Accountability based management principles at Suncor Insitu

Michael MacSween   Let me first welcome everyone, especially the guests that have come from far away. I mean, impressive to come from Australia or Lebanon or from Europe. I came from three blocks away, so I live in Calgary. I'm a proud Calgarian. I've been here about six years. And so it's great that you've come from far and near because I know there's a lot of familiar faces in the room as well. This is the third time I've spoken in this hotel this week. It's strange. We had our board meeting Monday and Tuesday this week and so I spoke Monday. I had a presentation Monday and Tuesday. Monday went a little bit better than Tuesday. Yesterday I had in the major projects group, which is the area I lead now in Suncorps. We had all of our admin assistants together. They have an annual get together because they're spread geographically around a number of different areas and they have a lot of common issues and it's an opportunity for them to do some professional development. And so I spoke for an hour at lunch and it was just the room next door. So those of you here, you may have heard some laughter and some good times with it, but I'll tell you, it's the first time I've ever spoken with a group that was exclusively female. And the questions were a hell of a lot harder than the ones I had Monday and Tuesday. And it's good that there was no videotape. Anyway, with that I'll start and I think I'm least comfortable talking about myself, so I'll make that the briefest. I've been at Suncor since 1996 and been in the oil industry for over 20 years and currently lead the major projects group at Suncor. I've worked in operations, technical kinds of functions in a variety of levels. I'm currently in the executive team at Suncore and it's a company that's changed dramatically over the time that I've been part of it. And I'm going to speak specifically around the merger that occurred with Petra, Canada and Suncorps in 2009 because I think it is a little bit of a special case. I've worked with Paul and Paul's been a great confidant and thought partner through many aspects of what I've dealt with in my career through the Requisite organization thinking, but in other areas as well. And that's taken its form in a number of different roles and areas. But I thought I'd focus on the merger because it is a little bit of a specific case and it has some unique aspects to it. So I'll start with and I am technically challenged. Here the button in the middle. Okay, there we go. So I'll start a little bit about suncor and PetroCanada. I know lots of people here are familiar with the companies, but for those from away, suncor is Canada's largest integrated energy company. We're involved across the country about a $52 billion market cap this morning. And we have oil and gas production. We have retail gas, we have offshore production, some international production in the North Sea and in the Middle East. We have a refining network that is in Canada and into the US. And so it is a vast, diverse company with about 14,000 employees. So it is big. And the merger with Suncor and Petro Canada was the biggest in Canadian history. So it was a big deal. The oil sands industry is what defines Suncor. So Ken talked about the boom that's been happening in Alberta and it's been happening for some time. There's been certainly different levels of velocity through the last ten years in this region. But it is largely driven by the oil sands and development of that energy resource, which does distinguish Suncor as well. If there is one aspect to Suncor that I describe, all the components of the company, the one aspect that I think differentiates us from others is the vast resource that we have in the oil sands. And oil sands initially when it started in the mid 60s, was mining. And so a lot of times you see the media reports, you see the mines. And there is a large amount of the resource that is too deep to mine. And it is the vast majority of the resource, roughly 80% across the province. And it's true in Suncor's case as well, that are resource based. It's about 80% what we would call in situ, which is too deep to mine. And there's different methods that are used to extract the material. The most common is something called SAGD, which is steam assisted gravity drainage. And it was commercially developed in kind of the scales we're seeing about twelve years ago. And it was really the horizontal drilling techniques, much of which are now getting implemented in oil shale and shale gas that you hear about that changed the industry. That was the technology that allowed us to access this resource, this 80% of the oil sands resource. So that's a little bit about Suncore. That's a little bit about the area as well. I don't want to dwell into too much technical detail about the area of the organization. I'm going to talk to you. But it does help to know what we do in the area and in Suncorps, there's a couple of operating sites, firebag. It's named after the Firebag River and First Nations people would carry fire in a bag as they would go on hunting expeditions. That's how the site gets its name. And the Mackay River, which runs by the Mackay River. And so these are two operating sites. Firebag was a Suncore legacy site, and Mackay River was a PetroCanada legacy site. And so there's operations, there's projects. Roughly about $15 billion worth of asset value so about $12 billion of asset value at Mackay River or at Firebag and about three and a half at Mackay River. So big capital intensive projects that have been developed over the last ten years. And the technology piece, it is a young industry. There is technology and innovation that is happening at a very rapid pace. There's intense competition as well. So there was one site I mentioned twelve years ago, there's now 33 sites, all competing with each other, lots around technology and people. So the people piece of this, I would say, is the largest constraint. So Paul mentioned that I started together with him in 2008, and I came into the operating area. Most of my background was in operations. And it's funny, you go into an area and you see things right away and you have to act quickly. And I've had some great mentors that have said, and I'm sure how many Star Trek fans there are here, but you get assimilated into the Borg if you're there three months. Like, you stop seeing things that you would have seen with cold eyes coming in first. And so it's important to take note and always have the mindset that you're eventually going to deviate towards the norms if you're not careful. And what I recognized in the place was kind of a combination of new tech, resource developed people running operations with a project, mindset that the facility had never really kind of gotten out of being a project, yet it was operating and the results weren't great. And a big piece of what I recognized is it wasn't clear who was doing what or who was accountable for what. And even the people who you would think would be accountable didn't think they were. And things just weren't structured or organized in a way that was sensible. So that's in part how Paul and I got involved. I had Paul come back about six months after we'd made some of the initial changes because I wanted a sober second look again in terms of how things