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How Organizational Cultures and Structures Influence Performance in Oil & Gas Companies

Discover How Oil & Gas Companies Leverage Effective Organizational Structures and Cultures

Today‘s globalized nature of competitiveness in oil and gas markets is placing more pressure on organizations operating in these industries to develop more effective organizational cultures and structures. There are many studies that focus on the organizational and managerial factors that drive organizational performance.

Organizational cultures and structures are such areas that play a critical role and are strategic prerequisites for business success in today’s hypercompetitive environment of oil and gas markets. I place a new emphasis on organizational cultures and structures, and shed light on these important organizational factors to build effective organizations operating in oil and gas industries.

Pettigrew (1979) initially introduced the term organizational culture into the business literature. Schein (1984) describes organizational culture as a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.

Organizational culture is therefore reflected in shared assumptions, symbols, beliefs, values and norms that specify how employees understand problems and appropriately react to them. To analyze the relationship between corporate culture and firm performance, organizational culture could be visualized by its three major dimensions: collaboration, trust and learning.

Both cultural aspects of collaboration and trust positively contribute to oil and gas companies to actively respond to environmental changes, customer needs and employee growth needs, by developing effective learning workplaces within these companies. This also helps these companies to improve performance in terms of the quality of products and services. Learning culture sheds light on organizational capabilities to develop learning. It is clear that this cultural aspect can particularly facilitate performance in oil and gas companies, by developing suitable workplaces for experts to effectively share their knowledge with others.

People in fact recognize how old resources can address new and problematic situations by sharing their knowledge within the organization, and this can help to create more innovative ideas. Maister (1993) in his book, Managing the Professional Service Firm, states that innovative ideas generation improves profitability for companies. Thus, I suggest that business consultants in oil and gas industries should consider organizational culture as an important enabler to enhance financial and non-financial performances.

A less emphasis on decentralized structures develops communications around oil and gas companies. This less emphasis on centralization also creates more appropriate and effective workplaces for developing learning and growth that in turn improves oil and gas companies’ sustainable competitive advantage as a central product of knowledge creation. This effective learning environment is a by-product of the delegation of authorities that in turn inspires employees to participate in organizational decisions.

Decentralization within oil and gas companies also enables these companies to identify changes in external environments and then helps them to actively and effectively response to these rapid changes. A less emphasis on formalization can also provide a freedom for experts to more innovatively handle their work operations that leads to higher job satisfaction within oil and gas companies.

Hesket and his colleagues in their book, The Ownership Quotient: Putting the Service-Profit Chain to Work for Unbeatable Competitive Advantage, state that job satisfaction can stimulate the quality of products and services that leads to higher degrees of customer satisfaction and profitability. Therefore, I suggest business consultants working in oil and gas industries should also consider the importance of organizational structure in improving performance in oil and gas companies.

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