While the energy industry grapples with new digital realities, executives and boards are being forced to answer a fundamental question: How do you prioritize assets and people in times of transformation? At Egon Zehnder’s eighth annual CEO and Board Breakfast Panel in Houston, leaders gathered to discuss these and other human capital issues within the sector. Regardless of where businesses are in their digital transformation journeys, and whether they are publicly traded or private equity, today’s energy organizations are facing changes that are requiring leaders to look at elements like culture, diversity and purpose in new ways.
Egon Zehnder leaders who hosted and participated in the 2019 CEO and Board Breakfast were Carol SingletonSlade, Global Energy Practice Leader and event announcer; Trent Aulbaugh, Partner and panel moderator; and Ed Camara, Chief Executive Oﬃcer who joined our distinguished panellists:
Ulrich Spiesshofer, President & Chief Executive Officer, ABB
David Foley, Senior Managing Director & Chief Executive Officer, Blackstone Energy Partners
Lee Tillman, Chairman, President and Chief Executive Officer, Marathon Oil
Carl Trowell, Chief Executive Officer & President, ENSCO
Achieving sustainable advantage starts with people, especially in today’s digital world.
While assets will always be important, it’s the experience of people combined with digital technologies that will allow energy companies to get the most out of their assets. Even when an asset isn’t perfect, putting a great management team behind it can lead to a turnaround. The same is true when it comes to giving people freedom to operate – pairing employees with years of experience with younger digital natives can create value and solutions no one has ever considered.
Domain expertise is the true differentiator for digital transformation.
Despite popular belief, digital transformation success is less about the technology aspects – cloud, Internet of Things (IoT), data collection – and more about using technology like artificial intelligence (AI) to build solutions based on the domain expertise of people. Leaders can create skills but not experience; using digitalization to shape solutions with domain expertise will be critical in the future.
A fundamental part of being a good leader is driving culture; but it’s also realizing that you can’t do it all yourself.
Shifting cultures is a journey that takes time and purpose.
It’s the hardest change to execute in an organization. For leaders bringing companies together under mergers or acquisitions, or for those dealing with culture shifts under new digital regimes, there may be dramatic actions along the journey. One of the main components of establishing or changing a culture starts with providing clarity to employees about where the company is headed. Not everyone will be on board with the new direction, and there will be tough decisions from a leadership perspective that involve continuing to invest only in those leaders who will embrace, rather than resist, the change. Cost reductions can lead to workforce and portfolio changes. Processes will shift to withstand the pace of a short cycle investment world. The journey is never complete, but the reward is when the market and employees respond positively to these changes.
Leaders can sustain cultures by setting the example from the top, focusing on ethics, meritocracy, execution and defining company values.
An ethical culture creates an environment of people who want to do the right thing. Meritocracy generates innovation by urging people to strive for constant improvement. Execution means ensuring change actually happens. Leaders who can sustain change do so because they create a movement that the organization picks up on and drives further. The simplest way to ensure cultural change is sustainable is by creating one definition and picture of what the company stands for and pairing it with values. Regardless of industry changes and technological transformations, as long as these values and cultural principles remain consistent, culture will sustain.
The simplest way to ensure cultural change is sustainable is by creating one definition and picture of what the company stands for and pairing it with values.
Humble leaders will win.
With scrutiny of today’s leaders so high, it has never been more important to exhibit humble qualities. This means leaders should focus on coming across as modest and generous in the face of scrutiny. The days of the hero CEO that openly discusses transformation successes are numbered; CEOs who can transform companies without actually taking all of the credit send the most powerful message.
Gender diversity remains a pain point in the sector, while international diversity and diversity of thought are areas of improvement.
In private equity, structures have changed over the past 20 years to create performance-oriented teams that represent challenges and goals, which has led to increased international and experience diversity. But for public and private companies alike, the challenge at the board level is that existing qualifications include C-level and board experience, and diverse candidate pools under these qualifications largely don’t exist. To make meaningful change, the pipeline of gender and internationally diverse leaders must expand, and there must be a shift in mindset because it’s not always the case that previous board experience makes for the most qualified board members.
In today’s world, conveying purpose matters.
For a sector that often becomes the subject of public ire on topics of climate change, it’s critical as leaders to be forthcoming about the positives the industry has brought to the world while also noting sustainability progress. Purpose also relates to conveying the safety and environmental responsibilities of the sector, and how inextricably tied those elements are to profit. Ultimately, there needs to be a balance between the short- and long-term perspectives of what energy leaders are doing with their companies. Balancing purpose and profit will be key.
To show our appreciation to our panellists for sharing their insights and expertise, each panellist selected an organization to receive a charitable contribution from Egon Zehnder.