ORGANISATIONAL BEHAVIOUR – COURSE ASSIGNMENT NO.

ASSIGNMENT REFERENCE: OB/JAN2009/1

DAVID M JENKINS - 7483571

 Organisational Behaviour – Course Assignment No.1

CONTENTS

INTRODUCTION....................................................................................................................................3

SHELL EXPLORATION AND PRODUCTION COMPANIES IN NIGERIA (SEPCiN).

UNDERSTANDING THE EPG – SCM ORGANISATION.......................................5

WAS THE EPG-SCM IS AN ORGANISATION DESIGNED AROUND THE SOCIO-

TECHNICAL SYSTEM CONCEPT?........................................................................10

D. ATTACHMENTS..................................................................................................11

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INTRODUCTION
The paper assesses the value of the Socio-technical Approach to understanding the structure and

effectiveness of the Supply Chain Management organisation, (EPG-SCM) of Shell Exploration and

Production Companies in Nigeria (SEPCiN)

SHELL EXPLORATION AND PRODUCTION COMPANIES IN NIGERIA (SEPCiN).

1. Who is SEPCiN?

SEPCiN is a relatively new organisation which is subject to much debate between Shell and the

Nigerian Government represented by NAPIMS1, the reasons for the debate are not discussed in this

paper. SEPCiN was created by the joining together of two Shell companies in Nigeria namely,

Shell Nigeria Exploration and Production Company (SNEPCo) and Shell Petroleum Development

Company of Nigeria (SPDC).

SNEPCo was established in 1993 with the objectives of discovering and producing hydrocarbons

from Nigeria's frontier areas and a vision of becoming Africa's leading deepwater Oil and Gas

Company. In the same year a Production Sharing Contract (PSC) was signed with the Nigerian

National Petroleum Corporation (NNPC), and five exploration blocks were awarded at that time.

The relationship between the two parties is one of Client (NNPC) and Contractor (SNEPCo). In

1995, SNEPCo discovered an oilfield 120km off the coast of the Niger Delta, named Bonga and in

November 2005 after 5 years of development and construction activities, oil and gas production

commenced from the Bonga field.

SPDC is the operator of a Joint Venture Agreement involving the Nigerian National Petroleum

Corporation (NNPC), which holds 55 per cent, Shell 30 per cent, EPNL 10 per cent and Agip 5 per

cent. It has the largest acreage in the country from which it has the capacity to produces some 43

per cent of the nation's oil. The company's operations are concentrated in the Niger Delta and

adjoining shallow offshore areas where it has been operating since 1956.

1
National Petroleum Investment Management Services

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2. SNEPCo’s Supply Chain Management Organisation.

At the beginning of 2000, the Royal Dutch/Shell Group of Companies (Shell) was emerging

from one of the most ambitious and far-reaching organizational restructurings of its 93-year

history.2 The result of this re-organisation was to establish a model; which would be adopted

throughout the Shell world. This can be described as a combination of a Function-based

organisation at corporate level (Slide 1, Attachment No 1) and a matrix organisation at a business

level. SEPCiN, being an upstream organisation (Slide 2 Attachment No 1 gives graphic

explanation of the Oil and Gas Industry) became part of the Exploration and Production

Community.

Exploration and Production (E&P) is one of the key business operations of the Shell Group. In

terms of earnings, in 2007 E&P’s segmented earning were US$ 14.7 billion (Slide 3 Attachment

No 1), employing in excess of 18,000 people world wide (Slide 4 Attachment No 1).

Exploration & Production comprises six directorates that grow Shell business and guide and

support their operations around the world. The six directorates are:

• Exploration

• Business Development

• Technology

• Corporate Support (Legal & Health, Safety, Security and Environment - HSSE)

• Human Resources

• Finance

To give the matrix structure there is also a regional breakdown into the 6 major geographic areas

of operation

• Africa – EPG

• The Americas – EPW

2
Organizational Restructuring within the Royal Dutch/Shell Group - Robert M. Grant

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• Asia Pacific – EPA

• Europe – EPE

• Middle East and South Asia – EPM

• Russia and CIS – EPC

This organisation is shown in detail in Slide No. 5 Attachment No 1.

The Supply Chain Management function is part of the Finance Directorate and is represented at

corporate level by a Director (EPF-SCM). At the corporate level SCM aligns its function and

regional roles in a matrix organisation (Slide No 6 Attachment 1) with each region having

Regional Supply Chain Manager (RSCM) who has reporting lines to the Supply Chain Director

and VP Finance of the regional that they are located. In the case of Nigeria the RSCM EPG would

report to EPF-G as well as EPF-SCM. As it is a regional function the Supply Chain Organisations

for Gabon and Cameroon also report back to RSCM EPG, the organisation for these two countries

is no discussed here.

The EPG SCM Organisation shown in Attachment No. 2 is a function based Organisation

providing support to all aspects of SEPCiN operations. The organisation is located in three

geographic areas of Nigeria and operates within two types of agreement with the Nigerian

Government namely a Production Sharing Contract and a Joint Venture Agreement.

