# Measuring the Performance of Oil Company Work Teams

Jack Zigon President, Zigon Performance Group\
Copyright © 1998 Jack Zigon

## Introduction 

Many U.S. oil companies are using self-directed and cross-functional
work teams as a way of improving their competitiveness within an
industry facing sharply reduced revenue per barrel. For the most part,
measurement of these teams has focused on either organizational result
measures or team process measures, neither of which gives the precision
needed to fine-tune the team\'s efforts.

This article will present a process for creating performance measures
for self-directed and cross-functional work teams. The process allows
the team to create both team objectives and objectives for individual
team members that directly support the team\'s results. Examples of
on-going applications in one oil company will also be shown.

## Background 

One innovative oil company reorganized its operations into
cross-functional exploration and exploitation teams. Prior to the
reorganization, the company was organized along typical functional
lines. Geologists, drilling engineers, production engineers and landmen
reported up thorough separate departments. The company\'s reserves were
managed by (?) who called upon the members of the various functions to
provide services. While typical of oil companies, this organization
design brings with it the same kinds of communication, coordination and
flexibility problems other industries have experienced using a
functional design.

To increase the company\'s ability to change more rapidly, the
company\'s reserves were divided into five regions and each region was
assigned a cross-functional team. Each team was made up of core team
members (geologist, reservoir engineer, production engineer, land
person, foreman) and floating team members (geophysicist, drilling
engineer, environmental staff, technicians). The core team members were
permanently assigned to the specific geographic region, while the
floating team members lent their expertise on a part-time basis to
several core teams.

It was hoped that this organization design would allow increased
accountability for results while drastically reducing the communication
and coordination problems inherent in the functional design.

To increase the chances that the teams would be successful, team
development training was provided which covered skills such as
communication, meeting management, problem solving and conflict
resolution. During this development training, it became apparent that
the teams could not progress further until they had clearly defined
performance standards for the entire team and each member of the team.

## Mapping the Work Process 

We began by mapping the work process the team used to complete its work.
This allowed us to identify the team\'s customers, the products/services
the customers need, and identify all the major process steps and
hand-offs that lead to the final product the customer receives. Figure 1
illustrates the work flow for the team\'s two main responsibilities:
ongoing operations and exploration/exploitation projects.

![](media/image1.png){width="6.770833333333333in"
height="4.458333333333333in"}

Figure 1. Example work flow for cross-functional oil exploration team

The teams were able to use the diagram to create team measures for total
oil reserves and oil deliveries made at a given cost plus one surprise
measure. In general, a map of the work process identifies three
potential team measurement points: final results, key process steps
(boxes) and key handoffs (arrows). In addition groups of process steps
can be candidates for team mesaurement since these groups usualy require
a coordinated group effort to be successful. Getting new drilling
projects approved and implemented on a timely basis is one key to
profitability for oil companies. The diagram made it obvious that flow
time through all of the boxes on the right side of the diagram was a
measure that was critical to the overall success of the team, but one
which had never been tracked before.

## Identifying Individual Measures 

To identify the individual team member measures which support the
team\'s process, a role-result matrix was built. The team members were
listed down the left side of a matrix and the work process was laid
across the top, with accomplishments needed to support each process step
inside the cells. Figure 2 shows part of the role-result matrix for
three tasks and five functions of the oil exploration team. These
accomplishments were the starting point for all individual performance
measures.

