Paddy's writing on Brand and Reputation

News International's brand new opportunity

2011-07-08T16:32:00.001+01:00

News International (NI), the UK newspaper arm of Rupert Murdoch’s News Corp, has been in serious trouble with one of its brands. However unlike, say, BP it is a sub-brand, “The News of the World”, which has turned toxic not the corporate “mother brand” and whilst there is fallout on NI, and even to a small extent on News Corp itself, the Murdoch empire has really only suffered collateral damage.

Corporations of the size of News Corp are used to managing a proliferation of brands in different markets. News Corp has literally hundreds of separate brands across its diverse media businesses and its senior executives understand well that brands have strengths and weaknesses and that, as in the case of the “News of the World”, they can be damaged. They have decided that the damage to the News of the World is beyond repair and so they are closing the title. Such drastic action is quite rare but even the most skilled brand practitioners have to bite the bullet sometimes. Coca Cola, for example, had a brand disaster with Disani a bottled water brand in the UK a few years ago. They withdrew it rather than try and repair it. The “News of the World” is a much older and formerly a very strong brand entity but the phone hacking and police bribery stories were such that the brand was judged by NI executives to be beyond repair – they were no doubt right.

News International's main revenue generators have been “The Sun” and the “News of the World” and these titles’ income streams have cross-subsidised the loss-making “The Times” and “The Sunday Times”. Indeed without the ad revenues of the tabloids NIs whole business model collapses. The shareholders of News Corp have every right to expect that NI will seek to minimise the effect on the bottom line of the “News of the World” closure – and there is only one way to do this. The Sunday tabloid, with a circulation of 2.6million, has to be replaced urgently and a sound advertising driven business has rapidly to be built up.

A definition of a strong brand is one that generates income over and above is basic utility or commodity value. When it became apparent that the “News of the World” could no longer do this there was no choice for NI but to withdraw the brand. But the business infrastructure of the newspaper remains intact. The editors, journalists, reporters and support staff are in place. The advertising sales teams have not been disbanded. These employees can be switched instantly to a new title and that is what will happen. Out of the ashes of the “News of the World” a new NI Sunday tabloid will emerge.

Which brings us back to the brand. A sign of a strong brand is when it is used in the vernacular one step removed from its actual business. So just as we once talked of the “Pepsi Generation” so the idea of the “Sun reader” is fixed in the awareness of marketers and commentators. Whilst this descriptor may be used by some in a derogatory way in fact the Sun readers are very valuable indeed. There are 7.5 million of them, spread fairly evenly across the age ranges and with 88% of them in the CDE social class groups. They have a very high collective purchasing power and they are firmly in the sights of the FMCG marketers – like the supermarket chains. And it is this huge group which NI will want to attract to their new Sunday tabloid – and how better to do this than to give it the Sun’s brand name?

The launch of a “Sunday Sun” or, more likely, a “Sun on Sunday” could happen immediately – indeed it is not too far fetched for the switch from the News of the World brand to the Sun brand could happen on consecutive Sundays. This might politically be a step too far for NI, although I wouldn’t put it past them. But whether the Sunday Sun title appears immediately or whether there is a short hiatus doesn't really matter – it will happen. And for a marketer it is a dream project to launch the Sun’s Sunday sister. The promotional and advertising budgets can be guaranteed. Cross promotions from the weekday title will be straightforward to arrange – expect coupons which when saved during the week will give a free copy of the Sunday to loyal readers at launch.

The Sunday version of the Sun will have a huge head start over any other new title – this is because the brand values of the Daily will simply be transferred to the Sunday. You don't need to explain to a “Sun reader” what a “Sun on Sunday” means – it all in the name.

It’s the brand stupid

2011-07-07T17:46:00.001+01:00

When the news broke, on Twitter inevitably, that the “News of the World” was to close there was a mighty gnashing of teeth and no little wailing form the journalist community. Job losses. Innocent victims. That sort of thing. But actually it’s no big deal. Here’s why.

When a brand is damaged beyond repair, but there is a market position to defend, then rebranding is the obvious choice. At the moment BP is rebranding many of its gas stations in the US “Amoco” and the reasons for that are obvious. For News International its the same. They have a very strong brand in “The Sun” which has a circulation of 3million –nearly one million ahead of its next competitor. Their fatally wounded “News of the World” brand is similarly strong in circulation terms 2.7m and a lead of over 800,000. There is no way that NI is going to give up that inco0me stream – and they don't need to.

The introduction of a “Sunday Sun” (or “Sun on Sunday” ) has huge benefits. The toxic News of the World brand is shed. The Sun brand can extend seamlessly into a seven day operation. There will be some economic savings. And online they can concentrate on one Sun branded website for all their communications.

One can expect that those Sun readers who don't currently buy the NOW will be heavily incentivised to switch their Sunday paper to The Sunday Sun. Or in some cases to buy a Sunday paper where currently they don't. Cross promotions will be the order of the day – NI has the financial resources to really build the Sunday Sun as a successful sub-brand of the generic Sun brand.

The people who should worry about Mr Murdoch’s clever coup are the publishers of NI’s competitors! A seven day Sun will be formidable.

Shell's latest corporate advertisement

2010-06-09T12:04:00.003+01:00

LET'S DELIVER ENERGY
FOR A CHANGING WORLD.
LET'S GO

Today's consumers are smarter than ever about energy. Naturally they want it to heat, cool and light their homes, get them to work, and power their mobile phones. But they are also keen to help build an energy system that sustains the lives of future generations. They want their energy to come from cleaner sources. They want to get the most out of every drop. And they want to see positive results now.

At Shell, we're listening. Consumers' raised expectations inspire us to come up with ever more innovative products and services.

Take the quest for cleaner air in our cities. We have created a fuel oil, which can cut soot emissions from factories by up to 75%. That should help people breathe a little easier.

Customers at our service stations want to play their part, too. They want fuels that are more efficient. We've responded with new blends that help drivers save fuel with every fill-up. And we're working with transport companies, combining the latest fuels and lubricants with satellite technology to reduce fuel consumption.

Low-carbon biofuels are another way to meet rising expectations. They can help reduce emissions from road transport right now. We're already the world's largest distributor of biofuels and are pursuing plans for large-scale production.

We're also working with technical partners to develop future biofuels from non-food sources, like crop residue and even algae.

Of course, our customers' horizons stretch beyond transport to more responsible living, whether through cleaner electricity or more energy-efficient homes and offices.

That's why we are boosting production of cleaner-burning natural gas, which emits less than half the carbon dioxide of coal when used to generate electricity. And why we are investing in vital technology to capture emissions from power plants and other industrial sites and store it safely underground.

Despite all this change, one thing remains the same. After more than a century, our customers still expect reliable and affordable energy every day. With global energy demand set to double by mid-century, that will be a challenge. But together with our partners we will continue unlocking energy from hard-to-reach places like frozen Siberia and delivering it to customers around the world.

At Shell, we're grateful to have millions of customers asking for better energy. They demand as much of us as we ask of ourselves.

Commentary
In its latest corporate advertisement (above), expensively placed in some influential publications like "The Economist", Shell claims to be "listening". We have heard this claim before of course and we should treat it with some scepticism - Shell pulled its online feedback forum "Tell Shell" some years ago - presumably because of the virulence of the criticism on it. But no matter - let's take this latest request for feedback at face value and offer some.

The dark arts of advertising are notoriously " economical with the actualite" - but I would guess that nobody really minds a bit of hype and "accentuating the positive" - where would copywriting be without the need to put a brand's products or services in the most favourable light? But there are limits - the need to be "Legal, decent, honest and truthful" is required of any advertiser and the rules say that your ads shouldn't mislead, lie or even tell half-truths.

So in the context of the need to be at least credible in your ads, and at best transparently truthful, how should we judge Shell's latest offering? Remember we are talking big bucks here - not principally to the ad agency for preparing the ad and writing the copy but definitely to the media for running it. A few hundred thousand dollars at least - and possibly much more. Has Shell's budget been wisely spent?

The first paragraph claims that "Today's consumers are smarter than ever about energy". It goes on to say that these consumers are "also keen to help build an energy system that sustains the lives of future generations". How many consumers (that's you and me folks) speak in anything like these terms? I don't know what an "energy system" is - and I worked in the industry for nearly forty years. I doubt that my neighbours would have a clue what it is either. Presumably somebody can define the term "energy system" - but there's little point in using such opaque language in an ad - even in "The Economist"!

So that first paragraph is at best patronising and trite and at worst gobbledegook. But the second paragraph is far worse. The claim is that "Consumers' raised expectations inspire us to come up with ever more innovative products and services". The conceit of this statement is breathtaking. It purports to suggest (a) That Shell is innovative and (b) That innovation is consumer led. Now lets be charitable and agree that Shell can indeed be innovative. Virtually all of this innovation comes from the upstream - and impressive some of it is as well. But there is no way that this highly technological activity can be seen as consumer driven. Then in the following paragraph we get mention of a low soot fuel oil for factories. In Britain, which is where this ad appears, a tiny minority of factories burn fuel oil - most of them switched to cheaper and more environmentally friendly natural gas years ago. Not too many people will be breathing any easier as a result of this innovation!

So what about the "service stations" (paragraph 4) - a curious and old-fashioned term by the way. They mean petrol stations I think. Here we are told that customers want "fuels that are more efficient". Well yes - but not if they have to pay through the nose for them. The "new blends" that are referred to (presumably like V-Power) cost a premium, which negates any efficiency savings. Most motorists want cheap petrol - and there's not much of a promise about this in the ad. If V-Power and its like really saved money through efficiency don't you think that Shell would give us the data to prove the case?

The statements about "Low carbon biofuels" (paragraph 5 and 6) are another utterly misleading bit of hype. It is no doubt true that Shell is a big player in these products - but there is nothing much new about them. The Brazilians have run some of their cars on biofuels for a generation or more but in the UK they are virtually non-existent - and will remain so unless governments create a tax regime which make them viable. Some chance!

The seventh paragraph about "customers' horizons" is just poor copywriting and is virtually meaningless. It's an unsubstantiated claim - hardly surprising as it is hollow and patronising. It leads on to the next paragraph where the implicit claim is that Shell's driver for the expansion of its Gas sector is in some way environmental and that it is driven by these "customer horizons". The real reason for Shell's drive to boost its production of natural gas is because this sector is growing and is profitable - good business in other words. Yes it is cleaner than coal - but Shell has no influence at all on utilities' decisions to build Power stations that run on Gas rather than coal. True Shell can supply the gas, at a price, if the utility makes that decision but the determiners of the decision are primarily governments and local authorities - they are the ones one should thank for the resultant cleaner air - not Shell!

The penultimate paragraph is platitudinous and one again trite. If you asked them my guess is that many consumers would be very disturbed about some of the side effects of Shell's ambition to "…continue unlocking energy from hard-to-reach places". The Tar Sands of Canada is just one example of where this ambition is, to say the least, controversial!

Shell is not a bad company - although it does some indefensible things at times. But it does itself no service by running advertisements which claim distinctiveness when little exists, claim to have a unique understanding of consumers without any evidence being provided and lapse into self-congratulatory and highly selective hype.

GREENWASH – The drama and the reality

2009-04-30T09:59:00.000+01:00

“He’s a PR man. For an oil company. That’s bottom of the list!

Below TV evangelist. Just above child molester.”

Michael in “Greenwash” by David Lewis

I have just been scanning through the last seven editions of “The Economist” newspaper – and as always it’s a very good read. And in these troubled times it is arguably an essential source to inform about what really might be going on in the world. The pointers to today’s realities come from The Economist’s excellent but anonymous correspondents, the letters and especially for the advertisements – or at the moment the lack of them. The good news is that the “Greenwash” ads, which featured strongly in the newspaper until recently, have vanished! A year or so ago, and for some years before that, upmarket print media was full of mostly disingenuous corporate advertising from oil and energy companies with a common theme. In short Shell, BP, Total, Chevron and even ExxonMobil wanted to convince their “special publics” (as Shell called us) that they were public-spirited companies. In particular the message was that they had a unique contribution to make to the resolution of the world’s energy problems – global warming and all that. A common message was that the “proof” that Shell and the rest really cared was their alleged commitment to not just their traditional oil and gas businesses but also to a whole raft of non-traditional energy initiatives such as renewable forests, solar, wind, hydrogen and the like. It wasn’t just former oil company insiders like me who were sceptical of these claims – all the NGOs and most of the other proponents of Renewables saw through the chimera and christened it “Greenwash”.

The tiny “Orange Tree” theatre in the London Borough of Richmond–Upon-Thames has a justified reputation for putting on original drama – both revivals of forgotten classics and new writing. In the second category we have recently seen David Lewis’s new play “Greenwash” a satirical and very funny demolition job on the PR industry in general and the oil industry in particular – hence the title. The hero of “Greenwash” – or rather the anti-hero – is Alan a middle-aged PR consultant working for a company which sounds very like Shell! “We’re working with the realists and isolating the radicals. That’s accepted strategy! You have to divide them up! If you’re simply confrontational, you just unite them, make them more powerful!” he says talking about his company’s approach to the NGOs. It rings true. Shell, for example, would from time to time cuddle up to NGOs like “Friends of the Earth” whilst distancing themselves from Greenpeace. A divide and rule tactic which worked exactly as Alan suggests that it does.

The mantra chanted by Alan and his like is that managing opinion and reputation is all about managing perceptions. Sure you might need to modify some of the grosser excesses in your business or in your behaviour but in the main you carry on doing what you have always done and carry on doing in the way you have always done it – you just present it in a more palatable way. It’s a bit like a politician saying that they better “get the message across more clearly” – much easier than actually changing what they do. And this is where the Greenwash advertising comes in. Shell’s business, and that of all the other Oil majors, was 99% about exploiting hydrocarbon resources. That’s what they do, what they are good at and what in truth they expect always to do in the future. Shell in particular was hopeless at diversification – only the Petrochemicals sector (itself of course based on hydrocarbons) has survived as a significant business which isn’t directly oil and gas. All the rest, from Nuclear to Metals to Forestry to Agrichemicals to Power Generation have gone. Shell couldn’t (or wouldn’t) make them work. But, so went the argument, Renewables was different and Shell was prepared to put its money where its mouth was.

Take Wind Energy. Back in 2006 Graeme Sweeney, head of Shell Renewables, said that the giant offshore wind project known as the “London Array” would provide a “major breakthrough in the UK low-carbon energy mix”. Shell was part of the consortium that wanted to build the array and was awaiting a planning decision later that year. 'A positive decision would be a clear signal that a substantial contribution could be made by renewable energy if we could all drive this through to a successful conclusion” said Sweeney at the time. A year ago Shell pulled completely away from this project and more recently we have seen an announcement that Shell is pulling out of investments in all renewable technologies (wind, solar and hydro power) completely because they are “not economic”.

There was never a proper balance between rhetoric and reality. The advertising that extolled Shell’s commitment to Renewables in The Economist and in similar publications around the world was clearly designed to deflect criticism that Shell was an old-fashioned smoke-stack loving corporation whose principal business was exploiting the planet’s depleting oil and gas reserves. One TV commercial promoting Shell’s Renewables commitment even said that “One Day it may be our biggest business”. It was bullshitting Greenwash when it appeared and many of us who knew this said so at the time. But Shell was impervious to criticism and this disingenuous corporate advertising continued until quit recently. Shell’s recent virtual withdrawal from the Renewables sector shows what a shameful sham all this was.

Alex Carey quoted in "The Public Relations Industry's Secret War on Activists" said that the “20th century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy." Multinational corporations are subject if not to democratic processes at least to judgment by the media and to revelations by honest activists who seek the truth through all of this propaganda. Despite their almost unlimited budgets and the ability they have to employ PR professionals like Alan in the play “Greenwash” to tell their lies for them eventually hubris will catch them out. Shell was arrogant enough to think that they could present their miniscule and largely irrelevant Renewables business as significant. It wasn’t - but that didn’t stop the Greenwash claiming that it was. And now that the deception has been revealed can we expect an apology and a commitment to tell the truth in the future – don’t bet on it!

Shell and the shocking bonfire of its vanities

2009-03-29T14:18:00.002+01:00

When corporations act as dysfunctionally as all too many in the world of banking and finance have been doing over the past few years it gives the opponents of capitalism a field day. The charge, which is impossible to refute, is one of greed and incompetence and we have seen what happens when these twin venalities work together. The pursuit by directors of a level of personal wealth beyond the comprehension of most of us has been shown to have skewed their decision making and brought their businesses down.

Less in the public eye, but only marginally less venal, have been the multinational oil companies who whilst their behaviours may not have been as borderline fraudulent as some of the banks, have nevertheless been overtly deceiving us for years in a shameful way. Let’s take Royal Dutch Shell for example. Shell was worried about the public perception of its behaviour and, in particular, was concerned that its reputation was damaged in the eyes of some of its key stakeholders. This damage was caused back in the 1990s by insensitive decision-making over such issues as Brent Spar and Nigeria and in the early years of the new century by its “reserves” scandal – the revelation that senior Shell directors had been lying about the corporation’s hydrocarbon reserves. The internal analysis of this reputation problem led to the launch of a series of corporate communications initiatives - including extensive and expensive advertising. Much of this advertising was predicted on the premise that Shell was “corporately responsible” and the reasons to believe this claim was, they said, that they had some sort of unique understanding of the world of global energy.

The communications initiatives that Shell launched focused in particular on the need for energy diversity and claimed not only that renewable energies such as solar, wind and hydrogen had to be part of the mix but that Shell was committed to the Renewables sector for the long term. “One day this may be our biggest business” was the tag line of one of the TV commercials which lauded Shell’s involvement in this sector. But as we have seen recently all of this was a chimera. Those of us with personal experience of working for Shell over many years knew that Shell is the most risk averse of all the oil majors in both its diversification and its acquisition policy. In the main they stick to the knitting – and the knitting is Upstream Oil and Gas – with a bit of downstream thrown in (until, that is, they decide to walk away from marketing and refining which many us believe that they will before too long).

So why did Shell make a fool of itself and open itself up to criticism by getting involved in Renewables in the first place? Why did they get even tentatively involved in a business about which they knew nothing and into which they were clearly, from the start, not prepared to invest any serious money? The answer lies in the reputation management problem referred to earlier. If Shell wanted to be seen as “Responsible” than what better way to do this than to claim that they really cared about the global energy future to such an extent that they would be involved across the energy mix? So small scale and tentative investments were made and Renewables was even given its own status as a “Core business” for a time – along with the real core businesses like the Upstream. But from the start it was always a lie – the executives appointed to run the Renewables sector were far from being the most able around and the amount of time that the company’s really senior executives spent on this sector was minimal. Shell’s heart was never really in it.

Shell had the vanity that it could run a series of self-promoting advertising campaigns that would portray them as energy responsible, innovative and forward thinking. In truth Shell was retreating more and more to the familiar world of dirty old hydrocarbons about which they had a genuine corporate memory. Does this story mean that you can’t believe a thing that Shell tells us in its communications? Sadly I think that it does and that it will be a long time, if ever, before you can believe a word that they say again. Unless there is a proper feedback loop between behaviour and actions, on the one hand, and rhetoric, on the other Shell will not be in a position to do any credible corporate communications at all. It isn’t complicated. Do the right things responsibly. Tell the truth about what you do. Don’t claim that you are committed to things that you are not. Walk the talk and talk the walk. Too much to ask? We shall see…

The scandal of the grotesque rewards that accrue to failed executives

2009-02-28T11:28:00.000Z

Enron, Lehman Brothers, Royal Bank of Scotland…Royal Dutch Shell - what have these corporations got in common? Quite a lot actually but what I was thinking of in particular is that they all have issued glossy and self-promoting documents extolling their “Corporate Social Responsibility” (CSR) – and all of them have been brought to their knees by the grotesquely dysfunctional actions of their most senior executives.

I have written before about the illusionary myth that is CSR and I suppose that the one good thing that might come out of the global financial crisis is that none us will ever again trust the disingenuous garbage that corporations choose to throw at us from time to time. The idea that, say, a tobacco giant like BAT can be socially responsible is absurd but they still peddle this nonsense even though they surely can’t expect us to believe it. Do they really believe it themselves? - I doubt it.

But of all the current areas of public disquiet about the behaviour of the top men in multinational corporations it is the obscenely high levels of remuneration that they pay themselves that comes out top. Here is how it works. The Board of Directors appoints one of their number – usually a Non Executive Director – to head up some sort of Remuneration Committee. That Committee is charged with ensuring that the Executive compensation of the CEO and his colleagues is competitive with the remuneration of executives in other corporations. If it isn’t then it is adjusted – always upwards of course! The fallacy of this whole process is for all to see – it creates a spiral of remuneration excesses. To illustrate this I looked back ten year to the late 1990s when I was a middle ranking Shell executive and Mark Moody-Stuart was the CEO. At that time Mark was paid ten times what I was paid. Fair enough you might think – he had a pretty big job. Roll forward to today and the same ratio is now fifty to one! If I was in the same job in Shell, and allowing for inflation of my salary as well, Jeroen van der Veer would be paid at least fifty times what I would be paid – probably much more than this.

But as we have seen with the case of Sir Fred Goodwin of RBS the excess doesn’t stop even when a failed CEO is unceremoniously booted out of his job. Sir Fred qualifies for a pension of £693,000 a year – an entitlement that has caused a furore in Britain, and understandably so. And back in 2002 Sir Philip Watts’ (shown in photograph) severance payment following his forced removal as Managing Director of Shell consisted of a lump sum payment of £1,057,971 and an (index linked) pension of £584,070 per annum. Goodwin and Watts and their ilk would no doubt have justified their extraordinary levels of remuneration by reference to “the market” – that spiral of excess that I described above. And perhaps they would also have said that extremely high levels of responsbility require extremely high rewards – and perhaps they do, but only if these responsibilities are discharged with competence and with honour – which in both their cases certainly did not happen.

Sorry Jeroen it just won’t do…

2009-01-10T17:59:00.009Z

A friend who knew that I have been a rather vocal critic of Shell’s corporate advertising over the past few years asked me if I felt vindicated by the admissions in George Monbiot’ s recent interview with Jeroen van der Veer: Of course for Jeroen to admit:

"If we are very big in oil and gas and we are so far relatively small in alternative energies, if you then every day only make adverts about your alternative energies and not about 90% of your other activities I don't think that - then I say transparency, honesty to the market”

is a big step forward. The disingenuousness of Shell’s advertising over the years, which has concentrated on the minuscule and unimportant Renewables sector and excluded much mention at all of Shell’s core oil business, was one of my main complaints. But, as Monbiot points out in the article which accompanied the van der Veer interview, Shell continues to mislead in its advertising. The position that the company tries to establish is that it has something unique to offer the energy world and, further, that this something is primarily driven by some sort of altruistic motives. The whole campaign over the years has been and continues to be utterly misleading – as I argued here and here:and here:

It may be an old fashioned concept but when you communicate with stakeholders the first thing that you must do is tell the truth. This not only means that you must make statements that are verifiable but also that you should answer legitimate questions.

