Transforming procurement processes in oil & gas: Interview with Eric Beylier, TETRA Technologies
The Energy Process Excellence Network conference in Houston Texas is fast approaching and in the lead up we caught up with Eric Beylier, Vice President, head of global supply chain and procurement, at TETRA Technologies - and one of the speakers at the conference.
In this interview Beylier shares how he has completely transformed TETRA's approach to procurement and supply chain management. since since taking over the procurement function five years ago.
He has automated and re-designed processes, built up the team’s skills and capabilities and even sparked an organizational re-design so that he was reporting direct to the company CEO. In this interview, Eric describes what he what he did, why he did it and some of the lessons he has learned along the way.
Editor’s note: this is an edited transcription of Process Perspectives interview conducted earlier this year.
PEX Network: What were the key process challenges that were facing you when you took over the procurement function in 2007?
Eric Beylier: There was a long list. The most challenging one actually was silos from very fragmented acquisitions or family businesses or mid size businesses. Each one of them had leadership with a very strong ego - it was their way or the highway. Do you want to collaborate as a team? Did want to acknowledge the role of the corporate groups and the more, not centralized, but a more balanced type of an organization and belonging.
Instead the leaders were isolating themselves, trying to keep their legacy business and not collaborating with the other business units. They would not share customer relationships, they would not share supplier contracts and pricing. In effect, they just would not play together – and I think that was probably the number one challenge.
The second challenge was that we had no visibility. In my area of supply chain procurement, I had no visibility into our spending and no visibility into contracts and - to be honest - no visibility into the true nature of the relationships we had with some of our suppliers. And it is very difficult to fly a plane blindfolded! So that second aspect of visibility had to be addressed.
The third challenge was that there was no communication of what supply chain and procurement could bring to the organization, what sort of competitive advantage a dynamic and efficient supply chain procurement organization could bring because there was not really such a function in place. So the function had to be created and reorganized from scratch. That’s a sales job in itself!
PEX Network: Can you take us through what you had to do to address those challenges?
Eric Beylier: The first thing we did was basically removed the position of head of supply chain procurement from being buried underneath finance and treasury to report directly to the CEO of the organization. That was a political battle that was very challenging for me to win. When I was successful that was a corner we turned that marked a real a milestone within the organization because everybody sat up and took notice.
Restructuring the reporting function was absolutely critical to send a signal to the organization that things are changing and they are not just changing a little bit, things are changing drastically. To address the visibility aspect of that we designed a custom solution of spend analysis to TETRA. There are a lot of packages out there that are absolutely excellent and outstanding, but TETRA being a billion dollar company - which is very small in oil and gas terms - we sometimes cannot really afford fancy solutions so we have to be more creative.
So that’s what we did, we created a spend analysis tool that was and still is widely used in the organization and that created 34 very specific spend categories that you can slice and dice at the divisional level. We had five divisions at the time and you can go down to the cost center very easily and then you also can slice and dice by supplier, by spend categories. My CEO, for example, can go by himself and get a updated numbers on spend for his team and corporate wide for a division or a cost center in a matter of a few seconds. He doesn’t need any help from anybody to do that and it’s perfectly accurate because it matches against the chartered accounts
Developing this tool sent another signal which is, we are watching the money, we are following where it goes and now we know where you spend your money. And that is very critical because people can’t argue with that. They basically could no longer say "I didn’t spend that money" because we had it in black and white transactions. And that was actually quite powerful.
If you take the number one, the reporting relationship was moved to report directly to the CEO and then suddenly we found the cash and we get the facts straight about what the cost center is doing in terms of spending money with suppliers; that’s a pretty signal.
To address the third aspect, which was the selling function/communication, I got the input from all the teams and divisions into what I call the procurement manual. This was a manual that was customized to our organization and that clearly laid down the value proposition of supply chain procurement. The target that was and are agreed upon every year in terms of earnings per share contribution from better negotiating terms and conditions or managing our suppliers. That actually talks a lot because we are publicly trading on the New York stock exchange. We also communicated through quality training programmed. We have six, two hour training sessions every quarter with a simultaneous WebEx so that everybody around the world can actually participate and ask specific questions. That was designed so that every two weeks we allow for a very fluid communication between corporate and the divisions and all the folks in supply chain procurement or finance and accounting or operations or the field.
To really understand how we expect them to behave and work, what the processes look like so they don’t have the excuse of saying, "I didn’t know we were supposed to do it this way". Now they have it black and white, very clear, detailed but yet simple, so they know exactly what they are supposed to do and so if they don’t want to do it, then there are consequences to it, which the first one is you explain it, you train and if even after training people still refuse to do it, then it’s a different type of an issue and then you start engaging managers and say, we really need that person to do it differently – how can we get there?
Usually it works. You’ve always got exceptions which don’t have a nice ending, but usually, so far in the past five years, it’s been pretty successful. It takes time. That’s the frustration of change management; it takes a lot of time. You need to have strong symbolic changes and then be patient and continue, never give up through the training and through the business alignment on processes and then occasionally you have to escalate straight to the CEO and say yes.
We thought about creating a policy - which is one way of communicating to the organization – but what I decided to do instead is to unofficially launch what the policy might look like one day through the manual. It was a kind of warning call: "you’ve got a couple of years to really start to understand what we expect you to do". We just issued it a couple of months ago. It’s basically a formal document which is no surprise to anybody so it’s not been slapped on anybody’s head. It’s something they’ve known about for two years and we said one day it’ll be an actual policy with disciplinary action documented, HR involvement, all that kind of stuff, which is quite brutal and then sometimes can turn off people. But we allow the organization, for a couple of years, to really understand what we expected them to do so that when the policy is in place, they already meet 80% of the requirement of the policy. I think that was something that was well perceived as opposed to the corporate dictatorship of this is the policy and you shall follow it.
