Change in the Oil & Gas Industry: Critical Action Learning

Introduction

Organizations encounter different forces that pressurize them to implement intended or unintended change. Numerous studies on managing change have been conducted in an effort to assist organizations in the implementation process. Thus, it suffices to argue that contemporary organizations should be very successful in implementing change. However, the available literature shows that successful change implementation is a challenge to most organizations.

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Despite the challenges encountered in implementing change, firms’ managers have a duty to implement change programs successfully in order to promote their organizations’ overall performance. One of the elements that firms’ managers should consider entails changing the perception of change. Brockner and James (2008) emphasize that it is imperative for organizational managers to understand the impact of the intended change on the overall performance. An all-inclusive approach should be adopted in implementing change. Subsequently, organizational managers as change agents should not solely focus on structures and operational processes. On the contrary, the focus should include the human capital dimension. This approach will foster effective change management, for example, by perceiving the crisis inherent in the process as a source of opportunity. Consequently, the likelihood of successful modification of the firms’ strategic and operational practices will improve significantly.

According to the case study under evaluation, the Oil and Gas Company intended to maximize its financial performance by adopting lean management practices. However, the firm ignored the human capital dimension. The pressure on the employees to improve their productivity in order to optimize the firm’s financial performance culminated in the creation of a stressful working environment. Due to the poor work environment, the probability of the organization sustaining its positive financial performance through the change initiative is slim. This paper entails a critical action learning and literature review with reference to managing change within the oil and gas industry. The paper evaluates the approaches that the management of the Oil and Gas Company would have considered in order to implement and manage its change program successfully.

Literature review

Change management has become one of the core managerial responsibilities in the contemporary business environment. Luscher and Lewis (2008) corroborate that its significance has arisen from the view that firms are progressively undertaking diverse change initiatives such as restructuring their decision-making process and their organizational structure. Despite its significance in driving organizations’ long-term performance, only a small proportion of managers can claim to have achieved substantial success (Luscher & Lewis, 2008). Palmer and Dunford (2008) affirm that change initiatives are complex as evidenced by the amount of time required and cost, hence affecting the workforce’s motivation towards achieving success. A study conducted in 2003 on managing change programs illustrates the magnitude of the challenge that is encountered in organizational restructuring. The survey involved 1,546 business executives selected from different organizations around the world (Balogun & Johnson, 2005). Only 30% of the respondents asserted that they had successfully implemented change programs in their respective organizations (Balogun & Johnson, 2005). Considering that change is unavoidable, it is imperative for organizational managers to formulate and implement strategies on how to implement and sustain change effectively.

One of the factors limiting the implementation of change entails the development of diverse assumptions on the management part of it the process. This aspect has led to the mushrooming of different approaches to change management. However, some of the approaches have not fully appreciated the significance of developing an organization-wide approach (Palmer & Dunford, 2008). Palmer and Dunford (2008) further contend that organizational change efforts have been epitomized by “uncritical pro-change bias that demonizes s resistance to change” (p. 21). Organizational managers must challenge this perception in order to exploit the intended benefits from organizational change initiatives. Furthermore, most change initiatives designed by the top executives fail to appreciate the role of the middle-level managers. Luscher and Lewis (2008) emphasize that middle-level managers are essential to change agents due to their role in operationalizing the desired change initiatives. The inclusion of middle-level managers fosters the change process by ensuring that their units align with the top managers’ demands. The middle-level managers have a duty to manage their subordinates’ emotions optimally during the change implementation process. The middle-level managers and supervisors should act as role models. Findings of a study conducted in 2000 indicate that employees “watch their supervisors intently and they are skeptical of the managements’ commitment to change’ (Luscher & Lewis, 2008, p. 27). Therefore, the importance of ‘sense-making in such situations should not be underestimated. Sense-making entrenches certainty within an organization’s workforce on the imminent change initiative.

Balogun and Johnson (2005) affirm that organizational managers have a duty to reframe their subordinates’ perception of the intended change. However, Isabella (1990) argues that in some situations, managers encounter challenges in making sense of the change initiative. The top managers are motivated to implement change initiatives by external dynamics. However, they usually dissociate themselves from the change implementation process. On the contrary, the actual change implementation process is assigned to the middle-level managers who experience intense confusion on how to implement change (Luscher & Lewis, 2008).

