oil and gas pipes

Improving profitability starts with answering this one question

July 15, 2021

Improving profitability starts with answering this one question

4 Minute Read

Pinpoint where your operation is losing money, and how with two key steps. Find out more here.

Throughout the oil and gas industry, business owners want to improve performance and profitability, but they might not know where to start. As an advisor to many organizations in the field, MNP is familiar with the challenge.

To help, we always start with one question: where are you losing the most amount of money? The most common answer is “I don’t know.” But to solve a problem, you need to be able to define it. And to improve performance, you need to have clear metrics and the ability to track them.

You can overcome the information gap through improved performance tracking and communicating expectations to managers and employees. Let’s dig into both ideas.

Tracking your organization’s performance

Many organizations understand the metrics they need to hit to make money from a job. Having benchmarks, like estimated labour hours for certain tasks, is a well-established best practice.

But most businesses are equipped to review these metrics after a job is finished. Few have real-time insights to measure performance during the job. In turn, the organization may not turn the expected profit, only learning they were off target after a job is complete and they review the monthly financial statements.

These post-mortem performance reviews can help identify problems and apply solutions to projects going forward. But what if the problems are minor? If you knew about the issue and could see you’re your performance was dipping, you could react quickly and get your organization back on track and hitting your goals.

Our work with an oilfield services company provides a strong example. This organization was working on a reclamation project with a quote for 80 hours of work. When the team arrived at the job site, they realized that the site would require clean up before their actual work could begin. The project ended up taking 105 hours instead of 80 hours, and the management team only found out afterwards.

If the company was tracking their work, they would have realized this issue sooner and could have addressed the gap with the client. Instead, they worked 25 valuable unpaid hours — and risk the same issues going forward.

Unlock potential with clear metrics

When we start talking with team members at an organization, we ask them if they know their goals for a workday. Most of the time, they tell us that they have a loose idea of what success looks like, or they haven’t received any goals at all.

Goals seem straightforward, so why are organizations consistently lacking them? Because they can’t create or measure them. Supervisors can identify how long a project should take or what an employee should accomplish each day. But without the ability to track and hold people accountable to the goals on an ongoing basis, an organization will struggle to see results.

To drive improved performance, organizations need to consider new ways of measuring the day-to-day impacts of their team members and develop standards. There are two main benefits to this approach: increased visibility into project management and a positive boost to employee engagement.

If you have tools that show you where a project stands, your supervisors can shift from being reactive managers who deal with problems well after the negative consequences have been realized, to proactive managers who can identify problems and develop solutions to mitigate risks.

Start tracking with technology

There isn’t a true silver bullet to improving performance and profitability. The challenges of each organization are unique and require tailored approaches. But the way to start developing that approach is through gathering information and tracking it.

How you gather information and track it depends on your organization. Some may require enterprise resource planning tools, while others may only need to use Excel spreadsheets. Regardless of your specific niche, there is a solution out there that can help you tracking performance, develop goals for employees, and improve your profitability.

Contact Sean Moorfield, Senior Manager, Consulting, at 647.283.7415 or [email protected]


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