Cross-border organization at the Norwegian continental shelf
- Consequences for health, safety and environment
This is a professional report made as a result of audits carried out by the Petroleum
Safety Authority Norway (PSA) towards four operating companies on the Norwegian
continental shelf (NCS): BP Norge, ConocoPhillips, ExxonMobil and Norske Shell.
The report summarizes main observations within a perspective of modern principles
for organizational structures and theories.
.
Contents
Contents ...................................................................................................................................... 2
1. Introduction ........................................................................................................................ 3
2. Basics and main summary .................................................................................................. 4
3. Cross-border organization - a new management concept for a consolidated group of
companies ........................................................................................................................... 5
4. Causes, company motivations and trends .......................................................................... 8
5. Development and utilization of knowledge ..................................................................... 10
7. New organizational solutions - national (Norwegian) control values .............................. 19
2
"Cross-border" organizations at the Norwegian continental
shelf - consequences for HSE
1. Introduction
A majority of the international oil companies with status as operators, as well as the main
international contractors, have established so-called "cross-border" business entities or
regional main offices. The decision to organize their businesses this way can be based on
many different reasons. It could, for instance, be the need for specializing, effective and
flexible use of the resources in a "cross-border" operating environment, as well as the
introduction and usage of new technology and integrated work-processes intended to support
the centralized executive- and operating functions of the organization, to mention a few. Some
basic concepts of great interest for further studies within the framework of the oil exploration
activities at the NCS are:
-
the allocation of the work between the local or national organizational units and the main
company
-
how the executive, planning and operating functions are organized and maintained
through various reporting and feed-back routines and procedures
-
the application and administration of global contracts
The Petroleum Safety Authority Norway (PSA) contracted the services and participation of
Professor Svein Andersen from Norwegian School of Management (BI) and AGR consultant
Mr. Ralph Guttormsen in an audit of four different oil companies with operating status at the
Norwegian shelf (BP Norge, ConocoPhillips, ExxonMobil and Norske Shell). The main
purpose of the audit was to gain insight and knowledge about why these companies had
decided to organize its activities with emphasis on "cross-border" business solutions and what
implications such decisions have had on the companies' practical organizational structure.
The audit was finalized in the second quarter of 2007 and a final report was sent to the
respective companies.
Svein Andersen and Ralph Guttormsen in cooperation with Paul Bang from PSA have
prepared a summary of the main observations made during the audit. This summary has been
3
combined with the additional documentation made available by the participating oil
companies and the data has been processed with specific focus on modern principles for
organizational theory and structures. Furthermore, the data used has been subjected to
anonymity with respect to specific individuals, events and situations. Consequently, the final
report can be considered a freestanding and independent report founded on well-established
and accepted professional principles.
2. Basics and main summary
In February/March 2007 the Petroleum Safety Authority Norway (PSA) carried out an audit
of four different oil companies with operating status at the Norwegian shelf (BP Norge,
ConocoPhillips, ExxonMobil and Norske Shell). PSA's main purpose with this particular
audit was to gain insight and knowledge about how and why these companies had decided to
organize their activities with emphasis on "cross-border" business solutions resulting in a
stronger process of "regional location" of their organizational structures. The report
summarizes the main observations made during the audit with specific focus on modern
principles and perceptions related to theory and research about organizations.
Cross-border business solutions are characterized by a combination of a national executive
and operational responsibility (including HMS) and cross-border cooperation, exchange of
"know-how"/experience and development of new knowledge/innovations. The national
organizational unit holds the overall responsibility for the national operation. The
organizational units related to the normal operation of a license were found to be located at
the main administrative national head office - with one exception. The national organizational
unit held the executive function and overall responsibility for the operation. With respect to
these facts the cross-border organization does not represent any significant change.
The most important positive changes resulting from a cross-border organization are those
related to the improved exploitation of functional competence, skills and cooperation within
the new type of organizational units. Furthermore, these changes imply that core personnel
now report by function across borders in a regional environment making it possible for the
company to exploit its resources in a more flexible and effective way for a particular region.
In order to give the various organizational units better support with respect to expertise,
competence and skills, the core personnel are given a higher degree of autonomy within their
professional domains.
4
The executive management within the respective organizational units in a country are
accountable and responsible at both the national and international level. The executive
management for the whole region's different functions can be located in Norway as well as
abroad.
The impression is that international companies operating at the Norwegian shelf comply with
relevant local rules and regulations in a professional manner. All four companies appeared
clear and concise with respect to their responsibility, understanding and interpretation of the
HMS rules and regulations as well as other terms and conditions for operating in Norway. The
survey did not uncover any specific uncertainties or confusions with respect to the compliance
with the HMS-rules and regulations. The main impression was that all relevant conditions in
this respect were correctly communicated and understood.