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According to the case study, the Oil and Gas Company restructured the top cadre managers in an effort to become leaner and efficient. However, such an approach may hinder the lower-level managers’ ability to implement change successfully due to limited interaction between employees and the management. Subsequently, employees do not have an opportunity to seek clarification on the change initiative, hence limiting their understanding of the significance of the change initiative (Luscher & Lewis, 2008). The firm’s approach to implementing the change initiative increased the level of work-related stress amongst employees due to the increased workload. This aspect shows that the firm’s change initiative was counterproductive and it culminated in an organizational crisis, which might diminish the attainment of the intended benefits if not resolved satisfactorily.

Sims (2009) argues that acceptance of a particular change initiative does not mean that the workforce will be committed to its implementation. On the contrary, employees might continue working but remain fearful, which affects their productivity. In extreme situations, imposing change on employees might stimulate a high rate of absenteeism and employee turnover. Brockner and James (2008) are of the view that if “handled appropriately, crises may leave the organization or its constituents better than they were beforehand’ (p. 96). Thus, one can argue that organizations should transform crisis into a source of opportunity.

Employee involvement

Most change initiatives are undertaken by organizations aimed at improving performance. However, organizational managers as the change agents fail to recognize the importance of influencing the employees’ attitudes. Tsoukas and Chia (2002) emphasize that it is impossible for organizations to implement change successfully without sufficient involvement in their workforce. Employee involvement entails the extent to which they are considered as important and unique to an organization’s operations. Alternatively, employee involvement entails giving them sufficient decision-making authority. Employee involvement became a fundamental concept in strategic management during the 1970s. However, in the recent past, its application in the work environment has reduced significantly. A study conducted in the UK shows that the significance of employee involvement in organizations underwent a marginal decline between 2004 and 2010 (Graetz & Smith, 2010). Subsequently, employee involvement is currently ranked amongst the high-commitment and high-performance organizational management practices.

The available literature shows that most high-performance organizational practices emphasize attaining efficiency (Zafar & Afzal, 2008). However, the negative impact of the operational practices on their workforce is usually ignored. This phenomenon is evidenced by the approach adopted by the oil and gas company. The firm’s top management increased the job demands and responsibilities of its front-line employees in order to achieve its desired financial targets without investing in employee training and compensation in order to promote performance. Paraskevas (2006) affirms that employee involvement should be aimed at empowering employees. In its quest to implement its change, the oil and gas company should have considered a number of aspects in order to ensure adequate employee involvement.

Communication

Sims (2009) cites communication as a fundamental element in the process of implementing change. Thus, communication in the change implementation process should not be an afterthought. Organizations’ top management should consider communication as an essential component in entrenching readiness to the intended change process. In this scenario, the organization’s top management should have used persuasive communication techniques in order to influence the employees’ reactions positively. In its communication process, the top management at the oil and gas company should have ensured that the lower level employees understand the discrepancy between the organization’s current state and the desired level. Graetz and Smith (2010) are of the view that illustrating how the change initiative will bridge the gap between an organization’s performances is critical in instilling a strong belief amongst the workforce on the necessity for change and the need for urgency in implementing specific initiatives.

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Communicating the purpose and urgency of the intended change initiative is fundamental to enhancing an environment that is conducive to work. Thus, information sharing, which is critical in sustaining the implemented change, is enhanced. Moreover, nurturing a culture of open communication amongst the top management, middle-level managers, and their subordinates eliminate the suspicion and anxiety that characterize organizational change initiatives. Alvesson and Sveningsson (2007) further opine that communication fosters trust within the organization. Conversely, poor communication increases speculation due to misinformation and propaganda, hence hindering the employees’ commitment towards the change initiative.

The change initiative within the oil and gas company was characterized by a communication breakdown amongst the top managers, their subordinates, and the lower-level employees. The communication breakdown was due to the one-way communication strategy used by the firm in implementing change. The firm’s top managers were only concerned with communicating the expected performance targets. Thus, there was no room for genuine interaction between the internal organizational stakeholders, viz. the management and the lower-level employees. Therefore, one can argue that the organization’s restructuring effort was characterized by cynicism, which limited its long-term sustainability. According to Brown and Cregan (2008), Organizational Change Cynicism [OCC] can undermine change programs due to a lack of fairness, honesty, and sincerity. Thus, change agents should focus on creating an environment that encourages information sharing.

In the course of strengthening information sharing within the firm, the management should have developed an efficient communication continuum in order to entrench the change initiative in the employees’ hearts and minds. Figure1 below illustrates the communication continuum that the oil and gas company should have considered.

