Journal of Management Development

Management development in Royal Dutch/Shell

Carla Mahieu,
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Management development in Royal Dutch/

Shell
Royal Dutch/Shell
Carla Mahieu
Spencer Stuart, Amsterdam, The Netherlands 121
Keywords Management development, Career development, Corporate culture, Strategy
Abstract Charts the history of management development in the Shell organisation. Techniques
established over many years were suddenly challenged by the economic forces of liberalisation,
globalisation and technology. In particular, Shell identified two types of organisation that could
profit ± the ``Just do it'' type, a hypercompetitive network of individuals, and ``Big Me'', a more
socially responsible organisation with a longer-term culture. An organisation the size of Shell can
use both models. ``Just do it'' fits a number of Shell operations, especially its new businesses, while
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``Big Me'' is reflected by Shell's changing stance towards consumers and the environment. Both
these models needed to be incorporated within the new management development programme
and Shell's larger career development structure.

The founding of Royal Dutch/Shell

The Royal Dutch/Shell Group was founded in 1907 through the co-operation of
two companies: Royal Dutch and Shell Transport: two companies, both with
their own specific knowledge and accomplishments. Royal Dutch developed oil
fields in the Dutch Indies, with the purpose to produce lamp oil. Gasoline was
only a by-product in those days. Shell Transport focused on the transport and
trading of lamp oil. The fierce competition in the developing oil industry made
the two companies decide to pull their complementary strengths together and
Royal Dutch/Shell was established.
The two companies became parent companies with a 60 per cent interest for
Royal Dutch and a 40 per cent for Shell Transport in two new holding
companies, which later became Shell Petroleum N.V. and The Shell Petroleum
Company Ltd. Since 1988, the shares of Shell Petroleum Inc. in the USA are
divided in the same 60/40 ratio over Royal Dutch and Shell Transport.
Over the years Shell has become one of the world's largest multinational
companies with 100,000 staff in 130 countries and with a total asset value of
$110.068 million. Shell's activities today span different businesses across the
energy spectrum with exploration and production, oil products (manufacturing,
marketing and distribution), chemicals, gas and power and renewables (forestry,
biomass and solar energy). Supporting these businesses is Shell Services
International, a shared services organisation offering transactional services and
in-house consultancy.

MD in Shell from a historical perspective

Shell's approach regarding management development was founded on a number
of principles, that served the organisation well for decades, some of which have
become very ingrained in our culture and in our MD approach over time. These Journal of Management Development,
Vol. 20 No. 2, 2001, pp. 121-130.
principles in a way were a reflection of the business environment in which Shell # MCB University Press, 0262-1711
 Journal of operated, characterised by a growing demand for energy, fuelling economic
Management growth, creating more demand for energy. Business ventures in the oil industry by
Development its very nature were long term oriented and capital intensive, favouring large scale
enterprises which were global in scope, yet managed by high calibre, professional
20,2 people ``on the ground'' who were entrusted with the handling of the local natural
resource base. As a result, the global outlook, long term orientation and the notion
122 of career-long employment and development of expatriate and local staff became
some of the basic ingredients of Shell's approach to management development.

A management development philosophy to ``grow our own timber''

Shell's philosophy is one of wanting to grow our own timber: Shell takes people in
from university, and provides technical, professional and managerial development
opportunities, moving people every few years through the organisation,
continuously testing their general management and leadership capacity during
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assignments of increasing complexity and scope. In doing so, future business

leaders would be given the experiential development required to staff the most
senior positions in the Group. Today, that philosophy still exists, although we now
also recruit people at more senior levels into the company, recognising the different
perspectives that this may bring. The MD philosophy still manifests itself in what
I would call a flux culture: within Shell it is a well-understood phenomenon that
after a number of years in an assignment people in the organisation move on to a
new challenge. This applies to staff at all levels and fosters the acceptance of the
fact that people continuously need new challenges to develop and grow.

