Creating

Leadership map for tomorrowtomorrow

August 28, 2009

8th Oil and Gas HR Round Table

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited

What an opportunity for leadership!

Demand – capacity gap: immense growth

potential and opportunities

Maturing fields and downstream assets

New technology and scale challenges in deep

water, EOR, CBM, etc.water, EOR, CBM, etc.

Climate change imperatives – energy

productivity and efficiency, renewables

Greater regulatory pressure, in context of intense

competition

Growing international operations and related

challenges

Higher bar for leadership performance

Higher levels of ambiguity and

risk

Entrepreneurship and global

perspective

Leadership asks

A leadership

‘engine’ that can

attract,

accelerate

What is needed

Ability to build

Retention of existing personnel

Ability to work with communities and regulators

accelerate

develop and

retain leaders in a

self sustaining

manner

3 elements of a leadership engine

Self- ▪ Integrated people

▪ Accelerating development of a critical mass of leaders for the organisation

Individual leader development

1

+Self-sustaining leadership engine

▪ Pervasive development culture: feedback, mentoring and coaching culture

Leadership culture

3

▪ Integrated people development, review and opportunity matching systems

Leadership systems

2

+

=

Invest in developing people as part of their real work1

What this will accomplish

▪ Provide razor-sharp focus

on core business challenges

▪ Achieve stretch

performance with a safety

Principles

Link leadership to

business strategy

Develop people in

stretch roles on the

Structured Structured approach to approach to

create create

awareness, awareness, performance with a safety

net

▪ Accelerate the

development of leaders significantly

▪ Take a business driven

systematic view of leadership development

stretch roles on the

job

Combine reflective

and fieldwork sessions

Make mentoring and

role modeling a ‘way of life’

instill instill motivation, motivation,

provide inputs provide inputs

and on the job and on the job practice and practice and

feedbackfeedback

Typical approach

Guide

Developmental

Stretch individual, deliver business impact and build confidence through on-the-job business challenges

Identification of learning edges and creation of action plans

B

C

E

Forums

Identify participants and match to specific challenges

A

• Superior, not in reporting hierarchy• Supports participant development through- Engaging with superiors and stakeholders- Coaching participant- Adding org context

1

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6

Developmental feedback from different sources (270o

Feedback)

Month 7

Structured inputs on different topics through- Forums input tailor-made, just-in-time knowledge and skills- On-the-job coaching to accelerate learning and track individual progress

Continued developmental feedback from different sources

D

F

Leadership systems2

Recruiting

Harnessing

▪ Structured process to decide on new

roles

▪ Use creative approaches to recruiting

▪ Volunteers and nominations for

positions

▪ Internal marketplace for talent

Matching

Performance

management

▪ Internal marketplace for talent

▪ Match portfolio of opportunities with

portfolio of leaders

▪ Enable X-business, functional mobility

▪ Ensure developmental focus to

performance management

▪ Make developing leaders a KPI

The vital few desired shifts in performance culture can be

influenced by interventions on 5 dimensions

The organization’s culture will shift if . . .

Understanding and conviction

‘…I know what is expected of me, I

agree with it, and it is meaningful’

Role-modeling

‘…I see leaders, peers and reports behaving in the new way’

Personal

3

Reinforcement mechanisms

‘…The systems reinforce the

change in behaviour I am being asked to

make’

Skills required for change

‘…I have the skills, capabilities and opportunities to behave in a new way’

Personal choice

‘…I choose to make a

difference’

Leadership development case studies

High-tech machinery

and equipment

company (60,000

employees, USD 17

billion revenue)

Leading retailer in

Latin America

Large retail bank

(26,000 employees,

20 geographies)

▪ Deep cultural diagnostic,

training and on-the-job coaching,

focus on top 100

▪ Rise in leadership abilities,

USD 500 million EBIT gap

▪ Leadership Academy launched

– core programme for top 250,

wider in focus for top 750

▪ Increased customer satisfaction,

8% increase in EBIT

▪ Developed critical mass of

leaders – focus on deep

personal transformation

▪ 20% drop in cost to income ratio:

strong external recognitionUSD 500 million EBIT gap

closed

8% increase in EBIT strong external recognition

Regional energy

powerhouse (USD 60

billion sales across

oil, gas, retail,

petchem)

Leading oil & gas

company (USD 40

billion sales, 2,000

employees)

Global chemicals

and materials

manufacturer

▪ High profile breakthrough

projects and ongoing capability

building

▪ USD 1.2 billion annual EBIT

improvement, new culture

▪ High impact fieldwork projects;

on-the-job coaching

▪ Sustainability achieved – nearly

30% of all employees

supporting projects

▪ Frontline training linked to daily

work

▪ USD 100 million savings in

6 months; improved leadership

capabilities

Learning from case studies

Go beyond training to holistic development

Develop a common leadership model

Work with the eco-system, not just the leadersWork with the eco-system, not just the leaders

Establish ownership with the business units

Focus on development instead of evaluation

Creating Future Leaders of the Oil

and Gas Industryand Gas Industry

August 28, 2009

8th Oil and Gas HR Round Table

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited