Masters of Business Awareness

So now I’m two thirds of the way through my MBA, not counting the dissertation. Have I learned anything? Yes, I have. I wrote previously about how useful I found the class on statistical analyses, but I’ve also now got a good appreciation of accounting and finance. By way of a benchmark, I didn’t even know the difference between accounting and finance before, nor sales and marketing for that matter. Now I probably haven’t learned much more than the basics, but it nevertheless allows me to look at companies quite differently. I also understand a lot more of the terminology which gets used in financial reporting.

I’ve also completed a good class on strategy, something I didn’t think I’d find very useful for some daft reason. I found the difference between commodities and other goods interesting, as well as the different strategies companies pursue in attempting to gain competitive advantage. We did a lot about competitive advantage, and how some companies do well and others fail. Underpinning all of this was a Capsim strategy simulation we played over the term which involved selling electronic sensors while balancing R&D, sales and marketing, production, and financing. I was skeptical at first but once I’d figured out how it worked I got stuck right in, and I came out the other end knowing an awful lot more about competitive advantage and how commercial enterprises work at the strategic level. Alas my team didn’t win the competition; we had in our class a young Ukrainian who was extremely gifted at figuring this stuff out and he left us for dust, but we easily came second.

What this has shown me is how unusual the oil industry is. For a start, there’s just so much money kicking around. I’m studying cases regarding the financing of investments of around $5-10m, which in Exploration & Production represents the money wasted because a manager didn’t want to change a wrong decision because he’d look bad in front of his boss. The first big oil project I was involved in, Sakhalin II, started off with an $8bn budget, it rose to $12bn and eventually came in around $20bn. Nobody really knows. I don’t know what the original budget of Kashagan was, but the main dispute now is whether the final price was $50bn or $80bn. Again, nobody really knows. If any other industry outside of government spent money this way, they’d go bankrupt within weeks.

The oil industry is also unusual in that the main players are partners as well as competitors. In any oil and gas development there is one operator and several partner companies. In the North Sea ExxonMobil often had an equal share of a development alongside Shell, who would operate the thing. This is done to reduce risk and make raising capital easier, but it’s equivalent to Boeing and Airbus teaming up to develop a new fighter for the US Air Force. When we studied flat and tall corporate structures and the characteristics of each, it was obvious which category my former employers fell into. I knew this already of course, but I didn’t realise quite how hierarchical oil companies are compared to other major corporations (one or two readers might find it interesting that the companies most often used to compare tall versus flat organisations were IBM and Intel).

The other thing which struck me about the oil industry is how unbelievably slow and bureaucratic the decision-making process is. In my previous place of work, decisions would take months and sometimes years, involving endless meetings up, down, and across the organisation. There may be good reasons for this, but most commercial operations don’t have this sort of time to waste. During one of the seminars I spoke to a chap who worked for a big pharmaceutical company in Switzerland, and he showed me the app he uses for processing and submitting his expense claims. He scans the receipts, clicks send, and it’s automatically approved within hours. Hotel bookings, flights, and ground transport work much the same way. If someone brought that into an oil company they’d summon witchdoctors to cast out the demons within. Booking tickets and processing expenses in my last place of work involved dozens of people, umpteen signatures, and half a forest for each trip.

Sixteen years in the oil industry has sheltered me from a lot of things, and my MBA is making me see the world in a different way. I’m also beginning to sniff out potential opportunities here and there. That was the primary purpose of doing it, of course.

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31 thoughts on “Masters of Business Awareness

  1. What has been the least useful part of the course? (Not because you already know it, but because it doesn’t seem true or applicable)

  2. What has been the least useful part of the course?

    There have been a few subjects – bits of classes – where the lecturer is just parroting middle-class establishment orthodoxy which I could have got from watching BBC for an hour. When challenged, they don’t seem keen on looking at the dissenting point of view (indeed, it seems never to have occurred to them there might be one). There’s not been too much of this though, thankfully.

  3. Good stuff.

    Your competitive advantage, understanding it, investing in it, supporting it and marketing it to your clients in such a way that they can clearly see how they will benefit from it, is one of the most important things a business should do.

