Human Resource Management of the Giant Royal Dutch Shell Group of Companies Plc. Ltd.

Table of Contents”A word of the authors” 3Shell – Our choice of research 4The 100 years of Royal Duth Shell plc – The shell logo 5Burmah Shell Indo Pak and Shell Pakistan Ltd. 7Purpose of Existence – Mission Statement 7The management – How to run a complex oil giant 8The motivational practices – Shell people 8The organizational culture – Belief, value, ideas and norms 9The complex structure10The Top management11The Pre 1996 Matrix Structure 12The management Structure – Post 1995 and the degree of formalization13

The HR Structure, What Shell looks for in candidates 16The Recruitment Policy 17Training and Development18Financial Rewards and Appraisals20Diversity on the forcourt23Health and safety concerns242007 Update27Leadership styles, and Control Mechanisms28JOB ADD, FINANCIAL CONSULTANT29Cross Functional Conflicts30Recommendations and Suggestions30References, Authentic sources of information33″A word of the authors…”The authors of this compilation would like to thank the academic community members for their support, patience, humble guidance and good sense of humor. Their professional guidance has been greatly appreciated.

Tania Khan, head of COCO (Company Operated Sites) Shell Pakistan was particularly helpful in providing us in getting useful information that brought about the completion of this report. Also mentionable would be Mr. Mohsin Siddique (HR accountant) who was instrumental in the contribution to this article. Finally we would like to thank our major instructors Mrs.

Asmara Mashood, who unfortunately had to leave LSE due to unforeseen circumstances, and Miss Ayesha Jamal who helped us in completing this course. With their guidance we were not only able to learn the different theories associated with Human Resource Management, rather we were also able to gain valuable practical experience through our analyses of numerous case studies and reports.

We found our coursework to be thought-provoking and insightful providing us with tools to explore the management strategies of professional world. This research compilation is surely the first step towards becoming real managers, so that when we look back at our university with pride.

Shell – Our Choice of ResearchAfter exhaustive study of different companies, all decisions came to a halt at Royal Dutch Shell plc. It’s extensive century old history added with its commitment to growth, expansion anddevelopment have earned it a brand name.

Shell Pakistan is the 2nd largest oil company in Pakistan. The four competitors going face to face are Pakistan State Oil having a 60% market share, Shell Pakistan capturing 30% of the market, Caltex with 6% market share and Total Parco with 4%.

Shell Pakistan Ltd. is a Multi National Corporation that aims to progress in Pakistan’s highly volatile political structure. One of the main reasons for choosing Shell came from this fact alone that how the Shell management team copes with these different forces in Pakistan.

The 100 years of Royal Dutch Shell Plc. The Shell LogoFor more than 100 years the word ‘Shell’s, “Pecten” emblem and distinctive red and yellow colors have identified the Shell brand and promoted its corporate reputation. These symbols have stood not only for the quality of its products and services, but also as very visible representations of the professionalism, values in all of business activities and to all of its stakeholders around the world.

The word ‘Shell’ first appeared in 1891, as the trade mark for kerosene being shipped to the Far East by Marcus Samuel and Company. This small London business dealt originally in antiques, curious and oriental seashells. These became so popular – the Victorians used them to decorate trinket boxes in particular – that soon they formed the basis of the company’s profitable import and export trade with the Far East.

The word was elevated to corporate status in 1897, when Samuel formed The “Shell” Transport and Trading Company. The first logo (1901) was a mussel shell, but by 1904 a scallop shell or ‘Pecten” emblem had been introduced to give a visual manifestation to the corporate and brand name.

The choice of a shell as an emblem was not surprising, as it was the company name. Also, each of Samuel’s tankers carrying kerosene to the Far East had been named after a different seashell. But why specifically was the scallop or Pecten chosen as the company’s symbol in 1904? It was certainly not thesimplest shape to reproduce in printed form.

