As we are all aware the oil and gas industry is currently deeply entrenched in a global downturn rooted in an enormous glut of oversupplied crude. It seems that each and every day we hear a different expert give their analysis of when this downturn will end and prices will rise, but the consistent message is that we will not see rising crude prices until we can start burning a lot more than we produce, and for an extended period. While we at The RAD Group don’t participate in the speculation of crude prices, we certainly understand the impact that a weak sector can have on profits, morale, and just about every other KPI that companies measure. You may not be directly affected by this current downturn, but you’ve probably been through one in your own industry or will at some time in your career. As you may also be aware as one of our readers, we do focus on the application of Human Factors science to improve the performance of individuals, teams, and entire organizations. To this end, let’s take a look at how organizations could use Human Factors principles to survive, and even thrive, in a market downturn.
I gave a speech last week and one of the attendees came up to me afterwards and asked me if Human Factors applications relate to process improvement models such as Lean and Six Sigma. While there are crossovers in the two methodologies, I would suggest that Lean and Six Sigma is simply a tool used by HF practitioners. In other words, Lean/Six Sigma is a process that could and should be used in the practice of HF. So let’s look at 3 steps from this methodology that can help organizations survive and thrive a downturn.
1. Process Improvement: Any great organization should always be looking for ways to become more effective and efficient in what they do. The first process improvement exercise that we would suggest is to use a Lean model of reducing waste. Waste comes in 8 forms and when intentionally identified and affected, will lead to more efficiency and cost savings. These 8 are:
Defects
Overproduction
Waiting
Non-utilized Talent
Transportation
Inventory
Motion
Extra-Processing
After waste is eliminated the Six Sigma model of DMAIC should be utilized to make the organization more effective in what they do. DMAIC stands for:
D- Define
M- Measure
A- Analyze
I- Improve
C- Control
This process is an intentional look at how work is accomplished and is based on a methodology which results in an organization which is intentionally better today than it was yesterday.
2. Think Context - If Six Sigma is the look at how work is accomplished, HF and the view of context is the when, where, by whom, why, with what, and still the how of work is accomplished. As we’ve written about numerous times, people do what makes sense given the most immediate and salient context in which they find themselves at any given moment. While this may seem to have been addressed in our process improvement step, context is much more subtle, complex, and hard to define. Context is made up of people, physical surroundings, and organizational influences and are individually interpreted by each person within the organization. The combination of these contexts and the nature of the individual (experience, age, knowledge, etc.) impact performance in unpredictable ways if left unaddressed. Leaders of highly effective organizations communicate with their employees about their work systems, identify barriers to performance from stress, morale, fatigue, poor layouts, conflicting policy, convoluted procedures, etc. and ultimately change the total system to be more conducive to quality performance and sustainability. In other words, they intentionally engineer the organizational context to create success.
3. Value Sales - If the first two steps are performed successfully organizations will steadily become more productive, safer, and cost effective, maybe to the point where they are profitable while others in the industry are not. While upstream oil and gas operations are slowed significantly (currently down 481 rigs over one year ago) there are still drilling operations taking place. The companies that survive in this market aren’t simply the contractors with the lowest day rates, they are the companies that are providing the most value for the day rate they charge. To survive, and even thrive in this market, companies need to be able to not only communicate their value to the E&P companies, they need to have measurable outcomes that are the result of intentional HF practices.
Many modern day industries have seen ups and downs and most have survived the downturns. In fact, many great advances in processes, technology, and human capital have been a direct result of improvements made in tough times. The oil and gas industry will see brighter days and with intentional practices we can all become better at what we do, after all, that’s what the science of Human Factors is all about.