Exclusive interview with Hugh Mitchell, chief HR and corporate officer at Royal Dutch Shell
Siân Harrington, February 27, 2013
There’s a scene in the 2005 award-winning satirical film Thank You for Smoking where Nick Naylor, chief spokesman and lobbyist for Big Tobacco, goes to a bar to meet best friends Polly Bailey from the alcohol industry’s Moderation Council and Bobby Jay Bliss of the gun business advisory group Safety. Sipping their drinks, they debate which of the industries they represent is most destructive – fags, booze or firearms. There could equally as well have been someone from the oil and gas sector round that table, such is the catastrophic impact in environmental and human terms when something goes wrong.
Only last month, one of global energy giant Shell's oilrigs ran aground in an environmentally sensitive area of the Alaskan coast during a storm, prompting criticism from NGOs and US Congress members. Meanwhile, a report into Exxon Mobil's pipeline break below Montana's Yellowstone River found that delays in responding made the spill far worse than it would have been. Deepwater Horizon, Exxon Valdez, Amoco Cadiz and Piper Alpha: these are all household names thanks to their involvement in major disasters.
Given this, it could be argued Hugh Mitchell (pictured), chief HR and corporate officer at Royal Dutch Shell, has the hardest job in HR. Not only does he have to attract talent into an industry with the weakest reputation of any, according to the 2012 Global Corporate Reputation Index, but he has to do so on behalf of a firm that tops the Forbes Global 500 biggest companies list, with revenues of $485.5 billion (£305 billion), and which trades in some of the most complex and sensitive areas of the globe - thus making it a constant target for a wide range of interests from anti- capitalists and environmentalists to supporters of indigenous populations.
It's also a company that is itself no stranger to controversy, notably in the early 2000s when it was found to be overstating oil reserves and during the 1980s when it attempted to dispose of its Brent Spar rig, triggering an international debate on sea dumping and a consumer boycott, which launched modern environmental activism.
But then, to snatch a quote from Naylor in Thank You for Smoking, if Mitchell wanted an easy job, "he should go work for the Red Cross". Instead he seems to relish the challenge.
"It's a dynamic business and industry, and provides a lot of stimulus to people in it. The geographical portfolio of the company keeps moving and it's constant change," Mitchell says as we talk at Shell's imposing building on London's South Bank overlooking the London Eye and Houses of Parliament.
"Ten years ago the smart graduates would look at our industry and say 'that's big bad oil, we don't want anything to do with you. We may want to throw rocks at you but we don't want to work for you'.
"But in the past five years, and we have the data to show it, they would rather influence from within. They want the opportunity to make a difference and contribute to a better world. If, as an organisation, you don't have a purpose that is meaningful to that desire, then you will not get the right people and they will not stay with you," he adds.
This matters because reputation is a value creator in the energy sector. Last year an employer brand survey by NES Global Talent, which has more than 30 years' experience staffing the oil and gas sector, found company reputation to be the primary driver of appeal for contractors. And with significant increases in the world's energy demands and an ageing workforce (more than half of industry employees become eligible for retirement in the next decade), both Shell, and the sector as a whole, face an enormous talent challenge.
"My main focus is developing talent," explains Mitchell, a Shell lifer with 33 years to his name and whose role comprises internal and external communications, real estate, global security, health, aircraft and responsibility for Sub-Saharan Africa, in addition to HR.
"If HR didn't exist in Shell then the business would invent it. Put people over the financial denominator and you get a very high number. That says the importance of people relative to the financial size of the business is huge. People cost money but are not fundamentally seen as an overhead - rather as an essential asset to delivery of strategy. So we have an engaged environment in which HR can ply its trade."
It is also a complex environment. As well as employing some 90,000 people across 90 countries, Shell drives a system of up to two million people who say they work for the company, for example in contractors or the supply chain. Single investments can run into £12 billion and single projects can employ up to 50,000 people from 50 countries, working in hazardous environments with new technologies. Between 2011 and 2013, Shell will invest more than £62 billion, and 20 major projects will start production across the world.
"We differentiate ourselves by saying we can take on things of a complexity and scale that any others cannot. It means we have to have the financial weight to take on projects of that scale, but also the technical and integrating skill to be able to do it," Mitchell explains.
To enable this, Shell is one of the few businesses with a truly global HR function, comprising 3,500 HR professionals, including learning and development and health and safety, reporting through the function. Mitchell leads a 10-strong executive leadership team that takes all major HR decisions. This, he says, gives a clear line of sight from top to bottom of the business.
"Shell has always lived comfortably in a matrix - if you have been here all your life you wonder why people find this so complicated. We enjoy the ambiguity it provides, but the notion of functional input has always been strong," he says. "The fact that all functions, including HR, are hard-wired back to the functional leader does drive efficiency. But the balance is that you mustn't lose intimacy with the local business in relation to local employees, stakeholders and customers."
Constant relevance to the business can only come through active participation, Mitchell adds.
"The only way HR, or any other functional people, can add value is through spending time in the business. You can't sheep-dip them through some training course - they have to physically get connected with business activity.
"If you are hearing about what is discussed after the event you become a reactive service provider, whereas if you are in the room when the discussion is taking place you can become a proactive value-adder."
One way Mitchell accomplishes this is through a strategy unit situated in HR, something he concedes he can afford, given the size and wealth of the company.
"Most HR organisations have people managing lines of business, HR partners, centres of excellence and so on, but I don't know many with a strategy organisation whose job is entirely to get connected with the strategic objectives of the company," he says.
"The people managing lines are predominantly driving today's business. They try to think ahead but the pressures of today are very much on their shoulders. Frankly, if they don't deliver, your credibility is zero, so they are essential. The people working in centres of excellence are driving policies within a defined lens of talent, learning, remuneration and so on. But the strategy people worry about the same agenda as I do.
"As HR lead, I scan the horizon and create the strategic agenda for the function as well as keeping pressure on the system to make sure we deliver against the needs of today. Having capability worrying about that same agenda is very valuable. I have institutionalised it into my structure and put some of my best people in it."
Shell's global approach has also enabled it to cut costs while delivering more valued-added HR. Three years ago the company reorganised to speed up and simplify ways of working and to enhance accountability. Some 7,000 jobs were cut, including a fifth of senior leaders, while at the same time 15,000 internal vacancies were posted - effectively restaffing the organisation globally.
During this period Mitchell took out 40% of HR cost, mainly through leveraging IT systems and putting 500 people in offshore centres in the Philippines, Malaysia, and Krakow in Poland.
"Globalised ERP/HR systems give the backbone to drive the function on a global basis," he says. For example, Shell runs a global pay system. "You press one button in January and 80,000 people get a pay increase instantly," Mitchell explains. "You can have different scales in Argentina than in Canada or in Malaysia, but because there is a common architecture with a common set of rules and algorithms, the efficiency you gain from that is literally massive.
"From an efficiency point of view, if you globalise you can pull the lever very hard and make a big difference," he adds. "The balance is to make sure smart ideas and thinking don't generate in the centre. You have to constantly ask how to create a system that ensures the thinking out there is sucked up and collated, aggregated and responded to."
Mitchell's skill in leading a global function has earned him plaudits, including a position in HR Most Influential top 10. He is admired as one of the most strategic HR directors in Europe and respected across the continents. And there is no doubt he is totally immersed in the business, with a sharp, strategic mind.
Facts roll off his tongue, from global population growth ("Did you know 35 cities in Europe have over one million people while 200-odd cities in China have over million with a new one arriving almost every week?") to the state of the future energy mix ("In delivering energy there will have to be a very different suite from that of today. We forecast 30% from renewables").
And, as he notes, most of the world's big energy infrastructure has not yet even been built.
"The dramatic shift will be what the 21st century city will look like and how it will be met in terms of demands," he says. "How do we play in that space, how do we create different venture structures, different collaborations, different ways of thinking to be part of that? For most people that is pretty exciting. Also the refineries we are running today have to be more efficient. And there is still scope in making engines better, for example."
Given Shell plays in an industry that, as Mitchell admits, is "guaranteed to grow", it would be all too easy to be arrogant, especially as it is the largest company on the FTSE, with a market capitalisation of $225 billion (£140.9 billion). Its global revenues exceed the GDPs of some 170 countries, putting it in the top 25 economic entities globally. Now that is power.
But, as one former employee tells me, Shell is shaking off its old reputation for arrogance and has shown greater empathy and transparency in the past decade. And it is clear Mitchell believes its culture is a strong selling point.
"If I'm not careful I may sound too tree-hugging," he says, "but Shell has always had strong value set around business integrity and safety and, for people for whom that makes sense and aligns with their own personal values, it is comfortable to stay in the company. People who play on, or just across, the line will not survive in Shell - the culture would reject them."