Both the word “Shell” and the Pecten symbol may have been suggested to Samuel and Co. by another interested party. A Mr Graham, who imported Samuel’s kerosene into India and sold it as ‘Graham’s Oil’, subscribed capital to, and became a director of, The “Shell” Transport and Trading Company.

There is some evidence that the Shell emblem was taken from his family coat of arms. The ‘St James’s Shell’ had been adopted by the Graham family after their ancestors made the pilgrimage to Santiago de Compostella in Spain. Whatever its origins, the original design was a reasonably faithful reproduction of the Pecten or scallop shell.

When the Royal Dutch Petroleum Company and “Shell” Transport and Trading merged in 1907 it was the latter’s brand name and symbol which then became the short form name (“Shell”) and the visible emblem (the “Pecten”) of the new Royal Dutch/Shell Group. And so it has remained ever since. The form of the Shell emblem has changed gradually over the years in line with trends in graphic design. The current emblem was created by the great designer Raymond Loewy and introduced in 1971. Thirty years on it stands the test of time as one of the world’s most recognized symbols.

Why red and yellow?The exact origins of the Shell red and yellow are hard to define. True, Samuel and Company first shipped kerosene to the Far East in tin containers painted red. But the link, once again, could be with Spain.

In 1915, when the Shell Company of California first built service stations, they had to compete against other companies. Bright colors were the solution, but colors that would not offend the Californians. Because of the state’s strong Spanish connections, the red and yellow of Spain were chosen. As with the Pecten, the actual colors have been modified over the years, most notably in 1995 when a bright, fresh and very consumer friendly new Shell Red and Shell Yellow were introduced to launch Shell’s new retail visual identity. The Shell emblem – or Pecten – remains one of the greatest brand symbols in the 21st Century.

Burmah Shell Indo Pak, Shell Pakistan Ltd.

The documented history of Royal Dutch Shell plc in Indo Pakistan subcontinent dates back to 1903 when partnership was struck between The Shell Transport & Trading Company and the Royal Dutch Petroleum Company to supply petroleum to Asia.

In 1928, to enhance their distribution capabilities, the marketing interest of Royal Dutch Shell plc and the Burmah Oil Company Limited in India were merged and Burmah Shell Oil Storage & Distribution Company of India was born. After the independence of Pakistan in 1947, the name was changed to the Burmah Shell Oil Distribution Company of Pakistan. In 1970, when 51% of the shareholding was transferred to Pakistani investors, the name of changed to Pakistan Burmah Shell (PBS) Limited.

The Shell and the Burmah Groups retained the remaining 49% in equal propositions. In February of 1993, as economic liberalization began to take root and the Burmah divested from PBS, Shell Petroleum stepped into raise its stake to 51%. The years 2001-2 have seen the Shell Petroleum Company successively increasing its share, with the Group now having a 76% stake in Shell Pakistan Ltd (SPL)- an expression of confidence.

Shell has currently about 1000 petrol pumps operating in Pakistan fuelling up the customers and business units.

Purpose of Existence – Mission StatementShell believes that its most valuable assets are its people, stakeholders, employee, and customers. Winning over them is the main work of this Group. However the following three paragraphed mission statement provides a clear cut way of explanation for Shell’s purpose of existence, or in other words its mission statement:”

The objectives of the Shell Group are to engage safely, responsibly, efficiently and profitably in oil, gas, oil products, chemicals and other selected businesses and to participate in the search for and development of other sources of energy to meet evolving customer needs and the world’s growing demand for energy. We believe that oil and gas will be integral to the global energy needs for economic development for many decades to come. Our role is to ensure that we extract and deliver them in environmentally and socially responsible ways, safely and profitably.

We seek a high standard of performance, maintaining a strong long-term and growing position in the competitive environments in which we choose to operate. We aim to work closely with our stakeholders to advance more efficient and sustainable use of energy and natural resources.

