Abstract

In order to improve operational effectiveness and to prepare for the growth to be generated by deepwater development, Unocal Indonesia embarked on an organizational redesign in June 1998. Unocal's organization was noted as having too many silos, being hierarchical, and bureaucratic in structure. The structure did not allow for single-point accountability for P&L (profit and loss) and did not encourage responsibility for cost and revenue control at lower levels. The organization was also characterized as always "re-inventing the wheel".

Using the widely acclaimed design model of Jay Galbraith, Unocal's organization change known as the EKM98 Reorganization was initiated based on teams, reservoir-to-stock-tank work processes and value chains. The design would retain and optimize Unocal's shallow water (shelf) PSC (production sharing contract) concession production and get ready for the potentially large deep water PSC production. Based on the model, design principles were derived to drive the organization architecture, management processes, work processes, and human resources processes and practices to ensure growth would occur in a systematic way, while at the same time technical excellence would be retained.

The redesign included the change of the organization structure. The traditional silos, departmental groupings of onshore/offshore split production operations and "informal" crossfunctional teams were redesigned with a team-based organization with shared services (of technical quality control and support logistics) to support and ensure speed and efficiency for the business performance. Performance Management was integrated throughout the organization to align the employee behaviors to the set of organizational goals. A Balanced Scorecard process was introduced from the framework of the Corporate Vision and going down to the individual departments or teams. Individual goals were tied to the Scorecards.

The Human Resources processes of career development, training, performance management, recruitment & selection were redesigned to allow better interfaces with the new structure and to create strong values and culture so that Unocal will be a truly learning organization.