Key effectiveness measures of implementing benchmarking process in oil and gas industry Essay

Abstract

Benchmarking is one of the most critical processes an organization undertakes to analyze its performance and compare results with the aim of assessing its productivity and competitiveness against others in the industry. Developing an effective benchmarking system requires implementing benchmarking success factors.

These factors include setting clear objectives, training, management support, planning and recording as well as enhanced flow of communication. Saudi Aramco has not had a well developed benchmarking system in its safety department.

Establishing a safety benchmarking system in the company will be of utmost importance in developing better and new plans as well as adopting best practices. This has in turn affected the performance of the department when compared with that of its competitors. This study aims at evaluating the efficiency of the safety benchmarks which are used by Saudi Aramco in line with benchmarking success factors.

Introduction

Safety benchmarking has become one of the most critical processes an organization undertakes to analyze its performance in safety management and compare results with an aim of assessing its productivity and competitiveness against others in the industry.

Safety benchmarking will be of utmost importance in developing better and new plans as well as in adopting best practice in the safety department at Saudi Aramco Company. The process of benchmarking requires developing an understanding of the success factors of benchmarking (Coers, Elliott & Henderson 2001, p. 134)

It is important to mention that this study seeks to identify various success factors for benchmarking procedures implemented in the oil and gas industry especially at the Safety department. Safety is of paramount importance especially in the oil and gas industry given the highly flammable and explosive nature of oil and gas related products. Studies reveal that the company has not had a well developed safety management systems, a consideration that calls for evaluating the benchmarking system in its safety department.

Background

According to Antia (2003, p. 102), Saudi Aramco is involved in the management of the conventional oil reserves in Saudi Arabia. Additionally, the company is engaged in exploration and mining of oil reserves. The major process the company has focused on has been refining of oil as well as ensuring efficient distribution of oil products. It is the leading oil producer in Saudi Arabia.

According to Cappelli et al (2011, p. 490), safety benchmarking is a process that helps a company to compare its performance in safety management to that of its competitors. By adhering to benchmarking success factors like setting up of objectives and planning, the company can be effective in formulating internal goals and setting up strong security policies. Developing a benchmarking system is critical in that it aids a company to gain advantage over its competitors (Eklund et al 2003, p. 171; Eklund et al 2008, p. 127).

According to Fridson (2011, p. 93), Saudi Arabia is undoubtedly the leading producer of oil in the world. Its oil production accounts for almost 13% of the world’s total output. This implies that Saudi Arabia greatly influences the supply of oil in the world’s oil market which impacts on the international prices (Gerding 2009, p. 150).

Statement of the Problem

In the current competitive business environment, it is important for the company to formulate the necessary strategies to ensure that it remains competitive. This study aims at evaluating the efficiency of the safety benchmarks which are used by the gas and oil industry in Saudi Arabia. This will also assist in measuring the performance levels in the in the Saudi Aramco safety department (Westerberg & Wincent 2008, p.40).

Objectives of the Study

The study will be guided by the following objectives

• To identify the safety benchmarks which are being used by the safety department in Saudi Aramco Company.
• To identify the various success factors for benchmarking that can be used to develop safety benchmarking system in Saudi Aramco safety department.
• To evaluate the safety benchmarking practices of Saudi Aramco Company

Significance of the Study

The outcome of this study will help Saudi Aramco to carry out the necessary adjustments to the safety benchmarks which it uses. This will ensure that the company gets useful information which can be used to help it to seek the way forward.

Literature Review

According to Gomes and Yasin (2011, p. 550), benchmarking technique was developed in response to increased competition. It entails comparison of different companies in the same country or even in the same industry. Benchmarking provides crucial information which can be used to enhance operating efficiencies in the company. Additionally, benchmarking can be used to identify problems as well as come up with innovative solutions for those problems (Hertz 2012, p. 4).

Irani (2004, p. 27) argues that benchmarking may sometimes take the form of one business studying the performance of another company which is considered to be the best in a particular industry (Kaza 2006, p. 381).

Safety Benchmarks

According to Larkin and Casscles (2003, p. 10), safety benchmark refers to setting up of standards of excellence in safety management. These standards of excellence consist of aspects such as security, process safety management, emergency preparation, maintenance, hazard analysis, inspection and incident investigation (Lenard et al 2005, p. 69).

In order to enhance meaningful comparison, the safety benchmarks are subdivided into three categories namely- soft benchmarks, hard benchmarks, and self-regulated benchmarks (Lucio & Giuliano 2010, p. 139). Soft benchmarks refer to those safety management standards which are different for various industries.

Safety benchmarks used In the Saudi Oil and Gas Industry

In the Saudi oil and gas industry, the safety benchmarks are used as the benchmarks against which performance of the company is measured against that of its competitors. According to Macey (2002, p. 90), some of the benchmarks which are used include safety and health policies, line accountability, planning, responsibility and authority, top management involvement, program evaluation and resources(Pera & Bird 2011, p. 24).

The safety benchmarking tools which are used to evaluate the ability of the business to generate revenue as compared to the resources which have been used (Manzerolle & Smeltzer 2011, p. 330; Martin, Oliver & Jacquelyn 2010, p. 188). If a company has a higher performance level than its other competitors, the implication is that the company is doing well. This gives that company a competitive advantage over its competitors (Monkhouse 1995, p. 41; Nayak and Nahak 2011, p. 70).