The Management – How to run a complex Oil GiantThe Management of Royal Dutch Shell plc, like other major oil companies BP, Amoco, Exxon and Mobil is highly complex. Controlling and efficiently profitably running an organization that is active in over 140 countries is not an easy job. Each country and region has its own difficulties and limitations that put the management’s strategy in challenge and force it to change regarding the political, economical and social situations. This is the challenge that Shell accepts and moulds itself according to the situation.

In Pakistan, under the presence of highly volatile political and economic structure, with ups and downs in governments and uncertainties at every turn, it is very hard to operate profitably, which Shell with the help of highly skilled expertise achieves successfully. Shell Pakistan Ltd. in accord with its other offices and branches across the world follow the rules and strategies of Royal Dutch Shell plc Governance Principles. This is the real management game that outlines how Shell should conduct its business affairs in every part of the globe.

The motivational practices – Shell PeopleRoyal Dutch Shell plc. is a competitive employer that seeks to preserve and value the interest of its employees. To the group, the most valuable asset is employees earning the name of Shell as a brand image. In our interview of Miss Tania Khan, who is the Quality Inspector at Shell Pakistan, head office Karachi, a few years back, she told that Shell launched the IDP, Individual Personality Development plan. This was an international plan designed to improve and further sharpen the skills and talents of people working at Shell. ShellPakistan Ltd. also showed great amount of interest in implementing this program. This program was named more sophisticatedly, Shell People.

Under this program, the employees are trained under the training workshops conducted at several places of the country and the chosen employees were also sent abroad especially from Asian nations like India and Pakistan. Shell Pakistan Ltd. has attractive salary packages offered to its employees. In our observation, we came to know that none of the motivational practices at Shell Pakistan or Royal Dutch Shell plc fit into the motivational theories present in the textbooks. This is due to the complex organizational structure as well as the theoretical limitation in each country.

The Organizational Culture – Beliefs, values, ideas and norms”Companies die because their managers focus on the economic activity of producing goods and services, and they forget that their organizations’ true nature is that of a community of humans.”Arie de Geus, The Living Company (1997), former director of Royal Dutch/ShellRoyal Dutch/Shell is a truly global organization, operating in 145 countries and employing over 119,000 people worldwide.

The company recognizes the importance of valuing all employees and maximizing their contribution to the organization. This philosophy sits at the heart of Shell’s approach to enhancing performance, and forms one of the group’s 9 Business Principles. It was recently highlighted again by the adoption of a new Group global standard on Diversity and Inclusiveness, which sets out the framework for creating a more inclusive workplace culture.

Due to decentralization, the organizational culture at Shell is very friendly and highly motivated. Each motivated member of the team is expectedly prepared for the unexpected. Furthermore, certain delegation of authority and responsibility has been given to the frontline, which is responsible to the regional managers’ turn to national Board of Directors who in turn is finally accountable to The London and The Hague Headquarters.

This is due to the story-telling and learning approach used by the management of the Group. The story-telling or scenario, in better words, is designed to help the team resist the future unforeseen circumstances e.g. what if OPEC embargoes the oil supply and the price of crude oil/barrel doubles within a few days? The other oil companies will find it hard to adjust easily, but at Shell, it’s not that hard. It had happened 2-3 times in the past history of oil companies, the swift up and down waves of the OPEC oil supply has had bad times for the Group. Then under the influence of Pierre Wack, who served at the Shell Building from 1972-1988 in London, preparing for the future had been changed.

In one scenario, an accident in Saudi Arabia led to the severing of an oil pipeline, which in turn decreased supply. That created a market reaction that increased oil prices, allowing OPEC nations to pump less oil and make more money. The tale spooked the executives enough to make them reexamine their assumptions about oil price and supply. Was OPEC preparing to increase oil prices? What would be the implications if they did? As a consequence, when OPEC announced its first oil embargo, Shell handled the challenges better and faster than the competition.

