Company Restructure
Executive Summary
SITUATION:
Following a sustained period of rapid organic growth, a multinational oil and gas exploration company found itself with an inefficient organisational model, resulting in unclear accountabilities, duplication, slow decision making and poor financial control that needed quick correction in order to avoid share price erosion.
OBJECTIVE:
To review, re-design and implement a more efficient and “fit for purpose” organisational model and structure that would address these issues, realise significant and sustainable year on year savings, without undermining the company’s ability to deliver on key strategic priorities and objectives.
ACTIONS:
Vista Insights was brought in to provide technical / “how to” / process management advice, objective analysis and facilitation support to a senior project team, reporting directly to the CEO and COO, tasked with reviewing and restructuring the existing operating model, providing alternative suggestions, and project managing the transition from old to new within a seven month period.
RESULTS:
The restructure resulted in a headcount reduction of over 45% and over $700m in General and Admin costs savings over the subsequent 3 year period with no discernable impact on delivery, bolstering the share price and allowing the company to survive a sudden drop in oil price and adjust to a “lower for longer” future.
Solution
For a period of six months, Vista worked very closely and alongside the new project team providing; technical “how to” process management advice, objective analysis of internal data, future state modelling, external benchmarking data, communication support and facilitation of workshops with senior leaders to ensure understanding, collective buy-in and an appropriate level of peer to peer challenge with respect to future state.
Results
The simplification project resulted in an organisational model and structure that was significantly smaller and simpler, delivering a year on year headcount reduction of over 45%, greater clarity with regards to roles and responsibilities (especially between functional heads and business unit heads), a renewed accountability framework, fewer and better integrated processes and a realised saving to general and admin costs of $700m over a three year period. The fact that the project had been driven and delivered by what was predominantly a team of internal, respected employees (with critical, but minimal external consultancy support), meant that changes and challenges were more readily and quickly accepted. This approach also minimised the two common pitfalls of major restructuring programmes that compromise morale, namely employees feeling 1) “It’s being done to us” and 2) by people “who don’t know us”.
Background
After a sustained period of success and rapid growth, both in terms of market capitalisation and headcount, a multinational oil and gas exploration company found that it was becoming harder and slower to get things done. The company had grown organically and quickly in order to deliver maximum short term value to shareholders, but this had led to an inefficient organisational model with too many poorly integrated processes, a lack of clarity around roles and responsibilities and unclear financial control / accountability below Group level. The effect was that decision making was slow, internal friction was high, there was considerable duplication of work and a collective sense that the company had grown too big and clunky. The CEO and COO recognised this, and empowered a senior leader to set up a project team with the goal of significantly simplifying the existing operating model and restructuring the company.
Initial Analysis
Vista quickly identified that the outsourcing of the project to an expensive big consultancy would not sit well with the entrepreneurial, do it yourself culture of the company. Vista advocated that for the changes to be understood, accepted and delivered at speed the programme needed to be led and resourced internally, with a small team of external consultants providing crucial technical and process expertise