Hats off to Jeroen for agreeing to be interviewed by George Monbiot who is arguably the most vocal journalist and writer around on the subject of climate change and whose criticism of the oil industry over the years has been determined and always well researched. But sadly in the interview Jeroen at times looked like a bumbling fool (which he is not) and at other times like a corporate cover-up king - which he certainly is.

Monbiot asked Jeroen pointedly to tell him what the quantum is of Shell’s investment in Renewables. It is a reasonable question – not least because Shell has spent plenty of advertising bucks over the years assuring us that it is committed to alternative energy. But van der Veer absolutely refused to tell Monbiot what the figure is. If you go to Shell’s most recent Annual report you won’t find the answer either. If you do a word search on this huge document for the word Renewables you draw a blank – Shell which so recently trumpeted its commitment to Renewables doesn’t even use the term any more. And if you try and find how much the bits and pieces of wind, solar and the rest are worth you won’t be able to find that either. It’s all hidden away. And, as George Monbiot found out, Jeroen won’t tell you either!

As a long-time Shell employee and now a Shell Pensioner I have always been and remain a Shell loyalist. This may be hard for some to believe in that I have been vociferous in my criticisms over the years. But if you look at my extensive report on the Corrib Gas project, which is now available free as a download here, you will see that I continue to have a high regard for Shell people and in the main what they do and how they do it. What I cannot tolerate, perhaps because I spent so much of my later Shell years working in Marketing and Corporate Communications, is when Shell lies about what it does.

Shell is in a vulnerable state at the moment. A huge cost cutting exercise is in the pipeline which will probably radically change the structure and imperatives of the organisation. Certain business sectors look very vulnerable and with the oil price so low any project which requires oil at, say, $80 a barrel can expect to be mothballed. The downstream receives inadequate investment – especially in the Shell brand, and whilst is may stutter on for a while eventually Shell has to dispose of all of its assets from the refinery fence to the consumer.

As a shareholder and one who is concerned that Shell succeeds I would actually rather see a smaller, fitter, more profitable Shell which concentrates on what it is really good at – upstream oil and gas. Such a corporation would not only be more viable but it also would not need to create illusions about its business and ridiculous boasts that it is “creative”. Sticking to the knitting and transparency would be the strategy that many of us would welcome – and if in his few remaining months Jeroen can set this in motion then that would be a legacy of which this eminently decent man could be proud.

The origins of Shell's "Greenwash" were back in 1997

2008-08-18T08:25:00.002+01:00

In this article former Shell executive Paddy Briggs explains the background to the oil company's predilection for "Greenwash

Greenwash is in the news again as the oil companies are pilloried for the disingenuous corporate advertising they propagate in a naïve effort to boost their reputations. Shell has been twice criticised by the Advertising Standards Authority and BP and others have also outraged the environmental lobby by the sheer effrontery of many of their claims. But where did it all begin? Take a look first at this video on YouTube, and then I will explain!

The purpose of advertising is to persuade – usually to convince a consumer to favour your branded goods or services over those of your competitors. And a perfectly honourable profession it is as well – or I wouldn’t have spent quite a bit of my Shell career commissioning advertising campaigns! In essence the task was to find a way of differentiating Shell products in such a way that the motorist (in particular) went to our petrol stations rather than those of Esso or Caltex or Mobil. We always tried to find a genuine edge – perhaps in respect of the product quality, or the levels of service or the range of goods or the location and extent of our network. We were required, as every advertiser is required, to ensure that what we said in our ads was legal, decent, honest and truthful. Of course there was an element of selectivity in our message. If, for example, Shell did not have the largest network in a particular country or area then we might try and ensure that we gave the best service. This is the famous Avis pitch – we might not be number one but we are trying harder because we are number two! But if you do this you better deliver - the public is not a fool and if you try and bullshit them they will soon learn to ignore or discount your future messages! So the task was to persuade by telling the truth about what we offered – not the whole truth, perhaps, but the truth nevertheless. Verifiable, defendable messages that worked.

Corporate advertising is another game. Here you are not trying to sell a product or a service but you are still trying to persuade – usually the persuasion task is to raise your profile or enhance your reputation. It’s a different game – but the same rules and principles apply. The perception of your advertising must be a perception that you are telling the truth and also, and vitally, that the message is credible and relevant to the receiver. Whereas in product advertising you are seeking a purchase following exposure to the advertising in corporate advertising you are generally seeking not a direct response but an altered attitude. “Before I was exposed to the advertising I thought that Shell was only an OIL company but now I know that they are a big GAS company as well” (for example). Consequently there is often a greater degree of information dissemination in Corporate Advertising.

The oil companies have received a lot of bad press from environmental groups and others because the plethora of corporate advertising they have been indulging in for some time seems inaccurate, nuanced and highly selective in its content and themes. The term “Greenwash” was invented to describe this advertising. Having worked for over five years on corporate communications for Shell in my last assignment in the Middle East (and off and on in other locations before this) I think that nearly all of the criticism and the charge of greenwash is justified. All too often Shell’s advertising tells highly selective stories and half truths and makes bizarre and indefensible claims about aspects of Shell’s business. There are many examples but the concentration on Shell’s Renewables business (Solar, Forestry, Wind etc) was a particular case in point. Clearly the intention of this advertising was to try and persuade that Shell is not only active in renewable energy but is a serious player. Do you remember the “Forestry ad” where a Boris Becker lookalike “Shell project engineer” “has a thing about trees” and believes that in the future “half of our energy can come from renewable sources like…sustainable forests”. The tagline of the ad was that “Damian Miller works for Shell Renewables. What was once just a small research project is now a major business. One day it could be our biggest business.” That was in 2004 - but the business featured in the ad (Forestry) was disposed of by Shell in 2005 – so it didn’t become Shell’s biggest business – or even remain a Shell business at all!

When corporate advertising is as disingenuous as the Forestry ad it brings the whole genre into disrepute. But notwithstanding this debacle Shell has continued to make claims in its corporate advertising which are at best narrowly and deceptively selective and at worst just plain lies. That is why Shell has been wrapped over the knuckles twice in recent times by the Advertising Standards Authority for it misleading claims. But what was the original stimulus for this style of advertising and why has Shell persisted with it despite the tumult of “Greenwash” criticism? To find the answer to this question we need to go back to 1997 when Shell management was battered and battle-weary from the criticism that had been thrown at them after a series of events which had seriously dented their and Shell’s reputation. There had been, in particular, the debacle over the disposal of the offshore oil production platform “Brent Spar” and the almost simultaneous crisis resultant from Shell’s activities in Nigeria. In this benighted country a corrupt and despotic government had brutally judicially murdered the Ogoni activist Ken Saro-Wiwa, and Shell was accused of indirect complicity in this repulsive act of vengeance.

As a result of Brent Spar and Nigeria Shell’s probity, and the integrity and judgment of its senior staff, were brought into question. By coincidence the new leader of the corporation at the time was a man, Cor Herkströter, who was something of an outsider (he was not an oilman at all but an accountant inherited with the takeover of Billiton). Whereas the hard-headed oilmen who had traditionally run Shell might have weathered the storm Herkströter was cut to the quick by the criticism – much of which was personal. He launched an exercise which was designed to restore Shell’s reputation – an exercise which had the ambitious task of making Shell the “World’s Most Admired Company” (this even carried the acronym “WOMAC”). Extensive research was carried out amongst “key decision makers” and one of the conclusions was that Shell needed to present its image to the outside world in a more positive light.

One day Herkströter was introduced to one of the doyennes of British advertising and the man credited with the successful marketing of Margaret Thatcher – (Lord) Maurice Saatchi. Saatchi was always one for the main chance and bypassing all the usual brand and reputation management processes and people in Shell he persuaded Herkströter that Shell need to reposition itself as a company that was indisputably a force for good in the world. The Saatchi message was that progress in the twentieth century had been attributable to the global spread of the capitalist and free enterprise system - and because Shell had been a major player in this system then Shell must have been partly, even substantially, responsible for this progress.

So when Herkströter came to a meeting of senior executives of Shell in the summer of 1997 it was the Saatchi inspired message that he was selling to them. The brief video clip posted on YouTube culminates in a three-minute film, made by Saatchi, which presented the message about progress and Shell in an emotional way. It also introduced the idea that Shell’s core purpose (no less) was to “…help build a better world”. And that its corporate identity was that “The future is a better place”. There were many in Shell, particularly those of us who had had a long career in the Group and who specialised in brand and communications, who thought that Herkströter had lost his marbles. That most of his colleagues lined up to support him in this bizarre endeavour worried us as well. In the event some of the brand and reputation management advisers in Shell were able to tone down the worst excesses of the planned campaign but much of it went ahead anyway and the effects of it still linger.

What we witnessed back in 1997 was a commercial company trying to justify its existence not by pointing to the genuine fact that it was a world leader in the perfectly respectable activities of oil and gas production (etc.) for which it was famous. Instead we were exposed to a pitch that Shell was somehow a sort of a quasi benevolent organisation whose core purpose was not to make a return for shareholders over time (the real core purpose, of course) but to “help build a better world."

The communications proposed by Saatchi, and bought lock, stock and barrel by Herkströter were toned down somewhat and as a result at the time excessive ridicule was avoided. But the vestiges of this ill-thought-through campaign remain and can still be seen in the continued attempts to present the beneficial by-products of some of Shell’s activities as the reasons for them rather than as what they really are - indirect consequences. The speech-writers, the advertisers and the other corporate advisers need to reflect in the light of this history (which if they don't know it, they should study) that if you try to present yourself as something that you are not then you will be found out. Shell has been rumbled - and they need seriously to reflect on how they present themselves to the world in the future. The time of lies and obfuscation is over.

It pays to advertise - so why doesn't Shell hard sell V-Power?

2008-08-03T09:03:00.001+01:00

Wally Olins, one of the most knowledgeable writers and thinkers on brand management in modern times, wrote back in 1989 in his seminal book on “Corporate Identity”, that “…oil companies are poor retailers.” The irony was that then, as now, the brand identities of Shell, BP or Esso were amongst the most ubiquitous in the market-place. Today with over 40,000 petrol stations in around 100 countries Shell is by some distance the most visible retail brand in the world. Other great and international retail brands like McDonalds or Starbucks or HSBC have recognised the power inherent in their brands and have ensured not only that their brand image is constantly renewed to be fit for purpose but also that it is extensively promoted in mass media advertising and other communications activity. Meanwhile Shell and the rest in the oily world only occasionally burst onto the media at all – and then with ever more questionable and disingenuous “corporate” advertising self-praising their green credentials or their capability for innovation and lateral thinking. Sadly such innovations never seem to be directed at their motoring customers despite the fact that there are countless millions of them visiting their myriad of retail outlets every day.

So what then should we make of the trackside advertising for “Shell V-Power” that you will see on television at the Hungarian Grand Prix and throughout this year’s F1 season? You may not know what “V-Power” is; it would be fairly surprising if you do. The brand is a brand of petrol that Shell would like you to buy and pay a premium for. Yes, that’s right, in a time when petrol prices are at a record high Shell would like you voluntarily to actually pay even more for your fuel every time you fill up your tank. At the time of writing you can buy standard unleaded petrol here for around 122p per litre or, if you wish, you can buy “V-Power” for around 131p per litre – a premium of around £5 per tank full. If you follow this link you will see Shell’s argument as to why you should do this.

Now I am not going to try and argue the merits of premium fuels - suffice it to say, that although my car will go perfectly well on standard fuel (as will all modern cars) I do pay the premium myself. This is because in my long Shell career I was impressed by the technological skills of our fuel development people and I do believe that V-Power is better for my car and that it provides performance advantages. Silly me? Maybe, but that’s my choice.

But back to marketing and to Wally Olins charge that oil companies are lousy retailers - which they are. What other branded retailer would have a premium offer at their outlets and not advertise or promote it? Shell has sorted the technology, the manufacturing and the distribution logistics to make V-Power available at their outlets in the UK and elsewhere in the world - but they hardly spends a cent in creating a “reason to believe” about the brand. Sure they will get some brand name recognition from their trackside advertising and from their point of sale displays on site. That is a necessary condition for the promotion of a differentiated product brand such as V-Power – but it is not a sufficient condition. If you want the punter to stump up nearly 10p per litre more for the premium in these difficult times then you absolutely must give them a reason to do so. You do this by presenting the benefits not on websites (helpful support though that can be) but with mass media advertising. The fact that you, gentle reader, may at best be vaguely aware of the V-Power brand is because Shell has never tried very hard to make you aware of it - and not at all to create brand preference for it.

Shell meanders on with its appeal to what it calls its “special publics” with its highly questionable and, I suspect, largely ineffective corporate advertising. Full page ads in The Economist don’t come cheap but every week it seems Shell is there promoting its green credentials. Meanwhile when it has, as I believe it has, a product in V-Power that many might choose to try if they knew about it they comprehensibly fail to give these people a reason to do so. No doubt V-Power sells a bit to folk like me who are either deluded or in the know. Meanwhile the rest of the petrol market sits low in the public’s esteem and it is simply a commodity that most people try and get for the lowest price whenever they can. And if they see Lewis Hamilton whizzing past a hoarding at the Hungaroring which carries the “V-Power” brand logo they might wonder what it is. If they do wonder then Shell won’t be telling them – which is why Shell and the rest of the oil industry have such deservedly low reputations as marketers.

The day we demolished a childrens' playground...

2008-07-10T08:53:00.002+01:00

I’ve told this story before – but ten years on it may be due a retelling! Back in 1998 Shell was going through a top down generated change management process. This one was called “BFI” but I can’t for the life of me remember what the initials stood for. It had two main elements. The first was about measuring the business and trying to improve performance. The idea was that you “drilled” down to examine the business in minute detail to try and find your business strengths and weaknesses. Where did the money come from – or where did it go. It was a bit dull and a bit accountant led and rather micro in scale - but it wasn’t totally daft. The totally daft bit came from the other part of BFI.

We were supposed to bond better by revealing our feelings and aspirations as individuals - one member of one of the groups I was in was a Managing Director of Shell (he is now Chairman of a very big company). He removed his tie (the first time anyone had been him without neckwear in an office) and shared with is how his marriage had been in difficulties when he was GM of a Shell company years ago. Curious stuff and rather embarrassing. Anyway to bond us all better as a unit we had to go into the community to do “good works” one afternoon. The good works in our case involved the demolition of a perfectly good childrens’ playground in a small town in Holland. The playground had recently failed an HSE Test (although it looked pretty good to most of us). So it had to go. Quite why a group of middle and senior Shell executives had to demolish it I to this day have no idea.

It was a dreadful day – pouring with rain throughout and the playground resisted our efforts to reduce it to rubble. The swings and roundabouts were cemented hard into the ground as were the slides and the other play things. One of my colleagues, who was from Nicaragua, said that if the playground had been in Managua it would have been by far the best playground in the city. But here in Holland it had to go – and we had to send it on its way. It was an utterly pointless even offensive thing to do. Most of us were not in the first flush of youth and certainly unused to too much physical effort (away from a golf course bunker that is!). And the pouring rain drenched us all and turned us from puzzled to angry – as well as wet. Did this farrago achieve its objective – did we bond better as a result. I very much doubt it. Did our opinion of senior management increase at the end of this utterly senseless day – what do you think?

Shell walks away from its drivers - and from its customers as well

2008-06-15T08:49:00.003+01:00

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.

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!

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?

June 2008

Shell's non-executive director's failure of his duty of care

2008-05-23T10:06:00.006+01:00

The British Institute of Directors says that "…the non-executive director's role is to provide a creative contribution to the board by providing objective criticism." Well "objective criticism" was distinctly absent from the non-executive directors who appeared at the Annual General Meeting of Royal Dutch Shell plc this week. To be fair Jorma Ollila, Shell's Chairman, handled the meeting skilfully, although he rarely ventured into comments about the business. But the others were either almost completely silent or, in the case of Sir Peter Job (right), seriously inept in what they said.

Maarten van den Bergh, a former Managing Director of Shell of course, must have struggled at times to hold his tongue as his erstwhile colleagues sometimes floundered or were particularly 'economical with the actualité' And Lawrence Ricciardi might wonder about his one contribution, which was to say, as I recall, that he "hadn't foggiest idea" to the one question referred to him. Wim Kok could also have enlightened us rather more about his views on Shell in Nigeria instead of just referring us to the answer he gave at last year's AGM. And what is the point of having people like Christine Morin-Postel and Nina Henderson at the meeting if you don't actually ask them to say something? Presumably they were just passing go to collect their £200.

But it was Sir Peter Job who was the Non executive "star" of the meeting (I use the word "star" ironically). Job is on the Shell board with a primary role for overseeing the integrity of senior executive remuneration. Quite what qualifies Sir Peter for this onerous, but well remunerated, role is unclear but shareholders at the Annual General Meeting of Royal Dutch Shell had a good chance to see him at work on this subject. He bluffed and blundered to little effect and showed precious little understanding of the issues. There was absolutely no justification given for the scandalous "retention bonuses" and a series of oxymoronic non-sequiturs from the well-upholstered Job did not lead to one. The bonuses are designed to keep the three executives (Malcolm Brinded, Linda Cook and Peter Voser) in the company, but, Job assured us, they are all uber-loyal to Shell and have no intention of leaving. Hmmm! Work that one out!

And Job's justification for the fat cat gravy train was interesting (and ignorant) as well. He frequently mentioned Shell's record profits as a reason to reward the Board so handsomely. But, as any fule knows, oil company profits in the short and medium term are almost wholly dependent on the movement of the oil price - a factor over which no oil company CEO or Director has any control at all. Finally the revelation that the high-priced help got a substantial bonus despite not reaching their target to be number 3 in the multinational oil performance tables (Shell was fourth out of five) showed what a farce the whole thing is.

Sir Peter Job is the conscience of the shareholders as a non-executive Director in respect of the matter of remuneration. A huge number of shareholders have rapped him and Shell hard over the knuckles and many will now call for him to walk the plank.

The Tragedy of Corrib

2008-05-08T18:34:00.006+01:00

The Tragedy of Corrib

Paddy Briggs

“The Tragedy of Corrib” is a twenty page personal analysis of the main issues surrounding the controversial Corrib natural gas project in County Mayo, Ireland. The analysis is not a technical one but revolves around the management of the external and community relations aspects of the project from its inception to 2008. The report is a frank assessment of the mismanagement of some aspects of the project by Shell and others, which led to the infamous jailing of the “Rossport 5” in 2005. The report makes some recommendations as to how a resolution of the difficulties of the project might be achieved. Paddy Briggs draws on his long experience as an executive with Shell (37 years) and his specialist knowledge and professional understanding as a commentator on reputation and issues management.

To find out more and/or buy the book click on the button below:

Shell pulls out of Wind Farm project

2008-05-01T11:05:00.010+01:00

Sometimes Shell’s actions are so extraordinary that you wonder if the announcements that they make are a wind up – thrown into the ether just to see what might happen. The withdrawal from the “London Array” wind farm project is just such a decision. I know nothing about the business plan for this project except that I doubt that there were any “unknowns” which have suddenly become “knowns”. Indeed Shell’s statement that the decision is a consequence of an "ongoing review of projects and investment choices" suggests that they just went off the idea – as they have with so many other non traditional business ventures over the years. Shell’s definition of their “core business” becomes narrower and narrower over the years – step-outs into Renewables being walked away from with the same disregard for their reputation for veracity as many of the previous wimp outs.

As an ex-employee, pensioner and small shareholder I have consistently argued that unless Shell is really prepared to diversify into alternative energy wholeheartedly then they really shouldn’t bother at all. The track record of management success at anything but the oil and gas business is deplorable – so why bother? But as a commentator on brand and reputation management I find Shell’s mismatch between rhetoric and reality a continuing and monstrous disgrace. Remember the “Say No to no” ad shown here? I thought when it was launched a few months ago that it was deceitful, self congratulatory and facile. The wind farm decision is sadly not the only example which proves my point – what is Shell doing but saying “Yes to no” with this walk away from wind energy? But it gets worse.

The latest so-called “Shell brand campaign” featuring the disingenuous “Clearing the Air” campaign about which I have written before on this Blog is apparently a new initiative designed to communicate “What Shell stands for” - the campaign material states what this is:

SO WHAT DOES SHELL STAND FOR?

We are positive about energy
We are anti-complacent
We are creative, persistent problem solvers

So let’s take a look at the withdrawal from the wind farm project about which Shell UK Chairman James Smith boasted less than eighteen months ago: "The London Array offshore wind farm will make a crucial contribution to the UK's renewable energy targets. " Is this withdrawal being “Positive about energy”? Isn’t the abandonment of the project so precipitously extremely “complacent”? Can’t Shell be seen not as “creative, persistent problem solvers” but as mendacious knee-jerkers who when they encounter the unknown or the uncertain they run like hell for cover?

As I have said before I don’t really mind what Shell does as long as it is legal and in the interests of their stakeholders. What I vehemently object to is when they fail to walk the talk. When they promulgate bullshit in their brand campaigns about innovation and creativity when the reality of their business decision-making is anything but creative, original or innovative. It’s not the most elegant phrase to use but it seems appropriate – come on Shell “Cut the crap”.

© Paddy Briggs
May 2008

Shell's Brand shame

2008-04-06T07:32:00.002+01:00

Shell’s Brand shame
By
Paddy Briggs

Take a good look at the photograph. What do you see? It’s a Shell petrol station, of course, and easily recognisable as such but when do you think that the photo was taken? If you said sometime in the 1970s or 1980s you would be logically correct. The visual style of the site is certainly that of an era some twenty or so years ago. Indeed professionals in the area of petrol station design, Shell brand management specialists and quite a few customers as well will recognise an identity from the past - one that was superseded by a new more modern identity more than a decade ago. But this is not an archive photograph – I took it a few days ago (April 2008) in New Zealand as I was driving to Auckland on the main East Coast road in a small town called Paeroa. Now you may think that it is a bit peculiar, even rather tragic, for an ex Shell executive, retired nearly six years, to want to photo petrol stations whilst on holiday in New Zealand. Let me explain.

For five years from 1990 to 1995 I was the project manager for the largest brand repositioning project ever undertaken in the oil industry. It involved the development of a new visual design system for implementation on all of the more than 40,000 Shell petrol stations in 120 countries. Research had shown that the then current design (known as VM2) was outdated and uncompetitive and that a radical redesign was necessary. This new design (called RVI) was introduced in 1993 and gradually implemented around the world over the next few years. Key elements of the new design included the representation of the Shell emblem (known as the “Pecten”) on a white background, the introduction of new colours, including a brighter and fresher red and yellow, and the replacement of the old logotype (the way that the Shell name is written on the canopy) with a much more modern font style. There was also a completely new signage and visual system which included a curved canopy edge and extensive new elements across the site. If you go to a Shell petrol station anywhere in the world today it is this new “RVI” design that you can mostly expect to see – it became the “new” standard fifteen years ago and was a significant success winning accolades in the design industry as well as boosting Shell’s competitive position significantly.

