ACCELERATING ORGANIZATIONAL PERFORMANCE IN THE ARABIAN GULF CHEMICAL INDUSTRY
CONTENTS Executive summary
4
Introduction
6
Research methodology
7
Findings
8
Data splits by company
10
International perspective
14
Conclusion
16
Acknowledgements
18
About Heidrick & Struggles
20
Executive Summary
Several interesting findings emerged. Overall, when we take an
Due to increased uncertainty and substantial market disruptions in
(60%). There are however, large differences with individual
the global petrochemical industry, such as the shale gas revolution
company profiles varying from ‘derailing’ (28%) to ‘accelerating’
and capacity expansions drive in Asia, the Middle East needs to
(92%). Despite this there are clear trends amongst the research
remain even more competitive. Our prior research tells us that
and across the organizations; ‘clarity’ is a stand out drive factor
there is considerable variation within the chemical industry and
and falls within the range of ‘accelerating’. Specifically, within
indeed those that are thriving versus losing the battle. During
‘clarity’, the strong sense of purpose (90%, ‘accelerating’) is
our multiyear and multisector research project, it was found that
reflected across the organizations. Another notable area is
organizational success requires acceleration; reducing time to
‘winning teams’ (74%, ‘accelerating’). The combination of these
value by building and changing momentum more quickly than
illustrates the teamwork and comradery that is shared.
average, companies analyzed in our research are ‘advancing’
the competition through Mobilizing, Executing, and Transforming with Agility (also known as ‘META’). The Organization Accelerator
When viewing the ‘META’ framework, ‘Execute’ is an area which
Questionnaire was administered to understand META within
requires the most attention (50%). Specifically, within ‘Execute’,
Petrochemical and Chemical companies in the GCC. Specifically,
the low ‘winning capabilities’ score (‘derailing’, 37%) indicates
13 organizations in Gulf Petrochemicals and Chemicals Association
the focus that should be placed on attracting, managing and
(GPCA) were involved in our research (p=213 executives).
developing talent more effectively. ‘Rewarding impact’ (38%), as an
META was viewed through our five categories of acceleration;
energizer also merits more attention. As such, not enough attention
‘accelerating’ (≥70%), ‘advancing’ (60-69%), ‘steady’ (50-59%),
is placed on knowing the people or what exactly it is that they do.
‘lagging’ (40-49%) and ‘derailing’ (≤39%).
‘Ideas adoption’ (38%) and ‘straight talking’ (39%) are two other areas which require more focus. These areas must be improved in tandem, as such employees should feel comfortable speaking up and sharing their ideas without the fear of being reprimanded. Acting on these themes to accelerate performance will be key moving forward, particularly given the current global climate.
4 | Accelerating Organizational Performance in the Arabian Gulf Chemical Industry
Introduction
attractive, the reality is that understanding and improving the ways the companies execute can make all the difference. So what does this mean for Gulf Petrochemicals and Chemicals Association? How do these Petrochemical and Chemical companies fare in the GCC region given our highly complex and volatile world? What can they focus on in order to thrive amongst their competition?
The majority of industries are being disrupted at a faster pace than ever. In today’s global economy, the new ‘normal’ has different meanings to businesses and regions alike. There is undoubtedly uncertainty in the global petrochemical industry with several substantial market disruptions including the shale gas revolution in the United States, and capacity expansions drive in Asia.
During our multiyear and multisector research project, it was found that organizational success requires acceleration. In other words, there is importance on reducing time to value by building and changing momentum more quickly than the competition does. This does not mean a persistent push for speed in every part of an organization but instead a careful analysis that leads to removing specific drag factors while taking other steps that will drive progress in the key areas that accelerate overall performance. Acceleration requires a focus on mobilizing, executing, and transforming with agility (also known as “META”).
These disruptions essentially put many GCC producers at a risk of losing their competitive edge, previously enjoyed from cheap feedstock. How can the GCC players ensure they achieve a competitive advantage? In this context, where can companies in the GCC region focus their energy in order to drive greater value? Focusing primarily on execution seems to be a good starting point. The average variation within an industry is 34 percentage points between the best and worst performers (in terms of profitability). Interestingly, in the chemical industry, this number is above the average variation, at 38 percentage points (figure 1) which tells us that there is substantial variation within the chemical industry and indeed those that are thriving versus losing the battle. This also shows that while branching into other industries and geographies may seem
Our specific research within the GCC region, views GPCA members through the organizational lens which was built on multiyear research. We will start by initially diving into our methodology including our Organization Accelerator Questionnaire tool. We will then view the findings and delve into various data cuts. Finally, we will examine these findings from both a local and international perspective and then look to draw conclusions.
