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Interview

with Doug Meikle, CEO, Stork Technical Services

16.03.2010 / Energyboardroom

Stork holds a unique history that dates back to the Dutch industrialization in the 19th century. Could you briefly introduce the company history and its main heritage from the old days?

Stork is the overall name of today’s technology company, but as you said its earliest history dates back to the formation in 1827 of the Nederlandse Fabriek van Werktuigen en Spoorwegmaterieel – Dutch machine and railway equipment works – in brief: Werkspoor, which later became the official name.

This originally Amsterdam-based company merged in 1954 on an equal basis with the engineering works Gebroeders Stork & Co., which was founded in Hengelo in 1868. This means that 1827 is the earliest date to which the company’s roots can be traced. Stork concentrated mainly on industrial production equipment – steam and other engines, boilers, pumps, sugar refineries – while Werkspoor’s main activities were means of transport – ship components, steam locomotives, diesel trainsets, carriages, buses and bridges.

Thus, we are dealing with a company that is one of the founding players of the Dutch Industrial Revolution with a tremendous history of technical innovation and also widely known for its social concerns and social care.

If you look at the history of the company you will see that Charles Stork particularly was a very innovative founder and chief executive who for instance created housing for his workforce and a pension fund and health care. Thanks to that there is a tremendously deep heritage in Stork of a commitment to the Netherlands and the communities where we work in, always prioritizing the well being of our employees while delivering cutting-edge technical innovation.

Even with a long tradition and heritage Stork has experienced many transformations in recent years, having new shareholders, a new CEO and a new structure. How have these changes affected the company?

With two hundred years of history it is natural that the company had its ups and downs. About two years ago it divested from food systems and prints – where Charles Stork’s origins lay – and we were left with two divisions: Stork Technical Services and the Fokker Services Group.
Stork Technical Services division is the one that maintained Stork’s name, hence we have the benefit and the responsibility of our history to take along with us. We have a great brand with a tremendous amount of history and Stork is widely known in the Benelux and around the world in at least the last hundred years.

Last year I became the CEO of Stork with the main task of bringing together Stork Technical Services’ various reporting units so we can deliver even more sophisticated services to our clients in Europe, Middle East and elsewhere.

The kind of customer that we primarily deal with are large international companies like Shell, Exxon Mobil, BP, which require global standards of excellence and service quality and no matter how excellent it is, they are not going to be satisfied by local performance only. They need certainty that wherever they go in the future we will be there with them. That’s the kind of company into which Stork is now transforming itself.

What are the main services that Stork provides to the Oil and Gas industry and what’s the relevance of the sector for the company?

Stork provides the Oil and Gas industry with mainly maintenance management services. Therefore, we are on the operating spend rather than on the capital spend of Oil and Gas companies, which means that our revenues are much more stable than those of companies exposed to the volatility of exploration capital expenditures.

On the other hand, having worked in the exploration business in the past gives me the impression that while the margins can be much higher on the capital spend side when business is good, on the operating side you don’t get the big highs but you also don’t get the big lows either.
So Stork is not particularly capital intensive business, providing basic maintenance management and operations services for the Oil and Gas industry. Our primary costumer is Shell and Shell affiliates, which account for around 40% of our business in this segment, and we also have relevant clients such as Taqa, BP, and so on.

As you said, Stork has been building its footprint in the Dutch market for the last two centuries, but recently the company took important steps to penetrate international markets. How successful have you been in doing so and how much of the company still depends on the local market?

Today about 70% of our revenues come from the Benelux and 30% from international markets. This is a balance that is not optimal. We are hoping to grow our business primarily in the Middle East, Asia and Latin America. So far Stork has a very good foothold in Latin America and a lot of opportunity to grow our existing activities in places like Australia and Asia.

What’s your strategy in order to penetrate these new markets?

A great thing about Stork’s name is that it is often ahead of us thanks to our international activities in the past, so even though we might not be active in a particular market people are already familiar with our name. Besides that, for an important part of our business, the more technology intensive activities, we can serve the world through our facilities based in the Netherlands.

For example we have business, mostly in the Power sector that is technology-based and we sell to places like China, Singapore, Malaysia; we also sell machine parts for gas and steam turbines to a number of markets worldwide. This is why we often find that our brand is reasonably well known when we arrive to serve a new market.

However for other types of maintenance management services we must have a local footprint.. For instance in Colombia in 2007 Stork created a very successful venture through the acquisition of a company with a local management team once we had identified the great potential of the Colombian market.

In our business local knowledge is paramount. Stork is not the kind of company that takes experts from the Netherlands and flies them somewhere else. We recruit people from local communities and develop their knowledge locally. We train and teach them the Stork way of doing things and them put them to work within the local communities.

For instance, we currently have approximately 3.000 people in Colombia with whom we successfully managed to transfer the Stork way of operating safely and with a very efficient business model. By doing so we kept ourselves very close to our costumers and learned to adapt and become a Colombian company in many ways.

We have a deeply ingrained Dutch culture here and in many ways this is positive; but my aspiration is to make Stork an international organization where an employee will first see himself or herself as a part of a international group rather than a Dutch company. This is very important for a company that already has operations in more than 30 countries worldwide. In the past whenever we had a problem overseas we sent a Dutch person to solve the issue – now the company has modernized and things are increasingly different. In order to become global we have also to become local!

