Fourth dimension leadership brings bottom-Line dividends to oil and gas companies. Frank Lloyd and Bruce Bullock at the SMU Cox School of Business explain how
Where will tomorrow’s oil and gas industry leaders come from? Talent available to lead the industry in the future is insufficient to backfill the baby boom generation.
Case in point: while interest in the oil and gas industry is growing among students at SMU’s Cox School of Business, oil and gas companies—even those acclaimed for world class environmental and sustainable energy solutions—face difficulty in attracting top job candidates. Why? Many students believe the industry is broken.
Based on perspectives gleaned from journalists, politicians, educators and even other business leaders, they see the industry as focused solely on profits for shareholders and willing to jeopardize public health and safety by turning urban and suburban areas and even farmland into heavy industrial drilling sites.
Fortunately, four new trends in leadership development give forward looking firms in the industry new tools to attract and keep the best talent.
The most profound of these trends adds a fourth dimension to the principles of managerial psychology that define the basic dimensions of leadership competence.
• Leading yourself (awareness of your personal values, skills and personality preferences and how those are perceived by others in the organization)
• Leading your team (interpersonal and group skills to motivate others and build effective teams)
• Leading your organization (corporate and enterprise skills to work across boundaries, communicate direction, and lead change)
The new fourth dimension takes leaders outside themselves and their organizations to establish leadership presence in their communities. It requires them to expand their competencies accordingly.
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Defining fourth dimension leadership
This fourth dimension of leadership is founded on the pillars of purpose, ethics, and value for multiple stakeholders.
It recognizes that profits follow purpose, and so fourth dimension leaders are able to articulate their organization’s larger purpose and focus on organizational as well as individual success.
Fourth dimension leaders’ ethical skills are based in truth, trust, and courage. They communicate truthfully and with transparency about their business practices and results.
While this relates to financial reporting, much needed transparency in the energy industry can also be achieved through third-party certification of environmental, health and safety systems.
Encana and GE Oil and Gas are two examples of companies that either have third-party certification or are seeking third-party certification under international standards.
The chemical industry has had this in place now for a number of years, and the public challenges it faced in the 80s and 90s have considerably diminished.
Leaders’ ethical skills are also demonstrated through relationships based on reliability and reciprocity: trust. This is an age-old business application of the golden rule. However, the finance industry is littered with recent examples of how damaging a single-minded focus on self interest can be.
Fourth dimension leaders act with courage and commitment to uphold personal and organizational values and provide channels to constructively address conflicts between stated and enacted values in the organization.
What if the personnel on the Horizon had operated in a culture in which it was acceptable to question a decision that seemed to run counter to the organization’s stated commitment to operational safety?
Fourth dimension leaders also recognize the interests of multiple stakeholders as well as shareholders—customers, suppliers, employees, and communities. They strive to align their interests and get them moving in the same direction.
Based on their awareness of multiple stakeholders, fourth dimension leaders will engage in the community to the benefit of themselves, their firms, and the communities.
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New leadership brings payoffs
By seeking candidates with fourth dimension leadership skills, oil and gas companies will attract more of the best business school students.
Business schools are doing likewise as evidenced by emerging curriculum trends:
• Proliferation of social entrepreneurship courseware.
• Curriculum revisions that emphasize ethical leadership.
• Intentional use of community service as a teaching tool.
• Growing emphasis on corporate responsibility and sustainable value creation.
• Increasing number of businesses who express social purpose as a key element of their brand promises to prospective employees.
In some cases, these changes are made in response to evolving student interests. In others, they are initiated by the schools themselves. Some top business school leaders feel that, as educators of business leaders, they have directly or indirectly contributed to recent scandals and excesses.
Firms can reassure students that the industry is not broken by authentically adding fourth dimension leadership skills to their culture and operations. As a result, they will attract more of today’s young high-potential employment candidates.
But what about the high potential managers and professionals already at work in the industry? They are a more immediate part of the solution to the industry’s future leadership needs.
Retrofitting fourth dimension leadership skills to current leaders’ portfolios will pay off in improved managerial and organizational performance.
Research shows that:
• Trust and integrity of leadership are key factors in moving employees to higher levels of engagement, and firms with higher engagement perform better in terms of customer loyalty, employee retention, productivity, quality and safety.