Back to New Zealand. As I drove around the country recently I realised that not only had RVI been implemented poorly with non standard design elements having been used (including a completely non standard “Prime sign” – the sign you see from the road) but that in many cases it had not been implemented at all – including the photographed site in Paeroa! What you see in this photograph is a site which conforms well to a design system (VM2) which was withdrawn fifteen years ago. The canopy, the way the “Pecten” is presented, the logotype are all from the 1970 – outdated, uncompetitive and long since not current as Shell’s brand identity. And this petrol station in Paeroa was not the only site of its type I saw in New Zealand – there are many others which sit firmly in the past. And it is not some sort of “heritage site” either – a deliberate and considered decision to keep a site in its old identity for nostalgic reasons. So what is going on? Shell might like to comment but I think that I can easily get to the heart of the problem without their help, but first why does it matter?

There are two inseparable aspects of the design/visual identity elements of a brand – they must be fit for purpose and they must be consistently applied. It doesn’t matter whether we are talking about a Coca Cola can or the livery on British Airways planes or the “Starbucks” brand name and colour system (or that of almost any other global brand) you have to get in right and you have to apply it with rigourous consistency. And when you change a design you have to apply the new design as quickly as possible and with a non-negotiable adherence to the agreed standard. In a company like Starbucks or Coke which are customer driven this happens without question – these great corporations wouldn’t be successful if the customer was not in the minds of everyone from the CEO downwards. But in the oil industry, and sadly particularly in Shell, this just doesn’t apply. Despite Shell being a huge branded retailer (there are more Shell petrol stations in more countries than there are Starbucks or even McDonalds outlets) Shell is today quite hopeless at brand management – scandalously so.

The Shell business imperatives are, as we know, not customer driven at all but are overwhelmingly concerned with exploration and production of oil and gas (the “upstream”). The board of Shell is rarely concerned with marketing matters and the customer barely gets considered at all at the top. Wade through Shell’s most recent Annual Report and see now much of the focus in it is on the customer or the Shell brand. Not a lot. Combine this with an almost complete absence of marketing experience and capability amongst Shell’s most senior management and an obsessive cost control mindset and you perhaps begin to understand how brand neglect of the type on view in New Zealand can happen. Join this to cost driven organisational changes which mean that key marketing decisions in respect of the New Zealand market are no longer taken locally but outside the country (in Australia and elsewhere) and you see that there is really no place in today’s Shell to apply the “All markets are local” imperative which all good marketers know to be true.

Branded marketing has always to be placed in a competitive context and it is important to record that in New Zealand Shell’s main Retail competitors (Caltex, BP, Mobil and local companies like Gull) look far better than Shell and certainly have more consistently applied visual identity systems. Shell’s appearance is shambolic and shameful – a disgrace for which there is no excuse and an insult to those of us who strived to give the Shell brand a global competitive edge all those years ago.

Finally let me say that whilst Shell New Zealand’s Retail network is a dire example of how a corporation that increasingly seems to have lost its way can utterly neglect some of its stakeholders (whilst, of course, proclaiming otherwise in its PR output) it is of course not the only one. I am aware that there are other countries where Shell operates in Retail where the implementation of RVI has been scrappy and incomplete and where the maintenance of good brand standards on site has been the victim of the application of cost minimisation mantras. I have argued in the past that the only solution is entirely to split marketing away from the rest of the Shell businesses and set up a completely separate Shell Marketing company which would be led by marketers, who know what they are doing, and within which there would be a culture which puts the brand and the customer first. Shell in New Zealand is a living example of why this is so necessary and what happens when the brand and the customer is forgotten.

© Paddy Briggs
April 2008

An extended version of this article will be published in April 2008. For details please visit the http://www.brandaware.co.uk/ website.

Happy Birthday "SITME"

2008-03-12T02:13:00.002Z

One of the more satisfying initiatives that I was involved with in the latter part of my Shell career was the launch and management of the magazine “Shell in the Middle East”, popularly known internally as “SITME”. The intention of the magazine was to promote Shell in the Middle East and we put together a substantial mailing list of recipients across the region including not just the top decision makers but also those in influential executive positions in the public and private sector. The magazine was published in separate English and Arabic editions and it had a clear editorial philosophy. This philosophy was to let our partners, customers and other external stakeholders speak for us in the articles of the magazine – not to use it as just as an opportunity to boast about ourselves! The logic was that in an increasingly “Show me” world we would be more believable if we ensured that it was those who knew us who spoke about us. This seemed to work well and the magazine, under the skilled editorship of Bobby Schuck and his wife Sue (both highly experienced and skilled journalists) the magazine went from strength to strength – it has just celebrated its tenth anniversary and 40th edition.

SITME was deliberately different not only from other more overtly PR style magazines elsewhere in Shell but also from anything that the Middle East region had ever seen before (or since). The dead hand of corporatism was kept away from SITME and I and later Managing Editors were able to pursue a style and agenda that was distinctive and appropriately designed for its task. I hope that SITME will continue to flourish in a Shell world that is increasingly dirigiste and centralised and that its uniqueness will continue to be valued. Happy Birthday SITME!

More on "Clearing the Air"

2008-02-22T08:20:00.004Z

“Clearing the Air”

Further thoughts on Shell’s misleading advertising

My recent article criticising Shells’ “Clearing the Air” GTL advertising campaign has generated a (mostly) healthy debate here and there. I hope that those who have criticised my piece are now satisfied (a) That there are no inaccuracies in it (b) That I am certainly not anti GTL or anti any other development which will mean improvements to our well-being and to the environment in the future. But as someone who has been active in the world of advertising and communications for more than twenty years I believe that it is legitimate that I pass judgment on advertising which is as ill-thought-through and as misleading as this campaign.

To add to what I have already said about “Clearing the Air” let me quote and comment on the copy of the TV commercial (TVC) currently running in the UK. The copy runs as follows:

“As the air in the world’s cities becomes more polluted are we running out of options? To help solve problems like these we need creative thinkers with different ideas. Like starting with cleaner Natural Gas not Oil to create a gas to liquids fuel. Find out how one company [Shell] is helping to reduce city emissions by up to 40% on diesel vehicles.”

There is also an on screen caption at the end of the TVC which says:

In cars tested to May 2007 the typical range was 26% to 40%.

Let us just dissect this copy and how why it is misleading. The intention is to suggest strongly that the reason for the development of GTL technology by Shell was to “…help solve problems” like the fact that “the air in the world’s cities becomes more polluted”. The reason for the development of GTL technology was to produce middle distillate products from Gas in those (very) special situations where it was felt that conventional Gas reserves exploitation could be augmented by the conversion of some of the Gas to liquids – and where such conversion could be economic. The only commercial scale plant in operation at present is the 14,700 barrels per day facility in Bintulu Malaysia – this is equivalent to less than 3% of Malaysia’s total oil consumption. Whilst it is true that if the GTL product is consumed in Malaysia then it could perhaps have a miniscule effect on air pollution - but 97% of Malaysia’s growing oil consumption will be of conventional oil products from oil refineries. Malaysia’s annual growth in oil consumption far exceeds the annual production of the Bintulu plant.

In a few years time the much larger Qatar GTL plant will come on stream and this will produce 140,000 barrels per day. This will be roughly equivalent to Qatar’s total oil consumption in 2010 so it is reasonable to assume that much of the product will be consumed in Qatar – although some will have to be traded (no gasoline will come from the GTL plant so this local demand will continue to have to be ex-oil refinery). The traders will no doubt try to secure a price premium for the environmentally friendlier NGL middle distillate compared with conventional gas oil. If we look at this at a Middle East level then in 2010 the region is expected to consume 12.2 million barrels per day of oil in that year so the Qatar plant, if it is on stream by then, could provide just 1% of regional oil consumption if it is all sold in the region (including in Qatar). 99% of the Middle East regions’ oil consumption will be of ex-refinery products.

I mention these figures just to illustrate how misleading Shell’s advertising is. The claim is that Shell’s GTL “…is helping to reduce city emissions by up to 40% on diesel vehicles.” At a micro level this is no doubt true. Any one vehicle does perhaps indeed produce 26% to 40% less emissions on GTL compared with conventional diesel. The point is that there are hardly any vehicles on the roads anywhere in the world doing this and this will remain the case for the very long term indeed! Even in Qatar the beneficial effect will be small and across the Middle East region as a whole (if that is where the product is sold) it will be negligible.

GTL is a good thing and it would be churlish to deny that over the very long term it will have a place in the world’s oil consumption mix. But the “Clearing the Air” advertising wishes to suggest that Shell is at present “helping to reduce city emissions by up to 40%” with GTL - this is simply not true! Even in Malaysia where the only producing plant is operating the production is so small as to have no measurable effect.

Advertising has to be “Legal, decent, honest and truthful”. “Clearing the Air” fails this test – Shell should withdraw the campaign.

© Paddy Briggs February 2008

"Clearing the Air" Who is Shell kidding?

2008-02-15T16:40:00.004Z

If corporations, especially energy giants like Shell and BP, ever wonder why they are vilified by environmentalists and accused of “Greenwash” one objective viewing of the latest Shell film “Cleaning the Air” should tell them why. This highly professionally made paean to the virtues and responsibility of Shell shows the company seemingly single-handedly trying to solve the problem of city air pollution is a misleading farrago of half-truths and lies. Let’s get out of the way first the overtly “romantic” undertone of the film as handsome young twenty-something male Shell scientist Theo eyes up and then chats up a gorgeous young sceptical female colleague whom he eventually convinces (business-wise anyway) by delivering synthetic diesel fuel for some taxis at the 2004 Athens Olympics. I suppose that the intention here was to show that Shell employs human-beings with all the foibles and fantasises that we all have. The misty images and stolen glances of this embryonic romance, brought to earth (or maybe not) by the revelation that the young woman has a daughter, is as facile as it is irrelevant. If I want romantic escapism I’ll watch a Richard Curtis film thanks.

But it is the false premise of the film, not its soppy story line, which most offends. Theo we are told has a job which requires him to “tackle the problem of city air pollution”. What nonsense! Nobody in Shell has such a job – it’s not what a multinational energy company is for. Tackling cities air pollution is the responsibility of city political leaders or national governments - even supra national bodies like the EU, but not oil corporations whose sole raison d’être is to deliver value to their shareholders. If a consequence of developing Gas To Liquids (GTL) programmes is that gradually the air in cities will become cleaner than that’s good news for all. But Shell’s driver in its GTL programme is not environmental it is commercial. If there is money to be made in GTL then Shell will be in it – if not, not. Period!

The mendacity of the film “Cleaning the Air” is the clever proposition of the premise that Shell is in the GTL business because it cares about pollution. Aside from the convoluted logic which allows any anonymous corporation to have feelings at all there is no evidence that Shell has ever or will ever take a major business decisions for purely environmental reasons – and it is preposterous to imply that the main driver of the GTL business is environmental. The stakes are too high and the costs too massive for there to be anything other than a cool business driver behind Shell’s GTL programmes. That’s how it is and that’s how it should be - for GTL to fly there has to be a hard-nosed evaluation of costs against benefits. So in the Qatar project (140,000 barrels per day of GTL products) the project planners will have satisfied themselves that it makes economic sense to convert a small proportion of the State’s huge gas resources into middle-distillate – principally, I suspect, for local consumption as gas oil and diesel fuel. Little if any of this synthetic distillate will find its way outside of Qatar and there will be no measurable benefit on city air pollution. I don’t recall the small city of Doha being particularly polluted anyway - although the fact that a by-product of the plant’s production of GTL fuel is that it will be a bit less so is to be commended – I suppose!

The facts are that GTL is only an option where there are massive gas resources and where the conventional uses of gas are limited or non existent. Gas is mainly used for electricity generation or space heating in the developed and (mainly) northern hemisphere world. It makes no commercial sense to convert any or Europe’s gas to liquids, for example, when there is a growing conventional demand for all the gas that Europe produces. The same applies in North America. It is true, I guess, that is possible that a Government in a European country could offer subsidies to encourage automotive GTL use rather than refinery fuel. But it’s not very likely is it – certainly in the short to medium term?

The 2004 Athens Olympics “GTL in taxis” exercise was no doubt useful to show some people that it is possible to covert gas to synthetic diesel and to run diesel cars on the liquid. But it was not a commercial venture it was a PR stunt. How many cars in the Greek capital today run on GTL fuel I wonder?

Of course much of advertising is designed to accentuate the positives and eliminate the negatives in products, services or businesses. Most of us have a fairly sceptical reaction to advertisers’ messages and a live filter to stop us being fooled. But “Cleaning the Air” is a pretty mucky example of the corporate communications advertising genre. It suggests, implies, and hints at things that are simply not true. There is no likelihood of GTL being a significant factor in any of the world’s most polluted cities for the foreseeable future. That Shell has the technology to produce GTL is commendable and there are some very clever people involved. That Shell has solved the horrific problems it encountered in its small Malaysian plant is excellent as well. But as one authorative source, “Chemlink”[1], has said

“It is clear that the commercial success of GTL technology has not yet been fully established, and returns from GTL projects will depend on projections of market prices for petroleum products and presumed price premiums for the environmental advantages of GTL-produced fuels.”

Price premiums will come only if governments specifically offer consumers and businesses advantages if they choose synthetic fuel over normal refinery fuel. Such a development is a long way away and except in very special circumstances it may never happen. So for Shell to develop a whole advertising campaign around something that is at best tiny in its impact for the foreseeable future is disingenuous in the extreme.

© Paddy Briggs February 2008

[1] http://www.chemlink.com.au/

Response to article in The Guardian by Jeremy Leggett

2008-02-12T10:11:00.000Z

Response to article in The Guardian

http://www.guardian.co.uk/commentisfree/story/0,,2252581,00.html

Jeremy Leggett makes some excellent points in this article and he is quite right to draw attention to the continual failure of Shell and other oil multinationals to invest in exploration and production. Shell’s continued affection for buybacks and BP’s recent massive hike in dividend payments show that it is the stockholder stakeholder who is the most favoured recipient of largesse. Cash “given back” to shareholders is, of course, cash denied to capital investment or to other potential beneficiaries such as employees, pensioners or the community at large.

This is not a temporary phenomenon - there has been a strategic shift in the industry that is irreversible. The power which was once in the hands of Exxon, Shell, BP and the others has shifted almost entirely to the National Oil Companies (NOCs). Remember that the growth of the oil industry was characterised by a corporation like Shell having skills and resources that the countries with the hydrocarbon resources lacked. So Aramco, Nigerian National Petroleum Corporation (NNPC), Petroleum Development Oman and the rest were established on the basis that the western oil company brought the technical expertise and the funding and the NOC partner was essentially a sleeping partner who simply banked their share of the income streams. Those days are long gone and whilst there will still be some areas where the multinational is the prime mover the shift to the NOC is almost complete everywhere. In Nigeria Shell is expected to lend NNPC the funds to cover the State's share of the budget of SPDC, the joint venture E&P company and this may shore up Shell’s position in that country in the short term. But Nigeria is the exception and with oil prices at $90 a barrel most NOCs have income galore to make them largely independent of the multinational giants.

So the model for the future is the oil-poor world continuing to grow economically but needing oil and gas imports to fund that growth – the United States the largest and most obvious example. The western oil companies will continue to exploit resources in their western homelands – increasingly non-conventional resources such as the Canadian oil sands. But their traditional role as explorers and producers in the rest of the world will swiftly decline (as it already has substantially) because the NOCs frankly don’t need their help any more. In many cases the NOCs already have as much expertise as the multinational companies that they used to rely on. Where that expertise in a particular technical area is missing then the NOC can buy it in from (for example) a Schlumberger rather than being forced into a partnership with an oil company. Existing partnerships, such as PDO, may well continue for a while but once the new generation of leaders in Oman begins to take power it is not conceivable that they will continue to tolerate a situation under which a substantial proportion of their revenue streams from oil and gas go not to their own people but to western companies - primarily Shell.

Jeremy Leggett is one of the pessimists who argue that oil production is close to peaking and that as a result the western world’s over-dominance on hydrocarbons will imperil their economic future. However when he says that the National “…oil and gas producers are going to start keeping what remains for themselves in an effort to feed their own economies” he is being disingenuous. Whilst some of the major resource holders do indeed have large populations and large economies (North America and Russia in particular) in the main reserves are concentrated in countries with small populations relative to their hydrocarbon wealth - Saudi Arabia, Kuwait, the United Arab Emirates, Libya, and Qatar in particular (these five countries have 40% of the world’s proven oil reserves between them). In addition other major resource holders such as Iran, Iraq, Venezuela and Nigeria are likely to remain substantial net exporters for a very long time as their economies are comparatively undeveloped and not very energy intense.
I would draw rather different conclusions than Mr Leggett from his analysis. I agree that the multinational oil companies’ days are numbered and suggest that they will have to institute further consolidations and mergers to survive at all. They are also highly vulnerable to the more sophisticated of the NOCs who might envy the multinationals’ downstream strengths and try and acquire these refining and marketing assets. There are also political attractions for (in particular) Russia to use their financial muscle to swoop on Shell or BP – what pleasure that would give Mr Putin! However the main changes in the next couple of decades are likely to be a growing strength of the OPEC producers and their diversification (using oil revenues) into other business areas around the globe. The most entrepreneurial of the oil rich states (with the UAE in the lead) are well underway with their strategy of using their financial (oil driven) strength to acquire a range of non oil assets in the west.

There is a case to be made that the principal challenge for the west for the foreseeable future will not be how to cope with “peak oil” but how to cope with the shift in control from the old world in which the multinational oil companies played a significant part to the new world where both the control of hydrocarbon assets and, increasingly, other core businesses is in the hands of a small number of increasingly powerful new players – especially in the Middle East and North Africa. That will be a political challenge for the nest US President – perhaps his (or her) principal one.

© Paddy Briggs February 2008

The perils of mediocrity

2008-02-06T10:25:00.001Z

“Thrusting mediocrity rises to the surface in almost every sphere”

This is a quote from Tariq Ali who was writing about characters in Anthony Powell’s “Dance to the Music of Time” - but it struck me immediately as being very true of Shell today.

When I left Shell after 37 years back in 2002 there were a number of colleagues much younger than me who I rated and respected and who I thought were the future of the oil giant. Almost without exception they have left the corporation over the last few years. To illustrate the point I will pick out two of them but, to spare their blushes, I will keep their names anonymous!

Michael

Michael is twelve years younger than me but before he was fifty he had already run four big Shell businesses – three as Chief Executive overseas and one global business. Michael is seriously bright, well-educated (MBA etc.) and creative and original. He performed exceptionally well – all of the businesses he ran delivered good results. He left because of his growing contempt for Shell’s senior management who he saw as greedy, short-sighted, conniving, unprincipled and not very competent. Michael now runs a FTSE 100 level company in the UK. In a few years he could have been running Shell – but he isn’t mediocre enough!

Charles

Charles is almost a generation younger than Michael but, like him, very clever and ambitious. When I first got to know him he was in his twenties and already MD of a Shell subsidiary in the Middle East. I worked with him when he was in this job and admired his originality, hard work, loyalty to his staff and superb relations with stakeholders in a difficult environment. He was pitched in at the deep end in this job and did exceptionally well. I thought Charles to be one of the highest potential young people I had seen in my time in Shell. But, like Michael, Charles become disillusioned, and for largely the same reasons. In addition he did not feel that his career was being thoughtfully managed and as a high flyer, and still only in his thirties, he felt that the prospects outside were better and he too left. Like Michael he was not mediocre enough to stay.

The point about both these stories is that Shell should have bent over backwards to look after two very able people and they didn’t. And they should have realised that the changing culture of the company, which so alienated Michael and Charles, would be likely to alienate others as well. I hear that it has - and I know of at least ten other examples of good people who have left prematurely because they couldn’t stand it any more. Very sad.

© Paddy Briggs February 2008

Running out of oil ?

2008-01-26T15:13:00.000Z

We'll begin to run out of oil in 7 years, says Shell

See: http://www.express.co.uk/posts/view/32789/We-ll-begin-to-run-out-of-oil-within-7-years

Plus ça change! When I was in The Netherlands in the early 1980s I sat on the Energy commission of the Ministry of Economics as Shell’s representative. There was much debate at the time over the high levels of profits that Shell was making from its (part) ownership of the Groningen gas reserves. Part of Shell’s defence of these profits was that the reserves were finite, that much investment had been made upfront, and that, therefore, it was legitimate for the company to get a good level of financial return. The key variable in this argument was the extent of the reserves. Obviously Shell’s argument to be allowed to secure high levels of return on capital was boosted if the reserves were estimated at a lower level - the higher the actual reserves then the longer they would last and the longer that Shell’s profit streams would last as well. Shell’s reservoir engineers and others assessed the Groningen reserves at a particular level and published their estimates. Shortly after this the then Professor of Energy Studies at Erasmus University in Rotterdam, Peter Odell, went public saying that Shell and other oil majors consistently underestimated hydrocarbon reserves. His argument, as I recall it, was that insufficient attention was given by Shell to future scientific and technology advances that would allow difficult reserves to be tapped or would turn uneconomic reserves into viable ones.

Given Shell’s more recent propensity to over-estimate rather than under-estimate reserves the Groningen story is somewhat ironic! However the substantive point of Odell’s argument remains valid and he was certainly proved right over Groningen where Shell’s estimates of the early 1980s have proved to be huge under-estimates. Odell knew that it was in Shell’s interests to preach a pessimistic credo about Groningen – and it is in Shell’s interests to continue to be pessimistic about reserves at a global level. Why? The main reason is the same as it was back in the 1980s – the wish on the part of the Oil majors to avoid the imposition of windfall profits taxes. The three largest oil companies (Exxon, Shell and BP) made nearly $60billion in profits over the last year between them (Shell $18.2billion). With oil continuing to be priced at around $90 these levels of profits are pretty much assured for the foreseeable future. Shell argues that it is up to governments to support diversification away from traditional energy and is looking for subsidies to develop its Renewables activities - again this argument is reinforced with a doom and gloom scenario over reserves in relation to increased demand. Similarly Shell has a huge potential profit stream from the development of its oil sands projects – especially in Canada. These projects are controversial for environmental reasons but permissions to proceed can be expected to be easier to obtain if legislators are worried about future energy supply security.

History teaches us that man has an almost infinite capacity to innovate – not least where hydrocarbon production is concerned. High oil prices are a driver of innovation and this, when combined with the certainty of increased global oil demand and the near-certainty that energy use throughout the 21st century will continue to be dominated by hydrocarbons means that we can expect the spur for innovation to be high and the technology effects on production to be considerable, if unpredictable. But to suggest that “We’ll begin to run out of oil within 7 years” as the Shell-inspired Daily Express headline suggests is nonsense and alarmist. Calculated self-interest is at play here and nobody should be fooled by it.