A common ``language and currency'' enabling MD in a multinational company

A key feature of the Shell MD approach has always been the use of a common
set of criteria to describe jobs and people:
. Around the world, job evaluation and grading provide a common
understanding of the level of complexity and scope of the position
requirements, facilitating the resourcing process.
. To identify people and their individual strengths and weaknesses, a
common set of criteria was introduced, namely: helicopter, power of
analysis, imagination, sense of reality and leadership effectiveness.
The notion of ``Helicopter'' was introduced to Shell by Professor van Lennep, an
industrial psychologist at the University of Utrecht and further operationalised by
Muller (1970), a Shell executive, who captured helicopter and other criteria in a staff
appraisal framework. In their research efforts to define the criteria that would
predict leadership potential and distinguish the successful from the unsuccessful
candidates, one of the key factors turned out to be ``helicopter quality''. Helicopter
was described as ``the ability to look at problems from a higher vantage point and
shape the work accordingly on the basis of a personal vision as well as the urge
and the ability to place facts and problems within a broader context, by
immediately detecting relevant relationships with systems of wider scope.'' The
 total set of criteria made up someone's estimated potential, expressed as a job-level Royal Dutch/
that someone might be able to reach towards the end of his/her career. Shell
In a multinational company like Shell, the use of a common set of criteria, i.e.
the job-evaluation process as well as the notion of estimated potential, provided
a common denominator, both expressed in terms of job-levels.
Based on an analysis of staff performance and development appraisals,
Trompenaars (1993) has, however, pointed out that the use of universal criteria 123
has not ruled out cultural differences. How criteria were being prioritised could
differ between different countries, allowing local flexibility as shown in Table I.
Whilst the appreciation of those values could differ between countries, the
importance of the common leadership framework contributed to the success of the
MD approach in Shell and became the language to identify and develop people.

The use of estimated potential as a pull factor

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People's potential used to be estimated a number of years into the company and
re-calibrated every year in so-called ranking exercises where line-managers
would assess people's performance and capabilities against these criteria. The
tool of an estimated ultimate potential was very much at the heart of
management development in Shell.
Based on someone's estimated potential, assignments were carefully planned
to ensure the right experiential development. MD was very much focused on
developing individual skills and capabilities to ensure that the right number of
managers with the right set of competencies and experiences would be available
to occupy the most senior jobs in the Shell Group. Promotion guidelines were
used to determine how long ideally someone should stay in his current job and
when it was time to move on to the next assignment and job-level if the person
was indeed to fulfil his ultimate potential (potential pull). A numerical analysis
would predict people's development over time on the basis of their potential in
terms of job-grades (supply) and compare those numbers with the numbers of
jobs at those levels for which incumbents had to be in place (demand); such
analysis was used to support recruitment and resourcing decisions.

Building a curriculum: cross-functional and cross-cultural development

For high-potential staff cross-functional and cross-cultural broadening have
always been part of the curriculum. The first two assignments in Shell for

Netherlands staff UK staff

1. Reality 1. Helicopter
2. Analysis 2. Imagination
3. Helicopter 3. Reality
4. Leadership 4. Analysis Table I.
5. Imagination 5. Leadership Cultural differences
re-order the staff
Source: Trompenaars (1993) appraisal criteria
 Journal of people who joined straight from university would provide grounding and help
Management establish professional competence and mastery within a certain discipline. For
Development high-potential staff, the learning gained would then usually be expanded across
cultural boundaries. The maintenance of an expatriate workforce of 5,000-6,000
20,2 staff over the years has offered tremendous learning opportunities for staff
concerned and has been one of the ways to transfer knowledge within the Shell
124 Group. Further on in the career of a high potential person, once the foundation
of professional expertise was laid, their functional personnel planner would
strive for some cross-functional experience to broaden perspective. At an age of
around 50 people would have reached a level of responsibility corresponding
with their ultimate estimated potential.
Summarising: the use of potential, ideal promotion guidelines and supply
and demand analysis of staff have worked well for an organisation:
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. which focused on the long term;

. where demand for talent was based on relatively stable and predictable
job-requirements, both in a qualitative and quantitative sense;
. which had a relatively ``closed'' system, where staff joined directly from
university and stayed with one employer to ultimately fulfil their
estimated potential.

