10

Chevron

Wise people learn when they can, fools when they must.

(Military saying)

Chevron Corporation is one of the world's largest integrated petroleum companies. It is involved in every aspect of the industry, from exploration and production to transportation, refining and retail marketing, as well as chemicals manufacturing and sales. It operates in more than ninety countries and employs about 28 000 people worldwide. The company turns crude oil into a variety of products, including motor gasoline, diesel and aviation fuels, lubricants, asphalt and chemicals.

History

Chevron Corporation started business in Los Angeles in 1879 as the Pacific Coast Oil Company. In 1900, the thriving company was acquired by John D. Rockefeller's Standard Oil Trust. The break-up of the trust in 1911 led to the formation of the Standard Oil Company of California. In the 1920s and 1930s, the company began investing in international exploration and made the first major discoveries in Bahrain and Saudi Arabia.

In 1936, in partnership with Texaco, it formed Caltex, bringing in new markets in Asia, Africa and Europe. After the Second World War, continued expansion led to major discoveries in Indonesia, Australia, the UK North Sea and the Gulf of Mexico.

In 1984, the company nearly doubled its size by acquiring Gulf Oil Corporation in what then was the largest corporate merger in US history. That same year, Standard also changed its name to Chevron, the well-known brand name of many of its products.

In 1993, Chevron achieved another milestone when it joined the Republic of Kazakhstan in the largest joint venture between a Western company and a member of the former Soviet Union. A new company, Tengizchevroil, was formed to develop the Tengiz oil field, the largest discovery in the past thirty years.

By 1999 Chevron's net income was $2.070 billion (up by 55 per cent from 1998), and operating earnings were $2.3 billion (up from $1.9 billion in 1998).

Managing learning and knowledge: the formula for success today and tomorrow

‘The discipline of “managing knowledge” once an obscure branch of management theory has evolved to deliver enormous benefits to companies that have embraced it, and it is now essential to staying competitive,’ Chevron Chairman and CEO, Ken Derr, highlighted in a speech to the Knowledge Management World Summit.

Chevron has come through these beliefs to be a leader in the field of learning and knowledge management. In an independent survey of Fortune 500 executives, it was named as the number 1 petroleum company for its knowledge management skills. Chevron started out on this journey in 1985. Today Chevron utilizes a vast array of tools, processes and techniques for managing knowledge and building a learning organization. Best-practice sharing, benchmarking, networking, new planning tools and work-tracking software are routine ways of life at Chevron. These have proven to be extremely valuable in delivering the profitable position of the company. Knowledge and learning tools and techniques have generally been credited in helping Chevron achieve a 30 per cent productivity gain, a 50 per cent improvement in safety performance and more than $2 billion in operating cost reductions during the 1990s.

But as Ken Derr, the man behind the Chevron transformation into a learning organization astutely remarks:

managing knowledge is no longer just a performance issue. Today, it is a reputation issue as well, directly affecting a company's ability to win new business and retain top employees. And it directly affects every major company's ability to win new business and attract and keep top employees. The fact is, finding and applying new knowledge makes everyone's work more interesting and more challenging. Because of that, it also has the potential to make people's jobs more fulfilling and more personally rewarding.

The importance of the learning initiative for Chevron can hardly be understated. Derr said:

Of all the initiatives we've undertaken at Chevron during the 1990s, few have been as important or as rewarding as our efforts to build a learning organization by sharing and managing knowledge throughout our company. In fact, I believe this priority was one of the keys to reducing our operating costs by more than $2 billion per year – from about $9.4 billion to $7.4 billion – over the last seven years.

The company continues to strive upwards by constantly seeking to find new and better ways to do things, and applying new knowledge in all areas of its business.

The learning company

Chevron informally began on its journey towards knowledge and learning in 1985, when it initiated TQM with a vision to be ‘Better than the Best’. In 1990, Chevron started to define quality throughout the organization. This effort was encapsulated by the ‘Chevron Quality Statement’. The period up to 1994 saw the company make great strides through integrating initiatives and TQM principles for business results. Chevron introduced during this period:

• revamping of corporate-wide planning process
• major cost reduction initiatives through continuous improvement
• breakthrough process improvement projects
• the use of vision metrics.