    On digitization and getting with the program, when I joined my current firm eight years ago, everything was okay but still a cobbled together manual type system and we worked in one country. We then moved to streamlined and customized documentation, improved on the specificity of key information points to our specialized offerings and two years ago digitized the whole shooting match on an existing cloud based system.

    All of our site guys now have iPads and our entire project reporting including daily progress, staff, material and equipment resources onsite, QSE compliance, technical queries, NCR’s and issues that may have a cost and time impact etc are all done on the pad and signed off daily. This digital record is date and time stamped and has an x, y and z coordinate of the actual location where the record was signed. We are now in ten countries and growing, and we can review any one of our projects actual progress and issues, in real time from anywhere in the world and at any time and we can share it with our clients as well.

    No more risky as hell massive Capex commitments for certain hardware and software with a single supplier for a number of years either. The cost of the hire of the cloud based system is peanuts and you also get the benefit of other operational improvements that are made to it by its other client users

    On the MBA coverage, something that I have found that is never taught anywhere and is badly needed in most business settings is negotiating techniques, do they cover that?

  4. On digitization and getting with the program

    We’ve done a whole class on Management Information Systems, the different types, how they’re used, the underlying architecture. It’s been very useful. I should have mentioned that in the post.

    On the MBA coverage, something that I have found that is never taught anywhere and is badly needed in most business settings is negotiating techniques, do they cover that?

    Yes, but in nowhere near enough depth. My advice would be to go on a specific course for that.

  5. “My advice would be to go on a specific course for that.”

    I was lucky enough to have received a two day crash course delivered by a high flying ExxonMobil attorney. He was doing it as a favour to Harold Clough and delivered it to a bunch of us in Melbourne. I reckon that I have made and saved my organisations millions as a result of those two days of hard core mind blowing techniques on how to get what you want from someone else.

    For those that may be interested and don’t have this luxury, you could just buy and read this very short book named below from any airport newsagent. This guy is very good at explaining how its done and how to get what you want, with actual real life examples that you can relate to, he ended up being a top hostage negotiator.

    You Can Negotiate Anything
    By: Herb Cohen

  6. I’ve worked across a number of industries and they all have their peculiarities, but I’ve never worked in oil and gas, although from your descriptions it sounds really like the public sector (which I have spent a lot of time in).

  7. it sounds really like the public sector

    I formed a theory some time ago the similarities derive from the fact they have virtually guaranteed incomes. When I had to prepare a budget in my early career, I had to first work out what I was going to spend and then – the hard part – work out where the projects were going to come from to pay for all that. In an oil company you work out what you’re going to spend, chuck a few million on top as contingency, then go cap in hand to head office who opens their wallet.

  8. “The mind and heart of the negotiator” – Leigh Tompson.

    It was the set text for the very practical negotiation course I did during my MBA. Very good and gives some more technical structure to the topic. ZOPA, BATNA, devisive and shared areas etc etc. Very useful indeed.

    What’s more amazing is that those doing the negotiations for Uk policy in the EU never seem to have recived a course. Those I knew certainly hadn’t and persisted in the idea of something called “goodwill”. They would give up value to obtain goodwill in the hope they could use it later rather than establishing a definite quid pro quo. Very English, The best one we had was an Italian working for the UK,

  9. What’s more amazing is that those doing the negotiations for Uk policy in the EU never seem to have recived a course.

    I’m not surprised. I’ve seen managers in major corporations who didn’t seem to understand the very basics of management, the stuff you’d learn in the first morning of a 3-day management course. I once asked the project manager of a $10bn project what the general priority on the job was: schedule, cost, or quality. He laughed and said “All three, of course.” By pure coincidence the project came in late and over budget. The jury remains out on the quality.

    Hell, I’ve seen supposedly experienced, senior managers commit to multi-million dollar projects without a clear scope of work. This is project management fail 101, but as I’m fond of saying, these people are not employed because of their competence.

