Chevron utilizes a vast array of methods to sustain its knowledge and learning energy. The key tools, systems and drivers are pre- sented here.
Organizational learning system
A recent development at Chevron has been the adoption of an organizational learning system (OLS), which is, in essence, a map for planning, execution and evaluation of ongoing work.
Example: In drilling, it uses a simple software tool to capture lessons from the first wells in a new area, and then it helps you use that knowledge to drill the rest of the wells faster and cheaper. Chevron’s well costs dropped by 12 to 20 per cent and cycle time reduced by as much as 40 percent in some cases, and it all adds up, especially if you consider that a big offshore drilling vessels costs up to $250 000 a day.
The point is that Chevron didn’t invent the OLS. The organiza- tional learning system came from Oil & Gas Consultants International, who developed it with Amoco and later verified a model by working with the Gas Research Institute. Chevron did not really appreciate the potential of the OLS until after it learned more about it from a partnership group, which it had formed in 1996 with Mobil, BP and Texaco to share best practices in tech- nology. That group eventually funded a special study of the OLS, and later proved the value of the OLS by conducting a pilot proj- ect on Chevron’s oil development in Papua New Guinea. Now Chevron uses OLS to manage key elements of deep-water explo- ration and development in the Gulf of Mexico. Success of this tool has been such that now an OLS specialist has been added to Chevron’s Project Resources group to help other Chevron organi- zations make use of it.
Best Practice Resource Map
Another mechanism for driving and sustaining learning is the Chevron Best Practice Resource Map. The map is a kind of snap- shot of the company at a particular point in time. The map shows most of the major things Chevron is doing to share knowledge. It is colour coded by Baldrige categories. The Best Practice Resource is designed to help people find their way to resources all over the company. Probably, its single most important role has been in helping identify the numerous networks throughout Chevron. The map also pinpoints who is in charge of each net- work, it lists numbers and computer contacts so people can get involved.
The original map has been replaced with an on-line version,
which is easier to update and more accessible to employees worldwide. The original hard copy has become a sort of a collec- tor’s item around the company. The Chairman often takes it around with him to meetings because, ‘it was one of the first things that got Chevron noticed in the area of managing knowl- edge – it made us more aware of ourselves in this area.’
An aspect the map does not capture is Chevron’s ongoing emphasis on the PDCA cycle, particularly the ‘check’ step.
Chevron is strongly committed to managing work as a process, and to continuous improvement. Chevron has learnt that the PDCA ‘check’ step can be very effective in improving repetitive or cyclic processes. This step makes sure the company learns from previous experience with a process, and it drives the com- pany to use that learning for continuous improvement. For exam- ple, the company recently completed a check of its corporate planning process, and found several ways to improve how it for- mulates company-wide strategies.
Of course, this map provides only a partial and static account of Chevron’s knowledge management effort. The reality of improvement comes from the day-to-day commitment and activ- ity of countless best practice teams. The success stories are pre- sented below.
Best practice success stories Energy efficiency
Chevron’s six-year effort in this area has reduced energy costs by about $200 million a year compared with the starting point. A big part of the savings has come from the systematic application, throughout operations, of best practices for managing energy use.
Chevron tracks progress through an energy efficiency index that is based on reports from each of its business units. It has a network of practitioners who meet and hold regular conferences and who network through e-mail, an internal web site and a newsletter.
Capital projects
The oil and gas industry is a very capital-intensive industry.
Managing capital projects is a billions of dollars a year task. For example, Chevron in 1999 invested over $5 billion. In 1991, a benchmarking study showed Chevron that it was spending more than some competitors on big projects. Chevron scrutinized best
practices and internal know-how to create the Chevron Project Development and Execution Process, which is now considered to be a world-class tool.
Since development of this tracking process Chevron has iden- tified hundreds of millions of dollars in project-cost savings – a 10–15 per cent improvement in capital efficiency. The company did not stop there but continued to improve upon that process.
Additionally, Chevron formed a central Project Resources group to help people use this tool company-wide. This group also sup- ports Chevron’s community of project-management people all over the world.