© Paddy Briggs January 2008

Making it green and keep them clean

2008-01-21T21:29:00.000Z

Comment on article in The Guardian:

http://www.guardian.co.uk/media/2008/jan/21/marketingandpr

This is a timely article, and of course the ASA was right to castigate Shell for its particular lie about CO2 and flowers. But really this was just a trivial little porky pie in the context of the mendacity of much of the oil giant’s corporate adverting in recent times. Shell is not alone in this of course, but there is a special offence given when the facts of the company’s business – facts which are open for all to see – are glossed over and instead we are subject to a barrage of greenwash on a daily basis.

Having worked for Shell for 37 years I know what the business imperatives are – and I wouldn’t have stayed so long if I didn’t think that these imperatives were perfectly honourable. It shouldn’t need saying but here is a précis of what those imperatives are. Around 99% of Shell’s efforts are focused on the search for, and the discovery, harvesting, transporting, processing and marketing of oil and gas - hydrocarbons from that diminishing stock of geological formations under the ground. That’s what Shell does, what drives their profits and what they are, in the main, very good at. It is fantasy to suggest that that there is any other strategy than the continuation of this business – this is the business! Now Shell likes to operate cost-effectively so there is a bias to ensure that waste is reduced as much as possible – but only if it makes economic sense – not because there is a spurious corporate conscience. So flaring (for example) is reduced primarily because it is waste of assets. But where the costs of reducing flaring exceed the benefits then it doesn’t happen – unless legislation says that it must. Technically Shell could have eliminated flaring in Nigeria years ago – but the cost/benefit analysis didn’t give the right numbers. So they dragged their feet.

Let’s look at processing – for example in refineries. The imperative to reduce waste is an economic one – efficient refineries are those which do not waste fuel. So reducing the amount of energy needed to refine a tonne of crude oil is primarily an economic issue. Shell does avoid waste because it believes that it is environmentally irresponsible not to do so. It does so because the bottom line benefits.

Finally the old chestnut of “Renewables”. I and others have argued for a while that Shell is only in non-traditional energy such as solar and wind for the PR benefits that accrue. There is some simplistic communications strategy going on that says that if your advertising focuses (say) 80% on something that is in reality less than 1% of your business the public will be fooled. But as David Ogilvy once said the public is not a fool – she is your wife!

Not all bad news

Whilst much of Shell’s advertising is like the CO2 flower example direly misleading there is hope. The “Eureka campaign” (see: http://www.shell.com/home/PlainPageServlet?FC=/aboutshell-en/html/iwgen/shell_real/shell_solutions/films/app_view_film.html) I thought was excellent because it told the truth.

Shell should stop posing as some sort of environmentally virtuous benefactor to the world and concentrate (as it did in “Eureka”) in telling the truth about what it does. Then it might be more believed on other things as well.

© Paddy Briggs January 2008

The phoney hype from Shell on Scenarios

2008-01-20T12:00:00.000Z

The phoney hype from Shell on Scenarios

And so another Shell CEO is to be feted at Davos as he presents the oil giant’s latest “scenarios” – the hype being , of course, that these scenarios shows the company’s intellectual edge in planning and decision-making. Having been involved in Scenario planning from time to time during my Shell career I can see this phoney exercise for what it is – pompous and self-aggrandising PR which has little or no benefit to any of Shell stakeholders.

Here is what the Wikipedia entry on Shell’s use of Scenario planning says:

“Observers of Shell's use of scenario planning have suggested that few if any significant long term business advantages accrued to Shell from the use of scenario methodology. Whilst the intellectual robustness of Shell's long term scenarios was seldom in doubt their actual practical use was seen as being minimal by many senior Shell executives. A Shell insider has commented "The scenario team were bright and their work was of a very high intellectual level. However neither the high level "Group scenarios" nor the country level scenarios produced with operating companies really made much difference when key decisions were being taken". The use of scenarios was audited … in the early 1980s and they found that the decision making processes following the scenarios were the primary cause of the lack of strategic implementation, rather than the scenarios themselves.”

In my experience this is a very accurate description of what really went on and I have no reason to assume that it is any different today. I worked as part of a small team in Rotterdam on long term scenarios for The Netherlands in the early 1980s. It was very interesting work, intellectually stimulating and directed by very clever people. Over a year or so we created three scenarios (internally consistent possible futures) for The Netherlands each of which addressed economic, social and energy developments over 20 years. The scenarios were launched with much panache, placed firmly in the public domain – and then quietly forgotten. The principle that when considering a major strategic decision you test that decision against possible futures was as far as I know never followed. Later in the decade I was in Hong Kong and contributed to a similar scenario process for China. Grappling with uncertainty (and the future of China was very uncertain at that time) scenarios were supposed to give us the edge – especially when it came to strategic investments. But once again although the scenario work was robust and intellectually meretricious there was no actual use made of the scenarios at all.

One clear illustration of how decision making in Shell was and is always expedient, self-interested and often hugely over-cautious (as the Wikipedia entry rightly says) is with regard to Russia. Scenarios for Russia in its post USSR mode were certainly under preparation in the late 1980s/early 1990s and although I was not involved I would be surprised if one of the scenarios was not a “Resurgent Russia” story. Under this scenario Russia would pick itself up from its low ebb in 1990/1991 and, driven by high oil prices, recover economically, socially and politically. Under “Resurgent Russia” there would be a strong and popular leader, some watering down of the commitment to parliamentary democracy and a more dirigiste and nationalist approach to financial planning and management. Let’s assume that such a scenario existed at the time of the original Sakhalin negotiations – carried out at a time of extreme weakness on the Russian side in the early 1990s. Had scenario planning meant anything then surely the possibility of the resurgence of Russia would have been taken account of in the negotiations? Surely in those circumstances a deal with Russia which was more equitable to them would have been struck – rather than the unequal contract that so strongly favoured Shell and which President Putin later tore into pieces as Russia became stronger and more confident?

The invitation to Jeroen van der Veer to speak to world leaders at Davos will no doubt give him a warm glow that he, and Shell, are legitimate movers in the refined air of the “World Economic Forum”. And there will no doubt be approval of the new scenarios as I am sure that they will be as intellectually solid and stimulating as ever. But if pressed (as he should be) to give one example of how these scenarios are actually to be used in Shell strategic decision-making he will struggle. Because there is no evidence at all that Scenario planning has made a hapeworth of difference to Shell’s actions or performance over the years. Like so much of the public face of Shell the rhetoric is a long way from the reality.

© Paddy Briggs January 2008

Employees as valuable assets in building your brand

2008-01-07T12:23:00.000Z

I attended the memorial service today of David - an old colleague and boss of mine who joined Shell way back in 1952 and who had been retired a couple of decades. He was a wonderful man - individualistic, cantankerous, intelligent, rude, caring, creative, trusting and above all humane. The church was full and there were many of his old colleagues present to pay their tributes. As I watched them, and thought about David, I wondered what he and they would make of the spiteful, greedy, selfish, ignorant bunch that run the show today. Perhaps David would have shrugged his shoulders and said something about bygones…and maybe he would have been right! But he would certainly have been disillusioned and disappointed by the Shell hypocrisy that on one hand says that it will:

“respect the human rights of our employees and provide them with good and safe working conditions, and competitive terms and conditions of employment...promote the development and best use of [their] talents …create an inclusive work environment where every employee has an equal opportunity to develop his or her skills and talents… encourage the involvement of employees in the planning and direction of their work… provide them with channels to report concerns.” (Shell Group Business Principles or SGBP)

whilst on the other hand laying them off in vast numbers in homage to the great God of “outsourcing”.

I have told a personal “outsourcing” story from my last years in Shell elsewhere before - but it is worth repeating again to throw light on the current imperatives.

Seven years ago I was working for Shell in Dubai where there was a small and 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 arm lengths 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 the SGBP! 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!

Back to my late friend David. He worked in Shell in an era (as did I mostly) when the commitment to employees wasn’t just words but reality. That was why so many of us, including David, were “one company” men and women. It wasn’t perfect and it had its frustrations and disappointments – but it was rarely if ever malign or uncaring. A business like Shell is about people – and when people are treated as disposable commodities then the values of the corporation disappear and the rot sets in. And today, sadly, Shell is rotten at the core.

Big Oil lets sun set on renewables

2007-12-20T10:10:00.000Z

Comments on article in "The Guardian" 11th December 2007:

http://www.guardian.co.uk/business/2007/dec/11/oil.bp

This report should not come as a surprise to anyone who knows Shell well. Over the past thirty years or so Shell has tried a variety of diversifications but failed to make any of them work:

Minerals: Billiton …………..…...SOLD
Nuclear: General Atomic…..……SOLD
Coal: Shell Coal…………….……SOLD
Power Generation: Intergen……SOLD
Agrochemicals:………………….SOLD
Forestry…………………………..SOLD
Solar………………………………SOLD

The reasons for these failures are not particularly complex. At the top in Shell there is a culture which is really only comfortable with the familiar – not for them the challenge of “unknown unknowns”. There is a bias for the scientific, technological and the quantifiable and an aversion to uncertainty. So the people who rise to the top are not original thinkers or creative – they are the apparatchiks who play the corporate games most successfully. As these top executives have rewarded themselves more in more in recent times there has been an increase in the safety first mindset. The huge remuneration and pension packages that are on offer do not encourage originality or risk taking – they cause retreat to the familiar where income streams can be more accurately predicted. This sheer lack of imagination is well illustrated by the share buyback schemes which continue – essentially Shell is saying that it has no capital investment, acquisition or diversification opportunities so the only thing it can think of doing with the windfall earnings from $90+ oil is to buy its own shares.

The other force in play at Shell at the moment is the continued centralisation of decision making. The traditional upstream oil and gas businesses do need central decision making but other areas (Renewables is one) are substantially local in character and far smaller in scale. Shell does not have the processes in place to manage decentralised businesses any more. In the past strong and independent country based “operating companies” often stepped out into non traditional activities where they saw a local opportunity. Since the power of these local companies has been curtailed there is no longer the organisation in place to encourage such experiments.

The changing Shell culture is placing one of its historically traditional businesses at risk – the huge network of petrol stations around the world. There is no more local business than retailing as any retail professional will tell you - the great retailers (McDonalds for example) really do “think global and act global”. There is always hands-on local management in every country or region in which McDonalds operates with globally developed products, services and offers being tailored to the local market. Shell used to do that in the past when the operating company structure was in place. But since its demise “Retail” (that most local of businesses) has been centralised and now has to kow-tow to the ridiculous nostrum that it is really a “global business”. Shell is gradually walking away from hands-on Retail in many markets and it would be no surprise if the business is not disposed of entirely in time.

The irony of all of these changes is that the centralisation of decision-making and the narrowing focus has not brought better corporate governance. There was nobody more adverse to risk and to delegation that Phil Watts – a hands-on manager if ever there was one - but the facts now emerging about the reserves scandal over which Watts presided showed that this centralisation was one of the causes of the problems. How ironic that in the post Watts era the centralising trends have continued with so-called “global businesses” now existing across the board. One of the reasons for this is the fear of legal actions and the presumption that the risk of these is reduced by not delegating or placing trust in subordinates. There are now far more lawyers in Shell than there ever were in the past and there is hardly a business decision made without the lawyers being consulted. So whilst the executive directors of Shell richly reward themselves this is not in recognition that these rewards are partly a compensation for the directors for having to take greater personal risk. How close Phil Watts has been to following the Enron directors, the Nat West three and Conrad Black into the criminal courts we don’t know – but you can be sure that the current Shell board will be very conscious of the need to avoid personal liability. Again this means that they are reluctant to move away from the very familiar.

The one area where Shell has been willing to go public and try and differentiate itself has been in its corporate communications and its green posturing. As Terry Macalister rightly points out Shell has “trumpeted its commitment to a low carbon future by signing a pre-Bali conference communiqué” – in my opinion an astonishing act of hubris. There can be little doubt that Shell is only in Renewables at all because they believe that this will paint them greener than in reality they are. Let’s be clear about this – the whole business imperative of Shell is to exploit hydrocarbon resources. That is what they do. Every hydrocarbon molecule that they find, produce, refine, transport or market contributes to global warming and climate change. My view is that there is nothing immoral in this – oil and gas are the main drivers of economic growth and prosperity and will remain so for the foreseeable future. Shell’s considerable skills in this business, combined with their good track record in reducing there own carbon emissions at refineries etc., should be a source of pride. There is really no need to be apologetic about Shell’s strong position as a global player in the oil and gas exploration and production world and Greenpeace’s suggestion that Shell “…needs to become not just an oil company but an energy company” with a strong commitment to Renewables is wishful thinking. Shell has neither the competences nor the inclination to move away from its traditional businesses – on the contrary all the signs are that they are retreating back to familiar ground rather than being creative or genuinely diversifying in their investments.

Corporate Social Responsibility - an oxymoron...

2007-12-07T14:52:00.000Z

I think that it is very important to make a distinction between State power over the individual and state power over institutions – especially private sector businesses. In an ideal world, I agree, that it would be good if individuals were free to pursue their lives peacefully and lawfully with the minimum of intervention from authorities. This does, of course, require that there is a code of behaviour which people follow that goes beyond what the law says they should do. But it doesn’t always happen. For example, the hope that pub or restaurant customers who smoked would be sensitive to the feelings and comfort of other customers who did not smoke was shown to be a forlorn one! The banning of smoking in public places came about, at least in part, because too many smokers could not be relied upon to care about others. Some might argue that the legislation was anti-libertarian – I would argue the opposite. My freedom, and the freedom of the majority population who don’t smoke, was hugely enhanced by this legislation of which I approve wholeheartedly.

Essentially the test should be to ensure that the worth of legislation is determined by its contribution to overall utility - there has to be judgment about the point at which you curtail freedoms. You cannot, of course, conceive of an “anything goes” world without laws. Commercial organisations – especially big businesses tend to argue for self-regulation. They want to be free to police themselves – but there is no evidence that this ever works. The imperative of a company is overwhelmingly a shareholder driven imperative – indeed the law states that it must be. So for a corporation to suggest that it follows self-imposed “Corporate Social Responsibility” rules is so much poppycock. When faced with the choice between profits and principles they will choose profits 99% of the time! So government HAS to legislate to curb the powers of business and ensure that they serve more than the narrow self-interest of their shareholders. Nobody else will do it!

(c) Paddy Briggs December 2007

Shell says “No to Yes”

2007-12-07T14:05:00.000Z

Just when you thought it was safe to buy a newspaper or a serious magazine again up pops Shell with more of its absurd corporate advertising. The “Say No to No” campaign, running again this week, almost defies belief in its self-congratulatory and disingenuous copy and tone. Let’s first take a look at one of the ads – the one with the teacher writing on the blackboard – here, word for word, is what it says:

"Say No to No

Isn't it high time someone got negative about negativity?Yes it is.Look around. The world is full of things that, according to nay-sayers, should have never happened."Impossible.""Impractical.""No."And yet "yes."Yes, continents have been found.Yes, men have played golf on the moon.Yes, straw is being turned into biofuel to power cars.Yes, yes, yes.What does it take to turn no into yes?Curiosity. An open mind. A willingness to take risks.And, when the problem seems most insoluble, when thechallenge is hardest, when everyone else is shakingtheir heads, to say: let's go."

The tag line is “Real energy solutions for the real world” and the implication is that Shell has these solutions because of the position it takes (as described in the copy). So Shell is not negative then? Shell is up there with those who found continents and played golf on the moon. With Columbus and Neil Armstrong. With NASA. With the fifteenth century Spanish court of Ferdinand and Isabella. Shell is a risk taker just like they were? What arrant nonsense.
Shell is one of the most risk averse, short-sighted and cautious enterprises of modern times. And especially in its energy category. When other companies made acquisitions (Exxon for Mobil, BP of Amoco, Chevron of Texaco, Total of Elf…) Shell stayed nervously out of the fray. When opportunities arose Shell said “Yes to No”. They shook their heads and said not “Lets’ go” but “let’s not”.

Shell always says “No” to diversification – to the risks of getting out of their comfort zone. Here’s an (incomplete) list to prove this point:

Minerals: Billiton ……………...SOLD
Nuclear: General Atomic………SOLD
Coal: Shell Coal…………………SOLD
Power Generation: Intergen……SOLD
Agrochemicals:………………….SOLD
Renewables……………………….?

As far as alternative energy (Renewables) is concerned can their be the slightest doubt that it would go the way of the other diversifications – if it wasn’t for the phoney “green” kudos it brings to Shell’s reputation?

The comfort zone of Shell gets narrower as the years roll by not wider. All of the daily emphasis is on the traditional businesses and in particular on the upstream – the search for oil and gas. Old world, old energy, old core competences. I don’t mind this at all either as a small shareholder or as a pensioner – but I do object when I am being bamboozled into believing something that patently isn’t true.

And isn’t it pretty negative to sell or franchise your brand – your most valuable intangible asset? And Shell is selling its brand – for example in Ireland where the Shell branded petrol stations now have little or nothing to do with the company at all. The Shell logo stands over petrol stations that Shell has sold and which it no longer controls. Here is what Shell in Ireland says about this:

“In July 2005, Shell announced that it had signed sale and purchase agreements with Topaz Distribution and Logistics for the divestment of the majority of Shell’s oil products businesses in the Republic of Ireland and Northern Ireland. The agreements relate to Shell’s retail, commercial fuels, lubricants, marine, and supply and distribution businesses.

Topaz will continue to use the Shell brand and Shell UK will continue to supply high quality fuels and lubricants to the company, which means that the Shell brand will remain visible in Ireland and service to customers, dealers, and distributors will be maintained.”

So the “Shell brand will be visible” – as if this, in itself, is something that consumers could be concerned about. A brand is more than a logo – it stands for a total commitment to the customer. Shell has walked away from its customers in Ireland and divested itself of this commitment. Shell is also walking away from a host of other markets, because it perceives that it cannot operate these businesses profitably. Who is being negative now? Who is saying “Yes to No” again not “No to No”?

One of the cases for the powerful multinationals is that their very financial strength should allow them to be long term in their outlook. They ought to be able to ride the waves of the squally world of business. Shell was built up on this very philosophy – risks were really taken in the past – new ventures, new countries, new markets, new technologies. Not all worked, but the sheer size of the organisation meant that it could ride the storms and tolerate the failures that will inevitably happen when you really do take risks. The Shell of today is utterly different from this – far more short term in its thinking and far more risk averse. And yet they have the supreme arrogance to think that they can credibly preach the virtues of “a willingness to take risks” and to suggest that they are on the moral high ground – an organisation that rejects negative thinking. It isn’t true – and I, for one, am sick and tired of being lied to by those who want me to believe that it is.

© Paddy Briggs December 2007

Alastair Campbell on the Oil Companies in Britain

2007-11-16T10:25:00.000Z

Crisis management and the Oil Industry

At a recent event with Alastair Campbell – formerly Tony Blair’s Press Secretary and chief spin doctor – he discussed (inter alia) crisis management. One of the crises that he talked about which happened in September 2000 in Tony Blair’s first term was the protests by haulage companies about fuels prices. The crisis involved the blockading of fuel facilities (refineries and depots) and very nearly brought the country to a grinding halt. Campbell described how the crisis was handled at Number 10 and elsewhere in the Government apparatus. When asked about the role of the oil companies, including Shell and BP, Campbell said that they were “hopeless” and showed a complete lack of leadership retreating completely from the fray. Campbell commented that he felt that this abrogation of any responsibility in the matter was particularly shameful given the excessive salaries that top executives in the oil industry paid themselves!

In Campbell’s diaries (pages 471ff) he describes a meeting with the “oil company executives” and describes them as “…not a very pleasant, compelling or impressive group of people” and specifically that “…the BP and Shell people were not impressive. I guess part of them was happy for this to be seen as a government problem…the guy from BP said that he was worried that they would be left holding the baby.” Later as the crisis began to be solved the Prime Minister called the oil companies in again. Here is how Campbell described that meeting:

“TB [Blair] said he wanted to read the riot act because he wasn’t happy with their systems, and didn’t really feel that they had pulled out the stops. Mark Moody-Stuart [chairman of Shell] was dreadful. He had earlier asked if TB minded if he sent his deputy. Yes he would was the answer. It was pretty tense at time, not least when JP [John Prescott] had a go at their contracts system.”

I think that I can throw some light on this matter from my own experiences in Shell (although I was not working in the UK at the time of the fuel crisis in 2000). Sixteen years earlier (in 1984) I had been responsible, as a member of Shell’s executive team in Scotland, for the management of the company’s commercial/industrial business in that country. Shortly after taking up my appointment the miners’ strike hit the United Kingdom – Scotland was one of the hardest hit areas. One of the issues that I had to deal with was in respect of the Ravenscraig plant of British Steel. If the furnaces at Ravenscraig did not get coal then they would shut down and could not be restored again. Ravenscraig would have to close. The normal supply route to Ravenscraig for coal was by train directly to the plant, but the rail unions, in sympathy with the miners, refused to move coal supplies. So the only solution was to have dozens of trucks on a permanent journey from a coal import port at Hunterston on the west coast of Scotland to Ravenscraig – a journey of some sixty miles. Shell’s interests were twofold – Ravenscraig was a huge customer, the largest consumer of Shell lubricants in Europe. And the haulage company running the coal supply trucks was a Shell customer as well! But there was clearly a problem – on the one had we did not wish to be seen as taking sides in the miners’ strike which was the hottest political issue of the time. On the other hand we had a duty to look after our customers and, as a long established business in Scotland, most of us also felt a sense of duty towards the thousands of people who relied on British Steel (and their suppliers) for their livelihoods. With the consent of my bosses in London the action that I and my colleagues took was to approach the Transport Union (TGWU) and ask them whether they would sanction our continued supply of diesel fuel to our customer – the road haulage company involved. I had a long meeting with the TGWU shop steward and we came to an agreement – it was, of course, a very difficult decision for this official as on the one hand he was instinctively in support of the miners but on the other he also had a duty to his members (Shell’s drivers) and to our customers. Anyway we kept fuel supplies going and Ravenscraig was saved.

The key point of the Scottish story and its relevance to the situation sixteen years later described by Alastair Campbell was that back in 1984 we had staff on the ground at a reasonably senior level to help resolve this crisis. Also the drivers were our own staff and we genuinely worked together as a team. By 2000 most of this had gone. Shell had cut back its business to such an extent that only junior staff would have been at the fuel facilities that were under siege. And these staff, unlike my colleagues and me back in 1984, were not empowered to act. Further the drivers and other staff were no longer Shell employees and had no loyalty to Shell. All delivery of Shell fuel in the UK had been contracted out to haulage companies – the very ones, no doubt, also involved in the protests against the government - John Prescott was quite right to “have a go at the contracts system”! In the Thatcher/Major years Shell had ruthlessly eradicated the unions from its UK operations as well – so there were no Shop Stewards to talk to either. Finally Moody-Stuart, although Chairman of Shell Transport and Trading at the time, would have had little or nothing to do with Shell’s downstream business in the UK. Shell UK once a fairly large and independent operating arm of Shell was by the year 2000 neutered, moving out of its offices at Shell-Mex House and losing its independence and focus. Regional offices, such as the one I worked from in Glasgow back in 1984, had long since closed. Although there was a figure-head Country Chairman he had little or no line authority and the sort of bias for action that we saw back in 1984 was entirely absent. There was nobody to pick up the ball and run with it.