Communication continuum
Figure 1: Communication continuum

The change communication process should be based on a well-designed communication plan to map out all the stakeholders who need information on the change process. The mapping process should identify what should be communicated, the reason for communication, and how to communicate. The communication process should not have been considered as a one-time occurrence, but as a sustainable aspect throughout the change process. Thus, repeating the change message through diverse mediums should be considered as one of the fundamental priorities.

Participative management approach

Change initiatives can undermine the productivity of an organization’s workforce. In this situation, the employees at the oil and gas company experienced a significant increment in their workload in an effort to foster the organization towards the predetermined performance targets. Brown and Cregan (2008) affirm that a participative work environment is an effective enabler in the change implementation process. Organizational managers have the discretion in designing their desired participative climate. Brown and Cregan (2008) define an information-sharing climate as “a situation where the management encourages employees to share their opinions regarding work-related concerns without giving up the right to make all the final decisions” (p. 670). Creating a participative climate provides an organization’s workforce with the discretion in making decisions on how to execute the assigned job tasks effectively and efficiently. The objective of nurturing a participative work climate is to minimize resistance to change by creating a sense of trust amongst employees at different levels of management and eliminating anxiety. Consequently, the employees develop a sense of personal control (Brown & Cregan, 2008). The top management at the oil and gas company adopted the alone approach in setting the ground rules and the change parameters. Subsequently, the lower-level employees who were charged with the responsibility of implementing the change felt alienated.

Governance

Providing adequate leadership support is critical to organizations’ change management process. Organizational restructuring culminates in the loss of authority amongst some employees within the managerial level such as supervisors. Thus, change initiatives might stimulate resistance amongst some employees. Despite the occurrence of such situations, it is imperative for organizations’ management teams to incorporate effective governance strategies during the change implementation process. One of the dominant assumptions in managing change underscores the importance of integrating effective managerial control. Palmer and Dunford (2008) cite the hierarchical or top-down approach as one of the structures that can be adopted in promoting managerial control. Palmer and Dunford (2008) assert that the hierarchical structure should “produce strong corporate capabilities that provide the organization with a firm platform to respond to and shape external changes” (p. 22). In its quest to implement the desired change successfully, the oil and gas company should have designed an effective governance structure to guide the firm during the entire restructuring process. According to Brown and Cregan (2008), change management governance focuses on the effective allocation of job roles and responsibilities, hence improving the likelihood of achieving the desired change outcome. The change governance structure varies across organizations and the purpose/goal of the desired goal. The oil and gas company should have considered a number of elements as evaluated herein.

Steering committee

The organization’s management team should have designed a steering committee comprised of representatives from the different departments affected by the change initiative. The steering committee should have ensured that effective change initiative policies are formulated. The committee should have provided strategic leadership during the change implementation process. The steering committee should have ensured that all employees understand the intended change outcome and the benefit to the overall organization. This approach would have led to the development of a clear vision regarding the intended change, hence promoting the probability of achieving the desired outcome.

Change sponsor

Even though the oil and gas company had managed to improve its financial performance through organizational restructuring, its likelihood of sustaining the positive financial performance may be threatened by the lack of commitment by the top management. The top management was only concerned with achieving strong financial performance as evidenced by the directives on the employees to put more effort in order to promote the firm’s market share, stock price growth, sales revenue, and level of profitability. Brown and Cregan (2008) emphasize this phenomenon by asserting that senior “executives may be reluctant to back change initiatives because they understand that the change effort might impact the employees’ jobs and personal lives negatively” (p. 670). In a bid to deal with this challenge, the firm should have engaged change sponsors in order to strengthen the employees’ commitment to the change initiative. Furthermore, the change sponsor should identify and mitigate possible resistance that might occur during the change implementation process.

Change agent

The oil and gas company intended to optimize its performance through organizational restructuring. However, the top management did not provide the employees with the support that they required for sustaining the change efforts. In its quest to sustain its performance, the firm should have appointed an enthusiastic change agent. The responsibility of the change agent would have involved coordinating and communicating issues related to the initiative, hence ensuring effective information sharing. Furthermore, the change agent should have maintained effective communication with the steering committee and the change sponsor.

Committed leadership

The oil and gas company underestimated the importance of effective leadership from the inception of the change initiative. Brockner and James (2008) assert that change must trickle down from the top management. Thus, the top leaders should have adopted a visionary approach and positioned themselves as role models and champions for change. By integrating a committed leadership approach, the oil and gas company would have strengthened the organizational culture and climate for participative management. Subsequently, the firm’s lower-level employees would have benefited from the exemplary leadership of the top-level managers.

