The New Energy Executive


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The New Energy Executive

  1. 1. The newenergyexecutiveWhat the BP Oil Spill reveals about theessential and defining attributes ofthe next generation of leadershipby Les Csorba, Partner, Heidrick & Struggles
  2. 2. The newenergy executiveWhile the complete impact of the BP oilspill is yet to be determined, we can becertain of one thing – the disaster will bea game-changer for the largest industryon the planet. Change in the oil andgas industry will be manifested in manyways – commercially, technically, andmost assuredly, from regulators. Yet, themost significant change may come in theexecutive profile of those who lead oil andgas companies.The petroleum industry functions notby the innovation of new technologiesand execution of strategies, but by theindividual choices of men and women inleadership. It is the executives and theirteams who plan the drilling projects,determine budgets and timetables,deploy assets, and set the tone for thecultures and values of the organization.The Macondo Well accident and theecological disaster that followed musttherefore alter the skill-set of the energyexecutive, or for that matter, the skill-set of any executive managing a globalenterprise. Leadership mattered morethan we could have ever imagined.Timely leadership lessonsThe BP oil spill and its causes and consequences raise anumber of difficult questions that executives face everyday. And while investigations will examine what wentwrong and procedures put in place to prevent futuredisasters, it will be the leaders who will need to push thereset button and begin asking the tough questions:• What should companies do to enhance the planningand contingencies in the event of horrific accidents ordisasters?• What is the right tolerance for risk and how should it beproperly managed?• What should companies do to create functionalorganizational cultures that motivate employees tospeak up freely when things go awry?• What is the right management/decision frameworkof the business; namely, weighing economic factorsversus operational design issues in making decisions?• How can companies create the highest devotion tosafety and balance it with the objective of increasingshareholder value? Can they not properly achieveboth?• How can companies develop the kind of external andinternal leadership that will prevent or, at a minimum,significantly mitigate the damage of disasters that mayoccur in the future?• Finally, what should the profile of the new executiveof these high-risk enterprises look like? What are theessential executive attributes?Instead of waiting for the final conclusions of thePresident’s Commission on the devastating consequencesof the BP Oil Spill, companies can begin to build morefunctional organizational cultures that foster excellence,safety, integrity, and profitability. But such cultures arenot created in a vacuum. They are not found in missionand vision statements published in annual reports andposted on office kitchen walls. The tone is set at the topby individual leaders and reinforced every day. Before theattributes of the New Energy Executive (or, for that matter,any executive) can be identified, these leadership lessonsof the Macondo Well disaster must be understood:2 The new energy executive
  3. 3. • Don’t run. CEOs and executives must takeresponsibility and resist the temptation to deflectblame.• Be compassionate. When people’s lives are destroyed,CEOs and executives should express sensitivity anddisplay high emotional intelligence.• Be collaborative. CEOs and executives should doeverything possible to forge a partnership withgovernment, community leaders, and other industrypeers in managing a crisis.• Be transparent. Companies should be transparent andget out front because the truth will ultimately comeout.• Get real. Executives should remember that it’s neverabout them, and they should always place the interestsof others ahead of their own.For the even the most casual observer, these lessonsof crisis management of the Macondo Well disaster areuncomplicated. And while BP deservedly gets most of theheat, there is plenty of blame to go around. Yes, BP hashad a spate of safety incidents recently, but the industryshould seize the opportunity to renew and strengthentheir safety resolve. Looking back on the crisis yearsfrom now, if BP and its industry partners have mitigatedthe ecological disaster, they will be commended for theunprecedented resources, manpower and assets that arenow being deployed.In 1982, during the Tylenol tampering incident, Johnson &Johnson set a corporate standard for crisis managementby conducting a massive recall and quickly creatingtamper-proof packaging. Just as Johnson & Johnsonprovided safe products for millions of people around theworld for decades, the offshore drilling industry has had astrong record for safety and environmental stewardship,drilling over 50,000 wells safely in the Gulf of Mexicosince 1947. Taking the lead from Johnson & Johnson’sunprecedented response in 1982, BP and others mustreact with the same level of transparency and a renewedcommitment to safety. In fact, the industry as a wholehas now taken a first step in that direction as major oilcompanies such as Shell, Exxon