Designing a Successful Assurance Program Relative to Your Corporate Culture – Assurance Series #3

by James Handschy, Guest Contributor

All companies want predictable results. The exact definition of predictability may differ slightly, but accurately predicting E&P results is universally considered a positive business attribute. Risk and probabilistic volume analysis tools have greatly improved our ability to consistently evaluate and compare exploration opportunities. That said, no matter how robust the tools, they often suffer limitations from:

  1. Incomplete and/or highly uncertain input data,
  2. Limited experience with the specific geology of a new opportunity,
  3. A short timeframe to do the analyses,
  4. The need to make assumptions about some geologic and engineering parameters.

One of the best ways to minimize the negative impacts of these limitations is through an assurance process that leverages broader knowledge and experience than any individual explorationist or subsurface team has. Assurance processes generally fall into three categories: A) tool based, B) corporate team based, and C) local team based.

corporate culture and assurance process

My work in three different corporate cultures and with more than 40 partner companies taught me that assurance programs can succeed or fail in any company. What works well in one company may not work well in another company. Even within the same company, assurance processes need to evolve when the corporate culture changes. Success depends on how well the assurance process is embraced by all levels in the company which, in turn, is a function of how well it fits into the culture. Most corporate culture assessments published in the Harvard Business Review can be distilled into a simple 4-quadrant diagram like the one shown in Figure 1.

Some E&P companies clearly map into the Process Oriented quadrant. However, many E&P companies map toward the middle of the diagram. They are dominated by one culture but have traits of one or more adjacent cultures. Almost all companies believe that their culture differentiates them from their competitors and gives them a competitive advantage.

Choosing or designing an effective assurance program means understanding what will work best in your corporate culture. People and Creativity oriented cultures thrive with bottom-up, employee driven processes while Process and Market oriented cultures work fine with top-down, management driven processes. It is also important to understand how specific attributes of your corporate culture (e.g., performance metrics, business unit empowerment, etc.) might present impediments to one type of assurance process relative to another.

Because the same set of eyes does all the assurance work, corporate or head office level assurance teams (often referred to as centralized assurance teams) are the easiest to implement and often the most comfortable for senior executives to work with. They are generally successful in Process and Market oriented cultures with the main difference being that the assurance team needs to be more agile and quick to evaluate new opportunities in a Market Oriented culture. Head office assurance teams can also work well in People and Creativity oriented cultures. However, in those cultures, the assurance team needs to take on more of a mentoring and training role instead of a policing role. Asking “why not” is just as important as asking “why.” In People and Creativity cultures the head office assurance team needs to be humbler and more collaborative. They should view themselves as peers with broader experience instead or experts or authorities.

Local or business unit specific assurance teams are often easier to implement in People and Creativity oriented cultures. They empower those local organizations and their people. However, they often don’t benefit from the breadth of experience a head office team brings and it is much harder to ensure truly consistent evaluations between different local teams. In People and Creativity cultures it is often a best practice to have a local assurance team working in conjunction with a corporate assurance team. Recent improvements in remote collaboration tools make this much easier today than it was a few years ago.

Smaller companies are more likely to fall into the People and Creativity oriented quadrants. In these smaller companies, or even mid-sized companies with only one E&P office location, the corporate and local teams essentially become one and the same. In these situations, it may be important to ask the question “is our team’s experience as diverse as it needs to be?” If the answer is “no” or “we’re not sure,” it might be worthwhile resourcing some broader experience from consultants or partners to fill the niche that a corporate team would provide in a large company.

Tools and assurance

Regardless of the human side of the assurance process you choose, tools should play a very important role. At a minimum the tools should provide a diverse set of questions that need to be answered in every evaluation and generate consistent documentation across all projects. More elaborate tools linked to global databases and leveraging big data analysis techniques can be very powerful for risk, volumetrics, and value assessments. While these more complicated tools often require more human assurance oversight, they do not necessarily mean that the overall assurance process needs to be more time consuming. If the assurance teams know how to use the complex tools well, the tools can help streamline the assurance process.

assurance in partnerships with different corporate cultures

In partnerships it is highly likely the partner companies will have different corporate cultures and different assurance processes. I have participated in many multi-company assurance reviews, some required by one of the partner companies and some required by the host government. Based on my experiences, the best practice in these situations is for each company to follow their own internal evaluation and assurance processes, develop clear documentation about the project and its uncertainties, and go into the joint assurance meetings with the objective of using the different partner perspectives to develop a better overall understanding of the project, its risks, and its uncertainties.

assurance team members skills

Finally, a few comments about the assurance team members. Obviously, the personality traits of the assurance team members need to fit with the goals and the corporate culture the team is designed for. For example, you might want to choose more decisive personalities for a corporate assurance team in a Process Oriented culture and gentler, collaborative, and mentoring personalities for a corporate assurance team in People or Creativity oriented cultures. It is also important to make sure that the team members’ individual performance metrics reflect their service time on the team and reinforce the behaviors you want them to exemplify while on the team.

Best wishes for future success!

about the author

James W. (Jim) Handschy started his career in the reservoir engineering department at the original El Paso Natural Gas Company. After getting a PhD in geology and geophysics from Rice University he worked for Shell Oil Company in both E&P and Research, where he started his work in risk analysis, volumetric analysis, and assurance. In 1998 Jim joined Phillips Petroleum, later ConocoPhillips, where he served as global chief geologist for 12 years with oversight of subsurface assurance processes around the world. Jim also spent five years as an E&P general manager where he was a customer of the ConocoPhillips assurance teams and processes.