Shell - History and Organizational Structure, Oil Spill in Nigeria - Case Study Example

Table of Contents Introduction 2 Shell: History & Organizational Structure 2 Shell Organizational Structure 3 Shell Business 4 Shell Oil Spill in Nigeria 5 The CEO 6 A Local Nigerian Shell Employee 7 A Shell Investor 8 Conclusion 9 References 10 Introduction The report examines the manner in which oil spill in Nigeria will have an impact on different stakeholders including CEO, local employee and investors. The decision to work and develop the required fundamentals will be largely dependent on the strategies that each shareholder adopt and will have a significant impact on the leadership that is being demonstrated. Developing a mechanism through which all aspects are considered will strengthen the brand image and will help to deal with the issues effectively. Shell: History & Organizational Structure Royal Dutch / Shell group of companies was formulated in the year 1907 when two competitors named “Royal Dutch Petroleum Company” and “Shell Transport & Trading Company PLC” came together. Till 2005 the Shell Company operated as two holding companies and finally the Royal Dutch Shell was incorporated with its headquarters in Netherland (ICIS, 2011). Presently, Shell has operation in over 90 countries and since its inception it has worked on the global arena. During the last 104 years since the company has been operating it has undergone different changes in the direction of organizational structure. The last organizational structural change was witnessed in 2009 which was done due to the sharp dip in the price of oil which had increased the risk for more 24,000 jobs (Judge, 2009). In a similar fashion the reputation of Shell suffered in 1995 when looking to carry out its oil drilling process in Ogoniland led towards the hanging of the Ogoni leader (Rowell, 1966). This had an impact on the brand image of Shell and dented it which forced the management to take steps so that the brand image could be preserved and alternatives through which the working process could be improved can be identified. To improve its brand image Shell entered into environmental programs and left the anti-Kyoto Global Climatic Condition (Munshi & Kurian, 2005). This helped Shell to work and improve its brand image which thereby helped to bring a complete transformation through which reputation improved and helped them to improve their profitability and quality of work. The different incidents and bottlenecks made Shell inculcate a global reputation survey in the mid nineties and became the first company to develop a “Sustainable Development Principles” which aims towards social corporate responsibility and looks towards improving the business fundamentals. This helped to establish a new leash of life to the established business and helped to build the required platform through which better opportunities of growth and sustainable environment was developed. Shell Organizational Structure The Shell group works at three major business areas Firstly, is the upstream business which searches for crude and natural oil availability across different places all around the globe Secondly, is the downstream business which refines, trades, ships supplies crude oil and other products to the different parts of the world and also produces petrochemicals for different customers Thirdly, is the project and technology business which is responsible for managing Shell’s major business and ensures research and innovation so that technology and innovation can be developed It is argued by many that Shell has five core businesses but realistically the above mentioned three core business covers all the areas that the organization works on (ICIS, 2011). To remove the discrepancies and to ensure that all the shareholders are able to identify with the different business that Shell has it can be identified as "Exploration & Production; Oil Sands; Gas & Power; Chemicals; and Other Industry Segments" (ICIS 2011). Shell Business The Shell’s portfolio of business includes a wide array of different business which looks to provide the different stakeholders with some valuable information through which they will be able to take valuable decisions pertaining to the working culture. Shell through its businesses has attempted to satisfy all the stakeholders associated with their business which includes government, investors, customers, suppliers, environmentalist, society, employees and so on. The Shell group accounts for 2% of the world’s oil production and 3% of the gas production which totals to 3.1 million barrel of oil and gas. The group has more than 101000 employees and 44,000 service stations worldwide. This is supported by the fact that Shell has around 35 refineries and chemical plant and is one of the biggest conglomerates which is growing at a rapid pace. Shell has thereby impacted the world economy by contributing positively not only by providing the natural resources but generating employment and investment so that the business economy can be able to ensure sustainable growth. This will help Shell to contribute positively to the countless shareholders that are present as the positive or negative actions of the organization will have an influence on the working style (Donaldson & Preston, 1995). Shell is looking to be positive in this aspect which will thereby lead towards positive contribution towards the