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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Boeing down the pan

I can’t say I’m overly surprised by the troubles Boeing is having with its 737 Max aircraft, which is now grounded until they can figure out how to stop it crashing. While the problem ultimately sounds technical (see also this post at the Continental Telegraph), this is the sort of thing which in the past proper business processes and management would have ensured didn’t happen.

I can’t claim to know how Boeing is run, but if they’re anything like most modern corporations they’ll prize unwavering loyalty to management diktat over and above competence, experience, honesty, courage, and character. Decision-making is likely to consist of bright young things in nice clothes giving PowerPoint presentations to their bosses telling them what they want to hear, and those bosses will do the same for their bosses right up through the hierarchy. If an engineer pipes up that something is badly wrong, he’ll be told in no uncertain terms to get with the program and realign his attitude or his career will suffer. In addition, it’s likely that as Boeing’s business became more about buttering up government and lobbying the FAA to turn a blind eye, they got worse at making planes which didn’t crash.

Back when I worked for an oil company they failed to deliver an expansion project in Russia on the third attempt. Twenty years before, when doing business in Russia was an order of magnitude harder, they’d managed to get the original facility built. Somewhere in the intervening period the company had lost substantial capability, not that anyone would admit it. I suspect the reason was experienced people retiring and being replaced by yes men and power skirts molded by a modern system of management which rewards aesthetics and compliance over getting stuff done. In other words, as companies increasingly obsess over process, diversity, and values they forget how to do their core business. On their corporate website Boeing boasts of:

Diversity Councils are integrated groups of site leaders, managers and employees, who work to improve employee engagement, provide learning and leadership opportunities, increase communication, and facilitate implementation of organizational diversity plans. Diversity councils are supported by a local executive champion. Boeing has more than 40 Diversity Councils.

40 diversity councils, and 2 catastrophic accidents of a new aircraft in the space of 5 months. Now air crashes are nothing new, but I can’t help feeling these two statistics are related. I also don’t think this is the last time we’ll be hearing a household name with a long history of excellence grappling with disasters that were wholly avoidable.

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Beta O’Rourke

I’ve got my fifth and final exam of the week today, so I’ll keep this short. In case anyone is interested they’ve gone well so far, mainly because I’m not dumb enough to fork out for an MBA then flunk the exams because I’m too lazy to study. My observations tell me that if I were 22 and my wealthy family were paying for it this might be the case, but alas it isn’t.

Anyway, here’s a video of presidential hopeful and darling of divorcee Democrats Beto O’Rourke:


He comes across as one of those corporate types you meet who’s waited ten years longer than his peers for his first chance at management, and when it finally arrives he takes his subordinates to the pub and gives them a rousing speech without realising he’s addressing seasoned, middle-aged professionals not teenagers.

In fact, he looks and sounds an awful lot like my ex-boss.

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Domaintrix

This amused:

Yes Yes.org, which specialises in making natural lubricants, was founded by Susi Lennox, 73, and Sarah Brooks, 58, who chose to use ‘.org’ in its domain name because they found it “amusing” due to its closeness to the word “orgasm”.

However Ciaran Arstall, head of sales and marketing, believed that changing it the site to .com would boost sales and changed it without permission.

He was then sacked from his £57,500 role in June 2017 after three years at the company.

An employment tribunal heard the name change resulted in a significant loss of sales for the business, which is stocked in 92 countries worldwide and was making £1.2 million a year in 2014.

I can’t imagine companies making sex toys attract the best candidates from top management schools, but how dense do you have to be to think you can’t use .org and .com for the same site? You just put a single page with a redirect in the header pointing to whichever domain has the full site. This is what nearly sixty grand gets you in the sex toy industry, it seems.

Mrs Brooks told the tribunal: “I do not know exactly when the claimant questioned our .org URL and suggest we use .com instead, but it would have been between July and November 2014.

Good to see you were keeping a close eye on things, then.

