Published here January 2008.

 

Musings Index

Oil Industry Leadership and the Price of Gas

We try hard to avoid trespassing into the world of politics, but this one is hard to resist. After all it is about large projects, their leadership and managership. In an article in the Canadian Financial Post, March 20, 2006, columnist Claudia Cattaneo wrote an article titled: Oil chiefs not cut out for the job. True, that is over a year ago, but the content and confusion is still relevant.

Claudia wrote in part:

"It's becoming a regular spectacle: defensive oil executives facing politicians outraged by high gasoline prices, big profits, too much consolidation, lack of investment. The latest high-profile episode was last week in the United States (a country supposedly run by an administration with cozy ties to the energy sector) when the heads of the top six oil companies were hauled before a Senate committee looking at proposed legislation to prevent gasoline price manipulation.

Hostility toward the oil industry is rising across the board. Many foreign governments are demanding a bigger cut and say in development, or showing oil companies the door [while] Canada, perceived as more politically accommodating, is attracting unprecedented investment. But here, too, environmentalists and anti-development groups are sounding off like never before. Aboriginals have become forces to be reckoned with. Property owners are rebelling against too much activity.

Then there are energy consumers, who continue to fill up their tanks, but not before cursing oil companies for making too much money. The sector's standard defense that oil companies are mere price takers in a global business is scoffed at. Sure, some of the angst has to do with a time of big change. Energy has gone from cheap and abundant to scarce and expensive in a heartbeat."

And then Claudia went on to say:

"But John Kotter, the leadership expert at Harvard Business School, said the oil industry also has itself to blame. In an interview last week, Mr. Kotter, the author of the international best seller Leading Change and who was ranked in 2001 by Business Week as the No. 1 leadership guru in the United States, said too many oil CEOs have the wrong skills for the times: They are managers, not leaders.

The reality is that the world is becoming increasingly turbulent, unpredictable," Kotter said. "The rate of change has been going up in most sectors because of technology, the global interdependence of everything. And what that means is that at the top of organizations and even in the middle, increasing numbers of people need to do more than just manage the system.

They need to provide leadership. And there is a big difference. There are all kinds of businesses that have grown up in a different era that have promoted and encouraged legions of people to be superb managers, and unfortunately what they need now are some more legions of people who can provide leadership to be able to duck the hazards, grab the opportunities, and deal with the uncertainties that are floating around virtually everywhere. Leaders are 360-degree people. They are paying attention to all the little pieces inside the company, but without a micro-management approach, and they are paying attention to everything outside, too.

None of the six oil executives who testified last week came across as people who inspire confidence or sympathy, or whom others would want to follow. I think they come across terribly. These guys looked like they didn't belong in that setting. They seemed defensive, and not willing to give an inch.

The six [oil executives] should have shown sensitivity to how the average person feels about high energy prices, rather than dishing out numbers and corporate speak, and defending their practices. How many of them have you heard step forward and say: 'We are just appalled that the average person out there is having to pay these prices. I know people who are having trouble heating their homes this winter, buying gasoline. This isn't an acceptable way to run a society. We have to work together.'"

Well, here's my take on all of that. Sure I'm the first person to be running around town for the lowest price of gas when it comes to filling up my tank. That's the free market economy at work. But we ought to be glad that here in North America the price is not a lot higher – it is in many other countries. Moreover, Business Week may have ranked Mr. John Kotter as the No. 1 leadership guru in the United States in 2001, but today I think he has his wires crossed. At least in Canada, Government levies make up a substantial part of the price we pay for gas so Kotter should be railing at government not at the oil industry.

But let's think again. Shouldn't we be happy that the price of gas is high? Shouldn't it be even higher? Think of the advantages. More people would find it more economical to go by public transit or other non-gas consuming means. With less traffic on the roads it would be easier to get around and there would be less pollution. People would be altogether healthier.

Come to think of it, where are those environmentalists in all of this? They should be heralding the new energy costs as nirvana - the incentive to use less; less personal transportation; transit expansion becomes more viable; solar, wind and sea power all become more competitive; and so on. For project managers, at least, these benefits far outweigh the increased cost of gas. Oh, yes, and the unions should be happy, too. The more public transit there is, the more drivers there are and hence the more union members. This way, the unions have an even greater strangle hold on the public whenever they decide to go on strike.

As for Kotter's remark that: "The reality is that the world is becoming increasingly turbulent, unpredictable", all that was highly predictable following the issue of the report of the Club of Rome circa 1972, so why the surprise? Events are unfolding just as expected even though a little later than expected. Oh what conveniently short memories these academics have.

As for: "None of the six oil executives who testified last week came across as people who inspire confidence or sympathy, or whom others would want to follow ... They seemed defensive, and not willing to give an inch." Well, if you were sitting on a long sought opportunity with the hoards yelling at the gates, wouldn't you be a little defensive inside the barricades?

For those who would like to have an understanding of the difference between leaders and managers, here is Jim Clemmer's advice:

"According to John Kotter, Management/Leadership Author and Professor of Organizational Behavior, Harvard Business School, 'Leadership and management are two distinctive and complementary systems of action. Each has its own function and characteristic activities. Both are necessary for success in an increasingly complex and volatile business environment ... strong leadership with weak management is no better, and is sometimes actually worse, than the reverse. The real challenge is to combine strong leadership and strong management and use each to balance the other.'

The terms 'management' and 'leadership' are often interchanged. In fact, many people view them as basically the same thing. Yet management is as distinct from leadership as day is from night. Both are necessary, however, for a high-performance organization. By contrasting them and understanding their differences, we can better balance and improve these essential roles.

One key distinction between management and leadership is that we manage things and lead people. Things include physical assets, processes, and systems. People include customers, external partners, and people throughout our team or organization (or 'internal partners'). When dealing with things, we talk about a way of doing. In the people realm, we're talking about a way of being."[1]

That seems to me to be a good description. Nevertheless, there is no consensus in the industry, academic or literary world as to the respective attributes of either label - only much theoretical academic pontification of which I am also guilty.


1. See http://www.clemmer.net/articles/articles.aspx?article=93
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