. On the financial front, the turnover grew from Rs. 2687 Crores in 1984-85 to an impressive Rs 1, 16,428 Crores in FY 2008-09.

To succeed in the competitive environment, the Corporation had taken up initiatives such as Business Process Reengineering exercise, creation of Strategic Business Units, ERP implementation, HR initiatives such as Organizational transformation, Balanced Score Card, Competency Mapping, bench marking of refineries and terminals for product specifications / safety, ISO certification of Refineries / marketing / pipeline operations, branding of fuels, Supply Chain Management for improving logistics, customer oriented approach, up-gradation and modernization of facilities. Information technology is being harnessed by the Company to improve productivity across the functions. The Enterprise Resource Planning (ERP) system is now operational on Oracle Software across the Company.

Hindustan Petroleum Corporation Limited today is the second largest integrated oil Company in India-playing a significant role in the nation's economic development and growth. Against the background of economic liberalisation, HPCL is diversifying upstream and downstream into Exploration & Production and Power & Petrochemicals while at the same time strengthening infrastructural facilities, the area of core competence being Energy Management

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2. Brief History and Inception

The Company was incorporated in 1952 as Standard Vacuum Refining Company of India Limited. In 1962, the name was changed to ESSO Standard Refining Company of India Limited. Hindustan Petroleum Corporation Limited comes into being after the takeover and merger of erstwhile Esso and Lube India Undertaking in 1974. In 1976, Caltex Oil Refining Ltd. was taken over by the Government of India and subsequently merged with HPCL in 1978. In 1979, Kosan Gas Company, the concessionaries of HPCL in the domestic LPG market, were taken over and merged with HPCL.

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3. Products & Services offered

3.1 Refineries:

HPCL refineries upgrade the crude petroleum into many value-added products and over 300 grades of lubricants, specialties and greases. HPCL has two refineries. On the West Coast is the Mumbai Refinery with a capacity of 5.5 Million Metric Tonnes Per Annum, while the other at Visakhaptnam on the East Coast has a capacity of 7.5 Million Metric Tonnes Per Annum. The Lube Refinery at Mumbai is the largest in the country with a capacity of 335,000 Metric Tonnes Per Annum producing superior quality base oils. Both the refineries produce a number of value added products like petrol, high speed diesel oil, superior kerosene oil, liquefied petroleum gas, naphtha, aviation turbine fuel and others and over 300 grades of lubes, specialties and greases. Both the refineries have implemented and upgraded facilities to produce green fuels like unleaded petrol and low sulphur diesel.

3.2 Aviation:

Hindustan Petroleum has been providing aviation refueling (Aviation Turbine Fuel - ATF) services at various airports in India for more than half a century. Its network covers all the major airports in India and is continuously expanding. Ten Aviation Service Facilities (ASFs) cater to the refueling requirements of both domestic as well as international airlines. At Mumbai, both domestic and international airports are directly connected to the refinery through a dedicated pipeline.

3.3 Bulk Fuels & Specialities:

The Bulk Fuel & Specialities Business unit caters to marketing of Bulk fuels & Petroleum products directly to Industrial consumers like power plants, chemicals, fertilisers, shipping companies and airlines. This unit is also involved in exports of Bulk fuels and finished Petroleum Products.

3.4 International trade:

The activities relate to Crude oil imports, Petroleum Product Imports / Exports, Shipping, Production planning for Refineries, Supplies for domestic Markets, and Product exchange with other Indian Oil Companies and Oil price risk management.

3.5 LPG - HP GAS:

HPCL has over 24% of market share of LPG business in the country. HP Gas, the HPCL brand of LPG, is bottled at 40 plants across the country with a total capacity of 1554 TMT per annum. The over 17 million LPG consumers of HPCL are serviced through a nationwide network of over 1865 dealers.

3.6 Lubes - HP LUBES:

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HP Lubes is an integral part of Hindustan Petroleum Corporation Limited, one of India's frontline oil majors, committed to providing energy and fuelling growth in every significant area of development. The range of HP Lubes is comprehensive and catering to the minutest needs; from new generation cars to ploughing tractors and industrial machinery.

