Challenges, Performances And Tendencies In Organisation Management

Ovidiu Nicolescu, Lester Lloyd-Reason

• Publisher: WSPC
• Year: 2015
• Topic: Biological Sciences
• eBook ISBN:
  9789814656030
• Subtopic: Science General
• Index: Biological Sciences

The field of management is, without a doubt, one of the most important and fastest changing fields in today's society. There is not any organisational structure — families, enterprises, towns, industries, countries, for example — which performs well without good management. For this reason, many resources are allocated to improve the management in the largest companies and also to management research/education and training.

In the transition to the knowledge-based economy of today, the "smart economy", management faces new challenges and opportunities. Challenges, Opportunities and Tendencies in Organisation Management is an invaluable volume that seeks to deal with the myriad of issues facing management today. It presents the scientific research of the most renowned management specialists from universities, companies, consultancy firms and research organisations from Romania and other parts of the world, who participated in the First International Management Conference organised by the Romanian Scientific Management Society (RSMS) in June 2014.

The book covers a variety of management fields, namely international management and cultural diversity; sustainable development and business sustainability; university governance and management; knowledge-based organisation, intellectual capital, information and management; entrepreneurship, social enterprise and SMEs; and leadership and human resource management.

It seeks to synthesise the latest and most innovative developments in management theory and praxis, in the context of the transition to the knowledge-based economy. It is useful for management professors, consultants, trainers and students, management professionals and those working in public administration. It will be of particular benefit to those who are interested in the evolution of management in the past few years in Europe, especially in Central and Eastern Europe.

The field of management is, without a doubt, one of the most important and fastest changing fields in today's society. There is not any organisational structure — families, enterprises, towns, industries, countries, for example — which performs well without good management. For this reason, many resources are allocated to improve the management in the largest companies and also to management research/education and training.

In the transition to the knowledge-based economy of today, the "smart economy", management faces new challenges and opportunities. Challenges, Opportunities and Tendencies in Organisation Management is an invaluable volume that seeks to deal with the myriad of issues facing management today. It presents the scientific research of the most renowned management specialists from universities, companies, consultancy firms and research organisations from Romania and other parts of the world, who participated in the First International Management Conference organised by the Romanian Scientific Management Society (RSMS) in June 2014.

The book covers a variety of management fields, namely international management and cultural diversity; sustainable development and business sustainability; university governance and management; knowledge-based organisation, intellectual capital, information and management; entrepreneurship, social enterprise and SMEs; and leadership and human resource management.

It seeks to synthesise the latest and most innovative developments in management theory and praxis, in the context of the transition to the knowledge-based economy. It is useful for management professors, consultants, trainers and students, management professionals and those working in public administration. It will be of particular benefit to those who are interested in the evolution of management in the past few years in Europe, especially in Central and Eastern Europe.

Readership: Students and professionals (professors, specialists, consultants, researchers) in the field of management.
Key Features:

• The authors of the research presented in the book are management specialists and experts who are internationally renowned for their research work in this field
• The book covers a highly varied range of management topics, structured in 9 sections, covering both micro and macro levels of modern management theories and practices

Part I

International Management and Cultural Diversity

Chapter 1

The Role of Large Corporate Boards in the Context of Globalization and Smart Economy: Creating Value for All Stakeholders

Mariana Gheorghe

CEO of OMV PETROM

In the context of globalization and smart economy, large corporate boards are very important for the development of a company. The chapter aims to analyze the way in which a company can advance due to the vision of Corporate Boards. The used research methodology is the case study. The case study distinctly presents the way in which OMV Petrom managed to deal with the new challenges arising from the privatization of the company. The analysis is carried forward in three dimensions: the complex socio-economic context, along with the more demanding stakeholders’ environment; adopting new technology and innovating; people changes and challenges. For the last 10 years, since privatization, the company has adapted itself through an almost radical and complex process of transformation and has created new opportunities for all of its stakeholders, while facing the challenges of this new era: the new economic and social order, both locally as well as internationally.

1. Introduction

Our new reality is shaped by three key dimensions that put a lot of pressure on all organizations and companies:

1.1. The complex socio-economic context and more demanding stakeholders’ environment

It is well known that we operate in an increasingly complex socio-economic context and a generally more demanding stakeholders’ environment, as we moved from a resource based economy to a knowledge based economy. Companies worldwide needed to adapt their strategies to this changing context and new solutions emerged as a result, in order to deal with the new priorities of the corporate world. “Boards of directors perform a monitoring and advising role and ensure that management is making decisions in a way that is consistent with organizational objectives” (Eccles et al., 2012: 7).

The financial crisis in recent years has brought a set of special circumstances and conditions that have also clearly put a mark on the general context and have influenced the behavior of companies and their stakeholders, with a generally increased concern for imposing stricter financial and operational discipline. “Researchers have also found correlations between stakeholder performance indicators and conventional measures of corporate profitability and growth” (Global Corporate Governance Forum, 2009: 9).

As a regional company based in Eastern Europe, with presence in Romania, Moldavia, Bulgaria, Serbia, and Kazakhstan, OMV Petrom has also had to additionally face the inherent pressure coming from the general context of transition economies and the deep reforms undertaken to emerge from the socialist command based position to the market economy status.

The main stakeholders, all the parties impacting and driving our business in addition to the employees are: investors, authorities, banks, society, media, customers and suppliers, our partner universities, which are constantly changing and evolving and we have noticed a major shift in their priorities. To give an example: the company’s customers were primarily interested in price before, but they became more sophisticated, with women and young generations being nowadays more of a decisive factor in the household purchase decisions, constantly seeking, in addition to product quality and prices, suppliers that are socially responsible and that have a reduced carbon footprint in society.