+-------------+-----------------+------------------+------------------+
| **Work      | **1. Geological | **2. Reservoir   | **3. Well        |
| processs**  | Mapping**       | Analysis**       | history and      |
|             |                 |                  | performance**    |
| **Team      |                 |                  |                  |
| members**   |                 |                  |                  |
+-------------+-----------------+------------------+------------------+
| **E         | Subsurface      | Log analysis     | Log correlation  |
| xploitation | interpretation  |                  |                  |
| Geologist** |                 | Volumetric maps  | Zone             |
|             |                 |                  | identification   |
+-------------+-----------------+------------------+------------------+
| **Geo       | Seismic         | Amplitude and    |                  |
| physicist** | interpretation  | attribute        |                  |
|             |                 | studies          |                  |
|             | New             |                  |                  |
|             | exploitation    | Volumetric maps  |                  |
|             | and exploration |                  |                  |
|             | prospects       |                  |                  |
|             |                 |                  |                  |
|             | Subsurface      |                  |                  |
|             | interpretation  |                  |                  |
+-------------+-----------------+------------------+------------------+
| **          | New trends      | Recognition of   | Log correlation  |
| Exploration |                 | depositional     |                  |
| Geologist** | New exploration | environment      | Zone             |
|             | prospects       |                  | identification   |
|             |                 | Log analysis     |                  |
|             |                 |                  |                  |
|             |                 | Volumetric maps  |                  |
+-------------+-----------------+------------------+------------------+
| **Reservoir | Reservoir       | Reservoir        | Production and   |
| Engineer**  | parameters      | characterization | performance      |
|             | which affect    |                  | anomalies        |
|             | mapping         | Material balance |                  |
|             |                 | evaluation       | Volume forecasts |
|             |                 |                  |                  |
|             |                 |                  | Analogies        |
|             |                 |                  | identified       |
+-------------+-----------------+------------------+------------------+
| *           |                 |                  | Descriptions of  |
| *Production |                 |                  | well mechanics   |
| Engineer**  |                 |                  |                  |
|             |                 |                  | Production and   |
|             |                 |                  | performance      |
|             |                 |                  | anomalies        |
|             |                 |                  |                  |
|             |                 |                  | Volume forecasts |
|             |                 |                  |                  |
|             |                 |                  | Analogies        |
|             |                 |                  | identified       |
+-------------+-----------------+------------------+------------------+

Figure 2. Example partial role-result matrix for cross-functional oil
exploration team

## Defining Performance Standards 

Up to this point we had identified what should be measured, but not the
details of how to write performance standards for either the team or the
individual members. Because of the creative nature of this team,
traditional measurement methods would work..

Developing performance standards for a difficult-to-measure position
such as a research scientist starts with a clear definition of the
customers of the position and what accomplishments these customers need
from the position. Measures for each accomplishment are first developed
at a general level (quantity, quality, cost or timeliness) and then at a
more specific level. Finally standards are set that represent meeting or
exceeding expectations.

The key to developing useful standards for these positions is not trying
to measure everything with numbers. The accomplishments of some work
can\'t be meaningfully measured with numbers, but can be described using
words. The key is verifiability - can we verify that the performance
standard has been met or exceeded. If so, the standard will be useful.
Numeric measures are easy to verify, but there are other equally valid
measures. Verifiable descriptive performance standards have three
components: a judge, what the judge looks for, and a verifiable
description of what would represent meeting expectations.

A complete set of performance standards for a team is usually several
pages long. It includes a list of the team\'s common standards as well
as performance standards for each member of the team. The length of the
listing is governed by two competing values: completeness and
practicality. The list should be long enough to cover all the important
facets of the team\'s performance, but not be so long that the time
required to collect the data exceeds its value to the team or the
organization.

Figures 3 and 4 represent a partial listing of the team-level
performance standards and objectives for one individual on this
company\'s exploration and exploitation team. Notice that some of the
objectives are numeric and others are descriptive, but all can be
verified.

For example, the last row in Figure 3 is a descriptive measure used to
evaluate drilling proposals. The list of criteria can be used by the
team to evaluate their own work prior to submission of the study, and by
management as part of a final evaluation after the proposal is
presented. The team understands who the customer is (management), and
what verifiable criteria they will use to evaluate their work. The first
criteria asks that all data was collected, and none were conveniently or
inadverntly left out of the study. The second criteria requires that the
team\'s decisions to pay more attention to some data and less to others
is done is the same way that management would have done it. The third
requires that any risks be openly discussed, because while a percentage
of failures is part of the oil business, being surprised by known but
undisclosed problems is not tolerated.

Who is doing the measuring can vary depending on the performance
standard. Strictly numeric standards can be evaluated by any member of
the team who has access to the necessary management reports. A sampling
of the descriptive measures in Figure 4 shows evaluation by the
exploitation vice president, management, other team members, the
reservoir engineer, etc. In each case the best judge was identified
along with the criteria the judge would use to judge success.