(This is an extract from Paddy Briggs’s book “The Changing face of Shell” to be published in 2008)

Shell in Pakistan

2007-11-04T22:05:00.000Z

Shell in Pakistan

When multinational corporations embrace a commitment to Human Rights the test is not (only) the immediate check as to whether such a commitment gels with their history and their current behaviour but also how they respond when the circumstances change in one of their areas of operation. So as the eyes of the world are on Pakistan at the moment and we are all asking whether the livelihoods and security of the millions of innocent citizens in that benighted country have been better protected by General Musharraf’s “second coup” it is also reasonable to look at the response of the many multinationals operating there particularly those, like Shell, which have boasted a commitment to Human Rights.

The imposition of virtual martial law in Pakistan has been condemned by the respected “Human Rights Commission of Pakistan” as well as by opposition parties, lawyers and other Human Rights groups in the country and abroad. So in the circumstances what do corporations, like Shell, say or do? Clearly an over precipitate reaction would help nobody but if, as is likely, the restrictions on opposition and the suspension of legal restraints on Musharraf’s Junta continue, and all democratic processes are suspended, can a company which has so openly embraced Human Rights credibly remain silent?

Words are cheap and of no value unless they stand for more than just self-promoting hype. Shell Pakistan is a significant player in that country’s energy sector and has declared that it has “Business Principles” which are to: “… conduct business as responsible corporate members of society, to comply with applicable laws and regulations, to support fundamental human rights in line with the legitimate role of business, and to give proper regard to health, safety, security and the environment”. So what will Shell Pakistan do or say now that “fundamental human rights” have been suspended? If it is argued that for commercial reasons they should do nothing then one must question what the point of the Human Rights commitment was in the first place. There is no obligation on Shell in Pakistan, or anywhere else, to make a Human Rights commitment. But if they have chosen to do so it is reasonable to ask what this really means when political circumstances change so radically that individuals’ freedoms are threatened – as is presently clearly the case in Pakistan.

Will Shell condemn the suspension of Human Rights in Pakistan referring to their published commitment of support for the principle such rights and to the company’s general support for the UN’s “Universal Declaration of Human Rights”? Don’t hold your breath!

Response to article on Brand Channel re gasoline brands

2007-10-11T09:38:00.000+01:00

Response to article on Brand Channel. See:

http://www.brandchannel.com:80/start1.asp?fa_id=388

The substantive point about gasoline brands is that marketing is only an incidental activity for oil companies – nearly all of their efforts are on the “upstream” (the search for and exploitation of oil and gas reserves). As a 37 years service Shell veteran, now retired and active as a brand consultant, I can assure you that the chapter on marketing in the average oil executive’s memoirs would be one blank page. This is not to say that there aren’t competent marketers in the oil companies – just that they linger low in the hierarchies and that they have no prospects of reaching the top if marketing is “all” they can do. When the boards of Shell or BP or ExxonMobil and the rest meet the agenda items are rarely if ever about customers, brands, channels of distribution, market share, communications and the other imperatives that drive the business in proper branded marketing companies. The discussions are about exploration, production, refining and all the other key business activities – the so-called “upstream”.

The irony of the almost complete ignorance of oil company top executives about branded marketing is that these companies are amongst the world’s biggest branded retailers. Shell ahs more than 40,000 Shell braded gas stations in over 100 countries, but in a recent extensive interview for the London Guardian newspaper Shell CEO Jeroen van der Veer didn’t even mention Shell’s marketing business once - see: http://tinyurl.com/ytxhjf . Everything in an oil major is top down and that top is so far removed from its consumer customers (motorists for example) that they probably wouldn’t recognise one if they saw one. This leads to minuscule and wholly inadequate amounts of money being allocated to advertising and other brand promotion initiatives. The culture of the men at the top is essentially a cost minimisation culture. When you drill for oil you can secure a completive advantage by doing it more efficiently (cheaply) than your competitors. As any marketer knows this is a mindset which leads for disaster in marketing. It is 35 years since the late Stephen King’s seminal “What is a brand” (recently reprinted by JWT here in the UK and circulated with Campaign magazine) which showed (even proved) that brands which invest consistently over time prosper and those that do not fail. That is a lesson that the oil industry has forgotten.

I believe that the only way that oil companies can properly exploit their brand potential is to separate completely their “upstream” from their marketing business. And I mean completely – not just some fudged separation within the same corporate structure. Only when the main preoccupation of the top management of Shell or BP is with the brand and with the customer will we start to see proper and focused branded marketing in this important sector. Please see my article in “Market Leader” magazine for the development of this argument: http://tinyurl.com/3dau4e .

Business and Human Rights

2007-09-28T13:30:00.000+01:00

The myth of Corporations’ commitments to Human Rights

“Shell supports the Universal Declaration of Human Rights and believes that business, as an integral part of society, can make an important contribution to furthering these rights”. Shell statement

“Business doesn't have to choose between profits and principles, Royal Dutch/Shell Group Managing Director Jeroen van der Veer told the Globalisation, Ecology and Economy conference in the Netherlands today.”

“We have to be particularly attentive to our contribution to local economic and social development and to human rights issues.” Christophe de Margerie, Chief Executive Officer: Total

The focus of the attention underway at present on the grotesque abuses of Human Rights in Burma has rightly drawn attention to the part that the Oil company Total plays in shoring up the appalling regime in that benighted country. Total is heavily involved in Burma – especially in a major pipeline project – and you need to be terminally naïve to think that such investment does not give support and comfort to the Burmese dictators. That a multinational oil company thinks that it is acceptable to be active in Burma is deplorable – even more so when you see the self-promoting statements saying that they are “attentive to human rights” as in the recent remarks of the company’s CEO.

If the dark arts of Public Relations are to have any moral underpinning then the contradictions between rhetoric and actions, such as those of Total have to be avoided. There is frankly no point in having your PR Department issue “commitments”, on the one hand, whilst your business managers go their own sweet way in ignoring these so-called assurances on the other. My experience in Shell, and I have little doubt that most oil multinationals are just the same, is that commitments to human rights are not worth anything at all. I could choose many examples to illustrate this assertion (Nigeria the most obvious) and which suggest that when push comes to shove the choice will nearly always be Profit rather than Principles – whatever Mr van der Veer and others might like to say. To be fair it is true that Shell has moved away from involvement in Chad, Cameroon, Peru and elsewhere partly because of concerns about the reputational damage which could have resulted. But these withdrawals are the exception rather than the rule. Back in 1991 EIRIS (Ethical Investment Research Service) stated that Shell was operating in 24 Countries where extra-judicial executions or disappearances had been reported, 44 countries where torture has been reported, 36 Countries where 'official violence against citizens' was reported, and 26 countries which were holding prisoners of conscience. Shell continues to operate in most of these countries today. To illustrate the dichotomy between rhetoric and behaviour let me choose two examples of which I have personal experience.

China

Back in the late 1980s I was working in Hong Kong and, increasingly, in China – and part of my job was to try and boost Shell’s brand and to advise on the avoidance of damage to Shell’s reputation. China was beginning to open up to the West and Shell was hungry for a piece of the action. Some of us in Shell felt that China’s pursuit of economic change would be accompanied by a change to the repression that had characterised the country for forty years or more – that the people would be given greater personal freedoms as well as greater wealth (we were wrong, of course). Others simply pursued the money and developed investment and other plans to be part of China’s economic progress. Amongst these was the Chief Executive of the Shell Companies in China and Hong Kong whose mantra was “China is very big” and who was determined to give Shell every chance to succeed - not for him any uncomfortable concerns about human rights! In the spring of 1989 the emerging democracy movement in China was brutally cut down when the tanks entered Tiananmen Square and it seemed for a moment that or Chief Executive’s dreams were likely to be shattered. He went into a sort of denial mode saying that as soon as things calmed down all would be normal again. Within a few months Shell was back at the negotiating table with Chinese officials as if nothing had happened in Beijing in April at all.

In August 1989, in an attempt to suggest that there were likely to be some squally waters ahead for Shell unless we acted with greater care and sensitivity, I wrote a mock newspaper article entitled “Do Tanks go well on Shell”. Here is the text of this mock article:

Do Tanks run well on Shell?

On Friday it emerged that Shell, the Anglo/Dutch multinational that is now the world’s largest energy company, is to invest over one billion US Dollars in a Refinery and Petrochemical complex in Southern China. Although officially only a commitment to a “Feasibility Study” at this stage, informed sources within the industry say that Shell is unlikely to proceed to this study unless they are fairly certain of a positive outcome. Observers of China say that such an outcome can be virtually guaranteed given the PRC Government’s wish to demonstrate to the world that the confidence of western business is returning following the political disruption in China earlier this year.

The Shell Group has had its share of controversy in recent years, not least because of its continued presence in South Africa. Shell’s role in sanction busting in Rhodesia is alos not forgotten. Those with longer memories will recall the questionable role played by Henry Deterding (One of Shell’s founding fathers) at the time of the Nazi military build up in the 1930s. Despite this rather ignoble history the announcement of the Refinery plan comes as a surprise. The plan would be the largest foreign investment by far in China. For it to be announced (however much that announcement is covered in caveats) in 1989 seems insensitivity on a grand scale. Shell may believe (as one of their Hong Kong directors said) that “Business is separate from politics”, it is doubtful whether many of the people of Honk Kong would agree. Firstly the announcement of an investment of this size gives a signal to China that no matter what they do to their own citizens the international business world will turn a blind eye. Secondly the investment is unquestionably strategic in nature. By building facilities that will produce a full range of oil and chemical products Shell will play its part in ensuing that the People’s Liberation Army in the South of China does not fall short of the essential products it needs. (The refinery will also produce a wide range of materials that can be used in Chemical warfare, including Naphtha used with such devastating effect by US forces in Vietnam).

For Shell morality and business have always been uneasy bedfellows. Once again it seems that you can be “Sure that Shell” will pursue what it seems to be its commercial objectives and be deaf to public opinion”

This mock article was circulated only to the twelve members of our Hong Kong and China management team and was meant to stimulate thought. In fact a storm broke out and or CEO instructed me personally to get back every copy and to destroy them! It had struck too exposed and vulnerable a nerve and in the CEO’s view even to discuss the possibility that Shell might be criticised for being back in China in a big way just months after the Tiananmen Square massacre was unacceptable. The rest is history. Shell did pursue the project and although it changed radically in format, took far longer than was planned and cost far more construction was completed and commercial operations stared last year. The “CSPCL Nanhai” complex at Daya Bay is, according to Shell, the largest single investment ever made by the Shell Group in the petrochemicals sector.

The point about this story is that although back in 1989 Shell did not have any open commitment to Human Rights it did institute such a promise in the 1990s and declare it openly. But notwithstanding this commitment the project went ahead in a country which has been accused of continued human rights abuses on a huge scale. My perhaps mischievous attempt to make us think about what we were doing way back in 1989 had little effect (other than to brand me as a trouble-maker in the eyes of some!). So you can imagine my scepticism when all the human rights commitment hype started to emerge from Shell Centre in the 1990s!

Saudi Arabia

In March 1997 Shell issued a “Statement of General Business Principles” (SGBP) to the world which included the following statement “…to express support for fundamental human rights in line with the legitimate role of business.” The launch of the SGBP was a much hyped event and the responsibility of those working in operating companies around the world was to promulgate them in the public domain. I was working in the Middle East at the time and part of my role was to communicate with “stakeholders” about Shell and try and enhance our reputation. I discussed ways to promote the SGBP with my management colleagues - including the production of local language (mostly Arabic) versions. I was a little way into my task when I received a phone call from the head of Shell’s businesses in Saudi Arabia instructing me not to promulgate Shell’s commitment to Human Rights in that country for fear of upsetting the rulers of this seriously human rights abusing state. “What should we say them?” I asked “That Shell supports human rights – except where it doesn’t because if we did our business prospects might be damaged?” Once again, as you might imagine, I got into a bit of trouble and the SGBP were never circulated at all in Saudi Arabia and a number of other counties where it might have damaged our business. Hypocrisy – of course! Profits before Principles – likewise!

© Paddy Briggs
September 2007

Royal Dutch Shell AGM 15th May 2007

2007-05-16T17:00:00.000+01:00

Royal Dutch Shell AGM 15th May 2007

In the good old days small shareholders of Shell Transport and Trading, the British arm of the Shell Group, could pop along once a year to see our Board of Directors and see the colour of their eyes as they answered our questions. We knew that they were a bit of a dodgy lot – well trained in the arts of obfuscation and the giving of elegant sounding but unrevealing answers to all our questions. Twinkly old Mark Moody-Stuart would wiggle his eyebrows in astonishment when anyone suggested impropriety and Phil Watts would glower down at us contemptuously as if we were all particularly inattentive students at his bible class. We suspected that deep down they were really, all of them, only just on the right side (or the wrong side in Watts case) of being mendacious bastards – but at least they were our bastards!

But now the British small shareholder is the poor relation of our Dutch cousins and we don’t have a meeting of our own any more. True there is still an event and we are entitled to sit in a hotel in Hammersmith whilst the real meeting is beamed to us from The Hague. But it’s a Clog run affair these days and with all the wit and humour that that suggests. That only around 200 of us bothered to journey to the meeting today suggests that it is not, for all, a very appealing prospect. The law requires that these AGM’s take place and that we have the opportunity to vote on the various motions in front of us. But these votes are rather Orwellian – Big Brother has already determined what the outcome will be. Today most of the votes were of the order of 97% “For” and 3% “Against” – so the 200 of us present were unlikely to foist an upset on the Board.

Quite a few of us at the London event were former employees so there was a bit of a reunion over the odd glass of wine after proceedings were over. I would guess that the average age in the hall was about 75 but that didn’t restrict the strength of feelings that were expressed. Virtually all the speakers/questioners were mildly or very hostile to Shell and I found virtually no defenders afterwards either. And I am not talking about the professional protesters here - but the ordinary small shareholders like me. In the past there was usually some chap who would stand up and thank the Board for their efforts and genuflect a little and generate a little ripple of applause. No more.

Corrib natural gas project

But let’s deal with the professional protesters first both in London and The Hague. By far the most moving were the folk from County Mayo in Ireland who are very vocal opponents of the Corrib Natural gas project. One speaker, Willie Corduff (pictured) , was an obviously totally sincere critic of Shell who in a softly spoken voice told us about the loss of his farm and his livelihood as a result of Shell’s project plans. He had gone to jail for 90 days in June 2005 for protesting against Shell but although he was aggrieved, and seemed to have every right to be, he was remarkably unbitter – as well as eloquent. Other speakers on Corrib were a bit more strident and this whole session reminded me so much of the Brent Spar debate of the mid 1990s. Shell’s defence was to apologise for the errors of failed consultation that had occurred early in the project planning stage but to claim that most of the local community was now behind the scheme and that Ireland as a whole would benefit from it. I know little about the details of the Corrib project but (as with Brent Spar) Shell seems to have the technical highground but has lost the hearts and minds of people they need to have on their side. The solution is clear. They must be prepared to invest more capital in the project to ensure that the concerns of all the local people like Willie Corduff are addressed. It’s as simple as that. Every effort must be made to make the design of the terminal and the pipeline acceptable – and if that costs more money then so be it. The final solution for Brent Spar cost far, far more than what would have been the cost had Shell been able to do what they originally wanted to do. If they want to get Corrib on stream then they must make it a model project in environmental, safety and local community terms – and above all see that it is perceived to be this by all. Even if their technical boffins say a particular refinement is not really necessary then they must still do it if that is what the locals want. The people of Rossport deserve no less. Getting senior Shell executives to spend money when they don’t really think that it is necessary is not the easiest of tasks – but that is what must happen if the project is to go ahead – the protesters made it clear that they will fight Shell all the way if some major compromises on the project scope are not made. We shall see if Malcolm Brinded was listening and got the message.

Nigeria

Most of the comments and questions about Nigeria were about gas flaring and the danger and risk to the health of local residents in the Delta that this practice brings. Again it seems to me (I am not an expert!) that this is a question of the application of financial resources. The technical solution to reduce and eventually eliminate flaring is employed elsewhere so it could be applied also to all the Nigerian wells if the funding was made available. Of course it would be a big project but for years Shell has been planning to put a stop to flaring but deadlines for achieving this are constantly being put back. In its corporate communications Shell is keen to be seen as environmentally responsible. They could end gas flaring in the Delta to help make this ambition a reality – and (like at Corrib) they might win a few hearts and minds along the way as well.

Sakhalin
The Board presented Sakhalin more as a triumph than the disaster it was and they got quite an easy ride from those present at the AGM. There were questions and some of these were informed and pointed but the fact that senior directors’ remuneration was actually increased as a result of the “successful” renegotiation of the project with the Russians (rather than reduced as many of us would think would have been more appropriate!) almost escaped the meeting. When I look at the Sakhalin story it seems almost unbelievable to me that a company of Shell’s stature could manage a project of this scale so incompetently. The story is well documented elsewhere so there is not need to repeat it here – other than to say that I was surprised that nobody in either hall called for heads to roll.

Share performance and buy-backs
The inadequate performance of Royal Dutch Shell shares over the past year (see graphic for comparison with the FTSE 100) was a very live item – as was the company’s continued share buy-back schemes. Questions elicited an extraordinary response from Jeroen van der Veer and CFO Peter Voser. They claimed that there was nothing that they could do about the share price other than to continue to manage the business as competently as they could! The disingenuousness of this response was astonishing to anyone who knows how much time is devoted by Shell to the cultivation of the Financial Analyst stakeholder. Let’s be clear about this – in the past Shell has used the enhancement of shareholder value as a key measure of performance. Whilst dividends keep pace with inflation (although not in Sterling terms now that they are given in $US) the share price underperforms. And in addition the company buys back its shares rather than finding proper investment opportunities for the spare cash (or returning the money to shareholders in extra dividends). Voser claimed that in the long term buy-backs would increase shareholder value – but as one questioner pointed out in the long term we will all be dead! The shareholders hated buy-backs but there was no sign from the Board that this practice will cease. A few less buy-backs and a few more community friendly capital investments would be my personal preference. The share price might do better as well – in the short term anyway!

Remuneration
We were asked to approve the Remuneration report and this led to a lively discussion about the huge salaries that the high-priced help in Shell is now rewarding itself with. Jonkheer Aarnout Loudon is the non-executive director responsible to making sure that there is an argument to defend the multi-million pound salaries and other benefits of the Executive Directors in Shell. Now Jonkheer Loudon may not quite have the common touch – “Jonkheers” are noblemen and right at the top of the pile in the Dutch class system. And the poor man has to struggle on himself with just barely £100,000 a year from Shell to compensate him for his arduous work. But then I suppose apart from helping set his Executive Board members remuneration, he doesn’t really have a lot to do. And perhaps he has some savings to help pay the gas bills to ensure that his is warm during the cold Wassenaar winter nights. One most eloquent speaker in the Hague couldn’t believe how much CEO van der Veer was paid last year (around $10million- excluding pension benefits!) and said that this was more than all the members of the Dutch cabinet combined! He has a point. I know why they pay themselves so much – because they can (and there is always a handy Jonkheer around to help you make the case).

Is Shell in good hands?
That’s the acid test question when once a year we see the heavies who run the company and who protect our investments and (in my case) my pension. I suppose that my conclusion has to be that they are probably as good as we could expect. But let me pose just one question to them. You are all now rich beyond the dreams of avarice and no doubt in your personal lives you live very well indeed. Whether this means yachts and homes in tax havens and art collections and fine wine and private jets I don’t know. Perhaps you are all being prudent so that your partners and families will be looked after. But now you are rich can you imagine what it must be like not to be? To be a poor County Mayo farmer; or a long retired Shell Pensioner of 75 on a pension of £5000 a year; or someone living near a refinery belching out noxious fumes and who doesn’t have the money to move. Can you imagine what it must be like? If you can then why not show some real compassion when you manage Shell’s wealth? Sort out Corrib. Sort out the Delta flaring. Sort out all the other social and human and environmental problems that your business almost inevitably brings with it. You never know – the share price might even go up if people believe they can be sure of Shell again.

© Paddy Briggs 15th May 2007

Article from "Market Leader" Autumn 2006

2006-10-05T09:34:00.000+01:00

Managing brands in the oil industry - the case for demerger
(Unedited version)

Reproduced with permission of Market Leader, the strategic marketing journal for business leaders. To subscribe visit www.warc.com/bookstore © Copyright WARC and The Marketing Society.”

The recent call by the respected financial advisor JP Morgan Cazenove for oil giant BP to split itself into two separate corporations, upstream (exploration and production) and downstream (marketing), will have struck a chord with many marketers in the international oil industry, as well as with the financial sector. In this article ex Shell Brand executive Paddy Briggs explains some of the background to the issue and outlines what the marketing and especially brand advantages of such split for BP, Shell and the other oil majors would be.

Marketing drives production…

Experienced marketers know that there are often tensions in companies between those in the factories who produce, and those in the marketplace who sell. But in the best customer-driven companies these tensions are usually resolved by managers making a judgement about what is in the best long-term interest of the brand, and therefore of the consumer. All of the world's great brands do, of course, have to source or produce their products and services - but the manufacturing process is always subservient to the market and must always deliver products that the consumer wants to buy at a price that they can afford. The world's great brands have reached their prominence by having a customer obsessive mindset throughout their organisations - and especially at the top.

…but not in the oil industry.

Consider, for a moment, an oil industry multinational such as BP or Shell. The success of these energy companies over the past seventy-five years has been primarily built on their technological competence and innovations in the "upstream" and on their willingness to invest heavily in the search for new hydrocarbon assets. This imperative undoubtedly still drives the business today - it is the main source of the companies' profit streams and it is where, by far, the largest proportion of the companies' investments are made. Unsurprisingly most of the members of the senior management teams of these corporations have been chosen from amongst their successful practitioners in the upstream.

But most multinational oil companies are also world-scale branded marketing businesses - they are, then, a curious amalgam of a global, branded consumer business (on the one hand) and a high technology raw material extraction, production and processing business (on the other) - and there is only the very loosest connection (and no interdependency) between these two segments. Shell or BP’s consumer business (most visibly their petrol station networks) is not in any way dependent on their production business for its products, which can be (and are) obtained from any available supply source. Whilst there may be “value added” along the supply chain from production to consumption this is incidental – there is no need to have a vertically integrated structure in order to realise that value - each segment is independent.

The call to split up BP.

