Case Study: Restructuring at Shell

Holt (1998) described how Royal Dutch Shell reached the decision to restructure in 1995. The restructuring was intended to increase efficiency by removing unwanted bureaucracy. Accordingly, the decision was taken to replace the matrix organization by a global team approach, with strategic divisions headed by small groups of senior managers. Ultimately the team concept was to become the norm for every unit of every branch in every country where the company had operations. This decision was made by the Committee of Managing Directors, comprising six senior managers who coordinated and oversaw worldwide operations.

Shell organized itself into six major strategic divisions, based on the global corporation's six main businesses of exploration and production, refining and marketing oil products, chemicals, gas, coal, and ancillary polymers. More than 100 worldwide divisions were created, all of which had to employ the team concept.

By 1997 the restructuring seemed to have paid off. In that two year period Royal Dutch Shell had overtaken Exxon in terms of sales and assets. It had become one of the most profitable global corporations in the world. Shell's experience was that the team approach was taking root and working well in all its units, despite the diverse nature of its workforce, and the cultural differences between the worldwide divisions.

The actual reorganizing effort was delegated to the managers at the local branches. Thus each unit was able to pursue its own agenda for change. In some places, the change required was marginal. In others, such as in Argentina, the proposal was to completely replace the bureaucratic structure by cross-functional management teams . In some parts of Europe, the reorganization contributed to the rise of self-managed teams. Various types of team building exercise were undertaken to encourage camaraderie and an appreciation of team endeavour. For example, in Belgium managers had to complete military style obstacle courses as a team.

Many key managers from all cultures learnt to be team players and take the reorganization in their stride. Others fell by the wayside. These misfits in the new organizational structure chose to leave or were forced out by peer pressure. It is more of the essence that because of the legacy of the previous organizational structure, the changeover to team-based expectations and team incentives generated different reactions in different units. Company-wide programmes based on team incentives needed to be introduced in one fashion at the British/Dutch headquarters, in another fashion in the United States, and in yet another fashion in Japan. In other words, the manner in which the new team incentives were introduced at Shell's units needed to reflect local cultural realities.

Source: condensed from Holt (1998).