+-------------------+--------------------------------------------------+
| **                | **Measures and Performance Standards**           |
| Accomplishments** |                                                  |
+-------------------+--------------------------------------------------+
| Region business   | \$ net operating income meets agreed upon        |
| results achieved  | business plan.                                   |
|                   |                                                  |
| -   Deliveries    | Total yearly cubic feet of gas meets agreed upon |
|                   | business plan.                                   |
| -   Costs         |                                                  |
|                   | Total yearly barrels of oil meets agreed upon    |
| -   Development   | business plan.                                   |
|     opportunities |                                                  |
|                   | Lease operating expense meets agreed upon        |
| -   Acquisition   | business plan                                    |
|     opportunities |                                                  |
|                   | Cash flow increases at X%/year.                  |
| -   Exploration   |                                                  |
|     opportunities | Reserve additions are greater than X%.           |
|                   |                                                  |
|                   | Cost to find and develop oil is \<\$X/barrel for |
|                   | the life of the field.                           |
|                   |                                                  |
|                   | Projects are completed by agreed-upon team       |
|                   | deadline.                                        |
+-------------------+--------------------------------------------------+
| Investment        | X to Y investment opportunities per year which   |
| opportunities     | meet corporate hurdle rates for drill wells,     |
|                   | acquisitions, workovers/recompletions, facility  |
|                   | modifications, and explorations:                 |
|                   |                                                  |
|                   | -   (corporate hurdle rates to be set for each   |
|                   |     type of opportunity).                        |
|                   |                                                  |
|                   | -   Fits strategy.                               |
|                   |                                                  |
|                   | -   Leverages into other opportunities.          |
|                   |                                                  |
|                   | -   Uses corporate competitive advantages        |
|                   |     (horizontal drilling, etc.)                  |
+-------------------+--------------------------------------------------+
|                   | Continuous reduction in average project study    |
|                   | cycle time for:                                  |
|                   |                                                  |
|                   | -   Repairs and workovers, etc.                  |
|                   |                                                  |
|                   | -   Recompletes and drill wells.                 |
|                   |                                                  |
|                   | -   Acquisitions and divestitures.               |
+-------------------+--------------------------------------------------+
|                   | Management says the following about the project  |
|                   | study:                                           |
|                   |                                                  |
|                   | -   All relevant data was collected.             |
|                   |                                                  |
|                   | -   The team\'s weighting of the data is correct |
|                   |                                                  |
|                   | -   All risks were identified and communicated.  |
|                   |                                                  |
|                   | -   Alternatives were fully considered.          |
|                   |                                                  |
|                   | -   The conclusions presented are analytically   |
|                   |     consistent with the data.                    |
|                   |                                                  |
|                   | -   They have the information they need to make  |
|                   |     the decision.                                |
|                   |                                                  |
|                   | -   The project has a good chance of working.    |
|                   |                                                  |
|                   | -   Completed by agreed-upon deadline.           |
+-------------------+--------------------------------------------------+

Figure 3. Example team measures and performance standards

+------------------+---------------------------------------------------+
| **A              | **Measures and Performance Standards**            |
| ccomplishments** |                                                   |
+------------------+---------------------------------------------------+
| **New reserves   | 250,000 net to company BOE reserve                |
| identified**     | replacements/year (new, unbooked reserves which   |
|                  | wouldn\'t have been recovered without this work)  |
|                  |                                                   |
|                  | 65% to 75% overall success rate on recompletes,   |
|                  | w/o\'s and infill drilling.                       |
|                  |                                                   |
|                  | 1 to 2 economically successful major              |
|                  | prospects/year                                    |
|                  |                                                   |
|                  | Exploitation VP is satisfied that the amount of   |
|                  | effort matches the potential.                     |
+------------------+---------------------------------------------------+
| **Subsurface     | Management says they are satisfied that:          |
| interpretation** |                                                   |
|                  | -   Seismic data ties together.                   |
|                  |                                                   |
|                  | -   Log correlations look reasonable.             |
|                  |                                                   |
|                  | -   All the available data is used and fits the   |
|                  |     interpretations.                              |
|                  |                                                   |
|                  | -   Conforms to known models.                     |
|                  |                                                   |
|                  | -   Fits engineering data.                        |
|                  |                                                   |
|                  | -   Looks beyond current producing horizons.      |
|                  |                                                   |
|                  | -   Interpretations identify new opportunities.   |
|                  |                                                   |
|                  | -   Meets agreed-upon deadline.                   |
|                  |                                                   |
|                  | -   Management agrees that time spent matches     |
|                  |     potential.                                    |
|                  |                                                   |
|                  | Exceeds expectations = Map fits the production    |
|                  | data.                                             |
+------------------+---------------------------------------------------+
| Log analysis     | Other team members are satisfied that the         |
|                  | interpretation:                                   |
|                  |                                                   |
|                  | -   Integrated offset well performance            |
|                  |                                                   |
|                  | -   All relevant data is integrated.              |
|                  |                                                   |
|                  | -   Makes a decision.                             |
+------------------+---------------------------------------------------+
| Volumetric maps  | Other team members are satisfied that the map:    |
|                  |                                                   |
| -   Structure    | -   Contours match the structural and net sand    |
|     map          |     maps.                                         |
|                  |                                                   |
| -   Isopach map  | -   Is consistent with the reservoir data.        |
|                  |                                                   |
|                  | -   Well production performance matches the map.  |
+------------------+---------------------------------------------------+
| **Log            | Reservoir engineer and other team members are     |
| correlation and  | satisfied that the correlation and zone:          |
| zone             |                                                   |
| identification** | -   Differentiate between structural and          |
|                  |     stratigraphic effects.                        |
|                  |                                                   |
|                  | -   Are consistent with all available data.       |
|                  |                                                   |
|                  | -   Met agreed upon deadline.                     |
+------------------+---------------------------------------------------+
| **Drill well     | Operations manager and drilling engineer are      |
| objectives and   | satisfied that the:                               |
| design           |                                                   |
| criteria**       | -   Formation objectives are clearly identified.  |
|                  |                                                   |
|                  | -   Well parameters are accurate.                 |
+------------------+---------------------------------------------------+
| **Risk           | Team members and management say risk looks        |
| assessment**     | realistic based on appropriate weighting of all   |
|                  | available data.                                   |
+------------------+---------------------------------------------------+
| **Well           | Team members and management say the well          |
| performance      | performance predictions properly weigh and        |
| predictions**    | incorporate all historical and analogous data.    |
|                  |                                                   |
|                  | Exceeds = Well comes in as projected or better.   |
+------------------+---------------------------------------------------+

