Management of Shell Company

Executive Summary

The report investigates on how Royal Dutch Shell should reduce the issues of oil spill by utilizing two managerial functions which are leading and controlling. This problem is primarily due to the operational failures, such as equipment failure and human error.

It is found that Shell has been engaged in solving issue that significantly disadvantageous for Shell. In response to these incidents, Shell was forced to solve these issues as soon as possible. This report includes investigation of relevant theories and concepts selected from leading and controlling to improve the quality of the equipment and infrastructure, followed by the controls needed to solve this problem and achieve its goal by 2011. Based on the investigations, recommendations would be provided for Shell to perform. This analysis is carried out to respond to the ethical issues and practices using the leading and controlling function.

Motivation from the leading function shows that motivated employees can bring out the best in the organization. To solve the ethical issues and practices, the motivating function theories was undertaken. Some includes the Maslow’s hierarchy of needs that is to satisfy the needs of employees for them to be more productive in their job, Goal-setting

Theory where Royal Dutch Shell should impose difficult tasks to challenge the work of employees and McGregor’s Theory X and Theory Y where employees who have specialized skills are to be rewarded for employees to be motivated. Using these approaches, problems in the organization is detected and the leadership theories are crucial for the Royal Dutch Shell Company to maintain good relationship between employees and employers.

Evaluation from controlling includes comparing and taking managerial action as control process; implementing feed-forward, concurrent control and feedback control. Sufficient analysis showed that taking basic corrective action as a control process would be a better alternative to improve the condition of facilities. Feed-forward control would be successful in anticipating problems to occur by implementing managerial actions beforehand whereas concurrent control can correct problems before it becomes too costly and much waste of resources has occurred; feedback control would provide meaningful information to make a better decision for future plan.

From this, the report concludes and recommendations which aims to put Royal Dutch Shell as the best firm. The recommendations include (1) develop communication and relationship of trust between citizens of Nigeria and Royal Dutch Shell Company; (2) employ clean-up crews and implementing clean-up operations; (3) make sure facilities used during operations are in good condition; (4) get new and better facilities. These strategies aim to solve problems encountering by Shell using management functions based on the analysis.

1.0 Introduction

1.1 Objective

The report is based on the Royal Dutch Shell Company and the objective of the report is to show how management functions theories are applied by managers to manage the organization dealing with ethical values and practices. As a company should have ethical values and practices to have better public expectations and public image.

1.2 Background Information on the Royal Dutch Shell Company

Royal Dutch Shell Company is one of the largest company in Netherlands and the second largest company in the world. Royal Dutch Shell Company is a global oil and gas company owned by the Royal Dutch of Netherlands and the Shell Transport and Trading Group of Great Britain. These two companies has been cooperating with each other to form many of the largest oil and gas company around the world such as Shell Malaysia, Shell Nigeria, Shell Africa and many more. The Royal Dutch Shell Company aims to address social concerns and work to benefit local communities (Royal Dutch Shell plc., 2011).

However, the Royal Dutch Shell Company is currently facing ethical issues such as environmental pollution due to the oil spill in the freshwater that occurred in the year 2008. As supported by Dr. Nwilo P.C and Badejo O. T. (2008), Royal Dutch Shell Company has the largest oil-spill rate of 580,000 barrels due to tank failure. Not only that, the Royal Dutch Shell Company facilities usage has been more than 20 years which leads to the oil-spill.

Therefore, the management of Royal Dutch Shell has decided to solve the company’s oil spill issues by the year 2011. The Royal Dutch Shell Company decides to solve these overarching problems which had caused the oil spill in Nigeria to create lesser impacts towards both the environment and the business of the company and also to create lesser impact on the stakeholders.

1.3 Ethical Issues and Practices Concepts

Based on the Royal Dutch Shell Company, there are many ethical issues and practices that the company has to face: for instance, the ethical concept of sustainability. Sustainability is a long-term corporation approach to the balance of business priorities with social, economic, and environment responsibilities (Breyfogle .F, 2009). Royal Dutch Shell should have as a major salient aspects as of sustainability concept.

For instance, Royal Dutch Shell should have fairness and equity between employees to signify the aspect of good society and create variations to inform future disputes about sustainability. Another concept that the company of Royal Dutch Shell has to face is the ethical concepts of accountability. According to Staql H. (2009), accountability means more than just responsibility when doing one job. Accountability is meant by a promise to oneself and others to deliver specific, defined results with consequences.