The end result was the attainment of the macro-goal of achieving 18.9 per cent return on shareholder value.

These outcomes helped to propel the quality effort onwards. The next phase of transformation began in 1995 and was called ‘Stepping to the Next Level’. This phase involved three closely intertwined elements:

1   The learning organization. Chevron developed a strategy that had at it core the concept of a ‘learning organization’(LO). The focus of the LO initiatives was to learn through:

(a)   best practices knowledge and transfer

(b)   knowledge about customers and markets

(c)   innovation and knowledge creation

(d)   competitor intelligence

(e)   benchmarking

(f)   personal responsibility for knowledge.

2   The Chevron Way. Originally published in 1995, The Chevron Way provided a strategic framework for the company, capturing what the company was about, where it was going and how it was going to get there.

3   Leadership behaviour initiative. Chevron's leadership behaviour programme was designed to promote cultural change. This was driven by the belief that leadership behaviours play a critical role in developing a learning organization by rewarding behaviour that leads to better sharing and implementing best practices. This meant that the company had to define what kind of incentives would encourage employees to share and how to positively provide feedback. Financial compensation was perceived to be only one part of the total, since many individuals desire other forms of recognition. Recognition needed to be very specific and explicit so that the people are able to state why an individual received the recognition and the impact it had on the organization. This would facilitate the behaviour re-enaction and fuel momentum.

Chevron strongly emphasizes the concept of ‘the learning organization’. Words encapsulating The Chevron Way capture the company's orientation and belief in learning and knowledge: ‘We will create an organization that learns faster and better than competitors through benchmarking … through sharing and implementing best practices … by learning from experience … and through continuous individual learning and personal growth.’

The Chevron Way is a guiding set of objectives, principles and values that define the company by stating what it is, where it is going and how it needs to interact and work with each other to get there (see later in this chapter for fuller details of The Chevron Way). In one sense, The Chevron Way is a learning tool to communicate and reinforce the company's values and goals, capturing within it Chevron's years of experience in its business for all its employees. This is especially useful to those new to Chevron. To people in Chevron it is a reference for what is essential to success.

Organizational structure: decentralization

Over the years Chevron has become a very decentralized company. It currently comprises of many major subsidiaries divided into business units. Each has its own management team and bottom-line responsibility. The logic behind this is that delegating authority to business units puts more decisions into the hands of those with the most knowledge of our markets and customers. So, in theory at least, decentralized companies should be able to get better and faster decisions that are also more customer focused. The fact is that this has made managing knowledge even more critical.

It seems fairly obvious that managing knowledge is something all companies will have to master if they expect to compete in a global economy. Those that can learn quickly and then leverage and use that knowledge within the company will secure signifi-cant advantage over those that cannot. This will be the case irrespective of whether knowledge is developed internally or acquired externally. This is the premium for learning and knowledge management.

Decentralization is a fact of life for companies, especially for global companies the size of and as complex as Chevron. Chevron well understands the implications of this: They have to work harder to make sure the right people connect and share knowledge across the geographic and organizational boundaries of the company.

Decentralized companies will always be challenged to achieve uniform performance in sharing knowledge. Chevron observes this in its performance metrics, with differences of 20–30 per cent between its suborganizations in many key areas. While the comparisons are useful in themselves, the real trick Chevron has learned is to view the differences as opportunities rather than deficiencies. Chevron's Chairman notes, ‘Replacing less-effective ways to work with better ways is what people in a learning organization are supposed to do, and frankly, I think you gain more from encouraging those behaviours than you do by trying to correct differences in performance.’

It is clear to Chevron that there are potential contradictions between company structure and the imperative of sharing knowledge. For Chevron, decentralization is not the equivalent of everybody doing their own thing. Quite the contrary, Chevron deals with the conflict and contradiction by keeping its various businesses tightly connected and strategically aligned. This is essential to top performance. Guiding the alignment process is the master document, The Chevron Way. Many, in the company, believe it is one of the most important things Chevron has ever produced. The Chevron Way acts as the framework to integrate the company's most important company initiatives.

