Reflections From The Rocking Chair: A Stakeholder Looks At Leadership And Opportunity In Health, Environment And Safety

By Raymond E. Galvin, Retired President
Chevron U.S.A. Production Company

Petro-Safe '98 Conference & Exhibition

Houston, Texas

Exactly 11 months ago today, my 44-year career in the petroleum industry came to an end. So you might be wondering why I would leave my rocking chair to come down here and talk to you this morning. One reason is that my friends at Chevron asked me to. But I had another reason as well: Yesterday, I worked for the industry, and today, the industry works for me.

Much of my net worth is still tied up in Chevron stock and the stocks of companies that operate in or support the petroleum industry. And Chevron is involved, one way or another, with almost every company represented here. So you're looking at a retiree, but you're also looking at a stakeholder. There are millions more like me out there.

Some stakeholders just own stock, but that's a pretty important connection to the industry. There are also important connections to neighbors, local governments, communities that benefit from industry payrolls, customers, fellow employees and retirees like Ray Galvin.

What we all need and expect from the industry is performance. All we ask is that this be uninterrupted, constantly improving, efficient, profitable, accident-free, sensitive and in harmony with all creatures great and small.

Today, a good many of us also want the industry to achieve harmony with the planet as well. What all of this means is that people with responsibilities in health, environment and safety (HES) have some of the most important jobs in the industry — and also some of the most difficult.

One could say that health, environment and safety people are like salmon. I don't mean to suggest that you're an endangered species, only that you usually have to do your jobs while swimming upstream — and sometimes against a swift current. Some of the resistance is just human nature, and change is difficult. Some resistance comes from managers and supervisors who just can't change. There are still some of them out there, even though a lot left during the downsizing years. Some of the resistance to emphasizing HES comes from having a faster pace in a downsized industry, where HES resources are limited and where growth defines every company's business plan.

Operating supervisors and facility managers know what it's like to walk the line every day. I don't know if the industry can run any tighter, leaner, cleaner or meaner, but I do know that busy folks like you are being held accountable to try. And I think this gives us reason for true concern.

I like to see us operating our refineries and chemical plants near their capacities, but I worry that we could be pushing too hard. I like productivity, but I know that stressed-out people make more mistakes. I want the deepwater producing industry to prosper, but I'm worried that we don't have enough trained people to safely speed up the opening of that new frontier.

Every stakeholder in the oil industry is counting on HES to focus on challenges like these. They also count on the vice presidents, geologists, process workers, accountants and service station people. But they count even more on you, and they benefit tremendously from what you do. Of course, you can't tell that from the feedback.

Within the industry, we do a good job recognizing safety, and awards from agencies like the Minerals Management Service help a lot. But the feedback from most stakeholders runs from total silence — if you do a good job — to demonstrations, fines and class-action lawsuits if you don't. And I can tell you, the bigger your title is, the more personal the feedback gets.

I remember when a group called People for the Ethical Treatment of Animals became concerned about the potential for birds and bats to get killed in oil field exhaust stacks. One of their representatives cut up her Chevron credit card, and others from her group did the same.

Next, she started passing out leaflets outside the Chevron Annual Meeting. We showed her a letter of commendation from the Bureau of Land Management, thanking Chevron for trying to solve the problem. But she responded by saying, and I quote, "Until Ray Galvin sends me a letter stating that Chevron is not killing birds anywhere, I will pass out these leaflets."

Earlier, in 1992, I personally stood up in a federal courtroom and, on behalf of the company, admitted to 65 violations of the Clean Water Act during the 1980s at Chevron's Platform Grace, offshore California.

This was a humbling experience for me. We had to pay $8 million in fines and penalties even though there was no spill or harm to the environment.

I will never forget that experience, partly because the laws related to those permit violations included the possibility of jail time for management. But I'll also remember it as an opportunity to learn several important lessons.

Now, I don't want to sound like one of those managers in the Dilbert cartoons who dress up every problem as an opportunity, but I think that the hardest jobs in the company are often also the best — and certainly the most interesting. HES problems help both companies and people learn how to anticipate trouble and counsel management, prevent mistakes and respond right when mistakes happen.

Even situations like Campbell Wells and Kennedy Heights can teach us things. And we learned valuable lessons from both the Exxon Valdez and the Brent Spar. The same is true for issues like "toxic racism," methyl tertiary butyl ether (MTBE) in groundwater, endangered species and endocrine disruptors. It's great to be needed, even when your employer assigns you to deal with the impossible or, at least, the nearly impossible.

