One of the modern shibboleths that businesses seem to worship is that of "contracting out" wherever possible - hire an outside contractor when you need to rather than managing that activity yourselves, especially when that activity is problematic in some way. But what if that activity is pretty crucial to your business and what, even more importantly, if it is crucial to your reputation?
Here in the UK the tanker drivers who deliver to Shell gas stations are striking but Shell, which walked away from involvement in oil product distribution years ago when they sacked their drivers and "contracted out", is powerless to help resolve the problem. The drivers work for independent contractors and neither these contractors nor the drivers owe any loyalty at all to Shell. In the past the drivers were Shell employees. Sure there were industrial disputes but in my experience the drivers and other blue-collar workers were part of the Shell family in the UK and essentially loyal. Within Shell there was an expert team working on Industrial Relations whose task was to understand the needs and aspirations or unionised staff and to dialogue with their representatives. I'm not saying that it was a golden age, but at least there was a forum for debate and discussion and at least we were all in receipt of a Shell pay cheque at the end of the month. That all went when Shell stopped employing drivers and the basis of a dialogue just does not exist any more. Shell may be talking with the contractors' bosses - but I doubt that they are talking with the drivers or their representatives.
So why has Shell walked away from employing drivers and abrogated responsibility for managing the product distribution process? Why has this supremely rich and immensely powerful multinational decided that its customers, motorists and others, can be abandoned and that it can walk away from the responsibility of ensuring that the products that Shell sells them will actually be delivered? Why has the great God of "contracting out" been worshiped whereas the principle ("Business Principle" indeed!) of the need to look after your customers been abandoned? When I was a Sales Representative more than thirty years ago my wise boss told me that a sale has never been made "Until the product has been delivered and it has been paid for." Shell seems to have decided that delivery can safely be left to someone else.
To understand the dogma that is driving this management imperative in Shell I have told the story about how it applied some years ago I was working for Shell in Dubai. In Dubai there was a small but successful downstream (marketing) operation. This was a fairly conventional business involving the marketing of a wide range of petroleum products to a variety of different customers across the United Arab Emirates. A key element of this business was, and always had been, the operation of a product distribution/transportation activity involving oil depots, vehicles and drivers. For more than thirty years this business had been built up as a professional, cost-effective and customer focused operation. It also had an admirable safety record (in a high-risk area) and the staff of thirty or so tanker drivers were a loyal, skilled and motivated team.
To understand the dogma that is driving this management imperative in Shell I have told the story about how it applied some years ago I was working for Shell in Dubai. In Dubai there was a small but successful downstream (marketing) operation. This was a fairly conventional business involving the marketing of a wide range of petroleum products to a variety of different customers across the United Arab Emirates. A key element of this business was, and always had been, the operation of a product distribution/transportation activity involving oil depots, vehicles and drivers. For more than thirty years this business had been built up as a professional, cost-effective and customer focused operation. It also had an admirable safety record (in a high-risk area) and the staff of thirty or so tanker drivers were a loyal, skilled and motivated team.
In the late 1990s Shell’s Central offices sent a new Distribution man to the region and, operating out of Oman, he visited Dubai charged with the responsibility of "outsourcing" the transportation operation. When challenged by me and others in the management team in Dubai as to why this was necessary he said that it was now "company policy" to outsource this business (i.e. to sack the drivers and sell the vehicles). A number of us were incensed by the insensitivity of this and we demonstrated that not only would no cost savings occur but that we would be needlessly disposing of the services of a team of loyal and skilled drivers each of whom was proud of his personal safe driving record and a motivated member of the local Shell family.
Well the battle raged on for a while with the argument that to go arms-length in an area as safety sensitive as dangerous fluids distribution was bad practice – especially as no possible cost savings would result. Furthermore to dispense with the services of the drivers many of whom had up to thirty years service hardly sat well with "Corporate Social Responsibility"! But this was ideology at its most sinister. The man from Oman had on his "scorecard" the target of outsourcing in Dubai. If he succeeded his remuneration would benefit – as well, of course, as showing that he was a loyal implementer of the new edict. He didn’t care one jot about the employees or their futures – all he cared about was showing himself off in a good light. Well we did fight on but in the end we lost. The drivers were sacked and the operation was outsourced. The irony of this story is that there was no financial benefit to Shell at all from the decision. Outsourcing (in this instance) wasn’t cheaper – it was simply the application of a dogma!
Well the battle raged on for a while with the argument that to go arms-length in an area as safety sensitive as dangerous fluids distribution was bad practice – especially as no possible cost savings would result. Furthermore to dispense with the services of the drivers many of whom had up to thirty years service hardly sat well with "Corporate Social Responsibility"! But this was ideology at its most sinister. The man from Oman had on his "scorecard" the target of outsourcing in Dubai. If he succeeded his remuneration would benefit – as well, of course, as showing that he was a loyal implementer of the new edict. He didn’t care one jot about the employees or their futures – all he cared about was showing himself off in a good light. Well we did fight on but in the end we lost. The drivers were sacked and the operation was outsourced. The irony of this story is that there was no financial benefit to Shell at all from the decision. Outsourcing (in this instance) wasn’t cheaper – it was simply the application of a dogma!
The ideology that Shell follows in its ignorant obsession with contracting out is, of course, the fantasy that such a practice will always reduce costs. The requirements of the customer stakeholder (who would wish to see no interruption in the supply of the products he buys) or the employee stakeholder (who would wish to offer his labour for adequate rewards and security of employment) are subordinated to the ambitions of the management apparatchik who wants to show his "skills" and loyalties to the new ideology by sacking staff (reducing costs) and contracting out. But the more arms-length an activity becomes the less control that you have over it. In negotiating contracts far and away the most important component will be how much it will cost - standards are inevitably secondary. So how a contractor treats his drivers (especially how much he pays them) is, of course, a matter for him not for Shell. And the contractor knows that the less he pays his drivers the more chance he has of getting or retaining the Shell contract. And drivers are two a penny aren't they - and who needs loyalty as long as the driver has a licence and can do the job?
© Paddy Briggs
June 2008