3.7 Retail (Petrol Pumps etc.):

The Retail Business Unit is oriented towards delivering better and faster service to consumers. The retails network consists of a nationwide network of over 4700 retail outlets and over 1600 SKO/LDO resellers. The scope of the HP petrol pump has been redefined. The consumers’ larger interests are served by transforming the petrol pump into a one-stop convenience outlet t where one can shop for anything from fuels to grocery and lubricants to gifts. A nationwide chain of convenience stores has been set up at HP petrol pumps. A number of outlets provide customers Internet access while instant access to cash through ATMs of leading banks is available at prominent locations.

3.8 Exploration & Production:

HPCL has ventured into new business opportunities to access additional revenue streams and to emerge as an integrated energy company. The Corporation’s foray into the upstream sector would provide access to equity oil to ensure energy security. HPCL Plans to invest approx. US $500 Million in the Upstream Sector during the current XI plan ending 2011 - 2012.

3.9 Joint Ventures:

Opportunities are also being explored to access new revenue streams, and augment downstream businesses. Accordingly, HPCL has ventured in upstream activities (Exploration and Production) and piped gas distribution with joint ventures like HPCL-Mittal Energy Ltd., Hindustan Colas, Prize Petroleum Company Limited, South Asia LPG Co Pvt. Ltd., Bhagyanagar Gas Limited, Aavantika Gas Limited, Petronet India Limited, Petronet MHB Limited, Mangalore Refineries and Petrochemicals Limited, CREDA-HPCL Bio fuel Limited, Sushrut Hospital and Research Centre.

3.10 Alternate Energy:

HPCL's maiden renewable & alternate energy Wind Energy Generator was commissioned at Dhule in Maharashtra State in May 2007. Power generated from this venture is being sold to the Maharashtra State Electricity Board (MSEB). HPCL commissioned another Wind power project in Jaisalmer in Rajasthan State on 1st January 2009. The power generated is wheeled through the Rajasthan State Electricity grid and is partly consumed by HPCL’s centers at Ajmer, Jaipur, Kota, Pali and Jodhpur. Surplus power is being sold to Rajasthan State Electricity Board. (RSEB).

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4. Principles of management followed in HPCL

4.1 Division of work: It is followed in HPCL. Where the work is divided among the members of the group based on the employee skills & talents .It provides an opportunity to specialize in different sectors.

4.2 Authority: The exercise of authority in HPCL has well documented Limits of Authority Manual, Purchase Manual, Chart of Accounts, etc, facilitating the decision making process at various levels within the organization.

4.3 Discipline: HPCL is well organized company .The key steps followed in HPCL are • Strict compliance to attendance and reporting system • Termination of illogical & un-justified practices • Counseling & disciplinary measure for repeated insubordination• Public admiration for disciplined and sincere workmen • Disciplinary action for deliberate poor performance • Discard of contractor’s deployment in workmen’s designated job

4.4 Unity of Command: It is commanded by head of the company and head of the department.

4.5 Unity of Direction: Since HPCL is having different objectives and different activities followed; the unity of command is not supported.

4.6 Subordination of individual interests to group interests: In HPCL the organizational interests dominate rather than individual interests. Since it is a production sector, individual interests are not preferred.

4.7 Remuneration: The wages & salaries bring out the best possible commitment in the employees to achieve the organizational goals. HPCL has very good manpower and it provides good facilities to its employees.

4.8 Centralization of authority: The authority is centralized and when decision making powers are retained at the top level management. HPCL follows the centralization of the authority. One man heads all kinds of work. In a functional organization, authority is centralized to a great extent.

4.9 Scalar Chain: It indicates the authority flows from top to bottom. HPCL is the organization where the authority flows from top to bottom.

4.10 Order: HPCL is very good in human resources; hence it follows the order in the company to place right men to the right job.

4.11 Equity: The equity is followed in HPCL.

4.12 Stability of tenure of Personnel: People need time to learn jobs and HPCL has stability of tenure where people are concentrated to a particular function in the organization.

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4.13 Initiative: The staff should be encouraged to show initiative within the limits of authority and discipline.

4.14 Espirit de corps: This means team work implying that unity is strength. The key features that the successes lie in the teamwork believed by HPCL

• Effective Leadership • Collaboration • Transparency • Sharing of responsibility • Trust and appreciation • Respect to each other’s views • Free & fair sharing of information • Cohesiveness • Change Compatibility (Accept, adopt, assess change)

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5. Organizational Structure of HPCLOrganizational structure is framework of policies and rules, within which an organization arranges its lines of authority and communications, and allocates rights and duties. Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. This structure depends entirely on the organization's objectives and the strategy chosen to achieve them.