However, the emphasis on the various aspects of the cross-border organization, and the
relations between global, regional and national organization levels, differed extensively
among the four companies. Significant differences with respect to presentation,
documentation, work-methods and follow-up procedures were also noted. Some of these were
undoubtedly a result of a different approach to cross-border organization. Other differences,
and maybe the majority of them, seems to reflect company policies and principles linked to
long term goals and objectives at the corporate level. The models presented by the companies
had been chosen in order to exploit in the best possible way the opportunities that the
development of new technology and communication platforms would give.
3. Cross-border organization - a new management concept
for a consolidated group of companies
The concept "corporate governance" is used in different ways. One particular use is the focus
on the relation between the Corporate Board of Directors and the daily operation of the
corporation. Another use is emphasizing the relationship between the Board of Directors for
each single company under the corporate umbrella and the management of the participation
and operation of licenses on a national level. A third use of the concept is directed towards a
centralized and regional level of corporate management. In this report we are concerned with
the latter use of the concept.
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In the Annual Report the participating companies describe their local management as follows:
A/S Norske Shell is registered in Norway and the management structure is based on
Norwegian Corporate Law. The company is managed by a Chief Executive Officer
together with ten executive managers from the two main business areas, Oil
Products & Services and Exploration & Production. The upstream activities in
Norway form a part of a cooperating organizational structure of all upstream units
in Europa
Europa).
ConocoPhillips Skandinavia AS
The company holds assets and liabilities at the Norwegian continental shelf and is
operator of the oil and gas fields in the Ekofisk area with 35,112 % ownership in the
Ekofisk-, Eldfisk- and Embla fields and 30,658 % in the Tor field.
It is also operator for the oil pipeline from the Ekofisk area to Teesside in the United
Kingdom. The Company is a fully owned subsidiary of ConocoPhillips Norge.
BP Norge AS is involved in the production and exploration of oil and gas at the
Norwegian continental shelf. The main office is located in Stavanger, Norway. By the end
of 2006 BP Norge held 13 licenses and was the operator of 10 of these licenses. Several
portfolio adjustments took place in 2006 and the company's main activities are now
concentrated at the North Sea production fields Valhall/Hod, Ula/Tambar and the Skarvand Idun development projects in the Norwegian Sea.
The organizational changes that started in 2005 continued during 2006 when the
operations of the various fields were merged into one single operational unit. The same
was done for field development and drilling, and for commercial professional groups.
These organizational changes did not result in any change of the work force. During the
last year the company has been effected by the overheating of the job-market with a
significant increase in the demand for qualified personnel. This has resulted in the
resignation of 31 employees within the last 12 months. Four employees went into
retirement. Recruitment of new personnel has been an important area of focus in 2006,
particularly with respect to the two planned development projects "New Fieldcenter at
Valhall" and Skarv. During 2006 BP Norge employed 69 persons locally of which 12
were females. In addition 37 new employees (expatriates) were added from various BP
units abroad. The company has a work force with a high level of expertise and
competence where a significant number of the employees hold higher educational
degrees. Of a total of 603 employees, 172 hold a master degree or degrees at a similar
level. Education and development is important for the company, and in 2006 NOK 22
million were invested in this area.
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ExxonMobil Production Norway Inc. is a subsidiary of a foreign company and
was established with the main objective to engage in exploration, production and
transportation at the Norwegian continental shelf. With the approval of
Norwegian authorities the company has acquired Pass-Trough agreements with
Mobil Development Norway A/S, the company that is a direct owner of the
exploration- and production licenses. These two companies have no employees.
All activities and operation related to the licenses are performed by Esso Norge
AS in compliance with a specific management agreement. The office address for
these companies is at Forus in Sandnes Kommune. All shares in ExxonMobil
Production Norway Inc. are owned by Mobil International Petroleum
Corporation, a company fully owned by the mother company Exxon Mobil.
ExxonMobil Production Norway Inc. and Mobil Development Norway A/S form
part of a group of ExxonMobil companies in Norway and are sister companies of
ExxonMobil Exploration and Production Norway AS which have exploration,
production and transportation at the Norwegian continental shelf as their main
objective and purpose as well. These companies are independent legal entities
with respect to their rights and duties as descibed in the exploration permit and
other agreements including all activities that are subject to taxation in accordance
with the Norwegian Petroleum Law. The day to day operation of the companies is
integrated organizationally through agreements for operation and management
with Esso Norge AS and includes personnel, accounting, logistics and other
administrative services.