Figure 4. Example measures and performance standards for an exploitation
geologist.

## Benefits of Measuring Work Team Performance 

This process for measuring work team performance has the following
positive results:

Gives top management the information it needs to make decisions
regarding teams. Management wants to know what works and what doesn\'t.
Scarce resources need to be deployed where they can have the most
effect, and managers responsible for a team\'s results need to be able
to measure a team if they are going to be able to manage that team.

Reduces the time needed to create team measures. One of the authors was
called upon to review the results of a Fortune 500 company\'s two-year
team measurement effort. While the resulting measurement system was
excellent, the process couldn\'t be replicated easily with the
company\'s 100 other teams because of the resources and time required.
The process described in this paper can produce a first draft of a
measurement system in 3-4 weeks - a considerable reduction in cycle
time!

Fosters team cohesiveness. Helping a team to develop its own measures
can help a group of individuals become a team in less time. The process
provides the team with a results-oriented development exercise that
fosters team cohesiveness and defines its purpose in measurable terms.

Combines individual and team measures. In the United States, most
employees want measures of both their team\'s results and their
individual contributions to the team. The process identifies both
individual and team measures which promotes cooperation while allowing
individuals to be rewarded for their unique contributions to the team\'s
overall results.

Builds on previous process re-engineering efforts. Many companies are
involved in process re-engineering. This team measurement model builds
on the results from these analyses if they\'ve been done, or demands a
partial process analysis if one doesn\'t exist.

Allows performance appraisal of teams. Most companies\' appraisal
processes are oriented toward individuals only. This usually results in
performance objectives that create conflict between the individual and
the team. This process provides the measurement data that allows
performance appraisal systems to be expanded to include teams.

Encourages a balanced scorecard. Most corporate measurement systems are
heavily weighted toward financial measures at the expense of market
share, customer satisfaction and other qualitative measures. This
process produces a balanced scorecard that includes external customer
measures and internal efficiency measures.

Supports team pay for performance. Companies can\'t pay for performance
unless they can first measure the performance. This process provides the
data to pay individuals based on a combination of team and individual
results.

Defines the hard-to-measure jobs. Most measurement systems work well if
you are measuring widget making or sales. Positions such as R&D
scientist, drilling engineer, reservoir engineer, etc. are not easily
measured with numbers. This process explains how to create verifiable
performance standards for these kind of positions.

## Summary 

Developing team measures is a straight-forward process if you keep in
mind the following points:

-   Start with the team\'s work flow. When you get to the team level
    you\'ll save time by identifying the customer of the team and then
    defining the team\'s work process.

-   Re-engineer to get the right measures. Measuring an ineffective
    process might improve its efficiency but you\'ll end up measuring
    the wrong things. Take the opportunity to re-engineer the process
    and identify the process steps and hand-offs that are worth spending
    resources to measure.

