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The Times: Military man puts discipline back into Shell’s ranks

The Dutchman has increased central command while boosting the status of scientists

Monday March 26, 2007
Carl Mortished

There is something of the good soldier about Jeroen van der Veer. In the chaos of Shell’s reserves crisis, he was hoisted on to the stage after the hasty removal of Sir Philip Watts, the chairman, and Walter van de Vijver, the head of exploration. Nothing in the century-long history of Shell had prepared the company, its staff and the outside world for the sacking of its two most senior officers and the revelation that, at the heart of its core business, there was a massive deception: not all the barrels of oil were proven.

Nothing had prepared Mr van der Veer for his sudden elevation. The title had been passed on like a comfortable pair of slippers to long-serving Shell executives decade after decade. This time it was different. The office was disgraced, the files ransacked by forensic lawyers and accountants, the title besmirched. This was a new job, that of company saviour. In March, 2004, the appointee stood blinking into the spotlight as the massed ranks of the press and City analysts prepared to tear a strip off an unknown Dutchman, recently in charge of Shell’s chemicals business. Chemicals? It didn’t inspire confidence. Shell is one of the world’s biggest oil companies and barrels had gone missing; the press waited to pounce.

Three years later, in a temporary office in Shell Centre, Mr van der Veer remembers the moment of his promotion as the worst day of his life. He arrived home very late and was visited by a friend. “He said: ‘I will shake your hand because this is a beautiful day in your life.’ I said: ‘No, this is a very bad day for Shell.’ ” He steered the ship off the rocks and kept the marauding wreckers of the press, ambulance-chasing American lawyers and vengeful prosecutors at bay. The crowds and tension are gone, yet even in small gatherings Mr van der Veer appears an unlikely chief executive. Slightly awkward, he’s a fidget, squirming in his chair and hesitant in English. Plunged into an extraordinary situation that required instant response, the new Shell boss fell back on his experience as a young conscript in the Dutch Army. “It was good training. During the crisis, it was quite hectic, I used all kinds of meeting models from the army.”

His technique was to select a room that was not quite big enough and ensure that nobody was excluded. They stood while the new chairman sat and explained the battle plan. “Speed is important, so I say the plan is to take the hill and can you do that? One says, I can do it, I can move my people; another says no, I cannot do that because I need a bridge.”

The open forum ensured that nobody felt excluded and, more importantly, ensured that no one could profit from the crisis by playing politics. “It is the military model. You don’t control who comes to the meeting. Everyone has a total picture and nobody judges anybody else.” It also focused minds on the wolves that were howling outside Shell Centre. Jokingly, Mr van der Veer recalls: “We were there to fight — The Times, the Financial Times.”

Restoring confidence was essential, but Shell also needed to restore discipline and change the internal workings of the company. Like many chief executives, Mr van der Veer likes to deliver simple mission mantras: “More upstream and profitable downstream.” More interesting is the drive to increase central command and control at Shell while at the same time pumping up the status of technology.

In the late 1990s, the fashion was for big companies to break themselves up into entrepreneurial units. “McKinsey was preaching atomisation, even for oil companies,” he recalls. Shell failed, along with everyone else, to become an entrepreneurial hothouse. So it is back to basics, tightly integrating the business from London to Singapore and continuing the process of dismantling the old McKinsey matrix. It was a weird and complex structure of parallel management hierarchies based on country of operation and business lines.

Its legacy was powerful and costly: country fiefdoms that were jettisoned at the turn of the century. “It was a nice life, but it had to go,” Mr van der Veer says. Unfortunately, the costcutting of the late 1990s also jettisoned more useful things — research programmes, scientists and technologists were put out to grass as the oil price drifted towards single digits. “The outlook in the mid-1990s was all about low oil prices and if oil prices are low, technology cannot help you. The idea was that oil and gas would be plentiful. Now, the view is: my goodness, we have geopolitical issues, energy security issues. The scope for technology has dramatically changed.”