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Airbust

Back in the early 2000s when I used to frequent the off-topic message boards on a rugby league fansite, a discussion started about the new Airbus A380, the superjumbo that would become the world’s biggest passenger plane. One of the contributors thought it would fail, and explained there were two theories as to how people would travel by air in future. One theory reckoned people would fly en masse between hubs such as London, Dubai, Singapore, and New York before transferring to shorter flights which would take them to their final destination. The other theory said people would just fly direct from one destination to another. The A380 with its 500 seats was banking on the former being correct; Airbus’ rival Boeing bet the other way, and developed the 787 Dreamliner which was much smaller, but had the same range and was more fuel efficient. The contributor on the RL forum thought Boeing was making the right call.

For a while it looked as though both theories were right. Direct flights between regional cities became more common, while Singapore, Dubai, Abu Dhabi, London, and other cities became hubs from which the A380 operated. Not every airport could handle an A380; the double-decker passenger boarding bridges had to be installed and the runway had to be a certain length. When I was sick on an Emirates A380 I was given a bollocking by the flight crew for boarding in the first place because “we can’t just land this thing anywhere in an emergency, you know?” But for a while, it looked as though this aircraft would be a success.

However, with fuel prices rocketing in the mid-late 2000s, the A380 became expensive to operate, especially in comparison with Boeing’s smaller alternatives. Orders slowed and yesterday I read this:

European aircraft manufacturer Airbus has pulled the plug on its struggling A380 superjumbo, which entered service just 12 years ago.

Airbus said last deliveries of the world’s largest passenger aircraft, which cost about $25bn (£19.4bn) to develop, would be made in 2021.

The decision comes after Emirates, the largest A380 customer, cut its order.

The A380 faced fierce competition from smaller, more efficient aircraft and has never made a profit.

It’s a shame in a way because it’s an impressive feat of engineering, but they weren’t that nice to fly in. I flew business class in an A380 with Emirates and Etihad and while it’s fun to wander to the bar at the back and order a drink, I found the seats on the Dreamliners much nicer. It was also a lot quieter. I’ll miss the A380 a little and be glad I had the chance to fly in a few of them, but what I’m really glad I experienced is the top deck in a 747. These planes don’t carry passengers any more but when they did, getting a business class seat in the exclusive top deck was as close as most of us will come to flying in a private jet.

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Aisle see you in court

I’m sure this will result in unforeseen consequences:

Supermarket giant Asda has lost an appeal in the latest development in a long-running legal dispute with staff over equal pay.

The decision means that lower paid shop staff, who are mostly women, can compare themselves with higher paid warehouse workers, who are mostly men.

The Employment Tribunal first ruled against Asda in October 2016. It said shop workers, who mainly work at check-outs or stacking shelves, could compare themselves with staff who work at warehouses.

It’s not over yet, though:

A ruling over whether the work is of equal value is likely to be in May.

There are three key stages in an equal pay case

– Are the jobs comparable?

– If the jobs are comparable, are they of equal value?

– If they are of equal value, is there a reason why the roles should not be paid equally?

I’ve worked on a shop floor and in a warehouse, and I’ve got to say I preferred the warehouse. Although the work is more physical, colder, and you have to dodge forklifts and reversing lorries, you don’t have to mind your language nor deal with idiotic members of the public. You can also goof off more easily: one of the worst things about working a shop floor is you can’t start loafing in the quiet times. Warehouse work tends to be peaks and troughs.

I expect there are women who work in Asda’s warehouses, just as there are men who work their shop floors. As Asda says:

“Our hourly rates of pay in stores are the same for female and male colleagues and this is equally true in our depots.”

The myth of the gender pay gap has long been debunked, and all but the dimmest of feminists are beginning to realise the differences in pay are down to the choices men and women make. Across the population, men are more likely to do dangerous jobs, work nights, work outside, and do deeply unpleasant jobs which women avoid – all of which attract a wage premium. So what we’re seeing now are campaigns for those jobs women choose being recognised by law as of “equal value” to those men opt for. It is quite easy to determine whether working in a warehouse carries equal value as working on the till – see which role requires the higher salary to attract suitable applicants – but this is producing the wrong result. Enter the ambulance chasers:

Leigh Day represents more 30,000 shop floor staff from the big four supermarkets – Asda, Sainsbury’s, Tesco and Morrisons – in similar cases.