Figure 1: Execution beats strategy Difference between highest and lowest margin, percentage points
Average margin, % Software and IT Services Beverages Tobacco Pharmaceuticals and biotechnology Technology Hardware Electricity Travel and leisure Media Healthcare Industrial metals and mining Mobile telecommunications Chemicals
12%
38%
Oil and gas Personal goods Industrial engineering
The difference between being average in the most and least profitable industries is
Industrial transportation Gas, water and multiutilities
The average difference between the best and worst performer within an industry is
19 percentage points
General industrials
34 percentage points
of margin
Fixed-line telecommunications
of margin
Oil equipment and services Mining Food producers Aerospace and defense General retailers Automobile and parts Food and drug retailers 0
5%
10%
15%
20%
25%
0
20
40
60
80
100
Source: xxx
Accelerating Organizational Performance in the Arabian Gulf Chemical Industry | 5
Research methodology META and the “Superaccelerators”
1
3. Receiving no more than 20% of their revenue from their home government (unfortunately eliminating state-sponsored Saudi Aramco from our initial research). 4. Not seeing their profit margin reduce by more than 20% as a
We began our extensive multiyear research project by looking for
percentage of revenue as they grew.
companies that are elite by Drucker’s definition2 “There is only one valid definition of business purpose: to create a customer.”
Based on our research, we identified a small group of 25
We viewed the FT 500 list of the world’s largest, publicly traded
companies that we named “superaccelerators.” We were surprised
companies which were evaluated based on their compound
by two things:
average growth rate (CAGR) for revenue. Revenue growth was chosen through our belief that it is an unpolluted indicator of
1. Their exceptional success is not a case of choosing the right
Drucker’s version of success when compared with others that are
industry sector or geography. Our superaccelerators are not
commonly used (e.g. earnings per share or stock price). In our
all tech companies, and they come from all geographies and
view, the best way to measure success is through the customers.
include sectors thought of as stable or low margin. 2. We found that many companies are trying to do the same
We looked at the most valuable listed companies in the world,
things such as ‘put customers first’, ‘adopt clear management
represented by the FT 500 list, and applied four “rules of 20”:
structures’, and so on.
1. Being in the top 20% for revenue growth in both the last three and the last seven years. 2. Generating no more than 20% of their growth inorganically (through acquisitions).
Factors that differentiated the superaccelerators from others was the ability to Mobilize, Execute, and Transform with Agility, being able to adapt and pivot faster than their competitors. Each of the four categories in the model contains unique drive factors that our research shows are most associated with a company’s ability to accelerate performance (figure 2).
1 Price, C. and Toye, S. (2017) “Accelerating Performance: How Organizations can Mobilize, Execute and Transform with Agility”, Wiley 2 Watson, G. and Drucker, P. (2002) “Delivering Value to Customers”, Quality Progress
6 | Accelerating Organizational Performance in the Arabian Gulf Chemical Industry
We used these findings to formulate our Organization Accelerator
In order to calculate the scores for each statement we take the
Questionnaire as a diagnostic tool that provides an accurate
% of respondents who ‘strongly agree’ and ‘agree’ and subtract
Acceleration Profile based on a company’s ability to mobilize,
the % of respondents who ‘strongly disagree’ or ‘disagree’.
execute and transform with agility. The assessment further delves
Respondents who ‘neither agree nor disagree’ or ‘cannot say’
into the 13 Drive Factors and 39 energizers of organizational
do not contribute. A balance score can range between -100%
performance.