  10. +1 AA – very true

    “What’s more amazing is that those doing the negotiations for Uk policy in the EU never seem to have recived a course. Those I knew certainly hadn’t and persisted in the idea of something called “goodwill”. They would give up value to obtain goodwill in the hope they could use it later rather than establishing a definite quid pro quo. “

  11. One thing that I don’t think has been touched on yet is how to decide who (or what) to believe when there is conflicting critical technical (and other expert) advice.

    Best regards

  12. On the MBA coverage, something that I have found that is never taught anywhere and is badly needed in most business settings is negotiating techniques, do they cover that?

    I tend to use the Brian Clough method: Well, young man, we talk about it for twenty minutes and then decide that I was right.

  13. One thing that I don’t think has been touched on yet is how to decide who (or what) to believe when there is conflicting critical technical (and other expert) advice.

    This is becoming an increasing problem as companies move away from individual accountability towards management by committee. If individuals are accountable, the subject matter experts are listened to and trusted; any manager who overruled his engineers would be accountable for whatever happened next. By contrast, in a company where management is done by committee – which is a lot of them – everyone is responsible therefore nobody is accountable. It’s how you get the “lessons have been learned” remarks with nobody losing their job in the event of a catastrophe.

  14. “ZOPA, BATNA, devisive and shared areas etc etc. Very useful indeed.”

    Absolutely, I am doing a big one right now, on my last days with my firm. We signed a contract last year with liquidated and other damages, I told my client that we will be 3.5 months late starting a fortnight ago. I knew for a fact that he had nowhere else to go and I also had a sneaky early termination clause that I had no intentions of applying. This obviously didn’t go down well, and they told us to go away and come back the next day with something better than this. On the drive back to our office the other attendees were shitting themselves to such an extent that they had talked themselves up to appearing in the Supreme Court before we got back to our office.

    The next day we stuck to our guns, their main concern was not copping damages from their client which they are exposed to, they are big guys, and this is a very high-profile CBD project. They said that they would tell their client that they couldn’t get another specialised contractor like us that was signed up to the project union agreement but how could they get around the fact that we had not formally notified them of this delay much earlier and in accordance with the contract? Once I heard him acknowledge that he had nowhere else to go, being his BATNA that I had worked out months beforehand, I said to tell his client that they should consider themselves lucky that we didn’t terminate early by pulling the clause above. That way he acknowledged that they were stuck with us and I helped him explain it to his client, without having to threaten him with termination, which is exactly what I was doing but very nicely.

    In further discussions with my client and his client, where they were all obsessing about the blown out end date, I discovered that the real pinch point was the handover of another section of the works. We offered to do that work in parallel, which is good for our income stream and hand it over to them on the original required date, the longer end date was all of a sudden not such a big deal.

    I just need this variation to the contract signed off, before I go and I am extremely confident that I will get it, because he has nowhere else to go and if things got shitty I can pull that early termination clause and walk away unscathed.

  15. Expenses are a pretty good litmus test of corporate culture. If expenses are done by trusting managers with a budget to approve and pay expenses, it probably works quite well. If there’s a list of rules covering all the things that can and cannot be paid and under what conditions and the maximum amounts, and there’s a separate team to deal with it, it probably doesn’t.

    It’s why so much software is outsourced from corporations. Sometimes you need an icon set or a software utility. This stuff costs a few quid. But getting it saves a load of time. And in a small software place, you just tell the boss and get a nod, buy it and email the receipt. But in a corporation, it’s a mountain of paperwork, all of which costs money.

  16. My experience of working for an oil services contractor, as opposed to a supermajor, is very different. Costs were tightly controlled, even before the late-2014 oil downturn. The goal was to make every working hour a billable hour. Overhead cost codes were strictly limited.

    Neither I nor my colleagues or bosses attended outside conferences or networking events. I gave a talk at one event which we organised; there were two dozen attendees from our main client (a supermajor), many of whom weren’t even on our project but who just came along for the ride. They were enjoying their day out; but none of us had ever had the pleasure of attending such an event on the company dime.

    I once had the pleasure of being given a sales pitch from a subcontractor. I felt the glowing joy that comes from being seduced; slowly diminished as the realisation dawned that our project couldn’t possibly afford their product.

