S3STR401

Strategy and Entrepreneurship

Compagnie des Services Ptroliers

Session 6

Case

In 2007 The Compagnie des Services Ptroliers (CSP)

was a French oil services company with approximately
3,500 employees and a turnover of 500m. It had been
founded in the 1950s and its headquarters were located
near Paris.

CSP activities
Of CSP's sales, 75 per cent consisted of conducting field
studies for oil exploration. These studies helped locate
and evaluate hydrocarbon reserves both inland and at
sea. Since 1997, CSP had also developed an industrial
activity: it designed and manufactured very specialised
equipment that was necessary for conducting such
studies. Selling this equipment accounted for 25 per
cent of CSP turnover.
Technology
Conducting a study had two phases: (1) data gathering,
through a very large number of on-site measurements;
this phase required specialised tools and quite a large
workforce (around one hundred people for each site);
(2) data processing, in order to obtain maps and
graphics that could be interpreted by oil exploration
experts; this phase required powerful and specialised
computer tools (hardware and software).
Market and competition
Customers were mainly oil companies. The market was
global and CSP was located almost everywhere in the
world, through a network of local branches that were
used as base camps for on-site missions. With a 20 per
cent market share, CSP was the only French company in
this industry. Its two main competitors were American,
each of them also with roughly 20 per cent of the
market. Other competitors were much smaller and
generally specialised in one region.
Structure
CSP was organised in four main departments: Service,
Equipment,
Research
&
Development
and
Administration. A deputy CEO managed each of these
departments. The Service department gathered all
activities that were involved in conducting and selling
studies, managed the network of local branches and
had several computer labs. It was also responsible for
two specialised ships that were necessary for sea
measurements. The Equipment department included
subsidiaries involved in designing, manufacturing and
selling of a whole range of electronic and
electromechanical devices that were used for field
studies. This equipment was sold inside CSP to the

Service department, but also to competitors. It was an

industrial activity.

Personnel
CSP employed a high proportion of managers and
engineers: roughly one thousand out of 3,500
employees.
Among
non-managers,
technicians
comprised the vast majority. Approximately one third of
the workforce was made up of 'prospectors', that is to
say employees dedicated to on-site studies, generally in
remote locations. In addition, CSP temporarily employed
a local unskilled workforce during field missions.
Senior executives
Out of nine members of the executive committee, six
were alumni of the most prestigious French school of
engineering, the Ecole Polytechnique. Almost all of
them had worked mainly for CSP during their career,
starting as 'prospectors'. The CEO and the Deputy
Director Generai - who had been designated as the next
CEO - both had external experience, one in the Ministry
of Industry, and the other in an oil company.

CSP achievements
CSP headquarters had a very unsurprising look:
ordinary architecture, classic offices, minimum interior
design, etc. Even senior executives' offices were neutral
and functional. The only posters on the walls were huge
maps of the world. Discretion was a highly respected
virtue at CSP. However, the company was proud to be
the only non-American company in its industry. It also
took pride in being the only independent company in its
sector: all its main competitors were parts of large
integrated groups offering a complete range of services
in oil exploration and exploitation. CSP was also proud
to have survived the crises that periodically shook out
the industry.
CSP senior executives willingly conceded that this
success derived from the technical excellence of the
company, particularly at the level of 'prospectors' and
mission managers. Thanks to a high human and
technical capacity for adaptation - and to a special
resourcefulness - CSP specialised in operating in difficult
areas (uneven land, deep forest, etc.). In contrast,
American competitors seemed more efficient in areas
where their organisation and procedures could easily be
implemented. 'As long as it consists of driving a truck in
a plain or a desert - for instance in Egypt - the fully
automated American system works perfectly', said a
senior executive.

Audencia is accredited

Case written by Frdric Frry & Herv Laroche ESCP-EAP Paris School of Management
Page 1/5

