Oil and Gas Executive Breakfast Insights
The hidden costs behind a traditional planning approach
Aucerna recently held an executive breakfast event for a cross section of planning executives from across the oil and gas industry. This invitation-only event was attended by representatives from the super majors, as well as large and small independents, and was facilitated by the Aucerna Strategic Consulting team. Leaders came together to hear peer-panelists discuss both process and people as important components of planning agility.
The panelists shared insights related to their planning processes, the shift in the nature of the questions coming from the executive suite as a result of the current environment and the increased need to communicate effectively across different planning groups and across their organizations. Questions and observations from the participants expanded the conversation, providing understanding about the challenges they face and the successes they are achieving.
"Never waste a good crisis."
Many felt that the difficult environment over the past 18 months has forced some very positive changes including increased efficiency and transparency in planning. Several attendees felt that a critical factor in their success has been an increased focus on communication across the organization. Different departments are now “learning each other’s language” and reaching out to the business units to ensure that they understand what was done with the planning data they provided and why that data was important.
How can companies continue down the right path to resolve the planning issues discussed? I could talk about this all day, but let me focus on the aspect of “improving efficiency.” Data collection is the most time-consuming aspect of planning. Reducing this time drain requires a balanced approach that combines the effective use of technology and rethinking the traditional processes.
Traditional planning approach
The traditional annual planning cycle can take months to generate plans. Our experience working with clients confirms what independent studies show-- that when using a traditional approach to planning, 10% to 15% of a company’s total office time is spent working on plans and budgets. That’s an astonishing hidden cost of doing business, but here’s what makes it worse.
85% to 95% of the time spent is dedicated to data – creating it, collecting it, formatting it, and checking it over. Actually analyzing the data and engaging in strategic conversation accounts for less than 5% of the time spent.
However, there is hope. We are beginning to see a new planning paradigm take shape that can be thought of as “planning on demand” with evergreen data.
Evergreen planning process
Replacing separate systems for strategic planning and budgeting with a single integrated inventory system for all planning data is a significant step forward toward a more agile planning process. However, to maximize the value of such a system requires rethinking the data gathering process. For instance, data should be updated when projects change materially, not when the planning group needs data. Infinite detail is often not necessary. The requirement to generate uncertainty descriptions (ranges of performance) for assets should be a function of the materiality of the asset and its degree of uncertainty, not a requirement for every asset. Revising the data gathering process requires a mindset change and some targeted communication around what data is needed, when and why.
Spend energy where it matters most
What’s the value of making this shift? After working with many clients, we estimate that companies can reduce resource requirements in this space by up to 70%. That could be time spent analyzing the broad business implications of their alternatives, rather than updating data and reconciling data between plans.
As we all know, time is one of the most valuable commodities you have. Refining your planning process doesn’t just improve efficiency; teams are free to spend energy where it matters most to the business.
Spend less time updating data, & more time analyzing it
Learn more about how the Strategic Consulting Group is helping E&P companies refocus their process, and take back their time.
About the Executive Breakfast series
Aucerna is proud to be the host of the Executive Breakfast Series: morning events held throughout the year for industry executives and those who support them in decision making.
These invite only events are designed to be valuable to senior industry executives both for their relevant content and as a networking opportunity with industry peers. Each breakfast features informal discussions led by a panel of industry executives and moderated by a senior member of the Aucerna Strategic Consulting Group. Following the panel discussion, there is time for Q&A and open dialogue between all attendees.
To request an invitation to the next Executive Breakfast please contact Brittany Bluestein: Brittany.Bluestein@Aucerna.com