posted 14 Mar 2005 in Volume 8 Issue 6
Halliburton: A sustained commitment to collaboration
A KM programme, founded on communities of practice, that ensures its long-term sustainability by building tangible, bottom-line value. By Jerry Ash
Here’s how you ensure the sustainability of your KM programme: make sure you have the support of management at launch; connect to the issues that keep executives awake at night, but don’t pick battles you can’t win; be 100-per-cent successful and prove it; and, make sure no-one overlooks the real value added.
It’s not quite as simple as that, but those are the keystones of a four-year-old KM initiative at Houston-based Halliburton that has given life to a strategy and a hypothesis for sustainability (see sidebar ‘Halliburton’s KM hypothesis’ on the next page) that are one and the same. There is nothing intangible about knowledge work at Halliburton and there is no mistaking its value – ever.
The Halliburton hypothesis doesn’t pretend to be a complete formula for success, but experience over four years suggests that failure to follow any one of these guidelines will lead to trouble. Perhaps it’s time to stop calling it a hypothesis.
In the experience of Michael Behounek, director of knowledge management at the company, a KM project that starts by shortening this list faces the likelihood it will fail. In one particular case, one of the technology groups began following only part of the hypothesis and its KM project did not work. The team was forced to go back to the KM core team to facilitate a relaunch.
The strategy and sustainability hypothesis began in mid-2001 based on the vision and drive of one of the company’s senior executives. Halliburton has two major operating groups: the Energy Services Group (ESG) with 35,000 employees, and KBR (which stands for Kellogg-Brown-Root) with 65,000 employees. The company had a trio of CEOs, one company-wide and one for each of the two groups (see sidebar ‘About KM and Halliburton’ on page 28).
The company’s overall vision, and ESG CEO Edgar Ortiz’s personal vision, is to be “the real-time knowledge company serving the upstream petroleum industry”. The ESG had already spent many years connecting and building an infrastructure to electronically move, store and analyse data. The next step was to leverage this infrastructure by connecting the explicit information it contained with 35,000 employees in over 100 countries. But there was one problem: although there had already been notable successes on the technical side of KM, too many people saw its front-line use as a very fuzzy concept. Worse, there were few case studies that demonstrated KM’s clear business value or a pragmatic strategy and methodology for KM implementation.
A scoping team was therefore asked to study the issues and return to the senior-management team with a recommendation on how to take KM forwards. Michael Behounek was part of that team. “We immediately recognised we were late to the game,” he says. “The best thing we could do was learn quickly what was or was not working in other companies.”
The team contacted the American Productivity and Quality Center (APQC) – also based in Houston – and solicited the help of APQC president Carla O’Dell to investigate and help synthesise what was working. The team examined more than 15 different companies, their approaches, systems, methodologies and results.
From this investigation, the hypothesis on what would work began to form and the team proposed three pilots to test the concepts in several parts of the business. The initiatives needed to be pragmatic, systematic and able to deliver measurable business results. They also had to solve large and complex business issues.
In time, Behounek became director of a new KM core team composed of five veterans with a total of 118 years of operations, management and knowledge-management experience among them.
The components of the initial KM pilots were drawn from bits and pieces of KM programmes at several other companies. “We tried to assemble them all into a coherent, systematic approach that delivered real business value,” Behounek says.
Since these early stages, all of the KM initiatives at the organisation have been project-based and built around communities of practice. To date, the core team has assisted the formation of 19 communities and all have proven successful. Each had a unique business case and each exceeded its original target, as verified by the relevant business unit. The communities are by no means static. They are organic in nature and evolve and adapt to new business needs. Some communities have split, others have merged.
Halliburton communities use most of the common KM tools and find big benefits in quality tools, social-network analysis and surveys. IT is used as the enabler for knowledge creation. Each of the 19 communities has from one to five full-time ‘knowledge brokers’ to moderate, facilitate discussion threads and steward the repositories. The brokers are not experts. Their subject-matter understanding is broad, but not deep. As users enter questions and issues, people respond to the various threads. The brokers engage subject-matter experts to validate the best global answer or provide one that had not been documented before. Therefore, knowledge is verified and the process is transparent, which in turn increases trust. Only three of the 19 communities are restricted due to intellectual-property issues. The KM core team prefers to leave communities open unless there are significant business reasons not to.
Communities span many different areas inside the company, from support of service quality in product service lines to technology innovation, functional support groups and even the enterprise-resource-planning system. Users are equally diverse – from PhDs to field personnel based in warehouses, factories, central office or remote parts of the world.
The value proposition
Obtaining and maintaining management sponsorship in the executive suite or the business unit depends on tying KM projects and P&L responsibilities together. As Behounek says, “VPs feel they need to deliver. In the long run, if managers feel KM is not delivering, they will begin questioning expenditures, time and effort – usually at budget time.”
