Historical and Organizational Background of Shell
Shell was started in 1833 by Marcus Samuel who was a shopkeeper who sold antiques and later sold shells (van Zanden et al. 2007). It was when he passed away and his sons took over the business that the sons discovered a potential in the selling of oil. Although they struggled at first, a merger between the Shell Transport and Trading Company and the Royal Dutch Petroleum led to the formation of the Royal Dutch Shell Group, enabling these companies to compete with the leading oil company at the time, Standard Oil. By the end of the 1920s, Shell would become the leading oil company.
Shell began to globalize its operations in the 1960s through the hiring of local people in the specific countries where they operate (van Zanden et al. 2007). By the 1980s, Shell would continue to grow through acquisitions and through the development of new technologies and offshore exploration projects (van Zanden et al. 2007). By the middle of the 990s, Shell would learn – through the Brent Spar episode – that more and more of its stakeholders were becoming environmentally conscious (van Zanden et al. 2007). In response, Shell allowed more dialogues to be conducted with interested third parties in order to discuss the environmental impact of the company’s operations and to establish good relations with the communities where they conduct their business. Moreover, the problem in Nigeria has compelled Shell to exert more effort at expressing goodwill towards the populations and the governments it deals with.
Key Issues in the Situation
One of the key issues with the incident in Nigeria was that Shell’s operations caused oil leaks in the Nigerian region of the Ogoni people (Abuja and Uyo 2010). According to the Ogonis, Shell was already aware of the leaks in their pipes but still did not do anything to fix the problem (Shell faces new Ogoniland lawsuit 2013). This led to the destruction of the environment being occupies by the Ogonis. What’s worse is that Shell failed to remedy the situation for a long time. Shell also failed to compensate the Ogoni people for the damages caused as well as for the profits made from the oil obtained from their region. As a result, this led to various reactions from the international business community where even the United States urged Shell to right the wrong that they have done.
How the Three Stakeholders Make Sense of the Wicked Problem
The Shell CEO probably makes sense of this problem as being part of the business’ daily operations. As with any other business, operations always come with risks and accidents can happen. As well, he would probably reason that Shell runs their operations based on sound decisions and based on the required expertise but that some people will simply not be amenable with the methodologies and techniques they’ve used. In other words, one can never please everyone. Moreover, even technology is imperfect. As such, incidents such as the oil spill are bound to happen no matter how much care or precautionary measures are taken.
On the other hand, a Nigerian Shell employee will probably make sense of this situation by pegging the accident as an unfortunate occurrence and that the mistakes made were all part of the job. After all, nothing and nobody is perfect. However, considering that Shell took a long time to fix the situation can make this Nigerian employee question the values of the company he or she works for, which may affect his or her job performance. In addition, although the employee acknowledges the incident as an accident, they are still bound to sympathize with the Ogonis, especially since they are from the same country.
Finally, a Shell investor will probably make sense of this situation by analyzing how the incident can affect their investments and what their next steps should be. They may also, at first, be in denial of the possible repercussions this incident would have on their investments.
Ways of Constructing an Understanding of this Event
As the Shell CEO recognizes the accident to be a part of the business operations, he will likely deal with this in the same way he would deal with any business problem. On the other hand, a good CEO would also consider the stakeholders that are affected by the incident. He should then be able to see the situation from the various stakeholders’ perspectives as this will enable him to make the right decision for fixing the problem. This would enable him to come up with a solution that would be agreeable to the different stakeholders involved. However, doing the right thing will come with high costs, so this may come in conflict with his prior decision of doing the right thing. These costs may affect the company’s bottom line, which may in turn displease the company’s shareholders. As such, the CEO should carefully weigh the pros and cons of his decisions.
With regards to the Nigerian Shell employee, they would try to understand the event by first getting information about what caused the incident. This will probably allow him or her to gain an understanding of the technical problems that occurred and which caused the accident. This will allow him or her to easily accept the situation as unintended. However, if his or her “research” leads him or her to determine that the accident was caused by neglect on the part of Shell then they would probably question whether they are working for the right company. Especially if they hear the side of the Oganis, this employee may perceive Shell as an unjust company and may even feel partially guilty for being an employee of Shell. Although this employee knows that Shell is a world renowned company and that he or she should feel lucky for having the opportunity to work in such a prestigious company, he or she may still be in disagreement with the actions taken by Shell in addressing the situation.