I'm reminded of the story of the lawyer who got fed up after years of dealing with a difficult client. So one day, the lawyer announced that he was going to quit. But the customer replied, "You can't quit — I'm the perfect client: I'm interesting, I'm rich and I'm always in trouble." To me, that sounds like a pretty good definition of the typical HES client. So remember that story the next time you find yourself wondering if there's an upside to carrying HES responsibilities.

Clearly, HES jobs and responsibilities are different from others in the industry. HES responsibilities don't include finding resources or producing them. They don't include moving oil or products or manufacturing them. They don't involve sales. And yet every day, HES work benefits the industry's stakeholders as much as any producing field or high-volume service station.

The HES role remains hard for people to fully appreciate. It's the kind of work that people sometimes call a thankless task. Nobody here has turned to the person next to him and said, "Thank you for not spilling hot coffee in my lap this morning." We simply have an expectation.

Medical doctors operate under the guideline: "First, do no harm." Stakeholders apply the same rule to oil companies. They expect safe, clean, neighborly performance from us because that's the way things ought to be. And so historically, HES has always measured its success by the absence of events. It's a job where you look forward to coming home from work and saying, "Good news, honey. Nothing happened today." It's great when nothing bad happens. But people overlook the fact that because of HES, all the things that are supposed to happen do happen.

HES is about enabling your operations and about empowering companies to pursue their business goals. It's about serving customers and about business development, because safe and environmentally sensitive companies make good partners, good neighbors and good investments. Put all these together and you can see that HES is about making money, not spending it.

So now I have a question: If HES is so valuable, why has it been downsized, defunded, outsourced and decentralized? Why have some of its duties and responsibilities been so widely dispersed to people outside the HES profession who already have a full plate? If both the perceived and the real value of HES is growing, why shouldn't the investment in staff and resources grow as well?

One reason is that there's a lot to be gained by putting line supervisors and managers in charge of things that used to reside only in the HES groups. I want to talk more later about the push to better integrate HES into the total organization, but we all know the other issue here is the imperative of continuous cost management. No function has been immune, and none should be.

For the last five years of my career, I presided over the restructuring of one of the largest oil and gas producing organizations in the United States. With oil and gas prices low and financial performance standards rising, we had to change. That reality, however, didn't alter the fact that cutting costs in HES looked like a blend of hypocrisy and bad business judgment. To a good many employees, it looked like nothing more than putting profits ahead of safety.

I recall a meeting I had with Chevron employees in Evanston, Wyo., who were certain that cutting costs would compromise safety. This was no small matter — most of these folks were producing and treating sour gas. But ultimately, they found ways to improve safety performance, handle more gas and reduce their unit costs.

I'm not saying you can't cut too deep. I know also that constantly searching for the next level of efficiency leads to change — and that makes people feel insecure in their jobs. But change can be managed.

Smaller HES budgets and leaner resources don't have to diminish HES effectiveness, if — and this is a big "if"— the industry is willing to invest other assets in the function.

I'm talking about assets like time, bright people, creativity, focus, diligence, management emphasis on awareness, and commitment in the work force. And I'm also talking about assets like communication, training, measurement, reinforcement and rewards. Every company and facility manager allocates these just as they allocate dollars. What makes these assets different from money, in general, is that they all relate to behavioral change, and this is the most exciting area of HES today.

We've always said that how people behave on the job is as important as properly built and maintained facilities and the right safety gear. The difference is that now we're starting to actually believe it. Ironically, the same downsizing that seemed to threaten the integrity of HES has given birth to the flatter work organizations that are more open to new workplace behaviors.

One example I'm familiar with is a team of folks producing oil for Chevron in the San Joaquin Valley. They have achieved some outstanding safety results recently, and one of the tools they used was an internal survey of safety behaviors. Managers and supervisors were asked to list the ways that they personally lead safety in their work groups, what their peers do and also what their bosses do. They knew that studies show a direct link between leadership behavior and safety, so they captured the "visible" leadership behaviors and shared these findings with all the supervisors and managers.

Many companies are fostering innovation in safety, and some of them have outstanding safety records that give us all something to shoot for. But let me comment a bit more on the company I'm most familiar with.

Chevron calls its HES policy "Protecting People and the Environment" (PP&E). It has 10 performance categories and 102 specific practices — a big menu. To its credit, Chevron saw that it couldn't expect to change overnight. The policy was rolled out in 1992, but it was only last year that they felt confident to say they had fully deployed PP&E throughout the entire company. It represents an unprecedented level of commitment to the priority of integrating HES into all sectors of the business.