The firm’s decision to restructure its top level of management was spurred by the need to achieve sustainable financial performance. Despite the view that the restructuring affected the top-level managers directly, the initiative was naturally unsettling to the lower-level managers and employees. In a bid to sustain the change impetus, the firm should have communicated a shared sense of how it intends to progress. Moreover, the top leaders should have integrated the change initiative first in order to influence the lower-level employees. On the contrary, the top-level managers imposed the change on employees, which is a threat to the benefits already achieved. The firm’s management team should have ensured that the change is effectively delineated to all the organizational stakeholders. This move would have led to the development of a better understanding of the intended change. Subsequently, the likelihood of sustaining its performance would have been improved significantly.

Continuous engagement

In order to sustain its performance, the firm should have engaged all its stakeholders during the change process. The firm’s management team should have assessed the workforces’ readiness to embrace the intended change. The assessment would have enabled the top management to identify potential hurdles and their impact on the change process. Consequently, the organization’s management team would have been in a position to make the necessary adjustments. The case study shows that the organization’s workforce experienced significant stress in the course of executing the assigned job roles. The top management did not recognize work-related stress as a potential threat to its change initiative.

In the light of the stressful working environment within the firm, it is imperative for the organization’s management team to appreciate the importance of integrating the concept of quality work life. However, the firm’s success in entrenching work-life balance depends on its commitment to undertaking continuous engagement with the employees (Luscher & Lewis, 2008). This approach would have enabled the organization’s top management to develop an ample understanding of the source of job stress. Consequently, the firm would have appreciated the significance of incorporating work-life balance techniques such as flexible working schedules.

Continuous employee engagement would have enabled the organization to mitigate the deficiency between the workforces’ competencies and the organizational needs. Subsequently, the firm’s management team would have developed a better understanding of the importance of investing in workforce development. This goal would have been made possible by the integration of diverse workforce management techniques such as employee training and education and performance management. These practices would have ensured that the workforces’ skills were commensurate with the organization’s demands.

Conclusion

Change is an unavoidable occurrence in an organization’s operations, but only a few firms have appreciated the importance of effective change management. The available literature on change management cites a number of organizations that have failed due to poor change management. Furthermore, the situation at the oil and gas company evaluated in this case study faces the risk of failure due to poor change implementation. However, the firm can sustain the benefits accrued from the change initiative by reinforcing its change management process through employee involvement. The firm’s top management should adopt a holistic approach to managing the change. One of the core aspects that the firm should consider entails integrating an adequate level of employee involvement and engagement. In a bid to achieve this goal, the firm should ensure that all employees understand the purpose of the change initiative through effective communication. Moreover, the top management should adopt a participative management approach in integrating the change. These aspects will lead to the development of a high level of commitment amongst the lower-level employees. Subsequently, the probability of sustaining the firm’s financial performance will improve remarkably.

References

Alvesson, M., & Sveningsson, S. (2007). Changing organizational culture; cultural change work in progress. New York, NY: Routledge.

Balogun, J., & Johnson, G. (2005). From intended strategies to unintended outcomes: The impact of change management recipient sense-making, London, UK: Sage Publications.

Brockner, J., & James, E. (2008). Toward an understanding of when executives see crisis as opportunity. Journal of Applied Behavioral Science, 44(1), 94–115.

Brown, M., & Cregan, C. (2008). Organizational change cynicism; the role of employee involvement. Human Resource Management, 47(4), 667-681.

Graetz, F., & Smith, A. (2010). Managing organizational change; philosophies of change approach. Journal of Change Management, 10(2), 135-154.

Isabella, L. (1990). Evolving interpretations as a change unfolds: how managers construe key organizational events. Academy of Management Journal, 33(1), 7–41.

Luscher, S., & Lewis, M. (2008). Organizational change and managerial Sense making: working through paradox. Academy of Management Journal, 51(2), 221–240.

Palmer, I., & Dunford, R. (2008). Organizational change and the importance of embedded assumptions. British Journal of Management, 19(1), 20–32.

Paraskevas, A. (2006). Crisis management or crisis response system? A complexity science approach to organizational crises. Management Decision, 44(7), 892–907.

Sims, R. (2009). Changing the way we manage change. New York, NY: Greenwood Publishing Group.

Tsoukas, H., & Chia, R. (2002). On organizational becoming: rethinking organizational change. Organization Science, 13(5), 567–582.

Zafar, A., & Afzal, B. (2008). Strategic management; managing change by employee involvement. International Journal of Sciences, 3(2), 205-218.

Change in the Oil & Gas Industry: Critical Action Learning
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