had progressed. And it's always with changes that are made in terms of organization or with strategy. It's never perfect. It's an 80% kind of view always that you take. And so my attitude was, let's make some changes, let's do things in the right way with the structure grouping, work appropriately, getting accountability clear. Not sure it's perfect in terms of selection of people, but we have to go and we'll come back and look and fix things after in six months if there's things that are out of sorts. And so that was a little bit of how things evolved with Paul's initial involvement, coming into help to look at the operation, thinking about the culture that existed as well, that was there. So if you can think of this industry being a new industry, it's not quite conventional oil and gas, but you'd have some of those people there who are drilling and operating in the subsurface, and so there's a certain way of thinking and operating in that environment. The surface components are big. Twelve, $15 billion worth of kits, so big boilers, big steam generators, you could see a manufacturing operation on the surface. And so there's a unique blend of this subsurface surface group and coming from a variety of cultures and so each thinking that they knew how the thing should run, the thing very integrated in that neither succeeds without both pieces working together. And so really addressing how those components worked, getting accountabilities clear and the collateral relationships well understood and agreements in place were needed. And there was a big operation down the road as well. It was an elephant. This is the oil sands mine upgrader, which is the mothership for Suncore. There was connection with that operation and it was connection beyond just the physical connection of pipe, it was connection of culture, it was connection of shared services. There was a lot of elements and organizational aspects as well, and so accounting for distinction, but as well ensuring that we maintained that connection and the Suncore culture and all that we did. And the other aspect that I mentioned already was just the fact that there was a project and the project group had run the site and the project group was still the most predominant group on the site because we kept building things. And so that is a very different operation or a very different set of activities when you're building. And I'm coming to appreciate it now in my current role. But when you design and build things, it's a different cast of characters and it's a different way of thinking versus operating something day in and day out, looking to manufacture oil in a consistent, reliable way. So those were some of the aspects that we had to work through in terms of setting up the structure in the right way with clarity and accountability, really establishing the culture as being an operating site beyond just a project site and ensuring that we did the checks as time passed. So fast forward to 2009, paul and I were reminiscing last night just about how the whole process worked. And one of the things that I would say was a great fortunate at the firebag site premerger was the team that was established there was probably the closest I've ever been part of. We went through this process together. We had very methodical selection process in terms of the right characteristics of people and it was high performing and it was high performing only for six months. And then we had this merger come. It was special, but it was too short. And that's the one regret I have about the merger because I think it would have been phenomenal what this team could have accomplished. Things happen, big merger occurs and with it another set of cultures coming together. This being a corporate culture, I think the best way to describe the difference is in a simple way between Suncorps and PetroCanada. Suncor, very entrepreneurial, had started in the oil sands and almost a maverick like identity. And so, you know, Suncor would be shoot, shoot, aim. That's how you would describe how Suncorps operated PetroCanada extremely methodical. I wouldn't say bureaucratic, but definitely not quick and would think through things very carefully and would act, but much more thoughtful and planful is how I would say. And so it was ready, aim, aim, aim, aim. And they would eventually shoot for sure. But it was just a very different set of cultures coming together in that aspect. Lots of common values around safety and a lot of common elements. So I wouldn't suggest that this was diametrically opposite kinds of cultures. There were aspects definitely that were the same, but there were some distinctions. And I would mean it was the senior executives and how they operated that did have the largest effect on that whole culture. So the company name was Suncore. The executive team was split. Our CEO, Rick George was from Suncore. And our board chair was from Suncor. So there was definitively a Suncore set of systems and feel. But it was recognized that this company had to be very different. We could not operate with the same kind of maverick attitude. With 14,000 employees and being very large, we'd grown from a medium to a large company and now we're a very large company. And so operating the same way was not going to be an option. So we labeled it the new Suncore and really wanted it to be operated in a very different way and to take the best of both and blend something that would be know, the merger opportunity. I guess fortuitous in that. Paul and I had worked together. We'd worked through the firebag area and had developed a couple of sets of steps there to group work appropriately. So there was certainly some portability of that part of the operation. There was the Mackay River operation that came together. And so at merger, a number of different business areas got grouped. We had two refineries in the Suncorps network, two refineries in the PetroCanada network. Those got grouped. There was a natural grouping of different asset groups. And so that's how the insitu area formed. Firebag, Mackay River and all of the other undeveloped properties came together. And when you look at Suncorps PetroCanada and how different groups came together, it was one of the areas, especially in the business units, that was a pure split. It was 50% PetroCanada. 