TINA forces challenging the way we work

Shell develops and uses long term scenarios to challenge the mental map and
the implicit assumptions of their managers. Wider socioeconomic and technical
trends are captured in plausible stories about the future to help managers
understand the wider context in which they operate. Managers use the
scenarios by assessing the robustness of their business strategies against two
different scenario-backgrounds, asking themselves: ``What if this were to
happen, how could this affect my company?''
The Shell global scenarios, developed in 1995, focus on the next 20 years and
portray the forces of ``TINA'' (There Is No Alternative): namely liberalisation,
globalisation and technology. These forces, global in nature, all-pervasive and
for which there is no ideological alternative (hence ``TINA''), shape the future of
societies and companies. How societies or companies react to these ``TINA''
forces may differ, potentially producing stresses and opportunities similar to
those of the Industrial Revolution. In two different images of the future, Shell
highlights what kind of companies could be successful in responding to these
challenges captured with the scenario titles: ``Just Do It'' and ``Da Wo''.
In the ``Just Do It'' scenario successful companies take advantage of the latest
technological innovations in a world characterised by hypercompetition,
individualism, networking and new ways of doing business.
In the ``Da Wo'' scenario it is understood that individual welfare is linked to
the welfare of the larger whole (``Da Wo'' means ``Big Me''). Building long term
strategic relationships with all stakeholders, including staff as an important
stakeholder, are at the heart of the success of a company. Winners in the Da Wo
 world are those companies which genuinely understand the importance of Royal Dutch/
trust, a sense of purpose and belonging and a close connection with the feelings Shell
and values of different cultures.
In the energy industry the manifestations of the TINA forces and the different
responses are unmistakable: managing a highly skilled, globally deployed
workforce is clearly an important aspect of our business. In exploration and
production, for instance, people work in virtual teams around the clock, with the 125
latest 3D seismic technology to discover oil. Within all our businesses, which are
basically global in nature, organisational boundaries are becoming increasingly
blurred with staff on payroll or as contractor, operating in joint ventures or in 100
per cent company owned units. Knowledge between people and organisational
units is being captured in various ways: through knowledge management, in
action learning processes and through our shared services organisation.
Creating and seizing business opportunities, important features of the ``Just
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Do It'' world, are illustrated by the launch of a number of new businesses

recently such as: Shell Capital (providing innovative financing arrangements
supporting new business deals), Shell Renewables International (forestry,
biomass, solar) and Shell Global Solutions (technical advice). Manifestations of
the ``Da Wo'' world are for instance the Shell Social and Environmental Reports
and the launch of a world-wide staff survey as ways to enhance communication
and relationships with all our stakeholders.
Whilst the manifestations of the TINA forces become increasingly clear, the
consequences for MD in response to the new organisational requirements and
the changing values of people have resulted in a new approach, in line with
realisation that in both type of scenario-worlds people are absolutely key to the
success of the company. The individualism of ``Just Do It'' and the nurtured
relationship with staff of the ``Da Wo'' world clearly call for a new approach to
management development.

A new approach to management development

Against the background of these wider scenario trends Shell embarked on a
Transformation journey. In a drive towards more efficiency, the structure, role and
efficiency of the two central offices in London and The Hague were reviewed in
1995. In the new organisation that resulted, the principal cornerstones became the
rapidly globalising businesses, demanding clearer accountability, challenging the
traditional matrix structure and affecting the role of the national organisations.
This change in structure was (and is) accompanied by a change in culture where
human resources, including the field of management development, are seen as one
of the principal drivers of the overall transformation process.
Specifically the following factors underpin the case for change in the MD area:
. general drive towards more openness and transparency within the company;
. the need for immediate success to maintain and build market position,
leading to more emphasis on performance, rather than just long-term
potential;
 Journal of . changing values of the workforce ± staff wanting more control over their
Management own careers and in many cases indicating more limited mobility;
Development . constant new skills requirements in the awakening of new and changing
20,2 business needs and new business directions;
. a more nimble, less centrally driven approach to talent identification and
126 development;
. new IT technology, most notably the use of intranet as an important
enhancing factor to do things differently.
The augmented changes in terms of the overall MD approach are reflected in
Table II.
The augmented changes have become real through the introduction of a
number of new HR processes and tools, all related to the development of talent:
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Open resourcing
In 1997 an ``Open resourcing'' process was introduced, first as a pilot but very
soon touching most of the staff and the jobs worldwide.
``Open resourcing'' is essentially a process where all vacancies are posted and
people are free to apply, within certain rules of the game. One such rule is that
people who apply should be near the end of their current assignment,
preventing people from rotating too quickly. The posting of the vacancy is
done by the hiring line-manager in whose department the vacancy exists. HR
advises in terms of the position requirements and assists in the handling of the
internal application process.
Applicants are advised to inform their current line-manager about their
application. The advertising line-manager will conduct the selection process.
Sometimes the current line-manager is approached by the hiring manager for
references. The hiring manager selects the preferred candidate and provides
feedback to those who didn't make the cut. Once selected, the move to the new
job usually occurs within the next two to three months. The process is finalised
with the agreement between the hiring manager and the preferred applicant,
stating the terms and conditions as well as the assignment duration of the new
job.