While everything that is contained in The Chevron Way existed in one form or another within the company before, Chevron management note that by putting it all together in one document has made the whole more integrated and meaningful. The document has made understanding the big picture easier.

A second challenge closely related to the issue of structure is of organizational circumstance and context. For Chevron this has arisen in the form of downsizing. Chevron over the last five years or so has undergone, like many other organizations, a significant exercise in downsizing. This has the potential for erecting substantial barriers to sharing.

Problems of work in downsized environments

Like many other companies Chevron finds itself working in a downsized environment. This translates into trying to do more with fewer resources. Rather than perceive this in an unduly negative way Chevron approached it as a positive challenge. It still aspires to perform at a benchmark level, and checks that it is doing so by testing operational assumptions by looking inside and outside for new solutions. Chevron knows that this means its people must be extra energized in learning and sharing. In the words of Jerry Moffat (Co-ordinator of Energy Efficiency network), ‘we need to start stretching higher and looking harder so we can harvest the opportunities that we haven't seen yet’. Chairman Derr adds to this, ‘and after that, we're going to have to get ourselves a ladder and reach even higher’. Chevron knows that it must keep the momentum and enthusiasm going in its people. For this Chevron needs strong knowledge-sharing advocates, and cross-pollinators like Jerry Moffat.

To keep the momentum going, Chevron works constantly on cultivating a culture that promotes individual and organizational learning. The company is strongly convinced that people are a key source of competitive advantage. This insight is especially important for management because it needs leaders to model and reinforce the right cultural behaviours. Chevron uses a number of methods to achieve this:

1   Promoting people who excel at learning-organization behaviours.

2   Emphasizing learning from mistakes rather than pointing fingers of blame driving out the ‘not-invented-here’ syndrome.

3   Recognizing and rewarding people more for using best practices from the outside.

4   Telling Chevron's story in speeches, at meetings, in company publications and through the corporate intranet. This helps stimulate more grass-roots activity, where employees with similar jobs (no matter where they work) are encouraged to use the company's Global Information Link (GIL) to take the initiative and start networking and sharing best practices. To help make this possible the company has made an enormous overhaul to expand the availability and use of web-based tools for sharing and managing knowledge through GIL.

5   Focusing effort on strategic and capital-intensive areas of business like project management, energy efficiency and deep-water oil development, because these are the areas where the biggest payoffs are likely to be found.

6   Making better use of the supplement to The Chevron Way, which spells out needed behaviours for a learning organization, such as networking, and investing in training.

7   Conferences – Chevron has long used in-house conferences as a knowledge-sharing tool. These continue to be used to address different themes and needs. For example, recently in-house conferences were held to energize its project-management network and supplier quality improvement network.

Other examples include:

1   In 1998, Chevron held its first conference to exchange ideas on valuing and promoting diversity.

2   The key conference event in Chevrons calendar over the years is the Chevron Chemical Quality Conference. It is often described as the birthplace of quality at Chevron. It sets a high sharing-knowledge tone, and now it is even supported by its own intranet site.

3   Chevron hosted its first conference on co-generation facilities. Chevron operates seven energy plants at a cost of about $100 million a year, and wanted to take a closer look at them. What is most important about this example is that Chevron probably never would have thought to hold this conference had it not first created the larger energy network many years ago to swap ideas on reducing energy costs.

Sustaining learning through tools and techniques

Chevron utilizes a vast array of methods to sustain its knowledge and learning energy. The key tools, systems and drivers are presented here.

Organizational learning system

A recent development at Chevron has been the adoption of an organizational learning system (OLS), which is, in essence, a map for planning, execution and evaluation of ongoing work.

