Management Consulting

Management

Consulting

Briefing document

Client: Baker Hughes For this years’ Management Consulting Project, we are going to be advising Baker Hughes

(BH). BH is a leading energy technology company. BH designs, manufactures and services

transformative technologies to help take energy forward.

For more than a century, BH’s inventions have revolutionized energy. BH harnesses the power

of engineering, data, and science to redefine what's possible.

With operations in more than 120 countries, BH works in partnership with customers, wherever

they are, to deliver better outcomes. BH is proud that their people and businesses are part of

the fabric of the communities in which they work.

BH key values

BH’s people, planet, and principles value framework guide their responsibility to sustainable

operations and enable them to accomplish our business priorities. This framework has the

following elements:

People

• Increase diversity in leadership, our employee base, and our supply chain to reflect the

communities where we operate.

• Attract, equip, and empower the workforce of the future by investing in early leadership

development, supporting employee health and wellbeing, and creating opportunities for

the next generation of talent.

• Collaborate with organizations and on projects aligned with interests and needs of the

communities where we live and work around the globe.

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Planet

• Reduce Baker Hughes' environmental footprint by minimizing emissions and waste

each year.

• Partner with customers to help reduce their environmental footprint. • Invent

technologies and invest in a portfolio of low-carbon products and services.

Principles

• Make every day a Perfect HSE Day—a day with no injuries, accidents, or harm to the

environment.

• Do the right thing always, delivering the best quality products, services, processes, and

technologies in the industry.

• Maintain ethical practices, as well as supply chains through a risk-mitigation

management approach across our global operations to ensure we are rigorous in

safeguarding human rights.

Market position

BH’s orders for the third quarter of 2019 were $7.8 billion, up 35% year-over-year and up 19%

sequentially. This is the highest orders quarter BH has seen since the second quarter of 2015.

Revenue for the quarter was $5.9 billion, down 2% sequentially. Year-over-year revenue was up

4%, driven by Oilfield Equipment and Oilfield Services, offset by declines in Turbomachinery

and Digital Solutions.

Operating income for the quarter was $297 million, which is up 10% sequentially and 5%

yearover-year. Adjusted operating income was $422 million, which excludes $125 million of

restructuring, separation and other charges. Separation charges in the quarter were $54 million.

Adjusted operating income was up 17% sequentially and up 12% year-over-year. The adjusted

operating income rate for the quarter was 7.2%, up 120 basis points sequentially and up 50

basis points year-over-year. Operating profit was $14 million, up $8 million year-over-year

Current situation: Health and Safety performance

In order to compete in the marketplace, BH deliberately focuses on continuous learning and

improvement. An area that requires permanent attention is BH’s Health and Safety

performance. The overall aim of this consulting project is to help BH improve its Health and

Safety performance. Health and Safety is not only a key BH’s value; it is also a key expectation

of their customers.

BH defines its Health and Safety performance as no injuries and work-related illnesses. BH

assesses its Health, Safety and Environmental (HSE) efforts with a specific measure known as

the ‘Perfect HSE Day’ metric. BH celebrates every workday they complete with no injuries,

accidents or harm to the environment. They have achieved 153 Perfect HSE Days in 2019.

They have also improved in all HSE performance metrics, including an employee injury rate of

less than half of our rate from just five years ago.

Multiple factors influence BH’s Health and Safety performance. However, BH believes that

leadership development is the most critical factor in continuing their cultural journey, centred on

zero incidents as an expectation, and not a vision or goal. To continuously improve their leaders’

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development, BH has designed and implemented what it is known as the ‘HSE Leadership

Foundation Learning Series’. This leadership development programme has evolved over the

last few years and it is now a cornerstone for how BH continues to build leadership skills.

Across the globe, 3,331 leaders complete the HSE Leadership Foundation series facilitated by

165 trained HSE professionals.

The HSE Leadership Foundation Learning Series is a two-day interactive training and education

programme designed to raise awareness, create alignment and gain commitment to HSE

principles among our people leaders. Leaders have the chance to learn from each other what

works, and the activities equip them with the knowledge and tools to ensure HSE is part of their

day-to-day focus and activities.