In connection with cross-border or regional organization the corporate governance is used to
describe the relationship between the corporate level and the activity-related type of
management in the respective countries where such activities are located. In this context one
could say that the corporate governance covers the sum of legal structure, formal organization
and formal and informal types of cooperation, both within a specific country as well as across
border with other countries. The structure of this type of governance offers good direction and
control, but also has sufficient room for innovation and adaptation. The companies often
choose to take advantage of the flexibility this fact gives to the organization. Everything
should not be locked into rigid and concise chain-of-command or specific predefined patterns
of functional cooperation. Consequently, organizational models of this type cannot easily be
described in a traditional organization chart. A particular employee could hold many different
functions and positions simultaneously in various parts of the organization, such as the basic
organization, professional groups, projects and the executive management. In other words, the
employee needs to allocate and manage his/her work hours and personal resources efficiently
in order to optimize the value and contribution from each position and function at a company
level.
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Among the chosen company models there are many indications of similarities with respect to
overall strategy and organizing perceptions. Nonetheless it is worthwhile to note some
variances - "organizing dialects" - in the way the companies describe and present themselves.
It may often be difficult for outsiders to understand reporting lines that sometimes are located
within the line organization and sometimes within the functions. The organization plans and
work process requirements do not identify or reflect a significant part of the daily work
processes within a matrix organization. It is apparent that this problem is not only restricted to
outsiders in the meaning of "non-employee", but has significant impact on the work situation
for regular employees as well.
Reporting procedures, both by line organization and by function, appears to be complex and
sometimes difficult to understand and communicate internally as well as externally. The
"internalized expectations" of the respective roles an employee possesses might be challenged
by different priorities between the tasks themselves and what is expected to be "produced"
from the different roles. This again can lead to "factual" as well as "perceived" shortcomings
with respect to quality and integrity in the way the various tasks are performed. "Selfscrutiny" and environmental audits within the companies with focus on these types of
relations and problems can often be necessary in order to initiate improvements. This kind of
assessments and audits can be targeted towards the understanding of the different work roles
as well as the effect of learning processes and communication.
4. Causes, company motivations and trends
The relatively low oil prices in the years 1990-2000 and the consequent pressure
rationalization emerged as an important factor in the companies' decision for a regional
organization. Cost-efficiency appears to be a significant "catalyst" in this respect. At the end
of the 1990s the oil industry found itself in a difficult financial situation and this resulted in an
unusually high number of large mergers. Such mergers appear to have been an important
factor behind cross-border reorganization in a number of companies, but such changes are
also part of a larger trend. The models for cross-border organizations were created during
difficult times while the implementation of such models took place in a time period with alltime high oil prices and profitability.
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However, there are also other important catalysts that have had an impact on the development
of the models for cross-border organization in the recent years. One of these is the high level
of activity typical for the oil industry today and the significant strive for increased capacity
and expertise in the companies and the oil industry. This tension between a high level of
activity and the limited availability of human resources has increased the need for a more
flexible utilization of the core competences. In addition, the increased protectionism of
national resources on an international scale seems to limit the large oil companies' access to
new licenses. If this development continues with the current trend it will undoubtedly
accelerate the demand for increased efficiency.
New types of organizations and integration processes usually imply high costs related to
education, training and complex adjustments along the way. Nonetheless, all the companies
claimed that continuous development and innovation is regarded as a necessity and a clear
ambition in order to reach their long-term goals.
Cross-border organization reflects larger trends within the area of organizational development
where innovation and more flexible use of knowledge are considered core factors in value
creation. An important part of this consists is training and utilization of available skills and
expertise, both to enhance the performance related to specific tasks as well as to develop and
implement improvements on a continuous basis. The companies emphasized that overarching
corporate standards can be expressed functionally, and that the guidelines from the corporate
management provide opportunities for increased strategic control and offer room for
innovations and development of new technology within a specific unit. These functional
principles can also be applied towards the suppliers at local, strategic regional or global.
Functional requirements and standardized processes also provide opportunities for new forms
of cooperation within a geographically extended matrix organization. The development of
new forms of cooperation and IKT-platforms for core processes is an important condition for
the development of know-how and new ways of knowledge-based problem solving and
innovation. The functional characteristics of such organizations will also depend on a number
of informal aspects as well as of culture, and such conditions are difficult to identify and
specify in new organizational models. Government rules and regulations, including control
and supervision, tend to put strong emphasis on formal management documentation and
established procedures for responsibility and communication lines. However, in addition to
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this the companies increasingly use many different additional communication platforms and
informal contacts within the organization.
Organizational changes are most explicit at a regional and national level so far. The effect on
operational activity appears more limited. However, some of the organizational changes do
have influence on the local management. One example is that coporate expertise and
competence can be utilized locally for improvement and development works to a much higher
degree. Even if certain effects on local improvement and development works could be
observed, no significant changes in the operational organizations were found.
The wide introduction of integrated operations within the main work-processes at the
Norwegian continental shelf opens up for a much closer daily cooperation between the
onshore and offshore organization. This covers a whole specter of new areas compared to
what was the norm in the past. Consequently, opportunities for more direct influence on the
daily operational activities emerges from the cross-border matrix organizations.