S3STR401
Strategy and Entrepreneurship

Compagnie des Services Ptroliers

Session 6

Case

Boldness and technical resourcefulness, belief in the

virtue of local and fast action, contempt for hierarchy,
liking for direct and convivial human relations
constituted what was called the 'prospector spirit'. This
spirit was built 'in the field' during 'missions'. Field
experience was also used to select young engineers and
technicians: on the one hand it eliminated those who
were not sincerely attracted by the job and on the other
hand it made it possible to spot high potentials. 'The
key profile at CSP', explained a senior executive, 'is the
mission leader who is able to adapt with 20 French pros
(prospectors) and 200 Gabonese workers, in Gabon.
When he survives, he is very good ... Not everyone
survives.' On this point, according to its senior
executives, CSP differed again from its big competitors:
'American brains are not in the field. In the field
there are only underlings.'
Senior executives acknowledged the quality and
devotion of their employees in the field. They submitted
to very hard working conditions and accepted a very
high level of availability:
'A pro who's in the field in Indonesia on
Monday, you tell him: Thursday you are in
Alaska. He catches his flight, he goes to Alaska
... Another who's on vacation, you tell him:
sorry, you have to be there immediately. He
packs his things and he goes there. Sometimes
he grumbles, but he goes there. The company
owes a lot to these people, who are generally
very attached to the company.'
Salaries were considered as relatively low, but career
was guaranteed: after a variable number of years in the
field, prospectors were offered a sedentary job and
worked at the head office. Obviously, some of them
could become senior executives. Very few prospectors
quit the company: there was no job market for these
highly specialised engineers and technicians.
It was probably because of this special relation between
the company and its employees that CSP could cope
with a light administrative infrastructure. Hierarchy and
procedures were denigrated. Trust, built over the years,
enabled a high level of decentralisation, in spite of a
large geographical spread:
'People are simultaneously highly autonomous
and perfectly tied. The managing director at the
Singapore branch, because of his training, because of

his future, he is actually tied to the head office, not to

his environment, his customers, or his Singaporean
subcontractors. You need people like this to manage
large operations.'

Concerns about the future

However, at the beginning of the new millennium some
changes in the environment and the industry began to
create tensions and raised questions. Repeated losses
of some activities (in particular studies at sea) regularly
raised the issue of redefining the portfolio of
businesses. In the opinion of some senior executives,
the answer was clear:

We do any business in our industry, anywhere

in the world. And we stick to it. It is certainly
not the most profitable method. But experience
has proved that it is the safest approach if you
want to stay in the business. If each time an
activity loses money you stop it, then in ten
years you have nothing left, because everything
is cyclical. What you need is a positive integral
in the life cycle (i.e. during the whole life cycle,
the average profit must be positive). If you
have more products, you are able to mitigate
these cycles and to get some regularity in your
profit.'
Conversely, CSP considered diversifications in order to
broaden its portfolio of businesses. There were some
ongoing tests from the technologies used by the
Equipment department and from the Service department. Again, the reaction to these possible diversifications was mixed. We are testing a whole range of
ideas, but it takes too long', said the CEO.
'Ok, we could take over a competitor. But in our
industry, a hostile takeover is impossible. In our
business, people are the key, and if people
disagree, they go somewhere else and you
remain with nothing left but empty offices. You
really need people to share your goals.'
Some executives were very pleased with this: 'It is
much wiser to sell our services in Mexico than to sell
socks in Singapore.' For others, mainly among younger
executives, CSP top managers were culturally unable to
consider diversification outside the oil industry.
'Is it wise when future CEOs of the company are
people who have spent three quarters of their

Audencia is accredited

Case written by Frdric Frry & Herv Laroche ESCP-EAP Paris School of Management
Page 2/5

S3STR401
Strategy and Entrepreneurship

Compagnie des Services Ptroliers

Session 6

Case

career in the Company? People who have seen

nothing else? People who are totally submerged
in oil? Do people who have been trained in the
oil service at the Ministry of Industry have the
right profile to consider large diversifications?
They are not financiers either: they are all
engineers. As a result, we go around in circles.'
Even inside CSP's core business, significant changes
were underway. Whereas for ages the key phase of CSP
business had been on-site measurements, data
processing was becoming more and more crucial:
because of the investments it involved (both hardware
and software), because it was absolutely necessary to
be competitive at this level (oil companies now signed
separate contracts for data processing), because of
constant evolution of methods and tools, and finally
because it was necessary to hire top-level computer
analysts, whereas traditionally CSP used former
prospectors converted into computer experts.
In addition, because of the global scope of the
business, and because CSP was now listed on the Paris
stock exchange, high-level competences in accounting,
finance, tax and law were required. The CFO felt this
need very deeply. Other members of the executive
committee were less concerned.
The first indication of these changes was the difficulty
to hire - or retain - these specialists. They immediately
asked for higher salaries than former prospectors who
had similar positions. They also demonstrated a lower
commitment and a lower loyalty to the company.
Offering a long and progressive career was not enough
to retain them. In the Service department, young
engineers and young technicians showed the same
tendency.
The last concern was the lack of potential top
executives, mainly people able to renew the existing
executive committee and above all to manage strategic
development. Was it still possible to rely on internal
promotion to select managers and senior executives?
According to one of the top executives, the future was
worrying:

