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ShellNews.net: “Hans” Bouman compares Shell and Enron

We recently became aware from Shell insiders of a treasure trove of Shell internal emails from a senior Shell manager, Mr. “Hans” Bouman, which were widely circulated as collector items because of their outspoken and eloquent content, often on controversial subjects. We appealed for more and are delighted to say that they are starting to arrive. Please note that we are particularly keen to receive copies of his emails to Jeroen van der Veer – the ones which apparently found there way into the newspapers. Mr Bouman is now retired. 

Please check your email archive and kindly forward to me any vintage “Bouman” emails: [email protected]. Your help will be much appreciated. In the meantime, below is an email from “Hans” to another senior Shell official, Mr John Robinson of Shell International Limited, sent in Sept 2002.  Bouman refers to the already scandal hit Enron and in that context expresses his concerns about corporate culture at Shell which subsequently proved so well founded. Less than two years later Shell was itself being compared with Enron in terms of global notoriety. An even greater shock than Enron bearing in mind Shell’s previously highly respected reputation which led to the famous advertising slogan: “You Can Be Sure of Shell”  

The bold print/highlighting is ours…

THE EMAIL CORRESPONDENCE
—–Original Message—–
From: Bouman, Hans MGJ NAM-ELG
Sent: 13 September 2002 10:34
To: Newsletter, P PL SI-PXG
Subject: RE: PLNEWS – ‘THE TALENT MYTH’

Hello John

Thank you for posting this story on Talent Myth. I could not react earlier. Here my reply. If you see merits in posting it, feel free. If it needs editing, please do so.

Best regards and I hope you have rebuilt your distribution list. I sent your request to re-register to many of my network.
Hans
The short story posted on ‘The Talent Myth’ is a very readable one and so very true. But why do we always have to look at others? Is this another example of sick organisations where all people tell auditors ‘in my outfit it is OK, but the others are bad’…..

I have heard many senior Shell Directors claim between 1994-1999 that we should be more entrepreneurial, generate more business and grow. To hell with all the business controls, these only hinder our performance. Look at Enron, Baan, McKinsey, they know how to do it and why don’t you do it like them……We offer no more a job for life, you are responsible for your own career. Everything needed to change and as a result improve. The change we have seen, the improvement I have my doubts (this is meant to be an understatement). Most of these Directors are still around actually, a bit more quiet of late I must say.

We seem to be so keen on changing that this has become a goal in itself. We have forgotten the wise words of the Arie de Geus : ‘ we should learn quicker than the competition’ and as a result I see that style and window dressing is taking prevalence over content and facing up to real problems.

It is simpler to make another abstract Powerpoint presentation that baffles the senior corporate audience than cracking some hard nuts and face up to the consequences.

Coming back to the Talent Myth, I see many similarities in Shell. We created a structure of pulling our best and brightest into central organisations (at the expense of the work at the coalface) and highly rewarded those who made the best promises. We even created an engine to speed up the building of this structure and called that engine LEAP. (I will never be able to clear my memory of the picture with the CMD dancing the macarena). Change was so quick and excuses for under performance so easily accepted that this structure started to grow (and has not yet stopped doing so). Rather than removing emotion from performance, the good news stories started to increase and any words of caution are often interpreted as ‘you are not constructive and you are a blocker’. This structure leads to a certain behaviour and in my view, with all our recent diversity drives we are moving rapidly towards this AngloSaxon culture of individualism. Money is the sole measure of success and Company loyalty is on the wane.

At the same time we destroyed the best in class Skills management and Resourcing systems and now we have a patchwork of attempted repairs, all doomed to fail because there is little vision and no steer behind them. To me this is the greatest danger that Shell faces: our inability to attract, develop and keep the right people and move them to the right place. And if one has the right skills in the right numbers at the right places, it becomes easy to learn quicker than the competition. With the right people around, the organisation type is pretty unimportant, they will make it work anyhow.

I hope to see some comments on this message. Maybe someone can convince me I am completely wrong and this would make me very happy!

Hans Bouman
Asset Manager Groningen

—–Original Message—–
From: Newsletter, P PL SI-PXG
Sent: dinsdag 10 september 2002 22:26
To: Newsletter, P PL SI-PXG
Subject: PLNEWS – ‘THE TALENT MYTH’

‘THE TALENT MYTH’
Are Smart People Overrated?

