Executive Summary
This briefing critically analyses evaluates, and synthesizes Shell Company’s organizational change event (s) by incorporating the company’s current state, change drivers, and central functionality issues to suggest a way forward in achieving more successful organizational change event(s). The drivers for change discussed in this briefing comprise internal and external factors, as depicted through the PESTEL model. Shell’s change event(s) affects its central performance issues, including leadership, culture, and strategy, which are paramount in defining its performance and competitiveness. Shell’s external change drivers encompass increasing competition, regulatory changes, fluctuating customer demands, and technological advancements. The internal drivers that have been vital in prompting a change in Shell Company include cost pressures, siloed business units, complex organizational structure, and resistant workplace culture. The company utilizes these external and internal change drivers to modify its central issues, such as organizational strategy, culture, and leadership, to align itself with the current market trends and position itself as a distinguishable player in the competitively growing oil and gas industry. The McKinsey 7s and Kurt Lewin’s Three-step theories are incorporated to depict how Shell Company implements its various change event(s). Although Shell Company has effective change management, as shown through its increasing market share, revenues, and competitiveness, it must continually transform to ensure it remains up-to-date and improves its differentiated worth. Thus, Shell Company needs to continue making its organizational strategy more agile and flexible, increase employee engagement to avoid resistant culture, and leverage its existing culture by building on its strengths.
1. Introduction
In a modern dynamic business environment, change is unavoidable, and companies must persistently adapt to remain competitive and relevant. Shell Company is an excellent example of a company that has recorded massive benefits from proper change management in terms of revenue growth, increase in market share, positive brand reputation, and superior competitiveness. This briefing critically analyses the current state of Shell Company to identify its central issues and change drivers which facilitate its successful change management. The PESTEL model will be incorporated to help in identifying the external and internal factors fundamental to driving Shell Company’s change event(s). The McKinsey 7s and Kurt Lewin’s Three-step theories will also be incorporated to depict how Shell Company implements its various change event(s). Afterward, the briefing will utilize the insights gathered by analyzing its current state, central issues, and change drivers to suggest practical ways the company administration can incorporate to improve its current and future change management.
2. Current State
Shell is a multinational gas and oil organization headquartered in the Netherlands with active business operations in over seventy nations (Shell Global, 2022). Shell is considered among the leading multinational corporations due to its massive business portfolio across the oil and gas industry. Shell Company initially derived its growth through widespread penetration into new business markets and increased production and exploration activities worldwide, enabling it to become a major global oil and gas organization by the mid-20th century (Shell Global, 2022). However, with more players entering the oil and gas industry, Shell started experiencing increasing competition, forcing it to innovate ways of improving its service delivery to ensure its customers get customer value unmatched by competitors. In countering the increasing competition and other critical market trends, Shell Company has adopted several change initiatives, including shifting to renewable power, energy, and chemicals, transforming its organizational structure, culture, and leadership, and advancing its commitment to sustainable energy production and consumption. Through viable change initiatives, Shell Company has attained yearly revenue growth, with 2022 fiscal year revenue of $39.90 billion comfortably exceeding its longstanding revenue record of $28.40 billion in 2008 (Meredith, 2023). The company management links its rapidly increasing revenue growth to its ability to implement appropriate change initiatives from production activities, leadership, strategy, culture, and global supply chain processes to ensure outstanding customer value and alignment with global sustainability demands. Change initiatives like strong trading and robust refining margins drive Shell’s current market growth and revenues (Meredith, 2023). However, Shell has also experienced significant revenue drops, making the company management reflect on its critical issues, including strategy, culture, and leadership, to identify suitable change initiatives to better its performance, realize expected revenues, and boost its competitive advantage.
3. Central Issues
3.1. Leadership
According to Gera & Haque (2022), leadership is paramount in choosing and planning viable organizational change management initiatives, making it essential for an organization’s leaders to create a workplace environment that stimulates the generation of innovative ideas to support successful change processes. Shell seems to incorporate the concept of Kurt Lewin’s Three-step of change [unfreezing, change, refreezing] and McKinsey 7s [strategy, structure, systems, skills, staff, style, share value] models to create an organizational leadership approach that supports the continuous implementation of appropriate change approaches. For instance, Shell utilized the McKinsey 7s model to adopt a transformative leadership style that inspires its staff to realize the importance of persistent change initiatives in developing the company’s performance. Also, Shell leadership applies the unfreezing stage in Kurt Lewin’s change model to create awareness about intended change event(s) and minimize the likely possibility of employees resisting the change.
