Performance Management for the Oil, Gas, and Process Industries

A Systems Approach

Robert Bruce Hey

• Publisher: Gulf Professional Publishing
• Year: 2017
• Print ISBN:
  9780128104460
• eBook ISBN:
  9780128104477
• Topic: Design
• Subtopic: Industrial Design

Performance Management for the Oil, Gas, and Process Industries: A Systems Approach is a practical guide on the business cycle and techniques to undertake step, episodic, and breakthrough improvement in performance to optimize operating costs. Like many industries, the oil, gas, and process industries are coming under increasing pressure to cut costs due to ongoing construction of larger, more integrated units, as well as the application of increasingly stringent environmental policies. Focusing on the 'value adder' or 'revenue generator' core system and the company direction statement, this book describes a systems approach which assures significant sustainable improvements in the business and operational performance specific to the oil, gas, and process industries. The book will enable the reader to: utilize best practice principles of good governance for long term performance enhancement; identify the most significant performance indicators for overall business improvement; apply strategies to ensure that targets are met in agreed upon time frames. - Describes a systems approach which assures significant sustainable improvements in the business and operational performance specific to the oil, gas, and process industries - Helps readers set appropriate and realistic short-term/ long-term targets with a pre-built facility health checker - Elucidates the relationship between PSM, OHS, and Asset Integrity with an increased emphasis on behavior-based safety - Discusses specific oil and gas industry issues and examples such as refinery and gas plant performance initiatives and hydrocarbon accounting

Chapter 1

What is Performance Management?

Abstract

Performance management is a structured process that has been designed for the improvement of a company. Specific improvements could be continual (possibly in small steps), or they could be in a number of big steps.

Managing performance to stay competitive is crucial to the success of the Company. For real improvement, the Company needs to improve at a higher rate than the competition. Thus “big” improvement steps are required.

The general business process entails setting objectives, planning and executing the work, reviewing and closing the loop, and back to adjusting/setting objectives. Monitoring of performance is generally achieved with the use of scorecards.

The improvement process entails comparing and assessing the current situation, adjusting the direction statement, developing implementation action plans, implementing processes and practices, and finally closing the loop by comparison and assessment of the new current situation. Eventually, this leads to world-class performance (pacesetter status).

Keywords

Comparative; Performance analysis; Improvement process; Key Performance Indicators; Management Systems; Performance management; Systems approach

1.1. Introduction

Quote: “The only constant is change.”

I regard performance improvement as a natural part of the evolution of man. Man harnessed fire and invented the wheel in the early stages of his development, and these led to leaps of progress that have ensured man’s continuing advancement.

Similarly, management theories have evolved with time. For example, Demming, Juran, and others initiated various structured approaches for product quality control after World War 2, with a focus on statistical process control and continuous improvement. This culminated in the establishment of International Standards Organization (ISO) 9001 for “product” Quality Management Systems (QMS) in 1987.

In parallel, other management improvement concepts were developing, including Business Process Reengineering, where processes were redesigned, and which involved step or episodic improvement. In addition, Business Process Mapping evolved into Business Process Management, and the Balanced Scorecard helped to align business activities with strategy, thus focusing on top Performance Indicators.

The parallel approach to performance management is discussed further in Box 1.1.

Box 1.1 Discussion on Parallel Approaches to Performance Management

The disparate and, often disconnected activities that can be described as ‘quality management’ or ‘total quality management’ have often created confusion among those to whom quality programs have been ‘done’. In many cases, a collection of techniques has been presented to an unsuspecting workforce in the form of ‘quality training’. Often, the training was entirely unconnected to the work that those being trained were engaged in, or worse, they thought that it was! In other cases, one particular aspect has been focused on, say ‘top management commitment’ – with the consequence that a ‘leadership’ program has been prescribed for unconvinced and uncommitted ‘top management’. ‘Communication’ followed close behind, when these other panaceas failed. ‘Empowerment’ became a focus as the missing ingredient, particularly when the issues of service quality rather than product quality came into vogue.

In parallel, there were the various ‘gurus’, all of whom had their own approach to ‘making it all happen’. Deming had his 14 points, whilst Crosby had his 14 step procedure. Peters went ‘in search of excellence’ while Camp introduced ‘benchmarking’, and Hammer developed ‘business process reengineering’. Many of these approaches were pursued with vigor reminiscent of the Crusades – and in some cases with an equal proportion of bigotry, with one group of followers deriding and belittling the work and contribution of the other or others.

From the paper “Knowledge Creation and Advancement of Organizational Excellence.” Authored by Rick L. Edgeman.¹

Many of these concepts started to merge with the introduction of ISO 9001:2000, which applied a Systems approach to managing the company. Various ISO standards were subsequently established for Environmental Management, Health and Safety Management, Asset Management, Energy Management, etc., using the same approach as ISO 9001:2000. Company internal audits, which have traditionally focused solely on the finances of the company, changed to risk-based auditing (which includes a Systems approach).

The Systems approach focuses on the Core System, which is the “value adder” and “revenue generator” of the business, with support from Strategic and Support Systems.

It is important to note here that, for our purposes, Processes are subordinate to Systems. The reasons for this are explained in Chapter 4, Management Systems Determination and Requirements (some businesses use the word “process” as a generic term to encompass all Systems and Processes).

The Systems approach, using the concept of a Business Unit, is evergreen and embeds both risk and opportunity management and improvements (step and continuous). Fig. 1.1 shows the Evolution of Performance Management and the merging of a number of theories.

Figure 1.1 The Evolution of Performance Management.

The approach described in this book is not necessarily the only approach to performance management. Nevertheless, whichever route is taken, it should always focus on long-term value addition in a safe environment, within a formal control framework, and have a structured mechanism for continual improvement.

Enthusiasm...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Dedication
• Preface
• Acknowledgments
• Chapter 1. What is Performance Management?
• Part 1. Systems
• Part 2. Governance and Performance
• Part 3. Risk and Performance
• Part 4. Performance Indicator Selection
• Part 5. Asset Performance Management
• Part 6. Benchmarking
• Part 7. Assessment, Strategies, and Reporting
• Part 8. Business Oversight
• Part 9. Oil and Gas Issues
• Part 10. Conclusion
• Appendix A. Glossary of Terms
• Appendix B. KPIs
• Appendix C. Oil and Gas Rules of Thumb
• Appendix D. Operational Performance Health Checker Example
• Index