Leadership engagements with employees have proven to be the single most effective means to

enhance BH’s HSE culture and performance. By engaging with employees one-on-one or in

groups, leaders can have candid conversations with their teams to explore and address

challenges and opportunities for continual improvement. The more employees feel heard and

are engaged, the more equipped and empowered they are to identify and proactively reduce

everyday HSE risks. During 2018, there were more than 39,000 leader engagements across the

company.

No effort to improve HSE performance can be completed without a focus on the human

element. Human performance is about what people do and how they do it. It is informed by a

company’s culture and applies not only to HSE, but also to every choice BH makes. What

people do is influenced by a range of process, social, organizational and psychological factors.

BH has developed strategies to reduce human error through increased awareness and

enhanced process design, building on the following efforts over the last few years.

BH is proud of its tradition of safety leadership and committed to sharing their successful

innovations broadly throughout its industry. BH received more than 55 industry recognitions in

2018, including the Centre for Offshore Safety’s coveted Safety Leadership Award.

BH’s key challenge and expectations

BH’s Health and Safety performance is linked to its operational performance. Although, BH has

demonstrated progress, there is still room for improvement. For BH, a key improvement action

is to update its HSE Leadership Foundations Learning series to enhance their leaders’

knowledge and skills.

Currently, there is an area of knowledge that BH believes can transform the way its leaders

work and significantly improve its HSE performance. BH would like to initiate a mindset change

in its leaders, raising their awareness of key complexity thinking ideas (applied to management).

BH recognises that large organisations are ‘complex systems’ (please go to http://bit.ly/2uhHtIi

for further information on this concept) and providing a healthy and safe environment for their

employees may require different managerial approaches to the ones currently used.

Complexity thinking is providing a set of conceptual tools that could help in the process of

shifting the way in which BH leaders think about safety. However, BH does not know how to

best translate these complexity thinking ideas into the practice of management and leadership.

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More specifically, BH would like Cranfield’s students to help them understand what specific

training material could be designed to introduce their leaders to complexity thinking ideas. The

new training material will be incorporated to BH’s HSE Leadership Foundation Learning series.

BH vision is to develop a ‘complexity thinking’ mindset in their leaders.

BH leaders and their work

To give you an idea of what BH leaders do and how they do it, here is a brief description of the

way of working in a BH manufacturing plant located in Europe responsible for the design and

assembly of large gas turbines.

In this particular manufacturing plant, business objectives are achieved through a broad range of professional groups:

Group Key functions Product engineer Design products, develops technical drawings used for assembly

Manufacturing engineer Develops an assembly process and provides tools required

Mechatronic and

automation engineers Design, select, program robots used during the manufacturing process

Plant management Oversee overall performance of the plant at different levels of the organisation. From manufacturing cell leader to overall plant performance.

HSE Ensures compliance with procedures, identifies how people can get injured, introduces controls.

HR Manages recruitment of all roles, promotion, leadership development.

Supply chain Manage the flow of goods, selects suppliers, sources raw materials, oversees quality.

Quality Responsible for quality planning, assurance, control and improvement activities.

Competency

management

Manage competencies of the shop floor employees, provides or arranges training.

Sales Interact with customers, co-determine the demand for products.

Shop floor operators Responsible for assembly which includes using heavy tools, lifting heavy equipment, using tools generating heat and gas.

Corporate

representatives Responsible for aligning local processes and policies with the corporate

direction in order to standardise the efforts and optimise use of resources.

Maintenance technicians

Responsible for maintenance and repairs of machinery and equipment.

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Machinists Responsible for programming and operating machines used for creating parts by e.g. mechanical abrasion.

Facilities Responsible for building management, from cleaning to leasing matters.

Finance Monitoring costs and revenue. Co-determines budgets.

IT Responsible for a range of aspects related to managing information and

technology, from issuing laptops, to managing databases to managing

servers. Contractors and

suppliers Represent their companies. They serve different roles and are present on

site for various durations. It may range from specialist engineering

consultancy, to temporary workforce, to machine maintenance, to builders

etc. They work at all level of the hierarchy.

Typical interior of a BH gas turbines manufacturing plant

Most of these professional groups are managed through siloed hierarchies even though all of

them dynamically interact with each other at different levels depending on their needs and

circumstances.