Some companies described models for optimization of the use of the resources within the
cross-border dimension with respect to the development and completion of new projects. Such
models may provide an indication of future developments. This may further create challenges
for the implementation of the national requirements in the project phase, and especially so if
such a utilization of resources is carried on to the operation phase. Here the national
requirements related to the operational work environment and safety will more directly come
in touch with the operational management and the employees.
5. Development and utilization of knowledge
In situations where companies are facing quite similar and relatively standardized work tasks
in a narrow geographical environment, they will often experience specific forms of synergy
effects as a result of a large-scale operation. This makes it possible to eliminate overlapping
work and optimize the utilization of the fixed assets. Joint operation is associated with
development and utilization of knowledge and "know-how" systems. One important form of
joint operation is the creation of various basic expertise platforms with greater width and
depth. This again often goes hand-in-hand with an increased specter of standardization and
acquisition of experience. Furthermore, this gives a better foundation for an experience-based
learning process. It reduces overlapping work, and increases the options for modification,
10
innovation and development at a local level seen in relation to international professional
standards and guidelines.
The simple figure below illustrates how the Petroleum Safety Authority interprets the
importance the companies' give to the following dimensions: level of importance relative to
the factors "large-scale operation", "joint operation" and "educational training" within their
process of regional location and internationalization. The figure is based on a subjective scale
from 1 to 10 for each of the three different factors. The number 10 reflects the highest level of
importance while 0 indicates the lowest. As can be seen from the figure, one company stands
out, with a high score on "large-scale operation". The remaining three companies all have a
higher level of importance on the factors "joint operation" and "educational training"
Figure1. Level of importance of large-scale operation, joint operation and educational
training related to the design of an organization model
The reason why one company differs from the others probably reflect the company's size, its
tradition and history, its dominating "company-culture" deriving from various mergers, and
the impact and importance it may experience from the participation at the Norwegian
continental shelf and particular oil/gas fields. Given that such variances reflect differences in
company culture, they will no doubt also play an important role with respect to the efficiency
in the functional relations as well as with respect to the degree of centralized management of
the enterprise. However, during this audit nothing of importance was uncovered that could
verify that such variances could have any significant effect in relation to a company's
compliance with and understanding of the local regime of rules and regulations. Those
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companies with the strongest focus on joint operation and educational training are most likely
to see a higher result in the area of continuous improvements, while a higher focus on largescale operation most probably will give increased significance on structure and documented
procedures and management routines.
During meetings with company representatives various forms of organizational learning were
described and explained. One particular type of learning emerged from a situation where the
company merged and systemized different kinds of know-how and experiences that earlier
had been developed and applied in national units operating on a relatively independent level.
Another type of continuous learning happens in a regional structure where joint forms of
standardization and IKT-platforms for communication and distribution give increased room
for multiplicity, information exchange, confidence and enrichment. A third type is the
increased local learning that comes as a result of more effective systems for the transfer of
joint experience from the corporate level down to the local units. Large-scale operations and
joint operations often offer a much wider and deeper foundation for the actual learning
process of educational training. The latter is an important condition for continuous
improvements - not least when it comes to safety.
The cross-border organization also creates new arenas and work methods for development
and distribution of knowledge. This fact opens up for mutual enrichment between local
learning in various contexts while standardization offers a possibility to distribute and utilize
knowledge generated locally within the entire corporation. The flowchart (figure 2) below
shows a simplified example of such a new form of development of knowledge.
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Figure2. New arenas for enrichment and utilization of local educational training
Joint operation in IOcontext with
development of work
methods/tools
Exported to a different
culture context
The same method
creates new ideas
in a new context
Created and initially developed
in one culture context
Creates synergy and
educational training that can be
applied to the entire corporation
Utilized differently in a
different culture context
The starting point could be when a local organization in the context of its work and culture
environment develops ideas and methods into a useful problem-solving activity or a practical
and suitable tool. By exporting the activity or tool to other local units or part of the
corporation where the employees, expertise and culture base are different, new ideas and
solutions that contribute to further development and growth are created. Consequently, in this
way solutions developed in a particular country can now become the starting point of similar
projects in other countries, while learning and development of knowledge and know-how
continuously take place and benefit the whole corporation. If a similar project gets started in
the country of origin it will be able to benefit from the cumulative educational training that
has taken place throughout the entire corporation.
Another example on enhanced learning can be found in one company's policies and
procedures to communicate experiences and lessons from various incidents. Standards and
routines provide a framework for description, diagnosis and analysis. IT systems distribute
information to those responsible for safety. However, in addition the company make use of
expertise that produce animations of the event and distribute these in the form of
demonstration videos in order to reach a maximum number of the operational personnel in the
13
most effective way. These animations are also placed on the company's Internet homepages
in a public domain and consequently made available to all the company's employees as well
as to other interested parties. In other words, the form and content of the knowledge are
targeted differently with respect to requirements, attentiveness and competence about safety.
