How Organizational Elements Influence Performance in Oil and Gas Companies

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Today‘s globalized nature of competitiveness in oil and gas markets is placing more pressure on companies operating in these industries to develop more effective organizational culture, structure, strategy and information technology. There are many studies that focus on the organizational and managerial factors that drive organizational performance.

Organizational culture, structure, strategy and information technology are such areas that play a critical role and are strategic prerequisites for business success in today’s hypercompetitive environment of oil and gas markets. I place a new emphasis on these organizational factors, and shed light on these important organizational elements to build effective companies operating in oil and gas industries.

Andrew Pettigrew initially introduced the term organizational culture into the business literature in 1979’s “On Studying Organizational Cultures.” Edgar Schein describes organizational culture as a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems in 1984’s “Coming to a New Awareness of Organizational Culture.”

Organizational culture is, therefore, reflected in shared assumptions, symbols, beliefs, values and norms that specify how employees understand problems and appropriately react to them. To analyze the relationship between corporate culture and firm performance, organizational culture could be visualized by its three major aspects, including collaboration, trust and learning.

Both cultural aspects of collaboration and trust positively contribute to oil and gas companies to effectively and actively respond to environmental changes and customer needs and employee growth needs through developing effective learning workplaces within these companies.

This also helps these companies to improve performance in terms of the quality of products and services. Learning culture as another cultural aspect sheds light on organizational capabilities to develop learning. It is quite understandable that this cultural aspect can particularly facilitate performance in oil and gas companies, by developing suitable workplaces for experts and internal consultants to effectively share their knowledge with others.

People in fact recognize how old resources can address new and problematic situations by sharing their knowledge within these companies, and this can help to create more innovative ideas for organizational problems. David Maister in his book, “Managing the Professional Service Firm,” says that innovative ideas generation can improve profitability for companies. Thus, I suggest that business consultants in oil and gas industries should consider organizational culture as an important enabler to enhance financial and non-financial performances.

Less emphasis on centralized structures develops communications within oil and gas companies. This less emphasis on centralization also creates more appropriate and effective workplaces for developing learning and growth that in turn improves sustainable competitive advantage for these companies. This effective learning environment is a by-product of the delegation of authorities that in turn inspires people to actively participate in organizational decisions.

Decentralization within oil and gas companies can also enable these companies to identify changes in external environments and then help them to actively and effectively response to these rapid changes. Less emphasis on formalization can also provide freedom for experts and internal consultants to more innovatively handle their work operations, which leads to higher job satisfaction within oil and gas companies.

James Hesket and his colleagues in their book, “The Ownership Quotient: Putting the Service-Profit Chain to Work for Unbeatable Competitive Advantage,” state that job satisfaction can stimulate the quality of products and services that potentially leads to higher degrees of customer satisfaction and profitability. Therefore, I suggest that business consultants in oil and gas industries should also consider the importance of organizational structure in improving performance in oil and gas companies.

Organizational strategy can also play a critical role in improving performance. Firms’ strategy can be categorized into two prominent streams: the first being that research indicates that there is a strong alignment between business strategy and external environment that potentially leads to higher degrees of performance at the organizational level. The other stream sheds light on different typologies of business strategies, and argues that one typology of these existing typologies can create better results for organizations when compared to others. It can be seen that these two streams have highlighted business strategy as an important enabler to improve organizational performance.

In terms of STROBE strategy dimensions, analysis strategy can in turn develop opportunities for human resources development within organizations operating in oil and gas industries, by assessing current situations in details. Analytical orientation has major effects on the performance of these companies through focusing on analytical decision-making process. Human resources development can potentially facilitate financial performance of oil and gas companies, by improving profitability for these companies.

Defensive strategy as a necessary requisite enhances profitability, which enhances efficiency in companies’ current positions in the hypercompetitive oil and gas markets. Since pro-activeness manifests itself in behaviors such as continuously exploring the emerging opportunities to invest, this strategy can positively contribute to the efficiency of oil and gas companies through helping these companies to find better opportunities for investment that potentially leads to better financial performance for these companies in terms of return on investment (ROI) and profitability.

Futurity strategy, which implements basic studies to develop an effective and comprehensive vision for the future, can also enable oil and gas companies to identify and actively respond to the changes occurred in the external environment. In line with this, I suggest business consultants in oil and gas industries should consider the critical role of strategy in improving organizational performance for companies operating in these industries.

Information technology is a key factor to improve business. Forbes’ Reports on American industries clearly indicate that effective information technology significantly contributes to firms’ financial performance. These researches acknowledge that information technology is an important enabler to effectively implement organizational processes. Communication technologies can in fact reduce paper-based transactions for oil and gas companies that potentially decrease costs and subsequently improve profitability within these companies.

Furthermore, it can be seen that communication technologies contribute to these companies to effectively identify opportunities in the external business environment that leads to identify best opportunities for investment in oil and gas industries that potentially leads to improve financial performance for companies operating in these industries in terms of return on investment.

Decision-aid technologies as another kind of information technology can also help oil and gas companies to effectively create more innovative solutions for their organizational problems. In this way, I argue that information technology is positively associated with two important factors of product and service quality and customer satisfaction. I, therefore, recommend that oil and gas companies should consider information technology as a key player in improving their performance in today’s oil and gas hypercompetitive environment.

 

Mostafa Sayyadi is a senior business consultant in Australia. In recognition of his work with Australian Institute of Management and Australian Human Resources Institute, he has been awarded the titles, “Associate Fellow of the Australian Institute of Management” (AFAIM), “Certified Professional Manager” (CPMgr) and “Certified Professional in Human Resources” (CAHRI).

 

 

 

 

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