Within two years, Shell moved from being the world’s eighth biggest oil company to being the second biggest. Scenario planning had earned its stripes. Wack had been strongly influenced by the mystic philosopher George Gurdjieff, who had imported a form of Sufism — a mystical branch of Islam — into the West. Gurdjieff’s teachings involved rigorous spiritual exercises, including practice in “seeing” as clairvoyants do. The art to martial arts, according to Gurdjieff, was the ability to “see” exactly where and when to strike for maximum effect.

Changes to the formal organizational structure were only one dimension of the organizational changes of this period. If Shell was to improve its operational and financial performance and improve its responsiveness to the multitude of external forces that impacted its many businesses, then change needed to go beyond formal structures. The criticisms leveled at Shell for being bureaucratic, inward looking, slow, and unresponsive were not about organizational structure, they were about behavior and attitudes. In any organizational change, a new structure may provide the right context, but ultimately it is the effects on individual and group behavior that are critical.

The Complex StructureThe organizational structure of Royal Dutch Shell plc. is highly complex due to its sheer size and enormous activities in over 130 countries. From its multi-national position to its joint venture merge, the Group has a unique structure. It is rated as one of the world’s most three international organizations, the other two namely The Roman Catholic Church and the United Nations.

The Top ManagementThe Shell’s governance structure or formal structure is shown in the figure below. As it is seen, The Parent companies are Royal Dutch Petroleum Company Netherlands and the “Shell” Transport and Trading Company plc. UK. These companies owned the shares of the group holding companies in 60:40 ratios (Netherlands: UK).

The group holding companies: Shell Petroleum N.V. of the Netherlands and The Shell Petroleum Company Ltd of the UK held shares in both the service companies and the operating companies of the Group. In addition, Shell Petroleum N.V. also owned the shares of Shell Petroleum Inc. of the US – the parent of the US operating company,Shell Oil Company.

The Service Companies: During the early 1990s, there were nine service companies located either in London or The Hague. They were:- Shell Internationale Petroleum Maatschappij B.V.

– Shell Internationale Chemie Maatschappij B.V.

– Shell International Petroleum Company Limited- Shell International Chemical Company Limited- Billiton International Metals B.V.

– Shell International Marine Limited- Shell Internationale Research Maatschappij B.V.

– Shell International Gas Limited- Shell Coal International LimitedThe service companies provided advice and services to the operating companies, but were not responsible for the operations. The operating companies consisted of over 200 companies in more than 100 countries.

They varied in size from Shell Oil Company, one of the largest petroleum companies in the US in its own right, to small marketing companies such as Shell Bahamas and Shell Cambodia. Almost all of the operating companies operated within a single country. Some had activities within a single sector (exploration and production (E&P), refining, marketing, coal, or gas); others (such as Shell UK, Shell Canada, and Norske Shell) operated across multiple sectorsThe Pre 1996 – matrix structureShell before 1996 had a matrix structure, as is shown in the figure below.

Within this three-way matrix, the geographical dimension was traditionally the most important. The operating companies remained national subsidiaries. This was the basis of operational and financial decision – making at Shell. It was reinforced through the strategic planning process, which provided its main emphasis on planning at the national and regional levels. It had three main features:1.Strong emphasis upon long-term strategic thinking. Shell’s planning horizon due to its sheer size extended up to 20 years, much more than 4-5 years planning that usually companies engage in. As a consequence, the Wack’s scenario strategy used to be implemented to better prepare the company for how future might unfold itself.

2.Much more emphasis was laid on the generation and implementation of ideas, rather than the narrow financial performance only. The Shell’s planning department collected ideas from departments like Mathematics, economics, psychology, biochemistry, and ecology, etc. As a consequence, Shell pioneered many new management techniques, including multiple scenario analysis and business portfolio planning, cognitive mapping, etc.

3.Shell shifted its strategy from that of planning to thinking for the future, developing the capacity for organizational learning, promoting organizational dialogue, and facilitating organizational adaptation to a changing worldThe Management Structure – Post 1995 and the Degree of FormalizationThe central feature of the reorganization plan of 1995 was the dismantling of the three-way matrix through which the operating companies had been coordinated since the 1960s. In its place, four business organizations were created to achieve closer integration within each business sector across all countries.