This new way of accumulating and developing knowledge and know-how comes in addition
to the formal documentation which usually forms an important part of the improvement work
done by those responsible for safety. The flowchart below shows a simplified example of such
a new form of development of knowledge.
Figure 3 below gives a simplified illustration of the two main forms of distribution of
knowledge.
Figure3. New forms of distribution and differentiation among target groups.
Announcement and learning from events in the enterprise
Announcement of
events (learning)
Preparation of safety report
Announcement of
events (learning)
Processing by the help of IKT,
video and animations in a
pedagogic center
Distribution by the help of visual
tools and effects internally and
externally.
Distribution of safety report
internally and externally
The knowledge is analytical and
directed towards those responsible
The knowledge is practical and
illustrative and is directed towards
all operation personnel within the
organization, as well as distributed
externally. Hence it becomes
instrumental in the creation of new
attitudes and improved work methods.
Another company stressed the importance of sharing experience through virtual networks
(deep learning). In this respect dedicated professionals are responsible for the due processing
and filtration of information related to specific events as well as the distribution of such
information to relevant groups. An internal online network (Intranet) is used for follow-up,
feedback and distribution of information related to these events. Simplification of systems,
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common IT platform, and more efficient and controlled ways of receiving information
obviously give a stronger degree of focus and accuracy in relation to the target group. Various
types of models are used with respect to the reporting. Analytical tools are used for events that
are considered to be of a serious nature. All experience shows that "real-time" data about
events in other countries gives more efficient and accurate results with respect to information
and learning, which again will increase the ability to prioritize more effectively and avoid
duplicate work. By accumulating a larger pool of experiences accessible in a common format,
which leads to an improved learning process, the HMS can be lifted up to a more complete
and international level. The exploitation of varieties in the form of new knowledge and
experience relative to "best possible practice" can thus take place through comparative
reporting and better options for a wider and deeper specter of cause-effect analyses.
6. Hierarchy, standardization – implications for the safety work
Cross-border organization introduces a new hierarchical level even if the national companies
are operating as independent legal entities. At the same time the importance of the hierarchy
in the organization will change due to the fact that the horizontal joint operation within the
matrix will be strengthened. In a traditional hierarchical organization the hierarchical
component is associated with authority, expressed as leadership and management of tasks, as
well as with detailed operative rules and procedures for problem solving and production.
However, in a matrix organization where functional joint operation plays a key role, authority
will be more directly associated with responsibility and to a lesser degree appear as direct
intervention, management and control of work processes. The hierarchical component in work
processes will more significantly be met by standard operating rules for those processes that
require specialists relating to each other through a mutual adaptation.
The fact that organizations tend to combine functional specialization and responsibility with
elements of a matrix in an organization is nothing new. In the oil industry such type of
organization has been in use for a long period of time. The cross-border organization is an
extension of this type of organization, but the matrix concept carries more weight with respect
to the daily operation. This reflects two conditions. Firstly, that the tasks tend to become more
complex and require a higher degree of learning and adaptation. Secondly, that the completion
of such tasks requires wider mobilization of various types of expertise and competence, which
again leads to a need for increased professional autonomy and higher flexibility internally.
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Hierarchy will usually coordinate joint operation through standardization (management by
procedures) or by desired outcomes (management by objectives) in work processes that are
simple and routine-based. For the companies participating in this audit, a major part of
hierarchical coordination is achieved through corporate procedures and standards. Greater
emphasis on functional joint operation in a matrix with focus on difficult and challenging
tasks will undoubtedly increase the need for standardization through common knowledge and
values and norms (management by culture). In this case frequent use of networking,
development of common norms and more emphasis on the cultural factors will all be
important and necessary mechanisms for management.
The corporate standards and procedures are key elements in a company's work-processes.
They define the requirements for quality assurance and quality control for these processes.
Such requirements can vary from minimum to absolute maximum demands for quality
assurance and quality control. Key aspects of the work-processes are horizontal specialization
and coordination. Parallel to this there will be, in a situation with escalating complexity in the
tasks, an increasing need for coordination through mutual adaptation between personnel with
professional knowledge, expertise and well-defined responsibilities, as illustrated below in
figure 4.
Figure 4. Complexity, professional autonomy and various coordination- and management
mechanisms
De
gr
e
al
ion
s
s
ofe
pr
f
o
y
ee
gr nom
e
D to
au
eo
fc
on
tro
l
Standardization of norms
(management by norms and values)
Management/control
Through hierarchy of
positions with authority
to give instructions
Standardization of knowledge
(management by expertise)
Mutual adaptation
through lateral and
horizontal connections
(use of network)
Standardization of results
(management by goals)
Standardization of tasks
(management by procedures)
Simpel tasks
Complex and demanding tasks
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The application of standards and procedures on a company level as well as on a national and
international (corporate) level does not, of course, represent anything new. Nonetheless, in a
cross-border organization such standards and procedures are used in a more active and
targeted way in the day-to-day operations. These are important tools in the sense of a common
base for communication and coordination between the various parts and levels of the
organization. At the same time they can function as framework for organizational learning
and exchange of experience across different local contexts. As a general rule the company
standards should conform to industry standards as well as national and international standards.