In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy.

HPCL is formal organization, controlled by the government of India. It is working with a specified organization policy. It has ethically sound policies and work always for the worth use of customers. In HPCL coordination, communication, tradition culture values are taken very care.

HPCL is managed by a Board of Directors. Presently there are 11 Directors, with the Chairman and Managing Director Mr. S. Roy Choudhury as the head of the Corporation. The Board comprises of 4 Whole time Directors also called Functional Directors –Director Marketing, Director Refineries, Director Human Resources, Director Finance. In addition, 2 part time Directors representing Government of India, through Ministry of Petroleum & Natural Gas, 4 part time Independent Directors, also called Navratna Directors are on the Board. All these 6 Directors are nominated by the Government of India. The organizational chart of HPCL is as follows:

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Fig: Organization Structure according to Management.

Reporting system of Structure from front line Executive to Top management:Engineer Senior Engineer Deputy Manager Manager Chief Manager DGM GM Executive Director CMD

But the reporting system is differed in some of the functional area like refinery unit has different reporting system due nature of work assigned in Middle level management and Operative management. Departmentalization: In HPCL departmentalization is followed by function. The basic aim of fictionalisation is to simplify by grouping all the work to be done into major functional departments. It helps to orient towards a special activity and concentrate competence in particular ways. Functional relationship subjects to multiple supervision for managers.

Matrix organization structure: In HPCL organization structure is matrix organization structure. Since HPCL has different sectors and products which can be organized effectively. Sector is organized by the top authority to balance the power. In HPCL, the roles projects and functional manager are clearly defined. Since it is a big organization this matrix organization helps to achieve long term goals in an efficient manner.

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6. Articles on Organizational Structure of Competitors:

6.1 Article 1:Implementation and performance of a matrix organization structure

This structure has implemented in Bureau of Engineering, City of Los Angel. A matrix was

proposed because of the existing conditions of the company could not fulfil the

requirements and the organization was facing a problem of outside pressure for dual focus;

pressures for high information processing.

Objective:

The Study explains assessment of need of organizational structure and its implication on a

Matrix structure organization.

Variables: Performance of an organization, Time required completing the task,

Findings:

- Identified the need of Matrix structure

- Difficulties finding in implantation of matrix structure

- Performance of an organization after implementation

Conclusion:

- The performance of the organization while operating under a matrix structure has

improved.

- Research on matrix organizational structure implementation has identified several

implementation difficulties.

Learning:

HPCL follows the Matrix organizational structure, as per the mentioned in article the effect

of matrix organizational structure show the positive change in speed of decision making and

the time required to complete the task has improved. So HPCL can continue with matrix

organizational structure with short span of command.

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6.2 Article 2“The effects of a divisionalised and decentralized organizational structure on a formal

internal communication function in an organization”.

This paper is mainly designed after survey research conducted 18 months after the process

implementation found the structural changes led to improved information flow and face-to-

face communication in South African manufacturing companies.

Objective:

- The Objectives of study focuses on the effects of structural changes on an internal

communication function

Variables: Communication of managers, Team work

Findings:

- The findings confirm the importance of power for the internal communication

function.

- The findings suggest that the public relations function, and subsequently the internal

communication function, needs to make sure that it has a specific.

Conclusion: - Decentralizing the internal communication function offers a more ethical approach

to communication in the organization. Decentralization is emancipator in that it gives

employees more participation and influence in their immediate environment.

Learning’s:

HPCL has the Centralised decision making process which follows the great impact on

performance of an organization. The decentralized process creates a work

environment with a better team spirit, more workplace discussions and more

opportunities for managers and employees to meet. The major advantage of a

decentralized process is high speed of decision making because decision being taken

is very close to the situation.

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6.3 Article 3“Management Development in Royal/Dutch Shell”

Shell is a large global group of energy and petrochemicals companies with around 101,000

employees in more than 90 countries and territories.

Objective:

The study is mainly focus on the restructuring part of the Royal/Dutch Shell. What are the

steps taken by the company to manage efficiently, for example from decentralization Shell

moved towards centralization? They also have 3 way matrix structures which need to be

restructured.

Variables: Division of work, staff performance

Findings:

Through the augment changes in their structure, Shell manages to achieve a more nimble,

less centrally driven approach to talent identification and talent i.e. span of control is

updated.

