Survey Gauges Management’s Effect on Corporate Survival During Downturn

September 2009 Vol. 236 No. 9

The results from a recent international executive survey of the oil and gas industry titled “Riding the Rapids” were released September 15 in Houston and debated at a panel discussion downtown.

The survey results concerned how company executives are meeting the challenges of today’s unprecedented economic shift and what they are doing to steer the company in the right direction. The research was executed by the Aberdeen School of Business (Scotland) and commissioned by the energy company Production Services Network (PSN).

Zeffrey Lucas, U.S. Director of Operations for PSN and emcee of the event, noted that typically, the oil and gas industry focuses most heavily on hard numbers, contracts and prices. “But this research reveals a more complex picture,” he said. “The results suggest that corporate culture, management practices, leadership teams and company philosophies play a very important part in a company’s ability to maneuver its way through a downturn.”

Despite the fact that all of the companies surveyed have coped with the recessionary challenges that occur in a cyclical industry, the research sought to discover why some companies are more resilient and optimistic in the face of similar environmental and economic challenges.

The research, led by Professor Rita Marcella, Dean of Aberdeen Business School, explored a wide spectrum of issues, from the price of oil to the supply chain, to financial and operational strategies, to people management and communication.

Most respondents, whether continuing to perform well or struggling to survive, spoke about the impact of 1) the banking crisis, 2) the price of oil, 3) the need for skilled workers, and 4) government incentives. These factors were especially critical for ‘the vulnerable,’ the companies who were more open to critical injury from economic factors – and less able to ignore or avoid dangers.

Other key findings from the research included:

  • 89 percent have been affected by the banking meltdown.
  • 78 percent have been hit by volatility in the price of oil.
  • 46 percent cited lack of government incentives or support as a factor.
  • 31 percent believe the worst of the recession is over.
  • 53 percent said they do not see signs of recovery and the industry is still firmly in the grip of recession.

The results showed that leaders formed two distinct groups. The stronger companies or ‘tough ones’ (51 percent) claimed they were immune or only moderately affected by the downturn and welcomed the chance to tackle recessionary challenges. This group demonstrated sound management practices, provided a product line in demand, conducted operations across different and diverse sectors and had intrinsically sturdy financials.

In contrast, ’the vulnerable’ (49 percent) companies felt exposed and less in control of their destiny, stating they had been seriously or very badly affected by the current recession.

The survey participants represented a cross-section of the oil and gas industry. Results were based on interviews with senior leadership from major oil and gas operations and contracting companies in Canada, the UK and the United States, employing more than 740,000 people in more than 130 countries. The research has been discussed throughout a series of events in Aberdeen, Calgary, Houston and will be the subject of an event in Abu Dhabi later this year.

Houston’s event took place at the Petroleum Club of Houston. Panelists included: Jon McCarter, Transaction Advisory Services Leader, Ernst & Young’s Americas Oil and Gas Center; Ken Medlock, Ph.D., Baker Energy Fellow, Baker Institute, Rice University; and Lane Sloan, President, Sloan Consulting Services.

Lucas added, “What this research does indicate is that oil and gas leaders see beyond the horizon and are not ‘caught up’ just getting through today. If you have a strong understanding of where you fit in the marketplace, combined with a solid corporate culture, all indications are you will prosper through this downturn.”

For more information, see The study itself is available as a PDF here.

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