50% suncor. That was the group of people coming together in other areas. For instance, oil sands, mining, heavy suncore, the downstream, the retails like obviously the PetroCanada network across the country, heavy petra, Canada. And so there were different business areas with different flavors. This was, I think, one of the business areas that was effectively half and half. And so great synergy opportunities, a new industry, very competitive, lots of technology that we'd independently been working, lots of groups coming together. It gave us an opportunity to get really clear with accountability and getting firstly the work structure set up properly right off the bat, getting real clear with accountabilities in terms of who was accountable for what, linking that to the strategy because we had a strategy of firstly developing synergies coming out of the merger and a strategy of operational excellence and building the foundation for Growth in that we needed to innovate and build technology. So there were definitively elements of that. And we had a triangle, we built a diagram to depict that along with a vision statement and a mission and all of that along with the grouping and organizing, happened in the span of three months. So I'll talk firstly of the benefits of building that requisite organization and I'll speak about the benefits three years hence, but I'm speaking here mostly about the benefits at the time because it's an intensely chaotic period, as you can appreciate. My wife remembers that summer very well. It's interesting because we both are small town people, we're not big city people. We were married in Canmore, which is a nice town towards the mountains here. And so we purchased a place and I purchased it because market conditions were right. But as well, I knew it was going to be a hell summer and I purchased it in May and she spent the summer there. And I did not have a day off work the whole summer. It was three months of intense, tense activity. The benefits that I saw firstly, we had a common language. So we had Paul come in with the group and we set the top level first and had the top group and it was 50 50 between the legacy organizations that came together. And what I noticed is that we would talk what we thought was the same language, but oftentimes it was very different in terms of what the context was or the quality was. And so with many of you from an HR background, we would talk about succession planning and you talk succession planning, but then we'd each have a very different set of succession plans in terms of the quality, in terms of things we'd look for, in terms of how low we would go with levels. And so you really had to drive two and three questions deeper to fully understand each other. And this presented a common new language. It presented an ability for us to structure things and talk about accountabilities and talk about grouping of work and what the work was in a very common language that we could collectively understand. So a fresh start, the slate is clean, you're starting with these pieces coming together and you don't have the 45 year legacy of people and positions or the aspects of having to do things a certain way because of what senior or even board level people think. And it just allows you to get work grouping in the right way and allows you as well to think through and take stock where you're at and to think, where are we going to go in the next three years? Because a lot of times you can kind of barrel along and forget that over time and not progress structure in a way that supports things that have happened in the business that are positive or how things have moved. It allowed us as well, to really focus on a playbook and Paul helped us through that process and it was all about the strategy, what we were going to deliver in terms of the goals or expectations and allowed us check in points along the way to check how we were progressing. So those were some of the benefits, some of the challenges. I mean, it was incredibly intense. The merger was announced and it closed three months later. There were lawyers in the room through the whole process until the competition bureau had finalized the merger. That was two of the three months. And so that was stifling. I'm not sure how many have worked any lawyers in the room? No. Okay. It was stifling at times. We could not obviously go into discussion areas until things closed that, you know, that were appropriate, but it it was challenging and and there's a lot of things happening. I mean, it's not just this you need to think through, it's combination of benefits, it's combinations of all kinds of human resource pieces, it's strategic thoughts around disposal and combinations and you're dealing with operations that are still running as well and keeping things moving because it's a 24/7 deal aside from all of this. And so there's a lot to sort through the culture, I describe some of it, but just the style, the way things occurred in different interactions in general, I think it was important to set the right context and environment to ensure those things, you know, were honored. But that was difficult. And then when the structure was set, it was about selection. And there were lots of leaps of faith in this process because I was very clear that we had a blend coming into this and we needed a blend throughout and we needed the best people for the right roles. And there's bias, there was different levels of understanding of different people's capabilities and there were 60 people who exited in this area, the organization, there was 700 people. This was a growing area as well. So you can appreciate in other areas that were not growing, it was even more challenging. But selection is tough in that circumstance and that's where it was important for us to come together as a team, as a senior team, and agree to things and leave the room. Agreed. And a lot of complexity because it's not just your area, things are happening, it's happening everywhere. And so there's managed chaos is how I describe it. So three years in, I would say I'm extremely proud of the insituary. There's terrific people who've done amazing things there and I've not been leading it for the last ten months. But I look at it every day and I can tell you that there's a lot of aspects I'm very proud of. It has the highest reliability in terms of the surface facilities, higher than even the refineries. And so the reliability and consistency of the operation has been very good. The culture, I think, is one that is very progressive. The tests for me were that people stop referring to themselves in terms of what their legacy heritage was very quickly. And I'm not sure that happened in every area and I've frankly still seen it in some areas in the company. So that was one of the measures, but I don't think it solved everything. There's always work to do, there's always opportunities, but I think it is something that has progressed very positively to that new Suncor that we were working to create. The synergy value has been immense, it's been staggering. And the biggest piece was the technical groups coming together. And it's not just the technical groups, the operating groups came together and I would say the Suncor manufacturing focus on the surface was stronger than the PetroCan manufacturing focus. The PetroCan subsurface focus was much stronger than the Suncore focus. And so those two pieces that I described were very complementary and we mixed and matched people right off the bat to get the groups together in a way that was going to generate that as quickly as possible. And it's very exciting what's been created. We've had changes since in the organization, so we continue to grow, continue to evolve. We had a change this year with Steve Williams becoming our CEO. And so with those structural changes, we've been able to port parts of the organization. And what I like is parts of the organization are emulating and copying what we've know. That I think is good in a lot of ways in terms of the way things were structured and developed. And I think it's an amazing future. I think it is a very exciting business and terrific people that are there. So anyway, that's a little bit about my experience around requisite organizations and specifically the merger that occurred three years ago at Suncorp PetroCan. With that, I'll turn it over.