Conclusion:

After implementation of strategy “There are no alternatives” (TINA) and “Just Do it” the

performance of the staff has improved which subsequently enhance the overall

organizational performance. JDI strategy led the Shell on top level company.

Learning: Shell is concentrated towards the human resources and adjusted their

organizational structure which is best suited to their human development process. This

could be easily understood by the span of control and the promotion towards the work

culture in the company.

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6.4 Article 4:An empirical study which compares the organizational structures of companies managing

the World's Top 100 brands with those managing Outsider brands.

Objectives: To find the best suited organizational structure for the company, which allows

managers to manage in the way they consider necessary to deliver their best. In some

instances this might mean an authoritarian style of management through a hierarchical

Organizational structure and in others, it might mean a more democratic style of

management through relatively flat organizational structures.

Variables: Dual chain of command, culture of openness and trust.

Findings: There may be no ideal structure for a company, instead companies may need to

develop the kind of structure that meets their particular circumstances and thereby enables

them to maximize their output.

Learning: First define the organization’s objectives, then the strategy to deliver those

objectives and, finally, put in place an organizational structure which allows both the

implementation of the strategy and the realization of the objectives.

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6.5 Article 5: “Organisational structure of Atlantic Petroleum (Ireland) Limited.”

Objectives:

To study the effect of core competencies e.g. geological, geophysical and reservoir engineering

expertise as well as commercial insight on performance of structure.

Variables: decision making, Core competencies

Findings: Effect of Flat organization structure on decision making and

Learning:

Atlantic Petroleum uses external advisers and has collaborations within the limit of the

organizational structure. A core competency of Atlanta Petroleum (Ireland) is fundamental to the

business and also substantiates any evaluation of new opportunities. HPCL does not share core

competencies like mentioned organisation. It has to look for an opportunity to different itself from

competitors.

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6.6 Comparative study:

The Following table shows the comparison of HPCL, BPCL, and Royal/Dutch SHELL. Comparison Table

Management Principle HPCL BPCL ROYAL/DUTCH SHELL

Organizational Structure

Matrix Matrix Mixed5

Centralization of Authority

Centralized Centralized Decentralized5

Way of Division of Work

Productive Productive Highly productive5

Span of Control Wide short Short

The organization structure of SHELL5 is Different from HPCL where the principle of management play key role in differentiation. The organizational structure of SHELL has been modified in early 1995 with principle of “There is no Alternative”, “Grow our own Timber” and “Just do it”.

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7. Leadership Style:

7.1 Control:

HPCL has undertaken a Business Process Re-engineering (BPR) study with the assistance of M/s. Arthur Andersen & Associates to sharpen the Corporation's competitive edge in critical areas of operations, and specially the challenges arising out of deregulation of the Petroleum Sector, to make the organization more responsive to market requirements and to update information technology for quicker decision making. The conclusions of the BPR study have been accepted by the Management and are under implementation in all major areas of activity. The exercise includes:

• Creation of 4 Strategic Business Units (SBUs) within Marketing - Lubricants, Retail, I&G and LPG. • Development of an action plan to reposition and strengthen the Lubricants business. • Decentralization of the purchase functions to SBUs to quicken purchase process. • Broad banding of various positions, to allow greater continuity and development of expertise. • Delayering/flattening the organization to quicken decision making process. • Enterprise Resource Planning (ERP) system to meet the long-term information technology needs of the Corporation. HPCL has kept itself abreast with the developments in the field of Information Technology, deploying state-of-the-art computers and systems for its activities.

The apex level decision making authority is the Board of Directors of HPCL, except for matters which, as per the Companies Act 1956 are to be decided by the shareholders in the Annual General Body Meeting. The Board has constituted several sub committees, such as Committee of Functional Directors (CFD), the Audit Committee, the Investment Committee, the HR Committee, the Investor Grievance Committee, etc. The meetings of these committees are convened on need basis and the minutes of these meetings are placed for information of the Board. Majority of the members of the Committees except the CFD are independent Non-Executive of Government nominated directors with the whole time directors playing a facilitating role.

The Corporation has constituted an Executive Council comprising of C&MD, the Functional Directors and the Business Unit Heads. This Council discusses important issues concerning the organization, analyze the same and recommend the ‘way forward’ in respect of matters discussed. The emphasis laid by this council is on team approach, mutual support of functions and joint deliberations on issues which has enhanced further the decision making process. It has thus facilitated an integrated thinking process and an aligned approach across the Corporation for achieving the Corporate Vision.