and 100%. These are then put into one of five categories of acceleration: » Accelerating (≥70%)
» Lagging (40-49%)
» Advancing (60-69%)
» Derailing (≤39%)
» Steady (50-59%)
Figure 2: Drive Factors
Mobilize
Execute
Transform
Agility
Customer first
Simplicity
Innovation
Foresight
Always responsive to changing customer demands
No bureaucracy
Low customer attrition
Streamlined structure
Culture of disruptive thinking, idea generation, and experimentation
Think ahead to anticipate and plan for changing circumstances
Lean processes
Consistent service excellence
Fast adoption
Learning
Energizing leadership
Ownership
Challenge
Meritocracy
High-energy buzz Empowerment at every level Strong role models who inspire others to bring their best performance
Delivery culture
Supportive, frank feedback and debate
Clarity
Integrity-driven processes
Winning capabilities
Highest performance expectations
Collaboration
Learn quickly to avoid repeating the same mistakes Improve continously
Adaptability Quick to adapt to changing circumstances
Talent magnet Great talent-development processes Best talent in key roles
Work as one organization High level of trust Joined-up processes and communication
Resilience
Mobilize
Execute
Transform
Agility
Internal focus
Complexity
Fear
Hindsight
Chronic service failures
Too many layers
Missed value opportunities Stagnation Outdated products and services
Always looking at the past for answers to current problems
Complacency
Inability to learn from mistakes
Everyone aligned and committed to purpose, ambition, and clear priorities
Recover quickly and emerge stronger from setbacks
Source: Heidrick & Struggles
Figure 3: Drag Factors
High customer attrition Overtaken by market disruptions
Fatigue KPIs in the red Key projects delayed Disengagement
Unjustified process variation Complicated metrics
Unclear accountability Overlapping accountabilities Rewarding effort, not impact Victim mentality
Acceptance of mediocrity Taking too long to remove poor performers Avoiding straight talk
Immunity
Avoiding failure at all costs
Inflexibility Slow to adapt to changing circumstances
Confusion
Skills gaps
Competition
Unclear purpose and strategy
Weak talent pipeline
Silos and politics
Frailty
Losing the best people
Distrust
Avoiding tough people decisions
Information hoarding
Unable to recover from setbacks
Lack of focus Too many conflicting priorities
Weakened by setbacks
Source: Heidrick & Struggles
Accelerating Organizational Performance in the Arabian Gulf Chemical Industry | 7
Gulf Petrochemicals and Chemicals Association (GPCA)
An Organization Accelerator Questionnaire was sent out to
specific research
selected participants within the above companies who largely sat
We partnered with GPCA on this important research project.
within the ‘top team’: CEO and executive/management team. The
GPCA represents the downstream hydrocarbon industry in
number of participants totalled 213 which we consider as a good
the Arabian Gulf. The industry makes up the second largest
representation of the Petrochemicals and Chemicals leadership
manufacturing sector in the region, producing over US$ 108 billion
perspective in the GCC countries.
worth of products a year.3 Of the 33 companies who are members of the GPCA, 13 took part in our research. These were: »» Saudi Aramco
»» Qafco
»» Borouge
»» SABIC
»» Equate
»» Sahara
»» Farabi
»» Saudi Chevron
»» ADNOC Fertilizers
»» Sipchem
»» GPIC
»» Tasnee
»» NATPET
3 Gulf Petrochemicals & Chemicals Association: www.gpca.org.ae/
8 | Accelerating Organizational Performance in the Arabian Gulf Chemical Industry
Findings
The need to innovate, work together and push the boundaries is particularly important given the uncertainty within the industry. However, we need to be cautious when drawing conclusions,
Overall, our research indicates several interesting findings. When
indeed, several of the drive factors appear at the lower band of the
we take an average of the companies within GPCA, the results
‘advancing’ scale (‘learning’, ‘adaptability’, ‘innovation’, ‘challenge’
sit in the ‘advancing’ category, although at the lower band of the
and ‘collaboration’). In order to paint a more substantial picture
‘advancing scale’ (60%). This means the drive factors within GPCA
around these drive factors we will need dig one layer deeper and
outweigh the drag factors. When we look at ‘META’; Mobilize
view the energizers (see figure 5 and the energizer section).
(68%), Transform (61%) and Agility (62%) are ‘advancing’, with Execute (50%) only marginally sitting in the ‘steady’ category.
‘Simplicity’ (55%), ‘ownership’ (58%), ‘foresight’ (56%) and
When we view the heat map of the 13 Drive Factors which make
‘energizing leadership’ (58%) fall in the ‘steady’ category. Too
up ‘META’ (figure 4), we can see that ‘customer first’ (70%) and
long in a ‘steady state’ position may be unsustainable as the drag
‘clarity’ (76%) are in the ‘accelerating’ category.
factors start increasing their weight and could pull the organization towards the derailing end of the spectrum.
These findings demonstrate a real sense of creating value and delivering excellent services to customers. Findings further indicate
Finally, ‘winning capabilities’ (37%) firmly sits within the ‘derailing’
a high level of clarity surrounding the fundamental purpose.
category. The below quote really highlights the need to manage
Quotes very much bring this to life;
and develop individuals more successfully:
“We already have a strong commitment from the management,
“Improve succession planning process, i.e. start early preparation
exceptional leadership, visionary and a strong drive to achieve our
for replacing key jobs with nationals by selecting candidates and
long term and short term goals. Our priorities are clear on our way
developing into determined future roles vs. waiting till last minute to
forward”
pick from an existing pool of people.”