• People and customers take positive action based on trust in a company, including recommending it to others and paying more for their products and services.
• Firms managed to optimize stakeholder value rather than shareholder value alone outperformed the S&P 500 at 3-, 5-, and 10-year intervals, by up to 700 percent.
Furthermore, by countering narratives put forth by journalists, politicians and educators that indict the capitalist system, the energy industry’s or individual firms’ emphasis on purpose, ethics, and multiple stakeholders invites in expertise from outside business needed to solve today’s most challenging problems.
Michael Porter and Jack Kramer, writing in a recent Harvard Business Review persuasively argue that “creating value in a way that also creates value for society will drive the next wave of innovation and productivity growth in the global economy.”
Thus current leaders who are skilled in fourth dimension leadership will be equipped to retain top employees, attract better customers, reward better investors, and drive innovation and growth.
Three more new trends in management development make it easier for firms to reap the benefits of investing to develop leadership skills—across all four dimensions—within their current management group.
• First, training providers and clients are working more closely together to co-create programs tailored to fit the needs of the business.
• Second, new programs incorporate multiple sources of learning that blur the boundaries between classroom, workplace, and community. These include executive instructors, projects focused on mission critical business challenges or community needs, and support for on-the-job implementation of new knowledge and skills through peer accountability, internal learning contracts, and executive mentors.
• Finally, companies are rethinking ways to assess the return on their investments in learning. Recent studies completed at Accenture, the University of Chicago, and MIT show that such investments can pay off in improved margin per employee, differentials in compensation and advancement, and better quality decision-making.
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Cases in point
SMU Cox School of Business is leveraging these trends to help oil and gas firms prepare their current high-potential employees for new leadership challenges.
For example, recognizing that leadership talent is at a premium, an energy company that is recognized as one of the world’s most admired corporations and among the 100 best companies to work for, turned to Cox to co-create a cutting edge leadership development experience for their high potentials.
Two one-week classroom sessions are conducted by handpicked Cox faculty who are paired with executive committee members to ensure that new knowledge is relevant.
The program is structured so that participants develop authentic leadership skills and align them with the organization’s business and mission. Participants are supported in their personal development and application of learning by in-depth assessments and executive coaches.
Throughout the program, participants work in teams to address a challenging real-world business issue. They are expected to develop implementation skills and self-knowledge, strengthen their internal network, deliver substantial and valuable business results, and engage with the organization’s top executives.
Teams present their project results to the executive committee at a special capstone event which concludes the program. One of the firm’s executive vice presidents characterized their two-year experience working with SMU Cox as a resounding success based on feedback from participants and senior leadership.
Another Cox oil and gas client quantified similar benefits they received from a co-created cutting edge leadership development program. They experienced savings of nearly $1 million by implementing participant projects and by promoting internal candidates rather than engaging search firms.
New trends in management education promise to revitalize oil and gas firms’ efforts to develop their existing high-potential talent because they lead to application of new skills and sustained behavior change.
Using this tool to operationalize leadership skills in the new fourth dimension that embrace purpose, ethics, and multiple stakeholders will help oil and gas firms counter the perception that the industry is broken.
This will enable them to attract and retain the best new talent. More importantly, it will help them achieve sustainable results—for shareholders, customers, suppliers, employees, and communities.
About the authors:
Frank R. Lloyd, Ph.D., is Associate Dean of Executive Education for the Cox School of Business at Southern Methodist University where he is responsible for creating and implementing the school’s strategy to grow its executive education businesses, cultivating corporate relationships, and developing innovative executive development programs.
He was instrumental in the launch of the James M. Collins Executive Education Center, one of the nation’s premier learning facilities for working professionals.
SMU Cox has served the advanced management needs of the energy industry for more than 30 years in association with the Maguire Energy Institute.
W. Bruce Bullock has served as director of the Maguire Energy Institute, SMU Cox School of Business, since May 2007. Since his arrival, Mr. Bullock has steered the Institute’s programs, energy education, energy policy and economics, and preparing students for careers in energy.
Mr. Bullock has authored numerous articles on energy issues, technology, and economics.
Under his leadership, the Institute has implemented a new energy finance concentration within the Cox School’s MBA program, restarted the school’s Frank Pitt’s energy lecture series, and grown the school’s student energy organizations to the largest and most active organizations on campus.