7.2 Exercise of Authority:

The Corporation has well documented Limits of Authority Manual, Purchase Manual, Chart of Accounts, etc, facilitating the decision making process at various levels within the organization.

7.3 Limits of Authority Manual:

LAM, as it is called, lays down the authorities that can be exercised at various levels, i.e. the Board, Committee of Functional Directors, the Executive Committee, the Contracts Committee, the Bids Committee and also the senior individual positions, etc. for different activities of the Corporation. The manual is divided into segments representing different functions like Sales, Crude & Shipping, Capital Projects, Operations & Distribution, Finance, HR etc., and provides for a decision making

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process through various committees as above, represented by inter-functional groups including Finance. This ensures a transparent and streamlined decision making process adhering to the laid down systems and procedures and thereby leaving no room for arbitrariness.

The Committee of Functional Directors has delegated further powers to various sub-committees within the organization, viz., Contracts Committee, Bids Committee, Credit Committee etc.

7.4 Feedback:

The Corporation believes that the key to organizational excellence is human resource development. It has around 11,500 employees and its policies are employee oriented. HPCL's performance appraisal system ensures growth based on merit as well as seniority. It has a residential training institute at Nigdi near Pune and it has always been the Corporation's endeavor to constantly upgrade the skills of its personnel.

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8. Leadership Style of Competitors:8.1 Article1Exxonmobil

AUTHORITY –

Exxon was a highly centralised organisation with six major divisions. The centralised structure meant that corporate headquarters played a major role in the decision-making process of the company, particularly with regard to investment decisions. All investments exceeding $1 million needed top-level approval from headquarters in Irving, Texas. In contrast to Shell, for example, the company apparently maintained tight control over operations in developing countries. The merger with Mobil has, however, led to structural changes. ExxonMobil has diversified. From being a multifunctional geographically-based regional organisation it now embraces eleven global functional businesses – such as ExxonMobil exploration, which is organised in four core business areas.

AUTONOMY –

These organisational changes could have at least two consequences for the relationship between the company and society: First, the merger with Mobil could lead to more relaxed central control of the organisation, permitting branch officers and operative entities a larger degree of autonomy than previously. Secondly, separation of upstream and downstream activities could lead to a higher degree of resistance to public pressure: Those responsible for causing problems will not necessarily be the same as those exposed to negative public attention and potential threats of consumer campaigns and boycotts. ExxonMobil’s global policies promote diversity and inclusiveness and prohibit any form of discrimination or harassment in any company workplace, anywhere around the world. These broad policies encompass all forms of discrimination — including discrimination based on sexual orientation. The dynamic nature of our business environment demands that we quickly engage the full capabilities of all our new employees. Providing transition guidance helps new hires quickly become proficient contributors. At ExxonMobil, mentoring programs are designed to achieve that objective and to increase job satisfaction, self-esteem and self-reliance for the new employee. Integration efforts to accelerate learning for new employees are critical to our continued success.

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CONTROL –

Exxon Mobil has the largest portfolio of proven reserves and highest production in North America. In 2000, net production amounted to about 40 per cent of the 2000 production level on an oil equivalent basis. Key European assets include extensive interests in the North Sea which accounted for a little more than 30 per cent of the company’s 2000 net oil and gas production. The Asia Pacific region contributes about 13 per cent. ExxonMobil holds strong upstream interests in Malaysia, Australia and Indonesia. As the scale of activities show, ExxonMobil is involved in upstream and downstream operations throughout the world. As regards developing countries, ExxonMobil has strong interests in a number of politically and socially ‘explosive’ and resource-abundant countries in Africa, Asia, the Middle East as well as the former Soviet Union. ExxonMobil is thus highly vulnerable to public scrutiny and criticism, and we would expect it to have been exposed to considerable criticism.

Return on equity can help investors determine how adeptly management gets the job done. This metric combines how well management is expanding profitability, managing assets, and using financial leverage, all in one ratio. While return on equity isn't foolproof -- managers can manipulate it with excessive leverage, for example -- it does an excellent job of suggesting how effective managers are, and how well they can generate high returns on investors' capital.

