Oilfield services companies who grow through acquisition immediately expect revenue growth and cost savings. These expectations are rarely met because acquisitions are never completely integrated. Purchasers take the easy route of creating a subsidiary company, slapping on a new logo, and hoping for the best.
As the two companies expand, costs grow exponentially. During the inevitable downturn, the board puts pressure on the management team to cut costs by completing the integration. Oilfield services can achieve integration success by using a combination of top-down and bottom-up approaches to standardize terminology, standardize data capture at the field, and rationalize positions.
Companies make a big mistake by failing to standardize terminology during the initial integration process. It may sound trivial, but establishing a company-wide vernacular is critical to speaking the same language and managing consistently across service lines and areas of operation.
Oilfield services companies fused together in a hurry may use terms like trucking, transportation, hauling, and logistics services interchangeably. These terms are easily interpreted in verbal communication, but translation is lost when accounting is required to book revenue. An accounting clerk will create new account codes for trucking, transportation, hauling, and logistics, resulting in a messy and duplicative P&L. This reporting nightmare can easily be prevented by consolidating the vocabulary used to describe trucking operations.
This same scenario applies to combining asset ledgers. Companies should define a consolidated asset register with company-wide naming conventions. Failing to standardize will cause confusion with operational areas who classify assets differently.
Oilfield services companies undergoing acquisition should utilize a bottom-up approach to standardize terminology to measure similar lines of business and fixed assets during post-integration discussions.
Many services organizations struggle to push reporting demands down to the field. Standardized data is critical and the easiest way to start is at the field ticket, straight from the source of revenue. The most important data to field service organizations are equipment, billing details, and employee time, which all depend on operations capturing it at the well head. It's important to not establish this as a corporate-driven initiative. Pushing ownership to the field creates buy-in to the data capture process, which is imperative to capturing accurate information.
Companies that start at the well head and use the bottom-up approach are much more effective. Be consistent with customer-facing documents and establish a cross-functional team to define a standardized field ticket. This will provide a variety of perspectives, which will yield far better results than a bunch of office employees who are disconnected from operations.
After the data captured in the field is standardized, the organization can focus on improving the processes which support field data collection at the well head. Mobility tools or tablets can help automate manual data collection and integrate easily with accounting and reporting tools.
Tone at the top ultimately drives decisions for strategy and people placement. Services companies buy a similar business and retain the full staff of both companies. The more, the merrier, right? Not necessarily. Wiping out the entire staff of an acquired company is harsh, but it's important to rationalize back office functions to cut unnecessary costs.
Clearly define roles and responsibilities across the business and avoid creating new positions to keep the peace. Personnel who don't buy in to the acquisition or vision of the growing organization are prone to becoming disruptive, which can easily transgress to peers and direct reports.
Oilfield services companies are not in business to employ people, they are in business to make money. Search for places where duplicate positions can add value and pose the question: Is there a place for this person in the new organization?
Integrating organizations is complex, but oilfield services companies can make it easier by standardizing terminology, standardizing field tickets, and streamlining back office functions in the organization.
Trenegy is a non-traditional consulting firm dedicated to helping companies achieve integration success. Reach out to us anytime at info@trenegy.com.