Such standards have always played an important role in the management of the oil companies
and their activities. This is particularly the case for API, BSI, NORSOK, EN and ISO
documents. The trend now is that these standards move towards an international level, i.e., in
the direction of European (EN) and global (ISO) levels. These standards have become in their
own capacity the leading documents and are in many cases also expressed in the form of
functional corporate requirements. The Petroleum Safety Authority's guidelines to its rules
and regulations give extensive references to such standards, and this contributes greatly to the
harmonization and understanding of such requirements across the national borders.
In general one could say that the trend towards globalization, regional location and
"dissolution" of more traditional structures and management styles has caused significant and
dramatic changes in the companies. For some of the companies such changes over time also
affects its local environment. At this point in time it is also quite probable that we have only
seen the beginning of the changes associated with the use of IO and IKT. Consequently, an
important area to look further into would be the management of these change-processes, also
known as "change management".
All the four companies participating in the audit have developed accurate system
requirements at the corporate level for the management of change-processes. Formal system
requirements will vary, on one hand with respect to formal rules and level of details, and on
the other hand with respect to the flexibility granted for management and processing. There is
considerable variation with respect to balance of global systems and the framework of
standardization (system-driven changes), on one side, and the flexibility and availability of
input and adjustments from the local national level (process and user driven changes), on the
other hand. Furthermore, there is also a certain tension between formal corporate-based
17
process requirements, on one side, and increased room for more pragmatic and expertisebased evaluations from the local environment on the other side. Differences between the
companies were found along both these two dimensions.
The main impression is that companies vary a lot when it comes to the relationship between
centralized (corporate) system requirements and local margins and flexibility in processes of
change and development. Two of the companies have a high score on only one of these
dimensions while the remaining two companies gave a more balanced scoreon the two
dimensions. Figure 5 below provide a simple illustration of where the companies are one a
subjective scale from 0 to 10 (weakness/strength) with respect to these dimensions.
Figure 5. System-driven change and scope of local flexibility
In general one could say that specific standard requirements tend to strengthen
communication across different organizational levels and between the various processes at the
same level. Effective daily communication will, on the other hand, have an informal element
reflecting values, norms and joint understanding, or culture. Common for all the four
companies is the strong emphasis on organizational development and change processes,
where structure, formal procedures and standards are important elements. However, the audit
did not show clearly how the informal sides of the organization associated with local values
and knowledge are maintained and developed within the formal framework of the crossborder organization. Finally, the level of satisfaction with respect to the local influence on the
development of the framework of the new organizational solutions varied between the
companies.
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7. New organizational solutions - national (Norwegian)
control values
Cross-border organization does not change the principle that it is the legal entity in the
respective country that executes the formal decisions in line with the country's laws, rules and
regulations. One company stressed that decisions were made in Norway, but in accordance
with (corporate) advice. From this fact it seems clear that the impact of giving and receiving
advices within the regional model is more important today than it was in the past. In this
respect it was also pointed out that, as a general rule, the employees should base their work on
giving and receiving advice. These types of expectations appear to be informal important
requirements for functional work-processes. Nonetheless, the decision-makers in the
respective countries will usually always have the last and final word, even if this is influenced
by the advices given. Such a way of handling who is responsible for the decision making and
who is giving advice is considered important with respect to the compliance with national
requirements for activities at the Norwegian continental shelf. At the same time a system like
this will require a high degree of integrity from everyone involved in the decision-making
process.
In the Norwegian rules and regulations for work environment, direct participation by the
employee is a basic element. The representatives of the employees, who participated in this
audit, all gave a clear impression that it was difficult to obtain any real impact from their
participation in the process of changes and development of management systems and
standards in the regional models. They also stressed that cross-border organization introduces
complex organization charts and reporting routines, functional as well as operative, and that
this can appear confusing and have a negative effect on the flow of information and the
development of common understanding with respect to their tasks and goals. In general there
is a need for more clarity with respect to the reporting lines at the level of the employees.
Well-defined expectations with respect to reporting and predictability in relation to the
follow-up of motivating factors and other psychosocial relations are in the Norwegian context
important conditions that need to be addressed.