This is the law firm which leads witch hunts against British soldiers who fought in Iraq. They believe the courts – rather than the market – is the true arbiter of a job’s value, and will be hoping to follow up on the success of this case, which they also brought:

A group of female workers in the West Midlands have won a Court of Appeal decision on equal pay claims.

The case involves 174 former employees of Birmingham City Council.

The women, who worked as cooks, cleaners, caterers and care staff, claimed they were excluded from getting the bonuses handed out to employees in traditionally male-dominated jobs.

Then there’s this:

It took more than six years and a hard-fought court battle for Joan Clulow, 72, and Pamela Saunders, 67, to finally receive compensation for the years they had been underpaid as home care workers.

“The pay was diabolical for what we did,” said Saunders, a carer employed by Birmingham council for 30 years.

When the council finally graded jobs, it put theirs on a par with mainly male road cleaners and refuse collectors whose wages were boosted by bonuses, shift payments and attendance allowances. “We were gutted,” said Clulow, a home carer for 25 years.

“It hurt because we worked that hard. Christmas Day, Boxing Day, night time if they needed us. We never refused,” she added.

Saunders said: “We couldn’t believe it. Don’t get me wrong, the men do work hard, but we did work hard. And I couldn’t see a lot of them doing what we do. Would they empty a commode, wash somebody down covered in mess, go into a house full of maggots and clean it up? But I’ll tell you what, I would have gone and done a dustman’s job for the day.”

Her remarks reminds me of this post, in which I noted some women don’t seem to understand exactly what “male” jobs entail. Does this Saunders really think men who clean streets and run garbage trucks couldn’t go into a house full of maggots and clean it up, or empty a commode? I think this Asda case might stem in part from the fact supermarket warehouses are no longer situated beside the retail outlets, leaving staff with little idea of what sort of work their colleagues are doing.

What will be interesting to see is how Asda and the other supermarkets handle this. If the courts rule that shop floor and warehouse work are comparable and of equal value, is there any reason why employees couldn’t be required to rotate between them? If Mrs Saunders would gladly have done a dustman’s job for a day (but for some reason didn’t switch to this more lucrative line of employment), would Janet from the deli mind humping boxes in the warehouse at 5am when the first lorry-load of vegetables comes in? I’m sure Barry who normally stacks pallets wouldn’t mind a turn on the till when the temperature drops below freezing in the yard.

We’re going to see a lot more of this, as progressives attempt to close the wage gap by equating wholly different jobs, supported by idiot judges and politicians. It will be interesting to see how the market responds, and what the unintended consequences are.

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Castles in the Sky

One of the signs that an organisation is not in good health is when grand plans are being mooted while the basic functions are deteriorating. Tesla is a good example of this. What they need to do is figure out how to mass produce cars, deliver on customer expectations, and turn a profit. Instead Elon Musk is talking about building a network of tunnels beneath LA to relieve congestion. This is probably a distraction, but in other cases it’s simply a matter of the leadership being too distant from the coal face to understand the basics. Added to that is the ego of those who end up in charge believing they’re put on this earth to deliver grand projects to the masses, and the nuts and bolts that hold everything together are unimportant or beneath them.

A few years back I was pulled into a meeting where an enthusiastic young engineer was explaining the new project his department was undertaking. It would be a colossal interactive data centre containing every piece of information an oil company engineer could ever want to lay his or her hands on: drawings, 3D models, specifications, spare parts lists, process parameters, production figures, you name it. Data for every facility in the company would be centrally stored, updated in real time, and accessible to anyone who needed it. This project was backed by senior management right up to the CEO, who may or may not have recently attended a lecture in which the term “information is the future” was used. I was asked my opinion on it, and I said I thought it was absolutely fantastic, a brilliant idea which would transform the lives of every engineer working in the oil industry. Sadly, it was hopelessly unrealistic. One of the absolute basic functions of an oil company is to maintain up-to-date drawings of its facilities using an industry-standard document control system. My outfit couldn’t even manage that. The drawings were not available let alone updated, and the Engineering Managers to whom the responsibility fell either didn’t understand this was a key part of their job or they simply didn’t care. Either way, we had demonstrated we lacked the organisational and cultural discipline to run a standard database with a tenth of the complexity of the one they were proposing. In fairness, nobody disagreed with me on my assessment of our current performance, and admitted if this new system was to work we needed “a new culture”. Good luck with that.