ExxonMobil's current return on equity falls below its five-year average. While recent economic conditions have been challenging, declining return on equity shows either that management hasn't been able to control costs and manage assets, or that it's failed to move into higher-return businesses over the last five years. In Exxon's case, the fall in gas prices hit the company hard. To management's credit, its pursuing new areas of high returns, as seen by Exxon's acquisition of natural gas giant XTO earlier this year.

FEEDBACK - Revenue per employee provides another way to gauge a CEO's effectiveness. If this metric is declining, the company might have a bloated organizational structure, or too many extra employees toiling away at new initiatives that just aren't working out. Either possibility would hint that management isn't effectively running the organization.

As you can see, ExxonMobil's revenue per employee has moved below its five-year average. This might mean that the company's hiring too many people, or spending too much. The company's revenue versus its 5 year average bests Chevron and Occidental, but trails Conoco by seven percentage points. On an absolute basis, Conoco operates at the highest levels in the peer group.

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8.2 Article2Bharat Petroleum

Founded as British Petroleum in Persia (now Iran) a century ago, this well-regarded company was a leading producer of oil throughout most of the twentieth century. But in the 1970s and 1980s, the industrial giant had fallen on hard times. Part of this decline in fortune was due to outside forces: In the years following the oil embargo of 1973-1974, the petroleum industry was subjected to a roller coaster of unpredictable political and economic events.

CONTROL -

In the early 1990s, however, BP began to change. First under the leadership of David Simon (CEO from 1992 to 1995), and more recently under John Browne (Lord Browne, as of 2001), BP revamped its profile within the petroleum industry and among corporate giants more generally. It cut down its core workforce by over half, from 120,000 to 53,000, in the 1990s; 8 at the same time, it acquired major natural resource companies. At the start of the twenty-first century, BP had climbed from being the fifth largest and least profitable of leading petroleum companies to the second largest and most profitable; in the first quarter of 2001, a bleak period for most corporations worldwide, BP reported a record-breaking $4.13 billion profit.9 Its main activities include the exploration and production of crude oil and natural gas, manufacturing and marketing, and solar generation—activities that have earned it the nickname "Beyond Petroleum."

FEEDBACK –

Having long been viewed as one of the principal contributors to pollution, BP now aims to become an environmentally friendly, self-styled "green company." It regularly reports on its performances vis-Ã -vis health, safety, environmental care, social investment, and responsiveness to local conditions. Each individual is monitored and assessed as per their contribution to the company. Those who cannot justify their contributions are rapidly and, some would say, ruthlessly dismissed from the company.

AUTONOMY –

But perhaps most astounding are the shifts that have occurred within BP itself, introduced by CEO Browne and his top executives. Once a conventionally hierarchical firm, BP is now organized in a flat way. Once an organization where responsibility was diffuse or altogether absent, it is now a company where each individual is expected to contribute directly to profits or to engage in creating or distributing knowledge that will ultimately increase profits.

AUTHORITY -

How did this dramatic turnaround occur? BP became a "learning company," trafficking (self-consciously or not) in the creation and alteration of mental representations. For example, BP executives now spend a great deal of time in strategy sessions—reflecting on the current state of the petroleum industry as well as the opportunities available, the possible pitfalls, and alternative courses of action. Moreover, the company is now characterized by considerable experimentation and virtually instantaneous communication of all knowledge within the company.

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http://hbswk.hbs.edu/archive/4069.html#9

http://hbswk.hbs.edu/archive/4069.html#8


8.3 Article 3Conoc`oPhillips

ConocoPhillips is an ethical oil & gas company with a demonstrated commitment to innovation and

the environment. ConocoPhillips values safety. ConocoPhillips is a large global company with

opportunities all over the world. ConocoPhillips pays their employees very well compared to non oil

and gas companies. ConocoPhillips offers a very nice benefit package in terms of time off for

vacation and in flex days. ConocoPhillips values and supports work/life balance. Because

ConocoPhillips is a more conservative company the risk exposure is lower which (should) contribute

to a higher return for shareholders and a more secure job environment. They should also be able to

survive in the long run through these conservative practices and by being innovative leaders in the

energy sector.

AUTONOMY -

ConocoPhillips shoves the United Way fundraising efforts down their employee's throats and does not

respect people's decisions to support other causes. People often feel harassed by the yearly campaign.

ConocoPhillips will let you overwork yourself; they do not enforce the work/life balance.