Example: In drilling, it uses a simple software tool to capture lessons from the first wells in a new area, and then it helps you use that knowledge to drill the rest of the wells faster and cheaper. Chevron's well costs dropped by 12 to 20 per cent and cycle time reduced by as much as 40 percent in some cases, and it all adds up, especially if you consider that a big offshore drilling vessels costs up to $250 000 a day.

The point is that Chevron didn't invent the OLS. The organizational learning system came from Oil & Gas Consultants International, who developed it with Amoco and later verified a model by working with the Gas Research Institute. Chevron did not really appreciate the potential of the OLS until after it learned more about it from a partnership group, which it had formed in 1996 with Mobil, BP and Texaco to share best practices in technology. That group eventually funded a special study of the OLS, and later proved the value of the OLS by conducting a pilot project on Chevron's oil development in Papua New Guinea. Now Chevron uses OLS to manage key elements of deep-water exploration and development in the Gulf of Mexico. Success of this tool has been such that now an OLS specialist has been added to Chevron's Project Resources group to help other Chevron organizations make use of it.

Best Practice Resource Map

Another mechanism for driving and sustaining learning is the Chevron Best Practice Resource Map. The map is a kind of snapshot of the company at a particular point in time. The map shows most of the major things Chevron is doing to share knowledge. It is colour coded by Baldrige categories. The Best Practice Resource is designed to help people find their way to resources all over the company. Probably, its single most important role has been in helping identify the numerous networks throughout Chevron. The map also pinpoints who is in charge of each network, it lists numbers and computer contacts so people can get involved.

The original map has been replaced with an on-line version, which is easier to update and more accessible to employees worldwide. The original hard copy has become a sort of a collector's item around the company. The Chairman often takes it around with him to meetings because, ‘it was one of the first things that got Chevron noticed in the area of managing knowledge – it made us more aware of ourselves in this area.’

An aspect the map does not capture is Chevron's ongoing emphasis on the PDCA cycle, particularly the ‘check’ step. Chevron is strongly committed to managing work as a process, and to continuous improvement. Chevron has learnt that the PDCA ‘check’ step can be very effective in improving repetitive or cyclic processes. This step makes sure the company learns from previous experience with a process, and it drives the company to use that learning for continuous improvement. For example, the company recently completed a check of its corporate planning process, and found several ways to improve how it formulates company-wide strategies.

Of course, this map provides only a partial and static account of Chevron's knowledge management effort. The reality of improvement comes from the day-to-day commitment and activity of countless best practice teams. The success stories are presented below.

Best practice success stories

Energy efficiency

Chevron's six-year effort in this area has reduced energy costs by about $200 million a year compared with the starting point. A big part of the savings has come from the systematic application, throughout operations, of best practices for managing energy use. Chevron tracks progress through an energy efficiency index that is based on reports from each of its business units. It has a network of practitioners who meet and hold regular conferences and who network through e-mail, an internal web site and a newsletter.

Capital projects

The oil and gas industry is a very capital-intensive industry. Managing capital projects is a billions of dollars a year task. For example, Chevron in 1999 invested over $5 billion. In 1991, a benchmarking study showed Chevron that it was spending more than some competitors on big projects. Chevron scrutinized best practices and internal know-how to create the Chevron Project Development and Execution Process, which is now considered to be a world-class tool.

Since development of this tracking process Chevron has identified hundreds of millions of dollars in project-cost savings – a 10–15 per cent improvement in capital efficiency. The company did not stop there but continued to improve upon that process. Additionally, Chevron formed a central Project Resources group to help people use this tool company-wide. This group also supports Chevron's community of project-management people all over the world.

Process masters

Chevron's ‘Process Masters’ programme is a network within US oil refineries. It is made up from seven full-time experts who support Best Practice Teams covering the major, high-cost functions common to all six plants – ranging from catalytic cracking to plant maintenance. The refineries have a lot of other networks called ‘natural teams’, i.e. employees who work in best practice groups as part of their regular jobs. The best practice teams and the process masters programme efforts combined have led to the company achieving distinction for its systematic sharing of internal and external best practices.