1.2. Adopting new technology and innovating

“Industries and companies tend to globalize in stages, and at each stage, there are different opportunities for, and challenges associated with, creating value” (Kluyver, 2010: 41). The economic globalization and the development of an economy where knowledge is prevalent could not have manifested without the platform offered by technology. What strikes business corporate boards across the world nowadays is, however, the extremely rapid and intense pace of the development of new technologies and the information revolution creating a new dimension of organizational transparency and communication. “The company provides timely disclosure of information about its products, services, and activities, thus permitting stakeholders to make informed decisions” (Epstein & Rejc-Buhovac, 2014: 22). The depth of the current levels of understanding real-time business operational information, empathizing with consumers and building a universe of connections with the environment in which the company operates was never seen before. This constant challenge to keep the pace with the rapid change of technologies and information creates a different scope of work for the business managers operating in the new economy.

The prerequisite for the development of the new economy and of all the technological and informational advancements remains energy — we cannot conceive of a modern society without having sustainable and affordable energy sources.

1.3. People changes and challenges

“One of the primary duties of every board is to ensure that its enterprise is heading in the right direction” (Tricker, 2012: 176). The last challenge is represented by the people dimension, present in all business aspects. The generation Y of our employees is no longer satisfied with just having an interesting job, they are looking for quick results, rapid evolution, and on-the-spot reward and feedback. They are technologically savvy, more mobile, and constantly seek for a better work–life balance. Balancing between the need for speed of the generation Y employees and the more experienced generation X baby boomers puts additional pressure on boards and business executives in planning the workforce development by increasing motivational actions, and it will go a long way towards determining a company’s success in the future.

2. OMV Petrom Case Topics

The chapter will focus next on bringing to attention the OMV Petrom transformation case study, as this year it celebrates 10 years since its privatization, along the three dimensions identified before:

(a) Context: The evolution of Petrom with a strong impact on the Romanian transition economy;

(b) Integrating innovation and technology (owned and through partnerships);

(c) Stakeholders’ engagement and performance culture.

2.1. Context: The evolution of Petrom with a strong impact on the Romanian transition economy

Romania is one of the earliest historically attested oil providers in the world, as in Romania the first oil exploration was documented 150 years ago, earlier than those of US or Russia. So we hold the record for the first documented oil production in the world.

Today, OMV Petrom is an operationally integrated oil and gas player, with a market capitalization of around EUR 6 bn, ranking as the largest company in South Eastern Europe and 16th in Central Eastern Europe. The Group turnover is EUR 5.5 bn and the total shareholders return based on dividend yield plus share price increase stands at 16% in 2013.

OMV Petrom has a complex shareholders structure: 51% OMV — Austria’s largest listed industrial company, an integrated oil and gas corporation with international presence; 20% the Romanian state, around 19% Property Fund — a close end fund managed by Franklin Templeton from US, and around 10% Bucharest Stock Exchange Free Float.

OMV Petrom represents a challenging business proposition and epitomizes a player with strong economic and social impact. It is the largest private employer in Romania, with over 20,000 direct employees and more than 60,000 indirect jobs created, at the same time being the main energy supplier accounting for almost 40% of oil, gas, and fuel supply and up to 10% of the power generating capacity.

OMV Petrom has a strong impact on the Romanian state budget, being the largest contributor, with a significant equivalent of 11% contribution to the non-consolidated annual revenues budget. This also represents a big responsibility for us, as the company generated and collected taxes amounting to around EUR 16 bn cumulated since 2005, the first year after the privatization.

OMV Petrom is also the largest investor in Romania, with EUR 10 bn cumulated investments over the past nine years, as almost 90% of company’s operational profit is reinvested each year.

These key performance indicators (KPIs) illustrate the successful turnaround of a state company into a performing privately owned, competitive company.

How was this transformation possible? Through a determined and dynamic change management process and a comprehensive risk management approach. As Board members of a large corporation, we are accustomed to deal with change and risk daily in our operations and in our decision-making, particularly in the dynamic global and European context mentioned earlier.

To make this turnaround possible, we have managed our corporation through thousands of change projects: after privatization in December 2004, we identified all the dimensions of the organization which were not in line with what the market and the society required and with what the industry’s best practices were at the time. We have taken all our activities from operational processes to corporate functions, identified status quos and the best practice of the industry in each area and then implemented the required change, in order to take the organization to that ideal position.

As this continuous effort for change became the standard norm, I was afraid, as the chief executive officer (CEO), of maybe pushing the organization too hard and I felt at times that we almost had a fatigue of change. But this is what it takes to turn around a large organization, as Petrom was before the privatization, into a very successful, competitive, dynamic company that has now become a role model for the Romanian economy.

The main dimensions of our change journey cover the areas of operational efficiency, management turnaround, and corporate governance.

Fig. 1. The economic situation of the company before and after privatization

Source: Created by the author.

First, the company concentrated its operations on its oil and gas core and divested from large non-core businesses, at the same time embracing t...

Table of contents

• Cover page
• Title page
• Copyright page
• Contents
• Foreword
• About the Editor
• Part I. International Management and Cultural Diversity
• Part II. Sustainable Development and Business Sustainability
• Part III. University Governance and Management
• Part IV. Knowledge-Based Organization, Intellectual Capital, Information, and Management Documents
• Part V. Entrepreneurship, Social Enterprise, and SMEs
• Part VI. Leadership and Human Resources Management
• Part VII. Management of Change, Innovation, and Quality
• Index