Halliburton views each community as an investment and expects each to be 100 per cent successful in delivering a substantiated return on investment. That’s why the core team insists each community needs a balanced scorecard and auditable financial method to determine ongoing performance and ultimate value. The process used is based on Six Sigma and performance-improvement methods.“Of course,” Behounek concedes, “KM cannot be quantified fully by monetary values, and so we use a balanced-scorecard approach. Since in many cases it is not possible to establish direct cause and effect relationships, it is worth using multiple measures in areas where KM should be having an impact. If these measures all point in the same direction, then you can state the systematic effect produced by KM. If the scorecard shows no results, then the decision needs to be made whether to stop the effort or change the scope of the project.
“Nearly all the KM programmes I have examined at other companies have not been diligent in actually getting the detailed numbers in a systematic fashion,” Behounek continues. “Instead, the financial value is inferred.” It is Behounek’s opinion that a failure to provide hard numbers causes a risk to the sustainability of the broader KM programme, particularly during a downturn or when new management moves into place. “If you fail to provide real proof, these numbers are at worst dismissed or at best viewed very sceptically by management,” he says.
Behounek outlines the litmus test he employs: “If you are truly adding financial value on the scale I see quoted by many KM programmes, then you should show evidence on the company’s annual report. I therefore have a close relationship with our accountant. Six Sigma principles stress the importance of this over and over.”
At the same time, it is easier to establish hard figures for KM programmes that are tied directly to the business process. All 19 projects at Halliburton were selected based on the ability of KM to have a measurable impact on the bottom line. Imagine, for example, the effect of an annual ROI figure of 564 per cent on management thinking. Halliburton’s ‘Employee Central’ portal was built to encourage 30,000 of its employees to work together to solve problems from field locations, client sites and offices around the world. The portal captures information from SAP’s financial and human-resource systems, Interwoven document and content-management applications, and several technical oil and gas systems used to manage the company’s various drilling and surveying businesses. Through collaboration and problem solving between employees in Halliburton outposts around the world, faster response time and increased service quality have produced an estimated $20m of benefits per year. The following sections outline two more cases in point.
Case history: SAP Procurement & Material Community
As a large, diverse company operating around the globe, Halliburton recognised there was a significant opportunity for cost savings through improvement in its procurement and inventory-management processes. While the implementation of SAP provided many benefits to the company, the system also added a degree of complexity for the individuals responsible for procurement and inventory management, leading to high purchasing, inventory and logistics costs, inaccurate inventories, and long lead times.
A team was chartered to work with Halliburton’s knowledge-management team to investigate the problems and develop a solution. The first step was a root-cause analysis and a review of company-audit reports. This analysis made clear that training and transfer of good practices and lessons learnt was critical for solving the problems incurred. For several weeks, the team worked to design the processes and tools needed by a community of practice to give all of the people involved in procurement and materials the ability to connect to each other, to experts and to necessary content.
Deployment of SAP had been a long and expensive process, but deployment of a global community took less than 30 days, using a network of ‘local champions’ and virtual training sessions. The community now has four knowledge brokers in various parts of the world who facilitate virtual discussions, connect members with experts as necessary, and capture good practices and lessons learnt so that they can be shared. This means that the procurement specialist in Egypt can post a question to the community at 10am her time and be assured a response before anyone even arrives for work at the Houston office.
The community has been active since the initial roll-out, currently averaging well over 500 unique users accessing the collaboration tool approximately 3,000 times per month. During 2003, there were a total 37,815 log-ons in the P&M Portal. Just half way through 2004, there were 31,859. In a recent survey, completed by 235 community members, 73 per cent reported measurable time savings from participating in the community.
But, though impressive, these are the kinds of soft numbers KM initiatives too often rely on. The true measure of success is the business result. During the first year the community was in place, the company recognised a $71.5m cost saving in procurement and materials. While knowledge management was not the only factor in that improvement, senior leaders agree that it was an important contributing factor.
Examples of smaller business gains could be directly attributed to knowledge management, including:
Reduced ‘request for service’ tickets per month. Now that the community answers many of these questions, the experts in the help centre say they are saving at least ten hours a month, worth $1,000;
The community has acted as a source of training and has also provided mentoring, which has led to reduction in the cost of unreconciled inventory in Saudi Arabia from $700k to $250k;
A single instance of collaborative working saved over $10,000 in one shipping event in the Middle East.
Case history: Electronic Technician Community
The high-pressure pumping and mixing process for fracturing, acidising and cementing have become more automated during the past ten years. This automation allows for consistency, but has also added new operational and maintenance processes. Just three years ago, Halliburton ESG noted that electronic technicians were required on 80 per cent of fracturing jobs to ensure that the electronics performed flawlessly. Technicians were difficult resources to hire and train to meet the demand of customers at each well site.
Halliburton’s knowledge-management group facilitated the creation of a small team of electronic technicians for a three-month period in late 2001 to help understand the business needs and design a solution that would improve pumping job-service quality, reduce non-productive time and decrease the need for electronic technicians to intervene at individual well sites.
Together, the electronic technicians and KM group were able to design a knowledge-management solution. Essentially, electronic technicians needed to be connected to experts and to each other so that the experience of the entire group could be used to troubleshoot and solve problems, rather than relying on the limited knowledge of one individual isolated at a customer’s well site. The group therefore developed a collaborative, problem-solving community to provide 24/7 peer-to-peer training, troubleshooting and support.