Mobil, Chevron andConocoPhillips have agreed to pool US$1bn to form a newcompany that would respond to major oil spills offshore.However, it’s not simply a question of crisis management.It is about the kind of leadership attributes that mightprevent a crisis from happening, and if a crisis does occur,the ability to mitigate and manage the effects before theybecome unmanageable. In short, a leadership upgrade isalso necessary.The defining attributes ofthe new energy executiveWhat are the most essential attributes of leadership forthe New Energy Executive – what we might call the‘defining attributes’? Assuming that executives alreadyhave outstanding records of business growth, profitability,and operating and leadership success demonstratedthroughout their careers, the following defining attributeswill distinguish them as next generation executives:Maniacal safety mindsetPractically every energy-related business that operatesheavy equipment around high pressure and hightemperature environments promotes a‘safety first’culture.The reality, of course, is that many of those‘safety first’companies operate instead with the philosophy that‘we’re not ultimately in business to be safe, but to provideproducts and services and enhance value.’But by devotingmaniacal attention to safety, high-risk businesses can beboth safe and profitable, and outperform their peers.Executives of such enterprises must have a proven, notprobable, track record of building safety cultures andthey must impose a no-tolerance policy for managersand employees who cut corners. Companies shouldread between the lines of any resume of external orinternal talent and probe for specific examples of a safetymentality. During previous safety incidents, what werethe key lessons the candidate learned? To what extent hasthe candidate become a champion or evangelist for safetywithin the organization? Of course, the more details andspecificity the better.Heidrick & Struggles 3
  4. 4. Risk managersMost executives do not view themselves as risk managersof the enterprise, but primarily as custodians of a P&L or aschief spokesperson of an enterprise. They tend to leave thedetails of risk management to their operating leadership,their CFOs, or even committees of their boards. That willneed to change. Company executives must be as watchfulas ever for what Nicolas Nassim Taleb referred to in his2010 book, as‘black swan’events, the most unusual andhighly unpredictable events that can be catastrophic andcan change history.At the top of the CEO’s agenda (which may includestrategic growth, global expansion, and capital raising)must be a big circle around managing risk. Just askLehman Brothers, whose risk committee met only twicein the two years preceding the company’s crash, whichprecipitated the devastating credit crisis. CEOs and othersenior executives should manage risk before a crisis bylaying out all of the contingencies and detailed plans– preparing for the worst and hoping for the best.Rigorous risk management and meticulous attentionto details combine to become a core attribute of thenext generation executive. Such executives should beidentifying areas of vulnerability in order to turn whatcould be a black swan disaster into a white swan triumph.Integrated decision makingWhile more information will emerge about the causes ofthe Macondo Well disaster, there is a strong sense thatthe root cause of the accident lay in the‘management/ decision framework.’Some companies in the industryhave been suspected of basing decisions more heavily oneconomic factors than on operational / mechanical factors.For example, if a piece of equipment has a lifespan of 24 to48 months, a more conservative operator (such as ExxonMobil) might do a complete reliability and maintenanceinspection at about 20 to 24 months.Some argue that BP may have opted for a‘run tofailure’plan on their equipment, or at best conductinginspections at 48 months to see if they can get as muchout of the equipment as possible (e.g. the technique theyused to test their Alaska pipelines). While BP has been astrong commercial performer, generating massive returnsfrom their trading business, some observers give themlower marks for operational excellence, which consists ofa combination of reliability, safety and the cost to operate.Companies need to ensure they know the business theyare in and that their leadership talent has all the attributescritical to operating their business. Instead of lettingeconomic factors dominate decision-making, companiesshould use an integrated framework that balanceseconomics and operational excellence.Accountable and self-effacingPeter F Drucker, the father of modern management,said that accepting responsibility is one of the primaryrequirements of any leader. The best‘see leadership asresponsibility rather than as rank or privilege,’Druckerwrote.‘Effective leaders are rarely permissive. But whenthings go wrong – and they always do – they do not blameothers.’The most effective executive understands that he or she– and no else – is ultimately accountable for the actionsof the enterprise. To assess whether prospective internalor external executives have such attributes, companiesshould explore some simple questions of character andleadership: Are they more ambitious for the enterprise andtheir employees than for themselves? What evidence is therethat they de-stratified the rank or privilege of leadership andpositioned themselves as servants? Who have they mentored?These are essential questions in determining whether anexecutive has the super-attributes of accountability and,yes, a little humility.“In the age of the 24-hournews cycle, authenticity andexecutive communicationskills have become essential.”4 The new energy executive