Given its longstanding dominance in the market, Shell developed a culture resistant to constant changes, with most staff becoming comfortable with the company’s status quo and hence resistant to new approaches. However, Shell’s leadership realized it is essential to establish an organizational culture that is flexible and supportive of new appropriate change initiatives, consequently empowering its employees to accept new tactics and devise innovative ways to improve the company (Shell Global, 2022). Based on the changing stage of Kurt Lewin’s change model, Shell leadership has transformed its organizational culture to guarantee improved employee engagement which has proved critical in supporting its growth globally through outstanding service and product delivery. Based on McKinsey’s 7s model, staff skills are critical in facilitating successful change implementation. In its transformative journey since its inception, Shell has focused on creating robust training and development programs to equip its staff with relevant skills to properly perform their duties in a manner that contributes to the progressive improvement of the company. Ensuring staff is equipped with relevant skills aligns with the refreezing stage of Kurt Lewin’s change model, which requires an organization’s leadership to cement staff skills and behaviors to ensure the accomplishment of intended change initiatives.
3.2. Culture
The shell leadership understands that organizational culture is fundamental in its quest to remain competitive and relevant. Shell’s organizational culture is generally described through its core values which include integrity, diversity, accountability, passion, respect, leadership, quality, and collaboration (Shell Global, 2022). For instance, Shell’s recent focus involves diversifying its business portfolio to include sustainable power, energy, and chemicals to differentiate itself further and maintain a superior competitive advantage. When implementing new change initiatives, Shell leadership encourages all its staff across the world to act in ways that align with the company’s core values in order to guarantee standardized and unique customer service to ensure customers get quality customer value regardless of their location.
3.3. Strategy
Shell generally employs value-based strategies to position itself in the market as a company committed to creating outstanding customer value and generating value for the communities it operates. According to Saqib (2020), value-based positioning helps improve customer perception of a brand and consequently generates success and growth for the company. Incorporating value-based strategies helps Shell leadership to create and implement organizational changes that meet the current market demands and trends and give it a differentiated worth in the market. As per the McKinsey 7s model, organizations need to incorporate strategies, structures, and systems that support current needs for change to ensure successful change initiative implementation and lead to improved performance and competitiveness. For example, in order to improve customer value and align with the current global demand for clean energy, Shell developed value-based strategies such as diversifying its business range to include renewable power, energy, and chemicals as a sign of its dedication to energy transition and sustainability (Shell Global, 2022). This organizational change initiative has been paramount in building a global reputation for Shell as a sustainably-conscious company, hence, creating a sustainable competitive advantage through enhanced satisfaction of customer and market demands.
4. Change Drivers
Shell Company’s external and internal environmental factors generally drive its organizational change. By incorporating the PESTEL [political, economic, social, technological, environmental, and legal] model concept, Shell’s external environmental factors like social and political risks, competition, fluctuating customer demands, technology advancements, regulatory changes, and global oil price fluctuations can trigger the company to formulate and implement an organizational change process. Internal factors like siloed business units, cost pressure, resistant culture, and multifaceted organizational structure also trigger Shell’s organizational change initiatives.
Political and legal regulatory changes worldwide, particularly regulatory changes on minimizing carbon emission, forced oil and gas companies like Shell to reflect on the existing activities and appropriately implement measures that align with the global sustainability demands and requirements. In responding to carbon emission regulatory requirements, Shell established a comprehensive sustainability approach to ensure it substantially minimizes the amount of carbon emitted through its operations and essentially attains zero-carbon emission in the future. In showing commitment to sustainability, Shell forecasts a 50% decline in scope 1 and 2 emissions by 2030 and minimizes its product’s carbon intensity by 20 percent by 2030 (Shell, 2022). Shell must continue adopting innovative organizational changes to help it attain its desired objective of becoming a net-zero emission company and align with local and global sustainability regulations.
Social factors, particularly fluctuating consumer demands and trends, constitute a crucial change driver for Shell. December 20, 2011, the Niger Delta oil spill caused Shell to receive widespread backlash from Niger Delta inhabitants, governments, and social welfare groups globally (Ngwakwe, 2021). Such backlash negatively affected the company’s reputation leading to a significant revenue decline. In responding to the Niger Delta crisis and other similar crises, Shell leadership incorporated an organizational change approach that included a community-based sustainability initiative that involved supporting community development projects. With most people becoming environmentally conscious, gas and oil industry consumers are demanding cleaner and sustainable energy solutions. Shell’s increased commitment to becoming a sustainable business has prompted the leadership to institute energy production changes, including renewable power, chemicals, and energy. Thus, Shell continuously evaluates current consumer demands to develop organizational change initiatives that increase customer value and satisfaction.
