By Andrew Wilson from DuPont Sustainable Solutions
SEVEN of the world’s 13 largest LNG projects, either under way or being planned, are in Australia. Projects are being delivered in the context of some widely reported cost overruns - Australian projects are 20-30% higher than costs for competing projects in North America and East Africa, and it is estimated that Australian costs for delivering LNG to Japan can be up to 30% higher than projects in Canada and Mozambique.
Cost pressures are compounded by competition between projects for skilled workers and lower than expected labour productivity. As projects start to prepare for operations, thousands of operators and other skilled workers will need to be brought on board and trained.
Why is this important? A global study by Independent Project Analysis revealed 65% of mega-projects (those worth more than $500 million) run more than 25% over budget and 25% behind schedule. The last thing you want when deadlines are looming is not have enough of the right people working for you. It is imperative that companies building and completing mega-projects create a working environment that attracts, develops and retains the best employees.
To avoid being among the 65%, DuPont’s believes that companies need to build a ‘productivity’ culture that supervisors and blue-collar workers, in particular, see as a place they want to work and are not continually changing jobs for an increase in pay or better conditions.
Much has been written about the reasons behind the overruns and productivity gap including labour relations and the need for those within the Australian LNG sector to work together more, for example through joint qualification of vendors to reduce tendering timeframes, but what about within the companies themselves?
Every site is different so there is no cookie cutter approach that can be taken but there are some non-negotiable essentials. It is important to have robust systems that focus on what really matters, cover the right people and manage performance. The transition to operations requires implementation of an integrated system for continuous improvement as well as risk management. This needs to be supported by tools and best practices to solve root level problems.
Systems alone won’t do the job. The best system in the world, poorly executed, is worthless.
It is essential to have a thoughtful leadership team that not only sets clear priorities but aligns the workforce so they understand their contribution to achieving the priorities and empowers them to have control over their working environment. It also requires leadership practices that focus on fully developing people to utilize assets to maximum effect.
In our experience, the most significant gains in capability development occur beyond the classroom, by learning through doing. This inherently involves learning from line managers and supervisors which also supports cultural alignment – the mindsets and behaviours where people instinctively do the right things, the right way, every time. At DuPont’s hazardous facilities, Leaders Standard Work (LSW) is used to ensure leaders are setting an example and demonstrating their willingness and ability to make changes themselves to be more effective in their work. This sends a clear message that ‘we are all in this together’.
The current LNG projects are more complex and on a larger scale than what many of the workforce will have experienced. They are hazardous to build and operate, and if you make a mistake it can quickly turn into something bigger. Projects are typically delivered by a consortium of organizations and the number of projects has led to high demand for skilled and non-skilled contract workers.
Much has been said about FIFOs as well – and that is an issue particularly in Australia. Integrating all these organizations and people into one cohesive group should not be under-estimated.
The productivity and costs focus often leads owner companies to create explicit or implied pressure on contractors to avoid delays and associated cost increases. This can mean unintended consequences of shortcuts being taken or work being executed at all costs, leading to incidents and injuries. As a result, not only is the injury to workers significant, there are impacts to project overrun, production and reputational damage.
Project owners need to invest in a contractor management model that is integrated into the systems, structures, procedures and monitoring systems to ensure contractors aren’t the reason they suffer cost blowouts.
Many LNG operations are in remote locations. It is important to develop and implement a coherent strategy for ensuring all personnel - be they plant managers or maintenance fitters - and contract workers have the knowledge, capability and mindset before start-up to operate the facility in a manner consistent with expectations of all stakeholders, shareholders, communities and governments.
The project owner must develop a robust system for monitoring output and have defined this program within the context of the contract before a worker starts. Effective monitoring calls for a partnership with the contractor rather than an adversarial relationship.
Culture is key
Having the right people that are motivated and empowered is critical in having a workforce in which people want to stay. A company must be able to retain and attract on culture, not price. It is about survival of the fittest and if you want to survive, culture and your people should not be an afterthought.
How do you know when you have hit this nirvana? How will you know your strategy is working? You will know when your workforce is making decisions in the field without having to second guess management. You will know because when management walk on site it is calm and in control.