A common challenge for companies in developed and developing markets is to find both young and talented employees to make up for the increasing engineering demands of the Oil and Gas industry. How does Stork manage to overcome this challenge and become the employer of choice?

Stork has a great track record of attracting young and talented people; we have a management trainee system where we have made considerable investments and a few months ago we won the award of the traineeship of the year in the Netherlands. This is a two year program for graduates where they rotate around the business doing four to six months assignments in several places and prior to their placement in a permanent role. In the past we didn’t manage the final part of this transition very well, but now we have focused our management teams on getting people further through the transition period and introducing them into their first formal job at Stork.

This program has been very successful and Stork hasn’t had any problem in attracting young and talented people. I’ve been very impressed with the quality of the people that we have attracted recently. Now we are concentrating our efforts on advancing the ways of ensuring that we retain these talented young managers inside of Stork.

The main challenge related to human resources is the cultural gap between the younger and the older generation of workers. Stork, like many other companies, has a large proportion of employees that are 45 and older as well as a growing community of people who are 30 and younger. Many of the work values of these two groups differ considerably.

If you don’t create a place where the younger members of staff want to come to work they will simply search for another job elsewhere. I believe that in general there are probably enough people in the market to feed our demand but some companies appear to be more successful at retaining newer recruits simply because they can better manage the integration between these two groups.

For instance, young people – even with very technical and specialized background – want to experience a variety of work places and positions such as marketing, or sales, or human resources when an experienced engineer won’t even really grasp why. If the company offers its new recruits the opportunity to rotate and learn about different areas they will be stimulated to stay, otherwise they will chase new challenges elsewhere. This is what I’m trying to bring focus within Stork to best practices in the human resources management part of the business. There are people in the Netherlands that are extremely creative and talented and we want them to know that Stork is the place for them to work. We deliver the flexibility and in return they deliver us their creativity and willingness to grow.

Stork is involved in very important projects for the sustainability of the Groningen gas field – the GLT and GLT plus projects. How can Stork help guarantee the long-term sustainability the Groningen field, a cornerstone of the Dutch gas industry?

GLT has been in place for twelve years and we just completed it in the end of 2009; now we are working under the GLT Plus project. Stork is a member of a Consortium that manages the GLT Plus project along with our partners. This approach has brought together all the knowledge necessary to manage the long-term rehabilitation of the Groningen field, which is quite unique.

What you see in Groningen at GLT Plus is a very mature business model that has proven to give very positive results. The works carried out during GLT included renewal and modernization of the complete production equipment and the addition of compressors and advanced process-control systems. The total project for all production locations – which was necessary to ensure continued gas production from the Groningen field in the coming decades – represented an investment of hundreds of millions of Euro by NAM.

We are particularly proud of achieving the mark of 6 million safe hours of construction management and services recorded: in the past 10 years all subprojects have been completed within budget, on time and without unresolved issues. This is in itself a strong argument in favor of the partnership model that has been used.

Groningen is a pretty unique asset for a number of reasons: we should rember that it is has very developed infrastructure; it is in a very environmentally sensitive zone; and it has a scale that makes it a world class size field that is also hugely productive. Everyone should have a Groningen field!

Due to its uniqueness, do you think you can export the knowledge that you’ve built in Groningen to other markets?

The main exportable aspect, in my opinion, from the GLT projects is their business model. The way in which this consortium is put together; the methods by which we managed it and overcame its sometimes conflicting interests; and how we always guaranteed the best interest of our customer is rather unique. This is high added value for the right customer.

The second exportable aspect are the processes and procedures for the maintenance management – how do we bring together all the materials to do the job, pack it up and send it out to make sure everything is there on time.

The third exportable dimension are procedures such as health, safety & environment (HSE), which underline everything that we do. It would be a mistake for a Dutch company to think that it can send basic mechanical engineering people to countries like Qatar and think that those are the people who will actually make the difference. What you can export is something closer to an intellectual property product such as the business model, the business process, the underlying HSE culture; these things are very exportable and also very valuable.

One of the things that we noticed in Colombia is that in developing economies you can solve a lot of issues by using manpower because of the lower cost of the workforce in those markets. The cost per employee in Colombia is less than one third of his or her Dutch colleague. For many things in the Netherlands we just can’t afford to have a large workforce, so you have to solve it by good business process, by good process procedures, by good HSE compliance – that’s how you solve the problems here and ultimately that is what is exportable elsewhere.

I’m a believer that organizations and companies like Stork have a social function as well as a commercial function and this social function is tremendously important in a company that puts lots of people to work every day. The most profound social good that we can do as a company is to provide our people a safe environment that allows them to earn their money and choose how they should spend it. This is the best way, in my view, to promote real economic development.

What will be your final message to the readers of the Oil and Gas Financial Journal?

At Stork we take our history very seriously; we feel we have a responsibility for the people that have worked here in the past and we also feel a sense a purpose in growing the business now and in the future. Stork is already very well established in the Benelux and a next step for us is to create a sustainable footprint worldwide.

The ultimate success for Stork as a maintenance management operator is when we become a leading global provider of knowledge based asset integrity management to companies like Shell, Exxon Mobil or Dupont Chemical and when we are able to follow our customers wherever they are, providing the highest quality service whether in the Netherlands or in India.

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