ConocoPhillips does not always promote the right people. ConocoPhillips does not do a good job of

identifying who the right people are - often times it's the person who got the job done, not the person

who got the job done right. ConocoPhillips is often trying to implement change but is very ineffective

in doing so. ConocoPhillips employees get frustrated with the same reinvention of the wheel that

actually needed to be fixed or replaced.

FEEDBACK –

ConocoPhillips does not proactively respond to employee feedback. ConocoPhillips stifles and

discourages creativity by their conservative approach that they take in everything. ConocoPhillips is

way too bureaucratic and wastes a lot of resources due to this bureaucracy.

ConocoPhillips has too many employees that do not perform well or care about their jobs or their co-

workers (they're "mailing it in" to get the pay check) and managers don't deal well with these

performance issues. ConocoPhillips does not always treat people equally and many decisions

regarding performance and bonuses are based on the manager’s discretion. ConocoPhillips has a lot of

bad lower level managers. ConocoPhillips Canada is to ConocoPhillips USA what western Canada is

to Ontario; at election time our votes don't really count. ConocoPhillips requires that you take global

assignments to progress within the company. It is very difficult to move up in ConocoPhillips and

they almost always under value employees in their pay grades and in salary increases. Many people

will leave the company to increase their work station because they cannot do this within the company.

AUTHORITY -

The leadership is committed to the environment and the innovative approach to researching

alternative energy. The company is marked for its laid back work culture. People are not hold

accountable. ConocoPhillips is filled with victims and they are not measured to any standard of

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excellence. One good employee taking ownership for their job and their choices has to be worth two

people who blame everything else. Why not fire those two and use the money saved to recognize and

develop the strong performer?

CONTROL-

There is an enormous amount of waste in our company. People take things for granted because

working in oil & gas is so lucrative and the perks are opulent. They have lost all perspective and now

they feel entitled. The organization is full of ego maniacs running rampant. A lot of money goes out

because of them and there is a lot of redundancy and waste. And in the meantime, the company is

nickel and diming the good people working below. Good people are going to your competition for

promotions because of HR policies. It costs more to hire them than it does to keep them.

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8.4 Article 4BHARAT PETROLEUM CORPORATION LIMITED

Bharat Petroleum, a noted refiner but not even the largest in India, into a global exploration company sounded as incongruous then as it does today. The government considers this public sector company to be one of its ‘gems’ (navratnas) and guards it accordingly. BPCL has little latitude to chart its own course despite having a turnover of Rs. 1.35 lakh crore ($28 billion). Pump prices of the fuel it produces are strictly controlled by the government keeping the company on the fringes of loss-making for the past decade. Despite recent pronouncements to free petrol prices, the government is far from yielding control of fuel pricing. BPCL, like other Indian oil giants, will continue to sell its products at often un-remunerative prices.

AUTHORITY -

Companies globalise for a myriad reasons and BPCL decided to do so in order to break free. When Ashok Sinha, an electrical engineer from IIT Kanpur, took charge as chairman in 2005, hardening crude prices and falling margins on sales hemmed in BPCL. The government had just gone back on its decision to deregulate the oil market. He had been finance director and knew the numbers. It was somewhat ironic that in an organisation-wide exercise called `Project Destiny’, the 14,000 BPCL employees had decided that their aim was to double sales volumes and quadruple profits by March 2011. It was obvious to Sinha that this destiny would never be fulfilled unless the company developed revenue streams independent of government control.

AUTONOMY -

The new leadership is promoting a higher degree of autonomy. This has bought about a new level of transparency in the working of the company. Employees are held accountable and as a result the attrition rate has gone down tremendously.

CONTROL -

Sinha sought to achieve this through a twin strategy. One, at home, he speeded up the implementation of a joint venture refinery at Bina in Madhya Pradesh to produce 120,000 barrels per day. Being a project with 26 percent participation from Oman Oil, the Bina refinery is not under the direct control of the government.

Next, Sinha drew up a more ambitious plan toward backward integration: A global presence in oil and gas exploration to be achieved over the next decade.

FEEDBACK -

Right from day one, Sinha took an active role in the planning to ensure BPCL made the right moves. One key call he took was to develop a relationship with Anadarko Petroleum, a large Texas- based oil and gas company. It is the serial entrepreneur of the oil business, constantly looking for new areas to explore and produce hydrocarbons. Every move in the international oil market was kept track of. The strategies were then drawn up to go the joint venture way or implement its exploration ambitions.