An oversimplified example of such dynamic may include installing a new machine on the shop

floor. In order to install a new machine, supply chain needs to work with mechatronic engineers

to determine features and requirements and then work with finance and site management to

determine the budget for capital expenditure. Facilities people need to be consulted to ensure

space in the building. HSE reviews various risks related to transportation, installation and

operation. They realise that there are no guards preventing injury and the space around the

machine would constrain movement. Therefore, they need to revisit the requirements jointly with

engineers and work with facilities to create more space. Operators and technicians have to be

trained how to operate the new machine relying on competency managers who have to design

new training jointly with engineers, HSE, suppliers and operators. Quality co-determines the

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impact of the new machine on the defect rate of the product and introduces changes to the

quality assurance process which also needs to be taught to the quality assurers. Manufacturing

engineers need to update their procedures which are stored in the databases managed by IT.

Sales talks about the new capability to the customers and increase the demand for the product

which impacts HR that needs to recruit more workforce and supervision which in turn has

impact of facilities as the canteen is now overcrowded etc.

BH recognizes that popular management frameworks are static, linear and do not account for

non-linear dynamics changing over time. BH would like to find an easy way to teach leaders

about complex systems and practical implications of complexity thinking – in other words, taking

into consideration complexity thinking ideas, what could they do differently?

Consulting project

BH expects to receive a set of recommendations about new training material that could be

introduced in its HSE leadership development programme to explain its leaders how they can

apply complexity thinking ideas to their work.

To deliver this objective, you will…

1. Need to familiarise yourselves with the foundations of ‘accidents prevention’. Here you

have a set of documents recommended by BH that you can include in your knowledge

review of ‘accidents prevention’:

• http://bit.ly/2RHHSgI

• https://www.skybrary.aero/bookshelf/books/2437.pdf

• http://bit.ly/2tEdjyS

• https://www.hse.gov.uk/guidance/index.htm)

2. Need to understand the key ideas associated with complexity thinking. These ideas are:

• What is Non-linearity?

• What is Emergence?

• What is Self-organisation?

• What is Performance variability?

• What is Equivalence?

• What are Feedback loops?

• What are Constraints?

• …You could also focus on another concept considered key within Complexity

thinking

Here you have a couple of documents recommended by Cranfield faculty that you can

use to begin your knowledge review of ‘complexity thinking’:

• Reeves et al (2020) Taming complexity, Harvard Business Review, available at:

https://hbr.org/2020/01/taming-complexity

• Merali and Allen (2011) Complexity and systems thinking, available at:

https://www.researchgate.net/publication/292653679_Complexity_and_systems

_thinking

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3. Pick ONE of these key complexity ideas and propose a set of recommendations for new

training material (i.e., ready-to-use slides, activities, debates, etc.) that can help translate

what this idea/concept means into simple, engaging, story-based explanations that

leaders can understand so they can improve their work and prevent accidents.

Remember, the overall aim of this project is to assist BH and its leaders in the

development of a ‘complexity thinking’ mindset.

Your typical target audience is a broad group of leaders, typically with an engineering degree,

responsible for managing manufacturing plants and drilling services. They have never heard of

systems and complexity. They are very practical, action oriented and time poor. They are likely

to quickly disengage if the content is academic, theoretical, conceptual or delivered using terms

they don’t understand.

Key deliverables

Further progress requires a new way of thinking. As a company, BH would like to continue being

a market leader in how it thinks about leadership, operations and safety. Although complexity

ideas have been around since 1960s, even the most progressive companies struggle with

explaining its premises to its people in a practical fashion. The results of this project will help BH

to refresh its HSE Leadership Training Series accounting for key characteristics of complexity

thinking.

Based on your consulting work, BH expects the following outputs or deliverables:

1. Team Presentation: Professionally designed presentation, which will be presented by the

consulting team on the last teaching day of the module. This presentation should last no

more than 10 minutes. The presentation needs to cover the following:

• Information about how the consulting project:

- How did you understand the BH challenge?

- What process/method have you followed to address their challenge?

- What key insights have you found based on the data collected?

- What recommendations do you propose? What training material will you

recommend about the selected complexity thinking concept for Baker

Hughes?

• This presentation should be accompanied by a professionally designed summary

report of no longer than 2500 words (excluding references and appendix) in which

the team fully explains the information contained in its PowerPoint presentation so

BH can better understand the knowledge captured in it.

2. A critical self-reflective essay reflecting on your management consulting learnings before,

during and right after the consulting project. Please see blackboard for further information

about this assignment. This essay will only be reviewed by Cranfield faculty.