Cazenove's suggestion that BP be split into two quite separate businesses and corporations will have probably been welcomed by BP's marketers - for in all oil Majors managers in the “downstream" struggle daily with the reality that marketing is the poor relation of exploration and production. The consumer end of the business is always subordinate to the upstream search for, and production of, Crude Oil and Gas. Consumer-driven marketing and production-driven geology, engineering and technology are quite different disciplines - and there is little evidence that those with talents for the latter field can also be competent in the former. But whilst the upstream is their main focus of attention, and their main source of profitability, companies like BP, Shell and ExxonMobil also have substantial marketing assets, strong marketing brands and millions of customers. Shell is the world’s leading branded retailer (in any product category) with around 45,000 petrol stations in around 100 countries (compare this with McDonalds 30,000 restaurants). But in my experience matters related to this huge business occupied little of the time of the company's senior management and were rarely agenda items at board meetings.

Successful marketing requires focus on a single skill.

Historically the big players in the oil industry created vertically integrated businesses with marketing, as the final link in the chain. In the past marketing was a core competence to such an extent that many of the most memorable advertising campaigns in both the inter-war year and the post war decades were from the oil industry. Mention "You can be sure of Shell" or "Esso Blue" to a British baby-boomer and he or she will sing you the jingles that went with the campaigns. In the years before the first oil crisis of 1973 we were all "going well with Shell" and believed that the "Esso sign meant happy motoring". In Britain one of the reasons for this marketing success was the existence of a company, now long forgotten, called "Shell-Mex and BP Ltd." - a joint venture between Shell and BP to market products under these two brand names in the British Isles which was, for a time, one of Britain’s largest companies. Shell-Mex and BP was "only" a marketing company and it did not even run refineries. The company’s products came mostly from its parent companies which then substantially left it alone to build its business. Because it was exclusively a “single skill” marketing business Shell-Mex and BP’s board of directors, and all of its managers and employees, concentrated principally on brand management and on the customer. It was also a very innovative company creating the concept of self-service at petrol stations and the domestic central heating market amongst many other customer-led products and services.

Yielding lost value

The likelihood that dedicated marketing companies would more successfully manage consumer brands in the oil industry was no doubt part of Cazenove's thinking in their suggestion for an upstream/downstream split for BP. Cazenove has suggested that such a demerger could "yield £35bn of lost value to shareholders" - an astonishing sum but no doubt they have done the math. Certainly the downstream businesses of the Oil Majors are huge concerns with assets, revenues and an international scope that would make them world class businesses on their own. The most compelling reason for a demerger is, however, not just that the resultant downstream businesses would be substantial but that the management of them would be 100% focused on the brand and on the customer. Take the most visible asset that a BP or a Shell has - their worldwide networks of petrol stations. In some markets tentative steps have been taken in recent years to use these assets to market a wider range of goods and services (notably convenience stores). Imagine how much extra impetus would be given if this retailing, rather than being seen primarily as the thing that you do at the end of the integrated oil chain, was the primary focus of the business.

Extracting maximum brand value

The brand implications of a upstream/downstream split for Shell or BP would have to be carefully considered but coincidentally each of these corporations has an obvious strategic brand solution readily available.

For Shell the Shell brand and logo and visual identity system could be allocated to the new downstream marketing business. The existing petrol station networks and product brands would pass to the new corporation as its most valuable tangible and intangible assets. The upstream business could be re-branded "Royal Dutch" - the traditional name of the Dutch part of the Shell Group and a name that is already familiar. (At this year's first Annual General Meeting of "Royal Dutch Shell plc" the "Royal Dutch" part of the corporate name was very prominent - along with its "crown" symbol. A ready-made corporate brand for the new upstream company is already substantially in place.)

For BP there is also an attractive and fairly easy to implement solution to the brand issue in the event of a split. The BP name and logo could be allocated to the upstream company and the downstream business could be re-branded "Castrol" - exploiting the high brand value and excellent reputation of this famous lubricant brand which is now part of the BP family. There is no reason why the Castrol name could not be "extended" also to brand petrol stations and other marketing assets and products.

In both companies the refineries would remain separate from the marketing business and could form a third independent business. As we have seen there is no need for oil marketing companies, however large, to also own and operate production facilities.

Reputation management

Another advantage of a split as suggested is that virtually all of the reputation damage that oil companies have received in recent years has come from their upstream not from their downstream activities - but damage any part of an integrated oil company and you potentially also harm the consumer brand. The petrol station is the most visible manifestation of an oil company and can become the focal point for protesters. Demerge the consumer brand from the upstream business and not only to you remove the risk of this type of brand damage you also put all of your reputation management and communication efforts for that branded downstream business into areas that are close to the consumer. For example the oil companies’ failures to communicate the rationale for petrol price increases over the years have been directly attributable to their lack of internal focus on developing effective communications with the consumer stakeholder.

More than twenty years ago Tom Peters[1] wrote “The most successful [companies] of all are those diversified around a single skill”. If ever a business need to concentrate on the “single skill” of marketing to maximise its business potential it is the oil industry – with the added benefit, of course, that the explorers and the drillers and the refiners could also focus 100% on what they do best. Shell (or rather "Royal Dutch") might even improve its oil reserves, as well as maximising the potential of its brand, if it took the step to demerge!

[1] “In Search of Excellence” , Peters and Waterman, Harper Row, 1982

Article in Media Week

2005-06-16T10:11:00.000+01:00

Why there’s a role for agencies to play in helping clients manage CSR

In a world where corporate social responsibility plays an important role in decision-making, former Shell brand manager Paddy Briggs says the media industry must embrace the “climate of concern” to succeed.

A remarkable and welcome shift in the positioning of advertising professionals is beginning as they move away from the traditional stance that the advertising world has taken.
Your feature (Doing the right thing, page 30, 7 June) on the changing climate for advertising in a world increasingly concerned with social and moral issues, was timely. This position is still summarised in the International Advertising Association's (IAA's) stated role that it will "champion the freedom to advertise responsibly without unwarranted restrictions".
The problem with this pose was often that what was "responsible" was determined by the client, egged on by their agency if high billings were promised, rather than from any more socially concerned perspective. If the communications were "legal" – by far the acid test – and if they could, if necessary, be somehow defended as "decent, honest and truthful", then that was enough.

It was, of course, the tobacco industry, a major provider of funds to the IAA, that was behind the IAA's "free to advertise products which are legal" principle.

Unwavering support

It's no secret that some advertising agencies, unwaveringly supported by the IAA, have conspired with tobacco clients for decades to find ways of continuing to promote cigarette brands, even though media channels are increasingly blocked to them.
If you doubt that they continue to do this, even in a world where corporate social responsibility (CSR) plays an important part in business decision-making, just watch a Formula One Grand Prix.

At Media Week’s Media 360 conference in April, all of us on the "From Social Problem to Your Problem" panel – and many in the audience – argued that communications agencies should have a role to play far further "upstream" of a potential problem or issue than is currently the case.
What if, instead of being presented with an issue that is causing reputational damage to a client or a sector and then being briefed to help minimise the damage, for example by producing information style advertising, the agency had actually helped identify the potential problem in the first place?

In my more than 10 years with different Shell companies around the world, as a client of a wide range of communications agencies of all types, I rarely met any employees of these agencies who were anything less than smart and articulate. I say this neither to ingratiate myself with these agencies in my post-Shell life as a brand consultant, nor to repay any debts, but to suggest to the communications world – and especially to their clients – that in these agencies there is an underutilised well of talent to be exploited. Too often, the role of an advertising agency or a design house or a media buyer is seen far too narrowly as "merely" a provider of these professional services. While agency and client may sometimes comfort one another with talk of "strategic marketing" and work together on the production of cerebral "communications plans", all too often these plans are heavy on the communications components and woefully weak on the real business strategy of the client.

That communications planning, often de-coupled from a client's business plan, is regrettable in many areas, but particularly so when a client is in or approaching the squally rapids of reputation risk.All too often, an "issue" emerges and a media world hungry for stories will run with it. Yet we find that the client or the industry group is totally unprepared and incapable of responding quickly or coherently to the challenge. When, 10 years ago, Shell was in the headlines daily because of its plan to dump a redundant oil platform, Brent Spar, in the ocean, we were wholly ill-equipped to handle the furore this plan had stirred up.

Reputational risk

While it is true that Shell was culpable in not seeing the reputational risk of the Brent Spar disposal plan – and this was to lead to much soul searching – it is also true that Shell's raft of communications agencies were nowhere in the loop.
When the various elements of communications – corporate advertising, PR, direct marketing, etc – were eventually deployed, it was in a firefighting exercise to improve Shell's damaged reputation among key stakeholder groups. But what if instead of problem solvers, the various communications agencies had been sufficiently immersed in Shell's business that they had actually helped anticipate the problem before it happened?
Most communications professionals I have worked with over the years have told me that it is essential that an agency fully understands a client's business before they start to prepare creative, or a media plan, or a DM programme. But how many of these professionals have really taken this to its logical conclusion and demanded that the client more thoroughly brief them on the client's business – including a briefing on what I call the business "stress points"?
A business "stress point" is defined as a social, environmental, economic, commercial, legislative or other trend that can potentially impinge upon the client's business.
The key word here is "trend", because it suggests that most changes do not come out of the blue but that they can be anticipated – if the necessary processes are in place to do this.
Brent Spar, seen in isolation, was about the right way to dispose of a big lump of metal. In fact, what it was about was the boundaries of CSR which were not, in this case, determined by the law or by technology, but by public perceptions.
Shell's plans were perfectly legal and most experts said that the proposed solution was technically the best. But in the public's mind, the proposal was environmental vandalism– therefore it was. "Perceptions are reality because people believe them to be true".
The current issue of child obesity is another case that illustrates the need for an agency to be directly involved in the issue identification process at the beginning. Children have not all of a sudden become fat – what has happened is that childhood obesity has suddenly emerged as an issue and fast-food firms, among others, have conveniently been the media's Aunt Sally.
The industry has responded to the challenge and advertising, etc, has played a part in promoting, for example, the new healthier eating options at the fast-food outlets. But this all seems very reactive with the businesses and their marketing agencies only acting because of the threat to their reputations as good citizens.

I would argue that this is an issue which could have been, and should have been, anticipated well in advance and that communications agencies could have played an important role in helping clients identify the social trends that were possibly going to lead to child obesity being an issue.
This would have required the role of the agencies to be redefined in such a way that they not only produced professional communications plans, but that they contributed to (or even facilitated) client sessions which worked on analysing business risks.
The possibility of child obesity emerging as an issue was surely identifiable many years ago and an agency could not only have helped a client identify this business "stress point", but help them develop a business and communications plan to minimise the risk. In this case, in fact, an early realisation of the potential problem could have been turned into a business opportunity. To be the first food provider to offer and promote the "healthy eating" option could have led to a potential profit stream, as well as being promotable as socially responsible and thereby enhancing the brand's reputation.

Clearly, a move to a world in which clients accept that there is merit in having their communications agencies role much less narrowly defined, and to accept them as being much more involved in their business, needs the agencies themselves to demonstrate that they can genuinely add value. This requires the agencies to develop and promote competencies in such areas as CSR and to inculcate these competencies into all of their processes. It also requires that client/agency partnerships are much more open and enduring than is sometimes the case.
However, there is no reason why the very large and multinational communications conglomerates, in particular, should not see part of their role as being to provide challenges to their clients in such a way that future social, and other, changes which could be potential business risks, and/or opportunities, are anticipated much earlier. This should lead to fewer surprises and genuine opportunities for companies and brands to differentiate themselves from their competitors.

Finally, it is also self-evidently essential that the IAA, and some others in the communications world, move away from their out-of-date and facile positioning that they will "fight for consumers' freedom to exercise their right to choose". This was always over simplistic, and shamelessly and self-interestedly protecting their income streams and it brought the industry into disrepute. In the future, the prizes will go not just to the brands and the agencies which communicate most creatively or cost effectively, but also to those that understand the "climate of concern" within which business is now conducted – and to those who spot a social trend before it potentially overwhelms them.

Paddy Briggs is managing partner at consultancy BrandAware. He previously worked for Shell for 37 years, including 15 in brand management

Article in "Market Leader"

2004-12-24T10:49:00.000Z

The story of Shell- how a great brand fell from grace
(Unedited version)

Reproduced with permission of Market Leader, the strategic marketing journal for business leaders. To subscribe visit www.warc.com/bookstore © Copyright WARC and The Marketing Society.”

In his seminal book on brand and design “Corporate Identity” (published in 1989) Wally Olins describes three different forms of corporate structure:; the “endorsed”, in which the corporation has a group of activities and companies which it endorses with the group name and identity (e.g. General Motors) ; the “branded” where a company operates through a series of brands which may be unrelated to each other or to the corporation (e.g. Unilever) and the “monolithic”, in which a corporation uses one name and visual identity throughout . For his example of a “monolithic” structure Olins chose Shell. “More than 90 percent of Shell’s business throughout the world bears the Shell name” he wrote, “…the reputation of Shell is symbolised to a quite extraordinary extent by its name and visual imagery”. Research around this time showed not only that Shell was highly respected but also that the Shell logo was the most recognised commercial symbol in the world. Shell was the brand leader in the oil industry and also, by some measures, the largest business of all types in the world in the Fortune 500 lists. Heady days indeed! Where did it all go wrong?

In the late 1980s I was working for Shell in Hong Kong, and increasingly in China, where we were making every effort to maximise the benefits of the unique strength of the Shell identity that Wally Olins had so accurately described. By striving to offer the highest levels of customer satisfaction in all of our many consumer businesses we were also consciously trying to ensure that the corporate reputation of Shell was enhanced and valued. When senior Shell executives visited the Territory for discussions on a multitude of large scale China investment projects their task was hugely aided by the fact that the Shell brand was already known and respected in Hong Kong. Around the world there were well over one hundred similar country-based Shell companies pursuing a similar strategy.

The norm in the oil industry is vertical integration - an oil company manages the full hydrocarbon stream from exploration for oil all the way to the point when petrol is put in the tank of a customer’s car. Until fairly recently this operation was generally conducted under one brand name and this has always been the case for Shell. In recent years mega-mergers in the sector have clouded the issue somewhat and some of the companies have created, often temporarily, a more multi-branded structure. BP dropped the “Amoco” from their corporate name as soon as they could (although they have kept the brand equity rich “Castrol” name) and Total equally swiftly discarded the “FinaElf” from their title. As well as the obvious external benefits of having a single name there are internal benefits as well. As Olins described it “A single name [“Shell”] and visual identity became significant as a rallying point for staff…employees…could identify with the whole enterprise”.

Given the huge commercial benefits that can accrue from having a brand name (and visual identity system) as familiar as Shell’s you would think that this value would be fully understood throughout the company and that the organisation structure would be designed to maximise brand value for the benefit of all of its diverse businesses. It would also be reasonable to assume that all of the most important actions of the company and its key employees would be at least in part driven by an ambition further to enhance brand equity and to protect corporate reputation. I was soon to discover that in Shell this was not necessarily the case. Looking back fourteen years from today, Shell’s then position looks like a golden era and it is true that few of us at the time thought that the pride that we had in our then strength presaged a calamitous fall.

In 1990 I was called back from Hong Kong to head up a project, “Retail Visual Identity” (RVI), to redesign Shell’s global petrol station network. From the start I assumed that the RVI project, if we were successful, would contribute far more than “just” the enhancement of Shell’s competitive position in the Retail sector. Shell’s petrol stations were the most public face of Shell. We were present in this sector in 120 countries world-wide and we had more than 45,000 outlets. We were not just the biggest petrol retailer but the biggest branded retailer in any sector (McDonald’s, at the time, had around 15,000 restaurants). Extensive consumer research had shown that the Shell brand had extraordinary strength and that we had an enviable reputational advantage - but it also indicated that some consumers felt our visual identity was beginning to look a bit tired.

By the autumn of 1990 a number of things about RVI were beginning to become clear. The average cost of re-imaging a petrol station was assessed at around $30,000 which meant that the overall cost of the project was well over a billion dollars. It was also clear to the project team from looking at what Shell’s competitors, particularly BP, had achieved that it would be necessary to complete the exercise as quickly as possible – within three years at the outside. The senior Shell executive responsible for seeking approval for this funding was David Varney[1] – the head of the global marketing Division within which I worked. Varney’s presentation to Shell’s Committee of Managing Directors (CMD) was masterly. Eschewing any return on investment calculations (which would have been largely fictitious anyway) he told the Managing Directors that Shell had to re-image its networks because we lagged behind the competition and that, whilst we would do all we could to minimise costs, there was really no alternative but to proceed. It was a typically robust message from Varney and one that a perhaps slightly bewildered CMD accepted.

The sense of elation that we had that we were rolling was soon to be tempered however. It became rapidly clear that the project was seen only as a marketing project. In other words that RVI was narrowly seen as being about the repositioning of the “brand” in Retail - it was not seen as being part of a more complete plan to enhance Shell’s corporate “reputation”. This seemed to many of us a non sequitur – Wally Olins had shown that for monolithic brands there could be no distinction made between the brand in the market place and the overall reputation of the company. By ensuring that Shell’s 45,000 petrol stations gave a far higher level of customer satisfaction we thought that we would make a major contribution to the enhancement of the overall reputation of the Group.

For Shell’s top management the RVI project was just about the re-imaging of our petrol station networks. The crucial consequence of this doubtful logic was that Shell companies (“Operating Companies”) around the world would be expected not only to fund the implementation of RVI themselves but to do so narrowly out of their Retail budget and earnings. So RVI, rather than being a project with momentum and with a strong central commitment and funding, became vulnerable to the vicissitudes of local company priorities. The imperative to effect the changes within three years disappeared and for many years most parts of the world had networks combining sparkling new RVI sites with outdated and in many case poorly maintained sites for which the re-imaging funds could not be found. In effect around the world there were two Shells – and at the top in the Group there was little or no interest in addressing this problem.

That Shell operates at times in a sort of parallel universe where the normal logic of businesses in the real world is suspended, and singularly Shell behaviour patterns emerge, became increasingly apparent to me at this time. The long drawn out and inconsistent implementation of RVI showed that, whilst any branded retailer (including those in the petroleum sector like BP) would see that there was an urgent need to implement a new brand identity as quickly as possible in Shell there was no such imperative. Similarly whilst any global brand would want to drive implementation of a repositioning exercise centrally, Shell was happy to leave the exercise to local decision making. And finally whilst a brand repositioning exercise of this type is a vital and significant strategic marketing project ,and a reputation building corporate identity project as well, demanding central funding and a firm bias for action Shell was prepared to let it drift and was unwilling to allocate any central funds. A strategic project, driven by the sort of “must do” logic so eloquently articulated by David Varney, cannot flourish in a world where ever more demanding performance indictors are put in place and which requires ever shorter returns from any investment.

Through most of its history Shell had been an immensely self-confident brand. This confidence had huge benefits in that, for example, when a new marketing opportunity occurred (e.g. a market entry) there was an expectation that by transferring experience from similar existing operations a successful presence could be built. And the self-confidence also led to a patient acceptance that to establish a profitable business in a new market would take time. In the 1990s this self-confidence began to be eroded and there was a growing reluctance to take risks. This corporate nervousness also led to a period of introspection and to the almost daily search for external gurus to advise on problems - real or imaginary. A bias for the over quantification of every problem crept into the culture leading to over elaborate studies, delayed decisions and missed opportunities.

Those of us working in brand management viewed these trends with alarm. We knew the truth of Lord Leverhulme’s remark “I know half my advertising is wasted, but I don’t know which half!" And we also knew that strong brands stay strong because there is an understanding that they need continuous investment. Whilst any brand manager will strive not to waste any of his communications budget he also knows that advertising is more an art than a science. With the obsessive bias for quantification in Shell, and the ever shorter term measurement periods, advertising budgets were vulnerable and duly attacked. We also viewed with concern the absolute failure of the organisation to recognise that brand investment (RVI, advertising etc.) enhanced Shell’s corporate reputation if it was done well. Historically the tag line “You can be sure of Shell”, whilst mainly associated with products and services, also created a reference frame within which all of Shell’s diverse business was carried out. In this period of the mid 1990s there was a complete unwillingness to recognise this reality – above all to see that brand and reputation are two sides of the same coin – even that they are synonymous. There was no organisational recognition that the management of reputation, and the soon to become a necessity to develop a Corporate Social Responsibility (CSR) policy, were inherent parts of brand management.

It was in 1995 that two events brought the whole reputation management issue into sharp relief in Shell. The extensive protests against Shell’s plans to dump a redundant Oil Platform “Brent Spar” in the North Atlantic caused much heart-searching and eventually led to the abandonment of the plans. In Nigeria around the same time that the political activist Ken Saro-Wiwa implicated Shell during his “treason” trial by saying “…the ecological war that [Shell] has waged … will be called to question sooner than later and the …crime of the Company's dirty wars against the Ogoni people will also be punished.” When Saro-Wiwa was executed on trumped-up charges some of the world-wide condemnation of the act was aimed at Shell who by association was implicated.

In 1995/6 Shell suddenly burst into a frenzy of activity designed to restore the perceived damage to its reputation resulting from Brent Spar and Nigeria. A raft of processes and initiatives was launched which was designed to find out the views of key “stakeholders” about Shell - and programmes were subsequently initiated to communicate a CSR message. This activity was undertaken by a team which was organisationally completely separate from those responsible for the management of the Shell brand. There was no integration of the CSR (etc.) work with Marketing and no understanding that this was necessary. Crucially the CSR team were almost all professional “buy-ins”. They were skilled practitioners in subjects like Sustainable Development and CSR – but few of them had any practical experience of the Energy industry and they were almost all new to Shell. They worked in London, remote from Shell’s local operations around the world, and few of them made any visits to local Shell companies. There was a complete disconnect between the management of the brand and the management of reputation. Throughout the Group quite different people were involved in the marketing communications activity, which promoted brands, and the new corporate identity initiatives, which were designed to enhance Shell’s reputation. The marketing communications budgets were severely cut whilst the comparatively well-funded “corporate” advertising and other “reputation” initiatives grew in significance - but with few links being made to the brand communications work.

Running in parallel with these changes in respect of the presentation of the external face of Shell, internally there was an emphasis throughout the organisation on behavioural change. The argot of “Old Shell” and “New Shell” was commonly used to describe what was supposed to be a step change in behaviour. Some of this was a change in process and in particular in decision making (greater centralisation was the main consequence) but most of the changes centred on a drive for greater efficiencies and lower costs. The old Shell structure was torn apart and the new “businesses” that were created cut across the old lines of geographic control and the country and its “operating company” became wholly subordinate to these vertically structured global businesses. The cost control imperative led not only to the decimation of brand communications budgets but also to swingeing reductions in levels of marketing staff in Operating Companies and to a greater regionalisation or centralisation of decision making. We were getting further and further away from our customers and no longer “thinking globally and acting locally” - the corporate behaviour that had historically created Shell’s global brand strength.