UNDERSTANDING THE EPG – SCM ORGANISATION.

Huczynski and Buchanan define a Socio-Technical system as “a system which processes both material

technology and a social organisation (job specifications, management structure)”. Taking this as a

reference point, the question is whether or not the EPG-SCM is an organisation designed around the

Socio-Technical system concept.

1. EPG-SCM Role within an EP Company

The function of the EPG-SCM organisation to provide support to the three main areas of operation

within SEPCiN E&P Organisation, these being:

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• Well Engineering – drilling operations, finding the oil and gas, the core business of any E&P

Organisation.

• Projects – These are the major developments required to bring an oil and gas field into

operation.

• Production – Operating the Oil and Gas fields, the Asset Holders.

Each of these operations has three distinct elements namely:

• Pre-contract activities – tendering process to establish the lowest technically competent

Contractor (for services) to whom the contract should be awarded.

• Procurement of Materials and Equipment – complete process from tendering through to

delivery of materials and equipment, which will either be installed by employees of SEPCiN

or a 3rd party.

• Post-contract activities – provision of the services by the Contractor identified during the Pre-

Contract phase.

In the case of Well Engineering and Production these activities are covered by three departments

within the EPG-SCM Organisation namely, EPG SCM CCE (Pre-Contract), EPG SCM PC

(Procurement) and EPG-CCM (Post-Contract).

Project are considered unique one-off activities so they a combination of all three elements and are

stand alone organisations.

The workload is split between the teams but continuity this provided by the CCM personnel who

are involved in from the Contracting Strategies stage through to Contract award when they

formally take over the contracts and run them.

The remaining departments within the EPG-SCM are support functions:

• Provide guidance in connection with the Nigerian Content Directive which is being launched

by the Federal Government of Nigeria via the Nigerian National Petroleum Corporation

(NNPC) – EPG SCM NCD.

• Staff development, market intelligence and systems support – EPG SCM Business

Improvement.

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• Governance, approval process and procedures – EPG-SCM Risk management.

EPG-SCM CCM staff and Project Staff are physically located within the function or project for

which they provide support and are considered to be part of that team. As the production

operations are spread across three areas in Nigeria, namely Lagos, Port Harcourt and Warri, the

remaining functions are spread over these same three areas. Extensive use of email, common

servers, video conferencing, instant communicator and software such as such as SAP and

Omnicom3 allows these teams to act as one unit despite the physical distance between them.

Extensive training programmes have been developed to ensure that all CCM and CCE roles are

fully conversant with this software. In addition Shell Group uses the Supply Chain Academy4 and

sponsors its staff whole wish to undertake the Chartered Institute of Purchasing and Supply

(CIPS)5.

Nigerian staff are rotated between the CCE, CCM and PC departments so as to develop a greater

understanding of the whole contracting process. Continuity in each of these departments is

provided by the use of Contract Staff (shown on the various organisational charts in Attachment

No. 2 by the initial AN – Agency Nigerian; AE – Agency Expat or MPS – Manpower Services).

The EPG-SCM Leadership Team (which comprises of all Departmental Heads) meet every week

to discuss various issues which are impacting the business, and this is passed by each Department

Head via meetings are department and team level.

2. EPG-SCM Organisation and its Culture

In an organisation such as EPG SCM its single most important resource is its people, they have the

greatest capacity to impact its effectiveness and like many of the functions within Shell is a

cocktail of race, cultures and groups all of which have a major influence on the organisation and

the way it functions and the nationality spread is summarised in Table No 1.

As can been seen from Table No 1 whilst the majority of the workforce is Nigerian, the Senior

Management is predominantly of Anglo extraction, 70% in fact with staff from England

3
http://www.omniware.com/
4
http://www.supplychainacademy.com
5
http://www.cips.org/

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dominating the management position. The key management position of EPG-SCM Manager is

held down by an Australian, although he is schedule to leave shortly and his position will be taken

over by an American female.

The EPG-SCM organisation has been developed over the passed 18 months and whilst the model

was handed down from EPF-SCM, the adapting of the model was undertaken by the EPG SCM

Leadership Team, which is dominated by the Anglo group of societies.

Table No 16

Nationality No Work No of Senior % of Total % of Total

Force Management EPG-SCM No of Senior

(JG 3 and Workforc management

above)7 e
Nigerian 190 3 88 30
Dutch 4 0 2 20
British – English 11 5 5 50
British – Welsh 1 0 0.5 0
Australian 1 1 0.5 10
American 1 1 0.5 10
Malaysian 1 0 0.5 0
German 1 0 0.5 0
Chinese 3 0 1 0
Venezuelan 1 0 0.5 0
Indian 1 0 0.5 0
Total 215 10

Does the organisational structure reflect the characteristics you would expect from an Anglo

society?

