Report on Schlumberger Limited

Submitted in partial fulfilment of the requirements of the course

Understanding People and Organizations - I

Instructor: Prof. Vishal Gupta

Academic Associate: Ms. Rachna Arora

Submitted on July 05, 2015

Siddharth Daga, Debesh Kuanr and Navinkumar Gurnani

Group 8, Section A

INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD

 SCHLUMBERGER LIMITED:

Schlumberger is the worlds leading supplier of technology, integrated project

management and information solutions to the international oil and gas exploration

and production industry. The company employs 115,000 people representing 140

nationalities working in 85 countries. It provides the industrys widest range of

products and services from exploration through production.

Organizational Excellence:

Schlumberger is a company that exhibits competitive organizational excellence

with a market capitalization and net income that exceeds that of the next three

largest competitors combined.

Exhibit 1: Schlumbergers Performance vis--vis competitors

Market Cap Net Income

(Million $) (Million $) P/S P/E

Schlumberger 106,669 4,821 2.3 2.8

Halliburton 35,660 2,235 1.1 2.3

Baker Hughes Inc 26,232 802 1.1 1.5

National Oilwell

Varco Inc 18,392 2,223 0.9 1

Source: Morningstar.com (accessed on 5th July 2015). These are the only 4

companies that are rated 4 stars by Morningstar within the sector.

Strategy:

Guiding principles and values form the basis of strategic planning in any

organization. Three well-established company values focusing on people,

technology, and profit guide all the work at Schlumberger. The firm focuses on a

differentiation strategy that rests upon two key pillars exceptional service and

new technology. Schlumberger executives serve as ambassadors to as many as

44 engineering programs globally to develop relationships with students and faculty

to ensure the best hires. It has also invested significantly in competency

inventories of its employees and knowledge sharing to improve productivity and

quality of services. Additionally, the firm has the longest track record for providing

leading edge exploration & production technology. Since its founding, the company

has invested heavily in R&D as a long-term strategy to support and grow its

technology leadership. As per its 2013 annual report, for instance, new technology

sales allowed opportunities for higher pricing in almost all markets while at the same

time enhancing customer confidence. Additionally, one of its acknowledged risks is

the inability to maintain technology leadership and the consequent loss of

competitive advantage.

Schlumberger is a prospector. Supported by a flexible, fluid and decentralized

structure as well as the above-mentioned capability in research, the company

engages effectively with the dynamic external environment and innovates to create

new opportunities and grow. For example, in light of the recent drop in oil prices and

reduced expenditure by oil companies on rental tools, equipment and services,

Schlumberger reduced its workforce and started investing in a transformation

program designed to make product lines more efficient. Additionally, it has identified

the reduced internal research & development at the oil companies as an opportunity
for it to gain market share. A major focus, for example, has been the drilling unit

which has seen revenue triple since 2010.

The firm also uses a goal approach to measure the effectiveness of its strategies.

Profit is enshrined as a core value at the firm, and earnings and returns form an

important parameter for performance evaluation.

Organizational Structure:

Exhibit 2: Schlumbergers Organogram

The organizational structure of Schlumberger can be studied in terms of the

reporting relationships (captured above) and the departmental groupings.

Schlumberger follows a functional structure. This aligns well with the focus upon

efficiency and the need for in-depth knowledge given that the firm operates at the

advanced end of the technology spectrum. Within Operations & Integration, one

finds a geographic structure because operations vary significantly due to factors

such as the nature of oil fields and laws and regulations. This is not observed within

other functionalities due to the fact that they remain largely the same across the

globe.

One of the competitive advantages enjoyed by Schlumberger is its knowledge

sharing. Horizontal information sharing and coordination is ensured through

information systems such as Eureka and special interest groups to enable

teamwork.

Since Schlumberger is a services firm, formalization is low. Decentralization is

the norm with decision making powers provided to even the lower level managers.

This is necessitated given the demand of field work, and exigent circumstances that

may at times arise in such situations. There is a distinct hierarchy and

specialization needed is both broad (services arms, engineers) and narrow

(manufacturing arms, mechanics).