Therefore, the company of Royal Dutch Shell should have accountable promises towards the stakeholders that are employees to maintain and motivate employees’ needs and wants. A company should have these ethical concepts to have fair and sustainable situations while on a job. Supported by Kamal F. (2006), it is important to practice self-reflection and self-inquiry to recognize ethical dilemmas and be able to identify the personal and societal ethics, which are held important by each employee. Good business ethics are not only preferred from a moral point of view but are an essential contributor to survive in a global economy and boost the bottom line.

1.4 Scope

The current issue that is affecting the organization is the environmental pollution that not only affects the business but also their stakeholders. Therefore, our management had chosen the country Nigeria as the main focus of the oil spill issue due to having the largest oil spill issue in the world with 14,000 tons of spilled crude oil in the year 2009. By using the management functions of Leading and Controlling, our company would assist Royal Dutch Shell Company to achieve goals that can solve the issue of environmental pollution. This report is specifically applies to the top managers who controls the work of workers and both the first and middle-class managers of the Royal Dutch Shell Company.

1.5 Selected Management Functions

Two management functions concepts are chosen to help managers to solve these issues that could harm the organization. The two management function chosen is Leading and Controlling. Leading is when subordinates are motivated and managers influence their co-worker and resolve conflict that could occur (Robbins, Bergman, Stagg & Coulter, 2009). The Leading function can be best related to Motivation which is defined as when a person’s effort are energized, directed and sustained to achieving organizational goals (Robbins et.al, 2009). Controlling is when it involves monitoring actual performance, comparing actual to standard, and taking necessary actions (Robbins et.al, 2009).By using these two functions, managers would be able to achieve organization’s stated goals.

1.6 Outline of Report

This report will be based on the Royal Dutch Shell Company with the issue of environmental pollution. Therefore at the second section of this report will be a discussion on the problems, causes, plans to achieve goals and management theories that can be used by the Royal Dutch Shell Company to solve ethical issues and practices. Later in the third and fourth section, this report would be based on the conclusion that our company feels that is best suited for the Royal Dutch Shell Company to pursue and few recommendations and advice that would be given to the organization to be able to solve and achieve goals suggested.

2.0 Discussion

As a suggestion, we advise the Royal Dutch Shell Company to follow our recommended plans to solve the issue of environmental pollution due to the oil spill that had occur in the summer of the year 2009 in Nigeria. Therefore, our company recommends plans such as to make sure facilities during the operation are in good condition, to employ clean-up crews and implement clean-up operation after the oil spill and to conduct casual experiments on the prevention of oil spills during the drilling.

These plans would lead the Royal Dutch Shell Company to achieve organizational goals to reduce the probability of oil spill that occurs during the operations by at least 50% and to reduce the impact of oil spill that had occurred in the past by at least 25%.

2.1 To achieve using the Leading Function

Leading is once again defined as the ability to influence a group towards the achievement of goals and is a complex process by which a person influences others to accomplish a mission, task, and objective and directs the organization in a way that makes it more cohesive and coherent (Robbins et al, 2009) .The Leading function is the key to effective communication among employees to sustain relationship between bosses and co-workers. A manager should have the leading function while on the job to inspire workers to gain employees loyalty.

Leadership is the process of making appropriate strategic involvement in order to five direction and inspiration to the team (Staniforth & West, 1995). According to Staniforth & West (1995), as a leader, fine judgment, intuition and the capability to manage risk is important. In leadership, there is a path-goal theory that states that “it is a leader’s job to assist their followers in attaining their goals and to provide the support needed to ensure that their goals are compatible with the overall objectives of the organization” (Robbins et al. 2006.p.577).

Employees of the Royal Dutch Shell Company show an important concern towards the company as it is part of what affects the environment. According to Weber H.R. and Kunzelman M. (2011), it is due to overarching issues such as defects in blow-out preventer and lack of research on mining location is caused by negligence of employee’s in designing the preventer and lack of diligence of employee’s making Royal Dutch Shell Company lie under one of the largest oil-spill rate company.

Thus, Royal Dutch Shell Company should have top managers to lead and motivate employees. For employees to follow and believe managers in charge to achieve organizational goals, manager has to coach and motivate them. This clearly shows the relation between leading and motivation. Motivation is the process of which a person’s efforts are energized, directed and sustained towards attaining a goal (Robbins et al, 2009). To achieve goals, Royal Dutch Shell Company should follow the Maslow’s hierarchy of needs approach in the company.

This approach is used by managers to motivate employees by satisfying the employee’s current needs. As has been stated, employees of Royal Dutch Shell neglects and lacks of diligence during work, managers should apply the Maslow’s hierarchy of needs approach to ensure employees receives their current needs. Royal Dutch Shell Company should motivate employees by concerned on their safety during the course of performing their job. Managers, for instance, can provide safety and protective gears to employees in charge of the blow out preventer. Alike, managers could also provide new and better quality facilities to satisfy the needs of employees.