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8.5 Article 5Petronas

Petronas has unveiled wide-ranging restructuring plans that will enhance its corporate governance and push it forward to meet new challenges facing the global oil and gas industry. Among the plans taking shape are a new restructured board of directors and management committee. Shamsul Azhar said that previously the Petronas board members came mostly from government departments but now it has brought in directors with "depth and breadth of experience" in the oil and gas industry.

AUTHORITY -

Under its restructuring plan, the CEO said Petronas had brought in external talents with abilities to

infuse new ideas as the company needed them to be more competitive in years to come. Petronas has

four new independent directors from the private sector, comprising Megat Najumuddin Megat Khas,

Mohammad Idris Mansor, Mah Siew Bee and Harry Menon.

FEEDBACK -

Petronas has become more accountable for those risks that did not pay off and there is more respect

for the bottom-line. The company have started to refocus on its upstream operations and give more

focus to development and production, and this could be achieved by acquiring proven fields and

"squeezing out" more from proven domestic fields.

To be able to do this, there was a need for Petronas to re-strategise and use new technology to go into

un-worked high temperature and high pressure areas in local fields, Shamsul Azhar said.

He said the refocus on domestic fields would also provide impetus to the government's New

Economic Model with spin-offs for local businesses, especially contractors and service providers.

CONTROL -

Stating that Petronas needed a more robust structure to face the "ups and downs" in the oil and gas

industry, Shamsul Azhar said the company had to review its non-core areas like property and

hospitals and if necessary, carve them out for greater operational efficiency.

Greater ownership and accountability is the main mantra. The company is going for a structure that

promotes greater ownership and accountability for things to move quickly and efficiently.

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8.6 Suggestion As Prevalent in British Petroleum, start holding employees accountable. Define measurable goals

and hold the employees to a set standard of excellence. Delegate work to managers and junior managers and afford them authority to carry it out, as is

observed in Conoc`o Phillips. Studying the case of Exxon Mobil, we recommend that mentoring programs should be designed

to achieve the objective of transforming new hires into proficient contributors and to increase job satisfaction, self-esteem and self-reliance for the new employee

Proper appraisal and recognition is essential to retain good human resource. It costs more to hire them than it does to keep them.

Show commitment to the environment and the innovative approach to researching alternative energy.

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9. Appendix:

Questionnaire attached:

Fig: Organization Structure of HPCL according to an employeeCMD: Chairman-cum-Managing DirectorED: Executive DirectorGM: General ManagerDGM: Deputy General Manager

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Reference:1. Holtzhausen D. (2002), the effects of a divisionalised and decentralized organizational structure on a

formal internal communication function, Journal of Communication Management, Vol. 6, Pg. No. 323–339.

2. Hankinson P. (1999), An empirical study which compares the organizational structures of companies managing the World's Top 100 brands with those managing Outsider brands, JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 8 NO. 5 1999, pp. 402-414,

3. Ortega J., (2001), Job Rotation as a Learning Mechanism, Management Science, Vol.47, No.10, page No.1361–1370.

4. Haynes B, (2007), the impact of the Work environment on productivity, Journal of Facilities Management Vol. 5 No. 3, pp. 158-171.

5. Mathieu C. (2001), Management Development in Royal/Dutch Shell, Journal of Management Development, Vol.20, Page No 121-130.

6. Kuprenas J,(2003), Implementation and performance of a matrix organization structure, International Journal of Project Management, Vol .21 Page No. 51–62

7. http://www.msnbc.msn.com/id/38880054/ns/business-motley_fool/8. - http://hbswk.hbs.edu/archive/4069.html 9. http://www.glassdoor.com/Reviews/ConocoPhillips-Reviews-E14933.htm 10. http://business.in.com/article/big-bet/the-adventures-of-bpcl/16362/3 11. - http://www.malaysianmirror.com/media-buzz-detail/9-business/41984-a-revamped-

petronas-to-face-new-challenges

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http://www.malaysianmirror.com/media-buzz-detail/9-business/41984-a-revamped-petronas-to-face-new-challenges

http://www.malaysianmirror.com/media-buzz-detail/9-business/41984-a-revamped-petronas-to-face-new-challenges

http://www.glassdoor.com/Reviews/ConocoPhillips-Reviews-E14933.htm

http://hbswk.hbs.edu/archive/4069.html

Documents

POM Report Final HPCL