From To more

Potential pull Performance push

Fully growing our own timber Attraction of talent at different levels into the
organisation
Central planning by HR staff Local and individual initiatives
Control Coaching
Table II. Being moved Moving yourself
Changes in MD Closed system Open system, with internal competition
approach Responsibility with line and HR Responsibility with line and individual
 Although still early days, some of the lessons to date concern the following Royal Dutch/
elements: Shell
. Support and buy-in from line-managers and staff is absolutely essential.
Usually both parties are attracted by the advantage of having a wider
choice which this process allows.
. It is crucial to keep the process indeed open: no fudging of jobs behind the 127
scene as this will damage the credibility of the new resourcing process.
Rules of the game should be clear and well communicated to the players
involved. If a potential candidate has been identified say from within the
department already, the job-advertisement will say so to inform
applicants at least of their chances.
. A robust, common IT infrastructure is crucial and also facilitates the use
of other IT related tools, such as electronic CVs and self-appraisals.
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. Additional, supporting processes remain necessary, particularly in

terms of coaching staff as to which job they should apply for and to
think through their own personal development in a more structured
fashion. To this end we have initiated for instance personal development
centres in Shell, where people can learn more about their own strengths
and weaknesses and receive some career counselling.
. Some placement processes are needed, for instance to accommodate new
recruits or in the case of returning expatriates or potential redundancy
situations.
The first evaluations of the new system are very encouraging, although some
improvements can be made, in terms of the internal application process, the
accessibility of the Web-based systems as well as the coaching of staff about
what jobs best to apply for.

New criteria
In 1996, three new sets of criteria were introduced that reflected the values of
the changing organisation and which were felt to provide sufficient structure
and comprehension to assess and develop people: capacity, achievement and
relationships. These three criteria still had a link to the previous more extensive
set of criteria as outlined above, but clearly put more emphasis on performance
and relationship skills. With the introduction of the new criteria, the use of the
potential concept was also re-established. It turned out that in some cases the
potential concept had become an end in itself, a self-fulfilling prophecy causing
some of the high-potential staff to become risk-averse in order not to lose their
estimated high potential. Rather than a precise definition of potential expressed
as one particular job-grade, people are now assessed in more broad-banded
categories, with a clear understanding that the estimated potential is indeed an
estimate. It can change on the basis of current performance and it is no longer a
guarantee that an individual will reach the job level that his current potential
indicates.
 Journal of Performance management
Management The whole performance management cycle stretches from target setting to
Development appraisal to reward. In line with the overall transformation process, self-
appraisal tools, competency frameworks, 360 degrees feedback and variable
20,2 pay were introduced, all stressing the responsibility of the individual and
underlining the notion of performance management. More and more emphasis
128 is being placed these days on ``performance contracts'' and the use of balanced
scorecards with financial and non-financial measures. The quality of the
conversation between a line-manager and member of staff at the end of the day
however remains fundamental to any performance management approach.
Naturally, that conversation not only focuses on evaluating past performance
but also on establishing targets for next year as well as the use of a personal
development plan through coaching of the individual.
To complete the performance management cycle, variable pay was
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introduced, with merit and bonus payments depending on individual as well as

business performance, which, like the appraisal tools reinforce the same
message: performance counts as well as individual accountability. Sharing
some best practices with other global companies on the subject of performance
management has taught us that there is nothing magic in the tools that can be
used. The key to success is in the rigour with which these tools are being used
and the way the various HR processes are being integrated and reinforce the
same messages.