Technology brokers

Offshore in the Gulf of Mexico, another Chevron group has combined the process-masters concept from the company's refineries with some best practices from Union Pacific Resources to create a new programme called ‘technology brokers.’ Six employees work full time in these new roles, searching for best practices in offshore oil and gas operations.

Already the payoffs have been delivered. A typical oil or gas well is about as wide as a dinner plate and thousands of feet deep. Just getting in and out of the hole takes a great deal of time and money. Now the group have found a one-step way to do two separate but essential operations at the bottom of the wells. What once took five days and two trips down the well now takes a day and a half and a single trip. After just ten wells, the company has logged over $2 million in savings compared with using the old method.

Human resource best practices

Chevron has adapted human resource best practices from companies like Bechtel and TRW to set up a new process to reduce conflict in disputes between individual employees and the company. Among other benefits, the company hopes it will help them reach fairer solutions before things get to the lawsuit stage.

Community best practice

In community relations, the Chevron Best Classroom Practices programme has captured innovative ways to teach mathematics, science and technology from a dozen great teachers. The lesson plans are placed on the company's Internet site, so any teacher can take advantage of them.

Environmental best practice

Chevron created the Environmental Management Company. The Chevron Environmental Management Company does all the environmental remediation work that was previously handled by separate groups scattered around different locations. This new unit shares the know-how and experience of the whole company, with a goal to reduce remediation costs by at least 15 per cent.

Vision Objective Teams best practice

Chevron's four Vision Objective Teams are involved in the sharing of best practices and promoting standard work processes in the areas of plant management, marketing, technology planning and supply-chain management.

(A detailed success story is presented at the end of the chapter. The focus of the story is operational excellence at Chevron's El Segundo plant. The story illustrates that excellence is not just built by top-level exhortations but by belief at the grass roots.)

Enhanced learning and sharing through Global Information Link (GIL)

Chevron, in 1998 installed what it calls its GIL system. The GIL was put in place to enhance exchange of know-how between employees. This massive project was completed in just one year using Chevron's project-management process. The significance of the achievement becomes clear when one knows that similar projects elsewhere have taken as long as four years. Chevron estimates that, quite apart from networking benefits, GIL is going to save about $40 million a year in system management costs alone.

Many individuals comment that probably nothing Chevron has done recently can compare to the rollout of the new GIL. The programme replaced every personal computer in the company with a common machine, software and connective system, creating a single desktop and operating environment worldwide. This undertaking involved replacing about 30 000 computers, with full intranet capability and Internet access for those who need it, advanced e-mail, scheduling and presentation tools.

These information technology tools were not, of course, new to the company. What was new was having them all standardized, compatible and connected. This means that every employee now has an identical ‘sharing machine’ on their desktop.

The GIL has also reinvigorated the already rapid growth in the scope and usage of the corporate intranet. The wide range of internal sites, ranging from best practices, to environmental, to the company home page and the individual sites of the subsidiaries and departments, have been made even more accessible and have opened up further possibilities for sharing. Through the GIL, Chevron has increased the number of employees who are aware of and contribute towards developing and sharing best practices. Publishing on the intranet is monitored but not restricted. There is even a place, ‘Scratches’, for recording the smallest details of knowledge and learning and ‘Itches’ for recording requests for solutions to minor problems.

Sharing is further facilitated by organizing best practices by process category. Chevron used the process classification proposed by the American Productivity and Quality Centre, which is structured around the Baldrige award criteria.

Looking in by looking out: benchmarking for best practice

At one time the company's primary method for measuring performance was comparing current financial results to its own previous results, but then Chevron started benchmarking competition and relative competitive performance became its measure of success. This led to the systematic search for best practices among world-class companies outside the oil industry.

When the company started out on this road the biggest challenge it faced was one of operating costs. Comparisons with competitors gave cost reduction a new sense of urgency. Through benchmarking for the first time, Chevron employees obtained extensive knowledge about peer companies and saw that in a lot of areas, Chevron's costs were not competitive. From this point on it did not take the CEO long to help the people towards asking the question: why? The outcome of the question led to an aggressive and deliberate improvement of work processes all over the company. It was not long before Chevron achieved operating cost reductions and narrowed a lot of performance gaps (saving in the process more than $1.2 billion). More importantly, through this process the company discovered that it could use knowledge, particularly external knowledge about competitors, to drive learning and improvement internally.