Six drive factors appear in the ‘advancing’ category, ‘learning’
This low score is an interesting finding and one which merits a
(63%), ‘resilience’ (66%), ‘adaptability’ (62%), ‘innovation’ (61%),
deeper dive. This will be presented in the next section, when we
‘challenge’ (61%) and ‘collaboration’ (61%). These scores indicate
view the three energizers that sit within this drive factor.
that drive factors outweigh the drag factors amongst this group. Figure 4: Acceleration Profile - A heat map of the 13 Drive Factors
Mobilize 68% Energizing Leadership 58%
Customer First 70%
Clarity 76%
Agility 62% Simplicity
Foresight 56%
Learning 63%
Adaptability 62%
Resilience 66%
Innovation
55%
Challenge
Overall 60%
T
e
50
a
nc
ti n
for
te
61%
e le
ra
Collaboration
ns
cu
Acc
%
61% Winning Capabilities 37%
ra
Exe
58%
m6
Ownership
1%
61%
g or
g a n i z a tio n p e r
m for
Accelerating (>70%)
Steady (50-59%)
Advancing (60-69%)
Lagging (40-49%)
Derailing (<39%)
Accelerating Organizational Performance in the Arabian Gulf Chemical Industry | 9
Figure 5: Acceleration Profile - A heat map of the 39 Energizers Mobilize 68%
Execute 50%
70% Customer First Org Creating value
69%
55% Simplicity Org
85% 80%
Service excellence 61%
82%
58% Energizing Leadership
Process efficiency
39%
Straightforward metrics Streamlined structure
Ind
Role modeling
63%
54%
Empowerment
46%
Bold decision making
55%
57%
50%
87%
48%
77%
59%
61%
Ideas adoption
38%
58%
Shape the future 28%
63%
61% Challenge
78%
76%
Integrity
65%
79%
55%
Rewarding Impact
38%
40%
Org
84%
Ambition
59%
77%
Focus
60%
85%
71%
55%
48%
90%
49%
Scanning the environment
Commitment
Purpose
71%
Disruptive thinking
Ind
Ind
Ind
Safe space
37% Winning Capabilities Org
62%
Org Assume uncertainty
Ind
61%
Org
76% Clarity
62%
56% Foresight Org
Ind
58% Ownership
Org
Agility
61% Innovation
Ind
46%
Market shaping
Transform 61%
63% Learning Org
Ind
Org
Ind
Straight talking
39%
58%
Fail fast
46%
55%
Tackling difficult issues Push the boundaries
55%
76%
Feedback loops
51%
86%
61%
77%
Curiosity
66%
70%
61% Collaboration Org
Ind
62% Adaptability Ind
Developing others Best people in critical roles
45%
43%
Trust
52%
64%
38%
50%
One organization 39%
63%
Talent magnet
20%
24%
Winning teams
74%
71%
Org
Ind
54%
48%
61%
87%
60%
64%
Org
Ind
Recover quickly
64%
86%
Keep people healthy
57%
68%
Lean in
57%
65%
Change management Embrace technology Flexibility
66% Resilience
Accelerating (≥70%)
Steady (50-59%)
Advancing (60-69%)
Lagging (40-49%)
Derailing (≤39%)
Each drive factor is measured by two statements, an organizational
It is also clear, from an organizational perspective that ‘creating
(‘Org’) and an individual (‘Ind’) statement, which measure the same
value’ (69%), ‘integrity’ (65%) and ‘curiosity’ (66%) sit at the upper
aspects of an organization from different perspectives. In this
end of the ‘advancing’ bracket. ‘Recover quickly’ (64%) also
sample, individuals are significantly more positive when responding
firmly sits within the ‘accelerating’ bracket. This combination is
from an individual lens rather than viewing from an organizational
important and should not be underestimated, particularly given
lens. For the purpose of this report, we have focused on the
the current climate. Within the organizations, there is a belief that
perspectives at an organizational level (rather than an individual
creating value for customers is of central importance. Individuals
level).
also feel motivated and encouraged to live the company values and to continuously learn. Perhaps most imperative, is that when
When we drill down and consider the 39 energizers (figure 5), there
faced with setbacks individuals believe their organization recovers
are two energizers that are accelerating at an organizational level.
quickly. These are encouraging messages.
These are ‘purpose’ (90%) and ‘winning teams’ (74%). Creating a strong sense of purpose gets people off the fence and encourages
The following are ‘advancing’ from an organizational perspective,
them to act urgently. This, combined with working in an output
however, sit at the lower end of the scale; ‘service excellence’
oriented environment and amongst a ‘winning’ team, is good
(61%), ‘role modelling’ (63%), ‘focus’ (60%), ‘safe space’ (62%),
news.
‘push the boundaries’ (61%), ‘embrace technology’ (61%) and ‘flexibility’ (60%). These scores indicate that drive factors outweigh the drag factors, which is positive news. However, these organizations should not to be complacent as they are nearing the ‘steady’ category.