PEX Network: It’s interesting that you gave people two years notice because that, for a lot of companies, would seem quite excessive.
Eric Beylier: There are different cultures in oil and gas. You have companies that are very well known to be military driven. It’s a very discipline top down organization with no questions asked. If your manager asks you to do something the answer is "yes sir" and you go and do it. Then you’ve got the other extreme of the spectrum which is the full consensus, takes forever to get anything done, it’s milestone after milestone, and a little project now takes a year and a half to get done! What we tried to do is something somewhere in between.
We’re a matrix organization, we have division heads and functional heads, all of them reporting directly to the CEO. The idea behind is to give people a chance to change and be better and work better and work smarter sometimes, not necessarily harder. I believe in building up the human spirit rather than slamming it down, so it takes a little bit longer but if you’re successful it’s very sustainable. When people are not in "pain", they have a chance to understand it and they have a chance to do it better and actually can eventually take pride.
We launched electronic invoicing with our suppliers two and a half, three years ago, and there was a wall of skepticism, criticism, screaming, and yelling. Now the exact same people are the first ones coming back to me and saying that they wished more suppliers were on electronic invoicing and they were glad we didn’t give up on them. We could have slapped the system down on the organization but then we would have people today - two years later - still resenting it. We would still have folks saying that perhaps it’s a good tool but it was too much pain to get there.
PEX Network: I love that quote, "scaling up the human spirit rather than knocking it down". It sounds like, in terms of many of the solutions you came up with, it really wasn’t just about redesigning processes, it was really about navigating company politics and culture. Is that a fair assessment?
Eric Beylier: Yes and no. I think there was clearly some politics and culture - what I would call the "legacy TETRA" – but the most challenging part is to rewire the businesses processes. At first we had to take care of the legacy culture. We had to clearly, in a very symbolic way, send a message that this legacy culture longer has a place in our organization and is going to change. That there was a new sheriff in town – that’s my boss, he’s our CEO, a very bright man. He became CEO at the same time pretty much I joined TETRA five years ago. And then once that was done I think people understood and heard the message.
The battle actually happens at the business process level because they’re going to say, okay, so words are cheap, let’s see what we are going to do and how we are going to do it. This is where the rubber meets the road. Once you start drilling down into the weeds about the purchase to pay process, for instance, that’s where you’re going to lose the credibility of change, because if you don’t know what you’re talking about or if you play the high level executives I don’t get dirty, that’s my job, you won’t get respect. If you get down with the guys and roll up your sleeves and work with them to make it better, they’re going to love doing it and you gain respect. You end up changing the organization one business process at a time.
That’s what we started doing three or four years ago. We’re still doing it and there’s still a lot of room to go and our board wants us to expand tremendously in our international markets – we do business in five continents but on a small scale. We’re trying to make those business processes super efficient so we can scale up without piling up a bunch of people and that’s a challenge, but it’s all in the business processes actually.
PEX Network: Do you think that you would have been able to achieve the results you did without the backing of the CEO in the way that you had it?
Eric Beylier: Our CEO is the kind of senior executive who doesn’t like too much "noise". He wants things to be done in harmony in the organization and he doesn’t "bark". When he gave me the responsibility, the first thing he told me was that I was not a cop. He didn’t want me to be a dictator and run around slapping my direct relationship with him in everyone’s faces. That was a challenge at times because that is clearly the short cut. The easiest way in the short term to make these sorts of changes is to do just that. But then in the long run, you upset people because they don’t see the value you bring outside of scaring them because you report to the CEO. We don’t do that.
PEX Network: Clearly changes to any processes and organizational structure particularly on this kind of scale, really doesn’t come easy in any organization. What were the key personal challenges that you had along the way?
Eric Beylier: There were a lot of new things for me that I had to learn how to do: completely reorganizing an entire function, corporate wide with five divisions and 4,000 employees was challenging. I had read books and learned HR and organizational design at business school but when suddenly you are in charge and you have to do it – and do it right the first time - that’s another thing. So doing that entire reporting to the CEO and putting the functions and recruiting people and then make sure you get the right DNA at the right place at the right time is something that I was challenged with, there’s no doubt about it.
When I was in San Francisco [prior to TETRA], I started two businesses, so I know what it is to grow and scale a business. But at TETRA the challenge was to achieve such a large scale transformation with hardly any money. We could not buy e-sourcing. We couldn’t have a bunch of high powered consultants to come in for six months to a year to help us drive change and save a bunch of money. It felt a little like I had to move a Himalayan mountain with a bunch of teaspoons and that was a little bit overwhelming at first. But you continue, day by day, and then eventually what seemed so difficult happens.
The last challenge is sustainability. How do we continue to scale up, make it sustainable in the North American markets and then duplicate it, adding international culture? I’ve done business in 50 countries before I joined TETRA - working for very large organizations - so I know what the end game looks like. But how to bridge from where TETRA is today into something where we do business in 120 countries and have country managers involves "crossing the chasm". and at different stages of evolution which I’m looking forward to enter, because I’m already in it. It’s a challenge, there’s no doubt about it.
PEX Network: And my very final question is if you had to go back in time and give yourself one piece of advice about what was about to await you on the journey, what would you say?
Eric Beylier: Lose your French accent and get a Texan accent! But I’m never going to lose my French accent, that’s just the way it’s going to be….