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									                                 LEADERSHIP, LEARNING

Steve Miller of Royal Dutch/Shell offers a powerful model of what LEADERSHIP means - a
recognition that commitment and creativity come from all parts and all levels of an organization.
Steve also demonstrates how to use the role of teacher-manager to energize LEARNING that
produced dramatic change in a $178 billion enterprise.

Fast Company, April, 1998, issue 14, page 110.

Grassroots Leadership - Royal Dutch/Shell

by Richard Pascale
Photographs by Dudley Reed

            "Change how you define leadership, and you change how you run a
            company."

            Grassroots leadership is not a term you would ordinarily apply to
            Royal Dutch/Shell. With a current market capitalization of $178
            billion, $128 billion in annual revenues, 101,000 employees, and
            operations in 130 countries around the globe, Royal Dutch/Shell is
            often cited as one of the world's largest businesses - but never as
            one of the fastest. With its 90-year history, its deep sense of
            tradition, and its carefully structured ways of doing things, Royal
            Dutch/Shell is often praised as a model of consistency and longevity
            - but never as one of creativity or innovation.

            Steve Miller, 52, group managing director of the Royal Dutch/ Shell
            Group of Companies, means to change all that. Miller joined Shell's
            Committee of Managing Directors - the senior leaders who guide the
            day-to-day activities of the Shell Group - in 1996, two years after
            the company had launched a program designed to transform the
            organization. But after two years of reorganizing, downsizing, and
            attending workshops, Shell managers had little to show for their
            efforts. The company's financial performance inched up - but
            employee morale at corporate headquarters in London and The Hague
            continued to slip. And for people in the field - "at the coal face,"
            to use the term that Shell applies to its frontline activities -
            everything looked like business as usual.

            Miller had observed Shell's efforts to transform itself one layer of
            management at a time, and he concluded that he would have to reach
            around the resistant bureaucracy and involve those at the front
            lines of the company. But the sheer size of the operation made this
            a daunting prospect. Shell's 47,000 filling stations, for example,
            serve about 10 million customers each day. And the downstream
business - consisting of dozens of product lines, from fuels to
lubricants to asphalt, and of operations stretching from supply and
trading to manufacturing and marketing - faced the gravest of
competitive threats: hypermarkets in Europe, new competitors
worldwide, and demanding global customers. Starting in 1997, Miller
devoted more than 50% of his time to work directly with grassroots
employees to respond to this new competitive situation.
His approach adds a new chapter to the art and science of grassroots
leadership. Aided by a business model developed by Larry Selden of
the Columbia Business School, and supported by process-design
assistance from Noel Tichy of the University of Michigan Business
School, Miller and his colleagues at Shell evolved a system that is
as revolutionary in the world of sales and marketing as Toyota's
innovations in total quality management were in the manufacturing
world two decades ago.

"Week after week, my team and I got to work directly with a cross
section of Shell people from more than 25 countries, representing
more than 85% of Shell's retail sales volume," says Miller. "The
grassroots employees got to touch the new Shell - and to participate
in a give-and-take culture. The energy of our employees spread to
the managers above them. These frontline employees taught us to
believe in ourselves again." Most important, Miller's approach
offers a model of grassroots leadership that any leader in any
company can adopt.

Over a six-month period, I observed Steve Miller in action and
conducted a series of interviews with him at his home in Houston,
his apartment in London, and his office in The Hague. Here's what he
has to say about grassroots leadership.

Why does a top manager at an old, established, and enormous company
like Shell need to rethink the basics of leadership?

A successful company depends on leadership. But we need a new
definition of leadership and a new approach to providing it.
In the past, the leader was the guy with the answers. Today, if
you're going to have a successful company, you have to recognize
that no leader can possibly have all the answers. The leader may
have a vision. But the actual solutions about how best to meet the
challenges of the moment have to be made by the people closest to
the action - the people at the coal face.

The leader has to find the way to empower these frontline people, to
challenge them, to provide them with the resources they need, and
then to hold them accountable. As they struggle with the details of
this challenge, the leader becomes their coach, teacher, and
facilitator. Change how you define leadership, and you change how
you run a company. Once the folks at the grass roots find that they
own the problem, they find that they also own the answer - and they
improve things very quickly, very aggressively, and very creatively,
with a lot more ideas than the old-style leader could ever hand down
from headquarters.

Why did you adopt a grassroots approach?

Our transformation program got started because headquarters and the
operating companies couldn't agree on how we were going to adapt to
a rapidly changing world. How would we respond to the Information
Age? We needed something to give us an energy transfusion and to
remind us that we could play at a more competitive level. Shell has
always been a wholesaler. But every service station represents a
commercial opportunity that any retailer would envy. Our task was to
tap the potential of that real estate, and we needed our frontline
troops to pull it off.

Can you describe the grassroots program you developed?