An interesting example of this outward-inward looking behaviour is how Chevron has changed its practice of research and development (R&D) management.

Chevron has two major research groups: one supports exploration and production and the other supports oil refining and products. These have always been the primary technical ‘knowledge centres’ of the company. Both were quite large and both had inward-looking cultures. Chevron used to emphasize large, inhouse R&D and internal invention of tools and methods. With the new outlook Chevron decided that it was more cost-effective to invest less in that approach and invest more in finding and integrating technology from a diverse set of suppliers from the larger world.

The company found that this also helped refocus research efforts more upon the business needs of their customers – the major subsidiaries who fund their research budgets. Now Chevron only funds those internal projects exhibiting high potential for competitive advantage. The company is quite comfortable in shopping for knowledge outside its corporate boundary rather than trying to invent everything itself. The outcome is that many managers have begun to comment that they are getting a lot more technology benefit at a much lower cost.

Managing sharing through goals, rewards and empowerment

Chevron has linked desired behaviours by embedding them within the guiding principles of The Chevron Way. Examples of desired types of behaviours to support the learning organization, expressed in terms of goals for the individual are:

• pursues learning and development as an ongoing process
• supports organizational learning
• learns from others both inside and outside the company
• encourages risk taking.

These types of criteria are used by managers to gauge promotion, salary increase etc. In turn employees use similar criteria to evaluate management on their leadership.

Example: One of Chevron's bright young analysts tags all her e-mails with the phrase, ‘Steal shamelessly, share continually’. Now, this lady's not an idea thief. But she is trying to encourage something that has become a watchword at Chevron – knowledge sharing or knowledge management. It means making sure business and technical information gets to every employee who needs it.

Chevron's formula for continuous improvement is fairly simple: set clear objectives, ensure opportunity to share rewards and provide an environment for empowered action for the workforce. An objective can be anything that is important; a financial goal, or a production target – whatever. Goals are an old concept, yet they work because they give people a compelling reason to find better solutions. In Chevron's case, providing data on the business performance of its closest competitors and then setting a goal to do better has been a simple but powerful tool for improving performance. People really seem to respond to the fact that somebody else is doing things better.

Chevron also uses rewards to drive sharing. This is through its ‘Success through Sharing’ programme, which distributes a monetary bonus in addition to basic salary, if annual metrics are achieved. The bonus can be as much as 8 percent of pay. The company also has started to provide stock options to all its employees as an incentive for excellent performance. By giving employees a direct stake in the organization Chevron has been able to better educate its employees about the key drivers of business performance. Informal recognition is used to complement formal recognition in effort to increase the transfer of best practices. Of course, sharing rewards is not managing knowledge, but it gives people one more good reason to do it: one helps achieve the other.

Empowerment is not exactly rocket science. Delegating authority helps people feel ownership for their work and give their best to the organization. Of course, this is hard to measure, but not impossible. Chevron uses its annual Worldwide Employee Survey to try to track feelings of commitment to the company. Recent results show a 15 per cent improvement in the last few years. Much of this is because people are feeling more empowered in their work.

Motivating sharing through leadership

Employees need to have good reasons to share knowledge. Chairman, Ken Derr, knows that he must constantly motivate people by advocating the importance of learning through sharing. Derr suggests that he uses multitudinous platforms to reinforce the message. For example, Derr points out that, apart from helping to create The Chevron Way (which he considers one of the most important things he's done), he:

• articulates the significance of The Chevron Way at every opportunity that arises, so that it becomes the basis for everything Chevron does
• talks about sharing best practices whenever he speak to employees
• asks top people from companies like Hewlett-Packard, Motorola and General Electric to speak at Chevron's monthly Management Committee meetings. These meetings are also a forum for Chevron teams to tell their success stories of using knowledge to improve operations and results
• tries to reinforce and reward positive behaviour
• leads by example. This means participating and showing personal commitment to learning and to the process of change. In Derr's case, he participates in ‘upward feedback’, a programme which allows people to tell their bosses how to improve their performance
• provides a consistent tone at the management level by, for example, always including a success story in each of the company's monthly meetings of forty senior managers, also using this opportunity with the group to reinforce the priority of sharing best practices
• stresses the value of sharing during the company's mid-year strategic planning sessions with operating companies
• reinforces the message during the Chairman's worldwide employee teleconference, held each January
• stresses the message at Chevron's Management Leadership Forum, which is a core training programme for middle managers. The forum is also used to promote The Chevron Way because Derr strongly wants core principles to guide managers at all levels.

In sum, the strong advocacy by the leadership for learning and managing knowledge management helps the organization sustain momentum. Leaders, led by the strong example of Kenneth Derr, take every opportunity to reinforce, re-emphasize and re-energize since they believe that every day that a better idea goes unused is a lost opportunity.

Summing up

The modern era is one of extreme global competition. Global imperatives have forced change across industries. One of the key shifts has been large-scale restructuring. In the main, these have been painful periods of transition. Notwithstanding the pain, the intensity and nature of competitive pressures have led to greater resilience and strength in those companies that have managed to survive. For most, survival has been consequent on an ability to constantly learn, improve and adapt. This has been at the heart of success for companies like Chevron. But, Chevron has discovered that building learning organization has delivered benefits beyond the bottom line. Learning organizations like Chevron have created better organizational environments for their people. In Kenneth Derr's words:

Learning organizations create opportunities for people …

Opportunities to expand their individual learning … Opportunities to get involved and participate more fully … Opportunities to use new tools … Opportunities to prove their value to their organizations … And opportunities to get greater enjoyment and satisfaction from their work … their co-workers … and their work-place as well.

Speaking for Chevron … I can tell you that I see these benefits as critical to building the Committed Team of employees essential to The Chevron Way. And I believe this will also be the case for learning organizations everywhere.

In times of change, learners will inherit the organization. Those who refuse to learn will find themselves well-equipped for an organization that no longer exists.

Yesterday's learning curve has become today's race track, and that means building a superior learning organization is now a necessity for any company that wants to be a top competitor.

The Chevron Way

The Chevron Way sums up who we are, what we do, what we believe in and what our goals are for the future. It reflects our responsibility to each other as members of a committed and collaborative team, to society and the environment as a provider of energy and chemicals to the world's economies, and to stockholders as stewards of their financial assets.

At the heart of The Chevron Way is our vision; people who are distinguished for:

• steadfast pursuit of being No.1 in total stockholder return
• unwavering commitment to integrity, respect and ethical business dealings
• proud dedication to protecting people and the environment, to improving the quality of life in communities where we work, and to developing trusted relationships with the countries in which we operate
• great passion for capturing profitable opportunities in new regions and markets and for delivering superior customer value
• rapidly gaining competitive advantage by strengthening the capability of the organization.

And that is why building the organizational capability to achieve superior business results is the cornerstone of our vision.

Our vision becomes reality when we each live The Chevron Way every day, through:

• Business principles
• Committed team values
• Organizational capability
• Protecting people and the environment
• Corporate metrics.

Business principles

We are an international company providing energy and chemical products and services vital to the growth of the world's economies.

Our mission is to create superior value for our stockholders, customers, partners and employees.

Our steadfast pursuit of winning is embodied in our primary objective – to exceed the performance of our strongest competitors by achieving No.1 in total stockholder return for the period 2000 through 2004. To achieve this goal, we will grow earnings faster than our competitors while maintaining a competitive return on capital employed.

Our business direction to achieve our primary objective is defined by ‘4+1’ strategic intents to deliver industry-leading performance in:

• operational excellence
• cost reduction
• capital stewardship
• profitable growth

• organizational capability – in each of the above areas.