Mr van de Veer reckons Shell was one of the first to respond to the demand for better technology, appointing a chief technology officer and a cadre of chief scientists. Events have also shown that oil companies cannot afford to make big operational mistakes. “The tolerance of society if something goes wrong has even further diminished and that is why it is so important.”

Now everything is planned, packaged and delivered globally: finance, technology, human resources. “We tell people there is no optionality. There is only one standard system — bang. High discipline, standard systems, no optionality. This is the way you have to work.”

It raises the obvious question of how a lively community of ideas can prosper in a disciplined, top-down management hierarchy. “There was a danger that technical people became second-class citizens: you are good in technology, you do intelligent things, now we make you a manager.”

There was a problem with the status of scientists. “When I joined the company, they had philosophies about dual ladders, but they were never really implemented.”

Mr van der Veer wants to make the dual ladder work and give status to the people in white coats. “The leaders in research do not have to fit the programme into a budget. Their role is to filter the good ideas from the bad. The role of senior management, like myself, is to find ways to pay for what they filter out.”

He is in Brussels today trying to persuade the European Commission that it must pin down its 2020 targets for CO2 to a detailed framework of fuel standards. He also wants it to stop the race to turn food crops into fuel and instead focus on the next generation of biofuels, based on waste plant material. “The danger is it will be like the Lisbon Agenda. In ten years Europe is to be the most competitive economy, and so on. We think it will happen automatically, but it is nonsense.”

Meanwhile, the oil industry needs technology as it returns to its origins in Russia and the Middle East, where the welcome mat is conspicuously absent. Shell has had a bruising experience negotiating Gazprom’s participation in Shell’s liquefied natural gas project in Sakhalin. Mr van der Veer hopes that its Russian partner will see what Shell has to offer in complex projects when the two companies start to work together: “The Russians have all the expertise for easy oil and gas. They don’t need us. We have to realise as Western companies that we can only add value to things the Russians cannot do as easily.”

Curriculum vitae

Name Jeroen van der Veer

Born Utrecht, the Netherlands, October 27, 1947

Education Studied mechanical engineering at Delft University; continued studies in Rotterdam, where he read economics

Career Joined Shell as a maintenance engineer in 1971, after military service, then moved into frontline sales. Initially worked in manufacturing and marketing, including spells in Curaçao in the Netherlands Antilles and in the United Kingdom.

In 1984, he returned to the Netherlands as manager of corporate planning and then moved to the Pernis refinery in Rotterdam.

After overseas assignments in Africa and Canada, he became managing director of Shell Nederland in 1992, where he led big restructurings and a $2 billion (£1.01 billion) upgrade of the Pernis refinery.

Three years later he moved to the United States as president of the Shell Chemical Company.

In 1997, he was appointed a group managing director, responsible for Shell’s global chemicals operations and began a worldwide restructuring of the business.

In March 2004, he was appointed chairman of the committee of managing directors and initiated a management upheaval that replaced Shell’s collegiate management committee with a non-executive chairman. He was then installed as Shell’s first chief executive officer.

In 2005, he led the merger of Royal Dutch Petroleum and Shell Transport and Trading, ending the century-old Anglo-Dutch joint venture and creating a single head office in The Hague

Family Married to Mariette, with three daughters. He runs half-marathons and has twice skated the Elfstedentocht, a 200-kilometre, 11-city marathon in the Netherlands.

Comment posted on Times article…

Jeroen van der Veer is so desperate to secure hydrocarbon reserves after one third of Shell’s reserves vanished in the 2004 scandal, with more lost as a result of Shell’s Sakhalin2 humiliation in Russia, that Shell is now flouting all moral and ethical considerations by entering into a business relationship with the Iranian government. This is despite the fact that the Iranians are supplying roadside bombs which are killing American and British soldiers and are holding 15 British sailors as hostages.

Posted by John Donovan, co-owner of the website www.royaldutchshellplc.com

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1567167.ece

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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