One way it is backed up is through the bonus program. A substantial part of the annual payout is based on safety goals, and everybody in the company participates. I believe this is a good way to underscore the policy.

But the real challenge after policy deployment will be taking it to the next level, and that means trying to get people all over the company to really live the policy. This will test the spirit of every HES professional and every manager. But the only way to find out if they can really get there will be to try.

To me, efforts like PP&E suggest that the industry is closer to fully integrating HES as a business priority. For years, we've said this was a good idea. Arthur D. Little calls it "next generation environmental management," but whatever anybody wants to call it, I am in favor of it. One example of integration and advanced HES thinking at Chevron is called incident-free operations, and the U.S. downstream organization has some great safety numbers and hard-dollar savings to show for it.

However, one of the most important things for all companies to recognize is that these kinds of results can be traced to a breakthrough in behavior. We've finally gotten comfortable talking about safety and cost-cutting at the same time.

Personally, I think it is a sign of maturity in the industry that we can do that. The mature organization knows that one tough priority does not cancel out the other.

Don't get me wrong — I know it's possible to shortchange an HES budget, and I have seen it done. But I think we've learned that the right perspective and attitude are to promote the linkage between safety and costs.

After more than four decades in the industry, I can say that when you consider the full range of costs over the long term, the incident-free facility will also be the most profitable.

Sure, you can take risks with HES problems and get lucky. You can still look good, ring the cash register and even get a nice promotion. I used to call that "transfer poker" — you made a bet with yourself that you could let things go and nothing bad would happen until after you had moved on to the next job.

We all know too well the price of that kind of attitude: People get hurt or killed. Fines and repairs routinely run into the tens of millions of dollars. And you lose business.

In fact, the risk is never worth it.

The industry has always said that health, environment and safety are everybody's job. We might actually get there if we can keep working the behavioral side to engage and involve the entire work force in HES priorities.

Some of you by now are probably thinking I'm too optimistic. But the fact is, I have faith in you. I believe you'll continue to combine ethics with professional courage, and that means that you'll continue to keep management informed. I can tell you from personal experience: They need to be informed. And for what it's worth, I want to thank every operating person and HES professional who had the courage over the years to tell me the HES news I didn't want to hear — or at least, they thought I didn't want to hear it.

The Wall Street Journal recently ran an article about management training in the military, in which the new brigadier generals learn that every increase in rank also increases the number of filters between them and their organization. In short, the higher you go, the less you really know. But managers can't afford to live in a false world. If HES folks don't give them the straight talk about real problems, the people on top might not even know there's a problem until they hear about it on the TV news. Even if the industry achieves true integration with HES, senior management will still need the frank assessments of HES professionals.

I'm not talking about preaching compliance. I'm talking about having people who see the real price of risk and who can "make the business case" for HES. Some of you probably think you shouldn't have to be a salesman on top of everything else. But I believe it's reasonable for management to expect you, not somebody else, to link HES to the bottom line.

Geologists have to sell their prospects, and engineers have to sell their projects. It's part of the new deal you all have with your employers. It's part of everybody being more business-minded — HES experts included. The good news is: Linkage between good HES performance and profitability truly does exist. You can sell it, because it's real.

There's a business case for doing refinery turnarounds when they are scheduled, even when margins are good. There's a business case for platform evacuation and fire drills and for simulating oil spills and practicing response. There's also a business case for speeding up a program to replace underground tanks and for reducing waste on the front end to avoid the cost of disposal on the back end.

And there's a business case for thinking carefully about the people you hire and promote. We've learned to value those who get the job done the right way and who set that example for others. Of course, this is easier said than done, and sometimes a producing property or plant just can't make the economic grade any more, even when you run it right.

The last thing you want to do is to make employees think that if they just keep things running, then they'll get to keep their jobs. I bring this up because the industry needs to remember that when you can't give people job security, you should darn well give them respect and consideration.

The years of downsizing and displacement had a big impact on morale — a lot of people left the industry feeling bitter. But a lot of others, whether they stayed on or left, appreciated the voluntary severance programs, the redeployment efforts and the job placement services that many companies provided for surplus employees. These efforts were far from perfect, but I believe they made a big difference in HES performance during the roughest years of restructuring. In fact, it's a credit to the people of this industry that we were able to make behavioral and cultural progress in the HES area during such a traumatic period.

Let me turn now to another area that makes me feel positive about the future of HES — the progress the industry has made working with governments. Ten years ago, the former chairman of Chevron, George Keller, told us to "work it out, don't fight it out." I won't deny that we've done a lot of fighting since then, but also we've made a lot of progress "working it out."