The team defined the community and processes required for the technicians to discuss issues and share good practices. The group developed an easy-to-use portal interface, which was designed around a collaboration tool that allows the community to share its knowledge and get answers to questions. The interface also provides access to vital documents and contact information for leading experts on various pieces of hardware to ensure immediate answers to urgent technical questions. The community was launched in December 2001 and today is a thriving knowledge-sharing network of more than 200 users in numerous locations around the world. Interestingly, the number of users is greater than the actual number of electronic technicians within the community.
In 2003, individual instances of knowledge sharing generated, in one way or another, over $1.4m for Halliburton. In addition, electronic technicians report time savings of approximately 20 per cent due to the community. This has allowed the company to meet the demands of business growth without employing additional technicians. The technicians it currently has are also better trained and more effective than ever. They have reduced the number of repeat repairs, measured through SAP work orders, from 30 per cent to virtually zero.
Relationship to hierarchy
During the developmental years of KM, there was a general belief that the open, cross-functional, intangible nature of knowledge management could not be directly tied to the business goals and objectives of an organisation, and therefore the ROI could not be quantified. Not so at Halliburton. The KM initiative was initiated at the highest corporate level and the KM core team was located close to the hierarchy from the beginning, focusing directly on specific operational functions and projects.
In December 2004, a change in the organisational structure further clarified the core team’s status as an integral part of the business. A new COO position was created and the organisational chart divided the company into three major units: the two major businesses (ESG and KBR) and Functions. The Functions unit includes Supply Chain and Management Systems (SC&MS), IT, Marketing and Strategy, ESG HR, KBR HR, Security, and Aviation. The concept of SC&MS is similar to the principles made famous by the likes of Wal-Mart and Dell. The strategy is to bring more value to the bottom line by focusing on procurement and materials functions, manufacturing, logistics and so on.
The KM core team resides with SC&MS, which reports to the COO. The Management Systems component represents the company-wide processes, standards and guidelines that all businesses need, including such functions as quality systems, safety systems and now KM. Knowledge management is viewed as an overall management process that helps operational units create, distribute, share and use knowledge throughout the company. The new structure makes it possible for the KM core team to assist both ESG and KBR. It is envisioned that the KM core team will extend its reach from ESG to the entire company by the end of this year.
The 19 communities of practice facilitated so far by the Halliburton KM core team have generated numerous instances of success. These are supported by hard numbers and reinforced by a KM quarterly report that keeps the attention of management on the ever-expanding and solid business case for KM. The knowledge factor is gaining attention as the core team functions as an integral part of Supply Chain and Management Systems group and extends its reach under the new COO to include both ESG and KBR business units.
For more information and the complete text of a STAR Series Dialogue with Michael Behounek at the Association of Knowledgework, go to www.kwork.org/Stars/stars.html#2004.
Jerry Ash is US correspondent for Inside Knowledge. He can be contacted at firstname.lastname@example.org.
SIDEBAR – About KM and Halliburton
Halliburton is structured around two operating units worldwide: the Energy Services Group (ESG), which provides upstream petroleum services and consulting to clients such as Shell, BP, ExxonMobil, Total, Petrobras etc; and, KBR, which provides support ranging from government and services infrastructure to refineries, liquid natural gas and fertiliser plants. KBR’s government-services division is the operation most often in the news, the division regarded by the popular press as ‘Halliburton’.
But regardless of KBR’s high profile and larger work force, it is ESG’s divisions that account for the majority of the Halliburton’s profit. ESG was for a long time also the location of Behounek’s KM team, which focuses on a subset of employees who are PC-based (roughly 15,000 employees). The KM programme reaches over 8,000 unique users. This year, the KM core team has launched a major programme to reach field employees who cannot connect easily to the network (roughly another 20,000 people). The KM team will be offering access via any internet connection.
SIDEBAR – Halliburton’s KM hypothesis
To assure a sustainable knowledge-management programme, an organisation needs to:
Create sustainable knowledge management, by providing
- At the business-unit level
- For a small core team.
A focus on a vital business need and an articulated business case
- Don’t be a company-wide initiative
- Be project based
Budget for appropriate resources, including time and funds;
Ensure sustainability, by providing a KM process design that includes
Dedicated facilitation, embedded leadership
Integration into users’ workflow
Help sustainability, by:
Focusing on solutions that assist the organisation in problem-solving
- At the business-unit level, to drive productivity, quality and innovation
- At the job-role level, to help people in their daily work life (reciprocity)
Collaboration, which is key and requires focus on the organisational environment
Targeting a business need; don’t be a hammer looking for a nail
Tying into existing efforts and initiatives
Paying attention to details; shortcuts are dangerous
To maintain sustainability, KM programs must be able to:
Provide intrinsic rewards by making people more effective
Provide validated, trusted information and solutions
Adapt to meet changing business needs over time
Prove value with a continuous measurement system
- Business objectives
- Input, process, output
Each item is a must and requires constant attention. The hypothesis surmises that failure in any one category can lead to failure of the whole project.