OPERATIONAL COST REDUCTION

Making Operating Cost Reductions and Improvements in Productivity for an Oilfield Services Company

CLIENT

CEO and Executive Board

ACTIVITY

Major subsea services company

KEY ISSUES:

The key issues for this division were productivity and performance. Overhead costs were too high to sustain the number of projects the division was likely to have to deliver in any one year. With around 500 staff, a root and branch restructuring of the business would be required in order to get the cost base down to a satisfactory level.

Productivity in each of the departments was also too low, and this would need to be improved with a dual approach of business process improvement and changes in managerial working practice.

Culturally, the business was very engineering focused. Project managers had little authority in the business and most of the key decisions were made within the engineering department. As a result, bottlenecks appeared within the organisation that had a negative effect on project delivery performance. This in turn was beginning to have an effect on the reputation of the business as a whole.

The company had a strong engineering bias and whilst to some degree this did have a negative effect, there were some very skilled individuals whom the senior team wished to retain and develop.

 

THE APPROACH:

This assignment had to be handled with sensitivity, as redundancies were almost inevitable. Job losses can cause low morale and reduce productivity as the workforce wait to see where the cuts will occur. To reduce this risk, the redundancy element of the assignment had to be completed quickly allowing the rebuilding of morale to begin immediately after.

The analysis for the redundancy programme had to be both precise and expedient. Hearsay and rumour were kept to a minimum by a well-developed communications approach that kept staff informed and allowed for dialogue. The project team also worked on a communications programme for customers and suppliers who would no doubt hear of the restructure and redundancies.

 

THE OUTCOME:

Eventually, 20% of the workforce was let go. Most of these were contractors as well as voluntary redundancies and retirement. Open unfilled positions were closed and restructured out of the business. Overtime was significantly reduced.

There was a $7.2 million per annum increase in divisional profitability.