Leadership and Lean Six Sigma at Chevron Europe

Eric Sirgo, General Manager of Operations at Chevron Europe, joins Process Excellence Network to talk about their Six Sigma Program, and how they engage with their leadership teams. Editor's Note: This is a transcript of a podcast that we ran earlier this year. It has been edited in some places for readability. PEX Network: I understand that Chevron has been using Lean Six Sigma for many years in its upstream division. What's the history of that program? E Sirgo: You're right. It started in about 2000. We started with our Indonesian operations. There was a group there that took on the Six Sigma practice and trained a number of Indonesian nationals in using Six Sigma, and they became black belts, and they started some projects locally. Then it picked up in our California Operations. In Western California we have a business unit, called San Joaquin Valley, and that program started there, and I'd say it was like most programs: it started at grass roots and it started slowly, and it moved, for about four years, doing small projects in that business unit, and then around 2006 they were starting to get a lot of attention on the progress they were making with the savings and efficiency gains, and we have a global upstream standards organization that picked up on the practice and decided to make it a global standard. That didn't necessarily guarantee that it would go worldwide overnight. It did say that the company endorsed it as a preferred method for efficiency gains and Leaning out processes, but I think where it really got going fast was the Vice President from the California Operations went to the Gulf of Mexico. His name is Warner Williams, and he has a lot of passion around this particular topic, and he and the President of North America, Gary Luquette, came to the conclusion it was something that North America needed to do, and so it went from a grass roots build over several years, to more of a top down program. Since 2008 North America has really blossomed, and has really spread Lean Sigma throughout the North America operations. Globally, we continue to have business units make progress in picking up the practices and the approach, and we probably have another three or four business units that now have pretty active Lean Sigma programs. PEX Network: So it started as something bubbling up internationally, and then came back to North America? E Sirgo: Yes, exactly. It started at a grass roots level with individuals who had a lot of passion around the subject, and they carried the banner for a while. Steve Turnipseed, in particular, just picked up the flag, and began pushing and pushing. I can remember going to the first training that Steve offered at the global level. He was

coming to the staff, the individuals who would push it out, and trying to sell us on the process, we were all extremely skeptical, and Steve was just so passionate about it. And that passion is pretty infectious. He's really been a big catalyst in the grass roots movement, but I tell you, it does help when a President or a Vice President says, this is something I want to do, and makes the metrics very visible, makes the project successes very visible. That certainly puts an expectation for the organization to pick up and adopt. PEX Network: You work at Chevron Europe, and Lean Six Sigma is fairly new to your division, what's the background to your Lean Six Sigma implementation? E Sirgo: I've been in this job, coming up on two years, and the organization here has been at it about six years. Its been very much grass roots. I would say that the leadership, prior to me arriving, were supportive, but were not top down. They saw it as another tool in the toolbox, and said that if a project seems appropriate, then you apply the tools. If you want to use it or you want to get trained, youre free to do it and well pay for that, well reimburse you for that. Weve probably completed 20 plus projects here in all different departments, from IT to supply chain to HR to operations to asset development. But I wouldnt say its been a steam-rolling program; its been pretty slow and methodical. When I got here two years ago, we revamped the steering team, we re-chartered the team, we set some goals and weve been doing a lot more organizational development in the skills. I think thats beginning to get our queue up and beginning to get our knowledge up and were starting to get more projects through the pipeline. PEX Network: When you first started off with Lean Six Sigma in Chevron Europe, how did you build the expertise up internally? E Sirgo: Its been a couple of things. Id say its been very typical: its training, its consultants. Weve brought in consultants from the typical suppliers, like Accenture or IBM, who have supplied black belts and people who are very knowledgeable to help teams move projects along. And then weve done a lot of training of our employees. We have a significant number of white belts, green belts, champions that we begin to just keep building organizational capability and keep spreading the tools and the expertise. So its a combination of training and consultants. We recently hired our first black belt as a Chevron employee, which is unusual. If you take a step back, its not a career path in the company to be a black belt. We typically have career paths of drilling or reservoir engineering or geology, and having a black belt career path is a bit of an oddity in the company. And so we just recently hired our first individual as an employee, as a black belt, and were going to be working on what the career path would be for them, and were working with that with the global group. PEX Network: As youve been building up that competency, what kind of challenges have you been encountering along the way?