    I’m now in a different sector, but I’ve learned to look for jobs working for the landowner, not for the gangmaster.


    Sales & marketing is like fishing: marketing is the bait, sales is reeling them in.

  17. My experience of working for an oil services contractor, as opposed to a supermajor, is very different.

    I’m not saying your experience is otherwise, but I worked a year for one large and well-known brownfield services contractor and was seconded for 6 months into a large and well-known EPC contractor. Yes, costs were tightly controlled in each case but only if you overlook the enormous overhead represented by “management” functions, the individuals post holders being 1) expensive and 2) utterly useless.

    Sales & marketing is like fishing: marketing is the bait, sales is reeling them in.

    Heh.

  18. TimN,

    Have you done anything on your favourite subject of HR?

    I’d be surprised if you’ve done HR and they didn’t cover the Netflix Culture Deck.

    If you haven’t heard Patty McCord talk about her time at Netflix and how they decided that HR was all about firing people then I recommend the Without Fail podcast from Gimlet Media. Available on all podcast platforms. I’ve heard her before but I can’t remember where, but this is a good one.

  19. I’d been thinking for a very long time that our blog host was a lost cause.

    Heh.

  20. Have you done anything on your favourite subject of HR?

    I have, but my specialist term starts next week where I’ll have 5 HR classes.

    If you haven’t heard Patty McCord talk about her time at Netflix and how they decided that HR was all about firing people

    I’ve not heard that podcast, I’ll download it. But I did find this article on Patty McCord and HR fascinating.

  21. When I was a maintenance programmer for BigOil I had manuals for 10 or 12 languages. All paper, nothing on line, much of it proprietary in-house stuff.

    50+ big loose-leaf binders.

    I asked my manager for shelves and was told I’d get one (1) bookshelf when I had been with the company another 13 months and 3 days or some equally absurd number.

    I used empty line-printer paper boxes.

    Any of you ever even seen a line printer?

  22. I’m not sure if it meets the definition of a line printer, but my first ever printer was a dot matrix ribbon machine, an IBM clone of an Epson printer. It was hooked up to my BBC Model B. The paper that had perforations allowing you to rip the perforation feeds off was more expensive than paper you could not rip out of the perforations. You had to line it up manually, very precisely, or otherwise you would print across the fold.

    I mention this only because I am resisting the imposition of “Sharepoint” on my company. I have been picked, among other victims to pilot the imposition of this POS on our lives. It has already destroyed some days worth of my productivity for various reasons.

    It struck me that we have had a functional filing system since I was a little kid, whereas Sharepoint, which is apparently the future, and fixes stuff, and we must learn to do things in new ways, manages to fail catastrophically on several of the basic and expected functions of a filing system (including dropping the handle before the program has exited properly, causing loss of data since the last save)

    So I dug out a photo of me as a kid playing around on the very first model of the IBM PC (as it was then). Said photo, with an added speech bubble “It’s not user error…”, emphasising the fact that I have been farting around with P compatibles for longer than most of my bosses even knew what a computer was, now adorns my working zone.

  23. @Fred Z

    Seen a line printer?

    Yes, and heard. Awe-inspiring

    Boxes as cupboards, tables etc – yep.

  24. Sales & Marketing

    First firm* I worked for, post-grad, Sales were at rear right of building, Marketing front left – made me aware they were different.

    * IT Consultancy, multi-million sales to eg BAE, BT, Shell, Statoil

  25. My dad was in the insurance side of the Oil & Gas industry as an underwriter. I recall him once discussing it with someone and mentioning how, internally, they used to lop off a few zeros to make the sums involved seem believable.

  26. “I’ve not heard that podcast, I’ll download it. But I did find this article on Patty McCord and HR fascinating.”

    Just started reading her book…

  27. Andrew M – “My experience of working for an oil services contractor, as opposed to a supermajor, is very different.”

    Same with me, I have worked with big oil and gas contractors, EPC of gas plants, oil refineries, offshore platforms, subsea and onshore pipelines, compression facilities, vessel fabrication, pipe spooling and the like and they were all very well run projects, whether they were profitable or not was beside the point, they were as profitable as they could be under the circumstances.

    Being a contractor, once you are awarded the contract, it means that you are typically low bid so that is a bad start in a “shit, what did we miss out of our price?” kind of way. All the projects were tightly run and well organised, with precision planning and execution strategy and zero room for excess baggage anywhere, that would be unsustainable and couldn’t be hidden for any longer that two months and the rest of the team wouldn’t have had a bar of it either, other than the unusual and extremely rare type of project explained further down this post.

    It’s probably the highest paying of all the various construction sector as well, so it attracts the creme de la creme of the project delivery professionals on the market.

    On profitability, I have seen over the years projects that have made an absolute killing, which is fantastic, the project team are honoured, rewarded and held up as the victorious warriors that we should emulate. I have also seen and been on absolute ball tearing projects, that were underbid, that were way behind schedule because it was impossible to achieve, loss making, hated by the Board, senior management and the staff that were on it files were marked with “oh he was part of the such and such project disaster team”. In my opinion it is those staff that stay on the shit projects, deal with the constant and daily adversity from every angle and eventually bring it home, they are the ones that should be most lauded, anyone can walk away from a bad scene, those that stay to the end are the true victors.

    The other thing that I have learned is that when a project is put up in highlights on how profitable and perfectly run it was, which is a good thing, who is to say that it couldn’t have been more profitable? A firm that I worked for completed a major company making project in Indonesia, they basically turned a coral island into a major gas production facility.

    The project broke all business performance records and put that company on the Indonesian map. We used to hear about it often in its sister company down in Australia. Later and when I transferred to Indonesia and met and worked with most of the staff that were on that project, they told me that there were huge monumental fuck ups occurring all the time on it, massive wastage and rework, we are talking about shiploads of exotic steels, pressure vessels and the like being thrown over the sides or sold off as scrap. Let’s say that project made 25% net margin, which is way out there in this sector, if the A team were on it, it could have easily made 40%.

  28. I mention this only because I am resisting the imposition of “Sharepoint” on my company.

    Oh gawd, I remember that being rolled out in my company circa 2005, amid the fashion of “collaborative workspaces” of that era. I can’t believe it’s still going, I don’t know anyone who actually used it, let alone like it. I think companies have been struggling for a while to get people to all work on the same documents simultaneously in the belief this will make everyone more productive, but I’ve not seen any evidence it works. In my last company we must have had 5 or 6 different systems which shared documentation, all of which were badly populated. To me, the best system is a well-structured file server which individuals can work from but everyone who needs to can access. So long as there is discipline in setting it up and using it, it works well. Although I found most people prefer to work on the C: drive of their work laptop, something I was told never to do around 2001 and have never done since.

  29. That simultaneous collaboration could occasionally be a useful thing in my line of work, but there has been software available to do that on your own server for years.

    Sharepoint of course is bundled for “free” with everything else now, so it can be forced on everyone as the default, because a better solution costs money.

    A bog-standard file server is the easiest way to work most of the time. I even used my own FTP until work blocked FTP connections, so now personal stuff I desperately need to share sits on Onedrive. I am not personally happy with M$ having my data, but with some of it I have little choice.

    Pharma uses various forms of DMS because, legal reasons, audit trails needed and so on. But these are frequently abused as working collaboration platforms (they are just about OK as secure document repositories that keep audit trails of changes, but frankly a bit too clunky to collaborate in).

    The average mid to large pharma appears to have about half a dozen different systems (probably even more away from the little area I work in) which don’t really talk to each other, require multiple logins to get to, and access requests, automatic lock-outs, and people just not knowing how to do what in the system mean you spend a lot of time on the process to do the process that lets you do the process, let alone the goddamn work. Every few years the overpriced management consultancy that installed the system comes in, shakes its head at the sad old piece of crap you are still using, and charges another multi-million sum to replace it with the latest version which removes essential functions, fails to fix known bugs, introduces a dozen more bugs, and promptly collapses irretrievably within hours of rolling out the production version.

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