Change Management Plans

Change Management Plans

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Change Management Plans

Introduction

The importance of Saudi Aramco to the Saudi government cannot be overstated. The company’s operations revolve around oil and gas, which is the highest source of government revenues in Saudi Arabia. The company intends to implement downstream expansion strategy to reduce its overreliance on oil revenues. This would require the company to implement several changes in its operations. Therefore, the successful implementation of the changes changes in Saudi Aramco would play a significant role in the achievement of Saudi Vision 2030.

Impact of the Downstream Expansion Strategy

Downstream expansion would necessitate Saudi Aramco to change its leadership structure to accommodate the firms that would be acquired after the implementation of the strategy. It would also require the company to use an efficient change management strategy to ensure new firms and employees that are added to the company due to the implementation of the downward expansion strategy do not lead to the dilution of the organization culture of the company. However, Saudi Aramco should also adapt certain elements of the organizational culture of the firms it acquires, which can improve the competitiveness and profitability of the company.

Impact of Cultural Elements on Change Strategies and Implementation of Change Plans

Cultural practices play a major role in the success of any organization. The political and societal norms of Saudi Arabia act as the foundation of the organizational culture of Saudi Aramco. Therefore, the organizational culture of Saudi Aramco is intertwined with the national culture of Saudi Arabia. The large size of Saudi Aramco and its links to the political leadership of the country made it difficult for the organization to implement change management. The government of Saudi Arabia has huge stakes in Saudi Aramco since it owns 98.5% of the shares of the company.

The implementation of the change plans would be affected by the close relationship between Saudi Aramco and the state. Since the government controls 98.5% of the shares of the company, the company is bound to be influenced by the political leadership of Saudi Arabia.

This is one of the main reasons as to why Saudi Aramco was separated from the Ministry of Energy. Separating Saudi Aramco from the Ministry of Energy facilitated the commerciality of the organization and ensured there was an arms-length relationship between the state and the company. It provided the company with an opportunity to work as an international company instead of a state owned company whose operations are influenced by the state (Atlantic Council, 2020).

The implementation of the downstream expansion of the company would lead to the acquisition of several firms, which would make Saudi Aramco become an integrated energy company. However, it would require the company to acquire other firms within the value chain that have different organizational cultures. This may lead to clash between the organizational culture of Saudi Aramco and the organizational culture of the firms within the value that it acquires.

Challenges of the Change Initiative

Secretive Nature of Saudi Aramco’s Operations

Since Saudi Aramco has historically been run by the state, it had not released its financial statements for an extended period. The company disclosed its financial statements for the first time in 2018, as this was one of the requirements of launching an initial public offering (IPO) of the company, which raised more than 25 billion dollars. The company still maintain the secrecy of the oil reserves under its control. The figures of the oil reserves of Saudi Aramco have remained relatively unchanged over the past decades despite the fact that it pumps millions of barrels of oil daily. This would limit the ability of the company to implement its effort to diversify its operations. The diversification efforts of the company would also be shrouded with secrecy.

Accountability and Transparency

Transparency and accountability are vital in the success of any company. Transparency and accountability ensure there is trust among various stakeholders of the company. Transparency and accountability helps in improving the management of an organization as it ensure the organization has competent management. A significant number of Saudis perceive oil as a God-given source of wealth to the kingdom. Therefore, they oppose the privatization of the Saudi Aramco, as they perceive this to be a strategy sell the company to a few influential people. They may not understand the reasons as to why the government is reducing the over-reliance on oil and gas revenues to fund budget deficits.

Political Interference

Political interference is one of the main challenges that the change initiative would face. In fact, the government is the one that initiated the changes in Saudi Aramco. This is because Saudi Aramco plays a major role in the performance of the economy of Saudi Arabia. Therefore, the future of the company is entwined with the future of Saudi Arabia (Ahmed, Sultana, & Khan, 2018). Therefore, political interference is bound to affect the operations of Saudi Aramco.

Strategies for Mitigating Challenges

Stopping the Practice of Political Appointments

Saudi Aramco should stop the practice of appointing political figures to the leadership positions of the company. The company should ensure the people that are appointed to the leadership of the organization are appointed based on merit instead of political connections. This would ensure the company is managed in a more efficient manner. Efficient management would facilitate the implementation of the diversification strategy since decision-making would not be based on political factors (Ramady, 2018). Instead, decision-making would be based on sound financial and economic judgments of the leaders of the organization.

Highlighting the Importance of the Change to Various Stakeholders

The government should also focus on informing various stakeholders on the importance of implementing the changes to the future economic prosperity of the country. Volatility and low prices oil in the global market have necessitated the government to reduce its overreliance on oil revenues. Downstream expansion would protect Saudi Aramco from losses due to low oil prices. This is because petrochemical products are expected to fuel the demand for oil in the next decade as the world shifts to more renewable sources of energy. In addition, low prices increase the profit margins of firms that are located downstream in the energy value chain.

Improved Accountability of the Saudi Aramco’s Management Board

Saudi Aramco should also ensure it improves the accountability of its board of management. This can be achieved by ensuring the activities of the company are audited and there is public scrutiny of the operations of the company by people with the necessary skills (Atlantic Council, 2020). This would ensure the firm uses its resources efficiently. This would help in improving public confidence on the people that are appointed to leadership positions in the company. It is vital for the state, and specifically, the royal family, to ensure that it does not interfere with the integrity, transparency, and accountability of Saudi Aramco.

Conclusion

The implementation of downstream expansion strategy by Saudi Aramco is vital to the continued profitability of the company. Downstream expansion would hedge the profitability of the company from losses due to low prices in the global market. However, the company should consider the impact of culture on the implementation of this strategy (Cawsey, Deszca, & Ingols, 2020). Otherwise, the implementation of the strategy would not yield the expected results.

References

Ahmed, J. U., Sultana, H., & Khan, M. M. (2018). Saudi Aramco: A Blend between Profit and Politics. FIIB Business Review, 7(2), 88-99.

Atlantic Council. (2020). The Saudi Aramco-SABIC Merger: How Acquiring SABIC Fits into Aramco’s Long-Term Diversification Strategy. Washington, DC. Atlantic Council.

Cawsey, T. F., Deszca, G., & Ingols, C. (2020). Organizational change: An action-oriented toolkit (4th ed.). Thousand Oaks, CA: Sage drafting.

Ramady, M. A. (2018). Saudi Aramco 2030. New York, NY: Springer.