Technological advancements have persistently triggered Shell to invest heavily in research and development to identify up-to-date technologies to keep pace with innovation changes in business areas like distribution, exploration, and production of gas and oil. Although Shell started utilizing digital know-how in the early 1970s (Shell Company, 2021), continuous technological growth makes it continuously identify more innovative technologies to enhance its oil and gas exploration and production and facilitate an unmatched and seamless supply chain of its products. Hence, the emergence of new technological innovations plays a significant role in triggering Shell to implement technological changes in its critical functional areas.
Increased competition from other oil and gas companies like BP and Total Energy, coupled with competition from new entrants, stimulates Shell to regularly implement new organizational changes to improve its performance and maintain a sustainable competitive advantage. Diversifying its business portfolio is a central organizational change initiative that Shell continues to pursue to differentiate its market position and maintain its competitive advantage.
The multifaceted organizational structure is a significant internal factor that triggered Shell to implement various changes due to the inability of the structure to facilitate efficient and quick decision-making (Shell Global, 2022). Shell changed its multifaceted organizational structure by incorporating a more decentralized structure to empower its divisional managers to make organizational decisions. A decentralized organizational structure allows Shell to efficiently and quickly implement change initiatives. In pursuing its profit maximization targets, Shell faces cost pressures to minimize its product and service costs to overcome competition and serve a larger consumer pool.
5. Way Forward
Although most of the organizational changes undertaken by Shell have generated positive outcomes, the organization needs to continue transforming its operations to guarantee it remains competitive. First, Shell must continue leveraging its existing culture and improve its capabilities and strengths to ensure all its organizational change initiatives maintain its core business values to preserve its unique business position. Secondly, Shell needs to continue strengthening employing engagement to ensure all its employees are loyal to the company and are committed to actualizing initiated organizational changes without unrealistic resistance. To ensure improved employee engagement, Shell needs to continue making its organizational structure a more supportive workplace culture to motivate employees to exchange ideas and create innovative initiatives freely. Furthermore, Shell needs to continue streamlining its organizational processes, structure, and systems to make them more agile and flexible, with a critical emphasis on eliminating siloed business components and improving employees’ decision-making ability and change implementation.
6. Conclusion
Through continuous organizational changes in critical issues like leadership, structure, strategy, and culture, Shell has transformed itself from a traditional-based Gas and Oil Corporation into a more flexible, agile, innovative, sustainability-conscious, and consumer-focused company. The various organizational changes have allowed Shell to rapidly transform itself and remain competitive while offering considerable benefits to shareholders, communities, employees, and consumers. Hence, continuous improvement of its change management approaches is paramount in ensuring Shell better implement current and future change initiatives.
7. References
Gera, S., & Haque, S. N. (2022). The mediating role of organizational culture: Transformational leadership and change management in virtual teams. Asia Pacific Management Review. https://doi.org/10.1016/j.apmrv.2022.07.003
Meredith, S. (2023, February 2). Oil giant Shell posts highest-ever annual profit of $40 billion. CNBC. https://www.cnbc.com/2023/02/02/shell-earnings-oil-giant-reports-record-annual-profits.html
Ngwakwe, C. (2021). Niger Delta Oil Spill Legal Victory against the Shell Company: The Future of Corporate Environmental Responsibility. Acta Universitatis Danubius. Juridica, 17(2).
Saqib, N. (2020). Positioning – a Literature Review. PSU Research Review, 5(2), 141–169. Emerald. https://doi.org/10.1108/prr-06-2019-0016
Shell Company. (2021). Shell Global: The role technology plays. Www.shell.com. https://www.shell.com/energy-and-innovation/the-role-technology-plays.html
Shell Global. (2022). About us: Shell Oil and Gas Company. Www.shell.com. https://www.shell.com/about-us.html#:~:text=We%20are%20a%20global%20group
Shell. (2022). Shell: Greenhouse gas emissions. Shell Sustainability Report 2022. https://reports.shell.com/sustainability-report/2022/achieving-net-zero-emissions/managing-greenhouse-gas-emissions/greenhouse-gas-emissions.html#:~:text=Powering%20progress
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