Due to the huge cost of finding and developing oil and gas deposits and the increasing pressure to compete in global markets, the oil industry has seen a number of high profile mega-mergers recently, including Exxon-Mobil and Chevron-Texaco. The combination of BP, Amoco, ARCO, and Burmah Castrol has created a global enterprise capable of competing at this level--known in the oil industry as "Super-Major."

Structurally, BP is divided into four business streams: Upstream (oil and gas exploration and production), Chemicals, Downstream (retail marketing and refining), and Gas and Power. This translates into approximately 150 business units that support each other via "peer groups," which are like-kind business units organized on a semi-formal basis to share knowledge and allocate resources. For example, in the Refining Peer Group, refinery leaders in Belgium participate with their counterparts in the U.K. and the U.S. to exchange information and best practices. These peer groups meet periodically and exchange information throughout the year using shared Web sites and other electronic tools.

When the BP-Amoco merger was approved, the new entity established a group called Global Property Management & Services (GPM&S) to manage a wide variety of corporate and facility services, including aviation safety, group travel, global facility management, real estate, design and construction, and business services. The new group's first challenge was determining how to best integrate the wide variety of personnel and work practices from the former companies' facilities organizations. Within GPM&S three peer groups operate globally (Facility Management Network, Office Safety Network, and Library/Records Management Network) and a collection of subsets that are divided on regional boundaries.

"Our goal was to blend the best practices of each group into a single world-class operation," says Jim Spencer, the integration and strategy advisor for BP's Global Property Management unit.

Early in the merger process BP and Amoco identified a $2-billion financial "prize" resulting from the synergy of the combined companies and the elimination of redundancies. The speed and efficiency with which the merger was carried out enabled BP to achieve the prize six months ahead of schedule.

Integrating Two Different Management Styles

To proactively manage the change brought about by the merger, senior management created an integration team charged with overseeing the transition. This team brought all of the business units together into focus groups and made a deliberate attempt to assess each heritage company's management processes in order to determine which was the best way forward.

"In GPM&S we went with the systems that were most likely to drive innovative and productive behavior and those that provided the highest level of accountability. If there was a tie, we defaulted to the BP method," says Spencer.

For instance, BP had a strong heritage of internal networking among peers. This process was quickly adopted by GPM&S. Amoco had a strong process for identifying customers for services, budget planning, and creating service level agreements. This, too, was a practice adopted by the new GPM&S organization.

In the initial stages of the reorganization a concept called "fail-fast" helped the new facility group refine its methods.

"Fail-fast is a continuous feedback loop where you start down a path towards success. If you struggle with barriers, you may be off target. You learn from the challenges and then redirect your efforts constantly using that feedback loop," Spencer explains. "This technique helped deliver outstanding performance more quickly," he says.

Prior to the merger the two companies displayed a striking contrast in management styles--strong shared services at Amoco and a highly decentralized structure at BP, where facility services were largely embedded in each of the 80 separate business units and received minimal intervention from BP headquarters. During the transition the decision was made to centralize facility and corporate service operations at large cross-stream locations into a global shared services model. Activity unique to an individual site was left "embedded" in the business, supported by the peer groups.

Under this model GPM&S serves as a worldwide policy-setting arm for areas such as travel, aviation safety, and real estate transactions. Decision-making for all corporate service and facility operations is conducted by Centers of Expertise in London and Chicago. These centers are staffed by small, specialized teams who bring considerable depth to the decision-making process.

"The business units must have a broad understanding of their business to deliver their performance targets, but they are not expected to have a depth of understanding in any one functional area for breakthrough thinking," says Spencer. "That is where the facilities and other group functions come into play. Our specialized consulting teams provide the depth to move performance to the next level."

Meeting Day One Goals

For the facilities people the key to a smooth transition was being ready to deliver basic services to thousands of employees on Day One of the new company. It was mission critical for the facilities group to provide the right offices for the newly configured businesses and assure that disaster recovery plans were current.

Sixty days prior to Day One the new organization named its top 50 executives. Those 50 immediately engaged teams to set the next layer, and then the next layer, and so on. Three months after Day One all 100,000 employees knew their status, and within six months of the launch most of the new businesses were up and running with the correct head count and office adjacencies.

"Our first priority was to get people connected, get them a phone, get them on the network, and not worry about office status. We did very little new construction in the first few months," Spencer says.

Because of the emphasis on people, the merger proved to be more than just a financial success. Surveys of those who left the organization in the wake of the merger, as well as those who remained, indicated satisfaction levels in excess of 60 percent with all of the company's efforts.

"We were very concerned about treating people with dignity and respect," Spencer says.

Among the many challenges the new facilities group had to deal with to be ready on launch day, one of the most surprising was being prepared to provide business cards and stationery.

"As it turned out, our ability to produce new branded business materials was a critical component of Day One activities," Spencer explains. "Naturally, our corporate leaders were eager to present the new company to our customers and you can imagine that many of the 80,000 people from the initial BP-Amoco merger wanting new business cards by Day One plus 30 was an incredible workload. Then we had to do it all over again for the ARCO staff and again with our new brand launch in mid-2000. So we certainly know how to do business cards now."

Leasing and Outsourcing Beat Targets

The merger also brought about a significant shift from owned to leased properties. Initially, BP and Amoco combined had about 35 major locations around the globe. This figure has since been reduced to 22, slashing the company's total square footage from almost eight million sf to a little over four million sf.

Approximately half of BP's total facility operating and real estate costs now reside in the central shared services function. The other half remains embedded in the separate business units. Embedded services occur at BP-owned and operated sites such as an oil refinery or chemical plant.

A primary component of BP's success in achieving cost efficiency and market goals is heavy reliance on outsourcing. Much of the delivery of BP's corporate facility services is outsourced to Milwaukee, Wis.-based Johnson Controls Inc.

"BP is probably one of the leaders in outsourcing IT, HR, and facility management," says Spencer. "There's a lot of discussion about how to get your costs down while maintaining market-leading service levels. At BP there is no debate. Outsourcing gets you to market and it gets you there today."

Technology and Networking

BP has also achieved significant cost savings through the extensive use of technology and group networking. The company recognizes that the merging of space, people, and technology will lead to better business performance.

"We place a high emphasis on the use of mobile offices and wireless technology," explains Spencer. "We have implemented innovative office designs, such as hotelling and hot-desking, that maximize productivity, and we've created team rooms that provide much more collaborative space. The deployment of e-tools across our entire business spectrum and an emphasis on people rather than places has allowed us to generate considerable cost savings."

Moving Forward

Spencer notes that due to a lack of precedent, there were few hard and fast rules for conducting corporate mergers of this magnitude, but BP has definitely learned some important lessons along the way. Most significant of these is managing uncertainty.

"The employees who were struggling and frustrated were the ones who resisted change, focused on old methods, and had trouble with uncertainty," he says. "We found that the best way to get past this dilemma is to drive the change process by networking with employees. Talking to everyone and anyone who would listen offset much of the uncertainty."

Communication has been fundamental to BP's success.

"We are much more accepting of people who ask for help delivering their results than those who try to tough it out on their own," Spencer says. "We want people who share, learn, and network since we know that improves performance."

In the oil industry it is also important to identify key risks and take a long look forward.

"We achieve our goals by assigning accountabilities and milestones, then monitoring them over time. Ours is a long-term business. New discoveries in the Gulf of Mexico announced in 2000 are going to take 10 years to deliver a financial return, but we've got to deliver performance quarterly. So it's important to think quarterly yet not lose sight of the long-term view," he concludes.

By Johnathon Allen