We brought six- to eight-person teams from a half-dozen operating
companies worldwide into an intense "retailing boot camp." One
example, from Malaysia: In an effort to improve service-station
revenues along major highways, we brought in a cross-functional team
that included a dealer, a union trucker, and four or five marketing
executives. The first five-day workshop introduced the model and the
leadership skills the team would need to enlist coworkers back home,
and prepared the participants to apply the new tools to a local
market opportunity. That could mean improved performance at filling
stations on the major roadways in Malaysia, or selling liquified
natural gas elsewhere in Asia.

Then those teams went home - while another group of teams rotated
in. For the next 60 days, the first set of teams worked on
developing business plans. Then they came back to boot camp for a
peer-review challenge. At the end of the third workshop, each team
sat with me and my team in a "fishbowl" to review its business plan,
while the other teams watched. The peer pressure and the learning
were intense. At the end of that session, the teams went back for
another 60 days to put their ideas into action. Then they came back
for a follow-up to analyze both breakdowns and breakthroughs.
How do you know it's working?

Because we're seeing results all around the world. For instance, our
business in France was in terrible shape. We were in the red and
losing market share. The advent of hypermarkets had changed the
game, and we weren't responding effectively to this new competitive
threat. Fifty percent of our retail fuel market disappeared in two
years! We either had to find a way to become profitable and to grow,
or we had to exit - because the way we were going, we couldn't stay
in the game much longer.

Now, if you asked the leader back in headquarters, "What's the
answer?" the honest response would be "I don't know." What we did
instead was bring together a cross-functional team from France,
provide the people on it with resources to analyze the problem,
offer them a business model to help them understand retail
competition better - and then challenge them to come up with ways
not just to survive but also to grow.

In January, I got a note from the marketing manager of our retail
business in France. The business had just closed its books for 1997.
It recorded double-digit profitability, exceeded its growth target,
and expects double-digit growth for 1998. More important, the
manager told me that when he and his coworkers started to work on
the problem, they were terrified. They didn't know how they could
solve it. Now they believe in themselves. As a result of this
effort, they've got a whole new company.

The truth is, it's scary as hell at the beginning. It's scary for
me. It's scary for the team. But the track record has been
incredible.

What makes grassroots leadership scary for you?

First, it's scary to put myself on the line with my peers. I was no
longer playing the classic "managing director" role. I spent a lot
of my time working with these grassroots teams - and that's a pretty
big gamble. This thing had to come off. Otherwise, 18 to 24 months
later, I could have egg all over my face. I could see my colleagues
thinking, "Okay, you held workshops. Sure, the teams got a little
excited - but how much really happened?" If you go through all that
and France doesn't turn around, it's pretty scary.

Second, I feel strongly about the people I've trained and sent back
to their businesses to make things happen. Those are my people, not
just abstractions in an HR report. It's the same feeling you have as
a teacher, a coach, or even a parent. You've done what you can to
prepare them - but now they've got to go and do it. You want to do
it for them, you want to make it all come out right - but you can't.
What you can do is feel for them.

Finally, the scariest part is letting go. You don't have the kind of
control that traditional leaders are used to. What you don't realize
until you do it is that you may, in fact, have more control - but in
a different form. You get more feedback than before. You learn more
than before. You know more through your own people about what's
going on in the marketplace and with customers than before. But you
still have to let go of the old style of control.

A big part of your leadership style involves a shift toward
teaching. What does it take to be a leader-teacher?

Two things. First, you have to know your material. Whatever you're
teaching, you have to know it forward, backward, inside, and out. At
the start of this process, when my team and I taught the business
model ourselves, we had to know it cold. If you're teaching your
people about market segmentation or value propositions, you've got
to have a thorough understanding of everything behind each of those
concepts.

Second, as a leader and as a teacher, you've got to open yourself
up. You simply have to make it personal. A lot of executives I know
can get up in front of an audience and give a presentation. They're
very comfortable speaking in the third person: "Here's what the
company is doing." It's a safe way of talking. You don't have to put
an "I" in very many sentences.

But real teaching means giving of yourself. To reach people, I had
to talk in the first person. All of a sudden, I'm standing in front
of 70 folks, talking about my transformation. That creates a
personal connection - and it changes how we talk with each other and
how we work with each other. After that, because of this personal
connectedness, I can call up those folks anywhere in the world and
talk in a very direct way.

Where do you, as a leader, get the chance to make a personal
connection with your people?

One of the most important techniques we use is the fishbowl. The
name describes what it is: I'm sitting in the middle of the room
with members of my management team. One team is in the center with
us, and the other teams are all around us in an outer circle.
Everyone is watching as the group in the center talks about what
it's going to do and about what it needs from me and my colleagues
to be able to do that. That may not sound revolutionary - but in our
culture, it was very unusual for anyone lower in the organization to
talk so directly to a managing director.