Benchmarks used by Saudi Aramco

According to Scott and Krempley (2012, p. 16), Saudi Aramco company benchmarking is done at three levels. The first benchmarking is done to compare safety management practices in the oil industry. Using this approach, the company is able to measure its performance relative to that of other companies which are in the oil industry (Shayne 2010, p. 94).

The other benchmarking is done internally whereby the company reviews the efficiency of the project system (Rzepczynski 2011, p. 100). A study which had been carried out indicated that Saudi Aramco had many areas in project performance that needed to be improved (Shayne 2011, p. 85; Putkiranta 2012, p.335).

In order to enhance project performance, the management decided to reduce the amount of time used for the projects. Moreover, the management was to ensure that the projects used the minimum possible cost.

Criteria for measuring the effectiveness of the safety benchmarks

There are a number of criteria which can be used to measure the effectiveness of safety benchmarks. Firstly, the safety benchmarks which are used should help in the identification of strengths and weaknesses of a company as well as helping it to set the necessary targets to enhance the performance (Suh et al 2010, p. 220). According to Sun and Wu (2011, p. 337), safety benchmarks should be applied continuously and should be incorporated in the strategic decisions of a company.

Methodology

This section will give a clear insight on the methodology that was applied to achieve the different objectives outlined earlier in the paper. Besides, it will outline the methods to evaluate safety benchmarking practices of Saudi Aramco Company. Additionally, it will assess critically the process that was used to establish the study results.

Success factors that will be investigated in the study

Before undertaking a benchmarking study, it is of great importance to understand and have a clear glimpse of the success factors of benchmarking. The major success factors will include setting clear objectives, training, management support, planning and recording as well as good flow of communication. The success factors of benchmarking will highly assist toward adopting a benchmarking procedure that will ensure maximum safety at Saudi Aramco Company.

One of the effective factors that should be considered when planning for a successful benchmarking process is identifying the weaknesses and strengths of a company. This is important in the sense that it assists in setting up benchmarks for improvements. Besides, it also aids in understanding the prevailing situation of a business, a consideration which is necessary for setting up targets.

Additionally, a successful benchmarking factor requires developing a focus aimed at improving operations. In this case, searching for best security practices as well as adopting a comparative approach is necessary. This ensures institutional strategic development and a long term continuous approach.

Moreover, successful benchmarking factors are usually realized where an organization is committed to change. This change has to be in terms of setting up effective leadership structures, involvement of staff in change and investment in human resource and finances. The latter ensures that the benchmarking practice is conducted continuously and purely by the institution.

Benchmarking is therefore a critical factor in an organization’s department as it is the case with Saudi Aramco. There are various types of benchmarking which include:

Collaborative benchmarking

Collaborative benchmarking assess how successful benchmarking factors can be attained within an organization. This is a type of benchmarking that involves collaboration between various entities.

Internal benchmarking

Management analysts indicate that internal benchmarking is necessary within an organization and is determined by the success factor of commitment of an organization to change. This is a kind of benchmarking whereby an organization conducts a comparison of the various processes within its operations. As noted earlier, this requires setting up effective leadership structures, involvement of staff in change as well as investments in human resource management.

Generic benchmarking

This refers to the process whereby an organization compares its operations with the best processes and practices in the market without considering the industry in which the best process operates in. In relation to successful benchmarking factors, a flourishing generic benchmarking requires developing a focus aimed at improving operations.

This can be attained through searching for best security practices as well as adopting a comparative is necessary. As noted earlier, this ensures institutional strategic development and a long term continuous approach.

Data collection method

The study will adopt both primary and secondary data collection methods. The use of questionnaires, surveys and interviews in this study will form a major tool for primary data collection.

Questionnaires

Questionnaires will be designed in line with the study objectives and in a manner that investigate the success factors that can be used to develop benchmarking practices and which appreciate the process of data analysis.. Employees will be required to fill questionnaires in order to find out the benchmarking success factors that can be used to develop safety policies of the organization.

Data will not be collected from employees only but also from department managers, security workforce and safety personnel within the department. Some of the questions that will be contained in the questionnaires include:

1. Is the safety department having any benchmarking practices?
2. What are the current benchmarking practices(if any) that the safety department is using?
3. What benchmarking measures has the department put in place?
4. Are the benchmarking measures effective and how can they be improved?
5. How effective is the leadership in this department in ensuring the implementation of benchmarking success factors?
6. Is benchmarking a part of planning process in the department?

Survey

Various employees of the company including the top managers with the exemption of the senior safety and security managers will be required to fill survey forms that will be used to evaluate the implementation of benchmarking success factors in the safety department and how its application can impact on the overall performance of the safety and security department.

Research design

Research design can be defined as the plan that will be used to collect and utilize data so as to achieve the required information from the data. The research to be conducted at Saudi Aramco will employ the case and field research design.

Data analysis

Data analysis will involve the process of analyzing the data obtained from the research in order to find out the information being studied. Data from the research will be analyzed using the SPSS statistical data analysis package. This package was chosen because of its robustness in analyzing data. The package can analyze scientific data and give out concrete and absolute results especially in determining the unknown parameter.

Reflections

The quantitative numbers in the performance are considered as key indicators of the organization. Benchmarking provides information on the operations, profits and performance of other similar companies and provides support or guidance in any form. The benchmarking process contributes to the study of a company’s demographics which include identification of characteristic of the company.

Conclusion

It is evident that a study on the success factors for benchmarking procedures at Saudi Aramco is unavoidable. This study should specifically focus on the safety and security department because it is one of the crucial departments at the organization. The smooth operation of the safety department will to a large extent increase the success of the company because most functional areas in the company rely on the safety of security department.

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