'After all, our Service department employs

mainly former prospectors. And among our
taken-for-granted assumptions, there was the
secure redeployment of prospectors. This is
probably something we will not be able to do in
the future. We will not find a job for ail
prospectors at the head office. An experience in

the field is undoubtedly a plus, but an

experience in the field with no external adaptation or expertise is a dead-end.' Another senior
executive also give a warning: 'The main risk is
to have young up-and-coming managers and
old veterans, and nothing in-between.'
Amongst senior executives there was no consensus on
these concerns. According to some of them, with proper
attention and a smart management of demographic
evolutions, it was possible to guarantee a positive
outcome while preserving the core values of the
company. For others, a much deeper change was to be
actively prepared.

Two change programmes at stake

When sales and profits were at their lowest in the life
cycle of the industry the CSP share price plummeted.
Believing that something had to be done, the CFO
decided to appoint a consulting company specialised in
the management of change.
In order to diagnose the change situation, these
consultants drew up the cultural web of CSP. According
to this diagnosis, they claimed that the CSP context was
deeply unfavourable to change: taken-for-granted
assumptions, routines and procedures, by blocking
necessary changes, were exposing CSP to a deadly
strategic drift. During their final presentation to the
executive committee, they recommended a radical
transformational change programme, using a series of
levers:
Stop the rite of passage of 'in the field' experience for
newcomers.
Hire fewer engineers and more managers and
computer analysts.
Make the hierarchy more explicit and build a more
structured organisational chart.
Diversify the profile of the executive committee
members, for example by appointing a CIO and by
replacing the current senior HR manager - a former
prospector - by a professional HR manager, preferably a
woman.
Appoint the CFO - who was not a former prospector
but an MBA graduate - as Deputy Director General. He
was considered to be the main change agent.
Replace the name of the company by an updated
brand name that would be both more modern and less
dependent on oil services.

Audencia is accredited

Case written by Frdric Frry & Herv Laroche ESCP-EAP Paris School of Management
Page 3/5

S3STR401
Strategy and Entrepreneurship

Compagnie des Services Ptroliers

Session 6

Case

Consultants also recommended two strategic directions

intended to force a reconstruction of the culture of the
company:
Transform the Equipment department into a separate
company, with a dedicated management structure and
fully redesigned procedures.
Consider alliances with competitors - or possibly a
takeover - and/or partnerships with oil companies and
software/hardware manufacturers.
Whereas some members of the executive committee
considered these recommendations as sound and
useful, others claimed that consultants were unable to
understand the true meaning of CSP values.
The Deputy Director General, in particular, was strongly
against a radical transformation. He explained that an
evolution - or an adaptation at the very most - was
preferable and that the main aspect of the change
programme was careful timing: the drop in share price
provided a good window of opportunity for incremental
evolutions. He argued that the 'in the field' experience
was the most powerful integration mechanism in the
company. Stopping this rite would expose CSP to a very
high risk of dilution: employees would no longer accept
work conditions and salaries; technical expertise would
be reduced. Adopting an 'American' approach - with
hierarchical structures, formal procedures and limited
on-site involvement - would kill CSP differentiation.
What would be CSP competitive advantage in front of
its powerful competitors without its unique spirit and
implicit management routines?
According to him, CSP achievements were rooted in its
employees' commitment. He agreed to the use of some
symbolic processes in order to facilitate the evolution of
the culture, for instance adopting a new brand name or
appointing a CIO. He also proposed to split the Service
department into an Operations department, which
would perform ail on-site measurements, and a
Computing department, fully dedicated to data
processing. This new organisation would enable
preservation of the specificities of the prospecter spirit and consequently the 'CSP way' - while amending the
management of computer analysts, accountants or
financiers towards a more market-based approach. In
order to diversify the national origin of the workforce
and to increase flexibility in HR management, the CFO
also proposed to hire prospectors in CSP local branches
through local contracts, instead of hiring them centrally
from the head office with French contracts.

Audencia is accredited

Case written by Frdric Frry & Herv Laroche ESCP-EAP Paris School of Management
Page 4/5

S3STR401
Strategy and Entrepreneurship

Compagnie des Services Ptroliers

Session 6

Case

Audencia is accredited

Case written by Frdric Frry & Herv Laroche ESCP-EAP Paris School of Management
Page 5/5