shareholders wealth and will multiply the different opportunities through which better growth can be achieved. Shell Oil Spill in Nigeria The Nigeria Delta has a long history of oil spills and is identified that 546 million gallon of oil was spilled in the Nigeria Delta in the last five decades (Nossiter, 2010). The last spill on June 20, 2010 made the Nigerian officials to ask Shell to compensate the affected communities which have come in contact with the oil spill (Ezigbo & Bassey, 2010). The local communities and NGO’s in Nigeria are upset as Shell has disputed a report provided by Amnesty International and Friends of the Earth International (FoEI) by stating that they didn’t breach the basic standard which has been developed to carry out operations and cannot be held guilty for breaching the basic standards (Alike, 2011). It was further seen that Shell has been accuses and discredited for providing misleading information about the oil spill in Nigeria (International Justice Desk, 2011). The oil spill has affected the local industry, environment and fishing business to a large extent. Shell instead of accepting the case blames it on sabotage and theft which led towards oil spill and justifies the stance that they have no role in the oil spills. This has impacted Shell’s credibility and has raised questions on the leadership and management skills which they look to follow. The consequences of the situation could be drastic on the CEO and the stakeholders as it will have an impact on the overall business leverage which Shell has developed (Pye, 2005). Depending on the steps which is taken to fix the problem would further lead towards both financial as well as reputational loss for Shell. The local community wants a similar penalty to be imposed which was imposed on British Petroleum when oil was spilled in the Gulf of Mexico (Margolis & Stoltz, 2010). This will have an impact on the shareholders of Shell which includes both the internal and external stakeholder as environmental hazards and the implications the situation could create will be really stringent. Analyzing and identifying the three stakeholders i.e. the CEO, a local Nigerian Shell Employee and a Shell investor will help to understand the different issues which the problem provides. This approach will help to develop the required platform for a sense making theory of leadership and the stakeholder model which will help to examine the different factors and the impact it has on the performance of Shell The CEO Leading in such a situation is a challenge and while looking to work as a leadership it becomes imperative that the different stakeholders associated with the business is looked after which stresses the need of using the stakeholder theory (Donaldson & Preston, 2005). Using a process of resilient questioning as identified by Cunliffe (2004) will help to find out the key issues and will facilitate in the development of a path through which a path which makes sense for all the parties involved can be formulated. This makes sense making an important component of the process and requires active involvement from the leader (Pye, 2005). Leaders usually act as symbol highlighting the instance which they are facing. Their actions helps to develop imagery of the entire process which thereby determines the actions which will be taken thereby helping to set up the whole process and determines the setting based on which decisions will be made (Smircich & Morgan, 1982). This thereby provides an opportunity where stakeholder theory and sense making in action is to be used so that maximum effectiveness and gains can be ensured. It is important that at the first instance the situation is analyzed which will be followed by finding out the stakeholder needs and concerns. Thus, resilient questioning will further help to develop the required ground where actions can be taken in a coordinated manner and all the parties are involved. For example, Shell should take up the cleanup efforts where they take up social responsibility and drive an effort which will look towards cleaning the environment and also benefitting the image of the organization thereby leading an effort towards environmental protection. The CEO has to ensure and give assurance that technology, expertise and operational management will be used to bring the required change so that disaster is handled in the most effective manner. This will help to give the local stakeholder an assurance that Shell is looking towards working for their interest and will look at improving the current situation which they are facing. This has to be matched by the fact that NGO’s and local government bodies need to be involved in the entire process where sense making and devising strategy will help to deal with the social and environmental impact. This will help to ensure better cooperation and the corporation can enter into partnership through which the problem of spillage can be handled. The CEO should also further look at maintaining a fighting instance against opposition and has to keep on pointing fingers at local saboteurs/corporate terrorists and state that it is the responsibility of the local authority to control the situation. This would help the CEO to keep up shareholders interest and will ensure that the credibility and image of the business is not affected over a longer period of time. The situation looks into two stakeholders