Speaker B Thank you very much, Michael. His story about the lawyers reminded me was the first time one of the things we needed to do when we were merging was to not accept the fact that titles over in Petracan would necessarily represent the same level of work complexity that we were talking about. Like was a vice president really a level four, for example, or was a director really level three, whatever. And they had some different kind of titles that they were using over there as well. So one of the things we felt we needed to do if we're going to follow the requisite principles was to make sure there was an alignment of those. But the funny part of the story was I wanted to go and of course, interview those people and do some leveling interviews around trying to find out what the complexity of the work was. You part of PetroCan, and it was the first time I've ever had to go through a lawyer to make sure that the questions I was asking were going to be okay and not contravention to any kind of competition bureau rules or regulations. So that was kind of an interesting experience. What we'd like you to do now, if you would please, for about five minutes, just huddle at your tables and talk a little bit about some of your reactions to what Mike had to say about how the principles may have been helpful to a very strategic kind of situation in a company, the merger particularly, and maybe try to come up with one question that you might have for Mike, and then we'll go around and get as many as we can in the time that we have. All right.

Speaker C I'm Susan Tangy from Warley Parsons.

Speaker A Oh, hi, Susan.

Speaker C My question is, I'm curious as to what your staff at the level two would be saying in terms of what they've noticed as the change or the benefits. And well, I'm assuming, you know, because there will be with this model, some communication upwards. So I'm curious as to what they would say.

Speaker A It's a great question, and I would say directly after in terms of the context of the merger, I think having that clarity very quickly was important for them because I'm not sure that it necessarily existed before in terms of what their accountabilities were. And I do think we had a number of areas where we had jam ups at level two. Level three, one of the challenges with language is we went through this and corporately we kind of reversed the leveling designation. So level one was our CEO and level two was my level. So we were always having a language challenge that Miles laughs around that. So I have to reorientate myself always between the two. It's like speaking English and French. But I think removing some jam ups was an important thing that we accomplished through this. And that's definitively one thing that I heard, and there's probably others as well. But starting the ground running with clarity was important.

Speaker B I'll come down this way somewhere. We got a question down here somewhere. How about this table over here? Got one.

