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Grassroots Leadership- Royal Dutch/Shell – Fast Company – Lokesh Ramani

by on October 16, 2007

I found Richard Pascale’s article on Steve Miller, group managing director of Royal Dutch/Shell rather intriguing. Firstly, this article opened up a different perspective on what I thought about wholesale/ retail business models; in particular about the critical areas that can be fine tuned to achieve desirable business outcomes. Further, the article also demonstrated that effective leadership strategies may not always pertain with typical upper management issues, say broad strategic, legal, stakeholder domains etc. Finally, hailing from a democratic school of thought, this real-world study corroborated that empowering employees (in the lower hierarchy) with substantial responsibilities and guiding them with pertinent direction can be an effective leadership strategy to drive a business, the customer-centric way.

Royal Dutch/Shell – Background
With a current market capitalization of $178 billion, $128 billion in annual revenues, 101,000 employees, and operations in 130 countries around the globe, Royal Dutch/Shell is often cited as one of the world’s largest businesses – but never as one of the fastest. With its 90-year history, its deep sense of tradition, and its carefully structured ways of doing things, Royal Dutch/Shell is often praised as a model of consistency and longevity – but never as one of creativity or innovation

Bureaucracy and its challenges
Miller identified that the organization needed to address issues through a customer-centric approach. When the change management initiatives designed to drive a change in the organization’s business strategy appeared to get bogged down among the top management due to complex governance structures, a whole new perspective to deal with the situation emerged. Shell’s 47,000 filling stations, for example, served about 10 million customers each day; there was no better way to address change into the organization than focusing towards the issues at the frontline. Every retail outlet was influenced by the same diverse factors like geographic location, work culture, customer background & needs, regulatory compliances, etc. However these diverse factors had different associated weights depending upon the location and culture. It was extremely critical for the organization to realize that every retail outlet presented unique businesses opportunities provided these outlets could understand the market dynamics and customer needs. Steve Miller acknowledged that this unique business proposition could bring rich returns to the organization provided this opportunity was suitably tackled from a bottom-up perspective. This is an interesting business model to tackle retail based businesses. Typically organizations set up high level business strategy (distinct to every country) that drives directives company-wide to spell specifications for retail outlets. In this business model, in addition to broad existing directives, business potential is aimed to be maximized by allowing the front-line to function as entrepreneurial, self-directing units.

Empowerment
How to empower the frontline retail enterprises and their staff when the synergies between the parent wholesalers are at a bare minimum? This is a tremendous challenge for the retail business model put forward by Steve Miller and his think-tank. While, it has been identified that there exists strong market potential that can be tapped out from the front-line, how will the organization equip the front-line retail enterprises with the expertise and business acumen to maximize the returns, especially from a bottom-up approach? This bottom-up approach is challenging because each of these front-line business units have unique styles of functioning, with very little control from the parent-wholesaler. This also brings out an interesting fact; before empowering an entity, it is critical to analyze that specific entity’s current status with respect to expertise, resources and the level of influence it pulls over the business. To equip these frontline units with the tools and strategy to make a company-wide impact, it was necessary to identify pertinent stakeholders at each of these units and train them to tap and convert potential business opportunities into revenue both for the retail unit and the main organization. Teams across the globe were brought together to participate in a retail-boot camp, where they were oriented and trained for necessary business skills to apply them in their respective real-world situations. An ongoing mechanism was established; the teams which went back shared the knowledge and trained their peers to achieve maximum coverage. The teams that went back developed business plans which they brought back for review after a period of 60 days. This was a peer-review challenge, with the best business plans being selected as good models for the retails units to leverage for their respective enterprises. This way, Steve Miller found an efficient mechanism to bring the disconnected frontline units to speed in the business front and empower them to make pertinent changes based on the market environment, customer needs and business opportunities. In short, these retail units would start functioning as independent businesses (with only broad guidance) with an entrepreneurial and innovative strategy.

Leadership: Redefined
Steve Miller exhibited characteristics that some may term “unconventional” for a typical CEO/Director of big organizations. While CEOs and senior management executives are increasingly caught up with board meetings, press debriefs, all-hands meetings, etc, Steve Miller found it important to connect with the front-line employees who shared a better picture about the state of business and customer needs. By connecting with these employees, Steve Miller was able to break complex governance barriers that impede a sense of transparency between the executive management and the rest of the organization. Further, by establishing a close connection with the frontline employees, Steve Miller was able to reaffirm that it was critical for these frontline business units to leverage innovative strategies to run their respective businesses and convince these employees that they had the potential to run their businesses just the way a senior management executive would run an organization.

Miller acknowledged that empowering the frontline employees with higher responsibilities and power served better for the organization than allowing the executive management to wrestle for all the powers and decision-making strategies. Part of this involved, moving from a “holier-than-thou-know-it-all” attitude towards more of a guiding force and a teacher style of leadership strategy. Steve Miller had to relinquish certain responsibilities and transition them to the frontline, because the mechanism seemed to be a better growth driver for the organization. To achieve this transition, Steve Miller took up the role of an active mentor and guiding force to ensure the frontline was equipped with the necessary capabilities and expertise to handle the transition. This leadership attribute is noteworthy. It is not only important for effective leaders to take charge and deliver, but also necessary to acknowledge leadership potential in the lower ranks and let go of important responsibilities.

Closing Notes
From an overall perspective, it was interesting to read about large scale change management strategies and their implementation for a large organization like Royal Dutch/Shell. I was particularly impressed by Steve Miller’s ability to recognize the power of the people and devise strategies to identify and develop leadership potential in the front-line. Certainly, what this has established is an ongoing mechanism that will serve as a significant growth driver for the organization in future.

References
“Grassroots Leadership – Royal Dutch/Shell” : http://www.fastcompany.com/magazine/14/grassroots.html
“Turning around an Ailing IT Organization”: http://www.cio.com/article/5212/Turning_Around_an_Ailing_IT_Organization/1
“New Face of Leadership”: http://www.fastcompany.com/articles/2001/05/shell_miller.html

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