Leading Through the Energy Transition

“To go from producing carbon-based products to net zero is one of, if not the, most drastic transformation of any industry, ever,” says John Dale, Managing Director, ALULA. “We’re seeing many companies struggle to sort through the layers of opinions and organizational chaos.”

The risk, he says, is that leaders get lost in the details of the technical solutions and lose sight of leading people.

As Oil and Gas IQ's Decarbonizing Oil and Gas conference gets underway in Houston this week, editor Diana Davis talks with Dale about the key people challenges of the energy transition and what he thinks it will take to truly lead your people towards a low carbon future.

Diana Davis, Oil and Gas IQ:  Decarbonization is one of the biggest topics right now in oil and gas. However, much of the discussion focuses on the technical challenge of reducing carbon emissions. Do you think organizations often underestimate the cultural and people challenge of decarbonization?

John Dale, Managing Director, ALULA:  Let’s start with a fact—there is no precedent for what the energy industry is under-going. There are some analogs in other industries like automotive. But in the end, they are still making cars. To go from producing carbon-based products to net zero  is one of, if not the, most drastic transformation of any industry, ever.

Rightly so, almost all of the focus is on the technical side of things. Whether CCUS, renewables, or hydrogen, the conversation is on how to do this at scale and in a fiscally responsible way.

However, we’re seeing many companies struggle to sort through the layers of opinions and organizational chaos. 

Once a new technology is tested and proven, it becomes highly predictable. People, however, are unpredictable. And I believe that we do tend to underestimate the cultural and people side of decarbonization. The reason is that these are not tangible in many ways.

I look at it as a balance scale. On one side, you have things like emissions tracking and reporting, carbon sequestration and the other exciting initiatives you’re doing to capture carbon from your processes.

On the other side, you have the people and culture side. It's easy to overlook this side because it's not as readily apparent as things like project plans or organizational charts and goals and targets.

This word culture is important to understand. If you ask 10 people to define culture, you might get 20 different answers. I have a very simple definition: culture is a result of the behaviors that are reinforced or punished over time by other people, processes, and systems.

And as we move to this lower carbon future, we need to really to understand which aspects of our culture are going to be important to getting us there and which aspects are going to get in our way. Maybe we have a culture of risk taking that will be important. Conversely, perhaps we are risk averse. How are these cultural elements going to come into play?

Understanding those pieces will help you understand which course of action may play to your strengths and which could hinder your progress and drag you back towards business as usual.

Many companies that are pursuing decarbonization opportunities are essentially trying to create a new organization or a new department within the base business. They’ll need a new team to operate  differently and think differently. Truly understanding which aspects of your culture will help you and which will hinder, is important.

From a competitive perspective, it is relatively easy to duplicate a competitor’s technology and processes. It is very difficult to duplicate a competitor’s culture. It is critical to not ignore people and culture in this transformation.

Diana Davis, Oil and Gas IQ:  Alignment is going to be important in this. Could you give me some examples of what misalignment might look like?

John Dale, Managing Director, ALULA:  When we talk about alignment, it is key to think about it as two types: there is leadership alignment and there is organizational alignment.

Leadership alignment is making sure that the key stakeholders above and at my level are aligned on what we're doing, why we're doing it, how we're doing it.

Organizational alignment is about clarifying roles at all levels for  the transition.  Employees want and need to know how the change is going to impact them, their teams, and the company. But, most importantly, they want to know what it means to themselves.

There are a few ways to recognize misalignment. One of my colleagues refers to the r’s when you don’t have good alignment. We find ourselves restarting things, repeating things, recycling things, and rebooting things.

If you find you're having the same conversations with your team, for instance, or perhaps you’re finding that people are agreeing to act but not following through, those are probably signs that you don't have clear alignment.

You may also find that you keep planning and debating instead of moving forward. People are each hearing something but each interpreting it differently. They’re sitting in the room nodding their head, but they're not truly committed to the mission.

These are all signs of resistance or misalignment.

In short, misalignment in the organization can lead to chaos. One of my clients, like many, stood up a lower carbon organization to lead the transformation. There is a lot of good intent.