Speaker D Well, we discussed mergering because it's a fascinating story, of course. My name is Franz Beerling. I'm from the Netherlands, by the way. But there's also this aspect in your organization that you told about the future. Are there any next steps in strengthening requisite organization in your organization? Do you have a next step, model or plan?

Speaker A Yeah, I have a next step because I'm in a new organization now and I intend to implement the Ro principles with it. So I don't think universally across Suncore we apply the principles I think we applied them to lesser or more extents. And so in my organization, my new organization, I intend to implement them. I would say in the Insitu group, it's something that always has to get viewed periodically because the organization is growing. When Paul started with us, we were producing 30,000 barrels a day at Firebag right now, the combined entity produces 140,000 a day and it's going to produce over 200,000 by the end of the year and so end of next year, so it evolves. And so there's an annualized or process that needs to happen periodically to view the work because the work's changing.

Speaker B Okay.

Speaker E Hi there. I'm Edwin nickerson. I'm from two blocks that way. I was wondering what tools you used because I think it would have been very difficult for you to select your new team 50 50 because you have a four year interview with half of the team or half of the candidates and potentially I'm not sure what tools you used for the other half of the candidates. So if you could talk about that, that'd be interesting.

Speaker A So the first thing we did as a leadership team and so I selected the top five members of the team. So there was five leaders at the next level, at the VP level. And the Firebag leader was a legacy Petracan person. The Mackay leader was a legacy Suncorps person. I purposely flopped people at the next level and I set the expectation with that group and we agreed to it that we would hold true to the principles of selecting the best people, that we would represent the people within that team. So it was some of the steps of trying to create a higher trust environment with that team, the senior team off the bat. And it wasn't easy because people were coming with a variety of different feelings coming into this relationship. Some people thinking that they were better suited for my job than I was. I had to kind of look past all that. But it was really establishing it with the senior team to start. And then as we went through that selection process, we were all faced with the same situation because the leader of Firebag was a former PetroCan leader and so he didn't know the people. And so when we're staffing the organization, but I knew the people. And the similar case happened at Akai River where we had a former Suncorps person involved there, I could maybe add.

Speaker B I mean, we did set the minimum critical specification as information, process and capability for level of work. So for example, for his direct reports, we shared the constructs with the PetroCan people as well. So it made sure that we were on level ground and we set that up that those were level four capable individuals. And then all the other things that Mike had talked about came into play and the same at the next level was were these next level. People, the senior directors and directors, were they operating people that were currently capable of operating at that level. So that was a minimum, but not sufficient criteria for selection. A couple more questions. Anybody just want to come up to the microphone and Wanda, why don't you put the mic in?

Speaker C Good morning. Our question from our group is how did you measure Operational Excellence, culture and synergy so that you knew that things were progressing the way that you wanted them to?

Speaker A There's a variety of leading lagging indicators, I think, for all of them. And so I'll speak first with Operational Excellence, it starts with safety and there's leading and Lagging indicators around it. And when you run reliably and you have consistency and you're improving and you're doing things the right way, you see that first, that first measure. There's others that follow around just how things operate. And lastly, you see production and costs decreasing. So that would be the Operational Excellence piece. I think it's true in the project, with new projects we brought in, but as well, with the technologies that we were progressing, there was definitively steps or measures leading and lagging in those too. In terms of culture, I would say the piece about people moving past legacy. And we talked about the L word, and we had to stop using the L word and the new identity, creating that identity and people feeling part of that identity. And so I described our vision and mission and we had a symbol. It was a triangle. And everyone had the triangle attached to their ID card. And so it was one measure we established at each of the operating sites, a closed circuit television system where we would have frequent information about all the operations. So not just the Firebag or Mackay River operation, but vice versa, and tried to have information about other company aspects as well. But it was a lot of working to get information and getting people aligned to that new identity. And so it's probably the toughest one to measure. But we did have surveys with lagging results that kind of showed connection with values and that type thing. The synergy piece, we actively measured it. I think you can quickly get into false accounting in that exercise because you can show whatever you want and there's maybe a bunch of downticks somewhere else that don't get shown in the variances. But to me, the truest measure was our cost decreased significantly. And that was true in both operating sites. And we had real tangible pieces that we could point to. But I think the biggest piece was just how the groups came together. That's what created the synergy. It wasn't the fact that we applied an exchanger cleaning method, one place that had been used somewhere else, or we used some pipe that we had stored on the ground at one site that could get used at another site. Those were trivial details compared to the power of the people come together.