Apart from that, managers may also use the Goal Setting Theory which involves motivating employees by involving them in company’s goal setting. Goal Setting Theory is the proposition that specific goals increase performance and that difficult goals, when accepted, results in higher performance than do easy goals (Robbins et al, 2009). Take for an example, conducting casual experiments on the location of oil mining and storage; managers could involve researchers in bigger and more challenging projects to increase performance of easier goals. By involving them, these researches would understand the needs of the company better and be more motivated to achieve goals when given specific tasks.

The Royal Dutch Shell Company should motivate employees by giving difficult goals to lead to better performances. Perchance, Royal Dutch Shell Company should come up with more plans such as increase quality of facilities and more experienced researchers to invent and build better blow-out preventer. Not only that, managers can set time frames to achieve goals which requires to take more specific actions and monitoring employees.

This can not only increase the performance of their job and also reduces the probability of oil spill resulting from negligence. Motivation refers to the stimulation, direction and perseverance of behavior (Daft, 2005). Motivation is the vehicle by which goals are accomplished and acts as the function of needs. Several theories under motivation can be used to address the issue. Looking at the theories of motivation, the McGregor’s Theory X and Theory Y, where managers have to identify the type of the employees are specialized at.

This theory should be adapted by managers as this theory believes that the managers will help their subordinates to achieve the stated goals. According to Robbins et al (2009), Theory X basically is the assumption that employees are negatively viewed as lazy, avoid responsibilities, must be cared to perform while Theory Y is the assumption of employees who are positively viewed: creative, enjoy work and can exercise self-direction.

According to Martin J., Theory X is classified as employees whose job is more focused on technical skills and Theory Y is classified as employees whose job is more on conceptual skills. McGregor’s Theory X and Theory Y can be applied by giving rewards that matter to the employees and to reduce employees’ dissatisfaction on performing their job. Hence, if employees are not rewarded, their job productivity would not change to be better and it will cause chaotic problems such as slow reactions during emergencies during operation hours and late detection of upcoming natural disasters where employees lack of awareness on the changes of the environment.

Royal Dutch Shell should hire clean-up crews that possess both Theory X and Theory Y to increase both employees productivity in mining oil and experienced managerial skills. By doing this, Royal Dutch Shell will be able to achieve organizational goal to reduce the impact on the oil spill that has occurred previously. To wrap up, Motivation from managers towards employees plays an important role in an organization.

2.2 To achieve using the Controlling Function

After leading, controlling is another function that could contribute Shell to perform better in preventing oil spilling. Controlling comes after manager lead. “Manager has to monitoring activities to contribute to the smooth working in conformity with the plan adopted and lead to accomplishment of organizational goals” (Lamond D., 2003). As the oil spill issue poses risk to Royal Dutch Shell, several actions must be taken to solve the problem. In the controlling function, there are several concepts that can be used to address this issue.

Apply the comparing to determine the “acceptable parameters of variance between actual performance and standard” (Robbins et al, 2009) as one of the control process. According to the actual performance of oil spill in 2009, there are 37 operational spills and the volume spilled increased from 2,300 to 5,270 barrels (Royal Dutch Shell plc., 2011). On average, all this is caused by operational failure, such as equipment failure and human error. As a result, there is an average one spill every three days, accounting for over 80% of the spilled volume during the year (Royal Dutch Shell plc., 2011).

Shell sets the standard goals by reducing the probability of oil spill occurrence during operations by 50%. However, based on the statistics in 2009, the occurrence of oil spill has a slightly increase instead of decreasing. The over-variance in this comparison requires managerial attention to interpret the information and make a decision. There are other strategies that Shell can undertake to solve the oil from spilling. Using the basic corrective action which can be determine as “looks at how and why performance was deviated and then proceeds to correct the source of deviation” (Robbins et al, 2009) as a managerial action.

To be able to develop effective corrective action, establishing the cause and volume of the spill is a must. One of the problems that resulted in the oil spill is the slow reaction to emergencies; due to the failure of blow-out preventer was not initiated in time to prevent oil spills during natural disaster. Shell should do operates a programs designed to ensure equipment and infrastructure conforms to global Shell Group standards and International Standards Organization (ISO). Shell should cover entire operation with pipeline and asset surveillance contracts to ensure spills are discovered and responded to as quickly as possible.