We will conduct our business in a socially responsible and ethical manner. Our Committed Team Values and Protecting People and the Environment principles will guide our behaviour and actions. We will respect the law, support universal human rights and improve the quality of life in the communities where we work.

The corporate Strategic Plan will guide our portfolio, growth and organizational direction. We will measure progress in achieving our goals with a balanced set of corporate metrics.

Committed team values

Chevron people working responsibly and as a team are key to success. The following values, which distinguish our company and enable organizational capability, will guide our behaviour and actions.

 

Honesty & Integrity	We are honest with ourselves and others. We demonstrate the highest standard of ethics in all business dealings.
Trust	We trust, respect and support each other. We treat each other as we expect to be treated.
Diversity	We value the uniqueness of individuals and the varied perspectives they provide. We promote diversity within our work force and have an inclusive environment that enables each of us to fully participate and contribute.
Communication	We have open, honest and effective communication in all directions.
Partnership	We accept individual responsibility, in partnership with the company, for the success of the business, for our personal development and for balancing work and family responsibilities.
Alignment	We clearly understand how our goals are aligned with corporate and our own organization's strategies.
Achievement	We are determined to produce strong results, seeking opportunities to help our organization continually improve, consistently deliver on commitments and achieve top competitive performance.
Recognition	We can proudly make our maximum contributions, which are valued, recognized and rewarded.

Organizational capability

Organizational capability is our key competitive advantage. Our goal is to have distinct capability systems in operational excellence, cost reduction, capital stewardship and profitable growth thereby enhancing our ability to execute our business with speed and excellence and to deliver superior bottom-line results.

The following elements are integral to our capability systems:

 

Dynamic Leaders	Our leaders role model our values; set bold, competitive visions; and deliver results. They align people to strategy, embrace change, inspire innovation and shape top performance.
Skilled Employees	Employees have the skills critical to achieve our strategic intents and are committed to and supported in personal development and growth.
Learning & Innovation	We actively learn from the best in the business, seek innovation, share knowledge openly and rapidly apply new learning and ideas to all decisions.
World-Class Processes & Organization	World-class processes critical to our strategic intents are identified, rapidly adopted or developed, and deployed across the organization. Our empowered, decentralized organization enhances speed of execution and customer responsiveness.
Technology & Partnerships	To extend our capability, we gain access to and apply technology and leverage partnerships and alliances throughout our business.
Recognition & Accountability	Reinforcement-based leadership is the foundation of our performance management system. Expectations are clearly defined, and performance is measured, evaluated and differentially recognized through salary, success sharing and assignment actions.

Protecting people and the environment

We are committed to protecting the safety and health of people and the environment. Our goal is to be the industry leader in safety and health performance and to be recognized worldwide for environmental excellence.

We will achieve this goal through:

 

Safety	Safety is everyone's responsibility. Design, operate and maintain our facilities to prevent injury, illness and incidents.
Compliance	Establish processes to ensure that all of us understand our roles and all operations are in compliance.
Pollution Prevention	Continually improve our processes to minimize pollution and waste.
Community Outreach	Communicate openly with the public regarding possible impact of our business on them or the environment.
Product Stewardship	Manage potential risks of our products with everyone involved throughout the product's lifecycle.
Conservation	Conserve company and natural resources by continually improving our processes and measuring our progress.
Advocacy	Work cooperatively with public representatives to base laws and regulations on sound risk management and cost-benefit principles.
Property Transfer	Assess and manage environmental liabilities prior to any property transaction.
Transportation	Work with our carriers and distributors to ensure safe distribution of our products.
Emergency Response	Be prepared for any emergency and mitigate any incident quickly.

Corporate metrics

Our primary objective is to be No. 1 in total stockholder return.

Strong performance in operational excellence, cost reduction and capital stewardship provides the foundation for profitable growth. Building organizational capability in all four areas, our ‘Plus 1’ strategy, will enable performance improvement.

Success across all ‘4+1’ strategic intents will accelerate our drive toward No. 1 in total stockholder return.

Our corporate metrics measure progress towards these goals.