However, they lack alignment at the top of the organization. So, this new entity’s efforts are falling drastically short as they’re all over the place with their guidance, projects, business development efforts, etc.  In fact, looking across the company, there are many duplicate efforts and turf wars. This is classic misalignment.

Diana Davis, Oil and Gas IQ:  The more senior you are in an organization the more you tend to underestimate the challenge of alignment. Everything can look great from the top, but from the bottom it's chaos. If you were a senior operational head, what would you be looking for to see if this poses a risk to your business? 

John Dale, Managing Director, ALULA:  I work with senior leaders, and they'll often tell me that before they were promoted there were certain recurring problems within their organization. Once they got promoted, those problems just seemed to go away. 

The reason those problems seem to have gone away is not that they have been miraculously resolved, it’s that the information reaching them is being filtered.

That’s something important for senior leaders to always remember. You’re not always getting the most honest lay of the land, especially when we’re talking about organizational alignment.

I advise leaders to ‘mine for resistance’ and ‘mine for misalignment.’ That means asking questions of your employees through surveys, listening sessions or talking to trusted advisors in the business. You need to get a real sense about how people are feeling about the direction and, more importantly, how are they feeling about their role.

You must look for it. If you don't, it will sneak up and bite you. It always does.

Diana Davis, Oil and Gas IQ:  What do successful oil and gas companies do to ensure alignment?

John Dale, Managing Director, ALULA:  Decarbonization is going to require a huge transformation of business and operating model. It will change the day-to-day job descriptions of many of your people in the coming decades.

We need to recognize that change itself is a skill set. If you’re good at dealing with change, you probably already have some of the requisite skills you’re going to need.

However, most of the organizations that I work with on significant transformations don’t have all the skills they need for successful and sustainable change. Change is not part of their DNA. It’s not part of how they operate.

To think about this as ‘change management’ will greatly underserve companies. The term ‘change management’ doesn’t do justice. This is about leaders leading in a different way, now, and into the future.

You first need to recognize that change is a process that starts with alignment. This begins with the senior-most leaders being aligned and then ensuring that leaders at all levels understand their role in supporting these new efforts. I think that's one of the key things. Successful companies understand the importance of alignment. They also understand that alignment is a process, not an event.

My favorite Latin phrase is ‘festina lente’ or ‘make haste slowly’. In auto racing you often hear people say ‘you must go slow to go fast.’  Speed for the sake of speed will only make you go slower.

Most of us are biased towards action. We want to start executing and getting things done. Things can quickly become chaotic if you don’t take the time to ensure leadership and organizational alignment and you, instead, jump to execution. You lose credibility because you're having to restart and redo things.

Take the time to get that alignment, get the understanding, and make sure people understand their roles and the road ahead. That's the “go slow” part.

But, when you do that, it will allow you to go fast. I often say that companies will ‘pay me now or pay me later’ when it comes to this. If you don't take the time at the start, you'll be taking it on the back end where you'll be having to clean up things and rework them. You were going too fast at the start.

Diana Davis, Oil and Gas IQ:  What are the risks of not getting the people side of the equation right?

John Dale, Managing Director, ALULA:   Some clients are effectively creating a new business inside the business. You have people who are working on this new, exciting future of the business. Then, there’s everyone else.

One of the risks is that you can lose people in the base business. They're doing the same old work as this journey continues. That could lead to bifurcation of the workforce and attrition.

As time goes on, this is going to become even more pronounced. There will be more investment and movement of people into the new opportunities being offered by decarbonization. There will be fewer opportunities in the traditional business.

But, people in the base business have an important role to play because they're helping to fund the transition and continuing to meet the world’s energy needs. The world will need fossil fuel energy for some time to come. It's key to keep those people in the game and keep talent excited about it.

Attracting talent to the oil and gas industry has been a challenge over the last five to ten years. People want to do something that's a little sexier or more fun. You could exacerbate this if you don't engage people in the base business and help them see their role in enabling the energy transition. This is an amazing opportunity for oil and gas to come to become cool again.

The other thing I would add is that leaders often think the people side is just common sense. It is common sense but, in my experience, it’s not common practice.