Whilst all of these developments were damaging to the long term health of the Shell brand, and the failure to institute a proper dialogue between marketers and those managing the reputation enhancement initiatives was counter-productive, what none of us could have imagined was that the much hyped “New Shell” would be remembered not so much for these errors but for catastrophic failures of behaviour. In early 2004 it was revealed not only that Shell had been systematically overstating its oil reserves for some time but that senior executives recognised that they had been mendacious. Heads rolled – including that of the Group chairman Sir Phil Watts and the resultant crisis was far, far greater than anything that had occurred in the 1990s.

If there had been a more confident and integrated approach to brand management (in keeping with the reality that Shell is a “Monolithic” brand corporation) and if there had been a better funded and consistent brand management exercise over the years could this disaster have been avoided? If those working on the corporate reputation initiatives had been more steeped in Shell, and if they had better understood where the business stress points were, could they have much earlier seen a potential problem? Certainly if there had been a real understanding and commitment that behaviour throughout the organisation had to match the rhetoric of the corporate CSR communications then the charge of hypocrisy would have been avoided. The crucial mistake was the lack of co-ordination of all the many aspects of the management of Shell’s public face and the lack of proper checks and balances to pick up the warning signs of dysfunctional behaviour. As many as a hundred people (perhaps more) must have known that Shell was fabricating facts about its reserves. Did none of them see the potential brand damage that this would cause? A truly brand aware company would have identified the risks much earlier.

Finally many global corporations have a director at board level who takes charge of all aspects of that corporation’s brand and reputation. Shell had no such position. By contrast John Browne CEO of BP was advised by one of his communications agencies to appoint a Board level individual as brand and reputation guardian. “Who should it be” he asked. “You” was the reply. Browne accepted this recommendation and BP’s brand has never looked back. BP’s reputation, their share price and the morale of their staff has never been higher. The lesson for Shell is clear – but is it too late? We shall see.

[1] Varney spent almost 30 years at Shell before moving in 1997 to become chief executive of energy company BG. Varney joined MMO2 in 2001 to oversee its demerger from BT, and his other roles include chairman of Business in the Community since January 2002 and council member of the Confederation of British Industry.

How to avoid brand attacks..

2004-11-29T16:26:00.000Z

From the "Financial Times" Special report on Responsible Business

"The best thing is to try to avoid brand attacks in the first place. According to Paddy Briggs, a former brand and reputation specialist at Royal Dutch/Shell, behaviour is more important than how effectively a company promotes its brand and values.

'If you behave well, the likelihood is your brand will be strong. If you behave badly, and communicate that you are behaving well, not only will you bring your brand into disrepute, you might actually go to jail' says Mr. Briggs"

2004-11-25T14:21:00.001Z

PR Professionals should avoid the spin and help the client to tell the truth!!

It was Alex Carey, quoted in "The Public Relations Industry's Secret War on Activists", who said "The 20th century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy."

Four years ago "PR Week" magazine reported the results of a survey which asked 1,700 PR executives about the ethics in their industry. The results showed that 25 percent admitted they lied on the job and 39 percent said they had exaggerated the truth. Anyone who has worked in PR, Advertising or corporate communications knows the value of being selective in what you say. A stout defence is always that your message is not untruthful – although, of course, it may well be only a part of a greater truth. As Gerald Ratner found to tell the unvarnished truth about your products or services may be very dangerous!

In April 2004 an Email emerged in which a Shell Managing Director wrote to his Chairman saying "I am becoming sick and tired about lying about the extent of our [oil and gas] reserves and the downward revisions that need to be done because of far too aggressive/optimistic bookings." Both executives (along with some others) left Shell in disgrace and they are now being pursued by various regulatory authorities on both sides of the Atlantic. To all of us with a stake in Shell this was a shameful event – not least because of the revelation that the obfuscation over reserves was not just incompetence, but came from systemic mendacity.

It may be that we now live in a world where we expect to be lied to. We were authoritively told that Saddam’s Iraq had weapons that threatened us. It wasn’t true. We have lauded western-style democracy because we believed that the system placed limits on the behaviour of governments - Guantanamo Bay and Abu Ghraib have shown that no such limits exist. And in the corporate world we have been told that modern corporations have a sense of social responsibility (CSR) which stops them from acting like the bad old capitalists of old. But is that really true? My experience with Shell, and my study of other current corporate cause celebres, suggests that the “wicked” Henry Ford or Andrew Carnegie or Andrew Mellon probably had more deeply embedded moral values than many of today’s industry leaders.

What do you make of the statement by the CEO of Imperial Tobacco in an interview in “The Guardian” that “… the biological mechanisms between smoking and the cause of diseases are still unknown?” He suggests in this remark that he knows better than the World Health Organisation (and all other medical bodies around the world) for whom the links between smoking and cancer and heart disease are beyond doubt. He suggests it because his own self interest – and the business of his company - requires that the matter be seen as doubtful even though the reality is that the true facts have been known for a long time.

In Shell I was part of a process which formulated and distributed the Group’s “Business Principles” which included the statement that "Shell companies do not make payments to political parties, organizations or their representatives or take any part in party politics."Shortly after the publication of these principles I was in Houston where I was told that Shell in the United States ignored this rule and made donations to both major parties. And notwithstanding Shell’s problems over truthfulness this year this hypocrisy has continued. The US Centre for Responsive Politics has reported that in 2002 Shell managed to end up on the losing side by giving more to the Democrats than it did the (winning) Republicans.

Shell’s hypocrisy over political payments is, of course, sadly consistent with its mendacity over other things and yet this is a corporation which seemingly embraced CSR and promoted itself as a model of disclosure. Another example is the commitment to Human Rights in the “Business Principles”. Shell says that it to expresses “support for fundamental human rights in line with the legitimate role of business”. However Amnesty International has stated that Shell is “…implicated in environmental and human rights abuses in the Niger Delta area [of Nigeria]” and when I worked for Shell in the Middle East I was specifically instructed by the President of Shell in Saudi Arabia only to allow distribution of the “Business Principles” if the Human Rights commitment was removed.

At the extreme of corporate dysfunctionality there are corporations like Enron and professional advisers like Arthur Anderson whose behaviour was undisputedly illegal as well as amoral. Shell is in the next rank and we must await the regulatory authorities reports before making a complete judgment on the alleged venality of Shell’s executives. But it is not unreasonable to conclude that greed and pride were the deadly sins that drove Shell’s executives to do what they did. They saw their personal rewards being under threat because of poor (reserve replacement) performance and they saw their status and post Shell earning potential being put at risk from exposure of the truth.

Whilst few would argue that corporate deceitfulness of the scale that we are witnessing today is entirely new (from the Industrial Revolution onwards some businesses have operated without due regard for some of their stakeholders) what is new is the modern regulatory climate and the need not just to be seen to be behaving properly but actually to do so. When the behaviour does not match the rhetoric it not only brings the corporation into difficltulies but it brings the whole profession of PR into disrepute. We have thick skins and like politicians and the media we are used to charges of spin and of being in the propaganda business. I believe that we can be and should be part of the solution not part of the problem. This requires us not just to respond to PR briefs but to question their legitimacy. No PR person or advertising executive should be briefed to peddle untruths – but it is up to us to challenge the substance of briefs and to refuse to get caught up in the dark world of protecting companies or their executives by systematically lying about them.

THE CHANGING FACE OF SHELL

2004-11-19T13:35:00.000Z

THE CHANGING FACE OF SHELL

An insider’s view of the remarkable world of a corporate giant and how it sought to change the way the world perceived.

The same week that I went to the (delayed) “Shell Transport and Trading” Annual General Meeting I also went to see the new Harry Potter film. The movie presents a parallel world of wizardry and spells that operates alongside the “real” world in which most of us live our daily lives. Harry Potter’s world overlaps with the real world from time to time - and many of the elements of his world are very similar to real world elements – but it would be dangerous to draw any comfort from that. No sooner do you think that you are back in familiar surroundings than magic intervenes and your journey returns to one in which the dimensions of space and time work quite differently and where the application of normal logic (cause and effect) has to be suspended. And so it is with Shell.

When you worked for Shell as long as I did (37 years) you learnt to accept its strangeness – just as Harry Potter had to adjust to Hogwarts. This adjustment took place quite gradually and I cannot recall one moment when I thought that I was being indoctrinated or force fed an ideology. Indeed Shell is essentially unideological – which is why when it tried to create a set of quasi-ideological principles in the 1990s (in response to external criticism) it struggled. This book is (inter alia) about that struggle and about the inevitable conflict and confusion that can occur when a predominantly “Left Brain Function” organisation has to come to terms with the resolution of mainly “Right Brain Function” issues and challenges.[1]

The book describes some of the paradoxes that existed within Shell and how extremely clever (but “left Brain” dominant) people approached the task of managing the decision-making process in a rapidly changing world. Society’s expectations of what is required of businesses generally (and multinationals in particular) underwent a major change in the last two decades of the twentieth century and Shell was not, of course, alone amongst big businesses in neither fully anticipating these changes nor in developing a strategy to cope with them. However there is a certain irony in the fact that Shell was rather myopic when changes were happening all around (and were plainly visible to those who tried to see them). The irony is that Shell was a pioneer of the Scenario Planning methodology that is designed to help decision makers wrestle with future uncertainty.[2] Pierre Wack’s description of the benefits of “creative foresight” were extensively discussed within Shell at the many “Scenario Planning workshops” in the 1980s and early 1990s, But, as we shall see, an organisation which prefers the certainty of physical phenomenon to the uncertainties which are inevitable when human beings interact, never successfully used scenario planning to develop any unique strategies. It is arguable that Shell was marginally ahead of its major multinational energy company competitors in picking up the growth of environmentalism and the growing power of NGOs (Non Governmental Organisations) but it is hard to find an example of how this affected any major strategic decisions or actions.

So the story of Shell in the 1990s is one of how an organisation dominated by technocrats (for whom the processing of a series of inputs in a structured way always leads to entirely predictable outputs) tried to come to terms with unpredictability. In this book that story is told mainly with anecdotes and there is no pretence that the chronicle is complete. But the intention is that each of the anecdotes is illustrative either of the corporate culture or of how Shell people responded to a “weak signal” – an event that may in itself be comparatively unimportant but which is later seen as one sign of a change that could be very important indeed. The problem with weak signals is that when busy men are wrestling with what they see as big decisions they may have no time for those who wish to draw their attention to minor phenomena which may (or may not) be important.

In the period under review, Shell’s top management had to wrestle with change - but there was nothing unusual in that. Arguably change is the only constant in the Energy industry and, following the first oil price shock of the early 1970s, no successful oil company executive would deny the uncertainties inherent in their world. But what was new was the nature of some of the changes. Suddenly (or so it seemed) there were new “stakeholders” on the block. The NGOs were active, well funded and consummately able communicators and some of the world’s media relished stories about the insensitivity or amorality of big business. Post Bhopal[3] and the Exxon Valdez[4] it became clear that companies operating in the Energy/Petrochemicals sector were going to have to get their act together if they were to protect their reputations.

Notwithstanding the clear signals that the world was increasingly unwilling to tolerate multinationals operating without due regard for the environment or for local communities, Shell was slow to move. There were two principal reasons for this. First the technological imperative of Shell was so powerful that there was a presumption that Shell decision- making would lead always to the “best” technical/environmental solution. Secondly there was a strong pride that Shell, because it had operated in more than one hundred countries for well over one hundred years, was a culturally understanding and caring organisation. Many Shell careers were built on having operated successfully (and therefore, it was assumed, sensitively) in (say) the Middle East or Nigeria.

It was in 1995 that two events blew Shell’s presumptions of superiority out of the water. The extensive protests against Shell’s plans to dump a redundant Oil Platform “Brent Spar” in the North Atlantic caused much heart-searching and eventually led to the abandonment of the plans and to a more environmentally acceptable disposal on land. And it was in Nigeria that around the same time that the political activist Ken Saro-Wiwa implicated Shell during his “treason” trial by saying “…the ecological war that [Shell] has waged … will be called to question sooner than later and the …crime of the Company's dirty wars against the Ogoni people will also be punished.” When Saro-Wiwa was executed on trumped-up charges some of the world-wide condemnation of the act was aimed at Shell who by association was implicated. It was these two events that gradually brought a realisation to some in Shell that the management of reputation was above all about the management of perceptions. The original technical decision on Brent Spar might have been right, but if the public perception was that it was wrong – then it was wrong. Shell may have had entirely clean hands in respect of Mr. Saro-Wiwa – but if the perception was that the company was in some way implicated in his murder then it was.

It was, therefore, in 1995/6 that Shell suddenly burst into a frenzy of activity designed to restore its damaged reputation. In classic Shell fashion a raft of processes and initiatives was launched which was designed to find out the views of key “stakeholders” about Shell - and then programmes were initiated to take action to promote the Shell brand and to restore the Group‘s reputation. The story of this period is extensively covered in this book and, in particular, the role of the then Group Chairman Cor Herkstroter is discussed. Amongst the anecdotes is a description of how the famed Advertising big shot Maurice (Lord) Saatchi became involved and how eventually some ground breaking communications (although not from him!) were instituted. Running in parallel with these changes in respect of the external face of Shell, internally there was an emphasis throughout the organisation on change. The argot of “Old Shell” and “New Shell” was commonly used to describe what was supposed to be a step change in behaviour. Some of this was a change in process and in particular in decision making (greater centralisation was the main consequence). Some of the change was the drive for greater efficiencies and lower costs. The old Shell structure was torn apart and new highly accountable “businesses” within the Group were created. These cut across the old lines of geographic control and the country and its “operating company” became wholly subordinate to the vertically structured global businesses.

Whilst organisational and attitudinal changes were being actively managed other cultural changes were also underway. One of the most significant of these (in the light of later events) was the move towards a far greater performance related remuneration and rewards system. Short term targets (if achieved) delivered high financial rewards to individuals and the old rather structured and rigid remuneration system of the Group was changed.

Whilst virtually all of Shell’s serious money continued to be invested in traditional businesses (especially upstream oil and gas) Shell also dipped a toe in the water of non traditional energy (Wind, Solar and Forestry) a business for which it coined the descriptor “Renewables”. Much of the advertising focused on this area (demonstrating that Shell cared about the environment and about the future needs in a time when fossil fuels ran out) but in reality it was a very small business indeed. Had it not been convenient to attempt to manage the perception that Shell was into the Renewables business for reputation management reasons it is doubtful whether Shell would have got into these activities at all. The subsequent withdrawal from the Forestry business indicates how difficult it is for Shell people to manage something away from their traditional areas of competence. The failed moves into Nuclear Power, Metals and Coal over the years was further evidence of this reality.

“The Changing Face of Shell” addresses the subject of corporate governance and reputation and brand management by the extensive use of anecdotes from the author’s personal experience. These lead to a conclusion that Shell was struggling much of the time to reconcile the need to manage the key imperatives of its business with the need significantly to improve the Group’s public image. This came to a sudden and shocking climax in early 2004 when it was revealed not only that Shell had been systematically overstating its oil reserves for some time but that senior executives recognised that they had been mendacious. Heads rolled – including that of the Group chairman Sir Phil Watts and the resultant crisis was far, far greater than anything that had occurred in the 1990s. The author describes some of the underlying reasons for this disaster and shows how some actions and processes within the Group made such an episode, shocking though it was, not surprising.

When living in a parallel world such as that inhabited by the fictional Harry Potter and his friends it doesn’t really matter whether that world is subject to the checks and balances that would come from a closer link to reality. But for Shell it was not fiction and its parallel world was entirely of its own creation. Whilst virtually every other multinational had a conventional corporate structure with an accountable Board of Directors at the top Shell was different. Shell has two Boards of directors and in reality neither of them is of great consequence. Top decisions are only ratified by these boards – they are taken by a Committee of Managing Directors (CMD) which has almost untrammelled power. The AGM that the author attended (referred to above) had a phalanx of Directors on the top table – but only two of them were executive directors paid to run the business. And the man who took over from Sir Philip Watts was not even there as, being Dutch, he is on the “other” board of Shell and he was at their AGM which was running at the same time!

Another strange fact about Shell is how little top management time is given to one of its major global businesses – the one for which it is best known to consumers and which is the most visible public face of the Shell brand. Shell is the world’s largest retailer (in any sector) with over 45,000 petrol stations around the world in 120+ countries (McDonalds, by comparison, has around 30,000 branded outlets for its Big Macs). Despite this huge business, it is true that issues relating to these petrol stations and their millions of customers daily are hardly ever discussed by the CMD or the Group’s senior management. Their emphasis is almost wholly on upstream oil and gas (and on financial performance indicators) and none of them has ever been much involved in developing customer propositions or in managing retail outlets. Can you imagine the board of McDonalds being similarly remote from its customers?

So the Shell world is a very strange one indeed. It is an important story because Shell is a major business which directly or indirectly affects the lives of millions of people around the world every day. It is a major player in the Energy industry and it has both the technical expertise and the financial muscle to continue to play a part in the world’s energy supply for decades to come. But it also, as recent events have shown an eccentric and even dysfunctional organisation with an archaic structure and some curiously short-term business imperatives. To avoid further charges of hypocrisy and incompetence Shell needs to change.

For further information please contact Paddy Briggs at Paddy@brandaware.co.uk

[1] Roger Sperry (1973) observed that the human brain has “Left brain Functions” which include logic, facts, maths and science and which is reality based and practical and “Right brain functions” which are “big picture” oriented and where imagination, images, words, language, fantasy and risk-taking are present.

[2] Pierre Wack, one of the creators of the Scenario method, and at the time working in Shell, described Scenario Planning as "a discipline for rediscovering the original entrepreneurial power of creative foresight in contexts of accelerated change, greater complexity, and genuine uncertainty."

[3] In the early hours of December 3, 1984, gas leaked from a tank of methyl isocyanate (MIC) at a plant in Bhopal, India, owned and operated by Union Carbide India Limited (UCIL). 3,800 persons died

[4] On March 24, 1989, the Exxon Valdez grounded and spilled nearly 11 million gallons of oil into the biologically rich waters of Prince William Sound, Alaska.

Article published in PR Week 3rd September 2004

2004-09-03T09:28:00.000+01:00

Shell and Saatchi - and the failure of the attempt to build an “inspiring identity”

In 1997 the Royal/Dutch Shell Group called in advertising legend Lord (Maurice) Saatchi to help it improve its image. Saatchi produced a number of adman’s slogans - but amongst all the hyperbole he said one very wise thing. “No communication”, said Saatchi “can work effectively unless backed by real action”. The years which followed Saatchi’s brief involvement with Shell were characterised by a plethora of communications initiatives – but also by actions at the top which have mortally wounded its reputation. The rhetoric and the reality were poles apart.

Society’s expectations of what is required of businesses generally (and multinationals in particular) underwent a major change in the last two decades of the twentieth century and Shell was not alone in neither fully anticipating these changes nor in developing a strategy to cope with them. Shell has always been essentially unideological – which is why when it was persuaded of the need to create a set of quasi-ideological values and “Business Principles” it struggled. An organisation dominated by technocrats (for whom the processing of a series of inputs in a structured way always leads to entirely predictable outputs) was suddenly confronted by new “stakeholders”. The NGOs were active and the media relished stories about the insensitivity or amorality of big business. It became clear that companies operating in the Energy sector were going to have to get their act together if they were to protect their reputations.

Shell was initially slow to move. The Group’s technological imperative was so powerful that there was a presumption that decision-making would lead always to the “best” technical/environmental solution. And there was also a strong belief in Shell that, because it had operated in more than one hundred countries for well over one hundred years, it was therefore a culturally understanding and caring organisation. It was in 1995 that two events blew Shell’s presumptions of superiority out of the water. The extensive protests against Shell’s plans to dump a redundant Oil Platform “Brent Spar” in the North Atlantic caused much heart-searching and around the same time, in Nigeria, the political activist Ken Saro-Wiwa implicated Shell during his “treason” trial by saying “…the ecological war that [Shell] has waged … against the Ogoni people will … be punished.” When Saro-Wiwa was executed some of the world-wide condemnation of the act was aimed at Shell who by association was implicated.

In 1996/7, in response to “Brent Spar” and “Nigeria”, the then Group Chairman Cor Herkstroter became obsessed with the need to protect Shell from the type of vitriolic criticism that it was then receiving. It was at this time that Maurice Saatchi became involved in the project. With his unique ability to get through to the very top of organisations Saatchi had befriended Herkstroter and persuaded him that Shell needed more value based communications.

Saatchi told Shell that what it needed to do was to define what its “Core Purpose” as a corporation was and, under his guidance, Shell’s senior management was convinced that it should define its corporate raison d’être as being “To help people build a better world”. Shell staff were told that this “Core Purpose” would be a “foundation for all our activities and communications”. By the end of 1997 this was launched externally along with a declaration that it was Shell’s belief “…that the future is a better place”. Saatchi said at the time:

"The strongest identities are built on simple truths. It is true that the future is a better place. History proves this. The condition of mankind has continually improved, and …it is also true that Shell invests more in the future than any other company. Together, these two truths provide Shell with an inspiring identity, one which is emotional but underpinned with logic."

To some of us these developments were a striking revelation of how lacking in knowledge the then senior management was of some of the basic rules of PR and corporate communications. That they had been seduced by Lord Saatchi into accepting the “Core Purpose” (which, we believed, was at best incomprehensible and irrelevant and at worst would hold Shell up to ridicule) was astounding. Whilst there was a need for a moral and behavioural underpinning for our business surely it was not credible to claim that Shell’s principal purpose was anything other than the pursuit of growth, reliable future profit streams and the need to offer shareholders good returns. To do this with due regard for all stakeholders was desirable and admirable and necessary. But to claim that our core purpose was to “Help people build a better world” made us sound like the United Nations – not like an energy company.

To manage the reputation enhancement process many professionals were externally recruited to produce both the multi media communications material and a shelf-bending series of manuals for employees. Whilst some of the worst excesses of the Saatchi recommended hyperbole were eventually toned down Shell was soon to launch a series of advertisements and other communications which were highly deceptive. For example by the 1990s Shell was dipping a toe in the water of non-traditional energy (Wind, Solar and Forestry) a business for which it coined the descriptor “Renewables”. Much of the advertising and other communications launched in the reputation campaign focused on this area despite the reality that “Renewables” was a very small business indeed.

A raft of other communications and PR initiatives was also launched - including the publication of the “Shell Report” which itemised how Shell said that it contributed to sustainable development. Shell introduced a positioning that it had a “triple bottom line” which included the need to take account of the “social” and the “environmental” aspects of business as well as the “economic” consequences. There was also the publication of a seemingly unequivocal commitment to Human Rights - although where such a commitment might be frowned upon (e.g. in Saudi Arabia) it was not promoted at all.