  5. 5. Authentic communicatorsBP’s failure to release immediately the video of the leakingwell suggested that the company was hiding something,which created instant distrust. In the age of the 24-hournews cycle, authenticity and executive communicationskills have become essential.However, it is not about charisma or flowery rhetoric butabout transparency and truth-telling. By and large, weknow what happened. It certainly helps no one to pointfingers, deflect blame, and speculate on the extent of thedamage. Even worse are the kind of responses BP’s CEOat the time initially provided:‘I am not stonewalling. I wassimply not involved in the decision-making process.’Inaddition to getting out front and being truthful, executivesneed to acknowledge what they do not know (e.g. spillrate, root cause, or the extent of the ecological damage).Learning that lesson and being authentic is as importantas truth-telling.Before executives step in front of a bank of microphonesand are forced to address the public, they should behoned and authentic communicators who can connectwith people. They should have already demonstratedauthentic communication inside the company by beingcheerleaders for a culture of integrity, transparency, safetyand collaboration. In addition, the best communicators arealways the best listeners. They keep their doors open, walkthe halls, and make no distinction between employees ormanagers.Companies should be less enamored of sophistication oreven impressive results. They should root out phoninessand be more impressed with those who are able to own upto their failings in leadership and discuss how they havegrown since. Like integrity, the attribute of authenticityhas become a‘must have’in any executive profile.Continuous‘people’improvementMost executives like to think of themselves as havinga continuous improvement mindset, but few actuallydo. The CEO or executive agenda is so cluttered withexecution, strategic planning, and meeting quarterlyresults that little time is actually devoted to upgradingsystems, processes, procedures, and even less toupgrading leadership.But the mindset of continuous improvement cannotsucceed without a respect for people, or those preciselyresponsible for building such cultures. For example, thecompanies who have embraced Lean or Six Sigma (suchas GE) recognize that high respect for people (employees,customers, suppliers, communities) is the essentialingredient of any continuous improvement process suchas safety. Some might argue that BP’s CEO was in facttrying to promote continuous improvement and a culturechange, except that he was doing it with people who grewup within the BP corporate culture. It is important not onlyto develop talent internally, but also to acquire externaltalent who can model the desired behavior and promotereal cultural transformation.Executives should be probed about their track recordof building people-oriented continuous improvementcultures. What processes have been put in place for people tospeak freely? Have they created functional cultures where theelephants in the room can be discussed openly?Emotional intelligencePerhaps the most obvious attribute missing among someof the executives managing the BP spill crisis is empathyor sensitivity. It’s hard to recover for then-CEO TonyHayward’s blunder heard around the world,‘There’s noone who wants this over more than I do…I would like mylife back.’However, it is worth asking whether other high-profile executives, divorced from the everyday realities ofthe lives of average people, might have responded in thesame way?For far too long, companies have been enamored withexecutives who have excellent pedigrees, academiccredentials, or high intellectual competence. Malcolm“The best communicators arealways the best listeners. Theykeep their doors open, walk thehalls, and make no distinctionbetween employees or managers.”Heidrick & Struggles 5
  6. 6. Gladwell’s exposure of the‘talent myth’at Enron in hislandmark piece in the New Yorker in 2002 drove home therealization that companies had perhaps placed too muchemphasis on class smarts and less on street smarts, toomuch interest in IQ and less on EQ (emotional quotient).Clearly, companies will need to spend more time assessingthe emotional intelligence of external or internal leadersto see if they have personally experienced adversity, haveserved others more than themselves, and have developedselfless character as a result.One of the common traits revealed in the Level 5 leadersthat Jim Collins discovered in his research for his epic bookGood to Great was that all of those CEOs had experiencedsome kind of hardship in life. This attribute (the crucible oflife, if you will) produced the rare combination of intensecompetitiveness and selfless humility – perhaps the secretof genuine