Drilling Contractor Uses TQM as Catalyst for Growth

How a drilling contractor solved a five-year, global expansion project

Published: Wednesday, February 8, 2012 - 11:52

This case study provides an overview of the design, development, implementation, and subsequent management of a total quality management (TQM) system developed for the international division of the largest drilling contractor in the world, which is based in Houston. The TQM system covered all aspects of business and drilling operations, including quality assurance and control, which was based on ISO 9001.

Prior to the implementation of TQM, the company operated 30 rigs in 13 countries with approximately 1,000 employees. The company embarked on a growth strategy over five years, which included mergers and acquisitions, and quickly grew to operating more than 100 drilling and work-over rigs in six continents and 23 countries with more than 5,000 employees. Almost immediately the company encountered challenges among the corporate cultures of the merged organizations, with the cultural differences of the countries, from relocated managers not understanding local norms, with language barriers, from resistance to change, differences in business practices, poor rig operations and maintenance, inadequate safety practices, logistical problems, and ultimately the need to reduce costs and train and promote local employees.

Within the first five years of the mergers and acquisitions, there was an increase in rig equipment failure, downtime, maintenance costs, and blowouts; an increase in safety incidents and fatalities; equipment and parts were delayed in customs due to improper paperwork; customer complaints were frequent; and the company wasn’t keeping pace with the changing oil industry. The growth the company was pursuing was now in danger of affecting shareholders, and the company was put on notice to take immediate corrective action.

Through strategic planning, the company quickly realized its current management systems could not support its growth. The conclusion was to implement robust quality, health, safety, environmental, and operational management systems to assist in stabilizing the company, to provide a framework and establish a baseline of standard processes and procedures throughout the organization.

Project scope

The scope of the TQM implementation project was to design, develop, and implement a comprehensive management system that would provide a framework and baseline for all 23 countries and more than 100 rigs. Quality was based on the requirements of ISO 9001; safety was based on the Occupational Health and Safety Assessment Series (OHSAS) 18001; and the requirements of ISO 14001 were to be followed for environmental management. The operational components would be based on industry and the company’s best practices.

Planning

To accomplish these objectives, a comprehensive study was performed on defining and categorizing the company’s critical success factors. After numerous brainstorming and strategy sessions, the company developed a structure that encapsulated all aspects of its operation.

Design

The final design of the TQM system included a three-tier management system that detailed processes and procedures for the company’s headquarters and local offices, for rig operations, and for elements within each individual level. Approximately 13 elements were identified for each level, and the entire TQM system included 39 elements. The elements were given clear names that employees could understand. The company now had a robust framework to design its processes and procedures. The actual processes and procedures were defined and documented through teams, and reviewed and approved by process owners prior to issue. Upon approval, the documents were translated into the various languages. The documents were then issued as sets of controlled manuals, and when the manuals were published, they were released for use.

Implementation

Upon the system documents being issued, the system was implemented at each level. The implementation involved a thorough rollout in the various countries, which included training, coaching, and actual hands-on implementation assistance to help employees properly implement the processes and procedures. Upon implementation, the location was given approximately three to six months to fully implement the TQM system. After this period an internal auditing program was established to continually enforce the newly issued processes and procedures.

A performance monitoring system was also established that measured key performance indicators every month. Employee incentives were also tied to these performance indicators to continually provide motivation to maintain the improvement that was achieved.

Realized benefits

The implementation of the TQM system was successfully accomplished over a three- to four-year period. The company experienced many tangible and sustainable benefits, which included:
• Increased revenues from $100 million to $250 million within five years, with a goal to achieve $1 billion within the next five years
• Consistent 10- to 15-percent profit margin
• Reduction in rig downtime by 50 to 60 percent
• Reduction in recordable incidence rates by 20 percent
• Reduction in worker’s compensation costs of approximately $500,000 to $1 million per year
• Ability to reduce labor cost by capturing best practices and using local labor
• Recognition for various drilling records without incident
• Recognition for fastest rig moves in various countries
• Improved reputation
• Employees became more comfortable and confident because they now had guidelines
• Ability to be flexible when change was necessary
• Better understanding and tolerance of cultural issues
• Establishment of a baseline and a balanced scorecard

Lessons learned

The TQM system became the model for the entire company. There were many lessons learned during the implementation project, and a few of the main lessons are as follows.

The company realized that the maintenance of hard-copy manuals containing the TQM system documents were difficult to manage. Ultimately, the manuals were converted into a digital format available online and on CDs; however, this was after a substantial amount of money had been incurred on print media. Do the research and establish a document management system that is Internet-based, functional, and reliable for employees to access management system documents.

The document system was developed using subject matter experts (SME), but it would have benefited from having some actual line employees provide direct input during the creation of the processes and procedures. The SMEs had a tendency to document best practices rather than how things were actually done. This caused some issues due to the inability to correctly diagnose problems. It’s best to document processes and procedures how they are actually performed, and then changes can be made as a revision, which provides information for root cause analysis of problems as well as better change management. A good analogy would be a patient improving her eating and exercise habits for one month prior to having tests done by her doctor, and all the lab results are normal. After the doctor visit, the patient returns to her poor habits. This does not give the doctor the opportunity to see a true picture and make a proper diagnosis. The inaccurate documentation by the SMEs was ultimately overcome through employee feedback systems and internal audits.

Employee feedback systems and internal audits must be properly staffed to ensure sustained success. This can be accomplished through direct or contract labor, but the implementation and maintenance of a management system is an ongoing effort that requires infrastructure and resources. This company initially attempted to undergo the project with a one-person team, which made for a lengthy development phase and also increased the time it took for a positive return on investment. Traction was realized only when the appropriate infrastructure was put in place, which included direct and contract resources.

Conclusion

A company’s management systems can be used as the foundation for its growth. Without sound management systems in place, companies that attempt to grow will encounter many unforeseen and avoidable challenges that may counter the benefits of the growth strategy.

About The Author

Oscar Combs

Oscar Combs is President and Senior Consultant of The ISO 9001 Group, a management consulting, auditing and training firm based in Houston, Texas. Oscar has over 25 years of experience working with management systems. Oscar has worked with clients throughout North America, South America, Europe, The Middle East, Asia and Africa helping companies manage risk and improve their business operations. He holds an MBA from the University of Houston. He is certified by Exemplar Global as a Principal Management Consultant and Lead Auditor. Oscar is also a Senior Member of the American Society for Quality and has served as the Programs Committee Chair for ASQ’s Houston Chapter 1405.