Finally, for the investor, they would probably try to learn everything they can about the facts surrounding the incident. They will try to determine whether Shell was really at fault or not as this can affect their decision on what to do with their investments. They will also try to determine how the other stakeholders – the customers, the governments, the environmentalist groups and the other interest groups – will react to the situation as this, too, can affect how Shell’s stocks will fare in the stock market.
How the Three Stakeholders can Have a Personal Impact on the Situation
The CEO of Shell can have a personal impact on the situation by being the key decision-maker on how to deal with the situation. By doing the right thing and by demonstrating a charismatic type of leadership, he will be able to regain the various stakeholders’ trust in the company. He will also be able to regain the credibility and the reputation that the company had prior to the incident. Moreover, he can make use of transformational leadership in order to bring about changes within the organization, particularly with how they conduct their operations as well as how they deal with their stakeholders, especially the communities where they operate in. By being a charismatic or transformational leader, he will be able to inspire not only the company employees, but also the community members, to conduct their businesses in an ethical manner. In addition, this will enable the company to obtain the support of these stakeholders. Moreover, this would be in line with the proper management of stakeholders (Donaldson and Preston 1995).
As for the Nigerian employee, they can have a personal impact on the situation through their job performance, that is, if they believe Shell to be at fault or unethical then this can make them less motivated to work for the company. In turn, this can affect the company’s productivity.
As for the investor, their personal impact on the situation is whether they retract or add to their investments in the company. This can greatly affect the company’s finances.
Summary of Related Literature
A charismatic leader is one who possesses characteristics that encourage people to
increase their job performance and to start their own initiatives. According to Isik et al. (2012), the charismatic form of leadership is best employed when dealing with stressful situations or crises. As such, it may be good to employ this type of leadership in Shell’s handling of the Nigerian problem. As well, a leader can use the sense-making approach when solving a problem. This approach involves an active process where a person constructs meaning from present stimuli based on prior knowledge. It is also embedded in the social context (Sleegers et al. 2009).
On the other hand, a transformational leader is someone who can effectively motivate and
inspire various stakeholders to work towards the achievement of a specific vision (Kim, Magnunson, Andrew and Stoll 2013). In this type of leadership, the leader has self-confidence, vision, and inner strength. Othman, Mohammed and D’Silva (2009) also claim that both transformational and transactional leadership lead to an increased organizational commitment. With these types of leadership, Shell will be able to regain the respect it used to receive from their stakeholders and from the business community as a whole.
Assessment of the Situation from the Three Stakeholders’ Perspective
On the part of the local employee, they may think that this situation will negatively affect the company’s finances. They may then think that these costs may be passed on to them in the forms of layoffs or the provision of very small salary increases.
On the part of the investor, they may anticipate a decrease in the value of Shell’s shares of stocks.
Motivations of the Three Stakeholders
The CEO will be motivated by his desire to salvage the company’s reputation and to minimize the financial losses that will be incurred from the incident. In the same manner, he will be motivated by his desire to increase the company’s stock prices, or at least keep them from going down, in order to please the company’s shareholders. As well, he will be motivated to do what is ethically right for the Nigerians.
For the local Shell employee, they will be motivated by a desire to perform well in their jobs in order to ensure that they keep their job or are able to advance in the company. On the other hand, they will also be motivated by their love for their country.
As for the investor, his motivation is to gain as much returns as possible on his investment.
References
Abuja, O. E. and Bassey, O., 2010. Oil spill: Environment practitioners want compensation from shell. [online] Available at:
Donaldson, T., Preston, L. E., 1995. The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20(1).
Isik, O., Ugurluuoghr, O., Akbolat, M., Oner, Z. H. and Pisapia, J., 2012. Charismatic leadership: Impulse factor for initiative-oriented health care personnel in the Turkish public hospitals. HealthMED, 6(5), pp. 1523-1535.
Othman, J., Mohammed, K. B. and D’Silva, J. L., 2013. Does a transformational and transactional leadership style predict organizational commitment among public university lecturers in Nigeria? Asian Social Science, 9(1), pp. 165-170.
Shell faces new Ogoniland lawsuit, 2013. TCE: The Chemical Engineer, 851, p. 17.
Sleegers, P., Wassink, H, van Veen, K. and Imants, J., 2009. School leaders’ problem framing:
A sense-making approach to problem-solving processes of beginning school leaders. Leadership and Policy in Schools, 8, pp. 152-172.
Van Zanden, J. L., Jonker, J., Howarth, S. and Sluyterman, K., 2007. A history of
Royal Dutch Shell.