E Sirgo: We still have challenges every day. Change is something funny in a big organization; it does not come free and nor does it flow freely. And everything youd expect. Im too busy, I dont have time for this; this is nothing new, Ive seen it before. One thing youve got to remember is that a company like Chevron is built on the back of a highly technical and skilled workforce that are masters of geology, engineers, people who are experts in their field. Theyre very technical and savvy and experienced. And when you come to them and say I can do what youre doing with Lean Sigma and you could do it a lot better, theyre very, yes, yes, Ive seen this before, Ive done it before. So youve got a lot of what we call change management issues to convince people that if you apply these tools, you can make changes stick longer. And thats been one of our best selling points: we do have a smart workforce and we do a lot of improvements, but often they dont stick and they fade after that person maybe moves on. And Lean Sigma helps control the project; it helps create metrics that keep the improvements in place, but it also educates people on what the change is. And so thats been a big selling point for this workforce: we can make change stick with this set of tools. So, anyway, back to your question, all the very typical things: I m too busy, nothing new, Ive seen it before type attitudes. PEX Network: One of the things that come up often when I speak to practitioners is that that top down support really helps, particularly when people are too busy or theyve seen it all before. How does your leadership really take that active role in your Lean Six Sigma program? What kind of activities do they do to give you that support? E Sirgo: Thats been an area that weve been trying to improve since Ive arrived here: getting more leadership involvement and uptake. Id say our support organizations, in particular IT and supply chain, the leaders have been very active in pushing their organization to apply Lean Sigma to their projects. The operational area and the asset development area and maybe some of the other groups, drilling, have been less top down. My counterpart here, Dan Chudnov and myself, we have taken a much more active role in asking our teams to generate projects, do brainstorming, assign champions, get people trained and then setting some goals and some challenges to try to move people along this path, and I think thats going to help. And I think its great when its grass roots. I think there are a couple of challenges for grass roots. One, the organizations are so large that you cant really just expect things to catch fire without somebody pushing it along. I do think you need leadership to make these programs successful, and Ill give you another example. We operate in 180 countries around the world and we operate in a lot of different cultures. And many cultures that we operate in, grass roots is not how it works; top down is how it works. Thats how the culture has come up, and so you really need to adjust accordingly to the culture youre working in. I think in the US, grass roots

entrepreneurship is often rewarded, and so things do get recognized when people take the initiative. But when you want to institutionalize it, I think you do need to put a bit of strong leadership and top down drive on it. PEX Network: How do you keep different departments and business units on the same track? E Sirgo: Id say thats not quite as sophisticated yet as it could be here in Europe, in our European operations. But we have a quarterly Lean Sigma steering team meeting that we look at our metrics, we look at our training metrics and make sure were making progress on getting bugs trained. We look at our project queue and we look at how many projects we have active and are moving through the pipeline. I look at my project queue with my team directly probably at least once a month, maybe once every two months. We track savings. We have all the very typical metrics for guiding any sort of program or process through a company. And I think we could probably be a little more systematic in that we have a new managing director who has only been here about a month or two, and she and I have been talking about how to make things a little more systematic in this area. So I think we do have some room for improvement. In North America, it is fairly systematic now: there are very clear metrics, very clear expectations on peoples individual performance measurements and very clear goals on the score cards of the managers as well as the business unit. So were not quite as mature as they are, but were heading in that direction. PEX Network: I understand that you use the balance scorecard. Is that correct? E Sirgo: We have more scorecards than we know what to do with. Being a very technical and analytical business, we measure just about everything. For instance, in my operations, the very typical high-level things that we measure are environmental and safety performance, our production performance and then our cost performance. And then from there, those three topics, you can go down to dozens of metrics, depending on what were chasing. In particular, we look a lot at maintenance and how were doing on maintenance backlog and the amount of maintenance were liquidating. These things all offer themselves to Lean Sigma tools and processes, so when you say balanced, I just say weve got a lot of metrics and they lend themselves to these processes quite well. PEX Network: Speaking, a little more generally, one of the things that process excellence professionals always tell me is that theyll never be out of a job because processes are always changing and there are always ways to be eliminated. In your role, what role does process improvement play in helping you adapt to changes in the business operating environment? E Sirgo: Id say its huge. We do operate in a fairly dynamic business; things do change a lot. Post Macondo, even in the UK were dealing with many, many, many changes