10 | Accelerating Organizational Performance in the Arabian Gulf Chemical Industry
Areas requiring more focus include scanning the environment and
‘Ideas adoption’ (38%) is also an area worth exploring. Results
attracting solid talent (‘talent magnet’), continually developing talent
show as derailing when it comes to the individual’s perception of
(‘developing others’) and managing talent more effectively (‘best
the organization. Establishing the systems, processes and culture
people in critical roles’). ‘Talent magnet’ (20%;) is classified as
that enable strong ideas to be adopted quickly is perhaps more
derailing; worrying as the importance of attracting and scanning
important now than ever given our VUCA world. ‘Straight talking’
for the best talent cannot be underestimated. ‘Developing others’
(derailing; 39%) is an area that requires more attention, particularly
(45%) is classified as lagging. As one individual articulated, there is
when we relate this to successfully adopting new ideas and
an “Unclear leadership development program and unclear future
creating a culture based on developing others. Employees must
for key staff.” Organizations that do this well continually support
feel comfortable to speak up and share their stories.
talent ensuring they develop their employees both informally and formally. ‘Best people in critical roles’ (38 %) is an area that also
‘One organization’ (39%), ‘process efficiency’ (39%) and ‘shape
requires more focus. Results show as derailing when it comes to
the future’ (28%) are areas which are also derailing. However, what
the individual’s perception of the organization, yet steady when
is interesting amongst these three energizers, is the discrepancy
viewing their personal experience within it. As such, more of a
between the individual and organizational scores. For example,
push should be focused on investing time to understand which
when responding to ‘shape the future’ (one of the three energizers
roles fit employees skill sets best based on the organization’s
that sit within foresight), there was a clear difference when
needs. This strongly came out in our quantitative research and
responding from an organizational standpoint versus an individual
responses such as this show its criticality; “put right people in the
standpoint; ‘We spend enough time preparing for the future rather
right place.”
than firefighting’ (organization statement, 28%) versus ‘I am able to devote enough time to prepare for the future’ (individual statement,
Interestingly, ‘rewarding impact’ (38%), as an energiser also merits
63%). These areas merit further investigation before drawing solid
more attention. As such, not enough focus is placed on knowing
conclusions.
the people or what exactly it is that they do. This again was seen clearly in our thematic analysis; “lack of fairness and recognition of wrong people”.
Accelerating Organizational Performance in the Arabian Gulf Chemical Industry | 11
Data Splits by Company
Figure 6: Profile categories by company
Derailing Accelerating
Interestingly there are large differences when viewing the data splits by company, specifically from an overall organizational perspective, with the lowest profile classified as ‘derailing’ (28%) and the highest classified as ‘accelerating’ (92%).
Lagging
When looking at the 13 companies under investigation, the following can be observed (figure 6): »» ‘Accelerating’ - 2 out of 13 companies »» ‘Advancing’- 4 out of 13 companies »» ‘Steady’ - 4 out of 13 companies »» ‘Lagging’ - 2 out of 13 companies »» ‘Derailing’ - 1 out of 13 companies
12 | Accelerating Organizational Performance in the Arabian Gulf Chemical Industry
Advancing Steady
If we view figure 7, we can see that Company A and Company B
(figure 7). ‘Clarity’ as a drive factor is accelerating or advancing
are accelerating or advancing on every drive factor. Conversely,
amongst 11 out of the 13 companies (85% of the companies).
Company M is derailing or lagging on every drive factor.
‘Winning capabilities’ is derailing or lagging amongst 11 out of 13
Despite the fact that there are differences between the players
companies (85% of the companies). Indeed, it was also the lowest
from an overall perspective, there are a number of clear trends4
of the drive factors in 11 out of 13 companies.