The views and opinions of the employees demonstrate that the companies' handling of
participation and management is seen as different from the practice that has evolved over time
on the HMS-arena in the Norwegian petroleum industry. Here the three-party cooperation has,
to a large extent, contributed to the development of common understanding, authorization and
confidence in the creation of guidelines and framework. In other international regimes of
guidelines these elements are often handled differently. Here the liaison relations are often of
a more confrontational nature, and the authorities' approach is to higher extent based on
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incentives and control. Figure 6 below illustrates in a simplified form these main models for
participation in the creation of guidelines.
Figure 6. Various types of traditions for participation and creation of guidelines
Cross-border organization - various organization traditions
Basic understanding of three main elements in a regulation process
Norwegian tradition
International
company tradition
Tripartite
cooperation
Counterpart relations
authorities and unions
Mutual
understanding
Application
of regulations
Empowerment &
trust
Incentives & control
Contrary to the local organizational level, in the cross-border level the processes of innovation
are to a high degree based on corporate standards with less emphasis on the element of
employee participation. In addition the mobility of personnel will imply that they are
relocated around to various locations where different cultures, local guidelines and ways of
thinking developed over many years can be difficult to comprehend. The main impression
here is that the decision-making process at the regional level is drawn more in the direction of
an international corporate tradition. With respect to the national organization including its
operational activities, it does not appear to be changes in relation to the established
Norwegian practice of the HMS-guidelines. It remains an open question though, how trends
and development within modern organization theory, herein expressed through cross-border
organization, will have an impact on the core elements in the Norwegian work environment
rooted in the Norwegian regime of administration
Cross-border organization can lead to significant changes with respect to the complexity of
the organization, by alterations of the borderlines of the organizational units as well as the
internal interactions patterns, and that the work processes become more expertise driven
through a more effective exploitation of the core competence. How increased complexity can
have a significant impact on the risk-profile for various types of accidents has been well
documented in the scientific literature. In general one can say that a high level of complexity
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requires a decentralized management model for efficiency and safety since this will offer the
best opportunity to exploit local information, knowledge and competence. At the same time it
turns out that a system with a high degree of interdependency between the various elements
favors a hierarchical and centrally managed model for management.
The oil industry is a typical example of an industry that has both a high degree of complexity
and a high level of interdependency. This can be exemplified by the way the production,
logistics, support-functions and living quarters are tightly spaced together on a very limited
and small area. The Norwegian guidelines emphasize the importance of the best possible riskapproach and development of barriers in order to make the various functions more robust and
less vulnerable against impact from events in other parts of the system.
The relation between centralized and decentralized management is a generic challenge in the
oil industry. Cross-border organization makes this tension visible in a new way. The
development of expertise groups and functions operating closely and jointly in a matrix across
borders can build up the need for decentralized management, and in the process offer better
educational training that utilizes local knowledge and information in a further context.
However, the creation of regional structures with use of standardized functions and work
methods will strengthen the centralized management.
One impression that emerged from the audit was that the companies' handling of the balance
between centralized and decentralized management varied with respect to what function such
handling was related. Several of the cross-border functions directed towards learning and
development processes are to a high degree impacted by decentralized management and
cross-border influence. Other functions, for example emergency operations, are often handled
through a hierarchical national rooted management model. Within the framework of these
types of management models various cultures for communication and decision-making
processes will develop. This can further create challenges with respect to the understanding of
responsibility and roles.
In general there seems to be a continuous development towards system simplification and a
common terminology in the area of contracting. Most of the contracts are of a national origin,
but there are also a significant number of cross-border contracts as well as framework
agreements. Contracting and contracts management includes HMS in all the phases of the
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work process. The companies’ view this process as a supply chain management process, and
it is seen as very important since a large and significant part of the total activity (more than
70%) is managed by the use of contracts.
National and international industry standards have, in addition to company standards, always
played a very important role as part of the management guidelines for the international oil
companies and their activities. This is especially true with respect to the instructions and
specifications used for the suppliers of equipment, goods and services. To an increasing
degree such standards are functionally oriented, which again leads to greater need for
understanding and specific interpretation of the Norwegian laws, rules and regulations within
the supply chain. Specific local requirements related to such rules and regulations are
identified and included in all contracts. This was found to be the case for global and regional
framework agreements as well. In some instances specific amendments for global and
regional contracts are created for the purpose of securing that national requirements always
are met.
Personnel employed in Norway with knowledge about Norwegian HMS rules and regulations
will also be involved in the contracting work processes. This includes the pre-qualification of
suppliers and subcontractors through evaluation of bids and tenders all up to the final
evaluation and closure of the contracts. An example of such personnel could be a dedicated
HMS employee whose main task is to secure a satisfactory joint operation between the
organizational line and the contracting function in the regional management. Within the area
of contract management it therefore appears that the predefined link between national
resources and local expertise on one side, and the regional management and other professional
resources on the other side, is much stronger than in other areas of the organization. Larger
units give more power with respect to dealings with their client base. However, this did not
seem to apply to the contracting function, which seemed rather unchanged by the cross-border
organization. In this respect one company gave the impression that the contractors showed
little interest for an expanded market place for their services.