It was intended that the new structure would allow more effective planning and control within each of the businesses, remove much of the top-heavy bureaucracy that had imposed a costly burden on the Group, and eliminate the power of the regional fiefdoms. The new structure would strengthen the executive authority of the Committee of Managing Directors by providing a clearer line of command to the business organizations and subsequently to the operating companies, and by splitting central staff functions into a Corporate Center and a Professional Services Organization.

The former would support the executive role of the CMD; the latter would produce professional services to companies within the Group. At the same time, the underlying principles of Shell’s organizational structure were reaffirmed:• The decentralized structure based on the autonomy of the Shell operating companies Vis-à-vis the Group was to be maintained.

• The new structure continued the distinction between governance and executive responsibility. Thus, the formal structure of parent companies, holding companies, operating companies, and service companies was continued without significant changes. The Boards of these companies discharged the governance functions of the Group, including exercise of shareholder rights, the fulfillment of the legal obligations of the companies, and the appointment and Supervision of the managers who fulfill executive responsibilities. It was the management structure where the major changes occurred, especially within the service companies.

The Business Committees were accountable to CMD for:• The strategy of their business area;• endorsing the capital expenditure and financial plans of the operating companies and business segments within their business area;• appraising operating company and business segment performance; and the availability of technical, functional, and business services to the operating companies within their business sector.

Chairing each of the Business Committees was a member of the CMD. Thus, in early 1998, E&P reported to Managing Director P. B. Watts, Oil Products to Managing Director S. L. Miller, Chemicals to Vice Chairman M. Moody-Stuart, and Gas and Coal to Managing Director M. van den Bergh.

Professional ServicesThese new units provided financial support to the operating and the service companies within the Group. They offered their services on an arm’s-length basis and competed with external service providers for the business of the operating companies. They were also able to provide services to third-party customers outside the Group. The services provided included:• Finance (e.g., treasury services, accounting, tax advice)• HR (e.g., recruitment, training)• Legal• Intellectual property (intellectual property protection, licensing)

• Contracting and procurement• Group Security (security advice)• Shell Aircraft Ltd (corporate jets)• Office services (e.g., accommodation, personnel services)• Health (medical services, environmental and occupational health advice)Each Professional Services unit was headed by the relevant director from the Corporate Center. For example, HR was headed by the HR Director; legal and intellectual property services were headed by the Legal Director.

The restructuring had involved the shift from a geographically-based to a primarily business sector-based structure, the elimination of over 1,000 corporate positions, the sale of much of its London headquarters, and the redesign of its systems of coordination and control. The restructuring had been precipitated by the realization that Shell would need to change the way it did business if it was to retain its position as the world’s largest energy and chemicals company and offer an adequate return to shareholders in an increasingly turbulent industry environment.

Decentralization:Decentralization of decision making from corporate to divisional levels and from divisional to business unit levels at the same time as giving divisions and business units’ full profit and loss responsibility was the key feature of oil majors organizational restructuring in the early to the mid 90’s. Before the restructuring the Group was highly centralized which made the decision process slow and losses in accountability too.

What Shell looks for in candidates?Shell basically looks for 4 things in any and all candidates for its staffing requirements. They are:CapacityThis means the ability to analyze data quickly and efficiently, to learn and adapt to situations fast, and to make sound logical judgments based on facts. Shell also ranks all new personnel on creativity aka the ‘out of the box thinking’ to tackle different situations. Innovation, a side-runner for creative thinking is also encouraged by Shell for both new and existing personnel.

AchievementSimply put, it’s the ability to get things done in a quick, low cost and efficient manner. It means that all personnel are graded on their resilience, will-power, self-confidence and similar traits to tackle complex time consuming problems that do arise.

RelationshipsRelationships are an integral part of any business enterprise, without which, operations or sales or marketing or any other departments work would come to a halt. At Shell, candidates with high ‘people skills’ are greatly desired, as they provide the needed connections that may enable greater growth. Candidates should have the ability to speak, work in a group and the ability to lead among other things.