Figure 7a: Splits by Company (1/2)
Winning Capabilities
Innovation
Challenge
Collaboration
Foresight
Learning
Adaptability
Resilience
Overall (n=213)
60%
70%
58%
76%
55%
58%
37%
61%
61%
61%
56%
63%
62%
66%
Company A
92%
86%
91%
95%
92%
88%
94%
92%
92%
94%
91%
88%
95%
95%
Company B
82%
95%
77%
90%
85%
85%
62%
81%
80%
86%
82%
88%
85%
76%
Company C
69%
74%
66%
82%
65%
67%
42%
73%
69%
75%
62%
73%
78%
73%
Company D
64%
72%
63%
86%
59%
59%
39%
68%
64%
64%
62%
69%
64%
67%
Company E
62%
86%
58%
78%
57%
51%
37%
59%
68%
55%
66%
63%
59%
68%
Company F
61%
79%
54%
80%
57%
67%
45%
47%
56%
59%
57%
63%
57%
71%
Overall
Ownership
Derailing (<39%)
Simplicity
Lagging (40-49%)
Clarity
Steady (50-59%)
Advancing (60-69%)
Energizing Leadership
Accelerating (>70%)
Customer First
Company (1/2)
Figure 7b: Splits by Company (2/2)
Winning Capabilities
Innovation
Challenge
Collaboration
Foresight
Learning
Adaptability
Resilience
Company G
59%
72%
49%
71%
69%
54%
38%
59%
60%
62%
39%
58%
66%
70%
Company H
56%
70%
41%
80%
54%
54%
30%
54%
50%
63%
54%
65%
52%
63%
Company I
55%
58%
67%
70%
37%
42%
32%
72%
50%
55%
38%
62%
60%
68%
Company J
53%
57%
46%
81%
28%
68%
40%
57%
57%
58%
59%
47%
38%
46%
Company K
48%
53%
59%
60%
37%
54%
22%
44%
56%
44%
38%
40%
52%
66%
Company L
46%
52%
52%
58%
52%
33%
9%
50%
56%
42%
34%
52%
57%
60%
Company M
28%
49%
26%
38%
15%
26%
-12%
31%
19%
24%
33%
42%
40%
37%
Overall
Ownership
Derailing (<39%)
Simplicity
Lagging (40-49%)
Clarity
Steady (50-59%)
Advancing (60-69%)
Energizing Leadership
Accelerating (>70%)
Customer First
Company (2/2)
4 Due to confidentiality reasons we are unable to reveal the company names.
Accelerating Organizational Performance in the Arabian Gulf Chemical Industry | 13
International Perspective As an average, companies involved in our research are overall ‘advancing’ (60%). How do they compare to their peers? When we looked at global chemical companies, it was seen that half (27 companies) of the 55 large chemical companies explored, were beating their peers and could be classified as either ‘accelerating’ or ‘advancing’ (figure 8).5 On the other hand, 28 companies were either ‘steady,’ ‘lagging,’ or ‘derailing.’ This indicates that more than half of all large chemical companies in the analysis have substantial room for improvement relative to their peers. When we dug deeper, an interesting finding emerged. It was clear that the majority of chemical companies that fell in either the ‘accelerating’ or ‘advancing’ categories were smaller in size (up to $7 billion in annual revenues), whereas the majority of very large companies (with revenues of more than $15 billion) were predominantly classed as ‘lagging’ or ‘derailing’.
5 Louis et al. (2016), ‘Accelerating performance in the chemicals industry’, Heidrick & Struggles
14 | Accelerating Organizational Performance in the Arabian Gulf Chemical Industry
When viewing this data by region (figure 9), 63% of Asian and Middle Eastern chemical companies fall within either the ‘accelerating’ (18%) or ‘advancing’ (45%) categories. However, the sample from APAC and the ME was the smallest (11 companies out of 55 companies) so we need to be cautious to draw concrete conclusions based on this. When compared to Europe, 45% of the chemicals companies fall within either the ‘accelerating’ (5%) or ‘advancing’ (40%) categories with 25% of companies that fall under the ‘steady’ category. In North America; 46% of companies were either ‘accelerating’ (13%) or ‘advancing’ (33%) with 46% of North American chemicals companies classified as ‘lagging’ (21%) or ‘derailing’ (25%). Who fared the best amongst all chemicals industry segments? 74% of specialty companies were either ‘accelerating’ (13%) or ‘advancing’ (61%). Conversely, 60% of the commodity chemical companies were classified as ‘derailing’. 75% of fertilizer and agricultural chemical companies were also ‘lagging’ or ‘derailing’. Industrial gases had an equal number of companies in either the ‘steady’ or ‘advancing’ categories. For diversified chemicals players, only 40% of them were in the ‘advancing’ category while 30% were ‘lagging’ and 10% were ‘derailing’.
Figure 8: A range of performance
Number of chemical companies 25 20 15 10 5 0
Accelerating
Advancing
Steady
Lagging
Derailing
Source: Heidrick & Struggles analysis of 55 global chemicals companies, based on 2010-16 performance
Figure 9: Accelerating/ Advancing Chemical Companies by Region
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Asia & Middle East
Europe
North America
Source: Heidrick & Struggles analysis of 55 chemicals companies, based on 2010-2016 performance
Accelerating Organizational Performance in the Arabian Gulf Chemical Industry | 15
Conclusion The companies included in our GCC research, on average, appear
However, it seems clear from our findings that there are three major
to be advancing (at the lower band of the advancing stage).
areas that need intentional work and development. These include
Does this mean that there is nothing to be done? Not precisely.