leadership. Indeed, the human compassionand empathy that comes from triumphing over adversitymay be the most defining attribute of the next generationexecutive.It is precisely because the oil spill crisis was precipitatedand then mismanaged by leaders that it providesa remarkable opportunity for leadership. The mostconsequential factor in any successful enterprise is notmerely the success of innovative technologies (ultradeepwater drilling, for example) or the execution ofbusiness strategies, but rather the depth, breadth, andsubstance of the leaders who drive all of functions.Drilling technologies, blowout preventers, policies andprocedures, or even contingency plans don’t drive,produce and reinforce safety, integrity and transparency– leaders do.At Heidrick & Struggles, we are working with boardsof directors and executive leadership teams to ensurethey have in place the very best practices in leadershipdevelopment. For nearly 60 years, we have helped theworld’s most prestigious companies build and developwinning leadership teams.Our experience has taught us that managing anddeveloping executive talent is as important as acquiringit. To assist clients transform the way they manage andupgrade their talent – and ensure the sustainable businesssuccess their stakeholders and the community demand– we have assembled a cadre of deeply skilled consultantswell-versed in human capital management and leadershipteam dynamics. Our leadership consulting professionalsare assisting executive teams and boards with bestpractices in critical areas of talent management, including:• Talent Recruitment: A higher standard of executiverecruitment and more holistic evaluation thattransforms the headhunter into a soulhunter.• Talent Management: Talent strategy, successionplanning, and rigorous assessments of high potentialsthat include thorough 360’referencing to determineboth strengths and gaps.• Executive On-Boarding: Assimilation activities,transition consulting, and team development.• Executive Team Development: Professional coachingand mentoring programs to ensure that all newemployees are inculcated with a company’s values ofintegrity, safety, and long-term sustainability. Theseare coaching and development plans that emphasizeexperiential over educational development.• Board Building: Board assessment and boardcoaching.Companies that rigorously invest in the development oftheir leaders will not only be heeding the lessons of theMacondo Well accident and preventing future ecologicaldisasters, but also gaining distinct market advantage.The industry can save money and save lives. It can buildshareholder value and serve as good corporate citizens.After all, the greatest competition in the marketplace hasnever been for customers but for the best leaders who canenhance value, promote safety, and mitigate any crisis. Les Csorba is the Partner-in-Charge of the Houston officeof Heidrick & Struggles where he has assessed and recruitedenergy executives including CEOs, CFOs, and Board members.He is also the author of TRUST: The One Thing that Makes orBreaks a Leader.+1 (713) 751 3047lcsorba@heidrick.comA shorter version of this piece was originally published in theHouston Chronicle, July 18, 20106 The new energy executive
  7. 7. Industrial PracticeOur Industrial Practice team, whichconsists of the Natural Resources Practiceand other specialty practices, combinesunparalleled search resources with adeeply consultative approach. Workingclosely with the client, we developthe ideal candidate profile against theorganization’s unique competitivechallenges, business objectives, andleadership culture. By considering farmore than candidates’functional orindustry backgrounds, we enlargethe talent pool to help find the talentmost qualified to meet those businessobjectives and address the client’s realhiring needs. Perhaps most importantly,this approach helps avoid the disastrousmismatches between candidate’scapabilities and role requirements thathave plagued many industrial companiesduring this time of dramatic change andincreasing complexity.Our dedicated group of over 125consultants has deep experience in eachindustry sector. We serve every regionaround the globe, including China, Russia,the Middle East, Eastern Europe and otheremerging markets. The more than 1200assignments we conduct for clients eachyear include executive search, leadershipdevelopment and consulting projects.This work has earned us outstandingcustomer satisfaction ratings and createdlong-standing relationships marked bythe trust we develop and the results wedeliver in every engagement.Heidrick & Struggles 7
  8. 8. Copyright ©2010 Heidrick & Struggles International, Inc.All rights reserved. Reproduction without permission is prohibited.Trademarks and logos are copyrights of their respective owners.201001JNTSRG47Heidrick & Struggles is the leadership advisory firmproviding senior-level executive search and leadershipconsulting services. For almost 60 years, we have beenbuilding deep relationships with the world’s mosttalented individuals on behalf of the world’s mostsuccessful companies. Through the strategic acquisition,development, and retention of talent we help our clients– from the most established market giants to the newestmarket disruptors – build winning leadership