-   Measure accomplishments whenever possible. Measuring behaviors is
    more expensive and tends to stifle creativity when compared to
    measuring results. You\'ll also save time when you use an
    accomplishment as your starting point for measurement.

-   Verifiability is the key. Don\'t try to measure everything with
    numbers. If your goal is to verify that a result was done well or
    not, a good descriptive measure will sometimes work much better than
    a poor numeric measure.

-   Employee objectives = team + individual. Rather than choosing
    between team and individual objectives, try measuring a combination
    of both. You\'ll have the common objectives that bond the team
    together and the individual data to recognize your stars and work
    with your lower performers.

## References 

Gilbert, Tom. Human Competence: Engineering Worthy Performance. New
York: McGraw Hill. 1978.

Lynch, Richard and Cross, Kelvin. Measure Up! Yardsticks for Continuous
Improvement. Cambridge, MA: Blackwell Business. 1991.

Zigon, Jack. Performance Appraisal Lessons from Thirteen Years in the
Trenches. 1992 National Society for Performance and Instruction
Conference Proceedings. Washington, D.C.: National Society for
Performance and Instruction, 1992.

Zigon, Jack. How to Measure White-Collar Employee Performance. 1993
National Society for Performance and Instruction Conference Proceedings.
Washington, D.C.: National Society for Performance and Instruction,
1993.

Zigon, Jack. Measuring Work Team Performance. American Compensation
Association Journal. Scottsdale, AZ: American Compensation Association,
Fall, 1994 (in press).

Zigon, Jack. Is Your Performance Appraisal System \"Team-Friendly\"?
Training Magazine, June 1994 (in press).

Philips, Jack (ed.) How a New Appraisal System Saved Yellow Freight
System \$20.8 Million, in Return on Investment in Human Resource
Development: Cases on the Economic Benefits of HRD, Alexandria, VA:
American Society for Training and Development, (in press, 1994).

About The Author

Jack Zigon is president of Zigon Performance Group, a management
consulting firm specializing in the design and installation of custom
performance management and performance appraisal systems. He has
developed performance appraisal systems for companies such as Hallmark
Cards, General Dynamics/Lockheed, Yellow Freight System, United
Telephone, Air Products and Chemicals, Kentucky Fried Chicken, Consumers
Water, and R.L. Polk and Company. His projects have won four national
awards and he is a frequent speaker at National Society for Performance
and Instruction, American Society for Training and Development, Society
for Human Resource Management and American Compensation Association
conferences. Jack can be reached at 604 Crum Creek Road, Media PA
19063-1646, (610) 891-9599.

Job Aid: How to Develop Team Measures

1\. Review and revise organizational and business unit measures.

Do the business unit measures flow from and support the corporate
strategy? If only financial measures are being used, ask why. Identify
measures to evaluate both strategic success and market results.

2\. Review and revise business operating system measures.

Are there measures for customer satisfaction? Flexibility or innovation?
Productivity?

3\. Map the team\'s work flow.

Identify the team\'s customers and the products/services the customers
need. Identify all major process steps (boxes) and hand-offs (arrows)
that lead to the final product. Change the process to simplify it and
increase value to the customer.

4\. Identify team measurement points.

Always measure the final product. Decide which process steps and
hand-offs are worth measuring. Measure processes using measures of waste
and cycle time. Measure hand-offs using measures of delivery and
quality.

5\. Identify individual accomplishments that support the team\'s
process.

Build a role result matrix with team members down the left side, key
process steps across the top, and accomplishments needed to support each
process step inside each cell.

6\. Develop team and individual performance measures.

For each accomplishment, select the general measures that are important
(quantity, quality, cost and/or timeliness).

For each general measure, answer the question, \"How could I measure the
(quantity, quality, cost or timeliness)?\" If you can measure the
accomplishment with numbers, record the units you would count or track
the percentage of. If you can only describe the performance, list who
will judge the work and what factors they will look for.

7\. Develop team and individual performance standards.

The goal is verifiability. If the measure is numeric, ask, \"For this
measure, how many would represent \'meeting expectations\'?\" Establish
a range of performance above which special recognition is warranted and
below which a performance problem exists.

If the measure is descriptive, ask, \"For each factor the judge will
look at, what would this person see that means a good job has been
done?\" List the judge, factors and what constitutes a good job for each
factor. Ask, \"If this description equals \'meeting expectations,\' what
would \'exceeding\' look like?\" Write what the judge would see
happening if these expectations were exceeded.