around permitting, around how we conduct ourselves offshore, contingency plans. So the business changes very rapidly. But I guess to answer the question a little more specifically, some of the issues around improving processes or making them more efficient are that, number one, sometimes our changes just dont stick. Well look at a process, well analyze it, well make recommendations and then people say, okay, that was interesting, and they go back to how they were doing things. And they just dont stick, and we tend to revert back to the more entrenched method, and that would be one flag around process change. I think the other one is that often, either the process is owned by a champion or the effort to improve the process is owned by a champion. Were fairly mobile in Chevron; we move around quite a bit. And if that person leaves or moves on to a new assignment, then often the improvement goes with them and it doesnt become engrained or entrenched in the organization. So those are very atypical problems with process change and we see them all the time. Id say one other issue, Chevron were very much built on teams and consensus and sometimes process change doesnt sit well in a consensus environment, where everyone has got to agree to the change or everyone needs to support the change. I think managers need to step in and be a little more direct. When youve gotten to the prescribed method and you know theres value in it, sometimes you need to be a little more prescriptive about what you want to do. So reversion to the norm, champions walking away with the knowledge and the process or problems with consensus can all stand in the way of changing existing processes. PEX Network: You mentioned Macondo. Are there specific challenges this year that are really driving those changes that are playing a role in helping you prioritize what you need to focus on this year? E Sirgo: Absolutely. The post- Macondo world for the industry is very different. This was an event that was low probability, but very high impact and when it does occur, it does leave a very large ripple. And it has rippled across the world: just about every major base and every major government is asking more questions, requiring more due diligence. And for the most part, I think at Chevron were getting a lot of validation from the scrutiny thats coming from a lot of the different governments around the world that our process es were good and they were in good shape. So were not making a lot of changes to how we do our work; we are making a lot of changes about how we communicate what were doing to the regulatory bodies. Weve answered just hundreds of questions for permitting here in the UK for our deep-water exploration west of Shetland, and its just a much lengthier process.

And I think were having to come to the conclusion that we need to be working way farther in advance and we need to be much more open about what we do and what we are good at with the regulators. And I do think youre seeing much more partnering going on. The regulators here know a lot more about what we do than they used to do in the past, and I think thats a good thing. I think thats going to be a very positive outcome from the post- Macondo world. But in general, I think were just planning for lengthier lead times on getting things done. PEX Network: What do you see as some of the key process improvement challenges for the industry as a whole in the coming years? E Sirgo: It does go back to the three things I talked about, which were safety, production and cost. If you focus on safety, we talked about Macondo and post-Macondo world. Its a pretty never-ending effort for us to be focused on safety. And as you enter new countries or you enter new projects, youve got to bring that culture with you and youve got to be able to get a new organization moving in the direction. Ill give you an example: weve just leased approximately a million acres of land in Poland, and its a new country entry for us here in Europe and for Chevron. But thats a completely different culture: its a language barrier, theres the different governmental process. One of the areas in safety that were really concerned about is driving; Poland is not known for very safe driving. So were spending a lot of time just getting the workforce there up to standards on driving and driving safety. So thats just an example. I think on production, a lot of the worlds reserves and a lot of the oil that has been discovered, we know where it is, we know how much is left, but we cant figure out how to get it all out of the ground. And so theres a huge challenge around improving the recovery of oil out of the fields we already own. I have a field here I operate in the North Sea, called the Captain Field, and I believe were setting around 30% recovery of the original oil in place, which means theres 70% remaining and we havent quite figured out how to get that out. So I think theres a lot of opportunity in the fields we own to apply technology and process to try to move some more barrels. Cost is another challenge we face. If the price of oil runs up, the cost for us to do our business runs up along with it. A lot of people think we dont se e that increase in cost, but we do. And so were constantly looking at how we do our work to become more efficient, to make a better margin on the barrels that we do have on these older fields. So the challenges are endless and theyre in all facets of the business. I invite you to join as a member of the PEX Network Group http://tinyurl.com/3hwakem, you will have access to Key Leaders Globally, Events, Webinars, Presentations, Articles, Case Studies, Blog Discussions, White Papers, and Tools and Templates. To access this free content please take 2 minutes for a 1 time FREE registration at http://tiny.cc/tpkd0