Process masters
Chevron’s ‘Process Masters’ programme is a network within US oil refineries. It is made up from seven full-time experts who sup- port Best Practice Teams covering the major, high-cost functions common to all six plants – ranging from catalytic cracking to plant maintenance. The refineries have a lot of other networks called ‘natural teams’, i.e. employees who work in best practice groups as part of their regular jobs. The best practice teams and the process masters programme efforts combined have led to the company achieving distinction for its systematic sharing of inter- nal and external best practices.
Technology brokers
Offshore in the Gulf of Mexico, another Chevron group has com- bined the process-masters concept from the company’s refineries with some best practices from Union Pacific Resources to create a new programme called ‘technology brokers.’ Six employees work full time in these new roles, searching for best practices in offshore oil and gas operations.
Already the payoffs have been delivered. A typical oil or gas well is about as wide as a dinner plate and thousands of feet deep. Just getting in and out of the hole takes a great deal of time and money. Now the group have found a one-step way to do two separate but essential operations at the bottom of the wells. What once took five days and two trips down the well now takes a day and a half and a single trip. After just ten wells, the company has logged over $2 million in savings compared with using the old method.
Human resource best practices
Chevron has adapted human resource best practices from compa- nies like Bechtel and TRW to set up a new process to reduce con- flict in disputes between individual employees and the company.
Among other benefits, the company hopes it will help them reach fairer solutions before things get to the lawsuit stage.
Community best practice
In community relations, the Chevron Best Classroom Practices programme has captured innovative ways to teach mathematics, science and technology from a dozen great teachers. The lesson plans are placed on the company’s Internet site, so any teacher can take advantage of them.
Environmental best practice
Chevron created the Environmental Management Company. The Chevron Environmental Management Company does all the envi- ronmental remediation work that was previously handled by sep- arate groups scattered around different locations. This new unit shares the know-how and experience of the whole company, with a goal to reduce remediation costs by at least 15 per cent.
Vision Objective Teams best practice
Chevron’s four Vision Objective Teams are involved in the shar- ing of best practices and promoting standard work processes in the areas of plant management, marketing, technology planning and supply-chain management.
(A detailed success story is presented at the end of the chapter.
The focus of the story is operational excellence at Chevron’s El Segundo plant. The story illustrates that excellence is not just built by top-level exhortations but by belief at the grass roots.)
Enhanced learning and sharing through Global Information Link (GIL) Chevron, in 1998 installed what it calls its GIL system. The GIL was put in place to enhance exchange of know-how between employees. This massive project was completed in just one year
using Chevron’s project-management process. The significance of the achievement becomes clear when one knows that similar projects elsewhere have taken as long as four years. Chevron estimates that, quite apart from networking benefits, GIL is going to save about $40 million a year in system management costs alone.
Many individuals comment that probably nothing Chevron has done recently can compare to the rollout of the new GIL. The pro- gramme replaced every personal computer in the company with a common machine, software and connective system, creating a single desktop and operating environment worldwide. This undertaking involved replacing about 30 000 computers, with full intranet capability and Internet access for those who need it, advanced e-mail, scheduling and presentation tools.
These information technology tools were not, of course, new to the company. What was new was having them all standardized, compatible and connected. This means that every employee now has an identical ‘sharing machine’ on their desktop.
The GIL has also reinvigorated the already rapid growth in the scope and usage of the corporate intranet. The wide range of internal sites, ranging from best practices, to environmental, to the company home page and the individual sites of the sub- sidiaries and departments, have been made even more accessible and have opened up further possibilities for sharing. Through the GIL, Chevron has increased the number of employees who are aware of and contribute towards developing and sharing best practices. Publishing on the intranet is monitored but not restricted. There is even a place, ‘Scratches’, for recording the smallest details of knowledge and learning and ‘Itches’ for recording requests for solutions to minor problems.
Sharing is further facilitated by organizing best practices by process category. Chevron used the process classification pro- posed by the American Productivity and Quality Centre, which is structured around the Baldrige award criteria.