People are much more complex than any process, machine, or technology that you're going to work with. Once a process is fixed or the technology is working the way it's supposed to, it works. People, on the other hand, have different backgrounds, opinions, and motivations, and they change over time.

In most companies, people are promoted for the technical knowledge and experience, which of course is important. However, the leadership side of the equation is equally, if not more, important.

Over the course of my career, I’ve seen great technical people fail as leaders. Very seldom, if ever, have I see a great leader fail—even if they didn’t have the technical skills for the job. Great leaders understand their limitations and surround themselves with highly competent, technical people.

Diana Davis, Oil and Gas IQ:  Do you have any specific strategies you’d suggest keeping the base business engaged?

John Dale, Managing Director, ALULA: Today, lower carbon is the primary responsibility of a small percentage of people in most organizations. It is their full-time job.  What about everyone else? Where does decarbonization fit into their day-to-day priorities?

When we are young, one of the questions we always ask is ‘why.’ As we get older, this question is still important. Why am I in this role? Why am I doing this?

You need to get very personal about the why.  I think that’s key. Employees want and need to know how the change is going to impact them, their teams, and the company. But, most importantly, they want to know what it means to themselves.

You need to explain why we’re taking a certain approach, why certain people are involved, why other roles are still important, why you’re involving some groups but not others. I could go on.

The bottomline is that you need to communicate how an individual’s role helps you to go in the right direction.

The other thing you need to consider are your rewards and recognitions. All the accolades can’t flow to the new business. It’s important to reward and reinforce the whole organization rather than just the new decarbonization efforts. There needs to be a shared spotlight.

Diana Davis, Oil and Gas IQ:  Some oil and gas companies are building rewards into hitting emission reduction goals into their compensation packages. Is that a practice you would recommend?

John Dale, Managing Director, ALULA:  Yes. If it's balanced with the base business, it can be a great way to inspire your company. You can see how you're stacking up against other oil and gas companies. Many of my clients focus on return on capital employed – even employees at the lower levels understand what it means and focus on it. I expect that in the future we may see something similar with carbon targets.

Diana Davis, Oil and Gas IQ:  My final question: if you were an oil and gas executive charged with leading decarbonization efforts how would you get started right now?

John Dale, Managing Director, ALULA:  I would want to make sure that I have my leadership team aligned on the ‘what,’ the ‘why,’ and generally the ‘how.’ We need the answers to those questions to have very clear and consistent communications. All of us, as senior leaders, need to have a united, consistent, front. This is key.

The next thing then, is cascading that down. If senior leadership has that alignment, we need to ensure that the people we’re pulling into this are aligned with those points and that they're also able to communicate the ‘why,’ the ‘what,’ and the ‘how’ within their roles. 

Be aware of the bias to action. People want to jump in and start executing. As a senior leader, make sure you take time to have your people answer the right questions. Let them know that it's not about just moving fast and getting things done. It's about us having our ducks in a row as a leadership team.

The other part is to engage the whole workforce.  We need to engage our people and help them get excited about this new future, even if they’re not directly engaged in the decarbonization efforts. We need to make sure they understand their contributions to it.

We need the base business to fund the new future. Remind people of that and keep it front and center.

Another point I’d like to mention is to be careful what you're communicating both internally and externally. You need to be thoughtful about what you’re communicating especially to investors or other key stakeholder so that you don’t overpromise.

Finally, you need to recognize that, ultimately, decarbonization means that the operations of your organization will need to start doing things differently. The more you can make these efforts part of the natural way that your people work, the easier it is to integrate it into how you run your business day today.

What are your OpEx goals? What are your spending goals for capital expenditure goals? What are your lower carbon goals?

Safety is a great analogy to this. I've been around companies who have spent ten years getting their safety processes in place to the point where people don't even think about doing certain things without stopping for a minute and checking procedure. It becomes second nature. Lower emissions will become like that too if we have that mindset. In this case, we don’t have ten years.

Interested in learning more? 

Decarbonization is as much as much a technical challenge as it is an organizational and human challenge. Download our special report Planning for the Operational and Organizational Impacts of Decarbonization to ensure your company’s operational and organizational readiness for the energy transition is on track.