Similar things were happening at the corporate level. I may be old fashioned and my views outdated, but I’m of the opinion an oil company’s long-term success depends largely on its ability to discover new oil reserves and its project management capabilities. Despite enormous expenditures and several large gas discoveries, we’d not found a sizeable oil reservoir in years (they still haven’t). As for our project management capabilities, we seemed incapable of bringing a project on-stream without years of delays and cost overruns which needed a widening of the columns on Excel spreadsheets to display. The reasons for this were pretty obvious to anyone who’d wandered the corridors for long enough with their eyes open (massive loss of expertise through retirement being the chief cause; compulsory gelding of all male managers another). But what was occupying the minds of senior management? A branch-out into renewable electricity generation and supply. Getting an oil company to supply your electricity is a bit like getting the army to organise your son’s twelfth birthday party. Which, to be fair to European armies, is something they’d probably do better than defending their borders.

Another example of leaders announcing grand plans while the foundations on which they stand crumble appeared on Twitter this morning:


Angela Merkel couldn’t even manage to hold onto the leadership of her own party, and remains Chancellor only because Germany is so divided nobody can agree on a replacement. Emmanuel Macron jets from one international conference to another while the biggest mass protest movement seen in France since the sixties sets Paris on fire each weekend in opposition to his rule. Yet here they are announcing that Europe should become “the new shield for the people” under a Franco-German alliance that nobody else seems to know about.

One of the reasons so many British MPs are against leaving the EU is because it will force them to abandon the grand schemes they hope will get their names written in history books, and return to the mundane task of governing which they consider beneath them. In business as in politics, it’s a widespread problem with so-called leaders everywhere.

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Mock ’em razors

During the marketing module of my MBA which I did last semester, the subject of colossal marketing failures came up. It appears Gillette is vying to be included in marketing lectures long into the future:


I don’t think I need to explain to my readers how insulting this is on so many levels. A comment over at David Thompson’s struck home, and included a last line which made me laugh:

Society has been bringing up boys according to the feminist model since the 1970s. It’s been going on a lot longer than #metoo or Gilette’s marketing pivot. We have enough multigenerational experience that we should be able to determine how the project of feminizing boys has worked out – do the boys grow up in to happy, successful men?

Even if it wasn’t so problematic, progressives don’t even find it believable that their guys, the oversocialized pajamaboy feminists, have any kind of iron hand inside their velvet glove, so much for the feminist promise to men of being able to access both their masculine and feminine side. They imagine instead that black men, under a kind of carbon credit scheme for their toxic masculinity, can be their street muscle against white Deplorables.

The reaction on Twitter was one of apoplectic fury, with people vowing to ditch not only Gillette, but all Proctor & Gamble products. But not everyone is unhappy:

Gillette has a dedicated page, to support the ad, which speaks volumes (emphasis theirs):

It’s time we acknowledge that brands, like ours, play a role in influencing culture. And as a company that encourages men to be their best, we have a responsibility to make sure we are promoting positive, attainable, inclusive and healthy versions of what it means to be a man. With that in mind, we have spent the last few months taking a hard look at our past and coming communication and reflecting on the types of men and behaviors we want to celebrate. We’re inviting all men along this journey with us – to strive to be better, to make us better, and to help each other be better.

From today on, we pledge to actively challenge the stereotypes and expectations of what it means to be a man everywhere you see Gillette. In the ads we run, the images we publish to social media, the words we choose, and so much more.

As I may have said before, modern corporations are as much standard bearers for a hotch-potch of post-modernist moral virtues than businesses returning value to shareholders. As I have definitely said before, these people would be better off joining a church.

The fact is, this advert has been dreamed up by a marketing department in a giant, multinational corporation. We already know which demographic these companies pander to when recruiting and promoting, and the further you get from the science and engineering branches, the more pronounced the effects of these policies will be. It doesn’t take any great genius to imagine what the marketing team behind this catastrophe looked like, and what views they subscribed to. The irony is companies justify diversity programs in part by claiming they allow marketing departments to better identify with their customers. Well, Gillette’s done a great job of that, haven’t they?

