People power

If employees really are a company's greatest asset — as many corporate executives publicly state they are — then they should be treated that way, NuStar Energy LP president/chief executive officer Curt Anastasio said in the Executive Roundtable session July 8 at the International Liquid Terminals Association's 29th annual International Operating Conference in Houston, Texas.

Anastasio said it is tempting to truncate the workforce in times like these, but he told a story about how NuStar chairman Bill Greehey approached an economic downturn earlier this decade when he was the CEO of Valero.

“They came out of 2001, and refining margins had dropped,” Anastasio said. “2002 was not shaping up to be a good year. One of the senior executives came to him and said, ‘Our margins are down and we're going to have to cut 10% of the workforce.’ That was really the wrong person to say that to. Bill looked at him and said, ‘Who do you think is going to get us out of this? It's not going to be you, Mr. Executive Vice-President. It's going be our people.’

“So Bill's approach was to go around to different locations and say to people, ‘This looks like a tight year. Here are the expense targets, revenue targets. Our strategy is still good. If we come out of this, we're going to have a good 2003.’ Everybody was loyal to the team. That was a pretty bad year for refineries, but Valero was the only one to turn a profit and the only one to pay a bonus. It wasn't a great bonus, but everybody else laid people off.

“It's amazing what people will do for you if you communicate and stay loyal. That's our approach at NuStar. The first thing is to establish trust and make it a great place to work. Usually in these times, companies will say, ‘People are our No. 1 asset.’ But the first thing they do is lay people off and cut salaries, and look at people as an easy target. At NuStar, we've never had a layoff. We're not going to do that. I think that's really counterproductive.”

He said that the petroleum industry has an aging workforce and needs to bring in more young people. But if the philosophy is to stage mass layoffs, it's very hard to recruit young talent.

“Young people are not going to be interested in a company that says, ‘If we have a bad year, we're going to lay off 10% of you,’ ” he said. “You want to be an attractive employer.”

Teamwork exercises

Rod Sands, president/chief executive officer of Explorer Pipeline, said the size of the company — just 182 employees — has served as an advantage.

“I can know every single person,” he said. “The average age is 47. That has changed because of people leaving. We have diversity. We have open discussions on what that really means. We're small enough where we're able to have summits where we bring everybody together. We do teamwork exercises on rope courses and develop trust. We can learn how we think and we work so we can learn to celebrate the differences. It's not something we can do in one setting. That's a major effort.

“It's in line with what we need to do with the entire globalization of our economy — understanding the differences of people. We try to capture knowledge by developing mapping processes. We actually do flow charts on the steps we go through. Once you capture that, you have a narrative. Then the object later is to go back and try to improve that. You look at all things that are core to your company, and try to formulate work processes. We have developed a little deal that says procedures are the how, processes are the what, and policies are the why. People will know this is the way we do business around here. It's like if you were an excellent football team. Fundamentals are the key.”

Said Hank Heithaus, president of Murphy Oil USA Inc, “It's important that your organization has people of different ages and different colors and types, because everyone brings a different perspective to the business you're in. The most important thing you can do is foster an atmosphere where everybody feels comfortable to bring a viewpoint to bear. Nobody knows all the answers. I'm looking for people who will speak up and bring a new approach.

“How do we attract young talent in our business? Sometimes it's very difficult. We have to create an environment where we all pitch in and become mentors of young folks. We all have an obligation to do that because we're already in the business. We have to chat with them and bring guidance and give them someone to talk to. If you don't have that kind of environment, you won't be successful. Young folks are into Facebook and Twitter. I'm not quite into that. But it's a different environment, the one we're in today.”

What should a prospective employee look for in a company in this industry?

“What is the culture of that company?” Anastasio said. “Are these people I want to be associated with? What are their values? What is the leadership like? Do they have a strategy that makes sense to me? Do they have a vision? Have they set goals that I want to be a part of?

“It can be an exciting industry. A few years ago, it was a Wall Street firm or finance. But if you don't know the values of those people. … Maybe some of those guys focused on short-term gain and not long-term value. That was an important thing to know before you went to work there.”

Said Sands, “I tell them, ‘We value your recommendations and thoughts.’ Instead of just sitting back and complaining about something, offer solutions. Become a solution developer. A young person can stand out in a crowd by recognizing that. Don't just identify a problem and expect the boss to solve it. Develop a solution. Don't just tell what's wrong. Tell a way to fix it.”

Some companies, battling to deal with decreased profits, are cutting back on customer service. How does that impact service?

“Without petroleum terminals, Explorer has nothing,” Sands said. “We don't want to sacrifice any of our services. We want to go back to basics and provide quality service to customers. We have had to spend a lot of time qualifying people. The cost-cutting we got involved in was trying to do more with less. We don't want to sacrifice safety and customer service. We're trying to drive the break-even point so when we do see some light, we can increase our margin and have a better return. 2007 was the peak year for us. We don't expect to get back to that, but to get back to something like we had in the early 2000s.”

Asked how his company determines customer satisfaction, Heithaus said Murphy embarked on a program 18 months ago in which customers use the back of a receipt to call a number and participate in a survey, with the reward being a free entrée at a restaurant or sweepstakes for gift cards.

“That has provided us with a greater scope of measuring customer service, rather than traditional methodology,” he said. “We also conduct focus groups to get the flavor of what customers think. But it's difficult to put a pulse on a particular site as to whether we're meeting customer expectations. We sell gasoline and diesel, and the choice is made on convenience and price. The missing ingredient for us is customer service. So there's no better time than now to stress those things. How are you taking care of customers? We want to grow customers that believe we're trying to do the right thing by offering them the best product at the best price.”

Said Sands, “We have about 70 customers. These are end users — refineries, marketers, airlines, railroads. We're seeing some drop off. We survey customers to find out what they want. Are we competitive? Are we listening to them? We do customer surveys every other year. It's not good enough to have satisfied customers. We want a list of those who have complaints, something about the operation we can't necessarily do. You may not want to be everything to everybody. But know your business and communicate to them what you're trying to do. We do surveys during ship routings, annual meetings, mailouts, and try to communicate back what we can do.”

On the topic of consolidation, Anastasio said there are some places that people have thought for some time are hubs, but are now overbuilt.

“Proceed with caution, because it's going to be hard to be profitable when you have trouble attracting customers at the price needed to make projects fly,” he said. “The cost of capital is going up. It's not just a matter of availability. There's an expectation of inflation coming. If that's the case, interest rates are going up and the cost of capital may go up even more. That's one thing you have to account for in forward planning — your assumption on how much capital you can raise at what cost is a lot different this year in a five-year plan than it would have been five years ago. So that makes those more competitive places an even rougher row to hoe.”

Said Olav Refvik, founding member of Arrowhawk Capital Partners, “We have shortsightedness and lack of visionaries. The way we're handling energy today is ridiculous. It doesn't make any sense to ship energy in pipelines and store it in tanks. In my mind, it's very easy for the government to have a long-term plan to create an efficient electricity network. Convert, particularly on the gas side, the plug-and-drive fleet. We are short in energy or how to convert it, but long in resources. In North America, between Canada and the US, it wouldn't take too many people too many days to figure out how to do it. The policy of giving a trillion dollars in bits and pieces to different projects is ridiculous.”