Saudi Aramco is a Saudi Arabian petroleum and natural gas company

Case Study

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Case Study

Background of the Company

Saudi Aramco is a Saudi Arabian petroleum and natural gas company. It is popularly known as Aramco. It was founded in 1933. The company’s headquarters are in Dharan, Saudi Arabia. It is one of the largest companies in terms of revenues. It is also one of the most profitable companies in the world. With more than 270 billion barrels of proven crude oil reserves, Aramco has the second largest proven crude oil reserves in the world. The company also has the second largest daily production of crude oil. Aramco operates the Ghawar Field, which is the largest onshore oil field in the world. The company also operates the Safaniya Field, which is the largest offshore oil field. The shares of Aramco started trading on the Tadawul stock exchange on 11 December 2019. The price of the shares increased to 35.2 riyals making the company have a market capitalization of approximately $1.88. The next day, the market capitalization of the company reached more than $2 trillion. Aramco has diversified its operations globally. It uses join ventures to conduct operations in various countries, which include United States, China, Japan, United Kingdom. United Arab Emirates, Singapore, and the Netherlands.

Reasons for Selecting the Quality Program for the Organization

Aramco considers various programs to increases its output and reduce any defects or errors. The quality programs that Aramco considers include Total Quality Management (TQM), Six Sigma, and ISO (International Organization for Standardization). TQM refers to a strategy for improving the effectiveness and flexibility of an entire organization. In essence, it is a means of organizing the entire organization, which refers to every department, every activity, and every single individual at every level within the organization (Maistry, Hurreeram, & Ramessur, 2017). TQM leads to the creation and transfer of more efficient and superior services by facilitating cooperation between various members of an organization. It requires all members of the organization and target all activities of the organization. TQM must become a permanent method in how the organization undertakes its activities. It also used to facilitate continuous improvement of the activities of an organization. For TQM to be successful, it must start at the top leadership of the organization with the chief executive officer or any other equivalent position.

The reasons for selecting TQM program in Aramco is because the quality program enables the management of the company to discover critical areas of focus that require immediate improvement efforts through the identification of gaps between what the areas are and where they should be. TQM also helps in defining the cultural and attitudinal issues that pose a challenge to the quality process (Ahmed, Sultana, & Khan, 2018). TQM facilitates process improvement and control in Aramco. Aramco’s production processes should be efficient since any problem in the production process affects the quality of the products. Control is also a vital component of TQM. It helps Aramco’s management improve the efficiency of the operation of the company. Control is vital in all steps of the company that are related to employees, customers, product, and other activities of the organization.

Another reason for selecting TQM in Aramco is because it helps in increasing the morale of the employees of the company. Aramco’s employees are motivated by extra responsibility, teamwork, and involvement in the decisions related to TQM. It is vital to have high employee morale since low morale would increase the employee turnover of the company. TQM makes the employees feel part of a team, which makes be more committed and productive. They also have more loyalty to the company. TQM enables the employees to be proud of their work, which leads to an improvement in the quality standard of the company.

TQM also enables each employee of the company to become a quality inspector since each employee it responsible for his or her own work. In addition, it provides the employees with the chance to criticize the work of other employees if the work is not up to standard (Yu, Park, & Hong, 2020). The huge size of Aramco’s sites makes it difficult for managers and supervisors to check all work within a short time. Therefore, making each employee be responsible for the quality of his or her work assists managers and supervisors. TQM provides Aramco’s employees with the opportunity to report any problem to the management as soon as they notice the problem. This enables the management to tackle the problem as soon as possible.

How the Quality Program Enhances the Organization’s Performance

TQM provides Aramco with a foundation for improving the performance of the entire company. It provides the company with the tools required to improve overall performance. TQM enables Aramco to manage change, determine opportunities for improvement, ensure continuous improvement, and improve the performance levels of the company. Unlimited support from the top leadership of the company is the main reason as to why TQM in Aramco has been successful.

TQM also provides Aramco with a means of measuring performance. Cost and quality are the two major organizational performance measures that are directly affected by TQM. Applying various TQM practices such as process management, training, and customer management influence the performance of employees, which consequently affects the performance of the entire company. TQM also influences the financial performance of Aramco.

The use of TQM has also led to an improvement in the levels of satisfaction and productivity of the company’s employees due to the reward and recognition program, which is a part of TQM implementation efforts in Aramco. Aramco holds rewards distribution ceremony quarterly. The employees are rewarded based on their performance or contribution. This makes the employees that are rewarded to strive to maintain high standards. The rewards make the employees of the company approach the management with creative suggestions. In most large organizations such as Aramco, the employees are likely to become complacent (Yu, Park, & Hong, 2020). However, TQM ensures Aramco’s employees strive to improve the quality of their work. The implementation of TQM has led to a reduction in sick application and late morning arrivals among employees. This has consequently led to an improvement in the productivity of the employees and the entire company.

TQM also ensures Aramco has a dedicated and trained workforce. This enables the employees to improve the quality of their work. This ultimately leads to the improvement in the performance of the organization as it minimizes costs, improves performance of employees, and improves the satisfaction levels of customers. Ultimately, the implementation of TQM has helped in improving the competitive edge of Aramco. It has made the company become one of the most profitable companies in the world.

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.

Maistry, K., Hurreeram, D. K., & Ramessur, V. (2017). Total quality management and innovation. International Journal of Quality & Reliability Management, 34(3), 418-437.

Yu, G. J., Park, M., & Hong, K. H. (2020). A strategy perspective on total quality management. Total Quality Management & Business Excellence, 31(1-2), 68-81.