i.e. internal stakeholders and the shareholders and others and not considered A Local Nigerian Shell Employee For the local Nigerian employee the situation is dicey. On the one side is the employer who provides employment and basic amenities of life whereas on the other side is the society who are facing problems due to environmental pollution. The community and the NGO are raising fingers on the corporation which is again impacting the social status of the employee. This could result in conflict between the personal goals and loyalty towards the organization. The ethical and moral standards require that the leaders act on the situation and find out a possible alternative which will marginalize the impact and consider the different views in their decisions In the first situation considering the social responsibility of the employee it will be his job to ensure that he acts as an ambassador of the company and looks to uphold the integrity of the organization. This will require taking steps so that both the workplace and social aspects are considered. In the second situation the employee could take a defensive action to uphold the interest of shareholders’ investment. This will lead towards a split between profession and social community and could have long term impact on the employee. A Shell Investor The investor at the given instance will be looking to protect his investment and might not look at the bigger picture in a positive manner. This at the most could lead to a loss of investment for the shareholder both in the short and long term. Taking a social responsible approach the shareholder would look to favour the act of cleaning the environment so that the society is protected and would look at protecting his interest considering the long term aspect. This will require working on the vision which the CEO has provided to work on. This will turn out a situation which seems cumbersome to a profitable one aimed at improving the brand image over a longer period of time. In case the shareholder take a defensive approach it will thereby lead towards loosing the value which was generated by the leader and could impact the brand image over a longer period of time. Conclusion The report thereby present the manner in which oil spill in Nigeria will have an impact on different stakeholders including CEO, local employee and investors. The decision to work and develop the required fundamentals will be largely dependent on the strategies that each shareholder adopt and will have a significant impact on the leadership that is being demonstrated. Developing a mechanism through which all aspects are considered will strengthen the brand image and will help to deal with the issues effectively. References Cunliffe, A.L. (2004) ʻOn becoming a critically reflexive practitionerʼ, Journal of Management Education, 28 (4), pp.407–426, Sage Journals [Online]. DOI: 10.1177/1052562904264440. Available from: http://jme.sagepub.com.ezproxy.liv.ac.uk/cgi/ reprint/28/4/407 [Accessed: 8 October 2013] Donaldson, T. & Preston, L.E. (1995) ʻThe stakeholder theory of the corporation: concepts, evidence, and implicationsʼ, The Academy of Management Review, 20 (1)ʼ pp.65–91. Available from: http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx? direct=true&db=buh&AN=9503271992&site=eds-live [Accessed 8 October 2013] Ezigbo, O. & Bassey, O. 2010. ʻOil spill—environment practitioners want compensation from Shell [Online]. Available from: http://allafrica.com/stories/201006300315.html (Accessed: 8 October 2013) ICIS 2001. Shell Company Structure Information from ICIS [Online] Available from: http:// www.icis.com/v2/companies/9146241/shell/structure.html [Accessed: 8 October 2013] International Justice Desk, Shell uses misleading figuers on Nigerian oil spill [Online] Available at: http://www.rnw.nl/international-justice/article/%E2%80%98shell-usesmisleading-figures-nigerian-oil-spills%E2%80%99 [Accessed: 8 October 2013] Munshi, D. & Kurian, P. 2005. Imperializing spin cycles: A postcolonial look at public relations, greenwashing, and seperation of publics. Public Relations Review. [Online] 31 Available at: http://www.spinitgreen.org/print/docs/POSTCOLONIAL%20LOOK%20AT%20PR%20GREENWASHING.PDF [Accessed: 8 October 2013] Margolis, J. D. & Stoltz, P.G. (2010) ʻHow to bounce back from adversityʼ, Harvard Business Review, 88 (½), pp.86–92. Available from: http://sfxhosted.exlibrisgroup.com.ezproxy.liv.ac.uk/lpu?title=Harvard+Business+Review&volume=88&issue=1&spage=86&date=2010 [Accessed: 8 October 2013] Nossiter, A. 2010. Far from Gulf, a Spill Scourge 5 Decades Old. [Online]Available at: http://www.nytimes.com/2010/06/17/world/africa/17nigeria.html?_r=1 [Accessed: 8 October 2013] Pye, A. (2005). ʻLeadership and organizing: sensemaking in actionʼ, Leadership, 1 (1), pp. 31–49. Available from: http://lea.sagepub.com.ezproxy.liv.ac.uk/content/1/1/31.full.pdf+html [Accessed: 8 October 2013] Smircich, L. & Morgan, G. (1982) ʻLeadership: the management of meaningʼ, The Journal of Applied Behavioral Science, 18 (3), pp.257–273, Sage Journals [Online]. Available from:http://jab.sagepub.com.ezproxy.liv.ac.uk/cgi/reprint/18/3/NP-b DOI:10.1177/002188638201800303 [Accessed: 8 October 2013] Judge, E (2009) Shell restructuring puts 24,000 jobs at risk [Online] The Times. Available at: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article6370818.ece [Accessed: 8 October 2013] Read More