This action may solve the problem of the late detection of upcoming natural disaster and resulting in delayed prevention of oil spills. Under the controlling function, the type of control is a concept that can be used to solve the occurring issue. There is three types of control involves feedforward, concurrent and feedback control. Managers can implement feedforward control before an activity begins; concurrent control during the time the activity is going on; and feedback control after the activity has been completed (Robbins et al, 2009).

Feedforward control would be successful in anticipating problems to occur by implementing managerial actions beforehand. The problem of defects in blow-out preventer can be solved through conducting a casual experiment before oil drilling activities begin. Shell should build mud which is a column of drilling fluid to equalize depth pressure since the pressure generally increases with depth. Moreover, Shell can prevent the mud weight from fracturing weaker rock and leaking out with drill pipe casings because the strength of surrounding rock can vary with depth.

Shell also should drill under the wells not more than 7,000 feet with uniform pressure and strong rock with normal pressure conditions (Royal Dutch Shell plc., 2011). Through conducting these experiment before the real oil drilling activities begin, it may reduce the probability of oil spill during drilling substantially. Although Shell implements feedforward control or any corrective actions to prevent oil from spilling, the incidence of oil spill still could happen.

As soon as leak is confirmed, concurrent control must be implemented to minimize the impact of oil spill that has occurred to the environment. The oil drilling must be suspended in order to stop and contain the flow of oil into the environment which may cause pollution of environment, destruction of ecosystems and damage marine life and wildlife. Shell also should finds out the reason (operational failure or sabotage) that causing oil spills and estimates the volume of spill. Shell must publish all the data of reasons and volume on the website to alert them of the water and marine has been polluted which is a kind of social responsibility.

Shell should ask for help from some authorities such as Oil Pollution Act (OPA), Oil Spill Prevention, Control and Countermeasure (SPCC) as soonest leak is confirmed. As the authorities have experienced various type of oil spilling, they can provide the solutions and feedbacks on the occurrence of oil spill. By applying this concurrent control, it may reduce the impact of any oil spill that has occurred. There is another approach where we look at the feedback control which is a control takes place after the activity is done. Feedback control is a kind homeostatic action that directly sensitive to the monitored output condition (Fowler A., 1999).

This control provides meaningful information on the understanding of respective performance of the organization which may enhance employee motivation. Shell should open lines of communication between the company and the community, this allowing citizen to give feedback and comments on the issue of oil spill. Shell could ask for feedback from the authority that indicates variance between actual performance and standard set by the authority which has given help to them. This feedback is evidence that the planning was generally on target.

Again, the manager of Shell will have to interpret the information and make a better decision. In comparison of measures require managerial attention regardless on both under-variance and over-variance (Robbins et al, 2009). Shell manager can use the information when formulating new plans in order to make them more effective when the deviation is significant.

The feedback control may improve the clean-up and remediation performance after the oil spill occurred. Moreover, Shell should employ clean-up crews and implement clean-up operations, in order to reduce the impact of oil spill that has occurred. In the initial clean-up, Shell should first remove the free oil and affected vegetation, then, in the following clean-up process would be easier. Shell should implement clean-up operations such as techniques for restoring land sites and can be demonstrated to be effective for the soil and climate conditions.

These techniques may solve the problem of insufficient research on the location of oil mining and storage and better detection on probability of disaster occurrence. Shell also could put addition of nutrients that stimulate the natural microbes in the soil, feed on the remaining oil and break it down to carbon dioxide and water. Feedback is a viable type of control for many activities, though the main drawback of feedback control is the problems have already occurred and lead to waste or damage.

3.0 Conclusion

In conclusion, we can see that using several management concepts, Royal Dutch Shell Company would be able to cope with the ethical values and practices quite well. Using the Leading and Controlling functions, Royal Dutch Shell is able to resolve issues that could ruin their reputation.

Focusing on the Leading function, Royal Dutch Shell Company main focus is on the employees’ satisfaction on their work and how employers of Royal Dutch Shell should lead employees to achieve organizational goals. In the Controlling function, managers of Royal Dutch Shell monitor actual performance comparing with actual standards and take necessary action to achieve organizational goals. Therefore, Royal Dutch Shell Company should decide to solve this problem and achieve its goal by the end of the year 2011.

4.0 Recommendation

Managers should implement the following to better achieve organizational goals:

  • Develop communication and a relationship of trust between citizens of Nigeria and the Royal Dutch Shell Company
  • Employ clean-up crew and implement clean-up operations
  • Sponsor projects to the Marine Environment contribution
  • Increase budget to create better blow-out preventer
  • Make sure facilities used during operations are in good conditions
  • Get new and better quality facilities

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