The Transformation of Shell

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Current Situation:

In the last fifteen years, Shell International has undergone many changes in their organizational structure. Three major events, the Brent Spar incident, human rights problems in Nigeria, and shareholder activism moved Shell to do a thorough examination of their company. After many attacks by activists, Shell first, changed from a complicated matrix form of organization to five worldwide business units. These units were exploration, production, oil products, chemicals, gas and coal, and central staff functions. This design was to make Shell more efficient, and focused on their customers. This started them off in the right direction, but did little to change their tainted image and policies. A major turning point happened at an executive retreat when Herkstroter, the chairman of the CMD, admitted that the company needed to own up to its problems and stop blaming outside sources for inside problems. This stunned the Shell organization. Shell was known as a “hard” company and the admission of “guilt” was not something that had happened before. This was the turning point of the entire organization. The Pensions and Investment Research Consultants (PIRC) decided Shell still had not addressed its concerns well enough. PIRC came up with a plan called Resolution 10. They told Shell to take three actions including place a director in charge of environmental and corporate responsibility; to monitor, externally audit, and report to shareholders on its environmental and social policies; and to issue a report by the end of the year on the company’s operations in Nigeria. In a speech a Shell executive described this new approach as a switch from DAD—decide, announce, and defend, to DDD—dialogue, decide, and deliver. Over the four years of change, Shell took a new direction for their company. They revised their business principles, reorganized the internal structure, and audited reports on its social and environmental performance.


Ethical Business Behavior

They admitted to their problems with the Brent Spar and Nigeria. They took responsibility for their actions. They took complaints on their website and allowed for everyone who logged on to see them. They allowed themselves to be seen as people, they wanted to change who they were, and they did.

Environment Commitment

Shell recommitted itself to the environment by launching a huge campaign to find an idea of how to recycle the Brent Spar. They held open meetings in five different countries to help make the final decision of what to do with the retired buoy. In 1998, Shell announced that it would recycle the Brent Spar as a ferry dock in Norway. Shell also hired external companies to do an auditing of their company and write an annual report. The Health, Safety and Environment Report, was published for everyone to read and was the first of its kind to be published by a multinational oil company. They acknowledge sustainable development and work to improve in this area.


Shell has worked hard for years to repair its image. They started by taking responsibility for its actions and making steps in the right direction. Shell has done a complete image makeover. They empowered their stakeholders by allowing them to comment on how they thought Shell was advancing or retreating. Shell has connected itself to society and declared support for fundamental human rights.

Strategic Analysis:

ExternalAt the time, Shell earned more profit than any other company in the world did. However, they trailed many competitors return on average capital employed (ROACE), which is a common measuring stick for performance in the petroleum field. This meant Shell was receiving a lot of profit but their social responsibility was way below average.

InternalShell is one of the largest and most powerful petroleum companies. They usually turn a profit and their company can be found on multiple continents. However,...
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