Looking in by looking out: benchmarking for best practice
At one time the company’s primary method for measuring per- formance was comparing current financial results to its own pre- vious results, but then Chevron started benchmarking competition and relative competitive performance became its measure of suc- cess. This led to the systematic search for best practices among world-class companies outside the oil industry.
When the company started out on this road the biggest chal- lenge it faced was one of operating costs. Comparisons with
competitors gave cost reduction a new sense of urgency.
Through benchmarking for the first time, Chevron employees obtained extensive knowledge about peer companies and saw that in a lot of areas, Chevron’s costs were not competitive.
From this point on it did not take the CEO long to help the people towards asking the question: why? The outcome of the question led to an aggressive and deliberate improvement of work processes all over the company. It was not long before Chevron achieved operating cost reductions and narrowed a lot of performance gaps (saving in the process more than $1.2 bil- lion). More importantly, through this process the company dis- covered that it could use knowledge, particularly external knowledge about competitors, to drive learning and improve- ment internally.
An interesting example of this outward-inward looking behav- iour is how Chevron has changed its practice of research and development (R&D) management.
Chevron has two major research groups: one supports explo- ration and production and the other supports oil refining and products. These have always been the primary technical ‘knowl- edge centres’ of the company. Both were quite large and both had inward-looking cultures. Chevron used to emphasize large, in- house R&D and internal invention of tools and methods. With the new outlook Chevron decided that it was more cost-effective to invest less in that approach and invest more in finding and inte- grating technology from a diverse set of suppliers from the larger world.
The company found that this also helped refocus research efforts more upon the business needs of their customers – the major subsidiaries who fund their research budgets. Now Chevron only funds those internal projects exhibiting high poten- tial for competitive advantage. The company is quite comfortable in shopping for knowledge outside its corporate boundary rather than trying to invent everything itself. The outcome is that many managers have begun to comment that they are getting a lot more technology benefit at a much lower cost.
Managing sharing through goals, rewards and empowerment
Chevron has linked desired behaviours by embedding them within the guiding principles of The Chevron Way. Examples of desired types of behaviours to support the learning organization, expressed in terms of goals for the individual are:
● pursues learning and development as an ongoing process
● supports organizational learning
● learns from others both inside and outside the company
● encourages risk taking.
These types of criteria are used by managers to gauge promotion, salary increase etc. In turn employees use similar criteria to eval- uate management on their leadership.
Example: One of Chevron’s bright young analysts tags all her e-mails with the phrase, ‘Steal shamelessly, share continu- ally’. Now, this lady’s not an idea thief. But she is trying to encourage something that has become a watchword at Chevron – knowledge sharing or knowledge management. It means making sure business and technical information gets to every employee who needs it.
Chevron’s formula for continuous improvement is fairly simple:
set clear objectives, ensure opportunity to share rewards and pro- vide an environment for empowered action for the workforce. An objective can be anything that is important; a financial goal, or a production target – whatever. Goals are an old concept, yet they work because they give people a compelling reason to find better solutions. In Chevron’s case, providing data on the business per- formance of its closest competitors and then setting a goal to do better has been a simple but powerful tool for improving per- formance. People really seem to respond to the fact that some- body else is doing things better.
Chevron also uses rewards to drive sharing. This is through its
‘Success through Sharing’ programme, which distributes a mon- etary bonus in addition to basic salary, if annual metrics are achieved. The bonus can be as much as 8 percent of pay. The company also has started to provide stock options to all its employees as an incentive for excellent performance. By giving employees a direct stake in the organization Chevron has been able to better educate its employees about the key drivers of busi- ness performance. Informal recognition is used to complement formal recognition in effort to increase the transfer of best prac- tices. Of course, sharing rewards is not managing knowledge, but it gives people one more good reason to do it: one helps achieve the other.
Empowerment is not exactly rocket science. Delegating author- ity helps people feel ownership for their work and give their best to the organization. Of course, this is hard to measure, but not impossible. Chevron uses its annual Worldwide Employee Survey to try to track feelings of commitment to the company.
Recent results show a 15 per cent improvement in the last few