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The Suffering of the Sisters

Yesterday while doing some research I came across an article which contained this gem:

And though women hold 52% of management, professional and related jobs in the United States, that number masks considerable gender-based occupational segregation. Women represent 85% of meeting, convention and event planners and 72% of human resource managers, but just 19% of software developers and 9% of mechanical engineers. You can guess which roles come with more power, prestige and pay.

The way that’s written you’d think there was some sort of conspiracy to keep women out of the higher-paying roles, or to pay men more regardless of what value they added. And if mechanical engineers enjoy greater power than HR managers in large organisations, I’ve clearly chosen the wrong course. I’m not even sure we score better in prestige. They then go on to say:

We spend about a fifth of our waking lives at work. Those hours should be a source of satisfaction — not stress, boredom and frustration.

Research shows that women often report higher job satisfaction than men.

Well yes, because many choose to go into HR and event planning rather than get their heads around calculus and steam tables to become well-paid mechanical engineers. But there’s nothing stopping them, as many of my female engineer friends can attest (and they all went to university in the late ’90s, so this isn’t a recent development).

The article purports to give advice to women on what company they should work for, but seems mainly to consist of suggesting they find one where they get well paid for not doing very much. I think there might be a queue outside that outfit.

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Unforced Errors

This post sort of follows on from this one, and describes much the same problem.

A year or two into my assignment doing weight estimates, we had a big re-organisation which meant I was dealing mainly with offshore facilities and more closely involved with cost estimations (rather than purely weight estimations). One of the principle ways the cost of a facility was estimated is to take various parameters – total liquid processing capacity, oil production rate, gas processing rate, etc. – and use that to work out the topsides weight. This is what they did, and as far as I know they still do.

One day we invited an American chap to visit us from a company which specialises in the design and operation of certain installations. We wanted his feedback on previous work we’d done with him, and his advice for future projects. He was very open, and I found the meeting fascinating. He highlighted the various technical requirements unique to our company which made our installations more expensive than they ought to be, with other clients happy to accept less stringent requirements or use industry standards. He went into detail on this, and in several instances it was the case that technology had moved on and our standards hadn’t yet caught up. For example, if you want to send an intelligent pig down a line you’d have to put 5D bends in (i.e. the bend radius is 5 times the pipe diameter), but nowadays the pigs can generally handle 3D bends. Our standards still required 5D bends, which take up a lot more space in a crowded facility. That was just one example of several, which as an engineer I found very interesting.

Not so my colleagues. After the meeting I raised these points as possible areas in which we could save costs, and the response was:

“Oh, that was all bullsh*t, he was just telling us that to try to get the next contract.”

Not for the first time has an expert in a particular technical field been invited into an oil company to share knowledge and been treated like he’s the dumbest one in the building.

Anyway, one of the things the American chap said was his company had found no relationship between the liquid production rates and the facility topsides weight. There were just too many other variables which affect it, such as the degree to which you want to remove certain contaminants. He even said his company had teamed up with a university to research this relationship, but after a couple of years they’d given up. What this fellow said effectively consigned our entire estimation methodology to the dustbin, because it relied entirely on a perceived association between production rates and topsides weights. This either went straight over the heads of the assembled staff sat in front of him, or they chose to ignore it. Either way, nobody mentioned it again.

Just for fun, once I’d been taught statistical analysis techniques last semester I ran some figures to see whether the methodology we’d been applying back then was mathematically sound. It turned out there was a correlation between equipment weight and topsides weight, but it was a lot weaker than I’d expected. But more importantly, there was no association between production rates and equipment weight, or indeed between any of the parameters we used and weights. So the American was right, then.

Now had I known these techniques when I still worked there, and demonstrated to those in charge of the methodology that we shouldn’t be assuming an association between X and Y when none exists, they’d have said:

“This is the methodology we are using. Your job is to follow it without asking questions.”

In fact, a short while before the reorganisation someone suggested I get involved in cost estimations and apparently one of the managers said:

“Oh, we don’t want him, he’ll just find things wrong with our methodology.”

Major corporations, people. Next time you hear about something like this or this, you’ll know how they happen.

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