The Hofstede study when considering the various societies identified indices against which were

set various cultures; Attachment No.3 is a summary of each of the indices for the groups identified

in Table No 18. The writer has provided indices for Nigerian as a comparison to those for West

Africa, as he feels that the huge changes in the environment since the Hofstede study have had a

6
Data obtained by writer from a review of the Staff database and EPG-SCM Organisational charts,
accuracy +/- 10%.
7
JG 3 – Job Groups 3 and above – includes head of Section and Mangers
8
Management Worldwide, Hickson and Pugh

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major impact on the culture in Nigeria9. Such changes include prolonged period of democracy,

technological advances such as mobile phones, internet access and satellite TV.

Using Hofstede’s analysis of Anglo societies suggests that:

• Rating low on the Power Distance index would result in an organisation that would be

consultative and creating participation.

• Rating high on Individualism versus Collectivism would result in an organisation that

rewards individual achievement rather than a team.

• Rating high on Masculinity versus Femininity would result in an organisation which

encourages promotion, challenging work and high salaries.

• Rating low in Uncertainty Avoidance would result in an organisation where there is a

relaxed attitude about the future, staff progression planning would low key, compliance to

procedures and guidelines would be relaxed etc.

Does the EPG-SCM organisation reflected the four traits identified above?

• Firstly the organisation design and operation does allow for a consultation and participate.

Whilst graphically it may appear to be hieratical it is a flat structure with only 3 levels,

Regional SCM Manager, SCM leads and the rest. This means the communication lines are

short and information passes quickly up, down and across the organisation.

• Whilst it cannot be seen from the organisation charts, there is great emphasis on

individual achievement, with staff being recognised for individual effort. Omnicom is used to

monitor individual performance and data from this system is used as the basis to evaluate

performance against Key Performance Indicators which impact performance bonus and

ranking.

• The organisation by its very structure shows that promotion is possible, hard wok can

achieve that and with it brings increase in salary.

9
The writer has been involved with Nigeria since 1983, having lived there for a total of 21 years. He is
married to a Nigerian National. His assessment is not based any empirical data or research and is subjective
based on local knowledge of the environment.

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• The organisation in having a Business Improvement and Risk Management Departments

is clearly showing that processes and procedures and compliance to them is an important

factor to the success of the organisation and is judged by it. Staff development planning and

commitment to training is key to the development of Nigerian staff for future roles within the

Global SCM Organisation.

WAS THE EPG-SCM IS AN ORGANISATION DESIGNED AROUND THE SOCIO-TECHNICAL

SYSTEM CONCEPT?

Did assessing the EPG-SCM Organisation using the Socio-Technical Approach allow us to establish if

it had been designed around the concept?

The dominance of one culture that prevailed during the development of the organisation is clear. In the

4 traits identified as being typical Anglo, 3 were very prevalent in the EPG-SCM Organisation. The

forth, being that relating to processes and procedures is the result of a number of factors including:

• Need to comply with government decrees and legislation, e.g. Nigerian Content Directives,

Sarbanes-Oxley Act.

• Nigeria is typical in its approach to bribery; it is not seen in the same light as it is in Anglo

cultures. This is changing by procedures have been set up specifically for operating in Nigeria.

• The role now being undertaken by EPG-SCM in connection with Health, Safety, Security and

Environment Compliance. EPG-SCM act as the monitors to assess the performance of the Shell

Company Representatives and Contractors based on strict Shell Group criteria.

It is clear that EPG-SCM place great reliance in technology as part of their day to day operations and

have ensured that the staff are trained to utilise it. Whether this will result in a better working

environment is doubtful as the same software is used to determine performance and hence reward.

The stress placed on individual performance rather than team performance is such that within Shell the

traditional Africa culture of working together has been changed. This combined with the external

forces is one of the factors that the writer considers the Individualism versus Collectivism ranking for

Nigeria to more towards Individualism than Hofstede.

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Consideration of the individual appears, from the organisation’s view to be so that it will benefit the

organisation, if the individual also benefits so be it, but that is not the purpose e.g. training to improve

performance, to cut costs; not training to develop the staff to facilitate promotion.

Overall it is felt that elements of the organisation may have been developed after consideration the

socio-technical system, overall this does not appear to be the case. The Social system has been largely

ignored, perhaps because it was felt that Nigerian staff would generally accept what they were told by

the management i.e. High Power Distance. As indicated by the writer this, in his opinion has changed

and next reorganisation should take such issues into account.

D. ATTACHMENTS

Attachment No.1

C:\Documents and
Settings\djenkins\My Documents\data\MBA\OB\Assignment No 1\Attachment No 1 - Shell Group - rev 2.ppt

Attachment No. 2

C:\Documents and
Settings\djenkins\My Documents\data\MBA\OB\Assignment No 1\Attachment No 2 - EPG-SCM Organisation.ppt

Attachment No. 3

C:\Documents and
Settings\djenkins\My Documents\data\MBA\OB\Assignment No 1\Attachment No 3. Hofstede Indices.xls

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