FOCUS 9
And when they get it right?
Our work in the sector has identifi ed six principles of those organisations that successfully deliver on sustainable value improvement initiatives:
1. Transparency: Understanding the complete picture of production, costs, headcount, margins, and working capital and establishing agreed baselines against which to measure improvements, ( For example many businesses only track and understand the payroll headcount needed to support operations and have a limited understanding of total equivalent headcount incorporating contractors, outsourced provider equivalent headcount)
2. Putting a value on opportunities: Demonstrating the tangible benefi ts of each potential opportunity in order to dispel myths and provide a hard factual view of value and risks against which management teams can take effective decisions
3. Use of comparators: Going beyond simplistic benchmarking but understanding quantitative and qualitative insights on how other companies operate to stretch management’s thinking and hold up the mirror of what the true potential opportunity could be
4. Speed: The most effective programmes have real pace and momentum behind them. This ensures management attention and also drives momentum into execution of agreed opportunities
5. Driving buy-in: Strong collaboration and sponsorship from the outset is critical. Involving the decision-makers early drives ownership and a higher likelihood of implementation
6. Addressing sustainability: In order to assure benefi ts are sustainable there is often a need to address elements of the underlying DNA of the organisation such as aligning accountabilities to performance commitments and results or that the right processes and controls are in place to maintain benefi ts.
For many executives, the process of driving sustainable value improvement will, by necessity, begin with a careful analysis of the existing value drivers of the organisation in order to increase their understanding of where value is created and profi t is generated. A task which is often much harder in larger organisations.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
To do this, organisations must be prepared to look across divisions and business units, compare themselves through robust comparator insights that go beyond simplistic numerical comparisons, but also highlight alternative ways of working, and then make some tough decisions which may challenge the accepted business models and transform their internal culture.
Success will require senior management to develop and execute strategies that maintain a clear focus. In subsequent articles in this series we will bring to life practical examples of sustainable value improvements in both upstream and downstream oil and gas in areas such as cost management, pricing optimisation and working capital release.
Fergus Woodward Partner, KPMG Tel:+44 (0)20 76943018
fergus.woodward@kpmg.co.uk
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DRIVING VALUE
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