(N1386) John Robinson, Editor

For the last year or more the press has been full of stories about Enron and other companies that are alleged to have falsified their accounts and indulged in corporate excesses. During this period the Newsletter has published three notes on Enron. ‘What Enron Did Right’ (December 2001 bimonthly issue, page 13) reviewed a Wall Street Journal article pointing out some of the good ideas that Enron created. ‘The Collapse of Enron’ (April 2002, page 8) recorded a conference which highlighted some of the company’s cultural and management failings. The same issue also contained a review of ‘Stakeholding Misconceived’ (page 9), a John Kay article discussing the dangers of employee share ownership. ‘The Fallout from Enron’ (August 2002, 16) wondered who would be next – after the auditors, banks and analysts – to be hit by the fallout. Would it be consultants such as McKinsey and Gary Hamel, who advised Enron?

This question was in fact answered by ‘The Talent Myth’, an article by Malcolm Gladwell in The New Yorker in July 2002, sent to me recently by Michael Glossop of Woodside Petroleum. It relates how McKinsey launched a research project to determine how top-performing companies in America differ from other firms in the way they handle hiring and promotion. This involved thousands of questionnaires, followed by detailed interviews with selected firms. The results are contained in the book ‘The War for Talent’ (October 2001), which concludes that the best companies have leaders who are obsessed with talent, hire as many top performers as possible, reward them generously, and promote them into ever more senior positions.

Enron was the ultimate ‘talent’ company. During the 1990s it hired 250 MBAs a year, rewarded them highly and promoted them rapidly. Although it had an employee review system ranking employees into three groups, MBAs were almost invariably put in the top group, on the basis of their potential rather than their actual performance. In the Enron culture, assessing performance was almost impossible, as ‘talented’ people were moved so frequently. An example of the dangers of this is given in Hamel’s book ‘Leading the Revolution’, where a star individual lost Enron hundreds of millions before cashing out his stock options for 270 million dollars. As history has shown, the needs of Enron’s customers and shareholders were secondary to the needs of its stars, and Hamel has been unusually quiet since praising the company is his book.

One of the most damaging practices in Enron was something its managers were proudest of: the open market for hiring, in which anyone could apply for any job and no manager was able to hold anyone back. Indeed, poaching was encouraged. So a new business startup which poached 50 top performers left 50 holes in other units, disrupting the operations of the affected departments.

The wider failing of McKinsey and Enron was their assumption that an organisation’s intelligence is simply the intelligence of its employees. They believed in stars rather than in organisation or systems. But companies co-ordinate the efforts of many different people, and the organisations that are most successful at this task are the ones where the *system* is the star. “The talent myth assumes that people make organisations smart. More often than not, it’s the other way round.”

But McKinsey was a prisoner of the talent myth as much as its clients. In 1998 and 1999 it hired 4-5 times as many Wharton MBAs as Enron. The McKinsey consultants were preaching at Enron what they believed about themselves. Moreover, McKinsey conducted over 20 projects with Enron, where their annual billings exceeded 10 million dollars, a McKinsey director regularly attended board meetings, and the CEO himself was a former McKinsey partner.

Further Reading

If you would like to read the above article in full, go to http://www.gladwell.com/2002/2002_07_22_a_talent.htm

For more information and specimen pages on the book ‘The War for Talent’, go to http://www.amazon.com and search for the title.

If you would like to read two articles on ‘The War for Talent’ published previously in The McKinsey Quarterly (1998 no. 3 and 2001 no. 2), go to
http://swweua1.shell.com/pxgs/planners/docs/WarForTalent1.pdf and http://swweua1.shell.com/pxgs/planners/docs/WarForTalent2.pdf

An excellent and challenging note on organisational issues, ‘Accountability for Managing People in the New Millennium’, followed by discussion on the
war for talent and the question of stars or team players, can be found in the October 2001 bimonthly issue of the Newsletter, page 2.

All the above-mentioned bimonthly issues of the Newsletter can be found at the bottom of http://swweua1.shell.com/pxgs/planners/1.htm

John Robinson
Editor, Planners’ Newsletter
Shell International Limited
Shell Centre, London SE1 7NA, United Kingdom

Tel: +44(0)207 934 2902 Fax: 7406
Email: [email protected]
Net: http://swweua1.shell.com/pxgs/planners/index.htm
 

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