The introduction of California cleaner-burning gasoline in 1996 was probably the largest new product rollout in the industry's history. Both the state and the companies had a lot invested in it, and despite their differences, they worked together over a five-year period to make it a success. Also, I know many of you are aware of the American Petroleum Institute's Safety and Environmental Management Program for offshore, which was developed by working with the federal Minerals Management Service. And while the so-called "neg regs" process has been a disappointment in some ways, it's still a great concept. So I'd like to see the industry keep trying. As I said earlier, HES is not an impossible job; it's only a nearly impossible job.

Government will keep doing things we don't agree with. The disputes over toxins, airborne particulates and waste management tell us we can expect more confrontations and more battles. But let's recognize also that it never helps our relationship with government to just have a knee-jerk negative reaction to new laws and regulations. Our focus should be positive.

The fact is, we need good laws and regulations. More regulators today see that the industry's business case for cost-effective HES can line up nicely with the government's enforcement case. One place this seems to be happening is in the state of Washington, where government has adopted a risk-based standard to balance simple containment methods against expensive cleanups for dealing with soil contamination. Situations like this make it clear that the door is open for more agreement on compliance solutions that make economic sense.

Another very positive trend is the globalization of higher HES standards. Some would say this is happening because host countries and the public worldwide want it to — and they do. Others would give the industry credit for setting standards well beyond what we've historically been asked to do by host governments — and we have.

Still others might say that the environmentalists forced the industry to change or that we only got cleaner because we're afraid of lawsuits. That has obviously been a factor. But any way you look at it, the trend toward higher HES standards worldwide is positive.

Some companies are using this perspective to gain a competitive advantage. Chevron, in fact, won its joint venture with Kazakhstan partly by convincing our future partners that our years of safely producing sour gas in Wyoming and Canada proved we could also master the sour-gas challenge at the giant Tengiz Field.

Any company can benefit by promoting international HES standards, but there's a total industry incentive as well.

Even before the global warming debate, the international reach of telecommunications and news media confronted us with the task of global reputation management. We should know by now that we're all in that fight together. Nobody here needs to be told that many world leaders today want our industry to shrink instead of grow.

People used to say the industry creates problems; now they're saying the industry is the problem. Every time we contaminate a beach, harm wildlife, frighten people, pollute the air or injure our employees, we give the world another reason to want to replace oil and gas. We have to do more to show we can be compatible and not in conflict with a healthy environment. Our stockholders and customers are counting on that.

Chevron's Chairman Ken Derr said recently that our industry "stands on the threshold of a great expansion." But he also said that the only legitimate growth — indeed, the only acceptable growth — will be responsible growth.

Other industry leaders are saying much the same thing. Together, they add up to a very pointed and public top-management endorsement of the HES function. That gives me yet another reason to feel positive about the oil industry.

Let me just close now with a few requests: First, keep telling the industry's story, and tell it better and more often. Spend time and money on it, because if we don't tell our story, nobody else will. We need to counter the constant flow of biased and just plain wrong information about us.

I ask also that you try to become more global in your perspectives. The industry needs people who can move throughout the world and be effective anywhere they go. If that means shaking up your lives a little bit and taking a foreign assignment, I encourage you to do that.

Also, keep finding more oil and gas, and keep inventing new ways to produce them that are safer and cleaner than ever before — and cheaper too. As I said, I'm a stockholder.

Don't spill any oil in the lakes and rivers and coastal areas. Some of my best friends are fishermen. As for the birds and animals and plants, I like them. I ask you not to harm them, and if you get a chance to help them, do that too.

Don't pollute the air. My neighbors and I like to breathe nice air, and we like to be able to look through the air and enjoy the view.

Don't turn over any trucks. Don't break any pipelines. Don't contaminate the groundwater. Don't hurt any neighbors and don't hurt any employees.

Do everything just right. Anything I haven't mentioned, do that right too.

Give me cheap, abundant, convenient and clean energy products. Keep my house warm in the winter and cool in the summer. Keep my car running and my lights burning. And I like that little gas lighter in my fireplace. Keep that going too.

Give the economy of my city and state, and of the nation and the world, all the energy they need. But for gosh sakes, don't bother anybody.

If all that sounds like a thankless task, remember that before you know it, you'll be like me. You'll be on the outside, looking back, just a stakeholder with expectations and needs, looking forward. Retirement isn't all that far away, and time flies. So think about what your work is and how special and important it is.

Appreciate your co-workers, your fellow citizens, and the people you protect and serve. I assure you, there will never be a better time than right now to challenge yourselves as professionals and to make your contribution to the industry and the world.

Updated: January 1998