‘ideas adoption’ (including the feeling of being able to ‘fail fast’ with
Companies that are ‘accelerating’, still need an agenda in place to
confidence), the ability to challenge and encouragement to speak
ensure this can be maintained. Their strengths (accelerating and
up (‘straight talking’) and a larger theme surrounding the ability to
advancing drive factors) need to be amplified and the weaknesses
attract and manage talent (‘rewarding impact’, ‘developing others’,
(lagging and derailing) need to be built on and maintained. It also
‘best people in critical roles’ and ‘talent magnet’).
must be noted that there are large differences in the data amongst the companies so our conclusions should be viewed with caution.
‘Ideas Adoption’ and ‘Straight Talking’
There are, however, themes that do exist that will be discussed below.
Within the GCC companies researched, it is evident that more focus could be placed on ideas adoption. It is important to push
Our data shows that there are two standout energizers that are
the rate at which good ideas spread across the organization such
accelerating both from an organizational and individual context.
as by establishing the systems, processes and culture that enable
These are ‘purpose’ and ‘winning teams’. This is good news as
ideas to be scaled quickly.
it highlights the comradery and motivation these individuals do have. ‘Purpose’ refers to connectedness and a shared sense of
Producers in this region must be proactive around adopting new
meaning. Purpose is the crucial means to creating a corporate
ways of doing things given the current shifts. One way to do this
culture of integrity which is vital to business success. When we
might be by strengthening various capabilities, for example, in
view ‘winning teams’ the sense of power (including shared values)
sales and marketing or supply chain management. In addition,
is something that seems to exist in abundance amongst GCC
more could be done to increase proactivity concerning new ideas
companies.
in order to capture their full value of products.
6 Kanter, R. (2006) ‘Innovation: The classic traps,’ Harvard Business Review, hbr.org
16 | Accelerating Organizational Performance in the Arabian Gulf Chemical Industry
Giving individuals at all levels the freedom to discuss obstacles and
Rewarding employees fairly relates to both financial and non-
suggest ways for improvement, can lead to a variety of new ideas
financial incentives. Aon conducted a study of more than 60
and innovation. The ability to communicate and receive difficult
US-based petroleum-related companies (with over 140,000
messages, including building the skills to repair relationships,
US employees) during the fourth quarter of 2016 to capture
cannot be underestimated. Teams that are assembled without
compensation trends for the industry.8 Fluctuations in global
attention to interpersonal skills but primarily focused on the
and domestic benchmark commodity prices meant that although
technical components; may mistakenly assume that ideas will
companies did not resort to reducing base salaries in 2016, 44%
speak6. If tasks are prioritized over relationships, key opportunities
of firms reported a salary freeze during this period. Luckily, most
to enhance the team interaction may be missed. This is
companies (94%) did not report plans to freeze base salaries in
necessary to turn undeveloped concepts into useful ideas. It takes
2017. A similar compensation trend is likely to be true in the GCC,
time to build trust and interplay between people that will spark
given the Chemical and Petrochemical sectors as a whole.
strong ideas. This is particularly true when it comes to comfort speaking up, straight talking and ‘challenging’.
More focus needs to be placed on other ways rather than purely financial incentives to appropriately reward employees. Putting
Attracting and Managing Talent
the best people in ‘big’ jobs is one way to do this and also sends positive signals to the market about how serious your organization
Although most organizations recognize the competitive advantage
is. When organizations truly understand their people it increases
of human capital, many of the talent practices their organizations
motivation and engagement.
use are outdated and designed for predictable environments. However, given our VUCA world, which is exaggerated in the
Understanding your employees, including a view of where your
Chemical and Petrochemical space, talent has to be more nimble
human resources reside, how effective they are and how they are
than ever.
utilized, should not be underestimated. This means developing an approach to centrally understand resources so they can be
Attracting effective talent at the outset is critical, however,
quickly deployed and used for the best opportunities. At Infosys,
Chemical and Petrochemical companies in the GCC region have
budgets are adjusted on a rolling four quarter basis. Infosys prides
been known to have a shortage of both qualified graduates and
itself on being able to reallocate resources exceptionally quickly.