A new approach to management learning

In a company with a high flux culture like Shell, most learning happens on the
job. McCall (1988) indicates how different kind of assignments (line versus staff
roles, turn-around business situations versus starting up new businesses) add
different kind of experiences to the curriculum of future managers. His research
indicated that working for different line-managers is equally building, again
greatly enhanced by the high degree of job-rotation.
In terms of more formalised training programmes the fixed curriculum,
related to the job-grades of the individuals, was abandoned in the course of the
overall transformation process. These days, the training curriculum is much
more flexible and leadership programmes are available not just for the most
senior executives but for all staff who consider themselves to be ``a leader'' in
their field. In these programmes ``Leaders developing Leaders'' is an important
underlying theme, enabling management to be more of a tutor and coach to
their staff. These leadership programmes are run within the context of the
business, focusing on real business issues.
Action learning, after-action reviews and knowledge management are some
of the more institutionalised ways in which an organisation like Shell learns. In
some of the action learning programmes where people from different
disciplines work a specific problem together and real-time learning takes place
during facilitated events, the young staff also get an opportunity to meet with
the senior executives in the company. Through active knowledge management,
 another way of more institutionalised learning, local experiences are made Royal Dutch/
accessible to Shell staff around the world, using the latest IT technology. Shell
Not everything changed
Amidst all these changes some elements have been retained:
. the flux culture providing the environment where open resourcing is
accepted and valued; 129
. the commitment to still ``grow our own people'', encouraging on the job-
learning and professional and leadership training programmes;
. succession planning for the top 200 positions and ``managing the talent
pipeline''.
It is expected that the best people will surface through the open resourcing
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system and rise to jobs where they can and will be noted. Here the MD
professional has no role in terms of planning people's career, other than as a
coach helping people to understand their individual strengths and weaknesses
and advising them of suitable job opportunities. For the top positions however
and due to the sensitive nature of these roles, their staffing is not just left to the
internal market and succession planning is maintained, thus limiting business
exposure and preventing any potential continuity issues.

Conclusions: is there still a need and hence a future for MD?

The answer to the question raised above is: Yes, but different! In my view, the
role of the MD professional becomes less that of the individual ``match maker'',
but more strategic, professional and enabling.

A more strategic view of the talent pool and its strengths and weaknesses
Leaving the build-up of your talent pool only to internal market mechanisms,
which is in essence what open researching is, would be abdicating
responsibility for what is a key resource for the success of the company. At
Shell, we have introduced a talent review process with each of the businesses,
to establish a feedback mechanism that crystallises the changing business
requirements in terms of talent and indicates how these changing requirements
can be met. Early identification of skill gaps in the context of the business
strategy is crucial. Development plans, both at company and individual level,
to bridge these skill gaps are vital. The occasional opportunistic match of
people and jobs gives way to more comprehensive resourcing and recruitment
strategies in a coherent response to internal and external market pressures.

More professional
The MD professional of the future increasingly requires professional skills in
identifying, assessing and developing people. Professional means:
. understanding the strategic intent of the company: what it aspires to be
and what the key is to secure short and long term success;
 Journal of . the ability to translate this into resourcing and recruitment requirements;
Management . the capacity to match the resourcing needs with a fitting value
Development proposition, that attracts and retains the right calibre of talent and
20,2 provides an ``employer brand'' which makes the company distinct from
any competitors;
130 . a systemic view regarding the Human Resources field: using the different
HR processes in a way that they are integrated and reinforce each other;
. in depth mastery of the tools and techniques that help identify, assess
and develop talent and which put the in-house MD professional on an
equal footing with external specialist, such as some of the better
executive search firms;
. the ability to coach and influence people at all levels of the organisation.
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More enabling
Indeed, the role of the MD professional has become much more that of a coach,
advising people on development needs and possible career directions against
the background of a wider understanding regarding the business requirements
and hence future opportunities.
It is also much more focused on enabling line-managers to be coaches to
their own staff and providing the processes and insights to people to do it.
In that sense, the responsibility for management development is back to
where it always belonged in the first place: with line-managers and individuals!
References
McCall, M. (1988), ``Developing executives through work experiences'', Human Resource
Planning, Vol. 2 No. 1, pp. 1-12.
Muller, M. (1970), The Search for the Qualities Essential to Advancement in a Large Industrial
Group, internal Shell publication.
Trompenaars, F. (1993), Riding the Waves of Culture, The Economists Books.
 This article has been cited by:

1. Rafael Ramírez, Leo Roodhart, Willem Manders. 2011. How Shell’s Domains Link Innovation and
Strategy. Long Range Planning 44:4, 250-270. [CrossRef]
2. 2002. Change models work well for Shell. Human Resource Management International Digest 10:1, 16-18.
[Abstract] [Full Text]
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