Asset operating integrity topped the list of issues in Celerant Energy Executive Global Survey 2007. (All graphics courtesy of Celerant)

Amongst the many challenges facing the energy sector in 2008, a recent survey we conducted of global energy executives put asset operating integrity (AOI) at the top of the list.

This general climate of opinion is reflected in the specific commitments being made by many organizations with BP, for example, announcing that it would be spending US $5 billion on asset integrity improvement programs in 2007.

This confirms that the status of AOI is being reflected in capital commitments. Yet, despite billions of dollars continuing to pour into a range of initiatives with the specific purpose of achieving and sustaining AOI, acceptable integrity levels are still not being attained. For example, in the North Sea — where asset integrity is perennially under the spotlight — health, safety and environment (HSE) prohibition and improvement notices in 2007 were up 53% on the previous year; this is despite an increase in capital expenditures (taken as a reflection of increased activity) of 25% during the same period.

The relative lack of progress with AOI to date should not detract from the fact that huge gains are possible. Approached in the right way, the working environment can become one where AOI can be transformed into an extension of personal integrity, rather than just an issue of process or compliance (which are important themselves). It can even, crucially, become a potential profit driver, as opposed to a brake on productivity and profitability. Yet this opportunity to reconcile integrity with profit is one that so far has not been given as much attention as it urgently needs.

What’s causing the problem?

The reality is that the biggest challenge most companies face is physically translating strategic direction into meaningful and sustainable change on the ground. When asked why integrity initiatives aren’t working the way that they should middle managers had a consistent answer: the proposal from the corporate center simply does not fit with the reality of what is happening on the front line. “The latest program they sent down was just not based on our reality: it did not take into account our local conditions. One size does not fit all, especially in this industry,” one Gulf of Mexico middle manager told us.

Among the most significant results from our study was the finding that the knowing/doing gap between the boardroom and the plant-room is often due to poor communication from the corporate level. This is exacerbated by sub-optimal performance management.

Yet the energy sector is not alone in facing this problem. A separate study we conducted of European companies (Figure 2), including those in the oil and gas sector, helps to explain why many initiatives fail.

Whose reality is it anyway?

Senior managers do not see the delivery levels they would like — and that a variety of stakeholders are pressing them to achieve — because there is often a lack of clearly defined key performance indicators (KPIs). KPIs are vital to ensure that the managers can monitor exactly what is being achieved over what timescale, as well as providing clear targets for the workforce. And even where KPIs are in place, they may not be set correctly to give a full and accurate integrity picture. The Baker Panel, assembled in the aftermath of the Texas City disaster in 2005, confirmed this when it pointed out that BP had been looking at occupational safety rather than process safety metrics.

Even if the KPIs are right, there is always the possibility that the underlying KPI data itself is lacking integrity. Two experienced foremen with one of the oil majors in North America admitted to us that only “60 to 70% of the KPI data we report up to head office each month is accurate”. This inaccuracy is compounded by the large number of temporary contractors currently employed by the industry that may not always follow the correct methodologies.

Cultural resistance to change

There is another underlying issue; a deep-seated cause of which the other factors are often no more than symptoms. This issue has a profound cultural and behavioral resistance to change and this affects all initiatives, not just those relating to health, safety and the environment. “The industry is not used to change. There are a multitude of projects which are always started but never finished, as the owners move on or just lose interest,” observed a North Sea performance manager.

It is hard for operational staff to prioritize integrity, as an integrity manager for a major energy company explained, “Managers who have their production targets set at the quarterly level often find it difficult to justify adopting long-term asset integrity policies into their schedule.” If senior management does not put integrity first all the time, every time, it is hardly surprising that employees further down the organisation follow suit and fail to put integrity at the top of their own working agendas.

Resolving the problem

If these are important causes of the failure to achieve and sustain AOI, then what are the potential cures? Our contention is that by addressing critical issues relating directly to people, processes and systems around these two key areas — communication and performance management — integrity excellence will be more quickly and more predictably achieved.

The key to making the integrity message stick seems to be in ensuring both suitability — relevance — of what is being asked for in terms of operational practice and behavior change and accountability of subsequent engagement with new initiatives. Persuading employees that any changes in pursuit of integrity will actually improve local working conditions is a good way of defusing resistance and getting the message accepted.

But acceptance is only the beginning. Sustainable integrity relies on sustained action. It is equally important to ensure that asset-based employees really stick with their new found focus on integrity. This requires detailed, hands-on and motivating performance management for the long haul. Just sending a fire-and-forget email will not work.

Support and recognition

The second most frequently cited answer to the question of why change initiatives fail concerned lack of coaching and support for change itself. Employees often feel when asked — or told — to do something that they are alone and simply left to get on with it. “We normally just get e-mails telling us we are doing things wrong, but without giving us any help to do things right. We don’t have the time to do everything they want,” reported a North Sea performance manager. Freeing up time for middle managers to complete newly set tasks is difficult as they often struggle to deal with their own immediate responsibilities. Inevitably, new initiatives around integrity can take a back seat. This is where internal or external implementation specialists, who can work alongside the asset managers, are often a useful resource to employ. They can help ensure — by showing and supporting rather than telling — that integrity practice can be combined with daily operational demands.

To resolve the KPI problem it will be imperative to make sure that all workers — permanent staff and contractors — are fully engaged with, and understand, clear KPIs and are able to record data accurately and easily. This is the indispensable first step to achieving lasting integrity. The nature of what is being measured must also be carefully considered. All selected KPIs must be directly relevant to the integrity targets set by the company. And ‘initiative overload’ has to be avoided. Too many KPIs will swamp the people doing the checking and mean they are not efficiently carried out.

Shift to sustainable integrity

Asset integrity excellence is an achievable goal. It has been impeded by sub-prime implementation across much of the industry. But the commendable efforts of many organizations illustrate the art of the possible.

Success requires a realization that the corporate and asset elements of the business are inextricably linked in both the development and execution of integrity initiatives. The corporate side must understand the operational realities before they can design any proposal. And every initiative will require detailed performance management.

Sustained integrity will not only secure operations against breaches, a major consideration. It will also engage and motivate the workforce, drive predictable and increased productivity and satisfy the agendas of multiple stakeholders. The commitment is significant but, without doubt, the prize is worth the effort.