Technology:

The Vice President of Operations, Satish Pai, believes in the ideology that lean

manufacturing methods have a great impact and positive effect on people,

performance, and bottom line. The technology of Schlumberger, therefore, is entirely

focused on a bottom-up and lean approach. To shift to lean manufacturing,

Schlumberger had followed a three phased approach as highlighted in the table

below.
 Exhibit 3: Phases in Schlumbergers Shift to Lean Manufacturing

Phase Timeline Activities undertaken

2004 - Lean consultants were hired to train the employees, assign lean

1 08 managers (champions) and set up the ground work

2008 - D&M (Drilling & Measuring), Schlumberger took direct control of

2 10 the program and expanded upon the ground work from Phase 1

2010 Implementation in the field with continuous feedback and

3 onwards improvement - Bottom Up Strategy

The organizational culture has slowly evolved to support active employee

participation and a focus on customers which lends itself well to the requirements of

a lean manufacturer.

Schlumberger also relies heavily on computer aided design and manufacturing

and in 1985 consolidated two of its major Computer Aided System group. The

Computer Aided Design (MDSI) and Computer Aided Manufacturing, both started in

1969, were merged without disrupting the management structure to offer added

efficiency and speed.

Schlumberger is a company that believes in Continuous Process Improvement.

For example, the Ekofish field is the 1st commercial hydrocarbon discovery, and the

firm had to overcome significant challenges in drilling due to the high porosity (25-

45%) and low permeability.

In keeping with the strategic orientation of the firm, and its emphasis on lean

manufacturing with continuous improvements, the firm maintains an organic design

of departments. The employees have decision making power and great training and
experience. Horizontal communications are also emphasized upon with low

formalization due to the non-routine nature of the tasks each rig is different.

People:

Schlumbergers diverse workforce is believed to be its greatest strength. People with

different backgrounds, nationalities and perspectives provide an engaging,

supportive environment where everyone is joined by a common goal: to enrich the

quality and impact of its work around the world. Gender diversity is given special

care and it has been aiming to increase the percentage of women and ensure proper

career development for high-performing women. Special measures are taken to

ensure a sociable, friendly, equal and safe environment. Facilities such as free food,

transportation, flexible working hours, sports clubs, social areas around the office

and special care for health and safety of employees help them to focus on work.

Schlumberger aspires for people who are enterprising individuals, good listeners,

creative and intellectual, adaptable, reliable and trustworthy, good team players and

self-motivated. Technological changes are very frequent, and employees are

expected to do whatever the customer wants. Hence, job requirements are hard to

specify. To maintain its employee-based competitive advantage, the firm continues

to develop and implement new systems, policies, and practices to retain the

workforce. Rigorous and comprehensive training and development programs in

technical as well as soft skill domains are organized to keep its employees at the

forefront of their fields. Competitive salaries and performance-based incentives help

retain the best and brightest of the employees, and well-defined career paths help

Schlumberger continue to grow and nourish the talent it needs to thrive in an

increasingly competitive world.

Schlumbergers performance appraisal is detailed, consisting of three pages of

written objective reviews and one page of subjective opinion. The review process
has been structured by regression analysis that weighs each aspect of performance

with a mathematical value thereby quantifying qualitative aspects of the job as well.

Conclusion:

The company, which started with the invention of Wireline Logging, has continued

ahead with a long-term commitment to people, technology, and customers.

Alignment of an organic and fluid organizational structure with the differentiation

strategy, focus on lean, advanced technology and development of its human

resources have helped it attain and sustain global leadership in a dynamic

environment.

[Word Count, excluding exhibits 1189]

References:

1. Susan Jackson, Randall Schuler, Stever Werner (2008). Managing Human

Resources

2. Jim Jubak (2014, April 11). Despite the Oil Price Slump, I Think Schlumberger

Remains a Classic Growth Pick in a Slow Growth Global Economy.

Moneyshow.com.

Available from http://www.moneyshow.com/articles.asp?aid=jjp-41379

3. Richard L. Daft 2013. Understanding the Theory and Design of Organizations

4. Douglas G.Shaw, Craig Eric Schneier, Richard W. Beatty, Lloyd S. Baird.

Performance Measurement, Management and Appraisal Sourcebook

5. Schlumberger Annual Report 2013

6. www.slb.com

7. Angelo Denisi, Ricky Griffin. Schlumbergers innovative HR strategy

8. Douglas G.Shaw, Craig Eric Schneier, Richard W. Beatty, Lloyd S. Baird.

Performance Measurement, Management and Appraisal Sourcebook

9. Angelo Denisi, Ricky Griffin. Schlumbergers innovative HR strategy in HR 3

10. secure.michaelpage.com.my