TechnicalThe technical trait isn’t necessary for most jobs at Shell. However, departments like chemicals, engineering or even IT do require specialized personnel, so Shell gives special preference to those with these needed skill sets.

The Recruitment PolicyShell started to see results from its increased recruitment efforts. In 2006, they hired almost 6,000 people – nearly 50% more than in 2005 and more than double their hiring levels in the late 1990s. Over half were from technical disciplines and, for the first time, Shell recruited more people in Asia than in any other region.

Shell strives to recruit locally and in ways that are sensitive to local conditions. For instance, to help build new skills in Algeria, they are hiring and training local graduates, rather than recruiting experienced staff from the national energy company. In 2006, they hired just fewer than 200 local university graduates and 75 experienced Indian professionals to support the establishment of Shell Technology India. In Nigeria, Shell recruited more than 350 graduates and experienced professionals, record numbers including the largest number of Nigerians returning home from abroad for many years.

Internship – Undergraduate / Post-GraduateShell also offers internship programs to interested and deserving candidates, to test their abilities on genuine business challenges. Shell offers undergraduates/post-graduates the chance to experience practical work to complement the theories learned from the classroom. They believe that application of what was learned in school is needed to deliver an output.

Having this opportunity will enable students to view the clearer picture of what it is like to adapt to the real condition of their respective fields of interest. To ensure that candidates get the maximum benefit, their placement is tailored to their specific abilities and interests and includes two-way evaluation.

A well-defined, distinct and objective-based project is a challenge that will directly involve them in planning, directing and execution. Reasonable allowance will be granted during their stay inside Shell while accomplishing the project. It gives students/candidates the opportunity to find out whether they and Shell are right for each other. If they are effective and efficient, then they could be one of Shell’s possible recruits.

Training & DevelopmentShell invests in its future by investing in people. One can find world-class learning opportunities there. The direction and support of Shell’s line managers, and Shell’s in-house training experts help all of its personnel make the most of them.

Not only do they provide formal training designed to equip their own employees with up-to-date, valuable skills, but they’re acutely aware that learning doesn’t only happen on training courses. In fact employees at Shell learn most from doing their job – from hands-on experience, the range of challenges they themselves face, the countries they visit and the people they work with.

People who become part of the Shell family, they be fresh graduates or professionals with experience who transferred to Shell gain a lot of valuable experience and come face to face with a vast array of opportunities for growth and development that include:1. On-the-job learning – with a wide variety of possible roles, that allow employees to gain new skills and knowledge every time they move on2. Training for recognized professional qualifications – either through external organizations or Shell’s own extensive training services and facilities3.

Personal development programs and structured on boarding experiences4. Direction and support – from ‘buddy’ schemes, mentors and regular appraisals with line managersShell’s ambitions for their own personnel’s future match what each employee looks for. (A great feat in itself). How each employee’s career develops at Shell depends on a wide range of factors – the most important of which is the person himself/herself. But it’s not just about individual enterprise and choice. Shell aims to guide employees to the support that’s right for them.

A typical first jobOne’s first job can last for anything between one and three years and could pan out as follows. Their next move may be to apply for a job locally or abroad.

Moving on inside ShellBecause Shell operates such a diverse set of businesses, the opportunities to move about and develop a career within Shell are extremely varied. Exactly when and how employees move on in their career depends on many factors including their business area and role. Shell is a meritocracy and new roles or promotion will be dictated by performance and competency.

Working abroadOne’s first post will most likely, but not always, be in his/her home country and could last for anything between two and four years. The opportunity to work abroad is there, but whether and how soon one can take advantage of it vary greatly, depending on the business he/she joins, the opportunities available and the career direction one wishes to pursue.

Building skillsTo help this wave of new staff understand our values from the start, our introductory training programs have been improved. New employees are offered a series of training sessions and workshops including courses on the Business P