In the fishbowl, the teams in the hot seat lay out their business
plans in front of me and all the other teams. They think the
pressure is on them to measure up. The truth is, the pressure is on
me. The first time I'm not consistent, I'm dead meat. If a team
brings in a plan that's really a bunch of crap, I've got to be able
to call it a bunch of crap. If I cover for people and praise
everyone, what do I say when someone brings in an excellent plan?
That kind of straight talk represents another big culture change for
Shell.

The whole process creates complete transparency between the people
at the coal face and the top-management team. At the end, these
grassroots folks go back home and say, "I just cut a deal with the
managing director to do these things." It has completely changed the
dynamics of our operation.

What learning tools produce the most change?

Breakthrough learning can come from the most unexpected places. For
instance, we give teams an assignment: "Here's a video camera. In
the next 90 minutes, make a 5- or 6-minute video that illustrates
the old Shell and the new Shell." That one exercise completely
changed the future of our business in Austria.

We had an Austrian team in our first program, and it was clear from
the start that it didn't want to be there. During the exercises we
did in the first workshop, out of the six teams participating, the
Austrians consistently came in seventh! Whatever the exercise was,
you could count on the Austrians, individually and collectively, to
be last. As the week wore on, they were having less and less fun.
They were getting shown up in front of their peers and in front of
management, and I wasn't sharp enough to know how to deal with it.
We were all just soldiering on, hoping that something would happen
to turn things around. What turned things around was the video
exercise.

As it happened, the Austrian team leader was called away suddenly,
and he wasn't there for the exercise. Now this struggling team was
leaderless and facing an "unconstrained problem": Here's your video
camera, you've got 90 minutes, go make a video. Good luck!
What the team came up with was the story of a guy who has to go to
the bathroom very badly. The "old Shell" video opens with this guy
walking cross-legged, in great pain, looking for the men's toilet.
He comes to the door marked "Men," and it's locked. He goes through
a bureaucratic procedure to fill out the form required to open the
door. The person he hands the form to has to get it approved by his
supervisor. That person rings a bell, and the supervisor comes over
and reviews the whole process. Meanwhile, the guy is practically
turning green - until he's finally given the key, and he lunges into
the men's room. That's the "old Shell."

Then came the "new Shell." The same guy goes to the men's room, but
now there's a doorman who ushers him through with a smile. As he
goes into a stall, he's handed his own personal roll of toilet
paper. When he comes out, he's given his own towel. The service
attendant even tries to zip up the guy's fly. The sequence was
absolutely hysterical.

We showed every team's video and picked the best one. The Austrians
won hands down - and that was the beginning of their turnaround.
Their leader came back to an energized team, and he began to realize
how much talent his team had and how capable his team members were.
Over the course of the week, they changed the way they worked
together. Later, they dramatically improved their business
performance in Austria.

What kind of follow-up do you do after teams leave the program?
I do a lot of field visits - for example, going on bus rides with
teams. I did one in Germany last week. We started out from Hamburg
with a handful of double-decker buses, each loaded with 30 or 40
people from different levels and functions in the operation. While
we're on the buses, the trip is like a traveling seminar, with
discussion groups and videotapes. In the course of a day, we visit
three or four customers, as well as other sites.

On this particular trip, we went to see a Mercedes dealership that
we sell lubricants to. We spent an hour with the owner and his top
people going over their business, what role we play, how we could do
better. We walked through his showroom, and the owner told us about
his selling issues. We went into his repair shop, and he described
what it's like to run his backroom operation. Next we went to a
Shell gas station. Everyone got off the bus and talked to the
customers: Why were they there? Why did they choose us instead of
our competitors? What could we do better? Our third stop was at a
competitor's site. There we just observed: What are the differences?

What do they do better than we do? What would we do to improve that
site if we had it?
Then we got back on the buses and talked about what we'd seen. We
all wrote down our impressions, and when we got back, we went over
what we'd learned from the visits. It's a great learning tool - it
breaks down the barriers between functions. You learn collectively,
you learn to understand the customer, and you share the
responsibility to fix the customer's problems - whether you're in
sales or accounting.

What's your own take-away on leadership and change?

As people move up in organizations, they get further away from the
work that goes on in the field - and as a result, they tend to
devalue it. People get caught up in broad strategic issues, legal
issues, stakeholder issues. But what really drives a business is the
work that goes on down at the coal face. It's reliability, it's
producing to specification, it's delivering to the customer.
Now, if that's true, then being connected to people in the field is
even more critical. They need all the support you can give them.
They need a common understanding of where they're going, and they
need a common understanding of the business. That's what drives
execution. And it's what provides the discipline in a grassroots
change program.

Richard Pascale was a faculty member at the Stanford Business School
for 20 years and is now an associate fellow of Oxford University.
Based in San Francisco, he is a well-known expert on corporate
transformation. His article "Fight, Learn, Lead" appeared in the
August:September 1996 issue of Fast Company. You can visit Royal
Dutch/Shell on the Web ( http://www.shell.com ) and reach Steve
Miller by email smiller@compuserve.com .

								
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