8. Final comments
The purpose of this report has been to gain knowledge and insight in how and why
international companies prefer to organize their activities in cross-border business units. A
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basic question has been what conditions, requirements, strategies and goals form the basis for
the companies' choice of organization and shape of roles and responsibilities. Another
important question was how the companies had assured themselves that local management
related conditions, including requirements from the authorities, ordinances from the
Norwegian Parliament and partner cooperation and participation, etc., had been included in
the company's policy of the cross-border business unit.
In association with regional organization the concept of corporate management is used to
describe the specific part of the management that strengthens the level between the centralized
corporate management and the corporation's activities in various countries. This type of
management covers legal structure, formal organization, and formal/informal forms of joint
operations within a country as well as across different countries. Cross-border business units
are characterized by a combination of national operative responsibility (including HMS) and
cross-border joint operation, exchange of experience and development of new knowledge.
The national business unit holds the over-all national operative responsibility.
The audit uncovered that the companies differed with respect to how much emphasis they put
on the various sides of the cross-border organization and the relations between the global,
regional and national organizational levels. However, all the companies were flexible and
open for current adjustments and modifications within the borderline of the regional-national
level, all seen in the light of experiences and changes in the strategic and long-term outlook.
Nonetheless, there are significant differences with respect to presentation, documentation,
work-methods and evaluation of cross-border organization. The audit did not uncover specific
uncertainties in relation to how the Norwegian HMS guidelines are complied with. The main
impression in this respect is that all relevant conditions have been communicated and
understood by the companies.
Figure 7 below shows an overview of the conditions for and consequences of cross-border
organization. It sums up the main elements in the picture the report has described: basic
drivers, main characteristics of cross-border units and consequences for the Norwegian values
and HMS requirements.
Global and international trends and development features are important drivers, both for
initiation and for innovations. The high level of activity in the last few years has lead to
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significant pressure on competence and capacity and hence increased the need for more
flexible exploitation of the core resources. During the meeting with the four companies it also
appeared quite clear that national frameworks and conditions have played an important role in
the concrete shaping of the new organizational solutions. New technology is in this respect
seen as a very important condition since it allows for a more flexible use of knowledge.
Figure 7. Conditions for and consequences of cross-border organization
Basic drivers for cross-border organization
Global/international
trends and development
patterns
National institutional
frameworks (contexts)
Application of
new technology
(exploitation of
new opportunities)
Cross-border organizational units
Standardization
Large-scale
operation
Management and
coordination
Development of skills
and competence
Capacity and
competence
Educational
training and
innovation
Consequences for Norwegian values and HMS requirements
The main characteristics of cross-border organization are increased emphasis on
standardization and exploitation of functional competence and expertise and new forms of
cooperation in an extended geographical matrix. Corporate standards combine hierarchical
coordination with a more flexible exploitation of the limited core resources of competence
and expertise. This allows for synergy effects in the form of large-scale operation and joint
operation. The companies with highest significance on joint operation and educational
training will also show highest significance on the area of continuous improvements, while
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those with highest significance on large-scale operation most probably will show the highest
significance on structure management documentation.
With respect to the national organization including its operational activities it did not appear
to be any changes so far in relation to the established practice of the Norwegian HMS
guidelines.
Still it remains an open question how trends and development within modern organization
theory, as expressed through cross-border organization, will have an impact on the core
elements in the Norwegian work environment rooted in the Norwegian regime of
administration. In the further evaluation of the activities at the Norwegian continental shelf it
will be necessary for the authorities to prioritize these types of conditions.
How the companies' cross-border organizations will function depends on a number of
informal aspects as well as of culture, and such conditions and factors are difficult to specify
in the new organization models. The guidelines and supervision of the authorities mainly
emphasize on management documentation and established responsibility- and communication
lines. The companies, however, find the deliberate use of many different communication
platforms and informal contacts within the organization increasingly important and useful.
This again raises the question about the need for new competence, expertise and methodology
with respect of the authorities' evaluation of the HMS work at the Norwegian continental
shelf.
The new cross-border organization does not change the principle that it is the legal entity in
the respective country that executes the formal decisions in line with the country's laws, rules
and regulations. However, such decisions are currently made based on advice from functional
cross-border groups of experts and professionals. In the Norwegian rules and regulations for
work environment direct participation by the employee is a basic element. The representatives
of the employees, who participated in this audit, all gave a clear impression that it was
difficult to obtain any real impact from their participation in the process of changes and
development of management systems and standards in the regional models. The employees'
views and opinions give a clear indication that the companies' handling of the issue of
participation and management is viewed as different from the practice that has been
developed within the HMS area in the oil industry at the Norwegian continental shelf.
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