The Transformation of Shell

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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.

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