experienced candidates for promotion in the workforce. When we
Business units highlight when they do not need as many resources
view chemical engineers in the next seven years, Saudi Arabia
as have been allocated and might even call the corporate planning
is currently expected to train at most around 3,000 chemical
department to return some resources they could not support.9
engineers. Germany on the other hand will train around 10,0007. This is mismatched with Saudi Arabia’s ambition to build around
Overall, throughout the report, a few key ideas have been
15 million tons of new capacity, while Germany expects to build
discussed and a number of themes emerge. Companies viewed
1.5 million tons over the same time period. Investing and training
in our GCC research have many areas to be proud of, including
new talent is something that could benefit the industry in the GCC
a strong sense of purpose along and extremely output oriented
region substantially. If training is not taken seriously both from the
(‘winning’) teams. Areas that can be improved very much relate
outset and after joining, this could limit not only the organizations
to ‘winning capabilities’; specifically, the need to attract, manage
ability to grow but also the industry in the region as a whole.
and develop talent effectively. Ideas adoption and challenging others are further areas that can be improved within this set of companies. Acting on these key themes to really accelerate performance will be key moving forwards, particularly given the increasing global competition.
7 Budde, F. et al (2014) ‘When gas gets tight: Next steps for the Middle East petrochemical industry’, https://www.mckinsey.com/industries/oil-and-gas/our-insights/when-gas-gets-tight-
9 Price, C. and Toye, S. (2017) “Accelerating Performance: How Organizations can Mobilize,
next-steps-for-the-middle-east-petrochemical-industry
Execute and Transform with Agility”, Wiley
Accelerating Organizational Performance in the Arabian Gulf Chemical Industry | 17
Acknowledgments We are delighted to be working with GPCA and would like to thank all the companies that have participated in our research. Without the valuable input from high-level executives in the GCC petrochemical and chemical industry, this survey could not have been carried out successfully. Thank you! »» Saudi Aramco »» Borouge »» Equate »» Farabi »» ADNOC Fertilizers »» GPIC »» NATPET »» QAFCO »» SABIC »» Sahara »» Saudi Chevron »» Sipchem »» Tasnee
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Disclaimer The data, analysis and other information contained in this report is of a general nature and for informational purposes only and is not intended to provide any business, finance and investment advice. Nor does it address the circumstances of any particular individual or entity. Whilst reasonable efforts were made as we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. GPCA and Heidrick & Struggles make no warranties and assume no liability or responsibility for any inaccuracy, effort, or for any loss or damage in regards with or attributed to any action or decision taken as a result of using information for this report. All rights of the publication shall be reserved to GPCA and Heidrick & Struggles, including the right to publish it by press or other communication, translate, include in database, make changes, transform and process via any kind of use. Full reproduction, copying or transmission of information from the report is not permitted without GPCA’s or Heidrick & Struggles’ written permission; however, the information may be used for educational and non-commercial purposes provided that GPCA and Heidrick & Struggles are fully acknowledged as the copyright holders.
About Heidrick & Struggles Heidrick & Struggles has more than 60 years’ experience building strong leadership teams. Our consulting experts operate from principal business centers in North America, Latin America, Europe, the Middle East, Africa, and Asia Pacific. We work with our clients to build their organizations, teams, and individual leaders to reach peak performance. No organization wants to be left behind by the competition. The need for speed is driven by external factors, but the capacity to accelerate when necessary is driven internally. An organization’s success depends on the speed with which it can forecast changing conditions and adopt strategies to stay ahead of the pack. We work with our clients to build their “capacity for pace” at all levels. Our multiyear research effort has identified the methods that top organizations use to improve themselves and their teams, leaders, and strategies. The key? Learning to Mobilize, Execute, and Transform with Agility.
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Accelerating Organizational Performance in the Arabian Gulf Petrochemical Industry | 21
The Gulf Petrochemicals and Chemicals Association (GPCA) represents the downstream hydrocarbon industry in the Arabian Gulf. Established in 2006, the association voices the common interests of more than 250 member companies from the chemical and allied industries, accounting for over 95% of chemical output by volume in the Gulf region. The industry makes up the second largest manufacturing sector in the region, producing over US$ 108 billionâ&#x20AC;&#x2122;s worth of products a year. The association supports the regionâ&#x20AC;&#x2122;s petrochemical and chemical industry through advocacy, networking and thought leadership initiatives that help member companies to connect, to share and advance knowledge, to contribute to international dialogue, and to become prime influencers in shaping the future of the global petrochemicals industry. Committed to providing a regional platform for stakeholders from across the industry, the GPCA manages six working committees - Plastics, Supply Chain, Fertilizers, International Trade, Research and Innovation and Responsible Care - and organizes six world-class events each year. The association also publishes an annual report, regular newsletters and reports. For more information, please visit www.gpca.org.ae
Gulf Petrochemicals & Chemicals Association (GPCA) PO Box 123055 1601, 1602 Vision Tower, Business Bay Dubai, United Arab Emirates T +971 4 451 0666 F +971 4 451 0777 Email: info@gpca.org.ae