For HR, this means increasingly being the part of the organisation that asks the question, are we in tune with society? "If we are not," Mitchell says, "we will not be effective as a business, for the people who work for us are just a reflection of society, as are the people we sell to.
"Also increasingly," he adds, "there are very few things we can do as a business on our own. We have to do it in collaboration with government, with partners and also in less formal collaboration with communities we impact.
"We need to develop people who are not just good engineers but who can engage with an indigenous people in a country on national, regional and local political level, right down to the people in a village who want to have conversation. We may have an agreement with a national government but that does not give you the licence to effectively go in and do whatever you want to do. So, for example, if you want to drill in Alaska, then you need experts in community liaison in the Arctic environment."
This broadens the challenge for HR, he adds. "It's not about manufacturing these people, but it is about raising the awareness and skills of core business people and complementing them with expertise. And this doesn't mean you can take experts in community liaison in Europe and throw them in. The reality is, 95% of employees are local to the countries we are doing business in."
In 2013 Shell will recruit some 6,000 people, of which 50% will be in the Americas, 40% in Asia-Pacific and just 10% in Europe.
"We have to shift the demographic east and this is not just about recruiting people from those areas," Mitchell says. "If we recruit someone from China or India who behaves like an Oxford engineer, I am not sure we have got what we want. How we create the culture that attracts the talent we need for the future - now that is the wrestle."
With global population predicted to grow from seven billion to 10 billion by 2050, energy demand is expected to double. The International Energy Agency estimates the world may need to invest $33 trillion in new energy infrastructure over the next 25 years. Attracting the talent Shell needs just to stand still, let alone grow, is a huge challenge. But then Mitchell is no stranger to a challenge, or as he would say, an opportunity. Reputation or not, I don't think we'll be seeing him at the Red Cross anytime soon.
Oil and gas: war for talent intensifies
Oil and gas: war for talent intensifies
Between 40,000 and 50,000 new jobs will be created in 2013 in the UK's oil and gas industry as a result of an increase in oil and gas investment and the onset of shale gas exploration.
However, the recruitment crisis in the industry will intensify, pushing up average wages, which at £64,000 are already twice the national average, according to recruiter Oil and Gas People. Meanwhile, sector expert NES Global Talent also says the war for talent will intensify this year as the industry competes with other sectors for technical and engineering experts.
Investment in oil and gas is at record-breaking levels, with more than £40 million planned spend in North Sea oil alone in the next three years.
A growth in demand for engineers and drill crew as well as those who work in the service sector that supports the industry will see a major increase in the need for qualified staff. Likewise, there will be a rise in the need for qualified and experienced geoscientists and exploration engineers.
Kevin Forbes, CEO of Oil and Gas People, says: "Our forecast shows that, with increased investment in North Sea oil, demand for qualified staff is set to reach an all-time high, which will exacerbate an already serious skills shortage - a problem that is being further exacerbated as UK candidates head abroad to earn even higher wages amid a huge demand for qualified expats globally."
Infrastructure requirements in emerging markets to meet economic targets will also take a "massive share" of the world's graduating civil, electrical and mechanical engineers for years to come, says Simon Coton, MD of NES Global Talent.
He explains: "Oil and gas activity is booming, but with an estimated talent shortfall of 40,000 engineers in Brazil alone, we must work hard to fill the talent gap by recruiting and training local talent, hiring engineers from other heavy industries such as mining and shipbuilding, and also by tapping into talent in developing nations."
Mitchell on HR
Mitchell on HR
"My sense is that as a profession we have spent too long apologising for our existence. I don't use the word business partner, as I don't think an engineering manager or marketing manager says business partner, just that they work somewhere.
"What you now see is an increasing focus again on 'show me you run a good shop' and efficiency measures. Do we want to be measured by how many people there are in HR per 100 employees? I think not.
"We need to spend more time and make a bigger contribution on the added-value agenda as business is changing and the environment in which we operate is changing. But we only get to play in that space if we do run a good shop. So you can't become an HR consultant - you can buy them off the street. Make sure things that come into the in-tray and out-tray are done properly and use that to create the legitimacy to participate in a more added-value debate.
"In that debate you have really got to work hard to get enough external input to your thinking, to be tuned into wider societal developments. Make sure HR policies don't just act as a constraint but instead look through the lens of business."