The intellectual rigour with which the reputation management systems and processes were developed was exemplary and a huge effort was put into this attempt to secure the moral high ground - but other forces were at work that would ultimately make such an ambition unattainable. Shell managers’ primary challenges were not concerned with Shell’s reputation but with the more prosaic need to achieve short term business targets. Although the communications rhetoric said differently the reality was that Shell’s actual behaviour, particularly in the era of Phil Watts’s chairmanship, was as single-mindedly commercial as ever. This became suddenly and shockingly clear in early 2004 when it was revealed not only that Shell had been systematically overstating its oil reserves for some time but that senior executives recognised that they had been mendacious. Heads rolled – including that of Watts and the resultant crisis was far, far greater than anything that had occurred in the 1990s. Ironically Lord Saatchi had warned that communications need to be backed up by real action – but that warning was ignored when the going got tough. And all of those carefully documented reputation management processes and procedures stayed on their shelves as Shell lurched into cover-ups and confusion at the top.

The “reserves” issue has shown beyond doubt that there was a complete disconnect between the reputation enhancement and communications activity, (on the one hand) and the reality of top management behaviour (on the other). The reputation of Shell has been destroyed by hypocrisy, mendacity and deceit and whether we will ever be able to be “sure of Shell” again is very doubtful indeed. Paddy@Brandaware.co.uk

Shell's new recipe for Marketing leadership

2004-05-19T13:18:00.000+01:00

Shell’s new recipe for Marketing leadership

One of the best loved learning methods of Business Schools is to use case studies to illustrate good or bad practice that students can draw lessons from. These cases are either real (sometimes with the names changed to protect the guilty) or fictitious (but with a good dash of reality thrown in). If you wanted to write a case study to put forward a story of a badly wounded brand today you could do worse than to prepare one about the troubled oil giant Shell. Over the last few months Shell has rarely been out of the headlines as further revelations have emerged about its failed decision-making and its deceit at the very top. Three of Shell’s most senior executives (including the chairman) have been fired or pushed aside and the trauma that has followed has inevitably affected managers at all levels and in all of Shell’s businesses. But it is to those responsible for the Shell brand and reputation that we would expect to turn to find the emergence of a strategy which will lead to a recovery of Shell’s once strong position in the petroleum sector.

To most consumers Shell is, of course, best known as one of the great petrol station brands – the largest operator world-wide in this sector and with a reputation based not only on its omnipresence (in more than 120 countries) but its innovation. For example the partnership with Ferrari has conferred technological distinction on the brand which has been well exploited by the development and marketing of its award winning “Shell Optimax” differentiated petrol offer. Given this recent background you would assume that the recovery from Shell’s current difficulties would be brand led – building on the historic underlying brand strength to re-establish Shell’s reputation for leadership and for managerial competence.

Shell’s marketing organisation is located within a management structure called “Oil Products” which covers all of its “downstream” business (“downstream” means that part of the business which refines crude oil into useful products and distributes and markets them to consumers). The head of the “Oil Products” business is a Dutchman Rob Routs who was previously head of Shell’s United States business and who oversaw the unscrambling of the disastrous Joint Venture with Texaco in America. Marketers in Shell and outside would think that that experience would have taught Routs of the key added value that the Shell brand can give – if properly managed. It is all the more surprising, then, that Routs’ first significant action and communication since taking over the leadership of Shell’s marketing businesses is all about organisation and process – and that the Shell brand does not even get a mention in it!

On 17th May all of Shell’s “Oil Products” staff received a communication of more than 1000 words from Rob Routs which not only failed to mention the Shell brand but also ignored the fact that Shell has recently experienced a period in the public eye during which its reputation had been badly tarnished. Many observers would feel that the reputation damage has been a PR disaster of such enormous magnitude that the principal focus of Shell’s marketing businesses for some time to come should be to rebuild the brand. But what Routs has launched under the descriptor “OP-One”, and which purports to be a new “strategic plan for Oil Products”, is not built at all on this reality. The driver for this new plan is not a realisation that the Shell brand is mortally wounded, but a regret about being “out-performed by ExxonMobil and Total in 2003 on earnings per barrel” and a concern that the overall return on capital employed of Shell has “languished well below shareholder expectations” and that the organisation is “complex and costly”. The key metric here is to do not with customer satisfaction, even less with brand strength, but with shareholder perceptions. Ironically it was this focus which led to Shell’s recent difficulties in the first place. The valuation of Oil reserves, and the failure to disclose early that there had been an over-estimate of these reserves, was largely attributable to a wish to be seen by shareholders (or rather by their proxy representatives the financial analysts) as performing well (even though the reality was different).

Shell’s new strategy seems once again to give the shareholder stakeholder pre-eminence over the many other stakeholders that Shell’s marketing businesses serve. The customer only gets a mention in respect of the perceived need for “processes and policies to make interaction with our customers simpler, more consistent and more effective” and for the creation of an “organisational model focused on servicing our customers through customer-friendly processes and systems”. The need to provide greater customer satisfactions in respect of better products and the improvement of the purchasing experience (e.g. at petrol stations) is not covered. And, as we have seen, the overall imperative which most marketers would expect to see - the need to restore confidence in the Shell brand and to release again its underlying strength - gets no mention at all!

The fall of Sir Philip Watts

2004-03-19T13:02:00.000Z

The fall of Shell’s Sir Philip Watts -
The reasons why

To understand the true significance of the resignation of Shell’s top man Sir Philip Watts it is necessary to appreciate that in an era when Chief Executives of world scale businesses are vulnerable (and many have been fired) no Shell Chairman has ever before been removed early from his post. The reason for this is that Shell does not conform to the conventional model of a business that is followed by virtually all of its competitors and by most other businesses. Such a model would have a classic hierarchical structure with a single Head Office and Board of Directors. Shell has two Head Offices (or "Central Offices" as they are called in Shellspeak) in London and The Hague and two Boards of Directors. This is because the Group is technically two separate holding companies in alliance rather than being a single corporate entity. Companies' legislation requires that these two companies and boards have jurisdiction over the business and that they are accountable to shareholders. The reality in Shell, however, is that there is no real direction from these boards and although they comprise the same people as the senior officers of the Group, they are little more than wielders of legally required rubber stamps. This also reduces the role of the non-executive directors considerably compared with more conventional businesses. The Board meetings of the "Royal Dutch" and of "Shell Transport and Trading" are little more than ceremonial affairs - the real direction of Shell takes place elsewhere.

At the very top of Shell is the "Committee of Managing Directors" or "CMD". Although the collection of individual directors that made up the boards of the two parent companies actually have little responsibility in these boards for running, Shell some of the same directors (the executive "Managing Directors"), have almost untrammelled power when they are gathered together as the CMD. The CMD has been referred to as the "Praesidium" of Shell and whilst this is a rather Soviet sounding term it is accurate. On a day to day basis the CMD takes the key decisions which determine the Group's direction. In that respect it resembles the board of Directors of a conventional business - but without the checks and balances that come automatically from being directly accountable to shareholders or from having non-executive directors actively involved in decision making. Appointment to the CMD has always, before the departure of Watts, been a job for life - no Managing Director has ever been sacked for incompetence or pushed aside in a board room coup.

The Chairman of the CMD is the most powerful man in Shell and historically the appointment has alternated between a Dutchman (who is also Chairman of the Royal Dutch) and a Brit (who is also Chairman of Shell Transport and Trading). The CMD Chairman before Watts was Mark Moody-Stuart, a popular and successful leader who not only inspired great loyalty but who was (crucially) well respected by financial analysts and large shareholder groups. There was much speculation in Shell in the years before Moody-Stuart’s retirement as to who would succeed him - but most expected that it would be a Dutchman who would take over in line with precedent. The favourite was Martin van den Bergh an elegant, well connected and urbane figure with all the right credentials. He had, however, two disadvantages. He was approaching 60 years of age when Moody-Stuart retired and Shell has always followed a strict retire at sixty policy. This could have been relaxed but it was clear that for some there was also the problem that van den Bergh was rather in the same mould as Moody-Stuart – smooth and patrician. And that was how Watts came from way out of left field into the reckoning.

Nobody would ever accuse Phil Watts of being smooth and patrician. Where Moody-Stuart and Martin van den Bergh were products of elite schools and universities Watts was from a far more humble background. He was a hard-nosed technocrat with few social graces and with a style at odds with those (be they Dutch or British) who preceded him as Shell Chairman. In the (as it turned out) misplaced belief that Shell needed a period of a more brutal management style (Watts’s hallmark) he got the job. His failure is attributable to three main factors. Firstly the Dutch (who own 60% of the Group) were less than delighted when an Englishman followed an Englishman and their support for Watts was going to have to be earned by him - he never in Shell succeeded in this task. Second much of the role of Chairman is external and Watts never cut the right figure in the wider business world – in particular he was universally derided by the financial analysts. Third (and crucially) Watts had few Shell friends who would loyally fight his internal battles for him. There were the usual acolytes who made themselves useful to him in their own interests - but few of these proved loyal when the chips were down. Watts had trampled over too many others in his rise to the top to expect that the battalions of middle managers in the Group would fight to the death in his support. He became an increasingly isolated and lonely figure and in the end this affected his judgement – as the debacle over the revaluation of Shell’s reserves, which in the end brought about his downfall, showed.

Phil Watts was perhaps the most notable modern example of the Peter Principle (the theory that employees within an organisation will advance to their highest level of competence and then be promoted to and remain at a level at which they are incompetent) and the ructions following his fall will hang around Shell for a long time.

2004-01-19T13:25:00.000Z

Shell’s shocking reserve

To understand the current brouhaha over Shell’s announcement of its decision to slash its estimates of proven oil reserves by 20% (which knocked 7% or $7.8Billion off its market value and has seen a clamour in the media for the resignation of Shell’s chairman Sir Philip Watts) you need to be aware of the Shell Group’s corporate culture.

One of the criticisms often levelled at the multinational oil majors (and it is certainly true of Shell) is that they desperately seek certainties to help them in their decision making. It is ironic that in an industry which at its heart has to wrestle daily with uncertainty (in the operational search for oil and gas) when it comes to looking at investment proposals they like to have the confidence that prospective capital programmes will produce adequate earning powers and clear their predetermined “hurdle rates”. Shell has sometimes been accused of being risk averse and of leaving earnings uninvested rather than allocating them to projects where uncertainties exist - and it is true that a bias towards prudent governance lies of the heart of Shell’s culture. This is characterised by a preference, in recent years, for share “buy backs” rather than capital investments or acquisitions but also by an almost Calvinistic seeking for truth and assurance rather than speculation and risk.

The announcement of the reduction in Shell’s reserves was, so Shell claims, driven primarily by its wish to comply with United States Securities and Exchange Commission (USSEC) rules rather than because the physical reality of their hydrocarbon reserves has changed. Indeed Shell’s media statement says “The recategorisation of proved reserves does not materially change the estimated total volume of hydrocarbons in place, nor the volumes that are expected ultimately to be recovered. It is anticipated that most of these reserves will be re-booked in the proved category over time as field developments mature”. In other words “We don’t really think that we have less oil and gas than we used to say we had - we just think that we have to say so to comply with USSEC rules”. Lewis Carroll would have been happy with this – it’s pure “Alice in Wonderland”!

To understand why the whole subject is so arcane and unfathomable to the layman we need to recognize what oil and gas “reserves” are – and what they are not. The proven reserves of any oil or gas field are those which can be recovered in the future under today’s economic and operating conditions. As production from a field progresses a flow of data allows a continuous re-assessment of recoverable reserves to be made. This often leads to a situation in which the declarations of the proven reserves of oil in a field trend upwards over time, in spite of the on-going extraction of oil in the production process. Historically oil companies have been extremely conservative in talking about reserves and in almost all cases the amount of hydrocarbons produced from a field or a region far exceed original estimates. This is partly because the science of forecasting is uncertain but also because, over time, both the technological and the commercial circumstances change. Technological innovation allows more oil or gas to be extracted than originally thought and also a higher world oil price may make some fields economic when they were not at a lower price. At the micro level (i.e. in respect of particular concessions) companies have been know to play down the reserve estimates deliberately to put off their competitors from bidding for adjoining concessions close to the field.

So to estimate reserves at any one time with absolute accuracy you need wholly reliable geological data (which is hard to obtain); knowledge of not just current but future technologies (which are by definition unpredictable)and confidence about economic and political changes over the lifetime of a field (often twenty years or more) which you certainly cannot have. This is not to say that you should not try to make forecasts and it is reasonable that reserve levels are seen as one of the key indicators of an oil company’s health. But the search for reserves as the principal driver of an oil company’s daily behaviour can be hazardous if it takes the eye off the ball of managing existing assets and activities profitably. In managing what you have at any one time you are largely dealing with certainty. In focussing on the pursuit of reserves to the exclusion of much else you are much more in the realms of fantasy.

Shell’s announcement is a direct consequence of their current bias towards openness and disclosure. Wounded by the criticism they received in the 1990s over the Brent Spar disposal and over their activities in Nigeria (amongst other things) Shell instituted a comprehensive programme of public consultation and greater disclosure. As Sir Philip Watts said in a speech to KPMG Global Energy Conference in Houston last year
“In Shell we believe that being trusted is essential both for securing our future and for opening new opportunities, in a world that is increasingly demanding and uncertain. We will continue working very hard to earn that trust.” The announcement over reserves can be seen at least partly in the context of this commitment. It can be contrasted with ExxonMobil’s statement that “We have never had to do anything like this [reclassifying reserves] …in the past, and we would not expect to have to do anything like this in the future.” Now you can believe that the reason for ExxonMobil saying that they are different is because their reserves estimating process is better than that of Shell however this is unlikely to be the case. The reality is that ExxonMobil is more ready to acknowledge the uncertainties associated with reserves estimation and that their management, better than Shell’s, realises that to push this issue to the front of the discussions about their company’s competence and performance would be a self destructive thing to do for no material benefit (other than, perhaps, spuriously enhancing their reputation for honesty).

The Saatchi way with words...

2004-01-19T13:17:00.000Z

The Saatchi way with words

The universal rejoicing amongst Conservatives when Michael Howard assumed the leadership was almost immediately tempered, for some, when he announced that Maurice Saatchi was to be a joint Chairman of the Party. The fears that the arrival of Lord Saatchi, that most brilliant but flawed of communicators, would lead to a predilection for presentation over substance have all too soon been born out by the publication of the clearly Saatchi inspired “personal credo and core beliefs” issued by Michael Howard.

Students of the extraordinary story of how the two Saatchi brothers created and then destroyed the Saatchi and Saatchi advertising empire are referred to two authoritative works on the subject - Kevin Goldman’s “Conflicting Accounts” and Ivan Fallon’s earlier “The Brothers”. It is difficult to imagine how anyone who has read these books would want either of the Saatchis anywhere near any organisation which purports to be ruled by principle or moral values - but the Tories are not the first to succumb to Maurice Saatchi’s persuasive power.

In the 1990s I was working for the international oil company Shell at a time when there was growing internal concern about how the company was perceived around the world. There was criticism on many fronts of Shell’s apparently uncaring approach to business – not least to the environment with the Brent Spar disposal saga in the headlines. At the same time there was fierce criticism of Shell’s policies in Nigeria prompted by the then Nigerian’s regime’s execution of Ken Saro-Wiwa and by suggestions that Shell had been in some way an accomplice in shoring up that offensive regime. Many of us working in the company at the time thought that the way forward was to institute a properly funded and factual communications campaign (including corporate advertising) which would redress some of the criticism. We knew that (although some of this criticism was justified) Shell, in the main, ran its business in a proper and morally defensible way and that we should say so. But there seemed then little appetite amongst the technocrats who ran the Group for such a campaign and initially nothing happened.

In the autumn of 1997 I was working in the Middle East when I was asked, along with others in the advertising and communications business in Shell, to attend a meeting at which a new communications initiative would be revealed to us. None of those attending this meeting had been in any way involved in this initiative despite the fact that we were part of the relatively small group of communications professionals in Shell around the world. At the meeting we were presented as a fait accompli the basics of a corporate campaign that would be launched internationally early in 1998. This campaign theme was that Shell had a “Core purpose” and that this purpose was to “Help people build a better world”. The presented rational was that history teaches us that things get better over time and so “the future is a better place” and because of this Shell invests – the then Shell capital budget was more then any other company (not just oil company) in the world. This theme was supported by a three minute film featuring a baby (the “future”) against a film montage which depicted the changes of the twentieth century. As this presentation unfolded it became clear that not only had none of us who were Shell communications managers around the world been involved but also that Shell’s global advertising agency J. Walter Thompson (JWT) was also out of the loop. The film and the assorted ragbag of pretentious, boastful and implausible slogans and claims had been developed at the very top of Shell under its head Cor Herkstroter, a sensitive and rather Calvinist Dutchman, aided and abetted by Maurice Saatchi!

After his removal from Saatchi and Saatchi, Maurice had wasted little time in founding a new advertising agency called M&C Saatchi - and it was this agency which had found its way through to Herkstroter and the top management of Shell. Where Herkstroter met Maurice Saatchi (newly ennobled by John Major as “Lord Saatchi of Staplefield”) is not known – they would hardly normally move in the same circles. What is clear, however, is that Saatchi swiftly got himself into a position of influence which allowed him to bypass the established Shell communications structure (and JWT the established advertising agency) and get an assignment to develop a communications position for the Shell brand. This was the “core purpose” positioning referred to above and which was supported by the “baby” film.

Fortunately when Shell’s communications professionals saw the Saatchi campaign proposals a storm of protest gathered force not only because of its preposterous content but also because it had been put together completely separated from Shell’s other advertising and communications initiatives. Although it took a while the campaign was eventually dispensed with – as were M&C Saatchi - and Maurice Saatchi had no further involvement with Shell.

The learning point from the Shell story is that the new joint Chairman of the Conservative Party is one of the most skilled salesmen of the modern era. He and his brother built the world’s largest advertising agency based on their undoubted ability to sell to and for their clients. Their fall from these heights can be traced back to 1987 when the Saatchis decided that they wanted to buy a bank and launched an initiative to acquire the Midland Bank. Suddenly they were out of their depth and potentially in a business that they did not know. They failed in their then wish to be bankers, but in failing they seriously wounded their advertising agency whose shares collapsed. The Saatchis never really recovered form this debacle. The Shell story shows that for Maurice Saatchi the message is everything – even if that message lacks credibility or substance. To suggest that Shell’s core purpose was to “help people build a better world” was as facile as it was patently untrue. But Lord Saatchi was such a persuasive advocate of this positioning that he not only persuaded the top management of Shell but got them in principle to agree to spend hundreds of millions of dollars to promulgate this message.

When I read the Saatchi inspired list of “beliefs” that he has clearly convinced Michael Howard to sign up to, I saw that this list was absolutely consistent with the style of messaging that Saatchi had wanted to force on Shell. If in Shell we had followed Saatchi’s recommendations we would have been a laughing stock - fortunately we just avoided this. Unfortunately for him the Leader of the Conservative Party has fallen into the trap that Shell avoided and he will no doubt spend months deep in the mire of these superficial, anodyne and bland statements that will be rightly derided as all gloss and no substance. No doubt following months of derision Mr. Howard will see that he can do without the shallow “ad speak” that Saatchi has persuaded him to espouse and he might then be forced to go back to the basics of policies rather than the gloss of words.

Of course the war in Iraq is all about oil - Article published in the "Khaleej Times" March 2003

2003-03-19T13:55:00.000Z

Of course the war in Iraq is all about oil

When President Bush or Prime Minister Blair moralises about the justification for their war on Iraq it is always “freeing the Iraqi people from tyranny” which features strongly in their rhetoric. A pre-emptive strike on a sovereign power is justified, in the minds of these aggressors, by the fact not only that Iraq poses an alleged threat outside its borders but also that there is a moral duty to remove a despot because of what he inflicts on his own people. The poverty of this argument is revealed by the fact that very few of the rest of the world’s largest countries support the action - and that most of the Arab world is staunchly against the war. The moral argument is hard to sustain because whilst Saddam Hussein is unquestionably an evil tyrant if this were grounds alone for military action then there are many other countries in the world where action would also be justified. In Africa, Asia, South America and Central America you do not have to look hard to find despotic regimes which bring misery to their peoples. Yet there is no military campaign underway on moral grounds by America and Britain against these tyrannies. So what is this difference? It is, of course, all about oil.
According to Sheikh Yamani, the former Saudi oil minister, reported in the British newspaper the “Daily Telegraph”, the US is examining ways of privatising the Iraqi oilfields once the conflict is over. "We know oil is very important and already the Americans have started to dispose of Iraqi oil [by offering it to others]” says Yamani." “It is said that Iraqi oil will be kept in custody for the Iraqi nation but they have even started studies of how to privatise the oil industry in Iraq. What does that tell you? The majority of people everywhere say this is a war which is about oil," he concludes.
Iraq, with more than 100bn barrels of proven reserves, is the second largest oil nation after Saudi Arabia. The exploitation of these reserves since the first Gulf war has been limited by sanctions – only production related to the UN “food for oil” programme has been allowed. But an Iraq under western domination – the certain outcome of the War – will bring American and British oil companies to the party like bees around a honey pot. The Telegraph reports that “BP and Shell have … had informal discussions with the [British] Government about Iraqi oil during "routine" meetings”. And Sir Philip Watts, the chief executive of Shell, is reported as saying that his company wants a "level playing field" when opportunities arise. In the US there is probably not even any need for routine meetings – from the President down the US administration is dominated by ex Oil men and they know the score (that the prize at stake for ExxonMobil or ChevronTexaco is those low production cost and huge Iraqi oil fields). It is not hyperbole to say that Western control of Iraqi oil would be a major blow for the unity of OPEC and would have a major impact on world oil supply, demand and price. The opposition of all OPEC members to the American/British military action is in part a recognition of this fact.
Over the past decade all the multinational oil companies have maintained low key, but focused contacts with oil men in Iraq. Although sanctions have prevented them from having any significant interest in current production they have nevertheless maintained good relations at a technical and commercial level. In Shell a full time team monitored Iraq and regular visits were made by Shell executives to Baghdad. There was nothing illegal or (in my view) immoral about these contacts - although Shell was keen that they were not publicised in any way. The internal sensitivity about Shell’s involvement in Iraq (perfectly proper though it was) was illustrated by the fact that, for a time, in all meetings (etc.) Iraq could not even be referred to in Shell by name and had to be called “East Jordan”! There is no doubt that Shell was doing all it could in those years to position itself so that it could take full advantage when sanctions were removed. And there is also little doubt that other British and European oil companies were doing the same (although it was a rather more difficult for the American companies to follow their example because of US legislation).
When Sheikh Yamani refers to “privatisation” he knows that Shell, BP and the American oil giants will be queuing up to be privatisation partners. No doubt there will be window dressing formulae found to present the post war opening up of Iraqi oil production and exports as being for the benefit of the Iraqi people. But you can be sure that (as always) to the victor will go the spoils and that the smiles on the faces of the oil men in The Hague, London and Houston will be as wide as the smiles on the faces of President Bush and his fellow oil men in the US administration.